bit frothy, et cetera. what you're not seeing is individual investors going out and just, i have to be in, all in. there's no fomo at the moment. that's really healthy for the market. >> you maeld it in. good to have you in. that's hallowed ground. >> i feel honored to be here, thanks, guys. >> the final check of the markets. we are set up for some downward pressure right at the start here, but not as bad as it was earlier. make sure you join us tomorrow. "squawk on the street" is coming up right now. good tuesday morning and welcome to "squawk on the street." i'm scott walker with jim cramer at post 9 of the new york stock exchange. carl and david have the morning off today. let's take a look at futures this morning. do have some earnings to get through. we'll open negative if we opened right now, of course. s&p would be down by about 18, dow would be down trip digits. we'll get to a couple dow strokes that are very important.

that's where our roadmap begins. walmart and home depot both topping estimates. their stocks are moving in opposite directions. plus, capital one is buying discover financial services. it's a $35 billion deal. we have the details. the ceo of doeb will be live at post nine. the first of of a cnbc interview breaking down his company's new ai features. both walmart and home depot topping earnings estimates. the stocks are moving in opposite directions. let's take the one that is up, that's walmart, jim, which beat strong holiday, strong e-commerce. comps up 4%. >> they're coming in aggressive because they're also buying visio, this advertising component they've got going. i think what they've done is capture the zeitgeist of the country. they know they have to fight inflation to keep customers there, and that's what they're doing. they have a rather remarkable

attitude of just monthafter month being better. even january with the cold weather doing well. i find this acceleration really exciting. what it says is, okay, consumer having trouble. you know where they go? they go to walmart. >> they near a sweet spot for where we are right now. >> i have them on this morning. >> you have mick mill lon on. >> yes, i do. >> what people are finding is they're getting great variety. i think the stores have had a major upgrade without them talking about it. that's one of the things i want to tap today. i think they're getting a younger group coming in. i think they're getting more discretion discretion /* discretion. the last quarter, by the way, total misinterpretation, stock

went way down, shouldn't have. this is one of the more breakout quarters of a gigantic company. look at the size of it. what can i say? i can't wait to speak to doug because they are offering not just food low, apparel really low, aisle after aisle, sporting goods really low, electronics really low, but people don't go there who are from this environment, and people who run billions of dollars, they're busy buying, i don't know, norfolk southern or tesla, of course. this is the company they should be buying. >> stock will open at a new high. it's a good looking chart. they've managed to work through the issues that were an overhang for a while, like inventory. let's listen to doug mcmillon on the call because he addressed that issue and where the company is now. >> we're just in a healthier place than we were a year ago.

i think inventory is a big part of that. as we noted, inventory in the u.s. was down 4.5%, down 8% for sam's. that just enables us to operate a lot more effectively. we saw markdowns in the quarter being notably less than they were the year before. all those have an effect on gross margin. >> that's a big deal because it was such an overhang that we talked about, let's say, a year ago, whether it was target or walmart, this inventory overhang. it's just taken a while to work through. >> they all figured it out. i don't know about target. i thought home depot, if the stock hadn't been up so good, january not that good, cadence not that good. i look at walmart and i say to myself, a global advertising business is expected to reach 3.4 billion. that's found money. how many companies have found money just laying on the floor? i think these guys are serious and there's a big three

development. there's costco, there's walmart and there's amazon. that's how we buy things. walmart has good ai, great ces conference doug had. so i just think what's not to like. i know the futures are down, but i also know the futures have been wrong. i say be careful if you're betting against this market. home depot stock was up big. i think we're going to have to -- we'll get to capital one, but that merger with discover signals that there's a level of merger activity in this country that means you buy goldman sachs, bank of america. things are changing here. >> the depot quarter -- transactions were down 1.7. average ticket was down.

it plays into the broader story of where rates are, obviously, because higher rates are having an impact on not only new home buyers, but if you've already exhausted the renovation of your existing property, maybe you're making fewer trips and spending less at home depot. >> i thought that the professional would have stronger numbers. remember, this is more professional than do it yourself, i thought the professional -- i was looking at the decking stocks which are classic examples and the door stocks. those were all -- they came in high. i do feel that home depot taeped a dramatic acceleration in remodel and renovation because people, they don't want to lose that mortgage. what are they doing? they're redoing their home. >> you can only redo it so many times. just move room to room i guess. >> i nomo hawk had good numbers. there isn't a part of the house that didn't do well except for the washer/dryer. i may have to go activist on

whirlpool for the club. >> yes didn't get to with walmart real quick, they raised the dividend by the largest amount in ten years, 9%. >> thank you for mentioning this. our people at home are looking at these dividends. we're say what does that mean? you can lose -- by the way, talk about what people are talking about. they're going to split the stock because sam liked for the employees to have a split stock. you deal with a lot of institutions. commission costs would go up, the large institutions. i think walmart is going to catch a second wave as we get close to the split. >> walmart is going to open at a new high. depot is going in the opposite direction. >> i don't want to dump on depot. >> we don't have to dump on it. the stock is doing what the stock is doing. >> the stock is dumping on itself. i don't have to jump on that bandwagon. >> important earnings reports,

but the major earnings report is nvidia. that's wednesday. >> i can't take the pressure. >> a lot of pressure because the stock is up better than 240% over the last year, up 50% or so in just three months. what's riding on that this week? >> well, okay. there's no doubt that nvidia is the most important. this is the stock out of nowhere has come the biggest. >> big enough that you have a big fat folder on it. >> they have a big march conference where they'll lay out the new ai vision as if they don't own the old ai vision. that's the gtc conference. last year they had that $4 billion upset surprise. and then, if you take a look, the stock was flat for the second half of 2023. it turned out to be digestion. i don't know if people went from individual anymore. i just don't know if anyone can possibly equal it. the margin on the next

iteration, very, very high. what they can talk about is, look, we've got these new chips. there are a lot of countries in the world. the fact that he's got sovereign buyers let alone -- i know amazon is sovereign. you can argue microsoft is sovereign, those are almost nation states. i think he can lay out a vision of the next gen. the ceo of adobe, i don't think you can get what you want, whether it be from zora, sam altman's outfit. amd doesn't really have the software. people keep thinking the stack is like a stack of pancakes. it's a high-end intellectual property stack he has. >> you mentioned shantanu is

coming out. pal palantir, oracle, arm, adobe. all of these stocks that have surged riding the coattails of what nvidia has delivered. >> just google jensen and you'll see who he's with. he can be with frank slootman, rent the cloud there, or you'll see him -- in this coming conference, i saw the list of companies that are speaking. arista! >> all these charts are low left high right. the stocks have all gone in the same direction. >> low left high right? i cut that class. i took art instead of that. they are. super micro does scare me because it represents a short

squeeze of incredible proportions as does the arm quarter because of the whole back of the softbank and a couple of pillar investors that really aren't selling. but, yeah, can jensen deliver? let's put it this way, if anyone can deliver, it would be jensen. jensen has been proselytizing. the speed of the next gen -- look, the next gen is when we are replaced. >> let's hope the next gen isn't coming any time soon. >> i think it happens. i think other than mahomes and andy reid, everybody is vulnerable. >> we didn't get to the deal of the morning. we'll get to that. shantanu shantanu will join us, the ceo of adobe. he'll break down his company's new ai feature.

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a treat. we have adobe, announced a new ai feature for reader and acrobat programs for people who create. joining us first on cnbc is shantanu narayen. so great to have you on the set. >> thanks for having me. >> you have a big announcement. i think people have to understand the context. when you use ai, what you really need is everything that comes with ai. the only company that really has everything that can make it so a

creation will be easy is yours. tell us about this. >> as you know, jim, we've been innovating a ton with respect to ai. it's all about how do you democratize access, whether it's to creativity or to documents with what we can do. today's announcement is huge. we all know the world's information is in pdf. there are trillions of pdfs out there. what we were doing is working on how to understand the structure of pdfs and make them really responsible on mobile devices. today what we're announcing is we have a new ai assistant which is live both in reader as well as acrobat. you can have a conversational enter sfas with the pdf. imagine you've opened a 100-page document, you want to understand the summary, want to have a conversation with it, you want to correlate that with other documents that you might have as well as the entire information that you have in your enterprise. we think it's a big day for us.

>> this morning, i am getting interviewed with doug mcmillon from walmart, a little time constraint so i went in and used chat to get the summary, which we do now. what could i do -- does it respond to any kind of summary, in that i want very much to use it as a jumping-off point to do something of mine own? >> that's exactly what you do. you open a pdf within acrobat or reader and you click on a single button and it will give you the summary, point back in that document to where the information was gleaned from. in addition you can ask questions. if you want to to compare how walmart's earnings were this quarter versus the last quarter. you say tell me more about where they're making money on advertising. i like the concept of found money. that's the kind of conversation you can have with pdf.

if you want to take that and create a document from it, you can cut and paste from that into doeb express. you're on your way, not just to understanding the information but creating your own reports. >> before i give it over to scott, you know i talk to you often, my daughter a baker. she designed everything based on you, the whole suite for about 560. can you tell me how this is a step up from the current suite and what you would get versus what you get now? >> adobe is in three businesses. if you think about what adobe is probably best known for still it's our creative business. what you're referring to, jim, is what we call generative fill and photo shop or fire fly which is our foundation model to create images. i think the value really there was anybody who has the story to tell, they can through text take a blank screen and start their entire creative or ideation process. that was on the creative side.

on the small and medium business side as relates to marketers, what they want to do is run campaigns. they want to personalize their information. those were the two announcements we made before. today's announcement augments all of that and brings it to pdf as well. >> you mentioned firefly, the issue of copyright infringement which has come to the forefront. when you announced firefly, you said you would basically indemnify businesses sued for copy right infringement. you must be thinking big about what is still a growing and very important issue? >> it's still a very important issue. if adobe doesn't champion creatives, i don't know which company is. when we think about ai, we e think about it in three layers. the data, the foundation models and the interfaces where they get value. we determined early on as relates to data, we were only

going to train adobe's foundation models based on data we had license for which is why we can indemnify it. not only did we do that, we actually drove the entire content -- for every piece of content you create within adobe, you can have a nutrition label. we recently announced last week the ai accord. for us it's not just about driving innovation. it's about driving responsible innovation. >> the other deal that everybody is having to play a new game in is this arms race. your announcement today obviously sort of fulfills that. open ai last week announces sora. your stock gets hammered, and the market view is, well, this is right there impeding on adobe's turf. you want to speak to that? >> sure. first, we're working on our video models as well. we worked on our imaging models. i think magic happens, scott, when it's not just the model, but how that gets integrated and

reflected in the interfaces that people are using. when you think about people who are going to be creating videos, i think there are two use cases. the first is in order to start the ideation process, maybe you're going to take something with a tech prong and create a video. that's the small part of the process. it's then what do you do with the video, how do you create the long form video. that's where adobe premier pro or photo shop or aftereffects are clearly the industry standard. we will do not just the foundation model. we'll not only do what sora did with firefly so you can start the ideation process, but it's entire tools and work flows where adobe is going to focus. >> shantanu, last question. somehow we think is winner-take-all, loser take none. when i listen to you, these are two different businesses. whatever altman is doing, has

nothing to do with -- the day today researcher at a bank or anybody who is lawyer, these are all people that aren't going to use sam's product. your product works. >> without a doubt. when we think about gen studio which is our product for enterprises, every single marketing department or agency is not going to say how do i create all of the variance, all of this production. from the perspective of where i think adobe continues to win, every time we've had one of these tectonic technology shifts, the market for this expands dramatically. that's how we focus on driving innovation. >> what an opportunity. i'm looking at your stock and thinking, you knock it down -- this is not unusual. you knock it down now -- i'm a stock guy -- ahead of what's going to be a good report over the next several years, not quarters, because of what you designed.

i want to thank you for all the small and medium-sized businesses, for making everybody being creative. >> thank you for having me. >> shantanu narayen, ceo of adobe, great to have you. >> thanks for being here. we'll take a quick break. the futures are lower. we're back in just two minutes. (grunting) at morgan stanley, old school hard work meets bold new thinking. (laughter) at 88 years old, we still see the world with the wonder of new eyes, helping you discover untapped possibilities and relentlessly working with you to make them real. old school grit. new world ideas. morgan stanley. a force to be reckon with. no, not you saquon.

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you can take a look at the r.ggest gainers on the dow so fa not surprising it's walmart after earnings this morning up better than 4%. intel pg, chevron and amgen. more "squawk on the street" when we come back. to duckduckgo on all your devie

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. time for cramer's mad dash as we count down to the opening bell. industrials from evercore. >> this evercore call, it's really important when you downgrade caterpillar, you're downgrading the king. ingersoll rand no slouch, the other downgrade. this is more of a valuation -- let's say don't want to lose the profit, ring the register call. there ain't nothing wrong with caterpillar. >> the chart speaks to exactly what you're saying.

>> yes. i want to reflect on that by going to what david costin is saying. he's talking about upgraded outlook for u.s. economic growth. when you think about that, that sweet spot cat, that cat quarter had so much to like about it. i felt infrastructure data set. [ bell ringing ]. >> -- china by the fact not even a factor. china had good numbers over the weekend. i say when you sell cat, what you're simply doing is saying, wow, i made a lot of money. that's been the trait that's hurt people. caterpillar we madea fortune on. you know what? i'm done. i'm so thrilled. then it went up another 20. >> that's the kind of market we've kind of been in. >> when i listen to the people on your show, which i do, both

shows, it's very clear. you did something last week about what happens -- well, i left them. how do you get back in? >> not in this market. it's awfully difficult. the train has gone to the next station so fast. >> i think any manager has to be concerned that, if they took profits, there's no place to go. there's an article today in the journal -- trillion is still going to the sideline. you look at that caterpillar chart, home depot, walmart. there is so much money being made versus there's a cost to getting 5%. the cost is you've missed out on opportunities that may be of a lifetime. >> we have opened lower. the opening bell is just ringing at the cnbc realtime exchange. phd world wide celebrating being named ad week's 2024 global media agency of the year. and major league soccer kicking

off the season. >> i heard someone talk about how apple doesn't innovate. watch mls on vision pro and tell me you don't think messi hits you in the face with the ball. i think when we look at what's going down today, we can shake any one of these off because i don't think there's anything that's quite that negative. >> you mentioned costin a moment ago. he did raise his s&p target again to 5,200. he's very emblem mattic the way he's viewed this market, 4,700 was the first target. the market starts to get away from you. okay, 5,100, now it's 52. >> i think it's a great work. i think cost into's work is superior. he has to keep doing the salami cutting, another piece, another piece, versus ed yardeni who

reiterates and doesn't have the pressure of the incremental piece. can i also mention, if you look at who rang with the opening bell here, ad week, the trade desk quarter last week was a breakout quarter, ttt. they're using trillion dollar ad market. i remember five years ago it was $660 billion. you sit there and think about what walmart is making -- it's a wholesale shift. by the way, i'm sick of linear is dead by people who watch linear. what i'm watching is dead. are you watching rigor mortis? the size of the ad market has expanded because of someone like shantanu. you can make your own ads. >> you talk about yardeni. he's used the word exuberance. we're coming into this week where we say so much rides on nvidia. did you see the stat, jim, about

what we'll call the mighty mega caps. according to deutsche bank which looked at this, the combined market cap alone of the mag 7 would make it the second largest country stock exchange in the world. >> that's because those country stock exchanges are nothing. look, let's get this straight. comparisons are odious. your mother said it, my mother said it. when we look at these companies, these companies have the greatest balance sheet. we know the pes are not even high. nvidia's pe on 2025, it may be 25. we can't -- there's seven companies that are valued high. what happens when another hundred start creeping up there? look at the size of walmart's market cap. if we had sold because the 7 were too magnificent, so we leave walmart on the table? eli lilly -- how much of my walmart discussion involves the wholesale change in the way that

we live? i think the question is when is adobe going to be worth -- rather than just saying, we have two worlds. i say we have -- the worlds are going to collide and many of the companies we like are going to be valued more. >> you know what other stocks have gone almost straight up? cyber. palo alto after the bell -- don't you have nick cash on? >> you bet i do. take a look at what the chinese are saying. i read john ellis' excellent site. the chinese are -- if you want it to be -- i'm not going to kid this into cash. they are the gift that keeps giving to crowdstrike and to palo alto. they are unbelievably great. a lot of the tech companiesthat do cyber are not stopping enough. you only have to get him once. u.s. government very much involved. when i look at these guys, when i listen to shantanu, remember when he answered your question

about security privacy? everybody has to -- all the stuff on the web has to be protected. at any given time, you may bump into -- i'm not even going to suggest political ad that could be having one of the presidential candidates saying something that's not true or some president or someone who has been a president saying something that's not true because everything looks real. >> you just said something that sort of focuses i think where we are as a market. you have to be unbelievably great. i wonder if that's where we're at now for almost every stock that's had a big rise like the charts we just showed you from cyber. mag 7, nvidia included, and so many other names. the risk of having to be unbelievably great in the kind of market that we're in right now. >> so let's be holistic and visionary about nvidia. what is the weakness of nvidia? the u.s. government saying the

chinese can't have the latest and greatest. what does huang have to say? he has to say, look, if we don't get china in 2016, we may not do as well, 2026. i think people are going to say, uh-oh, jensen is worried. that's been his line. saying it over and over again. people that have missed the last 27 speeches he gives may not know he's worried about china. some might say, uh-oh, jensen is worried about china. >> if you look at the stock price, you don't think he's necessarily worried about anything. let's do the deal. cap one buying discover. you like this deal? >> i love this deal. first of all, i think fair bank is a genius. i once bet against him, the ceo of capitol one.

i was in the doctor's office. i don't know how he got my cell phone. he said why don't you delay the procedure, i'll give you how capital one works. this has been an unbelievable stock. they know how to lend. you know who doesn't know how to lend? discover. they say great synergy, that's why master card and visa getting hurt. what i like about this deal more than anything else in the world, if they can get away wit, they take out their biggest competitor. if i'm the ftc, lina kahn, i'd say, wait a second, the way you get credit cards in this company when you're maxed out as i was, you get both of those -- you get one from discovery, from capital one, you only pay 18%, which is good. if you poison us, do we not die? i think this is one she ought to

say, wait a second. she's so busy going after the big ones -- >> by the way, she is -- she's become an empty suit. have you noticed how many deals have gone on. >> you tweeted, quote, no company seems scared of the ftc anymore, alluding to the fact that if you were scared, you don't try to do this deal. >> we don't know whether it was because they had such a beatdown in federal court when they decided to think that microsoft was going to somehow corner the gaming group and they were against an orphan drug company merging with a major pharmaceutical. those were so ill-advised, those cases, i think the staff has said, listen, you want us to stick around? stop it already. there are two reasons why you might want to do this deal. one is because you think the staff has said, listen, kahn, we're not going for it. the second is we've got an election coming up. i think bankers and lawyers are thinking about the election. >> gaming out the calendar.

maybe the ftc today isn't the same ftc tomorrow. >> right. i think the ftc with another president might give them the congressional medal of high rate credit cards. one of the ways they save is because of fees. you cut the fees. can i just say master card, mike called me back. he put up numbers -- to see tomorrow's paper today. he's raising numbers right now, raising numbers for tomorrow. buy master card, tomorrow you'll get hack analysts. they never get off the list. i think master card is a buy. >> let's talk airline calls. jetblue, icahn in there, upgraded at deutsche bank today. more than doubles the price target to 9 from 4.

talking about more balanced supply. obviously the stock went up a lot on the icahn news. now you've got him there. you have the southwest call, too, which was upped at bernstein. it was on a cell. so they take it off that, put the price target at 32. >> i feel when they say supply, this is one where -- remember i side cybersecurity, the chinese, the gift that keeps on giving. boeing is the gift that keeps on giving to the airlines. we don't want them to have more capacity. we want extremely full flights to continue to raise rates. if you don't have boeing planes because of the various woes of boeing, it could be a win. on wall street we just want good gross margins. if you're southwest, they want to take share. look at the boeing chart, that doesn't look like the charts you were showing me. that's more like the northface and teton.

>> one step forward, two steps back trade on boeing. every time you think that things are going to be better, there's something else that comes out and the stock goes back lower. >> yeah. it's kind of go long, go short, the ultimate trading stock. the inconsistency of boeing -- >> when you talk to people who own the stock, what do you think about the issues, it's a duopoly so it doesn't matter. >> the chinese have a new plane. >> wait until 2030 -- if i cancel my boeing order, do i want to wait until 2030 to get airbus? >> we thought they would start making more money on the new plane. i think boeing is problematic. i think the southwest air, they're doing better. that may be a good call. i like that call. i think that everybody had gotten down on southwest. we had them on. they had good numbers. look at the stock.

it's made a nice comeback from when they basically declared major mea culpa in november and said, listen, we can't get anything right but we're going to, and they have. i like that stock and i don't like airlines. >> what do you think of tesla? adam jonas is weighing in. recent investor survey, 84 respondents, aligned with the negative assessment on tesla shares. three-quarters of respondents believe the stock is yet to bo bottom. some say either mag 5 or mag 6 because they've taken this out based on recent performance. >> the chart says loads here. this stock bottom, and they've got a new iteration coming out. by the way, yes, hugging this line. i know, by the way, the cyber truck -- guess what, my f-350 rusted. it's something that happens.

yostudy that in chemistry. i think when i read what jonas said, please, adam, turn the station to viacom, nickelodeon for a second. he's got conventional wisdom. that's what i want to shoot against right now. this bet against musk trade has lasted about as long as it can last. >> that speaks to what the jonas call is partly about, that the stock hasn't bottomed. three-quarters of the respondents say the stock is yet to bottom. >> you don't want to wait for the next generation coming up. i do think there's ev -- when steve sucherr came on, backing p tends to be not a problem. even when you're taking your driver's test. remember, you pass that, had to

back up. apparently you took this with a tesla, you'd flunk your driver's test. >> oil prices are not backing up anymore. they're going up, right? >> there was a sham article in "the journal" -- >> not that far from 80 bucks. >> do you knowhow many years we've called the top of permian when it was 10 million,11 million, 13 million, 13.5 million. most of these mergers are about getting more oil out of the ground with less because of the technology. i'm putting the kibash on that. rusty brazil today talks about how there's a lot of refining capacity. refiners have been horses. mayor ton pete horse. >> is there a risk in the whole story here of oil if it continues to go higher? rates are up, inflation is kind of up, p pi, cpi were hotter.

do we have to worry about oil pushing higher? >> we're not going to worry about oil. terrific piece today talking about -- you mentioned specifically about oicl. 50% of january cpi -- is about imputed inflation -- imputed rent. not rent itself. he said february will reverse. that's very positive. against that i want to point that, if china has bottomed and starts going up, that's going to be a problem -- that would be a problem for oil. we don't want china to come back. although i understand they're militarizing apartment complexes there. i'm not kidding. the government is starting to -- i think the government is running in fear there. >> looking at the ten-year talking about inflation, 427, 428, the highest since november. bullard says march makes sense. richard fisher was on squawk and

said there's no need to do anything. >> march 2025 makes sense. i sent a piece out to club members and said this economy has not only not slowed down with the rate hikes, it's accelerating again. so i think that i know am taking may off the table. maybe in the fall. what do we need a rate cut for? we have employment -- there was an excellent piece in restaurant news about the way that the -- wages have gone up so much. that's a classic discretionary. unless you're going to look the other way on green card which i suggest you not do because i.c.e. will arrest you. i'm going with sem bliss, not right now, the idea that we have to keep rates steady is just imperative. >> is the market going to be okay if it is higher for longer as long as higher for longer doesn't mean more rate hikes? >> it pushes out how long we can love it.

>> jeremy seegal has view you d. >> i've been with jeremy since he was managing the endowment of the building that my father lived in. a great job by the way. >> before we head to break, it is time for the bond report. treasuries this morning, yields, at least the ten-year highest since november, 427, as high as 428. the two-year pushing 4.60. we're right back after this break. 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.

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asml, look at that big winner pushing better than $900. it was 500 and something a year ago. today, it got upgraded to neutral from sell at red burn atlantic equities. >> jensen behind that. behind everything. >> chart looks similar to so many other stocks related to ai. up next, it is stop trading with jim. don't go anywhere. rock star?

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remember, capital one has changed the model. it's not just subprime. i emphasize that. i get to head to head against jpmorgan and american express and made it upscale. there's a hidden gem here, discover has discover global payments networks, one of only four u.s.-based global payment networks. there is something proprietary buried within discover for a card capital one that does span small business, wealthy, not as wealthy and now with the discover network, i don't know, you have to buy this. you have to buy nvidia down. >> nvidia, by the way, since you mentioned down more than 5%. >> if you put a gun to my head right now and said should you buy nvidia, would you take the stupid gun from my head. >> there you go. >> we'll see. wednesday after the bell. >> nvidia own it, don't trade it. jensen, what can he do? what does he have to say, listen, i'm doing a self-tender

for my stock. just do it. grace hopper. we'll learn that, the movie "oppenheimer." >> tonight on "mad," mcmillon and arora. >> i think nikesh arora, doug, what more do i have to say about doug, other than i think walmart, i don't know when you were there last, i got one on 22 that's a killer, but my one in quakertown is amazing. you have to go with me to walmart. >> new high up 6%, just shy of that. >> we'll go to the one near asbury. oh, man. the food is dynamite. >> you and me? >> on that food. >> why not. i want to make sure we included me? >> why not. we'll go with josh too. right. >> by the way, i have josh on the half who says -- >> tell him enough with the self-deprecation. >> he says it's the whole ball game for the most crowded trade on earth. >> whole ball game. >> being the mag seven. that's coming up on the half. >> mahomes was very crowded and

how did he do? purdy lovers. >> own it, don't trade it. >> tebow, how did you do? >> all right. after the break, we're going to turn back to the retailers, as both walmart and home depot top earnings estimates trading in opposite directions as you see. stay with us. we're right back.

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ah, you're adorable. oww! violence makes our tummies tingle. violence. violence. violence. . happy tuesday. welcome to another hour of "squawk on the street." i'm jon fortt with leslie picker. what treat. we are live from post nine at the new york stoekz. carl, david and sara have the morning off. we're taking over. markets are lower, but just fractionally. let's have a look at treasuries. put those up. yeah. bond yields are all down a bit, but, you know, they're on a run lately, leslie.

>> they have indeed leading economic indicators out moments ago. rick santelli has that for us. rick? >> yes, leslie. what's interesting here, this is our january read on l.e.i. leading economic indicators, and it came out a little worse than expected. down 0.4%. but what's notable is, this makes 23, two three, consecutive negative month over month changes in a row. 23 in a row. down 0.4, follows down 0.2 which was originally released down 0.1 and down 0.2 is actually the least negative number we've had going all the way back to when it was only down 0.1 in march of 2022. so that's how weak it is. granted l.e.i. isn't many traders' favorite indicator but it does speak volumes regarding softness in various parts of the u.s. economy. interest rates are down across the whole curve except for

30-year bonds, they're slightly higher yields but near unchanged. leslie, back to you. >> rick, thank you. thanks for following that important indicator for us. we are 30 minutes into the trading session here are three big movers we are watching. you may have heard of this consumer finance deal. capital one financial is buying discover financial services in a more than $35 billion all stock deal. we'll bring you the latest this hour. chip name globalfoundries a top gainer on the nasdaq winning a $1.5 billion award by the biden administration for the company to expand its domestic production in new york and vermont. you can see those shares up 2.7% right now. retail a big focus this morning as well after fresh numbers out of walmart and home depot. home depot under pressure down 1.4% right now after comparable sales and u.s. comps fell during the quarter. chairman and ceo ted decker calling 2023 a year of moderation and walmart heading in the opposite direction up 6%

right now. a tough gainer after beating on the top and bottom lines, comparable sales up 4%. the company also increasing its dividend and ceo doug mcmillon is bullish as ever. take a listen. >> we're just in a healthier place than a year ago. i think inventory is a big part of that as we noted, inventory in the u.s. was down 4.5%, down 8% for sam's and that enables us to operate a lot more effectively. we saw markdowns in the quarter being notably less than they were the year before and all have an effect on gross margin. >> it's pretty remarkable kind of given where we are with regard to the inflation picture and talking about just their markdown capabilities. he spoke on the call about top line being a focus, actually, saying their position to grow because they can do that in store club pick-up delivery, however people want to be served, and auto nation plans which is up your alley, and in the u.s. in particular, they're kind of looking for a better use

of technology to track inventory accuracy and improve flow there which will help with those markdowns and wage productivity and all sorts of things that trickle into those margins inventories are focused on. >> walmart is an important company to take a temperature in every economy because hugest player in grocery, serving the working class across the board, but also the growth that doug mcmillon talked about in households making 100,000 or more and a lot of that fueled by the omnichannel strategy including e-commerce, many of those customers not even physically coming into the stores, but their ability through digital through their ad model to find those customers and then continue to monetize them isinteresting and important given that their growth is coming from transactions at this point increased transactions not just inflation, not higher prices. >> and the fact that they still maintain that lead over amazon in terms of, you know, their

sales figures there. then, of course, there was the vizio deal as well which we will get into with our next guest, as we stick to retail, our next guest not worried about either company, walmart and home depot, weaker than expected outlooks. joining us now d.a. davidson, michael baker, $195 price target and buy rating on walmart and $344 and neutral rating on home depot. maybe start out kind of high he will and get a sense from you the guidance was muted for both companies, but there are certain interesting factors in q1 like the leap day or it's a leap year, so an extra day and inflation moderating here. what would you kind of say from these two snapshots kind of exemplifies the state of the consumer right now? are they as resiliente as we hoped they would be? >> both companies are facing headwinds but feels like the headwinds are less today than a year ago.

a year ago, we were all thinking we were going to -- into a recession in 2023. that hasn't happened. maybe it's going to happen in the future, but it just seems less likely now than a year ago. so the outlooks are improved in that sense. walmart's outlook for the full year is better or at least in consensus, they have a little bit of a first quarter outlook. that's what we're not that worried about. they've been guiding to a lower next quarter and then beating it all year. but in general, it does seem like the consumer is holding up well. one important aspect of them, but maybe more important from walmart, is the concerns they had about pricing last quarter. remember on the third quarter call they had the big "d" word and talked about deflation and that as a potential. they backed off on that a little bit this quarter saying that the price declines that they're seeing, they are still seeing declines but not as much as would have been suggested last quarter. they have taken that deflation risk down and that's a positive. >> which may be as an indicator

for the overall economy could be a negative, as we're looking at, you know, just different areas that pricing has been hotter potentially than expected. but i want to ask you, because walmart's not typically not historically a quistive company but did announce the multibillion dollar deal to acquire vizio vertical integration. what do you make of the deal, first of all, and what do you think walmart is seeing as it, you know, looks to expand its ambitions and access to customer data and advertising in other areas? >> yeah. it's a pretty small tuck in acquisition in terms of the financial impacts. as it relates to the strategy it is really important. one of the things that we see from walmart and in their long-term plan is their ability to grow profits compared to sales and that comes from two main aspects. one is growing the alternative businesses, which are higher margins and advertising is one of those and this is a play there and secondly you talked about it in the lead in the automation in the distribution centers.

just more of the same in the sense of growing those two line items that helps grow their profits greater than sales and we saw that in the year that finished as well as in the guidance for next year. we think that's a key long-term aspect to our bullish call on walmart, is their ability to grow their operating margin. >> finally, michael, unpack for us the different inflation impacts across home depot and walmart. traditionally walmart has benefitted as people kind of seek inferior goods or good deals and then home depot, it seems, was benefitting from higher pricing, but that's rolling off? >> right. great point. one of the things we're seeing from walmart and we think was really important is unit growth getting better. particularly from higher income customers. so they are taking market share, and so we think that is one of the reasons why the stock is up today and again they're saying sales better than the industry data we're seeing. probably a little bit more

pressure to home depot. you're right. they don't have as much of that unit impact and, therefore, their comps were negative in the quarter and expected to be negative, but it's walmart's ability to grow units and take market that take market share that's enabling them to grow their comps better than expected in this environment. >> i think i can slip another one in. i'm going back to walmart and vizio for a moment. the market was really negative on roku as a result of this. i wonder is this just cynically more of a margin play on tvs from walmart, or is this going to be an instance where margins are hurt because walmart will have to invest in digital logistics to get that content into the tv? >> yeah. i think it's less about the margins on the tv set really. it's much more about the advertising business. that's really the key to this deal and how it helps connect them more with advertisers, with their brands that want to advise.

that is a high margin business f walmart's core business runs in the low single digit it range, we think the advertising business is probably at least a 10% margin at this point if not higher and a lot of room to grow there. it's about helping that business rather than the margin on the physical tv set in our view. >> yeah. interesting. and a fascinating way to kind of capitalize as you mentioned their kind of omnichannel and automation and felt near the different initiatives there. michael, thank you. appreciate it. >> great. thank you for having me. more on that blockbuster deal in the credit card space. capital one inking a deal to buy discover for $35 billion. the combination effectively creates the largest card issuer in the u.s. as measured in car loans outstanding at $257 billion. that surpasses jpmorgan which has $211 billion. according to piper sandler. discover shareholders will receive 1.0192 capital one shares for each discover share in this all stock deal that

represents a 27% premium to discover's unaffected share price. discover shares not quite trading 27% higher right now. you can see up just 12% on this news. that's a pretty significant gap here insinuating investor hesitation about the deal closing. that was the first analyst question on a call this morning to discuss the deal and his response ceo of capital one richard fair banks saying, quote, we believe we are well positioned for approval while noting they can't discuss conversations with regulators. the executives were asked what prompted the deal at this point in time and here's fairbanks' answer. >> we've had admiration for discover for a long time and have always felt that, you know, if circumstances ever, you know, happened, if planets aligned, that it would be, you know, kind

of an all sort of potential partnerships out there. that one was about, you know, as good as it could get from our point of view, and so we always had this, you know, thought in mind and watched them carefully. >> discover's ceo michael rhodes said it gives them the opportunity to have scale at a very rapid pace. the two say they expect to generate run rate synergies of 1.3 billion in operating expense synergies and network synergies of $1.2 billion by 2027 and say the deal will be 15% ecreative to adjusted eps by that year. regulatory uncertainty is a big question mark as is credit quality with the price tag that discover's trajectory of credit losses is embedded in at these levels. talk about it all the time, what

the state of the, you know, credit quality looks like across the financial system. it's kind of a question mark here. >> so i've been chomping at the bit to talk to you about this. first of all, it seems important for people to remember, this is about card issuers, not processors. right. these aren't competing with visa, mastercard and amex. more a card issuer. it seems like this combo flaws a different segment -- plays in a different segment of the market than jpmorgan which i think of as being a lot of it being higher end, and it also seems like card issuers these days are facing new competition from the likes of the buy now, pay later contingent that are trying to change the model. right. >> right. >> so what are the risks involved here with, if i've got the landscape right that investors should be thinking about? >> i think scale is very key in this environment. now, the price tag itself is, you know, a lot of people are pointing to will obviously get

regulators' attention with regard to this is the financial system. capital one is a bank as well, so, you know, you have that dynamic. it's the ninth largest bank in the country, and you're right, they serve a different customer than a lot of the groups that we might consider competition, but there's still significant overlap in terms of the income levels they serve. that's point number one, is kind of this question mark about whether this will actually transpire in the current environment where you have both antitrust concerns as well as consumer concerns about kind of credit card fees already being too high. so as you bring kind of two of these companies, two of these issuers together what does that mean for that. and then, you know, to your other point about buy now, pay later, that's absolutely a competitor. you know, if you're ceo of a credit card company, boosting that scale and kind of extracting the cost synergies and network synergies, they have a network platform that, you

know, their clients, capital one being one of them, use to kind of do that kind of back-end point of sale technology. so all of this is, you know, strategically makes sense. analyst communities say this makes a lot of sense strategically. there are clear synergies, creative to earnings, can they get it done and i think that's why you're seeing the stock price reaction of 12% when the deal is inked at a 27%. >> right. >> premium to the unaffected share price. >> they have to integrate and transform and convince the regulators at the same time. >> a tough job, but, you know, we'll be watching. >> all right. we will indeed. as we head to break, here is our road map for the rest of the hour. stellantis ceo not mincing words when it comes to competition saying it may be five big car make whose survive the next decade and find out why later this hour. >> big moves out of chinese regulator to shore up the property markets. we'll head live to beijing for the latest. and a look at the mammoth

bets made today when it comes to nvidia's results implying a huge move. we're going to break it all down after the break. big show ahead. "squawk on the street" is back after this break. don't go away. you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

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ditch the other guys and you'll save hundreds. get a free line of unlimited intro for 1 year when you buy one unlimited line. and for a limited time, get the new samsung galaxy s24 on us. welcome back to "squawk on the street." nvidia shares giving back gains this morning but up nearly 40% since their last earnings report and the street's bullish heading into the print this week.

dom chu has been tracking the action and joins us now with more. dom? >> hi. leslie, consensus bullish is what it's coming down to. that has a little bit of fear percolating through the traders and investors out there with regard to the stellar run. you just showed the chart of nvidia and remember, at this stage, with that $688 price that we have, we're talking about a market cap of $1.79 trillion which makes it worth more than amazon or alphabet and twice as much as berkshire hathaway. the analyst take right now is interesting. this is like i said, a consensus bull call across pretty much everybody on wall street. if you take a look at the way analysts are reading this out to be right now. the average target price is $752. we're close to there right now, maybe about 4 or 5% away given today's moves. 93% have a buy rating. only 7% say hold. there are no sell ratings on nvidia so a lot of people betting this is going to keep going higher, which is a little bit of cause for worry.

with regard to the commentary, you do have folks like bank of america saying that the appreciation has been parabolic, the word they used, and that we think that one interpretation of this is the nvidia move is a mix of fear and chase for all things ai. they have reiterated their buy rating on the stock. one other take from barclays is a little bit more kind of measured about this. they're looking at the data center gpu number that's going to be the only key metric that matters along with commentary on a broader market adoption. a couple takes there. with regard to how things are setting up from a market perspective, over the last eight quarters, nvidia has had five up days and three down days post earnings. the average move plus or minus 7.5%. now the options market right now is currently implying a plus or minus 11% move, so more volatile than it has been in the past over the last couple years so it's something to keep a close eye on, jon.

i'll send things back to you. >> dom, the stakes keep getting higher. i guess in a way that makes sense. as mentioned options traders betting on a massive move after the company reports tomorrow afternoon. 11% implied move in the stock on wednesday in overtime based on options trading alone. now let's bring in chris murphy, susquehanna cohead of derivatives strategy. do we commonly see the expectation of an 11% move up or down and nearly $2 trillion market cap stock? >> hey, no. we actually never have. if you add the -- if you multiply the market cap by the implied move, it's the biggest earnings expectation of all time. we went back and we looked through covid when apple was high market cap and we really have never seen this before. you know, an implied move in market cap after earnings of about $200 billion, that's the entire size of a company like

disney or cisco, so safe to say we haven't really seen this before. >> so -- and people -- there's a difference between trading and in investing. not implying people should do anything here. i wonder to what degree is this move, if it happens, there are bets that it will, going to impact the market overall or other stocks in this ai cohort that have also been pretty volatile lately? >> this is a major pivot point for this current ai, semi tech bull rally. it has showed signs of getting tired. if you look at the nasdaq, it's basically flat over the past month, while nasdaq volatility, the vxn, is one way to measure that, that's been moving higher. expectations are sky high, even just to meet expectations. you know, that might be why you're seeing the stock pulling back a little bit today. i think the rest of the market

is kind of queuing off this earnings tomorrow. >> what kind of circular effect can some of this options activity have to, you know, those who are equity holds in the sense that if they do have a sizable impact, um, after the print crosses tomorrow, what does that mean for those who are say more momentum traders or mom and pop traders kind of watching the activity and having fomo either to the upside or downside? >> you know, surprisingly, probably not as much of an impact as you would think. over the last two weeks, this implied move, that 11%, that's kind of been bid up. that's telling you that a lot of people are buying options, so what you might actually find is after this event, you know, we might see a sharp initial move, but then we're going to see a lot of options selling that's actually going to mute volatility. now, a lot of that has been buying upside calls. now if the stock sells off, those calls are kind of going to

just go away and not need to be hedged. maybe not necessarily a ripple effect out of the options, if we're assuming that a lot of people are buying ahead of this event. >> correct me if i'm wrong here, meta, formerly facebook, in early 2022, right, in the sense that it's a pretty big stock -- not as big as nvidia is now -- and what we ended up with was a big move that got people arguing that narrative had changed. now we can see to a degree that's greater than it actually did. so what did you see in the options market, not just in meta, but around related names, after that big move in '22? >> you know, the options market is just continuing to grow, and it's usually, you know, really smart. if you think about it, everyone is looking at nvidia. there's a ton of options being traded. you can feel pretty comfortable with the 11% move being relatively fair.

now, when a stock really catches you off guard, like meta did, as you mentioned, or three and four quarters ago, nvidia really caught everybody off guard, you know, beating by an incredible amount and you had these massive 14 and 24% moves higher in the underline. now that's kind of being expected. you know, obviously, nvidia could surprise and really have a worse number, but really, it seems like this incredible performance is still -- is now expected out of this stock, and part of the reason we're seeing that 11% move is because of those big moves that we saw recently, and it might be a little over inflated. >> all right. chris, thank you. people know what to look for now. >> absolutely. still to come, china getting aggressive to help jump-start its ailing property market and slowing economic growth. we'll head to beijing for the late aerhere. ayith us.t bak

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chinese regulators announcing the biggest cut to benchmark mortgage rates since 2019. that's as authorities look to support a struggling property market there. let's get to eunice yoon live from beijing. is this the penicillin this market was hoping for? >> reporter: not so sure about that, but it definitely shows a signal that the authorities here are getting concerned. the five-year loan primary rate was slashed by 25 basis points to 3.95%. this is the first cut since last june. the move was seen as surprising, not only because of the size, bigger than expected, but also because rates tend to move in tandem here. the one-year lpr, which is the reference for businesses and consumers, was left unchanged at 3.45%. now analysts say that this does signal that authorities here are

concerned about the property sector, but also at the same time, they want to maintain a targeted approach. this is despite the fact that we're seeing fdi in china fueling a 30-year low and official numbers on travel over the lunar new year holiday showed that they exceeded prepandemic levels, but goldman said that tourism revenue per head fell 9.5% below 2019 levels, so that flagged weakness with the consumer confidence here. guys? >> eunice yoon in beijing, thank you. after the break, some surprising new data telling a different story than the one you might be hearing about consumers and their credit card debt. we'll explain next. "squawk on the street" is back the a moment. -- back in a moment.

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news update. the united nations security council is meeting right now to vote on another resolution to call for a cease-fire in israel's war against hamas. the u.s. ambassador to the u.n. said moments ago that this is not the right time for that resolution, a sensitive hostages negotiations continue and the u.s. is introducing a separate resolution supporting a temporary cease-fire instead. police in colorado say the suspect in a deadly double murder inside of a university of colorado springs dorm was the roommate of one of the victims. the shooting triggered an hour-long campus lockdown on friday morning. police arrested nicolas jordan monday morning. he's currently being held on a $1 million bond. and lawmakers in hawaii are on the verge of approving a new law that would require tourists to pay $25 to visit the aloha state. the so-called climate tax is meant to address record numbers

of visitors to the state who lawmakers say are putting a strain on hawaii's environment. back over to you, jon. >> all right. thank you. now growing warnings across the streetp when it comes to rising consumer credit delinquencies. a major risk to the soft landing scenario perhaps, should investors be worried here? to steve liesman with data that might surprise you. hey, steve. >> nay, jon, good morning. amid some signs of earlier in the year 2023 about consumer credit brought on by the higher interest rates, the latest data from the credit rating agency suggests the credit cycle may have topped out here. 30-day dlinsys on all types of consumer credit after surging rerlg in the year are unchanged over the past three months at a level either just a bit above or below their long run averages. mark zandi of moody's who crunched this data said people were right this year to worry but that longer the case.

all the dlin data has stabilized. after increasing this year, 30-day dlins for autos one of the major areas of concern were unchanged through the final quarter of 2023. same for real estate loans and bank cards. all rates are below the 2009 level of the great financial crisis. steve rashoodo looked at this data and writes the net read from the available delinquency data is straightforward. household balance sheets remain healthy. opposite of what seems to be on the street. the silicon valley bank collapse could be responsible for today's better data. banks across the spectrum tightened credit standards, pulled back on limits, keeping today's numbers from, perhaps, getting worse than they otherwise would be. it's not like we're out of the woods. there are risks out there if you have a substantial upturn in unemployment, lagged effects of higher interest rates to make things worse and then the normalization of student

payments and delinquencies. student debt delinquencies are low. if these numbers top out here, it would mean consumers could help extend the expansion and there may be no imminent pull back in spending driven by a cred crunch. jon? >> couple quick questions. are buy now, pay later numbers included in these delinquency stats and as part of what you're saying that the trend here is more important than the absolute level in delinquencies? >> so i'll answer the second one first. so yes, that is exactly right. remember, we had this surge. the question was, would it even out with the long-term averages or keep going higher? at least for the past three months, when i look at this data it is simply a pancake across every major credit category, october, november, december, it went up and went sideways, and then some cases it has not exceeded the 2019 level, some cases it's just a bit above it. as for buy now, pay later i am

not sure, but i do not believe that counts in because that's not strictly considered credit. i don't believe that goes into the credit agency's figuring. i think you're right to point out there could be some additional credit out there that's not being counted. >> steve, you mentioned that banks have been kind of changing their underwriting standards, kind of following, you know, some of the regional bank turmoil. does that mean that there is a whole swath of consumers out there that were looking for access to credit that didn't get it? what is that dynamic mean for their likelihood to be spending in the future? >> well, for sure. it looks like the lower income credits were the one in the lower credit scores the ones most affected. leslie, i think the difference, and i'll credit steve with this idea, the difference between a credit squeeze and a credit crunch, in a credit squeeze, those who are least able to handle credit, they're the least likely to get it. a credit crunch is when good

credits don't get credit. a lot of people, i think, the last time they went through this was '09 we're gloog a credit crunch. squeeze is something an economy can withstand and keep going. you're right, lower income credits, lower credit scores, they're the ones we see data that shows renters spending more on their rent these days, they may be affected here. you're right, that's going to have an impact. in terms of a credit crunch or a broad pullback in credit, at least right now, those numbers do not speak today. >> all right. data is food for thought from our steve liesman. thanks. our next guest is overweight large caps and tech and recently upgraded financials. keith learner joins us now. happy week, keith. so you're overweight large caps. what does that mean ahead of nvidia? how are you positioned? >> yeah. great to be with you, jon. we're overweight tech and,

therefore, we're overweight large cap. that's the biggest part. last week we said that weexpect the tech sector to cool, so we like it longer term. that's where the earners momentum is. we have to be realistic. nvidia is up almost 50% this year before today's pull back. off the october low the s&p up 20%, tech up 30. i think this is more of a consolidation. i think on a short-term basis we'll see more out performance in the equal weight index which we're seeing today and that's likely to continue, a proxy for the average stock and seeing things as you mentioned financial stocks to do better, industrials at a new high as well. >> you're overweight, yet expecting that things could very well go down, at least for a little while interest here. what should -- from here. what should investors at home take away from that? >> it's time frame, right. we're not investing from week to week. for our tactical portfolio we're looking for the next six to 18 months. if you have that timeframe over the next 12 months tech is going

to be fine. if you're more short term over the next couple weeks, six weeks or so, i think tech is going to consolidate and maybe under perform a bit. i think timeframe is important and depends on if you're an investor or shorter term trader. i think the expectation bar is high on a short-term basis. as we get through this earnings will support these companies, but again, you can't move in a straight line. you move the long way in a short period of time already. >> it's interesting to hear you say that, keith, because this morning, we saw goldman upping its price target for the s&p 500 to 5200, due to higher profit system with a particular focus on the mag seven. ubs also boosting its year-end price target to 5400. so you do think that things will recover and recuperate by year end in. >> i do, but again, if you think about the broad-based market, the s&p, you're more likely to shop around. you hit a round number of 5,000. you had exuberance around there as well.

if you start to see what we're seeing today and we started to see last week where you see rotation, the top level of the s&p relatively flat, but underneath the surface, in more traction. last week a perfect example. small caps were up over 1%, mid caps up 0.7%. energy and materials were up over 2%. the headline index is so top heavy, that again, i'm expecting more of a flatter, choppy market at the top than more movement underneath the surface in the near term. >> keith learner, thank you. speaking of, mention the dow right now is about flat, the s&p down fractionally but the nasdaq and russ really down more than 1%. >> discover clearly helping pull the other indexes higher today. still to come, more signs of trouble for the financials as bad property debt at some of america's biggest banks officially exceeds reserves at atnvtoneng levels. wh iesrsed to know after the break. don't go away. it should be called wiffle tennis. pickle! yeah, aw!

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turning back to financials and continued warning signs. a report highlights bad property debt exceeds reserves at the largest u.s. banks with delinquent commercial property debt for the six big banks tripling to more than $9 billion in the past year. it comes amid continued consolidation in the industry with news overnight that capital one is buying discover financial. let's bring in kbw, a stifel company, ceo and president to discuss. thank you for being here. i guess we can kind of start there. what do you make of kind of all of these warning signs we've been talking about with regard to cre, especially against the backdrop of cbre saying in its earnings report it's cautiously optimistic the worse is over in office leasing, which kind of created more of a relief for the market temporarily. when you see numbers like this, what are you thinking of with regard to the banking system? >> well, good morning. also we just completed our 31st

annual banking conference last week, and so we got a lot of really good channel checks very recently. look, we are in a commercial real estate cycle. it really should be no surprise, and it's the reason why we're market perform on the banks and even though they're at a very low valuation, we're not at an outperform on the sector. there are stocks we like. our view is we're about two-thirds of the way through this real estate cycle and just to give you perspective, originations, when interest rates were near zero in 2020 and 2021, were two times their normal rate. these mortgages are going to adjust and they're going to adjust with lower vacancy, adjust with higher cost due to inflation, and we're going to see more losses, which leslie, as you study the industry, i know that you've focused on this, but loan loss reserves and provisions for banks, have been

essentially zero for years. we are going to see very large increases in losses. that is part of the banking business. we have a provision estimate for smaller regional banks for this year of 25 basis points. over the cycle, maybe 40 basis points. so we see this happening slowly and over probably the course of the next year, there are going to be more commercial real estate losses. we built it into our system. it won't happen all overnight. and then the question is, now many outliers will there be? there will be some. the next question is, is this a systemic risk to the banking industry. we think with the capital, the earnings and the reserves, it's not a systemic moment for the sector. >> but i think it's important -- >> the -- >> sorry. i didn't mean to interrupt you. i think it's important to distinguish between the big six banks that are very highly

capitalized, especially related to historical levels and becoming increasingly so in compliance with potential rules that are throughout, but then there's the regional banking space setting aside a lot more for loan losses and kind of fits in a different dynamic with regard to the cre ecosystem. if you do kind of distinguish those, how would you characterize what's going on in the regional space right now? >> you just did a nice job of laying that out. i think there are three banking industries within the banking industry. there are the big global siffys, universal banks, trillion dollar asset sizes. you have the mid sized banks. then you have 97% of banks in america below $10 billion. they all do different things and look a little bit different. the smaller banks have more commercial real estate and they tend to be less reserved at the moment, so we think they are probably at the greatest risk

for an earnings surprise if a commercial real estate problem shows up. they're less likely to lend in the big cities. however, there are going to be headwinds to earnings from those companies, and that's why we've been tilting for stock selection towards the higher companies. that's why we've been tilting for stock selection towards the higher banks, the larger banks. >> interesting. and i think -- >> yeah. >> i was just going to say, i think the market agrees with your prognostication just for the potential for some downside surprise in those names. i really appreciate it. thank you for your time. >> thank you, leslie. as we head to break, check out shares of roku. falling sharply this morning after the walmart/vizio continued news. that stock down 25% since thursday. still ahead, don't miss the ceo of medtronic to talk about the

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all-time highs as the company's north america brands jump into the ev game with ram, jeep and dodge all set to roll out pure electric vehicles. let's get to phil lebeau with more fresh off a sitdown with the company's ceo earlier this morning. >> this is a critical year for stellantis. they've been pointing towards 2024 when the year they finally start production and start selling pure electric vehicles here in the united states. they're lagging their competitors in terms of ev production here in the u.s. eight coming out this year, including an electric ram 1500, jeep wagoneer, dodge challenger, an electric challenger on the way in 2024. as you take a look at ev market leaders in the u.s., this is still tesla's game. everybody else, they're trying to at least get to 10%. nowhere close at this point. hyundai number two, and then gm ford in terms of automakers with ev market share in the united states. the key to gaining market gain,

bringing down the cost and making the evs more affordable. >> we have to find a way to sell the evs at the price of i.c.e.s. that's quite simple. to fix the affordability problem, we need to find a way to design our products so you sell evs at the price of ices. that is going to put extreme pressure on our companies. >> when you says our companies, he's not just talking stellantis, he's talking all of the legacy automakers. they have to figure out a way to bring down ev costs. as you take a look at shares of stellantis, while they're not in the ev game yet here in the u.s., they've been competing against some stiff competition over in europe. doing well. so, carlos knows what he's doing when it comes to the ev marketplace, guys. the question is, how does that translate into sales here in the u.s.? we'll find out this year. >> phil, why is this good? why does this make sense? ev demand right now looks iffy, as you've been telling us. hybrids seem a lot hotter.

even if they do get the initial price of these cars down, as we've seen from, i believe it was hertz, the cost of maintenance is a lot higher, too. what about that? >> well, that is -- that's one of the challenges out there. so is charger anxiety. the long-range prospects for evs will be tied into costs coming down, maintenance staying down. we're talking about repairs on electric vehicles. and having public chargers that are dependable and much more frequent than what we see right now. that's the main reason why you may have some people who are buying evs right now, guys, they have two cars. they'll buy one ev, let's say in a suburban arket. they're notbuying two. why? because taking a road trip, if you're trying to do it in an ev, that's a tricky proposition. that has to be tackled over the next couple of years. >> all right. phil lebeau, thank you. >> you bet. >> leslie, you live in the city so i hesitate to even ask. >> no, i live in the burbs. yeah, we have two cars, but two

hybrids. so, i guess we're kind of a mixture of what phil was getting at that. >> i mean, in a way not really, right? a hybrid, there's no risk. it's just -- >> you still have gas access and you're sort of doing well for the environment maybe. >> yeah, for sure. if you're putting out less of that stuff, absolutely, i think you are. we'll have more time to talk about the market and maybe even fossil fuels. >> our expertise. ke aell, everybody who drives is li pocket expert on this. "money movers" is going to continue from the new york stock exchange with me and leslie right after this. you know, it doesn't really matter what we believe. what matters is what ruth, marcus and michelle believe. that kendall believes he has a say in his future. that these neighbors believe there's opportunity in their neighborhood. at the massmutual foundation, we don't believe. we know things get better when we invest in each other. (♪♪) fresh, warm hot dogs!

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good tuesday morning and welcome to "money movers." i'm leslie picker with jon fortt from post nine of the new york stock exchange. stocks this hour, a little mixed. the dow is hanging in there with some upside results from walmart. the s&p down half a percentage point. nasdaq down a full percentage point. >> that's where we'll start with risk assets continuing to be the big winners off the strong back of data. our first guest, though, warns that a repricing might be in order. double