Good morning. The days top stories, the Global Markets. Political paralysis, the point of that in italy spooking investors and lead to go a selloff on wall street. And then asia follows suit overnight. European stocks are tumbling on upper trading this morning. It is tuesday, february 26th, 2013 and squawk box begins right now. Good morning and welcome to squawk box here on cnbc where thirchx feel a little under pressure. Im Andrew Ross Sorkin along with joe kernen and becky quick. Well, becky quick is off today. She will be back tomorrow. Global markets focusing on italy this morning. Sylvia berlusconis center left rivals won parliaments left house, but failed to win an absolute majority in the upper house. This is creating uncertainty. Berlusconi has ruled out an alliance with former italian Prime Minister mario monti. Hes arguing the results reflect unpopular discontent with stocks. We saw sharp drops, italian yields jumping. Check out early stocks in european trading. This morning, we have red stocks across the board. Germany, close to 2 off and france over 2 and the ftse down materially. U. S. Stocks to drop yesterdays session on that uncertainty in europe. Stocks steadily declined throughout the day. And accelerated losses during the final hour. The dow and the s p tuning in their worst days of the year. Major asian markets also trading lower. Exporters exposure to europe, they were hit particularly hard, as youd expect. And u. S. Equity futures at this hour, we have green arrows and things might turn themselves around today. Fed chairman ben bernanke is going to be heading to capitol hill this morning for day one of his hemp free hawkins testimony. Hes expected to defend the Central Banks bond buying and likely one that automatic spending cuts pose risk. Cnbc is going to have complete coverage all day. And our guest host this hour is ready to tackle all of these issues. This yesterday was thanks. We saw yesterday and you know hes not becky. You did say here with becky. He was sitting right there. He looks nothing like her. Every morning when you say the same thing i know. Andrew and cliff. But before we get to home depot and is home depot is out and were going to do this as quickly as possible. But there will be political maneuvering on what happened yesterday in the markets based on the sequester the. And because people dont watch it as closely as us, theyre going to see the sequester is now starting to come to the floor and theyre not going to tie it to italy because its hard to connect the dots to italy. But we were up like 80 points and people knew full well that there was no talk between the parties in washington and it wasnt until this happened in italy, which shows you that once again the idea that europe and 2013 was going to be a back burner issue, thats not we knew it wasnt really the case. This supposedly is a vote to not go down the paths of austerity and just getting their labor structure more akid to free markets, etcetera. I just wanted to get that out. Steny is going to be on. And i love steny. But you think this is going to become a talking point. I think this will be a talking point for people who say we cant handle the sequester. That italy thing on the sequester. Stock futures up today. Home depot is reporting 68 cents a share, ahead of expectations and revenue is up 18. 2 billion versus 17. 7 billion. Thats pretty big, a 17 billion Share Repurchase authorzation. I dont know the time frame on that, but compared to what the market cap of home depot is, thats still a pretty significant number, 95 billion market cap. The stock, unclear where its going to open, 63. 50 to 65. 87 on that chart. You can see its down, lowes ended down 5 yesterday, andrew. But remember how that was but that was 200 points, up, down, up, down. That was more, i think, more market related. Dont you think . So we blame italy . Can we blame italy on lowes . Well, we can blame the overall market being down 200 points. Ge was down significantly yesterday. It had been up earlier. The dividend at home depot, in addition to that 700 billion repurchase, the dividend was raised by 34 . Its a 1. 8 yielder now. So add another third on to that, it gets up into the close twos. U. S. Samestore sales, do you see that number in the u. S. . Home depot, up 7. 1 . This might be somewhat sandy related. Thats what people are looking tore. But theres also a 53week is it this a 53week year . It is. But youre going to get a bump on the extra week, as well. In this past quarter or this year . No, no, for last year. Maybe it did, then. Samestore sales up 3 in the fiscal year for this year. Lets check on the broader markets this morning. The tenyear is you can see home depot which is now indicated down 1. 66. Were at 1. 87 and that is not surprising that were starting to see a slight slide back into u. S. Assets. And i know that the euro got killed against the yen and other currencies. You can see 1. 30 this morning. Euro versus the dollar. Gold has been in and extended down trend. You know, not really seeing a big rush to when theres uncertainty, you think maybe gold is going to go up. Its up a little bit, 1590. And i dont know what oil should do. Were down about 81 cents now at 92. 30. Okay. Lets go see our friends overseas to find out whats going on with the market out of europe. Ross westgate is standing by in lobbed for the report. Ross. Hey, andrew. I see red there. Thats not a sea of red. Only about 40 stocks out of 600 at the moment on the Dow Jones Stoxx 600 have green on them. You see the top line above me here. So some serious lows. First thing this morning, number of italian banks limit down, as well. Lets show you where we stand. The ftse 100 the best performer. The cac 40 down 2 . The xetra dax down 1. 8 . We saw the ibex in spain down off 3 . Here is the italian market. Ftse mid down 4. 6 . I talked about those italian banks. The biggest players are seeing the biggest losses. Unicredit down 8. 2 , as well. Back into the 7. 3 . And as you might see, expect a sharp spike higher in italian yields. Now, the tenyear yesterday we were trending about 4. 24 . Were currently trading at 4. 74 . We did get up to 4. 86 . We had a sixmonth tbill auction this morning, yields sharply higher than that in january. We picked 50 basis points higher today, 1. 23 . Bid to cover was down, as well. And its going to be important because tomorrow weve got us a fresh tenyear auction for italy and suggestions are that the price will be sharply higher. Well see how demand is. Its going to gear a fresh test for the italy post this italian gridlock projection. Whatever happens in the election, at least some political stability and this was the worst Case Scenario. And now, its questioning the whole Reform Program in italy, as well. Remember, the omt program, which has done so much to support these italian markets and italian yield curves is predicated on having a government in place and can deliver the reform for the ecb. In the back of traders minds is whether were putting in a disconnect before that. Euro dollar got hit, as well. Not quite there at the moment on euro dollar. 1. 3095. A little above it as you can see. But nevertheless, European Assets getting walked at the moment. Thats where we stand. Back to you. Ross westgate, thank you. Lets get to Michelle Caruso cabrera from rome. Get the u. S. Copy elections italian style. Its hilarious. I love the comedian who got twice as many votes as monti. Monti wanted austerity. We dont like it here, either. Then berlusconi, 76 years old, theyre saying its not necessarily that hes alive. Its maybe hes undead. They have a great piece with a lot of key points, but thank god we sent you over there, even though, you know, you like going over there, anyway, but its nice that youre there for this, michelle. What can you tell us . Yeah. What we have this morning is complete and total gridlock, stalemate, there was 130e6d to away clear outcome from this election. There were numerous reports out this morning highlighting what happened here. Let me give you one example of what citi wrote, for example. Shock waves across the market. This is what happens when the worst case comes through. High Political Uncertainty is negative for investments in italy. So this is quite bad. Remember, this is a parliamentary system. So even though someone yesterday got the most votes, they didnt win. That is luigi bersani. Berlusconi and grillo got a lot more votes than anyone expected. Thats what led to gridlock and so no one is in control. Silvio berlusconi, sounding exhausted, called into one of his networks this morning to chat with the news anchors there. First of all, he doesnt think there should be new elections, which is a possibility. When he was asked about Interest Rates rising in italy, he said, dont worry about Interest Rates. They are an invention. The markets are a little bit independent and a little bit crazy. And the fact that the spread is widening compared to german Interest Rates, why do we have to compare ourselves to the germans all the time . We dont have to. He hinted to a coalition with the left. He didnt say he would do it. The other thing he said was he was hoping that mario monti didnt even get 10 , didnt get into parliament at all. He said if that had happened, he would have gotten drunk, but hes decided to give away those bottles of wine to his friends. Beppe grillo, the comedian that you talked about did phenomenally well. He boasted about the fact that they did this without money and without reimbursements for their costs. Remember, if you have a Political Party in italy, the taxpayer reimburses you your campaign costs. There are only two parties in this election that refuse to accept the money. The comedian grillo and then this very small pro market party that unfortunately did not do very well. Why do we care . Remember, italy is the third most indebted country in the world. They owe the world 2 trillion euros. They stopped growing in the mid 90s. Their revenues are going down and costs are going up. They must change that or at some point they cant pay anybody back. Weve seen that movie before. Back to you guys. 128, 126 debt to gdp. 10 unemployment. Yep. Unemployment among the young, 36 . Four straight quarters of recession. I wanted to point that out to you about the young. A lot of those young men, you know, theyre living at home, michelle, which makes it tough over there. I dont know whether you but didnt that do that when the economy was good . Yeah. But im just talking about for your situation. Because anyone that you meet, you just have to make i dont know. Some kind of alternative that i dont know. Anyway, i dont know what to think of italy at this why are you laughing . Never mind. Staying in a nice hotel. Go ahead, andrew. You know, can i tell you, i go ahead, michelle. On twitter a lot of the people are saying oh, the italians are crazy, the italians are this. I dont think the italians are that crazy. I think theyre angry that germany is telling them what to do. They dont like that. They see that as an invasion of their sovereignty. Mario monti was not elected. Whats happening here is theoretically undemocratic. Theyre not completely crazy at this point. Michelle, walk us through what happens next. Thats the part im still unclear about and i think its part of the reason why the markets are as uncertain as they are. So you ask numerous people. We hired a student who is get ago ph. D. In political economy who explain the election process here. What happens next . Will there be another election . Italians are quite physical. They do this. They dont know. There are a myriad of possibilities. Somehow miraculously there could be a government formed because parties that hate each other decide theyre going to work together. Will an election happen in a month or six months . The establishment wants to delay elections because they think if there were new ones immediately, the comedian would do even better and perhaps win the whole thing outright. So they dont want that to happen. So it is impossible to know at this point. Thats why youre getting the reactions in the market. Its so frustrating for italians. Theres a call to change the legislation around elections so that this doesnt happen again. Because they just cant stand the uncertainty, either. So who is in charge, though, of figuring out what happens next . So all the people who got elected last night go into parliament now. And in theory, bersani, the guy who got the most votes, can try to form a government. One possibilities thats been talked about is the one thing that the vast majority of those elected who agree so is changing the laws around election. We may get parliament to go in. They may do something related to, you know, the election process, and then we start all over again. But the people who got elected last night in theory are in charge, but also in theory, they couldnt pass anything of meaningful reforms. I will bet you that you can walk around over there, youre in a beautiful place right now, but youre not going to be able to tell theres a whole lot going on there. Youre right. It wloox like a beautiful day. Italy, how bad can it be . Youre in italy. Let me ask one other question. And the pasta is always phenomenal. Exactly. Anything outstanding in italy, not outstanding in the of course, the food is outstanding. Is there any budgetary issues that need to be dealt with in, say, the next three months . So what we have to watch for is their debt calendar, right . Were going back to the days whenever italy needs to borrow money, how much did it cost compared to the last time . Both italy and spain front loaded as much as they could at the beginning of the year. They were debt rollovers. They knew they had to redo their debt at a certain amount for the year. So they did as much as possible, as they could early on to get very low Interest Rates. And remember, this country has a primary budget surplus. They can live with higher Interest Rates for much longer than greece did, for example, which never slipped on to a primary budget surplus. And the rising so were going to start watching their debt calendar. They were at low rates earlier this week, like historical lows, right . So theorizing from low rates, right . Yeah, exactly. Exactly. 36 unemployment. Ming the young. Remember, its 50 plus in greece and spain. The uk is not good. The two tier system, particularly in italy. Michelle caruso cabrera, thank you. Smart moving sending our chief International Correspondent over there. Management here and her over there. Still to come this morning, searching for opportunities amid this weeks Global Market selloff. Two investment ideas from our guest host and then in the next half hour, weve got squawk box newsmaker former treasury secretary Larry Summers is going to join us. Find out what he makes of the situation in europe and the looming sequester here at home. But first, as we head to a break, check out u. S. Engt futures. Stay tuned. [ male announcer ] it was designed to escape the ordinary. It feels like it can escape gravity. The 2013 cclass coupe. Starting at 37,800. Welcome back to u. S. Equity futures right now. Were going to get back maybe a quarter of some ovs losses we saw yesterday if it were to open there. Its about 58 points on the dow. It wont get us back to 14,000, but its a start. European stocks this morning down in this from 1. 25 to 2. 14 . In france and that is the story. What happened in italy, which well be talking about all morning long along with the sequester. Making headlines, more americans fell behind on their auto loan payments in the last three months of 2012. Transunion, the Credit Reporting Company says the rate of auto rate payments at least 60 days overdue climbed to 0. 4 in the quarter. That remains, though, at the lowest level since transunion began keeping records way back in 1999. Lets get to the National Forecast alex wallace. Good morning to you, guys. Its snow, snow, more snow. Some of the same areas that were impacted last week dealing with it now across the plain states and the midwest. Wichita, still snow there for you. In fact, youve picked up about 7 inches and were still dealing with the snow. More to do with it as we work our way across missouri. And up around chicago. Well eventually start off as a bit of rain. Here is todays forecast. Snow across the plains in the midwest. Working on off towards the northeast as we head on into tomorrow. Well continue to deal with it around chicago, moving into lower michigan. So detroit, youll have to deal with some of that snowy weather and eventually the northeast, again, will have to deal with that threat for the wintry precip, including a good chunk of new england by the time we get into thursday. How much are we talking about . This goes through thursday in the morning hours, generally 3 to 6 inches in that blueshaded areas. But there will be some pockets of 6 to 12 inches. Again, shovelble snow to deal with here. By thursday morning, into the northeast, good news for the ski resorts. But boy, oh, boy, it will be tough to get there with a foot to a foot and a half across parts of new york state. Then theres the wet side of things. Very heavy rainfall to deal with across parts of georgia, into north florida. Weve been tracking strong storms. The area in the red watching for some severe weather. Guys, back to you. Thank you, alex. Our guest host this morning has managed its you manage 30 billion . Not by yourself. Im the top of the pyramid. 30 billion in fixed income investments. Bill cutwater. Thank you for being here. We have a couple of things to talk about. We talk about italy. Do you care . Is the market getting rattled nor the right reasons, for the wrong reasons . I think for the right reasons. Whats pushing policyholders forward is market volatility. And when draghi came out, to remember back a few months and instead, well do whatever it takes and created the omt. Weve got a very, very calm market and too calm in my opinion. So i think in a per verse way, maybe a flash of volatility. Putting pressure on markets might move that volatility forward. So we do care. Its creating volt tilt. Is volatility opportunity in your world . I think if you have a 12month horizon, we like to take a long view. Are you talking stocks or bonds right now . Mostly bonds. I need to know because you said the markets got too calm and there was a lot of volatility. Youre talking about bond markets. Yeah. I think the bond market is coming down through time. We chopped a huge amount of tail risk. We may debate, is this the end of th