adding to discretionary because those stocks have been hit really hard, and i do think the consumer's going to hang in there. >> steph, i want to thank you for your analysis of all of it join us on tuesday where we'll see you in the alps. >> yep >> from davos, switzerland >> rise and shine. >> don't forget to boot your booties on "groundhog day." ♪ good friday morning, everybody, welcome to "squawk on the street," i'm david faber with jim cramer. we're live from post nine right here at the new york stock exchange carl has the morning off let's give you a quick look at futures. of course, we get started with the final trading day of the week, 30 minutes from now, you can see that we are expecting a lower open, so to speak. equities will be down across the board when we begin trading, it would appear big day for financial sector earnings this morning. in fact, blackrock's ceo, larry fink, is going to join us. that company, amongst many of

the mega cap financial services companies that have reported earnings this morning, looking forward to speaking to mr. fink a bit later this hour, but let's get right to many of the bank earnings this morning. we're talking jpmorgan, citi, bank of america, wells, and the aforementioned blackrock, which obviously is a money manager, not a bank jim, it's almost hard to navigate, given just how many we get and the commentary from each the calls are at different times. jpmorgan's call is ongoing, although i can't believe jamie dimon has begun speaking yet blackrock's call also. we'll get citi's during the show, and then a couple of the others, i think, a bit later and you know, we always do like to caution people, the calls here are important, even the q&a part of it, the script part of it from the ceos hard to get a read sometimes, jim, coming at you in such an

avalanche of numbers all the stocks look down, but i'm not sure that's the appropriate read, or is it >> no. that's the appropriate read, and i think that what's happened is that not only is baffling as the -- because of the mass of information, but the analysts got everyone wrong every one of these >> they got them all wrong >> they all thought there would be much more net interest income than it turns out to be, because they look at our checking account, and we look at what they could invest in, we figure they must make fortunes, but there's a lot of repricing going on, and that didn't work brian moynihan sed, theays, the economy, they're raising rates, so the consumer doesn't have as much money as before you look at the wells fargo and it's down a lot. you say to yourself, okay, how in heaven's name do you really know what that number's about? given the fact that it's been in the crosshairs of the regulators, the expenses are down dramatically, which tells

me that things are getting better, and most importantly, there's one line the buyback is back. >> the buyback is back, right? >> if you ask me what line did i want to see? i would say, the expense line. what line shocked me the buyback is back. bank of america was terrific citi people are buying -- david, they have no idea why they're buying they don't i mean, david, the citi -- the book value is $80, and look where the stock is, $49. you and i both have to say to ourselves, wait a second there's something wrong here now, the one that actually is very clean is the one we're going to be speaking to. >> blackrock, yeah blackrock was pretty clean, and we are looking forward to talking to larry fink. a first here for "squawk on the street." back to the banks themselves, let's just keep going here you mentioned the book value of $94.06 at citi the ability of wells to buy back stock. jpmorgan also, jim, in his, you know, comments at least or in

the press release, jamie dimon saying, we can now have the ability to resume stock buybacks this quarter as we deem appropriate because they have exceeded their cet1 target of 13% one quarter early. >> very high-quality beat. the return on equity here was better than anyone else. the net interest income, when we start figuring it out, we're going to realize that it is actually better. i think that consumer borrowing is very good i look at this one and i say, okay, you want to sell this? it's because it's up a lot, not because because of anything. >> it has moved up many of the stocks have moved up, have had a good start to the year, and we're seeing a bit of a retreat. stephanie link also said this, and it seems to be true, these things always trade very strangely around earnings, typically down more than up. >> i think, you know, look, out of nowhere, we have an article about goldman-sachs losing a lot of money in the consumer

business good, get that out of the way before the report next week. the confusion of today has historically cost people a lot of money i did a piece earlier this week saying, don't trade these today. invest in them next week after you sit down but bank of america was a very clean, good quarter. blackrock is the one that i want to be in wells fargo, when people hear the quarter and listen to charlie scharf, they're going to realize this is the consumer financial protection bureau is now behind them. there are still more consent decrees, but they're almost there. there's still an asset cap, not as important as it was, but david, a buyback that i think is going to be the most aggressive of any company we're talking about or maybe even this year. >> wells fargo, you think, will have a very aggressive buyback >> yeah, and you're going to be in there buying it with them i really like that >> one name we haven't settled on here, and obviously, we're just jumping all over, is bank of america >> i like bank of america. >> i'm looking at a wells fargo note about bank of america, saying, "clean beat, clean quarter, offsetting one-timers,

tax benefit offset by a dva adjustment positive operating leverage. chargeoffs remain strong at only 26 basis points. the main negative, they say, is net interest income falling a hundred million short of the consensus. >> that's the point i mentioned, and i think we don't want to lose the forest for the trees. the analysts didn't get that right. that's why the average loan -- the average loan and lease balance is up, nice 10%. not a lot of bad loans now, there's another thing people got wrong you'll see they have to start taking a reserve that's because of how much money that they lend, they have to do that the consumer's very healthy. that reserve is not a sign that things are getting bad it's a sign of how banks have to -- >> no, but they also have to make predictions for the economic environment, which does lead me back to jpmorgan, if i might, for a moment. and what is page 3 of their release this morning the provision for credit losses

was $2.3 billion, says jpmorgan, reflecting a net reserve build of $1.4 billion, net chargeoffs were $887 million, so they built more than they charged off why? well, they say, driven by a modest deterioration in the firm's macroeconomic outlook now reflecting a mild recession in the central case >> okay, so, that's not what brian moynihan is doing at bank of america he's saying, basically, look, things are good. i love this. record net income of $3.6 billion increased consumer banking 15%. they are -- >> you think bank of america has a more positive outlook on the overall economy than does jpmorgan i mean, again, this just goes to what your decisions are in terms of where you want your loan loss provisions to be your credit loss provisions to be >> sometimes you ask me questions, and there's a -- just a plain objective answer, and the answer is, bank of america

has a more positive attitude >> and has for some time >> yes, it has, and they've got good growth. by the way, technology's playing a big role at bank of america in terms of their ability to be able to do a lot of transactions and to have expenses come lower. the company we're about to talk to, larry fink, blackrock, that's probably the most advanced technologically of any financial institution. i think these -- a lot of these fintechs that we talk about could learn a lot by being an apprentice at blackrock. >> yeah. we're about to get commentary. we're probably going to hear from jamie dimon on the call i think he's begun to speak. you know, i downgraded him yesterday from jamie "hurricane" dimon. >> i think jamie should be starting to talk, but he won't, about this possibility that after a couple days of rain, the sun could come out >> i guess my question and point is that we may get some description of the macroeconomic environment from these bank ceos that could have a broader impact on the market or no? >> yeah, i think it could, just

because it's going to -- i think that you're going to look at and say, wait a second, maybe the fed should be more considered in the way it increases, because they're winning. i think they're winning. there's a bit of a slowdown, and they're winning. >> dimon obviously pointing out there are still so many unknowns, including the war in ukraine, including the impact that's going to have on fuel and food >> well, look, the stock at the bottom, when the ten-year bottom, the stock was at 101 at the ten-year bottom. now it's at 135 and down from 139, and i think that the -- one of the reasons i like jamie dimon so much is he is really not promotional. he'll say -- he'll give you the negatives, and the -- i want people to understand these things i don't see jamie during the off-season, so to speak, where i don't know -- i take him at his

word that there could be something really bad happening but at the same time, that is a bit of his nature. i do see some of the other bankers offline, and i think that they tend to be people who just make a lot of money, their companies make a lot of money, they could make more money if they were, let's say, knew what the fed was going to do, just like the rest of us. >> sure. that said, jpmorgan had a return on common equity of 20%. >> well, we thought that never would go past 7% >> i remember saying -- >> remember, you said 7% would be big >> i sort of thought low double digits would be amazing, and here we are at these kinds of numbers. >> these are very good companies. >> investment banking was quite weak in the fourth quarter >> did we think the capital markets come back this year? the answer is, no. i don't think people understand, by the way, wells fargo was a deeply wounded institution charlie scharf came in and found

there was far more that was troublesome than people realized he's still cleaning up the aegean stables, but when those sables are done, he'd be hercules >> you are getting really positive on wells. that's what i'm picking up on. >> i have no choice. it's the cheapest. >> all right okay so, that's one i'm going to keep in mind through the course of the year we'll see how you do >> i'll be right >> you will? >> oh yeah >> all right >> i bet on scharf >> today's price, is that where i should measure it from >> i'm betting on visa and i'm betting on this. he better do it. >> or else he's going to be in big trouble with you >> i want to take something back about charlie. i said he was a mean man that's not true. he's actually congenial. i think he felt that i sometimes am too critical. i mentioned this just because there's a -- i just feel like he's a delightful guy who was caught up in a situation >> now he's delightful

he went from mean to delightful? >> bipolar >> you can -- you can occasionally be highly critical, fractious. >> i didn't know how much trouble wells was in i thought that wells had been cleaned up, and it's the sloan era. >> you didn't expect that last round of enormous charges. >> i didn't know the consumer financial protection bureau would come after him like elliot ness came after the organized crime in chicago, which was not -- wells fargo was not that bad, but they have been taken to the wood shed and they're about to get out >> $3.3 billion of operating losses related to a variety of previously disclosed historical matters, litigation, regulatory, customer remediation matters >> co-sell it. everything people are doing right now is based on nothing. >> okay. >> and i had never really made a lot of money investing on nothing. >> that's true >> it's based on emotion they're looking at these headlines and trying to -- these are all conference call stocks >> can make a great tv show

about nothing. >> i like that >> "seinfeld." >> oh, can you also just say that this is the worst day of the year all these companies have reported this morning. >> yes this is a very difficult day for us to grasp everything another story, though, that we can grasp a lot more easily is tesla. stock, as you see, may open down as much as almost 6% the company extended its price cuts to the united states and europe, also got a sell rating slapped on it by one wall street firm let's give you another look at futures. we're still going to open down more "squawk on the street" stig aadrahthe 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 round of a-paws at&t 5g is fast,

reliable and secure for your business. dad, we got this. we got this. we got this. we got this. we got this. yay! we got this. we got this! life is for living. we got this! let's partner for all of it. edward jones just look around. this digital agefor all of it. we're living in, it's pretty unbelievable. problem is, not everyone's fully living in it. nobody should have to take a class or fill out a medical form on public wifi with a screen the size of your hand. home internet shouldn't be a luxury. everyone should have it and now a lot more people can.

so let's go. the digital age is waiting.

tesla shares, we just showed them to you, down 6% as we head into the open 15 minutes from now. that may drag down the entire sector as well the company cut prices on some of its vehicles in the u.s. and europe by as much as 20% tesla may be looking to boost its sales, this after it did fail to hit its delivery target for 2022 still impressive, of course, with sales up some 40% year over year, jim. but these are the key models they now fall below the price level at which they will now be eligible or consumers will be eligible to get some of the tax benefits available under the inflation reduction act as well, so that could also stimulate sales for tesla. >> well, let's go into this. let's talk about the fact that -- let's use ford motor,

okay ford has the f-150 70% of their customers have never -- they were possible tesla customers. the mach e's direct competitor to the tesla y i bring all this up because what's happening is tesla makes about $20,000 a vehicle, so they have plenty of margin to give away to ten people to lower price vehicles what they're doing is using the old henry ford model t position. they're cutting price in order to be able to keep their market share. what's interesting, david, is that therefore, the margins are going down they still make a lot of money, hence the downgrade today to sell now, also, in california, there is a major negative for tesla customers because big mach e spike there. so, i'm saying, yes, there's actual competition for the first

time, and there's price cutting. >> model 3, the model y, these are sort of some of the key ones, obviously. >> look, makes plenty of money per car, so it's beating on price, but the model y has not been updated in a long time. it's a dominant player, though i just think that you have to accept that the world is changing and tesla has real competition. >> they have real competition, but to what extent has that already been reflected in the stock that is down, what, 70% from its high? >> normally, i would like to opine on that better a lot of this rests on the fact that these were overnight price cuts >> yeah. >> overnight so, it's going to cause you to take -- it takes your breath away a little. >> and again, to your point, you have sort of, as always, differing views. guggenheim does downgrade tesla to a sell. far too optimistic -- we haven't gotten the fourth quarter report we got deliveries and production, but we didn't get

the actual earnings report from tesla, and they say $89 is their price target, why? sizable gross margin miss. they feel like this year's estimates need a reset they're well below consensus on gross margin at guggenheim that's part of it. dan ives says, you know what this price cut is going to stimulate demand, and we see a higher expectation of revenue growth >> okay, the problem with dan ives' analysis is what have we never had to see we've never had to see a price cut to stimulate demand. this company had this field to itself i think that i'm debating, in my head, what you said, which is, isn't this why the stock is falling so much? the one thing that we don't know is, what is he doing right now >> what's elon doing >> yeah. >> at this very moment, i'm not sure >> what is the possibility that he's not as focused on his car

company? i mean, remember, jack dorsey, the downfall of the empire was the fact that he was doing two jobs this man's doing three jobs, and i am sure that twitter is taking some of his time >> there's no doubt that twitter is taking some of his time he's only one man. he probably only sleeps four hours a day. >> have you been to bmw ev >> no. >> it's unbelievable have you been in the mustang mach e >> i haven't, jim, no. >> it's incredible have you been in the gm hummer >> i have not, jim >> it is outstanding i always hated every other ev. suddenly, i'm thinking, what the hell am i doing with an ice? because these car companies are delivering evs that make me say, you know what? this is no longer tesla's. they still are the dominant player but the other ones that are coming out, wow. >> and that is the key consideration for investors. all right, let's get ready for jim's "mad dash. we'll also count you down to an opening bell that's less than ten minutes from now also ahead, don't miss it,

our first on cnbc interview with blackrock's ceo larry fink more "squawk on the street" straight ahead

>> announcer: is your innovative start-up disrupting the status quo? scan this code or go to d50nominations.cnbc.com. we haven't gotten a delta earnings yet, but we will. the stock is sliding based on those numbers. we'll go over them american also perhaps as well. ford, we just mentioned, along with gm and of course that tesla news so, we're hitting a lot of this, and we got more to hit as we move on here on "squawk on the street."

♪ every search you make ♪ ♪ every click you take ♪ ♪ i'll be watching you ♪ - [narrator] the internet doesn't have to be so creepy, the duckduckgo app, lets you search and browse pria blocking most trackers all forf your search history is never tracked, so it can't be shared. and when you leave search, duckduckgo helps keep companies from watching you as you brows. join tens of millions of people making the easy switch by downloading the app today. duckduckgo, privacy simplified.

you ok, man? the internet is telling me a million different ways i should be trading. 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] wow! yeah! it's time to take control of your investing education. cut through the noise with best-in-class education resources that match your preferred style of learning. learn your way. not theirs. td ameritrade. where smart investors get smarter℠.

>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. all right, let's get to a "mad dash," and then we'll take you straight from there to the opening bell

>> okay. >> little bit of a diversion from bank earnings for you in the "mad dash" here. >> i just wanted to touch on the fact that very negative piece about defense stocks today, and there's actually a fantastic piece on cnbc.com about it, but what's going on, david, is that a lot of people bought these stocks expecting that you would have a big budget increase given the fact of the war between ukraine and russia instead, what we're finding out is that the change in the house has made it so that the possibilities of all these budgets, all the different defense stocks, could actually be quite wrong, and i think that i happen to like raytheon technologies, because it's got aerospace, meaning, boeing in china, but northrop grumman, david, i think that's a fantastic stock, and they are

saying very negative things about it all defense budget issues. this is the first spillover of the house going republican, and i think people have to recognize that defense companies usually have bipartisan support, but they don't right now and i think this downgrade is very meaningful. a lot of hot money is in these stocks because of the war. lockheed martin, very good company too. >> although it remains very much unclear whether there really be any sort of funding cut for our aid to ukraine >> david, if we have a shutdown, people are going to be looking for themes >> if we have a shutdown and don't raise the debt ceiling, we got a lot more to worry about than just defense stocks >> well, if we have nuclear war, we have a lot more to worry about. >> i would argue, you have nothing to worry about if we have nuclear war it's over. >> i just point it out because i, myself, felt that what would happen is that there would be

a -- really, a recognition that russia can be beaten but it would take lockheed martin and northrop's help, and northrop would be integral to preserving our relationship with taiwan, which is so necessary for taiwan semi, because they have a fantastic bomber that needs to be stationed there. it looks like geopolitical issues are not coming up what's coming up is a for more stingy house, and only goldman's come with us, it's very important. boeing, again, big defense, but not part of this >> got it. >> people like boeing very much. >> as we get ready for an open less than a minute from now, any keys to this market in terms of how we're going to trade over the course of the day, jim >> you know, i want to go a little against the grain here and say it's united health >> okay. >> the reason i say that is because there have been a tremendous rotation out of health care at the time of the health care conference blowout quarter, and seeing if

that goes higher, then that rotation may be over >> interesting yeah you've made that point of course, many of the mega pharma, big pharma company stocks are down for the year, although coming back a little already. keep an eye on shares of united health care, by the way. half a trillion dollars market value there. there's the opening bell you can see the cnbc realtime exchange it's going to be more red on that board given where futures were here at the big board, the memorial foundation, celebrating martin luther king jr.'s legacy, and at the nasdaq, skyward specialty insurance group that's celebrating an ipo imagine that an ipo >> an ipo? geez, let's go buy the bank stocks look, i think that one of the things that we've left out, a pr p a apropos of that, let's understand that jpmorgan is set to make a huge amount of money

if capital markets come back >> and will start being able to buy back stock a quarter earlier than it anticipated. >> the stock's down because it's run. it's not down because it's bad i want people at home to understand that i did this analysis of what stocks are the most misjudged on the day they report, and it was a lay-up. the bank stocks had been far more misjudged, and if you look at them a few weeks later, they're rarely where they're priced right now >> you know, i downgraded jamie dimon to a tropical storm. >> yes, you did. >> but he doesn't seem to necessarily want that downgrade. he was asked on the media call -- jpmorgan has two calls they have a media call, then they have an analyst call. i think we're in the analyst call now but on the media call, he said, hey, what about those hurricane comments have you walked them back? where are you in terms of how you feel about things versus last year when you made those comments and he said, personally, i'm in exactly the same place

i just want to efsmphasize we don't know the future, soyou guys are asking a lot of questions about what's going on. we depoon't know. might be a mild recession, maybe not. i'm simply pointing out there are geopolitical uncertainties which are real, and we have our eyes focused on them and we hope they go away, but they may not >> i wanted the jamie dimon that says we are the strongest country, we have a great military, our universities are good i guess we have to wait for his letter for that. but i will tell you that personally, i think that the bank is positioned to help a lot of -- as is bank of america. all the banks. i know that they get a bad rap, but a lot of them are spending a lot of money to go into neighborhoods that had been underserved, and undeservedly underserved, and they're trying to change that and it matters. i went to a jpmorgan at 19th and theth in philadelphia, a neighborhood that has been tough that my mom is from. they're there. and i think that we have to point out that fintech is overdone these guys are coming back with fintech to bank of america, and

they are doing -- they're trying to make amends for what i think is a legacy of not wanting to lend in areas because there were, let's just say, the profit wasn't there there's something that i just said that i can't believe i said >> you did you did. nice things. let's get to delta, jim. we haven't hit it. it was one of the biggest losers on the s&p going into the open and continues to be down about 5% after the company did report earnings operating revenue was $13.4 billion for the december quarter. operating income, $1.5 billion the margin was 10.9% market's not particularly happy with the number. >> you know, phil lebeau, who is probably about as great a reporter as i have ever seen, points out that delta is down premarket because of how it's calculating its anticipated costs, impact of a pilot contract, but they still have strong demand and profit growth. the delta is starting to impact january 1 of that pilot problem,

and they have a contract that they can't really talk about this, by the way, u.p.s. has a similar situation. >> right >> labor contracts you think maybe the impact of the storm, both storms, they took hits from the storm but they benefitted from passengers needing to rebook and turning to delta and american, so i guess what i'm saying is, again, an overreaction to the downside based on headlines that are not as thoughtful as people like phil lebeau >> let's hear from the ceo of delta. he was a guest on "squawk box" this morning >> one of the most difficult years, operationally, we ever had, as we've got -- brought the air traffic system up fully for the full year. $2.7 billion of profits in the year for our company it's the seventh highest profit level in our hundred-year history in a recovery scenario, so that tells you something about the strength that we're building going forward >> stock down over 6% right now, though, based, again, perhaps on the outlook, the things you just said that we heard from phil

his analysis of it, although, again, not a bad year. >> remember, we have had a year in the first ten days. >> yeah. >> we have had a remarkable time, and there was only a matter of time the market's the most overbought it's been since november of 2020 when the market had a choppy time after. i use an oscillator that's consistent since 1977. i don't want people to say it's over i do want people to say this is one of the tougher days, and look how many misjudgments have already been made. we know that delta did have a good quarter we know that jpmorgan, it can come down, but that may be very interesting situation because of the buyback. charlie scharf at wells fargo emphasizing -- >> well, wells fargo, you know, your strong endorsement of the stock is not being well received in the market, jim >> i don't give a darn the people who are selling it, they are people who i think have

done some work >> do you want me to mark the close today or the open today for judging your call? >> they have a 3:00 conference call >> how should i do it? you want me to give you the down five and then i'll take it from there as a buy >> let's talk to sara after. by the way, sara had an excellent interview with john d donahoe from nike. we go back and forth, anchor to anchor, i talk to her about how things went. but i will say this. wells fargo is the hardest to understand because it has the most regulatory problems >> that's a good point overall, we got the market down about 0.8% that would be the s&p, the nasdaq, not far behind that, jim. to your point, sort of across the board, most things are down. it's interesting, we talked about tesla, of course, and yet it's gm and ford that are down even more, not to mention rivian and lucid. the whole group is down on, i

guess, the idea that you cut price, maybe i got to cut price? >> i think that there's competition. competition is negative. i also think that we're not getting from the banks that there will be no recession i happen to think that the autos are very -- that ford and gm are very underpriced but gm was up huge yesterday we had to deal with the fact that some of these stocks were up so gigantically that people just say, tell me something i don't know >> it's still up 8.5% for the year >> yes, thank you. >> there's been a rattle a little bit lately, the idea of ford, a company you know well, an ev, which obviously requires a great deal of investment do they have a scenario in which they would consider spinning off something like that? >> i think they basically, at this point, don't want to do that they want to compete against each other the internal combustion engine company is funding a lot of the changes they're making they're talking about building 30 to 40,000 cars, and i have to tell you what i think the factor might be, taiwan semi the other

day said they're really kind of almost done with the shortage of chips. i never want to cast aspersions on a company as well-run as taiwan semi. i don't think that's true. i think there's still a lot of chips that need to be shipped, and that's going to hurt some american companies >> okay. when we come back right here, we're going to have a live interview with blackrock ceo larry fink, a first on cnbc. >> what's the number one performing stock in the s&p this year hint, wie might get invited to the labor day party. >>let get to the bond report this morning, take a look at how treasuries are faring. yesterday, yields ended down when we got that cpi number. you can see where we stand right now on the two-year note we'll be right back.

to adapt in the changing world, you could hire a professor of theoretical mathematics. we all know this equation, right? he'd crunched numbers day and night. that's it. to maximize profitability. morning. i have quarterly numbers that are beautiful. and forecast revenue from every corner of your organization. is that important? or you could use workday. the finance hr and planning system that helps cfos make better decisions faster. for a solve problems like a genius world. workday. for a changing world.

blackrock, world's largest

money manager, out with fourth quarter results. it beat on the top and bottom lines. the stock is up more than 30% just over the last 3 months. joining us now in a first on cnbc interview is blackrock's chairman and ceo, larry fink thank you for joining us this morning. >> well, happy new year, david and jim. >> thank you >> and to you. you know, speaking of the new year, i was looking at your sort of memo to colleagues where you talk about the current operating environment being unlike anything we've seen in decades you talk about 2022 being a year of huge transition how do you see this year shaping up, larry? more of the same or, you know, are your expectations perhaps a bit different than what we've seen last year >> well, from the perspective of long-term investors, i see 2023 to be enormous opportunistic actually, maybe the hardest years for investing for the

long-term were the last few years because of negative interest rates investors worldwide had to take on more and more risk to achieve their liabilities. actually, now, having, you know, two-year treasuries going to be close at 4.25%, credits at 5%, high-yield at 8%, we're going to see a whole restructuring and a rebalancing of how portfolios were construct just a few years ago, and you're going to see now, once again, more bond investing within the confines of pension fund investing in 20 years ago, most pension funds had 60%, 70% in bonds because they were able to achieve their role and their goals that they were trying to achieve. by 2018, they could not own bonds. they had to put on more and more illliquidity so in reality, we're going to be seeing more and more

opportunities of rebalancing back into bonds, and as you talk a lot about growth equity, when interest rates are near zero, you can -- you have the ability to buy high-growth stocks because you're not losing any money. if short rates go up to 5%, you're paying a big premium for that type of perceived growth, and that's a recalibration that we saw in 2022, and now we're living in an era where you're going to be able to invest differently. in addition, we are seeing more and more investors looking at infrastructure, where you're going to have a combination of some illiquidity, but you're going to have a high coupon. this will be a period of more dividend stocks at play. i look at this as more opportunistic, and probably the most important thing in terms of earnings has been, blackrock is winning more share wallet than any firm in the world in good markets, when markets are going

down, or inbad markets -- or good markets when markets are going up and bad markets when markets are going down, and this past year, we had $400 million of net inflows and long-term assets of which $230 billion came from the united states, and so we have now raised, you know, raised about a $1.7 trillion over the last few years from investors awarding us in good times and bad times because of the guidance we're giving and also our performance and our fiduciary standards. >> understood. you know, last year, though, was distinguished by the fact that whether you owned bonds or stocks, you had a bad year you seem to be saying -- i don't want to read into it too much, but tell me. are you expecting bonds to sort of become a better performer during the course of this year, which would seem in some ways to say, well, maybe there won't be as much buying behind equities for the year >> well, i mean, we still see one or two more tightenings. we see, obviously, a very

inverted yield curve, so the market is saying, i'll buy coupon here, i'll buy it but what i'm saying is, we are going to see more and more of long-term pension funds reallocating back to bonds, more into bonds as they receive new pension contributions. we're going to see more of that. that doesn't take away from the equity market, but i do believe you're going to see, as we wrw witnessed in '22, we saw a whole recalibration of price earnings ratios, especially in growth >> to your point, the bond market is actually competitive with the equity market as you said, in '18, it was like, i can't get a return anywhere this is a very different world now in 2023. >> it is a totally different world, and it's actually an easier world to take -- you're going to take less risk to get to your target now more than ever before. so, i would frame it, you know, obviously, we had the nightmare in '22 with both bond and equity

markets down, but if you start today and look at the opportunity today, you have more opportunity going forward to invest with less risk and reaching your target returns that you're looking for, for long-term. >> larry, first, i want to thank you for coming on our show because i think you are a beacon in this industry a couple of things that i think i want to follow up on you talked about share take, and i know that you bought $500 million of shares yourself for the company during the fourth quarter and that's up from 375 in the third. i want to talk about how you distinguish yourself one is extraordinary technology. the technology that's so much better than everybody else that they have to use it. and second, if you don't mind addressing blackrock investment stewardship, because i think that your edge may be also that you democratize people those of us who want to be able to vote in certain ways, you are technologically able to give it to us. how much are those advantages

when you talk about share? >> well, let me just start off and say our technology platform continues to differentiate us. we had record new client demand for our system the expansion, aladdin's capabilities, has grown dramatically we actually added a new geographic region. we have our first client in africa we have more and more clients in south america. we're expanding across the board. using our technology, too, we were working on it for a number of years to democratize the vote there are people who believe that we have -- that blackrock should not have the entirety of the vote, and so we have been working with our clients to say, we could provide you with a vote back and so, we developed technology for our defined benefit plans and some of our pooled -- that we are giving them the guidance of what we see, but they are going to do the actual vote. they determine it themselves and that gives us an advantage

if society really wants more and more people to have their vote back, we want to provide the best experience in doing that, and we are doing that, and it's just another example of us staying in front of our clients' needs, trying to be that fiduciary on behalf of our clients and trying to give them the guidance that leads them to be the best they can for all of their beneficiaries. >> well, i think that it's important for people to understand, at one point, there were a couple of different states that said they didn't like your analysis, felt you were driving -- south carolina, david, remember? d driving you towards doing things that were not complimentary to the state and weren't making money. of course, i come at it from a completely different way, which is that i think people want democracy and have actually not been able to have it you offered choice, and most importantly, for instance, let's take on climate control. there was the late jay fishman, i'm sure you remember him, that may be the greatest person in insurance history. he came to see me a decade ago,

and he said, jim, i want you to stop investing in companies that have lots of land exposure to the beach, because you got to understand that climate is going to be a risk factor not unlike balance sheet problems you have offered people these choices. it's not been by explain how you took in even more money than everybody else, even though some states took this stance against your view. >> well, as i said earlier, we raised $400 billion of net long-term's sets, in the united states $32 billion net inflows from u.s. clients. let me be clear. we need to address the issues that some of these states addressed. we want to clarify our positions, if the facts were incorrect. our job, as you said it, jim, is to provide choice for every client it is not our money.

100% of the money is our client's money and we invest for them under their mandates, under their wishes we are not political everything we do is on behalf of our clients and clients' needs and if somebody in a state that is more progressive that wants us to invest one way, we will do that if you believe you have a more conservative view and that's the right thing to do for your beneficiaries, we will be doing that on their behalf so, we had approximately about -- a little under $4 billion of outflows from these various states but in the context of winning $400 billion globally in a year where every one of our public peers had outflows, the differentiation is pretty stark. we're winning more share wallet because of the guidance we're giving most importantly, jim, our performance has been pretty good in fact, it's been very good so, we are -- we're a fiduciary

first and foremost by providing every state who wishes to have that vote back, we want to provide it to them. we want to democratize the vote. this is one of the reasons i'm focused on the whole idea of blockchain for securities. i look forward to the day when we can tokenize stocks and bonds that every stock and every bond we can identify immediately who is the beneficial owner. this is why we're working on and every beneficial owner, from an individual to an institution, have the ability to vote, to democraticize every single vote. that's where we want to take this and we're leading that effort. >> larry, you know, on this larger point, though, in many ways you have become a lightning rod for criticism from both the right and the left in a way a lot of ceos have not, even of financial services companies some may go back to that letter you wrote five years ago that still gets quoted often, a sense of purpose you know, january 17, 2018 and i wonder, again, when the right says, you know, blackrock

is too woke and the left, perhaps those more focused say you're not doing enough on esg, it's greenwashing. do you regret having written that letter? i'll read a wrote from a "new york times" story recently knowing what larry knows now, i suspect there are elements of his ceo letters he would have omitted or written differently that's a quote from terrence kiely, former head of the official institutions group. do you regret those letters? >> well, first of all, terry is a good man and a good friend no, i don't regret it at all i think if you take every sentence i said over the last ten years in terms of my ceo letters, every ceo letter is about long termism and the absent of long-term thought. i do believe everything i said is really critical i believe more than ever that every ceo has to focus on all their stakeholders and if you do a good job with your employees and your clients, your stake holders, your shareholder is the biggest beneficiary of that.

and, david, probably the best example is blackrock you know, i write these letters, we focus on our clients every day. we focus on our employees every day. and every community we operate and we now have been public a little more than 24 years, 23 years to be precise. our share prices appreciated 7,700% total return. we are the number one performing financial services company in the s&p during that time andit's because i'm willing to have a voice i'm willing to speak out on long-term issues and i strongly believe the best companies, whether it's research from open door, that focusing on the needs of employees, focusing on your clients every day, allows you to build deep and long-term connection with your

shareholders that produces long-term, powerful returns. and across the board, if you look at every industry, those ceos and boards and management teams are focused on those issues are the firms of the future and they have provided us, the shareholders, the best durable profitability. >> all of that doesn't mean necessarily you won't get your share of criticism a lot does seem to come from the right. i had curtis lotftus on. these are small numbers overall. he said to me, and i want to get your response, he said, i don't represent the rich global elites that larry fink hangs out with i represent bob's plumbing and insurance agent. how do you respond to something like that? >> we manage money for over 50 million retirees we manage more money for more

firemen, for more policemen, for nurses and teachers than any organization in the world. we represent their money and we take that responsibility with -- with a deep and serious commitment our job is to give them hope the problem we have in society today, few people are trying to provide hope and i think one of the prevailing issues we have in the world today, and i said this in my prepared speech earlier today, there's too much -- there's too much fear going on and our job is to provide hope our job is to provide hope for more retirees and people who are building up to the retirees. that's build their retirement pool to live retirement in dignity and decency, and no firm is more committed in doing that, making sure that we are the firm that provides hope that's providing an ability that

people can believe that they can have that wonderful life in retirement that's why no firm is doing more in retirement than blackrock is. and so, i would just answer that way because i know what we are doing as a firm in every 50 states in the united states and what we're doing in other communities around the world we are trying to develop more and more hope through guidance, through performance, through fiduciary standards clients are able to live their life with more hope. and i'm proud and i'm incredibly proud that that's what we're doing every day. >> well, i share your lack of cynicism, as you know, larry, because i think that hope has been -- progress would be the word i would use, and constructive development they're actually empirical what i want to talk about for a moment is something that happened yesterday i want to use it as an analog, not to be personal

but we spent a tremendous amount of time interviewing nelson peltz. nelson peltz brought up some interesting points in his proxy fight with disney. i go back to looking at your principles, right on your website, the blackrock investment symbol and there are two i want to talk about you talk about the idea that you think long term, value for shareholders, but there has to be sound corporate governance, and the results, they must be accountable. and i thought that what nelson peltz was talking about yesterday was situations where heads they win, tails they win they buy a company they paid too much for they're compensated anyway if it works, they're compensated anyway there are many things nelson brought up that made me think, perhaps, when you do these proxy analyses, there are many things you take into account. do you think if people had a

chance, they might vote with nelson against disney? >> look, this is why i love capitalism this is why i'm a capitalist this is why i love public markets. public markets show the good of companies and the bad of companies. show the weak in governments and the strength in governance it reveals very willingly and easily who are going to be the winners and losers whether nelson or any other activist has the right point or wrong point, you're correct, jim, democratizing these votes will allow them to convey their feelings as an owner of a company. we're trying to make sure more and more people have the ability to speak their mind in the companies they own that is the power of capitalism. this is why i'm so proud of the developments in the financial markets of the united states, the opportunities we have. and because of all this

transparency, this is why the united states equity markets trade repeatedly three to four multiple points above any market in the world it is the power of our capitalism, but more importantly, because we have the broadest, deepest retirement market, we have more long-term savers putting their money to work and investing in companies like disney or blackrock or wherever they might wish to invest in. and then we have the ability to every year on vote on the success or failures of every one company. >> larry, do you think there's enough awareness for instance, again, on your website you talk about individuals can pick from a range of voting policies to reflect their preference i think most people do not know that's available and think this is not democracy it's just that you've got to just accept the fact about what a company says how can awareness be brought to the american public that owns stocks >> well, hopefully we -- more and more companies put that on their own website that you have

the ability to vote. please, vote look, one of the big issues we saw since we moved from a paperless proxy, fewer and fewer individuals vote so, a lot of this, we're in this transition again as we moved -- as we changed proxy voting you know, we actually are seeing fewer and fewer individual votes. we have to re-educate in helping people in some of our product we don't have the ability to provide the vote to those individuals, though because like in the form of etf, we don't actually -- we don't have a role of whose ownership -- who's the beneficial owner of that etf much of this is going to require regulatory changes the defined contribution plans, same idea. that cannot be done. there needs to be some regulatory changes to allow everybody in the defined contribution plan to have that ability. we do have the technology to do that now, we need some regulatory relief

this is one thing we're focusing on >> larry, let me just end with one last question, which is about active management. you generated $135 billion of active net inflow. those that have been following active managers for many years, i guess hope springs eternal you know, i mean, how do you defend an active manager versus saying, hey, come on, just invest passively they never beat the index. >> there's winners and losers in active management. it's hard to pick who's going to be the winner in the future. the history is not any indication of the future i'm a big believer in active investing. that being said, the most -- most of the money going into etfs, which everyone thinks is passive, is not passive. it's active investing using etfs to actively manage their portfolio. to actively express how they want to manage a portfolio

in bonds, it can become the giant revolution, using etfs to actively manage your bond portfolio. you can own a few etfs to convey your actively expressed desires through convexity, duration and credit so, all of these issues are changing there's a lot of confusion when we compare the index products versus active and much of the active -- or the index investing is not passive but active investors utilizing these instruments to express their exposures. 2022 was not a good year for active fundamental equities but active investing worked in many other asset categories it certainly worked in many of the fixed income categories. some of the credit categories. and some of the value categories of equities. but this is why it's very important for investors to, you

know, take time and understand, you know, how are they going to blend their total portfolio? and that's going to be the -- that's one of the biggest growth opportunities for blackrock. much of our active growth is when we have been asked to manage a whole portfolio i believe more and more organizations are going to be outsourcing their into general account and giving -- and awarding for, like blackrock, their entire portfolio. >> that's a good place for you to end we'll be following closely larry, appreciate you joining us today. >> thank you, larry. thank you. >> bye, guys happy new year to everybody. stay safe. >> thank you >> jim, before we let you go -- >> power house just tweeted, i'm going to speak to jeff marx who works with me on my travel trust. i have to put this in the bullpen. the tsr is incredible. the fact s they have technology and they represent the shareholder. that's going to continue democracy is the right way to go >> all right thank you for being here

of course, every day, all week and being here later on. >> this is the most exciting time, and i hope people understand - >> we've got a lot of bank earnings to digest between now and the end of the day >> i like the hope at it. >> yeah, the hope. >> and i would like to make you a steak dinner -- i don't know, maybe you're a vegan these days. >> no. >> about wells fargo that it does better than jpmorgan beginning today. >> everybody heard it. everybody heard it jim cramer let's get over to morgan brennan so we can start a little bit later than normal. >> this steak dinner sounds exciting, i must say. welcome to another hour of "squawk on the street. i'm morgan brennan with david faber. carl has the morning off we're live from post 9 at the new york stock exchange. getting a check of markets, which are ending the week with some red on your board with the dow down fractionally about 32 points the s&p down about 0.3% and nasdaq down 0.3%

earnings season under way. the big banks in focus, delta as well we're 30 minutes into the trading session so here are three of the big movers we're watching in addition to those before we dive into the banks. tesla under pressure after drastically cutting prices for some cars sold in the u.s. and europe guggenheim downgrading the name to sell as the whole auto space sees pressure this morning you can see tesla's down about 4.5% look at ford, gm and stellantis as well. virgin galactic, a different story, shares are popping after the space tourism company reported that it is on track to begin commercial service in the second quarter of this year. still stock's up about 14% it's had a bounce to start this year keep in mind, those shares are down 50% from their 52-week highs. finally, keep an eye on boeing that company's 737 max plane returned to the sky in china with an airline there.

after almost four years, thanks to two flights by china southern airlines it's a key market for the name it is a positive sign towards that full resumption of 737 max flights globally you can see shares of boeing are up slightly on this news david? >> morgan, we've had an avalanche of bank earnings bank of america, jpmorgan chase, wells fargo, citi. they just keep coming. let's get over to dom chu because he can sort of break down some of the key takeaways for us this morning. >> david, the avalanche kind of analogy is apt because we're still trying to shovel out from underneath all of the data and all of the stuff that's come out of here so far it's been a very mixed picture generally speaking, more on the positive side of things. banks in the near to longer term selling off despite some of the more generally positive bits of news coming out. we did see top and bottom line beats for bank of america. also jpmorgan. a little more mixed picture for names like wells fargo, perhaps

citigroup as well. during the course of what we've seen so far today, jpmorgan chase shares down 1% citibank, wells fargo moving off their session lows right now we'll see if that trend continues. we want to bring you highlights from some of the comments happening from the c suite of these banks during the course of either their earnings conference calls, formally speaking, or the media calls they've had with reporters earlier on today as well we'll play first of all, because bank of america conference call, formal analyst conference call is still ongoing as we speak earlier on, brian moynihan, the ceo of bank of america, did address some consumer spending trends he's seen so far. take a listen to what he had to say. >> it continues to be a slowdown year-over-year growth percentage in 2022 were 20% year over year and moved to 5% in the fourth quarter. that level of growth in

year-over-year spending is consistent with low inflation we saw pre-pandemic they're also moving from services to -- from goods to service and experience and spend more money on travel, vacations and eating out and things like that that is a good for unemployment but continues to maintain service side inflation pressure. >> we'll continue to monitor some comments. jpmorgan had their call, wells fargo making comments today as well as citigroup. morgan, those are some of the highlights right now i'll send things back over to you. >> dom chu, thank you. busy morning for you. let's stick with the banks and bring in raymond james' david long and ken leon who upgrades jpmorgan chase from hold to buy. let's start there on the heels of earnings. ken, why the upgrade this morning? how does it speak to what you saw in the results today and your upbeat perspective on it? >> so, we think bank stock pricing, they bottomed the last third quarter. we're seeing constructive

outlook. in the case of jpmorgan, it's best in class quality. we don't see demand destruction here, and what's likely is we get through the first quarter. so, we're actually going to see a more optimisticscenario for banks for the rest of the year bank of america was very different and they're setting a lower bar where they're saying, the consumer is really going to slow down spending to really low single digit but at the same time, the results were pretty good i know jim cramer has a soft spot for wells fargo they were weaker than the top banks that we just mentioned and we would stay with quality we're just seeing in the traditional bank area healthy corporate lending. we're also seeing consumer loans and rising net interest income still benefit results. that's pretty good when you have bank stocks trading at discounts to the s&p 500

>> yeah. david, let's stick with wells fargo for a minute, down 4%. we knew there was going to be this $3.7 million settlement and charge the fact the stock is trading lower, the fact this restructuring we've been talking about for so long now, still seems to be maybe at least in some aspects, according to some estimates falling short still, how do you see it? >> yeah. obviously, a little bit of headwind this quarter with some of the noise but i think i'll say, i'm on jim cramer's side of that steak dinner bet i'm still bullish on wells fargo coming out of their results this morning. they had the cap in place for the last five years and it forced them to really manage that balance sheet well. have a very efficient loan and deposit base that deposit base is proving right now to be very beneficial. they have the lowest deposit cost of the bigger banks as rates move higher, you're seeing them increase those

deposit costs at a slower pace than their peer group right now. also loan growth loan growth has come back. wells fargo is a place bankers would like to work as they're going through their recovery and charlie sharp has replaced a lot of the management team there are now bankers on the street that look forward to getting a chance to help wells fargo become the -- one of the po powerhouses in banking when you compare them to their peers, expenses ran higher because of the noise in the home lending business this quarter, but over 2023 into 2024, one of the few banks that will be able to reduce core operating expenses this is a function of the head winds they had not being able to cut expenses but also a lot of compliance and other costs that will come out over the course of the next several years that's a benefit the earnings growth prospect versus their peers as well

>> ken, i want to get your thoughts on citi revenue did rise 26% the fact that institutional clients group is up 3% trading revenue up 18% i guess just walk me through -- this is another name where we've been seeing some restructuring, we've been seeing changes under way under a relatively new ceo walk me through that process is going and how that's reflected in today's numbers >> well, for investors, this is the cheapest faang trading at 50% the net book value they're one or two steps behind wells fargo on a turn-around or what they call transformation. it's hard work to get all the pieces of the global bank working together they have already had the major catalyst, which was the announcement of selling off non-u.s. consumer banks. and at this point, the question is, where does citi want to be strategically? it's certainly not a dominant

u.s. bank. there are elite tables for credit cards, but mostly global and they're competing against ubs and others so, the question for frazier is where do you go from here because they're certainly not going to catch up to bank of america or jpmorgan chase in the u.s. market. so, again, they're one or two steps behind wells fargo on any kind of a turn-around. >> david, more broadly, looking at the bank sector as a whole, rising interest rates, which may be, perhaps, depending on who you speak to, could have potentially peaked late last year double-edged sword potentially for some of the banks, wells and others, in the sense that maybe it cuts into loan origination, things like the mortgage business on the other side you have net interest margin benefiting from that how to think about that balance across your coverage universe, not only through this earnings season but as the year unfolds

>> sure. i think with this quarter and the results we saw so far, and we can extrapolate this into next week and the regional banks and other banks that get to report earnings, but deposit data, the cost of deposits are rising very rapidly and much more rapidly than what we heard on the calls back in october when you look at net interest margin on the banks, we're peaking in the fourth quarter. some banks have the ability to get some asset sensitivity out of their balance sheet and get some extra net interest income into the first and second quarter. you'll see peaks in the first and second quarter by and large, i think net interest margins are peaking and you'll get that guidance coming down, like we saw out of wells, like we saw out of jpmorgan today, as we go through earnings season from a lending perspective, lending has been very good in 2022 but when we look out to 2023, because of the higher rates, because of the uncertainty in the environment, we do expect loan growth to slow

for the banks. that said, some of -- some bank clients still have very low utilization rates as their cash gets spent here early in the year, we think they will start to pull on those utilization rates, which will give the banks some loan growth again, it's definitely going to lead to slowing loan growth in 2023. >> yeah. ken, a number of the ceos coming out this morning, jamie dimon at jpmorgan, brian moynihan at bank of america, and everybody has a slightly different or more nuanced commentary around it, but everybody basically signaling they are seeing and/or expecting a slowdown, maybe in the case of jpmorgan even potential recession. economically speaking you're starting to see loan loss reserves put aside as well put into context for me what that looks like right now given the health of particularly the consumer and given the fact that we have seen much larger sums both put aside and released in recent years >> so, we're seeing really loan

growth reserves get back to historic normalized levels from below. kind of pre-pandemic and what it means, you know, we do look ahead to the first and second quarter you look at bank analyst earnings estimates they're actually going to be up year over year and then for those that are global banks or have a large investment banking franchise, you're kind of foiled for an opportunity in the second half of the year. that sort of thinking is if we can get through the first and second quarter and the banks are neither hot or not too cold or depressed, they're very well positioned to participate in the market certainly from a revenue and earnings standpoint, we're going to see quarter to quarter improvement for these banks. so, i think what we're hearing from the ceos today, particularly brian moynihan, is setting the barlow for opportunity to surprise on the upside

>> final question, david, quickly. top pick among your coverage universe as we do see earnings get under way over the next couple days, couple weeks? >> sure. most of the banks that were out this morning i definitely, as i said earlier, like wells fargo the other bank i like right now is first republic frc, they were on the tape this morning, reported very strong loan growth, very strong deposit growth i think that sets them up wul for this year. they have more of a liability sensitive bend very safe credit book. as investors move away from the focus on the deposit data, more of the credit name, that name will stand out in my opinion >> okay. gentlemen, thank you for kicking off the hour for us. >> thanks for having me. as we head to a break, let's give you a road map for the rest of the hour. delta shares have been under pressure since the open. this after higher labor costs hit its outlook. we'll discuss that next. plus, tesla cutting prices

in the west and the street's not happy. we've got more on that name. automakers in general later this hour. a lot more on today's overall market action following that slew of bank action and we'll discuss why blackrock chief larry fink thinks this year could be a big opportunity for long-term investors. from the perspective of long-term investors, i see 2023 to be enormously opportunistic actually, maybe the hardest years for investing for the long term were the stla few years because of negative interest rates.

i screwed up. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck.

welcome back to "squawk on the street." delta under pressure after the company reported a disappointing outlook thanks in part to higher outlook. phil lebeau spoke to the ceo earlier this morning and joins us now hi, phil. >> it's all about the guidance and the fact that delta said today its guidance for the first quarter, the expectation is that it's going to be factoring in, calculating the cost of an anticipated pilot contract, which they expect will be ratified at some point they started that on january 1st. therefore, they're expecting 15 to 40 cents as the eps the street was expecting 58 cents. that explains the disconnect between expectations and what they're forecasting. total revenue, it's going to be 14% to 17%, according to delta they expect an operating margin of 4% to 6%. when you look at the business right now, they're seeing incredible strength. they see no slowdown in demand

revenue per seat mile of 19 cents compared to 2019 q4 premium cabin revenue, people upgrading, saying, yes, i will pay for a little extra leg room, that's up 13% compared to the same time in 2019. when we talked to ed bastian, he believes this is going to be a trend that continues >> we're going to continue to see tens of billions of dollars of incremental demand coming into our space presidents day, the pick up in demand, i think this will go on for several years to come. >> one other note. delta is reaffirming its guidance for full-year 2023 earnings between $5 and $6 a share. the expectation on the street, the consensus, is $5.16. analysts have factored in the expected pilot contract over the full year. it's simply there's a disconnect between what they were expecting in the first quarter and what

delta is now saying. >> all right phil lebeau, thank you defense stocks across the board seeing pressure this morning. some of the worst performers in the s&p as well. we're going to break down why on the other side of this break don't go anywhere. 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 all this cash. if you own a life insurance policy of $100,000 or more, you can sell all or part of it to coventry. even a term policy. for cash, or a combination of cash and coverage, with no future premiums. someone needs to tell them, that they're sitting on a goldmine, and you have no idea! hey, guys! you're sitting on a goldmine! come on, guys! do you hear that? i don't hear anything

anymore. find out if you're sitting on a goldmine. call coventry direct today at the number on your screen, or visit coventrydirect.com.

welcome back take a look at shares of lockheed martin and northrup grumman, both trading lower after a downgrade from goldman sachs. goldman says defense stocks are near all-time high given the heightened geopolitical risks, the defense stocks don't focus in government cumulative debt. it is a key reason for the defense stock selloff to start the year after the group logged big gains in 2022 with the two biggest winners last year, northrup and lockheed. others like hii, huntington

ingles,raytheon, changing course fiscal 2023 u.s. defense budget was already appropriated and represents a nearly 10% top line increase in spending versus last year it's the trajectory of the future budget that is so highly uncertain. so, cowen this week saying a full-year continuing resolution, basically a stopgap funding measure, or longer, for discretionary funding may be the best outcome that's pretty incredible because, yes, it would keep the defense budget at current levels but that would still hurt military modernization as new promz wouldn't be able to commence now factor in the changes to the r&d tax credit ammoritization. it's shaping up to be a messy earnings season for defense

contractors, especially those that hadn't already baked in tax change charges into their forecasts last year. david, while these things are not necessarily the flashy, fun, visual things you want to talk about when it comes to aerospace and defense, tax accounting and fiscal gridlock are very much what are moving the stocks right now, even as lockheed, for example, just earlier this week officially got an order for 88 f-35 fighter jets from canada. >> right is there an expectation, though? given the rate at which defense spending has gone up over these last few years it would just continue to? >> that had been the expectation. it depends on who you talk to. goldman this morning in their note basically notes that when you see defense budgets move, they move in the decade long cycle and we're about eight years already into increased budgets. but with all the geopolitics,

new big program priorities, the army being a good example, you would continue to see -- and inflation, which has been hurting the pentagon, you would continue to see those budgets increase now with the talk of potential budget caps, which right now many analyst think -- which we saw in 2011, many analyst think that's unlikely. it's the fact that this is a balgs that could play out for the remainder of this year and maybe then so. the debt ceiling being case study number one in how a bigger budgeting process is going to go that's really what's leading to uncertainty given the valuations in these names and supply chain, too. it's a bad year in terms of supply chain, too, so that doesn't help. >> all right we'll be watching. as we head to break, check out the biggest laggards on the s&p this morning defense name is amongst them, of course, as well delta, gm down

on that tesla price cut.

♪ every search you make ♪ ♪ every click you take ♪ ♪ i'll be watching you ♪ - [narrator] the internet doesn't have to be so creepy, the duckduckgo app, lets you search and browse pria blocking most trackers all forf your search history is never tracked, so it can't be shared. and when you leave search, duckduckgo helps keep companies from watching you as you brows. join tens of millions of people making the easy switch by downloading the app today. duckduckgo, privacy simplified.

welcome back to "squawk on the street." i'm franc holland. here's your cnbc news update at this hour. across alabama and georgia, more than 40,000 homes and businesses are without power. tornadoes and severe storms ripped through those states destroying buildings, killing at least seven people and hospitalizing at least a dozen more winds got up to 60 miles an hour. russia is claiming victory over soledar, the first significant ukrainian town captured by russia in months however, ukrainian forces say the fight for soledar is still going on. donald trump's company has been fined $1.6 million for a scream in which top executives dodged taxes on lavish job perks. it was the maximum time the

judge could impose for tax crimes. and actor kevin spacey has pleaded innocent to seven more sex offenses in britain. the actor faces a dozen charges related to four men between 2001 and 2013 those are your cnbc headlines. morgan, back over to you >> thank you. we'll turn to the markets. our next guest maintains the fed will steer clear of sending the u.s. into a recession. the economy, rather, entering a slow session here with his forecast, moody's chief economist mark zandi great to have you back on the show slow session, aka, soft landing? >> you like that, morgan soft landing doesn't feel right. under any scenario, this year's going to be a struggle for the economy, given the high inflation and rising interest rate so, a soft landing just doesn't feel like a good description i don't expect a recession recession is a broadbased across lots of industry decline in economic activity that's persistent i don't expect that.

so, thus, the slow session in fact, i even got a url for it with a definition if people are interested >> okay. so, i guess, tell me a little more about what a slow session could look like, how that could feel, especially as despite a cpi print yesterday that at least on the headline represented a sixth consecutive month of inflation declines or the rate of inflation decelerating the fed has held the course and say they're going to continue hiking and stay there for longer what does a slow session actually feel like in that environment? >> yeah. it means slow or no growth so just to pick jobs. i think that's a good benchmark. so, job growth right now, monthly -- average monthly job growth is 250k that's above the 100k the economy needs long term to support labor growth and stable unemployment for the world dead ahead of us,

i expect job growth at zero, 50, 100k a month if you told me we had a month, two or three of negative employment numbers, i don't think i'd argue with you that to me is a slow session that's an economy that doesn't feel very good, feels uncomfortable but nonrecessionary. it's enough to take the -- continue to take the steam out of wage growth wage growth does feel like it's rolling over average hourly earnings growth is around 4% it needs to be a little lower than that. that kind of growth i'm talking about will allow unemployment to notch ever so slightly higher, take more steam out of wage growth, allow inflation to come back into the federal reserve's target in that sense it's a reasonably optimistic forecast. kind of like a soft landing but just going to feel uncomfortable at times >> mark, we heard from a lot of the big banks this morning jpmorgan in terms of setting its provision for credit losses seems to be predicting what

they're calling a mild recession in the central case. bank of america not that far off from sort of that same expectation, at least how they're positioning their loan loss reserves. are we -- is a mild recession what you're talking about or what do they see that you don't? >> yeah, no, they're thinking something a little more severe, more job loss and somewhat higher unemployment. not as severe as kind of the typical recession since world war ii i saw the jpmorgan forecast. if we went into a typical recession, david, the unemployment rate would go from 3.5% today to 6% i think they're calling for 5% unemployment rate. i think unemployment will be just north of 4% having said that, i don't think i'd argue too strongly with what the banks are doing here i mean, they're being cautious they have this cecil accounting they need to apply to come up with their loan loss provisions.

you use different economic scenarios, you probability weight them. if i was sitting down with the jpmorgan economists, you know, we -- i don't know that we would have too much of a debate except around what probability there is of a recession in the future they would probably attach a higher probability to that than i would. it's prudent for the banks to be cautious here because they do face a lot of risk here going forward. >> mark zandi, thanks for joining us. >> yeah, sure. >> he's got a url for slow session. that mark. all right, all those financial results that we've been talking about this morning are out. we're still trying to digest them some of the calls have taken place, but not all, i don't believe. let's get over to dom chu right now to help us sort through this >> david, to your point, what we have formally, the formal analyst calls for jpmorgan have finished up. bank of america is, i think, just on the verge of or just

having wrapped up. generally speaking, it's a more mixed picture for the banks overall. you mentioned some commentary coming out of the banks. i want to take you to a highlight we heard from jpmorgan chase ceo jamie dimon. one thing interesting about this call is he talked about the competition among nonbanking participants and lenders in a higher interest rate environment. this is what jamie dimon had to say about what he thinks about the competitive environment for some of those nonbank lenders. >> you have the apples doing banking services and walmart is starting theirs. higher rates alert some of the folks in the fintech world and maybe even helps some folks. we expect tough competition going forward. >> so, apple, walmart among some of those big nonbank lenders getting in on jpmorgan chase's business the economic commentary. wells fargo chief financial officer also spoke to reporters earlier this morning and had

this to say about what they're expecting and what they're saying is we are planning for it to get worse, the economy, that is, than it's been over the last few quarters i think we're preparing for a whole range of different scenarios and i think we feel good going into this environment with our strong capital position and the performance we've seen across all of our portfolios a little more pessimistic. one other place to watch, citi cfo, mark mason said he expects this year -- this year we expect somewhat of a rolling country level recession rather than a simultaneous global downturn and our base case is still a mild recession in the latter part of 2023 morgan, david, some interesting points to zandi's points of bank cfos and their outlook we have the base case looking like it's a mild recession for most people but they are positioning more conservatively their balance sheets and whatnot, morgan. >> we know that goldman is cutting head count right now given the commentary we're hearing from some of these bank

executives this morning, are there similar moves afoot at some of these banks based on what we're getting from the earnings calls and the releases so far >> what we are hearing right now is more of this notion there's a cost to discipline that many of these companies are looking to put into place we've heard the reporting about the thousands that are going to be kind of cut over at goldman sachs. all in total, between morgan stanley, goldman sachs and some other big banks, we've heard about 5,000 or so, roughly, jobs at play here in addition to some of the commentary we've seen about bonus compensation and compensation in general being cut. but with that being said, if you take a look at the overall picture right now, there isn't a lot of commentary that's necessarily pessimistic on that front. they are still looking to invest in the business to a point where they can see things growing in 2023 and 2024. there's not a huge amount of hiring binge type commentary given what we've seen. we'll see if that changes. again, we still have, david, to your point, wells fargo's

conference call and citi's conference call coming up later this morning we'll see if they have anything to say there, guys. >> i'm sure they will. we'll be listening closely dom, thank you for helping us through. as we said earlier, this avalanche of earnings. let's get to our next guest who believes we need to take the numbers reported this morning with a grain of salt here to discuss is interactive brokers chief u.s. equity strategist steve why with a grain of salt >> good morning, david the problem we have here are the banks are like the opening act for earnings season. i think in this case, banks are very id yoe san accuratic. they rely on -- they rely on interest rates and rely on trading revenues to an extent that pretty much no other industry does. the real key is what dom was talking about, what the economists are saying, what they're seeing from their customers. and so that's why i think you have to sort of say, all right, you know, i'm not going to get

too bent out of shape if jpmorgan, bank of america, et cetera, are down a percent or two this morning or not. it's more about what they're saying behind the scenes than what the actual numbers are most of the time. >> yeah. we do often get kind of -- i wouldn't say sort of strange reactions to those earnings. oftentimes down, then only to reverse over time, which i guess is my next question. what is your view of the sector, you know, over the longer term here >> i think you have to break it out into different banks, whether they are districtly loan and deposit institutions or multifaceted banks i think we'll learn a lot more about the type of stuff that's on the investment banking side when we hear from goldman and morgan next week, particularly since morgan has a huge percentage of the twitter data outstanding. and how that's going to affect their balance sheet, whether they have markups and stuff. if you're a deposit-taking

institution, one is still paying one or two basis points on checking sxkts they can lend that to the fed at 2% or 3%. that's a really good business. boring but good. you have to sort of break the banks out a little bit into what they do and how they do it what we heard today are the global banks that have huge deposit bases but also huge investment banking and trading businesses the reason you get a lot of the flukey moves afterwards is the analysts tend to discount the trading revenues as someone who is a professional trader at a publicly traded firm, that frustrated the heck out of me because money is money. but that's not easy to model and that gets lost in the wash a lot of times >> and it's certainly a fair point. how does this set us up, how does this set us up for the rest of the earnings season and trends you're watching >> yes, morgan i think the key here is what we -- more or less along the

commentary we heard in the last couple of segments what now do the other companies say? does this jibe with what the banks are talking about or not i think right now this is setting us up for some -- the potential for modest earnings revision to the downside if the weak economy idea comes to pass. and we'll find out over the next couple of weeks whether or not the major companies start to push back on some of the analyst expectations or whether or not they reaffirm them that will really be the key and that holds the key to valuation for the market as a whole. >> well, where are you then on that overall valuation you got a market call for us, steve? >> yeah, i'm still a bit in the volatility camp. i still think we'll get a lot of ups and downs. i think what we saw this week, to some extent was -- was very good broadening of the stock base but we also saw a bit of flight to crap when we were led by some of the worst stocks out there. >> yeah, best buy, bed bath &

be beyond. >> carvana, et cetera. some of that was the rebound from tax loss selling at the end of the year, in the case of meta, things of that nature. and i think we're just going to get a lot of backing and filling until we raeally get a sense of whether the economic consensus is correct it does tend to be the soft landing or slow session, but if there's any upset to that, we can move hard. remember, the fed and the world central banks are still restrictive. restrictive monetary policy tends to lead to volatility. and that's why i think you can't get too complacent in one direction or the other right now the trend seems to be okay by the time we get off the call, the market may be higher in terms of the s&p overall, i think you have to be very wary and not get too complacent in one direction or the other and just expect big swings as the economic tidz ebb and flow. >> got it. steve, thank you. >> my pleasure

>> tesla's electric slide continuing this morning. it's down about 1.5% more on what those price cuts mean for the name. don't go anywhere.

- psst! susan! with paycom, employees do their own payroll. - what's paycom? a magic payroll genie? - it's a payroll app. - payroll is way too complicated for the average person. - paycom guides them through it. missing or duplicate punches, pending expenses, unapproved pto, on and on. - why would employees wanna do all that? - this could be a stretch, but i think it's 'cause they wanna get paid correctly. i like getting paid correctly.

all right. tesla shares, you see it right there. still down about 2%. but the story of the morning so far is that it's come well off its lows but the rest of the group is actually still down. why? the news we have is that tesla cut prices rather dramatically on its key models. in fact, it has brought the price in the u.s. below that for which it would then -- the buyer would then qualify for the tax credits that are available as a result of the inflation reduction act. but what's interesting in a way, morgan, is that tesla is the best performer, and it seems to be weighing perhaps on shares of ford and gm. to be fair, both of those stocks

are up nicely for the year. >> here in the u.s. market, those price cuts that actually make those model ysuv and model 3 sedans potentially more able to qualify for that federal tax credit will mean more competition for those auto makers racing to catch up in the ev game. i imagine that's part of the situation that's playing out there in erm thes of the stocks trading. tesla receiving a soft landing stock moniker from goldman sachs. it trades 22 times forward earnings versus the ten-year median of 110 times earnings that could benefit if we don't in fact get a recession. all of that factoring in there as usual. >> gas has been the stock. of course mostly down. did want to point out, by the way, separate but related because it is elon musk, that trial for securities fraud, they

want to move the venue to texas. there will be a hearing today for a federal judge in terms of relocating that securities fraud trial. that involves the go private for 2020 tweet and whether he had funding secured, but it is interesting. he had also subpoenaed the head of the saudi fund, the pif they said they're trying to squash that subpoena for him to show up. if it does start fairly soon, we will be focused on that. in the mean tile, still ahead on "tech check," morgan stanley on whether earnings have come down enough this season or there is more pain ahead that starts in under ten minutes. stay with us whe trehe dow is slightly higher and the s&p slightly lower

just look around. this digital age we're living in, it's pretty unbelievable. problem is, not everyone's fully living in it. nobody should have to take a class or fill out a medical form on public wifi with a screen the size of your hand. home internet shouldn't be a luxury. everyone should have it and now a lot more people can. so let's go.

the digital age is waiting. the dow turning positive a few moments ago. up 52 points the s&p slightly below the flat line nasdaq trading below the flat line as well keep in mind, though, on pace for strong gains for the week where the nasdaq poised to

finish up 4% this week don't go away. we're back in two. all it takes is eight minutes to get started. then work with professionals to assist your business with its forms and submit the application. go to getrefunds.com to learn more.

welcome back markets are mixed right now as they look to close out the hour and the week shortly mike is here for a breakdown.

>> morgan, yeah. on a purely technical basis, you have a gut check this morning, some of the negative reactions the s&p didn't go below this year's low people came into 2023 defensively positioned, pretty skeptical about the general soft landing premise. and i think the on target cpi number yesterday allowed people to sort of put the inflation story aside and say, we got this unless something really changes here in the trajectory then it is all about the economy goingto buckle fast enough to bring the bearish case into reality. so far not earnings estimates seem beatable because they always seem beatable the day before reporting. i think there is a sense out there that the immediate risk is a little bit muted on the other hand, the s&p is right at this sort of proving ground of where it is going to actually break this down i would say it is a 3% to 4% up from here before you can

actually say it. you know, you will be able to have the bull market conversation if we get up there because it would look textbook to have the bottom knocked over. >> all right, mike we will be staying tuned to your commentary throughout the day. the bank stocks now actually in the green after all of those earnings this morning. that will do it for us on "squawk on the street. "tech check" starts now. >> happy friday ahead this hour, banks back with the market a messy mixed main street rollout takes its toll on wall street lending and loans in focus as earnings season kicks off. we will break down those results and the impact on thin tech today. plus, we are also talking tesla cutting its car prices getting the rare sell call and it's not just elon under pressure this