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tv   Squawk on the Street  CNBC  December 19, 2018 9:00am-11:00am EST

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soon we are watching the futures today, once again you are looking at future in the green we have seen this story before we'll see how it plays out dow futures is up by 161 points. that does it for us today, make sure you join us tomorrow. right now it is time for "squawk on the street. ♪ good morning and welcome to "squawk on the street," i am david faber along with jim cramer carl quintanilla has the day off. let's take a look at the futures at the new york stock exchange you can see we are set up for a higher open. as everybody knows -- yeah, what does that matter right if you can see a broadly higher across all the major markets
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including italy actually a nice move. >> budget looks like the e.u. is not going to sanction them that's a tremendous story how people sold stocks and based on the budget did not matter >> thank you for that. >> 10-yr note year, we'll keep an eye on this what a story, can we bring anybody to correct the forecast. stocks are rallying as you saw, at least going into great decisions. despite what has been a pull back in equities and that continuing scolding from the president, plus, you know the brands, everything from advil and tylenol, gsk-pfizer.
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over the counter drugs >> extraordinary deal. >> the new york times has a lot on facebook's privacy problems giving other tech giants access to use privacies >> mark benioff will tell you that this company does not care about ideas, mark zuckerberg got the idea >> we'll talk about that >> are you shock >> not at all. >> i am waiting for this >> i feel as though we sort of knew -- >> we did know it. are you kidding? i am waiting for the story that putin is on the board that we didn't know it or flynn is actually a chief
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honestly, come on, let's accept it facebook sold you out. they sold you every inch of you. you are like nascar with them. they sold you out. okay, good quarter coming. >> let's get back to a full discussion on facebook in a moment let's talk about stocks a bit now. they are set to open higher, you saw that >> right >> today's fed's decision on interest rates are going to be a key focus. policymakers are expected to hike the benchmark rate, it would be the fourth time this year investors will pay close attention on the statements, a lot attention there. will he apologize? no, i made a mistake >> the fed is going to announce that decision at 2:00 p.m. eastern and we'll follow that
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with mr. powell's remarks. he'll have a news conference and cnbc will be live. >> yeah, we'll cover that wall to wall. >> all eyes. >> on the heeills of it what's going to happen >> you are good. you are making me laugh this morning. >> i used to cover homicides, there is a rhythm. you got the story and you have the after math, we'll have futures trade erratically for four hours i think we can be down and up 500. >> it is not about the move, it is the discussion of it after wars >> right >> this is actually mportant >> it is the most important day, i know you are going to say jim, that's hyperbole >> how big are you going here? >> 2018. >> no. >> oh, we got a bigger one >> or you want the super bowl.
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>> here is why i think is important. if he comes and start talking about, oh, that's a disaster we don't want to hear anything we are here and we are going to look at the data >> we did this >> because at the absolute top of the economy which he may have caused, he said things are the best he and brian cornell, the best ever you got to be careful when you say the best when you do it on that huge forum that's judy woodruff, let's be careful i know he needs to take it back. he needs to stop saying maybe only two next year what the hell does he no >> what is it going to sound when fed speaks? >> powell is a straight guy. he's not apart of that language.
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list i was a little irrational. i am not saying that he started the recession. he tanked the market i am not squiasking for that. i am asking a little humility. we treat the fed as if there is some sort of temple of money they're not a temple of money. they're a bunch of guys trying to get it right and they got it wronging a whole lot i don't want 37 on our watch 1937 >> as gundlach pointed out, phd. >> i am a phd and i talk to a lot of ceos. >> i am a jurist doctor, i know how to settle lawsuits against johnson & johnson.
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>> do you really >> you just say hey, i want to settle we got so much to cover and so little time, we are 6.5 minutes in the show. >> i am blowing out the 10:00. >> fedex is going to move lower this week. >> it is one of the worst conference calls i have seen >> we are better than expected of quarterly numbers, the company did cut us the 2019 outlook. it is pointing the weakness in europe and overall decline as well and global trade. whether it is brexit or germany or right here in terms of our trade war with china >> didn't you feel you have a better sense of why david cunningham retire? >> most issues are induced by bad political choices making bad decisions about a new tax, whether it is creating difficult situations with brexit and the
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immigration prices with germany and the tariffs the united states put in unilaterally you just go down the list. >> true. >> and at&t has not been that good that's up to them. i think they have to recognize when it is double short. when you go to china, you can't expect there is no political risk i know europe gotten leadleads. >> europe has gotten weak. sometimes they fail to connect >> we had one of their little amazon-like that reported terrible numbers in the u.k. brexit is killing it in the u.k. brexit is bad for business they got away with it for a long time it is bad. i think that the fedex calls
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bad -- asia and china is slowing and the world is slowing you know what we need when the world is slowing >> what? >> good old fashion rate hike. >> fedex to me, i talked to boeing last night, there is still strong demand. i think it is having a dip here. i want to see -- i didn't get any field how christmas is going. maybe there is a chance that you are at the bottom here that the worse is over. stocks have been doing down forever but we are not sure whether it is the u.s. or europe or china it is not europe or china. u.s. is okay >> how about micron. >> it is an interesting deal the first one that i have been able to dig in for a while they are combining
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glaxosmithkline and pfizer, they are combining. they thought that glaxo would be a buyer but glaxo found on the receiving end from navorist. we are not in a position of pfizer to put out more money to buy your consumerdivision. p & g is a player there. pfizer has been sort of searching for solutions. in the meantime there needs for cash went away when tax reform occurred and they're able to have access to all the overseas cash and their ceo focused on taxes for the longest period of time that got resolved in their
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favor. cash is no longer a concern for them in terms of bringing in more this deal makes a lot of sense >> their multiples go up you are going to get a new company that's going to be extraordinary strong you are going to want to own it. >> here are the valuations, i just put them up there so then you can basically do some quick math, 68%, 32 about 53 billions overall is going to trade at its four times sales. you get the synergy number in there. >> is it going to be great it reminds you why you like drug stocks and as eli did this morning. why we like drug stocks? consistent and not talking about
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china or brexit or european slow down or president trump for the most part. >> right >> kind of gotten away from it he became tariff man and not antidrug man >> pfizer is going to be focused on that. it is funny, they bought, animal health for $10 billion these are all youths they took from wyatt now this goes for $17 billion in this deal but roughly just 32% of this. they kept the pharma business and they kept prevnor, maybe ten years later, it is not looking so bad >> glaxo is good
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the optionalty here is always huge one of the things i would warm people is don't sell pfizer, it is not done. i thought that it was over in the high 80s and it goesall th way up to the teens. this combination is going to unlock tremendous values >> this will be number one >> j&j business is bigger than buyer. >> can i go back to what you say? >> procter & gamble i had reported, they were serious of trying to buy. >> it would have been good >> my understanding at the time is that at least they were under pressure from pelts thing and it was before and just was not something they felt they kanpur s can pursue >> do you think pelt is pressuring -- this ge deal is
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accelerated. >> i keep hearing it is apart of the plan, the middle of the year they're going to take ge healthcare public. >> do you want to listen to the ceo of glaxo >> why the hell not, she's dynamite >> we are a consolidator now this new business is going to have such a significant scale. it is really important that we free it to have its own capital structure and investment and future growth. >> she came in and said she make radical changes and people did not pay attention to it. >> people did not love that deal i know and sometimes you meal like maybe she has more
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conviction >> apparently, the big issue was getting glaxo's board to say yes, we'll spin this it is not just creating the company that we'll -- getting them to agree to that. that was the key for pfizer because three years from now whenever it is, pfizer is not going to sell at 32% they'll sell over time or get their values >> are you surprise how much values of these drug companies they spin and a lot of these companies spin off medical devices. j&j, they have so much if they want to spin off i know we got to go. david, this is some warning. we are literally just getting started. >> we are just getting started on the hills of our conversations and all eyes will be on us when we come back
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talking about facebook, wall to wall, facebook is back on defense. not like the knicks, they don't get back on defense. >> the new york times reports, let's take a look at the futures, we'll get start with trading in 14 minutes now. we got a lot more from "squawk on the street" after this. at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade, you'll only pay $4.95. fidelity. open an account today.
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we are getting ready for the opening bell here. it would be a different outcome when the trading comes at 4:00 up next, we'll have jim's "mad dash" as we count to the opening bell the future of technology investing lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners.
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time for "mad dash," you are on "squawk on the street." micron you like to feature that in the "mad dash." >> right, it has been going down about 32 points. it is going to continue to go down it is a huge manufacture of d-rams flash has been rolling over for some time but now it is d-rams they had already gone done so much that it factors in the negativity a lot of people double order and it turns out wow, there is a lot of inventories in the system they did not give you a positive until the second half of 2019. that's a long time to wait they have a $10 billion buy back certainly the combination is not cost reduction
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great american manufacture >> what's the issue with demand then should we be looking beyond that in dell is coming public here soon >> i think there is going to be issues of some of the demand problems in the data center because remember we had nvidia with weakness and mamd with weakness these two cycles micron and flash really trade in their own, even though micron was telling you the product is come flex there is a shortage. there is this one chip that puts in equilibrium and full. and what you have to do is think well, intel does not have that so let's not put that in it. i am seeing decent demands for a bunch of semiconductor companies. the internet of things are doing well autos and semis are bad and cell
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phones and semis are bad d-rams, first time bad for a long time. everyone is going to sell semis again and figure out maybe intel is not effective >> can we do a separate show in 10 >> we got to talk about qualcomm and apple and talk about this ge healthcare and cbs and leadership and what's going to happen and -- i don't know, more than that. >> i got tons. >> all right >> stay tuned everybody.
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wi we can talk about some other things i like to ask you when carl is out what the key to the market is i bet there is necessarily one but something you are going to focus on in terms of trading maybe is micron. >> micron got the ceo on tonight. faang is moving up i want to see how facebook acts. david, if there is still one more story, will the advertisers finally get tire they have not yet. >> no, they have not >> that's the key. i know the press hates these guys they are about as hatable as it comes. no one got fired the board is completely absent >> you are not a fan either. >> i like truth. i am stuck at this whole thing i don't know, i am kind of
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caught up on it. they have not exemplified truth. >> they check their feed >> the stock stops going down about a month ago. >> we knew they sold us out. >> it is like the russians what's up with the russians? it is a third rate country why do they know social because they think they can get trump by talking about russia which does seem possible we got to face up to something here facebook was a way to make a lot of mumbai monetizing your town we didn't know that they were monetizing it anywhere there was never a sense of privacy. did they obey it >> they did whatever they wanted it is the last accountability that no one lost their jobs.
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>> they still make it 20% bottom line >> that's why i say it is the key of the market >> that's why you keep on getting investors coming back >> these are obviously enthusiastic people. >> there it is, opening bell here it is wednesday, hump day. let's take a look at the realtime exchange. winter village, over at the nasdaq, huntington bank shares >> very good a couple of food news, general mills, the stock has been going down hey, it is better than 8%. i asked you this during the break. >> yes >> when i see a bank of america
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and merrill lynch sell to buy, is it really, david? what does it say as we take a look at gis having a good morning >> it is not getting down, down. i don't know what if anything would with be behind the decision by merrill to have that large upgrade. you seem to be implying there is something outside fundamentals >> i don't know. >> i am just saying -- >> one that indicates that a lot of people are going into recession. general mills and hershey's. man, that would be bad >> i heard nothing i don't think we are going to see a lot. mma -- i don't know. >> i have no idea. >> if the fed talks about the plot map, then you are going to want to buy hershey's and
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general mills. >> is that the new one of the kiss of death? >> they have the chocolate and regular kisses and the one that has the caramel in them. >> this is the one that's inside and not tasty. we got to have powell say you know what we got to see what happens. if he goes with the data plot stuff then there will be some people of the same tools >> if you listen to banks this morning, they seem to imply and you are going to get some all dovish they are all down. >> definitely credit in terms of high yield and obviously the percentage in high yield is the largest single industry in percentage industry. you hear different things. i don't know where it is >> the banks, it is not that big
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of a number. >> i am talking about what people worry about >> what you worry about is loan growth that the country is slowing and you are paying so much for cds and you are not letting that much. these are things that the f fed -- let's say the fed's mouthpiece haves been completely ignored. we need to see several rate hikes. if powell goes there, down 500 so it is not like we are saved by the bell because it is from 2:00 to 4:00 i put the challenge out to jay powell so he's probably thinking of what say. he's going to cause a recession and the president is going to fire him >> okay. if he goes from two or more, we'll get a recession. >> three >> some of the things you s say -- >> i have been right completely about the whole thing about the
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fed. i have internal people who completely disagrees with me and refused to wipe it off their face i said october 3rd is the peak of the market. >> you have more homework. >> i will not deny that. >> i hate my wife, i just hate my wife. >> you are going get fired >> oh, you think that trump is not capable of firing mike flynn, firing this gentleman did you see what the judge says about him? treason. >> i wonder why he was not charged with treason >> do you think he could fire jay powell and hire some guy that committed treason this guy is capable of anything. >> that's true, too. >> he wants to call jay powell to the top and he wants to say jay, i know you work hard and
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liesman loves you, you are fired. let's move onto ge, another name >> i like culp the first interview he did with you, that was -- >> good. it was interesting >> our side was good >> he did discuss the plans for healthcare you seem to believe they are moving faster. it is all part of the planet, ge they have told us they would do this 19.9, i am told middle of next year, you can expect to see they're important healthcare business potentially in the public realm let's revisit what mr. culp's comments were on that healthcare business when i interviewed him a little over a month or so ago. >> we look at healthcare, for example, a tremendous franchise and we talked injun abo june abn
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ipo there. we have flexibilities and options there. we could preserve our tax-free and spin status while selling at 49%. so there is a lot of cash there and given some of the estimates of values that are there >> you like that you like this? do you like the stock by the way? >> yes >> the stock the last couple of days, maybe finally bought him tusa >> tusa is remarkable. i think if larry does that -- if larry does that, he gets tusa on the team and tusa can change history. i have to say i love this healthcare business. i told larry, i think it is worth 90 >> $90 billion
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>> this is a great business. >> what did you just say >> you heard what i just said. you need some q-tips stick them right here. >> okay. >> the reason why i picked that number because i went like this. thurman fisher is worth $90 billion. although i think mark casper is amazing. t i think larry would say jim, that's too aggressive. >> let's not forget the large amount of things that he's deeming with that are not particularly positive. >> no. >> the leverage situation and continue concerns of anything else that might, i think we are done at this point >> how about the kpng long time auditor. >> a good couple of days with the shares of ge, again, we can't expect to see the healthcare ipo >> culp is the man, they got the
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right guy. he knows them. >> okay. >> this guy can do it. no one really wants to see how healthcare goes. >> they would still happen >> powell is a mess. you know when he's really breaking the ranks of that fella who was a ceo ago. when he started calling him turbine instead of turbin. >> they're going with the ge county >> let's get to some other stuff here you want to talk about qualcomm or apple at all? >> you are the one with insights >> they just keep selling their phones anyway. i love apple we are just going to keep selling them and qualcomm keeps
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yelling. this is in china it takes us back to last week's story as you recall. we spent a lot of time on that, the judge issued an injunction on all models other than the newest model of iphones. apple is saying we don't think it applies it applies on the old software that we load on the phone. they are waiting for new ruling. none of it has done that much of the stock price of the company >> no, absolutely. >> where is that thing >> you know, i don't kno know -- david, this one is so difficult and people are so concerned because it just seems like it never ends yet, there is no end there will be a court. do you think it will be set? >> panything is possible >> fair enough >> even on that, we point out
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different things when both sides in terms of what mollenkopf told you and what tim cook and others have said and some publicly good choice, the lawyer for the suppliers to apple was on, not our network but saying there is no settlement talks. >> it seems to calm down >> qualcomm did not yesterday talk about settlement. >> no. >> they're trying to get the injunction fi injunction fulfilled in china. >> both stocks are going down. >> i want to move over to talk about soft bank a little bit they did take their japanese, their wireless public. it did not go that well. >> not too strong a debut, of course, this is the key really in many ways, soft bank has been built on in the second ratio he lost almost all of it and
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then he bought motor phone business and rebuilt it and made it incredibly strong and soft bank have gone on from there and now we think of division funds and so many other things that they own this was an important flotation for them it is early trading. the levy broke at 1500 yen and there was nothing that could hold it up there >> this is disturbing because it was a landmark deal. regular mom and pop, they have been door-to-door. remember those days 1980 and 1999 guys, we are taking up tokyo electron tonight >> cbs shares this morning are up a bit wall street journal story late yesterday, jim indicated that, this was a while back already. tom stack, he has been go in for
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business on the short list of potential ceos for cbs again, this is reporting and likely i can confirm that stag's name is around >> ryan goldman. >> he's sensation. it is kind of never ending i think he is superb he makes movies because they are kind of a 360 on each channel. he would be remarkable >> there when he is. >> that's saying nothing at this point. >> there is some recording indicating otherwise the thing i would have people focus on is timing here. it is the end of the yeerar, we got the report in terms of
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sexual misconduct. who's going to lead this company if it is not joe ianiello. ianniello he's going to be the long-term of the company it gets back to something we have been talking about for months now there may very well be interests on both sides in making that happen >> i think that happens. >> and you look at the calendar and you think of next year and when they potentially would. nobody has engaged with anybody on this but when in fact they may consider doing it. you are going to want to have a ceo in place >> i think he's doing a good job. and the idea that potentially if you are entering into a new deal with viacom, that would be the
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person that runs the combined company. those are things to keep in mind when you think of staging things >> big popular names johnson&johnson coming out right now, there is a story that india rated a tout facility. let's get the official statement. we are fully cooperating with them by providing testing samples. it has been reported in some instances testing of the regular way, the fda collecting samples, 2016, they did the same thing. it is hurting stock. >> were you surprise that the stock did not move up dramatically yesterday after your interview with gorsky and the buyback announcement >> i thought it would have a p sustainable move up because the stock is down more than 50
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billion and this is a aaa and mr. lanier indicated they're going to settle. there is a lot of scared investors out there and a lot of people don't believe in alex gorsky, i think he'll be vindicated >> okay, let's get to bob pisani now. i noticed fedex is down over 8% this morning we are staying at 10 years >> we are down 23% on the month overall here 2-1 in advancing declining stocks take a look at the sectors transports are down. energy is doing a little better and consumer staples a little better and bank are flattish fedex is the key story global trade has slowed in recent months and lead indicator
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point to ongoing deceleration in global trade near term there is the fedex if you can put that up. that's the key story we are dealing today. transports all down on that. fedex and ups and expediter and ch robinson and also to the downside on that here. we have seen a modest downward pressure on overall 2018, the fourth quarter number, we had 20% earnings growth. it has now come down a little. it is 16%. it is a little heavy than normal still about 8% earnings expected growth that may be the start of all of this where is the buyer going into close? everyday i have been talking about these buyer strikes. hedge funds are in redemption. the market makers when you get the volatility, they try to l b
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limit their participation. pension funds, their books are slowly getting close and i don't know how active they'll be there is the buy back story here but there is a limit of how much they can buy back in any one day. we are at a new world record on buy back for good or bad 1.1 trillion in announced buy back and $800 billion have already been repurchased this year they may be the marginal buyer we see a number of big buy backs and you heard johnson & johnson. how about the fed? i have never seen such a good hike of what's going to happen with the fed if the fed hikes, that's what the market wants, what happens do we get a rally or is it priced in or maybe they are not dovish enough and the market goes down. don't hike, this is what
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gundlach says. then people complain to me, no, bob, that could sell off the market because of fear that the fed sees slow growth out there nobody can agree the fed is going to do this, what happens to the market we all kind of know. now everyone has a big food fight because nobody can agree of what would be bullish or bearish for the market the dow is just up the highs today. >> thank you, bob, let's head to rick santelli right now. >> hi david. if you open the chart up to the last fed meeting in november on a two-yr note yield, you can see that we drifted down the only difference is some wiggles in the yield curve and actually since the last meeting there was a flattening but we
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stabilized so to speak dollar index is getting hit pretty high. lost the 97 handled big time all of this is in response of what happens today at 2:00 eastern. do understand that all the maturely outside of two-yr are melting a little bit lower we traded 280. 281 is huge, closing basis is the trigger for many of the huge technical signals. zoom to the last fed meeting on tens zoom it further back to mid august because we are copying right towards the 24th of august a lot of relationships get a lot of their time and deservedly so. nothing more even though intrinsically we understand how important it is to many sectors wch we'll do a couple of over lays, let's put in the july chart.
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you can clearly see and if you swap out the high yield for the s&p 500, it comes no mystery that there is a huge signal between those markets. it is markets. now, granted, it's been a volatile time for many markets but that one in particular really gets to be a barometer of how some so many markets are interconnected with energy david, jim, back to you. >> interesting charts, rick, thank you. rick santelli of the cme as we head to break, look at the 20 top performing stocks
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today's fed decision on interest rate in about four hours from now, we're counting
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you down and we will bring you live coverage of fed chairman powell's news conference, as jim said, very important perhaps the most important moment of the year up next we have stop trading with jim
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welcome back let's get a quick stop trading with jim where are you going? >> drug companies all over the place. allergen there's a european recall of a -- some breast implants because of a rare form of cancer allergan disagrees, that's why the stock is down. it's also hurting their bonds. stock is a disaster. >> what do you have on "mad" tonight? >> i have the big names. i have dave ricks. he's great in indianapolis other than frank wright. the amazing coach of the indianapolis colts >> great show. >> by the way, andrew luck, he actually went to class did quite well coming up, former medtronics ceo bill george. we'll talk to him about the glaxosmithkline pfizer joint venture.
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the future of technology investing lies beyond the tech sector. it's about technology transforming every sector. ♪ at pgim, our bottom-up approach uses a technology lens to identify long-term winners. from energy... to real estate... to retail. finding such opportunities for alpha is the true value of active investing. and around the world, you have a partner in that pursuit. pgim: the global investment management businesses of prudential.
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welcome back to "squawk on the street." i'm die gallana olick. existing home sales in november up 1.9% to a seasonally adjusted annualized rate of 5.32 million
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units. that beat expectations slightly for the monthly gain, but sales were down 7% compared with november of 2017 that is the largest annual drop since 2011 and the slowest sales pace for november in four years. sales were up across the nation month to month except in the west where they fell a sharp 6.3% that's because prices in the west are highest the median home price in november, 257,700. that's up 4.2% year over year. inventory is rising. 1.74 million homes for sale. that's up 4.2% year over year to a 3.9 month supply of homes for sale realtors say first time buyers are moving back in slightly. investors are moving out so, again, a slight gain month to month, that beat expectations but a sharp drop compared to november of last year. back to you guys. >> diana olick thank you. good morning everyone, welcome back to "squawk on the street.
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i'm sara eisen with david faber and mike santoli carl has the morning off let's look at the markets. about a half hour into the trading session. stocks are gaining on this fed day morning. the 2:30 news conference, dow is up 155 s&p 500 up.75% and the nasdaq up 1% our road map will begin with the fed. it's decision day. investors are hitting the pause button as they await a possible rate hike. >> plus, this deal could change the face of health care. pfizer and glaxosmithkline joining forces it will become the largest producer of over-the-counter dr drug general electric has -- >> and fedex on pace for the worst day in ten years
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cnbc senior economics reporter steve liesman is with us from washington where he's honing his press conference question, no doubt. he'll tell us what we should expect to hear. >> been through three pencils already. the dovish hike, the fed signalled future hikes will be less certain here are some changes we could see today. we call it the keys to the fed it will reduce its growth outlook for from 2.5%, probably something lower than that.
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reduce the rate hike forecast. talk about that for many a second remove that phrase that's been there n there and put in some form of phraseology that indicates the fed's data dependency might note the market volatility and might note some of the global economic weakness along with housing weakness, last time it mentioned weakness in capital spendings. at jeffries they say we expect the modified language to reflect the likelihood that the pace of rate hikes will be more tempered and increasingly data dependent. the big change markets want to see is a reduction in the outlook for rate hikes next year and beyond most likely consensus decline hikes from two to three and here's another factoid you may want to get your pencil out. 13 fed officials forecast that in 2020 the fed will raise the funds rate above the consensus of neutral which is 3% so seven
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members of the committee will cut their outlook to signal to markets that hiking above neutral or restricting the economy is no longer the central consensus of the committee now guys fed -- steve i called you fed fed steve, do members of the fed watch cnbc do they talk to companies and ceos i'm wondering what the process is there's a discrepancy between the data points and that go into their models and everything else swirling out there changing the outlook? >> they watch cnbc they definitely talk to business businesses they talk to businesses all the time and it's part of what goes into their thinking and i think
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sara this fed maybe more than any other fed i've covered is more attune to the market because you think about where these people came from, jay powell, richard clarida. these are former private sector academics than ever have been there before. there's a big private sector con tin jenlt. some of these guys may have been in academia but guys like clarida, he spent a lot of time at pimco so they're finely attuned to the market and the market is one of the things that will lead them to a lower growth forecast and a lower rate outlook. >> can they steal the market >> can you feel the market, dave >> oh, i feel it. >> we feel it all day long. >> i always feel it.
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>> i think the fed is going to take a market single from that it will take a market signal from the yield group but they're looking at the economic data which the market is ignoring and our panelist, the growth and the earnings are reflective and too pessimistic i think what will animate powell is what he talked about earlier. when you walk into a dark room and you don't know where the furniture is, you move slowly. i think they're going to go slowly and look at the data. they'll go along with the market rather than against the market on if next hi on the next hike. >> the days we live for.
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here to talk about a rate hike and what it could mean, citigroup's chief strategist and the capital market investments chief strategist how much is on the line for the markets out of this fed meeting, tobias >> the market has discounted a lot of concerns. sentiment was extremely bullish. our model was in euphoria signaling markets were over their skis we're getting closer to the panic levels, we're not there yet but signaling a 90% probability of markets so a lot of the concerns around fed, around next year's earnings estimates have started to get reflected and probably more so than they should be. >> so what could be a surprise, brian? one way or the other for the markets today? >> well, i think the fed needs to raise rates because at the end of the day economic activity is good, earnings are good i think you may have the short
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termers, the momentum players look at this market and if the fed tries to lift the market higher in a short term basis, what does the fed know we don't know the market is priced in for negativity and there's a bigger opportunity for upside moves than down side moves considering the multiple contraction we've seen and what we like to call the santa claus buyers strike since november 1 for all intents and purposes we published our piece on november 16 in terms of our outlook and i haven't seen this much bearishness and this type of binary activity in terms of portfolio managers sitting on the sidelines or selling since 2008 and i'm not trying to grandstand i think people are excessively negative for no reason on a 12-month forward basis near term there's volatility in terms of tariffs and the fed but at the ends of the day america looks strong in terms of the world outlook and then people are being way too emotional and short term sided.
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>> tobias, obviously the market has been perhaps responding or trying to tell us various things including perhaps that 2019 earnings forecasts as published right now might be too high. we looked at fedex overnight what do you think that process looks like of adjusting 2019 earnings and what does it mean for the market at these levels >> putting it in context, back in september earnings estimates were up 12%. pre-tax earnings were up 12% this year when you had this rosy global siynchronized recovery it's 8% now, probably on the way to 6% and we'll get that outlook in january i think some of the concerns -- i won't respond to any company's specific issues but europe is weaker than people thought
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the u.s. economy looks good and there's a lot of access to credit people have gotten negative on leverage loans but if you were to look at the nfib credibility for small business, there's no indication credit is a problem we just published a note showing a chart that looks at the percentage of the companies in s&p 500 down 20% year over year from -- sorry, from the 52-week high and you have not seen high yeld credit spreads do anything like that. so i think people are selling equities because of no internal fortitude, fear and liquidity. >> how does it resolve itself?
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>> time, i wish i could say there's a magic bullet but time showing the data is okay, the world isn't coming apart if europe has its issues, europe has had five recessions since 2001, the u.s. had one it was a very bad one but we've been able to grow without europe because it's an insulated economy. not immune but insulated >> brian, certainly a lot of indicators match up with what you were saying about the extreme bearishness right now in terms of activity and also just the mood i wonder if there's no this overhang we had all this good stuff thrown at the market this is year, the tax cut, the buybacks, this acceleration in growth and we're down for the year in the u.s. stocks and next year looks tougher so how do we unlock a path to getting more confidence when it seems like we have to
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down hift? >> it's a great point, michael and confidence is the key. if you look back 12 months ago the tax cuts weren't through and as we marketed our year ahead forecast for 2018 nobody believed the tax cuts would happen and then they happened. and remember, too that the global synchronized growth trade was the in-trade and a lot of people left the united states in temples of assets and chased europe because it was so-called cheap and they got crushed this year so we believe the stability trade, everybody likes to talk about high quality but we think the highest quality asset in terms of earnings are u.s. earnings earnings are slowing but at 6% or 8%, still a good environment relative to the rest of the world and i think it's that stability that will bring investors back to the u.s. so, again, there's so much speculative selling here that people are making binary decisions. i can't tell you how many accounts are just saying can the year just be over and we can
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move into january? when you hear that type of stuff people are giving up and we still think that that is the resounding mood on wall street and you always want to buy when people are negative. >> finally tobias, just to bring it back to the fed it's not unusual far president to urge the president to lower interest rates but it's unprecedented that it's on twitter and the eve of a -- right before the fed meeting how do investors process this and when does it become an issue of credibility and show up in the markets? i think jay powell has done a good job trying to navigate, i think was the term, some of these tumultuous forces. we haven't had twitter i think george h.w. bush felt he lost an election because the fed got too tight yet he didn't have twitter two complain about it so
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these are unprecedented. on the other hand, much tends to be noise and clutter and we have to get to the signal and that is that credibility availability is there, earnings growth is, there multiples are more attractive, sentiment is negative. that augers well for markets yeah, it's today's event but tomorrow we won't be talking about the fed anymore. >> what if the fed pauses today? then what? >> i think there are some people who would prefer that. it's not my job to be an advocate of what have the fed should or should not do but i think some might take that as a negative signal. that's one manhattan's opinion and it's not one that should be taken to the bank. >> thank you very much dow is up 193. we have breaking news out of ee
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>> mitch mcconnell announced he'll propose a cr, continuing resolution, to keep the government funded through february 8 so that will avoid a government shutdown no word on when the senate might vote and no immediate reaction i just checked with white house officials. no immediate reaction from the white house. presumably that means the president has backed down on his demand for $5 billion for border wall funding because that would not be in any continuing resolutio resolution the president has been signaling he might back down through the morning in terms of his tweets saying one way or the other we will get border wall fund iing, suggesting the military might pay but it doesn't appear he'll get his funding this week from this spending measure. mitch mcconnell just signaling he'll propose a continuing
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resolution to keep the government open through february 8. >> eamon, thank you. was there a risk for that? >> that was there as a list of worries so if you can remove that for this week we can focus on 2:00 today. up next, we'll talk about a megadeal that could change the face of global health care pfizer and glaxosmithkline teaming up plus, a report that general electric is going to be moving ahead with that spinoff of its health care unit that would be in the form of an initial public offering. medtronics ceo bill george wl wh us to discuss all of that big show ahead don't go away. this isn't just any moving day.
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world's lead er. >> in a very different part of health care, ge filing paperwork for the eventual spinoff of its health care unit, something the company told us it would potentially due under john flannery last june what do these moves mean for health care oversmall well, we have an expert in the field. former novartis board member and former medtronics ceo bill george novartis did their push back to glaxo that helped create this giant at glaxo that they're merging with pfizer's unit to spin off do you like the deal >> i like it a lot emma understand this is well and she's been eager to bulk up. but it had to be big enough to stand alone.
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they're a leader in the otc field. these products have a lot of stability, there's no patent so the brand name goes on forever so good move i would predict they're doing 68% within a couple years. they'll own 68%, pfizer will own 32%. pfizer has been looking for an exit for some time they thought they had a buyer in glaxo until they had to buy what they didn't own from novartis. p&g was there for a while and they settle on this. as you said, not a high both business, 1% to 2% top line but it does get a decent multiple to sales because it's predictable. >> and she can take out a lot of cost, too, as well gfk will have full control so it's called a merger but ian reed, this is his last move.
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he wanted to do this for a long time and she has a strong consumer business and she'll break the whole thing up in three years or less from the closing. >> and it will become its own. >> so we'll see but this makes sense. i think they're putting the vaccines business with the occ. >> what aboutize iffer obviously much more now a pharmaceutical company, i was looking at the wyeth deal for ten years ago. they sold animal health, now it's part inoetta. but they kept important things like prevnar, which is an enormous vaccine and they have a new ceo coming in as well, i think pfizer -- one of their weaknesses is they've acquired companies and don't keep the leadership, the management and the scientific talent goes away.
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to be a pure play fipharma and start discovering drugs. with a new ceo, he can do that >> i'm interested in the consumer health angle. what else is in play do you see more deals here yuan lever is getting thrown out. >> well, she can do both now she's got the global base. you create one global organization brian mcnamara is a good guy they can add on more products and those are very stable. those products don't go away. >> you mentioned pfizer much more four pharmaceutical company, that will be the case with glaxo, then what? the stock market wasn't giving them credit for these consumer-oriented businesses do they have to be real acquirers in the biotech areas yes, because i think they don't have as strong a discovery unit
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as, say, merck does or novartis or roche and they have to get back to that so i see them trying to pick up individual drugs and they'll have the cap cital to do that. >> and pfizer has access to the cash because of the tax reform ge moving ahead with this plan to split off to some extent, 19.9% initially, their health care business. do you like that business overall? >> i like the ge health care business a lot the current ceo of medtronic came from there. we were just together last night. it's a good business it will do better independently, trust me. >> why >> because they need to spend more money on r&d. they need to invest more products and there's so much capability that it will take more r&d ge was really strapped under
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immelt flannery came in and fixed the health care business and now it's in a position under keiran murphy to grow but they have to invest i think larry made a good move i was wondering if larry would keep it because he's a health care guy but it was the right thing to do and lair kri now build an industrial jet engine power business he has to keep moving and i'm pleased with the speed he's moving with. but spinning this out, they can be a strong independent business and they have plenty of bulk to do it. >> thank you. >> thank you for having me when we come back, shares of fedex getting slammed, on space for its worst day in ten years we'll tell you why and what the ceo is blaming for the company's weakness in guidance cuts. "squawk on the street" will be back with the dow up 181 oh, and there's the closing bell. (sighs) i hate missing out missing out after hours. not anymore,
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for our etf spotlight, looking at transport, the i
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shares transportation etf, that's ticker iyt, is down 10% in the last month alone under pressure today with its biggest holding fedex weighing down the group. shares of fedex sinking on pace for its worst day in ten years, down almost 10%. morgan brennan joins us on set with details >> this is a big move. looking at a one-month chart, fed sex the worst performer for that time period as well, down more than 25%. investors have been concerned about slowing economic growth and fedex confirmed the fears when ceo fred smith cited an international slowdown largely as a result of politics. >> most of the issues that we're dealing with today are induced by bad political choices i mean, making a bad decision about a new tax.
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creating tremendously difficult situation with brexit, the immigration crisis in germany, the mercantilism and state-owned enterprise initiatives in china, the tariffs the united states put in unilaterally. >> he said the list goes on but that the good news is that some reversals in some of those policies could actually mean growth also said that fundamentally the company still thinks trade will continue to grow overall the economic outlook according to fedex, which is seen as a bellwether, continue solid growth in the u.s. but saying internationally, quote, the peak for global economic growth appears to be behind us so fedex announcing accelerated cost costs including voluntary buyouts with what is expected to be thousands of employees. capacity reductions after troubles in the express unit and with thent acquisition in
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europe, pressured profits. fedex's biggest segment, getting a new ceo after an abrupt announcement this month and the company pulling longer-term profit targets for that segment as well. in terms of cost cuts, getting a lot of attention after the tax cut, fedex committed to higher wages and spending but it was quite the straightforward conference call in terms of how the company is thinking about not only its own business but about the macro picture global ly. >> fred smith never shy. i guess investors are trying to figure out how much is it a fedex issue and how much are we going to see this from company
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after company because of the global economic issues this company cited. >> it's a good question. when you look at shares of fedex, they were down 17% on the month before the big move lower we saw today a lot of that was around the changes in express and an expectation that business segment wasn't performing as well as originally was anticipated and the other thing to keep in mind is that their ground shipments and freight business also did better than expected and you're seeing strength there so there is company-specific weakness around express taking place here but over and over again on the call they said there has been a change in the macro landscape. they have seen global growth slow especially places like europe and it happened faster than they expected. >> that is a warning to other companies and the whole market we saw futures dip when the fedex came out after the bell. thanks let's get to sue herera for
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a cnbc news update. >> good morning, everyone. here's what's happening. president trump is considering pulling the remaining 2,000 u.s. troops out of syria. the move intended to allow the administration to declare the four-year american-led war against the islamic state as largely won according to officials but pentagon officials and top congressional leaders are trying to talk him out of the proposed withdrawal arguing such a move would betray u.s./kurdish allies. others are calling it a grave error elon musk unveiling his underground transportation tunnel to reporters and invited guests he says the tunnel is just the beginning and he sees a future for tunnel travel. >> this system is designed to do over 150 miles an hour through the tunnel and wouldn't it be incredible if you could travel around l.a., new york, d.c., chicago, paris, london, anywhere, at 150 miles an hour.
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>> a tornado that touched down in washington state on tuesday was caught on camera ripping off roofs and uprooting trees. the storm ripped through northern washington causing widespread damage about 50 miles west of seattle. sara, i'll send it back downtown to you up next, it's d-day at the fed -- decision day, that is ronnie cro randy kroszner is with us next stocks are raleigh ahead of the big decision dow is over 200 points higher. the nasdaq gaining by more than 1% "squawk on the street" will be right back
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welcome back to "squawk on the street," i'm sara eisen with david faber and mike santoli
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happy fede, one hour into the trading session. so far investors appear happy with the nasdaq composite gaining. still, the major averages are down, all each more than 7% for the month of december, way more than that even for the quarter we'll see if investors are happy with the outcome of the fed meeting in just a few hours from now. ahead of that widely anticipated fed decision, the final one of 2018, joining us is randy kroszner how does the fed balance the decent u.s. economic data with the much worse investor sentiment and the darkening outlook. >> that's always the chak the fed has because we have this high frequency information coming in of this market volatility but if you look at the fundamentals, they look good maybe we're not growing at 4% but 3% the unemployment rate is down below 4% inflation seemed to be -- the
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markets are in a bit of tumult i think they'll try to look through that and talk about the economic fundamentals but i think it will be a dovish tightening today. >> what does that mean in practical terms they raise rates and say what? >> so they will raise rates but i think they'll change the statement where they've been saying repeatedly that further gradual rate increases are necessary. i think they'll try to move away from that phrase and talk about more -- depending on the circumstances they'll decide when and whether more rate increases will be needed i think chairman powell is going to say a phrase he's used before that the fed is not on a pre-set pa path he wants to break the expectations that the fed is in a particular rhythm that every other meeting they raise rates. >> randy among other things he
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beal asked is the president's criticism to the rate increases and whether that has any bearing on today's decision. assuming there is a hike today, it would seem like it would have the benefit for investors to perhaps put that issue to bed. >> i think jay powell and his colleagues are strong colleagues most of whom are trump appointees and i think they'll do what they think is best regardless of what have the president is saying and when the president was talking about it he said these are my views and i'm going to let them do what they think is best and they'll do what they think is best. >> randy, the tax changes of roughly a year ago, the debate over whether they were simply sugar high so to speak or a one time stimulus or something that
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will spur productivity, where do you come down on that? >> that's one of the key things they're debating because they're seeing more wage growth and if you get productivity growth along with that that takes off the overall price pressure this is the thing that greenspan's insights in the late 1990s when we got an increase in productivity growth, robust economic growth, but he didn't need to tighten. and i think people are debating that now the key is going to be what happens to investment spending we saw it go up in q-2, go up more moderately in q3 so that's what i need to see if investment spending goes up, i think the more positive view of the tax change is fundamental reform and one that's likely to be the right interpretation. if we see investment spending fall off, we don't get as positive of a view but i think we'll need more data on investment spending and
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productivity to decide that. >> you may not agree with the president's tactics when it comes to criticizing the fed, randy, but this idea that the federal reserve caused the recent market volatility and erased progress maid on the trump economics, is he right about that >> there are factors besides the fed that are causing market volatility i don't see anything new that theor articulated that would have caused volatility the probability that they were going to move 25 basis points in december was known a long time ago. some things that are new are increased political uncertainty in the u.s and europe the slowdown in china has a big impact on u.s. firms so we think of the u.s. stock market as stalking about the u.s. economy but if you look at the biggest firms within the, is andp or
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dow. marginal growth has been coming from china rather than the u.s. so if china slows, there's more uncertainty, that has a big impact on the value of u.s. stocks. >> randy, good to get your insight. thank you very much former federal reserve governor softbank's mobile unit not doing a particularly good job in its public debut the share is down 15% in tokyo. micron shares also taking a hit. the chip maker's revenue fell short tonight on "mad money," micron ceo is going to join jim. "squawk on the street" will be right back ♪ ♪
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one indicator predicting the faang trade coulsee d a monster rally next year. find out how to play it on more "squawk on the street" is coming up.
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let's get over the dom chu with a market flash. >> we're watching shares of canadian alternative lending company home capital group which is down by 16% or so right now on the heels of the company repaying back or buying back a good chunk of its stake from warren buffett's berkshire hathaway group which last year offered it a rescue package, bought equity at $9.55 canadian. you can see why the shares are right now but an interesting development, warren buffett not leaving on sour terms. he said it was great investment but shares taking a big hit on the exit of berkshire hathaway. >> let's check in with jon fortt and see what's coming up on "squawk alley." >> facebook continues to be in the news, when it comes to data, who it shared it with, should it
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welcome back to "squawk on the street."
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i'm dominic chu. stocks trading higher after yesterday's volatile session as investors await that big fed decision at 2:00 p.m. eastern time real estate a sector slightly underperforming the broader market's mild rally. you've got lag ards, some of those names, that sector is one to watch as we approach that fed decision later on today. now i'll send it back downtown to you guys over at the exchange. >> all right, dom, thanks very much let's get out to the cme group in chicago rick santelli is there with the santelli exchange. good morning, rick. >> good morning and thank you. i'd like to welcome my special guest for this fed day, chief economist vincent reinhart thanks for joining me. >> thanks for having me, rick. >> the dot plot thickens you know, it should be evidence and much of your writing is focused on the notion that if you started to plot the dots and looked back at 2012, then what were the low dots, whether it was to the neutral range or just
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general horsepower of the economy, those are now the high dots so the lagging indicator nature makes many nervous what are your thoughts >> so i think that's why chair powell wants to get out of the guidance game. you don't give guidance on something you're not sure b it will impair your credibility over time. you just see the cloud of dots drifting lower and lower the lowest dot in april 2012 is now the highest dot in september 2018 that doesn't say a lot about your ability to understand the macro economy. if you don't know, don't say it. >> now, and this really does underscore, i can remember when alan greenspan started to tinker with the notion of guidance. they would have three choices. then they modified, went to the statement, press conferences i think it should be the dawning of a new age of guidance avoidance. you seem to agree. but easier said than done.
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>> if you look back at the transcripts, the first thing any chairman says in front of a conversation about communications is we have to be completely unanimous, we have to be completely confident, because once we give -- put something out there, we can never take it back i think they have got a chance next year to do away with the dot plot they're going to get the funds rate close to where they think is neutral chair powell can go out and say i'm not sure whether rates will rise or fall the next time, and maybe they can tell you where the long run is, but, you know, the next couple years, that's overdescribing monetary policy >> all right now let's get into the real heart of the issue today i personally think, along with many, that jay powell is very pragmatic and even though much of what he considers seems to be lagging and following the
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market, i think the notion of a pause is something they may see fit to comply with as we move through time you don't quite feel that way. tell me why. >> so i understand the argument for pause, but i also understand at a practical level that once you stop, it's hard to restart the headlines are going to be fed's done and what you have essentially done is put a bigger speed bump to the next action if you think you're close to where the funds rate should be in the long run, get it to that level, maybe stop a little short, and then say we're done from here on all decisions are data dependent and made meeting by meeting maybe we're more likely to raise the rate the next time than cut it, but we don't know. so if it were up to me -- >> you know -- >> i think this -- >> here's the problem i have with that whole notion, vin scet
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you say it's too hard to stop and start again. i say it's hard to break the economy's addiction to liquidity so maybe we need to do things that are uncomfortable your final thought, i would like to know when do you think we're going to get to balance sheet exit with terms of reinvestment? is that 2019 or 2020 in your opinion? >> 2020. they want a smaller balance sheet. >> gotcha. vincent reinhart, thank you for joining me i hope you have a happy set of holidays david, back to you. >> thank you, mr. santelli sara, what have you got coming up on "the closing bell" today. >> we have jay powell coming up on "the closing bell" today. >> will he be sitting right here >> no, he will not he will be giving his news conference, probably the most anticipated of the year and his career so far. the decision is out at 2:00. 2:30 he steps up to the plate and he will get to explain it, explain if we see any changes
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from the fed on growth prospects and the dot plot, which is just the forecast of the fed. clearly investors are looking for a change just how much is going to appease them, mike, with a 1% rally, interestingly, into the fed meeting. what does that tell you? >> a very small rally relative to the losses. what it tells you is the market is under an unusual amount of stress going into a fed decision where a rate hike is expected. if anything, the market is really set up to have this tension release rally on almost any news, which means if we don't get that, what does it tell you about the real condition of the market so i think a rally is more likely but be on alert if we don't get one by the end of the day. >> i just think it's so interesting how many prominent investors and economists have come out in the last few days saying it's time for a fed pause. larry lindsay, paul truder jones. you wonder what's behind it. a lot of these folks were the
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ones saying to yellen hike faster, get ahead of this, raise rates, get back to normal. and now quickly for a pause. you wonder how much financial conditions have changed or just what is behind that u-turn in the opinion. there's a lot to talk about. >> a little more than three hours from now we'll start to get some answers. up next, facebook denying a report it gave companies access ituther data who tir permission we'll have the latest on that story. that's next on "squawk alley."
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