Transcripts For CNBC Squawk On The Street 20170109

With stocks and the march to dow 20k, as you know was less than a point away from making history on friday. Plus, coke and p g getting downgraded to sell this morning over at Goldman Sachs. And a busy week on capitol hill, confirmation hearings for the president elects cabinet picks are ready to get underway. First up, once again the dow will take a shot at hitting 20k. Theres a call out of goldman not helping a pair of blue chips the Firm Downgrades coke and p g to sell saying it sees headwinds from a stronger dollar as well as sluggish and market demand. Not often you get two sells on two dow components from one firm in one day. These are companies these are Great American companies. Its obvious that this is a call setting self up for much Stronger Economic growth. Now, it is the wrong time for the call because Interest Rates are down big today. So thats going to put pressure on the banks. So if were trying to get to dow 20,000, you may see on the tape in the bottom a lot of good things, but you lose proctor, you lose cocacola and you lose Goldman Sachs and you lose j. P. Morgan, youre not going to get where you need to go. Im predicting no special. You said friday it looks like were asking too much out of goldman. Yes. I mean, theres 12 Companies Need to increase double digits in order to get back to where they were. Why do we keep asking goldman to do so much . First of all, they dont even have gary kohn anymore. No. They dont have a repeal of the volcker rule yet. Not yet. I felt Lloyd Blankfein is probably sitting back watching the giants lose and say i just threw that in as a completely gratuitous reference. Yes, you did. But how much do we have to do here . Took you about 30 seconds no, actually, were two minutes into the show. I tried to get it in earlier but you started talking about the downgrade. Threw my game off. I did talk about the downgrade. But goldman has given us plenty, hasnt it . Its given us all shes got. Its a scotty situation. Not scotty wapner which i will be on again today for another gratuitous plug. Ill set my vcr. How do you program a vcr . We had the momentum going into that moment on friday, where do they get these hats so quickly . Theyve had them ready. I have an eagles cap. Still waiting on that one. Yeah, thats one thing both of these goldman calls is a reminder of forex head winds, right . Yeah, its about time. Holy cow, people have really overlooked this situation. In the zeal to like whats going on, we forget that the numbers have to come down for a lot of these companies unless you get a tax reform immediately. And its very clear thats not going to be the case. Right. British pound. Oh, my, the british pound. Talking about currency. Press conference was all about immigration. Wasnt even about like economics. It was like, listen, we have to do this now because of immigration. And immigration is code, i think, for saying what were really after here is not better economics. Were here for fewer workers. Yeah, thats a big move. When you see a currency down over 100 basis points as that is right there. Shaky. I was shaking because i just look at this pound and i think what is going to happen . Sara and wilf this morning talking about inflation in britain, but the wrong kind of inflation. I dont think thats so far off the market. The journal takes a crack at arguing whether the rally has just begun. Did you see that . If you look at the outflows of bond funds from the beginning of 14 through october, 381 billion investors bought. They just bought this notion of secular stagnation. There were probably 47 articles about why nothings going to happen and then there was that piece. I know. Almost every article in conventional media has the same tone which is, look, this is not going to happen. Theres this tax reform and its not going to end and i saw ken griffin talking about they had a code but nothing was going to happen. And then theres this article, hey, listen, were only in the beginning. I looked at that piece and said where you bean, partner . Quite a rally since the election theres been a this dows had this big move. We have. We have. Should it be scary for people who suddenly have been weighted more towards bonds during much of this rally and say now is the time . Well, this is good timing. You have a nice rally in bonds if you want to try to exit, this is as good a time as any. It is. It is. And also another story today been very strong. Look, i think things that matter are oil. And you dont want to see oil stalled. You need to see rates go up because this is a bank led rally. And you need to be able to see quick repatriation because the companies that have the most overseas have the most to lose from the strong dollar. And those are the things im thinking about away from takeovers. All right. Were going to watch all of that of course we said earlier its a big week for the president elect. His cabinet picks head to capitol hill for confirmation hearings. Tomorrow it will be attorney general designate senator Jeff Sessions and wednesday is Rex Tillerson. Of course secretary, tillerson said to be the headline on this slate. Tillerson, you have the headlines last week, president elect admitted there was hacking this weekend. I thought that was interesting. But i do believe that tillerson is going to be a referendum on this notion of russia and friendship and notion of putting someone in state that has no state experience and really very much i think this is it. This is the hearing well talk about how quickly much of the agenda is going to go through . I got to tell you i dont really know. I know tillerson as a ceo, all right. And i know thats a mere relevance, look at how they did in the downturn. This thing didnt blink. But thats not exactly what qualifies you as bog gi bottom. Right. But shouldnt we be waiting until we really see the Economic Team take shape to sort of focus on the things that at least our audience for the most part has interest in and are the subjects we spend most of our time discussing . I debated that issue. Im so glad you brought it up. I was thinking everyone was the Economic Team, whether it be poster or labor, tillerson or state, these are all Economic Teams. Of course he could make decisions on weapons programs. Thats true. That will have an impact. Historically by the way hes a grunt, so to speak. Hes not about big weapons. Hes about training a force to be able to deal with precision. Ive got to tell you your point i guess is if Lindsey Graham and john mccain and perhaps the democrats entirely and one more republican decide to go after tillerson and that gets bogged down, then you could see the agenda right. Delayed. Thats the dominant fact that makes dow 20,000 talk would be off base. Youve crystallized it better than i did. The senate does not have a lot of trump republicans, so to speak. And i think that those hearings last week were really in the face of a trump who was trying to have real politique. It seems to be not the theme of some of the leading republicans. Yeah. Politico has a nice parlor game this morning arguing or asking whether or not khon will outshine mnuchin in terms of getting all the attention. Said one washington insider late last week, quote, if youre a ceo or the head of a bank or whatever, are you going to pick up who are you going to pick up the phone and call . Gary is someone you already know. Youre going to call gary. Mnuchin is an easy guy met in passing, but gary khon is a visible guy. Much more broadly known than is mr. Mnuchin within at least the community the business community. We have had moments where the treasury secretary george w. Bush. Looking, if youre looking to finance a film, mnuchin will tell you the ins and outs. Things he did. No, actually, he did some things for the first time that are important that other studios are looking to do in terms of selling ahead part of the slate to get a Financing Deal for it to take risk out. Things like that. Are you going Golden Globes here . I am not going Golden Globes. I am just talking about that. Do you think cohn will be on the heads up in 2017 . You are getting ahead of the story why is that ahead of the story . Thats next year. Because he just got this job. Just thinking. I like the way hes thinking. Sure. Thinking ahead. First things first. When we come back, lots of deals to get to this morning including a well known american brand. Also ahead the auto industrys future and the trump effect ford ceo mark fields will talk to us live from the detroit auto show. Look at the premarket. You already know we got to 19,999. 63 on friday. Bit of a weaker start on this monday morning. More squawk on the street from post nine after the break. Welcome back. A number of deals to tell you about this morning. Does it qualify for merger monday . Well, you can decide. The biggest of which is the decision by Veterinary Centers of america or vca inc. To sell out to the mars family. Now, when we hear mars you may think candy bars or wrigley c w chewing gum, but the fact is that perhaps as much as 50 and soon without a doubt more than 50 of this companys earnings come from pet care, pet food and things of that nature. A growing area that my colleague, mr. Cramer, knows a lot about. As for this deal this morning 9. 1 billion cash deal, that does include debt of about 1. 4 billion. If youre a vca shareholder, woof is the symbol. Youll get 93 a share. The multiple 18. 5 times last years ebitda. And that does rank as a significant multiple, the last deal done. Those smaller and a lot of these hospitals thats what they own, vca is about 800 pet hospitals and then also testing facilities, lab facilities, which are a key as you might imagine for pets because they dont talk and so you really have to do all sorts of tests to figure out what may be wrong with them. The last deal done, jim, was about 13 times. And, again, private equity been very involved in this. This will be the biggest player. Mars already owns banfield. That is in a lot of petsmarts. These are stand alones. Bob anton, the guy who runs this Company Founded it over 30 years ago has been running it all this time deciding this was the time to sell, im told they were approached at the end of november, a very significant premium above the current stock price. Again, that multiple being as it was they said we will take the money. He though will go on with his Management Team to continue to run this company as a part of mars. Which again you think candy but really you should be thinking pets. Yes, and iams. Yep. One of the things weve been emphasizing over and over again on mad money is the humanization of pets. Henry shine which thank you introduced me to which is diagnostic. Pets is probably one of the Fastest Growing secular story in the world and a lot of it has to do with the idea that we spend more money on pets than anyone realizes. This is a breakthrough deal because what it does is confirm that thesis. Ive liked vca for a long time, but my favorite has been idex. Had them on two weeks ago. This is not that great for them because theyd be competitors, but it does verify the industry is worth more. Vca a very fine company. The amount of money that we spend on hospitals remember, its not like medicare. This is cash in the barrel. Yeah, im learning that of course as a new owner of a puppy. Oh, my gosh. David, you might want to be it is unbelievable. Just two vet visits already, man, its brutal. David, let me tell you something. One of the things i like about vca is pet university. They have pet university. Its very good business. They have teaching hospitals. Online. Oh, okay, pets at home. But this is an explosive area. And i have to tell you that idex is the king. But the fact is that this woof verifies that people this is people sleeping with their pets. Thats been the big story. Right, the pet has moved or the animal moved from being on the farm to being in the yard to being on the couch to now sleeping in the bed. Yeah, mine sleep with me and its actually quite crowded in there. Bug, everest and lisa and me. Youve got two, right . Yeah, one of them snores. Its a terrible scene. While youre talking it is the auto show week. And Fiat Chrysler made some news this morning saying theyre going to invest 1 billion in u. S. Plants, create 2,000 jobs, three new jeeps, mostly michigan and ohio. The president elect tweeting a few seconds ago. Really . Says its finally happening, Fiat Chrysler Just Announced plans to invest 1 billion in michigan and ohio plants adding 2,000 jobs, this after waiting for his followup, ford said last week it will expand in michigan and u. S. Instead of building a billiondollar plant in mexico. Thank you ford and fiat c. Wow. This stuff is happening very quickly in terms of some folding, some not. Its not much of a stand because cruze isnt really imported here, but i do think some of this is working. Some of the, i dont know, really con the jawboning . Yeah. Its so much cheaper to make cars in mexico. Onetenth the cost in labor. Yeah. Overall cost about plant operating is 11 labor. What it is is currency. I think the president elect is beginning to understand currency. Im not i didnt mean that the way it sounded. Being understanding currency is the big issue with china, with europe, certainly with mexico with the peso at 21. The fact its not labor, what really does matter is this incredible, incredible advantage they have over the peso with the currency. And thats really the reason why youre seeing just the headlong rush down there to the areas where the japanese and germans completely love to dominate. And they ship right up through ksu and union pacific. Were going to talk to mark fields of ford in a few moments. First, lets get to the bond pits and check in with Rick Santelli at the cme in chicago. Good morning, rick. Good morning, carl. We are continuing to see a drift in rates and a drift in the dollar although the dollar has been a lot choppier than many would have thought especially for the new year. Look at intraday of ten, were down a half a dozen basis points. If you look at a oneweek chart, keep in mind, you know, we settled a year at 2. 44, trading now around 2. 37. Weve been a little lower in yield. Last weeks basically onemonth low yield close was 2. 34. Thats what traders are paying attention to against the backdrop of that big 2015 close right above 2. 25. Dollar index of course has been interesting but before we get to that, the spread between our tens and the overseas tens continues to narrow. Look at the chart since november 1st. Many are continuing to watch as the tug of war between the opposing policies by Central Banks is taking a bit of a toll on the marketplace. If we go back to Foreign Exchange, an early november chart tells you about erg you need to know. Since we went through 100 it really has been the type of formation where its two steps forward, one step back. And finally, lets look at the euro versus the dollar. Nothing cements the notion of where youre offsides better than this chart from november. 1. 04 clearly the line traders are going to protect themselves against in the trade. Carl, back to you. Thank you very much, Rick Santelli. When we come back, cramers mad dash, countdown to the opening bell, another look at the premarket on this monday. A lot more squawk on the street from the nyse straight ahead. One arge busineses the wlr e ev a about six and a half minutes before trading begins here on a brisk monday morning here in the northeast. Where are we headed . One of my favorite analysts on apple is Katie Huberty saying people are too focused on the nearterm supply chain, meaning the iphone 7 is not that strong. Shes talking about the iphone super cycle, usually fear that word its so bullish in china but cash repatriation, theres obviously a lot of hope there. And youve got a situation where u. S. Tax reform could help, but not as much as others. David, the main thing about this piece is we forget its a very cheap stock with a lot of catalysts. One of the things thats hurt the stock frankly is everybody recognizes that it didnt deliver. Tim cook obviously on paid salary kpcompensation was not what might have been. 118 you do get that breakout. This is a dow 20,000 stock, you need this stock to burst through. What about the journal today a column talking about their lack of traction in a. I. Despite originally with siri being seemingly ahead, they havent done it and this column argues they need to. I often find that these articles are well behind the times. We all know about google and what theyre doing. We all know about amazon and what theyre doing. So when i read that piece i did say, yes, thats verification of what we knew apple. Has apple really fallen behind . Apple has honed but some of the devices really are the amazon device is really quite exciting. A lot of people i know have got that. But what this says is stop worrying about nearterm concerns you hear about the 7 not doing that well. Focus on the 8. If you focus on the 8, then youve got a stock 12, 13 times earnings thats really, now get this, ten times ten times 2018. Ten times. All right. Well, thats not where the market is trading. Much higher multiple there. Well be focused on the opening bell a few minutes from now. E u ur tol fluebebe. s aat idtualde mt s . Heedgehe thiswim s pe ariad ier ers. Heedgehe thiswim s pe ariad ier d my. Yoedooubr. Ders, asclicks s pe ariad ier heagilnoe aru lyprprti isetenng t ananr d t. R neng ring reretimetrad a as ast heagilnoe ini adcave aru lyprprti ann isetenng t ananr d t. Youre watching cnbc squawk on the street live from the Financial Capital of the world. The opening bell in just about 90 seconds. Busy day, busy week as earnings season will kick off with the banks on friday. Pounds at a twomonth low which we mentioned. Rosengren, one of the great doves on the fed, not a voter, with some comments at the top of the hour saying the pace of normalization needs to accelerate this year. Unemployments at a target, inflation probably targets the end of 2017. Music to j. P. Morgans ears. Obviously you have a stock thats done a lot of heavy lifting dow 20,000, that really needs those rates up because it doesnt cost them anything and they get this giant windfall. Remember, theyve been saying publicly four rate hikes equals 3 billion. And that would if you take a look at the stock, its truly a parabolic move. You need to see rates continue to go higher. Thats not happening today, but these comments certainly do help. He says three hikes reasonable. And that overshooting would put the recovery at risk, right . I think the dollar skyrockets. I hope we get some repatriation or youre going to see number cut. There are very few companies that can sustain this. Cocacola, by the way, which was downgraded, they are hedged euro and yen. Dont freak out about the euro, but emerging currencies. We will see repatriation it would seem, just a matter of when. Yes. When. We got that downgrade p g at goldman, downgrade at coke, apple a top pick at morgan stanley. Very significant because the price target and the earnings big increase. They are connected with apple. They are very much connected with apple. Lets get to the opening bell. [ bell ringing ] and the s p at the bottom of your screen. At the big board, pama, at the nasdaq the Muscular Dystrophy Association doing the honors. Nvidia had a ton of news in vegas regarding a. I. Cars, some delivered within a year they say. Nvidia obviously had that bizarre spike on the second to last day of the year been trying to recover from, but nvidias got volvo, tesla, audi is really the chief and once again with phil and what audi is willing to do. In the end remember this is a Company Involved with gaming and data center, Artificial Intelligence machine learning. If we focus too much on Autonomous Cars, were going to miss the big story because Autonomous Cars could be further out. The fact is three years ago when i met with the fellow that he interviewed today, they were talking about how if you smash open an audi, which would really be a crime, youre going to see a tremendous number of nvidia chips fall out. Thats where they were first in. Known as engineering marvel. Report today in the journal also talks about alphabets Autonomous Vehicle unit now creating almost sets of sensors that they will sell to others. Oh, boy do they have chips. Waymo. And lasers. Or otherwise said lasers. But there were many stories about Many Research notes of late about how this will be the other bets quarter for google, alphabet. Alphabet some people calling a value stock. I know that sounds facetious, but remember they have tremendous amount overseas. Do get hurt by the way by a weak euro. If theyre able to do that. If ruth po rat able to see Revenue Growth in that end which has been very little, then i really think youll see a stock take off. My travel trust owns it. We talked a good deal about of course that large m a transaction in pet health care. But there was another deal today, and that stock also moving dramatically. Ariad Pharmaceuticals Going to be acquired by taketa, a roughly 75 premium. You can see where the stock is up almost that much right now. It is cash deal as you might expect. Total value including debt about 5. 2 billion. This for a company that has commercial stage oncology drugs. They arent there yet though. And for their part at suntrust they say it represents about 2. 6 times their peak revenue multiple that 5. 2 billion number, just to put it in some perspective probably paying that kind of a multiple to peak revenues not going to see anybody else show up to try to buy this thing. Big number. And whats really incredible here is that stock had a very big dip. Why was it . Because it does very expensive drugs. This is not a traditional bristolmyers, merck situation, they do have a hope for more than just orkin but people thought this would be under attack no matter who won for president. So this is perhaps verification we were too concerned about pricing away from generics. Remember theres two kinds of price increases were seeing. Theres the price involving orphan and youll hear j. J j. J. Bienaime about hemophilia, but still first generic, no relief on teva. A possible generic challenge which is really theyre a key branded drug. Right. I dont see any relief when it comes to pure generics. I see the orphan drugs people are saying, listen, those are worth buying right here. Thats a very important takeover. A lot of rumors by the way on that last week turned out to be true. Turned out to be correct. Leading the dow this morning is American Express which gets call at b of a, a call you said you like. Yes. Very much so. American express traded in the 90s when had same trading power. The idea that this thing shouldnt sell back at the same multiple it had in 2014 seems wrong given the environment is better for travel and entertainment. Makes a huge amount of sense. I think the stock could go to 80 rather quickly. You mentioned the apple call this is tenyear anniversary of jobs unveiling how do you like that sfl. I was watching video this morning of jobs on stage and he has pictures of blackberries which is what we were using at the time. He said were going to get rid of all the buttons and a giant screen. I happened to be going through my drawers this weekend and saw my flip phone from ten years ago and just thinking was it a motorola or no, it was a shoe phone. What was it . It was a motorola. Motorola solutions doing quite well. The largest deal google probably did was that motorola purchase, remember . I tell you, time flies. But i got to tell you if apple can break out here were going to have to spend a little time tonight doing something maybe related i dont want to jinx dow 20,000 like jinxing the super bowl between the giants and pats, you dont want to get out there and say that stuff i think you just did. You mentioned a big part of Morgan Stanleys call on apple as you said, jim, china. Right. Also in the news regarding mcdonltds today as they finally get a buyer in for their controlling stake in their chinese stores. Its funny that mcdonalds stock reversed heavily last friday after a downgrade. And i think that im not saying anybody knew anything, but im saying that mcdonalds is an exciting story if you believe that the that there can be an acceleration of same store sales. A lot of people feel same store sales have peaked and a lot of people recommending qsr, which is burger king. Some people recommending wendys. Im still a believer in easterbrook, the stock did have quite a run but could go back to alltime high without a problem, but the problem is dollar is an issue and same stores. But problem i meant the fact animal spirits involved. Worth mentioning in my Old Neighborhood of media that viacom has had a very good year so far. Yes. Up 10. 4 . I think this mornings its gotten an upgrade or certainly some very positive comments over at j. P. Morgan. Stock up another 2. 6 . Of course remember theyve got a new ceo at the company which will remain independent or so to speak certainly still has the same Controlling Shareholder but no deal with cbs. Bob bakish has already done a lot of things there as ceo in terms of removing people he didnt think were getting the job done and putting in new people. Plenty of challenges ahead for the company, but slate financing expected in the nearterm there. I mentioned that earlier associated with our incoming treasury secretary mnuchin having done that. Right. But this is something that gets done. I think viacom expected to do that at paramount for its upcoming slate. But beyond that, you know, perhaps some new momentum hoped for at viacom in terms of the networks, in terms of having a better relationship with their Distribution Partners being on the overthetop platforms we talk so often about. And being able to deal with a company that is still 3. 7 times levered. So well have to do some things as it looks towards a roadmap of getting back to Investment Grade or getting to Investment Grade. Cbs has a big move in the last few cbs had a good year last week. A lot of people talking to me about this this weekend, can you find out what does it mean when you have a tremendous number of lobsided games on this weekend for wild card weekend, does that impact things . A bcs game tonight if it is not exciting, does it mean anything . I know i dont have a quick answer to that. I dont think it does in isolation. Its sort of more season by season kind of thing. The questions on cbs are you too wedded to retran sports and then whats the year going to look like without political this coming year given the spending that went on last year. Those are more of the questions there. But particularly retrans can you continue to put up those kinds of numbers on retransmission youre getting. Okay. And will sports continue to be the draw it is . Or in this world we talk so often about where some say only 10 of households really want all that sports programming as you have disparate choices that can be made up of Entertainment Networks the likes viacom can offer without any sports along with many others, does that start to hurt . Certainly worth keeping an eye on because i know this group were always focused on acquaintances of trump and what will happen with time warner. Because a lot of people feel what will happen as time warner goes away theyll leave that money available to go to viacom, to go to cbs and to go do disney, which by the way is up 109 well, its moving. Time warner, in other words if it gets bought out people will redirect the money yes. Thats dedicated money. Sometimes. Sometimes it does. It will be very interesting. Hard to imagine. Well see if that deal if the president being against it doesnt i shoui should reserve comment until we get there. There will be a department of justice. Youve done a lot of work on that. As for whether theyll be an fcc i cant argue. But that deal doesnt really require much in fcc approval because theres barely any licenses to speak of. Its really about the doj. I feel when we look at disney i think about the optionalty disney went from a story at 93 worry about espn. Remember that 100 million subs and subs keep dropping to an optionalty situation where suddenly espn is exciting because it might be in play, disneys stock a leader in moving the dow since the election. Finally, on antitrust, just a quick look at our biggest m a story of the morning, woof up about 28 , but trading about 2 plus below the 93 share price. Not going to close until the Third Quarter of this year. And there are some who say is there any antitrust issue there. Right. Apparently there are about 27,000 veterinary hospitals in this country. Yes, exactly. A combination will represent about 1,700 of them. So they do not expect to have any real issues. Maybe they get a second request, but on antitrust its seen as most likely being fine. And people who do have pets know the brand sheba for cats, they know iams, dont realize how much money is spent there are countries where its of course a Big International company. You can expand countries like brazil global acquisitions are a big part of this. Yeah, for mars. The one thing i think people have to recognize is mars has a Balance Sheet because its a private company. I want to say brazil has the highest per capita concentration of dogs. Yes. It absolutely does. Rio it was a huge thing. People have three or four dogs. Emp. And i think when they start spendsing on it the way they spend here it will really change things. I know that idex is the way to play it if you are not concerned about, you know, mars coming in and taking share. And dont forget henry shine, which does diagnostics and a lot of this is diagnostics. Its a great market, the pet market, humanization of pets extraordinary how much people care. And the amount of money they spend per capita for pets every year goes up rather dramatically. Yeah. Dows down 57. Apple closing in on 119 now. Lets get to bob pisani, bob. Good morning, carl. Happy monday everybody. Going the other way on dow 20,000. And thats because i think modest geopolitical risks still out there. Teresa may talking about a somewhat harder brexit over in europe causie ining little prob there. Look at european stocks though for the moment. Of course the weak pound helps out european british exporter. So you do see British American tobacco, anglo american, unilever, all doing a little better. Mostly on the downside particularly true among italian stocks and european banks there you see the flipside of that argument about brexit. Here in the u. S. Bonds up, stocks generally to the downside. Thats putting some pressure on banks. But were also seeing some pressure on some separate groups here. Energy is weak here as weve seen oil down and natural gas down. And thats putting a lot of pressure on the natural gas names, your chesapeakes, southwesterns are also weak. And industrials and materials are weak as well. Look at some of the Big Industrial names. Industrials have done better recently on some hopes and beliefs, some evidence that the Global Economy is improving. If that becomes an issue here, those stocks are going to reverse and here you see most of those Big Industrial names to the downside here. Whats going to take us to the next leg permanently over 20,000 on the dow. Well, a lot of people are talking about earnings. They begin in earnest on friday, see big banks here theyll all be reporting on friday. And the question is how you get over that this dow 20,000 level here. S p 500 earnings right now going to be up about 11 for 2017. Thats the hope right now. Thats a 10 gain. But this has not changed. The estimate since before the election nobodys increased their earnings because no one knows how to model the trump rally right. And thats part of the problem that weve had. People who are making guesses, leon cooperman was on our air last thursday and said 132, well, we could do better. We could go to 140 in the s p 500 if the full package of tax cuts infrastructure comes through. Thats an educated guess on his part. A lot of people think so. And that might be very important overall. Right now the Dow Jones Industrial average average down 60 points. Guys, back to you. All right, bob, see you in a bit, bob pisani. When we come back, ford ceo mark fields live at the detroit auto show. Dows down 58 being led lower by some of those stocks that were downgraded today like proctor and coke, but actually exxon is the worst performing dow component. Back in a minute. At t opi sin l. It . Omheue s . T it . Worlds biggest automakers gathering in the motor city for the detroit auto show. Our phil lebeau is there with ceo mark fields of fords. Hey, carl. Lets bring in mark fields. Behind us the new f150, but you made a new announcement, return of the ranger and bronco, tell me a little about that. Well, were going to be bringing back the ranger in 2019. Were bringing back a name plate beloved by a lot of our customers and a vehicle that is affordable, is functional, is more maneuverable. Little smaller. And a little smaller. And of course built ford tough. We also announced were bringing back the bronco, our 4x4. Did you wait too long on the ranger . Because that market, the mid size pickup truck market has been red hot. General motors has had a lot of success there, and toyota. Did you wait too long . Not at all. We have a number of priorities like redoing our f150, our new super duty allowed us to grow that business, 40 years in a row of leadership. We just finished the launch of the super duty. We talk last week about you japing plans for the new plant in mexico. How much does this continued uncertainty about the trade policy, whats going to happen with nafta, does it cloud the possibilities of what youre going to decide to do . In other words, are you guys in meetings saying we think this is going to happen, were going in this direction, but lets be honest were not sure . Well, in our business were a long lead type, you make investments and two or three years later they start coming to fruition. In the case of the canceling of the plant in mexico, we did that simply because we didnt need the capacity anymore. Small cars were coming down. As we plan our business Going Forward, we look at a lot of factors, one is the trade environment and also tax policy. And we have to take that into account. In the meantime, we have to make decisions. So, you know, were in meetings and were talking about these things. If the tax policy is redone so that theres more of a tax credit, if you will, for exporting vehicles from the u. S. , would you build more vehicles in the u. S. . Or are we looking at its cost prohibitive to a certain extent. Well, first off, we have to step back. We dont know how the tax policy is going to be reformed. We think theres a good likelihood it will. But wooe were a global multinational, we have facilities around the world. We want to use them. At the same time though we think the tax policy, the blueprint thats out there with border adjustability, thats interesting because we are the number one producer of vehicles here in the u. S. And a top exporter. And jim cramer has a question for you, mark. Jim, go ahead. Mark, always good to see you. Enjoyed your commercials this weekend in football. I need to talk to you oh im sorry, go ahead. I love those commercials. I know. They were throwbacks. Autonomous cars, i went out to see your lab out in stanford, theres a lot of people who say, listen, autonomous driving, this is something thats going to happen within two years. And theres other people who say forget about it, this is five, seven years out. Mark, obviously theres a lot riding on this both for the Semiconductor Technology industry and for ford. Could you just tell us how realistic is everything involving autonomous . Well, its a great question, jim. First off, its real. But i think in our industry the word autonomous is being used very, very liberally. Theres Different Levels of a autonmy. We said a level four vehicle in 2021, no gas pedal, no Steering Wheel and the passenger will never need to take control of the vehicle in a predefined area thats been mapped. Thats what were shooting for. Geez. At the same time youre talking about the city of the future. You had mayor bloomberg on. Uhhuh. Youre going to be talking with him and some other leaders today. I hear back from people on wall street theres so much investment thats being thrown out there, im not entirely sure how to value an automaker. Well, these days. Valid point . Well, these days, actually, i think any company should be valued on having a point of view of the future. And then making sure theyre putting strategies kp plans in place to be able to grow the business and create value over time. Thats what we talked about today. We talked about our vision for the city of tomorrow and how we can bring assets to help solve societal issues but also open up Growth Opportunities for us. And in your eyes you have the growth that can be there, not just as an automaker but other forms of transportation . Yeah. This is looking at new Business Models for us. For many years our Business Model was selling a vehicle. You know, every couple of years. Now our Business Model Going Forward is that, but also how about the usage of our product and how do we gain recurring revenues that maybe are more stable through cycles and are just added and accretive to our business. Mark fields, ceo of the forld motor company. Jim, you liked that commercial, only thing you liked this weekend. Lions lost, giants lost know what the conclusion would be. Everything else was foregone. [ laughter ] incredible. Phil, thanks to you. And fields, thanks so much. When we come back well talk more about these markets. Dows in a narrow range to start the day down 55. Dont go away. Thatro time for cramer and stop trading. A piece out today by ubs, could be turnaround story of 2017. Can you guess which stock . Its salesforce. Wait a second, turnaround . Company reported a blowout quarter, went up to 77, came down to 67, now working its way back. What i think is interesting is if they can take m a off the table, sorry people who are on twitter because thats what wi the of, then they talk about a repurchase, talking about a price target of perhaps 124. This would ignite a whole section. I dont know how you get to 124 without m a and a takeover bid. I think this is an important piece because this is the group trying to make its way away from f. A. N. G. , the cloud business, and im surprised this stock isnt up because its one of the most bullish pieces ive read in a long time. Whats on mad tonight . We have jci. Im trying to feature some of these Industrial Companies that people are so excited about. Weve seen emerson get upgraded today, rockwell, eaton. Well, Johnson Controls should fit that profile. But ill tell you, you got to have numbers first. So lets see if they do have the numbers. Yeah. Got a new alltime high on rockwell. What an exciting time. I got to tell you. I just cannot believe apple finally breaking out. Thats very big. Jim, see you at 6 00. Yes. Mad money on cnbc. When we come back were going to go back to the detroit auto show. Live interview with toyota north america ceo jim lentz. Dows down 53. Good monday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sara eisen, david faber at the New York Stock Exchange. Couple things working against the markets early on this monday. Couple high profile downgrades of p g and coke. Oil is down more than a dollar but a big week still ahead. Fed speak, earnings begin on friday and confirmation hearings in d. C. Our roadmap for the hour begins with a pause to the march to dow 20,000 pulling back this morning after coming within a point of making history on friday. Well talk Market Strategy straight ahead. And as carl said its going to be a busy week on capitol hill as confirmation hearings for the president elects cabinet members get underway with just 11 days until the inauguration. Donald trump tweeting at the automakers were going to go to the detroit auto show, talk with the ceo of toyota north america. But first, with just 11 days until president elect donald trump is sworn in, the dow pulls back from that historic 20,000 mark. Were joined now at post nine by chase economist anthony chan and cfras investment strategist lindsey bell. Good to see you both. Nice to see you. Lindsey, why does the market have so much trouble hitting that big round number of dow 20,000 . Well, it is a really big round number, but lets not forget the s p 500 hit a new alltime high last week. So we are overall positive on the market for the year. But we think it could be a bumpy road ahead. For instance, one of the first hiccups could come after inauguration. Theres a significant amount of uncertainty about the policies and how they will play out. And when you think about that and you couple that with the fact the s p 500 is up over 6 since the election day, thats three times as fast as normal by historical standards. Trade k at premium valuations here and Fourth Quarter Earnings Period should be all right, but risk remains towards the outlook. Were a little bit cautious right now. Yeah, some High Expectations certainly, anthony. Do you agree that there are also some pretty high uncertainties and maybe the market got ahead of itself . There are some uncertainties out there, but as lindsey pointed out not only is the market up 6 from the election, but if you counted before the election and saw the big plunge after the Election Results came out, so all of this is playing there. We obviously are digesting what happened in britain. We are moving a little bit closer towards a harder brexit. Were obviously seeing some geopolitical risk in asia. So theres a little digestion thats going on. But theres no doubt in my mind that with all the things being proposed even if more than half of those get proposed actually get enacted we will see in fact things working out well for this market. Give you a number, if you look at that Corporate Tax rate going from 30 to 15 , every percent adds at least a 1. 25 to earnings. I know the numbers on the street are between 1 and 1. 50. Im going to do 1. 25. Some say 15 not so realistic, more like 20. That will be a bump to earnings of about 10 . The other one it would be a bump closer to 21 . These are still big numbers and these are all incremental numbers. But earnings for 2018, right . These are numbers after this happens we look 12 months into the future. But as you know, carl, the market anticipates whats going to happen. Theyre going to start pricing its such a big number, theyll start pricing it in just like last year the s p went up 9. 5 and of course with dividends 12 , did we get 12 Earnings Growth last year . Absolutely not. Theyre starting to price in all this stuff for the future. There could be some offsets to those positives. Like you guys have spoke a lot about the automakers coming out with their conference this week there could be trade tariffs that hurt. Theres obamacare. Theres a lot of puts and takes that were going to have to watch as the year unfolds and these policies become reality. You talk about the market getting ahead of itself, lindsey. In particular the bank rally has been quite stunning since the election. Were going to start to get earnings at the end of this week from j. P. Morgan and some of the other big banks. Whats realistic in terms of policy expectations there . And also what theyre betting on a steeper yield curve in terms of what will actually come to fruition next year. Yeah, theres certainly a lot of optimism around the financials. This Fourth Quarter should be the Second Quarter in a row for double digit Earnings Growth for that sector, which is certainly a positive. People are going to look to hear what those banking Management Teams have to say about the outlook. And i think with the fed thats more hawkish going into this year it certainly could be a positive thing. But these stocks are up substantially in the last couple months. You mentioned the downgrades this morning of goldman. Goldmans downgrades of coke and p g. Is that part of all this downgrades of megacaps that have big forex exposure, slow staples . Forex is an issue well have to contend with in the next year. In the Fourth Quarter its not really a big problem, u. S. Index up 2 on average for the quarter overall. That is one of the risks to the outlook. To carls point the signal on the consumer not to mention the news we keep getting on retail, limited closing all 250 of its stores adding to the announcements we heard from macys and sears last week. Consumer confidence spiked after the election, but whats the outlook for consumer i dont think the outlook is negative for consumer. What youre seeing is a transition consumers are moving away from brick and mortar to other areas like obviously the online situation. You dont hear amazon complaining about sales. You may hear some of the brick and mortar complaining. But with regard to that forex, look at the last 12 and a half months weve seen the Foreign Exchange dollar up more than 5 . That subtracts from earnings, but we havent even talked about ruk in personal income tax, reduction of even if 65 to 70 of that comes back were still talking about 1. 7 trillion after taxes 1. 5 trillion, what did they do in 2004 . Close to 7 0 or more was used to repurchase stock. Thats almost 5 of the total market cap but anthony, weve also been talking about the border adjustment potential tax on imports which could have a punitive effect on a lot of retailers, automakers and anybody who imports some of their products. We havent talked about tweets, policy tweets ordering Different Companies and industries to manufacture in this country. Well, first of all, that border adjustment tax were not certain thats going to happen. In fact, right now if you look at what the political pundits are telling you is that its still close to a 50 probability or evenless. Even if that happens youre getting a lot of other offsets on the other side. Netnet its still a positive. A lot to debate in the coming year. Guys, thank you for kicking off the week for us, anthony chan and lindsey bell. Of course it is a big week in washington as confirmation hearings get underway. Republicans have set at least nine hearings for the week beginning tomorrow with senator Jeff Sessions who is the president elects pick for attorney general. Lets get to eamon javers in washington to talk about the few days ahead. Hey, eamon. Good morning, carl. They are definitely flooding the zone here, team trump is in washington, d. C. With all of those confirmation hearings scheduled for wednesday, the same day donald trump is going to give his news conference. Thats going to make it difficult for any single piece of neg etf news out of any of those hearings to dominate a news cycle like it would on a day when the confirmation hearing was the only news story that day. Donald trump will be sort of providing political cover for all those nominees. Take a look at the schedule here and you see what im talking about. Starting on tuesday, tomorrow you see Jeff Sessions, the nominee for attorney general will be up on the hill along with general john f. Kelly, retired u. S. Marine corp general. Hes the pick for homeland security. Wednesdays the big day january 11th, Rex Tillerson for state will be up there, Jeff Sessions possibly for his second day will be up there, Michael Pompeo for cia in the wake of that russian hacking report by the intelligence community. Hell be up there. Betsy devos on education, elaine chao on education, expect that to be a relatively smooth hearing, all of that happening on wednesday as the donald trump presser. On thursday well see will lur ross at commerce on capitol hill. James mattis secretary of defense on capitol hill along with ben carson and Andrew Puzder for labor. All that happening this week at the same time trump is gearing up for inaugural next week. Clearly a big week and the idea is jam them all through now. One of the things to watch is expect democrats to complain a lot of these nominees havent finished their ethics forms and disclosures. So with a lot of these wealthy billionaires and hundred millionaires, democrats want to see where the assets are and where the possible conflicts of interest might be, guys. Were going to keep our eye on that, eamon, as we know you will. Our emg amon javers in washingt. Lets get to phil lebeau in detroit with the ceo of toyota north america jim lentz. Good morning, phil. Thank you, carl. Jim, its been a busy show, we all know what everybodys talking about here, donald trump. You guys were on the target list last week. He targeted you for the production planned in mexico for the corolla. Have you talked with donald trump or his administration, or has mr. Toyota talked with donald trump . We have not. I mean, the reality is were in the process of moving corolla from canada to a mexico location. That doesnt mean weve stopped our investment in the u. S. This year marks our 60th anniversary. Weve already invested 22 billion in the u. S. And over the next five years well be investing an additional 10 billion in cap x right here in the u. S. Ford ultimately said were going to scrap our plans for mexico. Any chance you do that as well . No. That the heat continues and at some point you say its not worth it, well pull out of building this plant in mexico . It would be difficult for us to do because this is just one piece of the puzzle as we are realigning all of our north american footprint. So to do that would impact our suv strategy. And right now the markets red hot on suv. Weve got to continue that strategy as well as additional pickup trucks as well. You know that the concern is that we ultimately see some type of a trade war break out. And anybody who manufactures outside of the United States is going to pay the price. You have a large presence in canada. Is there a chance that youre going to have to say were building more in the u. S. Simply because its the only thing that we can count on . Its difficult to do. I mean, these decisions, this decision to go into mexico its probably about six years to the point where we actually broke ground. So to make those kind of changes, to disrupt the manufacturing flow, to disrupt the flow of our suppliers would be very, very difficult. And actually cost jobs most definitely in the short run. You think it would cost jobs here in the United States . I think it would. I think even when you look at border tax, which is another type of tariff. Right. If that comes into place, its going to raise the cost of all vehicles in the industry regardless of your name plate name. The argument from trumps team and his supporters is but if you manufacture more in the u. S. And you export from the u. S. , its ultimately going to work out better for you. Thats true, but its a Global Industry with global suppliers. So you look at a vehicle like camry. Were launching a new car today. That vehicle has the most domestic content of any vehicle in the industry, not just car, any vehicle. That would probably see about 1,000 increase in cost. So is there a possibility though that you might ultimately have the suppliers because they change nafta, guarantee an x percent of the parts are manufactured in the United States, not just nafta, but in the United States, is that a possibility . Well have to see what the trade policy ends up. And well react to whatever that policy is. But we think its in the best interest of this industry to be able to produce as were producing today. Employments going to go up. And we need to make sure that we are competitive in a Global Industry and we take care of our customers. Quickly, lets talk about the market. Youve got strong consumer confidence, record sales, but also rising gas prices. Any concern that those gas prices as they move closer to 3 a gallon finally put the brakes on that demand thats out there . I think the natural demand is going to fall a little bit this next year. We just came off on industry at 17. 55 million, we think its going to be about 17. 2 this year. I think its being driven more so by used cars coming into the marketplace off lease. I think thats going to compete on the new side. But Interest Rates are going to start to creep up, gas prices are going to start to creep up, so all of thats going to be a little bit of a headwind to the industry this year. All that said its still a strong industry. And youll take it. All day. Even with the twitter in chief in washington . No problem. No comment from jim lentz. Understandable. Guys, well sentd it back to yo. Very interesting, phil. Of course a lot more to come on all of those topics. Thank you. Coming up, the future of obamacare in the spotlight as well as the new administration gets ready to take the reigns. Ceo of eli lilly will be ahead with us, david ricks. Unint earnl n a aentageat iicy unint earnl on ahli on a perfect car, then smash it into a tree. Your Insurance Company raises your rates. Maybe you shouldve done more research on them. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. And if you do have an accident, our claims centers are available to assist you 24 7. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. The dow backs farther away from that elusive 20,000 level after we got oh so close on friday. Plenty of calls out of Goldman Sachs not helping a pair of dow blue chips this morning. The firm downgrading both cocacola and p g to sell saying it sees headwinds from a stronger u. S. Dollar as well as sluggish and market demand. The common theme here, guys, actually its not set to be a very good period for the staples. They pay high dividends and thats why theyve been in vogue over the last few years. With Interest Rates rising with market perspective and fed raising Interest Rates, that makes them less attractive. Theyve been dealing with Slower Growth barely any top line growth for a long time now. And each of these two Companies Goldman highlights some particular concerns. For coke for instance goldman prefers faster growing drinks, beer, Energy Drinks instead of the carbonated beverages, slow growing, cokes portfolio even more so than its competitor pepsi is exposed. And with Proctor Gamble they say the valuation was stretched. A big winner last year, there was a turnaround in place from the new ceo, david taylor, but they say now its at a tenyear high that is the p e valuation. And theres a lot of hopes baked in. Its not a particular winner from any tax reform cutting Corporate Tax because p g already pays such a low Corporate Tax. Its one of those exposed multinationals that takes advantage of overseas tax rates as well. Yeah. Interesting. I mean, youd think they were both macro calls, but the proctor call they talk about the failure of promotions to translate into share gains. Market share vulnerability. You can somewhere read in there perhaps amazons entering private label. So its not just world events that are driving these calls. This has been a problem for p g for a long time now losing market share to online startups like dollar shave club, for instance, on the razors. Its happening all around them. Also with consumers increasingly going on mobile and online to buy, this is a company thats been fighting for years for the best shelf space and for the biggest shelf space. And its a completely different model. And p g ever really since the financial crisis has been dealing with the off price, the private label kind of brands as well as consumers get more conscience. They point out p g has a fairly low tax rate and not a lot of international balances. Of course when you think about companies that do have large amounts of cash overseas and will be able to repatriate conceivably those funds at a very low rate as well. Theyre not one of them. Same with cocacola of course. Those big multinationals. The i will say the one risk to all of this what could go wrong for this goldman call is your world, m a. I mean both of these companies, theyre big, and they could but they could potentially find themselves in some sort of deal situation, slow top line growth. We know for instance that theres a lot of food and beverage in m a. Almost likely as the acquirers very hard to imagine either one of them being acquired. Right. Though i mean people have speculated the guys in brazil would love to do coke one day if they could figure out a way to do. It ultimate sort of beverage behemo behemoth. I dont think our president elect would like that very much. But has capped some of the valuations and Consumer Companies high. Yes. An exciting place for deal making. Yeah. Interesting calls driving the market to a down today. When we come back well be joined by the ceo of eli lilly, david ricks. Well get his take on the future on obamacare. A lot more ahead. Stay with us. 35th annual j. P. Morgan Health Care Conference underway in san francisco. Its always the biggest event of the year and our meg tirrell is there sitting down with the ceo of eli lilly david ricks. Meg, take it away. David, thank you so much. And to our other david here, thank you for joining us. Thanks, meg. Glad to be here. Youve been in the ceo of all of eight days so far. What is job number one of eli lilly . For us its a year of execution. We rolled out guidance at the end of december which told the street really we plan to grow the top line by mid Single Digits and bottom line by mid teens. Were launching a number of products right now, very exciting products for cardiovascular disease, and cancer and psoriasis, and more are coming. Were focusing on executing rollouts of new medicines for serious conditions. Probably the biggest overhang on the industry has been questions around drug pricing. You guys were a target of Bernie Sanders last year who wants the government to investigate collusion and insulin pricing. How do you respond to that specifically that kind of pressure . Well, we did respond. I think a lot of that focuses on list pricing and Branded Pharmaceuticals which our biggest argument is thats not the focus we should have. It should be abt patient affordability. The system is not designed in health care or medicines for people to pay list price, yet under many of the new plan designs, high deductible copay plans patients are subjected to full list price. So big shift hasnt been the pricing behavior in insulin. Its been patients are being asked to pay the list price more and more. Weve announced a partnership with exsuppress scripts actually in december as well which people can sign up via this blink Health Platform and get a rebate right at the pharmacy counter if theyre a cash payer or have a high deductible plan up to 40 off right at the counter. Which is similar to what rebates we provide to managed care organizations. So were trying to innovate to solve that problem. Are those kinds of solutions kind of taking one thing at a time . Is that going to solve the problem . Or does the industry need to fundamentally do Something Different when it comes to price sng. We do think longer term theres other changes needed. First of all to recognize theres an imbalance today between what people pay out of pocket for medicine versus the rest of health care. Its about a 4to1 relationship, people pay about 20 of their medication bill, about 5 of their hospital bill. Why is that . We think medications are one of the best deals going in health care and that should be balanced. Patients should participate in their own cost of care, but why is that relationship there . The other thing wed like to move to as a whole Health Care System is more value based pricing scheme. Rather than a list price and all these deals and rebates, whereby preserved days out of the hospital or better hbac1 rates for people with diabetes, thats how we figure out the renumeration for the inventor. A lot of work to do to get there. We need changes in washington as well as innovation with commercial paying partners, but lilly is trying to lead the way. Speaking of washington, president elect hasnt said much about the drug industry but has said he doesnt like whats happening with drug prices and wants to bring them down. What are your expectations for what trump means for the industry and is Everybody Holding their breath to see who hes going to tweet about . Well engage with the new administration as we would any new administration. And chairman price whos the new hhs incoming secretary knows a lot about health care. To try to solve the problems i was just discussing, which is how do we make medicines as affordable for patients as we can and more balanced with the rest of the Health Care Services and products people consume. We think if we do that people realize medications are a great way to invest our health care dollars, eventually most these medications become almost free because they go generic. Thats unique for pharmaceuticals, other services in the Health Care System dont have that feature. So were happy to partner with them to try to solve these problems, value pricing is another theme weve been after. Well, another thing that has been talked about potentially under trump is a tax holiday. What would you do with do you want to see that . What do you want to see in terms of taxes . What would you do with that money . We need to see the specifics of any new tax program, of course were all for looking at the Corporate Tax system we have in america which puts us at a disadvantaged as a u. S. Based company whether that be to buy other Biotech Companies because we have a higher tax rate or just how we have to run our operation to manage cash around the globe. So we welcome comprehensive Corporate Tax reform. If there is a repatriation vehicle to that, of course well look into that. And weve got an ongoing Stock Buyback Program we would like to increase our dividend. Weve said that. And of course use capital to run our operation and look at business development. Well, i want to ask you about alzheimers. You had some news at the end of last year that was disappointing in your lead program, but you seem committed still to this strategy and target iing it as way to solve alzheimers. Of course a big event for the company. There was a trend toward positivity on almost every measure. So we think the hypothesis is worth continuing to study. Most experts weve talked to so far also agree. We have a number of other programs looking at that similar mechanism to reduce the rate of decay people experience with alzheimers. Base inhibiter which is in phase three in partnership with astrazeneca. Were also looking at other approaching like tao. Another protein. Yeah. Different approach, not exclusively looking at i think the data is encouraging in one sense. It was a big study, it was well controlled and patients did a little bit better, but just not enough to justify a submission. But were committed to alzheimers and helping patients with that condition. Given the need i think everybody is rooting for you on that one. Absolutely. Dave ricks, thanks so much for joining us. Thanks for having me. Meg tirrell, david ricks, thank you both. When we come back, just 11 days until president elect donald trump is sworn into office. Hell be joined by billionaire gop donor Stanley Hubbard next. Much more on squawk on the street with dow down about 50 points. Stay with us. Good morning everybody. Im sue herera. Here is your cnbc news update at this hour. Iranian mourners paying their respects to the late iranian leader akbar hafsanjani following his death over the weekend at age 82. Hundreds and current and former iranian officials attending a farewell ceremony. He was the leading reformer pushing for better ties with the west and the United States. A funeral was held today for one of the Israeli Soldiers killed during sundays jerusalem truck attack. The soldier laid to rest during a ceremony at Military Cemetery in jerusalem. Four soldiers were killed, 17 wounded in that attack. Millions of commuters facing delays and frustrations as a strike by londons underground workers shut down much of the citys subway network. Transport unions are protesting job cuts and Ticket Office closures citing safety issues. And 16 people were arrested in france in connection with the october Armed Robbery of Kim Kardashian west. More than 10 million worth of jewelry was taken from kardashian. Police tracked down the suspects through dna evidence. And thats the news update this hour. Carl, back down to you. All right, sue herera. Thank you. Ill take it. Checking in here on the markets the dow down about 52 points, s p is down about a quarter of 1 , just fractionally. The nasdaq actually remains positive doing the best of the bunch. Just looking in terms of the dow winners and losers right now, dupont and apple are on top in terms of percentage wise gains, guys. Chevron and exxon at the bottom of the list. Oil prices of course declining and youve got that story. Also talking about some of the movers like cocacola and p g on a pair of downgrades. Nike interestingly is lower. It was the best performer of the week last week up 6 . The biggest loser of the dow last year. So potentially that theme some of the losers turning into winners as we continue to see this rotation in and out of stocks. Reversal of the rotation we saw late in the year of course away from technology and growth names and to more cyclical names given what you just said. Of course the nasdaq comp up about 2. 7 thus far this year. This morning not being led by what it has been google and amazon, facebook is up, and apple actually one of the better performers up almost 1 . You know whats not up right now . No, what. British pound. We talked about that earlier. We talked about your show too. Jim covering you guys covering it. 1. 1 or 1. 2 decline, right . Yeah, goes back to the october low for the pound against the dollar. Take you to trump tower this morning getting a look at Senate Majority leader Mitch Mcconnell coming in probably missed him going into the elevator. But we are told that hes meeting ameet ing ostensibly with the president elect. His wife elaine chao one of the many designates to be in front of hearings this week. You mentioned oil and rates. Two important things to watch. Oil is down almost a buck and a half. And despite rosengrens relatively hawkish comments earlier this morning saying fed needs to accelerate the pace of normalization to avoid this recovery being put at risk, tenyear note getting down to 2. 38 guys. And one of the bright spots in terms of retail, just in todays session, is gap. Near the top of the s p. Had a nice comeback here in the last few months and week. Its up about another few percentage points. Hearing more anecdotal evidence november and december sales disappointing last week gap came out with actually better numbers. Were going to get the Monthly Retail sales report on friday. Friday is a big day, sort of a light week but on friday well learn more about what shoppers did during the holidays. Well get ppi on friday. Until then its a little slow, right . In terms of data flow. Well get to heart attacker and fed speak its talk. Its fed talk. Its conference talk. A lot going on. The aumptomakers all talking abt policy and trump, sort of taken the spotlight away from new models. Not to Mention Health care. Theres a big consumer industry Conference Tomorrow as well. Where in orlando, florida. Okay. Icr, all the big restaurant companies, Retail Companies which should be very interesting because the question is the restaurant in retail recession over . Youre going . Ill be there tomorrow. Enjoy the weather. Its going to be cold. Really . We feel so terribly for you. Sorry, guys. When we come back the march to dow 20k continues, but not this morning. About 90 points away at 19,911. Well talk about that. Conflicts of interest coming to light about a possible business deal between chinas insurance giant and the president elects soninlaw Jared Kushner. You might have read that piece in the times over the weekend. Well talk about that after the break. One of wall streets biggest bulls reveals where he sees value this year. What sectors are on his radar . Find out, plus very interesting acronym on where to invest at tradingnation. Cnbc. Com. More squawk on the street coming up. Welcome back. Crude oil declining more than 2 . Thats weighing on some of the Energy Stocks in the broader indices. Dow down about 51 points. Nasdaq outperforms, it is still positive. Joining us to talk about where we go next cowen and companys head of trading and cnbc contributor and familiar face david seberg. Good morning to you. Good morning, sara. So whether we hit dow 20,000 or not or when we hit it, its a Good Opportunity to sort of look at where we are and whether the big number represents the next stage in this bull market run or a sign things are topping out. Whats your take . Look, i mean, things dont feel like theyre topping out for the long run. I see shortterm pullback . No question. Too far too fast we hear that consistently on this show. Weve moved too far in different sectors. There was a massive repositioning rally that occurred especially in a lot of these financials in particular. Have the banks run too far too fast in the nearterm . Possibly. But i think for the long Term Investor you have to stay involved in these things. Rates are going to continue to creep higher. Looking at possible reform for the banks which will allow lending to open up quite a bit. So i look at the banks in general and say were probably only in the second inning here of a real rally. I mean, you remember when all these tech names blew up when the dot com bubble burst, it took ten years for a lot of these names to really come back. Weve seen a tenyear lag from a performance perspective in these financials. I look at it and say we could be at the beginning of a real cusp of a significant move in that sector. Im not hearing you say though that valuations are not stretched, david. Look, i think for the nearterm we may be a little bit ahead of ourselves. Lets put it in perspective, right . What are the implications going to be from tax reform . Were not sure yet. What are the implications going to be from dodd frank reform . Were not sure yet. So i think were putting a lot of, you know, were paying forward for a lot of whatifs. I think a lot of that digestion needs to come forward. Look at like this wednesday trump has a press conference. Were going to hear probably a lot of really crucial information from that press conference. I cant imagine the press not asking questions about, you know, the Affordable Care act, about, you know, tax reform, about the impacts of or possible reform with dodd frank. So i look at it and say we could have a lot of really important questions at least for the short term answered this coming wednesday at that press release. We havent heard a lot out of donald on that front recently. Again . David, are you seei ining mo flowing out of bonds into stocks . Ill tell you what we saw, when we saw the big shift repositioning trade, it was interesting to see you bring the financials up or talk about the financials in particular where people completely underweight. We saw a rush with buyers without positions really in the financials looking to gain exposure. And then we started to see, you know, slowly people had core positions or had positions on add to those positions. But weve seen the initial surge or frenzy in buying subside quite a bit. So right now what i see is a lot of back and forth between hedge funds, not necessarily new positions being taken or adding to positions right now. Its really just trading around positions for the near term to see what comes out of this potential reform. We did get a few multibillion dollar deals announced this morning. What are your expectations this year on the m a front . And do you think well see more ipos than what was a pretty pathetic year last year . Yeah, i mean, look, health care in particular. I know j. P. Morgan has their conference going on right now. We saw a couple deals, i think three announced this morning. In general i think youll see a lot more m a within the Biotech Sector especially in the masmal to mid cap portion of that space. I got to tell you i think thats an area to really kind of remain focused for the near term. I think that massive under performing last year, out of the gate really positive start this year, do we maybe pull back a little bit after j. P. Morgan . Historically we have during periods where its rallied into it. But i think biotech could be a real outperformer this year. Im looking for a more second half rally and i think youll see a lot of deals to follow. A lot of what youre saying sort of the optimism has to do with the policies and youre not alone certainly from what we can expect from a Trump Administration or republican congress. Mitch mcconnell in trump tower right now, is this going to be a market that is so sensitive to every comment from members of congress when it comes to these policies instead of a market so sensitive to every fed president and every comment by janet yellen, is that where were going . Yeah, no question. I mean, look, we have like i said paid forward a lot of expectations. So you have to have earnings keep up. In my opinion with expectations, right . So were probably going to hear more. Its not Fourth Quarter, its more first and Second Quarter earnings and guidance that are super, super important. So, look, keep an eye on it. I mean, whether or not earnings are actually going to you know, these companies are going to project to see this in their guidance is super important. And, again, any sort of relevant commentary out of trump this wednesday at this q a i think is going to be super important for the market overall. Wednesday is going to be interesting. One last thing, david, on 20k, does the impact on sentiment change the longer it takes to crack it . No. I mean, i think in general what you have is you have a lot of electronic trading right now going around that. On the institutional side, carl, thats a great question because we dont hear a lot of our clients talking about it in particular. Theyre not looking at that as a line in sight to whether theyre going to be taking on new positions or setting positions. So from the Institutional Investor pers pektive, its not that big of an event. Not necessarily focused on the dow 20k, whether we blow through it or not doesnt really change their opinion. Well, its awfully proving pretty tricky to get over that hump. David, thank you for joining us. I know. Thank you guys. David seaburg. Well, lets send it over now to jon fortt to give us a look at whats coming up on squawk alley, jon. Well, david, its been ten years, can you believe it, since the iphone made its debut . Seemed crazy at the time, but it has taken over tech in a big way. Were going to look at the past and more importantly whats next. Also, the ceo of Mercedes Benz usa is going to join us with a look at trade policy and the future of autos. And dan niles, the famous investor, is going to give us some picks in tech for 2017. All that and more coming up on squawk alley. Ys, w w er athhes h t all . L . T n on twi p said to be in talks to invest in a project to redevelop a flagship building in new york city that is owned by Kushner Companies, the real estate business that is owned by the president elects soninlaw or run by his soninlaw Jared Kushner. Our robert frank joins us now with more on the story. Robert. Good morning, david. Well, he is one of the most powerful advisors and gatekeepers in trumps center circle, but now the business dealings of Donald Trumps soninlaw Jared Kushner are coming under scrutiny. In the week after the election kushner met with the head of chinas Insurance Group in talks to partner with kushner on one of new yorks top Office Towers which was bought for record 1. 8 billion in 2007. Theyve been in the news for aggressive u. S. Buying spree and concerns over its opaque ownership. Bought new yorks famed waldorf astoria for just under 2 billion. But deals to buy Starwood Hotel chain and hotel chain in san diego both collapsed collapsed amidst questions over National Security and the companys ties to the chinese government. One of kushners other lenders, an israeli bank, is under investigation by the justice department. Ethics lawyers saying kushners business ties and his role as adviser to the president could pose potential conflicts of interest. Kushners Attorney Says in a statement that jared is committed to complying with federal ethics laws and may resign from his Family Company and would recuse himself from matters that would affect his financial interests. The Kushner Companies not as well known as the trump companies, but in some ways, they are larger. They own 20,000 apartments and over 14 million square feet of office space in the u. S. They have made more than 7 billion in acquisitions in recent years, much of that in downtown manhattan. And guys, much of the scrutiny now on where the money for that 7 billion in deals may have come from and who those big lenders might be. Guys, back to you. Yeah. Is his father still involved with the company, too, robert . Charles is involved. Remember, he went to prison after a scandal involving campaign contributions, ironically, to Democratic Candidates in new jersey. But charles had taken a back seat as jared took over the company sometime around 20082009. Now if jared steps back, perhaps charles would become the formal ceo. That is unclear, but charles has retained an Important Role in the company. And if jared steps aside, Big Questions of who would officially run it, whether thats charles or maybe jareds brother. But like the trump organization, this is a tightknit Family Business that is a little difficult to unwind and extract one Family Member from. Yeah, not to mention, of course, anbang, of all the companies, shrouded in a lot of mystery. Exactly. I tried to learn a bit about it when they were a bidder for starwood. Of course, then they just left the scene on that deal, allowing marriott to come in. But very interesting stuff, robert. Thank you. I know well be following this as we move along. Absolutely. Thank you, david. Robert frank. Apparently, sara, jack maw has also entered trump tower, or at least is said to be meeting with the president elect. Of course, he is the founder of alibaba, speaking of chinese companies. Its one of the largest, by far, of course, certainly the most important when it comes to the Chinese Consumer and one we follow closely here, having gone public here at the New York Stock Exchange not long ago. Unclear, though, what they might be talking about. Mr. Ma is certainly trying to grow the business here, right . As we take a look at those are not pictures from today. Stock footage. Yes, that is Stock Footage of mr. Ma, here on the floor, actually. But yeah, although not much of a presence here in the u. S. , he does own a lot of land up in the adirondacks. They are trying to have more of a presence, perhaps, with alibaba here in the tou. S. To a certain extent, but its not their focus of markets outside of mainland china. President elect trump has made china a cornerstone of his americafirst policy, has gone after mexico. But for global investors, a bigger deal is hes gone after china, the second biggest economy in the world, one where a lot of u. S. Consumer companies and all sorts of companies have a growing presence, and theres been some tough talk when it comes to china and some tough appointments that indicate that there is going to be a more confrontational stance when it comes to trade and business with china. So, potentially, for those that are worried about that, seeing jack ma go into trump tower suggests that he has sort of a china voice on the ground whispering in his ear the other way. Yeah, no, listen, a reasonable argument can be made its the most important economic relationship our country has, and if it becomes one that is more tenuous or difficult, that could be very negative, broadly speaking. Maybe hes there to talk about what the chinese authorities would do if donald trump does we can sit here and speculate. Theres so much op eds, editorials in the state media out there lately talking about retaliation against u. S. Companies that operate in china and the fact that they say china would win a trade war. So, maybe theres a little more color on that. Id love to know. Perhaps i can even do some reporting after he exits and we can find out what was discussed. But it is interesting his connections into silicon valley. Generally, though, he did have that big meeting or not that broad. Peter thiel sort of representing for him, his sort of point man on it. It will be interesting to find out what it was. Jack ma and maybe you can use your little handy phone on set while we toss it off now to susan li. I think jacks going to let me know. Ill text him. Susan li has a market flash. Id love to know as well. Lets look at shares right now. Outperformance in a weaker retail environment, francescas surging this morning. This morning they have raised their fiscal fourthquarter earnings outlook, revising it upwards. Its Sales Outlook as well. And the company says that we are pleased with our solid holiday performance which came on top of an 11 comparable sales increase in the Fourth Quarter last year. And shares, as i mentioned, have been up some 50 over the past three months. They have also revised upwards now their samestore Sales Guidance for next year from a decrease to an increase for the fiscal year. Back to you. Susan li. Susan, thank you. Were also watching shares of mcdonalds. It is selling a controlling stake in its china and hong kong operations to the Carlyle Group and statebacked siddic for about 2. 1 billion. Mcdonalds as part of the deal will keep a 20 stake. It plans to add more than 1,500 stores in the region over the next five years. This was something that was anticipated and widely expected. It looks like they got the deal done. Little reaction here on the share price, david. And as a quick followup, we are told by people close to alibaba that jack mas meeting is to discuss his latest expansion plans in the u. S. And his commitment to intention to create 1 million new jobs over the next five years in the u. S. Not clear how that will happen, but could be very interesting. Everybody going another ceo going yes, hes trying to outdo one of the largest shareholders, softbank in alibaba, who also went in with his plan to create jobs. Getting it out of the automakers in detroit. All good pr for trump. Certainly is. Coming up tomorrow, as i mention, ill be heading to the icr Investment Conference in orlando, florida. Weve got exclusive interviews there with the ceos of sodastream, lululemon, wingstop. Weve got a great fastfood roundtable. Find out whats really going on with Consumer Behavior after the election, what theyre expecting on Corporate Tax rates, and a whole lot more. Big lineup starting 5 30 a. M. Eastern time on worldwide exchange. Much more ahead here. Stay with us. R. Ouily trspse e esid is pfen. Si g g ow ot re. Wh six. D ean ouily trspse quick check on markets here at this hour. Were seeing some weakness, although the dows cut its losses in about half. It is only down now 27 points, so off the lows of the session. S p 500 still down about less than 0. 1 . Some of the energy names are hit the hardest with the decline in crude oil. Nasdaq outperforms, up about 0. 2 . And well leave it there for squawk on the street. Over to you, carl, for squawk alley. Thank you, sara. It is 8 00 a. M. At googles wamo headquarters in mountain view, california, 11 00 a. M. On wall street, and squawk alley is live