>> i know i mentioned it earlier, scott general motors what i didn't mention is as these chips are being delivered and the cars are being produced, there's pent-up demand, because people are driving their old cars into the ground they need new cars >> we'll see if they go buy them those are your final trades. i'll see all of you in overtime in just a few hours. great weekend, "the exchange" is now. thank you very much, scott hi, everybody. i'm kelly evans and here's what's ahead stocks are roaring higher today after a string of bad economic news softer wage growth, a report that says that the services sector is now in contraction is it all enough to change the fed's higher for longer plan that's what the market seems to be signaling we'll look at how it's playing out from the macro to the markets to main street plus, it's decision day over at the fda on whether or not to approve biogen's new alzheimer's drug could it set the tone for all of biotech this year? we'll ask. and he literally wrote the

book on why you can't beat the market wall street legend berton mallkill joins us with his current advice for investors but first, let's talk about these markets. the dow is up 1.6% exact same percentage gains for the dow and s&p, by the way, and pretty much clockwork for the nasdaq, as well. up 1.6%. yields, we're seeing some big action, as well. look at the ten-year yield today. 358. i think it was carter worth who just put out a note who said that 3% could be next. the two-year note, this has come well off the highs, just under 3.4% but look at this spread. we have the two-year, the close yield, over about a point almost higher than the ten-year yield that brings us to the three-month ten-year spread as well this is a big headliner today, hitting the most inverted level basically in history, in recent history, in about four decades or so. pretty much as far back as our tracking goes for this this is negative by a full point, the three-month tenure. as you just saw with the twos, tens, very similar story

doesn't bode well. we'll come back to that in a moment but the chip stocks which had been tumbling in december are among the biggest winners. lamb research up 5.5% right now. different story for chinese ev stocks li auto, nio, all sharply lower tesla has turned positive despite initially falling on news of those price cuts in china. a little bit more on that story later on let's get right to the big story of the day are we already seeing enough of an economic slowdown that the fed might call an early halt to rate hikes we have slower wages, contracting services, and a deeply inverted yield curve. could it even trigger a change at the fed's meeting later this month. steve liesman has a look at that macro picture for us mark vogelsing is here and michelle meyer is here with the latest spending data and what it all means for main street. steve, let's start with you.

>> the answer to all of your questions is "no," kelly there are two big economic stories today that have ignited a massive rally in the bond market it's driven down yields, propelled stocks, take a look. you can see the two-year yield fall in two steps. first, the jobs number came out, then the ism services index came out again, taking nearly 20 basis points off the yield so what did the data say let's go through it. headline payroll growth at 223 came in a bit above expectations unemployment rate falling to 3.5%, down two ticks but prior wage growth was revised and december number was a modest 0.3%. participation rate going by 0.2% more people in the labor market. revisions took off $20,000 to prior months still a pretty good report the ism services, falling below $50 for the first time since coming out of the recession in 2023 it's now suggesting contraction in that sector the prices paid index also hitting its lowest level in 11 months the market thought it all means less fed, but atlanta fed

president raphael bosstock in an exclusive interview right here after the numbers said he's still full steam ahead on hiking rates above 5% and staying there. >> what i think is the most important to hold there and stay there and let that policy stance really grip the economy and just make sure that the momentum is fully arrested so that we get to a place where demand and supply start to come more into balance. >> in fact, multiple fed officials spoke today and acknowledged some progress on inflation, but offered very little give on rate hikes. the market may have seen data included mess fed on the way, but the fed didn't see it that way, kelly >> and we have dwelt a lot on whether their predictions have been right so we're not going to torture that aspect of it right now, steve. i just young, it's interesting as well to look at these comments that wii getting from barken, where, you know, she's sort of talking about nobody tracks the money supply anymore

and this doesn't have to be a discussion about m2, in other words. that's not the only, you know, indicator that would tell you that there's a slowdown, even alan blinder, did you sigh his op-ed today in the journal, where he says, inflation is already at 2%, if you take the trend of the recent several months forward >> well, i would just like to say to alan blinder, who said that people aren't talking about it, that i think that you and i on this very show talked about the five-month annualized rate of inflation falling but he's right that it is not well engrained out there that the last five months has been quite a bit better than the full year. so alan, who is that good friend, saying that nobody is talking about it, we are talking about it, we have talked about it but i think the key here, kelly, is what is the federal reserve embracing? because we can think, you and i, what the right thing to do is. and i did ask bostic about that. maybe we do 25 and maybe another

25 and that's it get to 5% and then they're going to hold it there for a while but like i said, kelly the way to think about the fed is they're the forest ranger and you and i might pour a bucket or two of water on the fire they're going to pour five buckets on the fire. and they're going to stand around that fire and watch it to make sure it's not a single additional ember still aglow >> definitely how it feels right now, that's for sure steve, thank you our steve liesman. meanwhile, what kind of shape is the consumer in these days this one has been a little trickier to assess it's a different environment with inflation michelle meyer is the chief u.s. economist at mastercard institute and brings us the pulse of main street michelle, what are you seeing in the data >> to us, the consumer is still out there spending, you know, when we look at the holiday shopping season, we saw holiday sales up 7.6% over the november/december period for total retail "x" auto. part of that includes strength in restaurants, certainly

strength in terms of going out for leisure activities so the consumer is changing what they're spending they are responding to the economic environment, but the reality is, is that the consumer still has the ability to spend, even though they're changing what they're buying, when they're buying, more promotion-based, but -- that to me is consistent with the message from today's jobs report the economy is still adding jobs at more than double the pace that they would need to break even, to keep that unemployment rate constant. wages are still rising, even if it's at a slower pace. so there's still income creation there's still labor market that's expanding and consumers are still spending in that environment. >> you know, anecdotally, i've heard people say that they feel less well off now than even sort of during the pandemic and maybe beforehand and i wonder if it's an effect of, you know, there were those stimulus checks, there were the child tax credits. you know, so much of that has run off. now there's been some savings,

perhaps those are depleted everyone's kind of back to normal, but realizing that maybe, you know, will that new normal be sustainable, i guess, that would be my question? >> yeah, so kelly, i think it is important to think about the change in the dynamics that are driving spending so to me, the simplest way to break this down is that there are three main sources of purchasing power there's income creation, there's savings, and then there's access to credit. you know, debt expansion this time last year, those forces were more powerful. job creation was even faster wage growth was even faster. there was more savings and even healthier household balance sheet. over the course of the year, of last year, you did start to see those factors, you know, be utilized to some extent. but on net, they're still out there being supportive even though the pace of job creation has slowed, it's still very strong. even though some of the savings have been worked off, we still have on aggregate a lot of money left out there that hasn't been spent. and the balance sheet on

aggregate still looks pretty healthy, as well so, yes, consumers are responding that it's not as good as it was this time last year, but it's still on aggregate pretty positive. >> very, very interesting. michelle, thank you, as always michelle meyer with mastercard we turn now to the markets let's talk about stocks, up strongly on these rate pause hopes. but my next guest says, it won't change anything for the fed, and as a result, staying defensive, mike vogelsang is here so you think the defensive trade was certainly what worked in 2022 can it sustain throughout this year >> yeah, you know, i mean, i said in my notes, the market has got to take some adderall. they're so focused on federal reserve policy and inflation and so on, you know, at some point, bad news in the ism services index becomes bad news for corporate profits. we're trying to look for good news the problem is, either the fed is going to hold rates higher for longer, which, you know, the

market seems to focus on, you know, i don't know, yesterday, and then today, the markets -- the markets are focused on the fact that inflation may be coming down because the services index is so weak at a certain point, we've seen -- already we've seen 2023 estimated earnings fall from 250 to 230 229 this past week, a share. you know, where does that end? and at what point? if markets were cheap on lowered earnings, we would feel a lot better about stepping up and getting aggressive here. but my goodness, you know, the markets have been in a trade range. i think what santoli was just talking about a minute ago the markets have been basically trending sideways for almost three weeks. and we're at the top of the range today with the big rally, but we just don't think this has changed anything for the fed >> there are some who come n, and i take their point and say, you want to lean against the consensus right now. like, i was sort of saying before, the defensive trade has worked very well, but, you know, awful, look at the market today.

maybe it's time to be thinking about technology after the creaming that it's taken i don't know you have pretty short time horizons for some of these things no one's saying that -- but, you know, you could see the market dynamic changing rather quickly. and even changing right now if it turns out they're a step ahead on the trajectory that rates are about to take in the next couple of meetings. >> right i think that's right i think, you know, the way we're doing it is not so much technology, because technology has gotten, you know, less homogenous you have the sort of innovation, you know, unprofitable tech, you know, led by arc and so on last year that stuff is pretty much done the thing that's been more durable and has had more -- a longer term impact on the market has been the megacap stocks, the microsofts, apples, amazon, and so forth those we feel will continue to bleed. they have certainly not led the market this year we expect that to be -- that

sort of is the deflation right, we'll deflate that bubble as a percentage of the s&p we are clearly looking at inexpensive stocks you know, the home builders, the auto makers are trading at five to six times earnings. the airlines, incredibly inexpensive. there's this whole raft of things that are sort of economically sensitive that are trading at mid-single digit earnings those are the kind of things that have really shortened duration, if you want to think about it in terms of bond discussion, and that's where we feel pretty comfortable. sort of the higher dividend, more value, lower valuation in general. and you know, we're seeing it with, you know, if you think of microsoft as the archetype here, we think that's kind of the last five years trade it will probably be unwinding for a while. >> fair enough >> we've set up our portfolios that way >> let me just finally reconvey what we heard yesterday, saying that he basically owns probably

all of f.a.a.n.g i think it's more like mama these days >> right, exactly. >> he like that? >> he owns all the megacap tech except for netflix, essentially. thinks that's a little bit different story. but his argument is that these valuations are now compelling and again, i take your point about some of the areas that you think looked cheaper, but why doesn't megacap tech qualify >> one, they still -- they still are more expensive than the broader market, right, the sort of 480 names in the s&p are still cheaper than the top 20. but, you know, even those the differentials are coming down, i think you've got to be very careful. these stocks are massive cash flow generators, and that's why they have outperformed, right? i know i'm speaking out of both sides of my mouth here but at some point, we think the differential will come down. we're also worried about some of the competition we're starting to see in cloud services, that has driven amazon, driven microsoft, and to some extent, google that competition is picking up and that's never a good thing.

so at the margin, these sort of -- what we considered a year ago perfect stories of cash flow, of higher growth rates, of consistent and durable financial models are beginning to weaken a little bit and as a result, we just think, you know, money is going to go find other places that are less expensive and some of that leadership is gone it doesn't mean you want to get out of them, because they are very, very powerful and strong companies. >> and i don't want to leave without mentioning a couple of fun little picks here. next to ourlocal tv play, bet on political ads in this polarized environment, starbucks, china, new leadership, coterra doing what it's doing >> who knows where oil is going to go and energy is going to go. in general, who would have thunk that oil would -- or gas would be cut in half over the last number of months the point that it's very, very difficult to predict the dynamics of these markets. so you need to buy those kind of

company when the sentiment is as negative as it is today. we like an terra we like the fact that they've got good opportunity when the weather gets a little colder and you'll see a pop in the stock. that's basically how we're doing it and for the longer term. >> mike, thanks so much. we appreciate your time today. >> thanks, kelly >> mike vogelsang. coming up, one of the most influential voices in the investing world is here to mark the 50th anniversary of his classic book and why it remains relevant today first, we are awaiting the fda's decision on whether to approve a new treatment for alzheimer's. the details and potential pricing next and as we head to break, a quick check on the markets dow is up 30 points at the highs. russell 2000 small caps leading the way and the ten-year yield below 3.6. "the exchange" is back after this

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welcome back another round of voting complete for the house speakership. do we have a conclusion, ylan mui? >> reporter: kelly, we do not have a conclusion, but kevin mccarthy was able to split the opposition during the 12th round

of votes for speaker of the house. now, that vote is just wrapping up and in total, mccarthy was able to move 13 republicans into his camp after a marathon session of negotiations that began last night, went into this morning, and continued even on the house floor. now, once again, to be clear, mccarthy does not still even now have enough votes to become speaker, but this is the first sign of forward momentum that he has shown all week now, he may have to make some big concessions in order to secure that support, including potentially putting some of these members on the committee that controls which bills go to the house floor, agreeing to allowing any single member to force a vote that would oust him as speaker, as well as agreeing to allow some votes on policy issues, like a balanced budget but, again, mccarthy showing some meomentum here he said earlier today that he would shock us when this vote started. and at the very least, he can point to some progress, kelly. >> yes i don't know if that counts as shocking, but we like the

optimism ylan, thank you for now. we'll keep checking back in. ylan mui on capitol hill today meanwhile, defense stocks taking a dive midday on those reports that kevin mccarthy's deals would hold defense spending steady rather than hiking it. lockheed, raytheon, and northrop hitting session highs on that news there we have the fda expected to decide on whether to approve a new alzheimer's treatment today but there's still a lot of debate around this new drug and its potential cost to the millions of patients living with alzheimer's. meg terrell has the details. meg? >> kelly, this is a drug from biogen this is the second such drug to come fromthese companies in th last two years the first has cast a really long shadow on the entire field the first one was cleared in june of 2021 you can see, that's when the biogen stock took such a large jump up. but it's come down from there and gave even more back, as just

bad thing after bad thing kept happening. biogen set the price of $56,000 a year, which was way more than a lot of people thought it should cost, given the equivocal clinical data, and centers for medicare and medicaid services refused to cover the drug, except in certain medical trials just last week, there was a congressional investigation into how the fdaapproved this drug, so it's just been kind of a flop overall. now, this next drug, which is called lacanimab had a positive phase iii trial which showed a 27% less slowing or less cognitive decline then placebo so that was a pretty clear, if clinically questionable benefit seen in this drug. it's expected to be priced lower, perhaps 20 to $30,000 per year, we'll see how that ends. they have the same concerns, but perhaps slightly less with this drug than the previous one a lot of questions here on what we're going to see from the fda,

expected accelerated approval, what this is going to cost and on monday, we'll have biogen's ceo on to join us to talk about that from the jpmorgan health care conference. >> super interesting roughly, what's the time frame, meg, for us hearing about that call, the decision today >> the decision is expected today, so we don't know exactly what time. the fda could put it out at any point, but it is expected today. >> okay, great meg, thank you very much our meg terrell. for more on what an fda approval of this drug would mean for biogen stock and what nonapproval might do as well, let's bring in michael ye, managing director at jeffries. michael, good to see you this is taking me back to when we were here talking about the previous treatment and to meg's point, what a debacle that has been how much of a breakthrough is this new one >> it's a good question and great to be here with you. you know, this is an important step, i think, certainly for alzheimer's patients to finally get a drug formally on the market with much more clear efficacy than the prior drug that meg referred to and it really is, i think, first

step, as there's a long pipeline of other drugs company to get biogen on the market, get this drug to patients, and ultimately a whole combination approach on other drugs. when you see the price, we also need reimbursement, which is an important step, as well. so patients here, this is an important milestone for biogen >> biogen shares are trading around 280 maybe we can pull out a chart and show that pop to 400 or so do you think it's sort of fool me once, shame on you, fool he twice, shame on me for investors here >> i think that's the opportunity. you take a look exactly what you referred to, which is we totally got fooled on the first go around last year with a lot of fundamentables and disappointment and the second time, here we go again. there has been a pullback on the stock and there's definitely a lot of uncertainty, as i speak with investors, certainly about the launch of the drug, the price of the drug, and importantly, reimbursement by cms, which could take a year or so i do think that there'll be a

lot of debate. i think that's the opportunity for investors. and therefore, when this drug is approved, i think the stock can move higher as those things happen and as we climb the wall of worry scott gottlieb was on this morning, referring to reimbursement liable to happen let's get the first step here. >> shares up about 3.5% today. is that anticipation of approval, or what's going on that ylan just told us about in the house, writ looks like we're looking at a lot of gridlock >> well, i think that the stock is first of all pulled back a punch. i know there's some uncertainty around it. i would say, we put out a note this week, talking about it's generally expected so for investors, i don't expect a huge move. i would also forewarn people to expect that there is a chance for some delay due to logistics and administrative issues with the whole data set even if it was down a little bit on some delay, we would be with the stock. we think it should happen. be patient here. the drug should be called

lacanbe. >> and finally, getting to the point about what's happening on capitol hill, do you think there's a rational reason to bid up this sector on anticipation that maybe there's kind of nothing much to come of the rest of this congress >> yeah, i think, importantly, if you take a look at the larger biotech group as a whole, whether that's amgen or gilead, and we just recently upgraded moderna, which has a significant upside this year, is the fact that these stocks have been generally beating down over the last few years investors have not really played biotech for a while. there's certainly a lot of pipeline things going on if we're going into a recession, gridlock and other issues, this can be a good place to be. certainly, visibility on earnings numbers in a recession, are probably going to be more defensible for cancer drugs. we like this space, we like these large biotech names here in 2023. >> we have to go, but are they going to have an rsv vaccine, anytime soon parents wonder >> that is the next catalyst for

moderna. i'm looking for that i think there could be a 10% move in the stock on that. but i think they could have an rsv vaccine. >> that would be great michael, thank you so much michael ye coming up, the invesco solar etf tan is on pace to snap a four-week losing streak. as we head to break, take a look at the dow heat map with dow inc and walgreens leading the way. walgreens continuing to perform after its earnings unh and home depot are the only two in the red "the exchange" is back after this

welcome back to "the exchange." green across the board right

now. the nasdaq's leading the way the small caps are actually up just under 2% today, all of this after the weaker data on wages and that disappointing ism report the employment index dropping into contraction new orders dropping by almost 11 appo points let's get to contessa brewer >> here's what's happening right now. party city, we are hearing from the "wall street journal," is preparing to file bankruptcy within weeks, citing people familiar with the situation, the retailer reportedly blames the move on lower sales. the mother of the shooter in uvalde, texas was arrested this week following a domestic violence-related incident. adrianna martinez reyes was arrested in oklahoma citi wednesday, charged with threatening an act of violence and assault and battery, according to a police report real housewives star jennifer

shah was sentenced to six and a half years in prison after pleading guilty to wire fraud in a telemarketing scheme that targeted elderly people. she agreed to forfeit $6.5 million and pay as much as $9.5 million in restitution >> i saw that she was crying, contessa, and saying, i just play a character on tv, don't read too much into it. >> yeah, don't we all. contessa, thank you. up next, you can't beat the market is that still true these days? the man who popularized index investing in his book a random walk down wall street will join us to celebrate its 50th anniversary and weigh in on rrt rk cdions. we're back after this. we planned well for retirement, but i wish we had more cash. you think those two have any idea? that they can sell their life insurance policy for cash? so they're basically sitting on a goldmine? i don't think they have a clue. that's crazy! well, not everyone knows coventry's helped thousands of people sell their policies for cash. even term policies. i can't believe they're just sitting up there! sitting on

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last year was ripe for all kinds of investors, but no matter what happens, wall street legend burt mackil is sticking with investment strategies his influential "a random walk down wall street," is celebrating its 50th anniversary and he still believes you can't beat the market. joining us now is the man himself, princeton professor, burt mackiel, along with our very own bob pisani.

b bob, welcome >> burt, congratulations on the 50th anniversary it's quite a milestone 50 years ago, you suggested that what the average investor needed was a low-cost index fund that tracked the overall market like the s&p 500. you got what you wanted, burt. tell us, 50 years later, is the evidence stronger or weaker for index funds as the way to go >> i believe even more strongly today than i did 50 years ago that it's the way to go. you know every year, standard & poor's does a report, it's called their steba report, it's the standard & poor's indices versus active managers and every year, like clockwork, two-thirds of the active managers are beaten by the index and the one third who win one

year aren't the same as the one third who win in the next year so when you compound this, over 10 or 20 years, you find that 90% of active managers are outperformed by the index. now, i'm not saying that it's impossible to outperform, but it's like looking for a needle in a haystack. and if you try to go active, the odds are overwhelming that you will do worse than average rather than better than average. and just to put one other statistic from the steva report out, on average, the active manager underperforms the index by about 100 basis points, by almost 100 basis points. and as you know now, with exchange-traded funds, you can get a broad-based index for an expensive ratio that's very, very close to zero

>> you famously say, in the title of the book, a random walk down wall street what exactly does that mean and what's the conclusion about that >> essentially what it means is, while there is some momentum in the stock market and we always hear about that, particularly from the technicians, it's not dependable enough to make money consistently and in fact, the development of prices from day-to-day and from week-to-week are very close to what the statistician would call absolutely random, like a set of random numbers so the effect of this is to say, a random walk market is essentially an unpredictable market >> burt, it's kelly -- oh, sorry about that -- i was just going to ask, kind of, weather, you

know, what you would make of the current market landscape we've been through this very unprecedented time you know better than anybody, all of these market cycles we've been through what do you think of where markets are today? >> i think that markets are relatively expensive and the metric they use, which is not a metric that is going to predict short-term changes i'm still the random walker. nobody can predict the short-term changes but what does the best metric to predict long run changes, long run returns is the so-called cape ratio in other words, the cyclically adjusted price earnings multiple not the multiple on 2020 earnings, not the multiple on expected 2023 earnings, but ra'ad the multiple on the

average earnings over the last decade, what the old dodd and graham book would have called earning power, and that metric is well above average. and what it suggests to me is not for the next year or two years, i can't do that, but it suggests that returns over the next decade are less likely to be the 9 or 10% historical returns over the last 100 years, but much more in perhaps the 5 to 6% range. >> you know, you famously talk about the random walk and it's important for people to understand this is exhibited throughout life, this random walk pattern there's a famous book about basketball players, where you talk about the gamblers fallsy people have the illusion that basketball players hit three shots in a row, they'll hit the fourth shot, and it's not true

there is a random walk pattern exhibited, even in people betting in basketball games on basketball players that's an important insight in life in general, in addition to just investing in the stock market >> bob, i think it absolutely is that what memory plays tricks on you. you much more remember sequences that are the same from period-to-period you must more remember that this 50% free throw shooter hit the last five in a row, so you believe that there are streaks but what happened with us, danny conneman who basically wrote the book on behavioral finance, he and his colleagues did studies of the basketball players at cornell university and the

philadelphia 76ers and found it wasn't true. the players themselves believed if they made the last five shots in a row, they were more likely to make the next one, but the 50% free throw shooter has a probability of 50% of making the next shot, no matter what the previous five shots were >> it's important insight into behavioral economics and what people -- how people look for patterns you have been very critical in the past, and we've talked a number of times about esg, environmental, social, and governance funds and even though they were very popular and have been popular for the last three to four years, you have not been a big fan of theirs. can you explain what you don't like about them? >> well, look, i think it's wonderful to have yourself feel good by investing in companies that are going to be for the social good what i worry about

is the esg funds don't actually do that. you are supposed to be able to do good things for society and do well financially. and i'm not sure you do either and the reason is that i'm not sure what is a good company. for example, there's a utility xcel energy in the midwest, that's a, quote, bad company why are they bad because they burn coal but xcel is the only utility that has actually promised to be completely carbon free by a date certain, they're making huge investments in solar and wind. so are they good because of the investments that they are making or bad because they're still burning some coal? natural gas companies. are they bad because they're carbon or are they okay or even good because gas is the cleanest burning carbon and do we feel great because we

own visa and facebook or meta, as it's called now do we feel that those are great companies because they generally don't pollute, or are there things about the high interest rates and what's happening to some of our teenage children and grandchildren that we don't like about the whole social media business so, again, the problem is, i don't know what's good and what's bad and in fact, the raters who give an esg rating, they disagree completely the correlation between two rating agencies is as low as 0.4. and just to put that in perspective, the correlation between moody's and standard & poor's in doing debt ratings is 0.995. so we don't even know what's

good and what's bad. apple gets a perfect governance rating from one agency and a lousy one, worst one on another. so we don't know, and also, they don't outperform the esg funds are expensive, and they have underperformed broad-based index funds that i favor >> okay. all right, burt, you and jack vo "vo vogel had a wonderful idea 50 years ago and i'm sure you're very pleased to see the influence that you've had on the market congratulations on the 50th anniversary of the book and look forward to chatting in the future kelly, back to you >> bob, thank you. a huge thanks to burt for joining us on such a significant day as well. that was great coming up, never mind recessionproof wells fargo saying one part of the solar industry could see a recession boost. those details and the mpiecoans it's turning positive on, are next

welcome back the invesco solar fund down about 7% over the past month, but getting a big lift today after wells fargo says it's turning positive on the industry they're saying a recession could be good for one part of the supply chain got to hear this one pippa stevens is here with us. pippa? >> that's right, kelly wells fargo said a recession could be a tailwind for residential solar, andthat's because consumers still pay energy bills, even during downturns. and with utility rates rising and some solar leases requiring no up-front cash, consumers could look to cut monthly costs by getting panels. the firm upgraded shares of sun run and sunnova as well as first solar to overweight. wells fargo is optimistic on the industry broadly for four key reasons. regulatory overhangs are in the rearview mirror, there's strong underlying demand, especially in europe, margins are expanding, and of course, there are tax credits from the inflation

reduction act. now, overall, the firm's top picks are inverter makers and solar edge, due to business momoot moats and rising margins but it's still a big risk. >> huge risk pippa, thank you coming up, write a tv-style tease about microsoft shares falling, what do we have, are microsoft share prices in a free fall why their newest technology chat gtp could be the key to turning things around and boosting their bottom line. that was pretty good, pippa. that was pretty good 'lbeacafr iswel bk teth lily! welcome to our third bark-ery. oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you

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which way is the smtock suppose to be going? steve, what do we know about this valuation deal? >> it looks like they're trying to -- according to the report, raise $300 million by selling these existing shares. this is a fund-raising mechanism. this is a $29 billion company on paper. if you want a data point that we're not heading into a recession -- >> this would be -- >> prerevenue start-up. >> do you know what it's previous -- probably in the single digits. >> tens of billion dollars, i think. >> casey, i totally take steve's point and that's what's makes the timing fascinating here. everything else in tech has blown up and it's winter except for this do you think that this valuation is justified or is everyone just piling into the only thing going on right now

>> i can see it both ways. i think there's a lot of upside here, right, open ai releases chat gtp in november it gains a million users within about three days it can be used for a lot of things they do have tens of millions of dollars in revenue, mostly by selling access that's another point in their favor. how do you get from here to there? there's still a lot to be figured out. >> i know that we're all supposed to have learned the lesson of, yes, it's important to ask how they're monetized, but we've used this. we joked around, the technology is so profound remember when gmail was free it doesn't matter. if enough people use the chat because it works, they can answer those monetization

questions. >> we heard reports saying google employees are concerned about this and they're asking their leaders, what are we doing about this chat thing. why don't we have an answer to this google search is right for disruption if you search for something on google, especially on a mobile device, you have to swipe forever before you get those organic results. a lot of people have to gain their google searches to add on, like, if i'm looking for a product review, add on wire cutter, reddit in order to get what you're actually looking for. >> it's become the very thing that was meant to displace. >> casey, i've seen people saying, look, from an investment point of view, if you want to be long this kind of technology, is it the company itself or something like nvidia, which the data requirements here -- you should be long in the energy sector practically, because those demands are going to be enormous. >> that's right. these chips and this computing

power is really expensive and so i do think that if, yeah, you want to invest up the stack, there's going to be some upside for you there. look, there's probably upside to alphabet as well let's not forget that alphabet has its own large language model. some people said it's at least as good maybe better than open ai google's been a little bit more reticent to ship it into the market. >> that's a great point. i feel like it's time. let us at it -- >> responsibly, though i don't want my job replaced yet. >> thank you very much >> thanks. still ahead, tesla shares reversing course higher but down more than 14% this week. why the drop what it means for tesla's bottom line that's next.

welcome back one more thing before we go. shares of tesla reversing course

and now positive by 1.5% they're under $112 a share they initially dropped on that news of cutting prices yet again this time in china let's get to phil lebeau with the latest details >> any time a company has to cut prices, especially in the auto industry, people say what's going to happen with margins we'll talk about that in a bit this is the second time that tesla has cut prices in china. they are impacting china as well as other asian markets that are supplied by the shanghai factory. model 3 and model y, down 6 to 13.5%. this is the second time they've cut prices down 13 to 24% if you go back to september. shanghai production is critical for this company deliveries in december, down 21% compare today the same month in 2021, compared to november, down 44%. their deliveries in december were the lowest since july which raises the question, is there a

slowdown in demand in china or is there something else like the covid crisis over there being a temporary impact on demand we won't have a better sense in that at least for several weeks i think. but the thing that people are going to be focused on, when tesla reports its q-4 results on january 25th, it will be the automotive gross margins they came in at 27.6%. many people believe it's going to be down closer to 25% they have some advantages in china, lower cost of goods, that helps them a little bit, but at the same time they've cut prices twice in the last several months. >> do you expect them to cut prices further >> here in the u.s.? >> yes. >> they offered discounts at the end of the fourth quarter. whether or not that continues is a good question. but we haven't seen that to the same extent that we saw at the end of last year >> we'll see if it stays that way for now.

thank you very much. that does it for "the exchange" today, everybody thanks for your time power lunch begins right now >> welcome, everybody, to power lunch. kelly will rejoin us in just a second here's what's ahead. welcome back to the boss bob iger returned to disney. vince mcmahon is going back to wwe. katrina lake coming back to stitch fix could we see more old places return to their old places as ceo? energy a big winner in 2022. the sector gaining what can energy do for an encore should you look for opportunity, kelly, elsewhere. >> tyler, thanks the markets are seeing a nice jump, but kind of for all the wrong reasons. dow is up by 87, 100 points off the highs. all of this comingft