about the fixed income side of that, you're not only locking in better rates for a longer period of time but you have the potential for price appreciation down the road if the fed does pause and over time does start shifting rates lower as well lot of interesting opportunities, we think. this year will set up nicely for equity and bond invest ez. >> mona, thanks. good to have you on. don't be a stranger. join us tomorrow "squawk on the street" is next ♪ good monday morning, welcome to "squawk on the street," i'm carl quintanilla with david faber and mike santoli bulls are going to try to seize the opportunity after last week's bounce. important week ahead with chair powell on the hill, j.o.l.t.s., jobs friday. our road map begins with the macro picture and the market

implications investors await powell's testimony. plus china gets cautious, beijing announcing its lowest economic growth target in a quarter century. and tesla cuts prices again. this time, it's on its top-selling u.s. cars. that is the fifth cut in prices this year. let's begin with a new week for the markets, including powell on the hill and friday's key jobs report, mike, were the estimates somewhere in the 230 range, nowhere near the 517 from last month >> no, and you know, obviously, we would have to brace for something much stronger than that at this point last week's bounce kind of happened right where and when it probably had to, to keep the february pullback from seeming very routine and having oabsorbd this big move in yields and fed expectations when you have all the fed speak now, and you have powell on the hill tomorrow, the market is already kind of gone beyond what the standing fed stale december-based outlook for rates was. when mary daly comes out and

says, we have to do more than we thought we were going to do, that's a good reminder that the economy's remained strong and inflation's been stickier than we would like, but it's not news to the market. if powell seems alarmed and he really opens up the possibility of 0.5% in march, maybe the market has to struggle with that a little bit, because remember how reluctant he was to suggest that the fed might pause and then restart rate hikes? he just doesn't like that idea that you're going to be on this erratic path you want to be a glide trajectory so, i don't know if he has a similar hesitancy to go down to 0.25 point and up to 0.5 i think that's the game we're playing right now. the way the stock market has handled it is everything that rates directly touch has been hurt pretty bad. that includes house, some manufacturing, but also the parts of the market like utilities and staples and dividend and no-growth stuff and then cyclicals have been ripping. so, the market's acting like

this is an early cycle acceleration as opposed to we're waiting for the recession to kick in any minute right now >> you know, listen, i come back to mike wilson at morgan stanley, which we're going to talk about we will right now. and i mentioned this a number of times because i think it's the case he has an algorithm that's stapled to him meaning, there are trades that occur as a result of his calls >> yes >> and i think there are algorithms that actually do their thing based on what has been his overarching theme and continues right now. but mike, the simple quote here, we're looking at it, is the end there. "earnings estimates too high, therefore, bear market not every. >> he's been very consistent leading indicators he's coming up now, we talked about this last week or the week before, with this scrutinizing of earnings quality. and he's basically saying, not only are estimates coming down,

but earnings quality's been poor enough that there's kind of more shoes to drop. it's been a lot of inventory build. the accounting is not as sturdy in terms of reported earnings relative to cash flows and he's not talking about wrongdoing or deception. he's talking about where we are in the cycle and companies kind of run out of the ability to make earnings. so, that could be the case on the other hand, earnings estimates have been going down pretty consistently. it's only had isolated effect in terms of where it's really hit the markets, and so you know, you wonder then it becomes just, again, the argument over valuation, and is the valuation of turnout earnings and maybe a little bit of a haircut from current earnings excessive or is it okay for where we are in this cycle >> we've been talking about wilson for a couple weeks now. he does say the market reacted strongly on the second test last week we have to respect that successful test and decide what it means he also says if he did get back to 4,150, it would kerri walsh

jennings acknowledge that the bear market is -- is he trying to craft an out? >> i think he's being respectful of the market itself, and everybody has to recognize that whenever the market does get escape velocity from a bear phase, whenever it really does reassert itself, it's not because everything is okay it's not because it feels like it's the right time, and it's not because we've cleared up all the challenges that have gotten us into the bear market. it's because the market seems to be able to look through some things and get ahead of it the long-term trendline he's talking about dates to the 2009 low. so, you know, he kind of points out that we -- actually ended up being kind of a ceiling along the way in the 2010s for a while. >> anniversary is this week. >> then we shot right above it yes, exactly so, now, we're talking about 14 years or so from that low. so, yeah i mean, again, i think that's where the debate actually lies the people who put a ton of credence on the market's displayed behavior and the fact

that industrials and steel stocks and travel stocks are doing extremely well and the fact that we've created this separation over five months from the october low say, look, that often gets us there. we never spent this much time above the 200-day average in the 2000 bear market all that stuff on the other hand, it's not been a particularly strong liftoff, if that's what that was. i mean, you're not even up 20%, five months later. you have this heaviness, and that's why it's more of a selective market than it is, buy everything because it's a bull market again, even if it is. >> stock picker's market the active managers want you to believe that, right? >> yeah, but a stock picker's market also means there's a ton of room to pick the wrong ones it doesn't mean it's easy to outperform it means it's really important which bets you make within the market as opposed to just grabbing stuff the biggest stocks in the market, for the most part, haven't been the exciting areas in the market. they're still under a lot of

pressure from the highs, and so it's been kind of pockets within it it's like, some people are excited about insurance stocks doing well others, as i said, the mining-related stuff, although that's been getting a gut check after the china somewhat muted growth expectations over the weekend. >> meantime, other strategists try to parse the action a little more finely. stifel basically with some shade toward mike wilson, saying, "others are calling it a bull trap. they can call it a bear market rally, a bear trap or call it a banana, we are follow ignoring potential six-month rallies. >> he's basically been saying this he saw the possibility to have exactly this type of cyclical-led relief rally of sorts. strong seasonals helping that out gets you into april. 4,300 from here, what are we talking, 7% up it's not nothing, but it might be something where i think

everybody seems to feel as if maybe the market's not going to really run away from you, even if you think the low is in, and even if you think that we're going to somehow make our peace with what the fed has to do because the economy's stronger than we expected everyone's made uneasy by the shape of the yield curve everybody's made uneasy by how the leading indicators are still, you know, completely in the pre-recession zone so, you have to believe that there's something atypical to some degree about the sequencing of this cycle to say, don't worry about that stuff we're fine it's up and away from here and yeah, it's worth a reminder. 4,800 on the s&p was the record high that was, what, 14, 15 months ago. so, that's a decent reset, but nobody -- not many people are talking about getting back there too soon >> no. i did see evercore today basically saying, look at excess savings, still pretty monstrous.

household balance sheet, debt as a percentage of gdp, very healthy. it does, they say, open up the full-year upside case of 4,600, but no, not 4,800. >> yeah, i mean, you do have some folks out there thinking that you could do it but let's say we get there by the end of the year. it would be like a round trip in two years, which is not bad, if that was the worst the bear had to offer but the resiliency of the economy. the question is, does it become bad news at some point that's what everybody's on edge about. that's why we're worried about a hot jobs number on friday. >> mike can't help coming baa to the obvious, which is for the first time, we're looking at charts since '07 and '08, there are alternatives >> yes >> there's a "journal" story today, any number of the investment banks have their acronyms there are reasonable alternatives, says goldman-sachs. deutsche bank, "there are plenty of alternatives. and there's another one

called, "there is a realistic alternative. we see it in the fixed-income market and that's the first time in a long time, i don't know what that means for demand to buy stocks during this period, but you can get 5% for a year. >> no, that's absolutely true. and so, safety is kind of beckoning to everybody right now. it does have this sort of appeal, this 5%, you can lock it away but it's fascinating because during the time when we said there is no alternative, that was the mantra rates stayed really low. why do rates -- why do yields stay really low? because a lot of money was buying bonds a lot of people thought bonds were fine to hide it >> the fed was also buying a lot of bonds $3 trillion is not an insignificant balance sheet, which is now being reduced >> that's absolutely true. but the -- i feel as if it's not either/or. that's the -- that's what you always come down to. you see this data point out there where it's, oh, the short-term yields, 6 or 12-month

bills, give you 5% more than the 60/40 portfolio. in my entire career, nobody talked about the 60/40 portfolio as a source of yield it was like that was just a distribution to get a balance exposure to the markets. so, sure, we have an inverted yield curve. if you're happy with that, you're happy with that by the way, after taxes, plus inflation, where are you so, you're a saver, not an investor at that point >> t-bill and chill, i think, is how goldman put it on friday >> which is fair mike mentioned potential slowdown in china or at least the economic growth indicators there. let's -- china did set a 2023 growth target of 5% over the weekend. it did kick off as well. its annual session of the people's national congress eunice is in beijing >> it's not just 5%. it's around 5%, as opposed to what people had expected of above 5% this is indicating that the chinese are taking a more

cautious approach. the target is lower than expectations, as well as lower than what the target was for last year. now, the outgoing premier on sunday had laid out all the targets and also said that he was quite concerned about consumer demand and that domestic demand is key he also flagged some of the risks, such as an unruly -- he didn't say unruly, but he meant an unregulated, i should say, expansion of the real estate market, as well as some softness in the jobs market the unemployment rate indicates that beijing is going to allow for some more people to go jobless and for the authorities to be okay with that it's now around 5.5% for the year as opposed to under 5.5% last year. today, the economic planner also indicated another concern of beijing, and that is the debt risk for local governments the authorities said that these risks need to be addressed

immediately, so the fiscal deficit-to-gdp ratio is set at 3% this is slightly higher than last year to help ease some of the pressure for the local governments. they also said that the quota for special local government bonds that usually are used to fund infrastructure projects are going to be scaled back. so, all of that means a more modest stimulus than many investors had been expecting or hoping for >> eunice, you gave us a good road map on friday as to what to expect, not just in terms of what you're talking about here but also obviously the new complexion, so to speak, of the cabinet, if we want to call it that the leadership any surprises at all over the weekend? or did things go more or less according to what many had anticipated? >> reporter: so far, no real surprises. the expectation is that those institutional changes, which could potentially mean more control of the communist party

within state institutions, that that could -- that announcement could be -- is expected to be on friday but we have had some reports, one in particular in the "wall street journal," which said that the authorities are thinking of creating a government agency to regulate data management and that right now, you have data kind of looked at, at different organizations. the kind of more optimistic way of looking at this is to say that china wants to create a more efficient system. the other way of looking or a more pessimistic way is that the communist party and the top leader, of course, xi jinping, wants more control there's been a lot of discussion about how multinational companies could potentially have to get some type of approval for transferring data from their operations here in china to overseas so, all of that is being discussed right now.

>> eunice, a lot to get to, and we didn't really touch on how they're getting involved or not with the ukraine discussion, geopolitically eunice yoon, thank you so much when we come back, tesla cutting auto prices in the united states again. we'll get to some of the calls this morning, actually quite a few. ferrari, dr horton, kb home, got a new call on apple today. r restoration hardware as well there's a look at futures, avoiding four straight weeks lower. we're back in a minute do you ever worry we'll live forever? no, it's literally never crossed my mind. what if we live to like 100? that's 35 years of being retired. i don't want to outlive our money. and i have been eating all these stupid chia seeds! i could totally live to be 100! why do i keep taking such good care of my-

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one of the things we weren't sure about was the price elasticity of demand for tesla so, as we lower the price, how much does demand increase? and we found that even small changes in the price have a big effect on demand very big so, that was a good thing to learn. >> that's elon musk offering his take on price cuts at tesla's investor day last week company now slashing prices for the s and the x in the united states for the second time this year this time, between 4% and 9% in the case of the x suv, the price has been lowered by about ten grand to just under $100,000 wedbush today says, given the lead they have in margins and given the way the last round of price cuts acted, maybe this is a position of strength they're operating from >> sure.

i would say that's absolutely true among those who are definitely going to buy an ev and choosing among them. it is refreshing that microeconomics,the laws of economics, apply also to tesla vehicles but it does show you that the big change from many, many years of, you know, we're supply constrained, demand is this bottomless pool. but i think we make a lot more of tesla list price changes than we pay attention to the way that other car makers just modulate their incentives the effective price is often fluid for lot of different types of cars, and yes, you would have to say that they do start from a position of strength, although again, you always have to come back to the fact that the markets already give them copious credit for dominating for a long time to come, based on the stock and where the market value is. >> "the journal" has a piece up, ev start-ups brace for another

tough year as cash dwindles. we did get results out of lordstown. of the new endurance pickups, they delivered three >> yeah. it's obviously just kind of didn't quite get to scale. i mean, remember when we got all the ipos and the spacs of the ev companies, and people were saying, you know, in the early days of the automobile, there were hundreds of manufacturers it's kind of a -- sort of an echo of that to some degree. so, you know, we're dealing with cyclical pressures you're dealing with people getting a little bit hesitant to pay up for a lot of these vehicles >> if you didn't have to -- if you didn't see the memo, starting an auto manufacturer consumes an enormous amount of capital. tesla had the advantage of having very low rates, if not zero, for much of that growth period >> low rates and they raised a ton of equity. >> also the ability to its ceo raise a ton of equity, as you say, or a great deal of equity based on his reputation.

it's not easy. those lucid numbers as a reflection of just how much -- and/or rivian. if you want to see how much these companies are consuming, just take a look at the last quarter. >> that gets you back to why tesla is here in the first place. so, the argument has always been over the value of the head start. exactly how far that takes them. it's taken them pretty far >> yeah, indeed. meantime, morgan stanley's oadam jonas today remains the top pick, ferrari. the general point is they avoid a lot of the ev hype and the ev risk obviously, the base business is historically respected, but he says they continue to be underestimated in the ev opportunity. image i think their target is $310 >> they're talking about crossover, getting to parity between combustion and ev by

2032 the comp that morgan stanley uses for ferrari is hermes literally. it goes to the whole valuation, the margin structure it's a luxury good they're a bigger market cap than gm or ford >> $70 billion market value for ferrari. >> like five, six times sales, and gm and ford are at 0.3 times. >> maybe bernard is going to buy this too brand name, rich margins >> lvmh is bigger than walmart, you know what i mean this is not unique to autos, that the luxury brands get capitalized. >> i'd love to read the synergy analysis on that one signs of stalling momentum in the housing market. we'll talk to the ceo of one home builder about what he's seeing in this environment where we have a couple of notable downgrades in the housing space. futures trying to hang in there. obviously, a lot on deck for the

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take a look at some early s&p gainers today. you'll see apple in there up almost 2% as goldman, which famously had that hold call on the name with rod hall, who left the firm, niinitiates the day wh a buy. pretty deep dive into first-party advertising, the 'luee cycle services reven wel dig into that in just a little bit with the opening bell in four and a half minutes

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the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. the disinflation momentum that we need to see to get sustainably back to our goal is far from certain so, i put all of this together, it's clear there is more work to

do in order to put this episode of inflation, high inflation, behind us, further policy tightening, maintained for a longer period, will likely be necessary. >> that's san francisco fed president mary daly over the weekend at princeton, offering her take on rates and inflation. it's interesting, we've been on the lookout for firms looking at a higher terminal rate, how many out there three a six handle out there. today, goldman does say if consumer spending keeps up, we might be talking about 5.75% to 6% >> the market is basically prizing 5.25% where it ends up in the fall. we keep pushing it out that's been the story of the last several months, elongating the whole process of the economic cycle as well as the fed tightening moves >> watch that. although, we are getting a little bit of relief in yields today, 30-year comes down to

3.82%. let's get the opening bell here on the cnbc realtime exchange. at the big board, it's an information services provider. and at the nasdaq, viemed. we kick off what will be a busy week, not just powell, not just j.o.l.t.s., not just jobs. we get bank of canada and japan in there somewhere >> it's going to be a big reset on what we're expecting with the global central bank action i will say, the equity market story you were talking about before also applies overseas i think it's relevant that we kind of are absorbing this higher for longer notion, and europe, much stronger move, really, off the lows than we have had here. they're coming from a much lower base and they're in the -- those indexes are much more suited to this kind of value and cyclical move

but yeah, it's not just what the fed's up to here >> guys, i wanted to take a quick departure to deal land as you guys both know, we haven't had a lot of m&a in the current quarter, but there are a few things that we have been following. one, including this sort of richie brothers attempt to buy iaa, a well-known auctioneer in the industrial sector. that's where it's sort of key expertise is iaa is a digital marketplace for vehicle buyers and sellers. there's been some opposition to the deal amongst some of richie brothers' shareholders they have to hold a vote on it on march 14th. it could be tough for them to get approval the reason is sometimes and oftentimes, influential proxy advisor firms have advised shareholders to vote against the current transaction. by the way, that transaction recently or not too long ago amended towards the end of january. it's $12.80 a share in cash and

0.525 common shares of richie brothers so, if you put up iaa, you'll see the stock is down about 7.5% this morning this is new news, i think, a couple of wire services may have had iss out as being opposed glass lewis also can confirm all that but there you see it and what's happening. again, is it mostly dead no is it closer to potentially not happening? yes. starboard, for its part, did a structured transaction not long ago in which it basically provided about -- was $500 million it was a $485 million convertible preferred, $15 million of common shares to sort of help with the capital infusion to help with the deal, but again, that does look to be in some jeopardy given the influence of these proxy advisory firms, love them or hate them, and many people say they have outsize influence versus what should be the case

and many of these decisions should not be left to them, in terms of how these kinds of situations should be voted on by, of course, the large complexes that include many of the index funds. >> will try they to revise something before the vote? what would be the counter here >> you go to it because you think you can withstand the pressure of the no votes, even with a vote against, or you do try in some way to perhaps ameliorate the concerns of said shareholders maybe you postpone right now, it's scheduled for the 14th doesn't mean they can't push it. we'll keep an eye on that. haven't followed it that closely since the initial announcement, but worth noting again because this just occurred >> yeah. you might think after the last two days of trading at apple, there would be a bit of a reversal, but the follow-through today is interesting on this gold goldman initiation >> goldman initiating a $199

price target you know, which is up there. i don't think that's -- that is too many price targets at that level and it's a thorough look, but it all comes down to, wow, this is an enormous company with huge installed base and they are smart about refreshing the demand, not just for the phones but for everything that they put over it, and also making the case that it can become a bit less of a premium buy in a lot of markets because of, you know, higher residual values of the phones and to the upgrade cycles, it's a little more smoothed out it's not so much of a new, you know, we figured out something about apple you hadn't figured out butthat we should be payin up for this company, and that's always been the question it's a no-growth year for apple. we've known that for a while this fiscal year is flat earnings, flat revenue, based on the projections, and so you have the entire street coming out and saying, yeah, but longer term, it's going to be back toward

double-digit growth over the following two years. again, you're paying up for it, but that's the cost of entry at this point >> yeah. talking about filling the channel inventory. they mentioned some new innovations. pretty easy calendar for comps, q4 comps, better china macro, which we have been talking about this morning as well >> yeah. >> and you know, the entire market is migrating toward, you know, to some degree, reliable free cash flow type stories. in fact, if you saw the commentary on, in aggregate, on conference calls for post earnings, free cash flow is, like, one of the most common phrases that was uttered, and it's kind of shot through. so, apple's there. it's just, again, you're paying a lot relative to the overall market for that free cash flow story. >> yeah. not a top-performing down name at the moment. not a surprise with boeing, the laggard. we didn't mention these two downgrades in housing, kvh and dr horton.

double downgrade for kvh that coupled with the rh downgrade at jeffries lends itself to a slowing housing furnishing market. >> it does clearly, the mortgage rate move was very dramatic. we're up towards, what, 7% again. there's been some revisionism about how much that matters for the builders, specifically, not for the overall market, but this idea is, as you've mentioned, a tremendous percentage of people with like sub-4% mortgages, they're kind of locked they're not likely sellers to get back on the market and finance a new house. so, there's still this supply-demand gap. i think you had some commentary out there from folks saying, as long as we're below 8% on mortgage rates, somehow you can make the math work i don't know these home builders have had to make concessions in terms of effective selling price to get there. to even get -- move the volumes they're doing right now. >> right nice piece last week from axios

on why rate hikes haven't had the punch we expect. part of it is that the percentage of mortgage debt that -- whose rates float, like 5% there's another piece of it, which we never really think about, which is the other side of the ledger when it comes to higher rates, which is, domestically, people own a lot of bonds wealthy people own a lot of income instruments, and it's been this huge windfall with yields going up. so, high-end spending can get supported for a long period of time on that in a weird way, it's a kind of unintended fiscal stimulus, because the government is paying out that much more in interest into a lot of times, you know, investment accounts. and savings accounts >> guys, as you know, i continue to keep an eye on activision and microsoft's continued attempts to buy the company, despite the potentially significant opposition from the antitrust authorities in the uk. but that stock is near $80 look at that move. $95 deal, don't forget, so still

well below, still expressing the skepticism many have that the deal will ultimately be able to get to fruition. perhaps this has been -- helped this move by that news, last week, that the eu -- again, this was reported, i think, by reuters, but i can't say -- it's notmy reporting -- that would not require any structural changes until the eu in terms of their review, but behavioral remedies but that doesn't mean they dealt with the cma in the uk and as we've said countless times, that is the key impediment right now. not even the ftc here in our country, which we've not even really dealt with yet. but still not clear how that's going to help. maybe the idea is, well, if the eu, a trusted authority on regulation, when it comes to antitrust, is saying, you don't need a structural remedy, then why would the cma? does that put in stark relief the idea that perhaps they're

being more political that seems to be at least the thinking, one reason, mike, why that stock has moved up quite a lot. i don't think it's on the fundamentals i don't know that we got any other reports that would have necessarily indicated more strength in their business since we already heard from them >> no. i don't think so i mean, take two has had a good run, but i don't think it's been a general move in the area or related to activision. at this point, if you just boil it down, it's a bit more than $10 of upside. >> $95 >> sorry $15. yeah so, it's a huge implied return if the deal happens. >> without a doubt and it could still happen. you've still got a decent amount of time, because you have the ftc in opposition here we haven't even started dealing with that, but many have thought that the deal was mostly dead after the cma indicated its significant opposition >> i wonder if there's a question about how hard microsoft will fight for it. >> they're fighting harder than many had anticipated, i think, at this point, because there had been an -- not an expectation,

but at least some question as to whether they would just put their hands up after the cma opposition >> just because, like, $2 trillion company buying $60 billion, i mean, it would be nice they clearly want it there's reasons for doing the deal, and of course, they don't want to deal with the break-up and everything, but you know, how far do you want to go? >> right i mean, just the market cap they've added on the excitement around bing and chatgpt, far in excess of, obviously, the market cap they would add with the acquisition here few other things to hit. altria buys another e-cigarette start-up called njoy, 2.8, let's call it $2.75 billion in cash for this company $500 million in cash payment that are contingent upon regulatory outcomes with respect to some of their various products they continue to believe, they say, that the u.s. vapor category will undergo a h multi-year transition period

there are applications for tobacco-derived synthetic products they say the fda will issue marketing determinations on all of those currently applications -- standing applications this is part of their key strategy but remember, of course, it was 2018 when they announced they were buying 35% of juul for $12.8 billion. they sold it for 250 million bucks. as we like to say, altria got smoked on that deal. >> yeah. >> carl, you did a doc not long after that deal, if i recall, on juul it didn't go well. >> no. they were definitely after a hypergrowth. there had been some reasonable use cases, the uk, very supportive, just in terms of getting people to migrate off of heated tobacco but the lengths that they went to stay au current, whether

that's flavors -- >> also reflects the price paid for the stake initially, just reflects the kind of panic of, you know, a business which, let's be honest, for years, has been considered to be in long-term decline, valued that way. if there was a way to kind of prolong the life and maybe even get some growth, it was going to be grabbed so, altria was carrying the juul stake, i guess, at $250 million already, so from the market's perspective, the pain was felt already. >> the writedown had already been accounted for, but it was an incredible loss of value. almost all of the $12.8 billion for that 35% stake at the time you can figure out what it volume valued juul at. the thing just didn't work at all. they never even got the pr approvals they needed. even though we don't have new m&a, the last thing we'll end with is silverlake bidding for

qualtrics. they said, we're going to put them up for sale, silver lake owned about 4% at the time they are now in exclusive talks with s.a.p. to acquire that company. the stock had already moved up xm is the symbol there significantly, once we heard from s.a.p. sometime back, but you can see it's having a positive impact. they have got not that long. they've got until, when is it, until march 15th they're in exclusive talks $18.50 is the price that they are at least negotiating right now. about a 73% premium to what they're calling the unaffected average of the daily volume prior to s.a.p. saying they were looking to sell that unit. >> all right there's actually quite a bit of tech stuff today sienna high on their results we're not getting a lot of results but that is one of them. bullish commentary on netflix on their password-sharing revenue

next netflix is up almost 2% >> morgan stanley tnt, some of the commentary ahead of that is, i think there's warmer feelings toward rationalization in the streaming economy, a lot of these media companies have essentially taken, you know, a lot of writedowns on content, so basically front-loaded some losses, maybe it's a cleaner story for here if they get spending discipline, but the resilience of the revenue growth story at netflix is trying to substantiate that big move in the stock that's happening >> by the way, david, did you see we got that "60 minutes" chatgpt story that we predicted? >> i did we haven't mentioned it yet, but we'll get to it. we'll have the analyst behind a very long report from morgan stanley as well next hour. "60 minutes" has woken up to it. >> that's a touchstone >> that's one of them. >> when you know it's -- something's for real take a look at bonds this morning, as we got the dow up 68 to start the day treasuries this morning, we did mention the 30-year got down to

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we talked about the jpm downgrade of d.r. horton and kb homes. the next guest believes de might short-term challenges we are going to see strong, underlying demand for new homes throughout the rest of the year here to discuss today is tripoint ceo doug power. good to see you again. >> how are you doing thank you. >> good. i was looking at the journal piece talking about existing home market but say

momentum is stalling as we're going into the all-important spring season. that doesn't necessarily reflect what you're seeing in new? >> no. on the heels of a record 2022, we just reported, you know, i'm very encouraged by the green chutes that i'm seeing going into the spring. at the same time i'm very constructive about how the economy is going to play out this year. but, you know, carl, it's interesting, we talked last year about the strong underlying demand from the demographics that we see in the u.s., and in '22 we saw seven or eight increases and the consumer saw mortgage rates go from 3 to 7% they paused. the consumer's psyche is very interesting. somewhat unpredictable really the biggest driver of sales. as we head into 2023, the consumer has decided that 3 to 4% mortgages are a thing of the

past and what is left is something between 6 and a 7. and there's some, you know, good demand out there there's some other contributing factors that are important to note two of the -- a couple of the biggest one, the resale market, carl, is -- has been our biggest competitor as not moving, though, because more of america is locked in at 3 to 4%. so with that lack of competition and the home builders being able to offer permanent and temporary rate buy down that the resell market can't, it gives us an advantage for this demographic tailwind. >> when you talk about the flexibility to do those buy downs and make it more pat latble on the rate side of things, how much flexible do you have on getting your own costs lower? it seems as if there was, you know, a lot of builders clearing, you know, backlogs that had built up and now affordability seems to be the

thing that has to, you know, move in a lower direction to really refresh the market. how much can you do on the cost side on your own >> great question, mike. as we reported last week, our company is looking to get 10 to 20% in cost savings by the end of the year that will affect homes closing at the end of the year going into '24. but at the same time some of the other contributing factors to the consumer is -- we adjusted net pricing down roughly 10 to 15% off the peak of '22, so when you take a look at cost relief going into the year and then the result in price decreases, we still are able to hold our margins in the low 20% range the home builders going into the cycle are very well positioned, strong balance sheets, strong

margins going into this, and affordability as you said is the key. we need to continue to adjust pricing to payments. >> hey, doug, it's david you know, just to come back to your first answer to carl you said you're very constructive on the way the economy is going to play out this year, and i'm curious as to why. >> i guess i'm constructive because i'm a little bit cautious, is probably a better way to put it, david it's -- i'm not sure it's going to be a no landing, a soft landing, a hard landing, it's really hard to tell. but the one thing i know i started in this business with a mortgage of 15%, and the consumer will adjust as well as the builders this cycle, as we go through it, the builders are better positioned both financially, margin wise going into the cycle, so when i say constructive, i say i would rephrase it as cautious.

>> but you said the economy, not -- you didn't seem to imply just your business, so are you -- >> yeah. cautious about the economy going into the end of the year. >> okay. that explains it thank you. >> yeah. >> doug, finally, on net pricing, how much have you adjusted, and do you think you're kind of done? >> well, you know, certain markets we've seen some strong reaction to our net pricing adjustments. as i mentioned, we're down 10 to 15%. many of our competitors down as well i believe that, as the economy -- and if the fed continues to increase rates, we will continue to find the right price and the right payment for the consumer so time will tell during the year we have the flexibility, though, to meet the demand of the consumer as we go into the rest of this year. >> i'm glad we had you today

timely discussion given some of the news this morning. good to see you. >> thanks, carl. >> mike, thanks for joining us this morning. coming up, the morgan stanley analyst out with a note about what he calls a $6 trillion a.i. internet opportunity with the dow up 50 don't go away. (♪ ♪) how do we demonstrate our unmovable strength? (eagle call) nope. how do we show that we'll stand tall through the storms? nah. (thunder) how do we make our clients feel secure and- ugh... not lions. (lion rumbles) we do it with our people. people who've been looking after people for over 170 years.

good monday morning. welcome to another hour of "squawk on the street. i'm sara eisen here with carl quintanilla and david faber, we are live for you as always from post nine at the new york stock exchange stocks are getting off to a good start after the friday rally s&p up 0.4, the dow up 63 points and the nasdaq up half a percent the. relief on the yield front is helping out. factory orders out moments ago rick santelli with the data for us. >> yes factory orders and durable goods. factory orders for january minus 1.8 expected we end up with minus 1.6%, the weakest since november of last year when it was minus 1.9. strip out transportation it improves markedly up to 1.2. the best read going back to may

of last year and if you look at durable good orders on a january final, we take the mid-month read at minus 4.5. well, that becomes the final read at 4.5. what is noteworthy, that is the weakest month over month on durable goods headlines going back to april of 2020. if we strip out transportation once again, it improves dramatically to up 0.8%. that is the best level since march of last year financial market let's look at capital good orders nondefense ex-aircraft, that's a proxy for capital spending, up 0.8 replaces up 0.8, that happens to be the best since june of last year when it was up 1% finally we switch gears from orders to shipments up 1.1%. replaces up 1.1% that is the best level since october of last year so we see that the headline

numbers on factory orders and durable goods are a bit weak accounted for by the aircraft and transportation sectors so there is modest improvement. we see yields holding up towards the top of the range today, after being much lower as a matter of fact, if you look at 2s, 3s, and 7s and 10s right now, they just moved into higher yields, lower price territory versus friday's close. sara, back to you. >> all right rick, thank you. rick santelli. we're 30 minutes into the trading session. three big movers we're watching for you in the stock market. long-time tesla bull and morgan stanley analyst naming ferrari his new pick pointing to the pricing power, backlog natural gas, continuing to collapse on pass for the worst day in over a month. more on that move in just a moment we're watching the home builders, kb homes gets a double downgrade to sell, d.r. horton taken to neutral by jpmorgan

analysts writing, quote, we anticipate some mod dration in demand trends over the coming months following the recent moves in rates particularly given the stock strength since june 2022 guys, what really brings us to the top story in the market, i mean, with mortgage rates at 7% and the 2-year and 10-year marching higher the resilience of the equity market i think is surprising to a lot of bears out there and a lot of people who are watching who are saying look, higher yields hurts the economy, the fed has to do more for longer should get in the way of stocks, and yet the market is remarkably resilient. >> it's kind of why we are parsing notes from the likes of mike wilson at morgan stanley. we talked about this in the last hour - >> he's sounding bullish. >> short term looking at ways they can get something on the record that says they anticipated a longer bear market

rally than mike has written about. >> right so we went support levels, there were technical factor at work last week everybody is saying that's a bullish sign. when you have rates matching up and when you have members of the federal reserve that were once among the most dovish, and i'm thinking of mary daly here, san francisco fed president, over the weekend giving hawkish speeches about how the fed has to do more, the inflation is not coming down fast enough, you wouldn't think the stock market would hold up so well. here is what mary daly said this weekend. >> inflation psychology has not shifted and the public's faith in the fed's ability to achieve price stability and our resolve to do it remains intact. but the longer inflation remains high, the more likely it is to undermine that confidence or just chip away at it, even if it doesn't undermine it once high inflation becomes

embedded in psychology, it is very hard to change. >> she says we've got more work to do there. clearly they're thinking about their own credibility and we're going to have to stay there for longer and go potentially above the terminal rate if the data continues to surprise in a positive way i think so the equity, david, rally, is pretty remarkable considering the leaders today, technology, communication services, on friday a lot of the shorted stocks did well, the unprofitable tech stocks did well, that's not what's supposed to be workingwhen yields are rising. >> no. to be fair, that hasn't necessarily been what's been working recently. >> right but in the last few weeks, i think the -- so what do you do with that and how do you take that could it be a sign that investors think this rate move, a lot of hawkishness is getting priced in and going to come town from here, perhaps that could be the thing. we're all trying to read the strong january data which -- and

figure out how temporary it was. we just got this note out of the bank of america institute which parses all the credit card spending data and it's one of those real-time sort of indicators, high frequency type indicators and turns out, towards the end of last year and early this year, here's the note, it's the older generation, the boomers. as of the week ending february 18th, recent, boomers and the preceding generation traditionalists grew total credit card spending by households 4% and 6% from the year before. whereas the other age groups only spent 2%. what does this tell us we saw the cost of living adjustment for social security benefit pace out in the beginning of the year. 8.6% so david, it's your generation - >> oh, man. >> doing all the spending. >> he's the preceding one, the traditionalist >> lumped me with the boomers which she just did. >> all of your medical services spending. >> true. >> by the way, my medicare spend has gone up so much so it really

is balancing out my social security payments increase, so i don't know, sara i'm not feeling any better. >> i heard you've got a birthday this week, right >> yes i still will not be eligible for social security but thank you. >> that's next year. >> closer to a boomer than i am. >> i was this close to walking off the set. that's how bad that was. you dropped a nuke on me. >> trying to wake you up. >> i was busy texting our executive producer, whatever he's called, about the next guest we have coming on. all right. that's not the guest i'm talking about, though. because we're going to get to brian sullivan right now he's not a guest, he's our guy when it comes to all things energy not to mention 7:00 as well you join us from one of the nation's biggest energy conferences in houston this week, brian. bring us up to date on what you're hearing and particularly on natural gas which we have been talking about of late, of course, hitting new -- well relatively new lows.

>> yeah. you guys have sara week or sara year now i guess congratulations on that as well. a lot of things in flux. tune in 7:00 p.m. eastern. it's early, david. haven't had a lot of conversations yet, although just off camera you can't see her is the former ceo of ta lar ya. we were talking about natural gas, why is natural gas low? there's a long-term chart of natural gas and i've asked a couple, meg and vicky, and the ceo of slb and others on camera and off camera so far today, guys, what's going on with natural gas. kind of expecting them to say wow, it's been weak. all of them, including meg over here to my shoulder, said no, there's so much natural gas in america, it's almost more surprising that it's not lower in some cases. vicky of occidental, off camera, i asked her about it, she said, i don't know if natural gas will do back over $4 for a long time. there's a lot of nat gas here's the reality, i learned

about geology from meg over here just now and the permian is very gas rich geology, so as we drill more wells, grow oil production, more gas is coming out in sort of there, but i asked vicky and schlumberger's ceo about oil prices because oil and natural gas is related and here's what they had to say about oil. >> i think prices are in a good place right now. it you're in the 75 to $80 range for oil prices, that's a sustainable price scenario for the industry to be -- continue to be healthy. >> i think it would be higher. >> higher and i think based on the constraints of the industry is investing short and long worldwide, putting capacity and creating - >> so david, we're talking oil there, because if we get a continued uptick in oil

production, we'll probably get an uptick in gas supply. i don't know about you, you know, i think you went to tufts, pretty good school, more of something, unless there's a subsequent increase in demand, means prices probable going down per nat gas. >> i think i was an english major, of course, but i may have picked that up along the way what i'm happy about is i've been to the permian as well, brian, i can see that in my head and understand what you're talking about. i'm curious to come back to natural gas, though, from the export perspective we both know michael smith, i don't know if he's in attendance, freeport has been closed, essentially. is that contributing at all, and if and when that finally gets back up and running, is that going to have an impact? >> it is now back up and running, but only for a couple weeks, david i think your point is important and spot on. at freeport, lng, the second

biggest exporter, it shut down for some problems, they had a fire, whatever it might have been, it was shut down i think for about nine months time it's just coming back online when you lose your second biggest exporter, there's nowhere to put all the gas the gas that would normally be frozen turned into lng and exported, is building up in storage. i probably should have thrown a microphone on you. i have the former ceo sitting over here, don't know if we can show her on camera, either way, talking about this, but, yeah, as we continue to export more to europe, you could see some of that excess supply come offline. it depends on how long europe is going to need that as well by the way, a long tease, i will need to pick your brain, tomorrow, i think around this time, we're going to have the ceo of exxonmobil, darren woods, you know them well, spent time with them in guiana and the permian as well, we'll double-team that interview and ask him the same questions. >> looking forward to your -- to

darren joining you and us as well real quick, brian, you did do reporting in europe. i remember when you were in rotterdam. natural gas, we were wri what it would mean for the european economy. we're towards the end of winter now. they have kind of done okay, haven't they >> they have they're at 61% i looked at the numbers just yesterday. 61% storage levels heading into -- i know we're talking about the summer already, it's only march, but that's how they cycle it we were over there, and i wasn't predicting the worst i've taken heat for it he was the worse case scenario europe saved by a couple things. a relatively average, if not little milder than average, winter number two, demand destruction households turning the thermostats down, industry turning things down or shutting down also u.s. lng, which kind of, as we showed, has kind of saved europe i want to be clear on something right now. nobody -- and i posted something

on twitter about european bankruptcies are starting to go up it's not just an energy crisis having enough gas is one thing being able to afford that gas is a different. prices are down. they're still paying five times what we are. ask yursz if you're a chemical company or an automaker or aluminum maker in europe, how are you going to afford to make your product and sell it competitively in the world market you're not is the answer the story while good on the storage side, is now morphing into more of an economy, debt-type story and probably ultimately bullish for the united states like shell, opening up a $4 billion chemical plant outside of pittsburgh recently europe's woes may be our gain. not hoping that, just saying it's probably what's going to happen. >> all right brian, you've got a lot to talk about there. thank you very much. we're looking forward to more

coverage hearing more on last call from you. your new show at 7:00 p.m. as we head to break here's our road map for the rest of the hour it is no longer morgan stanley's top pick in the auto space but our next guest is still buying why he thinks the stock could go to $370. the china factor one top investor says he can't get his money out of the country. we'll discuss that. a $6 trillion opportunity. the stocks that stand to be big winners in a.i as we've hit highs. dow up 122 big show still ahead uld be a lot more kombucha... ...and a lot less business. inner voice (graphic designer): as a new small business owner... ...i've learned that trying to be the “cool” boss... ...is a lot harder when you're actually the “stressed” boss. inner voice (furniture maker): i know everything about my new furniture business. well, everything except... ...the whole “business” part. not anymore. with quickbooks, you can confidently manage your business. new business? no problem. yeah.

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watching tesla shares this morning down about a percent as the company cuts prices of the model s and x for the second time this year our next guest is buying more after cutting back a day before the investor day tesla shareholder partner gary black joins you. great to have you back we haven't had a chance to discuss investor day and sort of that cloud of so-called disappointment that the market at least seemed to reflect what did you think was at work then and what do you make of the price cuts today >> i would say the more you watch the video on investor day, the more bullish you get i think the market, it was definitely going to be a sell on the news event the stock was up 100% in the two months before investor day some people taking profits i would say it was long on aspiration, short on damageability and a lot of

people playing the stock that were waiting for a big unveil of something. we didn't expect an unveil because as you remember model y, you don't want to get too far in front, as we call on the existing products, everybody will wait for the new product and not buy the existing product. we didn't expect an unveil but i guess some people did. i think the positives from investor day, again, watch the four-hour video including q&a, you can't help but to be bullish. they reiterated a target of 20 million deliveries that would be the biggest auto ma manufacturer. that's inspirational they gave you a road map how to think about how they could cut costs by 50% which allows them to go into the mass market which is about 50% of the market they took looking at power trane cuts, battery cuts, general assembly cuts. they announced they were going to open up a new plant in mexico

where the labor costs are cheap and take advantage of the $7500 ira credit and export into brazil and other latin america companies where mexico has territories. i came away extremely bullish. it's an elon musk company, but you saw, almost 15, 18 people up on the stage, that gave you a lot of confidence that there was a really broad management team if elon were ever to disappear, not there's going anywhere other positive, cyber truck is coming this year cyber truck is going to be huge. 1.3 million fleet orders the street for next year is about 90,000 if they get this launched this year which i think the confidence level should be high now, even if they do 200,000 deli delivery next year with cyber truck, the whole energy side business, nobody pays attention to it, they have a new facility

that came non in california they can do mega packs per year. these things sell -- they just raised price over the weekend again, a two-year backlog, if they could sell 10,000 at $2.5 million each what they go for, that's worth about another 50 cents a share and so that's $1 a share more than the street is putting into their models today and we're still bullish on the stock and bought when the market, you know, punished it after investor day. >> gary, that was quite a litany of positives and you didn't mention humanoid robots. he thinks it's going to be a one to one ratio of how many oids robots you don't see that as an opportunity? >> one of the interesting things i found what elon didn't emphasize, he didn't emphasize row bow taxi, we've never been a fan. if it happens, great we built in a driver assist product, level 2 autonomy

product. $15,000 per. you know, that goes in at 10% rate we've never built in any valuation in our $370 price target for robo taxi i would use the same concept for bots, for robots if they get there, that's great. i'm not going to build in valuation. i don't know what its point of difference is going to be versus the other robots throughout. when we think about tesla, we go out to 2030, we don't use 20 million units, we use 10 million units. if you want to get comfortable with valuation, we use 10 million units, ev adoption about 60%, today it's 10, and if you look at europe and china, ev adoption is going through the roof the ira, $7500 credit, will cause the u.s. to go through the roof 60% ev adoption and assume, this is not a grand assumption, tesla can hold its current 20% ev share. because they got cyber truck coming and they're going into the mass market with this

$25,000 platform which is not just a compact. it's a baby suv. it's going to be robo taxi if it shows up a van there's a whole bunch of products that will come in this $25,000 segment. so 60% ev adoption times 20% ev share 12% share of the market. global selling rate for the industry is 85 million, about 10 million units that would put it at the top today where toyota is and they're number one here's the punch line. at 10 million deliveries, at an average selling price below 50 because you have to take it down when you go into the $25,000 segment, we're coming up with about $30 in earnings per share, we would put about a 30 p/e on it, 1.5 times growth going forward from there, that gives you $900 in valuation, using a 4%, 10-year treasury, 36% equity, we get about $370 that excludes robots. so to me, if they hit 20 million

vehicles you could double that number but we're not there. >> gary -- >> sara? >> if demand is so strong, why are they cutting prices for the second time? wouldn't a company want to take advantage of their pricing pour? cathie wood pushed back and said they are doing what they can and open up the value of the size of the audience usually when companies cut prices it's too boost demand. >> that's a fair question. i would say elon has been consistent, everybody wants a tesla but not everybody can afford a tesla i agree 100%. >> that's what they said about peloton. >> this is not peloton peloton, anybody can replicate peloton. goy to the gym every day, and i'm -- >> obviously i'm just making that point we've seen this in corporate america. >> okay. but here's my point on snx snx is less than 5% of the volume it's at the high end when you got that cap, remember with the ira cap, it went from a

$55,000 cap to $80,000 cap back in early february. the biden administration clarified it model y suddenly became $7500 cheaper than model s and x that's where it's going to draw from i think they're trying to adjust their pricing. it's less than 5% of their volume for this year, to get it right so that snx can grow going forward. the second point is on europe, a lot of people make a big deal of this, i just find it crazy, europe, they're putting a 6% discount on their inventory volume a first quarter adjustment europe is 20% of tesla volume. i can't look at that as a price cut as much as a quarter end discount to clear out invesinventory. people say you're using 10 million units on tesla, my ex-colleague tony, as you know, is a long-time bear, i have a lot of respect for, will say

hey, corow la and rav4 today are only selling 1.1 million units each and they're the top selling products in america. how do you get 10 million units? i go back to this next gen platform allows tesla to go into the mass market, they will have a exact compact car, baby suv, and if robo taxi, that's about 50%, model y on its way to becoming the best selling car in the world probably next year about 1.6 million, cyber truck about 1.5 million. you can add up the product tesla didn't do that, but if you did that you can get to 10 million easily. >> gary, i want to end with this, every time you come on you have a few that don't like you on twitter i'm not going into details to say listen, they point out your performance of the future fund since you began the etf, it's a small etf, nooigs august of '21

is down 20%. how do you answer those? >> year to date we're second percentile, two out 100. this is a growth environment we launched, unfortunately, right before the fed started raising rates. as you know when rates go up, growth stocks get hurt if they're long duration and tesla is a long duration stock, so we were unfortunate we launched as the fed started raising rates. we had a poor 2022 and so did a lot of other growth managers arc was in the 100th percentile, we were in the 70th. our fund is doing what you expect it to do in a positive growth environment where people are talking about the fed pivoting later this year w whether or not they do is a different story. in an environment more stable rates, we should be able to do what we're doing this year i'm not saying we're going to be second percentile all the time but we should do quite well for investors in a normal growth environment. you have to compare us to other growth etfs, not, you know, poor

etfs because we own a lot of growth stocks. when rates go up, mathematically growth stocks are going to go down. >> gary, appreciate that i'm sure we'll be talking again in the days to come on tesla and other matters. thanks very much >> thanks, guys. solid gains for apple this year and goldman forecasting double-digit upside. ahead, we'll break down the call moving the market. apple is contributing the most adding 26 points tthe w o do rally. "squawk on the street" will be right back . go wind turbines. go gorgeous reliable grid. go emerson software. go science people. go breakthrough meds and safe science. go space age welds for super silent cars. go big. or go home. from software that delivers new cures at warp speed, to technology that makes clean energy reliable, emerson innovation helps make the world healthier, safer, smarter and more sustainable. go boldly. emerson.

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welcome back to "squawk on the street." i'm dominic chu. stocks are slightly higher to start off the new trading week communication services you can see behind me here among the top gainers from a sector perspective in the s&p within that group we are watching shares of netflix and comcast which is, of course, the parent company of cnbc and nbc universal. analysts at morgan stanley are naming both stocks among the top picks in this industry with the expectation that we have not yet hit a market bottom yet. for netflix, they like among other things market leading streaming position and for comcast some of the theme park

performance given a stronger relative u.s. consumer, carl i will send things back to you folks at the new york stock exchange. >> thanks very much. still ahead, sizing up what morgan stanley is calling a, quote, $6 trillion a.i. opportunity and what names like amazon have to do with it in a moment thinkorswim® by td ameritrade is more than a trading platform.

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welcome back to "squawk on the street." i'm bertha coombs. your cnbc news update at this hour ukraine's defense of bakhmut is holding. russian troops are still trying to encircle the city in an interview on ukrainian television, a spokesman for the military says the russian effort is being hampered by a shortage of ammunition, but remains intense. the u.s. and south korea staged another joint air drill today over the yellow sea. that included at least one

nuclear capability b-52h bomber. north korea is threatening what it calls an unprecedentedly strong response. and in northern california, there's too much snow for skiing many sierra resorts had to shut down over the weekend because workers just couldn't get up the slopes to prepare the area for skiers and snowboarders. you know, sara, i think about all the kids here in the east coast bemoaning the fact that they've had not one snow day this year. >> no snow day my kids are very sad about it. it's kind of a bummer for them i used to love snow days thank you. bertha coombs. just over an hour into trading. let's bring in bob with what's moving and a lot is moving up. only energy and materials are down today. >> simple story, rates down, stocks up. loving the rate relief not just anybody loving the rate relief, tech speculative tech rallying since thursday take a, look technology,

communication services, ark innovation, sort of standard bearer for speculative technology, energy weak, nat gas declining, oil in the mid-70 range. we moved 120 points since thursday afternoon that's 3% on the s&p 500 it's continue rather remarkable and we've seen the yields from 4.96 on the 2 year 4.83. that's straight up since the middle of the day on thursday. ark and speculative tech strong. anything in the etf that has any robotic, cloud computing, sports betting 3d printing, social media, they have strong momentum since the middle of thursday that's the rate relief we've got. anything with the word a.i. in the title for the last month or so, we've been talking about this on the air for while, anything out there that has a.i. in it, bots, robotic, etf robotics and artificial intelligence, all of these have been rallying dramatically on

the a.i. in the name natural gas down 10% today we're seeing some sound moves in most of these natural gas stocks range resources, devon, some of the names, by the way, devon energy, coterra, 9% to the downside finally want to mention arms ipo potential lu coming here talking about the paperwork in april. this is a big deal a really big deal. $8 billion we don't have a valuation but might be $50 billion choosing london over the united states. the important thing, david, this would be the largest ipo in ten years we're talking about. $8 billion raised here would be the largest since uber in 2019 remember, rivian was $11.9 billion in 2021. so i'll give you an idea, billion, if they raised $8 billion, we raised $7 billion last year, the entire ipo market was $7 billion, $8 billion on one company, this year, would be enormous deal. >> if and when it happens. >> yeah. >> it will be here in the u.s.

>> a lot of people excited. >> a black eye for london i think they're not going public there. >> thanks. >> okay. >> bob pisani. bob mentioned a.i. that's where we're going to go next morgan stanley making the case that there is a $6 trillion addressable market, and that's for let's call them the internet names. analyst with that call was brian novak joined by a large team of people who contributed brian, good to have you with us. let's start at the beginning you start with your reporting saying we're at an inflection point in terms of consumer behavior for those who sort of haven't caught up to the story explain why we're at an inflection point and how many years this may play out from here? >> yeah. thanks for having me good morning, david. it is a cross-team collaborative effort we think a.i. is at an inflection point to the iphone moment of 2007, where we saw an unlock in new consumer

applications, new business application, new ways essentially for consumer behavior to change so what happens with a.i.? well, since chatgpt has had its -- really a rapid ramp of overall usage, we think what happens next is going to have more personalized and complete e-commerce search experiences, shopping assistance. you're going to have your travel itineraries and be able to create it by a.i the punchline is, we think a lot of new a.i. technology, applications and use cases, are going to further accelerate the amount of consumer expenditure that goes online whether it is in e-commerce, travel, on-line advertising, ride share, food delivery, et cetera. >> all right so, you know, in every scenario like the one you're laying out, there are those who -- companies that will benefit and those that will, perhaps, lose out. in the report, i know you try go through it across a number of

industry, but cu give our viewers a sense of broadly speaking who the beneficiaries are and the potential losers are? yeah the -- in the note we lay out 11 companies we think are best positioned to drive and benefit from the acceleration in a.i., consumer behavior. the big three platforms, alphabet, amazon, and meta, really headline the group that are the winners, but there are other companies as well f we go down, companies like roblox, like uber, like doordash i would say the punch line of how we're thinking about companies that are winners and companies more challenged, the a.i. age is going to be defined by which companies have the most unique data and which companies have the most ability and willingness to invest in these more expensive a.i. tools to essentially capitalize on this data and create more use cases for people that will ultimately

drive more dollars toward their platforms. the big three companies, alphabet, amazon, meta, we think are best positioned of those 11, but there are 11 companies in total. >> i find, brian, the e-commerce angle interesting because you think that it will really help the e-commerce players beyond amazon how does that work ultimately making them more profitable, which i think is interesting as well, because there have been issues there >> yep that's right beyond amazon there's a few key players here the first thing i think about, the overall google shopping search experience i think is going to improve significantly you're going to have more personalizization, more complete search experiences across more sites and what the sites will be able to do, they will have more information to better match long-tail inventory to people who might want to buy it a platform like etsy that has lot of unique inventory will be able to better match it to people interested in buying

those type of goods. similar to ebay as well. if you think about companies in e-commerce beyond amazon that have long-tail bespoke or unique inventory and data about the types of people who like to buy those items, better machine learning technology, integrating into google search, is going to drive more dollars towards those platforms i would argue. >> it seems like it's weird not to pension the sell-off of alphabet in the face of this new opportunity. isn't the general knock on would be so-called losers that it's forcing a capex timeline on them not of their choosing? >> yeah. that's right good morning, carl yeah we think this is one of the largest mischaracter zagsz in the current market where the market is sort of trading alphabet, as if it is an a.i. loser. we think that's wrong. this is a company that has been investing in a.i. technologies for well over five years and has developed a lot of fundamental technologies well, the near term discussion

is around chatgpt and openai, we think alphabet is going to roll out their own competitive products and other lambda like products and we'll get to know those over the coming weeks and months they have been investing for years. they are more expensive, you're right, carl, the incremental uplift of ad revenue and high margin dollars rolling over for the platform can quickly offset that trend >> the work you did and your team as well, i'm curious in the longer term ramifications here, do you come down at all on whether this is going to mean a significant reduction to job opportunities over a long period of time for courporate america. >> it's one of the unresolved debates. we had that over the last 20 years. will technology lead to job destruction? i think that's up for debate there are some jobs, customer

service, simpler tasks, that will be more automated you will have more opportunities for new types of developers and other jobs that are created from the a.i. age as well, so, you know, that's always been sort of the tech job destruction debate over the last 20 years it hasn't played out i can make the case now where it's a little bit uncertain where some jobs might get replaced, but other jobs through enabling more people to better use technology, probably create jobs >> yeah. all right. well to be continued, obviously, given we are at that inflection point, perhaps the earliest days thanks for your time. >> thanks, david. as we go to break, look at snap today jumping above the 200 day for the first time since october of '21 as u.s. legislators ramp up their scrutiny of tiktok senate democrat mark warner says he and republican john thune are working on a bill to ban or prohibit foreign technology like tiktok it would be a huge boom to snap and meta which also led the s&p

at the open. we're back in a memont

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director of global macro research, runs all the research for that hedge fund. it's good to have you back on. how do you read this 5% growth target market seems disappointed. all the commodities are weakening off the back of it. >> thank you for having me the china reopening has faded since. i believe the china asset prices need further impetus from further stimulus which so far they have not been gotten. i do think the chinese float will be able to meet this about 5% 2023 gdp target they set. as you pointed out, this target was ambitious and also suggests a need for more stimulus measures it is a realistic number, though, given the property sector, consumer confidence and private sector sentiment are set to recover in china and china faces exports in the year ahead.

>> i can't quite tell. last time you were on with me, you were pushing back against the bullish narrative. are you still not there or are you thinking we might get a bunch of stimulus coming >> i don't want to plan on the npc until it finishes because we might get more stimulus but what we heard over the weekend, i don't see a lot of stimulus. therefore, i would be cautious -- continue to be cautious on chinese assets going forward. and i also want to highlight the very strong performance of currency trade that i commented on december. along the mexican peso it's had a fantastic run but we do think it may be time to take profit on that trade the mexican growth fundamental side is still looking good, but the peso has made back its pandemic drop. on c & h side, we think it may have the propensity to weaken.

the pboc said they think 7 versus the dollar is the floor for the yuan. >> what about the playbook in january where you had a covid reopening, what some was the end of regulatory risk, all this pent-up demand, revenge travel that the consumer over there had in mind. where did that all go? >> carl, that's a good question. i think the point is the consumer has improved but hasn't really normalized. they are lagged by the property sector, which is bringing down consumer confidence. i'm not sure china what will do what is needed is direct consumer handouts. that would be the only way to bring back consumer spending i also think the property sector needs additional easing measures in order to revive until the property sector and the consumer sector revives in china, we're not going to see a durable pickup in chinese assets >> i'm curious, tara, do you hedge at all for a bad outcome, for example, if the chinese were

to arm russia for their war in ukraine? >> we don't necessarily directly hedge for that situation, although that is definitely a geopolitical risk. i would say we play on the u.s./china tensions concerns through the u.s. and other comment i made in december is we believe the peaks in the dollar and in rates in the u.s. will not yet in and the fed needs to do more. let's not forget the strong dollar and rising u.s. yields makes european assets and chinese assets more valuable this may be a basic way to hedge against further u.s./chinese tensions. >> thank you very much for talking through with us some of the risks. >> thank you so much speaking of china, don't miss our interview with the commerce secretary, gina raimondo talking the biden administration's new semiconductor push amid what she

calls a, quote, very heat global competition with china a big interview next hour. we're back in two nus. continuing to build on the gains of 125 on the dow. - it was the best thing i've ever done, and- - really? - yes, without a doubt! - i don't have any anxiety about money anymore. - great people. different people, that's for sure, and all of them had different reasons for getting a reverse mortgage, but you know what, they all felt the same about two things: they all loved their home, and they all wanted to stay in that home. - [announcer] if you're 62 or older and own your home, you could access your equity to improve your lifestyle. a reverse mortgage loan eliminates your monthly mortgage payments and puts tax-free cash in your pocket. call the number on your screen. - why don't you call aag... and find out what a reverse mortgage can mean for you? - [announcer] call right now to receive your free no-obligation info kit.

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this after a fresh initiation from goldman sachs this morning. let's get over to dom chu to break that down for us. >> david, it's like a resumption goldman suspended coverage in the fall of last year. rod hall used to cover the call, now michael ang the lead analyst for this set of stocks at goldman sachs. with this resumption at a buy rating, here's what they're talking a little bit about the stock moves we've seen over the last course of the year have shaved 5% off, that's not bad where apple had been at one point. there's a bull thesis they're trying to put out there and sell to their clients what it involves is a little more of the bullish case around the installed base and the multiple that it commands. if you take a look at the reasons why, the coverage initiation to this buy rating puts $199 price target on here so that is 30% upside. the growth installed base thesis, as well as the longer term services growth, new product innovation part of that

thesis as well if you take a look at some analyst takes on this particular move, it is 78% buy rated by analysts on the street the $169 target price is where we're sitting right now. again, the real reason that's driving a lot of this action is because they think the multiple can actually expand over the course of the next several months if you take a look at the reasons why that's important, it's mostly because they think that the higher quality services revenue, david, that this company will put out there and the tilt towards that is helping to drive gross margins for that reason they think it will command a deeper, bigger multiple than the overall market i will point out, it's not exactly cheap right now. it still trades at 25 times forward earnings back over to you >> great breakdown, dom, thank you for that dom chu. before we move on here, did want to come back to an m&a story ritchie brothers got bad news, the proxy adviser telling

shareholders that in its opinion thernd vote against the plan to acquire iaa. ritchie comes out and says, hey, we strongly disagree with that we think this transaction will unlock substantial additional value. we'll be following it in the weeks ahead. let's get over to carl and sara on the floor. good monday morning. i'm sara eisen with carl quintanilla. live from the floor of the new york stock exchange. setting at again da today, u.s. commerce secretary gina raimondo on the heels of the landmark c.h.i.p.s. act and possible foreign investment in china. jill carrie hall is with us as anxious investors pause ahead of powell tomorrow why four macro events over the next two weeks could decide this market. plus, saks ceo marc metrick. markets moving highe