tv Squawk Box CNBC February 27, 2020 6:00am-9:00am EST
2020 "squawk box" begins right now. good morning welcome to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. big news about yesterday was that the dow was up about 461 points at its high it gave back those gains throughout the course of the day. the s&p futures indicated down about 35 a lot of concerns after the president addressed the nation
talking about what is happening with the coronavirus and appointing vice president pence. >> as he was speaking, one of the cases of unknown origin that happened in europe as predicted >> if you look at the treasury now, you see the 10-year is yielding 1.297%. >> not negative yet. president trump speaking about preparations last night. >> we are very, very ready for this whether it is going to be a break out of larger proportions or whether or not we are at that very low level and we want to keep it that way >> he has tasked vice president
mike pence he also addressed the market response >> i think the stock market will recover. the economy is strong, consumers are incredible that's why we are doing well and other countries are not even before the virus our consume rp is very, very strong very powerful economically. >> and the president put some of the response of the dow to the democratic convection. >> are you suggesting financial markets are overreacting here? >> i think financial markets are very upset when they look at the democratic candidate looking at the stage making a fuel of themselves it is always a possibility it is an election. who knows what happens
>> we'll hear more from the president's comments at 7:00 a.m. eastern part of the points was united health care. part of that may be the prospect the other need >> bernie sanders looked liked he had such a demanding lead his pack is raising money. got the endorsement of the run to the senate or president -- sorry. i was very specific. i didn't want to trigger you i just mentioned united health, not coronavirus. i got it >> reporting a new case of the coronavirus in northern california but this can't be traced back to any travel to
china, this indicates possible community spread of the disease. showing where we are right now, the dow off. looking to the european markets. you can see there everything is off about 2% across the board. now 556 confirmed cases in europe denmark and estonia reported their first cases, italy above 450. germany has cases that can no longer be traced to the original source in china as well. hps bottom line will take a hit. saying the impact will be felt most in the manufacturing business >> today, manufactures are open
but not at 100% level. we saw a supply chain driven impact we have estimated in q2, this will be an impact. >> in a related story, microsoft does not expect to meet quarterly segment. generating most winds owes revenue by selling licenses to device makers including hp shares of microsoft are off more than 2.5%. shares of nutanix cited coronavirus as one reason for lowering the 2020 outlook. looking at asia pacific and japan region that stock off by 18%.
>> it has been a fascinating, ugly week. what struck me driving in about this being the worst week since the global crisis. speaking of that, i had a front row seat at leman brothers >> you almost caused it. >> i was hearing more discussion about central bank functions, if you recall, household debt were at the highest levels.
largely household financial. you couldn't do it there was no mortgage credit available. because that mortgage credit channel was cloged even before we had this last leg lower in rates by the way, household obligations are at the all-time low. household sector will be flush they've been deleveraging through the cycle. it happened in the 60s as well you could get a confident shot to be sure
it is likely to be temporary you talk about the business confidence channel going into the trade wars. that was at multidecade highs. the biggest impact was pretty profound now at the lowest level since 2016 i suspect this will be less disruptive than the great east japan tsunami quickly followed by the thai floods that shut down parts of semiconductor industry for months. your interview with honeywell ceo setd we local source 11 was the inflection point for
that i don't see the supply chain disruption this is going to have a hit. if you think about the knock on effects of the crisis, i don't expect to see them anything like that >> we are going to go to break you have made the point that ceos might sit on their hands. >> 100%. >> you would acknowledge, if bernie sanders were motting up, there could be a market impact based on that. you would acknowledge that >> i would acknowledge that. i don't believe that would have significant impact on markets. >> at this appointment
>> i think in the middle of the crisis at this magnitude, he's turning this into a political story. >> we know about supply chain and business and gdp >> sure. >> let's say this does get out of hand and that the response of the trump administration actually helps the democrat's chances. >> sure. >> you needed something to say about what he said yesterday >> it is a very highly correlated mark down tech going down the most there are two that stand out, health care providers and oil and gas. there is a little element in there for sure i would not call that the
primary catalyst >> not at all. united health care was downright after. >> more than would be justified in the price of oil. >> coming up, the markets continue to drag down the market >> it is 6:10. >> the knowing glances >> trump talks to the country about the coronavirus and how to prepare and uses it as a political -- i don't think anybody should ever get used to that >> updates from employers to china and in italy where confirmed cases are growing rapidly. travel related stocks this week. new comments from delta,
before the break, we told you about several companies reporting on supply. looking to eunice yoon and progress in china. good to see you. >> you too, becky. it depends on how large the company is the country put out some interesting data on small to medium enterprises the resumming of work topped 30%. if you look at the numbers for large companies. over a week ago, 80% had already
resumed work there is a question on the definition of resuming work. they are not getting the assembly lines up and running. it is not clear how far along the a semibly line getting up and running. the communities here put out surveys as of today. the american chamber of commerce said 48% polled see a drop in revenue for this year if business continues to stay abnormal al april 30 48% see a decline in revenue
46% expect to lower the business target for the year. the central bank has been trying to reassure businesses here with several different measures but today specifically said that bank would go as far as possible to reduce the impact and ensure that china receives for a year that sentiment has been raised for how long, the government will try to avoid large scale stimulus they've been talking about targeted with unemployment here, that is a big question mark. >> we had a little projection
here that gave a briefing today saying that he believed the outbreak in china would be contained by the end of april. we'll see whether or not that pans out i'm not sure if he included the surge that you are seeing overseas the concern here that it will be a reinter duroduction in china going to italy this morning. to cnbc italy joining us now on the news line. good morning >> caller: good morning, andrew. >> tell us the feeling there, the reaction we've had these conversations now for several weeks.
>> that's right. mentioning she's been on the ground for several weeks it is interesting to hear all the information she's gathered it is all new to us here we don't have much information we know the numbers. 400 have been reported 12 deaths. the areas in lockdown continue to be the same the cases in the rest of italy have been linked to the epicenter. we don't know who patient zero was but we know where all the new cases go back to they are keeping that area very much locked off. >> day to day, just you go outside right now.
>> you go outside. the treats are very empty. all offices have found a way to allow employees to work from home if they are in any way -- not even if they are linked to the area in complete lockdown. it is just trying to avoid people going to the street. from 6:00 in the evening to 6:00 in the morning can now stay open
citizens are beg urged to not gather and being told to lean away a bit even though the numbers are increasing without having to put everyone in lockdown, they are realizing they can contain it. >> you have started to see in the united states, that is being put in many other countries and regions that it is pretty inevitable that this virus will go around. we have to ra just and try and not stop the world economy while we deal with something very serious. in italy now, it is the beginning of that. today and tomorrow, very crucial, the days in which we'll see whether this is a short term or leading to a medium term.
i know the gdp comes from the areas that were affected they cannot -- they can handle for a short while, a stop. but if this does last longer, it could have a big impact on an economy that is very, very slow. this is really important to try and understand the length in time >> the low number of cases in the coronavirus is hard to believe the outbreak is
increasingly likely. global head of dramatic research the main question isn't true and we don't know the nomination we know the epicenter was wuhan and the total number of cases in china is a big number but compared to over a billion people, they have managed to at least on the surface, con continue it fairly well. do you think we'd be able to do the same thing in the united states because of more personal freedom? why do you think that would be so much worse? >> good morning. i think there is a couple of things to note here. one, we've seen si significant amount of social distancing in china and the rest of asia
a pretty client population allowed themselves sto be locked down once they found they had a problem, they received some criticism that it took too long to put their hands up. the repeatability from a higher flub to a lower number the rate of growth going to some time in april. a number of things, one, you may already have far more cases than you know about there has been very little testing done in north america. i find it quite interesting, you
can't perform that much testing. you can other test in three states and five cities when you test for this thing, you might actually find it when we are talking about outside of asia, italy being the big number, yes. i'm suspicious about iran. i think the number of cases in iran is far more than being reported this goess to the number of cases in iran. you can't have 998 cases and eight countries magically getting the number --. >> the number of deaths there much higher. >> it is kind of a half empty,
half full view point if there are more cases, you are not seeing emergency rooms flooded or a high mortality rate, then we start thinking the mortality rate isn't taking the advantage. then it is a weaker strain or either way -- can you find good or bad in either scenario -- >> potentially there is one point we think about. we see this from the diamond princess it took a long time, even though they knew they had that virus on that ship. this may be what we are seeing in iran. they may have known they had
this thing in the middle of january. and now it is sharting to she up the number of patients who show an acute response, about 5% to 10%, you talked about those showing up in emergency rooms, that could be a big issue in the u.s. goifen that there is not a large amount of social health care that could keep people from seeking health care and result in higher cases in the u.s that's the point i'd like to make >> the main thing you brought up is we may not be capable of the same type of social distance that where there are billions,
they are could be more effective at keeping their distance. if we were to say, b the biggest fear is what we don't know, we could get really hysterical. if it is a huge amount of cases here that we don't know about. we need to do the testing, which is what dr. scott would say. >> absolutely, yes you do need to do more testing >> some of these drugs seem like they may of therapy value they are more than a year away from a vaccine thank you. coming up, this week has been brutal for tech stocks.
look at some of the names at or near correction levels now after the break take a look at share winners. merchandize rose 33% to 1.7 billion. we are back after this taxes? sales tax, real estate credits, solar incentives... and we have no way to integrate all that? no...but bdo does. (announcer) people who know, know bdo.
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welcome back want to get a check on some stocks on the move beating forecast as it earned more from subscriptions and services saying the carb app mobil service had 24 million active users up 60% added new features including stock trading. and box earnings beating forecast now guiding first quarter revenue above analyst estimates software let's customers store and manage content talking about earnings during the coronavirus moments. futures are indicated lower again. the dow indicated to open lower than 268 points.
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points, friday, down 227 monday, the dow was down over 1,000 points add another 879 on tuesday, another 123 today and indicates another 290 points this morning. this morning, when you take a look at the concerns and writing down across the board. >> if it is 300 today, in 10 would be 10. >> pull back >> are what we just showed, we'll see what happens today but the losses team to be getting less but it is dependent on every piece of news that hits.
>> add that up, 128, 227 this is just the dow >> the equities might not about where you focus. >> the 10-year is even scarier we are talking historic lows down 1.38% getting to the guy with the thick green tie. >> air b&b out with a statement saying its policy allows guests and hosts to cancel reservations with no penalties. working to support the host and believe the travel industry will bounce back. jetblue became the first u.s. carrier to cut fees for changing or canceling flights >> i have a question
when air b&b says we have no fees, it would be the homeowners that take that on. >> if you cancel, the fees can get partially shared >> i'm also hearing, the homeowners can also cancel too >> can the fee then go to the guest? >> they are really not the ones getting impacted any of this >> if you cancel your flight -- >> but jetblue is selling you the seat the air b&b model, they don't own any of these the big loss goes to the
homeowner who was going to get the majority of that money, i assume >> in this case, it is all of air b&b's business so the beldelta there is significant. >> it is the same to me as air b&b getting rid of the fees. i mentioned you, is it a house tie. >> don't say it is guy you hate it and are embarrassed. >> that is not your case >> this is the case, i forgot my
tie. i usually grab my tie on the way out. we have in the back, there is historically these boxes of ties i said, okay, i'm not going to go back home so i put this tie on >> i would wear that >> this is your style, which is why it is not mine >> i mentioned it. you just blue it off >> i. >> it is a three-hour show >> do you want to talk about death and coronavirus all morning long >> when we come back, we'll talk to dr. scott gottlieb to talk about just that. and tuition-free college programs to generate the talent companies need.
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china, what is it like every day? not unexpected booking holdings expects are he have knew to fall 3 to 7%. the company runs travel sites such as kayak and priceline. it's impossible to predict where and what the impact will be. when we return, dr. scott le gottlieb is making a house call. coronavirus preparedness in the u.s. take a look at these two stocks both reporting overnight down sharply anheuser-busch and bayer anheuser-busch off 7%. back in a moment >> announcer: don't forget to subscribe to our podcast
all right, welcome back, everybody. president trump holding a news conference late yesterday to calm american's fears about the risk of coronavirus hitting the united states. >> i don't think it's inevitable i think thatwe're doing a really good job in terms of maintaining borders in terms of letting people in, in terms of checking people. and also, that's one of the reasons i'm here today, getting the word out, so people will know, they're going to know. no, i don't think it's inevitable i think there's a chance it
could get worse. there's a chance it could get fairly substantially worse, but nothing is inevitable. >> for more on the president's response to coronavirus fears, let's bring in our guest, dr. scott god loeb, the former fda commissioner and cnbc commissioner and serves on pfizer and ill lum nus boards. good to have you here today. scott, thank you how are you looking at this, how should we be looking at this >> i think we're entering in a new phase. there's cases in major cities, dozens maybe hundreds, certainly not thousands at this point or we would be seeing that. epidemic isn't inevitable, but we need to take conservative actions right now. we need crash development of therapeutics and vaccine and dramatically broaden screening simple changes in behavior can have a very big impact when distributed over a large population, hand washing, staying home when you're sick, workplaces changing practices
and broader mitigation steps to engage in social distancing and other things like that. >> workplaces changing -- what do they need to do >> well, i think you need to think about flexibility for employees. employees are sick, how they can stay home, how you can support employees with things like day care and other things that can keep them out of the workplace if they're sick. we need to start thinking about if we're going to have to change practices to limit social contact, cancel large meetings, limit travel we're not there yet, but those are the kinds of things you need to do to prevent an epidemic spread we will have outbreaks here in the united states. it's inevitable, but we do not need to have an epidemic. >> when you sat down at the table you did purell and did this to your hands. >> i think a lot of the transfer -- people worry about aerosol, but there's a certain amount of things we can do to prevent that a lot of the transfer is probably touching and in touching your face
so, if you're on a plane, it's not the air on the plane it's someone passing out cups on the plane to all the airline passengers. >> but i thought that purell didn't kill viruses. >> it kills the virus. this is a coronavirus. it appears that this virus lives on surfaces for a period of time but it's not a hardy virus so alcohol wipes, lysol. >> shaking hands is a barbaric thing to do. >> yeah. >> are you shaking hands with anybody? >> i've been trying to avoid it. >> me, too. >> i think simple changes in behavior and you distribute them over large population can have a very big impact. we need to think about implementing those behavior changes now. also good infection control in hospital doctors practice good infection control but we need to step it up. >> you don't agree >> i don't agree with using th word barbaric. at a point like this it's a good idea not to, but i think if you weren't worried about it, it's a human thing to do to look someone in the eye and shake
their hand i don't think it's barbaric. that's all i'm saying. barbaric, what is that >> there's a study that showed a fist bump could cut transfer by 90%. >> what about the fist bump, then >> 90% cuts by 90%. >> because there's no germs here. >> in all seriousness, i think the backstop -- we have to prepare this is not something that's going to start and stop this could become something that could live with and backstop against it will be a therapeutic or vaccine we need to invest very heavily in that. >> we might have a therapeutic already. we won't have a vaccine for a year and a half. why not focus on something that lessens the severity. >> it does look promising and it could be here -- >> is that gilead drug >> like what regeneron we could have in the late fall or early winter. >> what about a inhibitor, stuff that might -- >> those look less efficacious.
>> what do we need to do to make sure you don't immediately prescribe a steroid, predniso prednisone -- >> it looks like a storm and it looks like it's more respiratory acute syndrome and steroids are ineffective. it looks to be not effective in china. >> it could be counterproductive. >> would make it worse. >> it potentially could. the problem is that once you -- once that process ensues and you have a very high viral load, simply killing the virus may not provide therapeutic impact and may worsen i think we need a moon shot approach right now we have the ability to conquer this with science. the science is there it's available they were able to develop profill ak tick antibiotics to ebola and have one in the lab for mers >> that's a year and a half? >> it's not a year and a half.
in 2009, the first case was identified april 15th, 2009, by september we had a vaccine this is ossible. >> how much money? >> i think we should put billions of dollars. this is not a time to be a fiscal conservative. >> where are you on the weather the time of year, whether this dies out >> this summer should be a backstop, but it might not stop transfer entirely because this is a novel virus we don't have cross immunity it should be a backstop. you could see it dissipate in the summer and come back by the fall >> i've seen lots of questions on the other side. >> dr. got loeb, thank you for being with us. the future swinging over night after the cdc reported the first u.s. case of what looks like community transmission. we're going to talk more about the market response. we're down to 300 right now on the dow. we'll be right back. able to rete on our terms. taking care of dad. why ameriprise financial? my advisor cares about my personal goals. he gives us comprehensive advice.
in client portfolios. tap untapped potential. and strengthen confidence in you. flexshares. powered by over a century of investment expertise before investing consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. markets in turmoil the dow on pace for its worst week since the financial crisis. this as pandemic fears over the coronavirus continue to spread futures once again lower a number of companies warning of a business slow down. we're going to get you up to speed on what it means for your portfolio. and the feds new challenge how the impact of the virus and the low interest rate
environment could change monetary policy. we'll discuss with jim grant of grant's interest rate observer as the second hour of "squawk box" begins right now. ♪ good morning welcome back to "squawk box" right here on cnbc i'm andrew ross sorkin along with becky quick and joe kernen look at u.s. equity futures this hour as fears about the coronavirus continue to persist. dow looks like it would open down about 290 points right about now. nasdaq off 116 points. looking at the s&p 500 off about 36 points. joe? president trump, as you probably heard by now, held a news conference to reassure the american public and wall street that the u.s. government is prepared to respond to an outbreak of the virus. he is appointing vice president mike pence as a point person for
the u.s. response and eamon javers joins us now with more. we were playing your question earlier today. i'm sure -- and i think you even were on "worldwide exchange". >> yes, early morning this morning. >> you're in demand. what do you got? >> this appointment of mike pence by the president of the united states, the white house had gone back and forth they were going to point a czar the president insists this is not a czar position. this does elevate the administration's response. the president was in a delicate position yesterday he was trying to reassure the public that the united states government is fully prepared for this but even as his health and medical advisers were suggesting to americans they better brace for more cases of coronavirus inside the united states, the president had this to say about whether or not the virus is going to spread -- >> i don't think it's inevitable i think we're doing a really good job in terms of maintaining borders, in terms of letting people in, in terms of checking
people and also, that's one of the reasons i'm here today, getting the word out so people can -- they'll know they're going to know. no, i don't think it's inevitable i think there's a chance it could get worse. there's a chance it could get fairly substantially worse but, nothing is inevitable >> and joe, the president also reached for other explanations for that 2,000 plus point dow jones drop we have seen in the market this week here is my exchange with him this week. >> to be clear, the dow jones dropped more than 2,000 points this week. are you suggesting that it was overblown or financial markets overreacting here? >> i think the financial markets are very upset when they look at the democrat candidate standing on that stage making fools out of themselves and they say, we ever have a president like this -- and there's always a possibility. it's an election who knows what happens >> now, joe, when i pressed the president, he did acknowledge that the virus played some role in the 2,000 point selloff that we have seen here, but this is a president who clearly is looking for other explanations for that
stock market selloff not happy with what he has seen in the stock market and in terms of the response by some of the people on his own medical and health team. the president sort of walking that fine line here between reassuring the public that everything is under control and trying not to really set off any kind of panic either in the public generally or in financial markets, joe. >> yep and you heard all the scuttlebutt and media sort of even before the president spoke about there are times in a president's tenure with defining moments. we don't need to go over the list now. >> sure. >> and the reaction of the administration to those defining moments can mean a lot for the lookback at the tenure of a president. so i'm sure there's a lot of sensitivity to that as well. and -- >> yeah. >> it is a fine line even if it -- love trump, hate trump, any president put in that position yesterday probably would have been straining to
walk that same fine line between trying to reassure the country but not trying to sugar coat it too much tough position to be in. >> yeah. you talk about the lookback to the president's tenure, but these kinds of events can affect tlent of the president's tenure. he has re-election coming up it is not lost on him and his aides in the white house that this if it sparks any kind of economic ripple effect, accusations they dropped the ball or mishandled this and allowed americans to get sicker than they otherwise would -- >> or just a recession. >> yes, just a recession. >> global slow down and recession and stock market break that it's worse than your garden variety correction there's a lot of -- >> absolutely. >> -- scenarios. enormous amount at stake for the white house, and you can see them sort of straining to deal with all of that as the president announced mike pence was going to be in charge. strange moment at the end, the hhs secretary, who has been in
charge beforehand sort of rejected the idea that he had been superseded. no, no, no, i'm still in charge of this task force even though the president was putting mike pence in place it was awkward sort of turf stuff going on at the end of that press conference. >> i could see that, yeah. >> the president sort of threw up his hands and walked out at the end and said he doesn't look like he has any patience for that sort of thing. >> all right we're going to get to phil orlando. phil phil conners, the market -- the markets tried and failed to rebound from recent lows for some perspective we're joined not just by phil but also katherine rooney vera, chief investment strategist and as i said here on set, phil orlando. chief equity market strategist and head of client portfolio management at fed rated. when you told us about some protection with puts, katherine, we knew about the coronavirus at that point but that wasn't the only reason you thought you
might hedge, was it, that you were suggesting back then, market had run up quite a bit? >> absolutely. and i recommended the put option at 325, 330 coming into this year i noted high levels of complacency. and i would go against what eamon mentioned and a couple other things i think it's a curious timing that over the past week you have both the coronavirus and you have bernie sanders the front-runner and i think that, as i said to you a couple months ago or over the course of the past couple months, joe, i think that complacency had an expiration date what portion of the correction was because of that front-runner status, you know, it's hard to stay, but what you can say is that health care fail, energy fell disproportionately and can be attribute to believe the rise of sanders. >> points been made, we didn't make it on the air but off camera, that supposedly bernie is the candidate that trump wants to run against if you don't believe bernie can
win, why would you think that bernie being the nominee would be a bad thing for trump's election. >> yeah. all bets are off you don't know nobody knows whether sanders could win or not. >> yeah. but that's why the put option is really in the money right now. and i'm telling my clients, joe, to hold that sucker. hold that thing until expiration march 31 if the market doesn't care when bernie does a sanders sweep on march 3rd, if that's the case, then buy more. buy the november 20, 2020 put option because there is a chance >> what are you doing, phil? >> so, obviously the loss of life is tragic here. >> right. >> and we came into the year bracing for the potential of a 5 to 8% air pocket during the first half of the year, and we're basically there. so, monday after we were down 5% from the top we put 1% to work we took our equity over weight up from 5% to 6% we elevated domestic large cap growth which had been neutral. we took that to overweight
those stocks are down 15 to 20% here over the last couple of weeks. the next move down we think is the 200-day moving average, about 2% below where we are here we're prepared to probably put another percent to work there. so we're going to keep scaling in, i think, lower because our view is that as we look at the trajectory of this, as tragic as it is, we look at what happened with sars, the bird flu, et cetera -- >> if you're right, why isn't the market discounting this more >> because the market doesn't know we don't know. there's absolute uncertainty here one of the things that gives us a little bit of confident here, joe, i'm going to bring you in, gilead and moderna, they're in clinicals in terms of compounds they're working on we hear we may have good news in a couple months. >> their putical icallicall icio do something quicker than a vaccine. we were just talking about
whether we would even -- i mean, to try to figure out the economic effects of even a small outbreak is hard to do. >> right. >> you don't have to assume we have it -- you don't have to assume we have a huge outbreak health clubs what do you do with health clubs? i would stop going probably. movie theaters. >> that's why you saw ymc selloffs. >> think about it, it doesn't matter as far as the death goes, we know what the influenza president made that point last night, people die from that and we're nowhere near that globally yet. if you're going to hold those puts, kevin, it's nice to have protection but you don't want to be nice to take profits, too or else they didn't do you any good on the way down. you never cover. >> i would cover the puts if there's noteworthy drop on march 4th, for example but we'll have to look at the
magnitude of that drop. >> you're doing the election thing again. it's not coronavirus related. >> yeah, look, i think if we're talking exclusively about the coronavirus, joe, i think it's time to start stepping in. i agree with your other guest. i think, however, thatting a aggravating due to the coronavirus could be this political component of a market that really has been utterly complacent about the risk of a candidate that is going to aggressively go after technology, energy, health care and banks. >> okay. excellent, kevin phil, pretty simple what you're saying, ease in as it goes down. >> we're struggling as we know more and try to monitor the trajectory of this as we go down. >> down almost 10% if the futures were to open, less than 100 points more down 10%. >> i think 200-moving day is around 30 or 40 on the s&p we could be there in the next
day or so. >> phil, thanks. earning just out from best buy the electronics earning $2.90 share for fourth quarter, 15 cents better than expected. revenue and comparable store sales beating forecast and it's notable in another down market this morning that stock is up by 2.2% when we come back, esg investing is a complete fraud. the virgin galactic chairman says it's great marketing with a lot of sizzle but no stake is he right? we'll debate this issue after the break. before we head to that break, let's get a check on the markets again this morning dow futures at this point indicated down by 280 points take a decline of about 360 here to get us to down 2% s&p futures indicated down 33. quk x"0.aq off by 11 "sawbo will be right back.
couple stocks to watch this morning, microsoft said it did not expect to meet prior guidance for its personal computing segment due to disruption in supply chain due to the coronavirus they will begin their own study of potential treatment for the coronavirus next month trying to become the first drug company to sell a medicine specifically designed to treat the virus.
stock has been strong for gilead on that prospect you know that's the tamaflu company. it's a pretty incredible -- i try to keep that in the house. i take it for everything >> gives you weird dreams, right? >> you hallucinate a little. >> brings me back to college. adjusted quarterly profit, 10 cents above consensus, for marriott, the chain revenue fell marriott said cannot fully estimate the impact at this point of the virus outbreak. esg of course has become a buzz word on the street as companies face pressures from investors to be more transparent. on "squawk box" yesterday, though, virgin galactic chairman and social capital ceo chamath palihapitiya sounded off on the movement here is what he had to say. >> egs, real or marketing? >> it's a complete proud.
>> complete fraud? >> governance has been addressed. that's useful, but this idea that you're going to get a stamp, listen, my supplier -- i've offset their carbon credits and now i understand mine. it's a joke. it's jargon. >> joining us to discuss all of this is hal lambert and christian mccormick esg strategist i'm going to start with the esg strategist since it's in your title and chamath called what you're doing, christian, a fraud. >> well, it was certainly an interesting choice of words. and obviously global investors we would strongly disagree with that we think it's a bit of a broadness mischaracterization and simplified antiquated view of what esg is take a step back, global investors like any asset manager, we have a fiduciary duty to our client our goal is to generate competitive returns for our clients. esg has to play an important
role or otherwise we wouldn't incorporate that for us, when you take a step back and ask, what exactly is esg? esg is a set of data and a set of factors how are you researching those factors and applying those factors to different investment processes. when you look at what a modern company has become the growth of intangible assets, growth of intellectual plays, it begins to make more sense of why esg is important there and so we actually -- >> christian, i want hal to jump in i get the governance piece which is exactly what chamath is talking about. i applaud and get the leadership piece that so many companies are pursuing when it comes to climate and the other issues however, on their own, acting almost id owe sin catticly if you will it's unclear whether they can make a genuine dent in the system so then the question becomes the
cost to the company for that leadership and i just ask you whether it's worth it >> it absolutely is worth it from the standpoint of generating those competitive returns. again, when we engage with these companies, it's not about bringing carrots we're not meeting with company management we had about 448 different esg-related company engagements with boards and executive management last year it's about speaking their language it's about here esg factors. let's look at the isk/reward characteristics of each of these factors and understands what play ascii role for your company as it pertains to the stock price. positive benefit for our sustainability driven clients that's very important, but for us it's much more of a risk mitigation tool. >> hal what do you make obviously a number of companies in the past two months that have come out with very ambitious plans around climate, some have -- some are about investing in all sorts of new technologies, others about buying carbon offsets. is that in your mind marketing
or do you think that this is genuinely a financially important step >> well, no, i don't think it's a financially important step in fact, i would say that esg is a fraud, but probably for different reason than what you heard yesterday. it's a fraud because it's not better for shareholders. it's not better for stockholders look, jp morgan and goldman sachs both announced they're not going to do lending in the arctic for drilling. how is that better for shareholders of jp morgan? it can't be. i was talking to the alaskan governor, he is upset. he recommendation they cut off to no longer do business with j.b. morgan and goldman sachs. >> flip it around. i believe there are pension funds and other large investors who might not do business with jp morgan if they continued to operate and to continue to make loans for some of those similar projects, no >> well, i don't see that. >> both ends of it. >> well, they just did the ipo
for aramco for saudi arabia. doing one of the largest ipo ever in oil and gas. oil and gas is the most important sector of the economy period you think the coronavirus is disrupting things imagine if the left got what they wanted, which is to cut off all funding for oil and gas and shut down fossil fuels, imagine what would happen to this country? you could walk in tomorrow if your facebook page isn't working. that's fine. you walk in and your power doesn't work, you can't get gas at your car, the economy is going to shut down >> what's your reaction to that, christian? >> it's absolutely not about punishing a company for say what their carbon footprint is. i think hal raises interesting points we're an asset manager we have to meet the needs of our clients from a fiduciary standpoint look at the announcement of black rock or the examples mentioned with jp morgan or goldman sachs they have to answer to their own shareholders
as firms we have to answer to our clients. we think looking at esg factors for short, medium and long term risk assessment of a company is extremely important. and we have a lot of data. >> that's fine i agree with what -- you can do what you want but jp morgan have a duty, it's by law. i wouldn't be surprised if you don't see lawsuits happening now with shareholders on this stuff because, look, they have by law the duty to stockholders it was put into place in 1919. it was reaffirmed in 2010. the case law is very clear on this stockholders are who their primary responsibility is to not this global community. >> hal, we have to invite you and christian back to continue this debate. the world does seem to be moving in all sorts of different drerkss including now moving more towards stake holders you have an interesting point about the legality of this very issue and i do imagine it will end up in courts at some point and see how that gets litigated. thank you, both.
appreciate it. when we return, the cdc confirming the first possible community spread of the coronavirus in the united states we will talk about how the u.s. will contain this outbreak the virus putting pressure on the travel business. airlines are stepping up their response delta saying yesterday it will temporarily cut flights to and from south korea cut those flights by half. hawaii airlines saying it will suspend its five-times weekly service between honolulu and seoul, south korea on monday jetblue airways says it will suspend cancel fees. we'll have more when we come right back >> announcer: time now for today's aflac trivia question. who was the first woman to appear on u.s. currency? the answer when cnbc "squawk box" continues so we're answering their questions. aflac is auto insurance, right? no. uh uh.
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trivia question. who was the first woman to appear on u.s. currency? the answer, martha washington. ♪ i thought it was susan b. anthony. >> well, you didn't phrase it in the formal question, either. so you're not going to get that right. let's get a check on the futures now. down 315 those are some of the worst levels we have seen of the session so far the s&p indicated down 42. nasdaq indicated down 146 points >> okay. meantime, the coronavirus having an impact on microsoft. the company warning it will miss revenue guidance for its personal computing unit that includes windows that was before the warning. now the stock is down 10% lower just for the week and joining us right now is griffin securities software analyst and our guest host barry knapp. >> just read what's there.
just read what's there >> we're going to miss him but you're here. >> he's gone. >> nice to see you. >> you, too. >> was this expected i imagine it must have been. >> they were prudent to say something. they have direct exposure through their service product they sell themselves and more so with their customers with windows pcs. they were prudent to not put a range on it because we can't know but we at least from our model can size the envelope of risk we know the size of the windows exposure it's about 9% of revenue that's number one. number two, we know that asia, if that's where the demand and production effects are concentrated is about a third of global pc demand so, we calculated that of the 3 billion quarterly revenues for windows oem, every $100 million hit to revenue if that's what happens would be a penny a share. >> right. >> for surface, it's a much lower margin product and smaller
any way, it would be even less of an earnings impact per dollar of revenue impact. >> are those sales that get put off or disappear >> well, they said in a release last night that they don't believe, and i spoke to them afterwards, this is a demand issue. which seems intuitively right when you think about the demand for windows 7 refresh cycle. that is not going to go away given customers technological needs. so, when the pent up demand is met, that's the question but, right now, at least with this quarter, we can size what the deltas might be. >> we have the adobe ceo on yesterday. it doesn't matter for the china sales. they're getting ripped off >> adobe is really interesting we cover adobe. >> you raised your price coverage. >> that was a while ago.
they were right because adobe has very little direct exposure to china remarkably small amount of revenue pay for. they have employees in china but given their size, they are not overly exposed to that market. and none of my companies has more than single digit percent exposure to china, even microsoft. >> you have done the models such that you're focussed mostly on asia what do your models look like if this really becomes global >> well, the stat that i gave before is from gardener, the industry research firm which published their 2019 pc shipment data from that we can see that a third of 201 shipments went to asia >> you're focussed on asia i'm saying -- >> of course but if it spreads it's the same math for every $100 million of revenue delta of windows shipments, wherever it occurs, we can still figure out what the earnings per share impact would
be i just highlighted asia because presumably that's where the center of gravity is for the time being. >> thank you for coming. >> you bet. a lot more on "squawk box" this morning when we come back the feds new challenge, how coronavirus and low interest rates could force the fed to rethink its policy. then a report on the first u.s. coronavirus case of unknown origin has markets on edge we'll discuss the impact on business and what it means for major cities across america if the coronavirus spreads. "squawk" returns right after this no one likes to feel stuck, boxed in, or held back. especially by something like your cloud. it's a problem. but the ibm cloud is different. it's the most open and secure public cloud for business. it can manage all your apps and data from anywhere. so it can help take on anything, from rebooking flights, on the fly to restocking shelves on demand. without getting in your way. ♪ ♪
♪ welcome back to "squawk box. goldman sachs just out with a call on the coronavirus. they say if it becomes widespread, u.s. companies will generate no earnings growth in 2020 and take a look at u.s. equity futures we're now down looking off about 341 points, 42 points right now. s&p 500 would open off about 42 points and the nasdaq would open off about 143 points meantime, fed chairman jay powell is once again under pressure from the markets to take action. just a few months after putting the fed on hold. steve liesman joins us with his take on what's going on inside powell's head. >> good morning, andrew.
pressure is growing on the fed chairman to react to the mounting threat of the coronavirus for markets from former fed officials and of course from the president. this morning in "the wall street journal," former fed governor kevin warsh writing, quote, the federal reserve should lead the central banks in taking immediate action the window to contain the virus inside china has long since closed the window to mitigate its effects on the global company remain open but not for long recalled for quarter rate cut and announcing it will do more if needed the fed that is. the president in his news conference yesterday once again urging his fed chairman to reduce interest rates to negative territory. >> we should be paying the lowest interest rates. and when germany and other countries are paying negative rates, literally getting paid when they put out money, i mean, they borrow money and they get paid when it gets paid back. who ever heard of this before, it's the first i disagree with the fed. i think our fed made a terrible
mistake. >> powell also getting pressure from markets look at where they are pricing the fed funds today. march now you remember i have not been talking about march at all. it has been a low percentage probability. this morning, it is up to 49%. >> what was it before? >> 38, 32, 31, it was in the low 30s. i didn't have it on the screen before this is the first morning i had sort of march in play. watching if that gets over the 50% line april, 78% for that first cut and now june, 58% for a second cut november, 52% for a third cut this year. the fed said it's monitoring the virus and will make a change if there is a, quote, material reassessment of the outlook. with only a few rate cuts in his arsenal, powell faces a series of daunting questions. when to act and how much and whether cuts would even do much good in the face of a problem that at the moment, andrew, looks to be a supply problem from china >> hm. that's all you got
what is that >> i want to point out very quickly look at the dow futures right now, this decline of 373 points would put us in correction territory if we were to add this to the losses we have seen -- >> on the dow. have you checked the s&p >> i'm not sure what the numbers need to be but for the dow it's 361 down and right now the dow is indicated by 367 points. s&p future is off by 44. the nasdaq down by 50. >> closing off hope springs eternal maybe jim brant is going to -- >> wonderful you bring him up. jim grant is sitting with us here on set. we'll talk more about what this all means. jim, let's start with what steve was just talking about, kevin warsh's op-ed suggesting the central banks need to coordinate and step in and cut rates. what do you think? >> we have the lowest rates the longest business expansion, the most leverage and the weakest corporate credit profile perhaps ever and i'm not certain what leverage would do to improve
things >> would it hurt things in your estimation >> the trouble with all of this is we go from cycle to cycle with more intervention, more credit, more infusion of credit, more fragility corporate as long as we're all doctors, the corporate immune system has been degraded through ten years of fabulous bull market but increasingly weak balance sheets so, i'm not sure what the cure for this is, but i think that a quarter point down the fed funds rate will not be material. >> what do you think the solution is? or is there anything that can be done >> i think that solution is price discovery. one way of looking at the action today and yesterday and the day before is that we are on the value restoration project. not all bad. >> where are we in that process as far as you're concerned f
we're down 10% >> well, it's a start. >> people wanted price discovery for ten years now, jim maybe one cut wouldn't help but you would acknowledge that the fed finally easing after the december route a couple years ago, two or three cuts did help at that point, did it not? >> it helped what? the stock market. >> i don't know. i don't know whether you might think it's a illusory the market is at a set of new highs the economy didn't go into recession. >> how about this, kevin jay and president trump, how about this that the fed offers to accommodate people who present collateral it will lend at a market rate of interest it will not force credit down the throat of the market it will activate the discount window that was the original plan for the fed. the fed was to provide seasonal accommodation for a conference as the market requested that through a discount window. now we have for years and years been building this but we have an all season infusion of credit
among other things to sustain the market in financing the eternally growing federal budget deficit. this whole repo business seeming so long ago was about prepping the markets to absorb more and more of this debt. where does it stop >> can we -- is there anything to the case that you can make with inflation not really on the horizon that what's wrong with keeping the pedal to the medal and trying to grow as quick as you can. >> well, what's wrong with keeping the credit pedal to the metal is it distorts judgment. the financial times had the headline, bunds are greek and italian debt they're the bunds on steroids. from davos we heard -- davos is
very esteemed chat, bald faced names say the business cycle is over i think that attitude has been building over the course of the long boom as it has been over the course of long bunds we're extended in time and certainly in leverage and we are degraded in corporate credit quality. we're going to have to have some difficulties and so, this is part of life cycle of capitalism. things go up things go down we correct what do corrections correct? they correct among other things the misallocation of resources that follows hard upon -- >> jim -- >> suppression of interest rates. >> can you talk about this particular case here from people who normally would support a fed rate cut in the face of gathering weakness, i'm hearing an awful lot of resistance because of the particularity of this issue here, which is at the
moment it's a supply problem in china. and it's hard for them to see through the normal channels the way a rate cut in the united states would bring additional supply over from china what's your take on that >> i think that this preoccupation with the fed, the reactive demand for the fed to do something is a species of magical thinking you're right the fed is not going to create the supply that is now missing from the chinese manufacturing sector >> it's the plunge protection team, right? >> well, it's -- joe, i think there's a lot of smarts to that because there's a psychological impact. >> that's what i was talking about. you would never do the wealth effect if you stabilize the stock market and you don't -- you're not down $2 trillion you feel better about it maybe. >> the tension between joe and jim right now -- >> i love what he says intellectually. >> you say it's growing over ten years. your point, joe, is why stop
now? now is not the time to price discovery. >> it might be one giant ten-year -- built on balsa wood. >> there are $14 trillion of securities priced to yield less than nothing. >> i know. >> and so as the president said, what's that about? but he wants more of it. i think that on reconsideration we'll look back and say those 14 trillion should not have been priced less than yield to nothing something funtd mentally distorted, degraded about credit and particular about sovereign debt but not only about sovereign debt. >> powell, my take on him when he came into office is i think he wanted to break this. >> i think he did, too. >> i think powell is a conservative guy who wanted to go back to a day when the fed was less involved, less central and i think his -- you and him are in great agreement about how the markets provide this critical price discovery >> this is like a game 7 of the world series when all the people want to know the names of
umpires. tell us guy behind home plate, what is he like? what's he thinking about so we have transferred our anxieties from the marketplace where they ought to be to the referees and to the rules makers please change the rules. please infuse more credit so that we can get more leveraged i don't think it makes sense >> jim, i want to thank you for being here we'll have to have you back more to talk about this because the market, at least s betting that you are going to see some rate cuts. >> i don't doubt it. >> you don't doubt it. >> jim, thank you. jim grant, steve great to see you. look at the s&p 500, the dow and futures again this morning you'll see that right now the dow is indicated to open down by 386 points if that's the case and if you add that to the losses we have seen over the last five sessions or so and the stock market, you'll see that we would be down by about 10% we will be down by over 10% if we close at the levels that are indicated right now. 10% off the highs.
s&p is not quite at that level yet. you need to see down 69 points for the s&p to officially be down 10% right now it's indicated down by 47 points. nasdaq is indicated down by 165 points watching this very closely, right now it's time for a look at some of this morning's market movers for that we get to dom chu i want to point out we talked about goldman sachs saying u.s. companies will generate no earnings growth in 2020 if the coronavirus becomes widespread i want to point out, that's not their base case. goldman sachs says they're reviseding their baseline earns per share estimates for u.s. companies to $165 in 2020. that's down from 174 so that's their base case. i don't think anybody would be . that is not the base case. the comparisons year over year
are tough. they're still growing. you throw the coronavirus in there, it becomes uncertain. that's probably the reason why you have seen the markets swing the way they have. and even today, so far in the premarket, there's been a 509 point trading range for the dow futures themselves so you can see as indicated down 400 points this has been the norm in premarket and regular trading over the past, maybe few days a in the point. so that volatility may be foreshadowed a bit even more with that futures picture. of course that, of course, is just one of the big story lines we're watching here. there are company stories that are still driving some of the action today and they are perhaps id owe sin cattic but still maybe caught up in the sell off as well we'll start with the big earnings report so far today we have best buy down .5% or so, roughly 35,000 shares of volume. the company out with better than expected profits and sales it was even better with comparable store sales that that sales growth at pre-existing store locations. it does see a business impact from the coronavirus but that it
should be relatively short-term. i should note by the way best buy was positive earlier on and just swung to a loss next up you have shares of gilead up 6% premarket there roughly 500,000 shares of volume the drug maker said it started two later stage studies of one of the anti-viral drugs and its effects on patients with the coronavirus. that drug in clinical trials in china. that news driving shares higher. end on shares of virgin galactic, down about 14% right now, roughly 260,000 shares of premarket volume the space travel company not being helped by analysts including those at credit suisse both companies moving to the equivalent of a neutral rating siting among other things the recent runup in the stock. it's well off the highs from just last week but still up 150% virgin galactic stocks to watch there. best buy the big earnings story. back over to you. >> virgin galactica.
>> president trump telling the american people the risk of coronavirus remains very low, adding that the company is going to spend whatever is appropriate to deal with the virus we'll talk with scott got loeb earlier. he said billions will be appropriate. hoprarw eped america is and what can be done to stop the spread "squawk box" will be right back. yes. the first word to any adventure. but when allergies and congestion strike, take allegra-d... a non-drowsy antihistamine plus a powerful decongestant. so you can always say "yes" to putting your true colors on display.
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coronavirus, get to meg terrel right now. meg? >> good morning, andrew. last night of course the cdc confirming the first u.s. case of unknown origin, a california patient with no known travel history to affected areas of contact with another case. that mean, of course, it could be the first instance of so-called community transmission in the united states health authorities have begun tracing that person's contacts the university of california davis medical center in sacramento saying its treating the patient who was transferred from another northern california hospital the news came the same day germany's health minister said that country was at the beginning of an epidemic with chains of transmission that could no longer be traced. the virus spread to 47 other countries. saying new cases the world is reacting in japan, all schools will be closed through march as case numbers approach 200 in iran, with 245 infected and 26 dead, friday prayers cancelled. south korea, case numbers soaring to more than 1700.
joe? >> meg, thanks for more on preparing for the coronavirus, we're joined by michael, director of the university of minnesota center for infectious disease research and policy and chris meekens, former hhs deputy assistant secretary for preparedness and response in the trump administration he is now washington health policy director with raymond james. thanks for joining us. michael, let me start with you so we have seen these breakouts that you can't immediately point to, to where it came from a lot of places in south korea and in europe and iran and elsewhere and maybe here now so, it's not a huge jump to say that it will be here at some point. is it? should we be surprised at that or should the probability is what 90% at least, more than that >> yeah. first of all the world just has to wake up to the fact that we're the middle of a coronavirus pandemic this is a worldwide epidemic of
this virus even here in the united states, we have this one case that even is focussing on, but we failed to miss is the fact that the cdc because of a problem in getting their test reagents out to the local labs we hardly tested anyone and so here the absence of evidence is not evidence of absence. i think we have much more robust transmission going on in this country right now that we just haven't picked up. this is happening in countries around the world as you heard from meg, it's already now in 47 countries confirmed. and i suspect it's in many, many more than that that will be confirmed in the days ahead. >> what china has been able to do, a, do you believe that they slowed the spread and it's down in the less than 100,000 or do you believe -- you don't believe those numbers at this point? and is it possible -- >> oh no >> sit possible for other countries to slow the spread to the point where by maybe summer it peters out? or that's too much to hope for >> well, first of all, again,
you have to interpret what's happened in china. remember, they just put in place the most extreme limitations on human movement -- >> we can't do that. >> any modern government has done it's not only that, but once those are released and people go back to work, subways again are filled, trains are filled, public spaces are filled, i'm certain we're going to see a major resurgence in china. please don't interpret what's happened today as meaning that the kind of stopping of cases as we have seen them will continue once the population movement restrictions are removed it's going to come back. >> chris, is there a reason to think that if it does become a pandemic it would be a log rhythmically worse than a flu season or similar to a nasty flu season are we sure it would be much, much worse, chris? >> i mean, i don't think we can be sure it will be much, much worse because the response from the u.s. government is going to
be much, much different. and in an election year which is where we are, you're going to have a president and local elected officials that are going to try to probably shut things down so, as was just reported, you have japan saying we're going to basically not have school for the month of march it sounds like and the widespread outbreaks in cities and regions, the u.s. people are going to self quarantine and take steps to make sure you don't see the spread you would see from the normal seasonal flu. and however, this virus is more deadly than the normal seasonal flu, probably ten times more deadly and hospitalizations are likely to get higher i agree with everything your other guests said and this will get worse before it gets better. >> how do you get ten times more deadly >> so right now seasonal flu is 0.1% fatality rate and we believe personally base on my conversations with
government officials and other consultants who have done work in china is that the fatality rate is probably around 1% for the coronavirus. that's ten times. >> we don't know that because we don't know how many people have mild cases that was my point. you said you personally feel but personally feel is not necessarily that it's absolutely 1%. >> well, yeah, joe >> that's not true >> why is that not true, michael? >> let me jump in here there's actually been some very good work done in china. and i have to give the chinese cdc credit for that. and as your other guest is stating here, this is exactly right. about 80% of the cases are mild to asymptomatic, but the problem is the 20% that actually have severe illness and fatal illness up to 2% is very, very different than what we would see with flu. don't forget in 1918 with the severe influenza pandemic then the case of fatality was 3.35% so we're somewhere between that
and a really bad flu year. >> right. >> but the only point i was making, at the same time you're saying that the number of cases is much greater than we know about, you're still using the number of cases as the denominator for mortality. that's my point. >> no, not in china. not in china >> they haven't tested -- >> not in china. >> you think in china it's exactly 80,000 people have it? >> no, no. the study is looking at the hospitals, the severity of cases the population based studies 08% have mild and 20% have bad illness. >> there's not a big deviation all right. that's pretty scary. obviously. thank you both for being with us isorng. dow futures down 400 points. we'll be back talking more about that in just a moment. we can't calculate our total taxes?
do you realize how many otal different taxes we pay? sales tax, different p-o-s systems in all seven countries. and online sales? that's a whole other system... and different regulations. therere'realal eate e crits,s, . and we have no way to integrate all that? no... but bdo does. peopopleho k kno knonow o.
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portfolio is coming up the final hour of "squawk box" begins right now ♪ good morning and welcome to "squawk box" here on cnbc. live from the nasdaq market site in times square i'm joe kernen along with becky quick and andrew ross sorkin the futures are down more than 400 on the dow, some of the worst levels we have seen. goldman sachs making some comments about what the earnings will look like if it does become a much more serious in the united states saying 0 earnings growth. >> if it spreads but that's not the base case. we should emphasize that is not the base case. they're wear earning to $165 from 174. >> right the s&p indicated down about 46 and the nasdaq indicated down 168. we have been checking the
treasury yield curve as well the ten-year was at some new low, that's even lower, the yield. 1.276% i've never seen numbers like that before and put your money away for 30 years and get 1.75% but it's positive. we have that going for us in this country which is nice. meantime, we're going to start this hour with an update on the coronavirus south korean media now saying there are more than 500 new cases confirmed cases in the country just today that's the sharpest daily spike there yet and higher than the number of new cases in china more than 400 people have been sick in italy. french president emmanuel macron called the virus an epidemic on the way. new cases in denmark and estonia saw their first case in america, the cdc says they're not sure how an individual in california got the virus the person didn't have a relevant travel history or expo sure to a patient. the virus is spreading in the
united states community could be a sign president trump updated the nation and took questions on the coronavirus and eamon javers was there and asked one of them. we join him now in washington. >> good morning, andrew. the news out of that press conference last night was that the president is appointing the vice president, mike pence, to be the head of virus response in the united states. that escalates the administration's response from the task force that had been in place for the previous several weeks. the president also said he'll go along with democrats on capitol hill who proposed billions of dollars in more additional funding than the president has even requested in terms of virus response here is what he said >> we've been working with the hill very, very carefully, very strongly and i think we have very good bipartisan spirit for money. we were asking for 2.5 billion and we think that's a lot. but the democrats and, i guess, senator schumer wants us to have much more than that.
and normally in life i would say we'll take it. we'll take it. if they want to give more, we'll do more. we're going to spend whatever is appropriate. >> and as the president took to the briefing room podium last night, the dow was down more than 2,000 points for the week the president sought to offer an optimistic take on the market action that we have seen in response to the virus as well. >> i think the stock market will recover. the economy is very strong the consumer is the strongest it's ever been our consumers are incredible that's why we're doing well and other countries have not, even before the virus, we're doing great. other countries have not been doing great. our consumer is very, very strong and very powerful economically >> and andrew, when i asked the president about that 2,000 point slump in the dow and whether markets are overreacting to the virus, the president suggested that a big part of the reason in his view for this market slump is actually the democratic debates that have been going on around the country over the past week or so
the president suggesting that's a big factor here. i pressed him on that and he did acknowledge that the virus plays a role here, but this is clearly a president who is looking for other reasons for this dow slump we have seen this week, andrew. >> okay. eamon javers, thank you so much for that report. >> you bet. meantime, we're going to talk more about the impact of the virus on companies and particular on investors and note just this morning david costen of goldman sachs updating his earnings model to incorporate the likelihood that the virus becomes widespread and says u.s. companies will generate no earnings growth in 2020. earlier this week "the wall street journal" had its own article titled "fear of coronavirus" rather than virus itself hits economies and greg joins us right now we're also joined on the set by cnbc senior markets commentator mike santoli great to see you help us understand -- i don't know if you got a chance to look at what goldman sachs has out this morning does that make sense to you?
>> you know the numbers sound about right. i think at the end of the day what we're still talking about, andrew s not a demand chalk, typical recession. it's a supply shock. we have seen this before albee it this is large we have seen it with 9/11 and katrina. the way investors have to think about this is at some point the epidemic will be contained and life will go back to normal. i would argue whatever the world looked like before it began will be very similar. so that's the kind of scenario you have to build into your assumptions about what's the appropriate level for stocks and so on. but right now what people are responding to is a sheer uncertainty. we don't know how far it will spread and even more so we don't know what the authority response will be the public authorities and the public there's always a tendency to take -- to ere on the side of caution on these kinds of events and economic harm is considerably out of proportion to the scale of what we know about the disease. that's not much comfort right now. but eventually it will pass. >> okay.
so mike, play up the numbers we're down by 10%. we're now genuine recession territory, right >> the markets in a correction you would not say the market is pricing recession. >> correction territory. not recession. correction territory. >> we're basically -- look, the dow is back to january 2018 levels right? you have gone -- i think the issue is that the market was priced before all this hit -- >> to perfection. >> something close to a very good scenario and you needed the earnings growth and you needed the consumer to reaccelerate or companies to reaccelerate spending in order to really support where the broad market stood. so that's the adjustment that's going on i don't think that this is the kind of market episode where we're going to say, there's a particular headline or particular policy that gets imposed or particular bill that gets passed or some cresting of new cases that that's what we're looking for. we're looking for the market to finish the panic phase and get so out of whack and discount dire scenario in the short-term to the point where it all of a sudden finds --
>> what duds that look like? >> it might look like what we're seeing right now >> i want to talk about whether we should start to think that business activity is going to be dampened globally to the extent where we have zero growth and that would qualify as a recession. there's some people that you can assume that at this point. this is a recessionary event potentially. >> i think what we people call a nominal recession. when the world grows below 3%, that, the world, not the u.s. >> you think we could see 0 -- we talked about movies, restaurant, travel, planes, health clubs. >> that's a radical, many economies going. >> china is in this weird position. >> we're not priced for anything like that, put it that way. >> xi is saying go back to work and doesn't look like a great idea for people to go back to work they are walking this weird line where they're starting to look at economic activity and be very disturbed by it and starting to
potentially send people back to work before you should. >> i think the market is right now and where the economic outlook is moving toward is that the first half of this year is messy and there's probably not a lot of earnings growth, if any and we have -- we're going to probably see a lot of curtailing -- >> first half. >> first half i think. >> we had some say 0 in china and 15% next quarter people saying that the snapback -- you could get back everything you lost. >> greg's point, even if you have relatively decent containment-type dynamics in the short-term, theeconomic response in advance of that or to try to bring that about is what we have to think about. >> if i could point out the economic response is unprecedented. china shut down one of its busiest industrial provinces 60 million people completely. i don't know if there's any precedent for that i mean, they had an earthquake that killed 70,000 people. that's 35 times as many have died of this virus right now
it didn't have that kind of growth effect. i don't think the united states has ever shut down all travel to another country the way it's done with china. i'm not saying these are excessive responses. all i'm saying is we are watching both the public and the authorities respond, you know, very much on the side of excessive caution. that just means to say you have to sort of keep things in perspective. at some point the measures will work they've worked in china. we're still bracing for the bad news one of your guests said, absence of evidence isn't evidence of absence. the diagnostic evidence is still catching up with the presence of the disease out there will create a lot of headlines. that's going to be very rough on investor's nerves. but actually tuv this into a recession two negative quarters of gdp growth, you need effects quite a bit larger than what we're forecasting now. earnings will be roughed up, no question >> greg, very quickly, what do you think of the ten year and
where it's trading right now 1.2% and change. >> it's kind of weird. people are expecting action from the federal reserve. i wouldn't be surprised if that comes. i think the thing i need to point out to people now is the fed is not going to save you from this. the fed knows that this is a supply shock the fed can't cure or -- this reminds me a lot of 9/11 the market sold off way more than people just stopped going shopping the airlines were all shut down. this was -- the fed did cut rates but nobody kidded themselves for a minute that the solution to the problem was the fed cutting rates. it was for the authorities to assure us there would not be another terrorist attack the same story here. the fed can attenewuate but this in turns around once the authorities convinced the public that the problem is containable. >> how much was the market down after 9/11 >> the marktd was in a bear market, it went down 7% on the first opening, reopening of the market it bottomed a few days later and went up 20%. now, it wasn't the end of the ultimate bear market but i think the key to that and
to greg's point is that didn't happen when we solved terrorism or won the war the market tries to basically say, okay, we priced in enough change of behavior we can move on from there. >> one last thing, there was a weakening trend in the economy before that and there has been a weakening trend in some things look, we're heading into a record-length bull market. so this thing is hitting at a time when you could have made the argument that some kind of pullback was in the works any way. >> thanks, guys. good to see you. all right. coming up, prepping in response to the coronavirus from one of the front line industries, the airline industry a conversation for investors travel is next bring your purell. leave the seat back up don't touch anything head to break, take a look at shares of microsoft. don't keep punching -- if the person puts it back. actually maybe you should. get that away. the company said it didn't expect to meet prior guidance for its personal computing
segment, the one that makes windows due to supply chain disruptions related to the coronavirus. stay tuned you're watching "squawk box" on cnbc i see award-winning service, and a trade desk full of experts, available to answer your toughest questions. and i see it with zero commissions on online trades. i like what you're seeing. it's beautiful, isn't it? yeah. td ameritrade now offers zero commissions on online trades. ♪
we are in the red. you're looking at the dow looking like it would open down 390 points right about now s&p 500 off about 45 points and the nasdaq looking to open down about 162 points joe? coronavirus fears already taking a big toll on the airline industry, as you can imagine, both foreign and domestic. the nysc index is down more than 15% just this week on pace for its worst week since march of 2009. just this morning, analysts at bucking ham downgraded united airlines, jet blue, spirit airlines and american. president trump, in fact, commented directly on the impact on the travel industry in the news conference last night in the process making a pitch for local vacations by american citizens. >> right now i think probably not going to be going to china they're not going to be going to certain countries where the problem is far greater than it is in the united states. what it's going to do is keep people home.
and they're going to travel to places that we have. we have the greatest -- it's the greatest tourism country in the world. instead of leaving our country, leaving our shores, they'll stay here >> get to phil lebeau right now with more on the impact on global air carriers. i didn't think about boeing. insult to injury, right, phil? >> yeah. and joe, we're going to start first off with the european airlines and then we're going to transition to the u.s. airlines as you mentioned how bucking ham today downgrading the seven carriers all down to neutral but in terms of european airlines they're getting whack and that might be a sign of what's to come in terms of the u.s. carriers and how they're handling the coronavirus if it spreads. first off, lufthansa, they're seeing if they can move some of the workers to part-time status, all in an effort to cut their costs. also, klm, another one, the parent airline of air france and if you look at what these guys are doing here, same thing reducing hiring due to slower business in terms of the u.s. carriers
and their exposure to europe, strictly in terms of seats in the second quarter, this is the estimate according to raymond james. american and united 17% of their seats worldwide going over to europe in the second quarter delta at 20% speaking of delta, it has issued waivers for flights to certain areas in northern italy. in other words, if you're scheduled to go to milan, you wanted to cancel it or have to cancel it because some event is no longer happening, they're going to accommodate that. take a look at shares of american all the way back to the ipo back in 2013 when it came out of bankruptcy it's now well below that, down at 2050 premarket, could go below $20 a share. it opened up at 23 ipo back in 2013 finally jetblue, i think we'll see more of this here, guys, jetblue is waiving change fees or cancellation fees for all flights here in the united states through march 11th. guys, that's an indication of where i think the industry is
headed don't be surprised if we see this from other carriers as well because increasingly people are saying, i don't know i don't know if my family wants to go somewhere given the coronavirus or i'm a corporate customer and a particular event has been cancelled >> phil, thank you stick around for this. let's bring in an airline voice. joining us now for that is dennis taser, communications committee chairman of the allied pilots association he's also a pilot himself. dennis, you just heard what phil said about what american consumers are thinking what are your pilots think about whether they want to be flying >> well, they're very concerned. we have pilots right now looking at carekorea, some pilots said they're not comfortable flying there and engaged with our company getting our latest information from there it's not lost just like in china and hong kong, cdc has it at its highest level, restricting nonessential travel be reconsidered and also, even the military has
ceased its joint exercises with the south koreans. so, it's all of these bits of energy that remind us of the path we had with china to include hong kong. so, what's unique is they're asking questions whether or not it's safe. and they're going further because if something happens with them, pilots are unique, we can lose our license if we have a medical condition and others may work through at american, we don't have a safety net like they do at delta. and, that's a call for concern for our pilots beyond just our passenger's safety >> what do you mean the safety net that delta has that american does not >> well, basically if a pilot loses his license, say a respiratory issue from this, you're going to lose your license. you're going to lose most of your income, it's going to be offset at delta, they keep you at a very high level. you're not going to have to sell your house, pull your kids out of college these are more parochial
interests for our pie lots but the number one interest the the safety of our passengers and containing this virus. that is the key component of this so -- >> even if you get sick on the job, they wouldn't cover you >> we have a very, very anemic plan it's from the bankruptcy so, these were all features that add up to do you have my back? and if you don't, it's going to cause me to hesitate my decision for our families this is all after we determine whether or not it's safe in general for our passengers >> dennis, can i just go back on that if you get injure od or sick on the job, normally workers compensation would take care of that you don't have that american >> we do it's a very thin program you can get into a situation where you're down 75% off of what you expect to be -- your income it has a dramatic life shifting
event for our pilots whether it's this virus or anything that's more of an internal issue, but it's very important when you come to the conclusion whether your company has your back or not. >> that's a huge concern. >> delta made an interesting announcement for health concerns we're reducing our flights to korea. >> doesn't mean they're stopping. >> if there's health concerns -- >> that's the same thing i thought when i heard that. if it's a concern, you stop. you don't cut the frequency. >> absolutely. so we're -- and we made this decision in hong kong and china. we don't feel it's safe, we'll make an aggregate decision to not fly there. we're not there yet, but we're challenging all the information streaming on your program you talk about the conflicting information. even our own ceo just in the beginning of february had a doctor on saying this doesn't spread easily. we know a lot about it no, you don't. and that's why we're going to call into question just like with do with the max and boeing, just show us and we'll make a
decision based on the information we have. >> that's sound. what do you think when you hear about the first case that is not travel related being a community issued situation in california, do you think that you're going to get to the point where you won't want to fly in the united states >> no. absolutely not this is a very serious issue, but we've been through challenges like this and president trump made a bold decision to help contain this. we're looking for that same kind of leadership in other areas so, we don't want to be the vessel for this virus. we want to be the industry that assists in containing it and sometimes i hate to reference the green tie but sometimes you have to put on a green tie and do the right thing and contain this so, that's -- >> are you talking about andrew's green tie what green tie are you talking about? >> yeah, i am. sorry. i am >> dennis, you have been watching since early this morning. >> thank you thank you so very much [ laughter ]. >> i feel fashionable. >> i like that tie. >> do you? >> i do. >> it's a mistake those viewers
not with us earlier, it's not my regular m.o. >> it doesn't look like andrew >> we oftentimes have ties lying around. >> how did you forget your tie you're a professional. >> i wish i was a professional >> dennis, thanks for your time. >> thanks for watching, too. that's nice. >> give us an update soon. when we return, some new economic data due out at the bottom of the hour we'll get a new look at gdp, jobless claims and a whole lot of other information that will be outdated before we get it. 3m is the largest u.s. supplier of the respirator masks that are recommended to protect against the coronavirus. we'll talk to the analyst behind the call upgrading the stock this morning u'ay tuned yore watching "squawk box" right here on cnbc n 2005 quadrupled their money by 2012, and even now, many experts predict the next gold rush is just beginning?
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♪ welcome back to "squawk box. rick santelli here live on the floor of the cme group with breaking news. our second look at fourth quarter gdp. last look was up 2.1 same as new look 2.1. so our second time around unchanged. on consumption, 1.7. we lost a tenth but we expected that from last look 1.8.
price index, 1.3, also a tenth cooler personal consumption expenditure but this is a core quarter over quarter up 1.2 durable goods orders january, preliminary read which means it disappears at the end of the month is better than expected. but still couldn't lose the negative sign. we're expecting down 1.5%. it is now down .2 of 1%. and here is some good news, our final read on last month upgraded by half a percent from 2.4 to 2.9 extransportation headline is up. solid number look at capital goods numbers, proxy for capital investment and spending, we always like that number to be as positive as possible it's up 1.1. and last look at down .8 revised to only down .5. all very good news if we look at shipments instead of orders, that's up 1.9 we're looking for unchanged.
also solid with a positive revision finally, initial jobless claims are up -- excuse me, up 8,211 was the refused look from last week which was up 1,000 from 2010 we move from 2011 and 8 equal 219,000 and continuing claims move down just a smidge from 1.733 million to 1.72.5 million. and we see 127 on ten-year note yields, psychologically 1 1/4 will have some significance but not nearly that we continue to stay guns hot along the treasury yield, short maturities are guns hot with lower yields for the cycle. we now currently see under 110 and 2-year note yields 10s and 20s steepen because the ice is thinner on the long end and of course we still have
pending home sales listen, i'm not a doctor can't tell you all the specifics of coronavirus but i can tell you this, the markets overcompensating i'm not mdismissing it. at some point we'll turn it into a v on the right side. at least my opinion. becky, back to you. >> rick, thank you very much. steve liesman joins us right now. what do you think, steve >> you know, becky, i know you wanted to kill the ratings by saying none of this data matters because it's all old. >> truth in advertising. >> i know. i know and you are always accurate in your comments. but i'll say this, it's good to know going into what we're going to go through which is all of this girations in the data i think ultimately it stands in a pretty decent place. claims up a little bit but still at a low level the durables bounce back i'm watching yet but not ready to declare, remember, we have the resolution of some of the trade tensions in december, i think it's early for january to
show that bounceback in the investment spending, but it's something i want to watch over time. >> especially what's happening with coronavirus >> but it's good to know. >> i will concede the point that you want to know how far we have fallen so you need to know the accurate numbers going into it. >> i am very confused and i don't think i'm going to resolve this on set here we have the surge in nondefense aircraft and parts that's the thing i would think would be falling pretty precipitously because of the shutdown of the boeing 737 max it could be some kind of strange timing think of when it was counted in the last month, but that's a part of the -- that's a reason for i think the overperformance in the top line number it's something that's going to go down. we're going to face -- let's count it up, several things in the next couple months we have boeing impact on the economy. estimated to be half a point that's going to add to that v if and when boeing starts shipping that 737 max and now we have the coronavirus. which we know is going to be some form already of a supply
hit from china and that's going to have some impact at the moment estimated in tenths of a point it's a first quarter phenomenon with a rebound in the second quarter the question as to when. >> i had not thought of boeing and putting it into this context but probably much less urgent they get those planes back ready to go for the airlines that are watching collapses. >> ago that led me to do the story. forget that. forget that. forget that. look at this number down here. >> right. >> and that's, by the way, when we talked about the issues for the federal reserve, it's a huge issue for them how much do they look through and see these are temporary items and how much do they say these are permanent. by the way, one more factoid is that i had the march number, remember i came in an hour ago, at 48% for probability it was now -- >> for rate cut.
>> for rate cut at 58% in just that hour. as the ten year has come down, sympathetic move is that they go in and buy these fed fund futures. >> where is the ten year right now, 1.277. >> 1.277 was the last i saw. >> i can call that up. but i'm more interested in seeing the probabilities again >> here we go. on the screen for us 1.277. >> 63% the importance here is the market is forcing the feds hands. they're now going into this meeting -- >> expecting a cut. >> with just a couple weeks away expecting a cut and now we have to hear from the fed chairman before the blackout window to set those expectations rightly or wrongly. >> excellent point, steve. thank you. >> thank you, steve. stick around want to bring another voice to talk about u.s. growth and the potential impact of the coronavirus. joining us is allison schrager we can talk about these numbers or we can say these numbers are out of date. what do you think? >> i don't think they're totally out of date. i think steve brings up a good point in that you have a supply shock. you don't know how it's going to
play out but you want to look at how resilient are you to handling that shock. and the fact that, you know, we're going into it fairly strong is a good sign. >> goldman sachs also out with a report this morning suggesting there could be zero growth this year >> for the whole year. >> that's their expectation. >> in corporate earnings. >> in corporate earnings not in gdp. >> if, if, if it were to spread widely that by the way is not their baseline scenario. >> i think everything is on the table when you're looking at how a shock plays out, there's a whole range of things that could happen that's possible i don't know if it's probable. >> what is probable in your mind >> i think definitely gdp will be a lot lower this quarter. >> right like what? >> i don't know if it's going to be the full bases points drop they have expected but probably definitely going to be lower, maybe definitely less than 2%. but it depends on how -- it's unknowable how long this will play out for and how deep it's
going to be. a lot of people are expecting the v-shaped recovery afterwards, that could be second part of the year we don't know. >> if you're jay powell, what do you think he should do >> well, i don't know what he should do but he's most likely going to cut rates he tends to be risk averse >> steve, do you think that's -- is there something he could say before doing anything? >> i think -- >> meaning -- >> i think jay powell does not want to cut rates here. >> right >> especially in response to the market i think he doesn't want to have his hand forced by the market. >> right. >> i think he felt like he was perhaps in control for a bit because he had engineered this hold from the rate cuts. >> right. >> and i thought he thinks he's in a good place both the economy and monetary policy relative to the economy. i think he would like to see before he moved some real data that backed up the idea for a move that didn't seem like he was reacting
now, the idea of acting preemptively when you have -- when you're close to the zero rate number is pretty well established, i think, allison, in current post financial crisis monetary policy thinking when you ain't got a lot of bullets use them early and i think powell probably subscribes to that idea. there is this outstanding question in my mind which is beyond -- i would call it a placebo effect, but it's a little understated of a fed rate cut. how do fed rate cuts, maybe allison, you want to take on this question, solve the supply problem coming from china. >> they don't. i think the way to think about it again is recessions are low growth comes from external shocks. >> right. >> all the fed can do is take the edge off of that the concern is i think one thing they're probably going to debate is if we cut rates now and this thing gets a lot worse, will we have less ammunition to deal with that. >> what do you think the answer is >> i think it's tough. they don't cut rate and the
markets fall, where is the fed here it could get worse. >> what's the breaking point >> i think it depends on how markets play out we're going to know a lot more couple weeks how infectious this is with the mortality rates are and how well governments are containing it. we'll know before then. >> allison, you have written a book, an economist walks into a brothel. what happens that's the name of the book. >> what? way to catch attention >> what happens? >> well, it's the same thing how do different markets price risk and what's the risk premium on sex or risk premium now the whole premise of the book is how financial markets price risk is the same everywhere >> the risk premium with the coronavirus -- >> can we get an up close shot of joe's face right now? the smirk of all smirks. >> no. i'm just weighing the upside to a comment and the downside >> what's the risk >> i do a lot. >> what's the risk of the comment? >> the coronavirus walk into a brothel just went up
>> yes, that would be true that would be true but, joe, i think your comment was maybe -- go ahead. no, no >> i'm thinking. >> he's learned. >> allison, we appreciate you being here >> i'll tweet it out. >> thank you >> you know what, we would accept twitter answers if they're funny, i think >> that's a good one you can read them later. >> an economist walks into a brothel and then do you have any type of joke or anything for that >> no. >> we'll get some. we'll get some. >> that would be great >> hey, it's your book any way, thank you >> my pleasure. >> you knew that about that. >> about the book? >> that's why he sat down we have to talk about your book. >> i have known from the americc association annual conference and we have been talking about issues like this for a while. >> that's a good title for an economics book. >> three economists walk into a brothel. >> one does x-y and z. >> exactly. >> do you know what they're saying in our ear right now, move on.
please, move on. >> thanks for coming in, allison. we appreciate it. in the meantime, research out with an upgrade of dow component 3m, calling it a coronavirus hedge. 3m, of course is the largest u.s. supplier of n 95 respirator masks recommended for use in protection against the coronavirus. joining us right now on the "squawk" nudesline is scott davis the chairman upgrading 3m with $205 price target scott, i get your logic on this. but when i go online and try to buy any of these things or look on any of the stores, walmart.com or anywhere else, you can't find that he has how will 3m capitalize on this >> i think they'll sell for a long time. it will take years, certainly quarters, but i would say years to really catch up to the supply that's needed. and you know in the meantime you're making a lot of money on these things i just saw them on walmart.com at $60 a piece. >> i see it on amazon 120 bucks
for these things those are from third party sellers. >> i don't think they're going to price gouge people to that extent, no but i think they're going to make money on these things for a long time. i don't think this is just one week, one month issue. i mean, you need to restock supplies for -- it will take quite some time. we need 300 million masks in american alone just in the hospitals let alone personal use. >> how big of a part of the revenue or their earnings is masks for a company like 3m that has so many different products. >> it's probably bigger than you think. the category itself is probably close to a billion dollars if you look at n-95 it's probably smaller, couple money million but that could go up 10x easily. your compare is back to 2002 with sars. 3m outperformed by a massive amount from 2003 to 2004 so, there's some precedence. >> you know, you start breaking down trying to figure out how long it will take them to make more
where do they manufacture these things and can they actually ramp up production >> well, they make them everywhere you can ramp up production it takes time. but you go from making, you know, lesser filtration mask to higher filtration mask and over time you'll be able to ramp up same with honeywell. >> you have a supply of these things >> i have none i don't have any, becky, i wish i had some. >> let's talk very seriously your upgrade gets you to what? do you have a price target you're also putting out with this stock is at 150. >> $250 stock, not long ago. >> but you think that's solely because of the masks or other things the company is doing, too? >> it's other. it's macro things are going to get better this isn't going to last forever, i hope. >> does it seem kind of weird like if things are going to get better on a macro level, that seems like the demand for the masks might die off more rapidly. it's like a catch 22, right? >> maybe
you got to restock supply. >> okay. scott, i want to thank you for your time today. good talking to you. >> you too, becky. >> none of this is funny any way, coming up, i'm waiting. coming up, the technical signals investors need to watch as we approach the opening bell on wall street. two sectors bookending u.s. market performance and two health care names to keep an eye on as we head to break, take a look at the shares of bio tech company moderna. they are up big in the premarket early this week, company announced it shipped a coronavirus vaccine but with the first clinical trial phase one by the end of april still take a while. watch or listen to us live on the cnbc app stay tuned, "squawk box" will be right back
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♪ ominous looking shot out our windows. welcome back to "squawk box," everybody. we have been watching the futures this morning and that's been fairly ominous. the dow futures indicated down by 356 points. if you were to add those potential declines to the losses we have seen racked up over the last five to six sessions, that gets you down to 10% you are talking about
correction -- >> 361 is what you need. we're almost there s&p futures a few points off, i think you down 64 to be down by 10%. nasdaq is down by 158 points or indicated down by 159 points this morning that's after the nasdaq has been down 8.5% over off of its all-time high that was hit back on february 19th, i think. you're almost a correction territory for both the dow and the s&p 500 if they were to close at the levels they were just about indicated now not quite for the nasdaq, but again, long time to go before the opening bell and then the closing bell after that. just under an hour until the opening bell on wall street. dominic chu has a look at the big call goldman sachs put out this morning hey, dom. >> we were talking about the call earlier this last hour with regard to gold map's call 0% potential earning growth let's put the s&p 500 up here first. one of the things we want to know is that goldman, and this is david costa the chief strategist and his team at goldman are now forecasting a
year-end target of around 3,400 for the s&p 500, factoring in a number of things like bond yields, earnings yields, that sort of thing. by the way, that's important because that pretty much puts us at year end just around where the record highs were that we saw earlier this year. however, they said in the near-term, in the next few mont down to around the 2,900 area, which is where we were bumping around last fall to last summer. so again, some volatility there. now, what's driving that particular call, they made some observations with regard to what they're thinking you take a look at the earnings growth picture that was the real headline we took away from this. we have a scenario where earnings model has been updated to reflect the widespread coronavirus. the earnings per share for the s&p goes to $165 in 2020 it was $174 before the reason why that's important is because that does then represent 0% earnings growth over the same time last year the other thing you want to
watch is the 2021 estimate goes to 175, it was 183 that's a 6% growth rate. as for the playbook, guys, this is what they're saying they're saying real estate gets upgraded to overweight it was neutral utilities gets upgraded to a neutral, it was a sell or underweight. also cyclicals downgraded to neutral. financials downgraded to an outright underweight the reason why, that slowing economic situation there if you talk about the earnings picture, this is the playbook. that's the reason that goldman call is getting a lot of attention this morning, joe. i'll send things back over to you. >> but as you point out, it's if it gets bad, i guess, or worse. >> obviously it's assumptions driven i would say this, in the note they do with their target forecasts assume the 10-year goes to 1% and drives the market down to 2,900 and it rebounds to 1.5% by the end of the year. >> okay. not that far, are we
it used to be 30 basis points was nothing but now it's like a third of the entire -- of the total. thanks, dom. the dow is now down close to 9% from its record high set earlier this month i'm not sure if that includes today's move or not. those are the declines just in the last week. the dow dropping more than 2,000 points in the last three sessions let's ask what could be ahead, taking a look at the technical aspects of things with robert slammer, managing director at fundstrat global advisor short term >> let's look at the daily chart on the s&p we've done a lot of damage on a lot of charts across the board if we take a look at the s&p on a daily basis, we're coming right into that 200-day moving average which i think a lot of people are focused on. that's roughly at the upper ending of that trading range that we saw back in q3 and q4 n theory there's a lot of support -- >> 3060. >> 3060, 3000.
i think 60 points isn't that much actually. we've actually retraced, if you look from the q4 lows here, we're right in that 62% retracement level. that tends to be a level markets bounce from. we don't see the evidence there's an actual low but there's a long list of stats that suggest we're deeply oversold from a short-term standpoint so a bounce wouldn't be surprising. but i think this is what's really important we want to put some perspective on this. the intermediate term background that tends to track one to two quarter shifts suggests there's more time to play out before we get a sustainable bottom in the market. >> so as a technician do you have any trepidation about the notion that a coronavirus just throws all -- everything that we know off kilter? and you can't just use technical analysis when you have something that's an outlier. >> i understand what you're saying. >> or will it really work? >> i don't know if this purple line -- >> you know what i mean. can you still gauge things
technically ignoring a fundamental like coronavirus. >> we have an unknown event we have no idea how -- nobody seems to know what's going to go on but the market is probably our best gauge of what's going to go on the market actually started to peak. >> that's interesting. so you can look at the market -- that could be signaling what happens with coronavirus. >> i think so. look at where yields peak. all the cyclicals began to peak back in january. >> let's do your bookends. you've got tech and energy are those the two? >> the weekly momentum data tracks one to two quarter shifts it's not going to bottom until we get well into q2 and that makes a lot of sense. >> durationwise. okay >> let's take a look at the energy a very long-term peak. relative strength continues to decay. if we're going to get a snap back and this still looks like a big bounce or big top developing, we could easily get a bounce back. >> what about tech because then we've got to go. >> tech really quickly, look, that long-term -- if we look at these long-term trending lines, it's got more room to go
microsoft, apple, all those names need to spend more time. a couple stocks to look at are up a little bit today but a name like gilead, we want to buy that. >> all right, we've got to go. >> and regeneron as well. >> great, robert, thank you. let's get down to jim cramer at the new york stock exchange what do you think as we're looking at futures down 400 points now >> i think you have to let it happen i know that we are oversold. i also know i think that a microsoft and apple, they're the beginning. almost every company has to cut numbers except for the two that the gentleman just talked about, gilead and regeneron and some of the stay-at-home companies will keep their numbers up. i watched squares numbers today. but yeah, it makes sense that it goes down and i think the golden
piece is self evident of a nonhysterical way to look at what's going to happen. >> i saw what you tweeted earlier. you've been talking about m moderna. >> they're the ones that most likely have a vaccine. during the press conference last night, they were the ones that i think stood out as what people are hoping for at a certain point. how much money can moderna make on it, i don't know. it's like 3m if somebody has businesses that aren't doing well, maybe it's entirely possible that the mask could mask the rest of the decline. but i don't really want to -- you pay it up five, good luck. you can't even get -- it takes -- on amazon you've got to buy from a third party and arrives march 3. >> and $90 and that's assuming that these are really not counterfeit too. >> someone got ahead and bought a lot of them. i know i'm buying from a third party, not effective.
>> jim, thank you. we've got to run so c gweanet to you in just a couple of minutes. we'll see you right after this >> thank you ...i...i don't know... when did we introduce siracha? not soon enough. these are our sales... by product, by region... ...set against evolving demographics. you can actually see taste- trends. since when can we do that? since we started working with bdends. (announcer) people who know, know bdo. every time it takes care of something for us, we celebrate. how often does that... got it. servicenow -the smarter way to workflow.
invest in the community. in businesses owned by women and people of color. in affordable housing. the difference between words and actions matters. that's a lesson politicians in washington could use right now. i'm tom steyer, and i approve this message. final check on the markets we are now half an hour before the opening bell will ring if it rung right this moment the
dow would open down about 411 points down, the s&p would open down 52 points and the nasdaq would open down 189 points let's also take a quick look at the 10-year right now. that's at its lowest level, 1.277 in quite some time join us tomorrow "squawk on the street" starts right now. good thursday morning, welcome to "squawk on the street." the sell-off is set to continue today as the u.s. confirms its first coronavirus case of unknown origin, as the corporate mornings mount and analysts start cutting their numbers. europe is down about 3%. 10-year yield a record low, 1.27 and oil is below 47. we begin with correction watch as coronavirus fears grip global markets. stocks are set t
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