Transcripts For CNBC Squawk On The Street 20150224

Yellen on the u. S. Economy, set to testify today. Well bring you both prepared remarks and q a live. Home detail shares are higher premarket following solid Quarterly Earnings but macys volatile this morning on what are mixed results. Jpmorgan shares higher. The bank outlining new measures to streamline businesses and cut some costs. The nasdaqness aiming for a tenth straight day of gains after closing at a fresh 15year high. On capitol hill in an hour fed chair yellen begins two days of testimony on the economy. The watch is on for hints as to when the fed might raise Interest Rates. Shell face the Republicanled Senate Banking Committee, whose chairman is a fed critic. Live coverage of yellens testimony and the q a session with lawmakers. A lot of tea leaf reading this morning about whether or not the fed is simply trying to tap dance here play for some time let wages come back let greece play out and so forth. I think thats right. Its funny, the most visible thing that they could look at are retail sales which have been weak onning aga ing aagragregateaggregate. The home numbers yesterday, so week. Toll brothers so strong today. You choose if you were as granular and they never are miss yellen i know you hated the biotech stocks it wasnt her. It was the staff. Somebody on the staff didnt like the biotech stocks. When you look at individual companies, weve got to tighten them. Toll brothers is too strong. The aggregate, we have to keep it unchanged here housing not that good. Greece, you read through the fine print, theyre not ready but maybe they are ready. Brazil not good. Russia, not good. Other than germany, make a case that europes not that good. And all of the time you come back to is residential strong in the country . Maybe not. Is nonresidential strong . Maybe not. Theres cases to be made against this economy that she can make if she wants to keep it easy. She can make it. Toll was a good quarter, 44 cents, beating 30 cents. Most metric pretty good. Doing analysis of the previous quarter, the heat came from they didnt feel that new york was the Analyst Community didnt like the new york stuff. If you look at whats happening in brook len and hoboken, the explosion in pricing theres allowed the growth margins to increase dramatically. Caseshiller positive 4. 6 from a mid20 city ahead of expectations as inventorys come in. People are saying homes are no longer a buy but the other day, wells fargo, positive note how youre starting to get credit easing. This is such a mixed picture that you can understand why if you can tell you can tap dance, i like that term tap dance, thats what i think she can do. She can tell both sides of the story or go with either one. You can go with a Strong Economy story, yeah we have to raise, right . And or the no inflation, no Wage Inflation story, we dont really, we still have time. And the rest of the world is not as good as it might, although its not that bad. The twoyears telling you things are better. Yeah. But i its funny, i was doing analysis, where the tenyear was 2000 with the incredible p e ratios 6. 6 . Yes. That was good competition and still did well. Theres a setup where i see that if you let the big macro janet yellen testimony against the senators, you end up missing the big picture, which is that when i read home depot, i think i remember when home depot was crossing the country with new stores and you never saw numbers like this. And, by the way, i think the next quarters going to be better because cold weather is wrecking peoples homes. Good point. Lets get to depot. Beat the street with comps up 7. 9. 8. 9 in the u. S. Approving 18 billion share buyback, hiking the dividend 26 . Macys as well holiday earnings did exceed forecast revenues shy. Company expects growth for 2 . Macys did print 2. 5 for the quarter. The best beat for depot in 15 years and theyre closing in on coke as the biggest market cap out of atlanta. Great one. I know frank blake left the company in tremendous shape. A great ceo. Following along the Conference Call brilliant, they break it down aisle by aisle. You hear whats better what did better what did even what did poorly a sign that maybe youve got to go by tanly works, whirlpool, maybe sherwinwilliams, stay close to the Conference Call. Lets not for get that nordstrom traded from 79 to 74 based on the head lean and finished at 81. Those trading on macys once again, youre trading on nothing. You are filled with sound and fury, signifying nothing until you hear the Conference Call. How could you not how could you find a better time to be a retailer in recent days . Think about even the weather comparisons, we know its the the weathers terrible in the northeast. A year ago the polar vortex didnt help anything. The comparisons not that hard. No. Cracker barrel admitted that this morning. And inventories well controlled. Youve got an economy with a 2 tenyear at this point, borrowing rates are quite good. Inflation negligible. Im reading a list here any number of things from one noted analyst that says hey, this should keep going. Whats absolutely incredible you dont see the word promotional in press releases lately. Remember promotional means Gross Margins coming down giving stuff away. Theres nothing promotional about this about right now in retail. Its an extraordinary time. Its full price time. True. And by the way, whatevers left of the winter inventory, theyre not having to mark it down. Especially domestic and not dealing with effects. Home depot looking at 6 cents on a canada. Any currency. It doesnt matter. Any currencys awful. The pesos gone from 12 to 14 like it went to 14. 5 one point its come back down. You dont want to do business with mexico. The pesos out of whack but i think trading off of oil. Theyve shrunk the float by 2 22 . Does that matter at all . I think it does if only because theyre a consistent returner of capital with higher earnings. I mean higher revenues though not putting in new stores. Ibm, bought back half of the Company Since 19195. The stocks up since 1995 but not what people want now. When you have 8. 9 comp for home depot, i mean throws art blank wasnt doing those. Mash marcus wasnt doing those. Id love to hear ken landgone. Wow, this Management Team is unbelievable. After done counting their cash right . The turns must be incredible. Just they just make money on they replace the stuff, intramonth so many times on the float. You dont have to pay your people. You dont have to pay suppliers until the end of the month. Your fakemaking a fortune turning, turning. Commodity prices are low, too. A lot of the stuff theyre selling. Everyone has more gasoline in the meantime. Look at this more important than home depot is greece not really but this was a telegraph in headlines this morning but the eurozone is giving theyre blessing to the reforms that greece is proposing as part of the deal to extend the bailout by four months. Earlier this morning satisfilyyily comp hence ibl. When you look at home depot, what youre seeing is this incredible money going back to the bottom line of the consumer because of gasoline. Cracker barrel which i regard as being instate highway restaurant, says its directly important. It is all about gasoline and better weather. A thousand bucks a year a lot of money. Huge amount. Visa said it wasnt all going people werent spending it. Im not who am i to argue with Charlie Scharf but well talk about it. I bet theyll be getting questions as in terms of credit sperd spending. I think 50 april a fellow on squawk saying short the retailers. You dont have a problem. What will you going to short . Ive never seen growth like this. This is extraordinary growth. Its not promotional. The consumers obviously back. I were janet yellen and being grilled, listen is the Consumer Spending like mad . The consumer got a 1,000 tax cut from gasoline. Ive not seen numbers like this prerecession. Retail, on apparel, things are mixed and we are talking about we see bankruptcies. We see a great deal of spendings a result of what our friend david berman talked about, the apple amazon part of. Consumer is strong but retail can be mixed particularly that area. You can put the screws to the apparel makers. Go over the vf Conference Call it was a thing of beauty. Just a coalition they call them coalitions eric wiseman delivered a quarter magnificent, better than any of the oscar winners. You saw the number of tweets. Yeah. Birdman. Award ceremony for Conference Calls. Tesla would get the worst. Can you believe Merrill Lynch numbers cut numbers. Interesting you can do that not have a disclosure issue. You cut up ins and cut numbers again. Best guidance most improved call. Most improved call. Most drama on the call. Youre giving me whole shows. Expletives on a call. True. We had that too. I absolutely am going to do that. Im going to do the nominations, please, and im going to have eight, and theyre all going to be Conference Call. Jimmys . Whats the name i like that. You have an oscar theme going on. The jimmys. I also a haillo. Little jim statues. Conference calls that clearly that are mass Conference Calls, okay and going to get awards and niche Conference Calls that the academy would give huhuh. Im not doing that. Im going mass. Im going american sniper of Conference Calls. You want to tell tickets. Thats what im interested. You get david and i will emcee and do an opening number. Tuxedo. Like brad cooper . He looked good. Did he not look good. Its okay to say a guy looks good. Better ratings than that guy in his underwear. True. Neil Patrick Harris i like him, too. Hes good. When we come back the latest on apples march toward 1 trillion market cap. Ubs interesting call on them. Fed chair yellens testimony on the economy. Well bring you live coverage from capitol hill in about 45 minutes. And taking one more look at futures, as the nasdaq goes for nine straight longest streak since 2010. Back in a minute. No. You . No. Aflac what are you guys looking for . Claims legend has it these hills are full of em. It can take months for an Insurance Claim to surface. Claimin takes patience. Aflac paid my claim in one day. They got some newfangled kinda one day payin machine . Hehehehe yea, i got aflac at work. Aflac. In just one day, we approve and pay. One day pay, only from aflac. Aflac. Can data help cure a disease . The right treatment for you is out there. The problem is some of its in this lab. Some of it is in her head. Some of its in this new journal. And the rest of it is in your personal medical history. Ibm watson can not only read this data, but understand it. Its trained by doctors. And its always learning. It can help find hidden correlations and help your doctor recommend Treatment Options for you. Theres a new way to work and its made with ibm. Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more. If you are what you say you are a superstar Jpmorgan Chase holding its investor day today and is aiming to save about 1. 4 billion in annual expenses by cutting costs and streamlining assets the bank says its looking to eliminate 100 billion of nonoperating deposits and do that in part by charging negative rates. Some deposits too onerous to hold. Im going to get charged, not happy. Youre not going to get charged. Consumers are not. Dont frighten people. Maybe youre considered an institution. I could be institution. There is a theme to this whole day and its al green. Its lets stay together. This is a lets stay together. Does jamie have that on the music hold . He should. Right . This is if staying told how bountiful it is. Its so funny because this comes at a day when you pick up the paper, hey, gold rigging, we havent gotten to oil rigging yet but alleging gold rigging but it doesnt seem to matter because this is the perfect day to put that story out and no one cares. What i think is interesting they did choose to take up a good amount of time so far, at least, doesing this idea why a breakup would be a bad idea. Right. They are responding to something we first saw in a goldman report but a question weve asked, is this institution too big to manage . Would it be better off . And they gowin, marianne lake cfo saying our Business Model has 18 billion in synergies. Apparently theyve done work to come up with the number they say they have. And the value of the companys in its Business Model, a breakup would see slight capital benefit but duplicated businesses. It would diminish over time. They preserve optionality, you about to your point people like this. Staying together. That does not mean when you talk to manage ant at jpmorgan there are not particular areas where they do business as a result of changes in the rules over capital and federal regulations, that they are going to have to move out of those businesses. Absolutely. They dont know all of them and they cant they dont with certainty know what the returns are or will be. Frankly those rules have been promulgated. Just now starting its hard to figure out unless youre john stumpf at wells fargo. Hes a banker. These other guys i dont know. Hes a banker. Lake making comments now, raising dividend is a priority. Fantastic. The memo na the journal has, targeting 57 payout ratio by the end of the year adding theyve done the work on a breakup. When you hear that thing about the dividend what you think theyre out from under. The government is not maybe the governments not running the Dividend Program anymore. The regulations, good for bank of america. To get the government less involved with dividend decisions and buyback decisions is hugely valuable for a cup that sells at low multiple. The governments involved in a lost Different Things this is a small part of the overall piece but something im focused on the fed wont allow banks to len at six times leverage. A highly leveraged transaction financing are moving away from the bank if above six times leverage ratio. Period. End of sentence. Thats. Doesnt matter what the business or characteristics are, one can be different from the other, you cannot do it. Bdcs doing it private equity shops, hedge funds doing it. Its moving to other areas. So it wont be profitable for some of the big banks. These were very big lines for the in the old days right. Where you used to tell me jim, the return on equitys not going to come back because these were fabulous performers. So was trading which, clearly, we know is also changing in terms of at leaf the way it appears profitability wise. Elizabeth warren throwing a couple of bombs against the banks today. Good chance. Yellen . Why not. I guess . Shes a firebomber. Doesnt appear shes going to run for president. Feeling amorous thoughts for you . Cool minted blue eyes. Shes a senator now, you cant say that stuff. Youre getting married anyway. Well see now. Well see if that still happens. Shes a senator. Shes married. Stop it shes married . Yeah. I didnt know that. Cramers mad dash as we count down to the opening bell. Take another look at the premark as the nasdaq goes for ten straight today not nine. Jim references al green. Lets go out on lets stay together. Back in a minute. Cramers mad dash as we all right. Weve got about seven minutes to the opening bell. Mad dash with american airlines. Cowan this morning, buy to hold. Now this group has been choppy of late. You can see that people have kind of abandoned it. One is that gas, oil, jet fuel has not come down oil to 40. Jet fuel to lower. So thats been one of the reasons why its stalled. They say listen theres pricing headwinds. Something, ill say his name you know i like it ben baldo. Za talked about it. I caution selling this stock because it is so unbelievably cheap but resting. Its resting. As you talked about, almost oligopoly, price wars . Come on. What is that about . They pretend to have a price war. Its a pretend price war. Try to book a flight somewhere warm now, forget it. Incredible. Spirit my favorite in the group. Symbol save. Remember, if you mention their name youve got to pay them a dollar. Thats the way. Every single aspect. Ben, i owe you like 9 now. Weve got weve got some really positive news. A love the mix to negative. First solar, finally doing what ive been hoping they do hoping a yield co nrg, david crane did this combination with sun power. A great reeldyielding company. First solar involve with apple in terms of doing sealerolar. No ones liked it because they had the wrong technology. Theyve managed to bring down the costs of their technology. This has been my favorite april lot of guys dont like. I think youll get a lot of upgrades because of the spinoff. Explain whats going on here. Why first sole somewhere sunpower . Together they can do a joint venture which allows them to take completed plants and have them be like bonds. Utility bondsen and this is a very, very good company. A lot of analysts turned on incorrectly and all going to scramble. Theyre all going to scramble. Because does it increase ability to access more capital more cheaply. You on your game. Sometimes i pick things up. Allows them to access more capital. 28 years of doing this. Opening bell a few minutes away. Stay with us on squawk on the street. Can it make a dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . Youre watching cnbc squawk on the street, live from the Financial Capital of the world. The opening bell set to ring in just over 90 seconds or so. Busy morning. Yellens on the hill. Well get her remarks at the top of the hour. Q a will begin 20 minutes after that. Greece is officially on the back burner for a few months. Of course earnings are big from home depot and macys. Jpmorgan looks set to crack 60. Its only done it a handful of times this year. This is an important moment because the yield curve is not favorable for these guys. You have to make it up in a lot of different ways. John stumpf making it up with feebased business. When the Companies Report and the margins not good they sell off again. Its important jpmorgan power through 6 on0. When earnings come out people will say this is not their moment. Jamie dimon says you want 4 billion number you want the tenyear higher. I spoke to him yesterday. He does like we chatted. He does believe that like a lot of people rates are going move up during the course of the year. Are they going to move up sharply . I didnt get a rate call per se but you got a phone call, more than the rest of us. Things are going to improve. Well one thing and things are good. The u. S. Economy, not that bad around the world. If youre one of the 770 Million People in europe why would you want to earn their bonds when you go to our bonds . Thats the problem. Home depots going to open up almost 5 on the call. Just asked whether or not they would respond to walmarts minimum wage hike. Response, we pride ourselves on paying above the market wage well adjust as necessary. Come on home depot has always rewarded. There was a moment where the prepare ceo where there were cuts made. Blake changed that. And the new the home depot that has happy employees, which you know when you go to home depot, by the way, and i buy all of my plants at home depot, frank blake knows that and ive got to Start Talking about this is remarkable quarter. Im telling you, people short, youve got to understand someone followed retail since 1982, ive never seen numbers leak this. Cramer they should have a quote pipe burst repair kit by the front door. Walk in walk out. Amazing. Theyve got to come to bar san miguel. Im trying to do stuff with the vestibule. Incredible how much you have to sink in. That door. Vestibule. A place it looks awful. Ringing the bell associated bank core based in the midwest. Over at the nasdaq Multi Color Corporation doing the honors. So oil coming back up. Thats interesting. I had two Different Oil executives on last night. Neither one is willing to call a bottom. You get that whisper of an opec meeting but start hearing first quarter, so much oil being produce produced. Refineries doing well. Stay close to oil, hugging the dids 50 level. Whether it can do it when we get in yeah. Did want to do comcast. Our parent company, reporting earnings. You got call there, too, didnt you . I get nothing. I was on the call thats all, like everybody else. All right. Asked for your phone number when they get on the Conference Call. They do . Thats personal. Like a Social Security number. But you cant include them in your rewards show for Conference Calls. I have horses. The stock price is showing that. The key questions, the buyback, which is 10 billion this year or 10 billion overall, 4. 5 billion expected this year. Expectation, perhaps youd get an additional buyback if and when the Time Warner Cable transaction is concluded. The company saying theyre targeting 1 1 2 to 2 times leverage. But were looking forward to getting to Time Warner Cable closed other transactions we think buyback a full year from the call could come in close to 10 billion. In addition, if they dont get Time Warner Cable closed leverage would pop up. They were positive on the prospects for Time Warner Cable. When it cops to fcc review of the deal remember its the 26th that well get all of los angeles around title ii reclassification of broadband essentially. So its after that that the expectation is that youll start to really get the regulators, jim, paying aengs to the transaction. That at leaf the belief of our management at comcast. Its pretty much as we said the shot clock of the fcc due to expire at the end of march. Lots of information gathering taking place. Its an approvable transaction. This week they had to deal with open internet or thats what im talking about here and it will hopefully turn their attention right after that to the transaction. And the question becomes, will there be concessions what will they be if too onerous, we get into questions about whether the transaction will happen. But who knows . Wow, this play of signups, engagement. Pretty decent. Cap x higher 14. 5 of revenues. And thats and then the only thing i would say, i hear about Business Services not just from comcast but other provides are who have a lot of broadband out there and thats a competition to the likes of a verizon or at t. Certainly to existing dsl services that perhaps businesses both small and even medium sized. Its a growth driver it would appear, at comcast. The cfo mentioned it on the call. 40 of growth in that is from midsized businesses now, which is important. Wind stream does a lot of that and numbers were very bad. Right. Its interesting to see comcast continuing to take some. Increasing buyback to 10 billion, more than 4 billion earmarked for this year. Div from 90 cents to a dollar. And think about this carl you know everyone says the markets too expensive. Thats been the mantra. Buybacks are incredible. The dividend raise great. The competition, 6. 6 in 2000. Now competition of tenyear, nothing. Dividends how can you not want to own them. Film revenue down 11 last were weed adespicable me 2. On track to have a record year in u. S. Box office biggest since 08, in a few years because of people want to get out of the house, because its winter, people want to get out. Amc, all of the stocks. Remarkable. You spent a lot of money at concessions unless those of us who sneak in you cant do that. You dont sneak . I limit all intake. Deluxe popcorn guy. Junior mints. So good, wow. My father loved nonper rels. Apple is lower today. Ubs believes the capital return everybodys pinned their hopes on is going to disappoint. Well you know tim cook might have something to say about that but hes only the ceo of apple. Apple was up huge yesterday. Continues to be good things out of europe. I like this 2 billion spend, it gets regulators and keeps then at bay. And its great. A lot of jobs. Apples creating jobs all over the place. Dont forget jobs created by the operating system if we were to do an app right now that measured some sort of cholesterol rating as part of the watch, home run. We ought to work on that in our spare time. Cholesterol rate . The cholesterol level how are you get how do you get that from a watch . Im thinking you have to test your blood. Also looking into retailers. Dillard dillards up. Preaching dillards gospel for a long time. Its dillards. Excited about dillards. I like dillards very much and i like colts. Both of these are coming back. People wrote these off, big mistake. Classic classic, good retailers. List of the top ten s p gainers, at least almost half are housing related. Home depot, lennar, youve got who else lowes, hortons not far behind masco, pulte. Toll brothers we felt the Gross Margins were under pressure last time. The Gross Margins are great one of things home depot will talk about, how much money putting into our home. Me put more money into the home hasnt been up to gdp growth level. The main thing about your home put money in if you think its going to increase in value, circle to caseshiller its important that home that people feel a home is a decent investment. But home depot benefitting from weather which is saying everythings cracking. Everythings cracking. I bet interesting to see the insurers. Id like to hear from fischman on travelers, a lot of damage being dobne by weather, subtle. Garden variety pipe bursts. Also yellen a hard time about biotech call last time. I went back and looked where some of the big caps were six months ago. Celgene in six months up 35 . Gilead up 25. Biogen up 18. Is she going to double down . She was focused on the small stocks. I know. It wasnt her. Some person on the staff. I dont know. Which is the one she didnt like . Isis. Bizarre it wasnt in the statement. It was addendum. I feel awful, i think shes so good. You do . Yeah. I just this shes early on the call. About like 17 years early. Want to come back to a couple of movers from yesterday. Valeant, up 15 . Down a bit today. Go buy it. Stop it. That guy, i mean i got a lot of heat saying good things your interview so great. I was emailing david, im not getting that call, or on the call, but i was emailing, im listing to the interview. I keep thinking theres holes in the story its a rollup its a rollup, and i listened to the interview. Gosh, darn this guy is real. I know. We have been through areas where there are other ceos that were embraced what for rollups, swv said he just knows how to do it differently. In fact that was not the case. You wonder i mean how is it that you can take old products from a line i asked this question, and have them put up the kind of numbers they are . There are people who say when you look an unbelievable sales team unbelievable sales team, and full disclose, debt wellers on the sales team when i look at i look at what theyve done with the tired contact lenses what i see is just amazing share take. Its like theyre better salespeople. Weve seen that from a couple of companies. Buy old drugs and sell them well. Its i dont know how to explain it. That can explain it it. I believe. They are taking share. Reinvigorating franchises. They were doing their numbers but some showing double digit increases where there hadnt been previously. Top 20 drugs. He does. Line by line and theyre positive. What can i say . Look for holes and i still cant find them. Im looking for holes, believe me. Discovery, carl you mentioned yesterday, was up sharply, though it did come down during the day on the story that was completely refuted by fox. But interesting, at least, perhaps putting a light on their international franchise, weve talked often about. If there were to be consolidation and it was in the part of a Bigger Company that wanted more exposure overseas whether news corp. , which excuse me, fox, already there in a big way or our own parent Discovery One way of doing. Not that we think somethings going on right now. Viacom in the crosshairs not positive. A lot of flux in these guys. Cbs big after the quarter. Bewkes a great american. Great american. Got some intraday highs for the dow. The s p and the russell. Lets get to bob pisani. Good morning. The market is stronger than the dow, just up 13 points. Builders, as you know doing well. Semiconductor doing well. Consumer discretionary doing well. Financials doing well. Energy stocks doing well. Things are doing well over in europe. You heard earlier, it looks like the major powers are giving their assent at least early signs are, to the greek package of Economic Reforms they put in last night. The greek stock markets up 9 . The highest level for greece since december. The rest of europe is on the mixed side. Generally up. Were at historic highs. Essentially in france as well as germany. Speaking of europe qe ending here but europe is doing very well with qe. Thank you very much. Notice europe is dramatically outperforming the United States this year. S ps only up 2. 6 . But historic highs in france and germany. Both up 13 . The nikkei also the Japanese Central bank there, also engaging in qe up 6. 7 . And the ftse over in the uk we noted yesterday, also at new highs, up 5. 5 . My point in bringing this up europe and japan, notably, outperforming the United States this year. Turn to the u. S. Stock market. The high end of the Home Building business doing well. You mentioned toll. But these, im son of the home bill, i Pay Attention to numbers, average selling price for tolls 782,000. Good heavens, the highest in the business. But their guidance was 710 to 760,000. They blew out away. Thats how you beat earnings average selling price way above what was estimated. Gross margins another way tou beat on earnings in the top margin, 24 . Any time 20 and above in the business, youre doing well. 24 is outstanding number. Orders up 16 as well. These are just great numbers across the board there. Toll brothers, as you can see, sitting not far from a new 52week high. Outperforming the rest of the builders. Home building may be iffy but the remodeling business going strong, an historic high for home depot. And the numbers there, just great. Comp store sales 7. 9 . International, u. S. Comp store sales 8. 9 . We mentioned the Quarterly Dividend increasing 26 . Thats a history exhigh. Macys, i think the problem with macys, was while the numbers were in line guidance was disappointing. Comp sales growth of 2 for 2015, that was the guidance. That sort of slowing down a little bit. Thats getting closer to competitors and i think thats what the overall disappointment is. Finally, how lousy is the stock market business right now . We have the ceo of stifel on this morning and he looked very very happy, as well he should be. A new high for Stifel Nicolaus as we mentioned, they bought sterne agee for 150 million. They bought a business thats got a great Global Wealth business, bought a fixed income business. 0 generates north of 300 million revenue for 150 million, do the math on that. Its 0. 5 times revenues or something. A sign that you can buy fabulous businesses in the industry right now for very very cheap. Mr. Kruszewski had a very good reason to have a big smile on his face this morning. Miss yellen coming up shortly. Most expect her to say very little data dependent is the word. Remember, press conference of a year ago march talked about six months maybe raising rates, shell never do that again. Most people expect her to stick very very closely to her script. Guys, back to you. Thanks bob pisani on the floor. Jim says keep your eye on oil as it wrestles with 50. Jackie . Good morning. Thats right, the Energy Complex up across the board today, despite the fact we have a stronger dollar and most traders here are bullish about the dollar. So whats actually happening here . Seeing wti trading around 50. Brent crude trading around 60. This is probably technical buy, not enough here to make it on headlines or anything. Of course, we did have headline out yesterday about nigeria wanting emergency opec meeting. There is nothing on the calendar for march. The next opec meeting in june. There was an emergency meeting, saudi arabia isnt going to change its strategy so its probably not going to change what we see in the crude pits here. Expecting another build in inventories from the department of energy tomorrow. So curious that were seeing oil prices up now. In term of the products its not surprising that heating oil are up we are keeping our eye on refinery issues. That is definitely one thing to watch. And i do want to mention that we are seeing gold prices dipping un1200. It doesnt appear geopolitically and in terms of the eurozone things are stable. Stronger dollar pushing gold back down. Back to you. Jackie thanks so much. Fed chair yellens testimony on the economy, shes going to be grilled by the Republicanled Senate Banking Committee. Well bring you live coverage when that begins at the top of the hour. Record high for the dow, the s p and the russell. Back in a moment. Anyone have occasional constipation diarrhea, gas, bloating . Yes one Phillips Colon Health probiotic cap each day helps defend against these occasional digestive issues. With 3 types of good bacteria. Live the regular life. Phillips number of firms initiating coverage of shake shack. Goldman has a neutral on the chain, seeing 13 downside to its price target of 36. Jpmorgan barclays jeffries with a hold. Stifel does have a buy on shake shack which is off of the 52 that it hit on day one. It is the stifel story thats driving it. I think its an very interesting report. Concept called fine casual quick serve. A lifestyle brand which, to me says you want to own the stock, not for the short term play the long game be with danny meyer. All i can tell you, people who love the burger love the service, they will love the stifel report. And i understand if you want to own it. I think it. I think its expensive but i certainly has never kept people away from certain stocks. Shows incredibly loyalty. Its the tesla of burgers. Comcompetitors. Tesla of burgers. I like jack in the box because that fantastic with the qdoba story. Veggie burrito i talked about. Goldman has charts on social engagements for sales on shake shack. Maybe its a law of large numbers thing. But instagram, you name it, vine followers. Equity, fabulously. Dominos pizza has been the Technology Company that loves social media. Stocks down today. Stocks had a big run. I love that number. Dominos and dine equity are the two leaders of social. Thats an interesting statistic. Well get stock trading with jim a momentnd counting down to the fed chairs capitol hill testimony. Well bring you live coverage including q and a. In the meantime the dow is up 31. S p 2110. The road. It can bring out the worst in people. But the mclass scans for danger. Corrects for lane drifting. And if necessary, it will even brake all by itself. It is a luxury suv engineered to get you there and back safely. For tomorrow is another fight. The 2015 mclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Now with the xfinity tv go app, you can watch live tv anytime. Its never been easier with so Many Networks all in one place. Get live tv whenever you want. The xfinity tv go app. Now with live tv on the go. Enjoy over wifi or on Verizon Wireless 4g lte. Plus enjoy special savings when you purchase any new Verizon Wireless smartphone or tablet from comcast. Visit comcast. Com wireless to learn more. California. Three cars of a Southern California metrolink commuter train derailed. Tumbled on the sides after colliding with the truck on the tracks in ventura county. So far it looks like a number of injuries. Weve been looking at firefighters treating people at the scene. But the collisions between rail and cars in the past couple of weeks have been big. Amazing the train carrying oil recently with csx, that was not speeding. It wasnt speeding. I thought it was very telling. In the meantime lets get cramer. Alks is down badly today because one of their pain drug formulations in phase i is not going to advance. I say focus on their depression drug. Schizophrenia drug and ms drug and use weakness to buy richard pops company because its been a total home run and it will stay that way. Buy it tomorrow not today. People have been itching to downgrade it. Tomorrow is your day. Mad money tonight . Dominos pizza. They have done remarkable things. One of the best performing restaurants other than that is the fiesta group. That is taco cabana. This company has two divisions, not unlike jack in the box. Both doing well. Taft is a famous restaurateur within the industry. Both patty doyle and tim taft are fabulous operators. I cannot wait to speak with them. Ill see you tonight. A lot of good. Still more to come. Mad money 6 00 p. M. Eastern time. Fed chair yellen getting ready to testify on capitol hill. Well get live coverage of her remarks, plus the q and a session with lawmakers when we come back. Gr nd music begins ] when i was on wall street i felt trapped in that i was investing in a Health Care Industry that i didnt believe in. For years i really struggled with this idea that people were making money off my illness and i wanted to do Something Different and so i finally made that change. [thunder and rain] [thunder and rain] [thunder and rain] youre driving along, having a perfectly nice day, when out of nowhere a pickup truck slams into your brand new car. One second it wasnt there and the next second. Boom youve had your first accident. Now you have to make your first claim. So you talk to your Insurance Company and. Boom youre blindsided for a second time. They wont give you enough money to replace your brand new car. Dont those people know youre already shaken up . Liberty mutuals new car replacement will pay for the entire value of your car plus depreciation. Call and for drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch to Liberty Mutual insurance and you could save up to 423 dollars. Call Liberty Mutual for a free quote today at see Car Insurance in a whole new light. Liberty mutual insurance. Good morning. Welcome back to squawk on the street. David faber at the new york stock exchange. We begin with some breaking news. The Senate Banking committee getting ready to hear testimony from fed chair janet yell nn a little bit. The committee will consider a bill first. Once thats done the hearing will get started. In the meantime markets are having a pretty good morning. Dow is up 343 points. Its been a busy morning so far. Earnings from home depot, jpmorgan is cracking 60 on their investor day. Oil continues to wrestle with 50. Simon, it does look like greece officially is something we will worry about not any time soon but more likely in june. Yep. Here is the chairman coming through. A lot of people will assume that theres likely to be a negative bias to what she says. Some people suggesting she wouldnt want to preempt the committee by dropping the word patience in terms of Interest Rate rises. Others would say that perhaps now is the time she needs to layout whether or not the fed is going to raise rates slowly and gradually or be data dependent and therefore leave that door open. Well see if june is a month we worry both about greece. Lets get right to what the fed chair is going to tell the Banking Committee and Monetary Policy quoting from a prepared testimony. The Committee Considers it unlikely Economic Conditions will warrant an increase in the target rain for the fed funds rate, quote, for at least the next couple of fomc meetings. The fomc she says can be patient in beginning to raise fed funds rates because quote, there is room for sustainable improvements and inflation continues to run well below the committees 2 objective. When the right hike policy progression begins before that happens, her statement says the committee will change its Forward Guidance. The if Economic Conditions improve, the fomc will considerate hikes on a meeting by meeting basis. However, the statement goes on to say any change in Forward Guidance does not necessarily mean the committee will increase the target range in a couple of meetings. Turning now to the economy, a pragmatic but overall upbeat assessment of the economy since last summer. The chair notes the many aspects of the economy have improved especially the job market averaging 280,000 jobs per month during the second half of 2014. But again, back to the theme that theres room for improvement, specifically with the Labor Force Participation rate and sluggish wage growth. Yellen says gdp growth is expected to be Strong Enough to lead to a potential decline even further in the Unemployment Rate. She says that strong job market and a drop in oil prices is boosting Consumer Confidence. Housing construction, however, is the most significant drag, she points out, as far as the overall domestic economy is concerned. On the question of the drop in oil prices yes, it will be a negative for energy producers, but in the opinion of the committee it will likely be a significant overall plus for the economy. Greatest concerns foreign economic developments yellen statement says could pose a risk to u. S. Economic growth the european recovery remains slow and inflation has gone even lower. China, her statement points out, could slow more than anticipated. But on the other hand the chair points out the european recovery could rebound more strongly from some of the policies stimulus measures now in place and the decline in oil prices could boost global growth. The highlights from the fed chair statement. Back to you. Hampton pearson in washington. Thanks for that. Markets have settled back a little bit on those headlines. Dow up 17 and the s p down about two points. We do have more breaking news. Time for Consumer Confidence. For that we get to jim in chicago. Hey, jim. Carl, the Consumer Confidence numbers came out at 96. 4. That is disappointing. We were expecting 99. 5. Last months was revised up to 103. 8 from an already ready blockbuster 102. 9. On balance this is disappointing. The last couple of weeks the numbers have been soft. Two bright spots is labor and oil thats about half price it was before. Thats the recipe for good Consumer Confidence numbers and we didnt really get it today. Its hard to figure out what the Market Reaction has been with all the yellen comments coming out at the same time. Back to you, carl. Jim thank you very much. Obviously a lot to digest in a very short period of time. Lets bring in senior economics reporter Steve Liesman to get context here. Steve, whats on your mind here . Digesting a lot here carl. What i hear her saying is pretty much what the committees guidance is. I think it was simon who mentioned in the lead up to yellens remarks coming out that you wouldnt expect her to stray too far from where the committee is. I think thats where we are right now. Giving a pretty positive or upbeat view on the economy, but saying that were still on hold for a couple meetings here until the guidance changes and putting the market on notice that guidance is could be changing relatively soon, by looking at these headlines. Shes balancing foreign developments as well as lower oil prices. But has not given up the ghost that inflation will be returning to the feds target of 2 in the next over the medium term here. So, carl, im not hearing her say too much of a change in policy. We go into this testimony here with the question is it june is it september . I think thats still a question but it seems like yellen is holding on to that flexibility to do june if she feels like the economy has it proved to that point, carl. Dollar getting a slight pop here. Steve, apparently shelbys welcoming yellen saying that theyre going to discuss a little bit of the possibility of auditing the fed. Im sure in the next couple of hours. This is a big deal. Politics behind this are as interesting as the monetary aspects of it. Shelby opposed yellens nomination for chair and for vice chair in 2010. Yellen got a hard time in the last july testimony from democrats democratic senator Elizabeth Warren over the issue of bank regulation. She has powerful opponents on both sides. No friends on either the left or the right here. And well be listening, carl i think not only what the issues are in the back and forth there, but how much of an issue is the fed in this year leading up to next years president ial election. Does the fed is it seen as a place where politicians can gain some points when it comes to their constituency. Okay steve, weve got an hour and a half of this to go through. Lets bring in diane swan economist with zero financial. What are you watching for now . It was interesting, flexibility was the key word that steve pointed out. The audit issue, we might see interesting playback on this. I do think its a political issue but its going to be more of a partisan issue than politics alone. Warren and many of the Senate Banking Committee Democrats have come out and actually said they would not support an audit of the fed. Thats a bit of a turn around and a bit of a vote of confidence for janet yellen at a time when the partisan politics have been very bad and it had been bipartisan attacks from the fed. I think she might get a little bit of a break there but clearly in the house tomorrow is when shes going to get grilled on issues about what they should do about sort of congress imposing their rights and control over the fed and yellen has to say, hey, you see us, you do oversight on us. We are trying to be as transparent as possible but they are worried about these sort of threats to fed independence. As far as the market is concerned, diane, i guess the main focus is going to be when were going to get Interest Rate rises and what the pattern then once they started to hike will be. What is our base case as we go into this . I think actually ive been september, i still believe september. I think june is a stretch. I do think they want the flexibility to sort of ease markets into it. One of the things theyre real lit concerned about is preventing another paper tantrum. All the comments bullishness on the economy but not quite there yet, allowing for catchup. They are gliding path slow gradual. Theyre going to do this incrementally but they do want to get liftoff this year. Of course there are those who do not want to do that. Charlie evans came out and said he will wait until 2016. I think what we will see is some sort of symbolic liftoff this year but nothing that is at staggering heights. Fed is going to be very cautious on raising rates, especially given what she already noted about housing market. And where do you we feel the pressure points are in the market at the moment diane . I think its a 50 basis point move weve had now on the tenyear high. In a relatively short period of time. Is that where youre most likely to see a reaction or in the stock market which at the moment is up 24 on the dow . Well, you know i think the idea of a 50 basis point hike has been over mied. If we get i have 50 basis points by the end of the year. We could get there incrementally. Its not out of the range of the feds possibility to raise rates slower and less than 25 basis point movements when they firm the rates and then stand there. I think the markets, you know they have to deal with the noise that the fed is having to deal with which really mucks up the timing. That is the noise of we saw Consumer Confidence today but we have also seen economic data. All of that is due to weather and work stoppages out from the dock strike dock work stoppages and steelworkers strike moving into refineries. All that noise out there is could delay further delay that june sort of liftoff and i think people are focusing too much on specific date. At the end of the day were splitting hairs between june, september. Its going to be symbolic its going to be gradual. Thats the message she wants to put out there. When they do move theyre going to do it when we can handle it. The Deutsche Bank points out the surprise are currently lowing at lowest level since the middle of 2012. Arguably that isnt getting much of a focus at the moment. What would you say to that . Are you talking to me, simon . I am steve. Are you still with us . Im sorry. I was reading the text there. The economic surprises definitely had some weakening. Some sense timing perhaps it could be a weather related issue, some of that in there. Also, remember you had very very strong numbers in the Third Quarter as well as second quarter. I think 375, diane, correct me if im wrong, 3. 75 gdp in the back half of 2014. Right. Its not surprising we have some sort of a comedown in the numbers. I dont think and i dont hear people essentially giving up the ghost on Economic Growth. It looks like were settled back into a trend kind of 2, 2 1 2 number growth simon. I dont think we can look forward to that 2 1 2 3 number this year. Steve, diane, stay with us for a moment if you would. Thanks guys. Lets bring in art cashin to talk about what yellen is saying at least in the testimony anyway, the statement. Good morning, art. Good to see you. She covers everything. She covers foreign government. She covers oil. She covers wages. Even some comments on valuations in the stock market. Whats your headline . Well, i think shes left herself enormous amount of flexibility here. I think the markets initially worried a little bit about some of the early parts of the statement. Now instead we saw the dollar go up a little bit. We saw bond yields go up a little bit. Now theyre returning back to where they were before the statement came out. So i think people are learning that the fed is hanging on to that flexibility and i would still maintain its in my mind 50 50 whether we see a rate hike this year or not. This meeting to meeting business, how much fear is that going to infuse in the medium term . Well, i think, again, thats the idea of flexibility. You know were not going to come in with one big shot and change things. So new people will monitor. You know i think this is back to phrases like data driven and data dependent. Well see how things go is what that means. So i dont think that will drive terror into the market. It will increase the volatility because now every meeting after the word patience comes out they will be thinking about it. I think that theres every likelihood they would remove patience at the march meeting to give themselves a lot more flexibility but it would still be at the very least two meetings after that. March is an ideal one because its got a press conference after it. So whatever they do, she can get up and explain it after that. Is that the case in june . Im trying to remember. June i think so also. Diane, is this just taking a step back . This isnt your first rodeo. Is this how youre supposed to set Monetary Policy . If youre talking about landscape of Interest Rate rises and 18 months at the very least, should we really at this stage be meeting to meeting . Are things really so unsure diane . Actually i think that is what theyre trying to do is get away from the guidance to Financial Markets is a pledge. And the fed sees it as optionality. They want flexibility, as art pointed out, flexibility is the key operative word here. The only way to get flexibility is to say, remember when they raised rates before and it was baked in every quarter point every meeting, bad idea. They want to have not a pledge. They want to have flexibility. But they also want to keep on the table that theyre allowing for catchup. That theyre willing to they learned from the taper tantrum. They want to really prepare markets for this. They dont want to say were just going to raise rates and get markets ahead of them especially given the weakness in house pentagon this is the on going achilles heel. The persistent weakness in it. Weve seen a lot of broad based gains. You dont want to see long yields back up and cut off housing. Weve not recovered from the taper tantrum. Last year was a down year for housing. Simon i just want to emphasize what diane just said. What yellen just shes announcing lets get to her. A new policy here. Not quarter point hikes every meeting. Senator shelby and fed chairman yellen. Member bss of the committee im pleased to present the Federal Reserve semi annual Monetary Policy report to the congress. In my remarks todayly discuss the current Economic Situation and outlook before turning to Monetary Policy. Since my appearance before the Committee Last july the Employment Situation in the United States has been improving along many dimensions. The Unemployment Rate now stands at 5. 7 down from just over 6 last summer and from 10 at its peak in late 2009. The average pace of monthly job gains picked up from about 240,000 per month during the first half of last year to 280,000 per month during the second half. Unemployment rose 260,000 in january. In addition, longterm unemployment has declined substantially. Fewer workers are reporting that they can find only parttime work when they would prefer fulltime employment. And the pace of quits, often regarded as a barometer of worker confidence and labor Market Opportunities has recovered nearly to its prerecession level. However, the Labor Force Participation rate is lower than most estimates of its trend and wage growth remains sluggish suggesting that some cyclical weakness persists. In short, considerable progress has been achieved in the recovery of the labor market the room for further improvement remains. At the same time that the labor market situation has improved domestic spending and production have been increasing at a solid rate. Real Gross Domestic Product is now estimated to have increased at a 3 3 4 annual rate during the second half of last year. While gdp growth is not anticipated to be sustained at that pace it is expected to be Strong Enough to result in a further gradual decline in the Unemployment Rate. Consumer spending has been lifted by the improvement in the labor market as well as by the increase in household purchasing power resulting from the sharp drop in oil prices. However, Housing Construction continues to lag. Activity remains well below levels we judge could be supported in the longer run by population growth and the likely rate of household formation. Despite the overall improvement in the u. S. Economy and the u. S. Economic outlook, longer term Interest Rates in the United States and other advanced economies have moved down significantly since the middle of last year. The declines have reflected at least in part disappointing foreign growth and changes in Monetary Policy abroad. Another notable development has been the plunge in oil prices. The bulk of this decline appears to reflect increased Global Supply rather than weaker global demand. While the drop in oil prices will have negative affects on energy we producers and will probably result in job losses in this sector causing hardship for effected workers and their families, it will likely be a significant overall plus on net for our economy. Primarily that boost will arise from u. S. Households having the wherewithal to increase their spending on other goods and services as they spend less on gasoline. Foreign economic developments however, could pose risks to the u. S. Economic outlook. Although the pace of growth abroad appears to have stepped up slightly in this second half of last year foreign economies are confronting a number of challenges that could restrain Economic Activity. In china, Economic Growth could slow more than anticipated as policymakers address financial vulnerabilities and manage the desired transition to less reliance on exports and investment as sources of growth. In the euro Area Recovery remains slow and inflation has fallen to very low levels. Although highly accommodative Monetary Policy should help boost Economic Growth and inflation there, Downside Risks to Economic Activity in the region remain. The uncertainty surrounding the foreign outlook, however, does not exclusively reflect Downside Risks. We could see Economic Activity respond to the policy stimulus now being provided by foreign Central Banks more strongly than we currently anticipate. And the recent decline in World Oil Prices could boost overall global Economic Growth more than we expect. U. S. Inflation continues to run below the committees 2 objective. In large part the recent softness in the all items measure of inflation for personal consumption expenditures reflects the drop many oil prices. Indeed, the pce price index edged down during the Fourth Quarter of last year and looks to be on track to register a more significant decline this quarter because of falling Consumer Energy prices. But core pce inflation has also slowed since last summer. In part reflecting declines in the prices of many imported items and perhaps also some pass through of Lower Energy Costs into core Consumer Prices. Despite the very low recent readings on actual inflation, Inflation Expectations as measured in a range of surveys of households and professional forecasters have thus far remained stable. However, inflation compensation as calculated from the yields of real and nominal treasury securities, has declined. As best we can tell the fallen inflation compensation mainly reflects factors other than a reduction in longer term Inflation Expectations. The committee expects inflation to decline further in the near term before rising gradually to a 2 over the medium term as the labor market improves further and the transitory effects of the Lower Energy Prices and other factors dissipate. But we will continue to monitor inflation developments closely. Ill now turn to Monetary Policy. The federal open Market Committee is committed to policies that promote maximum employment and price stability, consistent with our mandate from the congress. As my description of economic developments indicated, our economy is economys a made important progress toward objective maximum employment reflecting in part support from the highly accommodative stance of Monetary Policy in recent years. In light of the cumulative progress toward maximum employment, and the substantial improvement for the outlook of labor market positions, the stated objective of the committee committees recent asset purchase program, the fomc concluded that program at the end of october. Even so the Committee Judges that a high degree of policy accommodation remains appropriate to foster further improvement in labor Market Conditions and to promote a return of inflation toward 2 over the medium term. Accordingly, the fomc has continued to maintain the target range for the federal funds rate at 0 to. 25 and to keep the Federal Reserves holdings of longer term securities at their current elevated level to help maintain accommodative financial conditions. The fomc is also providing Forward Guidance that offers information about our policy outlook and expectations for the future path of the federal funds rate. In that regard the committee judged in december and january that it can be patient in beginning to raise the federal funds rate. This judgment reflects the fact that inflation continues to run well below the committees 2 objective and room for sustainable improvements in labor Market Conditions still remains. The fomcs assessment that it can be patient and giping to normalize policy means that the Committee Considers it unlikely that Economic Conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of fomc meetings. If Economic Conditions continue to improve as the committee anticipates, the committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting by meeting basis. Before then, the committee will change its Forward Guidance. However, its important to emphasize that a modification of the Forward Guidance should not be read as indicating that the committee will necessarily increase the target range in a couple of meetings. Instead, the modification should be understood as reflecting the committees judgment the conditions have improved to the point where it will soon be the case that a change in the target range could be warranted at any meeting. Provided that labor Market Conditions continue to improve and further improvement is expected, the committee anticipates that it will be appropriate to raise the target range for the federal funds rate when, on the basis of incoming data the committee is reasonably confident that inflation will move back over the medium term toward our 2 objective. It continues to be the fomcs assessment that even after employment and inflation in near levels consistent with our dual mandate, Economic Conditions may for some time warrant keeping the federal funds rate below levels the Committee Views as normal in the longer run. Its possible, for example, that it may be necessary for the federal funds rate to run temporarily below its normal longer run level because the residual affects of the financial crisis may continue to weigh on Economic Activity. As such factors continue to dissipate we would expect the federal funds rate to move toward its longer run normal level. In response to unforeseen developments the committee will adjust the target range for the federal funds rate to best promote the achievement of maximum employment and 2 inflation. Let me now turn to the mechanics of how we intend to normalize the stance and conduct of Monetary Policy when a decision is eventually made to raise the target range for the federal funds rate. Last september the fomc issued its statement on policy normalization principles and plans. The statement provides information about the committees likely approach to raising shortterm Interest Rates and reducing the Federal Reserve Security Holdings. As is always the case in setting policy, the committee will determine the timing and pace of policy normalization so as to promote its statutory mandate to foster maximum employment and price stability. The fomc intends to adjust the stance of Monetary Policy during normalization primarily by changing its target range for the federal funds rate and not by actively managing the Federal Reserves balance sheet. The committee is confident that it has the tools it needs to raise shortterm Interest Rates when it becomes appropriate to do so and to maintain reasonable control of the level of shortterm Interest Rates as policy continues to firm thereafter even though the level of reserves held by depository institutions are likely to residual only slowly. If federal funds rate will be to increase the rate of interest paid on excess reserves. The Committee Also will use an overnight reverse repurchase agreement facility and other supplementary tools as needed to help control the federal funds rate. As economic and financial conditions evolve the committee will phase out these supplementary tools when they are no longer needed. The committee intends to reduce its Security Holdings in a gradual and predictable manner primarily by ceasing to reinvest repayments of principle from securities held by the Federal Reserve. Its the committees intention to hold in the longer run no more securities than necessary for the efficient and effective implementation of Monetary Policy and that these securities be primarily treasury securities. In sum, since the july 2014 Monetary Policy report there has been important progress toward the fomcs objective of maximum employment. However, despite this improvement, too Many Americans remain unemployed or underemployed, wage growth is still sluggish, and inflation remains well below a longer run objective. As always, the Federal Reserve remains committed to employing its tools to best promote the attainment of its objectives of maximum employment and price stability. Thank you. I would be pleased to take your questions. Madam chair, i first want to get into measures of inflation. You touched on that a little. The Federal Reserve, i understand, currently uses an inflation measure of core personal consumption expenditures, or cpe, which excludes volatile food and energy prices. Several alternative measures of inflation exist, including one called the trim mean pce which strips out a larger basket of volatile items from the calculation. I know you know all of this. Do you think that the federal open Market Committee should incorporate alternative measures of inflation such as trim mean pce and could you explain to us the risk of not properly gauging Inflation Expectations . So let me first say that the federal open Market Committees 2 objective refers to the increase, the annual increase in the total pce price index that includes food and energy. Food and energy are very important components of every Household Spending basket and i dont think it would make a lot of sense or be acceptable to americans to focus on a measure that strips out these important components of the consumer basket. So we focus on total Consumer Prices including food and energy. But at the same time we recognize that food and energy are particularly volatile prices and in order to get a better forecast sometimes of the underlying trend in inflation we do look at socalled core inflation that strips out these measures. And in trying to understand trends in inflation and the factors impacting inflation, we look at a broad variety of measures of inflation. Although our formal index is the socalled pce price index. We look at the cpi, which is wellknown to most americans, and also to these trim mean and other measures that you cited. Youve opined on the use of Monetary Policy rules, such as the taylor rule which would provide the fed with a systemic way to conduct policy in response to changes in Economic Conditions. I believe they would also give the public a greater understanding of and perhaps confidence in the feds strategy. You stated and ill quote, rules of the general sort proposed by taylor capture well our statutory mandate to promote maximum employment and price stability. You have expressed concerns however, over the effectiveness of such rules in times of economic stress. Would you support the use of a Monetary Policy rule of the feds choosing if the fed had discretion to modify it in times of economic disruption . Im not a proponent of chaining the federal open Market Committee in its Decision Making to any rule whatsoever. But Monetary Policy needs to take account of a wide range of factors. Some of which are unusual and require special attention and thats true even outside times of financial crisis. In the original paper on this topic, john taylor himself, pointed to conditions such as the 1987 stock market crash that would have required a different response. I would say that it is useful for us to consult the recommendations of rules of the taylor type and others and we do so routinely and they are an important input into what ultimately is a decision that requires sound judgment. Thank you. In a recent speech Richard Fisher the president of the dallas Federal Reserve bank has suggested a reorganization of the federal open Market Committee. Specifically advocates for a rotating vice chairmanship of the federal open Market Committee as well as a stronger role for Regional Banks on the committee. Do you support any of mr. Fishers proposals and why or why not . Senator shelby i think the current structure of the federal open Market Committee and the voting structure was decided on by congress a long time ago after weighing a whole variety of considerations about the need for control in washington and importance of regional representation. Its of course something that congress could, if it wished revisit but i would say that its worked very well. We have a broad range of opinion thats represented at the table and active debates. The decision to appoint the president of the new york fed is vice chair, reflected the reality that the new york fed conducts open Market Operations on behalf of the system and has special and deep expertise pertaining to Financial Markets and i think thats worked well and continues to be true that there is special expertise in new york. A recent article written by two economists for the think tank e21 proposes reducing the number of Federal Reserve districts from 12 to 5 and making the presence of all Regional Banks voting members of the federal open Market Committee. The article states that this would preserve Regional Diversity while giving more authority over Monetary Policy to reserve banks that currently rotate as voting members. It also says that it could allow for greater safety and soundness and remove the uncertainty created by 19 independent fomc members. Do you oppose consolidation of Federal Reserve districts . Senator, again, this is a matter for congress to decide. The structure of the Federal Reserve reflects choices that were hammered out 100 years ago and i think the. Current structure works well, so i wouldnt recommend changes but, again, you know the Federal Reserve of the congress is it not . Play. Important roles in their communities, but again, this is up to congress to consider. My last question to you in this round. Asset threshold for banks. A recent report by the office of Financial Research shows a large disparity in Systemic Risks between the largest banks and those that are smaller and closer to 50 billion in assets. All banks above 50 billion are subject to enhanced credential regulation regardless of where they fall on this systemic important scale. Do you think the findings of the office of football inancial research, should be incorporated, considered, for a determination whether a bank is systematically significant . Well, senator, we absolutely recognize in the Federal Reserve that the largest banks and those closer to 50 billion are quite different in terms of their systemic footprint. And we have many different measures that help us decide on the systemic importance of an institution and there obviously are large differences there. In Dodd Frank Congress gave us the flexibility to tailor our supervisor supervision and regulation to make it appropriate to the systemic importance and complexity in size of a bank and to the maximum extent possible within that legislation we have tried to use the powers that we have to appropriately tailor our supervisor supervisor supervision and regulation. For example, we recently proposed extra capital charges on the largest and most systemic institutions and higher leverage requirements and those requirements would not apply to the smaller institutions. But there are many other examples, as well. Do you know of any community or Regional Bank that has caused Systemic Risk to our economy . There may have been episodes in which there were Bank Failures that had of Smaller Banks that did threaten systemic consequences, but certainly its the largest i believe you chose your words carefully. You said may have been. Do you know of any yourself and could you furnish any for the record where Smaller Banks, any of them are Regional Banks have caused Systemic Risks to our economy or to our Banking System . Would you furnish that for the record if you do . I will certainly look into it and furnish i am trying to agree with you that that they dont charge by and large, that has not been the case. Thank you. Yes, i agree with that. Thank you, madam chair. Senator brown . Thank you, mr. Chair. I have one comment about your answer to your last question about Capital Requirements that you might apply. Reports have recently played clear its made for stronger banks and more stable financial systems. Thank you. Senator vetter, i know this committee has had special interests, as senator shelby thank you for that. Madam chair, you mentioned in that opening statement, last october you gave a speech on income and wealth equality. All of us agree the best way to address that is a more robust job creating economy. What steps are you taking to incorporate your concerns about that and to Monetary Policy decisions . Well, senator brown, as you know we are very committed to both parts of the dual mandate price stability and maximum employment. We have been running a very accommodative Monetary Policy in order to promote stronger conditions in the labor market. We have been monitoring wide variety of indicators of labor market performance, not focusing on any single summary measure and in particular for example, the large magnitude of parttime and voluntary employment workers who want fulltime jobs rg decline in Labor Force Participation, part of which we understand to be or believe to be cyclical. These are things that were monitoring inging very closely. Were also looking at wage growth the fact that wage growth has really not picked up very much during this recovery i take to be another signal that although the labor markets are improving we have further to go and we want to promote full recovery. Thank you. For much of our nations economic history productiveity has tracked wages. Since p 1970s, as you know this has changed an productivity has continued to particularly in the last 15 years or so continued to grow while wages have not. How do you explain this change and what are the dangers of wages being uncoupled from productivity . Well, we have seen a significant increase in the share of the pie of gdp that accrues to capital as opposed to labor. And that occurs when the growth in inflation adjusted or real wages fails to mirror the growth in productivity. So thats been occurring now for some time and we have seen that occur during the recovery. Well wages tend to rise more rapidly in this strong labor market so i interpret part of that phenomenon as a signal a sign that the labor market is not yet fully recovered but i should also say that there are longer term structural factors that may also be afting the shares of the pie that accrue to labor and capital. I think one of these factors recent Research Fact that many labor intensive activities in the Global Production chain are being increasingly outsourced. That phenomenon i think, has tended to push down the share of income going to labor as opposed to capital over the last decade or so. There is research on this topic, so i think its a combination of structural factors but also remaining cyclical. That includes the organization of labor, of workers being organized . That certainly could include that as a factor. I appreciate the steps that you and your predecessor have made to bring Greater Transparency to the fed. As you know theres a proposal in the house and senate to go one step further and require the go to monitor the policy deliberations. What are your thoughts on that . I want to be completely clear that i strongly oppose audit the fed. I believe the transparency and providing congress and the public with adequate information to be able to understand our operations, our financial condition, the conduct of our meeting the responsibilities that congress has assigned to us is essential. But audit the fed is a bill that would politicize Monetary Policy, would bring shortterm political pressures to bear on the fed. In terms of openness about our financial accounts we are extensively addicted. I brought with me this volume which contains an independent outside auditors, deloitte and touche touches, audit of our financial statements. So in the normal sense in which people understand what auditing is about, the Federal Reserve is extensively audited. What i think is really critically important is that the fed be able to deliberate on the best way to meet the responsibilities that congress has assigned to us to achieve maximum employment and price stability and that we be able to do so free of shortterm political pressures. I would remind you that in the early 70s when inflation built and became an endemic problem in the u. S. Economy, history suggests that there was political pressure on the fed which interfered with its Decision Making. It was in the late 1970s that congress put in place the current feature of law that exempts Monetary Policy deliberations and decisions, the one area thats exempted from gao audits and i really wonder whether or not the volcker fed would have had the courage to take the hard decisions that were necessary to bring down inflation and get that finally under control, something i think has been very important to the performance of the u. S. Economy. I wonder if that would have happened with gao reviews in realtime of Monetary Policy Decision Making. So Central Bank Independence in conducting Monetary Policy is considered a best practice for Central Banks around the world. We are one of many many Central Banks that are independent and academic studies, i think, established beyond a shadow of a doubt that independent Central Banks perform better the economies are more stable and have better performance in terms of inflation and Macro Economic stability. Last brief question, madam chair. You mentioned your Community Advisory counsel. What are you doing the encourage Regional Bank president s to follow suit . Well, reenlg nap banks,gional banks are actively involved with their communities. They have Community Development programs and are really trying to address the special needs of their communities. But in washington we also encourage and have oversight of those activities and strongly encourage similar practices. Thank you. Thank you, mr. Chairman. Thank you, mr. Chairman. Chair yellen i would like to use my time going over the igrippa process that were in right now with you. The first Economic Growth and regulatory paperwork act, or egrpa review submitted to congress in 2007 states quote, besides reviewing all of our existing regulations to an effort to eliminate unnecessary burdens the federal banking agencies Work Together to work from new regulation and current policy starmts as they were being adopted. I think you know where im headed here. The report submitted to congress specifically discuss Consumer Financial protection issues, antimoney laundering issues and included recently adopted rules. However, included in the federal register put forward for this current tenyear egrpa pro guess we are now in where we are supposed to be having our financial regulators, by law, look for outdated unnecessary, unduly burdensome regulatory in the system there was i think a remarkable couple footnotes included which basically said the agencies engage this time around are going to back off. Theyre basically going not going to review new regulations that have gone into effect not going to review regulations that are currently being considered and will go into effect during the egrpa process and clarified that the cfpb is not even going to be a part of the process. The entire Consumer Financial Protection Bureau werent be a part of the process. My question to you is going to be would you not agree that we should have a thorough egrpa process that reviews all rules and that the Consumer Financial Protection Bureau or the consumer regulatory system should be a part of the egrpa process . Before i put that question to you i would like to say we had a hearing last week which was dealing with Community Banks and Credit Unions and the regulatory burdens that they face. I asked the witnesses, and every one of them said that in the set of rules and regulations that they feel are creating pressures are rules and regulations coming from the Consumer Financial arena, coming from the antimoney laundering arena, and coming from the doddfrank legislation that is recently enacted. Which would be exempted from the current agencys review. A couple of examples they gave were the qualified mortgage rule that needs to be reviewed the volcker rule that needs to be reviewed and yet, all of this is apparently outside the scope of the entire grip of process that the agencies are now undertaking. Could you respond, please . So in the rules that have gone into effect or are in the process under consideration and will go into effect related to dodd frank we had federal register notices took public comment, and important part of designing those rules, was considering the costs, the burdens and what was the most effective and appropriate way of designing regulations to meet dodd frank objectives. So in the sense, what a grip asks of the agencies is something that we have gone through very recently in the process of designing regulations in some cases that have not yet even gone into effect. Would your answer be the same for the Consumer Financial Protection Bureau because its new that we dont need to review its rules i cant speak to we dont have that Rulemaking Authority and im, sir, i cant speak to what role the cfpb is going to play. I understand the argument. Thats the argument we got from the regulators before us two weeks ago in our hearings. It seems thats not what egrpa says. It doesnt say lets review the rules and regulations that are old. Its says lets review them all. Thats what law was passed to do. If you look at the dodd frank legislation you were saying has recently been through the process or rules and regulations through the process, the dodd frank legislation was 848 pages long but the page count of the regulations required by dodd frank has mushroomed to more than 15,000 pages and theyre not finished and over 15 Million Words of regulatory text. And to say that the fact that they are now, and the fact that the implementation process has been completed on them i dont think is a satisfactory response to the requirement of egrpa that the agencies need to look at their regulations and identify those that are unnecessary or unduly burdensome. Well we are Holding Public hearings and well be taking extensive public comments. You mentioned Community Banks. We are very focused on trying to find ways to reduce the burdens on Community Banks and during this process well be very sensitive to looking for ways in which we can reduce the burden of regulation and well be reporting back to you. Thank you. My time is up. I would enkourmg you and the other federal regulators to focus on the full intent of egrpa and expand your review. Thank you. You youre watching live testimony of janet yellen on capitol hill. Well be back shortly. Youre watching day one of live testimony of the feds chair janet yellen on capitol hill. Lets bring in Steve Liesman discussing the theory of bank raeg glation. Seems from a market perspective the big news here is that theyre defusing the longterm style of guidance and moving very much to a meeting by meeting, rate rises could come at any meeting, change at any meeting although not for the next couple months. Yeah. Not just yet would be the way to say it. When they start doing it it will be meeting by meeting. Thats yellen talking against the way that rates rose earlier this century by quarter points 2003 2004 2005 when they did it in a predictable way. Yellen saying it could happen meeting by meeting, paving the way for possibly removing in march but not saying that will happen. She just said during the break, simon, theres an internal review going on at the federal government following allegations essentially of problems with supervision and regulation at the new york Federal Reserve bank and wla theyre looking at is whether or not dissident views can reach higher levels inside the fed. Theyre trying to deal with some of the ideas of whats called regulatory capture at the Federal Reserve, simon. Talking about that everyone on twitter is talking about what the font is on her name plate. Lets get back to the fed chair. Clearing houses that would take bilateral transactionses derivatives, swaps, and put them on a multilateral basis but that introduces a degree of risk in terms of clearing houses themselves. And i just want to, obviously, put on your screen which i think already is the sensitivity that we have to continued oversight of these clearing houses both our own and others across the globe because of the potential systemic problems. Can i just put that on the table . Absolutely. And i want you to note that im were very attune to the need to be careful in our supervision, that weve taken the step forward, i think, as you mentioned, in moving a great deal of clearing to clearing houses. Eight Financial Market utility sies including the most important central counter parties have been designated by fsoc as systemically important Financial Market utilities and they are being supervised by the Federal Reserve. Those based in the United States. The fed, the cftc and the sec. There are a set of principles that haven been put in place and agreed globally for what best practices are in terms of lick liquiditity standards and other Risk Management standards for the Financial Market utilities and it is extremely high priority for us to make sure that we vigorously enforce those standards and were in the process of doing so because although these entities reduce risks that were previously present, they create their own risks if theyre not appropriately managed. So completely agreed this is important. Were giving it a great deal of attention. Thank you very much. Senator corker. Thank you, mr. Chairman chair yellen thank you for being here today. Theres a push right now to add a provision addressing currency manipulation in the Asian Pacific trade deal. Do you think trade negotiations are an appropriate place for these currency issues and what if such an effort leads to the inclusion of International Arbitration panel under tpps enforcement procedures where companies or other nations could challenge future Monetary Policy decisions by the fed . So let me first say that i think currency manipulation that is undertaken in order to alter the Competitive Landscape and give one country an advantage in