>> we can see it after the recession. even though tech has been an evaluation reset, it hasn't been that bad yet. >> no, definitely not. apple can definitely stick through it they've been holding up better than the rest. yeah, it's - >> the walk-off music, gentlemen. that's a signal. thank you. and thank you for watching "power lunch." >> "closing bell" starts right now. stocks staging an impressive rally off the early morning lows as we close out what is a solid week for the bulls with earnings firmly in the spotlight. in is a make or break hour for your money welcome to "closing bell." i'm sara eisen take a look at the turn-around, intraday dow, up 49 points. at the lows we were down 274 points the nasdaq up 0.3% it's really the banks leading the charge all weaker off earnings, all had a big intraday turn-around

the banks and discretionaries are the best performing in the market amazon is adding another 3% to what has been a banner week so far. amazon's up 14% for the week gives you a flavor of what's been happening take a look at the scorecard for the major averages this week because we are on a four-day win streak here and headed higher. s&p gaining about 2.5% for the week the nasdaq composite up 4.5% for the week some of them more risky stocks that got beaten up last year surged back this week. we'll talk about whether that can be a trend on today's show we have an inside look at big bank earnings we'll talk to wells fargo cfo mike santomassimo, along with his read on the housing market and wells fargo in that space. and bank of america's ceo brian moynihan, what he is seeing from the american consumer. it's a cnbc exclusive. let's get to the bactnks, te

moves are all bouncing off a slump this morning after reporting fourth quarter results. many rely on these banks as a preview for what's to come in the broader economy and the market on their earnings calls, both jamie dimon from jpmorgan and bank of america's brian moynihan said they're expecting a mild recession and preparing for that scenario citigroup ceo jane frazier sharing similar concerns take a look at the loan provisions the money they set aside from all four banks echoing those recession fears. they set aside more money for bad loans this quarter than previously reported lasts year jpmorgan putting aside the most, reporting a $2.3 billion provision for credit losses. citigroup reporting $1.8 bank of america and wells fargo putting aside a tad bit more than the previous quarter. we'll dive into that question with some of the executives. let's go to the market dashboard to dig into these moves. mike santoli, what sparked the

turn-around? >> i don't think anything sparked but yesterday's lows held and so far this year it's been tough to quibble with the action we've seen. in other words, dips are being brought. it's been a broad rally, the average stock outperforming the indexes. cyclical outperforming those speculative areas getting revived. so far so good in terms of a reawakening of risk appetites. where it takes us, keep drawing this line and we'll cross -- we'll keep drawing it until we break above it that's the down-trend line the s&p is around 3980-ish clearly trying to make a bid this is more than just one of those relief rallies in terms of the financials, the group as a whole has outperformed the s&p over the last six months or so. it's at about a two-year relative high compared to the s&p but it's not been the banks driving that recent outperformance here you see over two years, berkshire hathaway, right or not, is the biggest component in the financial sector in the s&p. it's more than 11% of the xlf.

that's been the performer. this right here, that's insurance stocks also strong. also, of course, a big part of berkshire. you see kbe, the large cap banks index. that's been lagging. it's been dormant. they're not necessarily expensive. they're not really cheap they're kind of pretty much in the middle of the zone and how they've been the last five or ten years. you could look at that and say, well, maybe better than expected results are going to be fueled to get these stocks going simply because they're not extended, for the most part. on the other hand, it's tough when you have the shadow of a potential recession to get really overcommitted to the banks. >> you see the airlines, they're the best performing names of the week united, american, norwegian cruises and -- >> having been crushed in the fourth quarter. >> that's the story. also on some good results, at least with the airlines. mike, thank you. we'll see you soon let's focus on the banks, and wells fargo in particular recovering from this morning's slump after reporting an earnings miss. the results come after the bank announced this week plans to

shrink its home lending business last month they agreed to a $3.7 billion settlement with the consumer finance protection bureau over consumer abuses. for a first on cnbc interview is cfo mike santomassimo. good to see you. >> thanks for having me. >> it was such a messy quarter because of the penalties it was almost hard to see the underlying trend in the business how would you characterize it? >> well, i think when you look through to the operating results, it was really good solid progress again i think you look at, you know, whether the benefit we got in net interest income from higher rates continuing to come through in a pretty substantial way. you saw really good credit performance again, strong capital position remaining you know, expenses were well managed. you know, while we continue to invest and roll out new products and add new people to cover clients. so, i think overall, good, solid operating performance, even though the quarter did have

impacts from, you know, the litigation and regulatory and remediation, you know, costs we had in the quarter that helps us but some historical issues behind us. >> but we've been talking about them for so long are we finally getting to a turning point in the regulatory issues or not, mike? >> i think what happened in december actually is a big step forward. you know, we still have more work to do, so i wouldn't say we're done with all of what we've got to get done. i think it was a big step forward in terms of really putting some of those -- you know, some of those issues behind us. >> you mentioned the net interest income. that's what everyone is paying attention to with all the banks. clearly it was a big jump, 45% from last year those fed rate hikes certainly help the forecast, though, of 10% in 2023 why was that not higher in some were disappointed with that. >> well, i think you have to look at the factors that go into it as you said, it was really good performance.

as we came into this environment, we were set up pretty well to take advantage of, you know, higher rates you know, through all the work we've done over the last couple of years to really optimize the balance sheet. but as you look forward, it's really all the basic drivers that are going to decide where we end up for 2023 you know, it's what's going to happen with deposit balances as consumers continue to spend and in some cases move to higher yielding alternatives. it's going to be deposit pricing and the competitive environment around that. ultimately it's going to be loan growth and what materializes there. that's all in the back drop of what happens with rates, which is still a little uncertain in terms of exactly what that path of rates is going to look like for the rest of the year >> so, what are you guys expecting? you added to your loan loss reserves as others did what is the signal there as far as your expectations for what's going to happen to the economy >> well, it's clear that the economy's going to continue to slow, right? and i think that's going to --

that's going to be the result of it ultimately as the impact of higher rates really takes effect you're starting to see a little bit of that now. and you're seeing stress in some consumer segments. the majority was driven by higher loan balances, particularly credit card balances came through and a little bit was related to the economic environment it's really a sign of continuing to see growth in the investments we're making in the card business, which we're glad to see come through the numbers and then the overall economic environment is a smaller piece of it. >> what about the housing market, you guys are shrinking the mortgage business with that announcement this week, ongoing process. why are you doing that what do you see ahead for pain in this market >> well, what we're doing is making sure we really focus on, you know, our -- primarily on our wealth management and

consumer clients you know, mortgage is still going to be an important business for us and important product for those customers. but we're going to focus our energy there in addition to really making sure we do a good job and even expand the things we do in minority communities to help support that piece of it but when you look at the back drop of what's happened in housing, you're starting to see some price declines across the country. nothing super substantial yet in many places, but you're starting to see that. and given where rates are, you're seeing mortgage applications still at a 25, 26-year low based on some of the industry data there. and to state the obvious, refinance volume is very low given where rates are, where it doesn't make sense to refinance your mortgage in most cases. i think you'll continue to see a challenge market across most of the mortgage players many of the industry, including us, are continuing to make sure our business is right sized for that expected volume over the

next year or two >> year or two i was wondering what the outlook was for that pressure. finally big news you're restarting the buyback in q1 what gives you the confidence to do that now with so much economic uncertainty ahead >> well, it starts with our really strong capital position of where we are. you look at our rash of 1.6, well above where we need from a regulatory minimum and buffers that's where it starts we feel like we have plenty of capacity to continue to support our clients. you see a little less pressure from interest rates on the overall balance sheet. and so we feel really confident we'll be able -- we'll be able to restart that, you know, this quarter and still continueto b there for clients and still keep a really strong capital position >> quite a turn-around for the stock today. it's now up 3.3% thank you for joining me with some of the color behind the

results. appreciate it. cfo of wells fargo we'll talk more about bank earnings later in the show when we're joined by bank of america ceo brian moynihan for an exclusive interview. tesla falling today as the company cuts prices in the u.s. and europe is it a play for tax credits or a sign of a bigger demand problem? we'll ask an analyst next. dow's up 64 points you're watching "closing bell" on cnbc.

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cuts on model 3s, model y vehicles in the u.s. and in europe the stock was also downgraded by guggenheim partners today to sell with concern over fourth quarter estimates. let's bring in collin rush how do you read the price cuts some people say it helps them qualify for some of the e vuchlt credits in the new legislation to have lower prices do you think it's a demand story? what is this about >> i think it is multiple things one, certainly there's the concern around demand, you know, and all the commentary going into a recession it looks like there's some inventory that's been built in china. i think this is an example of a good offense being a defensive move i think they're going after this market, getting into consumers' homes, building goodwill with folks on the price move as folks make decisions around buying new vehicles and they're going to push a lot of product into the market as a result we think there's really good

economics for evs and this makes it compelling in the u.s. and europe, where these prices are going to shake out >> where does valuation stand now that tesla has had such a big selloff over the last year, but some are still cutting, saying the numbers are too high? >> i think we're waiting for fourth quarter numbers to see where they shake out in the fourth quarter because they didn't sell everything they produced so there's potentially headwinds there. we're seeing a lot of the commodity -- commodity prices come down to levels that could turn into a tailwind for them on margins going into 2023. i think we're looking for some incremental information from them when they report here about where margins shake out. historically the company's pointed to margins in the mid-30s as a potential for the company. this is a process of industry building and technology node change there's going to be some ups and downs here i think we want to see where it's going to level out in the next quarter or two and start thinking about what this looks like long term as new models get

into the market. i think we'll see a little dip in this pricing dynamic and we'll see things start to level out by the second half of the year for the company >> sounds like you're giving them the benefit of the doubt. thank you for joining me, with the take on tesla today, which is notably underperforming we have a rally in consumer discretionary, communication services and technology stocks with 43 minutes left in the market trading session, there's the s&p, up about .25% just adding to the gains for the week, up 2.5% for the s&p. bank of america along with all the banks making a midday turn-around following earnings this morning we'll talk exclusively to brian moynihan about the quarter and his predictions for the economy and the consumer when "closing bell" comes right back bank of an

after beating expectations before the bell. higher interest rates helping to offset declines in banking fees. ceo brian moynihan joins us for an exclusive interview good afternoon, brian. thanks for joining us. >> hello, sara, how are you? >> doing all right trying to make sense of this turn-around. looks like your numbers were pretty good, cleaner of the bunch, i'm told, profit, interest, how sustainable are these numbers given the economic environment we're walking into >> well, you know, we had 85 cents a share, which is an increase over the last year, increased quarter. you saw pick up year to year 3 billion plus we locked in the economic -- the rate recovery and the rate is

going up and that will go forward. our core prediction at bank of america is for a mild recession in early '23 to mid-'23. our research team, been pretty consistently but it's daigle everything we see, it will be a mild recession. therefore, we ought -- we and the rest of the industry, which are in great shape on capital and liquidity, should be able to power through it and stand and deliver for our customers. will it be a little more interesting? yes. will it be a little different? yes, because the stimulus and stuff, a lot of it's still sitting there. we feel very good about our position we feel good about the team and how they performed >> you said mild recession and you mentioned that on the earnings call as well. so did some of your colleagues at the other banks why are you so convinced that it will be mild if the fed keeps plowing higher with these rate hikes into an inverted yield curve? >> what we've seen, as i've said

in prior interviews, the fed is faced with bringing down inflation. you're seeing some of that inflation tip over, which is good, and parts that are worrisome. they're trying to get it right they have to be more ardent about fighting inflation because that's the job they have that nobody else has. they're going to keep working. they've been resolute. i think they'll hold rates high for long they've been clear about that. but incrementally, the impacts, the rate structure has come up dramatically to where it is here the incremental rate higher, 5.25, which is what we have predicted, from where we are now, that's a bit but not as much from zero up to there i think the next impact will still be there the length which they hold will be there what gives us confidence is look at employment levels, wage earning levels, consumer spending levels. yes, they're starting to come down and they've come down but they're still consistent with low inflation growing economy. as long as american consumers are in pretty good shape,

america will be in good shape. >> you said on the call you still see a cushion there with consumers and the consumer is still in healthy shape, even if slowing. give us more color, if you could, as to what you're seeing and what you expect and how big that cushion is. >> well, think about a couple different aspects. in the first quarter of 2022 consumers were spending 14% more in the first quarter of '22 than '21. that's back down to 5% of '22 versus the fourth quarter of '21. and then what they spend on has switched from goods to experiences. travel, out to eat, things like that that's moved along, going to movies, going to concerts, things they haven't been able to do and now fully set up. you've seen that change. travel is obviously increasing that spending has come down to be more consistent where it was

in '16, '17, '18, '19. bad news, it's slowing down, the fed has pushed the consumer to be a little more conservative and the environment but the good news is they're still spending consistent with growth that's why we believe -- the second part is, do they have money to spend if you look at balance in our accounts, they're moving down slightly still sitting with multiples of where they were pre-pandemic for the same consumer coming out a bunch of years third is cash flow and pay their employed and wage growth is still strong even though it's flattened out a bit. you put all that together and that's pretty good you see delinquencies are coming up and people say, oh, my gosh, they're rising they're still not near where they were in '19, which is among the best consumer credit statistics our company has had in its history so you're still not near normal. that means they're getting worse but in a broad base of consumers you're not seeing the stretch

yet. that bodes well but it's slowed down and maybe that means the fed can slow down and be more problemtive about where they want to go. >> that's my question about you and how that effects your business the net interest income number, some gripes with the number you report a little lighter than analyst were expecting, leading them to wonder if the numbers were too high going forward. what does that number look like for you? and can it still grow if the fed pauses >> so, we had $3.5 billion growth from last year's fourth quarter to this year's fourth quarter. in the last half of the year we had $1.3 billion in linked quarter. those are heavy numbers. now we're up to level. the question now is, we've got to let the deposit level set in and from the end of third quarter to fourth quarter they were flat. are they in money market accounts or checking accounts, interest-bearing accounts? those changes have occurred.

we're seeing relative stability but still seeing drifting down of deposits. that leads us to believe you have to be careful about your forward projections. at the end of the day, what we told people today, next year's ni for the year ought to be up nicely from this year but don't leap off the fourth quarter and annualize it out until we get to stability in consumer balances and loan growth can grow, can you grow deposit balances, that's going to be a challenge for the banking system it's a pretty good challenge to have when you earn 15% on tangible common equity, your credit costs are under control, leverage operating six quarters in a row we've been through tougher time as an industry and a company. >> you mention deposits going down a little bit. what's the story there how much longer can you keep paying these low rates on these deposits for consumers >> it's a very sophisticated question, sara, because money is used -- cash is used for different -- there's transactional cash, money goes in and out to pay people's

bills. that's money in motion so in our consumer area we have $600 billion of checking accounts those rates don't move much. half of them or more are noninterest bearing so they have no rate and other are low cost deposits the far other end of the scale, the corporate business, for large companies. they start moving their cash immediately out of zero -- when the rates moved up that mix has taken place and we showed people that today all the parts in between so, investment cash is in the move transactional cash tends to be sticky or no interest rate accounts that's because that's how we get paid to do you'll the transaction work what makes it sticky, 3900 branches, the ability to go nationwide and accomplish your banking anywhere we have the nice wealth management business in the middle which continues to add, i think last year, 115, 120,000 new banking customers in the

wealth management business and a million new -- a million new checking customers in the consumer business. those both add newclients and new customer balances in, which helps us grow. >> yeah. my question on that is on layoffs and just how you're positioning the banks. a number of your colleagues in the news, goldman sachs, morgan stanley, layoffs, retrenching, belt tight continuing ahead of the economy expected to slow are you doing any layoffs? and why not? >> three parts to employee at the end of the day is how many people you have you can get there by eliminating -- slowing down hiring you can get there by letting people off and you get there by people leaving and retiring what happened in the four quarters of 2022, last year at this time we talked about the great resignation and attrition rates were way up. we turned on a hiring engine to make sure we could meet it in a given month we hired 4,000

people -- 4,000 people left the company, hired 2,000 in the third quarter of 2022 it goes in the opposite direction we slow down hiring, let attrition be our friend and manage head count. at the end of the day we have to have teammates that can serve great customer base but you have target levels. even with 10% turnover rate for our company, which would be very low and great on a relative basis, the lowest we've gotten is mid-8%, that means we have to hire 20,000 people to have the same amount of head count. we have lots of opportunities to manage head count down and that's what we're doing. eliminate open position, no hire, and then make sure we can provide a great service and hire relation bankers, wealth management teammates to financial advisers and client adviser and private business bankers. we hire production people and keep operational excellence going on the back end of takeout

jobs we can engineer out. >> makes sense, attrition. the pain is in investment banking. is there any sense we could be bottoming there and we'll see a recovery in 2023 >> there's a sense and a hope. the pipelines are still full we bottom and we've been bouncing around about $1 billion in fees. down 55% doesn't feel good year over year but bouncing around $1 billion in fees. we've got some room to go to get back to we are we were in a more balanced economy the idea is it's relatively stable the last couple quarters, right around $1 billion. those teammates work within a franchise, the global corporate investment bank, which has lending, transaction services, investment banking, capital markets and many other services, merchant services and things like that, which are growing around them and they're getting record growth and returns at the

same time investment banking it's amazing to think they're overcoming that downdraft. our pipeline seems to be fairly full we have to see the market stabilize to get those activateds. >> you're talking in the ipos, m&a, all of it >> debt financing is the biggest part of it, and ipos, m&a. with debt capital markets that impacts the ability to do m&a. it's been run around to stay in place. hopefully, you know, we'll see this stability come in the system we got to get through the debate you and i were having earlier about where rates go and we'll have a deep recession versus a mild recession at the end of the day, this is why we have this great balanced franchise. our market business just had -- and global markets the best fourth quarter they've had since merrill and bank of america came together in 2009 there's always offsetting things to make up for it, that's the backe of america franchise. >> what about loan growth? coming off a pretty strong year for 2022, what is the outlook

for '23? >> well, we basically think it moves back to where we typically have grown loans, single digit loan growth -- we grew 10% this year that was a bit recovery out of the pandemic, people borrowing back up. we had $1 trillion to loans, we fall and back over to $1 trillion plus and grows from here we think mid-single digits grow through the year, led more by commercial and some consumer line the first quarter you'll see a downdraft in credit cards, uptick in other stuff. the commercial borrowing has softened largely because they're facing the same questions we talked about earlier so, the line use is down a little bit it was on a constant going up. it flattened out we're seeing good origination and small business helping as the largest small business bank in the country mid-single digits. >> got it. thank you very much for taking all the questions on earnings

day. appreciate it. >> thank you, sara. >> it's getting noisy here because it's the traders ahead of a long three-day weekend. that's what you're hearing brian moynihan, ceo of bank of america. much more on the outlook of the economy when the world economic conference kicks off in davos. i'll be there with a huge lineup of ceos. we'll talk to jane frazier, marc benioff, pfizer's albert bourla, and coca-cola's james quency, service now's bill mcdermott it's a great lineup and so many different industries across america and the world about what they're expecting for 2023 it all starts tuesday live from davos. when we come back, wall street is buzzing about a major red flag being raised by one of silicon valley's most successful venture capital firms. details when "closing bell" returns.

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recently launched venture funds. at an event recently they said in san francisco the main change is limited partners will pay fees on capital deployed rather than the more common capital under management the move comes as private companies have continued to slash their valuations just this week the information reported stripe cut its internal valuation by about 11% that's at least the third time since june stripe has done so, bringing the total reductions to about 40% in four months stripe isn't alone another company waiting in the wings to go public we talked about, instacart cutting its internal valuation by 20%, the information reported in late december that's about 75% lower than its peak last year private markets generally lag the public markets with tech stocks still under pressure from higher interest rate environment, the worst may not be over yet. although some signs of hope in the market this week with the nasdaq up about 4.5% take a look at where we stand right now. in the markets, looks like we are extending the gain

four-day win streak. nasdaq is up 0.75% it is being driven by some chinese internet stocks. amazon is up tech communication services and consumer discretionary are higher the only thing not working today, again, the defensive groups that's what's been lagging all week long. we're talking health care, consumer staples, utilities. small caps are up 0.6%. larry fink when "closing bell" comes right back

goldman sachs downgralding a tree offof big defense stocks and underperforming. the analyst behind that call joins us when we take you inside

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you can stay on top of the market from wherever you are. power e*trade's easy-to-use tools make complex trading less complicated. custom scans help you find new trading opportunities. while an earnings tool helps you plan your trades and stay on top of the market. we are now in the "closing bell" market zone. cnbc's mike santoli here to break down the crucial moments of the trading day goldman sachs on defense stocks with a big call today. we'll pick it up with the broad market, up 95 points the dow is about a third of a percent higher we've been talking about this every day, about what's working

so well this work. first of all, amazon is having a killer week, but so are some of the more speculative parts of the market, the riskier parts and the more beat down parts, like media names warner bros. discovery, the ark innovation fund having a good week, up 15% almost. are the charts convincing yet or you see this as a bounce >> i wouldn't say the charts are most of those areas are convincing in the sense they're all of a sudden now going to levitate anywhere near back toward their leadership position back where they were but it is very typical of the first part of a new year where you do have just these reversals. essentially, they kind of snap back type rallies in the most beaten up stocks i would be concerned about it and think it might be a head fake if you weren't also seeing kind of the rank and file of consumer cyclical stocks do well if you weren't seeing credit markets be very supportive if you weren't seeing a kind of

breadth movement to the upside in this rally. if it were just the beat up stuff getting bounces and a short squeeze as opposed to that being a feature of the overall picture, i would be more concerned. >> blackrock is up a bit the ceo larry fink sees more market opportunity ahead after a solid start to the year for it the major averages this is what he told cnbc earlier today. >> 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 last few years because of negative interest rates. >> clearly, mike, that would be good for his business over at blackrock as a manager what did you make of the sdments. >> i think it's important to get at really what he was talking about isn't just that stocks are an outright buy because of the levels they're at but the fact

you do have yield in safer bonds that you can access pretty easily in a portfolio gives you a little bit of a head start if you just bought safe bonds at the beginning of this year with your whole portfolio, you have 5% income on the way to whatever else you do over the course of the year whether you migrate some into stock or whatever. he was basically saying there's a little more of a cushion out there if you want to set up a diversified portfolio as opposed to fighting the headwind of zero percent rate where you had to reach further risk to try to meet your goals in terms of longer term return. >> the idea we're back to a normalized environment as we're not in negative rates. a lot of people, especially stock pickers and people who manage people's money think that what about blackrock as a stock to own in this environment >> well, that's a stock that really does move as a magnifier of what's going on in the overall market because they get paid on assets under management as well as flows, you know, it's kind of a

supercharged way of playing the stock market it's held up relatively well that's block, not blackrock. it looks fairly cheap based on current numbers. and i would say that, you know, it's not going to necessarily distinguish itself apart from what the market itself does, but they've done a decent job of keeping the flows coming in, even in a tougher stretch for the markets. >> and with profit falling 20-something percent blackrock shares up a little bit. let's get another check on the bank stocks heading into the close. what a turn-around jpmorgan, citi, wells fargo all trading higher gaining steam during the session after weakening this morning we just spoke with brian moynihan i asked him if he had a sense of when the pain in investment banking, those fees would be bottoming. here's what he said. >> there's a sense and a hope that pipelines are still full. we bottom and we've been bouncing around the last couple quarters $1 billion in fees. down 50% doesn't feel good but

bouncing around $1 billion in fees before we had the run-up in pandemic and change in rates and everything, we would be about $1.5 billion in fees we have room to get back to where it was in a more balanced economy. but the idea is it stayed relatively stable the last couple of quarters, around $1 billion. our pipeline is full we have to see the market stabilize to get those active. >> pipeline fairly full. i specifically pointed to debt financing, big opportunity in business for them, and also ipos and m&a. that's a pretty interesting call f we really are at the bottom. that would bode well not just for his bank, those that rely on more investment banking. >> it's a pretty easy case to make that activity probably can't go down much from here, right? there's been an absence of ipos, general equity financing hasn't been strong. m&a is running well below where

you would otherwise expect it to at this point in the cycle it does seem as if they're looking up at the chances for volumes to get better. now, whether it happens quickly is a huge question i think the ipo market is only really going to kick in if the nasdaq goes on a pretty good run and you see small caps participate and growth investors are back in the game and they have inflow. all those things but once it does happen, there are a lot of companies so the pipeline point, we've gone a year and a half without really having much in the way of new offerings. there's some catch-up to do. >> the other takeaway, and this is what makes the banks battleground stocks is the comments from moynahan on net interest sustainability and also wells fargo. stephanie link, a frequent guest on cnbc, thought that moynahan sounded more bullish than he did on the conference call on the net interest income outlook. what do you think? >> yeah. in the sense that they don't feel as if it's going to become a super competitive environment on the deposit side to try to

finance themselves, which would hurt the net interest margin i think that's -- it's acceptably plausible point it's hard to move banks. they don't really need the deposits that's why they're not bidding heavily for them we came out of the pandemic. they were choking on deposits. i think it's plausible that they can have that hold up a little better of course, we don't know exactly what the fed path is going to be that's going to have a lot more to say about net interest. >> right, if they pause. goldman sachs warning on some of the top defense stocks let's hit those. downgrading lockheed martin, also northrup grumman. they see fresh scrutiny of u.s. debt and a possible defense spending slowdown that could deal a blow to these stock prices noah, the analyst behind the call, joins us now what stood out to us is that it's pretty much against cons consensus. all we hear is defense spending is ramping up from governments around the world

finally happening in europe. look at the geopolitical situation. we still have a war in ukraine but you're sounding the alarm here on budget mrults in the u.s., you think that's going to make a big difference? >> that's part of the call, yes. and thanks for having me on, by the way. >> thank you >> dwrefense stocks over time a pretty good companies. they have a naturally good business model and compound cash flows over time. it's true that last year the geopolitical landscape became a tailwind to defense companies. the challenge is the budget ebbs and flows over time. it typically has strikingly consistent upturns and downturns. we've had eight years of growth in the defense budget, even before what unfolded last year and then the price the market is willing to pay also ebbs and flows. after last year's large relative

move, the revelations are high today, despite what you see in the geopolitical headlines, the bottom line is that defense stocks trade at all-time high valuations, all-time high budgets and it's hard to generate excess returns mathematically from that standpoint >> we know the environment is toxic in washington and they sounded the alarm today on debt ceiling by june, having to take special measures i guess i'm wondering if we can afford in this geopolitical day and age, and also with some bipartisan support for what we need to do, militarily and in the world, if we can really afford to cut defense spending >> yeah. i mean, i'm not sure that we can afford to cut defense spending we're not really making the call the u.s. will cut defense spending the call we're making is with

where valuations are and what we hear from investors in the market we think stocks are pricing in that the defense budget will grow, you know, a nice, steady 5%, 6% a year the next five to six years. if the defense budget is flat or up 1% or 2%, and the battle for the speaker of the house talked about taking '24 spending back to '22 spending, so that would be down a bit. if it's flat or slightly up, that's worse than what's priced into the stocks. the call here is not a reversal or solving of the geopolitical situation, it's really what's priced in is a very robust scenario. >> i want to point out two names because noc and lmt go to sell why those in particular, more vulnerable to you? is that a valuation call >> part of it is valuation, those that have become the highest priced stocks in the group, relative to the market and relative to the peer set and then they're also the pure plays, the bellwethers in the space that are 100% defense.

raytheon has a sizeable defense business but also a great commercial air space business. we're bullish on commercial air space. we spoke about the boeing call general dynamic has a private jet business we're bullish on private jets. we had sell on a few other defense stocks it's really where there is that pure play that's more risk. >> looks like wall street is picking up on your more cautious stance on defense. those stocks underperforming thank you for joining us to talk about it, noah. there's the two-minute trading mark mike, what do you see in the market internals >> pretty positive again, sara the index has built strength throughout the course of the day. breadth started out middling and it's improved over the course of the day. not quite two to one advance in declining volume has been a grab for faster moving stocks, a little more beta exposure. look at higher beta stocks relative to low volatility ones. it goes with what we were saying

before, more aggressive, speculative stuff outperforming in the early going as the s&p 500 was just a little too close to the 4,000 mark not to give it a shot we're going out pretty much right around that level and right around that downtrend line from the january 2022 peak the volatility index really in retreat. going to close at 18 this is the lowest close since early january of last year so, essentially before the entire downtrend started we'll see if it's a new character of the market where this does not prove to be a sell signal for equities as it has when it's gotten below 20. >> leaving us with suspense. up 100 points or so on the dow. we're not too far from the best levels of the trading day. we started -- actually, just about at the best levels we started the day much lower, down more than 200 points. got an intraday turn-around just building on strength we've seen all week what's taking us there the banks. jpmorgan, biggest contributor, caterpillar and goldman sachs which reports earnings on tuesday. s&p 500 also going to go out

with a gain and 2.5% gain for the week what's working today besides the banks, consumer discretionary. thank you, amazon, which is having a great week. health care, communication services also doing well and so is technology. big winner on the week, the nasdaq adding 0.75, now up 4.5% on the week. that does it for me on "closing bell." have a great week. i'll see you next week from davos, switzerland in the meantime, into "over"time"" with scott wapner i'll speak to an investor who changed this market, kevin simpson, back with his latest trades and a strategy he says can be a winner for you. we begin with our talk of the tape with earnings which are really about to heat up. we'll extend this early year rally in stocks or derail it if today's bank reports and stock moves are any indication, it's going to be a volatile ride over the next few