business is strong and i think that will be a focus this year. >> jim? >> vertex sets an all-time high. this is a very good pharmaceutical play. >> the markets are off their lows. the dow down about 150 points. the nasdaq, the hardest hit, down almost three quarters of 1%. that's going to do it for us. "the exchange" starts right now. ♪ ♪ >> thank you, frank. welcome to "the exchange." i'm kelly evans. here's what's ahead. cpi, it did come in hotter than expected this morning. stocks are lower as a result. could the first rate cut not come quite as quickly as the market was hoping for? we'll talk about that and how to position from here and we'll hear from the white house in a bit on their plans to tackle all of it. coinbase ceo calls the etf approval a great victory, but our analyst says coinbase is set for a reality check. he joins us, with the price of

bitcoin topping $49,000. and the ceo joins us with names on his radar that could be in trouble. but let's start with today's markets. dom chu has the numbers. >> just to give you an idea, it's been a wide range today for the s&p 500, which currently stands at 4757. at the highs of the session, we were pushing 4798, and down towards 4739 at the lows of the session. so, again, off of the lows, but well off the highs that we saw after we tried to make a run above the 4800 market. so we're off one half of 1% today. a similar percentage decline for the dow industrials. 37,549, and the nasdaq composite, underperforming a bit, down 2/3 of 1%. 93 points to the downside, 14,876. one of the big focal points has been the mega cap technology

that so-called magnificent seven trade. we have seen some pretty interesting swings. at one point today, microsoft was actually more valuable than apple, but even microsoft had gains that have now turned into slight losses today, but it hit a record hooigh at one point today. nvidia is sitting at record highs today. alphabet and amazon, both stocks that are in that magnificent seven and both big drivers of the market, they both hit highs for at least the last 52 weeks. alphabet currently down 1%. and then we got to check out what's happening with bitcoin prices, as well. as kelly alluded to, we briefly topped that 49,000 mark on a lot of this optimism about what's happening with exchange traded funds, many of which have begun trading today so far. rather than show you all of them, because some of them are small in nature, we'll show you the bitcoin price, up about 1.25%. but kelly, it will be very

interesting over the coming days and weeks to just see what kind of dislocation from a net premium or discount to nav many of these funds have with regard to bitcoin prices and their holdings. it's something to watch for in the coming days. >> fees flows all of it. dom, thank you very much. today's hotter than expected inflation numbers spooking the markets a little bit, as some think any rate cuts from the fed might be a little further down the road. steve liesman is here with more. how much should we make of this, steve? >> well, i think it's a good lesson, kelly. the fed has been trying to say for several weeks now that the inflation numbers are not going to be coming in as expected, now that the data is out, the question is whether the markets are listening. the message there the dat a is this, yes, inflation is cooling but it doesn't happen in a straight line and you just can't price the imperfect to perfection. here's the data.

the headline number is up, pushing up the year over year. the core coming in unchanged. base effects have declined to 3.9% but still sticky at levels the fed is uncomfortable with. energy is now positive. used cars, all the other data should be negative, and there's that shelter component, just won't go down. if you're bullish on inflation, that's your ace in the hole right there. and airline fares also reversing a series of declines, up 1%. the trouble for the fed, inflation progress seems to have stalled, certainly on the headline. it's gone a bit sideways, and in the core, the orange line, the downward slope is no longer as steep as it's been.

>> but the market still continues to price a 67% probability of a rate cut come march. just unwilling to give up that ghost for the moment, down from 71% before the numbers. the next great hope for the inflation is tomorrow. there is suggested little price pressure from the wholesalers. the pce price index, we have to wait until january 26th for that one. >> all right. steve, stay with us. busy little while here. we have a 30-year bond auction and rick santelli is tracking that auction. how did this one go, rick? >> you know, it's squishy in an average sort of way. this is a reopen30, the original issue was created in november. we added to it now for the second time. 21 billion reopened 30-year bonds. the yield, 4.229. pretty much right on top of the

one issue market of 4.23%. if you look at all the metrics, they're basically very close to ten auction average. so close to ten auction average, and it priced right where it's supposed to, there's your plus. i gave it a c plus, charlie plus, a little better than average. but as you pointed out, if we compare this to some of the auctions in your or some of the auctions specifically in the uk, spain, europe in general, we can't keep up with it. their bid to covers are off the charts. the demand is soaring. it seems as though europe is convinced that probably they're in a recession. germany is. and they're going to keep easing. here, let's look at it this way. you see an intraday chart, yields move down. you look at a one-month chart. one-month chart, kelly, we're at one-month highs. should we close 30-year bonds here? maybe the most interesting thing of all. i talked this morning on the cpi about the expensive situation on

the long end of the market. look what's happening today. you have two-year note yields down about four basis points. you have the rest of the yields on a long end a little higher. we have seen steepening in the yield kcurve, under 30 basis points. this is what all the traders were telling me mid december, that the big trade will be watching long stdated treasury yields buck the trend and that seems to be the case. >> rick, i appreciate it. let's talk about this more with my next guest, one of whom sees a march rate cut, which could be significant for markets. welcome to both of you. gee, we're seeing pushback from fed officials even now, but do you think march or no? >> pretty unlikely. as steve and as rick mentioned,

there's a high probability of a march rate cut priced in, but a high probability of nothing happening. we heard comments from several fed officials over the course of the last week or two weeks, highlighting the why would that it's just too soon to be confident. it's time to ease off the relatively restrictive level of interest rates. at this point, about two points before the march meeting, we would have to be paving the way based on the fed's forward guidance approaches. >> i totally agree. guy, i wonder if the more significant data point, cpi was kind of a nonevent, but it was jobless claims. they were still so strong. if the fed wants to push back on a cut, they only have to point to the still strong economy. if claims were moving higher, i think the market would be very much pushing back against this. >> yeah.

which is fair. at the same time, it's still a holiday period when it comes to the jobless data and the weekly numbers. so i don't think we've got jay powell and his colleagues staring at that data point every thursday morning. at the same time, there is a lot of evidence that labor markets perhaps are easing off the gas pedal a little bit, but are still relatively strong. there's no evidence of economic deterioration. >> michael, what should investors do? do they buy bonds here? or are we going to be surprised by rates moving higher in general? >> kelly, i'm not sure rates move higher. i've been in the camp you're not going to see a rate cut until the summer, unless something really bad happens. the economy is not in bad shape, and labor indicates that. so i look at it as yeah, you can extend your durations a bit here. i don't think that you have to do it today, but i think you'll want to move some of that cash to slightly longer durations.

i don't think rates go up a lot, but i don't think inflation drops a whole lot here either. that's where it keeps the fed on the sidelines longer than the market expects. >> a lot of people are saying the opposite, where they say you have to be careful going long duration now. you have a deficit/debt situation to still get through and the short term looks more secure. why not go with that consensus? >> i said longer duration, meaning everyone is in cash now or three-month t-bills. i think you can go out five, six years. i don't know if i want to have a lot of money with the tlts, but you can look at where the ag is and move your money out there. given the fact that at some point rates do some down. but i don't think it happens right away, because i think powell is a student of history. he remembers that the fed back in the '80s wasn't aggressive enough as it needed to be on

inflation. then we had a big inflation problem after. so they'll wait until they see some real data that inflation has been beaten and maybe they'll see deterioration in the economy. >> guy, you think march could be significant for quantitative easing purposes. you think they're going to end the program that soon? >> so i think last weekend, lori logan, head of the dallas head, talked about the level of banking reserves in the system reaching or approaching or heading towards what the fed calls the lowest comfortable level of reserves. this suspect a big deal. it's not a big problem. however, as the fed shrinks the balance sheet among other things, and at some point the fed is going to have to stop doing that to ensure there's sufficient reserves. our best guess, and it's a very simplistic analysis, the economy will hit the lowest comfortable

level of reserves in april or may of this year. in march, if the fed slows the pace of qt, they can stave that off further and there's no short-term accidents in the money markets. so that seems attractive to do. it looks from the outside like they're easing, but in reality it's just a technical adjustment. >> but more people are saying wouldn't be convenience, we don't want a banking crisis, but it would help us buy treasuries and keep that long end from spiking like we were talking about. >> yeah, i think the market is wanting to see the fed cut rates because they want that juice back. unlike europe, which i think is definitely in a recession, we're teetering. so i think, again, the fed is going to be more slower. obviously, what guy is talking about with the treasury is a little different. they're going to do some different things because they have a couple different arrows in their quiver. but i think growth is going to be hard to find and the parts of

the stock market that growth can be found, you'll have to pay for those. the growth is going to be harder and harder to find as we all slow globally. >> gentlemen, thank you. we appreciate it today. let's get back to the cpi data and dive a little deeper with jared burnstein, chair of the council of economic advisers. steve liesman is back, as well. jared, anything you want to share from your discussion? >> no, thank you. >> thank you for joining us. what would you like to share about the cp ireport, the economy, inflation, should the fed cut? the floor is yours. >> thank you. i will tell you one thing we talked about with the president was this idea that you weren't going to get inflation down as much as has occurred. you wouldn't get as much disinflation as we have seen without considerably higher unemployment. as you and steve well know, many were arguing that had to be the

case, while in fact, we've seen quite persistent disinflation in cpi core, headline, pce very much so, without giving up really much of anything on the unemployment rate. from the president's perspective, he's happy to hear me talk about macro economics, but he wants to know how is this sitting with families like the one he grew up in? so the important point i think for him and for working american families is that this combination of lower inflation, while maintaining tight job markets, is delivering real wage gains. it's been a trend, not a blip. we saw it in this morning's data, with real wages up about a percent year over year. higher than their prepandemic level. >> the challenge -- this is kind of fascinating, because you could see maybe some political rhetoric about it, i don't know. number one category for inflation over the past year, car insurance, up 20%. transportation inflation up 20%. car repair inflation up 7%.

are we going to see the president going after flow? >> well, he has been really emphatic that the most important two words when it comes to our economic agenda as we head into '24, lower costs. certainly maintain the gains we have had, build on the progress, but continue to punch at some of those costs, some of which you mentioned, others which have come down nicely. gas is critical, and gas was north of $5 a gallon in june of '22. this morning, it was $3.08 a gallon, below $3 in 30 states. if you look at dairy, ags, which did tick up more avian flu in december, but they're down 25%. dairy is down, milk, bread, airfares, tvs, used cars over the last year, although they ticked up in december. so we need to continue putting downward pressure on costs, not just inflation, but costs.

that also taps into his junk fee agenda and also, look, if you're a corporation and your input costs are coming down because of the savings, you need to pass those along to the consumer. he'll continue to talk about that, as well. >> steve? >> jared, you know the question i'm going to ask you, wouldn't the president help his own cause, help the cause of american family it is there was some dialing back in spending from the fiscal side? i know you guys have an ambitious agenda. it's an ambitious business agenda in terms of reshoring some production here in the united states, especially high tech. but also in terms of workers wagers, doesn't that create some of the inflationary pressure that we're concerned about, and that you really want to see dissipate? >> let me say two things about that. first of all, there is a very important double benefit in the space that you're talking about from lowering health care costs.

these are actions this president has legislated. lowering the cost of insulin, lowering the cost of prescription drugs and health care coverage. it's not an accident that something like 20 million people and counting joined the exchanges this year, and that helps lower their insurance costs. and that is a plus for the budget in the sense you -- it's really important for family budgets. now, look, what you are talking about is a little broader. if you look at measures of fiscal impulse, look at the brookings measure, fiscal impulse has been flat. i don't think it's been particularly strong. so i do think that macro economically, at least that's the key indicator there. >> jared, where -- go ahead, steve. >> i was going to see if i can ask jared to put his economic hat on. when it comes to growth in this country and whether or not growth is inflationary, supply is the big word a lot of people

have. do you think we will have the workers -- when you look at what's happening with the unemployment rate, it's stayed low. will we have the workers to power growth in the years ahead? >> i'm optimistic about that. i'll say a bit more about it in a second. but i think if you look at supply more broadly, and this takes us back to the inflation report this morning. look at core goods. core goods have been tracking negative or about zero for many months in a row. it's probably the most important factor putting disinflationary pressure on these indeces. we have done some very good metrics on this point. we find that 80% of the disinflation relates to supply disruption, supply normalization, and that includes labor supply. either on its own or interacted with demand. so we have seen real improvements in that space. now, as far as growth in the

future, one of the things that you're kind of implicitly asking, is there more capacity there for the labor force to build? and there i think if you look at men in particular, there's been a long-term downward trajectory of labor force participation rates for prime age goods. so it's possible if we can build out the manufacturing sector the way this president has been successfully working on. i think that should help pull more of those guys in, in that regard. so there's more room to run there. >> does the president want the fed to cut rates right now? >> that is not anything we're going to get close to, because we, very deeply believe in fed independence. it's not something that we're saying, you know, to be strategically clever or anything like that. we come from a perspective that looks at the history of country where is the independence of the central bank has been

compromised, and those economies have been brought to their knees time and time again. so we deeply respect fed independence. >> to give the former president -- he did call for rate cuts before the fed did them. to put it differently, does this white house economic team think we should be having rate cuts right now? >> that's not putting it very differently. we're just not going to get into the fed's knitting. we track rates very closely. mortgage rates, the fact that rates have come down about a point is very helpful. i would like to see them come down further, because i think there's a potential there to unlock some housing supply. so let's track that. but when it comes to the fed, we're going to stay way out of their knitting. >> jared, that's what is called by kelly taking one for the people. she asks a question that she knows you're not going to answer. i have one more -- sorry, is there time for one more question? >> go ahead, steve. >> yeah.

jared, when it comes to making a deal on the budget, are you optimistic here that we'll be able to keep the government from being shut down? what is your latest read of what's happening right now in congress and in terms of the back and forth with the administration? >> i'm optimistic. i don't want to get into ongoing negotiations. let's give them the space that they need. i think when you see members agreeing on the top lines for the 12 appropriations bill, that takes the probability of a shutdown way down. but it's not over till it's over. we're watching it very closely. we have able negotiators who are working really hard. i don't think they have had a weekend or a vacation for a while. so they're extremely dedicated to avoiding any kind of an own-goal kick in this space. we have, as i think we've discussed in this interview, we have some very nice underlying economic trends going, real wage gains, lower inflation, tight labor market. even some of the consumer

sentiment measures are showing some improvement in december, pretty strong, good to see. let's not kick the ball in our own goal at a time like this. >> jared, thank you for joining us. steve, thank you as well. coming up, are bitcoin etfs a crypto game changer or a painful reality check? that's what my next guest warns, saying the fundamentals for companies like coinbase could suffer as a result. and red sea tensions arriving after the biggest attack on vessels to date. now mersk says it could hit global economic growth. we'll look at the fallout. and more's a look at the markets. after the s&p briefly traded above its record closing high, it's down 0.4% right now, similar for the nasdaq. pretty similar for the dow actually. so we're off session lows, as well. we're back after this.

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. trade brilliantly with schwab.

welcome back to "the exchange." the s.e.c.'s bitcoin approval pushing prices to their best week in a month. but is it good for trading platforms like coinbase? here's what brian armstrong said this morning. >> it finally happens. we had a number of etfs approved today. it was a big day for coinbase, because we were named as the

custodian in 10 of 13 applications. so over time, we'll see new pools of capital come into bit coyne. >> it has been a big day for coinbase. as you can see here, the shares are down about 5.5%, and in fact, are trading well off their 52-week high we saw in december. my next guest says the balloon has popped. joining me now is dan. you've been warning us about coinbase for some time. what do you think is going on here? >> this is the day, sort of the reality check that we've all been waiting for. if you look at the fundamentals, this is not a good thing for coinbase. this is a bad thing for coinbase, right? they're basically about to cannibalize their most profitable business. >> he seems happy. he says, we're going to be the custodian. i thought that was an interesting choice of word. >> it's a very good point, he's

right about this. but they get about five basis points, we estimate, to be the custodian. that's trading off 250 basis points, that's 2.5% for spot bitcoin trading. so they're giving up a really profitable business to get into a nonprofitable business. >> just to be clear, for those people, there's plenty out there who bought their bitcoin on coinbase in the past, they're chargeing 2.5% to do so? >> yeah. and now you can do it somewhere else. >> what you say raises an important point. a lot of people have said, because there's been the celebration for those who are going to offer these products obviously, but can they actually make money? you have 11 different options to pick from. as you said, do you think that they can offer low management fees for these etfs or etps for something that coinbase was

charging 2.5% on transactions previously? >> i think that now the massive price contraction, or deflation in bitcoin trading, that the era of that -- that era -- that is what is going to happen. we've been warning about price compression in crypto trading. today marks the day when this is starting. that's why the stock is trading down. >> why is it such more expensive to trade bitcoin than it is to trade other stocks, for instance? >> on spot? >> on these exchanges, on spot, yes. >> it's like -- because they were the only name in town, so you have ftx, which doesn't exist anymore. you've got binance, which is in trouble. until now, coinbase was the only legitimate way in america to trade bitcoin. so they were able to raise prices, which they did earlier last year, and they could.

going forward, they're not going to be able to do that. that this why this moment is so important. that's why it's not a good day for coinbase, because pricing is coming down. >> i said, what about those -- let's call them bitcoin purists or maybe the people who hold it now say they're going to leave it on coinbase. it gives me this feeling of self-custody, even if that's not what is going on. that's part of the appeal of bitcoin is its decentralized nature and not owning an etf. can't coinbase do okay if people continue to hold it on their platform? >> that's a great question. they only make money when you trade in and out. so if you just sit there and say, i'm nottouching it. i think it's a ten-year thing, they hold it for you but they don't make money. they make money when there's volatility. this is what is going away starting today. >> and we have seen the shares reset since december. how much further downside is there? >> i have a $54 price target, so

i see ample downside from here, a lot of downside. >> would you extend that, even though they're probably the pure play, would you extend that to any other parts of the thin tech world that have benefited for the fees that they can charge for crypto trading? >> we talk a lot about robin hood. they can benefit from trading the etf, so a lot of people are going to come to robin hood to trade those etfs. so is it better to be the custodian or the guy that benefits from trading the etf? that's why there's beneficiaries of that trend, as well. >> great point. final question here, do i say we're going to allow crypto etf trading on our platform too? >> they should. >> dan, thank you for joining us today. meantime, a major player in the ai space is on capitol hill today. emily wilkins brings us those details. emily? >> reporter: as we speak, speaker mike johnson and openai

sam altman are meeting together. sam has been a constant presence on capitol hill,and he told me today right before the meeting, i just caught up with him for a minute. he said he's here to answer some questions that johnson and other lawmakers might have. the big topic is election s inte integrity. the elections are coming, and there has been a lot of concerns for lawmakers as far as what role ai might play in spreading misinformation or disinformation. i asked if there was any specific bill he was hoping that congress would pass? he said he didn't have one in mind. he and johnson have a relationship that goes back a bit. remember when altman was here last may. he met with lawmakers at a din they are johnson hosted in his capacity as vice chair for the republican conference. so johnson's bid on ai has been something that is a priority for him. you haven't seen too much in his speakership because there's so much else to get done. for those i talked to, those

close to the speaker say he's planning to do more on ai. and the fact that he's taking time to meet with altman speaks to the potential priority we could see here. >> what were we to make of this meeting yesterday where they say there's already a revolt against the new speaker? >> reporter: things are getting very complicated here, kelly. the fact that you saw what should be a very normal, very process oriented piece of vote go down is not a good sign for johnson at all. and now he just met with some of his hardline members who say that they are now renegotiating and reopening that overall spending for the federal government. i mean, this was an agreement that johnson struck with the senate, the white house, and to go back on it now really does not spell out good things for avoiding a partial shutdown next week. we're still following this. we have to see where it goes, but there's a bit of concern in the capitol to think that this deal that was in place over the weekend now might no longer be a

thing. >> emily, thank you very much. a quick news alert to bring you. a well-known face here at cnbc christopher ailman has announced that he will be retiring. he will remain in his role through joun as they search for his successor. he's been in that position for a long, long time and a frequent guest. coming up, rapid ratings rounded up some of the names with the riskiest financials in the market. and there's one global shipper that stands out. the name and how the crisis in the red sea could exacerbate its problems. that's ahead. hi, i'm chris and i lost 57 pounds on golo. golo isn't complicated. i don't have to follow a restrictive diet, and i don't have to spend a lot of time making meals. using golo was truly transformative.

it was easy, and inexpensive. [♪♪] your skin is ever-changing, take care of it with gold bond's healing formulations of 7 moisturizers and 3 vitamins. for all your skins, gold bond. ♪ you were always so dedicated... ♪ we worked hard to build up the shop, save for college and our retirement. but we got there, thanks to our advisor and vanguard. now i see who all that hard work was for... it was always for you. seeing you carry on our legacy— i'm so proud. at vanguard, you're more than just an investor, you're an owner. setting up the future for the ones you love.

that's the value of ownership. powering sustainable growth in a changing world. powering financial solutions that transform industries. powering innovation with access to capital. powering critical decisions with precise data and insights. powering seamless execution in evolving markets. we deliver our entire global bank to power new possibilities for you. barclays corporate and investment bank. powering possible. welcome back to "the exchange," everybody. i'm tyler mathisen with your news update. the court is now on lunch break

in those closing arguments in the trump civil fraud case in new york. but right before the break, the former president was given five minutes to speak and went after the judge directly. saying "you can't listen for more than one minute." this prompted the judge to ask trump's lawyer to "control your client." trump sid he did nothing wrong before being cut off by the judge. trump said that he should be paid back for everything he had gone through. thisincident should not ever have happened and it cannot happen again, said the faa this afternoon as it announced an investigation into boeing after a door plug broke off that plane mid flight last week. the agency said it was boeing's responsibility to meet the high safety standard required of its manufacturing process. sam's club will use ai to check receipts at the exit instead of employees that it and costco employ. the program will roll out

nationwide, but it won't mean the greeters lose their jobs. sam says they'll refocus their time on helping customers. kelly, back to you. >> tyler, thank you. coming up, my next guest has a front row seat to the crisis in the red sea. he works with more than half of the top 20 global retailers, and says this has the potential to be as challenging as the pandemic. that's after the break. you can't buy great conversations or moments that matter, but you can invest in them. at t. rowe price our strategic investing approach can help you build the future you imagine. t. rowe price, invest with confidence. (ella) fashion moves fast.

can help you build setting trends is our business. we need to scale with customer demand... in real time. (jen) so we partner with verizon. their solution for us? a private 5g network. (ella) we now get more control of production, efficiencies, and greater agility. (marquis) with a custom private 5g network. our customers get what they want, when they want it. (jen) now we're even smarter and ready for what's next. (vo) achieve enterprise intelligence. it's your vision, it's your verizon.

welcome back. iran seizing an american oil tanker off the coast of ohman today, extending the red sea shipping disruptioning beyond commercial cargo. it's just the latest that have pushed up shipping prices, nearly doubling to $3100. and with no real end in sight to these conflicts, which could stretch on longer than thought, my next guest thinks supply chain challenges will persist and telling his clients to build up inventories in the u.s. and europe where they can. jonathan, welcome. how bad is it?

>> i think you're right. it is quite a bit of a situation. part of it is because of the uncertainty. there are so many things that we don't know. how long is this going to last? you know, whether we're going to get anything through the panama canal. so it's got lots of challenges to it. >> how realistic is it to ask people to build up supplies here? cargo is being affected going from where? >> asia to north america and europe. not long after the pandemic when products became available again, we saw a real spike in inventories. retail inventories were up about 28%, six months kind of after everything opened up. so hopefully that's going to give retailers some relief. but quite frankly, they're looking for their summer peak season inventory to come in, and we just want to make sure that doesn't fall behind. >> yeah. it seems like this could get

worse, at least oil prices have not spiked too terribly or anything like that. i suppose after the pandemic, do you think in a way people go, well, if we made it through that, we can certainly make it through this? >> i hope not. i hope that they take this quite seriously. that's where i'm working with my clients and the client teams and asked all of them to evaluate all of their inventory positions to look at what needs to be expedited now, and then to really review those inventory calculations to reset those lead times. because quite frankly, the lead times will go from 30 days to north america to 45 days or more. and so that's going to have a meaningful impact on their availability. >> and you're telling clients to build invenn toir -- inventories by 20% in the u.s. not only will that raise prices and inventories, but in the future there will be a payback. >> true. they have to make sure they manage those inventories

appropriately. knowing what inventories to build and not build is part of that equation. some things you can expedite. you may want to air freight some materials. some you can't. >> we also have seen retailers like ikea announcing product delivery delays already. what else should we anticipate? >> anything that is being sourced from asia, even if it's not just consumer goods like apparel or footwear, i think components are critical. when you are building a product and it relies on a component coming out of asia, that can be a constraint and a bottleneck on the whole production cycle. >> that's pretty much everything. wouldn't you say we're still largely reliant -- i can think of big-name companies, apple, for instance. to my my knowledge, we haven't heard anything on that front, but we should be hearing from

pretty much everybody who has an asia-based supply chain. >> that's true. we're seeing some movement around southeast asia, with manufacturers and contract manufacturers. but it's slow. that takes time. that's where we are spending quite a bit of time with our clients and understanding how do you build that resilience in your supply chain. >> finally, how much worse could this get, given what has happened as we said recently? and the comments maersk and others are making? >> it has potential to get worse. not to think of the worst case scenario, but as governments add warships into the red sea, such as france announced this morning that they were adding ships to escort cargo ships, the more traffic and more congestion you get, the more chance you have of bumping into each other. so that's something that concerns me. >> all right. jonathan, thanks so much for joining us, giving us the

seriousness of the situation. >> thank you. coming up, this name bet big just two years ago, and today they're making a big u-turn from that strategy. the name and what's behind the decision next. and boeing shares are down 15% since december. the company has lost more than $100 billion of market cap since 2019. what our next esisgut watching that doesn't bode well with the planemaker. or moments that matter, but you can invest in them. at t. rowe price our strategic investing approach can help you build the future you imagine. t. rowe price, invest with confidence.

welcome back to "the exchange." the dow is down 106, which is the mirror image of its highs today. we were up 106. the nasdaq, everybody pretty much down about a third of a percent. hertz was the mystery chart we showed you. the company saying it will sell 20,000 evs from its u.s. fleet and replace them with gas powered vehicles. they're blaming weak demand and

higher expenses related to collision and damage. shares are down around 4%. they had targeted for 25% of their fleet to be electric by the end of this year, and made a big splashy deal with tesla featuring that tom brady ad two years ago. elsewhere, staples are off to a rough start to the year. general mills on pace for a seventh straight day of losses, coming off its worst year since 2018. coming up, a rapid rundown with the rapid ratings ceo. from aerospace to shipping to retail, he's crunched the numbers and brings the names that are in poor financial health along with one he calls it impressive. he joins us next. let's check it out. says here it gets plenty of light. and this must be the ocean view? of aruba? huh.

this listing is misleading. well, when at&t says we give businesses get our best deal, on the iphone 15 pro made with titanium. we mean it. amazing. all my agents want it. says here...“inviting pool”. come on over! too inviting. only at&t gives businesses our best deals on any iphone. get iphone 15 pro on us. (♪♪) fresh, warm hot dogs! when i'm not selling hot dogs, i invest in a fund that advances innovations like robotics. fresh, warm hot dogs, straight out of my torso! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. hot dogs! fresh, warm hot dogs! before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com. trading at schwab is now powered by ameritrade, giving traders even more ways to sharpen their skills with tailored education. get an expanding library filled with new online videos,

webcasts, articles, courses, and more - all crafted just for traders. and with guided learning paths stacked with content curated to fit your unique goals, you can spend less time searching and more time learning. trade brilliantly with schwab. welcome back, from trouble in

the skies to the red sea, rapid ratings is taking a look at just how well the companies behind the headlines these days are actually faring. the firm software gauges the financial heels of suppliers, creditors and customers to help indicated company's future performance. they've been assigned a score

on a scale of 1 to 100, 100 is little to no risk, zero means very high risk, that being said let's bring in rapid ratings executive chairman's changing scaler. it's great to have you back. >> we're gonna start with the big story of kind of the month, the year so far which is bowing. what's interesting to me is not to ask about boeing proactively now after the challenges they faced from this aircraft going back to friday, and at the faa is investigating, but you guys have actually spotted some issues beforehand. what do you see going on here? >> our ratings, the financial health rating is an indicator of default risk over the 12 month period, but our core helped score, which looks at 2 to 3 years is evaluating how efficiently a company's run. and how well it's positioned to withstand shots. if you look at those two things together, it's a dynamic that does not paint a very good picture for bell way. they've been declining in ratings since 2019. >> which was one of the spa stop parks peaked. >> they currently have a financial health rating of 35

with a court held score of 18. to put that in perspective, over the last 20 years, with the last have been in 40 and below. that is insane, boeing is about to fail, and certainly if a company is going to get government support or is going to -- >> it seems unimaginable that you'd be talking about energy fall risk here. >> particularly it does especially in this market environment where it was just a few years ago that they came to market and raised 25 billion dollars in one shot. a lot of the boeing story is the same story that we see throughout the market for public and private companies. companies have been able to sustain themselves with relatively easy and very cheap access to capital, up until now. boeing is a great example of a company that has been able to sustain itself. >> >> i mentioned the faa is investigating that incident, boeing is saying they will cooperate fully in transparently with the faa and the ntsb on their investigation.

anything you should add here? a lot of people have said now this is an opportunity to get -- that will have to repair itself over the next, years i don't if there's anything you would add. >> they probably would have said that in 2019, and so here we are. i think it's a wait and see, unless you have an extremely long time horizon. >> fair enough, let's pivot and talk some shipping. now we were just speaking about this with our last guest about the conflict in the red sea, which actually has been sending some of the shipping names higher because the rates they can charger so much higher. there is one name in particular though that you said could the more exposed, here tell us about that. >> in general the shipping companies right have done very well and particularly coast covid where many of them improved in their ratings, they're resiliency to this kind of a dramatic problem has been really strong. most of the shipping companies that -- costco's and so far are in the

90s. -- zion is lower,'s it is in the 30s and -- it's a combination of indebtedness, a lack of profitability and i look into shipping industry and what i see today is not so much the product problems with us entities, it's the problems with the entities they are serving. they are in the supply chain of so many companies that are going to be affected, not to mention global growth, inflation and a bunch of other things that could be affected negatively by this. >> again a bit of a warning sign in the pipeline here. i also want to mention on the u.s. consumer front, you've guys have done some good research lately kind of looking through a lot of the middle market firms, trying to figure out what is going on with the help of the consumer, or the health of the economy -- what did you? i know there's one name in particular quite bullish on, to just give us a sense of that and some of the other results. >> well the first of all, the marble gauge work that we did, they are three billion dollar investment manager focused on

restructurings in the middle market based in greenwich, we've had a long term relationship with them and they used our data, anonymized all the private companies that we rate for the supply chain clients and public companies that we rates, and together we looked at middle market -- which are mostly private, and we compared those against the russell 3000, $750 million is the cut off. the things that we saw were very stark difference in the way those companies are performing over the last few years. to, it smaller middle market and private companies are down on an operating profit basis by 20% or public counterpart -- are up 20%. on our net profit basis, which of course is taking into account the funding cost that they are all having to incur, they are down 80% will publics are up 30%. leverages are up 62% in the big companies. that's down by 14, so this is a

picture of a sector that private companies that are under a lot of duress. >> and the ones benefiting, i'll just go ahead and say that lululemon comes out in our last five seconds here looking pretty good. >> lululemon rated in the 90s is doing really really well. >> i think the right differential again highlights why we are seeing such struggles among some of the strong smaller players among the big guys. jim thank you so much, it's good to see you again. we appreciate your time. >> james got from operating, that does it for the exchange. everybody tyler's getting reyad for power lunch, that's on the other side. >>

you can't buy great conversations or moments that matter, but you can invest in them. at t. rowe price our strategic investing approach can help you build the future you imagine. t. rowe price, invest with confidence. [♪♪] your skin is ever-changing, take care of it with gold bond's healing formulations of 7 moisturizers and 3 vitamins. for all your skins, gold bond. welcome to, alongside kelly

evans i'm tyler mathisen, stocks coming up. stocks falling today after rate cuts are coming soon at that narrative, it takes a hit things to harder than expected inflation data. the consumer