delta air lines will report in the morning. >> stepping ahead of the earnings >> i'll step in on the back of american airlines. i think that i'll take the chance that i'm not getting yelled at tomorrow >> we'll see you might be getting yelled at anyway but not for this i'll see you all in overtime "the exchange" begins right now. thank you, scott hi, everybody. i'm kelly evans. here is what is ahead. is the fed pause around the corner the market already coming to that conclusion. and now some fed members are signaling it too but will chair powell overrule them and devastate the market hopes. we'll debate plus a failed succession plan and now a proxy fight, activist investor once on did they' disney's board saying that they have lost their way. and talk about a much needed pulse on the economy, will there be cracks or continued strength.

we'll look at how to position. but first the markets building a nice rally >> session highs right now is what we're talking about so we've seen both sides of that unchanged line in a volatile trade. the s&p 500 is where we'll focus on today, the broader measure, it is up about 22 points to 3991 so pushing toward the 4,000 level. and futures up one point, did eclipse the 4,000 mark and so up 21 points. down 32 at the lows of the session. gives you an idea of the trading range. dow shows up 285 points, nearly 1% gains there and nasdaq holding at 11,000 in that big figure. and so one other place we're watching is bitcoin prices because we're now above 18,000 remember for the longest time we were talking about this band that was just kind of around the

16,000 range it has been a very narrow trading range for several months now, but 18,870 is important because at this level again still a long ways to go. highest level since roughly november 8th so 18,848 we're watching bitcoin prices american airlines up 8% after it revises its fourth quarter gui guidance better results than what the street was looking for so american airlines up 8% united up 5% p, dellta up almost 3% and so by extension transportation stocks seeing a nice bid but thanks american airlines for the up side move back over to you let's get right to the top story of the day the latest cpi numbers showing

the biggest drop since april 2020 and another fed official this time a voter saying the fed should stick with just quarter point hikes from here. let's bring in steve liesman with more. >> and another fed official in the past hour james bullard pushed back against low rates saying the market is failing to price in the up side risk. and inflation will return easily to 2%. a sign that federal officials are becoming uncomfortable with the falling yields in the wake of the inflation report and jobs report a week ago. you can see about 50 basis points have come off the two year phillies fed official said that he supports a 25 basis point hike bullard said he wanted to go 50. and here is the data that the fed is, i don't know, in-koornlt i cooperating, ignoring? i don't know and 0.1% down the prior month.

year over year 6.5%.i don't know and 0.1% down the prior month. year over year 6.5%. bigger increases are dropping out of the 12 month index. big declines in energy and airline fares and used cars and fruits and vegetables. natural gas up 3.1%, electricity up 1%. and shelter rising on.8% but fed officials stick to their call for a 5% funds rate and holding it there for this year and maybe into next. >> bullard is my weather vane. and the fact that he is not in the 25 camp does give me pause >> and he was sort of didn't care about it. he wassing ingsing sing a ag nos tick he said doesn't matter as long as you get there.nothing's tick

he said doesn't matter as long as you get there our next guest says this battle was caused by the fed in the first place and that they were necessary at the time but warns that they also gave the fed unprecedented power that could be dangerous and he says the fed should have pulled back sooner joining us now is randall corals great to have you here >> thanks. >> and can i ask you to weigh in on the inflation debate, should they stop given what is happening to some of the forward data >> no, i think it would be premature to stop, but i think that it is also, you know, very positive news, the good news about the inflation being principally driven by overstimulated demand, that is something that the fed can respond to and they are beginning to have an effect. it will take a lag for monetary policy to have an effect, so the strong moves from the summer and into the fall, you'd expect to begin seeing them working through the economy right now and i think that we're beginning

to see them work through the economy. >> nice fire out there, is that utah >> this is utah. >> 30 inches in like the last three hours, right >> every day, it has been dumping. >> and let me ask you about cold and hot here how concerned do you think the fed is by what is happening with financial conditions we just had a chart up of the two year, it came down with the jobs report and down again today. the fed keeps talking five, market keeps answering four. is that problem and should the fed do somethingabout it and what could it do if it should >> makes the fed's job harder because i think that it is very clear the news is positive, but we're absolutely not out of the woods. and i think that future rate increases are necessary. and they will be held for longer than the market expects.

a, just necessary given the way the word works the fed is signaling strongly that that will be the case and the more the markets don't listen to the fed or don't believe the fed, then the harder it is for the fed's policy to have an effect and it will have to possibly increase more than what would otherwise be necessary. >> so let's put back up the chart of the three month ten year which is now at a new -- let's just call it record low, 115 basis points right now why does everybody say the markets need to listen to the fed when it appears the fed needs to take more seriously the message coming from markets unless you think that they need and want this deep of a looming downturn in order to cure the inflation problem? >> i think that recession is extremely likely, almost inevitable i think that recession is given comparison to history on the short and shallow side given the fundamental strength of the

economy. so all of that is going to be necessary. but again, to the extent that prices in the markets are reflecting a lack of confidence in the fed's resolve or a belief that the fed is going to begin pulling back from the terminal interest rate relatively soon, those are mistakes and will in fact result in the fed having to go higher than otherwise >> and here is my question it would appear if we get negative job market trends, why shouldn't the fed respond to that with rate cuts? why keep them where they are if cutting the labor market means wage growth will slow. i don't understand why they would just ignore it >> it is not ignoring it, but recognizing that you have more progress to make there have been progress in wage pressures. the jobs report last week was positive on that front, but still a lot of upward wage

pressure and you have to see -- particularly when dealing with expectations, you have to see sustained progress and sustained moves towards the level that is much closer to the fed's targets in all of those levels and much closer to the 2% target before you can begin to ease. it is not a question of that the numbers are beginning to move in the right direction so we can begin to move our policy because that causes people to say, ah, they are easing and we'll respond argccordingly certainly it needs to be lengthy compared to what markets currently expect >> and i'll just turn on a dime one thing that you said earlier, you said maybe the market doesn't believe the fed. i think that it could be the opposite i think the market believes the fed and that the fed is making a mistake here i just wonder if you are buying two years at 415, 420, if you

believe inflation will be running out of control, i don't think that you do. but what i want to get -- you're a thoughtful guy and i'm sure you've considered that idea. but you said that maybe the fed has to do more would you think that that could -- the idea that rates are running lower than the fed wants, would that motivate them perhaps to do a 50 basis point hike and also there is the idea perhaps of using the balance sheet to potentially raise the long end of the curve. what do you think of that? >> so i think the fed has been -- has developed a practice of pretty successfully communicating what the next hike is going to be and i think rather than the next hike being 50 basis points, the question is how many more 25 basis point hikes are there given just where all the numbers are moving they are moving in the right direction. they are clearly not there yet and won't be for a while and so i don't think -- i don't think that means that to the extent that financial conditions are easing too much, i don't

think that that means a tougher next move, it just means more moves possibly higher terminal >> and we had a strong ten year yesterday, this time 30. rick santelli, could you bring in the results >> yeah, i'll tell you, this auction was unbelievable and the reason is because the market is rallying so strong as the auction is going on, the yields are coming up with new fresh low yields every five minutes. and so to that end, 18 billion 30 year bonds. and what end up a yield of 3.585. would have been an a-plus if it would have been for one metric and that was direct bidders at 16.3, a bit under the 18% ten auction average lightest since october 2020 two of the metrics blew my mind because there is nothing better,

indirect bidders, foreign entities, 74.6%. off the charts strong. and dealers took a whopping only 9% smallest i have in my 20 year database since she brought bonds back a really solid auction that all three were pretty darn good and i'd be interested in what he thinks because this really gives us a good insight. when the fed is pushing back the hardest, day of cpi, markets rallying and yields going down and they still bought the 30 year bonds >> and i'll interject because people need to know how hard it is to get an "a" from rick santelli on anything that you do let alone a bond auction the inflation is surging, fed going to 5% and people buying 30 years like they are going out of style. >> and randy, we should circle back to the point about the fed

interventions during the crisis and how that opens them up to future problems. you say that they went into these areas that they had never been in before but before we can even have that debate, probably the more consequential in the long run, we have to figure out if the economy is heading over a precipice. how else do you explain the demand for 30 year paper today >> well, 30 years is a long time so i'm not sure that has more to do with sort of -- doesn't have to do with expectations about immediate evolution of the economy i don't think. but i do think what we're seeing is a bit of a market misperception of what the fed likely near term path is likely to be. i agree i think that ultimately the fed will be successful, but

the more the market misreads the near term path, then the tougher the fed's action is going to have to be in order to get near term financial conditions where they want it to be >> rick. >> only issue i have is that nobody knows the future. and if two or three months down the road we're getting monthly numbers that are negative but a major retrenching of some of the year over year, i beg to differ. i think that they are date dependent which is a bit sad but i think that ultimately the data will win out and if the market is correctly anticipating and correctly informed with regard to prices falling and trying to enter poe late things like shelter and all the issues that are slow to come to present values,poe late things

like shelter and all the issues that are slow to come to present values, i think the fed is not maybe wrong, but they will hang out too long >> and so mr. quales your final answer. >> that is a fair point. if they meet targets much faster, yes, they should respond. where i think that there is a bit of a disconnect is in folks thinking that there is a line of thought out there, well, maybe 3% is enough and i think that it is very clear that the fed can't sort of say 3% is close enough for government work and so we can begin bringing our terminal interest rate downonce we've approached 3%. you will have to approach closer to the fed's targets and i think that that is where folks may be making a disconnects >> rick, i'll call you after the show i'll tell you why. because we talk a lot about. what if the fed is wrong. what if the market is wrong?

>> but wrong on past inversions? >> here is what i'm saying let's say the fed has this right. work with me on this let's say the fed has this right and the market has to come back up to where the fed is my point is -- >> ouch would be the answer. >> that would be an ouch, that would really hurt. and what is weird is that we talked about this idea of the market being below the fed and let's switch gears merrick garland is making a statement about president biden and his handling of documents. let's listen in. >> i'm joined today by u.s. attorney for the northern district of illinois who conducted the initial investigation into the matter that i will describe today on the evening of november 4, 2022, the national archives office of inspector general contacted a prosecutor at the department of justice. it informed him that the white

house had notified the archives that documents sparing classification markings were identified at the office of the penn biden center for diplomacy and global engagement located in washington, d.c. that office was not authorized for storage of classified documents. on november 9, the fbi xhcommene an assessment to understand whether classified information had been mishandled in violation of federal law on november 14th, pursuant to section 600.2 b, i assigned u.s. attorney loush to conduct an initial investigation to inform my decision whether to appoint a special counsel. mr. loush has served since 2017. before that, he spent more than a decade as assistant u.s.

attorney in that same office i selected him to conduct the initial investigation because i was confident his experience would ensure that it would be done professionally and expeditiously. on december 20th, president biden's personal counsel informed mr. loush that additional documents bearing classification markings were identified in the garage of the president's private residence in will min wilmington, delaware from the period of when he served as vice president. the fbi went to the location and secured those documents. on january 5, 2023, mr. loush briefed me on the results of his initial investigation and advised me that further investigation by a special counsel was warranted. wasted on based on mr. loush's initial investigation, i concluded that it was in the public interests to appoint a special counsel.

in the days since while mr. loush continued the investigation, the department hr appointment. this morning president biden's personal counsel called mr. loush and stated that an additional document bearing classification markings was identify at the president's personal residence in will mink to wilmington, delaware mr. loush said that he could lead the initial investigation but woould be unable to accept longer assignment because he would be leaving in early 2023 for the private sector his team of prosecutors and agents have conducted this initial investigation with professionalism and speed. i'm grateful to them earlier today, i signed an order appointing robert herr as

special counsel, it authorizes him to investigate whether any person or entity violated the law in connection with this matter special counsel will not be subject to the day to day supervision of any official of the department but he must con apply comply with the regulations and procedures and policies of the department he has a long and distinguished career he joined the criminal division in 2003. from 2007 until 2014, mr. herr served asassistant u.s. attorney for the district of maryland where he prosecuted matters ranging from violent crime to financial fraud and in 2017, rejoined the department and in 2018, he was nominated and confirmed to serve as u.s. attorney for the district of maryland as u.s. attorney, he supervised some of the department's more important national security, public corruption and other high

profile matters. i will ensure that mr. herr receives all the resources he needs to conduct his work. as i have said before, i strongly believe the normal processes of this department can handle all investigations with integrity. but under the regulations, the extraordinary circumstances here require the appointment of a special counsel for this matter. this appointment underscores for the public the department's commitment to both independence and accountability and particularly sensitive matters and to making decisions indisputably guided only by the facts and the law. i am confident that mr. herr will carry out his responsibility in an even handed and urgent matter and in accordance with the highest traditions of this department. thank you all. >> have you spoken to the

president about this investigation, sir there you hear it, merrick garland making comments about who is appointed spk in the document probe we'll of course keep you updated. it has been less than two months since bob iger returned to disney, and he has a proxy fight on his hands nelson peltz is looking for a seat on disney's board saying that the company lost its way and he is taking issue with their 2019 acquisition of fox. pe he also says the streaming business shouldn't be that hard. take a listen. >> my goal is to reduce corporate overhead to a point that the company gets better i'd like to see this company stop running like a matrix and start running like the companies we've been involved in where they have real ceos and

businesses, with real p and ls, real cash flows and real proje projections. i know it is hard in the movie business, but it is not that hard in the streaming business okay and they have got to be able to do that. >> i see sean laughing already all right. is it not that hard in the streaming business joining us to discuss, cynthia littleton, and alex, i urge everyone to read your piece which goes a lot of the responses to the case that peltz is laying out. >> and i listened for 30 minutes to nelson peltz speak to david faber and jim cramer and i was struck by the fact that i don't think that he leaned into his strongest argument, which is the fact that the disney board and bob iger have consistent ly bungled success planning over and over

again. that is the weakness of the disney board if he wants a seat on the board, he should be leaning into that as a 35 slide presentation that he has published, succession planning doesn't come ununtil slide 27 and he barely mentioned it at all during the wide ranging interview. the why is that disney has underperformed under bob iger is cherrypicked if you go back to when he started to the day he left, disney hasn't underperformed the s&p 500. this idea that he is talking about with the streaming service not being a profitable business, disney has said streaming wasn't going to be a profitable business for years you have to allow the business to play out. they have already set a target date of 2024 when they feel that business will break even and then the idea is that it will become a better business later on >> is success the achilles here for disney in other words, is iger himself the problem? is he the villain or hero of

this story >> he is the hero but it is not job one. he has two years and a lot of problems dan lobe talked about espn, that is still out there you know, succession is a big part of the plan here and the board set up a success committee to signify that they are on it, you know, that something that the problem that existed before. but, yeah, everybody knows this. i don't know that it is job one and the losses, you know, they are 1.5 billion, q4 probably the same range that is what has to turn around here price hike went through. so it will be another five or six months before that streaming starts to turn so success is out there, it is important, but a whole year to do what he is going to do with the business and then year two is success so i don't think that is job one right now. >> let's focus on the idea that the streaming business needs to

be profitable and it shouldn't be that hard a piece saying that hollywood needs to get real on the runaway spending on streaming. does peltz has a case? >> he could talk to a lot of ceos in town that might argue with the streaming business is easy that is a very challenging business to get out there and get subscribers. i think what nelson has done with a hammer here is he is forcing a reckoning, a referendum on the 21st century fox acquisition. he is asking was it worth it, was it worth what they paid, the leverage, with all of the issues that came along with the fox acquisition, was it worth it in the end. and i think that he is using a hammer to get to that question that wall street has started to ask as the losses piled up, but he is doing it in a much more blunt way. >> and i like the point where he says aiming at iger's

acquisition history is kind of a curious move because he's had so many great ones. so if peltz wants to pick a fight, is that enough to say that maybe the price tag was too high or what have you and for that reason alone i should have a voice on the board >> previous acquisitions were under $10 billion. fox was a much bigger swing. and i think anybody that has covered disney annual meetings, there are so many shareholder, so many votes, it seems like this is an uphill climb for him to actually get those votes. >> and alex, what do you think that the next move will be,

galvanize around the idea that he needs to have a voice or they need to buy the rest of hulu there are a lot of different ideas here >> and so i think that the bob iger defense for the fox acquisition is that if disney had not done that acquisition, our parent company comcast would have if you remember, comcast overbid disney for the assets for box. and what would would have happened is comcast would have walked away for a majority stake in hulu. it would have strengthened the position of nbc universal in the streaming wars, in the entertainment wars so, yeah, maybe disney overpaid. in fact they did overpay for fox. but you have to think about the competitive dynamics that go in to that deal, that basically i think bob iger would say look, that deal allowed disney to stay on top of the competition. and it goes beyond the simple

numbers at a given moment in time based on valuations that deal didn't look so bad 18 months ago now it looks really bad. so i think that is the defense there and we'll see if disney makes that argument publicly >> and sean, last word here. >> look, avatar is taking over the world so fox deal doesn't look that bad at the moment. interesting time to say that the fox deal was terrible when you have the number one film in the world. streaming is easy are the sentiments i don't know what his angle is honestly nothing new came out of this for me >> and if i may, the one thing that we do learn is that hugh perth murdoch sold his assets at the top of the market. >> revealing his business savvy if nothing else. guys, we'll leave it there thank you so much for your time. appreciate it. and want to mention the markets which are near session

highs -- sorry, look at that, we're off the level. the dow was up more than 300 points it is about half that to a gain of 165 still better than the low of 180. now the cnbc news update and here is what is happening. los angeles based city national bank has agreed to pay 31 348d to settle charges of discriminatory mortgage lending practices. the largest red lining case in u.s. history they deny any wrongdoing but paying nonetheless proud boys attacked the heart of the democracy during the capitol hill attack on january 6. former leader and four of his lieutenants are charged with seditious conspiracy opening statements are underway in the trial, one of the most

high profile 1r0involving the january 6 riot and suspect bryan kohberger back in court charged with stabbing four idaho university students he has yet to enter a plea his next hearing won't be until june his lawyers saying that they need time to prepare their case. and still ahead, the dow transports up are 7% to start the year what are businesses experiences. we'll get and you view and we'll have a look at the big banks reporting tomorrow morning. you won't believe the huge drops they are expecting to see. good luck. td ameritrade, this is anna. hi anna, this position is all over the place, help! hey professor, subscriptions are down but that's only an estimated 15% of their valuation. do you think the market is overreacting? how'd you know that? the company profile tool, in thinkorswim®.

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heavy weights that start to report next week tech getting slammed meta down 60%, amazon down 42% but they are perking up in january. here to discuss is head of internet research and also deputy tech editor

mark, did i hear correctly you think the stocks could be going to new highs this year i can't believe that you would think that >> please don't be so skeptical. we try to be tactically constructive going into the year estimates have been derisked and we saw a lot of cost action, job cuts that creates the ability for the companies to have an eps slingshot opportunity. but we want to look for companies that are somewhat recession resilient, maybe have a new product cycle and have taken costs out. that puts netflix at the top for us this new ad supported offering is the real deal i think it is cause a revenue growth i also like uber i think that the business model holds up we all still have to commute and i also like meta advertising headwinds will be real i think that the company has

take a major reduction in force action and i think that the valuation is super attractive. so, yeah, i think that some of the internet stocks have yut performed the market this year >> and you are sort of the i didn't know yin to the yang. and others say that they would be a holder.i didn't know yin to the yang. and others say that they would be a holder. so there enoughs can s disperset the stock. >> and the stories are also pretty disparate meta and amazon are the two that i'm looking at the most closely. and i'm really wondering, you know, if they will give us any skags that the bleeding has stopped, that there is something to look forward to in the second half first half is quite bleak. if you look at metmeta, it was e

business story of 2022 until the twitter saga hit and the crypto meltdown they cut a bunch of the fat through layoffs. but still no real growth there, the company has been shrinking for several quarters and this is a company thought of as a growth company. so until there is momentum, just hard to imagine investors getting excited about the story. ecommerce is a huge question mark across the board. and they have these huge questions in their third party marketplace where sellers are really concerned with the way amazon has been treating them, raising prices on them, limiting their storage capacity so those are the two stories that i'm anxious to hear about. >> and which of the narratives will be a bellwether, and is the biggest bellwether just the federal reserve? >> probably.

but the big bellwether obvious answers to that are amazon and google just given how sprawling their empires are, if you will amazon will give you a read into enterprise demand. cloud computing. a read into the consumer more of a read into the consumer because all of that retail and exposure. and i do find -- the question we need to ask ourselves, is it cyclical or is there something structural going on or did they make execution errors i think numbers are still at risks but amazon have not lost any market share i think they impact their gaining share, i think that they are maintaining share. they overhired post-covid, other companies did too. amazon was the first to admit it and i think that there is a nice setup. if you are willing to look out more than the year, i think that this will be one of the growth

assets i think if you want to be near term, other names that you want to look at >> yeah, hard to be near term right now. but if amazon and google are the bellwethers, uber is certainly a bellwether for the gig economy plenty are happy to throw the towel in we spoke to a trader that would sold it because he says the economics make no sense. drivers can't make enough money on the platform. it is expensive. tweets joking now about how the all new cheap fund stuff is more expensive than what it replaced. >> yeah, these were supposed to be tech companies and they were valued like tech companies when everything was up and to the right and everything was valued on revenue istmultipling

and that story changed completely and now you have to make money on the product that you sell you need to have the product be able to scale. and these companies don't fundamentally. doesn't mean that they are doomed, but will we ever view them as tech again, that is more in mark's world. >> and mark, a quick last word what are people who cite the comments i just made missing about the micro economics that might be turning in its favor? >> i don't think that they are missing anything i'll make the point that uber has turned positive free cash flow so every quarter if they can prove out a goal of reaching 4 billion in free cash flow by 2024, this stock will be higher. and it is a good thing we're focusing on free cash

flow and as they build that up, i think that that will be good for -- i think that will be good for the stock and for investors in the stock and a lot of people with a counter cyclical hedge here, a lot more drivers coming on to the network so they needless incentives which means it will be more profitable, so i like uber >> in a way all these companies were born of the slow recovery after the last recession we'll realeave it there, thanks much still ahead, gxo shares up 22% and climbing higher yet again today, but there are red flags on the horizon we have the latest next. 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.

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more than 6% let's get frank holland in here with the numbers >> gxo shares are popping now and year to date even as demand for its core businesses is softening. the ceo adds that the company expects about a $60 million negative impact from the stronger dollar. still today issuing preliminary full year numbers ahead of february you see the targets here and deutsche bank counts apple, nike and samsung among its customers. and malcolm wilson told me that while customer demand is slowing a bit, customers moving from china is a big tail wind >> general trend was seen across many customers, that trend of near shoring if i think about business in europe, companies typically especially the fashion industry

are bringing product more into turkey manufacturing sncentral european and mexico very busy i think that trend is set to stay >> and tail winds include f pcfpxpo. and both are outperforming even the dow transports.pxpo. and both are outperforming even the dow transports.xpo and both are outperforming even the dow transports >> and i'm always looking at it from the economic indicator economic point of you you view what is the broader message? >> we're nearing the bottoming cycle of trucking rates and logistics. but demand remains resilient consumers continue to spend and all us are used to buying thins

online and just having the things that we want. i don't think that anybody wants to change all of their habits. so as long as demand remains the same, they have stable business models and they have a free cash projection between now and 2027 because again companies are not only filling their warehouses with consumer items but also reshoring and near shoring production which is a big tail wind >> exactly what nervous investors want to hear still ahead, big backs out with earnings tomorrow and jac jpmorgan up 26%. ankey ctd faors to watch and how to be positioned, next e in ther? should we go check it out? yeah. we get to stay here all weekend! when you stay at a vrbo... i call doing the door code! ...the host doesn't stay with you. it looks exactly like the picture. because without privacy in your vacation home...

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banks have seen recent drops and stocks have followed suit. we've seen double digit declines for each of the three quarters of 2022 and the decline expected to continue in the final quarter of the year where analysts are currently predicting a here andd to continue final quarter of the year where analysts currently predict a 9% decline in earnings per share in that group. you can see, it's getting better trendwise somewhat isolate big banks in the sector range of expectations is wide. depending which firm you're talking about. likes of wells fargo, morgan stanley, goldman sachs, projected earnings declines in the range of 40% to 50% you see here for those three banks they're not expected to be nearly as deep for the likes of citigroup, jpmorgan chase and bank of america, down 22%. the results bad enough, perhaps, to signal potential bottom for the industry or what people are thinking.

where the forward-looking commentary from many big banks ceos and cfos is key the economic outlook is front and center as is potential market volatility that could go along with it. will it lead to more money set aside for potentially bad loans? what will it do to dealmaking and capital markets activity and what's the outlook for interest rates? could be the most important kickoff to earnings season seen in years send things back to you. >> dom, thank you. which bank will come out on top this earnings season gerard cassidy start with you who are you most excited about and most concerned about >> kelly, excited about the big banks, strong consumer deposits. 15 years since investors had to look at the right side of the balance sheet. these core consumer deposits are the funding of the balance sheets that gives banks big margins and big spreads which we saw in 2022, and will continue

to see in 2023 so bank of america is one. some of the regional banks, fifththird, jpmorgan as well the companies that have really strong consumer franchises leading to higher profitability in 2023. >> and then the flip side? who are you a little more bracing for? >> yep no a good question. i would say got to be careful about capital markets. we all know 2022 was a terrible year for investment banking. we don't think it springs right back here in the first part of '23, and i think as long as the ecm markets continue to remain under pressure as well as advisory, meaning morgan stanley and goldman could struggle first part of the year. >> rallying today, for what it's worth. hugh, jpmorgan, a little distraction here on the eve of its big report with a report what happened at the student loan business they bought. what is going on here? >> yeah. set the scene. okay and we broke the story in 2021 broke the news that jpmorgan was

acquiring student loan financial aid platform called frank. i hadn't heard tabout it before that time but spoke to the founder. reported, advertised to have a 4 million to 5 million users at the time and giap morgan touted it a platform that was around. a few moss after the acquisition learned from a lawsuit filed in federal court last month, jpmorgan is sending out a batch of about 400,000 emails to the reported frank customers starting the marketing ball rolling, monetize what they purchased for $175 million 70% of emails bounced back. >> wow. >> first time, took several more months to ascertain what happened when they purchased this start-up, think acquired also the ip and emails between the founder and other parties. what they had been able to reconstruct is the founder in order to get the deal done had actually hired data scientist to

invent, confect 4 million fake accounts to seal the deal. in the emails turns out the founder asked head of engineering for help in coming up with these accounts he declined and she went ahead and looked for a data scientist at the new york city college to help her it only cost about $18,000. >> incredible. nefarious and does it gerard, raise due diligence? i don't know how you do this, unless you send out before you buy them >> good question fraud even in lending, hard to debit fraud what we have here. maybe due diligence could have been done better it's very hard to detect fraud, traditional fraud as in the lending area in this case it's digital. >> the lessons for jpmorgan or

perhaps sign of the times? a shocking story almost, do we say theranos-esque >> we assume jamie dimon would crack a toe after hearing this embarrassing for them. defending their huge expense in technology this is one of those purchases, and then you have to go back and look and question their due diligence. the bigger story if it is -- it is different to do due diligence in this case in the age of ia and being able to use algorithms to create fake identities. >> true. >> will we see more of these >> probably sends a capitol hill down the spine of anybody looking to acquire a hot start-up ask if trying to flip the script probably look to, as a barometer, jpmorgan, for banks and the bigger economy >> sure. i want to say going into this,

jpmorgan, their exposure to credit and credit cards specifically heavier than others if you're looking at big winners in this, i think there's a chance they might have to reserve bigger than people expect. >> great point. >> i think boring is beautiful i think bofa in this case, s responsible growth mantra may be the most clean earning of the season. >> do you share that point of view or see it differently >> fourth quarter results strong on credit for all banks. you're right we're going to see reserve building due to new accounting, for 2023, economy is slowing but what investors are starting to realize and, kelly, you pointed it out with jpmorgan data since october outperforming the market because investors realize revenue growth, revenue, good old-fashioned lending, is very strong and covering the cost of higher credit as we expect we expect higher credit costs. right now revenue growth more

than offsets those higher expenses. >> very interesting. thank you both leave it there for now gerard cassidy and hugh zahn. and brian moynihan on "closing bell" tomorrow at 3:00 p.m. eastern time. coming up on "power lunch," condo king of miami's newest project and why he's betting big on super luxury amid signs of a slowdown three minutes away from "power lunch. ers e tyler cam. getting ready. tyler, we see you. don't do anything crazy. catch you on the other side of this quick break don't go anywhere. ♪ something you can have and hold. ♪ ♪ i'd build a road in gold just to have some dreaming, ♪ ♪ dreaming is free. ♪ accenture, let there be change. (woman 1) i just switched to verizon business unlimited. it's just right for my little business.

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. good afternoon, everybody. welcome to "power lunch" alongside kelly evans i'm tyler mathisen big news out today, a big drop in inflation, december cpi falling just a bit the first drop big in the sense that it's the first since may of 2020, kelly. >> plus, a f