in the equity markets buying on dips in the fixed income markets and dollar cost averaging in makes a ton of sense. >> okay. carol, thanks a lot. >> thank you. right now, let's take a final check on the markets as we're heading into the new year. here's your chance, guys. they've within waiting behind us. you missed your shot. right now, it looks like the futures are down by about 145 for the dow. i want to thank mike and robert for being here. robert, see you later. >> thank you. right now, it's time for "squawk on the street." good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer at post nine of the new york stock exchange. da david faber has the morning off. worth day for the nasdaq since october. news flow does heat up today with ism, j.o.l.t.s., and some fed minutes. our road map begins with a tough start to the year for the stocks. great expectations. barkin now says a soft landing

is conceivable but adds that hikes are still on the table. and disney's activist moves, sho shoring up some support in its ballot against nelson peltz. let's begin with the nasdaq. worse start to the year since 2016. apple, jim, of course, was a big part of that, got placed the blame squarely on barclay's on that note. >> we got another note today from avidson just talking about lack of innovation. one of the themes that i saw right at the end of the year was if you don't have newness in tech, which is an odd term, then you don't have what people want, and the apple note today is kind of indicative of where i think people are, waiting for innovation, maybe generative a.i. will help. i know they bought a bunch of -- they bought some cards from nvidia, but my problem with all this, carl, is that, all right, we've heard it time and again, and this time, it's that service

revenue will not be able to make a difference. i trimmed all of the magnificent seven. i didn't own tesla yesterday. magnificent six. i had a 1,002% gain in nvidia. not a big deal. but just because these things have become way too big a part of the portfolio, and i looked at apple, and i said, okay, i have apple forever. but i was just being-- just looking -- i didn't look at the stocks. i just took percentages. but i think that -- can apple fall 20 points? yeah. it can fall 20 points. it sells at 29 times earnings. i remember when it was -- i used to argue in favor when it was at 16 to 18 times earnings, and people said, no, that's too expensive. things got wacky at the end of the year. apple was up almost 52% last year, and i think it's okay to find something cheaper. we had verizon upgrade today.

>> yes, key today. >> well, look, you can do that. i think the problem with any of these upgrades, and b of a put out this great piece about what people bought this year at the beginning. they bought health care, utilities, energy, consumer staples, real estate. my problem is, you buy the consumer staples, and i totally get that. what do you do now? what do you do now? do you wait for general mills to report? i think that in the end, what happens is the mag seven goes down over time because they became too big. but carl, to replace it with something else, you better have good industrials, maybe like union pacific. good industrials that do better if we get the rate cuts, or else what's going to happen is you're going to go back to them after they come down. >> it's interesting you mention the rate cuts, because ed yardeni, who has been constructive on stocks for a long time now, saying wouldn't be surprised if the market stalls in the first half, in part because of election messes,

geopolitics, the idea that we're hoping for more from the fed that we might get. >> i'm with ed. i've been ed -- i had ed speak at a conference, and i think ed is the most thoughtful of the people who talk, and the reason why ed is so thoughtful is he just -- there's no politics. there's no dogma. he's dogma-free. and i worry, and was selling some of this mag seven, because what is going to happen? why don't you want to be all in? there are people calling for a fed rate cut as early as march. i don't know why we think jay powell should do that. we have a straw poll in two weeks. we have a -- >> you mean iowa? >> yeah. we've got -- we've got maine and colorado saying, trump shouldn't be on the ballot. we got trump reps winning big, and there's six states that matter. i don't know. it's a convoluted moment, and a convoluted moment is not a time to say, you know what? i really, truly want to stick my neck out and make a strong case

for owning amd. >> that has implications for the fed, and speaking of which, set to release minutes today from the december meeting at 2:00 p.m. this afternoon. but just last hour, richmond fed president barkin talked about the u.s. economy and the potential for a soft landing. >> this landing could be delayed. the u.s. economy continues to defy expectations. consumer spending is over 68% of the economy, and it's hard to make a case for a pullback as long as equity values are high and the labor market remains as tight as it is. longer term rates have dropped recently, which could stimulate demand in interest sensitive sectors such as housing. and while you might think this would be a first class problem, strong demand isn't the solution to above-target inflation, and that's why the potential for additional rate hikes remains on the table. so, soft landing is increasingly conceivable but in no way inevitable. >> he's not talking about cutting rates, for heaven's sake. he mentioned equity valuations are high.

i always hate it when the fed gets involved with equity valuations, because equity valuations being high basically means we have irrational exuberance, something that greenspan talked about. >> and yellen too. >> made fun of her. i feel badly about that, because she's a distinguished person, but what bothers me is that in they're going to start talking about that, we're sunk, because we've got a really high pe on s&p, and we've got the mag seven being able to lead the s&p, but the idea that he is talking about rate hikes versus what the march -- the numbers -- the figures for how many rate cuts we're going to get and how many we're down yesterday, but wow. i think that why don't you just set us up to fall? how do you set us up to fall? let's talk about rate hikes. >> we have a downgrade of sherman williams over at baird on the notion that the shares are susceptible to a potential reversal in higher-end rates.

>> i was telling jeff marks, who works with me on travel trust, that's heresy. you can't downgrade sherwin williams. that's heresy. it's one thing to say apple, but you just -- you come back, and you just say to yourself, all right, if you're going to take out the stocks that are not -- that are doing very well, you're going to have to go after floor and decor, and people look at me, like, david says, what's that? there's 500 floor and decors in 48 states, and that was one of the leaders of the s&p. and that's what you're going after, and i'm not willing right now to say those are done, and i know that we had a story about manhattan apartments. i don't think that's really indicative of our nation. the billionaires row. >> yeah. >> but look, i just think we have had a big run, and take something off the table. >> yeah. >> how is that wrong? 1,200%. >> as bespoke said the other day, 32 consecutive overbought

closes to end 2023. >> well, yeah. nine weeks up. we have to go back since 2004. these are not -- these are not the stuff which says, we need another big week. i think these are the stocks that say, let's reshuffle the deck for a while. let's take some profits. one of the things that's happened is that the term "take some profits" has suddenly become heresy, and i was going back and forth with larry williams, the oldest and smartest historian technician i know, and he was saying, jim, you're not a trader if you decide that you want to take profits for the first time in years. that doesn't make you a traitor. and i felt myself, wow, i felt tremendous pressure not to sell any of the mag seven, which is ridiculous. i mean, these are the greatest-performing stocks of all time, and i'm saying, let it rid? it's like dostoyevsky, double zero in the gambler. it's been such a great run. if you look from november, the,

you know, right around the november meeting, the stocks that have done well, it's jpmorgan. that's what's moving things. and it's the vanguard high-yield fund where jpmorgan is 3.3%. it's the largest in the thing. >> yeah. all-time high yesterday. >> all-time high. not -- you know? it wasn't -- we did not get an all-time high from -- i'm going to say it -- nvidia. we didn't get an all-time high, but we got it from jpmorgan. that was unbelievable. >> i do got to ask you about nvidia. today, da davidson, initiate neutral. the title of the report is, "what if a.i. is just another cycle?" >> having gone out west and listened to what amazon's going to do and what microsoft's going to do, look, it could be a bumble for a lot of companies. but it's real earnings for those guys, and nvidia has this

gigantic software lead, but -- and by the way, if you look at -- on future earnings, it's selling 25 times next year's earnings. that said, look at the stock since the november meeting. look at it. i got a complaint from the club. someone was saying, listen, apple, jim, are you really going to stick with that? well, i've stuck with it since 2005. but i, too, felt, all right, it's enough. it's too big. >> right, right. >> it's too big. >> how much is geopolitics playing in that trade right now? whether it's china, reports of balloons over taiwan today for the second day in a row, obviously, the red sea, which we'll get to later in the hour. >> look, i saw that the u.s. pressured asmlf, the great dutch companies, these things are the size of a bus, pressuring them not to come in, and i think that every time you think that they're going to be complacent and compliant, president xi throws us a curve ball. i know taiwan is saying, please

don't interfere. i just look at all these things and say, there's a lot of land mines. let's not go through until the land mines are clear. you can say, that's trepidation, and there's no room for trepidation and fear. we just went through this whole year, and i stuck with all this stuff, and i was making fun of mike wilson, who was a bear, and now it's like, i don't want to be him on the bull side. come in here and say, nothing's changed, i don't understand why people are deserting -- how can you possibly desert the microsoft move? microsoft just had an incredible run. >> but you're talking valuation. you're not pointing to concerns about corporate capex or weaker household or wave of corporate bankruptcies in '24. >> not at all. i mean, rite aid? that's really good for walgreens. i'm going to see tim at the jpmorgan conference. i'm just, you know, look, i don't like to pay 33 times earnings. i don't like to pay 29 times earnings for apple. people should recognize that the

multiples got very high, except for meta, which has a low multiple, and alphabet, which may not be able to make the numbers because of google cloud services. meta is insanely inexpensive if you want to look at on it forward, because of the efficiency. the question is, can -- are these new products going to sell? like with apple, vision pro, doesn't even rate in any of these forecasts, and the -- the ray-bans from meta don't rate, and the meta 3, the quest 3 don't rate. i mean, even just thinks that everything is a bust that any of these guys come up with. i do point out that i could make a very strong case for meta. i could. that one's really interesting. >> that's interesting. you're starting to ladder some of the seven, it sounds like. >> yes, because, look, i'm not saying tiktok is going to be banned here, but i think there's going to be grounds -- i think that zuckerberg changed the narrative for himself. i think he became, other than the bunker, which that i think

the bunker seems, i don't know -- >> it's a hedge. >> the bunker is a hedge. there's two boulders in my place inpennsylvania, and i told my wife i'm going to put a couple logs on top of it, and i got my bunker. she says, no, actually, mark zuckerberg has a more sophisticated bunker >> he's got his own water supply. >> yeah. and i have a walkie-talkie. still to come this morning, disney gaining support in its fight against trion and nelson peltz. we're coming off a lower start for the year. worst day for tech since august, but the dow did manage four all-time highs in the last five sessions. back in a moment. 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.

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♪ ♪ watching shares of disney today, striking a deal with activist investor value act, agreeing to support disney's slate of board nominees, siding with disney. looks like between this and blackwells, they've been busy. >> blackwell is small, these guys are big, but value act, they're heavyweights. they're in spotify. helped "the new york times." 21st century fox, nintendo, salesforce, and there's a belief, of course, if you're looking at this and trying to decide, for instance, that james corman won't be independent, this is the only board he's serving on. he's owned by nobody.

he is -- he does not play for dinner. my problem is that i still feel that because the company is doing so poorly right now, with the stock too, why not have the guy with the most stock on the board, nelson peltz? but they just made these changes, and i think that valueact coming out in favor of the changes, the gorman move, is going to be dispositive about what will happen here. >> you mentioned some of the challenges, certainly, in direct-to-consumer, but the studio side as well, jim. for the first time in almost a decade, our parent, comcast, beats disney at the annual box office thanks to "oppenheimer" and mario brothers. >> that was one of those where i was with my staff this morning. we said, you got to be kidding me. we beat disney? then we said, well, opp was good, super mario , it was very accessible that we did well, and

disney was not -- someone this weekend was saying, disney did great with barbie. i said, no. >> exactly. although, i would say ubs names both disney and netflix as top picks for the year. >> my trust owns disney, and if david were here, he would be saying, that's knuckle-headed, and i would say, it was knuckle-headed to dump boieing t $167. i know people go to disney world and espn's doing better than ever, but i feel like i'm battling because it's been a terrible stock, and one of the things that's happened in 2023, very few stocks that were terrible. unless you pivoted to massive profitability, like some of the tech companies did, if your stock was bad at the beginning of the year, it was bad at the end of the year. >> yeah. the last nine weeks, as you said, saved a lot of stocks from being losers. >> yes.

and i think that when i look at disney, i feel like i made a mistake. i feel like -- look. these are -- look. it's empirical that i have made a mistake. i was bad. when you speak to bob iger, i think he would say, the balance sheet is better, and i would say, yeah, but the stock is bad. maybe you need a guy like peltz in who has historically been a catalyst. he comes in most recently with procter. i think people thought he did a good job. i can't find anybody that thought he did a bad job. i would like to see how gorman looks at it. >> so, at this point, right now, at this point, you're agnostic as to whether peltz -- >> exactly. >> you are. >> right. now, if nelson were to say, here's my plan to cut out $10 billion. you know, when you have elliott partners come in, paul singer, they come in with a plan that a really good management team like marc benioff and his team at salesforce, they say, a-ha, some

really great ideas. i'm going to talk to these guys every day. you can say, yeah, he did that to wear him down. you can't wear him down, but i know that mark felt -- i talked to him a lot about this. you know, some really high-quality work here being done by paul singer and this group. so, if nelson came in a with a good game plan, i would like it to be embraced the way smart management embraces elliott, but most people, when elliott comes in, they say, uh-uh. although i have to tell you, constellation brands, which will report soon, and my travel trust owns it, i felt clarion call when they said, elliott, help us. >> it worked for salesforce last year. >> yes, it did. salesforce was the best performer in the dow, and i think that marc might say, you know who really helped? elliott. he has no egow when it comes to how to get things better, even though people think he's an egomaniac. he likes that louis vuitton stuff. he likes the, you know, the

cuccinelli -- the guy's expensive. i bought my wife a hoodie, and i should have just bought it at foot locker. >> that's good color on benioff. still to come this morning, we'll get cramer's "mad dash," countdown to the opening bell, take a look at the premarket atntinuing to hover below the fl line, especially since europe opened. we're back in a moment. that time to reflect. to be like wow! what did i do to get here? (tense music) right. work. you worked hard and it's time for a bank that'll work hard for you. everbank performance savings is built to put your money to work with some of the highest rates in the country . going, got you where you want to be. we're the partners for your next move. everbank. advantage, you.

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time for cramer's "mad dash" as we count down to the opening bell. i heard you say amazon. >> let me give you an example of how it's so hard to say, i'm done with the magnificent seven. really fabulous note from bank of america says still see room for margin upside in 2024 with prime video ads providing nice

boosts. so, they are going to have these two tiers. people have to get ready, because it's happening really soon, and for prime users will be able to opt into an ad-free tier for an additional $2.99. so if you're watching "reacher," which is a 48-minute episode. maybe you get 12 minutes of commercials. i've got to tell you, for $2.99, i'm happy to be commercial-free. what's going to happen is pure margin expansion, and that's going to be one of the reasons why andy jassy, whom i sat down with last year, is talking about the opportunities, the opportunities for a lot of upside. you get rid of amazon, and you switch to general mills, and general mills reports, and people say, blue buffalo, i don't know, this competitive dog feed. there's no competitive dog food to amazon. >> i mean, they do have competition in cloud, but would you argue they're best in class? >> i mean, it's -- yes. >> really? >> yes. i think they have the least expensive, most robust cloud

offering. they also were the biggest adopters of what nvidia's selling. by the way, meta, huge adopter. and people don't understand. i remember when i spoke to jensen huang, he said he speaks to mark zuckerberg constantly, and sure enough, the ray-bans are filled with a.i. i mean, i wear ray-bans. my ray-bans don't do anything. my daughter's ray-bans are taking pictures for instagram. she's listening to music and messaging me. mine, they block the sun. >> old school, keeping it real. >> i got them at costco. i block the sun. i sat on them once. i buy another pair. >> we'll watch amazon and a lot of the big names. you can catch us any time anywhere, listen to and follow the "squawk on the street: opinbe" dct. ckn a moment.s to duckduckgo on all your devie

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. welcome back to "squawk on the street,". gas prices around the country continue to drop, falling under $3 a gallon at a majority now of u.s. gas stations, jim, even as we look at more reports today,

just looking at how opec can't cut fast enough to keep up with this non-opec supply. >> i don't think people understand, including the people in the permian, that they're just -- they're just producing so much. i mean, we're now the largest producer, 13.5. probably go up another 300,000 if we want to. canada's got tons. they just need to -- they need a certain kind of chemical to make it so that they can flood us with gasoline, and i don't think it's the demand side. i mean, tesla, obviously, good note by adam jonas about the strength of tesla and what they have. he does the sum of the parts analysis, which is, you know, i like his work. i think it's just very valuable. >> he argues that stock's going to be valuing a company that relies less on cars over time. >> where i was going was, tesla energy is important. tesla insurance. so, it's not a question of there's a sudden lack of demand, but the supply is just so

humongous, and i don't think people understand that we have the capacity to do far more than anybody thought. and then, once exxon completes the field, oh man. >> not just that. u.s. has now overtaken australia and qatar as the number one lng exporter. >> that was never supposed to happen. never, ever supposed to happen. i know there's a couple people who recommended coterra today. that's old capital oil and gas. they've got $2 price per nat gas. you can take it as low as a dollar, and i look at this stuff, and i say to myself, how did this happen? i mean, these places were unassailable. australia, by the way, overbuilt and exported too much, and that was a fear when we started exporting five bcf. and then, it turns out that all we did was just find even more. we can't -- we do not have enough pipe to send all the

natural gas that we develop from the permian. we just don't. and that's just -- we just have too much, which is really kind of a high-quality problem when you think about it. although not in the northeast. >> to some degree, crude is being supported by some libya field work because of protests. obviously, what happened in beirut and the killing of this hamas deputy leader does raise the specter of an even broader regional war. >> i think at a certain point, it might matter, but if you had told me that ukraine would not -- would backfire and that the russians would end up producing more, and they're flooding -- you know, they have figures for casualties there are extraordinarily high. it just didn't matter. it just matters what we produce, because we are not in unison. we're doing it all on our own. we have the ability. we're building ports, the very large crude, but when we do that, look out, because that's

two million a day. >> sure. >> and that is really going to bring far more production. that's about to happen soon. thank you, russia and brazil. >> all that said, mizuho does cut exxon and oxy to neutral. i think chevron remains a top pick for those guys. >> you're running this problem. you're up against these funds that are high-yield funds. so, i mean, here you have exxon's the number two in this incredible important vanguard high-yield fund. that's got 3.1%. i'm using that, by the way, that's a metaphor for what's happening is, because if you look at the vanguard high yield fund, it's just straight-up versus an apple, which is headed lower. and this is what people want, because people feel the fed is going to cut very aggressively, and this fund is the jpmorgan fund, j&j, procter & gamble, home depot. i mean, that's what -- they're the largest -- chevron's in there. so, you're selling exxon, and you're -- and the people who are

buying it are people who are saying, i need stocks for when the fed cuts. >> right. >> unassailable, by the way. you can't buck that. >> yeah. >> as it goes lower, they're going to buy more. >> has implications for all kinds of industries. united, for example. citi today, 30-day positive catalyst outlook because the shares have lagged so much as these airlines have bounced. >> yeah. but, you know, i'm glad it's a trade. they always -- they're back to being in the trade mode. that's a shame. >> i wonder what you made of mortgage applications, because although the 30-year fixed is now down to 6.75%, overall index was down ten. >> i'm glad you mentioned that. let's put the manhattan aside. that is indicative of people, you know, who work on wall street. that was an extraordinary -- i know seasonally, it's a strange time, but that was an extraordinary decline, given the fact that we -- it wasn't like the country was gripped by hard storms. i know that when you read toll

brothers and doug yearley, the demand was incredibly strong, and stewart miller at lennar, demand was incredibly strong. these are not incredibly strong numbers. i wonder if they're buying back stock here. that was surprising. i know one week does not a trend make, but that was surprising to me. that's -- i thought that was real. i thought that was real life. >> you mentioned tesla a moment ago and the jonas call. it's oft said by bernstein, they're going to disappoint on margins and volume this year, and they're trading at almost 100 times fiscal '24 earnings. >> i think the tesla mobility ride-sharing, that's questionable, because it didn't work for hertz. hertz is saying, look, 10% of our fleet is tesla, just like 10% of the cars on the road are tesla, but i think that this work that adam jonas is doing on

the true value of tesla is going to come into play, because it's not like the guy who runs it is from the old-school gym. he's not going to read this necessarily and do it. he's doing it. i don't know. elon musk, from everything we saw, whether it was andrew's excellent interview or david's excellent interview, is a guy who is not going to sit there and say, you know what, i'm done creating value. i do think, by the way, and i have been saying this for a long time, that the f-150 is not going to be challenged by the lamborghini of pickup trucks, because we want pickup trucks that pick up things. but i do know that there's a cult following, and every one of those that is produced will be bought. >> yeah. speaking of f-150, did get some recalls of some ford f-150s because of a rear axle hub bolt that could break. it's 112,000 vehicles. we mentioned tesla recalls all the time.

>> i think that jim farley, if he were sitting here, would say, this single worst thing that is happening to us is our endless warranty problems, and it's embarrassing to him. it has -- i have a ford maverick, and there was a recall almost immediately, and i was, like, you know, saying, i thought these were done. and he -- he's trying so hard, but it's obviously a team effort. there's a lot of people. this is bad. i mean, we own ford for the trust, got a nice gain in it, but i look at it, and i say, darn it, no. the f-150 is supposed to be perfect. it's just a great vehicle. and so, i think the warranty stuff the just -- i don't call it disastrous. that's not fair. but it's just been dogging them beyond what anybody thought would be the case, and it's really -- it's really hurting farley. it really is. and i think he stands -- it's just something he says is a big black mark on the company.

>> ford's been on the tape a few times in part because of the amount of corporate debt that was raised yesterday among the likes of ford and toyota. at the same time, "ft" has a piece about companies turning to converts, trying to manage their interest costs. >> well, i do think that, hey, ford's bouncy, by the way, it's really fabulous, and went through the strike and had one of the great balance sheets. it's not -- they're not getting bad -- credit benchmark, plus 200. that's not so bad. look, i do think that we all know that there is worry about debt, too much debt taking on for autos, but then again, carmax had really good numbers, so i don't know. i mean, i think that this sector is, again, playing more about i.c.e. versus ev than anything else. i was talking to david, is an i.c.e. truck worth as much as an f-150 lightning? because of the future.

and i think the answer is, no. >> the depreciation is more intense on the ev side. >> yes. yes. people are worried about it. that's what happened at hertz. the ev side didn't hold its value. i mean, at all. i think the people are underestimating what happened at hertz and steven schurr. he bought these things, and they are hard to repair, and people don't know how to use them. and he was shocked. and i'm shocked. i had him on. i know him from goldman days. he's a straight-shooting guys, and he was not going to mince words. he was shocked at the decline in value. and he's a very good business person. so, you know, that's a tesla fault, not a hertz fault. >> yeah. one of the more interesting points of the jonas note is the notion that tesla might help facilitate china-based ev production here through joint ventures. >> yeah. >> which i know you -- i imagine

you're a bit skeptical about that. >> that's something that secretary raimondo in the commerce department would be, like, take a look at this note. who is this guy? well, he's the premier analyst. i think he's one -- maybe off track on that one. >> we got a bunch of calls today, jim. roblox, top pick at roth. rockwell, ubs up. >> rockwell is the way to be -- was the way to be able to play factory automation on shoring, reshoring, and then it got crushed, because it missed the quarter really badly. it's a very good company. i thought that was, like, wow. okay. that's an interesting idea. it's come down a great deal. all the other classic industrials are so high, you have to wait for pullback. this pullback is a joy for people who have a lot of cash. and you just are hoping -- i know -- i don't want to root against anybody who owns stocks, but i got a lot of cash for the

travel trust, and i'm betting that there's going to be a pullback of some substance simply because it's been a great time. all the numbers that we were talking about. and i'm just not going to sit here and just say, you know what, let her ride. it's like, no. go out and buy the cashmere sweater. >> so, substance means, what, more than the 4% russell's giving it so far? >> yes. >> 5 to 10%? >> yes. >> then things get interesting. >> yes, they do. then they get interesting, and i just find when i look at a stock -- i'll give you an example. one of my favorite companies is union pacific. they made a change. i happen to like the previous management, but in terms of the numbers, union pacific is -- the stock is doing great. and i had csx on, and i'm thinking, wow, you know, maybe it's time to swap into csx. very inexpensive stock. 18 times earnings. and it's got precision, doing precision railroading, and union pacific is at 23 times earnings,

and at 52-week high. so, hey, like, that's too high versus csx. that's what i think. very pedestrian. >> yeah. sort of fitting with the sherwin williams call, which we mentioned earlier, it's been on a run. sofi today, cuts to underperform. jim, big run there. kbp is another one. morgan stanley cuts to equal b weight. >> fulfilled their targets, and i don't like those calls, because it's not like -- they're not nvidia. i mean, look at so fi, which i happen to like very much. i worked with him at goldman and i was at the tstreet.com. the stock is, okay, is it really a dangerous stock at 9.5? >> yeah. >> i think is robinhood dangerous at 11? i don't know. i don't like the book of business because it's too crypto and option-oriented. >> what's working today, jim, is all in health care and staples.

lilly, of course, adding to a banner year last year. but it's all -- it's cigna, kroger, cvs, verizon, mckesson. >> those are all recession. and those are the stocks that we decided as, okay, fed is going to put us in recession by these stocks, and that's a convoluted theory, but it's in play right now, and it's what we heard this morning, which is that maybe it's going to be rate hikes. well, that would actually be very difficult. i'm going to speak to david ricks, the ceo of lilly, on our show next week. he's a great spokesman. remember, this is the best performer. ken langone said this would be a trillion dollar stock. >> we're going to get some data today. ism. j.o.l.t.s. do you think those still sort of buffet us? >> i think so. i think one of the things we try to tackle with the labor

secretary that nobody seems to want to talk about, the immigration issue has changed the equation. i mean, these are people who are working, once again, there's an underground economy. i don't want an underground economy. i want everyone to get health care. i'm not calling for an underground economy, but anyone who thinks there's not an underground economy is crazy. you have all these people. they want jobs. they're not, like -- i know there are people who make a political judgment about them. my experience in running restaurants is that there was no one, and i would never hire anyone -- there was a tremendous group of immigrants that left because of the trump administration, and then more immigrants have been allowed in, in the last year, than for four years. >> legally, you mean. >> yeah, well -- >> to work. >> in the status. the crazy status that people have, because it's so hard to understand what our immigration policy is. but i think people don't understand, you can hire anybody. now, you can hire anybody, and you don't want to look the other

way, and i would never do that. but you can hire anybody, and that's really changed the equation. >> so, you're talking about participation rates in the labor force. >> yeah. >> which is keeping a lid on wages. >> yes. i don't know if people understand. we had a -- we would go after anybody who was able-bodied who was willing to wash dishes. i was a dishwasher once in my career, so i'm not making a judgment. i washed -- someone once talked about a short order cook. i was a dishwasher at a restaurant. and it was hot. we were paying $18 an hour for dishwashers. if you're an employer who is willing to look the other way, and, again, i would never do that, you are not paying those prices anymore. that, i think, is what's happening, and no one wants to talk about it. >> we'll see how that manifests itself in wages and the labor market overall, which continues to confound the skeptics. >> well, yeah.

look, we have a strong economy. there's no doubt about it. but that's not changed. we do have -- we have things like gasoline you mentioned. it's like, you know, bullish. but it's still hard to find people to work in some places, but i don't know, let's watch j.o.l.t.s. let's watch everything. this notion of three to four rate cuts is now what people are looking at. and they could be disappointed. that's where selloff occurs. >> right. we'll get the fed minutes today and find out to what degree there was pushback within the meeting, because we heard some post-fomc -- >> we had a good economy. where do we not have a good economy? try to find a place. i mean, try to find a place where we don't have a good economy. >> well, i'll tell you one thing, given the population growth in china, japan, and europe, on a relative basis, the u.s. is looking pretty good on that standpoint. >> yes, it is. >> that's something -- i mean, elon musk has drawn attention to

the crisis of population growth in his view. >> well, i just know that we -- we have the strongest economy in the world, and we've got, you know, look, we have -- in debt for the federal government since the year began, a couple trillion? that's our achilles heel, but it's obvious we're going to have the washington shutdown, and that's on the agenda. we're hitting numbers that are unsustainable. but everybody else has it too. no excuse for what we're doing. >> $34 trillion, of course, for the first time. it does raise the question, jim, about the year as a trade, whether or not any gains are front-loaded because the closer you get to the election, the more wary buyers will be. >> i'll come back the other way and say, look, we know that the years that incumbents run have always been up. and we know that the last rate hike has -- and then the pause has led, other than in, well, we

had, you know, you added 2000 was different, but you just had a great run. there's information -- there's information and issues on both sides of those, but that tends to mean that i think you could have some people be wrong. and these people calling for the three to four rate cuts, they're going to be wrong. and i don't know what they're thinking. >> it's called wishful thinking perhaps? >> it's very wishful. i don't know where that came from. jay powell tell us that? at any point, did jay powell say, you know what, we got to start cutting? he has not said that. and i think that one of the things that -- where did people really go wrong last year? they felt that jay powell had a hidden agenda that he was going to do. he played with the most open hand of any fed earn i can ever recall. and you just had to listen to him. if you listened to him, you got things right, and if you decided that what he was really saying was something else, you got things wrong.

look, i happen to think that the world of jamie dimon is a banker, but jamie dimon was in the 6% camp. now, that was not on the agenda of powell, but it was on the agenda of dimon. and i was there when he talked about 6%, and i was like, wow, he knows more than i do. >> was that the philly -- was the philly interview? memorable. >> and that was wrong. >> yeah. we'll watch it. watch bonds today. in fact, yields up are up across the curve. ten-year continues to hug close to the 4% line with the long bond 4.12%. as we said, we'll get ism, manufacturing, in about 12 minutes. j.o.l.t.s. as well and then the minutes of the meeting at 2:00 p.m. with the dow down almost 200, we'll be right back.

dow managed to stay

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god some breaking news on disney via kramer. >> i spoke with nelson pelts and $3 billion worth is saying this is not influencing the decision at all, of course he's going to run, he has two people going to run. talk about long suffering shareholders, one year, five year, ten year and he's not going to accept anything where he's just invited to the board periodically and share information. he wants to be at the table, making important decisions. likes gorman thinks gorman is a great guy, everyone thinks gorman is a great guy but that's not enough. this value act decision is irrelevant to him. >> do you see the potential for a detente the way we had on air last year? >> no. i think this is enough is enough. we really need to have -- not

"we" peltz needs to have the transition now, things are not working. let's understand, he's not saying the company is not working. he questions bob iger's leadership and he's not going to let up. and value act is not a factor in nelson's thinking. the thinking is the total share over turn is abysmal. it's hard to argue. remember i said it's hard to argue with certain situations because the numbers are bad? >> yes. >> like empirical i made some bad moves you have to talk about the bad, talk about the 1200% gain in nvidia, this is a bad move for anybody who bought it, including me. they like the independent voices coming in but he doesn't think it's enough. remember he's got $3 billion worth of stock and he's got

mr. perlmutter's stock, part of that mr. perlmutter i've known for a long time, he has a big position -- anybody who's happy is brain dead. i'm really happy with the loss, this was a good loss. i don't like the playoffs, i'm going for a draft pick. there's no draft pick if you own disney. you don't get the draft pick. you throw the drink. >> you're talking skin in the game? >> yes. >> by the way, $300,000 does go to charity. you know, the temper drink? >> yes. >> goes to charity. and i understand there are people who, it's very hard sometimes i don't know why there wasn't a guard that didn't escort that fan out of the stadium. but no excuse. but the money goes to charity and it doesn't make sense that someone can heckle an owner throughout the game. >> that does move the ball forward jim cramer see you on

"mad meyon" tonight. jolts and ism after the break. don't go away.

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♪ upbeat music ♪ upbeat music good wednesday morning

welcome to another hour of "squawk on the street" i'm carl quintanilla with leslie picker live at post nine of the stock exchange, david and sara have the morning off. the new years dry continues to bedevil the bulls this morning. for a moment all sectors were red, yields elevated, politics in focus and the vix almost back to 14. >> we are 30 minutes into the trading session. here are three big movers we're watching today. sofi under pressure, kbw downgrading to a sell in a valuation call. the new price target implies 35% down side ahead. those shares down 11.4% right now. outback steak house owner reached a deal adding two members to the board, more on activist news with disney later this hour. and charles schwab moving lower as well. downgraded to neutral from buy it from goldman sachs. it pushes the earnings upside

case further out. the shares down 2.9% right now. let's get jolts and ism with rick santelli. >> yes, our november read on job openings and labor turnover expected to be 8,800,000 it's close to expectations, 8,890,000. it's an uptick from -- rear view mirror had a revision. last month 8,733,000 leaped up to 8,852,000 which makes 8790 the current read. the lightest read going back to march of '21, call it a little more than two years. the pmis from ism. my kingdom for a 50 everything continues to be below 50. so ism manufacturing likely in a

recession, although some of the numbers have improved, 47.4 better than expectations and better than 46.7 in the rear view mirror however it's still the 14th, 1-4, the 14th number under 50. prices paid, 45.2. that's the eighth month under 50 in a row. 48.1 on employment. and even though that is better than the rear view mirror, better than expectations, it's still the third number in a row under 50 and represents eight out of 12 under 50. now let's go to the new orders component, 47.1, that is less than expectations. less than the rear view mirror and represents, get this, the 16th number in a row, 16th month in a row under 50, the last time it was 50 or higher was august

of '22. so we see that interest rates after reaching 4% in a ten year has now dropped back down to 396 and is trying to define the difference between fed easings, how many and a slowing of the u.s. economy. leslie, back to you. >> thank you. the ten year yield climbing back above 4% today. although currently trading slightly below that rethreshold. steve liesman joins us from washington with more on what to watch out for. >> tom bark inn this morning perhaps giving a preview of what the minutes may say, cuts are pencilled in but no they're not guaranteed and may not come as quickly or extensively as markets expect.

barkin saying the soft landing is conceivable. he sees the case for it but it's not inevitable. there's a potential for four rate hikes, remains on the table and the cuts depend on the inflation data and easing. talk about the data in a second. he said weaker demand or more fed hikes may be needed to bring down inflation and the recent decline in yields and stock market could stimulate demand. markets trade with a 71% probability of a march cut, priced in a quarter point high. the january 25, look at that, six full cuts baked in with a current yield of 384. that compares to the average, baked in just three rate cuts to their forecast. most officials are trying to lean against the aggressive rate pricing but not having much luck. minutes offer evidence there's more uncertainty than the market has priced in.

i think the quit rate did come down, that's also an easing of the labor market along with that prices paid component or price index inside the ism also welcome inflationary news in there. >> although in terms of the minutes today, what do you think is the potential or possibility they really push back in a bigger way than perhaps the market expects on the notion that there is an imminent rate cut? >> well, it's interesting. sometimes, leslie, the market hears something and doesn't react to it until maybe it sees it in black and white. remember we had a bunch of fed speakers on. we had john williams on, our others on our air, austin goldsby, others have pushed back. whether or not it's in the minutes, that causes the market to sit up straighter and take notice you can never know but i don't expect the minutes to say rate cuts coming in many march and six are written down in ik.

i don't think that's the tenor of this. ithink it's we're thinking about this, this is the possibility. >> always speaking in likelihoods. >> exactly. >> at least the qualitative aspects of that. steve, thank you. >> sure. i've been chatting with sources to get a sense of 2023 performance. citadel posting strong figures for its flag ship fund. their wellington fund generated 15.3% returns. a separate person who asked not to be named shared d.e. shaw's funds as well. that largest fund posted gains of 9.6% in 2023. also, a respectable showing for d.e. shaw. and outside of the multiple -- strike that. world, pershing square return, those are public, but bill acman's firm generated

26.7% returns from the highly concentrated mostly equity book in the year. >> does it rhyme with the trades he had in the year. >> absolutely. 2023, as well as going back to 2020 as well. some of his most profitable trades have been these more kind of, you know, esoteric swaps and interest rate hedges he has put on more of a macro trader than the equity trader he's known to be. but his longs, strong showing there. concentrated large positions in names like alphabet that, of course, performed well. >> interesting. helps crystallize some of the events we lived through in the course of '23. watch for more to come. the santa claus rally running out of steam, s&p down over the last six days. let's discuss where stocks go from here? joining us is darryl cronk from

wells fargo. welcome back? >> thank you. >> what do you make of the last 48 hours. >> a a little bit of normalness. people didn't want to realize the games in december. when you look at the market and what we're looking at on this huge pullford in the days left in '23 you go down the list, look at sentiment, the aaii sentiment poll target. you look at valuations they're at the highest level in the u.s. versus europe and asia that they've been through the cycle. and so you start -- really the only thing you have going for you here in the near term is the technicals have been strong. we've pushed above a lot of the technical levels. the 200 day moving average on the s&p and still 4350 which is below where we were trading 4700 to 4800.

which is historically more incumbent on what people think the real value of the market is. where does risk reward start to flip. it looks like we overextended in the near term. >> it seems you think a draw down could be more than 10%? >> i would say anything less than 42, 4300 becomes really attractive and you get back into the level where the risk reward make sense, the risk premiums start to become attractive again. you pulled forward a full year of gains. we have from the october 27th low we put on 16.4%, that's an entire year of gains in 60 calendar days. so you have to be careful here. post pandemic the market has had the big extreme, as low as 3,500 as high as 4800 and everywhere in tween. we're sitting at 13, 14 vix. remember, 2023 was the year of

interest rate volatility. the move index off the charts, highest since the "80s. yet equity volatility sat benign and low and contained. that may flip we think in 2024. >> does that flip, relative to the interest rate posture, because we did -- you're right for the last few years we've seen little in the way of equity volatile when equities did move they tended to move in concert with what was going on in the treasuries market. as we look ahead, obviously the ten year is teetering that 4% line today. but if there is some sort of a pivot, does that increase the likelihood of volatility for equities? >> certainly you have the bid ask, right? the bid is the s&p of the fed at three cuts and the market is saying six. that steve just talked about here. somewhere in between might be the truth. the reality is, you need to see that data play out. i think this is going to be a

challenging year for the markets job owning versus the real economy performance. we saw jolts, ism, right, neither of those were terribly compelling with what the real economy is doing on the manufacturing side, let's admit labor held up better than we thought it would. but still lowest jolt reading since early 2021 on this morning's print. so you have to take the confluence of that rate. if you see weakness in the economy we think it's bound in the first half of the year. on the lag effect and then you come out of that in the second year. if i'm deploying cash today, right, i think you're going see better opportunities in the coming 30, 60, 90 days. >> fascinating. your point about equity vola volatility. the equity bulls pipe dream was bond volatility would come down and allow stocks to takeoff. >> i think that will happen.

you get the move index to come down as we hit the fed pivot moment. the interesting thing is, think about the crowded narrow consensus right now. it's all about we have the macro tailwinds at our back, fed is going to cut, soft landing happens we get 11 to 12% earnings growth this year. we have slayed the inflation beast. what you now need to see is the micro delivering. you need to see earnings come through, top line sales growth and profitability. you need to see margins hold the line. you look at earnings right now, revenue for fourth quarter 2.5% growth. revenue 5. that's good i'll take it compared to a year ago but i don't know that's 11 and 12 and off to the races and justifying 21, 22, 23 times multiples. last year we got five to 6% earnings growth but also expanded the multiple on the s&p three points.

we can't do that in '24 we need to see earnings kick in to see growth drive higher. >> i'm sure we'll talk about that in a couple weeks. thanks. another ocean carrier attacked on the red sea this morning as global shipping giants continue to face disruptions there. let's get the latest from tehran. ali? >> reporter: good morning. the latest was a massive explosion here in tehran. they say it's been a terrorist attack during the ceremony of iran's top general. at least 300 people have been killed, including women and children and almost 200 others have been injured. nobody has claimed responsibility for this attack but analysts in this country are blaming the finger at the officials in the country haven't said anything yet. they said it's an ongoing investigation into what's

happened and when they have more information behind it they'll release it. but whoever is behind the attack it's caused a lot of embarrassment for iran at a time they're trying to project strength in the region during the gaza conflict. seeing iran proxies attacking all sorts of american facilities in area. and, of course, as you mentioned attacks in the red sea by the houthis backed by iran. these attacks have been going on for quite some time now, they've disrupted some of the most important shipping lines in the world there. so much of the world's commercial revenue, 12% of it, passes through the red sea. and now the iranians have sent a war ship to that region recently. it's nothing new for the iranians to send navy vessels there but they've sent it at a time of heightened tensions. they sent it a day after the houthi's say ten of their fighters were killed in a u.s.

strike. so the iranians are sending a message they're supporting the houthis, supporting the attacks in the red sea. they say it's there to prevent piracy but they're clearly there to back the houthis, to cause as much disruption as possible in the red sea. the objective is to hurt israel and u.s. interests. so far the houthis have managed to block a lot of commercial vessels taking essential goods to israel getting through. so now they have to take the long way around the cape of good hope in south africa. that leads to a lot of extra insurance costs, petrol costs and time. but this has been the objective. they want to disrupt that area as far as possible and the houthis say they won't stop until there's a cessation of violence in gaza. >> back to you. >> certainly having some degree

of success. thank you, ali. as we go to break, look at our road map for the rest of the hour. including activist action around disney. apple shares under pressure for a second day in a row and another new call raising questions about apple's growth. we'll speak to the analyst behind that call and he's raising questions about nvidia and the a.i. hype. health care was a laggard last year but seeing a rotation into those names. some of the stocks you may want on your buy list. "squawk on the street" is back in a moment.

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disney's sharings trading lower amid news in the name. the company inking a deal with value act. a person familiar with the matter tells me value act owns more than 5 million shares representing about half a billion dollars at current prices. under the terms of the agreement disney can share information with value act and consult with the firm on strategic matters but they're not taking a board seat. this comes across the backdrop of dueling battles at disney. nelson peltz nominated himself and a second person to the board. and just a few minutes ago, nelson peltz telling jim crammer

it doesn't change the view on disney. as disney's largest shareholder with an approximate $3 billion ownership, try ann welcomes to try to help fix this iconic but wayward company end quote. for more on this let's bring in julia boorstin. for more on the disney side of things. julia? >> reporter: just really interesting, leaseslie to see t agreement between value act and disney. the way i see it disney is shoring up the defenses with the proxy battle with nelson peltz. so nelson peltz, triann itself owned 7 million shares but add the shares by perlmutter that

brings the number to 33 million. value act has 5 million shares, which is meaningful but smaller than the full number if you include the perlmutter stake. but i think the question is how the various alliances in the battle with peltz is going to play out with other shareholders. i think value act sends a message that disney has the support of this institution that has helped other companies through proxy battles. we'll see if that influences other big stakeholders to vote in support of disney. and disney just announced two new board members, including james gorman and sir jeremy derrick. i think they're bolstering their slate as we go into the next phase. and the thing we're waiting for now is the filing of the proxy statements we expect to come in the next few weeks from both.

>> we've seen situations in corporate america, sales force and a couple others, where you had a multitude of activists asking for different things on various fronts. some are kind of supportive of management, some super supportive of management and others super critical of management. you have val act here. in line with the strategy. peltz very critical and plans to continue that proxy battle and black wells which is supportive of disney and iger but still nominating three directors to the board there. as a corporate board, how do you reconcile with this? do you think this is the play book here, bringing in a white night that can fend off anyone who is more critical, at least in terms of the proxy fights that they're grappling with?

>> i think that's the case with value act. i would caution that black well's stake is small. they own $5 million worth of shares compared to value act which owns 5 million shares themselves. so black well, their stake is so small their recommended board members have so little experience relative to the people that disney added to the board that it doesn't seem like it's apples to apple here. so i would caution that black wells is in a different category. they have said they're supportive of iger but a small stake in comparison to what value act just announced. >> julia, thank you. watching it closely an important name helping to influence the dow. now session lows down 240. still to come, the take on tech as apple comes off the worst day in several months. there could be more pain to come our next guest says. we'll continue when "squawk on the street" continues in two minutes.

♪ (upbeat music) ♪ ( ♪♪ ) constant contact's advanced automation lets you send the right message at the right time, every time. ( ♪♪ ) constant contact. helping the small stand tall. welcome back to "squawk on the street" i'm dominic chu. the sector heat map today looks interesting because we are seeing some outperformance in parts of the market considered value oriented.

health care right now, energy, consumer staples among the outperformers, real estate and materials are the two big underperformers today. if you look at the technology trade overall. we are seeing a move to the down side. still up 51% over the last year but down from the record highs we saw last year. so keep an eye on technology. and within the technology trade it's been the solar stocks and semiconductors that are the laggards today. end phase, first solar. despite the fact it's called a top pick in the renewables. down about 4 and 7%. the real standout today is microsoft, the megacap name still up one half of one percent so keep an eye on the megacap names. apple struggling to recover from the biggest stock drop in four months. our next guest is saying he's

waiting for apple to become, quote, unstuck on the innovation front. join us is gill. thank you for being here. a big day for you assuming coverage of these three critical names. in terms of apple, let's start there. this was the driver of the nasdaq selloff yesterday with barclays downing the stock with the news that demand as shotshooftened for the iphone product. is that behind your thinking? >> our perspective is more longer term about innovation. apple needs to show some sign that innovation gets unstuck. we've been buying the same iphone for the last three years. they need to do something different in that regard. and if they don't have innovation from its hardware side. we need to see something new and exciting on the software side. there is a chance that they are

working behind the scene on something very compelling on the generative a.i. front. we may hear about that as soon as june. for -- when there's new hardware coming we know about it ahead of time because we have access to the supply chain. if there's something coming on jenni jen generative a.i. we may not find out about it until it's announced. but that's what it's going to take to get apple unstuck. >> i think about you need the right people in place to drive the innovation and design that consumers want that's a people thing more than anything. do you think they have the right people in place at this juncture to drive innovation forward? >> they've had some changes around the design team over the last few weeks and months. but they're probably doing that for the specific reason. because it's unacceptable that the iphone 15 looks like the

iphone 12, 13, and 14. we need some new form factors. ia pins. foldable phones, thinner phones. something that gets consumers to update ahead of a phone breaking down. phones aren't breaking down, people are holding them longer so they need a new idea to get an upgrade cycle to accelerate not decelerate. >> if technology is beginning to flatten out, would you expect them to be more aggressive on capital returns in the spring quarter? >> that is one way they can go. their growth last year was basically flat. this year at best it's going to be two or three percent. for a company like that they need to pay a higher dividend that will match the market dividend. they have the cash and cash flow to do that, shareholders are going to increasingly expect them to do that. >> they have the cash forward to do that. we're out of time gil we'll get

your thoughts on nvidia another time. we do appreciate you joining us today. >> thank you. still to come this morning, 2023 was all about a.i. as you know but what are the big stories we need to watch in the new year. we'll talk to one expert about his priconedtis and regulation is one of them. when we're back in a moment. trading at schwab is now powered by ameritrade, unlocking the power of thinkorswim, the award-winning trading platforms. bring your trades into focus on thinkorswim desktop with robust charting and analysis tools, including over 400 technical studies. tailor the platforms to your unique needs with nearly endless customization. and track market trends with up-to-the-minute news and insights.

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welcome back to "squawk on the street" i'm bertha coombs with your cnbc news update. more than 100 people were killed today in what iranian officials say was a terrorist attack. according to state media, two explosions took place just minutes apart at an event marking the top of a top iranian general who the u.s. killed in a 2020 drone strike. there are conflicting reports right now on what might have caused the explosions and no group has claimed responsibility.

israel will face genocide charges next week at the international court of justice at the hague in the netherlands. the hearing is scheduled to take place on january 11th and 12th. it comes after south africa levelled the claims against israel and its war with hamas. the biden administration plans to reopen four ports of entry at the u.s. southern border that had been closed to address a record influx of immigrants in december. customs and border patrol agents encountered 300 migrants last month. two of the sites reopening tomorrow are in arizona. one is in texas and the fourth is in california. carl, of course the speaker of the house will be at the border today. back over to you. >> bertha, thanks. a.i., of course, top of mind for investors in the last year. let's turn to a.i. of the year ahead. let's talk about the challenges, our next guest said regulation

will be a major theme but questions what we will see versus what we need. gary marcus, author of "rebooting a.i." joins us this morning. professor great to see you. thanks for being with us. >> thanks for having me on the show. >> we'll see whether or not the times lawsuit is a sign of things to come? >> absolutely. i think we'll see a lot more litigation this year. the times lawsuit is solid. but they have open a.i. dead to rights. they showed it's possible to make the systems plagiarize exact words things that are in "the new york times" database. i have work that i put out tomorrow with reed south showing basically the same thing with the visual domain. showing the mid journey and open a.i. are capable of replicating trademarked characters, even full frames of movies almost

identically. we'll see litigation from game studios, independent studios and artists. i think there's a lot of litigation this year. >> how big will be the litigation we're talking about right now or more broad based law, government regulation whether the united states or europe or elsewhere? >> so there's a lot of laws that may come out in europe soon. so there's the eu a.i. act. there's a tentative agreement on it. but it's not actually signed yet. if it takes effect it won't take effect immediately. there are still some things to work out but there's a lot there. the united states i think is lagging behind. we don't have a formal senate bill saying what might happen. so it's all on chuck schumer's desk depends on what he wants to do. before christmas there was a bill about data transparency where do you get your things from? how do you take copyrighted sources, that's an interesting

piece of legislation that could change the game if it gets through and becomes a law. >> what do you think about the commercialization aspects of a.i.? i think about how people have been analogizing this wave as akin to what we saw with the internet in the '90s. the internet, largely it's usable by everybody you don't have to pay to use it, except the service providers to get access. we've seen the tension between the for profit side, the nonprofit side. what do you make of the business models and how those develop in the forthcoming years? >> i don't think there's a business model yet that fully justifies the valuations that these companies are getting. so open a.i. is valued most recently at $86 billion. it's not clear where that revenue is going to come from, where the profits are going to come tfrom. they apparently need something like a billion and a half but that was not in profit, it was

in revenue. that's one issue another issue is weather people will actually, in fortune 500 companies, use this stuff systematically. so there is a little bit of background noise there. people are doing a lot of proof of concept testing things, but not too many fortune 500 companies have said we're going to go with this now it really works. there's a fundamental problem with the current technologies to make stuff up. people call it ha lllucinations in fact, that was the word of the year last year because the systems are not yet reliable to support the applications people have talked about. they're reliable enough for computer programs to use them as a form of auto complete but computer programs aren't a big enough market to justify the valuations we're seeing. there's a lot still open about that. >> i'm sure you understand the street is on the lookout for case studies that are relit mat

and productive. what would you imagine might be one of those i guess early this year if we get one, where this is the most promise? >> i think the most promise, the clearest use case is computer programmers, that's established. but it's not the breakout of economics that i think people are hoping for. people have talked about doing chat base search or generative search it doesn't work reliably enough yet. i don't think there is a breakout immediate use case the way people are hoping for. i just don't see it. the problem is you still need humans in the loop for most things. so auto complete, the way programmers use it, that's fine. there's money there. people are using it. writing copy text might work for people who want to make a lot of blog sites quickly probably some money there. but the killer app that people talked about a year ago was chat based search, you type in your query and get an answer but what

we have is a proto toe type tha doesn't work. the systems are not based in facts they're based in models of what people say and circumstances. that's why the search things are not materializing the way that people expect. >> certainly a gut check as the street wrestles with profound questions about its use and unverse salty in the years ahead. professor, thanks. >> thanks for having me. as we move to break, check out the mystery chart. a health care name that under performed in 2023 but more than 80% of analysts call it a buy, including our next guest forecastg g ininbigas ahead, he'll tell us why and give us other top picks in the sector next.

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sector wise. energy really the only one working in the early going today. although utilities and communication services trying to play along at the moment. health care railed the market last year but our next guest believes m&a conversations, weight loss drugs will drive the sector higher in 2024. jarrett holts joins us this morning. great to see you, happy new year to you. >> thank you, same to you. >> is the conversation going to change this year prior to the last 12 months? >> i don't think tremendously. maybe on the margin i feel most of the topics are similar. utilization. mlp. m&a is a topic the last couple of months we've seen a buying spree from pharma into biotech, that will likely continue obviously intermittent but consistent so i think those are the three things driving the sector. the election year throws a monkey wrench into things at times but i doubt it's a topic

all things considered. >> is m&a and merck part of the trade? >> i don't think so. merck has started to work, the chart has been better the last couple of weeks, biogen has been a horrible stock for so long, expectations are low, clearly they're the leader for a while in alzheimer's until other players get to the market but it feels like we've been talking about alzheimer's for years and finally there's a drug and the street doesn't care so maybe there's a sentiment shift. >> but pfizer doesn't get included in the camp in terms of names that have struggled for so long. >> it feels there's so much to do there, they've done at least six deals since 2021, loaded the boat from an m&a perspective, now they have to execute. stock is not that cheap on earnings. i feel the pfizer move has been made they tried to put out

conservative guidance a few weeks ago, stock went to 26, 27, back near 30 not much to do. >> what do you think about the prospect for weight loss drugs in this year? we've seen a huge runup, a big talking point for the sector in 2023, what do we have on the docket in terms of studies, approvals, use cases? total addressable market for 2024? >> there's a lot. i think we're still in early innings of this conversation. it's obviously going to evolve over time. this would be the first year that both novo and lilly have an approved drug for obesity. we'll see the scripts start to inflect. i think most of the streets are positive, as am i on the adoption rate and things of that nature. and yes, there are going to be a number of studies in both companies looking at arthritis, sleep apnea and inthflammation neuro degenerative diseases.

i don't see the conversation dying at all. the stock price performance may not be as elevated as last year it's going to be tough for novo and lilly to put up 50% gains again but this is the number one story line in health care still in '24. >> back above 600 today. nice remarks the other day about it one day becoming the first trillion dollar drug company. when do they use their curb so to speak? >> they've done a couple small deals i've been surprised they haven't been more aggressive but i don't think they need to. the large cap pharma level is based on the need to acquire and elevate revenue, they don't have that issue. so surprised they've been this conservative a couple small billionish dollar deals on the way but they could use it for something bigger if they wanted to. >> something to keep an eye on if they wanted to.

thank you. >> thank you, guys. still ahead, 2023 ending with a big plunge in mortgage activity what that may signal about the health of housing as we go into the new year. we're back after a short break. do you consider climate risk? changing weather patterns are impacting the way we live and the value of businesses large and small. this can mean disruption to supply chains, changing demand for products and shifting regulation. what does this mean for your business, your clients, and your investments? ice offers data and markets that can provide critical insight. manage your climate risk with ice. the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado.

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despite a sharp drop in mortgage rates to end the year, housing demand ended '23 on a pretty sour note. our diana olick joins us with those details. good morning, diana. >> good morning, carl. a big drop to end the year, actually. and we got two weeks worth since the mba was closed last week. these are the two weeks when mortgage rates sat below 7% for the first time since september. the average on the 30-year fix ended the year at 7.67%, lower than where it was two weeks, but higher than where it was a week ago, but of course, still well below the 8% high we saw in mid-0k9. but the sharp drop we saw in the start of december, kind of got a bit choppier. as a result, total mortgage application volume ended the year 9.4% lower than it was two weeks before, and that is seasonably adjusted. because the numbers for two weeks are kind of messy, and i'm going to give you year over year comparisons to break it down. applications to refinance a home loan ended the year 15% higher than a year ago. applications for a mortgage to buy a home ended the year 12%

lower. now, those who can benefit from a refi are clearly trying to get in while they can. but home buyers are still contending with very little supply and very high and still rising home prices. the question now is with rates in the 6% range, will they stay there? and if they do, will that be enough to get potential sellers off the fence and get some more supply into the market. mortgage rates started this week higher after also edging up on friday, so we are now, unfortunately, at the highest level in two weeks. back to you guys. >> interested in your conversation with robert frank this morning, diana. it sounds like you're a bit skeptical that rates at these levels are going to bring a lot of supply back online. >> i think so many people, the vast majority of current homeowners have rates in the 3 to 4% range. it's great for buyers that rates are pulling back a little bit. but if you're a seller and you're looking at trading your 3% rate, i don't think a 6% rate is really going to do it. maybe a five if you really need to move and 4 would be better. but if we could get into the low

6s or 5s, that might help get sellers off the fence. i don't think 6 and 7% is going to do it. >> a lot of psychology that goes into it as well, diana. thank you. getting some auto sales numbers from toyota this hour. let's get to phil la ebeau for more. >> strong december for toyota. this is in comparison, december of 2023, with december of '22. still had some chip issues that were hurting production in december of '22. it's not a surprise that for december, toyota's overall sales in the u.s., up 30.3%. but this is the stat that people are going to pay attention to. toyota's electrified sales, basically hybrids with a few electric vehicles in there, mainly hybrid vehicles, up 63.9%. we have talked about it for months. there is a clear rotation in the market for people who want greater fuel economy, want to take a step towards evs, but they don't see the full ev route yet, and therefore they're going towards hybrids, and that's why

you see the toyota numbers that they reported in december, 63% increase in hybrids. the demand is there, guys. >> interesting, phil, especially given in december, we saw such low gas prices. a majority of the gas stations across the country are now below $3 a gallon. is there still that interplay or correlation between where gas prices are and how many evs or hybrid vehicles are sold? >> no. because you really need gas prices to make a new high and then stay there. and we haven't seen that in a long time. that's really what drives people to say, i can't take it, i've got to get into an ev or i've got to get into a hybrid. i think what we're seeing right now in terms of demand for evs, not just with toyota, but with other automakers as well, is a clear understanding, this makes total sense in terms of the mileage and the cost and the price point for hybrids relative to internal combustion and to evs. it just makes more sense right now. and that's why you see the rotation that we're seeing.

>> pretty interesting push and pull on tesla today, phil. whether it's the headline about deliveries, beating expectations, but also falling to byd. and then, morgan stanley today arguing that the stock's going to be valued on less about cars, whereas bernstein today reiterates that 150 underweight, saying they're going disappoint on volumes and margin. >> talking about two different things here, carl. bernstein, with toni sacconaghi, he has said this for some time. he is not very optimistic about the next couple of years for tesla. his estimate for deliveries next year, $2.15 million. the street's at about $2.2 million. he thinks they're not only going to disappoint in terms of deliveries, but also in terms of margins. and when you mentioned morgan stanley, adam jonas has said for some time, the real value within tesla, it's not the automobile and the deliveries there, it's what the entire ecosystem may represent in the future. and there's -- that's why he believes there's so much

untapped potential, potential valuation growth in the future, and that's what you get when you listen to adam jonas. and that's his theory right now. not to say it's right or wrong, but that's what he talks about largely in most of his notes. >> yeah, right above the 50-day this morning, at about 234. phil, thanks. interesting story regarding the auto business right now. our phil lebeau. dow down 286 he.er our live market coverage continues after this. is it possible? with comcast business... it is. is it possible to help keep our online platform safe from cyberthreats? absolutely. can we provide health care virtually anywhere? we can help with that. is it possible to use predictive monitoring to address operations issues? we can help with that, too. with the advanced connectivity and intelligence of global secure networking from comcast business. it's not just possible. it's happening. at morgan stanley, old school hard work meets bold new thinking.

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good wednesday morning. welcome to "money movers." i'm carl quintanilla with leslie picker on the floor of the new york stock exchange. today, economist david rosenberg on why he says the u.s. has not skirted a recession and why it might be time to have a stash of cash on hand. >> and u.s. transportation secretary pete buttigieg on expiring ev incentives and the latest in the red sea and what it means for the supply chain. >> inside the drama surrounding disney's board as activist value act and blackwell's back the company in its battle. right now, though, currently, the equity markets are firmly in the red. the dow down about 0.6%, s&p down a