>> good to see you >> great to be with you. >> we have another big show coming up tomorrow from davos. among our special guests, jpmorgan chairman and ceo, jamie dimon, and morgan stanley's chairman and ceo as well they will both be joining us this does it for us today. there's james gorman this does it for us today. now it's time for "squawk on the street." ♪ good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber live at post nine of the new york stock exchange. futures, modestly green here as the market absorbs a morning of soft ecodata ppi is a miss. retail sales down more than double the estimate. yields backing off the curve two-year near 4.12%. our road map begins with easing fears in davos, anyway, as hopes rise for a soft landing.

a bunch of economic data crossing the tape today. microsoft considering cutting as much as 5% of its workforce. and shares of moderna are rallying ahead of the opening. the company reporting positive results for its rsv vaccine let's begin with the markets as the nasdaq tries to extend its daily win streak to eight now. we'll get more data in a few minutes with industrial production >> i think we're getting exactly what we were looking for, different from what the bears were looking for you're getting softer data, but not so soft that you're going begin to believe that things are cratering. you do have mortgage rates falling to the lowest level since september. i don't know if jay powellme was that what i see happening is kind of quintessential soft land, and that plane has been very difficult, but right now, the plane looks like it's got the runw

runway in its sights >> you see this note from jpmorgan not saying we're getting toward the end of the rally >> this win streak, by the way, is matched by one from november '21. does anyone remember what happened in november of '21? that's when the nasdaq had a win streak and then the pivot began where the fed changed its view i'm trying to figure out whether we should be kind of, like, o'hara-like, who had these stories where it begins and ends with the same thing. i mean, you begin with a very long streak, then you go through this incredible time that's bad, and then you end up with, like, wow, we bookend. or is that just too cute >> not an easy thing to figure out. >> no. no i mean, i certainly remember that the worst time in the world to buy the nasdaq was after the last seven-day streak, and i think it's so funny because right then, we were beginning to think, you know what let's think more secular than

cyclical let's think about what could happen so today, we have, well, what could happen is, give me a speech, we're down by seven during the halftime, and this, you know, cgb comes out and says, last time we were like this, it was 1963. yes, okay, really cool it's a parlor game maybe one day it will be transferred to industrial. i'm talking about cgpt >> you're talking about what what kwldo you call it >> i called it the technical term, but carl, i love anything -- when i was at nvidia, and i said, you know, i want to paint like matisse, they said, go ahead it can be done now i can have a rah rah speech during halftime. i can say, i want a speech like doug pederson. >> will you ask chad what happens if the debt limit is not

raised and will it impact the markets? >> what should i say between carl and david come back from commercial. here it is it looks like we can keep it until june because janet yellen has figured out ways to do it. david, perhaps we're over -- >> we're okay until june >> we should not be as worried as others. >> just wait in two years -- >> for the record, he's asking siri >> in two years, he'll be asking chad >> we don't need people. by the way, you could have me saying, you know what? i think the chinese are our best friends and what we ought to do is just lay down our arms, give them taiwan, and you know what all is forgiven. and then i find out that i said that on air, but it wasn't me. you don't think that could happen >> that will begin to happen yes. >> are you concerned or is that the kind of thing where we should be worried long after we make the change and become digitized >> avatars or whatever of our

own selves >> when i was with zuckerberg -- >> deep fakes? are we going to be deep fakes? >> are we fakes? >> no, will there be deep fakes of us? >> microsoft might miss the quarter. >> to jim's broader point about sentiment shifting here, embracing the possibility of a soft landing, certainly something that larry summers and david solomon are saying here's what he said on "squawk" today. >> i think the sentiment is softening a little bit, and the view that the chance of a softer landing, both in the u.s. and europe, is actually increasing our economists, our economics team, has been pretty soft landing over the last six months i was more in a position, because i was talking to ceos, who have been more cautious, that i was more uncertain, but i see ceos softening a little bit. >> interesting, because we have had a lot of discussions about the difference between solomon's view and the house view at

goldman. >> it's so funny you mention that brian moynihan gave us a speech, we had the conference call, and it looked like, not to worry then on monday, recession. >> yeah, brian moynihan changed his tune a bit he said, mild recession, and then he gave all these reasons why it wasn't going to be that bad, but he did say, mild recession, whereas solomon here is going the other way, in part, because he had, to carl's point, a different view than the economists, for example, in terms of the likelihood of a recession. he thought it was at least 50% i think he thought as well, based on his conversations with many ceos, that it could be deeper, and he does seem to be backing off that view a bit. >> let me follow up on that. in other words, a ceo can look at all of his book and business and feel very positive, and then deal with an analyst who's maybe not as in touch with what the customer base is doing but is

more in touch with what the world is doing and temper his positive outlook >> my sense is that solomon is taking his view from the many conversations he has with goldman's clients, typically -- >> in davos. >> -- the senior executives of various companies, and that very recently, perhaps, he's gotten a bit of a better view not that things are not still not going to be potentially mild recession, but better than he was hearing, let's call it, a month ago. >> my friend carmine knows more about many businesses than all of us, runs ey, said, look i got here and people are much more optimistic i was with him watching the giants win, but they expect that davos would not produce optimism i didn't think there would be much optimism. i thought davos would be, like, okay, ukraine, inflation >> but is that optimism? moynihan seemed to get more

pessimistic. >> i'm saying carmine joined solomon in the positive camp, whereas bank of america, i think, that brian moynihan may have been more positive. i don't want to confuse the viewer at home i think the takeaway is, holy cow, people are all over the place. some are very optimistic, and then you look at the -- at what united airlines is saying and kirby, and it's like the ramp is big. then you look at jb hunt today, fourth largest trucker, and they're like, oh my god, we're missing on every line. i come back and say, this is the inflection point where you have a lot of companies beginning to miss, but we don't mind because that miss is going to translate into something good at the end of this year, because jay powell says, you know what, it's

starting to work for me. ppi, a little bit weaker so, this is what i expected. i have always put more faith in jay powell than everyone else, to the point where my wife looks at me kpand says, listen, the m love thing, cut it out the numbers from davos confirm so far that the plane is -- the runway is looking good and you don't have to foam it. you ever been on a foam runway >> thankfully, no. >> holy cow. you start thinking, you know, that's not, like, bathwater with the, you know, bubbles >> you've told us before, when you were on that plane and the wheels didn't come down. >> you bounce four times and then it ends and nobody talks about it because you're not supposed to. but i think this is not feeling like -- this is not feel like a foam runway. >> you think this one has wheels >> yes we always think it's crash or easy there's crash, foam runway, and bounce, and there's, like, okay,

nice trip. and we're getting closer to, okay, nice trip. >> if he can engineer a soft landing, then your faith in him will have been rewarded. >> well, i'm out there with him. i don't mind >> big piece of that could be china. i don't know if you saw katie's chart work today but they are arguing the market is not appreciating the reopening could be on par with '08 or '09, investors still inefficiently exposed. they say china gdp at 4.7% >> i'm so glad you mentioned that because, three points that were interesting china raised gdp u.s. equities likely to disappoint that's a bit of a bummer, but people don't like them luxury goods, very strong. there's china again. and banks, nobody likes them i don't want to -- i don't want to present everyone with a difficult view, but her view that china's going to be strong is simply the total outlier view and yet, he's katie huberte,

formerly covered apple, so she forces you to rethink, and i think on the fly, i know i'm rethinking, but i was frantic this morning >> what about oil prices you had the iaea raise by 200,000 barrels, their estimates for demand, and that's china a day. >> you listen to the interview sorkin had with the indian minister we're using russian oil, no we're not. the oil picture is muddled, but i think muddled is the answer. we all want to discern and say, this is what it is no it's this curious amalgam of good and bad and more demand, less demand. you listen to the oil demand for next year, it's going to be better than this year, but what does that say about chevron? we live in dual worlds >> okay, but if oil demand is

101 or 102 million barrels a day -- >> then you go buy eog i mean, you know, i'm just trying to translate the macrodata into what people want to know, which is, do you sell microsoft or buy >> good segue, because we are watching mr. softy company set to announce layoffs as early as today. company's contemplating about 5%, which would amount to roughly 11,000 jobs. earlier this month, satya nadella does say he sees challenging time for tech. >> the next two years are going to be the most challenging we did have a lot of acceleration during the pandemic, and there's some amount of normalization of that demand, and on top of that, there is a real recession in large parts of the world, so the combination of pull forward and recession means we will have to adjust, and that will cycle

through the demand cycle, and in fact, come out of it with what can be another massive growth cycle for the tech industry. >> they have been eliminating some open positions santand pau some hiring, jim we'll see if we get this today >> i do believe that i'm waiting for that but the nasdaq, that is from january 4th. and that's the day the nasdaq rally began. and i think that one of the reasons why -- that's very contrary, but there were many shorts being built into that period, and i think the shorts got their event, which was satya -- no one really saw that interview coming, but that it was time to sell, and they have had their heads handed to them, because the market's been up in a straight line since that speech >> yeah, yeah. but layoffs continue as well, though, at many of these companies. again, this is a 5% here, salesforce is, what, 10% number. amazon -- i mean,

percentagewise, small number jobs-wise, large given the amount of workforce they have. meta started with a fairly significant double-digit potential decrease in their employee population. are we -- back to your points about soft landing, jim, are we sort of one and done with this run of layoffs >> we have to have some serious bankruptcies i don't know if you consider party city, bed bath has been holding on people thought that would be one. but you need job loss. you need bankruptcies. you need the kind of thing you saw from goldman-sachs on loans. quite shocking that goldman-sachs should not get -- do not give goldman-sachs a free pass their credit checks and small loans were abysmal against that, you have gorman who took away the risk over at morgan stanley, but you need to see these negatives happen, and the negatives are very jarring,

because it's like, well, wait a second microsoft, two years negative, wow, that's -- it plays into the soft landing theory. and then people like it when they do the layoffs because it shows discipline >> but is this -- well, i mean, you don't know we don't know. but is the expectation that they will complete these rounds and that will be it? >> i think the expectation is that they'll complete these rounds and at that point, artificial intelligence will begin to get kick things in. i disagree with that entirely. i think that they have to see some pickup. now, there was a -- there are some stories about morgan stanley, for instance, sees, in a piece where they recommend downgrade ibm, they talked about early signs that the technology trigger pullers at companies, budget stabilizing i cannot get that from anyone else

frantically trying to get that from anyone else but they do see that the chief investment -- >> meanwhile, it's a year since microsoft announced that deal to acq acquire activision obviously, still trying to get regulatory approval. possibility in the states is that it will have to go to court to do that, facing off against the ftc. the main event in the uk, there's not a lot of transparency there in terms of what the antitrust regulatory body in the uk is going to choose to do here. we are expecting to hear something fairly soon. it's a panel for -- so, four-person panel. where's my notes oh no. >> david, while you look for it, we do have nadella's blog post already out. and they are eliminating 10,000 jobs through the end of fiscal '23. less than 5% of the total employee base.

$1.2 billion charge related to the severance costs, and other changes, jim on a day where we got much smaller moves at companies like teledoc and unity software yesterday. >> well, look, right now, we're rejoicing in the tape -- the premarket tape i'm not so sure that's going to be the case when we sit back and say, well, we're about to get reporting. now, obviously, how's microsoft going to have an upside surprise if they're laying off all these people >> it's unlikely, one would think, but the market reacts usually positively towards companies trying to show some discipline on cost >> yes, they do, and what happens after a couple days is they peak out, because we like cost discipline, but we also like upside surprises. we like cost discipline now, but when we see the quarter, i don't know if we're going to love it when the cat's away, the mice will play. we're in a mice play moment.

and i fear these layoffs are coming because when you see the numbers, they're going to be disappointing. and so, today, on this eighth day of possible nasdaq, i caution people that one day, we're going to wake up and say, wait a second. you're telling me all these companies are laying off people and we should still like the stocks going into earnings that historically has not been the right thing to do. >> meanwhile, the technicians watching percentage of s&p names above the 20-day, the vicks below 19 you think we peter out here, it sounds like. >> i just -- i lose my enthusiasm for companies after a while, because they're laying off people, and instead, i start thinking about, i want more united airlines kinds of numbers. but look, the soft landing, that's a soft landing number that's a soft landing number the retail sales were soft landing numbers. it's just that, do i want to be in the stock that's part of the soft landing discussion, or do i want to be in the stock that's part of the inflation reduction

act where they're getting a big handout from the government? and i think for the moment, i would rather be in -- after a nice run off the bottom, i would prefer to be in the stocks and rev up and you're reading the stock does this stock tell you, i want to buy microsoft >> well, mr. nadella does say this is the context, that is, these companies must strive to deliver on an ongoing basis, aligning their cost structure with their revenue and where we see customer demand. and so, again, those 10,000 jobs, less than 5% of their workforce, by the end of the third quarter of fiscal year '23, important to note he says, "while eliminating roles in some areas, we'll continue to hire in key strategic areas. we know this is a challenging time for everyone impacted." and then goes on from there. so, jim, you know, read what you want into that >> okay. i think it's too early to tell i don't like to come on top of

a -- now, a seven-day rally that begun right at the time that nadella said we got two years of pain, and now we finally get the layoffs. i would prefer to buy companies that don't need to lay off people, because business is good and yet, these other companies allow the fed the room to not have to raise. so, who does that fit? well, oddly, it's jpmorgan it's bank of america it's morgan stanley. they reported very good numbers. i like those numbers more than i like -- >> you see that microsoft will have a $1.2 billion charge as a result of severance? >> great >> okay. >> we'll get cramer's "mad dash." >> i want to be skeptical. >> and countdown to the opening bell in a moment obviously, watching that, by the way, while we're talking industrial production was a miss yields fall. ten-year now below 3.4% and the two-year, below 4.09%. back in a minute ♪♪ ♪ a bunch of dead guys made up work, way back when. ♪

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about seven minutes before we get to an opening bell at the new york stock exchange. let's get our "mad dash" in. ibm. >> early on, if you were looking at the crawl, the tape underneath our show, and 4:30, 5:00, you saw ibm down very big, and you said to yourself, wait a second, ibm has been one of the very big winners since the year began, certainly since the november rally it's been viewed as a kind of cyclical name. here we go, morgan stanley pulls

the plug they go buy to hold. they say it's too late, that you just don't want to be in it anymore, that -- it says that it's run its course. it rerated to peak levels, so buy to hold. their top pick is apple. so, here's a -- this is contrary, this is morgan stanley, as anything i've seen, as ibm has been the place to hide but what they're saying is, stop hiding start buying be more aggressive early cycle coming this is another theme that we're seeing, david, which is that you can see through the valley of the shadow of bad earnings and start buying and i like it. >> but not for ibm, they're saying that. morgan stanley downgrades today. >> i'm saying this is defense. they don't want you to play defense anymore. and david, my problem with that is, like, suddenly -- look, we're all in the midst of the

transition i don't see anything wrong with ibm. they're talking about whether they need to do a big acquisition or not i say, wait a second, this stock says they're winning >> there are a lot of questions. we'll see what fourth quarter numbers look like in terms of free cash flow conversion. >> yes but i just -- i find these kinds of calls interesting because you're downgrading winners i think apple, you know, has owned on trade, but this was the horse that was working as is oracle, by the way i mean, these are the ones that are defensive and very inexpensive, and apple's not expensive. but boy, if they want us to go to these enterprise software stocks, they're selling at 30, 40, 50 times earnings, i don't think their time has come yet. >> meanwhile, we'll see. doesn't look like too much damage from that downgrade at morgan stanley we got an opening bell just a few minutes away and don't forget, of course, you can catch us any time, anywhere. listen to and follow the "squawk on the street" opening bell podcast. i know the markets have gone up and down, but you're right on track to reach your goals. my ameriprise advisor helps me feel confident

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the street is having a hard time catching up with the momentum that's happening, not just at united but with aviation in general it goes back to the fundamentals of supply and demand hare so strong we're building into our forecast a slowing economy and probably a mild recession in our numbers, and we think that gets us to $10 to $12 a share this year, which is a pretty amazing place to be back to where we were pre-pandemic, even in a weak economy. >> that's united's scott kirby talking about the quarterly beat and the guidance i don't know if you've seen the ski season metrics out of vale today. ski school up 35%, dining up 58%. >> wow we're doing a series on "mad money" called, life is too

short, and people are doing things about where they're just saying, you know what? life is too short. i'm getting on a united plane, i'm going some place i've never been, and i'm done playing "call of duty" i'm going to see the world it is, david, the operative thesis i'm using life's too short now, is life too short for share? no but life's too short in the sense of, i got to get out and see some place i've never been how does vale get that kind of number do you think people say, hey, let's go skiing? no they realize that life is passing them by. >> i'm going to leave the set right now if you don't mind, becausemy window is shrinking quickly as well. that's not saying anything for you. >> sometimes, you got to be a little more fictional, novelistic i mean, we see that. we know. shakespeare talks about life being too short.

well, i'm talking about life being too short. i'm going to vale. >> let's get the opening bell here in the cnbc real time exchange at the big board today, vitesse energy, and at the nasdaq, it is shuttle pharmaceuticals. speaking of medical services, moderna, pretty interesting today, comments. >> i think a lot of people know about this disease, the vrs, or have had it, and recognize that once again, moderna, which, by the way, came up with the first vaccine with one person vaccine in the month of february, when the pandemic started and that means, once again, that stephan bensal is just -- he's got a remarkable company that sells at such a low multiple, as if their whole thesis is done. just the opposite. they're doing personal everything look at that rsv, 84% effective.

do you think i would take that get me to walgreens. get me to cvs. >> rsv has been very serious obviously, more so for younger -- for infants and the like, but not unimportant for adults, and they have the cancer vaccine possibility, right, which we heard from merck and moderna a few weeks back >> if you -- yes, we can get -- >> melanoma, it was. >> how do we play defense? that's the parlor game the non-pairlrlor game is what s man is doing i remember when i first met him, i mentioned before, he said, i could have a vaccine for anything and i'm like, oh really? nice to meet you that's terrific. you're a little company. you've got no revenues i think that when you think at home about what you can see and invest in, it's a man like bansal, who then, like, proves it by the way, dr. borla, an excellent interview by sara

eisen this morning, is basically saying, we can do it too if you want to do it the safe way with the dividend, go with pfizer, but if you want the pioneer way, go with moderna >> also said they're in active discussions with china about supplying either the vaccine or other products, and we did get comments from xi and the premier over there, saying that the economy's going to recover faster because of their pivot. >> well, pfizer said, in answer to sara's question, too each his own. countries are doing what they want but i think he's making more progress now, i know that they have -- that the chinese have reverse engineered mrna, and -- what pfizer has i still think it's all -- we've all been very curious about what they're up to. i don't think we know. we do know that there were constructive talks with yellen that i did not expect, with lu and yenllen think about six months ago when we were doing flyovers of

taiwan now we're talking again. >> frank discussion, we're told. >> frank discussion is better than no discussion, right? >> i don't know. >> yeah. >> everybody wants to see us going to war -- not war but sees the chinese making a move on taiwan in the next year or two you hear that all the time >> but what do you think about the fact that maybe the united states finally hit them with something that they care about >> no idea if it's true or not >> not tariffs for furniture but semiconductors they need to make naval vehicles, naval attack, you know, where you, like, land on shore of taiwan maybe you don't have the technology i mean, one of the things that the government's been saying is if they catch one of their drones, maybe the russians will reproduce it i think that's nonsense. you can't reproduce it because you don't have the chips, and we have 4,000 drones that are ready for ukraine, so i still don't understand what we're doing with weaponry but i know that we can protect

taiwan >> speaking of semiconductor equipment, amat today, stifel goes back to buy, $132 i did see both on qualcomm and intel, citi with a catalyst watch. i don't know if you're feeling better about some of these samsung reportedly now, jim, may be finally cutting back some of their production >> look, i think that what people do with these stocks, and we're talking about applied materials, kla, and we're talking about lam, is they buy them in anticipation that finally the inventories will have gone down so low that these major companies will start buying that is simply not happening so, that's a hope early read, trying to gun jump ahead of a really bad quarter and i prefer to see the quarter before i make that move. i mean, you can't have micron saying, look, we just cut back big and we're going to keep cutti cutting back

you can't buy until you see the whites of their eyes the biggest institutions can't wait micron has cut numbers three times. the stock is off i come back to, let's not be so optimistic that we buy, buy, buy. >> couple of names, guys, that i wanted to come back after yesterday's performance. starting with goldman-sachs, of course, we heard from david solomon on "squawk box" earlier. he did address what he admits was not a good quarter my words, not his. stock's notbo rebounding at all it had a bad day yesterday after a miss that was far, far more than many had even the more negative analysts had anticipated. and jim, certainly raises questions that he did not answer in this interview about the consumer business and how much it is consuming in terms of expense right now without really contributing much in terms of growth he obviously makes the point,

listen, it's only 3% of our business people focus so much on it, but it's not clear to me that that's the right argument or at least that's the way that some investors are seeing it right now. what are your thoughts >> goldman-sachs is historically goes after elephants the largest, wealthiest people, and they make fortunes from that this was not a pivot, but they went into a business that they didn't know. the chargeoffs here were hideous. it's almost as if they didn't know what they were doing in this business and they know pulling out. >> he cited execution to a certain extent he did not go into any detail. >> no, but i think it's a pretty easy read to say, wait a second, that's not their business. get out. >> yeah. get out. >> yeah. >> it doesn't appear they're backing off from it, seeing it as a part of this company, though, at least if i listen closely to mr. solomon's comments during the interview. >> some of it, they do say, listen, we have to get -- we're moving out of this business.

and by the way, just so you know, i mean, they had a provision for credit losses of $972 million i'm sorry. i'm firing everyone that's involved with that if i run the firm. everyone everyone who touched that, i'm firing this is goldman-sachs. you don't have a $972 million credit loss. it's goldman-sachs, for heaven's sake that's not what they too they don't have that kind of reach >> you've been very positive on the apple card and the prospects for that are you less so now? >> i want to hear it from apple. i'd like to hear about what apple's side is. i mean, they're getting -- yeah, maybe apple gascash is going to at goldman how did they get this risk they weren't clear how did the retail portfolio have net chargeoffs and a worsening of our baseline scenario we're seeing early signs of credit deterioration well, you know, know, goldman

admittedly, six days ago, was at the same price, so it's not like it's a calamity. >> it's still up for the year, by the way, and had a far better year as a stock than many of the other financials, not to mention the s&p. basically almost flat, as i recall >> well, david, you couldn't have liked eric spencer, how they raised the compensation at the end of the year for some people >> no. >> but i just -- look, i want goldman to be clean. i don't want goldman to have credit risk because when i was at goldman, if you had -- if you risked credit and were wrong, well, good luck. you'll be working at schwab very soon >> well, some of the price target cuts today, i noticed wells, mike mayo, trims it only by about ten bucks >> it's still -- if you think that the market is going to be as bad as it was last year, you know, the m&a market >> thank you for that.

>> yeah. >> i wanted to come back to emerson. we spent time on it yesterday. that stock was down a lot yesterday, jim and of course, unveiling that hostile bid for national instrument stock got hit. it was down almost 7% plus i think it's a cash deal, so this is not a function of risk arb, setting it up, they've been 53 for nati. it goes to the idea that shareholders are saying, is this going to be prolonged? is this a distraction? where is it going to end up in price? as i reported yesterday, people close to emerson said, listen, we're not going to end up with something with a 6 in front of it we'll see. it was surprising, the negative reaction from shareholders >> i was heartsick about it. i hate hostile i think too much of air products i know that the company believes this could be done in a couple months, but maybe the board will come to its senses i think there was a -- close to

a deal i think they were almost going to be done this is the type of thing that derails. to me, a larger plan that involved reinventing emerson but david, when you -- as you well know, when you go against the ceo of a company, of a company that would be a great fit, that doesn't necessarily mean that the ceo -- the ceo could be wrong, of national instruments, and maybe they'll walk away. >> well, they've started a process. >> yeah, they started a process. >> and i mean, emerson has come with all guns blazing. it's not often that we see a company buy 2.3 million shares, file hard scott, bring up the process% of going after two members of the board, which may include the chairman, because i believe he's up at nati. no backing off here at all you can see national instruments trading below the $53.

expectation is that you are going to end up higher one key question continues to be, will there be anybody else i think the most notable action yesterday was on emerson stock price, which is mwhy i mentione it >> the emerson story was terrific >> it isn't completely over. it's a 7% move down. >> you have a stock that's 7% move down and you recommended it, and you own it for your travel trust you do not say, hey, man, terrific you say, well, can we find someone who likes us i have to think that the ceo is fantastic. law will figure it out, so to speak. i just don't like it when you go up against a company that doesn't want to be sold. >> yeah. >> maybe, david, you can tell me that's part of the -- that's the beginning of a process i look at it and say, you know what i'd rather buy jb hunt >> okay. >> which misses on every single

number and is up $8.71. >> i wonder if they're looking at some of the numbers >> you got a better than feared number we're back to the btf thing, perhaps, where we look at a company where i just cannot believe that the earnings were, you know -- revenue missed, earnings missed, and it's up the most >> yeah. >> and you know, you're not dealing with a small company this is the fourth largest you have u.p.s you have fedex, xpo and then jb hunt and this jb hunt is extraordinary. this thing is the leader today, and when you read the quarter in vacuum, it's like, wow, they're going to get crushed so we're in that better-than-feared moment where we say, jpmorgan is a lot better than feared. >> guys, we mentioned the microsoft layoffs a number of times, the $1.2 billion charge, the layoffs expected to be complete bid the third quarter of fiscal year '23 i started a brief comment

about -- it's been a year since they announced the activision deal and it's a lot of focus on whether microsoft is going to be successful in getting that done. we talked about "the ft" c's opposition and where that will end and up the ftc process could go beyond that but right now, the focus is in the uk and the cma, the regulatory body there. and a four-person panel led by a gentleman named martin coleman that we're expecting to hear from very soon we're not getting much of anything it's that old line from goldman, nobody -- william goldman in this case -- nobody knows anything when it comes to the cma. and what they're going to do you're going to get -- first you're going to get a provisional finding, very quickly followed by something called a notice of remedies, and the question will be, what does that look like is it going to be insurmountable the ability to really appeal there, if it's something that

notice of remedies is too much to bear, very difficult. or is it going to be something that microsoft can deal with easily we just don't know that's where the action is when it comes to this, and that's -- continues to be why this stock trades $20 below, all cash deal that was announced exactly a year ago >> i'm total ly mystified aren't there divisions, games, whatever, that overlap that, we'll start a new company and bobby will do it and we're fine? there's a remedy here. we're in the talking about northrop grumman emerging with dynamics >> they continue to say it's a very small part of their business the market share components are not large. sony has been a very vocal opponent, not greeting to any deals in terms of allowing very long periods under which they would have access for their platform for the playstation platform to various games, but you're right

that said, we will await the cma, and then we can talk about the eu and then at some point the ftc as well. but right now, it's the cma, and again, it's very hard to discern what their opinion's going to end up being >> between the justice department's insistence to simon & schuster and random house not merge because of what it could do to writers in which stephen king testified, and this, i would say, don't you have better things to do >> meanwhile, jim, getting some fed speak today, bullard's on the tape already saying the prospects for a soft landing have improved markedly >> yes, yes. >> we'll get laurie logan later today. and then brainard tomorrow that's the one people are watching but coming from bullard, who -- >> i love that >> -- at least to date has been a pretty sub botubborn hawk >> st. louis fed does the best, most rigorous work, and i have

often felt that bullard, post-the 2015-2016 period where he was not as concerned as i was about what was going to happen >> you were feuding with bullard back then. >> bullard had a full head of hair, and i had nothing. that was really the issue. >> okay. just about that. got it >> i think that bullard is probably, again -- i think he's the guy. and i felt that way now for seven years. he does incredible work, and i'm glad to hear him say this, because the last thing -- i thought he was doing it with a six fed fund six fed fund david, you and i are saying, which one of us is not staying? we had to cut "squawk on the street" to two people. >> easy there. i mean, you do have mortgage rates now at 6.20, lowest since september, as you mentioned, jim. is that why names like home depot are leading the dow? >> i think so. you can't have "happy days are here again," but you have retail

demand across the board. people are anticipating, they're seeing this valley remember, big institutions can cannot wait until we get to where -- to the promised land. they have to anticipate the promised land. they're kind of like moses versus aaron >> okay. >> get that? >> i did moses never made it there, but aaron did. >> you sound like edward g. robinson when you do that. >> i'm not going to give it to you today. got to wait a couple months. >> a big institution could say, jb hunt is bad home depot is bad. kla is bad because they're looking at, well, the fed might ease up, and this is what you have to own we can't wait. you know, it's gun jump, but maybe they get away with it. >> yeah. by the way, quick reminder, you can get in on the cnbc investing club with jim, just sign up and find out more at cnbc.com, or you can use the qr code on your screen it takes you right there as we go to break, as we mentioned, bonds, you got the

two-year pretty much at the lowest since october ten-year, lowest yield now since september, below 3.4%. be right back.

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watch tesla today, continuing its climb now up 8%, almost 9% for the year-to-date gets to 136 earlier this morning. that's going to be the highest since december 21st, despite the downgrade ggheguenim sells dow up, we get "stop trading" with jim after the break

let's get to jim and "stop trading. >> your comments about vale. we're doing this life's too short series you look at ulta beauty. that's about going out 52-week high dave kimble doing a great job. people want to go out. they want to be seen we're back to selfie time. you couldn't do a selfie while

you're playing grand theft auto. it's just an amazing time where people want to put -- people want to look better. people want to feel better people want to go places people want to experience. most importantly people don't want to die having seen nothing. life is too short. >> this just got so deep so quick with you. >> ever had sart >> no. >> get some sart >> -- i think it's okay to be a little bigger about what you're thinking i think everybody is going out and doing things, travel and entertainment. those are the two strongest part of this economy, t and e when you go and travel and entertain, you've got to look your selfie best. >> coincides with the downgrade of levi out of b of a, denim.

>> eamon, do you have the ulta, part of the 35 million people. >> i'm a member of the ulta club. >> no, i'm not why would i be a member of the ulta club? >> because that's what you do. you ask me these existential questions. this is one of the best sites ever more of what i want. >> what are you ordering from ulta >> makeup. >> yeah. i'm a vein person. i can't just go out looking like i do are you out of your mind >> you'll put on more tonight for "mad." >> i'm going to live my life it's getting on a plane. >> machu picchu, david. >> i tried machu picchu. sadry peru is having none of it. >> i'm going fishing off panama, going game fishing do you know why? >> life is too short

that's why >> jim, we'll see you tonight if you're still here and haven't gone on some enormous vacation "mad money" 6:00 p.m. eastern time. when we come back, more on microsoft announcing plans to cut 10,000 jobs, and morgan stanley's chief investment strategist mikwion oe lsn the road ahead for stocks in a moment nd of up to $26,000 per employee. 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.

just look around. this digital ages forms we're living in, application. 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.

good wednesday morning welcome to another hour of "squawk on the street. i'm carl quintanilla with morgan brennan and david faber. holding 4k on the s&p at 4,009 ppi, retail sales and industrial production, getting fresh data a comb moments ago for that we'll turn diana olick. >> builder sentiment in january for single family homes after 12 straight monthly decline, sentiment rose four points to 35 anything under 50 is still considered negative, but the street was looking for another drop builders point directly to the recent drop in mortgage rates off the highs we saw last fall,

the 30-year fixed a full percentage point lower to the lower 6% range of the builder indexes, current sales rose to 40, sales expectations increased two points to 37 and buyer traffic rose three points to 23. regionally on a three-month moving average confidence was still lower across the nation, lowest in the west and highest in the south in the report nihb chairman jerry con jers said the rise in builder sentiment means cycle lows for permits and starts are likely near and a rebound for home building could be on the way later in 2023. we get december reads tomorrow morning at 8:30. let's head over to steve liesman for business inventories >> thanks, diana up 0.4%, with don't know how much of that build is wanted or how much is unwanted with concern that, as consumption slows, as the economy slows,

businesses could be kept with inventories they don't want. the indication of that comes from super lousy retail sales we got this morning, down 1.1%. that was a tenth worse than expectations ex-autos down 1.16%. core retail sales down 0.8%. consumption is still going to be good for the quarter we had a good october and it turns out a lousier november than we thought, revised down 1% from 0.6%. the october number remains pretty strong. oxford commission says weaker consumer spending momentum at the end of 2022 is a sign the economy's main growth engine is beginning to sputterment gas station sales down big that's good. non-retail category, that was down as people shift away from that kind of thing

department stores, i had to do a double take on that number it's down 6.5% on the month. people abandoned the malls or department stores on the month restaurant and bars, people had been flocking to services. that was also down .9% looking at the one bit of good news we got today, wholesale prices down more than expected, down 0.5%. 6.2% year on year. that is down from a high earlier this year of 11.2% and also take out food, energy and trade, a more come number, that was up 0.1% year over year falling 4.6%. the industrial production being down and kind of lousy, capacity utilization down i'm not a fount of great news today. maybe you have more up lifting stuff? >> i'm sure we'll find some stuff. steve liesman, thank you speaks to consumer belt tightening right now a little over 30 minutes into

the trading session. mrna based vaccine was 84% effective in preventing disease in older adults. we have more later this hours. shares up 7.5% plus, keep an eye on the airlines you've got those largely in the green again today. united is the latest carrier to say it benefited from surging travel demands, topping earnings estimates with profits up 14% versus q42019. so prepandemic shares are actually -- they're loer now slightly. they are up about 35% to start the year finally, another bank reporting results. pnc financial under pressure after missing expectations higher expenses and credit costs are cutting into income.

those shares down almost 5%. >> 1% gains on the nasdaq. nasdaq attempting the longest win streak since november of '21 as investors continue to work through the outlook for inflation after this morning's key pi data came in lighter than expected let's bring in bob pisani to break down what's happening with equities and with yields today. >> ppi 6.2%. that's a big miss, on the downside 6.8 we were expecting. inflation moving in the right direction. that got me a little excited this morning bullard talking about a soft landing improved the most important thing to look for here is just a trend in the momentum in the market momentum, prices are an up trend. really since the october 12th bottom, prices at an up trend, but particularly in the last couple weeks breadth has been dramatically advancing. how many stocks going up versus down every single day, biggest increase since september we've seen the vix,x is below 20.

the broad market advance we're seeing, it's not a bull market but creeping in that direction relative strength, the rsp which is the s&p equal weight. there's the white line versus the s&p. this is equal wait many more stocks advancing since that october 12th bottom up 16% the s&p market weighted up about 11%. it's broad if you look at the sectors, equally weighted, consumer discretionary, industries, technology, health care, financials, they're all up that tells you that market overall is lifting the one thing that i think is a real problem is the multiple david, you talked about this and we talked about it many times. they're asking an awful high price for the earnings estimate. the price trend is higher. the earnings trend is lower. that means the multiple is expanding. the current forward multiple, 2023 is 17.5 historic average is 17

now, the fundamental guys go crazy when they see this wait a minute. you want us to pay more money for earnings going into a recession. no, no, no folks, it's the other way around the multiple is supposed to go down this is the point i've been saying for ages. somebody is wrong here and the bulls are now saying it's the earnings that's wrong. bullards are right, it's the earnings wrong too pessimistic on the earnings. david, that's the debate. >> continues to be where are you in s&p earnings for this year? the bulls as high as 220 and the bears below 200. >> 228 is the current number people have 20% below that and 10% above that that's a crazy wide dispersion of opinions. did you see j.b. hunt today? you cover this whole area. they had a big problem their costs were way, way higher than people anticipated. the revenues weren't as high necessarily. the stock is up there, there's margin pressures definitely out

there. i think that's going to be the big story for earnings. >> which i think is a key part of this discussion there seems to be this push-pull. inflation is starting to abate here inflation has been for something like the s&p, has actually been good for the top line for many companies as well. getting back to your point about margin pressure. if inflation starts to come down, especially for companies that are making goods, that's going to put earnings under pressure even if you don't have recession -- we'll talk about this later in the show with mike wilson from morgan stanley even if you don't have an economic recession nks it speaks to a lot of uncertainty about how that trickles down to the bottom line. >> these are why stocks are such a great long-term investment jeremy segal's great insights 30 years ago when he wrote "stocks for the long run," because organizations have pricing power, they're almost like an inflation-protected security in times of high inflation, they have to raise prices faster to take up for things at some point people push back

that's what you're seeing with j.b. hunt. constellation talked about people pushing back against beer prices by and large corporations have pricing power in an inflationary environment. that's why they outperform other investments. this is jeremy segal, look back 30 years he did the original research going back into the 1800s about inflation and how it impacts the stock market >> meantime, to morgan's point about mike wilson, we'll ask him to expand on it, but the idea that your sales slow faster than your costs slow and that's going to create risks for earnings, that's how they get to bearish earnings numbers, at least for the first half of this year. >> that's right. the problem here is the analysts generally are behind the curve by the time the analysts stop, the market has already smelled this and turned around the debate is how long is it some people think there's a drag of ten months. by the time the analysts stop cutting their numbers in the second quarter of this year, the

market bottomed in october of 2022 that's why the stock market is a forward-pricing mechanism. it tries to outguess everyone. that's what we love about the stock market it keeps us all employed. >> 40/50, is that the key level to watch >> start going above 4,000, going into 18 times forward earnings at 4050, you'll get people really screaming. very few times in the last 30 years has the s&p traded at a forward multiple above 18. that usually has ended badly >> okay. bob pisani, great to kick off the hour with you. >> pleasure. here is our roadmap for the rest of the hour more pain ahead for the market that debate is going to continue morgan stanley's mike wilson will join us to defend his bearish call. lay-offs at microsoft. we'll give you the latest news. more on the pulse of a consumer in an interview with the ceo of coca-co llaive from

davos. a big show ahead "squawk on the street" is back in a moment.

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.

welcome back to "squawk on the street." let's get over to sara eisen at the world economic forum in davos with a very special guest. >> good morning, carl. i'm here with coca-cola chairman and ceo james quincey. good to see you. >> nice to be here. >> everybody is wondering what

the global outlook is. how is the consumer holding up right now? >> the consumer is holding um. as we came out of 2022 we sawed broad-based consumer resilience. yes, there are pockets of problems, whether it be countries or consumers with less income broadly speaking, the consumer is doing well. >> what about china specifically what have you seen since they reopened and lifted all the covid restrictions >> obviously it's relatively recent mobility matters what matters to our business is the mobility of consumers in the country. obviously there's an increase in mobility, so that's going to be good for us. chinese new year is a couple weeks away so we're going to have to wait and see how that all plays out we typically don't know how the end of the year, beginning of the year has gone in china until we get past chinese new year because it's such a big occasion with them. we'll see. the trajectory of them reopening i'm sure will be very like the

u.s. and the european. >> which was a surge in demand. >> a surge in demand there was an increase in infections to begin with, and then a surge in demand i think everyone is looking forward to perhaps a rocky first quarter, but then improvement in the second quarter and a better second half. >> is there a market that they're more concerned about or seeing more pronounced weakness? >> no. you can pick on the odd country here or there. overall there's broad-based resilience i'm thinking that this is a relatively stable moment in terms of aggregate demand. >> u.s., too >> the u.s. consumer is still doing well again, it depends where you are. it depends which sector you're in if you're in certain sectors, yes, there's some down trading consumers with the least income are down trading and trying to save on basket size. we're a very available product, whether at home or away from home the away-from-home sector, the

recovery is still going. we've seen resilience. we've invested in that to capture the growth and the marketing and the packaging sizes. the u.s. consumer is still doing well. >> and the pricing we've seen double-digit pricing not just from you but across the category is that moderating at all? are you seeing any consumer pushback there >> clearly there's consumer stress you cannot go on long when inflation runs ahead of wages without consumer stress. that happened in the u.s., happened in europe our focus has been we're going to past on the cost increases come through, whether from services or commodities or other inputs of course, we try and become more efficient of course, we try and adapt our packaging strategy to give the consumers the price point that works for their pocketbook. >> shrinkflation >> different sizes sometimes it's a bigger bottle, sometimes it's smaller, sometimes it's more cans, sometimes less cans. it's about combining the size of

the package to help them out ultimately we're going to pass the costs through and try to make it work. >> what's happening with those costs? are you seeing relief in some of the commodities' input costs >> clearly we've seen commodity pressure slightly reduce obviously we're a large corporation, large system. we hedge forward sometimes commodities come up and then come down the underlying price is still higher today than it was necessarily before as the hedges roll off, sometimes that's more expensive. generally speaking, commodities are softer the inflation has moved to the service sector, to the wage sector some costs are slowing down and some are ramping up, if you like overall i think everyone's expectation is the inflation pressure will soften if only we're going to start comparing to the high numbers from last year >> what about labor? are you hiring are you still finding it

difficult to hire? are you changing your posture with some of the companies that are slowing down and preparing for a downturn >> if you take something like the u.s., there are two worlds we're still looking for blue collar, if you like, the truck drivers, the merchandisers, the people who help us stock the shelves, the salespeople much better than it was last year, but still a pressure to find people there. we're still having to increase wages to attract the best people so that is still a strong labor market there on the white collar side we have relatively little tone in the corporation. we took decisions a couple years ago to reorientate the way we took the structure, knowing post covid would be a growth phase. we feel we're set up -- there are tweaks here and there. we did the tough work two years ago. let's focus on growth. >> so on growth.

what in the portfolio is working the best we've seen a lot of different consumer changes over the years, the pivot away from diet coke into coke zero how has covid changed the consumer and preferences and what's going the take you to growth in that portfolio >> in covid people kind of retreated to the more familiar they also treated -- forcibly retreated occasions they had given up on, like breakfast at home some of that is still with us. that was great for some of our brands coke powered us through covid. so coke has done really well and the expansion of the portfolio has continued to work for us, whether they're brands we brought in like a fairlife or brands we had ourselves, the juice business continues to do well actually the number one thing about us is there is no silver bullet what's really working for us is having the right portfolio for the consumer and backing it up with the market and innovation. >> and alcohol

t analysts are curious about your strategy there what's the ambition? >> you heard me talk before, we like experimenting to decide what the ambition is. >> wondering if you're there yet. >> not yet although we're learning a lot more we launched jack daniels and coke in mexico initial read was beyond our expectations that was very encouraging. we have the launch coming up in the u.s. in march. we're generating enough experience in data to say, okay, this is a thing we can pursue and this is how we'd do it. >> keep us posted. in davos a lot of talk about companies being better citizens, companies contributing on a sustainability front you've been a leader in packaging, recycling packaging and all sorts of innovation around water as we talk about companies helping society, there still are the health care concerns it's nothing new for you of course, the sugar concerns

and the obesity. it's still there and it's a challenge. what's the solution? >> we continue to be focused on growing the business without growing the cal ris. in other words, less sugar we pursued a strategy of increasing the sales of the zero calorie drinks, whether it's zero coca-cola or other products with zero calories, having smaller pack sizes so it's more of a treat, and working with innovation to come up with products that have a lower calorie profile. we very much see our opportunity is to grow our business and do that in a responsible way relative to the calories, relative to the packaging and relative to the water. i think that's a way that can make it work for society -- for the consumer, for society and ultimately for us. >> big topic here. that is the thing here at world economic forum james, thank you for taking the times. >> you're welcome. >> james quincey, ceo and chairman of coca-cola.

i'll join tech check next hour we have the ceo of pepsi and the ceo of service now a lot more to come from davos. >> we're looking for it to it. sara eisen thank you, our thanks to james quincey as well. microsoft this morning laying off 10,000 and bracing for slower growth ahead. the company joining the ranks of alphabet, amazon, salesforce with cutbacks in recent weeks. we'll dig into that after the break. stay with us ♪ ♪

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microsoft announcing it will lay off 10,000 employees as big technology companies continue to tighten the belt jon fortt joining us with more on this decision >> 10,000 jobs, a little less than 5% of the overall workforce. ceo nadella writing to employees that microsoft will, quote, align our cost structure with

our revenue and where we see customer demand and cut 10,000 jobs in the current quarter with notifications starting today nadella said employees will continue health care coverage for six months, stock investment for six months 60 days' notice prior to termination. microsoft stock is about flat on this news as investors overall seem to cheer these signs of a softening economy. considering microsoft has hired i think about 75,000 employees since 2019, nadella says they'll continue to hire in key areas. this isn't a huge cut, but when we look at this in the context of the retail sales data that we got this morning and overall slowing consumer demand, consumer spending in light of inflation, you've got to wonder at what point, if there is a point, particularly when it comes to enterprise software, do we start to pay more attention to the fundamental slowing down

than the cheering, what this means for the fed and what they're doing with interest rates. if we're going into a protracted season of softening demand, as nadella says in this note, companies trying to do more with less, that sounds great for the short term but how long are we talking less i think a lot of technology companies, talk about salesforce, now microsoft, google doing some cuts alphabet, we'll see if they do anymore and certainly meta as well all of them trying to control expenses after this big spending spree, guys. >> it's such a key point, jon. that was the line that jumped out to me in this blog post, quote, exercise caution as some parts of the world are in recession and other parts are anticipating one we have this conversation in our ear every day more broadly speaking to hear the ceo of such a major company that touches so many parts of the economy at least through the sec sector say that

really kind of got my attention. the fact they're also talking about lease consolidation and the belt tightening that's happening, not just on the jobs front, but in other aspects of microsoft's own footprint. couple that with amazon now and this news from amazon this morning. are we talking canary in the coal mine for other industries or is this all because tech got so big so fast during the pandemic, and why wouldn't you if you think there's a recession on the horizon, why wouldn't you exercise caution here? >> morgan, i think this depends on whether this is just a quick adjustment and you look at the strength in the overall labor market and you say, yeah, things kind of feel fine. that's what we heard from citi yesterday. jane frazier saying over all the labor market remains strong. so we don't see a really bad recession coming or you think, if this is the beginning of a time of not only slower growth, what happens in the technology sector, when it

comes to enterprise and enterprise software is consolidation. is this an environment where the big players can really afford to buy up smaller competitors we have seen regulators clamping down on that what do they do? do they cut? do they continue to cut? we'll see. >> all right jon fortt, thank you we know you'll have a lot more on all of this next hour on "techcheck." we'll see you then still ahead, morgan stanley's chief equities strategist forecasting more pain ahead for markets saying, quote, mostare not prepared we're going to break things down with the man himself after the break. with the dow ever so slightly lower right now, but the s&p hanging on to gains and hanging on to that 4,000 level [music playing] ♪ imagine something of your very own. ♪

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we'll turn to steve liesman. the federal reserve saying jerome powell has tested positive for covid-19 and experiencing mild symptoms he's working remotely in home, isolating himself. he is up to date with covid vaccines and boosters. hard to imagine assuming all goes well it could be any impact on the incoming meeting. he can do it remotely if he has to i think he would be beyond the normal quarantine period by the time that end of january, february 1st meeting rolls around the fed chair testing positive mild symptoms and working from home is the word from the fed. david. >> good to hear. hope he recovers quickly paxlovid still available, mole peer veer. don't be bashful. >> you want to say all those fancy words quickly on tv. >> watch out for the side effects on paxlovid, particularly when you get to a certain age and are taking a lot

of other medicines our next guest calling the market a hall of mirrors designed to confuse investors and take their money, forecasting significant disappointment ahead joining us morgan stanley's u.s. equities strategist and cio mike wilson mike, always good to have you. looking at your latest talking points, you say, quote, our negative operating leverage thesis, and this comes to th overall thesis on earnings our negative operating leverage thesis remains underappreciated and will likely catch many off guard starting with this earnings season. what does that mean when you say underappreciated explain that to our viewers. >> thanks forhaving me good to see you. this has been a thesis we've been espousing for quite a while. it really tires into the whole fire and ice narrative where people are assuming that falling inflation is only good for stocks we have the exact opposite view which is that falling innation is good perhaps for fed policy

and valuations, which is what's happened in the last two months as the mashts rallied. it could be really bad for operating profitability. if you think about the covid pandemic itself, many corporations saw windfall profits because inflation went straight up and costs were lagging in that regard in other words, revenues were increasing at a much higher rate than cost of goods sold because there was a lag between the cost structure and what they were getting in pricing their product. now it's going in the other direction. we feel like, if i'm talking to clients, it's not anecdotal. we talk to clients every day that this particular dynamic is underappreciated in our client base, institutional clients, meaning there's a general view that, if inflation is higher, it's always good for profitable because it drives higher nominal gdp growth what that misses is the timing of cost versus revenues. we're in that now. we're absolutely in a dynamic where cost of goods sold is increasing faster than revenues.

and that negative outlook is going to be negative. >> is it something they shouldn't be pricing a multiple off of for the longer term >> that appears to be the case there's definitely been a growing willingness here lately to look through this valley we see in earnings. most clients agree that earnings estimates are too high it's degrees of earnings degradation that we're out of consensus on look, our history suggests that people will say they're going to look through, but if the numbers get as bad as we think they're going to be, they won't be able to do that. >> you write a lot about the pushback you're getting from clients but also some of the peers on the streets argue that, one is, the s&p tends to bottom maybe six months before the revision cycles are done the other is that the buy side has never really believed the sell side numbers, and a lot of wood in that sense has already been chopped how do you respond

>> i completely agree with the idea that the market will absolutely discount the trough before the trough arrives. the problem is we don't see the trough until late q4, early q1 that six to nine months would suggest sometime in the second quarter is when we'll probably reach a market bottom. once again, i want to stress how much below the street we are and how much below the buy side we are. we sometimes get it right on the sell side. we get ahead of the buy side with respect to doing these models a lot of clients don't do. this is a macro market macro data has been awful. it's suggesting that the earnings degradation is going to be way worse than most bottoms-up folks are thinking. >> so the fact that we've had this strong start to the year, the fact that we've seen a rally that in some way kind of mirrors the beginning of last year, the breadth has been very wide and very good. you see this as essentially a

head fake. is there anything you'd be buying right here right now in the meantime, even if the broader market is going lower as you argue? >> we're seeing a lot of defensive very genesee in the market we called for the rally from october to december on what we thought would be a better liquidity picture and the potential for the fed to pause we think that's price now. you can't price it twice multiples from 15 times to 17.5 sometimes. we got off that train in early december now we're trying to price it again. i think that's probably not a wise idea. i would say in terms of the speed in which this plays out is going to determine how surprised people will be in terms of earnings degradation i think it's now a lot of people are pushing it out to the second half probably q1, early q2. >> have treasury yields peaked from your view >> they have that's been our call in fact, our rates team just lowered their forecast again for

ten-year treasury yields to about 315 by the end of this year i think the equity market is still negatively correlated to rates. the equity market is still very focused on the fed and inflation and taking their cues as only positive this is why our call i think is so important it's missing this negative operating leverage feature as inflation comes down it's going to have a devastating impact on margins. that will prove itself out in the hard data. the soft data is already there, already telling us that's why our miles are where they are >> we're going to be in the midst of earnings season very soon, mike give me your numbers on earnings and sort of your sense as to how the market is going to react and a percentage, if you can, even if you can put it on percentages, what kind of down draft you're talking about once, if you're correct, these numbers come through >> i think at a minimum, we're going back to the october lows

the valuations are expanded to about 17.5 times numbers that we think are almost 20% too high. i would argue for at least a 10% correction if it plays out more broadly and let's say we slip into a recession, which we don't know the answer to, yet, if that proverbial light switch goes off, it could be closer to 20% that's what we're thinking, between 3,000 and 3,300 is the target we've put out since last may based on this earnings forecast i think the question for us has always been timing we pushed it out in q4 that was the right decision. we're not going to push it again. we think it's now because now companies have to guide for 2023 and they're going to be conservative on that in our view. >> mike, you wrote late last year about what you called a double-breaking putt i wonder if you think we moved into a new era of macro strategy where we can start to slice up targets in shorter and shorter time periods and whether or not you think that model is going to

be sustainable >> look, first of all, i think the whole year-end target thing is kind of silly to begin with there's so many things that happened between today and 12 months out when we have to do that i think the value add we can have for clients is trying to explain that path, the double-breaking putt in the case most recently. usually markets trend and you don't have to call these wiggles and wags so muchment but when there are 15 and 20% moves, that's our job alzheimer's i tell clients right now, talking to guys like me is a mistake. you should look at doing your bottoms-up work. that's where the value is going to be. i want to leave listeners with a positive note, we're closer to the end than the beginning we do think there's going to be real winners at the stock level. the macro market is suggesting that the index level, this bear market is not complete. >> finally, mike, on that sort of subject of things we can't anticipate, are you getting any

questions about the debt ceiling, concern about default is that coming up at all if so, is there any historical precedent for what we might expect in the stock market >> look, fortunately we don't have this happen every year. it is starting to come up now. most investors seem to think this is more of a second quarter, even third quarter issue. there are things starting to happen that may suggest the markets may start to worry about this more frequently the one that sticks out, of course, i think it was 2011 or 2012 where we had the short bridge, treasury debt got downgraded let's hope we avoid that this time it doesn't really factor into our analysis because it's so hard to predict. we're hoping we can avoidit an move past this. >> mike, always good to have you join us. thank you. >> thanks, guys. meantime, looking at bitcoin and feeling some deja vu, back above 21k and hereby recouping all the losses post ftx. can that rally ctionnue?

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welcome back to "squawk on the street." more details on bankrupt ftx's finances $415 million in crypto has been stolen in hacks since the november bankruptcy. in an overnight report, ftx saying it's recovered over $5 billion in crypto crash but still faces significant shortfalls in a blog post, the embattled founder saying the exchange is solvent and can pay back its customers. none of this is pressuring bitcoin prices at least in recent days with btc back to pre ftx bankruptcy and implosion levels other cryptocurrencies following suit joining us, needham's john at the time darrow. a lot to get to. first the price action we have

seen in bitcoin, the rally to start the year, back above 21,000 what do you attribute that to? >> i think it's a few things first off you have some skiens of easing inflation, better for crypto assets, risk assets two, you have some excitement around staking set to come up in 2023 with the shanghai upgrade on ethereum. kriep toe assets removing some of the staking protocols there's that impact. the last thing is a lot of the forced selling you had, whether that was selling from bitcoin miners, funds around the ftx collapse that happened. november and december were some of the highest volume months ever for bitcoin miners selling. with a lot of that selling out of the market, it formed an attractive bottom for a number of market participants. >> can we call this a bottom

>> i think it's a local bottom there's some credence of this being a bull trap. if you extend this rally a few more weeks, there's a lot of capital sitting on the sidelines that hasn't entered the space. if you do start to see the rally extend a few more weeks, you're going to see some of that capital come back in the space the near term, it's a positive outlook. that being said, i don't necessarily think we've started a whole new crypto cycle there's still the adoption curve and some of the trends we saw from last cycle. those are still kind of the main drivers right now it would be nice to see new use cases, new utility for the ecosystem that could propel and push the next cycle. >> so meantime, we're seeing contagion concerns swirl look no further than digital currency group and specifically its trading unit genesis and expectation that it could potentially enter bankruptcy the ripple effect there to

gemini you have coinbase which i know you follow, halting operations in japan right now walk me through the evolution of the exchange part of this industry, what that's going to look like and what it's going to mean specifically for a company like coinbase. >> so coinbase also reduced expenses by cutting head counts. these were necessary steps, halting some operations in japan. i think these were necessary steps for exchanges. you had high expenses, really an expense base set during a bull market with revenues down significantly, a bear market also going to have more regulatory oversight coming out of what happened with ftx. the offshore entities it will be different. the ones in the u.s., coinbase, kraken, increased scrutiny there. overall these exchange business models are mostly dependent on volume coinbase is a little diversified

with usdc, interesting coming off the stable coin there. that's an attractive growing part that's not necessarily levered to volumes you also had steaking with their product and a few other assets that is also not levered to volumes. the retail exchange focus, that still needs crypto prices to get going some to get those volumes back >> john, i saw a note from one of your peers yesterday advising clients to get off zero crypto allocation the argument was 2023 might provide one of the best opportunities to start building a long-term allocation strategy into crypto if you believe the on-chain and off-chain revenues will soar in the next decade is that how you're framing it for clients? >> i think we should share a similar belief right now the rally in crypto assets, i think a lot of market participants have been kind of caught a little off guard here

and have dry powder they want to put to work in the space but were biding their time waiting a little bit there is longer-term fundamentals, and once those start to become showed, i think the capital that has been sidelined is going to start to come back. >> okay. john todaro, thanks for joining >> still ahead this morning on "techcheck," digging into the layoffs at microsoft today we will check in with ceo of mastercard on how the consumerer is faring on this day we got retail sales with the worst print of 2022. don't go anywhere. tter future. so we're hard at work, helping them achieve financial freedom. we're providing greater access to investing, with low-cost options to help maximize savings. from the plains to the coasts, we help americans invest for their future. and help communities thrive.

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. welcome back to "squawk on the street." stocks are now taking a turn for the worse, heading towards session lows the last 15 minutes, although marginally so, we are tracking notable gainers within the industrial sector. j.b. hunt is leading the group despite earnings and revenues that fell shy of analysts' expectations it was driven by lower volumes and inlter modal and higher prices elsewhere transport and logistics higher so watch the industrials and the

transportation stocks. they are seeing some green here in a market that's turnley slightly red back to you folks. let's look at the top s&p gainers this morning of course, one is the j.b. hunt. moderna. rsv vaccine showing success in adults and freeport at the bottom there up 60% over the last three months anybody take a look at copper lately yeah, it's been moving a lot higher plus, more on the new billion dollars opportunity that is facing biopharma and what the tripledemic has to do with it. that is next

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icy hot pro starts working instantly. for a solve problems like a genius world. with two max-strength pain relievers. ♪ so you can rise from pain like a pro. icy hot pro. the vaccine race is heating back up and this time it is not over covid-19 meg tirrell with that story. >> hey, morgan, this time it is about rsv which is another horrible respiratory virus we have been dealing with along can covid and flu. moderna yesterday reporting its phase 3 trial in rsv is in the

same mrna technology, that vaccine was 84% effective in the trial in adults aging 60 plus. it was well tolerated with no safety concerns identified and they plan to submit for regulatory approval in the first half of this year. that puts them in a tight race with other companies like pfizer and glaxosmithkline, which are already at the fda with their vaccines you can see all of those stocks down right now as moderna is up. j&j and bavarian nordic in phase 3 trials moderna is the only one pursuing the mrna pathway pfizer has more traditional technology recompetent protein, as does gsk. j&j similar as the covid vaccine. you can see how the race is shaping up experts say it's great we will potentially have options for rsv because it is a disease that causes a lot of hospitalizations and deaths. morgan stanley saying this is a big market opportunity 7 to $10 billion in potential sales in the adulting market

these companies are looking at getting this to kids by 2030 in adults alone, causing 177,000 hospitalizations per year in the u.s., according to morgan stanley, 14,000 deaths and of course, guys, this is just the beginning of potentially wrapping this together with some other vaccines moderna talked about this at davos this morning with "squawk box. >> we are trying to combine them we can have the clinic of covid booster and flu booster in one dose covid and flu and rsv in one dose consumers, they get a covid shot this winter or flu shot. think about it for people 50, 60 and above. >> so, guys, rsv is the race now. we will see flu shape up with mrna vaccines as well and over time they will start to wrap those together guys >> so, meg, quickly, i mean, the

fact that we are seeing this is part of the reason that moderna's popping on this is -- i guess it's not a one trick pony we are at the end of the show. we will hold that question for another day. thank you. >> you are right thanks. that does do it for us on "squawk on the street. time to send it over to "techcheck." ♪ good wednesday morning welcome to "techcheck. this hour microsoft cuts 10,000 jobs is that a warning of a severe slowdown in spending plus, a pending deal for activision a year later. back in davos with an explosive from the ceo of mastercard retail sales indicating a weak consumer to close out the holiday season the outlook for q1 is next morgan stanley likes uber as the top pick for