dividend, things that have had work well for your strategy this year joe terranova? >> this time last year, i heard merck was too boring of a stock. now, this time, i hear it's too high and people don't want to buy it i still own it, i think it's a great stock, i think you should own it, too. >> okay, again, we'll keep our eyes on tesla for the rest of the day. i'll see you in overtime in just a few hours. "the exchange" begins now. thank you very much, scott hi, everybody, i'm kelly evans and welcome to "the exchange." we're off to a big start on this short week have you seen bond yields? why are they up so much today if all the stock is about inflation peaking? steve liesman has that story for us if the fed and other central banks can get less aggressive, does that clear the way for a rally in 2023. meanwhile, china is easing covid policies we'll discuss the major ripple effects and whether that will stop inflation from falling further global and 2022 has been a sour year

for apple, falling more than 25%, but citi has six reasons it could trade higher next year, the analysts join us coming up first, let's check on markets, and for that we go to bob pisani at the new york stock exchange bob? >> hello, kelly, and happy new year the important thing about today, we have an unusual situation the dow is doing well, it's on the upside, s&p is not and you're getting a little more help from the defensive sectors. i'll show you that in the middle s&p 500 down six points. have the santa claus rally worked, you would have to stay over 2832. that's where we were on thursday seven days from there, if it's above that, it's considered a victory for the santa claus rally. nasdaq has had a lot of problems, mostly because of what tesla has been doing i'll show you that in a minute here's the dow leaders this is the story all year round. what's working drugs are working, pharmaceutical stocks, consumer staples like procter & gamble and coca-cola and energy stocks like chevron this is the story all year they're called value stocks, folks, generally, most of them are value.

they have been the big story this year in the dow that's why the dow has been outperforming everything else and that's happening again merck is at a 52-week high and caterpillar is at a 52-week high new lows today, two big names you know and love. tesla down again tesla is driving the nasdaq 100 down l rivian's weak and apple just hid a 52-week low. that's a big story, of course. that's been avoiding 52-week lows, but not anymore. as far as where we go next, semiconductors are having a problem. there's two reasons semiconductors have been weak. one is the fallout from micron's announcement last week about the high inventory levels. that's a read through to the whole industry, overall. but the succeed big reason is what kelly just mentioned to you a moment ago those are those bond yields. we were in a period where bond yields were descending for a while now, and we were 4-3 to 3-4 on the ten-year yield, and now it's been backing up again we're right near 3.8% on the ten-year in the last couple of weeks. kelly, since that has been happening, since the ten-year

yield has been rising in the middle of december, tech stocks have generally floundered, particularly those semiconductor stocks you see that rally in the yield there? you can overlay that on the semiconductor index, and the index has been moving down, as that ten-year yield has been moving up. kelly? >> great, great point. b b bob, thank you for highlighting apple. a 52-week low, it's not just a tesla story. what do you make of that >> the important thing is 2022 in tech, in stocks, is about re-rating the future earnings potential of all of the big tech names. and it's not just apple. apple is only down 25% you could go right down the list and look at all of the big names. most are down 30 to 40 to 50%. that's the story we are no longer being able to provide very, very high multiples to these companies, because with interest rates this high, you're competing against these companies and in many cases, higher yeelgds on bonds are more attractive for other investors. so these companies are getting

re-rated downward. the good news is, value is really kind of back. we're going to talk about this all throughout the week, but it is very heart tong see consumer staples and utilities and health care stocks do fairly well this year, flat-to-even up on a number of names. and we'll show you that later in the week >> for now, bob, thank you very much bob pisani so the conversation, has inflation peaked globally? we are starting to see signs it's slowing in the u.s. and around the world let's bring in steve liesman on that story what it will mean for the fed and the stock market >> kelly, global food prices, interestingly, have fallen for the first time since russia's invasion of ukraine, according to morgan stanley. energy prices have mostly been down, supply chains look to be clean, the result of all of this, falling overall inflation, not just in the u.s., but also globally jpmorgan forecasting sharply lower inflation around the world, and that central banks are going to follow that trend they wrote in a report, our view that core inflation continues to rise 0.2 to 0.3% on a

month-to-month base should allow most central banks to pause at the first quarter of 2023, even as inflation remains above targets. and goldman sachs writing just yesterday, supply chain recovery on the deflationary impulse in the goods sector that it promised to bring took much longer than we expected, buarri. we expect this to push core goods inflation negative next year calculated by rsm, but the core service sector ex-housing, that's the one fed chair jay powell was focused on. it does remain sticky, you can see in that orange line right there. whether that measure comes down is going to help figure out if the u.s. raises rates to 5%, as priced in the market or higher and stays there for an extended period, and whether it cuts next year, as the market also predicts here are the key risks to global inflation. volatile energy and food prices along with higher wages that

could pass through to consumer prices that may be yet to come, kelly >> steve, stay right there we're actually getting some more bond news, even as we're talking. 385 on the ten-year, we have to come back to but the two-year auction just went off let's bring in rick for a moment with those results, rick what is going on in bond land? >> we have a thin market many of the sellers that were more aggressive have seemed to have disappeared we see that the selling is much more intense than it has been, and yields are really popping in an environment that isn't high volume this particular auction is exactly the opposite of that, though two-year notes, we just brought to market, $42 billion of them the yield, 4.373 well below the when-issued market, which was making new high yields at 4.385 at the time that the auction ended this yield is lower, lower yield, higher price. a-minus. an apple minus for this auction and to hit the highlights, well,

the bid to cover 2.71 was the best since april of this year. indirects, indirects, and those are the ones that we really like to pay closest attention to, foreign buyers, the best since may of '22, and that was at 62.2 we're a little bit light on a-minus. on the dealer side, they took exactly their ten auction, averaged at 19%. but to see that we're now fast approaching a 4.5% yield on a two-year, you see the yield drop on the auction that's because it was aggressive if you open the chart up to early november, should we stay here, kelly? it would be the highest yield for a two-year sinceth of november tens are hovering near a one-month high close it seems as though rates are on the move that was very good support >> rick, stay there, as well we have rick and steve and jeff crumpleman is joining the conversation, as well. if inflation's cooling, it's starting to create some discord within the fed

we have officials voicing different opinions about hikes and qt, but my next guest says that is a positive catalyst for stocks jeff, it's great to have you what do you -- i mean, this -- i don't mean to suck all of the attention out of the room on this one issue, but this recent run-up in bond yields, jeff, it's not just a one-day thing anymore. and it's coming at precisely the time that steve's reporting as everyone's talking about inflation peaking and rolling over what do you make of it >> well, i actually think that we see signs that inflation is calming. and that is really the keel that has to happen for the market to have some kind of sustained rally. and i'm actually positively impressed with the composure of the bond market, and for those that want to get really crabby and think that we're going back to the 1970s, you know, the ten-year is below 4% at this point. and back in the 70s, the bond market was saying, hey, we need to be vigilantes here, and you

really need to worry about inflation. and i think they're saying, we don't believe the fed. we don't believe the fed is going to jack these things up, as high as you see in the headlines. and actually, yields have held in very well, suggesting the bond market thinks inflation is going to calm. and the fed is not going to have to jam it. so what i see in the bond market overall, exit a day like today, is pretty encouraging. >> no, i take your point steve, i'm curious what you think, as well why the last couple of weeks have we suddenly started to see bond yields creep back up again? europe steve, what do you think >> i want to hear what rick has to say about this. but i want to say, lagarde went max hawkish. that's competition from the european bonds japan widened the band on its ten-year yield curve control and so there's competition from overseas, and i think you would make a very interesting point. this is happening just as you get the sense that inflation is

cooling, which tells you essentially, kelly, that it's the bond yield is not strictly tied to the inflation outlook. in some ways, it's been negatively correlated in the sense that the higher inflation went, the more people thought that the fed was going to make a mistake. and you get this inversion out there. but right now, i think it's the -- it's a resettling or a search for a new equilibrium between global bonds, which have previously been much more tied at the hip before the pandemic, and now i think they're getting re-correlated, if that's a word. >> what would you add to that, rick how much do we interpret any kind of december moves as too much but as when people are saying, it's just a day tor two, but steve's right. how much have things changed globally what about here? >> and things had to change globally listen, japan has gone decades with ultra-low interest rates, managed markets, and many people think they've gotten away with it, but they haven't if you've owned their stock

market since 1989 when it peaked, you could be the long, just under 40,000. this is still well below 30,000. so there are issues here and i think especially in the last week of the year, the shorts aren't going to defend the u.s. markets i think we're going to continue to -- buyers aren't coming in. the shorts are going to continue to be aggressive in the market why? i think because of europe, because of japan steve nailed it. those two issues change much of the dynamic. remember, the more mopping up, the more qt that ultimately comes out of lagarde, even though she has a multi-speed cure for what ails europe, the more fungible, quantitative tightening will be and it will affect all economies. i do think that the u.s. is going to see buying coming in, but i think in this market for the rest of the year, i wouldn't at all be surprised if just 4% in a ten-year and 4.5% in a

two-year >> yeah, wow jeff, let me bring it back to you. how did you guys perform in 2032 and where are you looking for 2023 >> we performed well, because we had a high-quality and a more defensive positioning. and we really warned clients and investors to brace for a 20% type of correction going in. and we use the word "correction," because we didn't think it would last virtually all year, but we knew it would last for a bit and you know, our thought was, if the last three years going into 2022, upper a 60/40 investor and the 26% annualized returns took you to 70% or more, you know what, don't be greedy cut back to normal rebalance, go back to 60%, and kind of stay there, and oh, by the way, don't buy on the dips and we knew all of these transitions were happening -- >> but did you rebalance into bonds? because that wouldn't have worked so well >> well, i tell you what it does work, if you build

adequate liquidity and have cash and an individual bond portfolio that's ladered out and sounds so simple, it works it's an outstanding, el gegant risk to raise money. you simply wait to collect your principle at the end and earn your 2, 3, 4% that's advertised. >> if i could put it more fairly, though, i would say, they didn't know they lost money in bonds when those are redeemed, they'll have their principle and interest back, but they would have lost pace on inflation. >> yaeah, it will creep back to par, we have plenty of crash to cover any needs that they have so, that was our thought and the other thing that we did from the equities side was to be very balanced. and we had a combination of offense and defense. and so, we outperformed on a relative basis handsomely in our

internal strategies as a result of that picture. and then, certainly, our allocation, by cutting back, that was additive too. so we feel pretty good 2023, you know, the bears want to really focus on, oh, the next shoe to drop is a decline in earnings, negative revision in earnings that may be the case, but quite frankly, p\es and inflation are the key. and they can swamp trends and earnings th this was a year where earnings were positive, and the market anticipated a recession, so it was a bad year next year, earnings could be flat to negative, and it's a good year in the stock market, as long as inflation is coming in, you can get some multiple expansion and we think it will be a very mild recession so we are beginning to build for positive returns, as we move through 2023 >> and that makes steve's story the perfect fit here sto we appreciate your time. and for those of you who are curious, you're looking at bonds here, a little bit here, small caps, some of the individual

names. eli lilly, starbucks, deckers, t-mobile and communications, technology, cloud strike, and service now. so people can go do their homework while they're at hope cleaning up with their families. thanks all of you for your time today. sticking with pays to position, let's turn to a long-standing wlall street year in tradition pick the five or ten highest dividend-yielding dow components and hold them for the next year. my next guest has a few picks for to the 2023. verizon are down on average carter worth is here i guess if we add dividends to that, is it almost just about even >> well, that's right. and it's a great follow-on to your conversation about yields at the end of the day, we know that long-term investing, if you look at any long-term chart of the s&p or the dow versus a

total return, half of your returns on any rolling two, three-year decade process is from yield and so, the dogs of the dow, while it's sort of a clever name, and there's actually an index, if you can believe it, called mutt, mut is the ticker, it's not buying stocks that are dogs that are down chevron is a dog of the dow. it's up 46%. it's picking the ten of the 30 dow jones industrials with the highest dividend yield and then holding them for the year ahead verizon has the highest yield of all at almost 7% but two that are worth looking at here, to my mind, to my eye, amgen and cisco. and each is quite compelling, and a very different circumstance amgen was a strong stock this year that's now dipped i think you take advantage of that, where cisco has been a

weak stock that's bottoming. so you're talking about a breakout to new all-time highs that's a fairly rare thing right now, going on. and now that correction to support. i think that's an entry point, a viable moment. so does that mean you wouldn't recommend the strategy as a whole? buying all of them and holding until the end of this year would you say to investors, maybe just those two >> no, we are in a market where the markets are not inspiring to the upside, let's just say that we're not so sanguine, all sorts of phrases that one can use. i think yield will be important here and so i would take a crack at the dogs of the dow, by owning basket, but two that come to mind, amgen being one and the other is cisco >> and cisco is a little bit

different story. so final word there, because, i don't want to waste your precious time talking about tesla again, but, wow, is there anything to glean from the fact that tesla and apple, apple is hitting a 52-week low, speaking of the dow, do you think this trading action is emblematic of something? is it just a year-end flush? what's going on here >> well, each stock has got its own circumstance, but let's talk about those, too apple is perhaps the most widely held of all. it is loved. and yet, it's day-to-day action couldn't be worse. it's right at its june low, and the presumption is that it will break its june low, just as the stock market did and many stocks did. tesla is an altogether different circumstance i, myself, we have reversed the long-standing short call and taken a shot on the longside what we do know is that even on the way to zero, whether you're enron or worldcom, you get big

bounces. we think it's a very extreme reading and one can try to make some money on the long side. >> and apple >> just free to move lower >> you have an elegant way of conveying very bad information carter, it's great to have you here today appreciate all your time carter worth with worth charting still ahead, spending at restaurants surging this holiday season, but are higher prices simply to blame? not so fast, as one exec will dig into the data, coming up but first, home prices cooling for the fourth straight month. is it the beginning of the return to normal for the housing market and if so, could there be a lot further to fall? as we head to break, here's a quick look break at the ten-year and all of the averages the dow is the only one positive, up 114 3.851. we're back in a moment

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welcome back, everybody. the latest case-shiller data showing home prices dropped half a percent in october, but that said, prices were still nearly 9% higher than the year before take a look at this chart. during -- dating back to march of 2020, the index level back then, 2015 by this june, that's the peak

there, it hit 308. prices climbed 43% we're only back down to a level of around 300, so how much further, if they will, will prices drop. let's bring in with andy walden with black knight. good to see you again, andy. what do we glean from the latest decline? >> i think it's somewhat to be expected i think we can add another month to that, with as well. we just released our black knight home price index last week and awe another month of declines in november i think that is going to be the continuing chart as we move into the early part of next year, given where inventory's at and more aptly given where affordability is at at this point in the market. >> maybe, overall, a five, a 10, a 15, 20% reset. that would still leave us way above pre-pandemic levels. >> i think we're going to trend downward into next year, for sure if you look at the pace that we're on right now, we'll cross that 0% threshold around april of next year and from that point forward, it's really dependent on a number of different factors.

one being interest rates and the second one being inventory right? that inventory continues to put upprd pressure on prices and will limit the amount of decline that we'll see out there in the market >> limit the decline you and i have talked about, how the housing market might be more in a freeze than falling off a cliff. there's also been some questions about whether the level of foreclosure quift ticactivity ps up could we see pressure there? >> not in the near-term. if you look at foreclosure taking place, foreclosure inflow is below pre-pandemic levels active foreclosure inventory still below pre-pandemic levels. you are starting to see some uptick in early payment defaults among fha-type mortgages, which will make their way downstream into that pipeline we have some cares act, so the trajectory for closure is on the

rise, but not another massive explosion of activity we saw last time around we're simply not in that type of environment. >> we talk about pent-up demand, but demand is weak right now, because people aren't really trying to buy. they're all watching prices, they're kind of waiting, watching rates what would it take to really unlock a wave of demand? >> there were 50% fewer purchased mortgages locked in in november than there were at this same time last year mortgage purchase demand is down 50% from where it was last year. and you look at where we've lost that market, and it was right around the 5% range in terms of 30-year rates. i think you're going to see, we're probably bottoming out in terms of overall purchase demand in the market. but to really spur volumes out there, we'll need to see interest rates certainly below where they are right now and unfortunately, they're kind of trending in the wrong direction, if we look at ten-year yields over the last week they suggest that rates may be pushing higher in the next week or two

we're certainly moving in the wrong direction to spur any kind of increase in demand. >> you can imagine as that lasted as we start to move into the spring season. we'll leave it there for now, andy thanks, as always, for your time >> you bet, thank you. >> and walden with black knight. up next, bright spots, the cloud computing etf is down 10% this quarter not every stock is under pressure we'll get some of the software standouts. check out this mystery chart down 42% this month. i bet you can guess it we'll reveal it, but give more staggering stats next. and as we head to break, take a look at the dow heat map we mentioned apple at a 52-week low today. it's the worstperformer in the dow. only seven names are actually negative verizon is the outperformer, up 2% caterpillar having a nice day, chevron, as well, on some of those china reopening stories. we're back after this.

welcome back, everybody. dow remains the only of the major averages in the green. all the more impressive, because apple is the worst performer there today, but it's adding 100 points nasdaq down 1% again the chips are a big headwind there, once again. i want to do something a little different and drill down on one stock here today we've got to talk about tesla. this is another 8% drop. we're trading at 113 , it's a 52-week low and has fallen for six straight trading days and nine out of the past ten the recent slide is out of a "wall street journal" report that tesla will extend its report into january, which is something it hasn't done in past years. zoom out, tesla is down 42% this month. worst month quarter and year on record, no question. look at this decline basically a45-degree angle this after the automaker expanded discounts, ceo elon musk sold a bunch more stock,

$3.6 billion earlier this month. tesla's market cap hit a peak of $1.2 trillion in january, and just above $150 billion. and its forward p\e sits at 21 times. and on that note, we head to kristina partsinevelos for a cnbc news update kristina >> thank you, kelly. here's what's happening at this hour. state and military police are being deployed to enforce a driving ban if buffalo, new york, which suffered its deadliest storm in decades across western new york, eight more storm-related deaths were reported today and more snow is on the way county officials are now warning about the risk of flooding later in the week, when the feet of snow on the ground starts to melt some u.s. airports are having to set up overflow areas for luggage from the thousands of canceled flights over the long weekend take a look at this video you're seeing on your screen. these are some of the bags waiting to be reclaimed in detroit and chicago. one of the nfl's best defense players in nfl history is calling its quits.

cardinal's defensive lineman j.j. watts says this will be his last season. during his 12-year career, he was named defensive player of the year three times, a feat matched by only two other players. kelly? >> wow wow! kristina, thank you. kristina partsinevelos coming up, the shanghai composite climbing about a percent today after the chinese government eased covid controls even further but why investors are bullish, one economist is warning that china is shifting its economic strategy and the u.s. better be prepared we'll talk about that, next.

welcome back china taking a big step towards reopening. dropping the mandatory quarantine for tourists visiting the country, it's got to be welcome news for the trave industry after nearly three years of being shut off to china. seema mody, speaking of traveling, the globetrotter, seema mody, back here with more. >> i got to see some of the recovery there, kelly. but just to put this story into perspective, nearly two months, if you were a chinese traveler returning to the mainland, you would have had toquarantine fo 14 to 21 days at a local hotel if you were traveling across the mainland, you would be subject to about three to four different covid tests. the travel recovery in china has been severely impacted by the

lockdown, and that's why the removal of this quarantine overnight is significant and that's why you're seeing the market respond positively. but of course, it is a balancing act. because they're reopening their economy at a time when covid cases are continuing to rise on the ground in china. and that becomes a big concern economic pressure is certainly growing. china is likely going to miss that 5.5% gdp target that it set out in january of 2022 we'll see if that target is revised for next year. but in terms of what it means for the travel industry, the biggest names that have exposure and the ones that could benefit, marriott is at the top of the list, kelly. it has nearly 450 hotels across the mainland it's been aggressively expanding its footprint, despite the lockdown over the last three years, similar story for hayat and hilton, as well. some of the online travel operators here, like booking holdings, c trip, and trip.com, the biggest online traveler operator in china, they're set to benefit but also retail. we're also talking about the chinese travel finally coming

back to the united states. >> and to europe >> exactly the retailers, the luxury players that have been missing out on that china traveler, or at least in person, set to benefit, as well >> are people getting too excited about the impact everywhere you turn now, they're going, china to the rescue china will save the world economy, basically, in 2022. >> it's a great point. especially when it comes to travel, certain restrictions are easing, but at the same time, one thing i keep hearing about, the airlines still have increased capacity if you want to see travel pick up, you have to have more options. if i'm a chinese traveler, i want to be given different itineraries to choose from, especially if you're coming from america, as well we have not seen that airline capacity improve just yet. when it does, maybe we'll see those forecasts increase as well >> always comes back to the airlines, doesn't it >> always! >> seema, thank you very much. seema mody so when can we expect a series, big-time come back for china? my next guest says possibly this spring, like in march. but the contraction between now

and then could still be stark and china's whole tick strategy meanwhile is shifting. let's bring in derek scissors, american enterprise institute's asia economist great to see you again, derek. welcome. why do you say, first of all, it could get worse before it gets better for china >> it's in the process of getting worse now. covid -- zero covid was a problem and covid is a bigger problem, which is why china had zero covid for a long time people are saying, hey, i think covid is going to peak in beijing and shanghai in early january, but beijing and shanghai are not china there's still plenty of covid spread left in cities around the country and in rural areas after that so we have at least two more months of bad economics, where work is interrupted, the retail you're talking about in china, you know, doesn't work, because people don't want to go to stores then we should see a very sharp recovery, but it's several months away, countrywide >> wow so, a lot of people might be getting ahead of themselves, then, if they're thinking, hey, you know, or maybe not

if you're saying, the stocks are pricing what's going to happen in three months' time, maybe they're fine to be rallying on in this what do you say? >> if you just want a rally, there's going to be improvement in everybody's prospects roughly in march it's going to last for about a year that's great but where are you starting from. you guys just talked about a 5.5% target for 2022 it will be great if it's 2.5%. the first quarter next year is going to be bad, whatever klein reports, even though it will be getting better by the end. so if you think you're climbing out of a two-foot hole, great, that's one way to play stocks. but if you're climbing out of a 10-foot hole, maybe that improvement doesn't really help you until well into 2023 >> very interesting. and what's the larger shift that you think is at play here? >> well, i think we've had a number of blows to china as a manufacturing and export powerhouse i mean, they're the premiere

manufacturer and premiere exporter in the world, so they've built up a lot of credibility and a lot of advantages one of the blows is going all the way back to 2019 xi jinping gets mad ast its own private sector all of these things are what foreign firms, at least, and maybe some chinese firms are looking at saying, i need to diversity out of china so the battle the chinese are going to have is, they want control of those supply chains they want to be the top of the food chain in manufacturing. this is first time in a while their position has been threatened they still have some advantages, but we've seen multiple blows to their position in the last three years. >> what should the u.s. do in response to that, do you think >> well, i think there's an opportunity here for the kind of diversification out of china that we want economically, politically, militarily and we have to play that right. we have to decide, first of all, what are our priorities? we've taken a step to that regard to semiconductors and the chips and science act in the

past congress earlier this year. we have to decide where our other priorities are is it rare earth, batteries? pharmaceuticals, which is where i would put the priority and then the next step is, we have to decide, do we want that stuff to come back here, or is it okay to be made in north america? is it okay to be made in australia or someplace else that we consider a friendly country so there's an opportunity here for the united states, and we have to pick our priorities and who we want to come along with us >> sure. and maybe what we've done on semiconductors is a template of a lot more of those kind of actions. derek, for now, thanks it's always good to hear from you. we appreciate it >> good to see you de derek sicissors with aei ckn "e chgeisexan" ba itwo.

welcome back the results are in mastercard's holiday spending

pulse. it showed experiences won out big-time over stuff this year. we did see an increase overall at least for holiday spending. but the jump in restaurants, that's getting the headlines pippa stevens is here now with the headlines. wow! >> that's right, kelly consumers are still eating out between november 1 and december 24th, restaurant spending was 15% higher than last year. according to mastercard. that's partly because of the post-covid mind-set. here's how mastercard's steve sadva explained it on "squawk box" this morning. >> i think you have a consumer that is right now trying to be very experiential. you look at the restaurants for an example at the 15 kt growth, there's clearly unit growth on top of inflation you try to get into a restaurant in new york, for example, and it's pretty tough. so there is real demand going on in the restaurant sector >> one thing driving that demand is restaurants are a better deal these days, because grocery prices have risen faster than

restaurant prices. november's cpi report showed restaurant prices up 8.5% year over year, while supermarket prices were up 12% this has been going on all year. and according to equity research, restaurant growth hit a record 55.3% in november despite this, restaurant stocks are mixed for 2022, as the industry faces challenges around labor and commodity costs. names like chipotle, starbucks, and domino's all in the red this year mcdonald's is flat while stocks like restaurant brands and texas roadhouse are in the green, from personal experience, kelly, i am certainly contributing to that spending >> you're doing your channel checks that's what you call it. >> exactly exactly. >> i'm shocked that restaurants have been underperforming on inflation and stealing share from grocery, because i just feel like that's about to change the labor piece of this is not going anywhere the commodity piece, as you know better than anybody, probably will look a little better in 2023 was this just a one-time

splurge, do you think, or could it be a lasting trend? >> i definitely think coming out of the pandemic, everyone was really prioritizing those in-person experiences. they wanted to see friends what better place to do that when eating out? but we are starting to see some traffic numbers dip. remember, a lot of the restaurant gain is also because they've raised prices. so we also have to factor in the traffic numbers here and particularly with the lower-income consumer, we've seen them to start to pull back. if things get, if we head into a recession next year and people cut back a lot more, this will certainly be one area where we could start to see consumers move down the food chain, or maybe even start to look more for the value at the grocery store. so stronger now, but we will see. >> who would have thought that it would have been the christmas of going out to eat at a restaurant, but we'll take it! pippa, thank you so much. coming up, six geese a laying was so last weekend citi has three reasons why apple will stay bullish.

we'll talk to the analyst after the break. was also the first time you realized... we can do anything. cheesecake cookies? [together] the chookie! manage all your sales from one place with a partner that always puts you first. godaddy. tools and support for every small business first.

welcome back to "the exchange." it's been a rough year for apple. the shares are now down 27% nearly, as higher rates wreak

havoc across tech. but citi's jim suva is saying 2023 could be a turnaround here are six reasons why plus his bonus option about why the stock could move higher. one, potential growth in india the contrarian view that iphone revenue growth will not decline next year, that's number two an expected boost in service revenue, thanks in part to easing foreign exchange headwinds. number four, the launch of the apple ar or vr headset number five, regulation remains a headline instead of a real risk number six, buybacks, dividends, and a flight to quality. the bonus which steve and i promised not to talk about is the long-term possibility of an apple car. joining us now is jim suva is with citi. are we getting the headset this year, jim? >> i think we will get it in the second half of the year, kelly not just because it's your favorite, but simply because the world really needs it. when you think about all of the things that need to be trained,

all the education, the doctors, a lot of the ar kits, the augmented reality kits have been built out, where you can put on these goggles and have a great experience so we do expect it to happen, likely in the second half of the year but there are absolutely a lot of new products in the works and eventually a foldable phone for the following year, 2024 so i know youar/vr right now but in the future, i bet we're going to be talking about that foldable phone on the top screen, you can watch cnbc and on the bottom screen, you can look at your emails. >> i was eyeing, there were ads for that during a football game for who are the competitors now? and i thought, i don't know if i trust it, but if apple did, i probably would let me ask you this, steve which of these do you think the investment community is most excited about that could be a genuine catalyst >> i'm looking at the services side their ambitions in fintech, the buy now pay later product, the high yield checking account that's tied to the apple card. they announced that a couple

months ago and it's going to launch most likely next year >> good time to be in that space. >> they haven't said what the yield is yet because of interest rates, but high yield, whatever that means fintech is super interesting there. then, how they get around or keep the app store growing amid these regulatory threats in europe, amid regulatory threats here in the united states, and then just this overall decline we're seeing in app spending, especially gaming. >> i wonder if one of the real reasons on your list should have been interest rates decline. is apple just a macro trade right now? it's hard to see how it's not. >> well, first of all, steve mentioned some brilliant things about fintech and their credit card and the business they're doing. and they're very much disruptin the industry right now, consumers are having to recalibrate their entire household discretionary income and what they're spending, whether it be food, gasoline, rent, things are very expensive. let alone right now, people

can't get from new york to san francisco. it's really facing a lot of challenges with weather. that's slowing down units and hurting apple near term. that's why when we look ahead to 2023, kelly, i'm right on the same page with steve about his disruptive discussion about fintech and services, we're in alignment with that. we think 2023 becomes a much better year, especially after people recalibrate to this newest higher interest rate environment we're living in. >> steve, there's apple below $130 is there any fundamental reason or justification, this is the worst stock in the dow today >> down 2% or 1.5% >> what's going on anybody know >> what we have seen all year, there's no good theory but it's the leader, it's the loss leader for the market as it goes and everyone follows, we saw that this summer when it started peaking up, and everybody followed it too. maybe that's an indication of

how things are going to look early next year. i wanted to talk about the ar headset. what we saw what meta did with their headset, really failed to show a use case for it and what jim described is great, enterprise stuff, going on warehouse floors, mike soft is working on similar things but no one has come up with the killer use case, i have to run out and buy it when we saw the iphone for the first time, you had to run out and buy it, the watch, run out and go buy it. what is the run out and go buy it feature for the headset no one has really articulated that if apple can't articulate it, this thing could be really dangerous for them >> jim, i'll give you a final word do you stick with your $175 price target even after an end of the year like they're having? >> kelly, we do. right now, you can't even get out of your house to drive into a manhattan store or in buffalo where a lot of the roads are closed down. we do expect that december

quarter to be challenged that's going to help out next year the demand is still there. when you look ahead, whether it be item one, two, three, four, five, six, the things you laid out we're positive about, we're sticking with our buy rating and target price people will revisit the strength, they're going to be buying back stock. as the year progresses we expect more and more positive things to come, not just from airpods, air tags, there's lots of business case uses and we're looking forward to a more healthy and fruitful year of 2023. >> we appreciate you joining us from the family christmas, even if the connection was in and out. jim and steve, thank you >> coming up, the cloud computing etf has lost half its value, having its worst year ever, but it hasn't been bleak for every name in the space. we'll veveal on the other side of this break. don't go anywhere. welcome back to earth. thanks, it was pretty life changing. dude it was eight and a half minutes. i didn't even get to finish my burrito.

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one more thing before we go, everybody. got to talk about the cloud stocks for instance, the wcld cloud computing etf down 10% this quarter. not great, but not the whole story either there are some clear winners and losers in this space frank holland is breaking it down for us. hi, frank. >> cloud enterprise and cybersecurity stocks have underperformed big tech. if you look at the qqq etf, in q4, these stocks weighed down by elevated valuations and the rising doweler however, the doll pressure has eased up significantly it's fallen 8% to the yen and the euro has risen to the dollar that's how these are measured. in relation to the currencies cutting it in half, and globally, a positive tailwind for the transition to the cloud. spending has leveled off in the first half of the year, but every month, more than 20% year over year growth companies that issued bullish signals have been rewarded

s.a.p., a german cloud providing, forecasting tw26% in cloud revenues okta, especially in multifactor authentication raises billing guidance up. box raising eps guidance, showing margin expansion you see shares are up 26% in q4. however, high valuation names or stocks not seen as mission critical under pressure in q4. snowflake, classic case, trading at more than 500 times forward earnings shares down 20% in q4. palantir, a complicated business that relies on government contracts. the unexpected inclusion of oracle in the pentagon contract creates more questions about government contracting that even palantir has called lumpy, and a project management stock that faces stiff competition from mega tech players including microsoft and salesforce however, m&a may be the big story for the stocks in 2023 new data, private equity has

$941 billion in dry powder a lot of money to spend on companies. we saw coupa acquired by thoma bravo. >> thank you, frank. that does it for the exchange. "power lunch" picks things up looking for the bright spots it begins right now. >> welcome to "power lunch," everybody. hope you had a great christmas china once again one of the biggest wild cards for the energy markets now that the world's second biggest economy is easing covid curbs bill the oil bulls take control in the new year or will a global recession keep the lid on demand? plus, no place to hide the bond market turning in its worst performance ever this year, one analyst says it is nothing like he has seen before. so will next year bring even more surprises that is all coming up in just a few minutes. kelly, whaare