Business. We hear what the ceo has to say about the future of the company. And amazon getting into the streaming music game with a new lower cost option. What that means for the industry and all the competition like spotify and apple. First up though the watch is onto see if the dow and s p can rebound from worst oneday performance in a month. Tuesday was even worse for the nasdaq down more than 1. 5 with microsoft among the biggest tech losers. Mike, were back to essentially the 100day semis didnt perform well, honeywell, dover, alcoa, what does this mean . Definitely a nasty oneday shake out. Brought you down to the bottom range weve been in really in months and to that average. Seems like there was all this disorder on the borders of the equity markets going on for awhile on the currency fronts, in Government Bond yields, theyve been moving much more dramatically than stocks recently. A lot of that finally spilled into the stock market yesterday. I feel like october came ten days late. But i think for now its still just kind of volatile in a range and not so much like a change in the story. Mention industrial earnings, i think thats a big deal. When the markets trying to get used to the idea that the feds likely to go in a few months, they want to see Everything Else lined up nicely and thats not really playing to script yet. See 179, 179 almost 1. 8 now. Not good in the face of results that appear to be getting weaker. I feel its one of those things where everyone sa its okay here. Were fine if its 1. 78 going quickly to 1. 95 or 2, we dont know whats going to get knocked loose in that process. We are in such an interesting time to be talking about yields spiking to 1. 79. Its hardly historically a high level, but yet the steepening yield curve is helping the financials. The best performing sector albeit still down yesterday and that comes ahead of earnings this week. But 27 days to go before the election. Theres still so much conversation about what wall street regulation looks like. What happens to Health Care Companies . Mike, im wonder if you think investors at home should stay away from health care for the next month . I dont know about staying away from it, but i dont know exactly what the kind of oneline bull thesis on for lets say the Health Care Sector etf, right . It seems to me everyones got a very shallow conviction when it comes to health care. Either safety in big high yielding pharma, potentially Risk Appetite growth for biotech or its kind of, well, obamacares here to stay and its the hmos and hospitals so all those things can be kind of shaken up based on whats going on in the markets. I do think yesterday you had this idea of a democratic sweep filtering into peoples consciousness, whether it happens when its likely or not the house tips i think thats what you saw yesterday. Showed you people saying maybe we cant be so sure were going to have split government. Lets dcuss more on the markets and bring in aaron gibbs, chief equity nstment officer at capital iq. Erin, there are so many sources of anxiety in the market whether its earnings, the election or stronger dollar. Where are you seeing it this week . For us this week id say its particularly going in the election. And then just those obviously disappointing results we start for the very beginning of our earnings season. So were expecting some volatility over the next couple weeks. Also, historically october just tends to be a poor month for the market. So if we do have some shakeouts during october, were still looking for a solid and strong end to the year for the u. S. Stock market. The earnings season always takes on a cyclical nature where you start with some of these industrial names and then you get into financials and later on its tech and retail. But im wondering if you think we will see different waves of strength and weakness and how the market will begin to interpret that. So certainly alcoa was a big surprise. Look, when youre talking about only 7 of the company is reporting out of the s p 500, its just too early to call certainly financials have that big wave that has an impact on that industry. And obviously at the tail end of Consumer Discretionary we get a better picture of what the u. S. Consumer is doing which also will give us a good idea of what were heading into for Fourth Quarter for the retail area. But overall, look, right now were expecting a 1 contraction for Earnings Growth for q3. Its always at the very beginning of the Earnings Seasons that the expectations are the worst. And typically we see anywhere from 2 to 5 higher by the time we finish earnings season when everybody finishes reporting. So were still looking at low single digit growth for q3, not great but not contracting and starting to rebound. Erin, you know, it seems like were entering earnings season at an interesting time sector wise. Youve obviously had a lot of the defensive plays, dividend yield sectors selloff a bit, people got comfortable with the idea of owning more cyclical stocks heading into it and yet its those cyclicals at least very early edge of reporting industrials that have caused a little bit of anxiety. Do you think were going to see just a lot of internal rotation continuing during this earnings season . Yeah, like i said, i think were going to see a lot more volatility over the next three weeks because we also have the election coming up as well. So that just adds a little more volatility to october. Industrials is one of them. I think were going to see less of the volatility in the Consumer Discretionary and some of your consumer staples. But certainly a lot of those high yielding stocks theyve already been pulling back and been some of the worst performers even in q3 just on a return basis. So i think were going to see this transfer of leadership into the more cyclical stocks. Its just that we may see some of this more churn over the next two to three weeks. Well, its been a good refuge, erin, for places where organic growth has been lacking for investors to find stocks that have buybacks, find stocks that have dividends that have been growing. But i wonder if you think Dividend Growth is about to be under pressure because weve been hearing that from the likes of david costin from goldman and others this week its a little bit of a contrarian tale. So when you really look at it quarter by quarter, the first two quarters were the great places for those high dividend yielding stocks, but as of basically midjuly we really havent seen that leadership in those high dividend yielding stocks at all. And youve seen those pullbacks, youve seen the valuations get really pricey well over the benchmark. And you dont necessarily see the growth coming with it. So i think like i said, we are going to see a change in leadership particularly as we move further into q4. Were expecting more some leadership go into Consumer Discretionary, potentially Even Health Care because right now valuations are looking great, especially once the elections over. And as we get closer to that expectation of a fed rate hike, particularly in december, i think thats also where we may see those stocks really fall back and we see a new leadership in more of the cyclicals. Finally, erin, we just talked about the impact of politics on the market. This narratives been written, a, that the market would be nervous with a white house, senate and house all dem. The other side of that is that a clinton victory would create a wider path for the fed to hike rates perhaps even faster. Do you buy both of those . So we actually did a couple studies on how the option markets work around an election. And certainly going into the election youll see more volatility. And you can depending on peoples opinion youll see stocks maybe you can take advantage maybe 5 . But ten days after the election when the november options expire, all of those plays are gone. So this is a very short term i think its really all about the uncertainty and once people see whos in the house, you really go back to more of the fundamentals, finishing the end of the year with the santa claus rally, those type of things. So all of these i really feel are very short term. Take advantage while you can. This is why i like some of the Health Care Stocks right now because theyre beaten up and its really just headline news. Although uncertainty is a word weve been hearing a lot. Erin, appreciate your time. Erin gibbs from s p capital iq. Yum brands ceo greg creed making the case for spinning off the companys China Business earlier this morning on squawk, he said the split isnt because the food safety scare china was too difficult to handle. We thought we could create these two powerful independent focus growth companies. And we thought we have an equity play, which is high growth but with some more higher risk. We also thought we could have higher growth but lower risk business if we obviously separated the China Business out. So that was really the strategic reason for doing it. Interesting interview. Talked on all the fires they sort of have to put out. Joe asked about returning relevance to pizza hut and some other things like that. In fact i see some pizza hut going with the wacky pizza chain ads during post baseball right now. Theyre trying to stay in that game. To me i think the rationale for splitting this company is almost like spinoffs 101, right . You have one very large piece of the company that often was kind of coloring the rest of it which is the China Business. People want a very pure play on the kind of domestic Consumer Spending story in china. So you can kind of maybe fix or revive the growth levels in the u. S. Business while you have investors, you know, getting their hands on a separate china play. The question to me is whether the stock already kind of builds in some of the good news because people love spinoffs and maybe its already priced in. But he wasnt necessarily bullish about the u. S. Consumer at this point in time. He said theyre wait and see until the election. When he talked about comps, he talked about comps on average over the last two years. Clearly theyre trying to smooth out a very choppy statistic, but i loved when he talked about taco bell and the fact that the average customer comes in once every 11 days, half the American Population goes to a taco bell every month. Make a run for the border. They talk about the power of users, right . Thats right. Twice a day. That old twoyear stack. I love that too. When we come back this morning, amazon upping the ante by offering some new Music Services. How worried should the ion be . Also ahead, top apple analyst tony sacconaghi. More squawk on the stre from post nine in a minute. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing tradinknowledge. Ats great idea, t why dont you just go to thinkorswims chat rooms where you cashare strategies, ideas,ven tual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at ameritrade. Amazon is launching its paid Music Service today, called music unlimited for 8 a month or 80 a year for prime members. Nonprime members will pay 120 a year. But owners of amazons echo device will pay just 4 a month for a version that only works on that device. Amazon already has prime music, but it only has about 2 million songs. This new service has tens of millions of tunes. Mike, theyre all about the companys all about giving preferential pricing to customers of prime or customers of its hardware. But theyre having quite a few tears here. Its getting a little bit tough to track. It totally is. They obviously want to bundle in various different ways. I wonder if youre also in a music streaming business at another company say, well, at least they didnt wrap it into a prime subscription. Theyre asking you to pay more on top, they probably have to to make economics work at all. So maybe that makes it slightly less of a threat, but i think its scary like Big Companies like apple and amazon, if youre pandora, spotify, that can kind of use these services as kind of just an addon or rounding error to your core business. Do you think it signals that prime is bursting at the seams . I wonder about that. I wonder if theyve already packed it so full of products its about to break . Either they feel like its got enough in there that its such a great deal for the core subscription they dont actually have to give you anything more inside it, or, yeah, its getting complicated and you dont even know what the usage is. Maybe its a hardware play, sell the echo. A lot of discussion about what was a barrier at 10 for Music Services. Now if you get the echo, 4. I mean, id love to hear the discussions that went on between amazon and the labels as to what amazons going to subsidize and what labels are willing to put up with. Exactly. You cant think thats the actual cost of the content. But, you know, youre never going to get those numbers of course. They wont tell you how many prime members they have. I tweeted this morning the number of fronts amazons taken on, cloud which we already know, netflix and streaming. And now grocers, store in the journal about how kroger and walmart are going to try to fight these tiny brick and mortar amazon shops if in fact it gets that far. Its like the oneword short thesis is basically amazon could do this. For any sector, any vertical that you can find. Whether its true or not, i mean, i do think thats the perception. You dont think that the previous attempt to do lockers within preexisting Retail Stores is sort of cautionary here . You would think it would be. Nobody in the real world is fighting to get into the Corner Convenience store business, right . Its kind of a subsistence level thing unless youre, you know, cvs and adding basically a deli into it. I think its a threat on that front. But i think there would be a lot of caution. Now we have canner coming out with a 1,000 target. Their argument is ecommerce is reaching a Tipping Point this holiday season. I think ever core is higher, suddenly the quadruple digit target doesnt really phase people. I think because its just a 20 gain from here so its really kind of not that newsy if you have a bullish analyst with a price target of 20 or above, but i think with the exact very simple argument amazon getting more of its share of a very fast growing market in ecommerce. Thats kind of all you need to know, at least from the bulls point of view. I keep reminding people for as wonder a 20year run, a 19year run as amazons had, many, many 20 setbacks. It was down more than 30 in the First Quarter of this year. It has bumps on the way even when itsoi the right thing. This is also a safe time of year to invest in amazon. It always runs up to the holidays, and when it announces earnings at the beginning of the following year and people actually see what its margins look like for all the packages it had to deliver and all the deals it gave people on price, then they start to dislike it a little bit and gives up a little bit of its gains. Speaking of apple, samsung cutting their operating net forecast, they look for about a third reduction as a result of all the troubles involving the galaxy note 7. Its costing the chairman quite a bit of money in terms of his own personal stake. Theyre shipping these explosionproof boxes so they can be safely transported back to the company in a recall. Journal this morning makes the point its obviously one reason apples had one of the strongest rallies its had in a few months. But opens a lane for google pixel. And would you rather be lucky or smart . I think google would take it. Obviously theyre going to take it. Samsung being forced to sit out. I think the question i have is absent a new Samsung Phone and the carriers kind of putting that in front of people and pushing it, is it a one for one, are people going to buy x number of these new Samsung Phones and therefore theyre going to buy a phone and everyone gets the benefit of that, google, apple, somebody else. I dont know. But clearly a net positive for everybody else. Are shippers, transport companies that are sending these fireresistant or heat resis tant boxes back, do they have a trepidation about carrying these . Youd have to imagine youd want to model in some potential liability if something goes wrong. Cramer sat here yesterday tr traveling on a passenger jet is scary. See something Say Something as cramer said yesterday. A lot to watch. Samsung warning a third of its profit could be at risk because of this. The Company Actually warning on this device specifically. So well see whether this is a conservative estimate or whether this is just the company trying to put a fine point on it. And well talk to tony sac sacconaghi. Well take another look at the narrow range in the premarket with fed minutes on the way this afternoon. Dont go away. Just about seven minutes to the opening bell. Lets bring in art cashin director of floor operations with ubs. Good morning to you. Good morning. You said yesterday midday watch 2140, ive seen people break in slight support, is that the way you think of snit. It was within an hour you were below 2130. If we get weakness again, you want to be very careful of the area around 2118 to 2121. You break that then we could get more serious problems. For now weve rallied back to just under the 100day moving average which is around 2138, 2139 in that area. The big event of the day actually is the stabilization of the british pound. And that came about because Prime Minister may somewhat reluctantly agreed to let the Parliament Debate the brexit. Theres not going to be an official vote. Theyre going to debate it. But they are a lot more dovish, if you would, than she is. And there may be a Court Challenge maybe as early as today or later in