Tuesday. The major indices have recovered about half the losses they saw on the lows from february 9th. From february 2 chnd to february 9th a big selloff, but weve seen half of that regained lets look at treasury yields. Yesterday the tenyear was sitting at 2. 837 . Once again this morning, tenyear at 2. 84 . 30year at 3. 124 . Overnight in asia, the nikkei was off by 0. 4 . Big gains for the hang seng. Up by 2. 27 . The shanghai was up as well. Check out whats happening in the early trading this morning in europe. Youll see green arrows across the board. The cac, the dax, and the ftse all showing gains of better than half a percentage point. Stocks are higher in italy and spain. Check out the dollar, which set a new low, 15month low against the yen yesterday. You can see that continuing. The dollar down once again, 10 7. 45, the dollar against the yen. Oil prices are actually below 59 this morning wti sitting at 58. 72 brent is above 60, 62. 43 those prices continue to drop. Couple big stories were watching january Consumer Price index comes out at 8 30 ooeeastern tie this report is important as it is the first read on inflation since the rise in treasury yields sparked that selloff in stocks before things rebounded ubers loss narrowing in the Fourth Quarter following cost cutting measures by Dara Khosrowshahi and twitters jack dorsey downplaying comments that the company could be a takeover target he says he seeing value in twitter remaining independent and that if twitter were connected to a larger company, they would not be able to do as much rumors about a potential deal were reignited last week sort of a switzerland argument, if you will. I guess i guess. All right among the top stocks to watch, chipotle shares soaring after the company tapped taco bells chief to be its new ceo. Interesting, i think, because for years, kate rogers, chipotle had this aura of no, were not taco bell, were fresh, were that now its come over and help us i love both. I do love taco bell. If i cant get doritos on top of my taco, its not as good. What else is there to life . They have stuff they merge its not even no one in mexico has seen any of this stuff they serve at taco bell. They merge things, the words go together like burrotacos, its all good with me its Innovative Marketing an has been successful for brian niccol chipotles search is over with the burrito chain announcing late yesterday that brian niccol will take over for steve ells on march 5th. Niccol has been with taco bell since 2011 and has been ceo since 2015 he made taco bell a lifestyle brand. He launched the breakfast offering as well as mobile order and pay across taco bell in a statement chipotle said ells expertise in digital technologies, Restaurant Operations and branding make him a perfect fit for chipotle a we seek to enchance Customer Experience, drive sales growth and make the brand more relevant yum brands, the parent of taco bell, just invested in grubhub and chipotle hopes to make a greater push into the delivery space in 2018. One downside that analysts did note, chipotle is companyowned, and taco bells are majority franchised, and that could be learning curve for niccol. Others say ells role as founder could make it a challenge for him to step away as ceo and become executive chairman. Chipotle got a pop of 12 yesterday. Hes been there through some important years for taco bell. Certainly breakfast mobile order and pay. He was there when they moved into clothing with forever21 making this an important thing for millennials. Does the core product at chipotle change at all and move more towards i dont know what you refer to taco bell mexican food as. Its different than baja fresh menu innovation theyre not scared to experiment i dont think youll see doritos at chipotle. Theyre all about the fresh food but are in dire need of somebody coming in and setting things up, centralized planning all the stuff they had problems with because they are locally source the food. They need centralized control over some of these things. My own experience, i dont think they have a great taco offering at chipotle thats true the bottom line taco bell taco, if they say were out of everything else, thats all i can get, its like 79 cents. Still good with you thats fine you think a taco is key to the turnaround more key than a burr reit to. For chipotle . I dont know if hell do that i dont know if i want a taco at chipotle. They are known for their burritos rice. Eh beans. What about a soft taco theyre okay. But what about you know the fufu taco . They got cilantro in them. I dont know theres something about that 79 cent if i have to get it. Then they sort of make ginned up version of those the supreme taco supreme i do know what youre talking about. Then the fire sauce, kate the fire sauce theyre not cheap with it there. Theres big vats of the sauce. Some places they give you one thing. I could help, kate i can help i had know idea you were such a big taco bell fan. They should have tapped you for chipotle mexican food. I could each rancheros for breakfast. Probably not good for anybody here other stocks thanks, kate shares in baidu rose after an increase in quarterly revenues the Chinese Company announced it was planning to list its video platform in the u. S. Fossil reported better than expected Fourth Quarter results. Fossil had an increase in samestore sales during the holidays the company had a market cap of under 500 million at the close yesterday. Metlife says internal failures that resulted in not making payments to thousands of pension recipients go back 25 years. That problem which was revealed in december, has prompted some investigations and a 70 million charge in the Fourth Quarter that charge along with the hit from the u. S. Tax law changes dragged down metlifes Fourth Quarter earnings by more than a third. 25 years . Goes back 25 years. Wow amazing inflation Data Taking Center Stage today. The details of which could rattle equity markets all over again. For more on that were joined by Jim Osullivan and covering the equity angle, david leibovitz. Welcome to both of you jim, lets talk up the cpi number we expect the consensus is for a gain of 0. 4 versus 0. 1 gain we saw in december the focus is more the core. Thats the real key here 0. 2 . Yes that seems reasonable. Over the last year thats up 1. 8 , and give or take a tenth theres a lot of focus on this number and pressure on this number the core is the key here lets explain why this is important. The core is the number without food and energy wrapped into it. Inflation concerns are sparked some of the issues that we saw starting at the beginning of this movrnth where people thougt my gosh, inflation is coming faster than expected if we see a 0. 3 read on that core number instead of 0. 2 it will feed into that. Would that affect you youre right, were talking about tenths of a percentage point, but do you think well see that hatch it is likely to go in march any way. At the end of the day onetenth will not make or break a trend could it be 0. 3, 0. 2 today it wont dramatically change my view of where were going. If core inflation is up it makes a huge difference to what the fed is doing may not change jims mind about where the economy is headed, will it affect equities traders . I think if the print is higher than expected, we see core inflation rise, it will destabilize the equity market. What has happened over the past week or so is that the bond market has begun to price the stock markets outlook the stock market has been focused on healthy mick growecoc growth, solid profit growth, the bond market is on structurally lower growth i think a hotter than expected inflation print would destable i equitie equities we have now seen stocks make up about half of the losses. Yes that they took through that time how do you value where we stand right now an where you think prices are fair or not i think that prices are prices around the world in asset markets are elevated given where we are in the broader kochb text of the economic cycle. On a relative basis, equities are looking attractive against fixed income i think theres room for stock prices to rise the yearend targets are still viable ones as we look to the end of 2018. What yearend targets ive seen numbers around 3,000. Thats a consensus for the s p 500 yes we think even if the multiple doesnt do that much, you can get close to those numbers based purely on Earnings Growth. Jim, lets talk about where we see bond prices as a reflection of what economy looks like david laid out a good case for the bond market saying we see what the stock market sees, we see strong Economic Growth is that what you think is happening . If the fed keeps tightening, bond yields keep rising. I have the fed tightening four times this year. Thats thats aggressive ultimately bond yields go up as well. So tenyear treasury yields i have alt 3. 20 at the end of the year youre on the high end of a lot of those estimates yes theres a lot of debate on how sustainable is growth it looks like growth is picking up. Im expecting 3 growth for the year, but the key is sustainability if thats associated with an Unemployment Rate that flattens out, its sustainable. If it is because unemployment continues to fall and were down to 4. 1 , the message to the fed is that this is too much relative to the economys potential growth rate. Ultimately thats key because the Unemployment Rate keeps falling. In association with that do we see more upward pressure on Inflation Numbers. If unemployment is flat, inflation is doing nothing, the fed could do two moves all year. If wages are drifting up, they go every quarter. David, if you look at your valuations for the stock market being a reflection of what you get there versus the bond market f youre looking at 3. 2 for the tenyear what does that mean for equity valuations . I think the pace at which rates rise is going to be the most important thing to watch over the course of this year we got evidence of that last week when rates moved aggressively if we get to 3. 20 on the tenyear, well have investors thinking about their Asset Allocation to us, the magic number is 3. 5. If you assume the fed hits their 2 inflation target, rates around 3. 25, 3. 5, thats a real return of 1. 25 and 1. 5 with a volatility of 3 or 4 from fixed income, versus 2 to 3 from equities with a volatility of 15 plus once fixed income starts paying you again, the calculus changes on what portfolios should look like if we get to 3. 5 , would be taking money off the table in stocks and putting it into bonds . Yes, as fixed income moves north of 3 , it begins to look more attractive. Were late cycle this is not a market to be a hero this is the time to rely on Asset Allocation you need balanced portfolios i have a 3 dividend, youre going to wait a year to get 3 i still like equities relative to fixed income but for the average investor dont you remember historically where yields were even 6 , if you have core inflation, you need a return stocks typically even if it was tax free the issue is youve seen investors going through a period where zero bonds. Bonds paid you nothing. So its not about the lkt heongm its about where we are today and the relative valuation of those two. Im staying in stocks were staying in stocks as well is that your valentines tie . Did you think about that i did andrew s that your offering this is mine. Its a red thing. Because of red roses. Jim, youve been unlucky in love it was lastminute i was called on to the set do you have a valentine . I do, my wife you sure . Im in purple its okay. It wasnt intentional that you just blew it off blue is a cold color. Very cold unlucky, thats a song i have like 8 valentines you have at least 5. I have kids, i have parents parents shes probably not watching, i should have done this yesterday. I have a grandmother who turned 99 years old happy birthday a day late. We talked on the phone yesterday. I wanted to do that yesterday. You didnt do that yesterday . I didnt. She turned 99 years old we love her. She lives in merrick, long island happy birthday. Thats great coming up, when we return, are investor s fa eor s fallinge with safe havens u. S. Equity futures at this hour, we are in the green. Dow looking up about 145 points. Lets build a better world for investing. Lets hold ourselves to the highest standards of ethics. As Investment Management professionals, lets measure up. Cfa institute. Transparency. Expertise. These are the Building Blocks enduring relationships are built on. As Investment Management professionals, lets measure up. Cfa institute. Welcome back to squawk box. Its valentines day we have flowers here we have beautiful flowers. We have viewers who own a flower store. They sent over roses for much of the staff here thank you for that thats the good news nice. Heres the bad news. The dollar this is a business show, transition yeah. It hasnt gotten much love in the past year yeah. Theres some arguments, if youre an exporter, thats not bad news if youre exporting roses. You know theyre importing these they are from ecuadoecuador. Theyre importing these. Maybe well hand out roses as the show goes on the dollar index down more than 11 in the past 12 months. Now tax reform may have some moves in the offing for the greenback. Joining us is david woo from bank of America Merrill lynch. Always great to see you. You have been generally bullish, happily so for the most part its been a great call this past week or two shaking any of your faith . Not really. Honestly ive never been this bullish about the u. S. Economy in ten years dollar that been going down for most of the last year. I can only assume the market does not see the economy the way i do i think because people see the tax reform as glass half empty as opposed to half full. Some conversation ive been having across the country, i must have met with 200 s p 500 companies. One cfo told me that that they produce in 40 odd countries, he said it cost the same to build a factory in thailand as in illinois he said with this tax cut, the next factory they build will probably be here in the United States across the country, what im hearing from companies themselves is that with this tax reform finally u. S. Companies will be able to compete on a level Playing Field with the rest of the world. From that point of view i cannot be more ecstatic of course the Financial Market does not see it that way they see it as a fiscal still plus that will cause the economy to overheat, cause the fed to tighten. I dont think 9 markthe marks seen it like that. It saw this coming, went up 45 , now its a simple consolidation. Joe, i would love to believe you, but if the stock market has been trading tax reform, small cap stocks would be destroying tech stocks. Small cap stocks, most of the earnings in the u. S. , the effective tax rate into the 30s, as opposed to microsoft, intel, most of the money comes from outside the United States. The optimism youre expressing is being felt by business owners, Small Business owners across the board, consumers. If you do polls on the outlook on the economy, people have not been this bullish. Lets stipulate and say all of that is true. Are you worried about the other side of that what the market has been worried about the last week and a half, this idea of inflation this idea of what the fed will do to maybe slow it down marginally im very bullish on growth. Im not sure to what extent inflation is going to todays number, anybodys guess. I think inflation will to the have as much upside and growth will have upside on 29th street there are three residential buildings, each of them 50 stories tall and going up in my neighborhood, vacancy rates are going up holding down the rent m al rates are tenyear yeel yooeyear yie with 3 Growth Growth in other places has been strongeranticipate. We still have higher Interest Rates than any of those other countries. This is why i believe the dollar deserves to be higher what youre seeing in terms of rates is repricing of the u. S. Growth prospect and then that is leading to a oneoff configuration of pricing for stocks, for basic credit an everything else. Once we move to higher growth, higher rates, that has to gb for t good for the u. S. Dollar the onus is on the bears at this point to prove the pullback is anything but a garden variety correction in a bull market. If they prove it, they do. At this point its tough to point your finger to the underlying negative that would cause a 20 bear market in stocks it looks like a retrenchment from a market what has been going since the election until it proves its more than a 10 garden variety correction, i dont know whether we need to youre right. Maybe it will maybe im too complacent i cant figure out where the fly in the ointment is now for things but that said, one thing ill bullish on the economy, bullish on the stock market is Something Else in 198 we had 6 we had an amazi reform and then the year later the stock market crashed and we had an incredible 90s i hope youre right are you sure . You never want to bet against america, joe that means trump it successful we want this country to be successful weve got that on tape. Cameras are rolling. Coming up, the top stories doesnt mean you have to agree with everything the man says chipotle has a new boss, will he bring a decent taco to that veoraro chain . 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