wish you happy holidays and look forward to a big new year ahead. i hope you're a little wrong and maybe there isn't a recession. we will see. thanks. >> happy holidays. final check on the markets. >> just say good-bye to everybody. >> give everybody lots of hugs, your family. >> andrew, thank you. merry christmas. >> happy holidays. happy new year. lots of hugs. hug your family. make sure you join us on tuesday. ♪ a good friday morning, welcome to "squawk on the street," i'm carl quintanilla with scott wapner, leslie picker at post nine of the new york stock exchange. cramer and faber have the morning off. futures a bit mixed here. headline, pce drops month on month, first time in three years. core now below the fed's target. our road map begins with inflation. core pce, prices rose less than expected. what it means for rate policy

ahead. plus nike shares tumbling after slashing its sales guidance, delivering its second straight quarter of worse than expected revenue. and shares of bristol myers slipping ahead of the open. let's get to the markets in this reaction to pce. people were expecting maybe a dovish number after some of the gdp data, but six-month annualized is getting tossed around a lot at 187. obviously, below fed's target. we'll talk to lael brainard later this morning about whether that's celebrating a bit too early, but the expectation is that you would get to target on a full-year basis in the next two months. >> the prior six months, it was about 4.5%, so now to below 2% definitely shows a tale of the bifurcation of this year that we've seen. >> kind of justifies why the market is where it is, right? the whole notion of this rally was based on the fact that the economy was going to hold up,

inflation was going to come down, the fed's going to start cutting, and you don't have to, i heard one guest a few moments ago say, the fed wants to slow the economy. no, it doesn't. it actually just wants to bring inflation down and would be really happy if the economy just maintained where it is now. that's the definite of a soft landing. i've also heard some suggest mission accomplished today. is the fed ready to declare that? maybe not. but you can't fault them if they feel close. >> i didn't know that slowing the economy was part of the dual mandate. that's a new one. >> the triple mandate. >> it wasn't. look, it wasn't part of the mandate, but at least it was thought that they had to choke off demand and slow the economy to bring inflation down when, in fact, inflation has come down without choking off the economy. >> no, it's absolutely true. i think a lot of people, especially as we reflect now on the entire year, basically everybody had their base case of 2023 as we would have a recession, because history tells you that if you raise interest

rates, and we saw this just historic regime this year of interest rate increases, you would have to have some kind of recession. now you're kind of at this fork in the road where people are becoming more comfortable with the idea that, you know what, maybe this time is different. maybe we have avoided what kind of history and precedent has told us. that said, there are some concerns out there, and this, of course, was november's reading. you've got the red sea that is creating some inflationary pressures out there and other dynamics too. the mission accomplished thing, i've heard that said as well this morning on our air, and i don't know. it's always scary to say that, especially when things can change so quickly. >> well, because, carl, there's still the long and variable lags as the fed chair himself would suggest that no one truly knows if there's impact yet to come. but certainly, right now, it would appear as though they are achieving their goals, at least they're well on their way to

doing so without the economy taking a severe downturn, and i'll go back to where i started. that's the reason why we are where we are with this eight-week winning streak, >> yeah, going into the sweet spot of seasonality, historically, at least, the last week or so of the markets. you mentioned resilience, durables up 5.4%. we mentioned jobless claims yesterday, atlanta fed's at 2.6%. the micro leads to what leslie mentions. fedex, general mills, and now nike. the three big earnings prints of this week going into the next season that really point to promotional activity, lulls in between big events like black friday, and the holiday. that's -- even though inventory at nike, which we'll get to, down 14%, does suggest caution among the consumers. >> there were idiosyncratic issues for each of those stories, but they do all blame the macro too.

a lot of the macro issues are china or other areas, not necessarily u.s.-driven, but macro, at least in terms of how it's affecting individual earnings reporters, does seem to be a little on the weaker side. >> when fedex came out, i was wondering what the impact on the rally itself was going to be, and there was a momentary wobble, right? and then the market kind of brushed that off as, like, well, is this a canary in the coal mine of what's really happening in the macro economy? maybe not. then nike comes out, and is this another canary in the coal mine? is the consumer finally slowing down? and then the stock market, because of the pce number, at least the futures, looked pretty good. now, the dow, obviously, is set to open modestly negative, but nonetheless, the seasonals and all of the other issues that are at play seem to be brushing off any of these macro concerns that we are talking about right now. >> yeah. let's get to one of them. of course, we mentioned nike,

now poised for the worst day in more than a quarter century. the dow component did cut their full-year sales guidance, announce this cost savings plan. last night on the call, the company's cfo highlight add pullback in consumer spending. >> we are seeing indications of more cautious consumer behavior around the world. in an uneven macro environment. total retail sales across the marketplace fell short of our expectations with softer demand outside the key consumer moments. while nike's store traffic continued to grow, we saw softness in digital traffic and higher levels of promotional activity across the marketplace. as a result, we are adjusting our channel growth plans for the remainder of the year. >> that said, china, up 8%. gross margin expand for the first time in seven quarters, year on year. that's the third straight beat on gross margins. not a lot of reaction from the

street td cowen says, needs improved marketing. outside of basketball, innovation at the high end is not resonating. jordan moving to lower price points and valuations not cheap. >> has nike ever been criticized for not marketing enough? they've made some of the most iconic commercials that any of us can remember. i feel like this stock is so emblematic of the moment of where we are. check this out. january 1st to october 31st, shares were down 12%. stock did nothing. there were questions about china, margins as carl was just talking about. november 1st, when this real rally got going, to right before the print, the shares were up 15%. did the fundamentals really improve by 15% in six weeks? i don't think so. although, in the last few weeks, you have had wall street come out. they have elevated nike up. they've taken lulu down a notch, not through downgrades but at least saying, hey, on the preferred lists, we like nike

now. maybe a little bit better than lulu. now maybe we're questioning whether those were good calls or not. you mentioned the td call this morning as well. >> that could also have been just reaction to the stock prices as well. i was reading the notes reading into the print from yesterday, and a lot of them said that the channel checks were looking a little light, and they weren't expecting kind of a quarter that would necessarily justify the recent run that stock has had and of course now you see the notes this morning describing it a bit more realistically relative to kind of what they printed. i kind of like this bernstein note headline. nike q2, did the grinch steal the santa rally? i wouldn't say that, given what we're looking at with the futures quite yet, but they go on to say, the stock plummeted on guidance cut and cost-cutting news, reduced fiscal year eps guide 6%. their read is it's more macro than nike. management is investing in growth. whether the broader market sees through that, it looks like that's kind of been the case, and it goes back to what we were

just talking about with regard to fedex, kind of these bellwether names and what it means for the state of the economy right now. >> if it is about the backdrop, then we're definitely going to watch deckers today, foot locker, on lulu and crocs, right, and the wholesale up 9% was a lot better than north american revenue up 3%. >> yeah, no, absolutely. i think, you know, it will be interesting to see, obviously, this is a quintessential time of year for consumer spending, and we have jen on next hour where we'll get into the nitty-gritty of how this current environment is shaping consumer behavior, and we're starting to see that kind of play out in the earnings thus far, but kind of digging in underneath the hood to see what's really going on. >> i go back to what this stock did in such a short period of time. you could pick 200 stocks that have had these incredible gains in a six-week period of time. i looked at, let's say, i will read you some names. blackstone's up 39% since

november 1st. salesforce, 32. sherwin, 29. shake shack, 29. uber, 41. some of the banks, 25 and 30% gains are the fundamentals 30% better in six weeks? i don't know. but that raises interesting questions for investors now. i knew investors in nike who said to me they're scared to death going into the print because they weren't sure what it was going to bring and whether the stock move would be able to be lived up to in the earnings print. do we need to reassess some of these numbers that i read off to you to justify whether we should be where we are? some investors are going to look at those returns and say, should i trim? should i continue to buy and believe? >> the fundamentals haven't changed, but the rates have since november. and so, a lot of the movements we've seen in at least banks have a lot to do with the fact that rates have come down, which relieves a lot of pressure on their balance sheets, so therefore the equation would be that their value goes higher.

now, when you look at a nike, for example, i don't know how rates are so demonstrative in that they would kind of derive that kind of a rally compared to, say, blackstone. >> unless it frees up household budgets, consumer debt becomes an even lower percentage of disposable income, you have more money to spend on apparel and footwear, as well as bigger ticket items. b of a's chart was interesting. 19 of 20 quarters, open to close, nike has faded. it's generally not a good performer on an intraday basis coming out of the print, which is weird. but we know they've been -- they have had challenges, whether it's been china or consumer distribution models or whatnot, last couple of years. >> china remains, i think, arguably, maybe the biggest question for all these companies that have china-facing businesses. starbucks, big percentage of their business comes out of china. apple, 20% of their revenues are out of china. nike gets a big piece there. but you alluded to something in terms of freeing up consumer

spending. maybe this is no more complicated than, don't fight the fed. maybe the fundamentals of the backdrop have improved just by virtue of that. if you think that rate cuts are coming for the right reason, because the fed can, not because it has to cut, then maybe these gains are justified because it just sets in motion the next leg of what some say is a ready to rage bull market. >> the problem is the more pernicious evaluation of that comment is that the fed sees something. the expiration of tax cuts. fitch, yesterday, talking about pressures on cre in '24. that's not going away. >> no, and when we talk about rate cuts, we're talking about maybe 100 basis points here. i mean, it's not like we're going back to zero in 2024. if we have a recession, perhaps, but i think the market is kind of looking at a lot of what's going on as this whole big regime change, given kind of the way that the fed moved this year, but you know, by and large, it's not going to be that

huge game-changer that will unleash all sorts of kind of easy financing and back to 2020 and 2021 era. >> i'll tell you who's not fighting the fed. the dodgers. the dodgers just dropped a billion dollars for a free agent. >> what does he know about the future trajectory of the dollar and inflation, right? >> don't fight the dodgers. although, we'll see if it lives up to the hype. in recent postseason history, it hasn't exactly done that. but we'll see. the amount of money being thrown around is just extraordinary. >> well, their m&a too. >> whether it's sports or in the stock market itself. >> m&a for all of 2023, we've been talking about, you know, the dearth of deals. we haven't seenanything. it feels like the last few weeks, deal makers have been really busy, whether they're announcing deals, whether they are considering deals. you've got the bristol myers deal we'll talk about in a minute.

that, to me, kind of validates that whole risk-on sentiment, at least in terms of confidence in the c-suite, more than what we've seen prior to november if we're using that as our benchmark. >> even gorman's comments yesterday. even some of the things that went wrong this year due to their own stupidity, as he said. speaking of m&a,leslie mentioned bristol myers joining in this year's pharma m&a parade. we'll get to that. one strategist take on the fed pivot, meantime, we'll get to some calls on coin and paychecks. got some news on tesla, and of course, we'll dig into nike even more when "squawk on the street" continues.

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welcome back to "squawk on the street." you are next guest the next quarter marks the start of the fed pivot trade. joining us now, welcome, it's good to see you this morning. >> good morning, scott. >> you think we're just getting started, even though this has been pretty powerful over six weeks? >> i do. i think powell has kind of thrown in the towel, and i think we've recouped what the market drew down through the summer months, and so we're kind of back to valuation levels and bond yield levels even a little lower than where we were a couple months ago, so, yeah, i think this starts kind of a -- this is a bit of a paradigm

shift for the market. >> you're ready for them to come out and say, mission accomplished. some say it's too early. >> yeah, and i think that's going to be an ongoing debate, but given our macro outlook for continued softening of some employment trends and inflation, we feel comfortable that the fed is done, and the market certainly does, but it won't be a straight line down with bond yields, but i think the confidence of investors is that they're done. cpi tis not going to come roarig back, and we're going to enjoy a more stable bond yield environment. >> if it's a new paradigm, what do you do? do you pivot along with the fed to small caps and these other more cyclical areas of the stock market? or do you dance with who brung you? >> i think it's a bit nuanced, because while the first few months of any rally always looks the same, it's always beta and small caps and risk, what i think is going to be different going forward is that this is not the beginning of a

broad-based earnings recovery, and i think that's important. this is really a rally on the back of lower bond yields, and that should not produce the same sustained leadership that you would see after a sharp correction in earnings or the economy driving the market lower. so, while it's been risk on to say the least, in the last six weeks, i think that things are going to balance out as fundamentals come back, and we'll start seeing that in the fourth quarter of reporting season next year. >> do you put a target on stocks for '24? or at least have an idea of how good you think the equity market can return? >> we do our year ahead outlook the first week of the year, so we haven't done that yet. with the multiple of the market at basically 20 right now, with the fear of bond yields, the fear of inflation largely behind us, with credit spreads and the vicks as low as they have been in years and really high earnings expectations, could the

market go up? of course. are we going to see another year like this year? i doubt it. the way we're thinking about it here is that markets can drift higher, but it's really going to be a stock picker's market this year even more so than what we saw in 2023. >> there was a good stat from evercore isi showing the s&p hasn't declined during a re-election year since 1952 and averaged a 12% gain in those years. you think next year, then, given kind of the dynamics you just laid out, kind of won't necessarily match that historical fervor? >> well, the way i look at it is we still have downside risk in the economy. again, what the market's doing here has more to do with bond yields than it has to do with macro getting better or earnings getting better, and so what we have today is the fed -- the market thinks the fed is done. every single time that's happened in history, the market follows through with some sort of rally. it could be as short as a couple

months or it could be indefinite, and all that depends on is jobs data. so, as long as the employment backdrop, and as long as unemployment claims don't go to, let's say, 275,000 or higher, i don't think we're going to see any kind of sustained correction in the market from here. that means -- >> on a related note, i didn't see a note from one of your peers on the street that said, they don't think march is happening. they think june is the first cut. to get march, they said you need cpi sub-0.2. does that make sense to you? >> i think for the fed to cut in march, i think we would have to see some pretty evident weakness, and perhaps even a negative payrolls print. so, you know, splitting hairs, maybe, with 50 k versus zero or slightly negative. i think the data will continue to be positive but trend in a softer -- i think it's gotten a little ahead of itself in fermz

of how many cuts we're going to get next year. we think the fed will cut, but it's going to be more jobs driven than inflation driven in our opinion mike, i appreciate it very much. >> happy holidays. still to come this morning, we'll get white house reaction to this morning's pce data. lael brainard will join us in the next hour. you'll see the dow impacted by nike, obviously, on pace for one of the worst sessions in several years, but the s&p looking to resume this upward climb. abt pnt oif we get a gainf ou11ois. back in a moment. de is now part of schwab. bringing you an elevated experience, tailor-made for trader minds. go deeper with thinkorswim: our award-wining trading platforms. unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. and sharpen your skills with an immersive online education crafted just for traders. all so you can trade brilliantly.

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coming up on the end of the year, we're taking stock of some of the best names the dow has had this year.

salesforce remains the top one, but intel on track for its best quarter, at least, in 20 years after all the excitement over rivals like amd and to a lesser degree, nvidia. we'll talk about that later this morning. opening bell is coming up in just over five minutes.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. bristol-myers squibb confirming it has agreed to acquire karun therapeutics, all cash. bristol is looking to expand its portfolio as some of its drugs face some patent expiration later this decade. you mentioned the string of deals we've seen in the energy and pharma spaces lately. >> all cash, by the way, which is remarkable given what we were talking about earlier with regard to the financing dynamic. this is basically a bet by bristol on getting into the psychiatric and neurological drugs, which they see as a growing market, and one where the tam appears to be kind of even bigger given this kind of crown jewel that karuna has,

this car xt, which is being reviewed for the treatment of schizophrenia but also in development and could possibly be a treatment for use cases such as alzheimer's and bipolar disorder. so, very large tam if you look at strategically what they're looking at doing here. you see karuna therapeutics up 45%, of course, on this deal news. very close to the price by which they are looking to pay. $330 a share. >> it's a disappointing space this year. health care, biotech, this stock hasn't done anything. it's down by 30% over a year. i know there was a call on amgen this morning. jeffries called it their top large biotech pick. obesity has kind of stolen the thunder of the whole space. if you're not in that particular space, it's kind of like, okay, well, who wants to buy your

stock? maybe there's going to be more deals to be had in this space as well. >> yeah, amgen is interesting. scott mentions today's call, upgraded by daiwa yesterday and bmo the day before that. three positive calls on amgen just this week. but it's definitely about the companies that have stuck to their hitting, in diabetes especially, really the prime example there. let's get the opening bell on the cnbc realtime exchange. at the big board, it's sp funds. and at the nasdaq, it's a building technology company celebrating its recent ipo as we try to get back to 4,760, dow getting dinged by nike. i'm wondering whether -- how you're viewing the commentary you're getting on the half just in terms of sentiment, whether we do feel like this is over our skis, given the backdrop of earnings, at least. >> i feel like people are still bullish and maybe even getting more so and looking to areas other than mega cap to do so suggesting that if you look away from that, that the market isn't

as expensive as it otherwise might appear to be. >> this is like the tom lee ex-f.a.n.g. 15 multiple that we hear about. >> if you look at the total multiple, it's 20 times, it's historically expensive. we've never been able to maintain that over a long period of time. then, if you take the hood off and the hood has the seven stocks on it and you look under into the engine of the market, it sputtered for most of the year. well, now, it seems to be running on all cylinders. whether it's able to maintain that or not is going to be the real question, but i feel like that's where people are trying to place their bets. looking for, you know, underloved areas of the market to buy intoing, even though so y of those are up. where are the bargains now? that's an interesting question. >> that's a really interesting question. and of course, this week, you know, the key narrative of the whole week was, are we overbought or not?

we saw some technical shifts earlier in the week related to kind of hitting that key indicator there. >> probably are, but you can remain overbought for an awfully long period of time. >> exactly. >> doesn't mean overbought goes into selloff mode simultaneously. >> we're in the santa claus rally phase, starting today, it's the last five trading days of the year, the first two of next year, and 80% of cases, it has been a positive period for the markets, so there's no real catalyst, of course, this week, and you know, early next week, we're looking ahead to the q4 earnings, which are three weeks, actually, from today. they kick off with the banks. we'll get a rest before then. but you know, light liquidity, how much that narrative involving the fed pivot is likely to carry us through this kind of santa claus rally period. it seems like a lot of people who come on our air believe it can. >> your space, the banks, they've done really well over the last month.

i mean, it's like, what waller started, powell piled on, and today, oppenheimer says bank of america, citi, goldman, morgan stanley, their top 2024 picks. they like jeffries and u.s. bank corp., but there seems to be this renewed optimism around the financials. >> absolutely. this is the weekly fed data that comes out. if you recall that bank term funding program that went into effect in march, which basically allowed banks to tap into this borrowing facility using their own treasurys and other types of securities at par. so, it was seen as a cheaper borrowing mechanism. that hit $131 billion in the week through wednesday, which was the largest ever. so, a lot of people looked at that headline and said, oh, no, this means there's more stress in the regional banking system. here we go again. actually, that's not it at all. there was a really interesting arbitrage trade that banks are seeing kind of with this

lightening up of rates, if you will. you've got the overnight index swap that's fallen, the market pricing in rate cuts. that's 4.88%. so, what banks are doing is they're taking that and then they're plowing that capital back into the fed, which is paying a 5.4% interest rate, capturing the spread and doing so to the tune of $131 billion. and so, not necessarily a sign of any stress. so, you've seen this huge runoff in regionals lately because people see the lower interest rate. >> it almost rhymes with the sweet spot of the consumer story where you got prices falling faster than wages, and they're catching that spread at the household level, at least for now. >> yeah, and you don't know how long this program is going to last. it was initially set to kind of be a one-year deal, so that would be march of 2024. so, you got three months to capitalize on this, but it is an interesting use case for these banks that, of course, have been so beaten down in the first, say, nine months of the year

since november, just a totally different story. >> you know what call is looking like one of the best calls we've seen? you jarred my memory on that. bill gross calling the bottom in the regional banks in early november. >> tied with ackman long bottom. >> yes, yes. but gross calls the bottom. he says, the kre, he names a few names. >> like the 49ers beating the eagles. >> there are a lot of -- well, the small caps are dominated by regional banks, right? it's the biggest part of the small caps. that's just an amazing call. those stocks are up so much. i mentioned what schwab's done since november 1st. i don't know. those stocks have just absolutely surged. >> i have to say, there aren't still unrealized losses. >> absolutely there are unrealized losses. as we were talking about earlier, just because rates go down, say, 50 basis points, it relieves pressure, absolutely, but they still exist. as long as you can keep your depositors, and another key dynamic here is when rates decline, depositors have fewer places to take their money and

seek it elsewhere. obviously, the cash flows of this year, year to date, bank of america had new numbers on that showing, obviously, a tremendous record. i believe it was 1.34 trillion going into cash year to date. obviously, because cash is finally worth something these days. but that whole kind of cash-shifting trend has impacted the state streets of the world. it's impact a lot of the wealth managers of the world, so the notes you were referring to this morning, a lot of the analysts out there, they really like big banks that have sizable wealth management divisions because of this trend. as rates go lower, they don't go seeking higher yields outside of their deposit. >> i'm sure james gorman's sitting in his office, you know, saying, uh-huh. agree. wealth management. yeah. really good for us. i agree with leslie picker. >> his last five days on the job, by the way. >> right. >> after a wonderful interview with david yesterday. >> he'll go out on a high. >> absolutely. >> if there is a threat to sort of the soft landing story, it

might be energy-related. wti crawling back to 75 today, aiming for a 5% up week both on brent and west texas. you have the angola opec news this week but also the red sea issue, obviously. container prices back to $10,000, affecting the east coast more than the west coast. and then, maersk implementing surcharges on these diversions. we had the ceo on earlier in the week. he said, it might be addingtwo to four weeks delay. ikea is a good example. they mentioned it this week as well. that's at this moment. we'll see whether or not that two to four weeks delay timeline gets expanded if this gets worse. >> there doesn't seem to be much on insight here. energy is the strongest performing sector today. consumer discretionary is the laggard there. >> and you have buffett. how much oxy can one person -- >> as much as hep wants, obviously. >> now 28% ownership of oxy. he loves this story. >> he has been just -- what is

it, over the last two years, has really just been acquiring, acquiring, acquiring, and obviously, buying on the dips in order to kind of capitalize and grow his stake, but yeah, 28%. i remember when he went over that 10% threshold, that was a big deal, and now we're almost triple those levels. it's pretty remarkable. you can see there are two years, more than doubling for occidental there. >> and it's not going to -- next to nothing this year as energy's been, by far, the worst performing sector. is that going to change in the year ahead? there were so many counterintuitive things that happened this career in the market. energy has a great year ago, it does nothing this year, mega cap was terrible last year, now it leads. forgive people if their heads are spinning a little bit on where to really put your money or really place your bets in the new year. >> yeah, it does seem like quite a mean revision year. is that going to kind of shift back to revising again next year? that's a good question. >> so much will depend on global demand and whether or not opec

solidarity continues. we haven't even mentioned china's crackdown on online gaming there where they implement some new rules, not the first time, but new rules barring the use of online games by minors, banning some probability-based games for minors. you had $80 billion in market cap wiped off of ten cent overnight. so we're back to china crackdown stoirp. this story. >> really interesting. just the sheer, swift market reaction. just ten cent alone losing market value after these rules were drafted. they're draft guidelines, by the way. so, we'll see if they actually go through and what kind of an impact that has, but clearly, big business for those select chinese tech companies. >> you asked me earlier about what the commentary is on the half. maybe you have had a little more positivity around some of the names, but not much. for the very reason -- >> you mean china?

>> yeah, but for the very reasons that you suggest. anything can happen on a moment's notice that causes the value of your investment to go up in smoke. right? there was a, i think, alibaba, there was something positive about that in the last couple weeks. i can't remember what it was. got us talking about those stocks again for the first time in a while. but i don't get the feeling that investors are ready to put two feet in that investment water any time soon. >> yeah. >> although first dreamliner arrives in china since 2019, and paving the way for perhaps some max deliveries to come. we know what boeing -- david and jim love to make -- not make fun but marvel at the boeing -- it's probably a one-year or six-month chart where it's like an everest cliff going straight up. >> it's like they're taking a flight, soaring into the sky. interestingly, we talked about m&a. i hear all the time from bankers who say that more than interest

rates, it's actually geopolitics that are concerning c suites. there's just so much uncertainty out there about what exactly all these governments are going to do. a lot of bankers will point to just the sheer number of elections that are taking place worldwide, including right here in the u.s. >> is it not a record number of people affected by elections next year? >> yeah, i believe it's something like 80 countries are holding elections next year. that's a rounding, but 80 or so countries holding elections, and a lot of the polling is suggesting it's becoming more populist. so when you look at a situation like u.s. steel, this is a cross-border deal, and we can talk more about that. a japanese fire here. a lot of c-suites are concerned about doing deals like this, because they're worried about the political blowback, which, case in point, here we're seeing -- >> you're hearing it from brainard, whom we're going to have on the air. "appears to deserve serious scrutiny," speaking of this proposed deal between nippon and

u.s. steel. will they move to try and block it? we're going to find out. >> it's interesting because in recent history, china as a buyer has been more under scrutiny. japan, actually, doing a little bit of a history lesson, it was created in the '70s and its powers were expanded in the '80s in response to japan growing as an economic force and doing more deals, but lately, japan is seen as more of an ally, so that's an interesting dynamic we're seeing here. it is steel, which is a national treasure. >> with a headquarters in a swing state. >> exactly. in an election year. >> yep, yep. >> so, all of those interesting complexities will play a role here, but i think it certainly has -- it will have an impact and ears are ringing across boardrooms, especially as it pertains to cross-border deals, which have been very modest. >> i've wibeen watching shares cleveland-cliffs this morning.

he talked about this deal, and the premium that nippon had offered was so significant over the august offer that cliffs gave. now, when the deal was announced, cliffs was up a lot. the market saying, we're glad you didn't do this, but maybe we're more glad that you didn't do it at the price that these folks were willing to do it. >> they said a buyback too. they were going to do a buyback. >> yeah, take the savings and do a buyback. i just wonder, though, if there is real political blowback and the market gets the idea that that deal might not happen, if it puts cliffs and some of these others back in play. >> they got the support of the union, which is critical, and also especially going back to the politics. and you see both sides of the aisle, by the way, opposing this deal. it's not a party-specific opposition. it is really kind of everybody. >> speaking of unions, seems like it's been a year since the uaw strike ended, but there's some auto news. tesla today, according to chinese news agencies, launching a new mega factory for batteries

in shanghai. that would begin production in q4 of '24. and then just taking stock of what's being said right now about the ev deceleration, scott, and what that means for legacy automakers. seems like every day, adam jonas and morgan stanley has a note as to why that's good for gm and ford and the suppliers that sell to them. >> doesn't want them -- he doesn't want them to spend as much as they were. that was that note of a few weeks back. i think when he -- was he comparing what they were spending relative to their market cap? >> yes. the sergio principle, which most companies, it takes years, maybe decades, to spend your market cap in r&d. >> they're doing it in days. >> exactly. >> i'm being facetious a little bit. by the way, wedbush raises tesla's target price. >> that's right. dan ives thinks -- i wontder if that's about less competition. >> he's always been a big bull, obviously, on that name. speaking of musk, did you guys

see this conversation that he was having with cathie wood? >> about indexing? >> about the markets in general. and grievances of sorts that he has with the public markets. too high a regulatory burden, too much pressure from shareholders, and really took aim at passive investing, leslie, that it was a stoking volatility, that it's "gone too far." wouldn't recommend companies go public "unless they really have to." >> funding secured, remember? he's been someone who's long said he doesn't love tesla in the public markets, despite tesla, for much of its life in the public markets, being a huge beneficiary,and he has said that the biggest benefit of being a public company is access to capital, which is, you know what, you do often tend to hear when people tell you the truth kind of off camera about why they're going public, it is that access to capital. but interesting that he's speaking with cathie wood about passive investing who, of

course, runs a suite of -- these guys are actively managed, but tesla is the second largest holding in that innovation. >> you can imagine marc rowan, for example, of apollo, saying, yes, the markets are overindexed. it's hard to generate alpha and that's why, if you can manage the illiquidity, private markets make sense. >> if you can get it at the right valuation. and the turn around stories, i mean, it's difficult, right, if you're -- it's an easy sell to say if you're in the private markets, you're not as worried about the quarterly earnings. you're not worried about pressure from activists and investors pushing you to do things, which are a real issue for a lot of ceos out there. go private and you'll be able to make those changes privately, but then of course you have to get an exit eventually. do you go back to the public markets? >> this is the conversation we had with citi yesterday about which way. >> you have to do something. >> yes. >> you have to, you know, return that capital to lp. so far, no one's really cracked the code of staying -- i mean,

you can stay private forever if you're cash flow positive. >> are we going to have another debate this year about active versus passive management if the fed is truly getting out of the way? you know, being a stock picker rather than just buying the indexes and set it and forget it? it's back to good old-fashioned stock picking? i feel like we're going to be talking about that more and more going ahead. >> it's a stock picker's market, scott. that's the story for '24. as we go to break here, dow up almost 90. trying to evade the nike downward halo. let's take a look at bonds as well. got the 30-year still with the four handle, but ten-year, 3.87%. not done with data, by the way. new homes coming up. [music “this little light of mine”]

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here we go. can we land? you're old enough to do it in the sky now. but it's gross. there is no way we're landing. are you sure no one is watching? gwen mallard! do it now, or we leave without you. ok. take a look at this month to date chart. the s&p equal weight against the standard s&p index. you can see what's outperformed so far as this market has broadened out.

we threw in the mag 7 in for good measure. dow up 114 and 30 points away from 4800. don't go awhe.nyer

watching the market to add gains. let's bring in bob pisani and see what he'sing me. >> the important thing, carl, there's good and bad news out there. the good news, it is amazing to see the market broaden out like this. everyone is concerned about the magnificent seven but look at what's going on. s&p small cap value up 11% this morning. amazing gains. the russell 2000 is up 11%. the equal weight is up 5%. remember, the s&p is only up 3.5% or so, so we're definitely not seeing -- there's the nasdaq, it's sort of, you know, going along with the overall market. that's not an outperformer anymore. i'll tell you what is concerning me. i don't like the trend of earnings. we've got 16 companies reporting including nike and general mills and fedex and generally, while the top line beats are there, 94% meeting on the top line, 50% are beating on revenues. that's below expectations and with nike again today. we're seeing the numbers coming in a little disappointing and as

a result of forward estimates for some of these companies have been going down a little bit. i find that a little concerning here, and i'm going to keep a close eye on this. leslie was talking about the santa claus rally. there it is. last five days of the year, first two. this is laughed at a lot on the street, but it's a very good indicator up 80% of the time. 1.3%. as ryan has pointed out, this is the best seven consecutive days of the year generally. it doesn't happen often like that. remember we're in other seasonal patterns, in the best six months of the year, the november top april, the best three months, november to january, and preelection years are usually pretty strong in the middle of december. you often hit new highs in preelection years. people ask me, why do we have the december rallies and a lot of this is because we get tax law selling that ends in the middle of the month. middle of december, you traditionally see the market lift. that is what's happening and also talk about new money coming in, end of the year. you want to talk about election

years. next year, in years where there's a sitting president that's running, which is happening this year, the s&p is up 12.8% historically going back 70 years. when no sitting president the s&p is down. that's a pretty amazing difference here. most people say it's because the president can pull some levers to help the economy along. when there's no president sitting there, you have people more concerned about the lack of the economic outlook for the future. nobody is sure what's going on. it's really pretty remarkable when you are going finto the year. your comments on elon musk were interesting. one thing i would say, people complain that they -- that you can't generate alpha with so many indexes but the point is, the active managers couldn't generate alpha when there was no indexing. so you see what's going on here. >> yeah. >> investors have decided they

can't beat the market. why pay the high fees. a reason indexing is winning outs. investors are acting rationale. >> i appreciate it. >> yeah he. >> the static. wasn't sure if it was just me. too much static, bob. what can i tell you. >> still to come, lael brainard with white house reaction to pce, umich and new homes on deck as well. don't go anywhere. trading at schwab is now powered by ameritrade, giving traders even more ways to sharpen their skills with tailored education. get an expanding library filled with new online videos, webcasts, articles, courses, and more - all crafted just for traders. and with guided learning paths stacked with content curated to fit your unique goals, you can spend less time searching

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5% apy? that's new! yup, that's how you business differently. . good friday morning. i'm carl quintanilla with scott wapner and leslie picker. david and sara have the morning off. markets behaving. dow up about 100, 4768 on the s&p as the data this morning has been cooperative. core pce annualized now below fed target and we'll talk about it. >> we are 30 minutes into the trading session, here are some of the movers.

bristol myers buying karuna therapeutics for 14 billion. under the terms of the deal bristol myers will pay 330 in share. that's a premium to its closing price yesterday. the deal allows bristol to make a bigger bet on psychiatric and neurological drugs. bristol is up about 3%. karuna up 47%. nike tanking on its earnings and outlook. the stock was having its best month more than a year going into the earnings report, however the gains have been wiped out and shares are on track for their worst day in more than 25 years. scott, currently down about 10.5%. the shares of rocket labs soaring today. the company landing a government contract for space vehicles worth over half a billion dollars. that stock up 23% right now. it is the last real busy day of data for the year. let's get new home sales and consumer sentiment with rick santelli. >> yes. boy, there's some wild data

points here, carl. new home sales expected to be darn close to 700,000 seasonally adjusted annualized units. a big miss. 590,000. from a slightly revised 672,000. that means this number is down over 12%. that's over 12%. what's more, that is the weakest number, the weakest rate, all year. as a matter of fact, going back to november of last year. we want to keep that in mind. let's go to university of michigan sentiment, shall we? these are december finals. our mid month reads and toss them. 69.4. now becomes 69.7. still the best since july in five months. expectations moves from 66.4 to -- i'm sorry -- yeah, that is a huge jump, 66.4 to 67.4. i thought i made an error.

these are big moves. that's the best in five months as well. now we look to current conditions. our last mid-month look was 74. this one deteriorated to 73.3 which means it's the best since august, not july. we'll call that four months. the inflation numbers. one year inflation remains at 3.1%, which happens to be the lowest inflation rate in this survey since january of 2021 and if we look at the 5 to 10-year, 2.9%. that increased .1%. if we look at 2.9%, it's still well below our final read for november, which was 3.2%. we see that interest rates are still down on the session, but the long end like 30-year bond and 10-year notes are closer to unchanged. deeper, more pronounced buying pushing yields down and short maturities and the driver is thoughts about the fed and

easing. carl, back to you. happy holidays. >> same to you, rick. rick santelli. let's bring in steve liesman and get reaction to the latest batch of data as well as what we got earlier this morning. steve? >> yeah. i just want to add little bit to the data that rick gave us. the month supply jumping up to 9.2 months, it had been 7.9 months, and i know if diana olick were here she would be all over that number there, which shows up, return of normalcy in this regard. interesting that homes have come back on the market or that number of homes on the market not necessarily selling. meanwhile, the average price declining by 6%. that's going to help in terms of the inflationary numbers we're looking at. speaking of the inflationary numbers, carl, they were pretty interesting this morning. i have a couple ways i want to show you this number. the first thing is -- that peak was 5.7 in february of 2022. november year over year down to

3.16 on the core. three-month annualized 2.2. look at the fed forecast for the end of 2024 at 2.4%. looking at the difference between the top and bottom number suggest to some the fed may have more work to do than it thinks in terms of reducing rates and that then then propels the next screen up there, look at where the market is pricing in. just look at the january 2025 contract, 3.73. that would be 6 or 7 rate cuts from here. again, more than the fed itself has dialed in, but the difference in those two numbers i showed you, maybe helps explain a little bit, carl, how much the fed may -- the market thinks the fed may have to do by the end of next year. >> steve, extenuates the point of the fed of doing these rate cuts because it can, not because it has to, because the economy is so bad. it's like cutting to prevent the

economy from getting bad unnecessarily. >> i think that's right. you know, trying to make sure that you don't snatch tdefeat from the jaws of victiory. today's numbers are perplexing. the spending numbers were good. the sentiment numbers ticked up. we have people, joe, just raising his forecast for gdp in the fourth quarter to 2.8%, saying there's a risk that it goes to 3. potential is below 2. we have this fascinating moment, scott, where what you have is inflation coming down, back towards the fed's target. remember, just one month or one quarter of the fed's target the fed will want to see more, but you have strong growth. i think that's the definition of a soft landing where you don't really have too much that you're giving up in the way of economic growth or unemployment in order get these lower inflation numbers, and i'm going to listen at noon and see how you guys trade this. better growth, better inflation

numbers, nobody expected this under the tree this christmas. >> that's for sure. thank you. appreciate that. steve liesman. speaking of which, reaction from the white house to the latest round of data, joining us director lael brainard joins us. i want to read you something this morning, speaking to steve's point, powell, quote, could not have asked for a better present. consumers are spending, the economy is rolling along, creating jobs, lifting incomes, and yet inflation is simmering down nicely. the end game turning out better than the fed or nearly anyone could have imagined at the beginning of the year. i assume that's how you see it as well? >> absolutely. we're closing out the year with inflation on a six-month basis at 2%. that's the prepandemic benchmark. that's a very significant milestone. and with 2023 close, it's worth noting how much progress we've seen. not only has inflation come down faster than even the most optimistic forecast, but growth

is very resilient and employment is very strong. just think back to a year ago the consensus was we couldn't get to where we are today on inflation without a spike in unemployment and a recession, butthe unemployment rate below 4% for 22 months running and we have more data today and yesterday confirming economic growth is robust. if you look at after tax income growth for americans, 3.7% this year after adjusting for inflation. so yes, a good year for the american worker, the american economy. >> now we're graduating into a moment where, for example, the fed chair, austan goolsbee are beginning to talk about paying more attention to unemployment. i'm beginning to see takes on this morning's data that the fed is now at risk of an inflation under shoot by late '24. how much are you focusing on that? >> let's pause there for a second. who would have thought that we

would have made this much progress on inflation, inflation running at 2%, that benchmark on a six-month basis and the labor market looking quite balanced. we've seen a surge in people coming back into the labor market. that's also something that nobody was predicting. remember when people were talking about the great resignation. instead, we've seen a strong labor market bringing people back in. highest working age participation rate. for individual americans, they really are seeing prices coming down, whether it's gas, gallons of gas, is now close to $3, a big reduction over the course of year, a gallon of milk, chicken in the grocery stores, eggs, toys, you look across the board and seeing places coming down over the years. >> it's scott. as it nice to have you on the show. if growth is resilient, inflation is down, jobs are

good, nincomes are strong, consumer sentiment is up, how concerning is it that the president's approval rating remains so low, and his handling of the economy is judged by the same surveys to be poor? >> look, when i talk to the president, what he wants to know always is, what do these good economic statistics mean for americans. does it mean they have more breathing room at the end of the month? i think now we can definitively say the answer to that is yes. if you look over the course of his presidency, the joint economic committee is estimating that people have $3500 more per year to spend even after adjusting for the kinds of purchases that they would have made, and price changes there. wealth is up 37%. we are seeing across the board, you think about 401(k)s, people

are seeing gains, and that takes a while, given just how much americans have been through, but i think it's starting to really take shape and you saw that in the jump in consumer sentiment this morning which was so good to see. >> director brainard how willing are you to say it's mission accomplished, keeping unemployment relatively intact, and how concerned are you about potential tail events? looking at what's going on in the red sea and vessels being redirected over a potential attacks there, how inflationary do you think aspects like that are right now? >> yeah. so i would say our work is ongoing. the president is committed to continuing making sure that economy is strong and that we are lowering costs for american workers, american households.

there are areas like health care where americans still see prescription drug prices that are 2 to 3 times higher than in other countries. we're working hard there. he secured important legislation and we brought insulin prices down to $35. capping out-of-pocket drug costs. those are important. our work is continuing. on the broader outlook, yes, we have to be attentive to risks and in particular, in the red sea, the national security team is working with shippers, with other partners in the region, to make sure that those disruptions don't affect supply chains here at home, and so far we have good reason to believe that they will not disrupt in any way the holiday season. >> your statement on u.s. steel, nippon, got a lot of play yesterday. i'm wondering what questions you want to get answered, and whether or not you think a cfius review would be more intense

than the average one? >> so i think we know from a lot of actions that have been taken by this president and previously, that steel is an important critical, vital sector for national security purposes, for supply chains, resiliency here in the u.s., so the president i think is very focused on the steel industry, has made sure that this is an industry that continues to thrive, given its importance to our national security. it's also one where unions have played an important role where they play a partnership role and what we believe is that it's very important from a national security perspective, from a supply chain resiliency perspective, that we look at this, and it gets serious review. >> some people say that japan is an ally and, you know,

historically a lot of these reviews have involved countries that may not be as close in terms of their kinship with the u.s. what signal do you think that says to other potential allies whose companies might be pursuing a cross-border transaction? >> we certainly welcome foreign companies investing in the u.s., investing in u.s. manufacturing, investing in the u.s. workforce, so generally speaking, we continue to welcome that and we've seen record levels of foreign direct investment into the u.s. to participate in this clean energy boom, this boom in infrastructure and semiconductors. that said, it's also long-standing important principle we need to make sure that transactions are consist bent with supply chain resiliency in critical areas of national security and that's why

we have said that this kind of transaction, even from a close ally, merits serious review. >> if i could steer you back to the fed, director brainard, given your prior role there. the criticism, of course, was that the fed waited too long to start hiking interest rates. how concerned are you at this moment that they wait too long to start cutting? >> so one very important principle for this president is to respect the independence of the federal reserve. so we don't comment at all on their policy deliberations. of course, looking out at the economy generally, as we have been discussing, inflation on a six-month basis at 2%, that is the prepandemic benchmark. we are back down to that. the labor market is in good

balance. we continue employment growth, very high participation rate among working age americans, and so if you look into 2024, those kinds of conditions we think widen very much the path for a soft landing and that is all i think reflected in how the markets are thinking about the path of interest rates. if you look at mortgage rates they've come down by 1.5 percentage points. >> finally director brainard, our colleagues at nbc reported president xi told the president in san francisco that beijing would look to reunify with taiwan, although the timing had not been decided. i won't ask you to comment on that reporting but if that were the view of china is that going to move u.s. industrial policy te margin regarding ships or

export bans or tariffs or anything else? >> well, let me just say that the president has a strong policy on both those vital semiconductor chips, as well as on our clean energy future here in the u.s. that is absolutely critical, that we have supply chains that are resilient and that are not accessbly dependent on any one country, and as we know china has dominated a good part of clean energy supply chains in a way that isn't healthy. we have a number of policies that we're going to continue to pursue, including the historic legislation to make sure that the u.s. has resilient supply chains on areas like semiconductors, clean energy, and that is not just for economic security, and good employment and growth here in

the u.s., but also for national security. >> we covered a lot just now. really appreciate you fielding all those topics. lael brainard, happy holidays. >> and to you. thank you. as we go to break let's take a look at the road map for the hour. nike talking about them, tumbling after cutting its outlook, warning about consumer spend. we'll discuss that and the retail landscape. china proposing new rules to crack down on on-line gaming and a number of stocks impacted by that. >> three names that should be on your radar going into next yr.ea more "squawk on the street" straight ahead. don't go away.

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i'm a little anxious, i'm a little excited. i'm gonna be emotional, she's gonna be emotional, but it's gonna be so worth it. i love that i can give back to one of our customers. i hope you enjoy these amazing gifts. oh my goodness. oh, you guys. i know you like wrestling, so we got you some vip tickets. you have made an impact. so have you. for you guys to be out here doing something like this,

it restores a lot of faith in humanity. welcome back. nike shares sinking after revealing a $2 billion cost saving plan and slashing sales outlook. those gains nowerased. our next guest does not see a consumer led recession coming here. jay rodgers, wwe ceo, joins us now. you're not too concerned about nike being the canary in the coal mine? >> did you edowngrades on mike this morning? you didn't. everybody still overweight. why? they're the best brand managers in the world or close, and they've done this for a long time and i don't see cutting expenses as a bad thing. i see cutting expenses a good thing. they had a fine quarter.

it was that guidance through cyber monday weekend. do they still own that space, absolutely. they own that space and they'll figure it out and they're really good at what they do. they're getting hurt in china but everybody is getting hurt in china. they're not as strong as we thought they would be at this point in time. >> as an investor how do you extrapolate what's going on, you mentioned china and cited europe as being a weaker area that kind of informs their guidance? do you just kind of take that out and say but the u.s. is good and that's kind of their key market? do you take money off the table? >> i worry about it and don't blame anybody that takes money off the table. if you look at all of us following nike, we all think they're very strong and they will continue to be strong and they're going to gain going forward. the question is, what's the timing and did it run up too much? there's all those questions, but i don't have to opine on.

i can opine on this being one of the greatest retailers in the world and best brand managers in the world and it's going to work going forward. do they own the space as firmly as they once did given the competition that you mentioned? >> i think they do. i do think there's competition and room for other people too. i think they are -- it's like lulu owns their space. nike owns their space. >> are you worried about the red sea? should we be watching contowner rates at this -- container rates at this point? indian goods? >> am i worried about it, yes. if what they're doing right now adding two weeks to the route change it much? it will drive up the cost. we're talking about differences between 1500 and $3,000 and 20,000 prior, we're not going to see this in the cost of goods, not yet. >> in terms of inflation, we saw the core pce number come down on a six-month basis looking at that fed below the fed's 2%

target. what does that mean for the plight of spending as well as the cost of goods for a lot of the retailers out there? >> when you look right now at inflation and goods, i claim inflation in goods is zero and hope it doesn't go negative but it is right now zero and on the other hand, services are still inflating. they're going to continue to inflate until something changes with jobs and earnings. it's getting to be more attractive right now for goods versus going out to dinner and we're seeing that reflected. we're seeing a small drift back towards goods as far as purchasing. i think that's going to continue and going to accelerate, not decelerate. i think goods will benefit heading into 2024 and i think they're benefitting right now because they're just cheaper than doing other things. >> where are we on inventories, discounting? >> we are as good as we're going to get. looks like 2019. and the reason is everybody was cautious coming in.

we do not have excess discount going going on out there, not having excess promotion. we returned to normalized world of 2019. we didn't see that in recent years. if we see 4% sales instead of 3% sales this holiday season we're going to see extraordinary performance on the gross margin and on the sgna line. 4.2 would be a normal year. 5.8 was last year but it had a lot of promotion in it. this year it doesn't have a lot of promotion and we could run 4.2. if we do it will be fabulous. i'm using 4%. the rest of the world 3.5. whatever it is, if tomorrow is a good day, we're going to see a 4% holiday. >> i got to ask you about one of the biggest stories of the year has been about the physical store, right, meaning shrink, self-checkout, whether or not consumers want an experience where they go. drug retailers have been hit over some of this stuff. is that going to change and that story change in 2024?

>> we're going to continue to see online take share from brick and mortar for the rest of my life, maybe not yours. that's been going on. it's not moving as fast as it was. we saw some huge gains, right, but doubled during covid, and now it's just gaining slowly. we're going to see this holiday season be at least 23% online, maybe 24, and if that's true and runs somewhere close to double digits, that's going to be half of the driver of retail sales gains. so that's what's happening. yeah. 80, 75% is going to stay in the store, but next year only 74% will be in the store and it will continue to happen. in the store we have to get to be a lot faster, a lot more fun, and a lot easier. they're trying to do that. but it's really hard to do that when you're trying to control the expense line because your business is moving online. so do i think we're going to get better at it? sure. i think ai will make a big difference in stores. the stuff like self-checkout

will get a lot smarter and it will get easier, and we'll get stolen goods coming out at a slower rate if we're lucky because of all that. it's a big problem. theft is an enormous problem, but i think that's a post-covid phenomenon, like the rules don't apply anymore. i think we are seeing return to normalcy in the world. >> so you think ai in terms of law enforcement and stores is the biggest use case? >> no. i don't think it will be the biggest use case, but i think it's a use case. there's a zillion great use cases. i think ai is like going from the hunters and gathers to the society. it's like the industrial revolution. it's going to affect everything, but i definitely think it's going to affect retail and make it easier to get your inventories right, keep track, know what's happening in your store and who is doing what and when. it's just a big game changer and it will just reduce the cost structure significantly.

>> fascinating. p deflationary potentially. really appreciate it. thank you so much. >> thank you so much. got a big deal in pharma. we'll talk about it. china planning to crack down on 'ltane gaming. wel lking about the stocks you need to watch in today's trade. we're back after this.

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welcome back to "squawk on the street." let's get to dominic chu track something movers today. we got? >> we have quite a few, carl. health care is a big focus and headline news this morning because we have got shares of karuna therapeutics up 47% right now. the biopharma company is going to be bought by drug company bristol myers squibb for $14 billion. that will give access to treatment to schizophrenia which will help the drug pipeline as it loses patents later this decade. the shares for bristol myers up 2.5%. sticking with the sector, shares of amgen are up near session highs in early action near 2% at this stage. the biotech company known for key drug franchises like enbril

for rheumatoid ar thigh tis is named a top pick at jefferies given what's expects to be better development of obesity related treatment. those shares up 2% helped along by that. we're keeping aon on the tech stocks across the pacific in china with focus on video gaming as opposed to casino gaming. tencent in hong kong have lost about 12.5% of value that translates into roughly $43 billion of lost market value. chinese regulators released draft guidelines that aim to curb what they think is excessive gaming and spending on the platforms. shares of billy billy, net ease are seeing shares on the u.s. business side down as well. keep an eye on a plethora of names. i'll send things back over to you. >> dominic chu back at hq. >> wall street analysts rolling out top picks for '24. we have three names that should xtear the your radar going into ne yand two have doubled

this year. we're back after this.

the u.n. security council voting on humanitarian aid after several dates, the israeli military began a new ground offensive push into central gaza today. this as hopes fade for talks of a breakthrough in truce. hamas proposed for a cease-fire in exchange for the release of 40 hostages. a makeshift memorial sprung up outside a university in prague after thursday's mass shooting, the worst in the cont's history. according to police, a czech student killed his father and then killed 14 others and wounded more than two dozen. police say it appears he then killed himself. the government declared a national day of mourning today. and japanese star yamamoto is set to sign a 12-year, $325 million deal with the l.a. comers. that's according to mlb.com. the pitcher who has never played

in the majors sparked a bidding war with the yankees and mets and joins countryman shohei ohtani who signed with the dodgers last week. >> thank you. silvana henao getting a quick check on the markets ahead of the holiday. now it's the first day of the so-called santa claus rally period. wall street looking for its eighth week of gains. our next guest sees anything but negative growth next year. joining us now, evercore isi founder and senior chairman roger altman. happy holidays and new year. welcome back. >> thanks for having me. >> inflation falling except for major league baseball as we just learned yet again. you sat down and said unbelievable data. should the fed declare victory? >> let's step back for a second. what's unbelievable is that, as was said earlier on this network, 85% of economists at the beginning of the year thought we would be in recession. honestly i thought we would be in recession too, so i'm not

different. and not only are we not in recession, but the economy is gliding along at a really good pace. unemployment rate is 3.7%. obviously, markets have been soaring. and the outlook for 2024 seems to me to be quite good. the interesting question is, why? why was everybody so wrong? i personally think historians will say, it will take a few years, it was the pandemic. uniqueness of the pandemic in terms of its economic effects. in my view at least the pandemic caused this inflation. americans unable to go out. a lot of liquidity. obviously, unable to spend on a lot of normal things. splurged on goods. demand for goods surged whether it was a bike or grill. supply chains couldn't keep up. inflation soared. as americans began to finally go out they still had a lot of liquidity, huge pent up demand for experiences whether a night out at a restaurant or a trip. and the demand for that also

soared. supply side couldn't keep up and so forth. now, on the other side of it, supply sides have fully loosened and basically returned to normal, labor supply is continuing to creep up because people who left the labor force on account of the pandemic have come back to it. participation rate got back to its prepandemic level. so normalcy is returning. history will say that while those on the transitory side of the argument didn't think it would take nearly this long, they were fundamentally right. it was inherently transitory, just took a couple years, and that all this came about because of the pandemic and fundamentally ended up with a soft landing on account of the pandemic. >> is it time to cut rates? >> not yet because i think the fed will want to seat inflation rate come down further, but, you know, we're forecasting up to five rate cuts next year. i don't know whether it's going to be four or fives, but it's

going to be probably a year of easing and, you know, steve liesman and others were debating this morning after the inflation figures came out how far -- how far down interest rates should come to square with the new inflation data and the answer is, you know, 150 to 200 more basis points, at least on like the 10-year. should be a good year. growth should be steady, interest rates lower. two risks, one geopolitics, one the election, who knows how those are going to play, but it should be a good year other than that. >> what's going to be the best argument to push the fed on their dots even more in terms of rate cuts? is it going to be about corporate taxes expiring or commercial real estate? we're hearing a lot today about risks of under shooting given today's data. >> well, if i was sitting on the open market committee, i would just want more good data before i made that very profound shift.

i don't think there's anything in it for the fed to do this early. because whatever the -- however risk, however small the risks are, if you get it wrong, you ruin your whole progress here. so take your time, and i don't think it's really more than that, carl. i mean, there are sure, soft spots in the economy like you say, commercial real estate and, you know, other factors, but i think it's more about locking it down in terms of inflation, progress, and not assuming too much early. >> i guess the other way of asking it is, historically the fed when they cut, they cut fast and they cut in a hurry. do you want to see that again or can they do this on a glide path? >> i think they can do it on a glide path because the markets will be ahead of them. the 10-year has fallen something like 80 basis points so far. the fed hasn't cut anything.

you say why is that? well, partly it's because of the inflation data and anticipated better data we're seeing but anticipating the rate cuts. the markets are going to do a lot of the job for the fed, including the financial conditions index. i saw goldman sachs, jan hatzius say the financial conditions impact on the economy will go from restrictive to stimulative in a few months and a lot open market trades. the mortgage rates down 150 basis points. i think the fed can wait because i think the markets are going to do a lot of the job anyway. >> about tighter financial conditions however, earlier this year we were talking about potential lag effects from the rising interest rates. can we say those never really appeared in the way that we expected them to, or is it possible they could very much kind of pop up, despite the fact that, you know, the market is acting as if the cuts are imminent or will happen definitely?

>> that is a great question. because there are going to be libraries full of analysis as to how monetary policy could have been tightened so much and so fast, fastest pace in 40 years, and the economy seemingly shrugged the whole thing off. and the interest rate effects. and that is unique historically, at least i think it is. as i said, i think the answer has to do with the other side of the pandemic and the healing of supply chains and the steady people pulling back steadily into the labor force with factors like that. i must say that in a normal cycle where inflation was caused by overheating, this type of monetary tight woong have produced much softer economic conditions. it's just the uniqueness of the pandemic that i think has enabled us to get into the sweet spot. >> yeah. >> are you more optimistic today about the coming deal environment than you were two or four weeks ago? >> yes.

i agree with the tenor of james gorman's comments yesterday. what great job he did as ceo of morgan stanley. that we're going to see a better overall financial market and transaction environment in 2024. by the way, that's not a very bold prediction because the bar is low. 2023 was a really bad year, so we follow a lot of data. you can imagine. one of the pieces of data we fol is, -- follow is global m&a volume as a percentage of the total value of a major global stock exchanges, 2023 40-year low will not continue, so you have lower interests, playing out as we sit here, you have pretty good optimism about business conditions and economic conditions. you have a little less concern about the regulatory environments, still some concern, but the great fear of a year ago is lessen and going to make for a better year.

moreover, activity levels are up. things like backlog and conflict checks, they are up. now, you know, that's only like a three-month indicator. i think it will be a better year, yes. >> great having you here. >> happy new year. >> thank you. >> roger altman. when we come back, one analyst's top three tech pic r 24 including one not among the magnificent seven. "squawk on the street" continues in a moment.

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welcome back to "squawk on the street." meta trading at a new 52-week high, up almost 200% this year. our next guest has meta as one of its top tech picks for 2024 along with uber and amazon. also had nice runs. roth km managing director joins us now. let's start with meta. what is going to be the next leg of growth for this company after having such a tremendous run this year? what is it that 2024 has in store that we have yet to see?

>> thanks for having me. two things. one is they have new revenue growth drivers that are becoming large enough that it's going to pull the gravy train ahead. you have reels, whatsapp. i think those new revenue growth drivers helps sustain revenue growth. number two, we're getting started with ai driven efficiencies across the entire value chain of tech and facebook is probably the best example that's implementing new ai tools for advertisers, for consumers, everybody across the board an we start seeing that in efficiency in terms of how quickly people can get ad products out there. obviously, we know that they are going to be efficient with spending and i think we see profitability rise as the year progresses. we like meta and feels it goes to new all-time highs as the year progresses and even more value. >> what about uber and amazon, what do you think propels those names to the upside?

>> across magnificent seven i think amazon is the only one of the magnificent seven that has doubled positive fundamentals, which means their growth is accelerating in 2024 versus 2023, and margins are expanding. that's the only one of the top seven tech names out there, so amazon is very well positioned into '24 and a couple controversial takes on amazon. we see evidence where the cloud segment starts to gainslayer versus microsoft -- gain share because of microsoft because of the ai amazon has been doing. that's one take on amazon. number two we see evidence that margins in retail go to new all-time highs even before what they used to be before say five years ago, where two-day shipping, one-day shipping and same day investments, almost

five years have passed and we're going to see margins in retail go to new all-time highs an we have market share in ai and aws and new margins in retail, so that's why we like amazon a lot. >> has the year of efficiency right-sized meta

the co-owner of the boston celtics andformer and his take on ballooning sports contracts as these dodgers land another star. stat's come up at 11:00 a.m. eaern time. dow off the session highs. up 70.

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welcome back. there's a niche but growing pocket of the finance world called nav lending garnering some attention. it's backed by the value of the underlying portfolio companies. in the current environment where ipos and sales are harder to come by for those portfolio companies, nav loans are becoming increasingly popular. firms are often using them as a way to generate cash to distribute back to limited partners, those investors in their funds. the borrowings can also be used for acquisition and fund-level refinancings. because those portfolio companies already have debt on them, some see this as leverage

on top of leverage. now we're witnessing the next iteration of this pocket of finance. historically this lending has been done by traditional banks, but increasingly the nonbank sector has gotten into the mix. just yesterday news broke apollo wrote a $1 billion loan for w a. warber pinkist. one source familiar with the matter told me that warberg partnered with apollo instead of going back to the 2018 banks even if the rates are a little more expensive. current levels for this loan are sub 10%, i'm told. apollo, which has low cost of capital from its booming insurance arm, these nav loans are attractive because they're often done at low loan-to-value ratio with known counterparts and secured by presumably

diversified basket of companies. of course this recent upsurge in popularity may also bring unknown risks, critics say, especially given its opacity and push into the unregulated nonbank arena. guys, trying to tell the story, i was trying to collect data on how much is really going on. really, there isn't any because it's all kind of done behind closed doors so it speaks to the opacity and out of the eyes of regulators, which some say is more efficient. of course, you have the critics who say it's concerning as well. >> why have publicly traded private equity stocks done so well? blackstone is up, kkr, apollo is only up more than 40. >> it's amazing. it speaks to what we were talking about last hour. the first half of the year, if you had good exposure to private credit, you look at an aries,

because they were beneficiarying of a rising interest rate environment because they provide floating rate debt so they're able to capture higher rate debt. those with more exwit exposure underperformed because they're more exposed and they mark their portfolio companies based on what's going on in the stock market. you have a situation now where you is it i will have pretty high interest rates and you talk to private credit managers out there and they say, you know, just because things go down doesn't mean it's going to really impact, you know, our margins tremendously. and then you've got private equity where they say, okay, well, if rates do come down, that makes financing a little more pallatable, therefore we could do more deals, exit more deals, crystallize potential gains, all of that. >> we're not done with the critics saying there's a bubble forming in private credit. we know where it's coming from as well. our live market coverage of today's action continues. dow's up 46.

good friday morning. welcome to "money movers." i'm carl quintanilla with leslie picker. the market is ch