your perspective. there's the dow up 222 points near the highs of the day. for the month so far, curiously, the dow is basically flat up a quarter of a percent, similar gains for other markets as well. there you see it on your screen right there. you know what this is? this is the 30th anniversary of the inauguration of bill clinton. how about that >> how can i be that old >> thanks for watching "power lunch," everybody. >> "closing bell" starts now stocks rebounding in friday trading, gaining steam throughout the session with the nasdaq on the verge of turning positive for the week. this is the make or break hour for your money welcome to "closing bell." i'm mike santoli in for sara eisen. here's where things stand in the markets. they have levitated throughout the day. all the indexes have s&p 500 up about a percent and a half it's down a little more than a percent, percent and a half for the week at this point nasdaq there the outperformer, obviously strong netflix earners

as well as lyft. ten-year note yield has been bouncing the last couple of days it is now up toward 3.5% again here's a look at two stocks leading the tech rally there's netflix on the back of strong subscriber numbers and alphabet after announcing a round of layoffs we'll talk more about both of those moves throughout the show. take a look at the s&p 500, though, and where it now sits. we've gotten this little lift, we're at 39.50, just a little three-day pullback i would say also an interesting setup in terms of we were at 4,000 last friday this is the third friday of the year, third strong friday, maybe that's a pattern we also have an options expiration today it seems like it might be fueling the afternoon dynamics still in this longer term downturn as i pointed out at the time, we were flat for three weeks, stabilizing for three weeks after we hit one of these lower highs in early december. that's different that's a different pattern than these times when you more or less high tailed it to a new low.

we'll see if that actually makes much of a difference we are obviously seeing toggling between potential for a hard economic landing or a soft one no determining verdict on that yet, but clearly the market day-to-day is ping-ponging between those two scenarios. take a look at corporate credit spread specifically. b bbb rated corporate debt and really engage on how much the fed has done to tighten financial conditions in a short period of time people are demanding more return in exchange for the -- spreads are going down that means risk appetites are going higher, and corporate credit is getting less expensive. and you see this little drop more recently, it's about 5.2, 5.3% right here on the yield itself for bbbs. that's pretty high relative to the last ten years not very high if you go back a ways obviously the mid-2000s we were here for a while now, if the fed keeps insisting it's going to be right about getting short-term rates above 5 for a long period of time, hard to know if they're going to stay

here it shows you that the capital markets are still healthy. we're still issuing a lot and buying a lot of bonds at these levels so far no crucial damage done yet. the big question is how much more might be to come. and let's now turn to the latest signals from the fed steve liesman speaking today with fed governor christopher waller at the council on foreign relations. steve joins us now with the big takeaways from that conversation, steve. >> yeah, thanks, mike, an important one, fed governor chris waller pushing back against the market's optimistic and dovish view on the outlook for inflation ans the fed needso hike as much as 75 basis points to ensure inflation is brought back to the fed's 2% goal and the market may have it wrong here >> the market has a very optimistic view that inflation is just going to melt away we have a different view inflation is not going to just 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 fed and the market are about 72 basis points apart. average fed forecast 5.13. the market has the fed raising to 490 and undecutting down to . waller says he needs six months of improving inflation data bv he's going to pause. he said rates are pretty close to sufficiently restrictive, but he has a way to go on that it's easy for the fed -- or easier for the fed to cut if it's wrong on the inflation outlook. waller joined in his speech over fed officials in supporting a 25% basis point hike, and the market trades with an 80% probability of that happening. central bank is now in its quiet period before the meeting but the key next week, the fed's preferred inflation indicator comes out on friday, and mike, waller used that term immaculate

disinflation which he says the market is looking for here. >> the market's certainly leaning that way or hoping in that direction and steve, let me just make the case that, yes, if you look at year end, the market is relatively far apart from where the fed is saying they're likely to end up, but on the way there in terms of where we're getting to, in terms of a peak fed funds rate, it doesn't seem that big of a spread. if you're going 25 basis points per meeting, you'll get 25 in february, another one six weeks later, and along the way, maybe things happen in a friendly way with inflation >> i mean practically i could take a vacation and come back in may. that's when things start to get interesting. everybody is in agreement, you're right the question is is there another 25 there that's what the fed seems to be suggesting to get to that 75 that waller was talking about. does the fed pause at that

point, and even then, i'll like it up while we're talking here i think the market has maybe a cut built in for that may meeting. i haven't looked recently. that could be the possibility. let's see, for the may meeting, only a 12% probability of a cut. it's still going up to 475, 5% by then. >> to your point, the market does not have rates hanging out at whatever the peak level is for long anyway because it's supposed to be coming down by the end of the year. >> straight down. >> we'll see how it plays from here have a good weekend, we'll talk to you soon. joining us now for more on the economy and the fed is jpmorgan chief u.s. economist mike feroli, and make, just to weigh in right there on the discussion whether the market, in fact, is -- you know, i wouldn't say too hopeful about rate cuts. maybe what the market is saying is there's a high enough risk that the economy has a downturn that the fed will be forced to cut rates. so where do you come out on it >> i think your point is exactly

right. the market isn't just price in the most likely outcome, it's pricing in the whole distribution, and there's a tail risk here this things go really south by year end, particularly around the debt ceiling. so i think that's important to keep in mind when thinking about what the market's pricing. >> for sure, and you know, we heard waller today say it'd be ni nice to have six months of improving i thinnflation data. the question is the effect of what's already been done in terms of the economy and how that's going to work its way through and whether, in fact, the economy as it sits right now is well-positioned to avoid a recession or if the fed feels like they have to get unemployment higher to do their job. >> so i think it seems pretty clear that unemployment should go higher from here, or at least that's what the fed wants to see is some deterioration here in labor market activity. we haven't seen that yet what we have seen is a lot of slowing and spending and

production, but so far the employment indicators are really hanging in now, i think there are some forward-looking indicators that suggest that that may be changing soon, but we're not there yet, and i think that's really what the fed's waiting to see. >> so you feel like they want to see the actual effect in the employment data before they're willing to back away >> yeah, and i think waller said that as well today, which is that wage inflation -- and he was, you know, pretty careful in how he said that, but that wage inflation needs to come down and that right now where wage inflation is is probably inconsistent with their inflation objectives, so the most likely way you're going to see wage inflation come down is if employment growth shows and likely if unemployment growth goes up. while he wasn't trying to sound too harsh on that respect, you know, obviously it would be nice if productive went up. that's another way you could sustain these higher wage inflation numbers, but realistically, i think what they want to see is lower wage

inflation, which really requires lower employment growth and likely higher unemployment and we haven't really seen, you know, even the first hints of that yet what we have seen, you know, this week was slowing retail sales, slowing industrial production, and eventually we think that's going to flow through the lower employment growth but i think until they see that, they're not going to really want to, you know, take these most recent inflation numbers and, you know, kind of put them in the bank because as long as those wage inflation numbers are running firm, i think they're going to be still a little worried about what that means for particularly service price inflation. again, he repeated that mantra today which started with chair powell a few weeks ago or a few months ago i think until they see that, they're going to remain a little bit nervous about how durable this -- these last few inflation prints really are going to be. >> sure, now we are down a million in stated job openings from the peak whether that's

meaningful or not. also of course we've been talking about the drum beat of large company announced layoffs. none of that has really shown up in the actual unemployment claims or any of the other aggregate data is that the front edge of what we expect to see in terms of softening job growth >> so i think the front edge is more what we've seen over the last several months in temp help employment it's also what we've seen in the average workweek, which is to say firms are using their work force less intensively than they had been six months ago. i think in terms of the tech layoff announcements, not only is that not really a big number in the grand scheme of things, but you have to think of whether that's going to contribute to net declines in overall employment in other words, a lot of these tech workers may just reallocate into other areas where they're going to be -- where there's very high demand for workers so i wouldn't think that the tech layoffs that we've seen are necessarily a big macro story, but i do think there are other reasons to believe we've seen

some, as you say, leading edges of declining overall firm demand for workers. >> yeah, good news for those individual workers, maybe not good news for what the fed's attempting to achieve here mike, great to talk to you, appreciate the time today. >> likewise. >> mike feroli at jpmorgan. goldman sachs taking a midday plunge after "the wall street journal" said the fed is looking into its consumer banking business we'll talk to one of the reporters who broke that story next, you're watching "closing bell" on cnbc. young lady who was, you know, mid 30s, couple of kids, recently went through a divorce. she had a lot of questions when she came in. i watched my mother go through being a single mom. at the end of the day, my mom raised three children, including myself. and so once the client knew that she was heard. we were able to help her move forward. your client won't care how much you know

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we are sitting at session highs across the board you see the dough there up 285 one name, though, sitting out the rally is goldman sachs that stock taking a dive midday, by far the biggest drag on the dow. that's after "the wall street journal" published a story saying the federal reserve is looking into whether the bank had proper safeguards in place around its consumer business goldman responded to our request for a comment by saying, quote, the federal reserve is our primary federal bank regulator, and we do not comment on the accuracy or inaccuracy of matters relating to discussions with them. let's bring in one of the reporters who broke that story, ana maria andriotis from "the wall street journal. what can you tell us about perhaps what the focus of this probe might be, what parts of the consumer operations seem like they're under scrutiny here >> so the probe is broad, and it's focused on lending that's happened under the marcus brand, so the federal reserve is

investigating goldman's consumer business broadly to determine whether the bank had appropriate safeguards in place, essentially as it was ramping up lending so this is broad, and this started as part of a normal review process back in 2021 that then actually became an investigation starting last year >> interesting so you know, the markets business, the consumer lending and deposit taking business at goldman was relatively new and i'm sure kind of ramped up relatively quickly do you know or do we know if there were, you know, a pattern of consumer complaints or if there are any other kind of compliance missteps along the way that seem to give an indication of why the market might be concerned here? >> so that's one of the things that the fed is looking into it's examining what happened in instances of customer harm, including whether issues that were flagged internally pertaining to that, were they

addressed? were they properly resolved? part of the issue here as well has to do with the weight at which lending grew and the marcus division essentially broadened out into consumer lending and questions around whether there were proper monitoring and control systems in place to handle the existing consumer business as well as it kept developing and expanding. >> interesting, and now, ceo of goldman sachs david solomon this week did actually comment on the strategy around the consumer business and how it has evolved, let's listen to that >> we probably took on more than we should have, you know, too much too quickly but i think we now have a very good deposits business we're working on our cards platform, and i think the partnership with apple is going to pay meaningful dividends for the firm over time we have this acquisition of green sky. we think it's a good business, and so we're going to give people a clearer view. there's more transparency around how they can contribute.

>> now, annamaria, there have been some trimming of ambitions i guess in that business, some layoffs there, some concerns about, you know, whether the apple card biusiness is going t be profitable. you cover goldman what do we think is ultimately going to be the scope of this business, whether, in fact, it stays under the regulatory sights or not >> a few things to think about first, they are already backing down on several different elements of their consumer business they're winding down personal loans. they are not going to move forward with their ambitions at least on the large scale, they were planning to do that and then you have the credit card division. things there become trickier you can't just pull the plug on something where a partnership exists apple as well as gm, the green sky acquisition, how do you pull back on something you acquired not that long ago. this also really points to how complicated consumer lending, credit cards, consumer banking in general is.

consumer complaints can go a long way with regulators goldman already disclosed last year that they're under investigation by the cfpb for their credit card operations, and just in what goldman disclosed, you can tell that inaccuracies, mistakes, even small missteps in consumer banking and lending can really resolve -- in trouble for big banks, goldman included. what's really interesting about the fed probe is how wide ra ranging this is with regard to what the fed is looking at it encompasses goldman's compliance functions as well as audit and legal. essentially were there enough controls in place, what was known about particular issues, and were those issues actually addressed, issues pertaining to consumer harm. >> yeah, it is fascinating i maean, it seems like it's essentially a lot of attention on whether they had the proper

compliance infrastructure for a consumer business. i think back, i mean, goldman was essentially forced to become a bank holding company around the global financial crisis. it seemed like they thought, well, we have kind of the general financial infrastructure and plumbing in place, why not extend our brand into the consumer area. i just wonder if the way investors are selling off the stock today, it seems like perhaps an unnecessary complication to the overall business. >> well, this makes sense in the beginning. the idea of offering savings accounts, deposits, the benefits of that to the bank. that was clear cut, and i think still is clear cut however, where things start to get complicated is -- the question of and as you said, david solomon pointed it out on the earnings call, did the bank try to do too much all at once we talk about personal loans we talk about credit cards, but there were other elements of lending as well that the bank tiptoed into, right?

a point of sale financing, the jetblue partnership there. there were a variety of different consumer banking and lending initiatives with the bank actually executed on and implemented or was in the process of hoelding out but neve came to be questions basically around how much is too much in the span of five, six or so years. the costs associated with that, and at this point, quite frankly, the growing regulatory scrutiny >> interesting annamaria, appreciate you kind of telling us what you know from our story today. let's check the markets, dow continues to click to new highs here we have the s&p 500 up 1.7%, dow up almost 290, nasdaq has been the leader up 2.5% on the day. still ahead, does alphabet have what it takes to compete with chat gpt the reporter's asking founder the reporter's asking founder larry page and sergey britn fo

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celebrations kick off this weekend, and more than 2 billion trips are expected to take place across the country from january into mid-february according to government estimates let's bring in seema mody for the big picture on why the event is a big test for the country's reopening. and seema, 2 billion trips sounds like a lot for a company relatively early in its reopening. where does it seem to be tracking relative to let's say the last normal lunar new year >> well, we were talking about 1.4 billion people, mike, who essentially have not been able to travel for nearly three years now being given the green light, and it's coming at a time when the lunar new year kicks off, which is widely seen as sort

largely seen as the largest, it is a big test for the country. right now from the travel companies we've been speaking to including expedia, they're seeing a double-digit percentage rise in travel searches from china to the united states as well as from the united states to china, so the increase we were seeing is very different than what we've seen in other china lunar new year forecasts just given the extreme lockdowns we saw over the last three years. i was also talking to james lou at clearnomics, what kind of supply chain disruptions could we see as a result of this reopening if it's worse than expected do we see factories shut down? there are a lot of moving parts here. >> when you say if it's worse than expected, in other words if perhaps a resulting covid spread is worse than expected and all of a sudden it ends up kind of setting back china a little bit in the process of reopening? >> yeah, china has been on this

pr campaign mike since the beginning of this year touting china as the economic center for foreign companies saying the lockdowns are over come back to the china and don't worry about the lockdowns we've seen so this idea that they can reiterate this message of growth but also contain covid cases, that remains to be the big challenge. if we do see migrant workers perhaps, you know, get infected and that results, that delays their return to major factories, that, of course, is a major concern beyond the hospitality and consumer companies but for big tech as well >>. >> interesting, absolutely, you know, a fascinating real world experiment, seema. we'll see how it all goes over the next couple of weeks or so >> right. alphabet in the meantime, re reportedly calling in founder sergey brin and larry page as reinforcements against its battle against chat gbp. we'll discuss if that will help

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alphabet shares moving higher today, the company announcing it will lay off 12,000 people, the latest tech company to announce skjob and spending cuts separately "the new york times" reiteratin the pressure alphabet is

receiving tr chat. larry page and sergey brin have come back for several meetings with company executives in recent weeks to discuss the threat chat gpt poses to its search business. joining us is oppenheimer & company senior analyst jason alstein, jason, good to see you here >> thank you >> put these things together, a lot of trimming going on, a lot of these companies hired pretty indiscriminately for a few years. they're trying to figure out the correct cost structure on the other hand, they are going to have to make new spending efforts in other emerging areas >> sure. i think you have a number of factors happening hear so clearly the company hired a lot, head count up 50% since 2019 you have an activist investor pushing for head cuts but then you have chat gpt. on top of that, if you look at the outlook for advertising, they're not in as strong a position as they should be around the shift to connected

tv and so ultimately we think saving some money on head count will allow them to invest in other areas. >> obviously one of the knocks on alphabet over the years has been a relative lack of attention to cost discipline they want to do many things in many different areas they want it to be the paternalistic employer and all the rest of it is the street convinced that maybe has changed? i know that earnings estimates for 2023, for example, the consensus is down 20% since the middle of last year. >> yeah, i maean, you've got a number of factors, right you have the head count, and then you still obviously have the revenue correction there's still some concern that estimates might be too high. i think we have a youtube estimate that's 4% below the street, for example, for the year yeah, look, i think there's been a lot of opportunities in silicon valley over the years for people to work at, startup companies, the next new thing. so i think google had a culture of come work here, come work with the smartest engineers, and you know, we will take care of

you. they really tried to pride themselves on not having to do something like this. but i think you look at every single tech company is laying people off so you know, they would have been the outlier to not do that. and again, i think they need to give wall street some kind of answer on chat gbt for all we know, they do have ai internally that is better than chat bpt there was a blog post i think on the 17th when they talked about their ai initiatives, outlined what they've been working on for the last ten years, but i think they do need to show investors and the consumer kind of, you know, what is their hand in this ai race. >> don't they also have to show that there's not potentially erosion on the advertising, the monetization efforts against search results under the, you know, whatever ai protocols. it seems like right now they're serving you up links, a lot of what people are looking for. it's not just ai generally trying to figure out an answer to a search query. >> if you look at google now

versus google five or seven years ago, correct to some extent they're giving you the answer it may be the answer to things they think you wouldn't click anyway or maybe it's not as much of a monetizable search, when you think about the high monetizable travel, auto, certain high monetizable categories, but yet there's no question that, you know, if they just give you the answer and don't make you do some digging, it's harder to monetize. i also think what is just the business model what is the business model chat gpt? >> right >> do they actually start charging for g suite if chat gpt is part of g suite, just like microsoft is talking about making chat gbt a part of microsoft office 365 so there's definitely we have not seen how this is going to play out but i think -- and there's been a lot of reporting -- microsoft or alphabet, they kneadneed to o probably some training around their ai to do some of the

things that chat gbt is doing where it may not be let's say today ready to do that. >> and sort of the bottom line take on the stock from this perspective, when the valuation's being compressed quite a bit at this point? >> yeah, look, we still think in large cap it's probably the second most interesting stock in our universe, we'd rank probably uber number one and then alphabet there's thrdefinitely a lot of questions of what happens around meta meta is a cost cutting story rather than a revenue story. i think investors are looking for more you may not get more we do like the hand that alphabet has right now going into earnings. >> good to see you >> thank you here's where we stand in the markets with less than a half hour to go you see the s&p 500 up 62 points it continues to click higher as i mentioned it is an expiration friday. netflix one of the big winners in the s&p after announcing stronger than expected subscriber growth. coming up, a top analyst on whether this rally is just

getting started. you can stlien to "closing bell" on your favorite podcast app we'll be right back.

the nasdaq turning positive for the week as tech stocks rally today. here's a live look at the nasdaq 100 heat map you see overwhelming strong breath, green pretty much across the board. you have about ten stocks down in the entire nasdaq 100, which is up 2.6% objn the day. let's check out our stealth mover, restaurant browns, shares having a crowning moment bmo capital marketss serving up a whopper of a call. to outperform from market

perform and hiking its price target from $72 to 63. citing improving performance at burger king, popeyes and the tim horton brand. eli lilly sitting out today's rally after failing to get early fda approval for its new alzheimer's drug, details straight ahead. netflix rallying and software surging when we take you inside the market zone ♪ ♪ engineered to elevate the senses...

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power e*trade's easy-to-use tools like dynamic charting and risk-reward analysis help make trading feel effortless and its customizable scans with social sentiment help you find and unlock opportunities in the market with powerful, easy-to-use tools power e*trade makes complex trading easier react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you won't miss an opportunity we are now in the "closing bell" market zone, richard bernstein adviser ceo rich

bernstein is here to break down these crucial moments of the trading day. alicia reece on netflix, and greg moscowitz on software stocks we have the nasdaq up more than 2%, the s&p 500 ahead by 1.7%. rich, what's your read on the first few weeks of the year here it seems like investors are acting like maybe they felt they don't own quite enough risk, enough exposure to the growth story. maybe raising the probabilities of a soft landing, how does that sound to you >> yeah, you know, mike, i think it's kind of funny that for once in a long time, people aren't talking about the january effect, and we're sort of getting a january effect you know, january is always kind of a month for risk-on assets, and it seems to be happening i would be cautious whether this is a lasting rally in these risk-on assets it really doesn't make a lot of sense to me relative to inflation, relative to fed tightening, relative to profits still decelerating that you'd

want to be in such risky assets. history says it's not going to be a lengthy outperformance here. >> yeah, and we will get to that in a little bit. i know you think inflation might be a little more of an enduring story as well as the risks to valuations but we want to get to netflix, big story today leading the nasdaq 100 on the day, and getting a big pop on the back of fourth quarter results earnings, missed expectations, but subscriber growth blew past estimates. netflix announcing a management shake-up reed hastings is stepping down as co-ceo. analysts heard from peters on the earnings call where he talked about the strength of the company's new ad-supported tier. >> we see that engagement from ads plans users is comparable to similar users on our non-ads plans. that's really a promising indication it means we're delivering a solid experience, and it's better than we modelled, and that's a great sort of fundamental starting point for

us to work with. >> let's bring in wedbush securities vice president of equity research, alicia reece. it's great to have you on here did it change -- look, the market had already kind of migrated back into netflix believing perhaps subscriber trends were going to be a little firmer, perhaps happy about things like, you know, getting pricing for shared passwords and things like that at this level, at this valuation, what's your current view on whether the growth can support it >> yeah, we're still very positive on netflix. we think there are a lot of growth drivers ahead just two months out of the gate they started well with an ad-supported tier offering there was a lot of uptake. evening we learned two really positive things from netflix there was a low tradedown from the premium tiers, and you know, i think what we saw is with those high subscriber numbers that there was a lot of retention. people instead of going to trade down to the ad-supported tier, what we were seeing is they kept the tiers that they had, and if

they were already going to cancel, they opted for the ad tier instead it really kept a lot of that churn, you know, those subscribers on service the issue i'd say right early on is that the rpu is quite low, but that's going to rise over time, so really positive about that ad subscriber growth continues, rpu starts growing and then they have the password crackdown coming and that's going to drive rpu higher as well >> you know, it seems at this point, at this level based on the earnings run rate that we're at right now, you're clearly paying a premium for what you would anticipate to be future reliable growth. i'm reminded a little bit of the cable companies, not the cable networks but the cable providers in the first couple of generations or generation after they came public, and they were chronically unprofitable they had a lot of debt they were spending a lot on ca capex, but they were growing to basically have full penetration, and then they could raise prices every year, once they had people

subs subscribing, there was very low churn. how far are we off from netflix delivering something like that where it's going to show up in a big way on the bottom line >> i think we're there now and that's the turning point where we are now where i think this is a really positive story, a really interesting story is that this is the first year that they've posted huge free cash flow number. they had 1.6 billion in free cash flow in '22, and they're guiding for over 3 billion in '23. i think that grows by a billion a year they've just found a way to be more productive with their content spending they're bringing in content, you know, showing content globally from around the world, you know, korea's putting out great content. you know, the uk, there are lots of different areas where they could make their original content more productive, and because they have so much original content now, they're able to play with that a lot more they're just really a global player in this content market now, so they have a lot more leverage than they used to they can drive all of that to the bottom line.

>> okay, yeah, it will have to be the case for $150 billion market cap, see how much the free cash flow can start to come through. alicia, great to catch up with you. thank you somuch. thank you. >> all right, eli lilly is one of the weakest performers in the s&p 500 after the fda rejected the company's application for early approval of its new alzheimer's drug they say the regulator wants to see more trial data. meg tirrell joins us. >> this sounds bad, but it's less bad than the headline might imply. essentially, lilly had applied for approval based on its trial, showing clearance of these amyloid plaques. it wants to see data on at least 100 patients taking the drug up to 12 months in this study patients could

stop, and enough did that that they didn't reach 100 patients taking the drug for a full year. that is the only thing the fda said the reason they were not approving it now the other thing to consider here is of course lily has a larger phase three three expected to read out results in the second quarter. after that they're going to file for full approval. and right now based on accelerated approval, these drugs don't have broad medicare coverage it really wasn't going to make a huge difference if it got out there now. that's why you're not seeing the stock down more today. there is the negative headline around that. lilly is down and biogen that makes the approved drug we saw get on the market but it's not being used yet, their stocks are up today. >> exactly i did see a headline that this fda request extends biogen's lead so to speak, i guess to be the first to market to some degree would these be directly competing treatments, meg? i mean, essentially you would do one or the other for those

patients who might qualify >> that is the expectation they would be directly competing. we haven't seen any -- i haven't seen a lot of discussion about them being combined. that's an interesting idea they do target the plaques in different ways they would be directly competing and there is that idea that they're out front. >> got it. thanks so much rich, as a broad category, we actually did see a really good outperformance by traditional pharmaceutical stocks, biotech also got pretty washed out and came back. does this qualify as the kind of defensive type group that you might want to prefer these days? >> well, mike, i think you have to make a distinction between large cap pharma and large cap biotech, and then kind of sexy smaller biotech. large cap pharma and large cap tech are both actually somewhat defensive, obviously biotech is a higher bet pharma does, but they're both pretty defensive. why? because no matter what goes on, we all tend to get sick.

it's very unfortunate but it's reallye speculative, and if you plolook at the performance r the pats st year or so, large t bio have demonstrably outperformed smaller biotech i think we have to differentiate the word biotech from defensive versus speculative, large biotech might be densive. >> some of the largest biotech firms did get cheap valuations and essentially ended up looking like cash cows for a while there. >> exactly. >> the software, those stocks rallies today leading the tech sector the group well off its highs downnearly 30% m miz suh hoe saying stocks like service now show promise of long-term opportunity. service now's ceo bill mcdermott sat down with sara eisen at davos earlier this week and discussed his stock's performance.

>> there isn't a tech company that i'm aware of that has outpaced the s&p 500 in this particular downturn because there's been a move away from growth, so growth stocks had their multiplescompressed. we're no exception to that but our multiples are still the highest in the industry because our growth is the fastest. >> let's bring in mizuho software analyst, greg moscowitz. all these growth software companies that have had their valuations come in because of rates, because maybe they got too extended right now as you shift among the potential winners and losers, where does it bring you in terms of the types of software players, i guess the kind of end markets they serve what do you like here and not like #. >> thank you, mike, for having me i think it's a very important question to distinguish where software vendors are playing, what is going to be a priority we all know that there are macro

related pressures, i.t. budgets are certainly going to be more charged in 2023 than they were in 2022. service now we do think is one of the better positioned ve vendors. they stumbled quite a bit in q2. sthans time they revamped their go to market they got in front of decision-makers more quickly they articulated their time to value a little more clearly, and we've seen them get more deals over the finish line, which resulted in a better q3 than expected what we published this morning is indicative of a continuation of that, in other words, 1 yes there is hesitation, but by and large, service now is continuing to be in favor on a relative basis when it comes to spending and i.t. and spending in software. >> and just to turn quickly to microsoft, we are going to get results from them next week. clearly it's kind of the huge stable one in the business, also had some valuation compression

how is that set up >> so in our view, the setup is a little less clear. now, if you were to look at public cloud oriented data points, the hyperscalers aws and gcp, they clearly have had a down tick over these past few months and so that has brought a great degree of concern as it relates to -- from the investment community as it relates to these companies and particularly in my space, microsoft, and so, the expectations have come down quite a bit. what's interesting is microsoft guided to a disappointing level for azure this period, so 37% constant currency growth that is a deceleration of five points from the 42% they did the prior quarter, and that in and of itself was disappointment there are some investors who think they're going to miss this target we believe it is likely to come in line. that is not anything specta

spectacular. it is reflective of challenges i think it's important to mention that while many customers are cutting back, they're optimizing their public cloud spend, there are also a number of other customers who are actually pushing forward, doing more with digital transformation, putting more workloads into the cloud there is a partial offset, and so that is, again, worth bearing in mind. microsoft has gotten significantly weaker, as you know over the past few weeks at this point it's trading a little bit less than 20 times our calendar 24 p/e, and so that is interesting, particularly for medium to long-term minded investors that can look out a bit beyond all of the noise and all of the challenges that we're facing right at this moment. >> sure, and i guess the very long-term trends have not really been disturbed with this little downturn greg, appreciate the time. thank you very much. greg moskowitz the s&p 500 up 1.9%. the dow up more than 300

rich, i maean, it seems as if software would not necessarily be the thing for, you know, inflation being stubborn and the fed remaining serious about fighting it. so where does it take you in terms of the types of things to emphasize this year? it seems like you still want to play defense and let the aggressive stuff run without you. >> i think that's right, mike. i think, you know, number one, we are in january. as i mentioned before, you're getting the january effect, which is always a lower quality, more speculative effect. we're getting it in spades this january, so that's number one. number two is we got to remember the cpi, the headline cpi is still 6.5% the headline ppi is still like 9%, so we still have a ways to go here before the fed will feel comfortable. now, it doesn't mean they're going to be tightening at 50s and 75 basis points every time, but the question is when do they reverse course when do they start feeding a speculative environment? i think that's much farther off in the future than people think. so your portfolio should

concentrate on necessities rather than desires because that's what usually works in an environment where profits are decelerating and the fed is tightening >> right, and so it seems like the hard assets over virtual and hope-filled ones maybe is a trade that might work for a little while longer. rich, it's great to catch up with you thank you. >> mike, thanks very much. all right, in the last minute here, we are going to go out pretty much on the week's highs, 3970ish for the s&p we closed last week at 3999, so really a relatively modest decline on the week so far, less than 1%. the nasdaq still leading it's above 11,100 again. netflix, alphabet, all the rest. the volatility index has dipped back below 20. it had clicked into the low 20s, receded back reflecting a more stable index environment that dollar index under 102 as well lower yields, lower dollar and lower volatility have been the

supports for risk assets this week we have three weeks now into the year, the s&p 500 is sitting on better than a 3% year-to-date return, and you see the russell 2000 also up 1 2/3 percent today. small caps have performed so far in january to date this is going to do it for "closing bell. now to "overtime" with carl quintanilla. and welcome to "overtime," i'm carl quintanilla in for scott wapner we just heard the bells but we're just getting started shares of goldman taking a hit today after this new report says the fed is investigating the bank's consumer business we'll have top analyst mike mayo join us in just a few minutes with his take. we'll begin with our talk of the tape pretty nice finish here to a bad week stocks rallies today but the s&p posting its first weekly loss of the year who is winning here, the bulls or the bears let's bring in greg branch