they're falling below $3 a share, mcdonald's should be a beneficiary. i expect revenues to increase and accelerate this year. >> bryn? >> free cash yield, had a good last year at 14%. great trade for 2024. >> thank you. "the exchange" is now. ♪ ♪ thank you, scott. welcome to "the exchange." i'm kelly evans. here's what's ahead. stocks are falling again, with the nasdaq yet again the worst performer after its worst start to a year since 2016. is weak data the culprit? manufacturing activity did contract for the 14th straight month. job openings came in at the lowest level in three years. but the richmond fed left rate hikes on the table. we'll try to figure out what's ailing this market.

and another cargo ship attacked on the red sea overnight, bringing the total to 24. our expert says the u.s. will almost certainly decide to attack houthi targets in yemen, as fighting across the region intensifies. we'll talk fallout for energy prices and the global supply chain. and microsoft is getting closer to passing apple's market cap. is tech in trouble or is leadership just shifting? before all, that let's get to dom chu with the latest on these markets. we've lost steam throughout the session today. >> we have. we are sitting just in the middle of the trading range, at least for the broad s&p 500, which sits at 4722, down roughly one half of 1%. we're in the middle of the trading range. the dow down about one half of 1%. and the nasdaq composite at 14,662, which is the underperformer of the day, down

nearly three quarters of 1%. kelly mentioned the middle east issues happening because of what's happening in the red sea, the suez canal region. all of that in addition to u.s. interests, is propelling oil prices for u.s. benchmark west texas intermediate, up about 3% now to $72.57. we're sitting just at about from these levels, $95 to where we are here, roughly 24% to the downside. we'll keep an eye on that move in oil prices, and whether there's a sustained movement higher. and the technology trade, enphase and first solar, the energy stocks facing some downside. first solar an outperformer, and enphase is down 6%. on the semiconductor side, some of these chip names that have been talked about as part of

apple's supply chain reeling from that downgrade from apple yesterday. analysts over at barclays is having reverberations today. so keep an eye on solar stocks and those chip stocks tied to apple. kell, back over to you. >> dom, thank you very much. is bad news bad news again for the market? manufacturing activity and job openings remained at lower levels in the latest data, and we'll get more clarity from the fed's last meeting when their minutes come out at the top of the hour. steve liesman has more. steve, what do you make of it all? >> we've got the soft landing scenario that got a little help from the economic data with a decline in job openings, showing easing inflationary pressures. the ism manufacturing was up 0.7 to 47.4, but the third straight month it's indicated to contracting an economy that is below 48. ism the index, the price index, it declined.

so that's a good measure. the fed is looking for easing in the labor market and did get a little bit, the lowest level since march '21 but above the prepandemic level of around 6 million. the quit rate also declined back towards normal. the richard fed president this morning perhaps giving a preview of what those minutes will say. yes, cuts are penciled in, but no, they're not guaranteed and they not come as extensively as markets expect. a soft market, he says, is not inevitable, so the potential of rate hikes remain on the table. about that, he said weaker demand or more fed hikes may be needed to bring down inflation, and the recent decline in yields and the rise this the stock market is going the wrong way. so he's a little bit nervous. markets unfazed, trading with 74% of a probability of a march rate cut.

so the january 25 contract shows six full cuts baked in with the yield of 3.84. so most officials have leaned against the market's aggressive pricing, but to little avail. the minutes, maybe they'll do the same and we'll see if it has any impact at all, kelly. >> steve, stay with us. my next guest thinks the fed won't cut as much as expected this year. mike england joins us now. mike, it is fairly common for us to hear people say no, no, the fed's not -- i don't know. maybe we'll continue to be surprised by this disinflationary impulse and they will cut in march. why are you not in that camp? >> we think back to last year at this time, we hended december o 2022 with a down trend in inflation and the markets got

excited about that. it turns out through changes and ugly inflation numbers for january and february. by the time we got to march, the down trend in inflation was still evident but not as done as we seen at the start of the year. here we have a similar situation. we are assuming there will be continued down trend in inflation, but there is the big minimum wage hikes in quite a few states. that's going to have an inward impact on the wage data. and we could completely quash a lot of this market perception. i think the fed has it right in looking for 75 basis points in cuts. since they revised their economic outlook four times a year, they'll skip march and start their cutting sequence in june. >> i guess the question then is, you know, how the market is likely to react to that. not that that's what you have to think about one way or the other. but what do you make of the weak trading action to start the year

off? mike, and the data, maybe it was good, maybe not so good. >> i think the market got ahead of itself. if you look at the dropoff in mortgage rates, it started in the third week of october. it's the same as last year. in october of 2022, mortgage rates peaked. this time they dropped dramatically. the stock market rallied and i think the market has gotten ahead of itself. the overall outlook is good. the prospect of inflation slowing through the year is positive. i think part of the reason why we back stepped a little at the start of the year, aside frf the problems we have seen in the red sea, i think maybe the market is just catching its breath. >> i heard our friend, david kelly, talking today about especially if things like auto insurance prices drop, we could be back to % on core pce. but then i heard home insurance rates and car insurance rates

going up, so maybe that prospect is -- maybe that's not going to happen the way people think. >> yeah. and let me give you, kelly, a little behind the scenes story here. mike and i had been talking over the past several weeks about what happened last year. we've been trying to get the data together to show this. but to make a long story short and less complicated, the fed thought that -- and the market thought that inflation was coming down pretty strongly at the end of last year, and the beginning -- sorry the end of 2022, and the beginning of 2023. that was revised away, and we had a little uptick in inflation in the beginning of the year. so it was a bit of what fed governor waller called a head fake. now, mike has some good reasons that we've been talking about, why that may not happen again. but the important point from that is that markets seem to be priced for this linear movement in what is essentially a very volatile, non-linear series. so i'm a little concerned about

that. you could get a pop in the cti or the bte, and it may not mean anything in terms of the overall trajectory, but it would be something that could cause markets, which are all the way on one side, to have to adjust. >> we were talking about that a little yesterday, mike. but even if that's true, even if the cpi readings come in sticky for a couple of months, do you think anyone would interpret that as a serious problem? in other words, do you think they would change their trajectory if the inflation reading is half a point higher than, you know, we would like it to be? >> i think the fed is pretty well positioned to stay its course. it's got a 75 basis point cutting path for 2024 and '25, 100 basis points. so with each quarter they can cut. and another 75 after that. if you look at that broad picture, their forecast for inflation is pessimistic. they plugged in some high inflation numbers. a gradual reduction.

so we do see some backtracking with the inflation numbers, it's marked in by the fed into their official outlook. so i think they have a solid path year, as long as the economy stays strong. obviously, if the economy starts to weaken more dramatically, they may want to react to that. so growth is taking a slow and careful approach and cutting rates is the best path. >> the market wants the fed to do victory cuts, not cuts in defeat. >> that's a great way to put it, kelly. i think that's exactly right. in fact, powell even talked about that at the last press conference when it comes to relative to whether the fed would -- and how it might end quantitative tightening. it depends on what's going on in the economy. that is the definition of a soft landing. it's one of the critical ones, that the fed cuts rates because the economy is relatively strong. but that inflation has come down and the restraint is no longer

needed. >> still is base case, that we're cutting from a good place. gentlemen, we'll leave it there. steve, we'll see you next hour. our steve liesman and mike england. more cross border fighting in the middle east pushing oil prices higher today, and spurring opec plus to announce a monitoring meeting on the first of february. this follows iranian reports of explosions at an event honoring one of its generals killed four years ago in a u.s. air strike. at least 103 people have been killed. lebanon's hezbollah and russia's putin condemning the incident with putin sending condolences to iran. on top of all of it, houthiing attacked a 24th container ship on the red sea overnight, and my next guest says the u.s. will attack houthi targets in the next week or two. welcome. put that into context. how would the emergency markets take it if those strikes do happen?

>> look, i think so far what we have seen is both the red sea and geopolitics, we haven't seen prices react much, in part because fundamentals are softer for crude right now. we have seen some inventory go towards year end. that's why the market isn't sensitive to this. even if there are attacks, we are not expecting any oil supply losses on the battlefield, and the market is going to really look for specific supply disruptions that actually helps tighten balances before we see a significant increase in prices. >> and to that point, i guess the larger question is what it would signify for the middle east more broadly. so we have seen this escalating tension, even as the oil prices remain relatively calm. >> yeah. i think you could argue that our oil prices are just not reflecting some form of geopolitical risk. it isn't right now, and is that fair? the challenge we have right now is that crude demand seasonably is weaker.

product markets are tighter, and i think that's kind of where the imbalance is right now. but we are likely to see and once you kind of stop realizing inventories are still relatively low, especially versus this time last year. and if we start to get supply disruptions, then you are going to get -- the market is going to pay more attention to these attacks in the middle east. and you have listen seen a lot of ships divert. it just means you're going to tie up shipping on much longer routes, which means asia has to pay a higher price, and it does affect inflation overall. >> another head wind for china perhaps or for the region. i'm curious, if it's the case as i saw an analyst put it that the houthis rule the red sea right now, what more is the international community going to have to do to get passage back and normalize supply chains and help with oil prices and all the rest of it? >> well, i think it's a great

question. we just haven't seen even with u.s. carriers attacking and destroying some of these houthi ships, that the counterattack or the attacks from the houthis have not stopped. if anything, they continue. so i'm not expecting a deescalation in the red sea any time soon. i think that's where the real risk lies. right now, the market is comp complacent, but these things don't take a lot of time to turn. if you get any disruption, which is already causing quite a bit of diversion for these ships, we're just going to need a process to go up even further to actually reflect what it would mean a pretty significant imbalance. there is a risk that that does happen. >> there's a joint statement pout out by the uk and other countries saying we call for the end of houthi attacks of commercial vessels, and the release of unlawfully detained vessels and crews, saying the houthis will bear the

consequences should they continue to threaten the free flow of commerce in the region's critical waterways. this is an extremely worded statement, but statements don't amount to much. >> exactly. the point is that we have seen some of these houthi carriers or boats being destroyed, and that hasn't deterred them whatsoever. if anything, we are seeing continued attacks on vessels that do -- that are still going through the red sea. if anything, what you are going to see is more and more western companies saying yes, we have to eat the cost, but we are not willing to send our ships through that route. that is the real outcome right now. unless you see either a deescalation, or this situation getting sorted out. >> if it's correct to substitute iran every time you see the word houthi, if that's where the funding is coming from, is the u.s. at some point going to respond to all of this provocation by levying more sanctions on iran and affecting its oil output in a way that's

correct maybe have a bigger impact on the price of energy? >> it's a great question. i think one of the challenges the u.s. faces right now is that the bulk of iranian oil, illegally, of course, is going to only one country, which is china. the companies buying this iranian oil are not a part of what i would call the global financial system. they don't transact in u.s. dollars. so what if you sanction them, it doesn't affect them. it's fair to say the u.s. administration has turned a blind eye to iran raising exports last year, so even if you want to see a significant tightening, and the u.s. says no, companies that are popping up in the uae, he maybe you do beyond that 600,000 barrels a day, iran will continue to sell to china because the companies don't care about sanctions at

this stage. >> that's fascinating. it suggesting the u.s. has to use some leverage on china or offer them some other opportunity. just a quick final comment. russia did come out with a statement in support of iran. we see this continuing widening of this middle east situation. what is the fact that they came out in support of iran after the explosions, telling you what might be going on whipdz the scenes in terms of what bigger shape this may take in the coming months. >> well, i wouldn't read too much into it. russia, again, interestingly has always travelled this route, they always supported iran on some issues, but especially given the war in ukraine, they don't have a lot of friends and they have very strong allies in saudi arabia and uae. they're a part of opec plus, and that is not going to change regardless of their support for iran. russia has played this role for several years now where they are actually supportive of kind of

both -- you've seen the relationships with the gcc but also politically with iran. >> and there's been speculation that it will be saudi arabia who ultimately capitulates, maybe allows for more barrels to come on the market, takes the lower price but guards their market share. others suggest they can't do so. they need a higheroil price for some of their vision 2030 goals. what is your expectation on that front? >> i would say that saudi arabia is a revenue optimizer. they will continue to look at markets and say look, if we continue to cut production and keep the prices at a stable level, we are better off on a revenue basis rather than netting price down but increasing exports. so they continue to revenue optimize. we continue to believe that they will keep the markets stable. the prince has enacted addition additional cuts on q1 and they

probably will get extended. the focus is very much stability in oil prices and making sure inventories don't go low. >> thank you for joining us today. coming up, we're officially two years removed from the s&p 500's record close, and we have climbed nearly all the way back up, less than 100 points away from that level now. my next guest is looking for opportunity. he'll tell us where the catchup trade is next. and two weeks worth of mortgage application to go through. could we see a mini wave of refies? that's ahead. and here's a glance at the market. the dow is down 130 points today, off the session lows but still the s&p 500 is down almost half a percent. the nasdaq, down three quarters of 1%. the ten-year yield briefly over 4% earlier, now at 3.927%. back in a moment.

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welcome back to "the exchange." the s&p 500 is nearly on the cusp of taking on its record high from two years ago, but my next guest says it's time to start buying the beaten down parts of the market. david, so far the market is in your mood the last couple of days, don't you think? welcome. >> yes. happy new year, kelly.

it does seem as if the start of 2024 feels more like 2022 than '23. of course, it's only a couple of days, but obviously, those big momentum names in the nasdaq are facing a valuation wall. they're just extremely expensive, and many names can execute really, really well from here. and yet, already have it priced in where i do think some of the defensives in 2023, they were still up in many cases. some of the utility names may not have been, but they didn't get overstretched. i think '24 will produce some of those opportunities. >> before we dive into those opportunities, does that mean the magnificent seven, that they're not part of your portfolio? an a two-year basis, it's not that spectacular. on a pe basis, some of them are 30 x. it's not crazy. >> 30 x would be the cheap ones. some of them are 100 x, and 50

x. i mean, as a group, they're 55 x. >> wow. isn't that amazon, though, largely? nvidia is what, 30, microsoft, 30, apple probably, i don't know 20 something. >> yeah. again, some of it is if you're looking forward versus trailing. that makes a huge difference, too. i think the idea with some of them is absurd that they can hold their margins and get some of the revenue growth that's projected. so you have a lot of issues with that. but you make a great point about the two-year view. you had such an incredible performance in 2023 for some of -- let's take nvidia out. a lot of the rest of them are negative return or even returns. you recall a group like netflix, which isn't a magnificent seven, but the only f.a.n.g. comben clacher, it gave back returns in 2022 in six months. >> so perhaps you're hinting we could see that happen again.

certainly the places you're looking, do you expect big gains or are they just ways to stay defensive? >> what it is for us is a permanent philosophy of investing, kelly. i believed it in '22, as well. dividend growth was up about 6%, 7% and the s&p was down 20%. dividend growth was not up as much as the market in 2023, but it still had a mid teens performance, which most people would take any year. on a two-year basis, it's beating the s&p by over 10%. so you made a big point before the break, we're not back to our high with the s&p. as great as 2023 was, based on '22, investors still haven't gotten back to that level they were two years ago. that's the market we're going to be in for years. big years up, a few years down. but range bound. the problem, the reason i believe that is because of valuations. you just simply cannot get the earnings growth to get double

digit returns compounded for the next ten years with a market starting in 20 times earnings. >> now you are making us nervous again. for the new year, we have to fund some 529s, things like that. and we're like, please let this not be the year that the market tops out for the next five or ten. but then, you know, you'll feel like that might always be the case. >> and one of the frustrations i have is you want to make that consideration on a rational basis, not with the fed hanging over your shoulder. there's been this wall of when the fed would stop tightening. investors dealt with that all of '23, and they got that pivot at the november meeting. and i agree with consensus that you'll see rate cuts in '23. i don't care if it's 100 basis points or 200 basis points, it's going to likely be in between there. but fundamentally, you just have earnings projections that are really optimistic, and you're doing that at a starting point of a high valuation. i'm a child of the late '90s,

early 2000s, beginning my professional investing career. i saw incredible companies that have performed magnificently for 25 years, that never got back to those levels that they were. cisco, intel, some of those great examples. >> right. >> because people entered at too high of a valuation and you couldn't recover. >> what am i going to do, buy bonds? they give you four options, you can do the s&p, you can do some bond funds. there's not -- i can't go buy these like you are recommending. >> well, of course, individual portfolios like the ones we manage, this is the part where i get to talk my book. you're right, and some of these target date funds and 401(k)s, they don't have that option. a lot of them do offer some form of active value. >> but the fee structure and

the -- i don't know who the fund manager is. and then i've -- i just feel, you know, that's nerve-racking. to your point, when you put these portfolios together, this is all stock by stock. >> yeah. we're individual stock buyers, and it ends up with the sector allocation. you mentioned american electric power is a name i presented today. it's a utility name that is best to breed, it's the only utility name we own, though. i'm not trying to get the utility sector, i'm trying to get american electric power that fell last year because utilities were down 7% but it's a name that longs higher. it's underpriced and a great dividend growth. >> david, we'll leave it there. you're making me nervous again, but i appreciate it very much again. coming up, disney eked out a 4% gain in 2023, to narrowly avoid its longest losing streak in two decades. but the proxy battle is back in

the spotlight. we'll bring you the latest and what it could mean for the legacy with shares now negative since his return as ceo. "the exchange" is back after this. lt something truly beautiful. it takes years of dedication to get to this milestone. the new york stock exchange is a symbol of what america is all about the potential of an american dream. it is day one. a lot of work has happened to lead to this historic moment. the only way you can move a society forward is a true expression of freedom. ♪♪ this thing, it's making me get an ice bath again. what do you mean? these straps are mind-blowing! they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. and you are? i'm an investor...in invesco qqq, a fund that gives me access to... nasdaq 100 innovations like... wearable training optimization tech. uh, how long are you... i'm done.

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welcome back to "the exchange," everybody. i'm tyler mathisen with your cnbc news update. in the latest prisoner exchange since the war started, more than 200 ukrainian and russian p.o.w.s returned to their home countries today. the deal was brokered by the united arab emirates which has kept close ties with moscow. prisoner swaps aren't new, but have slowed recently. the last exchange happened way back in august. at least four state capitol

complexes were evacuated because of bomb threats earlier today. the capitols of georgia, kentucky, michigan and mississippi were targeted, but authorities say no dangerous items were found. investigations into the threats are ongoing. it is the latest in a pattern of threats made against state capitols this week. and meet the newest breed to be recognized by the american kennel club, known for its smile, yes, its smile. there it is, it's smiling right now, is the lancaster heeler is now eligible for thousands of dog shows, including the westminster dog show. the they're known to be courageous, happy and affectionate. they sometimes pull back their lips into a smile when they're content, kelly. just like me. >> now we just need a new crypto named after it. >> heeler coin. coming up, the home builders

are having their worst day since october after a historic run to end the year. the home construction etf down a percent and a half today as mortgage rates rebound from their lows last week. after the break, we'll see whether last month's drop was enough to get buyers back into the market. and take a look at some of the health care names hitting all-time highs today. all hitting 52-week highs. it is less than 4% away from its record intra day high. "the exchange" is back after this. in the u.s. we see millions of cyber threats each year. that rate is increasing as more and more businesses move to the cloud. - so, the question is... - cyber attack! as cyber criminals expand their toolkit, we must expand as well. we need to rethink... next level moments, need the next level network. [speaker continues in the background] the network with 24/7 built-in security.

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welcome back to "the exchange." lower mortgage rates not enough to spark demand at the end of the year, but refis were a different story. diana, what did we find out? >> the drop in rates in december had little effect on home buyers, but a little current help to owners. so the average rate ended the year at 6.76%, lower than two weeks ago, higher than a week ago, but still well below that 8% high we saw in mid october.

as a result, total mortgage application volume ended 9.4% lower than it was two weeks ago. now, because the numbers for the two weeks are messy, i'm going to give you year over year comparisons. 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. so those that can benefit from a refi are clearly trying to get in while they can. home buyers, though, are contending with little supply and very high and rising home prices. now, mortgage rates started this week higher after also edging up friday and again today. so we're now at the highest level in more than two weeks. still in the 6% range, but that is probably why the home builders are not so happy, kelly. >> exactly. doesn't take much to move them one way or the other right now. diana, stay right there. our next guest says it should rebound this year. let's bring in andy aldman.

good to see you again. am i saying that correctly, you do expect things -- affordability to get better, buying demand to pick up? >> i think gradually as we move throughout 2024, if you look at the interest rate forecast, rates will come down about a half percent throughout 2024. should give buyers about 5% to 6% more buying power and should improve demand. it's hard to take too much away from the couple of holiday weeks there, but if you look from october when diana was mentioning, rates got up near 8%. we have seen demand rebound a little bit gradually, and roughly, if you adjust for week-to-week comparisons, we're at a similar level to where we are in may. so very much behaving like you would expect them to behave in this environment. >> one thing i think about, and maybe you have the data handy, there's so many more either cash buyers, you know, people to whom

this is not the swing factor. again, you wonder how much that has played a role in the way the whole economy has responded to rate hikes. >> yeah, certainly you're seeing more of that. you're seeing cash buyers even back out a little bit, but they're making up a larger share of the market because of the compression you are seeing in mortgage demand out there. it's a little more cash down world than we've been in, in the past. but you are seeing compression in demand across the board. >> diana, what would you add to that? >> it's going to be about supply. when you say rates are coming down a little bit, do we get into the high 5s at some point? it depends on the supply and will the seller -- we talked about this so much today, will the sellers finally decide that they're willing to trade their 3% or lower rate up to a 6% low-ish rate to get into the market and put more inventory out there. that's the only way we'll see affordability. but i don't see that really happening unless rates came considerably lower, and that's

not really in the forecast. >> yeah. we haven't seen that last year. that was the thought process, we moved into the 2023 home buying season, falling rates should improve inventory. we haven't seen sellers move with rates at all. you see a very linear reaction from buyers. they reacted to rates. i haven't seen any signs of sellers moving with rates getting down into the 6% range last year. so maybe if we get in the 5s, that changes. we just haven't seen that play out in the numbers just yet. >> diana, last word. >> again, i think it's going to depend on that. i wonder if falling rents aren't going to help a little bit. if we see down sizing baby boomers or people that don't need to buy another home, might consider selling and getting into a rental. maybe that helps the market a tiny bit. i'm looking for the silver lining, kelly. >> thank you very much. we appreciate it today. coming up, bob iger and a

deadline for nominations closing tomorrow, could nelson pelts fire one last salvo? 'lta authanext.

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welcome back to "the exchange." shares of disney higher about a percent now, despite what's being seen as a vote of confidence for ceo bob iger and the board from a key activist investor. let's get out to julia with the latest. julia? >> hey, kelly. that's right. disney announced an agreement to advice on strategy and value support. disney has placed a board of directors at the annual meeting. the ceo saying -- >> valueact owns about 5 million shares of disney, according to sources close to the situation.

this helped disney defend against trian, which has about 33 million shares, including 25 million shares owned by former marvell entertainment chief. trian saying the agreement does not change its approach to this proxy battle. analyst gordon has kin weighing in, saying this gives disney an important backer and put this endorsement to work. all of this comes as trian nominated peltz and rasulo to the board. disney named former morgan ceo james gorman, who has had experience with proxy fights and succession planning, as well as sir jeremy darroch. there's another activist firm which says it supports iger. blackwell, which owns about 55,000 shares, nominated three of its own directors to the

board, saying it welcomes other shareholders attempting to fix this iconic but wayward company. kelly, certainly very strategic here for disney to align with valueact. >> again, i'm just thinking about it, thinking about some of the success they have had there in the past. i wanted to ask you about kind of -- to the point about which way disney should go. we got this data point about how universal overtook disney as the highest grossing studio in the box office, and it speaks of the decline of disney at the box office. they didn't have one of the top three movies for the first time in a long time. the first time since 2014 none of disney's movies crossed the billion dollar benchmark. so there are real challenges here. >> yeah. look, there have been a bunch of movies that are scheduled for this year, some big marvell movies. so there's some expectation that the box office will be strong this year, in part because of those disney franchise films.

there are concerns about superhero that and franchise fa in general. programming decisions made by bob iger's predecessor. so the question now is getting the content that's going to get people -- get audiences out to theaters in the same way that "barbie" did and "oppenheimier" being one of those universal films that helped. bob iger says this is an area he will be focussed to make sure that the films are the kinds of blockbusters that they have traditionally had. and some acknowledgement that maybe some disney films suffered because they were being produced during the pandemic. s >> there's some out there saying maybe a breakup is the way to

go. so the fact that's even, you know, not considered implausible tells us about the struggles of that division. in any case, we have a lot of work cut out for them. >> i would just say, kelly, that the movie studio has always been seen as an engine for the rest of the whole company. so the franchises developed for the movies are then exploited across the different platforms, not just disney plus but the theme parks. think how intertwined those businesses are. you go to the theme parks to see the characters that you saw on the big screen. as full the more reason they have to short out their box office woes, as soon as they sort out the board woes. julia, thank you very much. coming up, shares of this small-cap tech name are up 55% over the past year, and several firms see more room to run. maybe a top pick for 2024. but with the nasdaq under pressure, are growthier names in

jeopardy? 'ldiusth, xt.

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in decades. the call is dragging down apple ecosystem. gm among the hardest hit over the past two days. that translated into the worst first day of the year for those nasdaq since 2016. our next guest has the opportunity. joining us now is the ceo of taylor investments and mark mahaney, head of internet research. welcome to you both. i don't want to -- let me start on the big picture of being here . if this is a change in leadership, is microsoft the new apple? i will put this to you first. for a couple of years, apple has literally vended the stock market. is that changing now? >> don't underestimate apple. i understand that growth is slowing. one of the things the market is missing is that the company has announced $100 billion in share

buybacks in the magnificent alone has announced 190. that puts a floor under the stock price. that said, we took it out of our 12 year portfolio two years ago. we still own a small piece of it. we do own microsoft. the last thing i will say is i think mark and i were investing during the 90s. we think this market is analogous to that market and at that time, at the end of the decade, the four oarsmen were treating at regulus evaluations. for microsoft, it was 51 times peak earnings and trading at about 30. i think there is plenty of opportunity, a much more robust opening with a lot of leverage and a lot of monetization to come. >> this is now the second time this analogy to the 90s and 2000's has come up. it was used in a negative way earlier saying he saw that as the peak. >> i think nancy has a better memory than i do.

i will defer to her in terms of microsoft and apple. i would hope that one more stock does not move the market. i would hope the market moves are broader than that. the take on the magnificent seven, after a pretty severe 18 month route intech and growth stocks, you had the seventh highest-quality tech stocks. of course you would want that. you want the highest quality and that is what we have. now we will get into this as we have for the last few months. i think that creates some new opportunities. it does not mean that some of that can continue to ork. amazon and meta are some of my favorite for 2024. >> we showed pinterest going into the break. what are your thoughts there? >> this is part of that fusion trade. i think pinterest is under new management. it has been 18 months. it takes time to turn these

ships. under new management, it has improved tools for advertisers with things they call mobile ding -- deep links. the return, for marketers were working with pinterest, has been rising. the cmo of walmart talked about 15 x increase and they have this partnership with amazon that is going live now. i think that is big enough to cause the growth rate to jump up a couple of points. it is a revenue growth acceleration story with much greater cost discipline than they have had in the past. it is one of the reasons why it is our top longest. >> just to go back to what is going on with apple, maybe some would make the case that apple's growth is peaking but i don't think they make the case for microsoft. it would be hard to come a given everything going on with the lifecycle. >> we know the total adjustable market is an estimate. some of the numbers is that we

will see 45% compounded annual growth rate through 2030. if you look at cloud computing, that is not over either. about 51% of all i.t. spent going into cloud computing, if you step back and you see labor shortage, which we still have, we have a productivity improvement which we have seen much like we did in the 90s. you can draw an analogy. we can coexist. tech stocks can go up with higher interest rates as they did in the 90s as long as we are seeing improvements in productivity. we will use this weakness as we did in the fall of 2022 add to some of the names. we don't know all of the magnificent seven like mark suggested but we do know names like broad,. amazon is one of our top picks as well.

andy jaffe got cooked and he took over. apple is a 16%. it is a free cash story, amazon, that is. by 2026 they will be generating that on pre-cash flow. i will be patient and we will be stepping in. those are all run by excellent ceos and we think that is critical. >> i love how you talk about the internet. those were names that had a monster 2023 and maybe can continue to outperform. we will leave it there. we appreciate it. tech is not in turmoil as it seems. thank you. that does it for t ehahexcnge. power lunch picks up coverage right after the break.

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lunch. glad you can join us. stocks continuing to sell off to start the new year. >> take a look at the nasdaq. it is declining and continuing to stretch. we started off yesterday with the worst first day for the nasdaq composite since 2016. we did see more upward pressure on rates earlier. let's get to steve for the fed minute, shall we? >> i will cut right to the chase and tell you that to the extent that there was a discussion about cutting rates this year, it was not a very robust or resolute or confident discussion. the current policy rate at or near the peak of this rate hike cycle. the projection showed that most agreed a lower target range would be appropriate this year but there was a high level of uncertainty around the