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

deliveries report. plus the latest on houthi rebels attacking vessels in the red sea. one shipping giant says it will continue to avoid the area. we'll begin with the markets chasing history here. scott, we know the level to watch now, 4,796. >> and change. we're getting closer. >> but interestingly, this rally, which, yesterday, it started on our show and really picked up steam throughout the day into the closing bell, being led by the russell 2000, index of small caps, and i think it's hard to ignore the move that you've seen there, wondering if the russell is going to break out. we're at a 20-month high. it's been in this stuck, narrow range underperforming the rest of the market. as the market picks up steam, it broadens out into small caps. >> i think just since this rally got going in the last days of october into the very first days of november, the russell is up by 23, 24% over that period of time. so, it's gone from nowhere to everywhere really, really quick. you have people like tom lee

suggesting you could get 50% gains out of small caps in 2024, because they've dragged so much, and his whole thesis is what you know, economy performs well, inflation comes down. >> i think he believes inflation is coming down like a rock now, which you could make the argument if you look at some of these six-month annualized charts of things like core pce. we're lower. we're back down to fed target kind of ranges. >> so, we had the -- who was the former fed economist we had on yesterday? >> claudia. >> suggested the last mile -- i'll never forget this -- the last mile is the easiest. >> that's what janet yellen says. >> that's sort of counterintuitive. i was just struck by the fact that she said that she thought it was going to be the easiest, and that would play right into the bullish hands. >> the only question at this point is how do financial conditions impact that? we've seen this steep drop in treasury yields.

that's going to bring rates down. mortgage rates, credit card rates. it's good. it's relief for consumers and relief for americans, but it also threatens to undo some of the progress on inflation. that's going to be one of the tells. by the way, the ten-year note yield this morning hit a new low of 3.844%, lowest level since december 21st. the german ten-year bund yield hit the lowest level in a year, so we continue to see these sinking treasury yields, which has been fodder for this rally. >> how about as we look at these forecasts, did you see go aheadman's forecast? it plays right into what you're talking about. number one, gdp growth. i've highlighted what i think are the most important. gdp growth will beat expectations. consumer spending beats expectations. growth is good. the consumer hangs in. core pce inflation will fall below the 2.4% forecast, and the fed's going to cut five times. >> and bank lending will reaccelerate. it really is kind of a rosy forecast. the only thing, maybe, to

quibble with is that they say that the balance sheet runoff won't end until 2025, so, by the way, that's still happening. the other kind of negative part of it is that fiscal policy will not turn stimulative ahead of the election. we knew that already. we've got a debt problem. >> that's true. how are you going to introduce more fiscal policy and stimulate after all of the criticism about, you know, whether that stoked inflation even further? of course, the biden administration wants the economy to be as good as it can possibly be, and consumers to feel as food as they possibly can feel as you get closer to the legarrelaegs, b election. >> they are scratching their heads about why people aren't feeling better about the economy, given we have very low unemployment, very tight labor market. there's still plenty of job openings for those unemployed. we're seeing real wage growth for the first time in a while. inflation is coming down. i think people are wondering about consumer confidence, which has been weak, while spending has been higher.

it doesn't necessarily track. in the goldman forecast, i think the biggest out of consensus call, they say, those economists, is the 2% forecast for 2024 gdp growth, well above consensus of 0.9%. they think consumer spending is going to be the expectations, and they're pinning it on this real income growth that we've seen, 3%, household net worth close to an all-time high. that's the soft landing scenario. >> it's going to come down to the very simple question, can the fed cut rates because inflation has come down or is it going to be because the economy slows too much? that's where i think the market conversation begins and ends, because that's either the soft landing, the fed pulled it off, or they did too much, it took a long time to have these, you know, long and variable lags show up, they finally do, the economy slows too much, and their hand is forced. that's what you don't want to have happen. >> and there are plenty of those that are still arguing that, and they look at leading economic

indicators, which have had a string of negative numbers portending recession now for the last year and a half. they look at the yield curve, which is still inverted, and continues to be inverted, even though it has steepened a little bit. they look at the ten-year yield falling like a stone. is it just factoring in higher odds of lower cuts, or does it factor in some sort of economic weakness? >> also wonder, you know, as the market has rallied so much, as you make the turn, the s&p is up 24% now year to date. do people stay with this rally, or do they start to get a little bit skittish? i noticed that you had $10.5 billion of net outflows from stocks last week. that was breaking a nine straight week inflow of inflows. so, you have had all this money rush in. markets going up. now it gets a little bit topee and tired, perhaps, and people stop putting money in for the meantime. you had an initial move as rates came down, maybe money from cash or money markets or whatever,

you know, came into stocks, and maybe that slows a little bit too. >> or is there some chasing in the new year? remember the money market. that was one of the stories, i would think, in 2023, which is, how much money went into cash, essentially, into money market funds, because they were getting paid to do so with higher treasury yields? $6.1 trillion is how much money is held in money market funds. it's about 29% higher than its level just before covid as people rushed in, because the rates were attractive. does that money come out and go into stocks and bonds? is that even a tailwind or not? i remember talking to the charles schwab ceo a week ago or so. he said, that's not in itself going to move stocks higher, but it could speak to the fact that there's still demand, and there's still a lot of caution on the sidelines. >> there's not much caution from ed yardeni. he was on "closing bell" yesterday and had this to say about his target for where he thinks the s&p can go next year and thereafter.

>> 5,400 by the end of next year and 6,000 by the end of 2025. i think this is a bull market that has legs that's going to continue to charge ahead. i think what we're seeing here is a significant relief rally, and the relief that we're not going to have an economy-wide recession, and the relief is that inflation can come down without a recession. >> i mean -- >> that's the optimistic case. >> yeah. well, one of many. as targets come out and some targets have come out -- i think we were talking yesterday that even targets that came out a month ago are being revised higher. david kostin had this target of 4,700, and the market takes off, and he says, maybe i need to reassess. you got a lot of targets at 5,100. you've got tom lee, a little bit higher than that. you've got yardeni talking these big round numbers by the end of next year and thereafter. you better get inflation down to target. you better get cuts of interest rates, and you better get the

economy hanging in there, or none of that's going to happen. >> there's the next year. there's also the next few days. you mentioned the santa claus rally yesterday. i think it's worth -- i looked at some of the statistics. it's last five trading days of the year plus first two of next year, seven-day period. it is a really historically, 79% of the time, the market rises in that period. average gain, 1.3%. we're right in the middle of that sweet spot, just a seasonal tailwind for you. >> it's a sweet spot, too, because there's like an air pocket of things that can happen to impact stocks one way or the other. you haven't really had anything this week because of the holiday. next week, you get j.o.l.t.s., ism, fed minutes, and then we start talking about earnings, which are going to begin in the middle of january, and have to live up to the hype in some respects. growth of 5.5% expected. if you take out energy, it's a little higher than that. earnings better live up to the hype. >> especially in the shadow of nike. we do have a couple regional fed reports today, richmond, dallas,

of course, manufacturing. we get some more treasury auctions, and by the way, yesterday, i don't know if you noticed, the bond auctions, very strong demand. it's something we were watching earlier this year because there were wobbly ones. we are seeing strong demand now, whether that's people coming in off the sidelines to lock in higher rates before the fed starts cutting next year or just this idea that they are going to be cutting and that's driving just demand -- continual demand for treasurys. the other thing we're seeing that's helping this rally, scott, besides the lower yields is the weaker dollar. and we're now at a five-month low on dollar index on this idea that the fed is most dovish right now. in the competition of central banks, it's speaking the most dovishly. the market's pricing it in the most dovishly. even though our economy is not in all that bad shape, the euro has gone up on this idea that even the walkback from the fed that we got -- remember a little bit of the walkback from new york fed, governor john williams and others, it was weak.

and it was dismissed. and the market just raced on in terms of pricing rate cuts for -- we're at 90% odds in the swaps market that the -- that the fed cuts in march. >> the most powerful fed speak -- obviously, the fed chair, with great respect, obviously, his voice carries the most weight, but you know, waller -- waller, like, set this whole thing in motion by suggesting if inflation continues to come down, yeah, we can cut. and i remember when liesman said, he said the quiet part out loud. and chair powell had a chance to throw a little water on that. did not. that just extended the rally to where we are now. >> also, waller was an important voice when the fed turned uber hawkish and started quadrupling or tripling its rate hikes. he was an important turning point there. proved it again. we're going to continue to talk about this incredible rally when we return. an analyst joins us with his top picks for social media stocks for 2024. taking another look at futures here as we head to the opening bell.

we've gone positive on the dow, joining the s&p and the nasdaq, continuing this rally. are we going to hit that record closing high? we're going to watch that level carefully, 4,796. we'll be right back.

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welcome back. we're taking a closer look at tech and social media stocks. our next guest, forecasting 11%

in the online ad industry, naming pinterest a top pick, along with meta and alphabet, just raising his price target for each of those names. joining us now is collin sebastian from baird. what kind of signals are you getting that lead you to the optimistic growth forecast on online ads? >> yeah, thanks, and good morning. so, i mean, really, it boils down to the state of the internet sector is quite positive. we're seeing revenue growth accelerate in many cases. margins are expanding, and there's line of sight to a lot of product innovation, and along with the fact that valuations, at least in historical context, are not really stretched. that's what keeps us excited about those names you mentioned and others across e-commerce and social media. >> it looks like you have a buy on nearly all the stocks that you cover, everything from alibaba to ebay, meta, pinterest, shopify, except for maybe airbnb. is it just a rising tide lifts

all boats when it comes to online ads? >> yeah, that's certainly part of it. the reality is we are seeing this year, and into 2024, really a resurgence of secular growth trends across digital media, online advertising, e-commerce. we certainly have a preference for the larger platforms, and you know, in a year where there are a lot of macro uncertainties, as you've just been discussing, we do have a preference for the higher quality companies, so those like meta, like amazon, like alphabet, but there is room for companies like shopify and pinterest that in themselves are merging as higher quality technology and consumer internet companies. >> where does a.i. factor into all of this, particularly around amazon? i ask you because one of your peers on the street today over at raymond james makes amazon their top pick. they're looking from laggard to leader in terms of a.i. it seems like so many other companies are the ones dominating the conversation

here, but what about amazon? >> well, for amazon, i mean, on a broad level, you have that same context. you have faster growth, expanding margins, market share gains and online retail and recovery and cloud. in terms of a.i., specifically, amazon's strengths are fully in the infrastructure layer, and where they lack some momentum is on the application layer. that's for microsoft and openai have shown a lot of progress. so, for the year ahead with amazon in a.i., they need to show more momentum in the application layer, things they announced recently at reinvent. that being said, we still think the stock is positioned really well for 2024. >> what does meta have to do to back up the kind of year that they just had? not suggesting in any way they're going to do 200% return on the stock, but to have any sort of outperformance, what has to happen? >> well, first off, on historical levels, this stock trades below its typical

earnings multiple, so i think compounding earnings growth will be enough for meta. aside from that, there's still a lot of concern around competition from tiktok, for example, and there we're seeing reels continue to take market share. stories is still drive ing a lo of monetization on meta. the part that may be less well understood is the fact that messaging, whatsapp and messenger, these are emerging as new billion dollar businesses for meta. we think that's going to be a major theme in the year ahead and one reason why we like that stock. >> i'm curious about your outperform on instacart, because this one was a more controversial, i would say, new entrant in terms of the ipo market, questions about the mote. i know they get an increasing portion of revenues from online ads, which may be why you like it, but the overall business, what do you think are the prospects for that, and what's the sentiment like from some of your institutional clients on this one? >> yeah, sentiment on instacart is quite mixed.

i think the prospect of a lot of competition from doordash, from uber, is what keeps a lot of investors on the sidelines with this one. while that's clearly true, what we like about it is the very large market that grocery presents. it's still very underpenetrated in e-commerce, less than 1% has shifted online to this point. it's a massive market opportunity. instacart is the leading player in grocery. you mentioned advertising. that's a very profitable revenue stream for them. what we expect in the year ahead is that growth expectations are perhaps a little bit conservative for instacart, and we think margins will continue to expand. so, on that basis, we do see upside for instacart. >> let me ask you about a stock that we haven't really talked about much outside of the controversy recently from the ceo at wayfair suggesting employees need to work longer, work harder, et cetera. is there any further fallout to

come from that, from a stock standpoint, execution risk? are you thinking about that story at all in that it may have more legs? >> well, wayfair is a high-quality technology company and a very challenging end market in home furnishings, and i think that's been a lot of the story for years here. it's a low-margin business. there's a lot of competition. i don't think those specific remarks will impact the company or sentiment all that much. i think we've seen a lot of that effect, perhaps, thus far. it depends what the ceo does, i think, from this point. so, that being said, in a more favorable or accommodating rate environment, stocks like wayfair tend to do better. they have debts. they perhaps trade at gross stock multiples, and from that perspective, you know, that could be a tailwind for wayfair this year. what we're really looking for is margin expansion. that gives them the room to

invest more in growth, and that's what would make us more constructive on the stock. >> what was your best call of 2023, colin? >> oh, i think it was meta. we said buy the dip back in, you know, q4 of last year. meta would get its mojo back. the street was missing all that was happening with reels and monetization and competition, and so maybe we got lucky with that one. >> it's pinterest for you for 2024? is that the fave? >> pinterest was our top second half pick. we like what bill reddy, the ceo, has done, transitioning pinterest to an e-commerce and shopping platform. we think that is still in the early innings. there's still a lot of room to grow monetization on the platform. obviously, the stock has done really well of late, so we need to see follow-through. but this is one of those second-tier ad platforms that has the potential to emerge, not as a first-tier platform like meta but certainly in between. >> really took off just since the end of october. so, colin, thank you very much.

appreciate it. top picks for the year. >> happy new year. >> happy new year from baird. lots of news involving tesla from the stock's december rally to the road ahead for deliveries as we expect a new number next week. taking another look at futures here as we head to the opening bell, looks like we are going to open positively, just barely, on the s&p 500 as we inch closer to that all-time record close. the nasdaq, also adding about 0 0.2% here in the early action. we are just adding, at this point, to some year-to-date gains, which have only piled up on this win streak we're coming off of.

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s&p 500 premarket fgainers righ now, bath & bodyworks on that list. align technology as well. little bit of a theme there. keep in mind, we closed yesterday within 0.5% of a record high, something we haven't done since last year, when interest rates were at pandemic lows before the fed hike streak. we are just adding to gains. nasdaq is tracking for its best year since 2003 when it gained 50%. opening bell just minutes away. to duckduckgo on all your devie duckduckgo comes with a built-n engine like google, but it's pi and doesn't spy on your searchs and duckduckgo lets you browse like chrome, but it blocks cooi and creepy ads that follow youa from google and other companie.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. crude oil prices pulling back today, one day after hitting a december high, which was sparked by news of houthi rebels attacking another ship in the red sea. an msc vessel en route from saudi arabia to pakistan. a german shipping giant says it will continue to avoid the red sea, despite the u.s. and allies deploying naval ships, so going a little bit different direction than maersk. clearly, the problems have not gone away, and we have this news

of another attack yesterday, even with the u.s.-led coalition trying to police the seas. >> just shows you how uneven this is going to be for the foreseeable future, for every, as you said, maersk, there's hapbag lloyd and who knows who else or what defuses this situation to any more meaningful thing. on energy and crude prices, remember, john yesterday was telling us that he thought we may go under $70 because these supply-demand dynamics, just given what's happening in the global economy, are likely to drag oil a little bit lower. of course, any sort of geopolitical flash point could change that in the immediate near term, but maybe the supply-demand dynamic and the slowing economy thing is going to play out a little bit longer and have a greater impact on oil potentially going lower. >> well, and that's been the overarching theme of the supply glut and whether that continues into next year, because opec plus has been trying to get

prices a little bit elevated there. even though we have had this little squirt in terms of crude oil, we are tracking for a down year in oil prices, and that's the first down year we've seen since 2020 when it comes to the price of oil. let's get the opening bell. at the cnbc realtime exchange, here at the big board, university of miami and rutgers university ahead of the bad boy mowers pinstripe bowl at yankee stadium. over at the nasdaq, blank check company bowen acquisition corp. those are still happening, huh? blank check companies. looks like we are going to open a little bit higher here on the markets, not quite as broad as yesterday's strength, at least in the early action, but in key groups that we have seen as winners, they're opening up. consumer discretionary, communication services, technology. health care and staples are getting a little bit big today. nasdaq 100 up another 0.1%. nasdaq's up another 0.1%.

year to date gains for the nasdaq now above 44%. >> you know what's down again, though, is apple, which has been down for four straight days. stock's still just about $193. as it was moving back towards $200, it's been over $3 trillion in market cap again, and now there's news that the outgoing vp of i iphone and watch designs going to -- is going to join johnny ive at love form in february, and sam altman to build hardware. boy, jony ive is an icon in tech hardware design from his days when he was at apple, running the show in designing the iphone. >> 20 people from apple over to that firm, which obviously takes a lot of notice. i don't know how sam altman -- he's doing this, working objn t hardware for a.i., leading

openai and chatgpt. he's raising money for this nvidia competitor to build semiconductors. he's got a lot going on. but this is one of the criticisms. >> he's a multitasker. >> when word came out that the board wanted to get rid of him to begin with, because he's got his hand in so many different things. >> there's another person i'm thinking of that has his hands in different things. elon musk. tesla stock is up 130%. they are expected to fall short of that 2 million annual sales target that he has set, at least internally, and that happens as, you know, ev sales have slowed globally. he's been cutting prices dramatically throughout the year on numerous occasions, trying to drive sales, especially over in china where, you know, they're not the only game in town. in fact, now they're the second game in town as byd has really eaten into their market share. >> they're poised to surpass tesla as the worldwide leader in evs. >> that competition is going to

continue. that's one of the reasons why we're wondering if he's going to cut prices again. >> also, byd has a cheaper price point. it speaks to the changing competitiveness in the u.s. auto market, the chinese auto market. the chinese auto market overtaking soon potentially the japanese auto market when it comes to production and exports. as far as tesla, big fan, dan ives, thinks they're tracking for deliveries slightly ahead of the number for the fourth quarter based on what he says is strong data in china and the region that gives him confidence in the bullish call. he also calls musk's move this year a poker move, praises it, to cut prices in the face of concerns about demand and competition, which put all the other automakers, i think, in a tougher position. >> i still always have in the back of my mind, too, and i think tesla investors do as well, just given what's gone on with the financials around

twitter and the acquisition there, whether at some point he sells more tesla stock to deal with some of the debt around the twitter acquisition. i feel like that's always in the backdrop somewhere, because it's happened before where he had sold some tesla shares, not that it's had a meaningful impact on the performance at all, because there's still such a substantial investor base that buys the dip for the most part any time that stock does have a considerable dip. >> though, for now, it doesn't appear that that's the central concern. there were times, right, and i think that it was a few months ago, musk said, i'm done buying for now. it could happen at any time. the only sort of tesla mover out there right now is there's a report out of bloomberg that it's preparing to roll out the revamped version of the model y, which was the smash hit sort of suv in its shanghai plan. this is according to people familiar with the matter, but obviously something for -- exciting for investors to get a new model out there on the market in this sort of higher, competitive ev market of china at a time where demand has been

slumping a little bit and appetite for evs in the u.s. >> another tech billionaire in the news today as well is masasan. $7.6 billion. they received shares as part of that deal. it's really been a win big/lose big dynamic over the years. lose big in wework, win big in doordash, and obviously, this -- >> sprint, t-mobile, for sure. >> the sprint fallout here. >> also, they had -- >> by the way, arm was, like, i don't know, $46 late october. we could throw up what arm is now. it's not $46 anymore. it's surged with the rest of the market too. >> 44% above the initial public offering price. >> three months, it's up 40s. >> it's had a goodrun.

>> remember what happened after we had this, what, three or four ipos in a row. >> shut down. >> they got out of the gates really well, and then you look a week later, and they were all below the ipo price. >> well, what happened is that was coming in the fall when we saw this rate spike, this backup in yields on the idea that the federal reserve might not be closer to the end. that's been completely reversed, so i do wonder if it opens up the window. it should for ipos to get the interest rate stabilization and to get interest rates at lower level. you should see capital markets wake up and perk up next year if we continue to see these trends. ipos, m&a. we're already seeing the m&a happening. that gets to sort of what's been happening with banks. i don't know if you saw the tally. "financial times" did a really nice tally on global banks and just how much they've shed jobs this year. they looked, especially, at the investment banks, because that's where the pain has been. global banks eliminating more than 60,000 jobs in 2023, marking one of the heaviest years for cuts since the financial crisis.

now, we're nowhere near those levels, but it does reverse a lot of the hiring from some of these banks that we got during covid-19 when business was booming. a lot of it is the investment banks, the deal makings, the ipos, the takeover by credit suisse, by ubs, for instance, that led to a lot of job losses, at least 13,000. more to come, potentially, on that front, but that has been one of the themes of the year, and then there's also, you know, a regional bank crisis that happened earlier this year. >> oh, yeah, i remember that. >> banks failed. we got through that, actually, pretty much okay as far as the financial system. but we're all attuned to risks like unrealized losses on bank balance sheets now and a time of rising interest rates. the question for 2024 is less that, with falling interest rates, and more commercial real estate exposure, and if we do get losses in commercial real estate, defaults in commercial real estate, what's that going to do to regional bank balance

sheets, and does it have systemic implications? >> pretty amazing gains for all of these over the last month, minimum, whether it's the regionals, where i know i cited this already, i think, yesterday about bill gross calling the bottom in some of the regionals and buying a basket of them that have done quite well, but also the big guys. jane fraser has spearheaded the turnaround of that firm, and investors are rewarding what she's doing, at least in the last month, up 14%. outpacing gains from some of the other competitors, whether it's goldman or jpmorgan. >> so, there's some optimism around the restructuring, and that is ongoing right now, so i think that's sort of a show-me story when it comes to the progress and whether she can really cut out some of the fat in that organization and make it grow faster, right? one example of one of the bigger banks that through the regional crisis, the story was the bigger banks got bigger and better. jpmorgan, first republic, for instance, got to buy that bank.

all the deposits that were flowing out of the regional banks, some of them were going to the bigger banks. citigroup didn't benefit as much from that but has been, as you say, toward the end of the year, a winner on jane fraser's whole restructuring plan. also wanted to hit retail, scott, because we're in the middle of the christmas buying and returning season. the xrt, the retail etf, has had a pretty good december as well, up 12.5%. there's some leaders that we don't talk about every day in this space. sally's beauty, up 40%. leslie's, chewy, the online pet retailer that's been swinging around, a very volatile stock, is having a great december. 69 components of the xrt are up in december, some of the mall operators, bath & bodyworks is having a good day today. >> target's up almost 8%. >> a lot of these companies had lagged, and macy's too, with some hopes that it gets taken private. it's up 30% in december. >> what did we cite? the consumer -- >> mastercard. >> we have 3.1%.

there's still expect -- look, go back to the goldman thing we started the show with, the ten predictions of 2024 that the consumer spending is going to outpace expectations. that's going to be a key thesis moving into the new year about whether the bull story continues or not. >> at a slower rate. i don't think anyone denies that the -- all of the rate hikes and all the inflation and a cooling jobs market is going to have an impact. the question is, can the consumer hang in there? 3.1% growth for holidays is great, but it's like half of the year before. if you look at some of the credit card data, and there's some realtime data -- citigroup puts out one week by week. they did the fourth week of december showed an acceleration from the third week of december, so that was positive. it's still down, though. decreasing 6.4% on the year. but it's better than the week before. and december, positively, is actually poised for an acceleration from november, which is good, and also makes

you wonder what's happening with the consumer if things are getting better. i think you have to point to real wages. >> i was just looking at the s&p 500 ticking by on our screen here as we're a little less than 20 points away from a new closing high. 4,796 is the number that you want to keep an eye on as well. some other stocks -- let's get back to microsoft just for a moment, because we didn't really talk about that big story of the morning happened just before we came on the air today that the "new york times" is suing microsoft and openai, alleging copyright infringement, really big story as that whole battle and this whole, you know, brave new world of artificial intelligence continues to evolve, and we try and figure out who the winners, losers, and what all of these other ancillary issues are going to be. >> we've seen this kind of copyright issues before, some of the actors, sara silverman, for instance, is suing. the regulators need to figure out what is protected in terms of copyright, in terms of what goes into these a.i. models, or

you're going to continue to get these groundbreaking cases here, now like "the new york times," which is claiming that they built -- that chatgpt built the a.i. models by copying and using millions of the publication's articles, and now, they're directly competing with the online content. it's clearly an existential threat for a lot of media companies that we have to figure out the rules of the road. >> this lawsuit comes after negotiations between the two companies had failed, so it's not like they're not trying to figure all this out, and you know, openai has had conversations and done deals with other publishers, whether it's axle springer or the associated press. they just couldn't come to an agreement with the "new york times," so you're going to go down that road. you're going to have to. these chat bots are going to have to -- are going to have to strike deals with publishers. it's the only way that this is g going to work, or else you're going to be in court with every single publisher on earth.

>> actress, poet, writer. i mean, you name it. by the way, on that note, did you see the anthropic revenue numbers? this is the openai competitors. this is the one that's backed by amazon and google. they're projecting it will generate more than $850 million in annualized revenue by the end of next year. that is a jump from three months ago where it was telling investors that it was generating revenue at $100 million annualized rate, which just speaks to how fast these technologies are taking off and the demand from that. they thought that, at that point, when they last updated investors, it would reach $500 billion in revenue by the end of 2024. guess what? we're now up to 850. >> call me when it's $100 billion like openai. back to microsoft for a second, speaking of valuation. another, you know, key story to watch in '24, is microsoft going to hit $3 trillion in market cap? it's not far away. apple's barely hanging on to it. still, microsoft is around 2.75,

so it's getting really close. we'll see if this mega cap hype and all the openai -- yeah, the openai investment there but also a.i. hype continues to lead that stock higher. it's had a really good year, obviously, like all the others have. >> i was just going to say, in the opening action, we have tesla, meta, amazon. you were talking about amazon getting some love. it's had a pretty decent year so far this year. not thought of as much of an a.i. play, and i wonder if some of these that aren't, like apple or amazon, have an a.i. story or component to them in 2024, because this year, it's been, what, nvidia, microsoft, those are the a.i. plays. >> that's what i mentioned raymond james to the analysts we had. they named their top pick, amazon, "laggard to leader." they like meta. yes, they like alphabet. yes, they like microsoft, which they say is in the pole position, but after a while, you start looking to the other players that are going to have a considerable role. i guess we're going to wait and

see what apple has to deliver as it relates to a.i. they're not going to sit there and do nothing. that's for sure. the degree that they do something amid these other issues that they have around the watch band and trying to get their revenue growth back into, you know, positive territory. >> and jony ive's working with it with sam altman. time to put a spotlight on dow dogs and dividends. let's get to dom chu. >> it's a decades-old strategy, right, sara, scott, with regard to dividend plays and the dow. those so-called dogs of the dow where at the end of the year, you pick the ten highest-yielding stocks in the dow, buy them in equal amounts, hold them for a year and then just rebalance them each year. it's generally been viewed as some of an outperforming strategy if you factor in the dividend yields that you get. this year, it has been a bit of a laggard so far, but if you take a look at the dogs of the dow this year as we head into

2024, some of the biggest moves that we've seen on a year-to-date basis, in terms of gainers in the dogs of the dow, have been in amgen, up 8%, dow, 16% gain for ibm. jpmorgan, up 26%. and of course, the real big gainer, intel, nearly doubling in value, 91% gain overall for the dogs of the dow. if you take a look at some of the underperformers that we've seen as well, these are some of the names that have been cycled through, walgreens, you can put in there. chevron as well. some of those ones have really underperformed. you can see walgreens down 29%. chevron, down 15%. 3m, verizon, cisco, up 6:00. th 6%. the portfolio of ten happen roughly 6%, 7% so far this year, underperforming the broader dow. as for what it's going to look like in 2024, the general list of those ten have stayed the same with regard to the highest-yielding stocks on the dow. walgreens is still up there, 7%

plus yields, same with verizon. five-plus percent yields for 3m and dow and ibm with a 4% yield there. and then you take a look at some of the other higher-yielding stocks in the dow as well. you take a look at chevron, amgen, cisco, jpmorgan, and intel, those are the current dogs of the dow. because of the intel performance and jpmorgan performance, up in price, yields gone down, they are now going to get probably kicked out. they're going to be replaced by a couple of other stocks. a consumer staples name in coca-cola, also a health care name in johnson & johnson. both of those stocks have underperformed so far this year, and both carry a roughly 3.1% dividend yield overall. as you take a look at the dogs, sara, this time around, the list for 2024, very similar to 2023. but we're going to kick out intel because it's done so well. kick out jpmorgan, because it's done so well. we'll put in coca-cola and johnson & johnson. we'll see how that plays out. i'll send things back to you. >> some of the dividend payers

making a little bit of a stand here as we're seeing these lower rates. dom, thank you very much. as we head to break, it is time for the bond report. speaking of lower rates, let's take another look at how treasurys are faring this morning. yields, well, they reached a new low for the cycle this morning. at least on the ten-year note yield. and yeah, we're right there. 3.844%. so, more buying of treasurys continues the trend of what we have seen in the back half of the year. we have seen four straight weeks of positive returns for bonds. and that's been underpinning this stock market rally. we'll be right back. together, we built something truly beautiful. it takes years of dedication to get to this milestone. the new york stock exchange is a symbol of what america

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what's moving? the dollar index. lower again. look at the year to date performance. down more than 2%. the first negative year in three years, back to 2020 for the u.s. dollar index. and a lot has been supercharged by fed chair powell and

expectations for the rate cuts. and the dollar is down 1.64%, on pace for the worst quarter since 2022. e eraning to be thankful for for thamic national companies that do so much business abroad. we'll continue to hit the action on the other side of the break. more benefits. more growth. when you realize you can give your people everything, and more. thank you very much. [applause] ask, "now what?" here's what. you go with prudential to protect, empower and grow. with everything you need to deliver, you guessed it... more. one more thing... who's your rock? learn more at prudential.com

mortgage rates have dropped in the last few weeks after rising more much of the year. will that be enough to boost the housing market in 2024. diana olick join us with a look at what to expect. will it? >> reporter: that remains to be seen on a number of factors because 2023 may have been the least affordable year for housing in history. record high and rising home prices combined with rising mortgage rates which don't usually go together made that happen. through october, the typical 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 house payments for the median priced home. the median household income is $75,000. so mortgage rates started at 6.5%, jumping over 8 p% in october. they will start next year about where they did this year.

so let's compare a 6% port ga -- 6% mortgage rate compared to 8%. at 6% a $400,000 mortgage your payment is 1918. and at 8% that jumps $430 a month. lower rates help on the payment but home prices continue to rise and the gains are getting bigger because the supply of homes for sale is so low. as of october, prices were up 4.8% year over year. that's the largest annual gain of the year. the supply of homes for sale is still about 38% below pre-pandemic levels. so will sellers get off the fence and list this spring? it would still likely mean trading to a higher rate not just 8% rate but still a 6%

rate. that's what remains to be seen this spring, guys. >> i think we should mention the performance of the home builder stocks. dr horton, la for that, up more than 60% ear-to-date. they were running up with high mor mortgage rates and got a leg up and then rates started to fall. >> they did get the jump when rates started to fall and when housing starts for november released a week ago shot up, because home builder sentiment shot up as well. potential new orders, they have to still watch prices, people can only afford so much. >> when we come back, talking to a bank ceo with perspective on 2024 mortgage lending and the housing market. "squawk on the street" will be right back.

there is a lot of information out there. hamas slaughtered more than 1200 innocent people, holds innocent hostages, and raped countless innocent women. and now hamas is trying to hide

sexual violence against women. they don't want those women to be able to talk about what happened to them stand with palestinians and israelis for basic human rights. stand for all women. good wednesday morning. welcome to another hour of "squawk on the street" i'm sara eisen with scott wapner. live for you from post nine of the new york stock exchange. carl and david have the morning off. we continue to inch higher, nearing that record closing high

for the s&p 500, at 4780 right now. the number to watch is 4796. which would be the first time we closed at a record high since back in 2022. before interest rates really started to move up sharply. the dow is up, the nasdaq up .2%. we should hit the russell 2000 moving higher, up .4% right now. taking the month to date, since the beginning of december, total to 14.25% for the russell 2000. small caps have lagged but they're having a breakout bringing the year-to-date gains past 17%. treasuries also rallying. this is the rally of everything, gold, bitcoin, bonds and stocks. the bond picture. the 10 year note yield continues to move south, 3.84% and that is stimulating the positivity in the market. the 2 year goes below 4.3%. we are 30 minutes into the trading session. here are movers we are watching.

bitcoin, another good day for bitcoin and related stocks like coin base and microstrategy. rally alongside the crypto cryptocurrency. tesla, the company plans to roll out a revamped version of the model y from the plant in shanghai. mass production could start as soon as next year. and amazon announcing plans to show limited ads on prime video at the end of january. customers who want to remain ad fee have to pay an extra $3 per month. as we turn back to the broader markets. fresh economic data hitting the tape. getting regional fed surveys, richmond comes in at negative 11. that's kind of a miss. the consensus was negative 6 points. this reflected negatively last month and speaks to the pain in the industrial part of the economy, manufacturing part of the economy, it's not the biggest part of the economy but

it is showing some weakness. we have that in the fedex earnings report. dallas is up next at 10:30. >> important if you're trying to build a case that manufacturing is troughed. then it matters more. at some point you have to hope that you're going to start getting back to expansion in the manufacturing sector. it's been everything else that has carried the economy. if you have any bit of waiver from the consumer and then you have manufacturing which still hasn't troughed and turning higher then you have a potential issue to deal with. but one read is not going to upset much of anything. i don't know if it caused a movement, a tick lower or two, a couple points in treasuries or not. that's where i would look. minus 11 versus minus 6. >> it's a big mix looking at treasuries right now. so maybe a little lower tick. the overall theme, though, and the major data point that the market is teeing off of and has

been throughout this entire rally, has been the inflation story and the disinflation story just how far how fast, david rosenberg did the six month annualized which is what a lot of sophisticated economists, including at the fed and treasury are looking at to smooth over what's happening with inflation. core pce deflator. this is six month annualized. look how far it's come down. this is the progress that the fed wanted to see on the back of the rate hikes. this is the progress the market has wanted to see. and the big thing, it comes without a recession or spike in unemployment. if you go back to the surveys this time last year, 80% of economists in the surveys expected a recession or a downturn to happen in 2023. it didn't happen. >> at some point the fed's own

staff of economists were talking about a recession. and the fed itself didn't expect inflation to be where it is today. and the fed itself didn't expect growth to be as strong as it is today either. you know, let's see if we can avoid a surprise in 2024 where the pce deflator is going in the right direction towards target that you don't want any sort of reversal in inflation at all. they have to rethink the whole, you know, story about not only how we got here but where we may go from here. >> right. i think there's a risk on the other side, too. that we start to get more components in depolicefldeflati. that last chart, that's core target 2.6%. here's the different components thank you to ben emmons at medley advisers that are looking

deflat defl deflationary. these are the parts of the economy that have not been in high demand and it's not a majority. we know that inflation has been focused right now in the services part. but we watch these sectors and we watch these goods, for instance, because if that expands, then you worry a bit more about deflation. i'm not sounding the alarm but i am saying with high expectations of earnings growth next year, deflation is bad for profit margins and that was good for profit margins. watch for sectors not just disinflationary prices but deflati deflationary prices. it could be a head wind in earnings. >> on that note stay with the markets and the conversation as the nasdaq aims for the best yearly gain since 2003, joining us dean mackie and chuck leibermen. great to have you both with us.

dean i begin with you on what sara and i were talking about. is the fed going to pull this off? did they already? >> certainly the last six months of inflation have looked very good. and as you're saying we did not require a recession to see that disinflation happen. we have not thought there would be a recession. we don't think a recession is coming next year either. the main reason for that is really the resilience of the service sector. it's still -- many sectors are still below precovid levels and that gives a tail wind to the economy. so what happens is that pandemic related surge in prices has unwound and that didn't require a sharp rise in unemployment to get there. >> so chuck, then if you believe what dean is saying, the data sort of bears it out, what's it mean for markets in 2024? >> i think it means very clear sailing, i do agree with dean,

i'm not looking for recession, i don't think there's one on the horizon. there are too many parts of the economy that are looking healthy. you can run through them quickly. in the manufacturing side, boeing is doing well. the single largest exporter in the u.s. look at housing. even last year when interest rates kept on rising. housing bottomed out and now it looks like it's about to take off because rates have come down. looking at other parts of the economy. government spending on infrastructure, green initiatives and also bringing manufacturing back on shore. all of that presents tailwinds for the economy. i don't see a recession. >> you say things like clear sailing i can't help but think of what some on wall street have said in the last couple of days, one of the fears is there's nothing to fear. are you concerned at all there

doesn't seem to be very many bears left at this point? >> it's all a matter of timing. you know, some people would say i'm a bear because i think that labor costs continued to rise at a pretty solid clip. and so does hiring. and the net result of that is it limits the potential for wages to come down and wages represent roughly 70% of the cost of producing gdp. so i don't see the improvement in inflation, necessarily being sustained. some of what has occurred is merely the reversal of the transitory factors that were pushing inflation up a couple of years ago. that's now come out of the economy. but under the trend, if you look at labor costs, labor costs are still rising at a solid clip and so is hiring. so it's no reason to think that the job market is going to get loser. it continues to get tighter. temporarily we had a surge in labor supply. i think because of baby boomers

coming back into the market because the payment -- or the pay was too good and also we had the illegal immigrants who were hired. they need to work, put food on the tables, and firms need labor so they hired them. that means growth is not going to slow and labor costs are not coming down that much more. >> is that a risk to the market's 6% or so rate cuts it expects next year? >> yeah. i do agree with charles that the -- the labor market is more likely to take a boost from here. we think the unemployment rate is lower a year from now than today. but that means while wage growth has decelerated, a lot of that really is just coming off one-time large pay increases to get people back into the workforce during covid. but it's limited how far down wage growth falls and at some

point as wage growth falls further unemployment picks up. that may be a 2024, 2025 story. but i don't think the fed is going to be cutting six times with the labor market this tight. >> if wage growth is going to pick up later on, does that mean the consumer hangs in like goldman suggests it's going to beat expectations in terms of spending this year? >> i agree with that view. we think the two main drivers of consumer spending are real wage and salary income growth and household net worth and it's higher now than any .70 years prior to covid. net worth relative to income and also real wage and salary is healthy. we don't see why the consumer is going to settle down here we think spending will stay solid. >> happy new year to you both. see you soon. dean and chuck, thank you both. >> thank you.

everybody was pessimistic 2022, 2023 was up big. as we head to break. our road map for the rest of the hour. the ai he ladlines you need to know as they face another departure at apple. why one banking executive said to expect movement in the space and soon. whiskey drinkers breathing a say of relief as prices of top shelf imports look to be staying steady for now. more "squawk on the street" still ahead with the dow up 68, 70 points. don't go anywhere. that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this. and it was easy, with a partner that puts you first. godaddy.

welcome back to "squawk on the street." u.s. retail sales growing 3.1% this holiday season according to a report by master card. but next guest is warning of uncertainty ahead. the consumer is cautious and discerning across all income levels. dana chelsea joins us now with top retail picks including ralph lauren and target. i feel the consensus on the u.s. consumer is slowing, feeling the physical pain but still growing and will continue to do so. is that wrong? >> that's right. first of all, thank you for having me, happy holidays. wages are growing 4%, inflation 3%. when i think about 2024 and the

set up, i think there are two markers of success, it's about innovation and vaul. we know you need newness to drive demand and innovation fuels the flywheel of consumer spending. think about value it's more than just price and quality. looking at companies today and who can deliver those markers it's a ralph lauren with low to mid single digit sales growth should get to $165. bath and body works which had an underwhelming 2023 and poised for growth with 2024 and a loyalty program with 40 million members that can take advantage of their categories. >> i am wondering, who you don't think gets enough respect as far as the retail strategies go? because it obviously makes such a difference now with the consumer starting to slow. >> exactly.

think about which retailers overall, you think target. margin recovery should be the game plan for 2024 after what happened in 2023. and that could certainly be a benefit for them. in addition, look what we talked about with innovation, more merchandise enhancements coming and more brand clollaborations. >> looking at estee lauder which you have a hold on, stock down 40% on the year or thereabout. i think china is a considerable part of the story. what happens there? >> a messy year in 2024. i think the first half of calendar '24 you continue to see challenges. there is product innovation under way at estee lauder that should debut in the second half of the year but more risk of earnings pressures in the first half of the year given you're still not seeing the recovery in china you would have expected to see to drive growth. and in north america i think there's more product enhancements that need to be

done in order to drive growth. beauty is a category overall that's working. look at ulta, sephora, and the independent brands that are top sellers driving demand. >> you're saying it's not a broader comment on luxury? >> no, overall, luxury overall, i think that estee lauder is their own ewe meeunique issues. luxury we've seen it slow, the aspirational consumer isn't spending as much. i don't have the chinese tourists. think about luxury for the back of the year, taking advantage in companies like lvmh is a strategy. frankly i'm also watching a pe ind tapestry. i think we'll see the core tapestry business reach the $5 a share over time. i'm anxious to see the debt

reduction and synergies that go into that. >> i think the market has skepticism around that deal. the stock is flat year-to-date. >> um-hum. >> i think about the nike warning because it's unusual for nike to do that. they really did speak to macro softness around the world and i wonder how much that's factored in to say a lululemon whose stock is trading at a record high. >> keep in mind on a lululemon, i was out there two weeks visiting them. you talk about innovation, watch new product coming out this year that captures men and women, that's accessories, outwear and apparel. look at the growth, it's u.s. and international. the brand awareness, particularly omen is still low. and there's significant opportunity. and the functionally that they have helps to enhance their margins. i think there's more opportunity in lululemon given the product awareness and product innovation that's coming in '24 than what

you may have had in 2023. because keep in mind i went back and looked at my outlook report of 2023. the words of uncertainty filled the pages. the pivot that we have with the fed with consumer spending in '24 makes for a more dynamic year in '24. >> does it make you worry about anyone? >> it doesn't make me worry about lululemon. it makes me worry about some of the suppliers who nike supplies. you worry about the dbi and dsws of the world. look how they didn't mention foot locker in the announcement of which retailers are performing well. i'm looking at the retailers who carry nike and watching carefully. >> dana tesley thank you very much. >> thank you. and bitcoin rallies into year end. can the crypto keep up the

momentum? 2024? we will be right back. stay with us.

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the cryptocurrency continues the gains into year end. dom chu is here with more. >> cryptocurrency still a big deal out there for folks on the investor front. we have seen cryptocurrencies not just bitcoin but all the others going up. bitcoin at $42,865 the highest in the last few weeks pushing towards 45000 mark. because of the move higher in bitcoin prices we've seen a number of stocks in the bitcoin ecosystem ride the wave higher and to a greater degree. so they've put on x times the performance of those bitcoin moves. microstrategy, the business software and enterprise services company is up about 2.5% right now.

a massive move higher over the course of this year. coin base and robinhood to a lesser degree as well. on a one year basis many of the stocks have gone up huge in value. if you look at the moves. look at marathon digital holdings up 6.5%. up 740% over the course of the year-to-date period. so companies like microstrategy and marathon digital holdings. both of those stocks among the highest shorted stocks in the market right now and hold bitcoin and other cryptocurrency on their balance sheets as well. massive moves in terms of micro staej and marathon digital holding. some of the big winners because of the bitcoin move. >> robinhood too. i don't know if it's a bitcoin mover. >> it's up about 60% this year, which is very respectable but not unlike some of the 400-some-percent gains in the

other stocks. >> after the break, speaking of stocks on a tear, mag 7 tech stocks the group up nearly 20% in two months p. we'll get the top picks for the new year. stay with us. ameritrade is now part of schwab. bringing you an elevated experience, tailor-made for trader minds. go deeper with thinkorswim: our award-wining trading platforms. unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. and sharpen your skills with an immersive online education crafted just for traders. all so you can trade brilliantly.

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and creepy ads that follow youa from google and other companie. and there's no catch. it's fre. we make money from ads, but they don't follow you aroud join the millions of people taking back their privacy by downloading duckduckgo on all your devices today. welcome back i'm silvana heona with your cnbc news update. donald trump will stay on michigan's primary election ballot the state supreme court said it would not hear an appeal to a lower court's ruling in the case. it comes after a colorado supreme court found trump ineligible to appear on that state's ballot because of his role in the january 6th attack on the capitol. about 8,000 people are thought to be headed to the

southern border from mexico, venezuelan, cuba and other countries. they're continuing the march north as secretary of state antony blinken is set to meet with mexico's president today. and the eiffel tower is shutdown today as workers strike ahead of negotiations with the city of paris. it's not clear how long the strike will last. workers picked today for it to stop because it's the 100th anniversary of the death of the tower's creator. lots of a.i. head llines to get to including apple's brain drain, another executive departs. let's get to steve for the story. >> reporter: there's apparently some kind of secret hardware thing going on at open a.i. based on previous reports we knew johnny inlandve, the chief

designer at apple he's involved from his independent design firm that he started after he left apple. bloomburg reporting that tang tan, who is the departing designer is now joining the same project with johnny ive. we have no idea what they're working on. but you have the hottest company in silicone valley tapping apple's designer for a new ai gadget. love form was contracted by apple to desome design work but that is over now and he's free to work for apple competitors. and the design team is run by coo jeff williams. and he has a reputation, kind of like an operator, like ceo tim cook than a product visionary

design guru that led the group. saying a lot about the state of apple, a mature market for phones, apples and computers. i took part in division pro design, but nothing brand new on the horizon that needs that famous apple design take, guys. >> what is a.i. hardware look like? what does ivan mean? >> your guess is as good as mine. it's not a phone. there's one start up working on something called an a.i. pin that is founded by some former apple designers. that's going to launch next year. it's a kind of pin that you put on your clothing and can display stuff on your palm. i don't know if that's the answer to what an a.i. thing looks like. we're also hearing a lot of people talk about a.i. computers. unclear what that means beyond adding a.i. to the name. if johnny ive is involved in this this is telling the

direction of the ceo of open a.i. sam altman wants to go in, not just the software but some kind of new hardware to tap into it. these things take years to design and come up with. i don't anticipate seeing anything soon but it's fun to speculate and again, this hot start up is taking talent from apple. "the new york times" suing microsoft and open a.i. for alleged copyright infringement saying the company exploited the content to create their product like chatgpt. here to break down the impact is jeffrey's brent dale joining us now. you see the headline what does it make you think? what's the risk to microsoft, if any? >> i think the a.i. world is a new world, obviously. we're -- this is the first big lawsuit we've seen.

and when you think about news flow on a.i. chat bot to go on and find information seems logical that would be the first place an a.i. bot would go and doesn't know if it's infringing. microsoft is good at navigating these legal hangups. but there's many a.i. roadblocks that we run into as we go through the journey. we are at the beginning of the journey. we are not anywhere near the middle or the end of it. it's just starting and the revenue ramp for microsoft is going to happen in the back half of '24 in a bigger way into '25. so we're still superearly in the journey. >> where are we in the stock journey of microsoft? we're talking about $3 trillion in market cap not that far away? >> yeah. the stock has had a phenomenal run. we think for '24 it's going to have another great year. that's basically backed by double digit growth, continued

margin improvement over time. and their leadership in a.i. and we continue to think again the back half of '24 will be a better a.i. revenue build. so we think microsoft is going to go higher. i would caution you, the igb or the software is up 60% year-to-date we're not going to see the same type of returns in '24 we saw in '23. no one was positioned, everyone was long semis and the software rally caught everyone off guard. think about next year i think it's a more modest return year for software. microsoft is a leader in that and it's going to be one of our top picks into next year. >> what about salesforce, best stop of 2023, up 10%. -- up 120%. i know they've done a lot but also have an activist story. >> the story there is is the

margin improvement. they're running 40% improvements. they need to still go on a diet and hit the peloton harder so we think there's tremendous amount of margin upside in 2024. they are behind in a.i. adobe and microsoft are ahead. the products in market shipping real tangible rois from customers. we think it comes for salesforce but it's not there yet. not every story has a perfect a.i. story yet. we think salesforce will have a better story. the product is hardening and getting better but not ready for what you consider prime time. a lot of companies are still exporting to snow flake to do analytics on that data and not keeping it inside salesforce and that's a testament to -- i don't think a.i. is quite ready. it will be and we're bullish they'll get it right over time.

but right now i'd say adobe and microsoft are ahead in a.i. >> why is amazon seemingly a name in favor, all of a sudden as it relates to a.i. i've seen some of your peers talk about it that way. it is one of your top picks. it's not like the stock hasn't done anything it's up 80% year-to-date. i think i read notes that suggest in terms of a.i. it goes from laggard to leader or one of. >> they got caught. microsoft got out of the gate quick and down in the game around a.i. and marketing. i think they're catching back up, this concept of multiple providers, the bedrock is getting better reviews, hearing customers going and testing in production. we think amazon got off to a late start but is plenty of time to catch up. we think the simple investment thesis is microsoft and amazon are going to win the enterprise. those are going to be the two

most dominant platforms we see the next five years. and in that amazon will benefit from a.i. they are today the largest cloud provider on the planet with a 90 plus billion dollar run rate. most of the corporations have their data in amazon and they'll leverage amazon's a.i. over time to effectively help their companies. again, most of these large enterprises aren't ready for it and the hype is ahead of the reality. we think as you go through next year, the same thing happens at amazon as microsoft. they will not want to go to one vendor not just microsoft but want to go to amazon in others. and most of the data is at amazon already so they have a unique advantage to help out. so aws will accelerate next year. you see continued good margins at story combined with the advertising business and then the continued focus on logistics and in ensuring that they're not

wasting money on projects they had to spend during the pandemic. so continued operating margin improvement, accelerating growth, amazon still in a really good position. >> thank you, appreciate it very much. >> thank you. still ahead, are virtual power plants the future of energy? we'll discuss that and explain just what they are. after a break. with the dow still rising losing a little bit of momentum here. up 50 points.

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with mortgage rates dropping sharply the last few weeks, what will rates look like in 2024? let's bring in frank. good to see you, welcome. >> great to be back, welcome. >> what do you see right now for housing activity since we've seen mortgage rates come down? >> certainly there's an uptick in mortgage applications today as interest rates have come down a bit. but i have to tell you, 2023 was a robust year for housing starts, for home builders, apartment builders and for people graduating into new homes and buying and building new homes. it was a pretty robust year. >> so it didn't really slow down as much as you would think with an 8% mortgage rate? >> on the construction side we all have to remember, our housing stock in the united states is woefully under supplied. so for the past probably decade

we've been at least a million homes short in the united states. that includes apartments and single family homes. so builders have been really taking spadvantage and constructing in neighborhoods. it takes a long time to get approved and get a shovel ready project in the ground and deliver it. so there's a steady stream of folks looking for new product, the housing stock that exists is aging quite a bit. so it's actually a good time for home builders and contractors today. >> when you talk about -- when you hear people talk about this coming crisis for regional banks, what is generally your response to that? i will also say i'm looking at a headline at "the wall street journal" saying a banking crisis at the smallest lenders. they're talking about the rural

banks but i'm not sure you have perspective on the topics. >> connect one bank here in the new york metro market has really stayed true to what banking needs to be for its community and that is we take in deposits and make loans. we don't have any products and we continue to build through our deposits for our clients, servicing our communities and making loans in those communities. so a lot of those issues really don't impact, you know, what we're doing here in the new york metro market. and i would say that's true for quite a few of the banks in the country. there are some that have lop sided securities portfolios. the reduction in interest rates over the last few weeks probably helped a lot of those out. so crisis may be a strong word for what's happening in the banking industry today. let's not forget it's banks that

provide the liquidity and the funding and the capability for business to -- you know, to do what it does here and make the united states what it is today. >> but there were all sorts of worries after that regional bank string of failures about a credit crunch that banks like yours wouldn't be giving out loans and it would change their posture. what's happening on the loan side and access to liquidity for businesses and individuals. >> i think what needs to be focused on is what is the federal reserve doing? the federal reserve is doing two things, increased short term interest rates that dampened some economic activity makes people think about what the cost of funding is for various types of projects or lending opportunities, whatever. and so that just dramatically slows down the economy by itself. but secondly and more importantly what the fed is doing with its balance sheet and the reduction of the size of the

balance sheet and the amount of liquidity in the banking system which in turn slows down lending. i believe both of those things are exactly what the fed has planned. they wanted to bring inflation under control, slow the economy down and wanted to have a normalized rate of return, interest, or cost of money, in the economy as we go through the next phase. that all represented probably for 2023 one of the slowest growth years for lending. and -- but i do think we will see an increase in lending as we move into 2024. liquidity is beginning to come back into the market. gdp is up. everyone has a job. people are feeling good about the economy. so i do think when we look ahead to 2024 we'll see a better time. >> that's encouraging. frank thank you for joining us with the outlook. >> you're very welcome. turning to energy as

electricity demand rises, virtual power plants could be a game changer. pippa stevens joins us to explain. >> electricity demand is rising while sources like solar can't just ramp up where we need it. that's where virtual power plants come in. it's a collection of thousands of smart devices, that when grouped together can help the grid by providing a power bank or reducing demand at peak times. there are benefits for both the customer and the utility. first is a more reliable grid. blackouts surged 60% in the last decade costing 150 billion a annually. the customer gets a credit of power supplied to the grid.

there are stake holders here like sun run, sunnova. and then the utilities adopting the programs including edison international and national grid. so scott and sara, it was a power in numbers story here. >> this is already happening or is this sometime in the future? >> it's already been happening and this idea is no means new. but we're at a turning point in the grid was built as a behemoth but now it's distributed. more homes with solar panels, more evs. while the grid had a supply and demand constant, things are in flux with consumers sometimes using their own power and sometimes using the grid. so these can be a game changer here when we think about electricity demand growing. they may not have to build and

spend billions of dollarson that peak plant, instead they can use vpp as a way to secure the backup power when needed. it's confusing but essentially it's harnessing all the grid connected devices in a smart way to match supply and demand. >> vpp. who knew. thank you very much pippa stevens. coming up the next round is on the house. potential tax on whiskey getting delayed as part of an ongoing tariff battle between the u.s. and europe. we have the tadeils and, of course, what it means for you next. of risk out there. huh ♪♪ hey, is this thing hard to learn? nah, it's easy. huh. you know, i think i'm going to ride it home. good thing you chose u.s. bank to manage and grow your money. with our 24/7 support at least you're not taking chances with your finances. yeah, i think i'm gonna need a chair.

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we're back on "squawk on the street." whiskey distillers toasting the any year. emily wilkins is here with those details. emily? >> hey, scott. american distillers are raising a glass to the eu this year after the countries announced they would extend a suspension of tariffs on whiskey. if they hadn't, bourbon would have been slapped with 50% tariff that would have started on monday with the start of 2024. the tariffs on liquor, they're the result of a larger dispute on steel and aluminum tariffs that were initially put in place

under the trump administration. now, turned biden administration, the u.s. and the eu have been negotiating over the tariffs for about two years, and u.s. trade representatives katherine said the goal is to forge a forward-looking arrangement that will allow the u.s. to join forces economically to incentivize fair and clean production and trade in the steel and aluminum sectors. andy barr, who pushed for an extension of the halted tariffs, told me that the eu has become a critical market for distillers from his home state. in the years after tariffs were first lifted in 2021, barr said that there was a 32% increase in u.s. exports. >> it really matters. europe is the biggest market outside of the united states for american bourbon exports. we're still trying to crack the code in asia and in other parts of the world, but europe really understands aged, distilled

spirits. and so this is the place where we really need a level playing field, zero taxes, zero tariffs, to really continue to grow this industry. >> the current pause on whiskey tariffs is set to last until march 31st, 2025. and both u.s. and eu trade officials are hoping to get a deal on steel and aluminum before then. sarah? >> all right. so they dodged a bullet there. emily, thank you. i want to bring in brandon gomez now for the impact to the alcohol makers. you cover these stocks. have they reacted? >> yeah, they haven't reacted in terms of swinging one way or the other from the relief of the tariffs. however, what i will say, if you look at the performance of these stocks year-to-date, you see that a lot of them have actually been in decline, right? you have brown forman, diago, although scotch with the johnnie walker. but they issued more cautious guidance, because they told consumers won't be spending on whiskey as much in the coming years as well. so you have to sort of factor in

that europe is a large market for a lot of these players, when it comes to those whiskey sales. this actually is a win for those names. >> are there just changing tastes as to why the guidance isn't that great? people not drinking brown spirits as much as other things? >> changing tastes in the u.s., definitely. you see vodka still number one. tequila, mezcal over taking whiskey as the second most popular spirit. but that's why europe is such a big market for these companies when it comes to their whiskey sales. you see brown foreman opening up a distribution plant in slow vaca. >> beer had a tough year. it wasn't just the decline of abm and the whole disaster around the marketing issue, but continued slower volumes in beer, too. >> beer as well, one of those players that has seen a lot of market share shift. people moving away from bud light, budweiser, brands like constellation brands, portfolio, things like that as well.

it's really seen as a re-allocation of interest. and we're talking about non-alcoholic beverages as well going into the new year, as gen-zers tend to drink less in one. >> i wonder how much the issues, also, ultimately have an impact on how much alcohol we're drinking. >> alcohol, but also then just broader consumer products, right? how is that going to exact consumer spending. notjust here in the u.s., but again if europe, and with these tariffs not being enacted until 2025. we might see more of that play out. >> anecdotally, people i know who are on these drugs are not drinking as much alcohol. the question is, how widespread are people going to be on these drugs, are they going to get paid for, they're very expensive, but could change the behaviors. >> yeah, absolutely. >> thanks, brendan. appreciate it. brendan gomez. see you on "the halftime report." we'll talk about dividends. it's not been a good year for dividends. we have jenny harrington on today. talk to a portfolio manager, get some top dividend picks for 2024, as well. a lot of people reliant on those

dividends. >> and i feel like they're in now, that rates are falling now. >> maybe that's the comeback. dividend, dividend growers, dividend aristocrats. we're going to talk about all of it. >> that sounds good. scott, thank you. >> thanks. >> enjoy your hour off. our live market coverage continues after the break. i will say, the s&p has gone negative, but just barely. dow remains positive. nasdaq also loses a little momentum, even with the strength direony duer in consum sctiarinstrials and real estate. we'll be right back. [ "i'll be seeing you" by the five satins ] the mercedes-benz holiday love celebration is here. come in now for the exceptional offers you're bound to love, now, through january 2nd.

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good wednesday morning and welcome to "money movers." i'm sara eisen with frank collins. ahead, apollo tortsten slok and can the rally continue with 72% of the stocks in the s&p 500 underperforming the index this year. and home builders etf on pace for the best year ever. what's all of this mean for housing affordability next year? and how can investors play the market? we will discuss. and the ceo of health compan