Good wednesday morning welcome to squawk alley. Im Carl Quintanilla joining us this morning former ceo with us, a mentor at index ventures good to have you with us were down 85 points some of the selling is intensifying although the losses are not huge, the dow and s p are having their biggest oneday drop in about seven weeks. Worst performing sector is telecom. Thats a small sector, big move on at t, causing after earnings miss last night. A few other earnings movers to speak of, were seeing weakness there. Utilities, financials, industrials, broadbased selloff here when it comes to s p. Tech holding up relatively well. Ge getting hit again. Yes opened below 22. Were going to get to the markets with dick in a moment. First up, dick, social media and regulators, twitter saying it will add labels to political ads including who bought them, how much they are spending, ahead of representatives facebook, alphabet and twitter all testifying on capitol hill next week and follows prodder concerns over ad policies, fake news, privacy, dick, the sheer size of big tech how is it being talk about where you are and how is it being thought about in your own head i think there are sort of two camps out here, i would say. In one camp youve got sort of historical perspective, hey, were Technology Companies were Platform Companies were in the business of distributing other peoples content. We dont want to make we dont want to have to get spot mud, if you will, of making editorial decisions. I think theres another camp that ive probably caught myself in this second camp thats more of the opinion, look, we always make editorial decisions you make user safety decisions about what accounts to suspend and what accounts not to suspend. We should just, you know, take the blinders off and admit that we always make editorial decisions and we should were going to have to be more and more in that business. I get the hesitance to want to admit that because with hundreds of millions of pieces of content pouring in, youre going to miss a lot of border cases and edge cases. Id like, for example, seeing twitter get more dpref about some of the things they are going to do like tag these ads and get more aggressive on user safety. Dick, it seems to me political ads are not the problem. If its a political ad and you can see its political, fine its the ads that are maybe divisive or controversial that arent explicitly political and the fact the viewer doesnt necessarily know who placed that ad im not sure twitter or other networks know who placed that ad how much more visibility do we need into the character and motives of the people who are trying to use these platforms to manipulate. One of the suggestion has been to make sure these tags and the ads, if you will, are in some sort of machine readable format theres no way you or i or any other small group of people is going to be able to pour through the overwhelming quantity of ads that go through these systems and try to figure out who is targeted with what if you put them in machine readable format, the ads and tags themselves and make that available for review by some other machines and other computers, youll have a much better way of trying to figure out where these things are coming from and whats actually happening. Thats probably where this all needs to head. This is already being discussed, as you know in congress theres honest ads act, bipartisan backed by mccain and klobuchar and warner that sort of gets at this idea. Do you think the rules need to come from washington or can the Industry Police itself you know, the challenge irrespective of where the rules come from, the challenge is going to be trying to figure out who is behind these things as you know, you can create any sort of company to buy some of these ads. Even when they are tagged, its going to be a job of combing through the tags and trying to figure out who and what are behind some of these ads again, irrespective where they are political or otherwise. Two questions here, dick. What do you expect the tone to be like when everyone goes to the hill in the coming weeks, and how much of this i always come back to you now, famous memo, about abuse and how you thought the company wasnt tackling it well enough at the time how much worse is it now than you thought it was even back then well, i just wanted us to be more aggressive. I liked some of the things that i just jack has just recently announced they are going to get more aggressive. I was excited to see that i always wanted us to be more aggressive about tackling those things the challenge whenever you create new rules is you get new gray areas right . Now youve got to have more people looking at these gray areas. Thats just something i think all of these platforms are going to have to deal with im talking about facebook and youtube and all of these, again, platforms that are distributors of other peoples content but also make editorial decisions every day. They are all going to have to get more aggressive. Dick, lets turn to technology and the markets tech has taken a step back in the recent runup. They have been overshadowed by industrials and blue chips which appear in the drivers seat this week for a year it been about tech. I know youre a savvy investesh, although you dont talk a lot about it cost low capital management, what do you like ill tell you, as crazy as some of the valuations are, longterm i still like these Big Tech Companies as they become distributors of more and more content, more and more original content, you know, Reed Hastings and netflix knows this, hes going to face increasing competition obviously from amazon. Hes talked about that but some of these other big platforms as well, google, twitter. These are huge opportunities they see these huge opportunities and are attacking them aggressively and i like the future for the big tech platforms, the fang companies, if you will. Dick, saying longterm is one thing. Im taking a look at some stats here over 12 months oracle up 30 , apple up more than 30 go down the line, intuit up, goodness, in the 40 range would you buy those here and now . I mean 12 months ago apparently those were ridiculously undervalued if were okay with those here im more focused on i would say some of the, you know, the top of the pyramid amazon, for example. Im sort of a feel the way he does, talking about the potential. Its hard to see anything traeg down other than Macro Economic trend taking amazon down in the mid or longterm jeff has been incredibly successful with multiple lines of business. Amazon web services is a juggernaut obviously what hes starting to do more and more aggressively in retail with the whole Foods Acquisition seems to have tremendous upside. So i just think that these are extraordinary companies with extraordinary earnings potential. The fact that they are attracting the interest right now of regulators, a that can manifest on earnings weve seen that with bigger eu finds, for instance, for antitrust division does that not worry you . Is that not a headwind for business earnings and Stock Performance . Im sure it worries them. It doesnt worry me so much. You know, you can imagine it does merit investigation in some of these cases some of these companies have enormous market leverage and im sure leverage is a word they wouldnt like to hear me use, because it does sort of invite regulators into the tent i just think amazon has so many areas of business where they have extraordinary earnings potential. Its hard to see regulators doing into that that would really hamper their ability to operate a number of these businesses successfully. Dick, i know youre usually love to tell jack dorsey how to do his job, this morning we had a discussion about Square Market cap on the cusp of eclipsing twitter, we looked at a chart versus square versus s p remarkable to see what its done in fintech space a lot of viewers wonder if you think it would behoove jack to pick a side. Either do with the one that remains challenged or go with the one thats got a big tail wind. Im not usually loathe to tell jack what to do, im always loathe to tell jack what to do look, i think hes doing hes doing a great job. Hes present at both companies hes got an incredible ability to sort of compartmentalize. When we talked about twitter all the years i was there and he was on the board and adviser to me, we would only talk about square if i brought it up it wouldnt otherwise come up. I think both his leadership teams, you respect him and admire him ill tell you, you know, for years people were sort of shaking their heads about square and how is this ever going to work its a testament to his persistence and resilience that its doing as well as its doing. Dick, we always appreciate your candor. Good to have you back. Its been a few weeks. Hope to talk to you soon. Great thanks for having me. Dick costolo joining me from one market dow down again on absolute basis, not impressive selloff,. 4 . But youve got to go back almost to late august to find a loss this large on the dow and s p. It really does appear to be earnings driven, which was what was behind the rally yesterday boeing is the biggest weight on the dow, even though we got great numbers on the economy this morning new home sales, highest level in a decade durable goods showing business spending is picking up keep in mind the context here also youve had this very buoyant risk on kind of mode its boosted the dollar and treasury yield and stocks. So were taking a pause coming off those highs. Air pocket for amd, that company down more than 10 so far in early trade shutterfly also off nearly 8 . So the smaller tech names not doing so great. When we return this morning, is apple sacrificing quality or quantity when it comes to the new ten . Well fill you in. Later amazon wants to deliver packages inside your front door even when youre not home. Well talk about that when squawk alley comes right back. Not rebalancing your portfolio. Focused on what you love, not how your money will last through retirement. We make it easier to plan for retirement with day one target date funds from prudential. Look forward to your 401k plan. Stocks are lower this morning following a slew of earnings major Tech Companies now on amazon, all reporting tomorrow this as investors waiting for President Trump to name the next fed chair. 100 point decline on the dow, worst day, biggest drop for dow and s p since early september. Lets bring in brian jacobson, Senior Investment strategist and wells fargo and mike santoli back on set. You see amd, chipotle, not as strong as the industrial stal warts we got yesterday. I agree with that its definitely providing an excuse to take profits i do think this earning season has been fighting the general sell on the news effect we often see with earning season. I mentioned yesterday at this point in the last earning season, which was also a good one, stocks topped out for the season two weeks into the earning seasons july 27th, i think the market just kind of says, okay, we got it. Were a pretty good run rate of earnings growth. We price that in, already have priced it in i wouldnt necessarily draw too much from todays action about anything so nasty in the Earnings Report as much as it was an excuse after a really good streak on the upside to pull back a little bit also big tech stocks are not running to the rescue of the broad market they are also, in fact, down more. I was going to say, intel, microsoft, amazon and alphabet all report on thursday and all are down. They are all down thats not really been the focus. Mostly about the cyclicals, not running up into those reports. I think in terms of this whole rotation youre not seeing that direct support at least on shortterm basis. Interestingly Information Technology better performing sector in s p. Names like visa which actually have good earnings as well how does this set us up for slew of big tech earnings. It will be interesting what they come up with. I agree with mike. I usually agree with mike, that shouldnt ab surprise. Reassuring this is actually more of an earningsdriven phenomenon as far as the mild selloff were having today you think about it, were actually back where we were five days ago its not that huge of a move at least in terms of s p 500. Earnings still matter here i think thats really relevant for investors when they are thinking about valuations, they are stretched, are they going to implode in on themselves just because of the weight of the valuations the answer is still no as long as you see earnings continuing to rise, that should be constructive for the market overall. And when you look at the economic backdrop, the new home sales numbers, those are probably slightly distorted as a result of rebuilding from Hurricane Harvey those are looking good looking nord to third gdp number, whats that going to tell us. People are beginning to ratchet up their expectation for low expectations for the Third Quarter here that actually bodes well for the market. Netflix, blowout report, the stock has done nothing amd last night top and pobottom line. Gross margin, down 10 those are stocks that tend to move quite a bit on positive news but they are doing Something Weird here what, if anything, should we take a look at that. I think many stocks got stretched. Basically you got everything onto the boat thinking a good number netflix double in 12 months before. Are they bellwethering . Is it running out of gas. I dont think for the broad market i think it has an issue in terms of making sure thea path continues higher if you do back to the Third Quarter of 2014, okay, earnings this Third Quarter that were hearing about right now are up 10 from the quarterly run rate three years ago. 10 in three years over three years s p up 20 . So there you go. The market is a little more expensive. You have to have a higher hurdle again, as brian says, nothing in the macro is making you knock down Fourth Quarter numbers or downscale your expectations for 2018 until you can kind of make that case that youre really having a downgrade earnings expectations in a big way, i think the market can kind of hang around here. How much of an overhang do you think is the question of taylor versus powell versus yellen i think shortterm if not on equities, volatility 1267 on the vix gets your attention. I think its one of those things traders have decided to fix. When you have something thats a soft or hard deadline that everyone can focus in on, weve got to surf every headline, i think it becomes a preoccupation especially when the bond market seems like it wants to break out in terms of yield. Finally, brian the data strong surprise jump in home sales since 2007, durable goods. Are you surprised to see the dollar weakening here and treasury yields moving sharply higher day to day moves can be confounding, stronger Growth Numbers in the u. S. Youd also see a stronger dollar. You also have the yields moving up significantly here. It is a little bit perplexing, maybe a bit of a head fake as far as the move of the dollar in the nearterm. I think as most academics would point out, Exchange Rates are prone to overshooting both on the upside and downside. So maybe its just more noise, not so much signal here. I think that maybe the fed chair decision might be coming to a head wen the next few days here. Lets keep in mind as far as with that, there are a number of vacancies on the board its entirely possible President Trump could say youre all hired in some capacity or other. Yeah. And what would the markets do with that . I dont know tilt it more well see what happens, brian, thank you for weighing in. Brian jacobson and our own mike santoli. Shares surging leaving s p 500, well talk to the ceo right here next. Akamai technology is a leader on s p this Morning Cloud security and content delivery provider reporting 9 decline in profit year over year but Beat Estimates by growth in its security, Cloud Security business joining us now here at post 9 akamai ceo Thom Leighton good to have you. Nice to be here. You started off your call talking about Cloud Security, your kona product does among other things prying to prevent exactly the kind of thing that happened to equifax. Okay. So how much have your inbound calls increased post equifax how is that affecting the business going forward. Security business at a clip, half a bill a year, growing high 20 . Kona does provide security to keep things like that from happening. Confident you stopped it. Those kind of things easily stopped just by filtering traffic coming into the enterprise. While your Cloud Security business is growing quickly, the rate decelerated what, if anything, does that say about the maturity of the business and does that in part drive m and a. We have a long way to go in security you can look at the headlines and see the attacks and damage they are causing recently we debuted new Technology UsingMachine Learning to distinguish between a humans behavior and a bots behavior how you hold your mobile phone when youre doing a transaction and thats really important because so many login attempts are bots trying to break into accounts, steal peoples money. How you hold your phone. Yes. Using nanotechnology to say a human being is actually doing this by hand absolutely. Youd be amazed as you hold your phone you do certain motions, click and tap. When bots come into your site different profiles it makes a big difference saying, hey, this is a bought thats stolen somebodys credentials. We have to block them and alert security. Whats happened in the Media Business the traffic you dealt with up 24 but revenue is down. That doesnt look good for margins. You say it stabilized. How confidence are you why are you confident it has stabilized and whats happening with that dynamic . Traffic grows and price decreases. Overall revenue pretty steady in the Media Business now but traffic is starting to accelerate so the