i mean, it's awful safe and it's state tax free >> all right shaun? >> abbvie. we talked earlier. they've got oncology, immunology, they pay aspace. >> last word >> star buck >> "the exchange" begins right n now. >> hi. i'm brian sullivan in for kelly evans once again it's certainly been a big week of fed speaker dominating the headlines and we're not quite done yet fed governor chris waller speaking right now at the counsel on foreign relations steve liesman is there let us get straight to him for the headlines. steve? >> brian, thanks very much fed governor chris waller will say that monetary policy should continue to tighten. however, he currently favors right now a 25 basis point increase at the fed's next meeting, which as you know, happened at the end of this month and the noums comes on the first of february.

he says the fed still has a considerable way to go to get to its 2% inflation goal. he expects to support continued tightening of monetary policy, even after, is the implication, this upcoming meeting. economic activity says it's holding up well with the fourth quarter gdp, around 2%, but notes that it's slowing and he expects that economic slowing to continue that's part of his forecast. he says there's ample evidence that the fed's rate increases have dampened demand and economic activity. you've got the slowing of business activity. he says that is consistent with the fed's goal, but he does point out the goal is not to halt economic activity, just to slow it and moderate it. he says consumer spending has begun to slow, as well, and he expects it to moderate further this year. he expects the economic slowing to continue. he sees continued strength in the labor market, but again, there is some signs that both labor demand and wages are, indeed, moderating that labor market strength shows up -- it shows that income and jobs can hold up, despite higher

federal reserve rates, but he does need to seek continued improvement in labor costs, on inflation, he says, it's good news, recent declines in inflation, quote, but i'm still cautious core inflation has moved sideways the fed does not want to be head faked. that's why he's staying the course >> this goes to what we talked about extensively yesterday, steve. is there any mention of pausing, let's wait and see it sounds like he's kind of got his views already set. >>e the king of word search. you introduced word search to cnbc i invite you to do a word search of waller's speech and look for the word "pause. and i'll give you 20 bucks for every time that word comes up, because it doesn't come up at all. >> that's not a good deal for me that's not a good deal for me. >> look, you buy the beers and i'll drink them. that's the deal i would like to offer you. the deal is this, brian.

he's still going forward, it would appear, another quarter point and maybe probably one after that, which is how the market is priced and that is that it's -- get to five, get high, and hold that's the idea of the federal reserve right there. >> so you're going to be doing i want to give our viewers an update on what's going to h happen, you'll sit down, do a q&a, but either way, we'll see part of that conversation. you're obviously not going to give away everything, because his handlers are probably watching this interview. but can you give us directionally where you want to go with this >> i'll give you the first question, brian. it's the conversation that you and i have been having, having on cnbc. can he explain the gap between the way the market views where the fed is going and where the fed says the fed is going? that gap is 70 basis points. it's three quarters of a percentage point i like to hear why he explains that the market is wrong and his outlook is right

>> there you duo we'll let you go in, do that, and we are going to tap into it live and show part of that q&a steve, thank you it's like we said. we are going to dip into that q&a a little bit there, come back out and talk more about it. but right now, let's get to your money, because stocks right now, they're up in fact, technology having a pretty good day and looks like we'll have a down week overall, a pretty good year. overall, the nasdaq is up nearly 5% let's dig in a little bit more dominic chu is like 10 feet away over at the plasma >> like 15, maybe over 20. >> yes, we'll go that way. anyway, brian, if you talk about the markets overall, with those comments from fed governor christopher waller, we are still seeing stocks right now just about near session highs the s&p 500 up about 35, 36 points, to give you an idea of where we were at the highs of the session earlier on, it was 39 points. so very much just towards the higher end of that range, we were actually down just one measly point on the s&p at the lows of the session, the dow industrials up about one third

of 1%, 113 points, 33,157, the nasdaq composite up 1.5%, the real outperformer there because of some of that tech strength due in part to some of the big names, especially netflix coming up we'll talk more about that later on the nasdaq composite up, one place to keep a close eye on is the recent rally that we've had in precious metals now, gold and silver specifically, if you take a look at those particular names, you can see over the right-hand side of the screen here, since the lows that we saw in the fall, gold prices are up a very respectable 19-some percent in that time span but look at the orange line. since the lows that we saw in the fall, it's up double that amount, close to 40% so gold and silver catching a bid, some dollar weakness may play into some of those stories, as dollars get weaker, it makes those composites somewhat more attractive, relatively cheaper on that kind of a basis. we'll watch that and speaking of tech media and telecom, a big part of that outperformance like i pointed out is netflix today in the composite, but it's also what's happening here with alphabet

shares up 4% right now. that's a big move for a 1 trillion-plus-dollar company all of this is happening on a massive amount of job cuts 6% of their workforce, but investors are saying this could show some cost discipline. they're bidding up the shares of alphabet right now keep an eye on what's happening there, bri >> thanks very much, dom chu alphabet, speaking of tech, is just the latest tech name to reduce head count. microsoft, amazon, facebook, all cutting tens of thousands of jobs in the past year. and while this is obviously bad news for the folks losing their jobs, nobody wants to see that, companies are being forced to adjust their cost structure to deal with leaner economic times ahead, which means the stocks may get a break after a rough 2022 let's bring in kim forest, boca capital partners' cio. dom is here once again i do hate these kind of stories, kim, where it's like, oh, the stocks go up because people lose their job. that just sucks for the people losing their job, pardon my

french but listen, we're investors, that's what we do. we look at the companies and they're probably going to have to cut costs >> sure. well, silicon valley is never shy about hiring people and spending money, regardless if they have the cash flow to support it and it's interesting that these larger, older companies have really started to lead, i guess, the world of technology into restraint, or so it seems. and that's why they're up. investors like to see companies that know they're owned by shareholders and concentrate on things like, what products they're going to come out with to make their customers happy and drive cash flow. and do that in an economical way. and i think, especially in last couple of years, when growth was so big, at all of these companies, they just didn't give a thought to maybe adding that

extra person to a team >> and if we look at these companies, we tend to lump them in i know they're in all the same baskets, dom, but, you know, these are different companies, man. what google's an advertising company. meta is -- i don't know what meta is. >> a metaverse company >> it's a goggle company i'm not really sure what it is >> apple's a hardware company. >> they're totally different, right? amazon is basically a retailer with a giant cloud business attached to it how do we look at these companies differently? >> in terms of the overall business that we're talking about here, kim kind of nailed it it's about whether or not there was an over-hiring, i guess, is the best way to put it over certain parts over the last couple of years. and there was a reason why, by the way. because there was so much more focus and tilt towards things like technology, i.t. hardware, for sure services around kind of remote work, hybrid work, and that sort of thing that kind of gave you a tailwind the problem was, if that

tailwind faded quicker than i think a lot of other companies anticipated it would and for that reason, they're reacting a little bit more profoundly in this way now, the reason why it's a little bit more significant this time around is because, if you look at the way things are shaping up right now, it was this cascade effect. you showed about the board, all of these people laying all these people off, but it's almost become a norm right now, and you almost have to, because you've been given license by your peer companies to cut costs and investors are going to kind of treat it the same way. so that's going to be a real rub, is whether or not these companies will all follow suit, not just these megacap once, but other companies, as well >> sure. i think there's a good chance that other companies will cut their staffs wherever investors are looking at companies, especially if they're private, they are comparing them to public companies. and if public companies are getting skinny, the private ones are going to have to get skinny too. >> yeah, the question is, how

much more skinny will they be and how much more would the market reward them getting skinnier again, we hate to see anybody lugds their job, but at the same time, they seem to be telling us a pretty big story about where they see either the economy going, or to dom's point, they messed up. everybody's like, we're going to work remotely forever, and now we realize, no we're not >> i think that's the bigger part of the story is, what are they going to do with the teams that they have and i'm thinking that they are not only right sizing, remember that term from the '90s, but they are also skill narrowing. that they are going into the areas and keeping the people and maybe even -- i know this is crazy, maybe even hiring additional people on those projects that they think they need to, you know, present in the next five years. so it wouldn't surprise me that the mix at these companies is going to look very different in

the next five years, and the teams are either going to be completely gone in products that they no longer want to offer and support, and the ones, you know, that's what they do. that's what we pay companies to do is move us into the future, in the most, you know, responsible way, i suppose >> okay, so as i kind of add on to that conversation, if you take a look at the way things stack up in our economy, very tilted towards services, which is kind of what tech, media, and telecom does they're either in the business of services or supporting services that's the issue now, is when you start to see head count coming out of those places, it may be signaling sthipgomethingt the broader economy. other places in the economy that are just not tech smesk. >> well, you can't find anybody. if you can find me an hvac

installer, i'm paying him or her whatever they want a plumber? do me a favor. >> i know exactly -- >> you probably can do it yourself i can't. i need a plumber i've had a busted sink for six months and i can't get anybody to come over >> i just had copper line replaced by a professional in our house for a refrigerator and it cost a lot of money >> but your pockets -- >> flarts of the economy that are stronger than others technology is maybe isolated right now. >> kim, one pick ten seconds for us opportunity friday >> sure. this is going to be a big eye rol, i know, but how intel and i'm looking far into the future i think they can become a fab. i think they're going to have many sites around the world and i think they have the money and the talent to pull it off. >> and a giant backing for the federal government with the chips act and some other things. kim forest, appreciate it.

dom, thank you good luck with that new copper line >> and the niners this weekend. >> let's move on, salespeopling of cost, let's turn our focus to the personal balance sheets. there are two things happening at the same time first, millions of americans are saving less money than at any time in years. the personal savings rate has collapsed from the covid stimulus highs, but you can see the savings rate is now also below pre-covid levels in other words, people are spending and they're not saving, which, by the way, is understandable, particularly if you lived in an area where the economy was shut down for long periods of time who could blame you? now, this is the total amount of so-called revolving credit outstanding in america the majority of that is credit card debt. you can see that is not only going up, it's at a record high and it's approaching $1 trillion and as the federal reserve

raises rates, rates on that debt also are likely to go up sometimes by a lot the average annual interest rate on a credit card in america is now 19.9%. that's up from 16.3% last year and that could rise even more, which is actually quite inflationary on its own. here's why using the bankrate.com calculator, if you owe $8,000 on a credit card at 16% interest, you will ultimately pay $10,100 to pay that card off or about $2,100 in interest but, that same $8,000 balance at 20% will be $4,700 in interest, more than double in just interest costs that is inflationary let's talk more about it with greg mcbride, chief financial analyst at the aforementioned bankrate.com appreciate the good calculator, because i could have never done that math myself but this seems worrying, greg? credit card balances at record

highs? rates on the rise? that's -- how -- is that can't be good? >> it is not good, brian and it's reversing the trend that we had seen during the pandemic, where when we were all at home and we weren't out spending money, we saw people boosting savings and paying down credit card debt but with the surge in inflation, particularly in the last 12 months, we've really seen a big change you'd mentioned that the savings rate, the lowest since 2005, but savings balances themselves are increasingly declining as people are leaning against it to kind of bridge that gap, where income stops and expenses keep going. and ocf course, credit card debt the other side of that, there are households that are no doubt having to use those credit cards for necessities, because income hasn't kept up >> and discovery yesterday saying that their charge-off rate did rise, still 2.5%. but it did basically double from earlier. i was actually talking about this around the dinner table last night, because that's the kind of family that we have, and my wife said, well, what if

people just don't pay it then it's not inflationary i thought that's a good point. some people might say, you know what, i'm not going to do it they're raising my rates, it's predatory, i don't care. not going to pay the loan. >> well, if you listen to bank earnings calls, you'll notice that they're put mrg and more loan loss reserves looking at the outlook for a weaker economy, they know that delinquencies are going to rise. they know that charge-offs are going to rise. so you're seeing them already starting to increase reserves to reflect what they see as an eventuality. >> i know there are max caps on aprs, average percentage interest rates that credit cards can charge but the 3.5% move has been significant. are we going to go over 20% on an average rate? >> i think we will because credit card rates move in ockstep with the fed. if you have a card right now that's said -- a rate of 19.5%, and the fed plans on raising

rates another half a percentage point, that gets you to 20%. my advice, don't take this sitting down have one of those low-rate balance transfer options ow there. we see zero percent. >> greg, sorry to interrupt. stick around we're going to come back to you after this, but we want to steve liesman starting his q&a with chris waller >> the gap between the market and the fed for the end of 2020 is 70 basis points, which is towards the high side of where you guys were concerned with that gap back in july. so there's really two questions that come off of it. what do you think explains the different attitude of the market towards the same data that you just laid out. and secondly, is that a problem for the fed in the execution of monetary policy? >> if you look at the market's perception of the terminal rate, it's not far from where we think it is. it's not the peak. that's maybe a hike difference that's not a big deal to be

absolutely honest. but as steve mentioned, the market has a much more rapid decline in the policy rate this year than we project excuse me. and i think that's driven by one key thing. the market has a very optimistic view that inflation is just going to melt away it's the immaculate disinflation is going to incur. inflation is just going to come down very rapidly and once that happens, there's no reason for the fed to keep policy rates high and they'll start cutting rates. we have a different view inflation is not just going to miraculously melt away it's going to be a slower, harder slog to get inflation down, and therefore we have to keep rates higher for longer and not start cutting rates by the end of the year. the other issue that we have to deal with, the markets don't, is we have from a risk management point of view, we have to ensure that inflation doesn't take back off. and that means we're going to have to kind of keep rates higher for longer than we

normally would say we would do from a tailor rule or some policy rule because of a risk management site. it's worse for us to have inflation take back off and have to start raising rates again than to keep them there until we are fully convinced that inflation comes down so i think that's really the big difference, is just the markets have a very different path for expected inflation than we do. >> does it make monetary policy tougher in that lower rates are essentially an easing of financial conditions and you're trying tighten them? >> yeah, this is the thing it's hard to talk people out of the forecast, you know, if they believe that's what the forecast is and they're going to bet their money, it's very hard for me to get them to change the view >> do you have to respond by making rates higher than they would be >> we'll kind of see how the data comes in. if this loosening of conditions makes things looser in the sense that growth takes off and employment doesn't loosen and inflation starts taking off

again, then, yeah, it will require us to do a lot more. >> are you at all humbled in your certainty about the trajectory of inflation by what happened a year ago in that the fed was all decided that inflation was going to be transitory and it was going to go away and most of the fed members ended up being wrong about that what's the chance that you're wrong again this time? why should markets be anymore confident in your outlook on inflation? >> everybody that does forecasting should be humble by definition because you're mostly always going to be wrong. but we go do it anyway, right? we know we're going to be wrong, but we have the guts to go out and make our prediction. 2022 really was a humbling experience it clearly was when you sat in april or may of 2021 and you saw this inflation, you said, what's causing it, every possibly explanation was a transitory effect. i mean, the logic of it. just the logic just led you to say, this can't persist for very long it's going to unwind, it's going

to rattle, the demand is going away, the supply stuff is going to go away and inflation will come right back down and that story held from april until september of 2021. inflation was monthly coming down it looked transitory and that october, november, december of 2021, it just exploded so, once that happened, we had to quickly change pace and say, this story, this belief, it's just not there it was a mistake we corrected it. that's the thing we don't really want to make that mistake again >> but what was the mistake? was the mistake being too, you know, locked into your view? or was the mistake that you were simply low in terms of your trajectory on inflation? >> so i've made these comments before the mistake in my mind that we made was, we bet the farm on the transitory story any risk management model, you would have said, what if it doesn't go away. what should you be doing to get

ready for that event if it doesn't go away? >> when i look at the projections of fed officials right now, 17 of 91 above 2%, are you doing the same betting the farm >> the beauty is, it's a lot easier to go down. i tell you, if i'm wrong on this, i am going to be a happy man. right, if the inflation comes down much more rapidly than i think, that's fantastic. i will have no problem saying, i was wrong, right because it's good for the economy. it's not about me being right, it's what i think is good. but again, from the risk management side, i have to protect against that it stays up or takes back off. that's what i have to protect against. >> did i hear your or read your comments correctly that i think you ought to go a quarter at the next meeting and a quarter a second time? and would that be the end of it

as far as you're concerned >> depends on the data ever since october, i've stopped giving long forward guidance, and whatever the data tells me is what i'm going to do. but the next quarter, you think, is pretty much what you're going to do? it sounds like from your speech? >> we'll see what happens. if inflation stops popping back up again, rate hikes are not going to stop. >> so that brings me to my next question here, which is, you said you were a happy man. it's like, what does it take to make governor waller happy you made inflation go like that. >> here's the thing. >> unemployment is staying right there. >> you -- in wizard of oz, dorothy wants to get back to kansas, right? >> this is a first >> but they keep moving the goalpost on her, right they keep making her do new things and more things you in november said that one month worth of inflation wasn't enough >> exactly >> and that was october's inflation. >> yep >> then you got november

inflation, that's two. then you got december inflation, that's three and in all three cases, inflation came down and that's still not enough >> well -- >> dorothy trying to get back to kansas, you keep moving the goalpost >> well, that's the beauty, by the march meeting, you'll have two more that's five. and that will give you a much clearer idea i gave you an example, in 2021, where we have basically five months of this thing coming down and it shot up and exploded in our face >> so what's it going to take, governor waller. what's it going to take in order to make you feel like enough is enough already >> yeah, like i said if you see inflation continuing on this path, we know that shelter costs or equivalent rent, those are going to start coming down four or five, six months we know that's coming off. if wages start continuing to moderate to where, you know, wages are going up consistent with productivity growth and inflation, that's a good sign.

so all of these things, you know, you know, chair powell has pointed out that services are very heavily labor dependent so wages are a critical factor for pass-through again, if we continue to see wage data kind of softening, more consistent, as inflation comes down, as well, that just makes our job a lot easier >> let me ask you to comment on some of the recent news, an announcement this morning -- >> that is our steve liesman interviewing fed governor christopher waller live at the counsel on foreign relations you want to continue watching that on your second screen, you can do so by heading over to cnbc.com where it is streaming live all right, bankrate's greg mcbride is still with us your thoughts on maybe what we just heard or maybe didn't hear? >> well, i think, you know, it's clearly the fed stuck to that transitory script way too long they were behind the curve, and we saw the fastest pace of rate increases in 40 years last year, because they spent a lot of that time playing catch-up. and you know, they're reluctant

now to hint at any kind of pivot and they're keeping their options open, because we've been head faked before. they referenced the august, september, 2021 time frame what ended up being two or three what inflation has peaked >> you know, you referenced in our previous segment about people still looking for offers on balance transfers do those still exist for average credit -- not 780 credit scores, okay, but whatever, 680. do they exist? >> yeah, sblul 680, 700, they're still widely available. we have a list at bankrate.com but we see zero percent. a lot of the issuers are offering one flavor or another some of these go as low as 21 months th that's really significant, brian. that insulates you from however many future rate hikes we end up

seeing and you can put the hammer down. you have a long runway to get that debt paid off once and for all. that's the goal. it getses tougher the higher rates go, but when you insulate that, you can reallyefforts. >> that's it that revolving credit number with rates going up, add that to a.r.m.s, adjustable rate mortgages, add that to car loans, spectacularly inflationary if you have dead. gregg mcbride, bankrate.com, thank you. appreciate that. >> thank you, brian. all right, on deck speaking of a.r.m.s, home sales declined once again last month, but not as much as some feared so, can the housing market hold up better than some are predicting we'll talk about it. and rare bipartisanship in washington, but, maybe it's just the boos talking it's a really story. it involves ylan mui drinking, apparently that's coming up as we head to break, let's take a look at the dow heat map.

american express, honeywell, the biggest gainers. "the exchang ipa aer th ise"s ckft welcome back to earth. thanks, it was pretty life changing. dude it was eight and a half minutes. i didn't even get to finish my burrito. technology lets you vacation in space, but to get work done on earth... you need more than technology. you need cdw. so with the cisco hybrid work environment, we can deliver the same network experience to all your offices. space spaghetti. no. securely connecting your team from anywhere. houston we... have a solution. we get it greg, you've been to space. cisco makes hybrid work possible. cdw makes it powerful.

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green on the screen this friday afternoon right now, markets are higher, not overall soaring, but the nasdaq is up 1.4%. that's a pretty big deal by the way, part of that, media stocks they're on the move. a lot of news in the last 24 hours. let's get to julia boorstin for a market flash julia? >> a lot of news, indeed and it all started with netflix. those shares up nearly 7% on those better than expected subscriber additions that the company reported in their earnings other media companies are moving in tandem, a sign that the

company's netflix subscriber growth indicates overall strength in the sector at least that's what investors are hoping take a look at disney shares they're up about 3%, as are warner brothers. comcast, cnbc's parent company, those shares up over 1.5%. paramount and global shares also up about 3%. i also want to point out, pinterest. it's a rare stock in the space that is struggling today earlier today, it was in the red. right now, it's just flat on a downgrade to neutral from buy by mkm partners, citing negative survey results that show advertisers preferencing its rivals for where they're going to be putting those ad dollars brian? >> julia, thank you. let's step outside of the world of business and get a cnbc news update with tyler mathisen >> brian, thank you very much. here's what's happening at this hour, folks. a summit of western defense leaders has failed to resolve their differences over sending tanks, the latest ones to ukraine. they held more than five hours of discussions at a u.s.

military base in germany germany's defense minister says his government has still not made a decision on supplying german-made leopard ii tanks to ukraine. the federal trade commission wants a judge to hold pharma bro martin shkreli in contempt of court. regulators say the convicted fraudster has started a new drug company, violating a ban on shkreli working in the pharmaceutical industry. a lawyer for shkreli did not immediately respond when asked for content. -- for comment, excuse me. and in an australian rain forest, a park ranger has found, look at this thing, look at this, what could be called the world's largest toad this kane toad weighs in at 6 pounds has been nicknamed toadzilla. unfortunately for toadzilla, kane toads are an invasive species and it was euthanized before it could lay tens of thousands of eggs.

toadzilla's body has been donated to a museum for further research a six-pound, now-dead toad, brian. >> you can race kane toads there are bars in australia, i may or may not have been in one, where you do this, and you bet on the toad and you smack it and not that you don't hit the toad, you get behind it and you race -- and you kri, whoever loses finishes don't do that. >> i thought there might be alcohol involved somewhere >> that's it i see a cnbc segment ahead >> yep kane toad olympics >> that's it, with rip toadzilla. by the way, don't lick them, also apparently they're poisonous >> i wasn't planning to. >> not you like a dog or something. >> i'll see you, man >> tripping tyler mathisen, that's a great segment all right, fire up the jets, because your next guest says f-35s and destroyers could be a great place to put your money.

the stocks she likes, coming up. [music playing] ♪ imagine something of your very own. ♪ ♪ something you can have and hold. ♪ ♪ i'd build a road in gold just to have some dreaming, ♪ ♪ dreaming is free. ♪ accenture, let there be change.

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 "the exchange." defense was a bright spot last year the aerospace and defense itf,

ticker ita saw an 8% gain. the s&p 500500 fell 19%. but the tide has turned this year amid reports that the new gop-led house considering deep spending cuts across the board, as the likes of raytheon, rock he'd martin lower to begin the year morgan stanley says spending cut fears may be overblown, and now is the time to buy some of these names, perhaps at a discount let's welcome in the analyst behind that call, christine, thank you very much for joining us why do you think these defense spending cut fears may be overdone >> thanks for having me. from a proprietary analysis, what we found is that we're in the very early innings of generational investments in defense. that's because we're in a heightened geopolitical environment today, that we haven't really seen since post world war ii and when we look at the commitment that the u.s. military has, what we've been

reliant on for strategic deterrence are the three legs of a nuclear triad and they're just aging. when you look at some of those programs, the minuteman system has been in operation since 1970 that is now a 52-year-old system and similar to other capabilities that we've been reliant on, like the b2 bomber and the ohio class ballistic nuclear submarine. all of these are ranging 30 to 50 years old in order to prepare for a heightened gee geopolitical environment and have a strategic capability modern i'd, we're in the early innings of spending to get these things replaced. when you look at the winners of who's been winning the programs to replace a nuclear triad, we've seen northrop grumman. they have whon two legs of the nuclear triad with a b-21 bomber and ground-based strategic deterrence, which will replace our minuteman icbms. so these are the opportunities for defense. >> is northrop your best bet >> i mean, it's our top pick,

during the last cycle, during the reagan administration buildup, northrop only had one leg of the nuclear triad, and in this cycle, they will have two legs of the nuclear triad for growth >> is there -- what's the difference between these companies? i mean, we talked about it earlier with tech on the show. the difference between amazon and alphabet northrop, lockheed, general dynamics explain to our viewers, yeah, they're bigger in ships, they're bigger in missiles, they're bigger in planes, et cetera. >> when you think of general dynamic, they build submarines, and they also have combat vehicles like strikers and inrimms and gulf stream business jets gulf stream today is a key driver of the stock. even though it's a defense contractor, thecompany trades more on the business cycle lockheed martin, their biggest program is the f-35. 30% of total revenue is related to the f-35 program, and even though this has been a driver of growth for the past 20 years, the f-35 is maturing

northrop grumman, what's unique about the company is that they've won programs for growth in the future. so think of where the f-35 was, 15, 20 years ago, northrop grumman has won two programs of that size with a b-21 bomber and gbsd and also you look at the portfolio, and this is where the morgan stanley proprietary analysis really stands out, we've looked at the fastest-growing portions of the defense budget and looked at who's got the exposure for their portfolio and saw faster growth, hypersonics, nuclear triad, and northrop's portfolio is really set up for that. and they fulfill all the capabilities for these fastest-growing high-priority programs for the future. >> well, if we hear more submarines are going to be built, we'll think, okay, now we know, general dynamics really appreciate it >> the nuclear triad, that is northrop grumman >> we have a complete army and navy right there between us.

all right. up next, as congress remains divided, ylan mui sitting down with the heads of what they call the bourbon caucus, republican andy barr, perfect name. and democrat morgan mcgarvie will discuss what might just be the only issue the two parties can really agree on and they're hoping it repeats itself, echoing a famous quote from the seventh speaker of the house, henry clay >> he famously said that kentucky bourbon whiskey was the key to lubricating the wheels of government and we think the bourbon can do that in today's divided congress, as well. nothing. absolutely, nothing. it really is something. as an expedia member, you can save up to 30% when you add a hotel to your flight. so you can have a bit more money, to do even less. because you've got a whole lot of nothing to do

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i had to get help somewhere along the line to stay competitive. i discovered prevagen. i started taking it and after a period of time, my memory improved. it was a game-changer for me. prevagen. healthier brain. better life. welcome back when you think of congress, it's probably a few words that come to your mind think of ones that start with the letter "b. bills, budgets, brinksmanship. but one group of congressmen are thinking of a different b-word

and that is bourbon. ylan mui sat down with the co-chairs of what they call the congressional bourbon caucus and why they're hoping the brown liquor could lead to more bipartisanship or fistfights. ylan >> brian, that's another word that begins with a "b. bourbon and other american whiskeys are the country's top exported spirit, making up 62% of the $1.6 billion in international sales according to the distilled spirits counsel. market share is bouncing back after the eu suspended tariffs on the kentucky signature spirit, and now lawmakers on both sides of the aisle are pushing for permanent relief >> in an era of divided government, there is one issue that brings people together. bourbon, >> with the bourbon caucus, they get pretty popular we get to drink our policy >> the bipartisan bourbon caucus is led by andy barr and democratic representative morgan mcgarvie

both hail from kentucky, where 95% of boar bon is distilled in fact, it's the only spirit recognized by congress as the distinctive product of the united states. >> all bourbon is whiskey, but not all whiskey is bourbon and we think bourbon is, of course, the best of all whiskeys that means that public policy actually matters >> reporter: here's proof. during the trump administration, the bourbon caucus pushed to lower the excise tax on spirits, after president biden took office, the bourbon caucus fought to suspend europe's retaliatory tariffs on kentucky's finest, sending sales soaring by 23% now they're trying to prevent those tariffs from snapping back into place next year still, this is washington, and politics is never totally off the table. >> we have so many kentucky bourbons here on this table. which one is your favorite can you even answer that question >> the ones from my district >> that's right, that's right. >> now, of course, brian, bourbon is not the most urgent issue facing this congress there's a debt limit and funding the government, of course.

but this is a good reminder that bipartisanship is always worth a shot back over to you >> i see what you did there. worth a shot and this is why i'm going to say something, i hope i'm not going to get in trouble. we're going to miss -- this is your last-ever -- maybe, as a cnbc employee, correct, this is it >> this is it for me this is cheers, brian. >> well, because -- like, the worth a shot is a perfect example of why we're going to miss you, because you're super talented, super friendly, got up for wex at 3:00 in the morning >> right alongside you >> you're always smiling we're going to miss you, ylan. >> thank you very much, brian. i'm going to miss too and everyone at cnbc it's been a really great run >> well, ylan, thank you i'm not done with you yet, because i'm going to new orleans. a lot of people don't know this, that ylan is a -- she's a raging -- she's not a raging cajun, because that's a college,

but you're a cajun, and you'll give us some good restaurant and bar tips on our next trip down the new orleans. >> we can go to boarurbon street >> there'll be no partisanship they'll be partyingship. that was stupid, i'm sorry ylan, we'll miss you >> thank you, brian. >> ylan mui off to next adventure. no doubt will rock it. next up, december marked the 11th straight month of declines for existing home sales. any relief on the horizon for buyers a housing health check, next ♪ a cyber-attack can grind everything to a halt. cisco security keeps your company moving forward. because if it's connected, it's protected. cisco.

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(co-worker) but it's wednesday... (co-worker 2) see you monday! (co-worker 3) am i missing something? (hero) it's the weekend baby... see you later. (vo) like getting things two days early? when it comes to payday, you can with wells fargo. (co-worker 4) what are you doing this weekend? one. xhb is moving higher today on better than expected existing home sale numbers. diana olick, the data wasn't all doom and good. >> no. look, sales fell in december but not as hard as the street was expecting. they dropped 1.5% month to month but they were down 34% year-over-year rounding out 2022, saw 18% fewer sales than red-hot 2021.

higher mortgage rates and tight supply are plaguing the market with inventory at the end of december down about 13% from november here's the bright spot, actually up just over 10% from a year ago. at the current sales pace, that's still just a 2.9 month supply and four to six month sup ply supply is a balanced market. prices are easing. the median price of an existing home build in december was $366,900, up 2.3% year-over-year we're off the huge annual gains they were seeing as recently as last summer. it is the smallest price gain since may of 2020. homes are staying on the market longer on average, 26 days. that's up from 19 days the year before just 14 days last july all cash sales, though, are rising 28% in december up from 23% the year before. that's likely due to higher mortgage rates and a return of investors to the market as pricespric s start to ease.

while steals are down at all price points, they were falling the hardest at the top of the market sales of $1 million plus homes were down 45% year-over-year, while the other price points were only down in the mid 30s. there's your luxury issues, brian. >> seems to make sense diana, let's talk more now about all of this and bring in another voice. danielle hale, realtor.com's chief economist. danielle, this is probably a bad question, but mortgage rates are about 6% on average now. at least they're staying there is there a positive story to be told in that rates seem to have stopped rising as a buyer, you know what you're going to get rather than having to deal every day with another higher rate. >> the volatility lately in mortgage rates has been on the downsize that is in buyer's favor, a better direction for buyers is

helping to make the pricing on homes much more affordable for buyers taking on a mortgage. as noted, the uptick in sales was investors, buyers often using cash and aren't as affected by swings in mortgage rates. what is also interesting, we saw an uptick in first time home buyers it was slight but they saw a slight increase in share in december that suggests some home buyers are taking advantage of slightly lower mortgage rates as we move into the new year, a lot of people set resolutions, looking to make a move in the calendar year. i think that's going to be a big boost to home sales for those folks. the fact we are seeing lower mortgage rates is making homes more affordable for people relative to what they were at the end of the year last year. >> you buy that argument, diana? >> i mean, i don't know. there's this incredible push and pull danielle talked about it, and

she put out a release this morning as a reaction to the numbers. t sellers are afraid to lift because they don't want to catch a falling knife. buyers are afraid to buy for the same reason. they don't want prices to go down further and miss out on a bargain. lower mortgage rates are certainly going to help. we saw that in the homebuilder sentiment numbers this week. they saw more buyer traffic in there. i want to know from danielle, who jumps first, the buyers or sellers, back into this market >> i think the buyers are already in the market. they're just waiting for their opportunity. >> uh-huh. >> you'll have to see sellers come in. they're sitting on record levels of home equity, though home price growth has slowed. it is still positive i'd rather be a seller than a buyer in today's market, but there are plenty of buyers for whom it's the right time to make a purchase regardless of the economic conditions. they're waiting for the affordability to improve. >> you and i talked about this the other day. if i'm on realtor.com -- not

plugging realto if i'm on realtor.com -- not plugging reaealtor.com but you' a guest so i'll plug it. if i go and say, okay, i'm a buyer. i like these two homes wait a minute, this home was last sold in 1994. they've been living there a long time probably have it paid off or close to it. this house was sold in 2019. they might be underwater and won't be flexible on price that equity has to matter a lot on how much they're willing to move, diana. >> right i mean, it's all about the negotiation. but i do think buyers now have a lot more negotiating power they don't have to drop all the contingencies like we were seeing two years ago you could buy a house but couldn't say, i'd like a home inspection, please now, those are back. there is less competition in the market that means sellers do have to be more flexible. as for the equity issue, i think it really plays much more into the potential sellers, what they're saying about, you know, do i want to give up this mortgage rate and have a higher mortgage rate where i'm paying

more into it, then not gaining as much equity as before, or do i sit on this equity and perhaps take some out and redo the house in the way i want it, so i don't have to move i think that plays into that side of the equation hands down, across the board, we need more supply >> that's it we'll have a more supply show i'm sure next week danielle, diana, thank you very much this is cool remember we talked abouttoads e? in your dog does it, take it to the vet. let's show the power lunch studio it's wild. there's the power cam. contessa screaming at tyler about something. they've got tech palooza coming up big moves in tech. that's fake conversation, what they're doing right now. they're pretending to talk to each other look at the background it's all good stuff. laura and martin, great guests on the "tech-a-palooza" from the tron set have a great weekend "power lunch" is next.

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♪ good afternoon, everyone welcome to "power lunch. with contessa brewer, i'm tyler mathisen we have big tech and fed speak google is bringing back its founders, like many other companies. netflix soaring on strong subscriber numbers, and the ripple effects of apple trying to do more in-house. plus, we heard from fed governor christopher waller. we'll get live reaction from his comments, what they mean for the markets. let's get a check on the markets. stocks are higher right now, though all three averages in the red for the week the dow with a 3% loss for the week up half a percent on the dow s&p 500 up 1.25% nasdaq is up 1.98% you have the russell 2000 up a percent, as well >> all righty. we've go