Welcome back to squawk. We have odd breaking news this morning. We reported earlier today that home depot and excuse me, office max and office depot were merging. Theyve taken that press release back. Apparently the negotiations are still ongoing. This according to dealbook. Well find out more throughout the day. Thats where things stand as we speak. Robert wolf has been our guest host. Thank you for being here. Its been a lot of fun today. Well see all of you tomorrow. Join us tomorrow. Squawk on the street begins right now. Good wednesday morning. Welcome to squawk on the street. Im melissa lee, with carl quintanilla, jim cramer and david faber at post 9 here at the New York Stock Exchange. The day after we broke a lot of records for the u. S. Markets, were looking at an update for the dow. The s p looking to give back just a little bit, along with the nasdaq. As for the picture over in europe, some comments from germans chancellor Angela Merkel about the euro saying between 130 and 140 for the u. S. Dollar is normal. Those are the comments being focused on this morning. A mixed bag in terms of europe and take a look at the picture in asia. The nikkei, the one to focus on, closing at a 4 1 2year high in yesterdays session. Fresh fiveyears for the s p and dow, fresh 12 years for the nasdaq, helped in part by a renewed appetite for deal making. Cracks in the housing picture this morning, january starts to decline 8 1 2 . Toll brother earnings sharply miss earnings. Could demand for the iphone be cooling . Fox con pressuring shares this morning. The rally continuing with the dow and s p having their best day in two weeks. Nasdaq closing at 12year highs. Dow less than 130 points from closing at an alltime high. Guys, a lot of discussion about how its a nominal high. But getting back to 14164 would be news. In some form or fashion, jim. I think that there is a level of, dare i say, excitement. In other words, were seeing levels that we havent seen in some time. Its making people say, geez, maybe i could make a little money. As opposed to saying, i should leave. I believe that is the new view, maybe i can make some money. Does that build, that momentum continue to build into the spring . I think if you were to finalize the Office Depot Office Max the papers are filled with rumors of deals. And when was the last time when there were rumors of deals every day when you come in. You have analysts now doing the lbo crunching number, like kohls. Lets call heinz 1, 55 equity check. You never see that. Dell was unique because you have the founder rolling in all the stake and putting in additional money. So they didnt call on the pe firms to come up with huge checks. Dont get too crazy on doing your big lbo models. At the same time, i was on the dell call last night. This is one of the things where half the people are saying, this is nuts. This thing is worth like six. Others saying, dell refigured could be worth 13. There is a great schism right now of a lot of professionals who say what a great opportunity to leave the marked. Because theres fraud. And a lot of individuals saying, you know, i knew dell. Google, ooh, geez, 800. Ive got to get in that before it gets to 1,000. How many people said to me, honestly, jim, google, 800 to 1,000 . So you obviously want to take the other side of the yahoo trading, except you listen to Marissa Meier and you want to buy it. You seem to be suggesting that those who are chasing the market the market doesnt have a lot of intellectual depth. Because there keep being this discounts. I read through the toll release and i liked it. That will distinguish me as someone whos not rigorous or skeptical enough. I think toll goes to 38. Because this market gives you intraday, intrastock pullbacks. I was looking at tiffany. We pronounced tiffany dead, and its like they got the walking dead show, where you have to shoot them right through the head, kids love it. This one they obviously missed the head and it comes back. You have to hit it right here to be able to survive in walking dead. They didnt shoot it in the head. Which means what . Its still around. It wont die. It wont die. People reluctantly like this market. They see the markets going to new highs, they dont want to get out of the market, but they dont want to miss it. Its like dying by a thousand paper cuts. Thats not the kind of market that drives excitement or drives the volume. But it keeps people in. Yes. Yesterday General Mills reported a the update, the food conference, i thought, that stocks too high. But then i say to myself, well, wait a second, heinz goes out on a certain level, maybe someones thinking theres a guy from General Mills, then dannon yogurt is looking good. Take a look at the defense stocks and some of the Consumer Staples names. Staples. Like staples. But you are bringing m a into your overall market thesis as a driver here. I am saying things like the heinz multiple 14 times what its taken out at, is something i can start thinking about at least and then it becomes a reality again. Which it hasnt been for years. Yes. Ill give you an example why i wa to mention General Mills. In my old fund i would have shorted General Mills. Conagra. Theyre not all going to get heinz. And they loved General Mills yesterday. The stock is selling at a multiple of in excess of google. Odp, omx thing, i know andrew also, i think hes standing by back at hq. Kind of weird, andrew. The press release had this little thing called other matters, which we all saw this morning, detailing at 269 ratio. But but never got a press release on the deal. Were talking office max office depot. What do we know at this point . The negotiations are ongoing. There are dealmakers furious this morning with whats happening. Office max is supposed to report its earnings tomorrow. We thought wed hear about a transaction by tomorrow. It was buried on the fourth page of this press release under other matters. Also in the press release, referring to a 10k which havent been filed. Theres a lot of questions how the release got out. Its now been taken off of the home depot or the office depot website. Well see what this all means. But i imagine 9 terms are not going to change that much. But we might be seeing i imagine well probably see a statement about all of this, and perhaps a deal in the next 24 hours anyway. Its a very weird, and as some people were talking about this morning, sloppy way to deal with it. It actually makes a foreign deal more interesting. How does it work . Now the entry behind the deal is more exciting than the deal itself. Did the times get it wrong . How does it work . Ask your colleague. But they didnt get it wrong. The Companies Got it wrong. Somebody jumped the gun to get an advantage. Maybe they wanted 269 out there as a ratio. That could be it. And maybe its not done. Jim, no, no, just to clarify, this wasnt about the New York Times or any other news organization. In fact many news organizations went with the news because office depot put out a press release that included all this information. We, therefore, reported it here on cnbc and squawk as a news story, based on the news release that was put out. Even as bizarre as the news release appeared to be. Then they took it back. Now theres a new story broken effectively in this case by the New York Times suggesting that the press release was not supposed to go out and the negotiations are ongoing. A lot of people are saying the press jumped the gun. No, it is not the press jumping the gun. The banker was jumping the gun. Again, theyve got a local story. Dont you love the local papers, people take these stocks up. David, in your many vast years of covering m a, how long do they listen to the local paper, listen, were going to pay 40 more . Is that the process . When do you get involved investors in these days seem to want to take anything anywhere, which gives an opportunity to others do a bit more work. You never know. Local management, local paper, management is there, sometimes you might have a member of the board or two there. You never know. The diner. The general store. Right. Exactly. Cracker barrel . Stocks been hitting highs. One things for sure, it is a very bad day for someone at odp. Yes. Our thoughts are with them. This is an interesting story. Now i want to find out more. Andrew, thanks for sticking around. See you later, carl, thanks. Construction on new u. S. Homes falling in january. But construction of singlefamily homes did rise at the highest levels since the financial crisis. Toll under pressure after they missed estimates. Expanding the operations in an effort to capture a larger portion of the apartment market, pushing into Student Housing as well. New orders up 49 . Cancellations flat. But theres a sense, guys, that starts have exceeded the markets ability to absorb. I listened to the terrific debate this morning on squawk, and Steve Liesman said something pretty profound, which is some people think this may be the new normal, but were so well below how many homes we used to build. I think these are all noise. I trust Toll Brothers. Toll brothers, i remember when things were bad, i wanted bob toll to come on the show and say, come on, he says, you know what, jim, youve been goading me. Youre right, there is light at the end of the tunnel. Ive had enough. When he goes bullish, i am not about to question him. When he was bearish, he was right. I think the bigger issue for this company at this point in terms of the stock reaction, if you read the metrics, they all looked good. Im with you, jim. You read through the press release and everything looks good. They gained market shares, so they werent giving up on margins to gain the market share. The problem is, it trades at a 42 forward multiple. At a 42 forward multiple you need the stock to beat. At least meet, and it didnt, the estimates for the quarter. People are getting hung up on this headline number. Well get more details from the Conference Call, of course. Influenced by weather. Exactly. Theres a debate about whether these two months of weak starts are seasonal noise or theres actually a trend developing. I think its a good debate. You go back over pullty, theyre still talking about demand out there. Toll brothers, obviously, articles about, well, theyre affected by the sequester. Most people, like sequesters like the jeopardy answer, right . What are the massive cuts . That would be a sequester, yes. Why would they phrase that in the form of i cant even do it right. I dont know how i won. You would, because youre lucky. Better to be lucky than good. Lucky is the residue of design. Good one. Thats a good one. Therapists for 500, alex. Well talk to the toll ceo tonight on fast. Freezing all hiring as it cuts production of the iphone 5. The company is not hiring at any factories in china, this after a federal judge said Green Light Capital einhorn has a likelihood of success. In this case against apple over the large cash holdings. A couple of issues here in terms of apple. First, lets deal with the fox conn. Scaling back, but could that just be that another iphone is in the pipe. I think well read a story in the next two hours from the defen defense analysts saying, ive been in touch with foxconn and theyve moved the business over. Apple does a lot to try to like cisco used to do, by the way to make it so you cant read the tea leaves. We can trade on every single bit of news. But weve been whip sawed. Its not been a great strategy. Between the hacking news, einhorn showdown in court, the news flow continues to rain on apple, every single day. Its amazing. Yeah. An enormous company with interest in so many different places, and so much interest in it. You were pointing out an npd number. 20 of all Consumer Spending on technology in 2012 was apple. 20 of all spending on technology. On all Consumer Spending. Yeah. Is apple. The numbers are stunning. When you include apple in retail overall, the numbers are stunning as well. Look at retail in america and what percentage it takes up, those apple stores, i mean remember they topped the yeah, everybody, hands down. The einhorn drama is not done by a long shot. Could we see a Dividend Increase or buyback question there. I was watching this court scene, and the immortal words of u. S. Marshal sam gerrard when confronted by kimball about whether he was innocent, i do not care about this lawsuit one bit. Einhorn, like i wish hed bought the mets. Is there a trading deadline . You dont like it listen, intel has a preferred. Real estate is preferred. Go sell it. The court suit, come on, it was like perry mason . What have you got there . Like the defenders . Is this the defenders, are we going back that far . Its going to be walltowall coverage on that suit. I care about the bp suit. Amendment 6. When we come back, Marissa Meier talking about the latest push to turn the company around. Well find out what shes doing to keep yahoo relevant. The president and ceo of Marriott International live with his first reaction to earnings and a look at the companys recordbreaking hotel in dubai. One more look at futures. Cant get much closer to the flatline than that. Today is gonna be an important day for us. You ready . We wanna be our brothers keeper. Whats number two we wanna do . Bring it up to 90 decatherms. How bout ya, joe . Lets go ahead and bring it online. Attention on site, attention on site. Now starting unit nine. 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Again, just to recap, we did think it was a done deal because of what Corporate Information was saying on their website. Until it disappeared, david. Other matters. A press release that was the Earnings Press release from office depot said, hey, were buying office max for 2. 69 shares of common stock of each standing share of office max common stocks. That was the ratio, 269. Thats what you saw. But you never saw a press release. It was weird, because it was just buried in the earnings release. Yeah. It did strike us as very odd. Yeah. Yahoo ceo marisa mayer looking for a new look at the home page. The new look will take advantage of peoples daily surfing habits and capitalize on the growth of Global Internet users. Its more personalized than ever. People said, give me a reason to come back to yahoo a few times a day. The content is always updating and refreshing. It gives you all the information you want. And a few things that are a serendipitous surprise. Is this enough to bring investors back here . I think investors are coming back. Right. Or staying in. Tim armstrong pulled off his deal. Yahoo never lost its core base. I have an apple iphone, i guess that makes me a stone ager. But im not on the samsung galaxy. But it is loaded with yahoo . The galaxy. I find that yahoo is still very much intergreat into our society. If they can do a little bit cooler things, it will work. How do you prepare for todays Market Action . Mad dash is coming up next. Well take another look at futures as we sit here at fiveyear highs. It looks like well give back a little here at the open. But we can still help you see your big picture. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. All in one place. Im Meredith Stoddard and i helped create the fidelity guided portfolio summary. 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Since we make radiator valves wouldnt it be better if we just let fedex help us to expand to new markets . Hmm gotta admit thats better than a few likes. I dont have the door code. Whos that . He won a contest online to be ceo for the day. How am i supposed to run a business here without an office . [ male announcer ] fast, reliable deliveries worldwide. Fedex. Theres a lot to watch today. Talk hotels, jim. Well, you have mr. Sorenson on at 11 00. Marriott, incredibly successful company. Why . Because he figured out how to divide the company to bring out value. The ceo of starwood recently, i suggested that if he did Something Like what sorenson did, the stock could be up here. I cant wait to hear your interview. Sorenson is a remarkable creator of value