>> i think we got to get sam stovall on i'm curious how he gets to 4,500. what is the multiple the concern i understand, but that one, i would like to unpack a little bit >> dom, thank you very much. >> you got it, guys. and thank you for watching "power lunch." >> and closing bell starts right now. ♪ the dow right now sitting at session highs, erasing a 319-point deficit as big-name earnings take center stage this is the make-or-break hour for your money welcome to "closing bell." i'm sara eisen there's the dow, up 141 points or so. it is in the lead right now as i mentioned. the biggest contributor to the dow gains, travelers, caterpillar, united health care. s&p 500 is unchanged, tale of various sector performances here industrials, utilities, and real estate going strong. but the tech sector, energy, communication services, they're all getting hit today. the nasdaq is down 0.1%.

rbi, remember, this follows a strong back-to-back rally check out alphabet, late-day dive on news that doj and eight states have filed an antitrust suit against google over its dominance in the digital ad market we're going to talk to colorado's attorney general in just a moment. also ahead this hour, we will talk to cantor fitzgerald's ceo about his read on the economy and what he makes of the wave of vacancies in commercial real estate. let's get straight to alphabet some late-breaking news here, the doj holding a news conference to lay out its case this afternoon eamon javers has the headlines for us >> the department of justice traces google's ad business back to its acquisition of double click and alleges the company tried to create what they call a

mote around its advertising business that harmed advertisers and publishers alike attorney general merrick garland said the department of justice is not picking winners and losers here, simply enforcing the law. >> for 15 years google has pursued a course of anti-competitive conduct that has allowed it to halt the rise of rival technologies, manipulate auction mechanics to insulate itself from competition, and force advertisers and publishers to use its tools. >> but google's parent company responded with a statement this afternoon, saying that, in fact, the lawsuit from doj attempts to pick winners and losers in the highly competitive advertising and technology sector. it largely duplicates an unfounded lawsuit by the texas attorney general, much of which was recently dismissed by a federal court. now, alphabet says the department of justice's suit would slow innovation, raise advertising fees, and make life harder for small businesses, but the department of justice says google has engaged in a

years-long plan to do two things first, to neutralize competitors through a series of acquisitions, and second, to use its market dominance to force more publishers and advertisers to use its products. now, this is just the opening salvo in all this, of course this dispute is not going to be settled any time soon, sara. back to you. >> eamon javers, thank you joining us first on cnbc is colorado's attorney general, phil weiser. colorado is one of those eight states joining the department of justice in its lawsuit against google mr. attorney general, thank you for joining me this afternoon. >> great to be with you, sara. >> so, why, as the a.g. of colorado, are you joining this suit by the department of justice? >> the bottom line for consumers are when you look for content on the web, often, you're now being asked to pay for that content because the advertising costs aren't actually always going to the publisher. in many cases, google is siphoning off these extra fees

35 cents for every advertising dollar, google's able to capture because they have monopolized this market. they have got a dominant share on the publisher side. on the advertiser side and in the auction in the middle. this hits consumers in the pocketbook by having to pay for content where otherwise advertising could help pick up some of that cost, not to mention undermining innovation in this market whenever you get a monopoly, it squelches innovation by controlling how the market works. the internet can be and should be an open platform for innovation because of google's conduct here, it's not >> it's not exactly a monopoly, though, is it, mr. attorney general, when you're talking about the ad tech market they definitely have a large share, what, 30% or so, according to e-marketer? that's not -- there are other big players in there >> well, we're talking about here a certain segment if you're a publisher and you have content that you want to have ads, you have to go to ask,

can i get ads filled on my website? and then if you're an advertiser and you want to place ads, you have to have tools to get access to getting it placed so, within this segment of placed ads, google has dominance both on the publisher side and on the advertiser side they've maintained dominance by acquiring companies and by ado adopting policies and squelching threats, all in violation of the antitrust laws >> microsoft has been growing in this ad tech space, and in fact, made an acquisition of xander. why didn't you object when that happened >> when you have a firm like google that has dominant market shares, it's important to bring out the microscope, to look closely at what's driving that dominance. is it innovation, competition on the merits or anti-competitive tactics? to the extent upstarts can find their way into marketplaces,

that's good for consumers. to the extent you get dominant firms like google, who can undermine would-be rivals, that's not good for consumers or competition. >> well, but speaking of competition, we've seen some of the other players, yes, they're big, but they're growing cnbc's reported that amazon's ad business has been growing as fast as alphabet and meta. doesn't that show there is competition? >> what's really important in antitrust law is to define the market what is the relevant market? when you have meta offering ads on its platform, that's really distinct from a publisher, "the new york times," for example, who wants ads on its website, and those publishers need these ad tools, and insofar as google has monopolized the ad tools or ad tech market, that's harmed competition and hurts consumers. >> what, ultimately, do you want to see happen here >> so, the relief that we're going to be seeking is to restore competition to the

marketplace, to address the harms that have come from google's conduct and to open up this marketplace to competition so consumers can benefit obviously, this is the first step of a process, a complaint was filed today with the department of justice. several states, including colorado we know we need to prove up our complaints, and we'll do that. this is one of three actions we have against google, both this one, involving ad tech tools, another one involving how they charge for apps, and a third one involving its dominance in search and search advertising. >> you know, european commission has done this. margaret bessier is several years ahead of the u.s. regulators on these types of competition rules, especially suits against google, and they've resulted in mostly some fines, some court battles. not a ton in the way of change in behavior. how do you get around that >> in the united states, and as attorney general for the state of colorado, we're committed to changing behavior in the marketplace. that's why, in the cases i

mentioned, it's not only about money where appropriate, but it's really about, how do we change behavior? by having a court put in place protections to enable competition, to end practices that are exclusionary, and even structurally, to ensure that the market can be restored and that acquisitions that were done and had the effect of undermining fair competition can even be undone >> you want to see the ad tech business broken up i get it what about the argument that google's making, that this suit really largely duplicates a suit that was brought on by the texas a.g. a few years ago that was largely dismissed? >> we can debate exactly what that district court decision held, but i will say a number of the claims in that are going forward. i also would note the suit is the product of considerable amount of work, for those who can read the complaint, it's obviously 150-something pages. it documents a range of actions by google that are not normal

competition on the merits. they're done for the purpose and the effect of excluding rivals, for making it harder to provide alternative services these are the sorts of actions that violate the antitrust laws, and we're confident the court will ultimately see this for what it is and will want to take action to restore competition. >> phil weiser, thank you so much after the break, bernstein cutting its rating on lululemon today. and later, don't miss our exclusive interview with howard lutnick. the dow is up about 133 points nasdaq is under a little pressure apple is strong. alphabet and amazon and microsoft weighing on big tech you're watching closing bell on cnbc

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we've got an update on those trading halts that happened here at the new york stock exchange around today's open. bob pisani with the latest bob, what do we know about what happened >> well, the nyc has just issued its third press release of the day, and it's the most clikted one yet. i'm not going to read it to you. the nyse has announced they appear to be busting a limited number of trades that occurred this morning at the open several hundred stocks opened this morning without any opening trade, essentially, opening price, and initial opening and that caused a lot of problems, a lot of price dislocations so, they have announced that they are going to declare a

number of trades clearly erroneous. that means they're essentially busting the trades, but not all of them, and that's where some of the difficulty lies in here the nyse has very clear rules in place for when they can announce rules and when they can say that stocks are busted, essentially, and they have to follow these rules. they have limit up, limit down rules as well that restrict when these stocks can halt and when they're down and when they're up and when they halt, and it appears right now that they're announcing that they're going to bust some trades that were outside of these trading bans, but others that were -- may have been below the trading bans are not. so, for example, this was a multistock event, and there could be many stocks that are trading above 30% off their prior price the day before when they opened. those stocks will probably be made whole they will be declared clearly erroneous. others that are trading below certain price bands, where even though they were down a lot,

they weren't in a sufficient area around those price bands, they may not be busted and declared clearly erroneous what i can tell you, sara, is there was more than 200 stocks that were affected, including very big names a lot of companies were down 10, 12, 14, 16, 20% or even more, and the question is, are all of them going to be declared erroneous or not it looks like the nyse is declaring a limited number of them erroneous what exactly happened here we don't know. they are not telling us, but it does look like in the past, these kinds of trading glitches have been associated with software upgrades or security upgrades around the system we don't know that, but that has happened in the past, and that's a likely explanation for what happened the one thing i can tell you for sure is, the s.e.c. is probably not going to be happy to hear about this, and likely, there will be some large fines down the road sara, back to you. >> nobody can make sense of it like you bob, thank you bob pisani it's a sour day for lululemon. look at shares taking the hit

after bernstein downgraded the stock to underperform, cut its price target to $290 the firm noting a cautious consumer outlook and a lack of pent-up demand are some of the factors weighing on the company's performance. joining us is aneesha sherman. analysts have been trying to be bearish or call a top on lululemon because of valuation for a while, but this is a company that is still growing 20 to 30% so, what's the problem >> well, the problem is that lulu has grown at 25% on a kager basis for the last five years and that's been fueled by a number of catalysts. there was a wave of e-commerce growth where e-commerce went to 30% of sales there was the covid athleisure boom and there was a pent-up demand run this year where we were back to kind of social occasions, and there was a lot more spend on things like lulu's belt bag and

some of their outer wear and lifestyle wear we are not seeing that kind of catalyst again in 2023 and so we're going to see a big deceleration in the growth trajectory we're not going to see 20-plus percent growth anymore i'm modeling more like low teens growth, and the problem with that is the entirety of the earnings growth for the stock comes from the top line. almost all of eps growth comes from sales, so we're going to see a big deceleration in eps growth from 33% this past year to something like mid-teens. and that means that the multiple is going to have to take more of a haircut than it already has. so, it has knock-on effects for not just sales but also earnings growth and also the multiple it's a triple header on lululemon. and that's not to say it's not a sustainable growth story it's just that that correction is needed right now to reset expectations to a new level of growth >> no, and the margin warning was perhaps a signal that we got from the icr conference a few

weeks ago, but just to play devil's advocate, the bull story on lulu has always been they're very small and there's a lot of runway for growth and expansion, whether it's in international markets where they barely scratch the surface, in stores where they've only got a few hundred, and in wholesale where they're not even playing yet >> yes, but if you look at the mix of sales, international is only 20% of sales. 80% is north american sales, of which the vast majority is in north american women's, which is their core and that's the maturing part of the business, which is -- which has been soaring the last few years but will face tough comps and will slow down as we have seen the customer more cautious, spend more on promotions and less on full price yes, international is a huge growth opportunity, but china is small as a percentage of sales and the new products that have done phenomenally this year are

a tiny part of the overall sales equation, so the vast majority of the business contingent on north america women's product. that's where we may see more of a deceleration than people think. >> it's an interesting call. thank you for joining us to talk through it predicting $290 for lulu let's show you what's happening in the overall market. dow is going strong. we're up about 100 points. the s&p 500, it's unchanged, it's a tale of various sectors industrials, utilities, real estate, staples, financials, and materials are all green right now. everybody else is red. the market being weighed down by health care and communication services, in particular today. and the nasdaq is really tale of mixed performance right nowwit tech that's why we're not seeing a big fall alphabet, amazon, those are the weights. apple and netflix, though, are hanging in there, going strong, little change for small caps as well still ahead, mark mahaney

weighs in on the doj's suit against google and the ramifications for investors. plus, microsoft gears up for earnings after the bell, and the company's investment in chat gpt creator open a.i. will certainly be top of mind for investors we're going to talk aton analyst about what to expect all when "closing bell" comes right back

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elon musk testifying for a third day now in that shareholder lawsuit over his tweets about taking tesla private for $420 per share back in 2018. steve has the latest details >> it's a tweet that won't go away musk is done testifying, though. his testimony, like you said, after three days, appearing in san francisco federal court. now, his attorney's line of questioning focused on musk's track record raising money and successfully returning value back to investors among his multitude of companies, but one revelation that's new here, sara, from the last couple days, musk claimed on the stand he would have sold his shares in

his rocket company, spacex, which is a private company, by the way, to fund a go-private deal for tesla he estimated his spacex shares were valued around $15 billion and that's the first time musk claimed that it would also be a source of funding for the deal the attorneys for the plaintiffs asked why he never brought up spacex before. musk saying he doesn't recall but pointed to the fact that, hey, it's common knowledge that he owned a lot of spacex and that he would have sold those shares to fund the deal. musk also claimed he told the s.e.c. about it, though, during that initial investigation meanwhile, also musk was renewing his tiff with jpmorgan, saying the bank "hate tesla and me very much." there's the full quote on the screen after tesla withdrew its commercial banking business from j jpm. jpm, by the way, is suing tesla for $162 million, saying the company owes it for business done several years ago this trial, the shareholder trial, is expected to last another week or so, sara, but musk is done testifying for now.

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welcome back to "closing bell." here's where we stand in the market about 30 minutes left of trading. the dow is going strong. the industrials are having a good day on the back of earnings and that's what's powering the dow and the s&p. it's the top-performing group with utilities and real estate the s&p 500 is little changed, would be the first decline in the last three and the nasdaq is down but nothing major. alphabet's a part of that story. the suit by the doj and some of the attorneys general over its ad tech business let's head over to the market dashboard with mike santoli. what are you watching? >> a flattish, quiet day for the s&p, but there's information in that too we're coming off two back-to-back 1% gains over the past couple trading days also, we're consolidating here in this very quiet way after a morning selloff at the open, and kind of gained strength throughout the day. we're doing it above last week's highs and also right at this exact down trend line everybody's been looking at. we don't know which way it's going to break i think it shows you a little

more traction in the market than it shows you vulnerability, at least in the very short-term as we await microsoft after the close. the economic debate really comes down to which indicators you want to put more weight on and less hard versus soft data is one way to split these things up soft data are things like the ism business surveys, home builder sentiment, some consumer surveys, things like that. goldman-sachs splits it up and says, boy, the soft data looked real bad and a lot of those things have tended to have predictive properties. in other words, they're leading indicators to some degree, although they are also more sensitive and swing a lot more hard data going to be things like employment, spending numbers, things where you're measuring what's going on as opposed to mood and expectations and perception so, i do think this is an interesting one. you've seen times in the past like in 2015-ish, when you did see the soft data erode really quickly, and you eventually did have an economic slowdown and a i need of industrial recession but to me, this is the

interesting piece of what we're going to focus on to decide if the macro is going to get worse. >> is it watch what they do, not what they say? >> exactly or it can be self-fulfilling if they're expecting the worst, are they going to invest and spend accordingly. >> mike, thank you joining me for more on the market and the economy is cantor fitzgerald ceo howard lutnick. it's good to see you again >> great to see you back in the americas >> back in america right. we were in davos together and you were on my panel on commercial real estate and i guess through your lens, you're chairman of new mark, ceo of cantor, you're looking at capital markets and real estate you're pretty negative, is that right? on the outlook >> well, look, interest rates going up is tough for real estate today, but of course, we all know that you make your money on the way in, choosing

the moment to invest is the key to making money in investing, and the opportunity is coming in real estate. so, i think starting this summer, when real estate reprices, you're going to see so much money moving to commercial real estate. it's really going to change the outlook. but i do agree, it's going to take a while, couple of quarters >> why what are you eyeing this summer? some might think that time is coming sooner if mortgage rates and treasury yields have peaked. we're way off the highs. >> you know what that's what was so interesting in davos the market's saying that there's going to be cuts coming, cuts in the second half of the year, and cuts in 2024 by the fed, and that's what the markets are saying, but everybody at davos, and it was scary, because everyone kind of agreed, people like me saying, rates are going to stay high they're going to stay at 5% all the way through that so, i just don't buy this cutting stuff. i don't think the fed's cutting into a recession i think we're going to have a light recession, but i just don't buy these cuts coming.

i think rates are going to stay up i think real estate's going to have a tough next couple of quarters, and then it starts to come as rates stabilize and people get confidence in that stability, i think you're going to see real estate start to rally, and that's the time to buy. that's it. >> are you talking public sector reets that you would tell people to buy >> look, public sector reets, you can see them down 35, 40%. i think they got another leg to go down when people realize -- when the ten-year stops being 3.46% and goes back to closer to 4% they're going to take another leg down and that's the time to buy it so, i like real estate i like opportunity funds in real estate, distressed real estate, public reets but not until the summer let them take another leg down and then it's time to go >> but you know it's not just high rates that are working against commercial real estate, howard there's an office problem, and it's getting worse as places like san francisco have companies that are shifting to

permanent work-from-home policies, the glut of commercial office space in this country, isn't that getting worse >> so, remember, when you say commercial real estate, you're gettinga lot of categories there's multifamily in there, which is doing well because rents are going up there's industrial there's senior housing and alternatives -- other housing, so just talking office, we agree. here's an interesting thing. the best new buildings in office have never had higher rates. never had rents this high, and they are on fire everybody loves the new, sexy office buildings b and c buildings, you know, they're not that nice, mid block. they're going to have a tough time so, i think that's an opportunity of change. i think, you know, in the '50s, there was industrial buildings all over these cities. they all went out of business, and now they're lofts. i think that's going to come again. i think you're going to start that next year you're going to start seeing

these lesser quality buildings start to convert to residential. that's really interesting. it's an interesting opportunity that's coming. and i think a lot of people are going to raise funds to do exactly that we will as well. so that's an opportunity that's coming, but commercial, you're right. it's challenged both that rents are not rising and companies are not taking more space, because they're -- they think a recession's coming they're a little bit afraid. so, the move is, i think office is not probably the place to put your bets yet. but back end of the year, i think when this stabilizes, i think that's a time to place your bets in commercial. >> talk me through the whole zombie office building becomes affordable housing is that something that is realistic? first of all, who pays you know local governments are already under fiscal pressure, and they're now losing out tax revenues because some of these offices are not getting renewed by companies, so what are the economics here >> okay, so, local government has to clear the path of the

regulatory hurdles the regulations and local government are outrageous. they're this thick to do anything, and they kind of constrain and restrain so, local government's got to clear the path away so that you can do it, and then the lender is the key, fannie and freddie have set aside lots and lots of money to do what they call purpose lending, meaning, what's their goal to get more low-income housing, they'll give you good rates. they'll give you very high quality loans, and they'll help get these buildings to convert, so that's where they're going to find the money but the federal government's got to help. fannie and freddie have got to help and then we need local government to clear the path i think it's coming. i think if you talk to the local mayors, they understand it, and they want it to happen >> one question on the cantor business, howard, because you guys invested so heavily in

spacs. spacs have majorly underperformed and dried up. what is the future there >> remember, ipos, historically, have been priced 20% below what you think the company's worth, so if the company was worth a billion dollars, you price the ipo at 1,800 so everybody makes money. spacs got so frothy that not only were they doing a 20% discount, they were trading at a 20% premium. so, if you look at the current ones like my last deal was rumble, and rumble's trading right about $10 a share, raised $400 million, well -- a great company, well priced i think spacs will be a -- something that will stay the course in business all these celebrities and these ridiculous people who never should have been in the business in the first place you're going to watch them all get washed out, and pros who know what they're doing will find that spacs is a great way to take a younger company public you got to price it right, and it's got to be the right kind of company. they're coming to check out

rumble it's doing great >> we'll hold you to that. finally, howard, i wanted to ask you about donald trump you were a big fund-raiser i remember you hosting him at your place when he was president, and i was wondering -- we're trying to get a sense from business whether you're backing him again in his bid to run again >> so, the fun part was people asked me, how come you had donald trump over at your house? when the president of the united states of america says, will you host a fund-raiser for me, the answer is, sure, i'd be delighted to have the president come over to my house. if joe biden called me tomorrow -- >> not everybody would say that to him >> i understand that, but if joe biden called me tomorrow, i'd love to have him over. that would be fantastic. but i think donald made a mistake with kanye i think he's made a mistake with all these things i think he's created real challenges, and he's created real challenges for me too i mean, why in the world doesn't he think these things through? you know what? i've taken a step back plainly, taken a step back >> all right that's an answer howard, thank you. appreciate it. >> all right, my pleasure to see

you, sara. >> good to talk to you howard lutnick, ceo of cantor fitzgerald look at 3m, biggest drag on the dow after slashing full-year guidance we're going to discuss whether that's a red flag for the rest of industrials, which are outperforming and doing better today. dow is up about 75 points. we cut our gains in half since the top of the hour. we'll follow it for you through the close when we come back.

alphabet under pressure following a second antitrust lawsuit by the department of justice this afternoon up next, the potential long-term impact on the stock. that story, plus 3m sinks and what to expect from

microsoft's earnings after the rkll when we take you inside the maet zone. we're losing a bit of steam. be right back.

we are now in the "closing bell" market zone. mike santoli here to break down the crucial moments of the trading day, plus seema and nathan are here. we'll kick it off with the broad market nasdaq is getting hit the hardest, mike, down 0.6%. looked like a mild selloff it's now worsening here into the close but this is the first down day in the last three. other cross currents, gold hitting its highest price since april. what's the narrative today >> well, yeah, i've been saying

with the nasdaq underperformance, it's just some cold feet ahead of microsoft's numbers, i think that stock, in particular, is down about 80 basis points and sort of weakened in the last hour or so so, kind of just noise after the run that we have had s&p is kind of hovering here we're up 15% off the intraday october low. so, i think the gold outperformance is interesting, and it works slightly in contrast with some of the other risk-seeking action you're seeing in very small stocks and other things but you know, rates are down huge the dollar has come off very hard, and this sort of global reflationary theme that maybe is coming around with the china reopening, i would say argue, might have something to do with it and by the way, other metals and other heavy stuff in the world is doing quite well. yob if that's related at all, but you see a stock like pack art today, up 8% truck maker in the u.s so, there's weird parts of capital goods and basic materials working, even as some of the flimsier, kind of discarded speculative growth stocks also fly this month

>> you answered the question i was wondering why construction and farm machinery and heavy trucks was the best performing sub sector today there you go we've been watching shares of alphabet this afternoon, falling in midday trade after the department of justice filed a lawsuit against google alongside eight states we heard earlier this hour from colorado's attorney general, phil weiser. mark mahaney joins us, head of internet research, covers the stock. mark, here we go again with alphabet any reason that this one looks particularly different or worrisome for you? >> well, it's a focus on a different part of the business so, in the past, the regulators have gone after, and the doj currently is going after the company's search business. google clearly has a very strong position there, but it arguably offers a service that's great for consumers. when you get to the ad tech part of the business, this is a small part of the business only about 10 to 15% of their revenue and maybe 5% of the company's profits. that's where it's just a lot

of -- i don't know what the right word is here it's intricacy so, they help publishers sell their ads. they help ad buyers buy ads, and they run the exchange in the middle, like, there's a lot of potential conflicts in that. so, i think that's why the doj's been looking at this and attorneys general have been looking at this for a long time. it seems like an obvious place to work. whether they're real alternativ alternatives in the marketplace, it's hard to see what the next big agency or ad network that could come in there. this has been building for a while. it's here. it's going to be an overhang on google shares, one to three points on the p.e. multiple, and i think you have to expect that for the next couple years. >> so, worst case scenario here, for google, is what? >> my guess is the worst case is that they're forced to spin it off. i don't know that they -- yeah i think that's -- and that's where you had this negotiation last year, and google offered to sort of spin it off but not really spin it off so, that's my guess, and by the way, for investors, i don't think that that would be necessarily a negative development. again, it's about 5% of google's

earnings, so it may be a touch less than that that's the thing i think that's the worst case for google there may be some fines associated with it, but investors will look through that as they have with prior fines. it would really be a forced spin off the -- of the ad network business >> mark, who else is at risk this is the first real action we've seen from the biden administration, isn't us, on antitrust, sort of picking up where the trump administration left off on this front where's the next one coming from what's the big worry that you have you cover all these internet giants >> well, sara, i'm going to go the other way. i'm going to talk about names that i think kind of show this is -- that put in relatively better light because of this i think meta is one of those meta doesn't have any monopolistic position. if it did, tiktok wouldn't have any impact on it that it has and then if you're going to build up a new ad network, i got a couple of companies you should watch out for. maybe this is apple's big entry opportunity. i could see them doing something like this. this would be years in the

development, but it's possible and then there's amazon, which is already built up a pretty large demand-side network, demand-side platform for advertisers. that's almost as big as google so, if you're going to put pressure on google, you're creating opportunities for some of these other platforms, so meta, amazon, and apple seem like positive derivatives to me. >> mark mahaney, thank you for joining us with some of the stock implications of this announcement and this lawsuit today. two major industrial companies reporting earnings today, 3m, which is the biggest drag right now on the dow after missing profit estimates and slashing full-year guidance because of consumers cutting discretionary spending meantime, look at ge, beating o top and bottom lines thanks to strong demand for jet engines and power equipment. it's been volatile because of disappointing guidance and challenges with inflation, which ceo larry culp discussed earlier here on cnbc >> given the nature of when we buy and when we produce, there's some of the inflationary

pressures that we all saw in 2022 will be with us in '23. that said, all in, we think price cost is a slight positive for us in 2023 >> seema modi joins us what are the takeaways for you with some of these industrial giants, which we often look to >> well, sara, 3m and ge operate in two very different parts of the industrial world so that's why the messaging was very different today. ge touting the strength in aviation as china reopens. ceo larry culp telling me he's seeing a dramatic snapback in air traffic there, now expecting china to get back to 2019 levels but it is struggling on the renewables side. however, the struggles at 3m, sara, much larger, arguably, with the ceo referencing consumers are sharply cutting discretionary spend, and the real concern for investors is the legal issues tied to pfas and thousands of lawsuits from u.s. veterans that claim 3m's

ear plugs caused hearing damage. there's a lack of visibility, and that's been a drag an 3m, not just today, but you'll see it's down significantly compared to ge, which has really made restructuring a big priority and seen its share price up about 15% during the same time period. >> mike, look at that gap. that's pretty stark. >> yes, well, for sure i mean, i think that the realization of 3m's issues is something that you basically have to, you know, attribute that to right now. but both companies, really, in different ways, are showing you kind of the messiness and the untangling of multi-industry conglomerates at different phases ge making progress, but nobody can tell you what the core earnings power of the company is the guidance is tough to disentangle. the market is preferring to go over toward the either very pure play aerospace-type things or pure capital goods, farm equipment, mining equipment, things that you actually are --

it's more tangible, less financial engineering, and it's less unwinding >> got it. seema, thank you let's hit microsoft because it's out with earnings after the bell this comes after the company announced a new multibillion dollar investment in openai, which is the company behind the a.i. chat bot, chat gpt. sterling says he rates microsoft as market perform, $268 price target there's a lot happening here with microsoft beyond just, you know, we'll talk chat gpt but as far as the quarter and the performance is going, they announced these layoffs, they're obviously in belt-tightening mode what do you expect as far as the slowdown potentially in cloud? >> yeah, cloud is what's front and center for all investors right now. the company talked about a five-point slowdown on a constant currency basis. that will put you around 37% constant currency. when people see the press release and the reported number, consensus numbers, our numbers,

are around 30% that's kind of the bar that we're looking for. i think everyone knows that growth is slowing. the question is whether it's slowing more or less than expectations i think anything slightly above that expectation level, so if we see a 36, 37 type of number on azure, people are going to feel comfortable that the deceleration is in line with expectation, and they can focus on the positive of chat gpt and the openai investment. the layoff side, it's a couple of percent of expenses that they're really letting go, and frankly, across software, there needs to be a little bit of going back and trimming the fat, because hiring over the last couple years was aggressive, given the growth that we've seen this actually could be healthy you're going to see companies come out stronger and more profitable through this cycle. >> how do you expect microsoft to do guidance, to set the bar for 2023, given this kind of environment? >> yeah, remember, they've got two more quarters in their fiscal year, so they're going to give six months' worth of

guidance a lot of the calendar year, software companies will give you full '23 guidance. i think it's going to be a lot of the qualitative things that we want to hear, so what's going to happen with azure, everyone's expecting a further slowdown, especially for the next two quarters, but what's going to be the qualitative commentary about the, you know, are they going to expect improvement when we get into the back half of the calendar year? that's going to be critical to listen to on the call. >> on chat gpt, my a.i. guru is jim breyer, who i spoke with last week in davos, because he's been talking about a.i. for many, many, many years now, believes it's the future of health care and other industries says the valuation microsoft paid is frothy how is microsoft going to answer that and paint it into their long-term vision >> yeah. it's always difficult when you're talking about these cutting-edge, groundbreaking new technologies i mean, i remember the valuation of net scape when it came public felt like it was setting a bar or google, et cetera this is something that can

really be a game-changer for microsoft. we believe that 75% of microsoft's revenue could actually benefit from incorporating chat gpt into it, and i think this can be a massive competitive weapon in the various areas, not just cloud. we're talking about office we're talking about power b.i. so we think that, you know, while the initial sticker shock may get to some people, we think when you think about the next ten, 15, 20 years and the growth dynamics it can generate, it's probably going to be worth it. >> mike santoli, microsoft is up this year, but just barely it's underperforming the broader nasdaq, and i know this is one of those that you look at as a true bellwether for tech >> sure, it's a bellwether mostly of sentiment and of people's just faith in the huge platform's ability to kind of churn out the numbers. now, for calendar 2023, the estimates are down like 11%, but that's better than many of the peers, things like alphabet looking like 20% from the middle of last year

this year's earnings estimates coming down. so, it has shown more stability. i think there's a general faith that whether it's with the a.i. investment or other areas that they're going to be covering the next frontier of what needs to be done, and so you're not going to necessarily be left behind. and by the way, a $10 billion investment at a $30 billion market cap, i mean, microsoft bought linkedin, like, seven years ago for $30 billion when nobody knew why. $10 billion on a $1.8 trillion market cap for microsoft doesn't seem like a big cost >> you're not worried about it all right. mike santoli is not worried. sterling, thank you very much for joining me two minutes to go in the trading day. mike, what do you see in the internals? >> very mixed. as you would expect from a flattish to down index story here but definitely not a washout. we have had very strong breath coming into this year but some giveback today with more declining versus advancing look at microcap stocks as a group compared to the largest 50

in the market. that's the xlg, and you see really a big gap opening up there with the smallest stocks outperforming by seven percentage points over the past year but almost all of it in the last few weeks that's a typical january effect, a little bit of excitement in some of the smallest names volatility index, not doing a lot. down another almost half a point. around 19. we sit here waiting for not just some more of the earnings but also the pc inflation number on friday, the fed on wednesday, and we have the indexes kind of hovering right at the crux of whether it's going to break to a new uptrend or not >> so, here we are at a critical moment also on microsoft, street's expecting a big move options market implying a move of 6% or larger in microsoft stock. as we head into the close, take a look at where we stand here in the dow. started the hour up about 150 points on the dow. lost a lot of that we're up about 118 right now we came back a little in the last few moments travelers, unh and caterpillar driving the dow higher

3m, merck, and nike are the biggest weights. the s&p 500, little changed right now. industrials, staples, all doing well energy, health care, consumer discretionary, not as much the nasdaq composite down 0.2%, maybe some jitters, as mike said, ahead of the microsoft lawsuit. that's it for me on "closing bell." into overtime with scott all right, sara, thank you very much. welcome, everybody, to overtime. i'm scott wapner you just heard the bells we are just getting started from post nine here at the new york stock exchange, and man, do we have a big hour ahead. a little bit later, we've got a new market call from fun strat's top technician, mark newton. you got to see where he now says stocks can go from here. we begin with our talk of the tape two imminent and important earnings reports about to hit. texas instruments, any second now, and of course the biggie, microsoft, just shortly after that, both