it is wednesday, december 27th, 2023, and "squawk box" begins right now. ♪ good morning and welcome to "squawk box" right here on cnbc live from the nasdaq market site in time square. i'm steve liesman. we have contessa brewer. contessa, help me out here. what's the record we're looking for on the s&p? >> we need about half of 1% higher? >> 4800 is it? something like that. not too much to do here. the dow kicked off the final trading week of 2023, closing at a record high. currently up 13% this year.

and check out the nasdaq. also at record levels, a whopping 44% this year. did you guys all have your money in nasdaq stocks this year? >> as you know, we're not allowed to hold individual stocks. >> but you can hold nasdaq and qqqs. >> it's on pace to have the best performance in 2003. >> you act like you didn't have it. >> i have a 401(k). you want me to ask. where do you have europes, steve? in a boat, a couple of boats. >> yes, that's right the s&p, half a percent. that index is up just 24% this year. and, of course, you made some money in treasuries as well if you invested at the right time. take a look at treasury yields. there we go.

4.01% on the 30-year, 3.87 on the 10. 3.87 on the 5, and 4.29. i don't know. do you think 2024 is the year when we disinvert? that's a question we have to be watching. >> yeah, definitely, absolutely. >> do you think happens? >> why has it been inverted for so long is the question? >> as the fed does its thing, you would expect a disinversion yield curb. >> eventually. >> it may not happen too closely. paul simon said things happen really closely in macroeconomic and they happen much more quickly. >> that's why we keep you on your toes. there's a worry of a fresh round of attacks after attacks in the

red sea rattled the market. they're stepping up their military campaign including an exchange yesterday that saw a u.s. navy destroyer and f-18 fighter group shoot down 17 drones and missiles launched by ira iranian-backed houthi rebels. this is the latest sign the war between israel and hamas is spreading into a larger conflict. that war began on october 7th. while all this is happening, the biden administration is adding crude to the strategic petroleum reserve, the government pu purchasing 3 billion barrels bringing the buyback to 14 following last year's sales. if you were with us yesterday, we were talking about the slump in natural gas prices. check out home heating oil dipping more than 5% on forecasts of warmer weather for the east coast. i was also reading headlines about minnesota. people were walking around over

christmas without coats on. there is some blizzard activity. >> there's this el nino thing that says it's supposed to be relatively warmer through march. >> the interesting thing about home heating prices whether it comes from oil or natural gas or electricity is that this is one of the areas where you can make people feel poor because of what they're spending on winter heating. we've seen this before. it has a similar impact as summer gas prices when people want to drive and go on vacation. so what you may get is consumers feeling like they have more money in their pocket because they're not paying out thousand dollar bills every time the guy comes to fill up the tank at home to heat their home. so whether the weather lasts, whether this is just, you know, a freak late fall sort of warmer

period is to be seen. >> i think that's an important insight. it's the prices in front of me that shape your believes about what's going on in your life and in prices. whether or not they represent a substantial portion of your expenditures. you do go to the gas station every day or every week and you do fill up your tank. your other prielss are the same every month, but it's the prices right in front of you. >> there was a journal piece about misery index. you don't historically siee it. usually you have the misery index and inflation and it usually moves invertly with, you

know, consumer sentiment. this year things have gotten better, but people aren't feeling good and they attribute that to republicans not being happy with biden in the white house and effects after the pandemic. >> they're not happy, but they're still spending. >> they're not happy, but still spending, so does it matter? >> spending makes us feel better. >> i know a little bit about this. i wrote that story last week when we did our cbc all-america survey showing high holiday spending but low sentiment and i wrote that story for "the wall street journal" in 2002 when after 9/11, consumer sentiment number ts plunged, spending remained robust. people found themselves extremely depressed and buying automobiles. why? because prices had sunk and they had incentives from the government to go buy autos some of the connection between sentiment and consumption, i

think, is tenuous at best. i think if you asked economists, well at turning points it matters a lot, they can go up and down. the most important question when it comes to spending are incomes and the price you're spending. so what i've always said is don't say somebody won't spend until you know the price they're not going to spend at. if a car is x minus and 10% off, i may go buy that car no matter how depressed i am. >> it's retail therapy. >> exactly. >> we have corporate news now. we're leading with apple. the tech giant is appealing its ban of impockets of ultra-2 and series 9 smart watches after the white house declined a veto of federal agencies stopping the sale in the u.s. according to "the wall street journal," apple is asking the court to allow it to sell its watches once again while the

appeal is being considered. it adds if the ban remains in place, apple will suffer, quote, irreparable harm. and bloomberg reports apple's outgoing design chief is joining forces with p ale's famed former chief design officer jony ive and sam altman. tam will start at the design firm on an ai project focusing on devices that inlt a great the latest capabilities in ai tech. apple shares have been on a losing streak, but right now we're seeing apple shares are in the premarket still down a tenth of a percent. but look at year to date, up almost 50%. not chump change. overnight softbank said it would receive shares in t-mobile. this is part of the merger agreement between sprint and t-mobile.

and tesla is reportedly planning to launch an updated version of its popular model y from its plant in shanghai. it will feature significant interior and exterior changes and should reach mass production as soon as mid-2024. the report adds the shanghai plant will pause production for about a week in preparation for the changes. the plant will need another upgrade before peak production begins. >> is that what we drive here in the states? >> i i do think people drive it here, but i know it's very, very popular in china. so an upgrade. more news from the wonderful world of streaming. amazon prime video will start to show ads starting january 9th. if you want the ad-free tier,

you've got to pay. it will be an additional 2.99 cents a month to avoid ads. it will allow it to continue to in vest in compelling content. amazon shares right now mostly flat, up this year 83%. we talked a little bit yesterday about we're paying -- i don't know what we're paying but the price for prime keeps going up. mostly people may opt for prime for the free shipping, but you get the amazon prime on your device without the ads and already the free-v comes free. showing ads for shows we pay for -- >> i feel like this is a

curmudgeony thing so say. all of a sudden they start introducing ads and he says, what is this? welcome to life, sweetie. this is how you introduce consumerism early. >> i remember having a talk with a mall developer once. he said, let's see. they had this thing where you order it online and they send it in five days. then you have a thing and they send it in three days. then they have a thing where you order it online and pick it up at the store. sounds like they invented the mall. >> it's full circle. >> now it feels like with all these ads on streaming, why aren't they driving me back to my cable? >> the ads are shorter. they're usually 30 seconds, tar targeted. >> there's a convenience to cable. maybe i'm buying cable companies with all these ads going on. >> i'm very pro cable.

>> yeah, but -- >> we like cable here. >> what's the difference. $11.99, 9 -- do you have any idea what you're paying for all these? >> no, i do not. honestly, i've cut a few in the last year, but no. all right. we're going to continue this discussion. coming up, a sector investors need to watch coming into the new year. plus will the s&p tap in? quk x"ger ferguson. "sawbo coming right back. we have some ads coming up.

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welcome back to "squawk box." as 2023 comes to a close, what's one sector to keep in mind? dom chu with this year's sectornomics. >> interest rates are going to play a big part of that story. as we know, there's a lot of focus on whether the fid will cut rates as early as sometime in march. with the s&p outperforming in 2023 to the tune of perhaps around 22%, 25% for the overall s&p 500, what could be that one driving force? it's going to be financials. we asked a couple of our cnbc contributors why from a fundamental basis. tom lee is looking at financials for one key reason and that's

because of the rate story. interest rates are falling and mortgage rates will fall and that will inprove quality for the banks. they should help regional bank and financials. they're understood owned by hedge funds right now. they're like the energy trade of 2021. we also asked cnbc contributor katie stockton from a technical perspective what she likes. lo and be hold, she said financials as well. it has a base breakout contributess to it. the performance since the october lows, we have seen again outperformance in the s&p and sector overall for financials, but the sector spdr etf, up

roughly 19% higher from those low levels versus a roughly 16% gain for the broader s&p 500 overall. so we'll see whether or not, le leslie, we see any of that continuing performance heading into 2024. >> really interesting stuff. i think financials are also the least sorted sector. definitely one to watch in 2024. i know i for sure will be watching it. thank you, dom. joining us now for more on the markets, zachary, we're half a percentage point from another record in the s&p 500. do you think we get there before the end of the year? >> i think we do. we have positive momentum, seasonality. i think we'll be hitting all-time highs if not very early in january.

>> there's -- you know, some would say the recent rally is leaving the market vulnerable to disappointment maybe not in this kind of setup but at the end of the year with little news, little in the way of economic data coming. but you've got earnings to look forward to in the next few weeks or so. do you think it's priced to perfection at these levels? >> i think it's good you brought up earnings. i think that's a cast list you're looking for in coming weeks. a lot has been looking at that. i think what that kind of misses is those companies have really outearned the rest of the market. equal weight s&p or small caps lag behind really substantially in terms of earnings power. we've seen some breath increase over the last few weeks. it's been healthy, especially for the areas of the market that haven't participated like financials you were just talking about, but to see that in a more

durable way, we need earnings to validate that. we have windows where you don't have a lot of new information and i think that's kind of dominating markets. but come the end of january, i think we're going to be doing a lot of wok to look at what the projections for 2024 might look like. >> i see you think stocks next year won't beat 2023 gains but you think they'll do better than cash and 3w07bds. so how would you be allocating your portfolio given that thee sus? >> that's a great point. i think the last 18 months has been a shock in terms of what rates can do. you see a lot of people move to cash, t-bills, money market bills and the like and i think 2024 is going to be that time of year of getting invested. that's the way these things tend

to go. i think it's going to be a good year for the stockmarket. we don't see a recession coming. we see the fed kind of delivering cuts in q1 of this year and continuing to do that throughout the rest of the year. we've got the head winlwind, thl wipd. all of those things tell us you do want to be exposed to stocks here in a material way. and then on the fixed income side, 5.5% is rate, but what about the six-plus cuts in the curve next year? it's going to look a little bit different. we do think extending duration and fixed income, going from cash to fixed income is a thing that investors are going to be doing really all of 2024. >> hey, zach, you have like a double reverse psychology program where you say everybody

is going away from the big seven into the broader index, but you're going to stick with the big seven. am i reading the notes right? >> not exactly. we look for opportunities, you know, over the one to three-month time horizon and we see that in the broadening out of the market. we've been adding small caps in our portfolios, the ones that make the most sense since mid-november and we do think that's a window that's going to continue to work for that part of the market as we catch up. we materially underperform. these things can take a pause and that's kind of a healthy development. i do think as we look forward to next year, we still do think that kind of technology at the very top of the market is driving innovation in ai,

adoption across the economy. it's going be where you want to be. the last thing i would say is the history of these kind of -- you call them the mac 7 or fanng, they'll change. i think we'll see that within next year. that's something we're looking out for. >> maybe you won't be saying magnificent seven. maybe it's something else. coming up, the next round is on the house. the tax on whiskey gets delayed during the ongoingar tiff battle between the u.s. and europe. "squawk box" will be right back. >> announcer: sector nomices is sponsored by sector spdr effs.

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whiskey distillers are toasting the new year after the tariff tax gets punted. emily wilkins joins us. good morning. >> it's easier for distill letters to get into the christmas spirit after there was an agreement to suspend the tariff. it's the result of a larger dispute on steel and aluminum tariffs put in place under the trump administration. now the discitiesers in kentucky, virginia, and beyond can breathe easy,s at least until the end of march 2025. they have been negotiating the tariffs for two years. the representative said the goal

is to forge a forward-looking arrangement that will allow us to join forces economically to incentivize fair and clean production and trade in the steel and aluminum sectors. republican kentucky congressman andy barr who pushed for the extension of the halting of the tariffs tells me it's been critical in his home state 69. after the tariffs were initially lifted in 2021, barr said there was a 21% increase in u.s. sk exports. >> europe really matters. we're still trying to crack the code in asia and other parts of the world, but europe really understands age distilled spirits, and so this is the space where we need a level plap playing field to really continue to grow this industry. >> u.s. whiskey distillers aren't the only ones.

europeans looking to get a harley-davidson motorcycle next year will not have to face tariffs either. it will be a happy couple of years. >> i went to kentucky when the tariffs were first introduced, and they were up in arms, but the bourbon distillers that i spoke with felt confident that the quality of their product would be the selling point as long as the price point could be overcome. the fact that it's punted, d that mean they're optimistic there will be no negative effect for them? >> if you want to read the tea leaves, the fact that they both punted on these retaliatory tariffs is a pretty good sign they're making progress and could come to an agreement soon. down in kentucky, tennessee, and other places, they did see a

drop in exports during the times that the tariffs were in place. they were retaliatory tariffs, but as it's been lifted again, they've seen it bounce back. and as you heard from congressman barr, they've found a nearby in europe who appreciate it. >> bring out the old pappy. emily wilkins, thank you. coming up, vice chair roger ferguson will tell us where he's seeing the new year and how concerned he is about the nation's looming debt. and as we head to break, a look at yesterday's s&p 500 winners and losers. >> announcer: executive edge is sponsored by at&t business.

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good morning. let's take a look at the futures at this hour.

currently pretty flat across the board, dow indicated to open up about 17 points. nasdaq indicated to open up about 12. s&p, we're on a record watch. half a parnl point from those levels. tr treasury complex, yields 4.3% currently. looking at the fed rate path, let's welcome in vice chair roger ferguson, now a cnbc contributor. thanks for joining us, roger. good morning. >> good morning. nice to be here. >> i was okay not dismissing but leaning against the market, pricing for deep cuts next year beginning in march, but along comes goldman sachs who i consider to be more considered about their forecast and maybe not quite so ready to get swept

up into the meaning of it all. here's what they wrote yesterday. we expect 3e consecutive 25 basis points in march, may, and june followed by one cut per quarter till the fed fund rate reaches 3.25 to 3.5% in 2025 q3. if the unflappable ferguson gets onboard, i'm ready to bet on this. do you think goldman is swept up in the mania or is this a reasonable considered position here? >> i think it's a little bit skbenlt to the market excitement. yes, inflation has come down quite nicely, looks as though the 2% is well within range. that's very, very good news for those expecting a series of cuts. having said that, the economy itself is still strong and is withstanding, you know, some of these interest rates as they stand today. we saw what looks like a very

strong holiday selling season. the numbers are coming along relatively strongly. the redline r is looking at 2.3 roughly right now and we have a loosening of the financial conditions. it might create in a sense to the fed let's go more slowly. we don't need to add more fuel to the fire by having six rate cuts of the type talked about. it's a close call, i'll admit that. i'm still of the view the fed has a preference, not a strong preference, but a preference toward initiating cuts toward the second handlf of the year. i'm on the side of june more likely unless something surprising occurs. >> you've been there in office

when the fed has been cutting interest rates. what does it take for you to be comfortable that this is the right call? >> i think it's the first thing you said. it's down at the 2% target. you'd say, oh, it's slightly above that. maybe a start at 3 if you look at 12 months, but if you annualize the six-month and three-month numbers, you might be more comfortable. they want to be highly confident of that. the last thing they want is to see this pick up again. the last thing to drive it is the financial conditions. obviously the financial markets are ahead a little bit. they've attempted to push back verbally. there's a little bit of a concern that if you start to validate the financial conditions get easier and easier more quickly, and that's a risk as well. at this stage, they're within a hair's breath of getting that much desired soft landing, and i

think they think they have room to be maybe a little more cautious than the markets do right now. >> how much do you think you're haunted by this flurry of the '70s. you look at the inflation in the '70s that went up. the fed came back down and inflation came down and it went right back up again. how much is that a concern that when you basically turn your attention away from it, it could spark back up? >> look, i think it was a concern at the beginning of the cycle. at the same time they said it's different, the supply chain, et cetera. still it doesn't go away. i think there's always a concern. no chairman wants to be the arthur burns. i think that continues to weigh a bit, which may be a another

thing that slows them down just a little bit. so i think you've got to recognize that these are very serious policy makers. at the same time, you know, they're human beings, these are the kinds of mistakes they want to avoid. >> roger, thank you for joining us today. we really appreciate your insight. >> great, thank you. coming up, the countdown to shutdown. nothing is happening on capitol hill as congress is in recess. will there be enough time? straight ahead. you can get the best of "squawk box" on your daily podcast. follow on your favorite app and listen any time. we'lbeig bk.l rhtac

we're days away from another budget showdown. lawmakers will have just nine days to avoid a shutdown. joining us now, politico's budget and appropriations order, kaitlin emma. it's good to see you. here's the thing, it seems like the house speaker is stuck between a rock and a hard place, and right now it's the hardliners trying to get that boulder moving. >> right. this is really the same fight we've seen all year over government funding just dragging its into 2024.

you know, basically congress left for the holidays without a deal on an overall government funding framework so that would be the parameters of a deal that would allow for federal agencies to get updated budgets for the current fiscal year. right now we're operating under a continuing resolution, a stopgap that expends gap funding. without a deal in place it's hard to right the rest of the spending bills that could point to a funding government deal and lawmakers needed this weeks ago. so we're heading into 2024 with two government shutdown deadlines in january and february and lawmakers are no closer to nailing down the basics. >> what's the extent for deal making? >> keeping the government open is a huge priority at this

point. hard-liners know that this is n not a winning measure. it's almost never a winning message when you're the party that's blamed for it, particularly heading into an election year, you know. basically congress should be able to keep the lights on and stay functional. but time and time again we see the same fight where two sides are warring over fighting. speaker mccarthy was being pulled in one direction by his right flank and pulled in another direction by moderates. >> okay. so what are the sticking points? what areas do they absolutely need to find compromise on to keep the lights on? >> it's interesting. the two-year debt deal that president biden and former

speaker negotiated should have done the heavy lifting. that should have set the parameters for the deal, made thing things easy. you've had republicans, the freedom caucus trying to walk back that deal pretty much for the better part of this entire year, so for the moment, both sides still have to agree to an overall number for military funding and overall number for nondefense programs, whether or not to provide any emergency fund, whether or not to include certain policy provisions, how t to package spending bills? they are details that could otherwise be taken care of by the deal they struck earlier this year, but nothing has been easy for this congress. >> caitlyn, do you think one of the reasons is there's an election coming up?

is that seen as a potential reason for lawmakers to really dig their heels in as oh goes posed to trying to compromise or come to some sort of agreement to keep the government open? >> i think it's harder in election years. congress is often famous for operating under continuing resolutions. i think that's more so the case when you're approaching something consequential as a presidential election. the last government funding package that passed was for fiscal 2023, and that passed last december. so just about a year ago, and a lot of republicans at that point were saying, yeah, i'm going to support this because i think it's the last time we might be legitimately funding the government for a really long time. everybody knew that coming into this year with the republican-controlled house that things were going to get so much harder and it's really proven true and it just remains to be seen what happens.

>> do the democrats think there's nene gauche yating to be done? >> no. that's the thing. they have this bipartisan debt deal that was negotiating this year and it wasn't a good outcome for democrats. it's way lower than they would like it to be. there was like a side agreement to the debt package that would provide an additional nearly $70 billion for nondefense programs, so think health, education, labor programs. that wasn't written in the legislative text. it's something that is like routine. you know, this is a normal thing that congress does where there are changes in mandatory buckets and maneuvers to have a little bit of wiggle room set by the budget deal. >> so really you're look at a situation where does a potential shutdown really incentivize them

to go back to the table on one side and come to the take table on the other. thank you for sharing some of your reporting with "politico" with us. coming up, the fed's sig tall the potential rate cuts in the new year and the boost in housing and why 2024 will mark an inflection point for real estate investing. "squawk box" is coming right back. what is cirkul? cirkul is the fuel you need to take flight. cirkul is the energy that gets you to the next level. cirkul is what you hope for when life tosses lemons your

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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. the federal reserve's pivot away from rate hikes is likely good news for u.s.-listed reits. joining us for more on the real estate landscape heading into the new year, rich hill, head of real estate strategy and research at cohen and spears. rich, you say after a challenging two years, 2024 will

mark an inflection point in real estate investing. is that purely just based on the direction of rates? >> sure, good morning. nice to see you. thanks for having me on. look, it has been a tough two years for commercial real estate and specifically listed reits. they're down around 17% from their peaks at the end of 2021. prices are down around 22% or so. but believe it or not, they were down even more in october, they were down around 35% or so. but what we have seen over the past almost two months now is a big rebound in listed reits. they're up more than 25% believe it or not. actually november was the fifth best month ever and the strength continued in december with returns around 9% or so. so you're right that some of this has to do with decline in interest rates. we have seen a big pivot where interest rates, both nominal and real rates, have declined. and we do think the market is pricing in the 1% real rate environment or so. but that's not the only reason

that listed reits are doing a lot better. number one, credit markets feel a lot better. we have seen a significant rally in tightening and credit spreads, both investment grade corporate and real estate debt spreads and growth is holding up really well compared to historical averages. growth is around 5% or so right now. compared to the historical average around 2.5%, 3%, and recessionary environments are weaker than that. certainly interest rates are helping that, but credit spreads are also helping that, we think the worst is behind us on the credit side and growth is holding up pretty well. >> fundamentally, office has gotten a lot of attention as you see some pretty shocking headline numbers of certain office properties going for, say, 50% of the value that the buyers paid just a few years ago. and people will point to supply and demand issues here, there is just an oversupply of office out there, and not too many companies that need that amount of space, especially as they

kind of pivot to more hybrid or work from home models or just rethink their work spaces in general, looking for newer and bigger and open environments. so, how do you reconcile that? i know offices, you know, just a fraction of the overall reit market, but it is getting outsized attention. >> the outsized attention is warranted. to maybe level set, offices only around 3% of listed reit exposure. it is relative demand. as a percentage of the overall real estate market, it is higher, north of 20% or so. i want to be clear, those headlines are very real. we have seen listed reit exposure in office market down more than 50% from peak troth. as we think about the office market and maybe as a microcosm for the overall commercial real estate market, we think

valuations are only 50% of the way through their declines. so what we have seen happen is the private market reset to take advantage of the higher interest rate environment, but the next leg lower after that we'll see happen in 2024 is really more distress working its way through the system. so you're right, you're going to see more headlines like this with valuations being down more than 50%. i think you're probably going to see headlines even more severe than that. >> does the distress have the potential to have kind of a contagion effect? because i was just reading a note yesterday and they highlighted a st. louis fed paper showing a 10% drop in value of cre would result in 55% of banks exhausting their capital buffers. so are you concerned that, you know, if you say they're only 50% through their declines, have another 50% of the way down to kind of mark -- or match what happened in the publicly listed reit market, are you concerned that that could then again spread to other areas of the

economy? >> great question to be asking and i think a really fair question. rewind back to march of 2023 when we saw some bank failures. i think there were some real significant concern that the commercial real estate lending markets would have a swift collapse. keep in mind that commercial real estate isn't inherently a levered asset class. i think the markets are beginning to recognize the headwinds that we're facing right now are going to be here for a longer period of time. so, it is not going to be a swift time like in march. it is going to take a long time to play out. how important commercial real estate banks are or commercial banks are to the commercial real estate sector. to be very clear, commercial banks are important, but we see around 30% funding for the commercial real estate sector. small banks, 70% of funding. that's a little bit of a misconception. it will have implications but we

don't think it is like the snl prices where commercial led the broader economy. >> rich, thank you for your insights. appreciate it. >> thank you for having me. all right, a big hour coming up, we turn our attention to the residential real estate market. will homes get more affordable in 2024 after a year of rising prices and higher mortgage rates and not enough inventory? plus, what will the new year hold for crypto? b bitcoin up more than 150%. is all the good news already priced in? should contessa finally sell? we'll get into that discussion in the next hour on "squawk box." the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

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that can provide critical insight. manage your climate risk with ice. good morning. the market rally rolls on. you have just three trading days to make the whole year right. futures are once again in the green. the s&p and nasdaq are once again coming off 52-week highs. bitcoin catching a bid this morning. part of a rally across the crypto complex. we'll talk about what's ahead

for digital assets in 2024. and can you afford a home next year? after a bruising 2023, rates are finally coming down. could come down a bit more. what about actually finding a home that is available? we'll take -- we're going to talk housing and a lot more as the second hour of "squawk box" begins right now. good morning and welcome back to "squawk box" here on cnbc. live from the nasdaq market site in times square, i'm leslie picker with steve liesman and contessa brewer. joe, becky and andrew are off today. here are the futures at this hour. dow indicated to open up 20 points higher. nasdaq up about 15%. thin volume this holiday week. as we said in the open, the s&p 500 and the nasdaq both hit 52-week highs yesterday. and the nasdaq now on pace for

its best year in two decades since 2003. treasuries looking a little red on that complex. you got the ten-year around 3.9 -- >> that two-year is interesting, leslie. not quite sure why, but it is an interesting move that we're going to be following. >> coming off some weakness in corresponding yields in europe as well as asia today. >> right, right, right. >> could be a spillover on that effect. oil today also in the red. we continue to monitor the geopolitical tensions in the middle east. crude down about .7%. brent down about .6%. and crypto, yes, we're talking about crypto this morning. bitcoin up about 2% today as we continue to watch the potential approval of that spot bitcoin etf. >> and shares of softbank moving higher in japan overnight. the tech conglomerate would receive shares of t-mobile worth $7.6 billion at no additional

cost. it is part of the merger agreement between sprint and t-mobile. the transaction bolsters softbank's stake in t-mobile to 7.64% from 3.75%. there you're seeing the moves for softbank up more than 4%. t-mobile in the early trade, just a tenth of a percent. today's gains bring that year to date performance to a little more than 12%. it lags well behind the benchmark nikkei 225 index for the year. >> among today's top business stories, long time apple designer joni ive and sam altman, they're tapping -- >> there is a window washer. we're going to talk about sam altman and what he's doing, but the window washer is going to pick this moment to be outside and -- has been behind leslie, behind steve, i can't wait -- >> he's like everybody else, contessa. >> no, no, you got to work hard for your money. >> he has three days to make it

right. >> okay, anyway. >> do you ever wonder -- do you ever wonder if the stock market is like the final race of a racing card when you go horse racing? everybody lost money and on the ninth race they all bet long shots? you think that's what's going on? i got to try to make the year -- i got this story to read here. guys, go back to the top of this and we'll read the whole thing again. so, this is long time apple designer johnny ive and sam altman, they're work on a.i. hardware, acording to bloomberg. tan will join ive's design firm as it looks on the looks and capabilities of new devices while altman will focus on software. amazon prime video ramping up advertising like many other streaming giants. this is a scandal of the morning, i want you to know. a letter sent to customers says starting january 29th, prime video movies and tv shows will

include limited ads unless users opt to pay another $2.99 per month. did i raise my voice? >> sounds outrageous. >> i'm trying to express my outrage and your outrage. >> if that's the scandal of the morning, we're doing okay. >> no, no, no! amazon says the ads will allow it to continue investing in content. what was the other money we gave them for? that's what i want to know. it also says its goal is to have what it calls meaningfully fewer ads than linear tv and other streaming. no, it is a goal. doesn't say they're going to do it. final story here, the u.s. finalizing contracts to buy 3 million barrels of oil. this is smart. to help refill the country's strategic petroleum reserve. the department of energy says it bought the oil at an average price of a little more than $77 a barrel, that's below last year's average of $95 a barrel. the biden administration released millions of barrels of

2022 to help control prices after russia invaded ukraine, including one sale of 180 million barrels. u.s. repurchased about 14 million barrels of oil. i don't know -- i don't remember how -- we have a guest coming up, we'll ask how big the spr is. i don't know when they sell a contract, they should buy a future. that's what they should do. they should sell forward into the one-year forward market. >> we have been talking a little bit about the price of oil right now. there are some predictions we're going to see that move higher, just because historically that's what happens. but also because of what we have seen in the middle east and with the red sea problems, we have not seen that yet. but interestingly insurance on those shipping containers has skyrocketed between three times and ten times higher because it is such a dangerous zone right now. if you go around -- >> that was going to be my question, if you go around, is

it still as expensive? >> it adds -- >> to the mileage? >> like 3,000 miles. we read earlier, and leslie read this right, oil is down .7%, but it is up about 3 to 5 bucks over the last several dies. i don't know if it incorporated all the additional insurance in, the added risk and what else. we talked about this yesterday, got a lot of production here, we're sending some abroad from here, that is, i think, attenuating the kind of volatility and upside that you might have had given there is shooting going on in the red sea. >> there is worry, there is concern that it could spread to become a wider either proxy war or it could expand to other areas in the region. there are a lot of headlines to that effect this morning about concernsthat, you know, it won't be contained as it seems to have been largely since october 7th. >> let's get back to the broader markets now and take a deeper

look at where things stand. a few trading sessions left in the year. joining us for that is k ken kensell, a very active lender in 2023. you think that this is a golden age for private credit. what do investors in this space need to know? >> i think we have seen a tremendous amount of growth in the private credit space. certainly over the last two or three years. i think that it is increasingly individual investors, their advisers are looking at the traditional 60/40 model and saying there should be room for long-term investments, alternatives, private credit, and that has fueled a tremendous amount of growth in the industry. >> even for retail investors? >> even for retail investors. >> there is a democratization of private credit you think under way? >> i think there is. it is interesting, if you look back over the last ten years, i would say that the theme has

been the institutionalization of private credit, large scale pension funds, asset managers, sovereign wealth funds, adopting private credit, allocating for the space, and i think the next ten years are going to be about the democratization of private credit, individual investors, huge market opportunity. >> meanwhile, credit is very tight right now. what are you seeing in terms of the quality of the borrowers and the defaults coming down. >> sure. so, interestingly the -- a couple of things i say today in private credit, one is the quality of the companies we're seeing has been quite good. if you think about it, you're not typically going to see the more challenged businesses raising capital today. they're going to be struggling to find financing and capital, but higher quality businesses, businesses that are growing, companies that are looking for capital to expand operations in the u.s. and internationally, they are seeing tremendous growth and opportunity and we're seeing tremendous deals. the other thing i would say is

with the tremendous expansion of private credit, larger companies as well are accessing the private credit markets. it is a good time to be a direct lender. >> isn't there a private credit etf? i'm looking that up. >> is there a private -- i don't -- >> i think is. >> there are certainly bdcs that are traded. >> aries. >> right, and publicly traded bdcs. there are some funds raised, primarily closed end funds that track private credit. the cliff water index, they have a private credit index fund that invests in private credit managers. >> i think that's the one i'm thinking of. >> yeah. >> one question i had, the next iteration of private credit is democratization. doesn't that eat at the heart of the entire business model, to say private credit has these longer duration investors, therefore they're able to make loans that the regulated banking system can't because their funding source is depositors. if you introduce more retail as a funding source, do you bring

in more regulation and therefore kind of eat into the overall advantages that this business model has had? >> so, today, private credit is still probably 70% to 80% institutional overall. but i think when you look at the growth trajectory and look at the amount of capital that is sitting in the retail space, that is generally underallocated to alternatives and certainly to private credit, $180 trillion generally underallocated, if you talk to most managers they're allocated 5% to 10% to alternatives. there is a tremendous amount of growth there. i think the question becomes what is the underlying structure for the vehicle. if the structure is right, then i think it can accommodate growth and can accommodate the illiquid nature of private credit. that's where i think education is important. investors need to understand that when they invest in private credit, it is generally not going to be as liquid as a stock or a bond. education is a big part of that. >> i know churchill typically

focuses on noncyclical industries. going into 2024, what industries do you like? where do you see opportunity? >> we like software a lot. we have for a long time now. we like business services. particularly services that are really embedded in, you know, a company's operation, so long-term relationships, business services. we like healthcare. generally stay way from healthcare reimbursement risk. so, particularly prices increasing overall inflation, it has been difficult for healthcare providers to pass those costs on. so, generally away from reimbursement, but healthcare services we like a lot too. >> thank you for coming into the studio here. >> where is the next gig, ken? >> the next gig, we're playing in stanford. >> where? >> we got -- we have two gigs coming up. >> ken is in a band called suburban chaos and the musical -- the musical conversation that happens before the breaks here leave leslie and

i thinking we need to start our own band. >> giving away our secrets. >> girls of tv. >> well, women. women. >> the old greenwich social club coming up in february. so, look forward -- i understand your band is playing as well coming up. >> yes, we are. yes, we are. >> look forward to seeing you. >> all right. >> fantastic. >> thank you, guys. >> thank you. >> good seeing you guys. coming up, what is next for crypto in 2024 after a historic run-up? we'll talk about whether gains can be sustained and how much an etf approval by the ftc could supercharge returns. plus, housing affordability this year and next, we'll trace where we have been and what could be ahead when the calendar flips to january. stay tuned. yoreatin"sawbo ou' wchg quk x"n cnbc.

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crypto has had a big year. bitcoin is up over 150%. much of that concentrated in this past fall's performance, a big q4. the rally is largely on investor hopes of s.e.c. approvals for spot bitcoin etfs. joining with us more on crypto and whether the good news is already priced in, perry ann boring, founder and ceo of chamber of digital commerce. thank you for being here. let's start there, do you think that the good news is already priced in? there are concerns out there that if and when the spot bitcoin etf is officially

approved, it would be a fell on the news event. you t do you agree with that? >> i don't. there is a lot of pent-up demand for access to bitcoin. you have to understand that the government has been putting its thumb on the scale of innovation and preventing publicly listed bitcoin products from coming to market. now that a spot bitcoin etf will be here soon, it is not and if event, it is a when event, there is a lot of people who want exposure who will now have access to it. when you add a small amount of bitcoin to a portfolio, it increases the sharp ratio. and that is why there is so much interest in this asset class. i really like what michael sailor and natalie brunell said about bitcoin earlier this week, bitcoin empowerment technology, bitcoin is going to empower

financial advisers to allocate again because it increases the sharp ratio. and i think a case could even be made that if you're a fiduciary, you have a responsibility of adding bitcoin to a portfolio because of how it performs. >> why is it invariably increase the sharp ratio, which is a way that institutional investors calculate risk adjusted returns, including some sort of hedging mechanism, maybe through a spot etf or otherwise to ensure that those returns are, in fact, adjusted according to their risk profile. >> well, you add a small amount of bitcoin to an investment portfolio, the risk goes down as well as the volatility goes down. and that's why the sharp ratio goes up. but what is really important about a spot bitcoin etf is that it allows financial advisers to be able to allocate their client's portfolios to this

asset class. prior to having a spot bitcoin etf, which is pending, it is imminent, financial advisers couldn't really help their clients navigate this new asset class. and investors would have to leave the financial advisory and go navigate this ecosystem on their own. this empowers the financial advisers to service their clients directly on this new asset class of bitcoin. >> okay. i think we don't know what the future of bitcoin trading looks like in terms it going up or down. but in terms of the desire of institutions to buy bitcoin, what are you hearing in terms of just that marginal demand that is out there? do you have any numbers or figures in terms of just the people who haven't been able to get exposure to this asset class that may soon want to? >> yeah, we use valuation models to try to understand what is the value of bitcoin today. we all know what the price is.

it is what it is trading for on exchanges, which operate 24/7. but the real question that we need to understand, investors need to understand is what is the value? we use four different valuation models. today it has the price of bitcoin currently valued between 100,000 and $210,000 per bitcoin. we also apply an s curve analysis to look at the long-term adoption of bitcoin, currently about 40% of u.s. households have already allocated and own some form of cryptocurrency today. we are on track for 90% adoption by 2029. once we hit that 90% adoption, prices could go as high as $1 million a coin because, again, bitcoin has that limited supply, which is a key feature of this technology. >> so there is a lot of ifs there. i got to ask, if that is the

case, what happens when governments introduce their own digital currency? >> well, i mean, we have already seen central bank digital currencies be introduced around the world, most notably china has been the global leader in bringing the digital new line to market. we believe that this is surveillance technology that will be used to control an entire population. they can be incredibly dangerous. i do not believe that bitcoin is necessarily a direct competitor to cbdcs. i think that bitcoin can co-exist with the money whether in the form of a central bank digital currency or the type of technology central banks are using today. the legacy technology. bitcoin is largely being used as a store value. that's a different use case and a different application than currency.

so i don't think we need to pen bitcoin up against as an adversary to the u.s. dollar for years, for 14 years, they co-existed. and also helping extend the use of the u.s. dollar internationally. >> well, we're currently comparing it to the u.s. dollar on the screen there. but it is showing some decent gains of 64% over the last three months. perianne, thank you for being here. >> good to be here. coming up, top stocks making moves. and the futures right now looking flattish, higher, but flattish. we'll be right back. >> announcer: time now for today's aflac trivia question. how many holiday cards do e sw wn s send each year? thanerhe"squawk box" returns. o do you think taps out first? i think the duck goes the distance! alright, you about ready to get out? what's this? a hospital bill?! for a thousand bucks?! gaaaap!

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movers. dom, it is 50 degrees. are you looking at the weather forecast like you can golf now? >> i think the weather forecast does allow me to golf, but i'm pretty sure my family, my wife, are not going to look kindly upon me heading to the golf course. >> i can help you get around that. give me a call. >> please, i need your veteran advice, sage advice on this front. >> don't argue, dom. >> no, i'm going to -- believe me, i'll send you an email after this and ask you about that advice. as steve pointed out, we see some stocks on the move this morning. we'll start with the video gaming companies like tencent holdings which gained in hong kong, trading 4%. markets reopened from the christmas holiday on monday and tuesday. so wednesday was kind of the first day. u.s. listed shares of netease and bilibili are lower in the premarket trade so far. they posed some big gains yesterday. big driver of the moves comes by regulators in china who say they will carefully study all the

concerns of stakeholders with regard to the draft rules they proposed late last week that, remember, were aimed at curbing excessive online gaming and spending on the platforms. those comments were seen as a possible maybe softening of the stance from regulators in china. that's some of the maybe upside and bullish tone to some of the names. they have not gotten back what they lost because of the regulatory comments last week. >> our side of the pacific, shares of apple down fractionally after a small loss yesterday. some near term negativity c centered around apple pulling sales of new high end watch models, a patent dispute over technology use and track certain medical metrics. apple will appeal the ban on the watches being put on it by the u.s. international trade commission after the biden administration did not intervene to overturn that ruling. the appeal will go through the u.s. court of appeals for the federal circuit. apple shares 48% gained this year, down .1% now. laptopmakers will get attention today like hp inc.,

dell, with distributors like cdw. analysts have issued some commentary they think pc growth will be in the 8% range next year with customers refreshing their hardware from the covid era pandemic purchases as new products get integrated with a.i. technology and get released. so watch some of those pc-related names. we'll end on shares of tesla, up fractionally after seeing a 1.5% gain yesterday. analysts pulled by lseg say the electric vehicle giant likely deli delivered 1.82 million vehicles range, that's up 37% from 2022 levels, but still possibly shy of the 2 million vehicle target that elon musk laid out at the beginning of the year. tesla shares up about one-third of 1%. back over to you. >> dom, thank you so much. coming up, will it be easier or more difficult to afford a home next year? we'll speak with the chief economist from the national aysociation of realtors. st tuned. you're watching "squawk box" on cnbc.

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mortgage rates have dropped dramatically in the last few weeks after rise for much of the year. will that be enough to kick start the housing market in 2024? diana olick joins us now with

more. the woman with the answers. >> good morning, contessa. 2023 may have been the least affordable housing market in history. record high and rising home prices combined with rising mortgage rates which don't usually go together made that happen. through october, at least, the typical 2023 home buyer needed to earn an annual income of at least $110,000 if they wanted to spend no more than 30% of their earnings on monthly housing payments for the median-priced home. that's according to red fin. the median household income is about $70,000. mortgage rates started this year at about 6.5% and rose steadily over 8%, jumping there in october. they have since fallen back sharply and will start next year about where they did this year. so, let's compare a 6% mortgage rate to an 8% mortgage rate. so, if you're buying a $400,000 home with 20% down on a 30-year

fixed mortgage at 6%, your monthly payment is $1,918. that's without insurance or property taxes. at 8%, that jumps to $2,348. a difference of $430 a month or $5100 a year. lower rates help on the monthly payment, but home prices continue to rise and the gains are getting bigger because the supply of homes for sale is just so low. as of october, prices were up 4.8% year over year, according to s&p case-shiller. that's the largest annual gain of this year. sellers, however, were a little bit more active this fall, but the supply of homes for sale is still about 38% below prepandemic levels. so, will sellers get off the fence and list this spring if it would still mean likely trading to a higher rate but not an 8% rate? guys, we will find out. >> okay, but if the supply is somewhat 40% lower, is there any

indication that is -- is that going to crack? >> well, only if sellers put their homes on the market and if home builders ramp up the building. they have a little bit. we got a big jump in housing starts in the last month in november. but builders are still not building at the levels that they need to be. so, we need builders to ramp up more and we need sellers really to just get off the fence and decide to sell, even if it means trading up to a higher rate. >> i'm glad you're back. you left me all alone last week, all right? housing starts are -- >> sorry, i went on vacation. >> come on! housing sales come out, inventory jumps up to 9.2 months from 7.9. i have no idea how excited to be about that. so would you please help me out here. >> the inventory jumped in the new home market, and the reason it jumped so much is because new homes are expensive, right? so, you're looking at november numbers, mortgage rates were higher, mortgage rates have come

down a bit, in the 7% range in november, so those were november numbers. >> okay. >> now you got it more in the 6.5, maybe 6%, maybe the builders get a bump, people come in the door in january, remember, november, december, not big home buying months. that's why you have the big jump in new home inventory. but it is the existing side, the cheaper homes that people can afford that we need to get on the market. >> next time you tell me when you're going, you leave a cell number and don't leave me hanging on the new home sales. >> sorry. >> thanks, diane. >> not sorry. >> all right. for more on the housing market, i don't know how much more you can get than diana olick for all that time there, we're joined by lawrence yu, chief economist, lawrence, thank you for joining us. >> good morning. >> so here is the thing i'm wondering about. rates are coming down, we still need inside the cpi the housing component to come down to

justify the fed cutting rates. is housing like this tinder box ready to explode when you get down from an 8% mortgage down to, say, i mean, god willing, a 5% mortgage? >> well, you know, certainly the buyers always respond to lower interest rates. the prices which earlier in the year had been actually declining somewhat, especially in the west region, but prices are beginning to accelerate upwards. home prices are not part of the consumer price index. it is considered like stock prices, gold prices, it is an asset, it is not part of the consumer price index. what goes into it is the rental component and owners equivalent rent, hypothetical what the owner would pay in rent, and that has been decelerating because we are essentially at a 50-year high in terms of apartment construction. so, many empty units will be reaching the market and i think that will begin to calm down the

inflation numbers. >> okay. what about the housing market? is there a level that -- or is it just a relative level that people are going to see, hey, it was 8, now it is 6, it's go time? >> well, you know, we have a new reference point. people saw the 8%, so they're comparing from that. so 6%, that's much more attractive, 6% was not attractive when people were comparing 4% rate, so what we needed for the housing market is really about the supply situation. so, as long as we have more supply, it will moderate home price growth and that will be good for america. people's incomes are rising about 4%. we need home prices not to exceed that 4% level. >> how many people, i don't know if you have a precise estimate of this, how many americans are stuck in their home because of this mortgage situation right

now? >> you know, people are loving their 3%, 4%, which they purchased a few years ago or refinanced into -- if one looks at the demographic dynamics over the past two years, when the inventory levels were low, we have to remember there are over 7 million newborn babies, 7 million americans who have turned 65, so, there are a lot of people who need to trade up or trade own, but they have not done so. but i think as people begin to realize, you know, 6% mortgage rate is not that bad. it is not 3% or 4%, but i need to make the move. i need that larger house or i need to trade down so i think we will begin to see more supply coming on to the market next year. >> but, lawrence, isn't it the case we're seeing supply in places where people don't want to live, either because it is too cold or because there is no jobs? if you drive through central new york and some of these towns, you can see house after house

after house that is either up for sale or looks like it is about ready to be auctioned off by the bank for whatever pennies that they can recoup there. and then, you know, the opposite is true, in florida where we have seen such a migration, and texas, and these low tax, lower cost of living states. >> you are absolutely right. there is so much variation across the country. the upper end market, there is plenty of inventory there. the downtown, people are not returning to downtown obviously, they work from home phenomenon is leading to the suburb, that strengthened the suburb over the downtown areas. what you mentioned, people are migrating from, say, pennsylvania, new york, illinois, into the southern states of texas, florida, carolinas. and people going into the rocky mountain states of say, arizona, nevada, colorado, so we are seeing some different dynamics across the country. but broadly speaking, the number of homes on the market as people are walking down the street, looking around the neighborhood

is about half of what it was compared to pre-covid 2019. >> wrap item f up for us, therea couple right now with a small baby in a small brooklyn baby, maybe another baby on the way, is next year going to be a better year for them to buy a house? >> well, there will be more choices to select. builders are building more. there will be more pent-up sellers beginning to put their homes on the market, mortgage rates will be lower, so, you know, those are good -- better conditions certainly than what we saw here in 2023. >> and let us end on a note of hope. thank you. >> thank you. >> coming up, our virtual power plans the energy resources of the future. we'll talk about the technology that can lighten a load on the nation's grid and the companies emerging as power ays plerin the sector. stay tuned. "squawk box" will be right back. u to try knix. makers of the world's comfiest wireless bras.

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welcome back, as electricity demand increases, virtual power plants might be the answer. pippa stevens has more. this is a new one for me. virtual power plants, i'm trying to wrap my head around what that means. >> yeah, essentially the grid is facing a host of challenges as

you said, electricity demand is rising, and then intermittent sources like solar can't just ramp up what we need it. that's where virtual power plants come in. it is a collection of thousands of smart devices, panels, home batteries, thermostats, evs, that when grouped together can help the grid by either providing a power bank or reducing demand at peak times. there are benefits for both the customer and the utility. first is just in more reliable grid. blackouts surged 64% over the last decade, costing some 150 billion annually. and it can help utilities load chips. they cut emissions and reduce costs. the utility might not have to build a plant and the customer gets a credit for power supplied to the grid. there are multiple stakeholders here including residential battery installers, grid services companies and utilities themselves that are adopting the programs including emerson international and national grid. this is a story about power in

numbers. >> what does it mean for the overall costs? >> so, essentially it reduces costs for both the utility and the customers because utilities always have to have generation to match demand. there are things called gas peaker plants which fire up, can only be a couple of hours per year. but it has to be there as a resource should demand surge. and so if the utility has a bpp, they may not have to build that gas peaker plant. >> how does it work? the residential customer buys the battery or the generator or whatever the devices are that are going to feed into the grid and then the utility goes to them and says, hey, we know you bought this, we would like to have you as part of the grid? >> customers opt into the programs. a lot of the time utilities will incentivize it by providing something like a smart thermostat. thousands of homes are lowered by one degree, thats had a

meaningful -- >> do they lower it or do you lower it? >> the utility lowers it. >> you opt in and you can choose to opt out. charging your electric vehicle, maybe you want to charge it at peak times, but everybody is tapping into the grid at this moment, so power prices are higher. you can say to you're utility, you can charge it at a time, 2:00 a.m., when there is not a lot of demand on the grid, but you can opt out. there is the option to say, hey, you know, i do want to charge my ev at this time. you get a credit and sometimes you get paid directly for the power saved. >> how reliable is this? i think of anything that is more in my control as being a little scarier in terms of reliability. is it as functional as, you know, the old way of doing this? >> yes, so, you know, ultimately it is here to help for reliability. the idea is that the grid is changing with more distributed energy resources, there is no longer this constant supply and demand. we're not ramping up fossil fuels to meet demand, the grid

of yesteryear was built to always have that match. and today it is different. customers are generating their own power. and so ultimately the utility can tap into your battery, and be smart about it, they might not have to implement things like rolling blackouts because they're tapping into a customer's battery in one area and then shifting -- >> maybe they want -- >> what smis the most striking thing in your report, blackouts are up, at a time when we require the grid to be more reliable, it is getting less and less reliable. >> it is hard to manage. costs are going up. demand is going up. i mean, you know -- >> climate risk is real. and there is always the potential for a cyberattack that takes down the grid and that's -- you know, in the insurance space, this is something -- >> we don't need terrorists to take down the grid. we take it down ourselves. 64% increase in blackouts. >> people are tapping the grid a lot and it is a different grid, no longer the centralized

behemoth. now you have all the devices, evs going around, heat pumps, so much more demand and different types of demand for a grid that was built a century ago. >> thank you very much. all right, coming up, a holiday season retail wrap-up including what to make of a potentially concerning sales growth number. as we head to break, you can get the best of "squawk box" in our daily podcast. follow squawk pod on your favorite podcast app. you can stlien anytime. power that. we'll be right back. why choose a sleep number smart bed?

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we're about to close out the shopping season on 2023. retail sales between november 1st and -- 3.1% year over year. that is below the 3.7% forecast by mastercard in september, and well below last year's 7.6%, but, still, 3.1% growth. i guess a matter of perspective. joining us to talk about what drove shoppers and which companies saw the benefits is forester research analyst. what do you make of the number? 3.1% growth. would you characterize that as solid? would you characterize that as disappointing? >> well, it's not a great number, and there are a couple of reasons. one is that when you break it

out into online versus off-line, the online number was about 6%. the off-line, which is the physical stores, that's the vast majority where we do our spending and a lot of it actually is in categories like restaurants or grocery stores, which are not really holiday shopping places. that number was 2%. which suggests a lot of sectors, for instance, electronics, did not do well. the other fact sir that there was inflation in that number and inflation is about 3%. and what that means is that when you take inflation out, there was also almost no growth in spending, and that means that demand was pretty soft. >> the national retail federation head predicted that the amount spent should have approached a trillion dollars, and instead looks like it's in the 900 billion dollar range. including not only stuff you buy but also eating out and what you spend on groceries as well. give us a sense of, you know,

missing that mark, and why that would be. >> well, i think that the biggest factors are just that consumer confidence, this has been one of the quandaries i think that has really perplexed economists and kind of just observers and certainly retailers for the last year, which is that even though a lot of the key economic indicators, like unemployment rates and wages, are relatively strong, consumer confidence continues to be pretty weak, and the shopper is not really spending above that inflation number. i think part of it could be that the consumer spent so much more over the last few years, they're finally done with all of that excess savings that happened during the pandemic. you have other economic factors, like in the case of students that perhaps some of their --

anything leftover in discretionary is going to loan repayments. there are a number of factors that could be driving consumer issuing, and with the retailer sales candidly were not great this year either. it was pretty mediocre from a qualitative standpoint. there wasn't as much from a store-offer standpoint, not as much free shipping standpoint. >> talked recently on "squawk box" some retailers are instituting fees for returning items now. if americans are returning 15% of the gifts that they get for the holidays here, how much do those returns eat into the bottom line of these big retailers? >> well, returns are definitely a cost center. there are some retailers that do try to turn those returns into exchanges or they try to somehow preserve that revenue, but it is

generally perceived as a cost center. it's absolutely -- that 15% number is a conservative one. i mean, that's the store return rate for your average physical goods retailer. when looking at online that number can be anywhere from 25% to 50%, depending on the retailers we're talking about, and it's a huge, huge cost. a lot of technology now going into try to optimize return rates. there's also pretty well-known staff that you know, minority of shoppers contribute to majority of rueturns and if there's a wa to try to make the experience, you know, more challenging for some of those heavy serial returners is what they're called in the industry, that is actually something that can improve your profitability. >> going into 2024, then what are the retailers you think van opportunity for profit here? where should investors be looking? >> yeah.

there are some of the big names that we have been familiar with for a long time that have been capturing more and more share. walmart and amazon are two that continue to outpace the industry. they're outpacing inflation. in the apparel sector, companies like lululemon do particularly well and have been doing well. also have been outpacing their peers in the sector and continue to have a lot of the energy with the shopper. where i would be a little cautious is in the electronics sector at the moment, and that means potentially companies like apple which have had some softer quarters recently. now, that doesn't mean that it won't recover and its innovation won't support it through 2024, but absolutely the electronics sector has been adversely impacted by -- >> if, they can't sell their highest-end watch.

nc in fact, they told the government it would be material. that's a problem. thank you. >> thank you. coming up on "squawk box" -- the hit and the misses at the holiday box office and what 2024 could hold for hollywood's biggest studios. that and much more. sometimes you just got to epke on the hook, when "squawk box" returns.

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good morning. futures trending higher this morning. will the bulls continue to roll into the new year breaking records along the way? we'll get you ready for the trading day ahead. big pharma's battle against obesity. a sort of gold rush for the industry this year. looking at players getting into the race. and "barbie" wins the box office crown for 2023 followed by "super mario." is there any hope for hollywood in 204? a sneak preview. the final hour of "squawk box" begins right now.

good wednesday morning. welcome to xwb here on cnbc live from the nasdaq market site in times square. i'm contessa brewer along with leslie picker and steve liesman. joe, becky and andrew are enjoying a well-deserved morning off. a look at futures now at this hour hovering around the flattish mark you see dow jones industrial implied open 16 points. nasdaq opened up 19 and s&p 500 all eyes here because we're just half of 1% away from hitting that record high again. we haven't seen that number in more than two years. that we're looking at 4,796. that would be the number to set the new record. in the meantime, treasury yields heading downward this morning. there you're seeing the ten year note at 3.861%. in the two year, lower as well

as 4.285%. checking energy. prices this morning, seeing wti lower by almost a full percent. same with brent crude. in an opposite move from what we saw yesterday, natural gas up 4%. almost an equal move we saw this time yesterday morning, steve. >> get to dom chu with this morning's stock movers. good morning. >> mr. liesman, kicks things off with a check on amazon shares up marginally after yesterday's session. cloud computing and ecommerce giant unveiling flagships that start january 29th for customers here in the u.s. also in the uk, germany and canada. other markets will follow suit later on in the year. amazon, by the way, also offering and apps-free option costing an additional $2 p.99 a month. next check crypto world.

we know about the massive rally in shares of bitcoin over the course of past year. bitcoin prices up 158%. business software and solutions company microstrategy which has the most bitcoin on its balance sheet of any pub luckily traded company out there. those shares skyrocketed on heels of the bitcoin holdings. over 174,000 individual bitcoins on its balance sheet. microstrategy shares up 330-some percent over the course of the year. those shares, by the way, seeing some movement because of momentum in the pre-market as well. broader check on the broader s&p 500, because a banner run since the october 27th lows we saw. the blue line is going to be the market cap weighted s&p 500 up 24% so far this year. loosening the 27th, eye-popping 16% gain overall, but outdone, believe it or not, by the equal-weighted s&p 500, which

weights everything on a more equal basis as opposed to market-cap weighted. since the lows, by the way, also more respectable 18% gain for that equal-weighted s&p 500 index. steve, that shows you a little more about, this idea that there is a possible broadening out of the rally. it's not just the so-called magnificent seven stocks and tech media and telecon driving the gains recently that many more companies participated. some notice out performance in financials notably during that time period as well. interesting move and dynamic. one trend traders and investors are seeing if it carries over into to2024. >> should be red. heinz 57 trade. you know why? the catch-up trade. made that up, for what it's worth. it still has a ways to go to catch up to where it was.

right? what's the differential. zoom in. 28% versus, what, 11% year to date. >> 24% for s&p 5in. >> full year. >> about half. 12%, 13% equal weighted s&p 500. the gap is fairly wide. pointed out. wasn't that wide beginning of the year. >> rinchts again, catch-up trade doesn't seem like a lot. talking 200 basis points. two full percentage points of out performance. look at it on annualized basis over a couple months, a lot of hedge fund managers and investors and traders would kill for a two basis, 200 basis point, 2 full percentage point during that time frame. a lot of folks trying to see whether or not those funds can emulate themselves over course of the next -- >> the question, whether or not you've had the gains you're going to get in that catch-up trade, or do those two over time -- we need to see a ten-year chart maybe another time.

over time whether they tend to go together or do they tend to have just a bunch of outliers lead the way all the time. >> what i would say. over the course, since the great financial crisis and the era -- >> ten years. dom, look behind you. unbelievable! >> no doubt during zero rate policy interest rate time frame over the last decade and a half you've seen value of megacap technology, median telecom stocks overall drive bulk of gains in s&p 500. that shows you here, seeing that bear out. over the course of the beginning, say, five or six years, pretty close. >> it's been great. >> but really the meta platforms, right? the microsoft, the apples and whatnot that have done the heavy lifting. why you see that gap widen out, especially since the pandemic lows. >> beautiful. >> so much by zero interest

rates and recovery from the pandemic. mega caps are huge in the story. >> i thank you and terry king for coming up for that -- >> that's not me. you called for that shot. terry, teresa, all we're doing trying to put words to the graphics you're seeing out there. >> well done. catch-up trade to catching up -- >> heinz 57. >> heinz 57. see what other condiments have in store for 2024. a closer look. >> mustard trade. >> at the market -- mustard trade. exactly. relish. morgan stanley investment management. andrew, to kind of tag on to what dom was showing us there. it's interesting. because the so-called catch-up trade, we described, that 200 basis-point differential between the equal weighted and the s&p 500, to me, that's happening largely during a period where you don't have much in the way of fundamental news. it's after a lot of the earnings reports have come out. you've got obviously a lot of

reaction to potential piv ot by the fed. what does that indicate to you looking into 2024 should get more idiosyncratic information, earnings reports and fundamental n news? what does that tell you about the trend and broadening out seen this year? >> you have to remember that unfortunately the first year off the bear market low, investors sell stocks. happens all the time. saw a net outflow from mutual fund and etfs a year off the covid flow and sea it again this go-round. about one year later investors slipped from being bearish to bullish. it happened in february of 2021. it happened in november of this year. when they go to buy, when they realize they shouldn't have been selling, should have been buying, they look around for things that they feel that they could play catch-up.

it sen tirely logical that the equal-weighted s&p has played catch-up to the cap weight because it was really lagging. so as i move into next year, the breadth of the market, what dom talked about. so many stocks are working now. look at history it is an extraordinarily bullish signal for the market. you have to have your head in the sand to really be bearish at this juncture. it means the market is breaking the upside as contessa said. year that 4796. i think when we break through that level, you're going to see it even higher, a higher level of bullishness. keep in mind. the market has gone nowhere for two years. that's about to flip. i think it's a bullish sign for the markets going into next year. my only comment, interested in what people do not expect. i hear everyone talking about how equal weighted will outperform the cap weight. that seems to be an overwhelming

consensus view next year. so i'm intrigued by, well, what if these big stocks, they have not kept up, obviously, as dom pointed out, they have not kept up with the broader market. so they look, they stalled out recently. so new money, i think new money coming in might go on to say, well, maybe stockless play catch-up. yes, better year to date but kind of lagged recently. >> interesting. you've got, what is it? 1.4 trillion dollars that went into cash this year. obviously cash was an attractive asset. bonds did pretty well if you're a bond investor. i know you believe investors were younder weight equities going into q4. do you still believe that especially looking at various attractiveness of the other active classes out there. >> sure. >> money market. whatever the hottest pot usually doesn't do well the next year. so rates come down, because the economy is slowing down.

that will make the money market not a very, as attractive as it was this year when rates were higher. some of that money will come out and it will go into bond funds, and some of it will go into equities. look, end of the day, we've just seen fund flows turn positive on a weekly basis. it doesn't stop after, you know, three weeks of positive flows. i think that money will come back into equities, and that will push the second year of a rally, as it did in 2021. doesn't mean the market looks a little short-term overbought but a good sign for equities for next year. >> how much does investors psychology play a role, especially if you turn that calendar year over into the new year. you've got obviously 2023 really the magnificent seven kind of catapulted into the consciousness of, you know, your average investor. do you think because the returns

were so strong throughout the course of 2023 that, that could be, maybe, a hindrance to performance next year, just base and psychology factors alone? >> first of all, i love that you bring up psychology, because i think it's incredibly difficult to predict gdp, earning -- look at all the people predicting a recession this year. earning was going to collapse. boy, oh, boy, was that dead-on wrong. what was so consistent, just what you mentioned. psychology. which is, unfortunately, investors humanly get bearish after bear market and we came into this year with overwhelmingly negative consensus. and so it's -- it's intearily consistent with what we've seen in the past. we are moving slowly from the fear stage to the greed stage. i don't think one year is enough. i think it will continue. that is the consistency of investing. as i said before, i think

predicting economic data is very, very difficult, and all you have to look at is what was the average price target for this year to know that that's a fool's game. >> yeah. >> so i think the psychology is, we are in the process of moving from fear to greed, but we're really only very early in the stage, and it's, i think next year is the continuation of 2023. >> fascinating. yeah. behavioral economics from my favorite classes in business school as well. andrew, thank you. >> thank you. all right. coming up, warm weather giving a chill to natural gas and heating oil prices. we're going to look at the trend and the rest of the energy market next. later, eli lilly, a big winner in the obesity-fighting gold rush of 2023. will this sector continue to be a big winner next year? that's coming up in e xtthne half hour of "squawk box."

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welcome back. price of natural gas has tanked in 2023 amid record production and warmer temperatures. for a closer look at what's ahead, bringing in oil price information services global head

of energy analysis. tom, thanks for joining us. i guess we're up a little bit today. i saw these weather maps yesterday. they were all red for, i guess it was the end of december, but now there's some blue on the forecast maps, which temperature anomaly maps. those things upon which gas really trades. right? >> yeah. and, i mean, weather is the, 90% fundamental that moves natural gas over time. it's almost like mother nature is short some of the heating elements. whether it be natural gas, to a certain extent crude and heating oil in particular, because she's bailing us out in another winter here for that question. >> i mentioned second one in a row. right? last year, obviously, there was big concern about supplies of energy from russia. had it been a cold winter, we would be talking about very different results for the economy, for the global economy, really, but, again, it's interesting the way you put it.

it's almost like you're feeling a little paranoid. like mother nature has it in for you tom. tell us, and just to be clear, they can't, the guys producing the natural gas, they can't stop this stuff from coming. right? they can slow down over time, but not on a week-to-week basis. right? >> yeah. they can leave the liquids in natural gas, you know, things like propane and butane when it doesn't pay to remove them, but they're pretty much tied into this. look at numbers. i mean, last year we saw the equivalent of 500 or 600 dollar a barrel oil for european natural gas. it's down quite a bit now. probably four times the u.s. price. really, you only brick that sustaining u.s. numbers, less than half of what europe and asia are,you know, tends to be the lig export. so it's very, very cheap. heating oil is very cheap probably down about 14% or 15%. >> right.

>> actually jet fuel is down about 25% from last year. >> tom, there's -- not to get too geeky about the weather, which actually really like. one is temperature anomaly maps red or blue. but there are longer-range forecasts. if i'm not mistaken this is an el nino year, and i think that means warmer temperatures in north america through march. is that right? >> yeah. well, it is. the one thing, steve, you have to be careful of, in an el nino year, sometimes some of the winds and the masses of air do allow for a polar vortex. and you know, one thing about natural gas. we've got a lot in texas and louisiana and places like that. we don't have a lot of it downstream because it's not stored that much. if you had a polar vortex in new england, the middle atlantic, or in the northern midwest, you can

have a problem. so that's still something we have to worry about if the sciences are accurate about, you know, perhaps a little bit more of a chance -- >> tom i don't want to get too corny here or cue the national anthem, but i'm enormously proud of what the american energy industry has done in terms of responding to what's happening in russia and kraine. how much natural gas are we exporting right now? how vital is what the american natural gas producer is doing relative to keeping europe warm and keeping europe safe right now? >> yeah. i mean, we are the saudi arabia of international gas. >> right. >> over a combination of the saudis, the russians and u.s. in crude, and it very much makes us a privileged continent. if you look at latin america, where we provide a lot of gasoline and diesel, we provide it, because it doesn't make sense to have refineries in latin america, because they

don't have cheap natural gas, let alone natural gas in a lot of places. when you're making gasoline and diesel, you use natural gas to fire up the boilers, but you also take the hydrogen out of the natural gas and that enabling you to make some of the refined products. so one of the reasons why we're exporting a million, a million two barrels per day of gasoline is because of the fact that we are the privileged continent right now. >> tom, how important -- tom, i know that there's legitimate ecological and environmental concerns but how important is this louisiana natural gas terminal talking about or liquefied natural gas terminal? >> well, it's important to accentuate the exports and we have the export capability to move an awful lot more natural gas that we can find probably break-even numbers. close to a billion to -- that's one of the battles that rages, because this administration is

out for environmental justice. they want to make sure that if we have these facilities they're operating properly. and yet in the balance of trade, you know, what we're sending out there, steve, the one thing i would mention is, we always talk about being the most vital choke point in the record. close second now is developed in mexico, because this summer we'll be exporting 11 million to 12 million barrelling a day in various -- >> unbelievable. really good stuff. tom, thank you for joining us. natural gas for the winter keeping us nice and warm. >> toasty. coming up, 2023 saw some blockbusters out of hollywood, yet we are still not back to pre-pandemic levels at the movies. after break, are there opportunities in film in 2024? stay tuned. you're watching "squawk box" on cnbc. ♪

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the 2023 box office struggled due to hollywood strikes focus on streaming and dwindling interest in superhero movies. highest grossing movies of the year of "barbie" followed by "super mario brothers" and "oppenheimer" both of the second are universal films. >> saw the third one, i only saw the third one. >> you did?

>> i did. >> i saw the first two. >> me, too. >> because we have kids. >> didn't go to "guardians of the galaxy". >> saw that on the plane. >> did you really? >> uh-huh. joining us to discuss what to expect in the 2024 is -- no, no, no. i can do better. hair gara bediat. i have a three-syllable make it's important. >> won't fit on a movie marquee. a problem sometimes. >> practice makes perfect. talk along about the much proclaimed demise of the superhero movies. i'm looking at the top box office here and i still see three superhero movies made it to the top ten. it's not all bad. is it? >> that's right. i mean, an idea that there's super hero fatigue. a make a great point.

top movies, many superhero among them. uninitiated not necessarily big fans of comic book movies having to do a ton of mopework to figure out how the universes fit together. a huge a lot of superhero programs on the small screen as well. i just think an oversaturation of that. but, yes, if you look at those top movies worldwide and domestically, a lot of superheroes there, but, this weekend with "aquaman and the lost kingdom," that earned about $38.3 million for the four days according to our comscore data. people hoped to are more, but i think audiences love going to the movies, and if you have a unique or different way of telling a story, like with "five nights at freddy's." "godzilla" and two japanese and two india sin mall titles in the top ten.

i think we're getting a lot of actionable intelligence from audiences saying each eth with their absence or presence at the movie theater what they want to see on that big screen. >> how much is because it's super important for the moviemakers to appeal to an international audience? looking at the domestic earnings versus worldwide earnings. every case, "barbie" more than doubled what it made domestically with what it made internationally. that says, to me, you've got to make movies that appeal to europeans and asians and south americans? >> you just hit the nail on the head. that's exactly what's going on and, in fact, the first "aquaman" movie earned almost 71% of its box office outside of the u.s. and canada. in the international market. in fact, this weekend it did much more business internationally than it did in north america. so you're absolutely right. having a global view is very important both from the

filmmaker perspective and also from the studio perspective, and if you look on streaming, look how much content on streaming is internationally flavored, has point of view that has everybody is kind of included in that. there's something for everyone and different. yes, a lot of franchises, the big ones rely on that in the box office fast x, fast and furious franchise. for years those have totally relied on the international box office to build up their profitability. >> i wanted to ask you about all of this chatter about the potential tie-up between warner brothers discovery and paramount. if you see a merger of that scale, or, you know, that gets exploded, could comcast be interested with nbc universal? what does that do to the creative consent seen in movie theaters? >> interesting.

combining two huge studios it really is a big deal for their streaming platforms, because they want that content, and a lot of these studios or these streaming entities, they want that filmed entertainment on a big screen first and then that can feed the streaming side to bring people onboard. i think for audiences, they follow show runners, movie franchises, the archive titles, library title, that a lot of these studios have, and then you also have everyone circling around, whether it be amazon or apple, you know, warner's -- whatever it may be all of these companies are kind of doing this dance. they're trying to figure out what everyone is doing. we're in a time of incredible change right now. i think we're seeing a shift in audience taste. also i think we're seeing how streaming is impacting movie-going. meaning i think a lot of people who love streaming also love going to the movie theater, but streaming is presented so many

different types of content that it's opening i think the minds of the audience they want something different. not cookie cutter all the time. >> paul, thank you for joining us. thank you for your time. coming up, the fed seems it got a handle on the inflation picture in the last few months, but should investors brace for a relapse next year? talk about the risk to the economy. as we go to break, listen to us live using the cnbc app. stay tuned. you're wchating "squawk box" live from the market site in times square.

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welcome back. let's talk about inflation in 2023 and what to expect next year. fortunately we have steve here. mauling over that for -- all of 2023. i bet there's not a day goes by you don't think about inflation. is that right? >> yeah. and i didn't used to think about it at all. remember? didn't used to think about it. look at that chart right there. looks pretty good. heading back, that's the year over year change and headline inflation. 2.5%. 2. -- right around 3% right now. the trouble is this. last year around this time, we had some good data.

it turned out that it was revised and revised upward. so we thought we were out of the woods and the fed chris waller called it a head bake. talked with action economics suggesting last year was the result of some seasonal adjustments and really nerdy kind of things, could deal with the ukraine war. that they expected a rise in prices. never happened. he doesn't think we're in danger this year with another head bake. one other thing to look at. let's go back, in the way-back machine i guess they call it to the '70s. whoo -- sound effects. there you go. look at that on the left there. inflation went up. came back down. fed cut rates. what happened? went back up. that's the thing that really animates a lot of fed policy. this idea that there was this inflation redux, inflation return, and whether or not they would be, it would be too quick to cut rates next year, because you have this.

now, remember, oil prices came back up. a big part of that. you remember that, contessa. >> i don't, actually, but i've read about it, yes. >> ooh. >> but to your point. >> yeah. >> if past performance is no indication of future results or anything. >> right. >> do you think that the specter of that double peak in inflation is overplayed? >> you know, i don't know if -- we're going to ask our guest about this. my lead-in question. what i care about more than anything is that i think it animates fed policy. i think it drives them to be a little more reluctant to hike -- to cut. that's important. look was what we can expect from the economy and the fed in 2024. joining us ben harris director of economic studies and director of economic policy the at the american enterprise institute. mike, start with an issue. how ashade should the fed be of

cutting too early and having a return of inflation like we had in the '70s? >> steve, i think it's a great question. the case for being concerned is as follows -- the labor market is still very, very tight. laker demand still in excess of labor supply. labor demand way in excess of what we thought in 2019 was a lot of labor demand. we have 9 million job vacancies now in 2019 had millions fewer, and thought that we had quite a bit of labor demand. potential gdp is likely lower than actual gdp will be. so not just the labor market. the economy overall likely will be running hotter in 2024 than its underlying potential. services inflation is slowing at a much slower pace than overall inflation. so we have a services inflation problem. wage inflation is slowing, much,

at a much slower rate than overall inflation. so wage inflation is still inconsistent with the fed's target. and most importantly, the market is reacting to the fed's communications strategy, the fed's decision at the last meeting, by going gangbusters. so what the fed wants to do is to tighten overall financial conditions. overall financial conditioning by some measures are looser today than they have been in two years. the market is expecting many, many cuts in 2024. and so all of this, i think, should make the fed concerned, that inflation, if it doesn't rebound, it might just kind of get stuck at the 3% level it currently is, which is, of course, much higher than the fed's target. >> just to fill in some data that michael was talking about. in 2020, before the pandemic 6.7

million job openings. now it's 8.7 million. michael, just, it was like a cold stream of cold water all over the optimism of this market, ben. do you want, you want to try to restore the optimism? rate cuts? or do you want to pile on, ben? >> steve, i think i agree with what you said at the outset, which is i think markets shouldn't be assuming the fed is going to cut. i mean, i look at this fed and i see a group that's dieing to pause, and doesn't want to hike and doesn't want to cut unless it is absolutely forced to. if we get three months of really strong inflation data, the fed's going to have to cut in march and cut by 25 basis points, but it's going to take sharp declines and core pce for that to happen. they did show, and some economic projections, in the december, they are expecting over the course of the year core inflation to fall by about 80 basis points. which is a lot. that has to happen in order for the fed to cut.

i think we're in a pause unless the data forces that pause type of moment right now. >> and ben, stick with you. give your best outlook for next year. is it crazy to think that the fed lands this plan? you have a soft landing, keep unemployment low. gdp at potential and just go about our merry business in 2024? >> yeah. i mean, this economy right now is like the definition of a soft landing. unemployment at 3.7%. we've had a gradual moderation, labor market, something we've almost never seen. you know, you saw labor market tightening not because of, easing in the tightness in labor market, not because of raising unemployment, because more are coming back to the labor market. a great thing. seeing strong consumer spending. household balance sheets, except for those in bottom, still in really good shape. a ton of reason for optimistic. my base case is for slow but positive growth over the course of the year, consistent with the

fed. i just don't think there's much reason to think that we'll see recession in the next year. >> all right. michael, here's your opportunity now to throw cold water on what ben is saying. are you onboard with this fabulous soft landing we'll have next year? >> i'm kind of off message for the third day of christmas with all of this negativity. i think ben and i see this a little differently. >> and you're on message, a good thing. >> that's right! you know, three scenarios. one, soft landing. second is the economy heats back up again. fed has to hike more, or at least pour even more cold water on this dot block that shows 75 basis points of reduction, which is what the fed's forecast is for 2024. third scenario, recession. i would put a soft landing as the least likely of those three scenarios. we don't have soft landings in the u.s. economy. you can debate how much we've

had since world war ii. some people say zero. some people say one or two, but it's not all that many. i think the underlying reason for that is that recessions ultimately about loss of faith on the part of investors and consumers. think about this in terms of the labor market. the soft landing narrative is that monthly job gains kind of slow to the, you know, 30,000, 40,000 jobs per month level. stay there until inflation comes down. stay there after the fed starts cutting and then kind of come back up again to 150 a month. >> right. >> that just seems way too neat and tidy. if ceos, hiring managers, small businesses wake up in the morning and they see, oh, 60,000 jobs gained this month. oh, 20 or 30 basis point increase in unemployment rate. they're going to be worried about their revenue projections. not add the head count. they're going to try to let

workers go who they then aren't necessary and then the recession psychology takes hold. that's, i think a much more likely scenario than this really neat and tidy goldilocks soft landing scenario. >> michael, we have to leave it there. do you have nowhere to go on new year's eve? is that a part -- >> let me help you. look at that. christmas cheer in the neck tie. >> i see it in the neck tie. not hearing it in the forecast at all, find it somewhere. >> why i'm wearing the tie. balance it out. >> no, it doesn't. not at all. ben harris and michael strain, thank you for joining us this morning. >> i like it. all-in to the tie. >> how about my red tie? >> doesn't play music. >> it does not. >> that doesn't count. coming up, 2023 was the year of the weight-loss drog and theweight loss drug maker. eli lilly a name in that sector. after break, talking about what's ahead in 2024.

is there a diet in the future? stay tuned. you're watching "squawk box" on cnbc. ( ♪ ♪ ) ♪ (when the day that) ♪ ♪ (lies ahead of me) ♪ ♪ ( seems impossible to face) ♪ ♪ (a lovely day) ♪ ♪ (lovely day) ♪ ♪ (lovely day) ♪ ♪ (lovely day) ♪ a bank that knows your business grows your business. bmo. i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. life is for living. let's partner for all of it. i'm so glad we did this. edward jones this thing, it's making me get an ice bath again. what do you mean? these straps are mind-blowing! they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. and you are? i'm an investor...in invesco qqq,

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emily, anything that you see that could slow this train down? >> good morning. i mean, i think what we're most watching closely on our side is really supply. just because both eli lillie and nova nordous. demand unprecedented. think how sale oos involve in 2024 dictated how quickly can they make these drugs? trying to ramp quickly as they can but that's what people will watch. how much can they produce to meet demand. >> what do you see at the addressable market? some as high as 1$100 billion i sales by 2030? >> but us in that camp. $100 billion for the obesity market by 2023. within the next decade from this year and think that's a matter of new drugs coming on the market from nova and lilly and

other competitives will eventually make it and expanding as companies launch outside the u.s. market. >> we've sooner a lot of pharmaceutical dealmaking even in this time of year, which traditionally hasn't seen much in the way of announced deal. scott gottlieb put it on twitter yesterday saying he thinks it's in spaces there are natural barriers to entry often owes to formulation, manufacturing complexity. may not be coincidence. we'll see a bid put under these platforms as patents are eroded by policy mistakes. do you see that continuing to be a key driver of ma? m & a? if not what will be a catalyst for dealmaking? >> a great question. sort of this diabetes and obesity space asked all the time why are nova and lilly so far ahead? due to factors underinvested in the space. obesity a graveyard for development for a number of

years and now lilly and novo in front. such a big market a company really can't be out of it completely. seeing companies like roche and astrazeneca weigh in. >> baffling, though. look at the obesity crisis in the united states alone, the fact that anybody could think that that should be a graveyard in terms of pharmaceutical development is jaw-dropping. then, meantime, i know you're looking to see more data on, then how these drugs, have an influence on sleep apnea or liver fibrosis or chronic kidney disease. in other words, if you're solving an obesity problem, there is effects on other health outcomes as well? >> yeah. exactly. that's the key to why we think this market is going to be so big. because both companies are producing data to shows these aren't jut vanity drugs but help with so many health-related conditions.

novo earlier in the year showing 20% reduction in high-risk population of having a heart attack or stroke and data just like that sleep apnea, liver, kidney disease, all coming in 2024 that's going to build this notion that, you can pay for these drugs and get a return. >> emily, i've seen a report that people who have report that people who have critical conditions that require some of the drugs using these weight loss drugs cannot get those drugs. is there any danger of a regulatory or a move by government that would stop some of this use of the drug for, i guess what you might call voluntary reasons rather than those -- and provide -- and get those drugs available to people who need them for critical conditions. >> yeah, we have seen that particularly in the drugs that are meant for type 2 diabetics. novo and lilly work closely with the regulators to ensure that the right patients are getting the drugs, and we think we're going to continue to see that

evolve as supply comes online, but the companies are certainly playing ball and have very good relationships with the regulators, so we don't see regulatory risk to either of these companies. >> yeah, it seems like that will be a key story to watch for in 2024. thank you, emily. we have some news just coming in this morning. "the new york times" suing openai, the creator of chatgpt, and microsoft for copyright infringement. "the times" says millions of its articles were used to train chat bots that now compete with the "times" as a source of information. the paper says the defendants should be liable for billions of dollars in damages. >> this is -- >> microsoft is an investor in openai and has incorporated the technology into its bing search engine. >> potential big story. i don't know how they thought they were going to get away with it. >> you've seen concern. "the new york times" is maybe the biggest name in journalism so far to come out with this, but we've seen the concern from the actors and the writers when

they were making sure that a.i. protection was written into the contract. >> oh yeah. >> exactly. my wife found out that her novel was one of 30,000 ingested into a large language model. does she get paid for that? should she get paid for that? i don't know the answer to that. >> "the new york times" is saying, yes. very strong copyright laws in this country. >> except when they're broken and nobody -- >> except when we have to adapt to new technology. >> right, exactly. coming up, what to watch ahead of the opening bell on wall street. we'll be right back.

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little more than half an hour until the opening bell on wall street. joining us now, catherine rooney bara from stone x. we have had so many insiders today talking about whether we're too optimistic, whether the optimism of the holidays is bleeding over into the new year, or whether there's cause for concern that after such a big run-up in the markets, that we're kind of overdue for some big pullback. set the scene for us. >> i heard a phrase today, weaponized fomo. there's indiscriminate buying now. everyone's very positive, expecting that the fed cuts more than 150 basis points. what i would say is, fine, keep your long positions, but hedge

them. the vicks is very low. you can get cheap puts, and i think it make sense. if you're going to stay long and overweight the magnificent seven, overweight qqqs, overweight s&p market cap, i would say, start to take a hedge position, and that doesn't have to just be buying puts. that can be buying gold, tips. this is the just in case trade that i think is cheap right now, and i think is prudent. >> the interesting thing about a weaponized fear of missing out is that we're seeing the s&p only half a percent -- half of 1% from a record high that we haven't seen in two years, and you know, the psychologists in some of these advisors say people don't like to buy when you hit that peak, that if they are not in it already, now is not the time that they're getting -- that they feel like they want to get in it. do you think that that's -- the fear of missing out overwhelms,

then, the fear that i've already missed out? >> there could be that, but i do get a sense that there is this -- still this a.i. trajectory that everybody wants in, so the tech sector is bvery strongly held especially in real estate portfolios, but what i would say is, be careful with that. if the fed doesn't cut as much as is currently priced in, then you could see some headwinds, and some serious ones on cyclical sectors. >> another interesting dynamic of 2023 is that your traditional stocks and bonds portfolio worked, about 17% this year. is that still going to be something that carries over into next year, especially as we look at just the prospect of rate cuts and all sorts of other cash-shifting trends that took place this year? >> so, i like fixed income, but the biggest headwind or risk to the fixed income space is positive correlation and the continuation of positive co correlation. i doubt that continues.

it's historically very unlikely to continue. it's an anomaly. it's an aberration from financial reality that you have that positive correlation, and the reason that you had it is because of high inflation. inflation is coming down, whether it continues to come down because of immaculate disinflation or because of recession, i think that's still to be determined, but the fact is, i think, that the negative correlation will return, lending additional credibility to a 60/40 portfolio. >> how much of your clients' money right now is in one-year treasurys maturing in february, march, and april? how much right now is in money market funds? >> yes. >> and what are you telling them to do with that money when it matures? >> if bond yields continue to move lower for good reasons rather than recessionary reasons, that money is going into equities. >> boom. don't pass go. don't collect $200 in a money market fund. just go right into equities. >> if bond yields move lower

because the u.s. consumer rolls over, which i think is an underpriced risk for many reasons, that's not good for equities. so, i -- my advice, steve, is to hold on to those juicy two-year treasury bills that outearn the s&p 500 right now, have the nice, hefty allocation to fixed income, you know, the steepener trade -- >> you're saying, take those one-year and roll them back into ones and twos? >> look, i think it makes sense. i think the fed is going to be cutting. i think steepeners make sense right now, and i think having a hefty position in fixed income is a good bet, especially if we get this negative correlation returning. >> but not in the money market fund. >> i think in -- you should have a hefty cash position, and you're going to roll it into short-term duration fixed income, yes. >> kathryn, thank you very much. >> thank you so much. we're going to take one more check of the futures market this morning. where are we at now? is it at the big board now? there it is.

are we going to make that record today, contessa? are you feeling it? >> if you're looking at only need 0.5%, don't you think that everybody goes to buy just to see it? >> let's take collective action. join us tomorrow. "squawk on the street" coming right up next. ♪ good wednesday morning, welcome to "squawk on the street," i'm sara eisen with scott wapner live from post nine of the new york stock exchange. carl, jim, and david have the morning off. take a look at futures, improving throughout the morning. getting a higher start, at least, if you look at s&p and nasdaq futures, both pointing higher. dow futures, unchanged. our road map begins with the stock market momentum on wall street. the s&p 500 within 0.5% of a record closing high. also ahead, tesla joining the december rally. the stock doubling year to date ahead of the company's quarterly