bitcoin sitting around $16,500 somewhere around there kayla, thank you for hanging out. >> thank you for having me i'll see you in 2023 >> i'm back tomorrow, as far as i know >> we'll see you tomorrow. >> happy new year to both of you. >> hope everybody gets where they're supposed to get. >> especially to kayla, hopping on a train soon. >> join us tomorrow. melissa will be here i will too "squawk on the street" begins right now. ♪ good wednesday morning, and welcome to "squawk on the street," i'm morgan brennan with scott wapner and mike santoli. carl, jim, and david have the morning off. we're going to take a look at futures with 30 minutes until the opening bell and you see some green on your screen, although we're fading this premarket rally here. the s&p is poised to open up about 3.5 points the dow, up 36, and the nasdaq, hanging on to gains here

premarket, poised to open up 4 points after that 1.4% selloff the selloff continues in the nasdaq we're going to start with our road map, though tesla trying to rally following yesterday's steep declines the stock on pace for its worth month, quarter, and year ever. >> plus more troubles for southwest airlines already canceling more than 2,000 flights today, the company's ceo apologizing to his customers. and amc's ceo adam aron asking his board of directors to freeze his salary in 2023 amid the company's sliding stock price. >> but we begin with tesla, which did drag both the nasdaq and the s&p lower yesterday. got another price cut this morning, this time from baird, the firm reiterating its outperform rating but lowering its price target it's the second price cut in under a week that's after wedbush slashed its price target on tesla before the christmas break. you can see right there, shares of tesla are trading at about

$111, up about 2% premarket, but of course, scott, we were talking about this yesterday it has just been a rough year, particularly a rough couple of weeks. >> kind of like a rough everything, right? it's been down seven days in a row. never been down eight in a row it's been down 10 of 11 days, and it's down 43% in december alone. look, dan ives was on yesterday, and he's one of many who still have an outperform rating on this stock, and even he's questioning the level to which this thing has just broken >> the analysts are chasing it down in the form of cutting price targets. they're not saying something has radically changed, but on the way up, nothing had radically changed, when the stock was up 2,000% from november 2019 to november 2021. everything that was working in the stock's favor on the upside is running in reverse right now, which starts with, yes, evs got to scale, tesla got there first. you have this, you know, demand that was pent up and being quenched during the pandemic

that's kind of the premise earnings estimates for 2023 for tesla, coming down a little bit. they're down like 8% in the last few months, but it's still going to show supposedly huge earnings growth it's not a fundamental story it's the momentum working the other way. people thought musk was seeing around corners that's kind of been compromised. the options flow from retail investors had been accelerant to the stock on the upside. i think it's an exaggerated example of what's gone on with mega cap growth in general on the upside and the downside. >> yeah, it's such a key point, because you've got tesla trading at, what, 19 times forward earnings, which is compared to some of the other automakers, if you want to consider an auto maker. i know that debate is out there, especially in the analyst community and among investors whether this is a car stock or a tech stock but shporsche, 17 times, ford, 6 times earnings you can make the argument this is still a name that looks like it could have further to fall, just based on valuation. >> not to mention the

macro issues they sell expensive, discretionary items, whatever you think about it, and even if you don't want to compare it to the car companies, i mean, it's 19 times earnings is a premium to the market. we think maybe who knows if there's downside to earnings estimates based on what's happening in china so, it's a really fascinating issue in the sense that it seems like it's gotten crushed, and it has, but on a three-year basis, it's up 280% so, that just really is everything you can talk about in terms of the tale of the tape on this one is more just telling you how wild it got on the upside >> do we really believe, though, that, you know, especially among the analyst community, that the valuation premium that it's always gotten is suddenly going to be rerated permanently or once you get past this spell that the stock has been in, you're going to have the fan people suggesting that, oh, it deserves this premium because it's, to morgan point, it's not a car company.

>> right >> apple trades at 20 times. >> it's a tech company it's this. it's that. you come up with every reason why it's not just a car company to justify a wild valuation. you say, well, it's got $5 in earnings power, and as morgan said, right now it's 19, 20 times, gets you to $109. >> what's interesting is now you can have that conversation whereas, when the stock was at $1.2 trillion market value, that wasn't even part of the conversation it was just like, you had to invent other markets they were going to penetrate and dominate to have any fundamental basis for where it was trading now, it's, all right, what's baked into the price are they going to achieve 2023 numbers? it's like 12 times enterprise value to cash flow okay, that's not cheap google's at nine or something like that, you know, so that's -- but you're talking about, at least in the same zone as the other mega growth stocks. >> i feel like when you were saying that, i'm thinking, peloton, when they were saying,

well, it's a fitness company, it's a media company, it's a t-shirt company, it's a retailer you could make milkshakes. you can do everything on this machine to justify what was an incredibly high valuation. now, it comes back to earth, and you're like, it's a fitness company. they make bikes. treadmills >> it speaks to the broader trend we've been talking about on the market, which is the fact that you could argue bubble or not but it's been inflated or lofty valuations that have been inflated by low interest rates for a very long period of time the chase for yields, the quest for yields by investors into growthy names. tesla has been one of the penultimate growthy names, even if it misses its estimates this year and comes in lower amid this weaker macro backdrop, amid higher interest rates, and we know what that's doing to the auto market, is still going to grow something like almost50% in terms of production this year >> exactly and so, again, everything is

about where you're starting the measurement from if you're starting the measurement from three years ago, the market fully captures what has been accomplished it's going to go from $83 billion in revenue this year to $117 billion in revenue next year, just on that basis alone, it's become a very big company it also has a $350 million market cap, it's bigger than meta at this point >> makes me think of how fragile the nasdaq still looks, you know when even yesterday, you get this pop on the china news, and it all but deteriorates by the open, and you close significantly lower. here you go again, if you look at the futures now, it's the nasdaq that's pulling up the rear yet again we had a conversation with, i think, jonathan krinsky yesterday, the technician at btig he threw out a number of 9,800 on the nasdaq. you start to get to some kind of dark levels. >> not much lower than we are. exactly right. the risk still seems in the very

larger stocks, in the sense that that's where the valuation remains. so, very broad terms >> the apples -- >> i was just looking at this. the nasdaq 100 peaked a year ago, 30 times forward earnings right now, 20 times forward earnings it's at the exact same premium to the s&p, because the s&p has also gottenl less expensive. apple went from 20 to 30 is 20 high or low? on a ten-year basis, it's kind of high. on a pandemic-era basis, it's looking more reasonable. and it does seem as if then now you have the tax law settling, the mechanical stuff >> and by the way, you know how these revisions, treasury just put it out yesterday around tax laws and what that's going to do to share buybacks, which we know have been something that buoyed the market more than otherwise we would have seen i think goldman-sachs had a trillion dollars, record trillion dollars in share buybacks by companies this year. >> i don't think anybody buys back more than by size than

apple. >> in absolute dollars, that's right. >> in absolute dollar amount so, it's an interesting point. let's turn our attention now, the latest around southwest airlines, under pressure yet again today. according to flight aware, southwest has already canceled more than 2,000 flights this morning. bob jordan releasing a video last night apologizing for the situation. >> i want everyone who is dealing with the problems we've been facing whether you haven't been able to get to where you need to go or your one of our heroic employees caught up in a massive effort to stabilize the airline, to know that we're doing everything we can to return to a normal operation and please also hear that i am truly sorry. >> i mean, a situation, mortgage p, is just a complete mess. transportation secretary buttigieg says he wanted to hold this airline accountable i'm not exactly certain how. a cnbc producer was one of those stranded i was lillehamterally just told

they're not going to be back until january 1st. they cannot get back until january 1st. you've seen the -- i heard you comment earlier on the video we've seen of the bags >> on tarmacs. >> all over the airports people, you know, stranded all over the place what that accountability level -- i wonder what that is >> well, it seems like the next step for -- and who knows? i mean, for southwest, it's going to be -- i don't know about the accountability part of it this feels like low-hanging fruit and maybe a little more optics than reality in terms of regulatory blowback from the d.o.t., but who knows? i don't know but it does seem like what you're now going to have happen at southwest is what happened at, like, united last year, where you're going to see a big push in terms of tech investment to try and overhaul their system so something like this doesn't happen again >> and it's southwest, which has always been considered one of the better operators if you were talking about more quality, and clearly, weather stuff hitting regions of the country maybe doesn't often --

that's a factor here, but to me, it tells you the fragility of the whole industry, right? it's like the labor, the tight labor situation, there's no redundancy, it's kind of like one little bit gets thrown off, and there's a cascade over the course of a few days and so, if southwest can't sidestep it, i guess, is the idea, then it just seems like it's much more about the brittle nature of the industry right now. >> which is why people say, you know, these are -- these stocks become so difficult to invest in they have their moments in time, and certainly there's a period of time in which they did go up, but you'll have some say they're horrible long-term investments just for december alone, jetblue is down 20%. united's down 14%. some of the other travel names, hilton's down 12%. avis, down 30% expedia, down 19%. norwegian down 24% to your point, just a little chaos thrown into the system throws the whole thing >> they're also suffering from this idea that we're getting a lot of travel out of the way,

that was kind of pent-up this year, and you know, just a little bit of a tighter budget next year. >> yeah, tight capacity and also coming off several years of what's been really just difficult travel if you did have to travel during the pandemic and with many of these companies that are loaded with debt and trying to recover and go on down the list and what that looks like going into next year with a softening macro backdrop but scott, i also think the ripple effects to hotel operators, to the online travel companies, which i think we're going to be digging into more as this week unfolds as well with one of those ceos. brittle. brittle is a good word >> the ceo of southwest was saying they need to upgrade their "legacy systems. to mike's point, i still remember having these conversations during the pandemic and the bailout it's like, you know, you run into trouble, you get bailed out, and then you still have these legacy issues that never

seem to get solved, no matter who comes to the rescue and when >> and the reason they've been tough long-term investments is massive fixed costs. when times get good and they're able to impose all kinds of fees and get pricing, the incentives are to harvest those profits at those times and not necessarily try to run with these redundancies now, we know nothing, really, about specifically what got glitchy in the systems that really caused this massive collapse, but it is endemic to the industry that you're going to have these episodes >> bob jordan, you're invited to come on the show and talk to us as you get more information to share. okay well, after the break, it's been a tough year for big tech stocks like alphabet, amazon, and meta, but is more pain still ahead we're going to dig into that even further through this hour but in the meantime, take a look at futures we are poised to open up modestly on this wednesday morning.

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welcome back to "squawk on the street." tech stocks have had a rough 2022, but can the sector turn it around well, joining us now, mkm partners can big cap turn it around next year >> it's going to be tough first few months and thanks for having me in the first, probably, first half of '23, they are going to be sideways to stay under

pressure we think there are more downward revisions estimates to come. i think as we see in the first half, if estimates are going to come down, interest rates go up, valuation of high-growth tech stocks are going to be under pressure if you have a part of you beyond, say, early next year, then i think companies like amazon and uber are extremely compelling, in my opinion. amazon is trading below its kind of covid lows. amazon is the only company that has had any upward revision to estimates over the past couple years, so i think that's the one we like. if you think you have the visibility beyond first half of '23. but short answer to your question, yeah, it's going to be times under pressure over the next three to six months at least. >> let's talk about another name you have a buy rating on, and that's meta. it's down 65% this year. why are you sticking with that

call >> i think the growth versus profitability conundrum that meta has had while apple and tiktok have been weighing on meta, i think if you dissect those two dooebates, i feel the first debate on focusing on profitability versus growth, that debate is going to turn into meta's favor as the first half of next year progresses we feel they are getting the right kind of message from investors that cut costs, focus on near-term profitability, while revenues remain under pressure, so i think they are taking the right steps so, the first half of next year is going to be focused on higher margins and better cash flows. that should help with the stock's valuation in the near term and as we progress in the next kind of six to 12 months, i feel both big, big external factors, apple and tiktok, we would see evidence of that kind of ebbing

on the fundamentals, ebbing on the revenue constraints that had company has had. and net-net, i feel this is a bet on mark zuckerberg over the longer term. he's the youngest big billionaire ceo. he has a lot of runway ahead, and i feel kind of as we get into the medium term, beyond the 12 months, cyclical tailwinds and execution should start flowing through. so, i'm not seeing that there is -- this is the urgency to buy it right now, but as the year progresses, we see this unfold profitability first, apple, tiktok start to ebb in the second half, and then execution follows. so, we like it amazon is the more compelling idea here, but meta has something that is a company that we would be behind as the year progresses >> rohit, how much do you think tech valuations were buoyed by zero interest rates? and then, now that they're not zero, and they're not going to be zero, and they may never be zero again, or at least for the

foreseeable future, and they're significantly higher than that, how much do you think valuations still need to reset to catch up to what is a new environment >> again, a rule of thumb that we have had here is every hundred basis points of higher cost of capital is kind of 10 to 12% in reduction in valuation. that's simple math that's simple kind of geeky stuff that you would want to do. so, if you have a point of view that we are about down 40% for 400 basis points, then that feels to be in ballpark as far as where the tech valuations have converged with the new era of the cost of capital if interest rates are bound to increase, which we think, our macro economist feels that there could be more interest rate hikes come down the pike over the next couple, three months or so that means there's another 5 to 15% off tech stock valuation

correction on top of that, we think estimates need to come down. so, that's one of the reasons why we like megacaps through the recession, through the valuation correction there are these factors about interest rates affecting valuations and the multiples, plus secular headwinds -- sorry, i meant to say, cyclical headwinds affecting estimates, so there is more pain to have, in my opinion. >> where does that leave you with a stock like alphabet, which now, for the first time, essentially ever, people now wondering about the long-term competitive advantage with some a.i. applications and things like that. >> in our mega cap pecking order of the buy list at current levels, i would rank alphabet as number three behind amazon and meta the reason why we feel that is, a, again, stock has done well. it's about its covid lows, very

clearly, and it has gained market share during '21 and '22, away from facebook and largely that's because of all the apple changes. we see margin pressure and market share evolution over the next 12 to 24 months so, i think we are at a peak multiple for google, at least for the near term, and that makes me wonder if that -- yeah. that should be some sideways movement, more so more google than the other two >> okay. rohit, thanks for joining us >> thank you >> all right, let's take a look at futures one more time as we inch towards the open this morning. we're trying to hold on to gains here we are dow would open higher by about 44, s&p, 4 points, snnasdaq by near 7 more "squawk on the street" when we return. look! what's up my trade dogs? you should be listening to me. you want to be rich like me? you want to trust me on this one. [inaudible]

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well, the opening bell is just five minutes away here are the gainers this morning, premarket, on the s&p, which is poised to open higher progressive, up 3.5% by the way, other insurers are trading higher this morning. generac holdings up. tesla up 1.5% after a rough seven days other names rounding out the top five are dollar tree and interpublic group. we're back after this.

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the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. welcome back to "squawk on the street." we're watching apple this morning. we have less than two minutes to the opening bell it's under pressure again premarket. it's touching its lowest level since june of 2021 that was with the close yesterday. and it's dipping below right now ahead of the opening bell in premarket, that 130 level, mike, which certainly strategists have been watching closely. matt miller pointing that out as sort of a key support level, because it's where the lows from

june come from, and it's the low for 2022 you go down from here, it's bearish for the stock and bearish for a broader market >> and apple for much of the year was essentially standing completely apart from the rest of tech, the rest of the nasdaq. it did get the stability premium. the issue is, in addition to seeming like it's trading very heavy and losing that sort of technical support, is it got expensive. it's down to 20 times earnings, and there's no growth. current fiscal year ends next september. it basically is supposed to be a flattish year revenue and earnings-wise. that's before any downward revisions come based on whether it's going to be flagging iphone demand restarting growth in the following year it's very stable financially, bulletproof all the things we know about apple in terms of shareholder return of capital and all that is intact. the question is what you pay for it, and you know, right now, as i said, all these stocks are coming into question for why are we paying a premium when the

growth estimates are coming down there was a time when they had growth nobody else did not the case >> worth noting it's almost 13% of the nasdaq 100 as well. we've got the nasdaq turning lower here in these final seconds before the opening bell as well. there they are the opening bells. at the cnbc realtime exchange, when you can see on your screen. at the big board, executives and guests of syracuse university, the university of minnesota, and the new york yankees in celebration of the bad boy mowers pinstripe bowl. at the nasdaq, new york cares, the largest volunteer network in new york city, ringing the bell there, and right now, out of the gate, scott, it looks like it's a bit of a mixed picture, because the nasdaq is slightly lower. the s&p is just north of the flatline as well and the dow continues to be be outperformer here. >> i'm sure you can get what stock i'm going to mention

first. it would be tesla, because it is up today again we said it's down seven straight days, and it's been down 10 of 11, but you're getting a little bit of some bottom-feeding here, although as i'm watching it, it's just teetering around, mike, the flatline it's going to be so closely watched. it just dipped negative, of course, as i was saying all that down 43% in december alone the real question at this point, too, is who's selling? who are the sellers? are the institutions and the bigger believers in this story now the ones who are starting to capitulate a little bit? >> i think that, well, first of all, you name it, who's selling. i mean, the ceo was selling a lot of it. the ceo, who says esg is a crock, basically guess who owned a lot of tesla stock? esg funds, right on the way up. so, i don't know if it's anybody in particular. i still think retail is the key swing factor on a day-to-day basis. superpowered retail, like, heavy kind of short-term traders,

people who are in the options, and there is just this kind of unwind of a lot of these names that really did dominate on the way up so you have all this market cap in there from people -- first, people who sell it are the ones who were pbuying it just because its started going up the momentum works in reverse. if you want to buy it on a fundamental basis, is this the moment when you have widespread anticipation of consumer struggle and all the rest of it? even just because it's, again, they sell expensive stuff, and we're kind of downgrading our expectations for what dro discretionary is going to do next year. all those things are in the mix. in terms of what levels matter, i think you really want to be very careful shorting it here just just based on how far it's down, based on the dynamics of january, which is laggards often spring back, and based on the fact it's just become a very sort of unpredictable spring-loaded situation, just on the intensity and the angle of descent here but all that being said, it

trades like a video game i mean, it trades that many shares a day, and so, i think handicapping what it's doing on a short-term basis is futile >> it's far and away the largest stock in terms of activity within the options market as well, but the retail piece of this, and i know we talk about retail investors every day on our network, but the retail piece of this goes back to what you -- you mentioned jonathan krinsky from btig. he was talking about there needs to be more capitulation and that despite bearish sentiment, it's not necessarily showing up on the retail side in terms of buying and selling, you know, with that activity more broadly, across the market. but tesla probably one of those, i'm going to make the pun, get under the hood, take a look on the retail side and what that means. >> is anand look, i think it's also a principle of when you have these extreme market peaks and you're on the other side of it, and it's being dismantled, the stocks that led and were most intense on the way up are the ones where you have a little

bit of stubbornness about people giving up on them. i think apple, to be honest, has a lot more of that focus at the moment now, there's no correct level they have to get to. you don't have to see people crying in the streets and saying, now, finally, we've capitulated, but i think that it's not -- you shouldn't be surprised that this just has a long afterlife of this reckoning. now, the overall market, i would argue, you're starting to see heavier outflows from equity funds. you're seeing the last couple of weeks, there's a little of a give-up going on as the stock market, the s&p 500 has really bumped around this down 20% level that's where we are right now. that's where we've been for a little while the seasonal rally has really not shown up in any observable way, to say the least, and so you've just kind of suffered with it, and you're also down a similar amount if you have the diversified stock bond portfolio. not quite as much, but you're barely outperforming if you own 40% bonds coming into this year.

that's something that maybe changes into next year bonds create a little bit of a cushion. they've already kind of had their losses and i actually believe that's one reason equity outflows were not heavier going into the end of the year, because people hated bonds more than they feared the stocks they held, and because stocks and bonds are going down together, it looked like the exposure to equities were staying high, even though people weren't affirmatively deciding to keep them high they were just losing on both sides. >> if i said to you, okay, mike, what's the catalyst to buy stocks right here? probably have a hard time coming up with an answer. and therein lies why seasonality has not been enough to carry you over the goal line for a santa claus rally, because you're barely inching towards the end of the year, barely able to hold on to a gain there's still too much noise out there. >> the identifiable catalysts are only contextual, which is, when you have been down 20%, historically, it's typically not the worst time to say, okay, maybe we're closer to a low than

to a high. that doesn't say much. we're down a thousand points in the s&p. if you go down 900 points from here, it's going to hurt a plot. that's notnecessarily somethin anybody would want to sign up for. it is about that ebb and flow type stuff, not because somehow we're going to get a bit of good news and the fed's going to become less hawkish, and that somehow magically becomes the reason stocks go up. it is the midterm election dynamics it is how markets behave after a big down year. >> they're typically not down, you know, in the following year, as pisani was saying yesterday, when he was sitting here with us the times that bad years have been backed up by bad years are when you have crises that emerge does a new regime of fed tightening meet the bar of a, quote, unquote, crisis that the market has to severely correct to deal with that's the open question >> that is the open question, but i think we have a key unknown here, and that is quantitative tightening.

and that sort of gets back to the point. how is quantityive tightening going to -- how is it already, and how is it going to continue to affect this entire conversation, liquidity in the market, and that dynamic between bonds and equities into 2023 >> i think it's -- literally nobody knows >> exactly >> and honestly, it runs the gamut from, it's complete noise, qe was just a placebo and a messaging instrument, and it wasn't doing much for the bonds. two, it's the entire story, and that's all the market was floating on. the fed balance sheet is down by half a trillion dollars from the peak since that point, market hasn't really gone down that much it was down before it, so it's from like april, may, you're down, qt has started to do some -- have some effect on the balance sheet. so, i think it's true that the general point of, fed's tightening, they haven't seen enough restrictive, you know, policy work done on the economy, they're going to keep it up until they can't -- until it's

obvious that they're done. whether it's the qt piece of it or not, it's unclear, because it's also the issuing side how much is the treasury going to have to be issuing? and by the way, people starting to love bonds right now. so, it seems as if there's going to be buyers for whatever the government has to sell, simply because whether it's the risk aversion or the sense that there's this novelty that we finally have some safe yield in the system that you can capture. >> so, major averages are all trading higher right now eight minutes post-bell here that also includes the transports, which are having a good quarter they're up 12% this quarter. and yes, still down 17% on the year, but in general, that's better than the s&p for the year one of the names, though, that is not trading higher this morning is southwest that's down almost 3% right now. you have some other airlines like jetblue and alaska trading lower in sympathy. we talked about it earlier in the hour, since the start of the week, the fact that you had all these cancellations from southwest airlines, all these passengers that are stranded

across the country close to 11,000 flights have been canceled since last thursday that was according to flight aware as of this morning but here's -- we've got some sound from "nightly news" last night, pete buttigieg, the secretary of -- the treasury secretary of d.o.t., talking about this let's have a listen. >> we're going to have to take a deeper look at what's going on with their scheduling systems, other issues that may have contributed to this, because while we all understand that you can't control the weather, this is clearly crossed the line from what's an uncontrollable weather situation to something that is the airline's direct responsibility >> okay. says the woman with a 7-month-old who's still not sleeping at night. secretary of transportation pete buttigieg is whose sound byte we just played. going to have to see how this

one continues to play out, and it goes back to the points, scott, that you made earlier in the show, the fact that the airlines have been hit hard, despite the fact that we have actually had some semidecent earnings over the last couple of quarters, and we've seen more of a return to pre-pandemic norms, dare i say, in terms of some of the travel trends and now of course you got china reopening, which i realize is a sword that could cut both ways, looking to 2023 >> mike, i'm thinking about the -- back to the airline conversation and the investbility of these names. for a while, it was like, you can't do this. and then, buffett gave sort of the buffett seal of approval for the first time, seemingly, and i don't know if ever, but i can't remember back. but in a long time >> sure. >> and then he had sold his whole stake early on in the pandemic and to me, it was sort of the statement of, like, okay, he gave a seal of approval for a minute, literally, and then now he's out and then what makes --

i looked at a lot of the performance of these stocks, for example, this year united airlines, for example, yes, it's had a nice three months for the year, it's down 15% plus and many of the airline stocks are in the same predicament. at the same time, you can't get a seat you're paying the -- more money than you ever have in many of our lifetimes for a ticket on the these planes and if you can't make money as an investor in these stocks now, when can you >> no, it's a great question nothing has changed the fact that they're deep cyclicals, right? they're going to be kind of on the extreme end of whenever there's a marginal change in activity but you can argue that a better run than they used to be they had an issue, a ton of new stock and raised a lot of debt during the pandemic, so balance sheet by balance sheet is going to differ a lot, whether you're delta or american, in terms of how you're situated. so, i don't think there's a good answer to, can they be buy and hold stocks? can you just buy them and forget

them >> hasn't history proven that you can't? >> that it's not a great bet no now, southwest, interestingly enough, was the one which, over the decades in which it's been a public company, has actually been the one more steady, traditional growth stock >> because you have had herb kellerer was a great operator. gary kelly, who was then in that job, and now a new ceo, who is dealing with this current level of disruption and chaos and everything at a horrible time to be dealing with it, around the holidays now you got congress all over you as well. >> yeah. it's not a great fix, and by the way, you're exposed to energy costs out of your control, and all the rest of it so, i don't know if there's a good answer to what you do with the stocks, except it explains why they trade super cheap on peak earnings when things are going well >> speaking of a name that's under pressure, amc, a new

52-week low, down almost 1% right now. that's despite the tweets from ceo adam aron asking for a salary freeze in 2023. shares are down more than 75% this year. obviously, you have had the rise of streaming you have fewer blockbuster releases, which has affected foot traffic at theaters it's got 900 theaters. cash burn, losses here, and it looks like he's also pushing for, in these tweets, other management to also forego their salaries or their salary increases too. this is one of those names going back to retail that we know has been a big focus of the retail investing community. when he takes to twitter, it speaks to that >> he sold $40 million worth of stock in the not-too-distant future >> in the past, yeah >> in the past >> he and other executives as well >> not-too-distant past, yeah. >> similar to elon musk, didn't he also take to twitter and say, i'm done selling for now

>> yes >> my point is, yes, you've sold $40 million worth, so no raise >> i think we can say he's maximized the hand that he was dealt in terms of getting retail to fund a business that was failing, basically, and continues, perhaps, to fail. because there's no box office. the actual fundamentals of the business aren't there. he's managed to raise capital. he's trying to convert these engineered preferred shares back into common. that's why the common has collapsed relative to the a.p.e. shares a lot of noise in this one and it remains the higher valuation than it had back before the pandemic >> he has -- >> the movie business was better >> arguably, he has used the markets to his and his company's advantage, more so than -- i can't even think of necessarily a ceo in the last, you know, handful of years who has used

the circumstances -- and i'm not suggesting in any way in a bad way, he has used the hand that has been given him to -- they sold a lot personally, and he was able to deal with some of the debt of the company by virtue of this -- >> there's another ceo that sold about, what, a hundred times as much as $40 million? >> elon musk exactly. >> a thousand times. >> but one business was severely challenged, like this. the other one, not so much >> you're right. >> but this one, without the ability to do what mr. aron was able to do, i don't know where the company would be today i don't know what kind of conversation we'd be having today about that >> it's definitely a case study in terms of marketing and communications, and as well, and just in the way he's done this, and the fact that you have seen over the last couple of years, other ceos try and come out and do similar things in terms of speaking directly to, for example, retail investors. okay let's get to bob pisani now for a look at the market action we're seeing this morning. bob? >> flattish open, but we had a

nice little move up, because we had a broad rally here take a look at the sectors we're getting a bounce in some of the risk-on stuff, cathie wood's ark funds, tech's doing a little bit better. healthcare is doing a little bit better on top of that, energy's the one that's lagging, but that's been the big mover. in terms of nice movers today, remember the big lows today, tesla, new low, bouncing today apple, a new low yesterday that's bouncing a little bit today. nvidia, flattish at the open and amazon just a terrible year. that's also up fractionally. you were talking about tesla and who owns it. this is pretty obvious and pretty easy to say here. about 25% of tesla's owned by institutions, and it's really only 5 or 6 companies that own the 25%. i could show you that in a minute but insiders, that's almost entirely elon musk he owns probably 14% and the other 1%, some other group of insiders there's your retail investors. you see the breakdown here, a quarter of the institutions, 25% are institutions, and most of these are the people you know. these are the etf guys,

vanguard, blackrock, and state street that's the biggest holders of these right here, and you can go on the next two or three companies that own this, essentially, there's five or six companies that own a quarter of tesla that are the big institutions that have the s&p 500 funds around that elsewhere, just on the ipo front, closing out one of the worst years i have ever seen in 25 years, i would note that instacart, the eternal ipo, who had been planning to go public for years now and still waiting, today has new valuation of $10 billion. march, it had a valuation of $24 billion. and last year, it had a valuation of $39 billion this is only good news because it's potentially set up for better prices for ipo buyers in 2023 maybe the valuations will get a little more reasonable see that the resnaissance ipo. that's the lowest level since going back to the pandemic in march of 2020. it was about 21 at that time terrible year for ipos finally, just on the very great note on the folly of market

timing for my friend, nick, over at data trek we know market timing is difficult. you got to be right going in and going out. he pointed out if you look at the five worst days of 2022, this accounts for the entire 20% down that we've seen in the s&p 500. september 13, hot cpi. may 18, target miss. june 13, we had a hot cpi. april 29, amazon miss. and may 5, that was a post-fed day. that's the entire 20% decline. the problem is nobody knew those days were going to happen, just like nobody knows the up days that would account for most of the gains that we have the point being here, guys, and mike you know this very well, market timing, you got to be right going in and going us, and almost nobody ever gets that one right. morgan, back to you. >> bob pisani, thank you it's interesting, the dynamic between public and private markets and the reratings valuations you're starting to see. expectation, i think, from some of the private equity folks and the like is that you're going to see more of that in the private

market next year >> yeah, it's a big, big lag >> yeah. before we head to break, it's time for the bond report let's take a look at how treasuries are faring this morning. all those up right now. and you can see, lower across the board. the ten-year right now, 3.839% we'll be back right after this >> announcer: the bond report is brought to you by pimco, a global leader in active fixed income

take a look at tesla it is the stock of the moment for sure, getting a nice bump today, up 5 1/3 percent. it's still suffering through its worst month, worst quarter, 14rst year on record $1 is where tesla currently trades we'll keep an eye on that.

welcome back it's been a tough few weeks for the chip names our kristina partsinevelos has more on the semiconductor sector >> hi, morgan. like you said, let's talk with the smh, it's tracking for the fourth straight week of losses honestly it's tracking for its worst year since the great financial crisis in 2008 so what is happening to these names? the supply gut narrative is still a major theme across chips

as demand weakens for electronics and companies are cutting capital expenditures, they need to work through their industry and not buy anymore chips. micron warned they don't expect demand to turn around until the second half of next year right now today you can see the stock is one of the biggest winners on the nasdaq 100, up 1.6% one major move is nvidia, it dropped 7% yesterday on no particular catalyst. you'd expect intel and amd would be worse off but that wasn't the case we did get weak smart phone shipment numbers, down 27% in october. nvidia has limited smart phone exposure i spoke to matt at wedbush this morning and he said customers hadn't heard anything in particular ability nvidia. but it could be profit taking

because nvidia had done a little better since coming off its lows in october i want to just move to one positive right now a positive for gaming and semiconductor names. that's china's recentapproval of gaming titles like pokemon unite, creating hope that china's government might be moderating its stance on large tech, morgan. >> we will see kristina partsinevelos, thank you. >> thanks. we've got a lot more "squawk on the street" coming up after the break with all the major averages up modestly right now, led higher by the 5% pop in tesla. don't go anywhere.

good wednesday morning welcome to another hour of "squawk on the street. i'm morgan brennan with mike santoli. we are live at the new york stock exchange carl and david have the morning off. just getting a quick check on markets this wednesday morning modestly higher, the dow up about 49 points, the spp up .25%, 3839 and the nasdaq up about .4%.

what's leading the gains tesla. other consumer discretionary names, other tech stops rallying, and health care and real estate as you have bond yields a bit lower across the board, mike. it is breaking news time, speaking of. we've got the housing market, pending home sales the national association of realtors says pending home sales fell 4% in november from october, declining for the sixth straight month we've got higher mortgage rates continuing to cool demands the measure of home sale contracts fell nearly 38% from a year ago mike, with my little false start right there, let's get your take on the markets as we see some of these areas like -- we're going to do three stocks that are moving i'm doing a bang-up job. >> 30 minutes into the trading session, we're watching southwest airlines, continuing to cancel flights as it struggles to return its schedule to normal. more on the airline sector later

this hour. southwest down about 2%. generac down about 75% jenny montgomery scott initiating coverage with a why and price tarring of $160. that implies 76% upside from current levels ending on tesla, looking to break its seven-day losing streak this morning baird reducing the price target to $252 per share from $316, but continuing to rate the stock you see it up almost 5% at 114 now let's turn to the broader markets. higher this morning, all the major indices on pace to break a two-month win streak in december joining us, jeffries chief market strategist david ser bows and amy woo silverman. good morning to you both on a real top-down level,

heading into next year, the debate over hard landing, soft landing, no landing. of course, what the markets have already digested about what that means and what the fed is up to. where do you see the potential for surprise or what's your general stance on things >> i wish i had a really exciting thing to say to you, mike, but i don't have that much exciting still in the range-bound world i like this idea that we kind of set the lows, 35, 3600 in the s&p. we did that twice. in june and again in the fall. i think it bounced nicely off those. i think on the upper levels we saw what happened in jackson hole when we got frothy, came in and gave us a slap on the head he would do the same if we rallied back up towards those levels again there's a lot of reasons why at the bottom things look interesting. inflation tends to be good for

nominal asset valuations and nominal earnings that's going to keep us pinned on the bottom. on the top we've got a fed that wants to fight inflation and still have a seven handle on cpi. they're not giving up any time soon, not declaring victory any time soon. >> for sure. to follow on that, david, the year ago, the remarkable thing in retrospect is, yes, everyone expected the fed was going to start tightening no one foresaw the magnitude of it i think the market was priced for -- was it sub 1% or 2% here we are, we're going to get to 5 is there anywhere you see the potential for a similar kind of offsides call in the markets right now. >> look, it's important to remember, we started the year last year with inflation right here at 7.1% of the cpi. we had two huge shocks that hit us we had the zero covid policy in china which is now ending, and we had the war in ukraine which

took us up to over 9% inflation at one point both of those shocks caused the fed go to much further than the fed expected or anybody else expected with the exception of a few people who stayed out on the fringes of the inflation forecast i think the fed did an excellent job of managing the supply side shocks we're back to seven and all of the guts of inflation that are very different than the guts of inflation a year ago tell us we're headed lower i think what we got is a lot in the hopper from a tightening perspective. we've got probably good news coming on inflation. if anything, mike, my expectation we'll touch the u per edge of that range before the lower. the fed may react in a not-so-nice way. but it will depend on how the inflation data comes out >> amy, i want to get your thougs thoughts on the year that almost

was. i'm looking at your notes here you say it behaves like a toddler. what do you mean by that >> they certainly behaved like a toddler from an options perspective, just from the sense that they completely misbehaved. the s&p drawdown is about 20% year-to-date if you had owned puts on top of that, so if you had hedged, you did worse, worse than down 20% talk about a market with a drawdown where your options are still not working, i think of that misbehavior part of it was the path that we took it was a very orderly drawdown this year. it really sent people's positioning scrambling i think now we're in a very different place from investor positioning than we were a year ago. people are not at all well hedged,they've been very burne on hedges. in fact, people are thinking

more about the upcrash there's far more demand for upside retail risk than it is for downside as we head into 2023. >> there's demand for upside tail risk protection, people want to make sure they're exposed to any big rallies what does that mean? you're taking that as a contrarian signal and we're going to have so more dramatic downside shocks? >> it's a great question it's one i'm quite concerned about because, you know, say what you will about the beginning of this point in time last year, but i think it was fairly consensus that the fed was going to lift off. obviously we had debate about where that was going pretty much everyone agreed that the fed must have lifted off and that's why they were well hedged going into this year, we're very underhedged on the sail side i would say there's far more debate about where the fed path is from here

we're seeing that in the proxies and options for other markets. for instance, credit those proxies are flagging a lot of alarm, even though we're not seeing it on the equities side what concerns me heading into this year is the gappiness we didn't see last year we will see this year. we'll really feel that in the derivatives market. >> david, the conversation we were having in the last hour in the show, quantitative tightening, the fact that in some ways we're in uncharted territory where qv is concerned. your expectations about how meaningful that could be to broader market activity in 2023. >> morgan, it's a big deal it's been a big deal the market has expected it the market has priced in the qt. we're going to have something like 400 to 500 billion of qt that's gone into the system this year and another trillion priced for next year or so. maybe a little more at 95

million a month. i think that's unimportant tightening that's occurring as rates stops being the mechanism by which the fed tightens. it will be interesting to see how the new tools work, all the things the fed has put into place since the last time they did qt, seem to suggest it's a much more orderly withdrawal of reserves and liquidity, and i think we're going to find some sticky points, but i don't know that it's going to be as messy as it got the last time in the money markets. i think the fed is much better prepared to manage the liquidity withdraw it's going to occur at a nice healthy pace it probably means, also, that rate expectations shouldn't go that much higher people should not be expecting a significant rise in rates. this is a fine-tuning year

we get a 25, a 50, maybe a 75 out of all this before it's all done and it's qt that takes over. >> finally, amy, last question for you. tesla and everything else in terms of options activity, your thoughts on what we've seen there and where that's headed. >> tesla is another one where, look, a year ago i would tell you if we had seen call buying in tesla, to stay out of the way. the positive momentum, the retail fervor so indicative of the pandemic was something that would continue and cycle on itself i think a lot of it was gone a month ago i was in europe marketing with clients and they were telling me they were only tesla puts it was more of a proxy play on twitter because the company had gone private as a way to get ex-poelz your there, believing that elon was distracted now there's more fundamental news on tesla itself the option prices are extremely

expensive. the relative upside to downside, those downside options are still not all that expensive compared to where we see it historically. >> interesting all right, amy and david, we appreciate it. thanks for the conversation this morning. happy new year. >> happy pu year sticking with tesla, shares are moving higher this morning despite getting its second price stock in nearly a week stock down more than 40% from the month. joining us, collin rush oppenheimer senior research analyst. collin, i know you joined us earlier in the month when you downgraded to perform on this name your thoughts given the activity, given the fact that, to amy's point, you have seen more headlines that speak more fundamentally to the business in recent days as well. your thoughts on tesla at these levels currently >> a couple of really interesting things as we wrap up the year and get into 2023 first, this is going to be a

year when the pretenders and real contenders get washed out in the ev space. i think one of the things that we've been excited about wit tesla is the technology leadership as we look at that and look at how many folks are going to buy evs and what that looks like, we see tesla in a strong position, and that's been a consistent view for us. the concern here is as you have more options on the market and you have incremental competition for tesla and you have elon out in and around twitter and changing the consumer perception brand, that some of those folks decided to make a different choice away from tesla despite the product being an advantage for some of the competitors. that's the thing that's been a concern for us as we look at these fourth quarter numbers and the intensity we always see at the end of the quarter for tesla, it's going to be interesting next week when we see those results to see how many cars they produced and how many they actually shipped as we look into the first quarter, we'll be tracking very

closely what happens in china as some of the world shift in terms of the tax credit and other support we've seen for the ev space in the early part of the year and how it actually works as we've seen the stocks sell off, it's raised the question of whether tesla should be viewed as a tech stock or as an automaker how do you see it? >> there's i think three elements of the business one, it's a material science company that's done an enormous amount of innovation one of the things that got missed was the run rate on the 4680 production, as they move to a new battery and what it does in terms of range and performance for the vehicles the second piece is auto company. they're making cars and they're making specifically evs. that's the core part of the company. the balance of this is around ai and what they're doing in terms of navigation with self-driving vehicles and all the other

applications for ai. so we really see it as a company that's really built on those three pillars. you can throw in the solar piece of it, but that seems like a sidelight at this point. i think it's more of a technology conglomerate that's suffering from very difficult problems and has a corporate culture around innovation and meeting the challenge. we need to see them as more of a technology conglomerate as i said here. really the cash flow is being driven by the vehicles so it's hard to separate out that cash generation from the auto market at this point. >> colin, you referred to what goes on at the end of the quarter as the intensity around quarter end, essentially trying to make their volumes and reports of incentives to actually try to buy a vehicle by the end of the quarter does that place the 2023 consensus up to 2 million vehicles sold at risk, the fact it seems as if they're having to stretch? do you think that's a pretty

comfortable number >> you know, it's a number that i think is fair at this point. i think we need to see what the real rules are around the u.s. tax credits. in europe electricity prices are a bit higher, relative to diesel for sure, as well as the implementation for the rules around zero emission vehicles and ev cities. this 2023 thematic will be around testing the market for evs. you heard stories about folks who couldn't drive their cars because of the cold around christmas. that's pretty disappointing. i think this is a real test that we're coming into. i think that 1.92 million vehicles is a fair number for tesla. the question is what's the cash flow to push those vehicles into the market the question for us is really around incentives for marketing an discounts that we're hearing about. that gives us a little pause around with what the cash

generation might ultimately be we still think they'll generate an awful lot of cash, but not the upside numbers some folks had hoped for. >> collin rush, thank you. here is our roadmap for the rest of the hour a deeper look at the airline sector and growing concerns around southwest. >> should investors stick with emergency in 2023? putin attempting to undermine an oil price cap. finally, boeing rallying more than 50% in q4. goldman says there's still more room to run. he weavthe analysts behind that call with us "squawk on the street" is just getting started.

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welcome back on going disruptions continuing to impact travelers. southwest scrapping more flights this morning as transportation secretary pete buttigieg vows to hold the airline accountable cnbcer leslie joseph has the story for us. walk us through where we're at some of the images in the last hours of luggage dumped on tarmacs, something like 11,000 flights canceled since thursday. are we through the worst of it yet with southwest >> we are not. these disruptions are actually snowballing. southwest has canceled about two-thirds of its flights for today. there's another about 58% that are canceled for tomorrow going into new year's eve. they do expect things to

stabilize. you have tens of thousands of travelers all around the country stranded people are trying to get home after christmas, and the options are limited. sometimes you think, i'm desperate, i'll book a flight on another airline. there aren't a lot of seats available. the fares have been sky high the transportation secretary has been urging airlines to cap fares and we've heard from delta, united and american saying they are doing that at least in select markets, if not more, for any traveler that has been affected by southwest that's something we see in the wake or before hurricanes. this is really an emergency situation for a lot of travelers. people are stuck at airports, they don't have their stuff, they're traveling with children. there's lots of expenses they're incurring. southwest says they are going to accept receipts and reimburse tr travelers for those expenses those are getting bigger by the day, by the hour really.

>> it certainly speaks to -- to use a mike santoli word -- how brittle these networks are leslie, stay with us for what it means on the broader transportation industry, let's bring in seema mody. >> as lesley was saying, flight cancellations certainly having a cascading effect on the broader travel industry. i spoke to two travel executives saying they're waits to see what transportation secretary pete buttigieg will do. one hopeful development as part of the passage of the omnibus bill, a new position in washington was created, assistant secretary of travel and tourism at the u.s. department of commerce the position has not been appointed. the hope is that will lead to more solutions and action in general. as to what that means for hotels, average hotel occupancy across the u.s. breaking below 60%. it increased from 54.5 to 59.6

prices have remained high led by new york city, averaging a 90% occupancy rate markets with the lowest occupancy include the florida panhandle and myrtle beach, south carolina, where there tends to be a higher proportion of home rentals. speaking to a number of travel agents, while hotels tend to have more flexibility, they don't have that luxury and have a harder time accommodating a change in reservation. a similar story for the cruise lines that are still well below 2019 levels. the cruise lines have done something really strategic over the past couple of months. they've been adding more ships to different ports across the nation to really accommodate travelers and make it easier for them to jump on. that could potentially help reduce a number of cancellations that we see this holiday season, morgan >> it sounds like you would have many more people jumping on to, seema, online travel sites in

light of everything going on right now. would this be good news for them, or bad news for them given the fact that capacity across so many different types of bookings is so strained right now >> i think the flight cancellations, morgan, from what i've been able to grab so far is pretty much a negative headline for all parts of the travel story. for the online travel operators, they are seeing more activity, more customers rebooking, trying to figure out what is the next best option. if they can get to the place they were hoping to get to, what else can they do is there a different airline they can take, perhaps go with a plan b the other thing i'm hearing from travel agents is people saying, well, if i can't fly, can i drive to a nearby destination to at least take my family somewhere? if i can't get to where i want to, what's the next best option? that's where the online travel operators can play a crucial role >> leslie, as we try to sort out what went wrong on the airline side, what the government might say needs to be done or what these companies are going to try

to do, what really are we talking about? they've already been dealing with labor shortages it's probably difficult for them to automatically add capacity. i don't know what the investment in systems is going to look like what would be the to-do list if somebody were to come by and say let's prevent this from happening again? >> technology is absolutely something they need to inves in southwest has been around for five decades, been pretty stable, haves a very simple model. a point to point model the others fly in and out of hubs this model helps them keep costs down when things go bad, they go really bad in october 2021 southwest had a meltdown that cost them about $75 million. this is going to be much more. investing in those systems so they can handle as many scheduling changes as occurred in this winter storm and the aftermath, that's very high on southwest's to-do list they also have to start to

explore the idea of interlining. that wheens when things go wrong, usually in an emergency, airlines will book travelers on another airline. that's something southwest doesn't do they'll have to look at that overall. hundreds of thousands of travelers stranded all over the country and in some cases in mexico and the caribbean, the protections for travelers in the u.s. are very week compared to europe this is something that's going to have to be looked at by the federal government most likely they're doing that in terms of what passengers are owed when things go wrong. if it's something like weather and not controllable, you're unlikely to get anything those are very high on the priority list. >> we're focused here domestically as we head to 2023, it's going to be interesting to with china coming back into the equation, what that will mean for the global travel industry as well

as we head to a quick break, a programming note tonight at 6:00 p.m., don't miss a cnbc special "taking stock." brian sullivan will dive into how to play the tech sector, taking a look at the microsoft/activision deal. we'll have much more on tesla. stay with us

welcome back to "squawk on the street." i'm steve kovach the s&p 500 edging higher for the second time in three sessions let's take a look at the hefty damage this year the index has lost more than $8 trillion in value this year with nearly half of the declines coming from the tech sector. the seven mega cap tech stocks made up 60% of the index's decline with amazon and apple each losing more than $800 billion in value and tesla, microsoft and alphabet dropping more than $700 billion in market cap. one bright spot has been ibm, up 7% this year, gaining about $9 billion in value morgan, i'll send it back down

to you. >> all right, steve kovach thank you. the energy sector outperforming the s&p by about 80%. should you stick with energy into 2023? 'lwel discuss when "squawk on the street" returns. we'll be right back.

here is your cnbc news update at this hour. with covid cases surging in china, the biden administration is considering new rules for travelers from china officials tell nbc news the measures could include testing on arrival as well as additional tracking hong kong is easing some covid rules including testing requirements for overseas visitors china is also starting to issue news pa ports and visas, setting up a potential flood of millions traveling abroad from next

year's lunar new year. this as china is sharing little information about the magnitude of outbreaks or the variants that are most dominant. the health of pope benedict xvi has worsened this morning. pope benedfrancis asking the fau to keep benedict in their prayers. morgan, back to you downtown >> sylvana, thank you. let's turn to energy up 60%, outperforming the s&p by a wide margin. russia announcing a ban to sales that imposed the recent $60 price cap. welcome. >> thank you had to come down and do the victory lap for energy this year >> will there be a victory lap this time next year as well? >> not necessarily i think there will be a solid

performance. i wouldn't expect a negative sector we'll oppose the gains we saw in the aftermath of the price collapse from the covid situation and all that but they're still cheap. exxonmobil, chevron, in the single digits. a lot of good vulnerabilities that should keep the commodity price at least aloft if not speaking at times based on the geopolitical tumult that continues to hit this market. >> how much of a swing factor is russia given the headlines and implementations around oil sales and threats to cut production? is that meaningful in light of the price cap we've seen >> we have a rich that decision of evading sanctions you look at iran, venezuela, the iran oil for food deal remember all the circumvention that occurs. russia has been an expert doing

that with the sanctions imposed on it. the one thing we're banking on in the oil market, to the extent you want to keep a reasonable price target going, is putin is desperate for that oil revenue, more so than for the natural gas revenue. i would expect him to keep most of the russian barrels on the market willing buyers in china and india. that's where i expect him to continue to go plus the shenanigans that will start as they roll out this ghost fleet they bought out in terms of tankers. >> how about nat gas i know it gets wildly volatile, especially at this time of the year we've seen this freeze that we're coming in parts of texas and the middle of the country. expectations for the trajectory there? by the way, not just stateside but also in europe where the prices are just -- skyrocketed is an understatement. >> skyrocketed and collapsed our own u.s. natural gas as high as 9 bucks a couple months ago, down to $4.50. i don't think folks appreciate

how wildly it swings if you can imagine the dow jones industrial average swinging 10% on a regular basis today we're down 11%, back under $5.00 a unit for natural gas it's the wild west in terms of pricing. the supplies are on the nice edge, if you will. to the extent the weather forecasts become strong, what has consistently happened is they've been projecting cold weather and the forecasts have consistently fallen apart. as you know, here in the new york area, for new year's, like 60 degrees on sunday that pulled the rug out from under of any price strength in the market so far. we are well supplied we're right on the five-year average in terms of inventories in the u.s to the extent january stays relatively warm, even normal, the winter is going to be declared a bust on the market and we should track lower. that's been the theme for consumers, if you ask me, dodging bullets left and right we got a flotilla of fuel in the

east coast it saved our bacon now you see diesel fuel prices retail in new jersey below $5.00 a gallon everything is easing. >> china reopening, what does that mean for the broader energy complex next year? does that create a floor here, or does that put upward pressure on prices? >> right now it seems to me the market is assuming this reopening is going to go well. i'm not so sure about that to the extent this covid situation rips through, the funeral parlors are doing well in china, the hospitals, the cream tore yeah data you can watch. if they dodge anotherbullet, t stay on my theme here, yes, we'll see a nice rise in demand and should support prices. if this is going to be almost a humanitarian crisis in terms of deaths and new variants and things like that, there's a lot to be worried about with this reopening. this has been the mother of all pivots to go from zero covid to

almost a que sera sera situation where it's best of luck to you, you should be fine if it doesn't go fine, if you have hospitalizations and things like that where the economy geltz gets weighed down by that, the china story won't be great for the energy market. >> john, thanks for joining us. >> thank you happy new year. >> you, too. after the break, goldman -- stocks up more than 50% in q4, under a little pressure this morning. stay with us a mountain? a tree weathering a storm? (thunder) lions? nope. (lion rumbles) we do it with our people.

welcome back the results from the latest cnbc cfo councilsurvey are out. frank holland joining us with the results. >> a lot of interesting data more than a third of corporate financial decision makers say inflation is the biggest risk to their business that's actually an increase from q3 as we've seen better-than-expected inflation reports. it still remains a long way away

from the fed's target of 2% inflation. you can see other things haven't changed. at the same time, almost two-thirds of cfos say inflation has peaked more than half say the fed has done a good to excellent job of controlling inflation. you have to remember the survey was taken between november 30th and december 20th. during that time we saw china covid cases speaking, november cpi better than expected the fed hiked rates by 50 basis points, binging them to their highest level in 15 years. it was in this tiermt with those headlines that more than 85% of cfos forecasted a recession in 2023 we've got 43% saying that economic downturn will happen in the first half of the year 43% say the second half of the year 9% forecasting the so-called soft landing that's inflation under control with no recession. still more than half of of the cfos say the dow will fall below

the 30,000 level we haven't seen it below the blue-chip closing since october. >> are they investing more, hiring more, trying to cut costs? what are their priorities? >> you saw a bit of pessimism and neutrality 78% say their staff is going to stay the same or increase head count. they'll keep their capx spending the same or increase it. >> i guess because it's a mixed macro environment, tough to navigate thank you. >> thank you. let's get a check on the markets. weakness has taken hold, below the flat line on the s&p 500 the dow down barely negative at this point nasdaq down not quite .25% stay with us

welcome back shares of boeing outperforming

the broader market, down just 6% for the year get this up 55% just since the start of this quarter goldman sachs naming it the topic in the aerospace industry for 2023 saying orders should increase as air travel continues to rebound joining us is senior equity research analyst at goldman sachs. noah, great to have you on the show the rally we've seen in recent weeks, what would you attribute that to? it sounds like you think it has legs going to 2023 >> i really do thinking about the move it's had over the last few months, after a long period of challenges at the company, some things have started to go right for them if i kind of work backwards from the most recent, we're now looking at china maybe reopening pretty quickly that maybe benefits air travel and boeing more than anything, or at least it's high on the list china is a huge part of the travel ecosystem

the company recently had an investor day in november that i thought went well and proved to be a pretty important market for the company. a lot of visibility with management and people working at the company, a good vibe coming out of that event. financial guidance provided for the first time in four years you had the dash 7 and the dash 10 news on the max recently which is really important. i think the biggest thing, honestly, is simple demand for the product. the order flow has been really strong there was an order last night from boc you had the united 787 order a few weeks ago, the largest order for the program in its history the max orders have been particularly strong despite what's happening with that airplane so long term there's growth in the demand to fly. this remains a global duopoly between boeing and airbus. just these orders coming in really strong i think is the most important thing for the stock over time and why it's been strong of late.

>> how meaningful is the china market as that reopening plays out right now for boeing, especially given the fact that china has been putting so much money to work on its own home grown rival? >> absolutely. there's a lot of people in china. the penetration rate of those who fly regularly is increasing every year in recent years, prepandemic when things are more normal and you can measure it, it's been about 20% of global seat miles flown, about 20% of the boeing and airbus backlog in deliveries it's lower in the backlog today because they haven't ordered in a while. if they reopen and flights restart, you could see orders start to come out of china as well so boeing can deliver a lot of airplanes and generate a lot of cash flow with china not taking airplanes, but it's historically been a big part of the market and will help them a lot if they come back.

china is also the only country to yet restart deliveries of the max. if they have the demand and lift, that could be a catalyst as well for them taking the max again. >> this sort of structural demand to rebuild or expand fleets as it one, i assume that you are suggesting based on liking boeing that there has really been no harm to boeing's franchise longer term from all the issues and what does it mean for the rest of the food chain in aerospace? >> yeah, i don't think that there has been major harm to bo's boeing's franchise there may have been small or temporary harm you can't just put aside what happened with the max. but you know, order flow on the max has been really strong all its largest customers, whether it is a southwest, united, ryan air, alaska, they have all stuck with the airplane, they have all ordered more of it since the onset of

the pandemic and so, you know, things have gone okay there. 787 remains the best wide body in the market. and also over time boeing and airbus just develop new airplanes and the mags wx will replaced one day i think the franchise took a hit but is okay and it is a global duopoly and over time will own half of that market. in terms of the supply chain, there are many really high quality businesses in the supply chain. the economics actually tend to be better for boeing suppliers than for boeing. through most of the cycle, we'll actually recommend a lot of the suppliers for that reason. boeing evaluation is just so discounted right now that we recommend boeing but companies like spirit, halmet is a good one in the supply chain and then companies more into the maintenance market, more recurring revenue, higher margins, and they are awesome

cash flow compounder businesses, they have a fuller multiple at the moment compared to boeing. >> so you've tackled the commercial part of the portfolio. talk to me about defense because that has had some issues where boeing is concerned just looking at the last earnings report and then some of the charges. more charges being taken on that side of the business and that has really underperformed so you could argue it has been a drag on the stock despite the recent rally even as we have seen other defense contractors move higher this year. >> absolutely. you said it well the boeing defense business has been significantly underperforming the rest of that end market now, over time there is not really any great structural reason for that to be the case so again if you are looking at boeing long term forecasting the earnings and cash flows in the outyears and discounting it back to today, i think you can assume a decent growth rate and normal

margin but near term it is one of the biggest concerns i have is that, you know, the commercial air travel side is really picking up, the max is back, 87 is back but they continue to have problems with the handful of programs you know, really why that happened, there were just bad contracts written relative to cost a few enginyears ago, they have to live with that charges last year were very large, so i think the likelihood of needing do that again in 2023 is pretty low. and you have a new team here, they have made leadership changes in that defense business so i think that they can manage through that, but it is certainly one of the biggest risks at the company >> okay. noah, thanks for joining us. >> thanks for having me. happy new year coming up on tech check, how do think about iphone demand and apple's advertising business that starts at 11:00 a.m we'll be right back.

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u.s. bankruptcy filings continue to drop, but sperpts warn that trend may not continue into next year and christina will run through why that is.

>> so you mentioned u.s. bankruptcies, they fell in november and despite filings like revlon, 2022 is still on pace to have the lowest number of filings in overa decade but don't be fooled, it doesn't mean all u.s. firms are on good footing. they trail off because of seasonality, but there have been unprecedented low interest rates and government aid and those support systems are now gone >> there is a common element of cost of debt is up and economic conditions are worsening and that is bound to lead to an increase in the number of defaults >> speaking of defaults, global default rate is predicted to double to almost 5% next year. and that is what you are seeing on the righthand side of the

screen another warning for u.s. firms in 2023 is credit downgrades outpaced upgrades last month see all that red signaling more companies are not solvent enough to readily repay their debts several environmental factors are at play. >> obviously what people are calling the crypto winter is one, you know, changes in commuting patterns and occupancy of downtown which is impacting the commercial real estate market, that is certainly something that lot of us expect to see lead to construction activity in 2023 >> so how do you make money off of this? it is tough to get into the distressed debt market if you are not a hedge fund, but investors can get into high yield corporate bond etfs like what you are seeing on your screen and they offer higher yields because of higher risk of defaults and you see just over the last three months, all of those are

at least about 1% higher or so >> so just to be clear, what we're talking about here is ch largely chapter 11 when we look to 2023. >> precisely and of course you can get creative with restructuring. we might see a lot of that in the new year often with industrials and consumer distregs e. kregsary companies but just over the last decade or so, chapter 11 filing, it is not the end all. it is a way different process, ceos usually don't get fired right away you bring in chapter 11 expert on the boards and they start to restructure. so we may start to see a lot of that first half of next year >> we might absolutely christina, thank you very much did want to take another glimpse at tesla, it has lost the early gains. it is now slightly negative. the broader market as well has given up a modest early rally.

you have the s&p 500 down about half a percent right now, 3800 level on the s&p morgan has actually acted as a bit of a gravitational pull in recent weeks >> just health care is the only sector in the s&p that is higher right now. that will do it for us here for "squawk on the street. we'll turn it over to tech check. happy wednesday morning, welcome to tech check. today the nasdaq is struggling to knock gains in a volatile last trading week of the year. is there opportunity in this down turn? one possibility may be apple hitting its lowest level since june of 2021, is it time to buy at a discount. plus how to play the china reopening, why one portfolio manager sees opportunity in alibaba, nvidia. but we start with the tech