during live sale next week including every creation of princess diana's engagement ring. >> to think the producers budget this in production? >> they are, now. a little extra added cash at the end of the season or series. >> there you go. nfl clothing and the crown. that's it for "power lunch". >> "closing bell" starts right now. >> welcome to "closing bell". we are live at the new york stock exchange. we have a final stretch before arguably the biggest night of the year for markets. microsoft, alphabet, amd, reporting earnings. ai is front and center. each of the stocks are up a ton, raising the bar and the stakes even higher. we will ask the experts was likely to happen in a few moments with first, look at the scorecard 60 minutes in regulation. it's been rough for the nasdaq, some mega names are in

that report a mixed picture. we will track that. apple is selling off after an influential analyst says that iphone shipments could fall 15% this year on structural challenges. elsewhere, u.p.s. has fallen on his outlook as they lay off 12,000 workers with a washout after their guidance disappointed investors. it takes us to our talk of the tape, the countdown to these reports. we are coming microsoft and off of that. steve, let's start with you. >> let's set it up. it's not just ai, let's talk about cloud growth. that's related. we saw last quarter that the benefit to this cloud growth came from open ai, but the better open ai does, the better microsoft does, thanks to their relationship microsoft investment. for microsoft's fiscal first quarter report months ago, azure climbed 21% as they

credited open ai, and they expect 27.5% growth for azure if microsoft beats that number, there's the signal. that activity will reignite growth after a couple years of decline. everyone is curious about copilot, the ai assistant for microsoft, opening up to more consumers. i would be surprised if we got solid detail numbers on copilot , unless they are really crazy and impressive. you will want to hang on to every word from cfo, amy heard, and what she says about copilot momentum or sales and the guidance that comes on the call as well. don't wait. the call is super important. >> good heads up. thank you. >> so, what should we watch out for from alphabet? >> yeah, a lot of the same

things that steve was talking about. it's cloud, and that's involved in the ai proposition. as we talked about, google has to prove something to wall street, that they can create generative ai products and monetize them, but they also have this tailwind. we've been talking a lot about rolling waves of layoffs. investors wanted to know how that's trickling down to the bottom line and if there's more on the way. google actually reduced the workforce, so does that trend continue? that gets wall street excited because this efficiency drive is continuing and might be meeting the ai productivity drive we've been talking about. the last thing i would say is that cloud is going to be really important because if you remember last quarter, it beat expectations. that growth was a little soft and tend to the stock. i will say that on the price-to- earnings basis, alphabet is

lower than some of the other magnificent seven. it's at 23 times earnings and there could be room whereas expectations for the others, like microsoft and amd, is sky high. >> we will look forward to that overtime. thank you . let's bring in anna crawford, executive vice president at -- and portfolio manager which owns microsoft and alphabet. we also have j.p. morgan asset management and market commentator, mike santilli. it's a big night. you said the firm owns microsoft and alphabet. is the bar high? >> that depends. microsoft, the bar has gotten higher this quarter. expectations in this year was 27% for azure and it's up to 28 percent to 29%. who knows if they can do that, but what we are looking for is the trajectory for azure and

how they expected to ramp up. i completely agree, that we need to see them on the right path for clad, open ai, and copilot. >> the most important evening for the markets, because it feels like it is. both stocks are up a lot, their market caps have exploded. microsoft is the most viable company on earth because of that. >> part of me feels like the reason you paid 33 times earnings for microsoft is so that you don't have to worry that over three months, the story changes. the whole story will not change. they are in the right spot. since his ipo, it's up 400,000%. it 675,000%. i'm not going to say it's it, $3 trillion is the top, but in terms of being able to carry forward the narrative, to give

us more to go on, to bring the ai opportunity forward and put it in tangible terms and say, you know, you don't feel silly for paying 33 times earnings. i agree alphabet has more to prove and the potential is there to say progress on margins , and looking to raise the metabolism of the company more, and they have some kind of plausible, i guess, creditable effort on the ai side so that they are not a net loser. >> microsoft, you could do a whole case study on the reinvention of the once stagnant company that has reinvented itself and now has this huge growth trajectory. some are calling this the most important of all. >> absolutely. you mentioned that microsoft trades 33 times and i would counter and say one of the biggest underestimated aspects to this ai trade is that ai

will profoundly change the earnings power of all of the technology enablers. microsoft is the dominant technology enabler in this megacycle that we are about to experience. i would bet that 33 times is a lot lower by the end of the year. >> the numbers have not gone up. the market is saying things are getting better, we think the opportunity is close there. obviously that's why you would did that up here. you think the numbers are not as high as they should be. >> and that's the nvidia playbook. it's an extreme case, but as the picture has gotten better, the valuation is lower. microsoft's 10 year historical average is around 23%. now it's 33%. you still have to decide what valuation makes sense despite the glowing story that surrounds this, don't you? >> of course, the evaluation is something you need to take into account.

today, the numbers for microsoft are 14% revenue growth. again, we think that the earnings power for a business like microsoft, because of the megacycle, it will be significantly higher. even if it is four points higher than the streets, the impact on earnings is much higher. the incremental margins produced by microsoft are high. you could be looking at a company that is double digit, 20% earnings growth over the next few years, which gives it a different earnings profile as you go forward. >> i would not disagree with that but i think you have to get your head around the idea that 20% revenue growth for microsoft is $50 billion. you have to pull in $50 billion from the rest of the economy incrementally to have that top line growth. i think that's when you start to run into how much more is there in terms of total? >> the laws of large numbers

apply given the expectations. this is our super bowl week in some respects, because of all that lies ahead. can you put in to respect what this means for the markets? >> if we start with this evening, something that underpins our thesis that the rally will broaden is earnings. last year was a year of multiple expansion and this year we expect some of that performance to come from earnings. if we look at earnings last year, or 2023, you see pretty much all the profit growth relative to the rest of the market contracting from a profits perspective. looking at 2024 to get to 12%, you have a third of the earnings from the magnificent seven and two thirds from the rest of the market. how feasible is that? it sounds like better balance, but as you mentioned the stats,

the mag seven have to produce 20% returns in growth. thing about last year being a recovery. to your point, the bar is high. it's possible the mag seven can do that but that's large growth and the rest of the s&p 500 has to do 10%, coming off down year, that's possible. i think the risks from an earnings per spec when you look at 12%, are to the downside. it does not mean we cannot see growth but again, that underpins broadening out exposure and portfolios and you bring it microsoft. think about when we called them the fangs, that was a different constituency of stocks so we have to be active and that is where earnings give us a bigger picture. maybe tomorrow is the biggest day of the year. >> it's no accident, i suppose. as to why there has been a

return of quality when many thought there would be more broadening. we've gone right back to the tried and true, what you can count on, and that is the magnificent seven. >> you seen expectations around the fed, and you've seen yields rise. that's a good thing to see that ultimately the market is on the whole, pretty resilient. it's early days. if you think about the dramatic david from the end of last year, suddenly you have the holidays and we are taking on more data. there is still uncertainty about what the fed will do about the path of rates. people cling onto what worked last year. heavy recency bias, but we need to remember we've had dramatic pendulum swings from 2021 performance to 2022 to 2023, so being balanced is important

because otherwise that's a lot of volatility even though the overall journey is good in the long run. we have to think about year to year and month to month and week to week moves. >> it will be hard for investors to get off at six of when anytime this uncertainty comes, you go back to the tried and true. >> that is the favorable outcome. it's not as if it's okay, we have to retreat in general from equities. with interesting is the way it's being treated as defense. maybe people are overpaying for the comfort, psychologically, of that defense. i also think that even though we had this everything all in rally last year, with small caps ripped and low quality ripped and the old speculative stuff along with it, we had backsliding. it's not as if it's as narrow as it was last summer. so far, you are still seeing the equal weight of discretion. equally industrials are doing okay. it's not a completely,

either/or, super narrow market like before. the small caps are unimpressive. they are stuck at the top end of the range and have been for two years. aside from that, i still think it's more of a nuanced picture this year than just seven stocks. >> do you feel, for offer but -- profit, we get down to ground level, is that the privet story, more so than microsoft? are you more concerned about alpha that? >> i think the market is more concerned about off of that. it's more controversial. i'm taking test loud. so, with google, i think that what we are looking for is are they showing cost discipline? i think the digital ad market is entering 2024 on the solid footing and i will quote crm, head of data cloud, who said

2023 was the year of the measure while 2024 is the year of optimism. we see that not only in enterprise but also for ad market and in this case, everything will rise. >> i think that makes sense and makes the story a little more difficult. so many boats have risen with yachts bringing everything into the harbor, thinking they'll eventually i'll be the same. not every ai story is created equal. you may learn that this week, that these stocks have been largely trading as groups, with some relative divergence here and there. maybe this is the week that separates that. >> this is why valuations matter so much, because if you think about the index level, surpassing all-time highs january 2022, look at the valuations last time. it was about 21.4 on the s&p

500 and now it's about 20. it's still a little bit rich and we've grown into that, but if you take out the top 10, we are at 18.5. it's higher than long-term averages, but nonetheless, that's where evaluation separates things. we pay attention to areas that could be vulnerable. >> is this the week we get this breakup of this group and start scrutinizing? >> you are seeing splinters. apple is a nonentity. now we have reports of a potential ship and cut, according to an analyst in asia. that has things a little uncertain. like amazon has often had a mind of its own. it really sat things out, from the peak of the lockdown. i think the most bullish thing would be if these six stocks each go their own way and that out to nothing and then we get past it and say if earnings in general are going positive, if

the next move is cut no matter when or how much, the market can probably deal with a little bit of a wobble in the first pullback probably won't be big. that's how i would think about it. >> thank goodness the fed will come this week, too. that's the other variable. what about this point mike makes? you get these out of the way and maybe the forces of the fed in his trajectory with their policy is enough to offset any upset from the mega caps. >> i think we still see upset regardless because the market has been, is on track to be more normal. last year was so subdued in terms of volatility. i do not think we should get nervous about the volatility, because it's getting back to normal. rate volatility was extreme but market volatility, i don't think we should be to deterred. i do not think we should hang our hats on that. even though we are optimistic, that still keeps us in

relatively restrictive territory so we need to keep that in mind. i would say that we are heading into a more normal environment with the balance of risks to react to as investors. in the last several years we have been hooked on the upside and the potential huge catalyst , where slow and steady is a realistic expectation. >> do you think march is too soon to expect the first cut and when do you think it happens? >> marches soon. it's probably more like may or june because of the data we've gotten. i don't think sticky growth needs to mean sticky inflation but i think the fed want confirmation that the inflation passed is headed to where they want to go. we have also seen easing and financial conditions and we could start to see them want to ease. if you put that together they may not need to do as many rate

hikes as the market tanks. -- thanks. we might be more biased to their view, slow and steady, to be sure inflation does not reignite. >> how much confirmation do you think we need this week, that something will happen soon enough? >> i think that i agree that they are not going to cut in march, they will push it out further. it may cause the market to get jittery because i think there's a 41% chance of a cut in march. expectations have come down. >> it was a given. >> right, i think would be the wrong move to cut in march. i'd like to hear them confirm it will be later because i think it's a negative if he starts to cut in march. it could reignite inflation. >> do you agree, does it matter? >> i don't think it's crucial. i don't think we are going to sit around here and i don't

think that we can have a solid opinion about what the answer is because there's no way they know. i think they want full advantage of the next seven weeks of data and they want to see how things develop. they are hoping they ave the cover to go in march if they feel like the inflation has downside momentum, but i'm not that fixated. we were 90% in december. a month and a half later we are 40% and stocks are up and spreads are tight and everything looks fine for now. >> that points to the idea that as long as we know the next move is likely a cut, does it matter when or how much or how many? at least we think we know where the path is in the path is good enough to get us started. >> as long as they are not cutting because they are worried about economic growth. >> they are cutting for the right reasons. it's overall a supportive macroenvironment and i think that we do achieve trend like growth. we think inflation gets closer

to the 2% target and we avoid a recession if the fed is able to normalize any absence of a recession and bring policy to a somewhat still restrictive but reasonable stance. overall, that should be at a reasonable set up and we re pretty constructive. >> so you are more constructive than what you're "house view" would tend to be of late, some of the strategists seem to be negative on the outlook for stocks. is that fair? >> i think so. from our respect of, given a benign macroeconomic backdrop, general recovery in earnings out of the earnings story, maybe we don't get 12% growth that we have reasonable earnings growth and that should be a good environment. >> i'll let you have the last word on your outlook for the market. >> it's interesting. what we've seen in the first month is not repeatable every month. do we posit a little for the earnings to catch up and for us

to get more confidence? i think the market is higher at the end of the year. >> exciting, glad you could set it up. thank you. good to see you. let's send it over to kate for the biggest names moving into the close. >> we start with general motors shares today after an optimistic outlook. the automaker is forecasting strong guidance on looking for adjusted earnings up 11 to 20%. gm hosted top and bottom line in quarter four and then we have marathon petroleum at a 52 week high after topping expectations, which they were expecting budget decline. shares are up 31%. back to you. >> thank you, kate rooney. up next, sebastian pages back.

he is slagging his top risk for 2024 and what it might mean in the months ahead. we are live at the new york stock exchange, you are watching "closing bell" on cnbc.

all right, welcome back. we are watching the markets today. the nasdaq is lagging, with that decision. the risk is to the upside. let's bring in sebastien page of t. rowe price. it's trending in the opposite direction, why does that give you comfort? >> trending down, and housing is building in a dis- inflationary trend. i do think

the risk is to the upside. i'm not talking about 10% likely had, but i look at the red sea shipping and container from shanghai to new york. the cost of doing that has doubled in about four weeks. wage growth is at 5%. our research platform is bullish on energy stocks, so i put that together and it's coming down. house prices, nine months in a row, at 9% annually. that effect turns into a positive contributor. >> i'll give you another number that might trump everything and that is 49.27. the s&p is at an all-time high and the market is beyond that. >> inflation has generally been good for earnings, right? when you get positive inflation, companies have pricing power. it's not intuitive. inflation is coming down fast.

i would not equate increased or uninspected inflation with disappointment for markets. markets are looking at earnings, generally at rates coming down and we've talked about it. the money is still out there. >> why, how long are we going to be fixated on this? don't we at some point have to say, maybe we are wrong because this is different? the economy and the trajectory are screaming that things are good. listen to what ken griffin said today in miami. it's so relevant. >> we do look like we have put economic anxiety of quarter four behind us, and inflation is moderating at a pace that is

better than marketing has stated. we make it goldilocks, we may get a soft landing or no landing. we may be looking at a moment in time where inflation is low. the fed could start to cut rates this summer, and we will see unemployment touchup a little bit, but the overall economy looks pretty good right now. >> what do you say? >> it looks good. look at the forecast at the beginning of 2023, basically zero growth, 0.2%. look what we got, we got through .0% realized growth. that continues to surprise us. we are having that debate in asset allocation. we are enthusiastically neutral between stocks and bonds, fully invested. the bears are still talking on

my committee about the long and variable acts, and as winter is coming, the maturity wall is coming. >> winter is coming, so maybe the bears need to hibernate, because they been getting run over by a market that does not want to hear it anymore, this bear story is tired and old and you heard ken griffin, who is pretty good at managing the money of citadel and running that firm, to have returns that are unlike most others, to suggest that maybe it's good. >> i agree. it comes out to the consumer and the strength of the consumer. what's going on right now is people's wages are growing 5%. as inflation comes down, your income relative to inflation is growing. that will give continued strength to the consumer. i don't agree with economists that say we are

seeing cracks at the labor market. follow the data. >> why are you over u.s. equities? >> the equity risk premium is as compressed as it's been since 2007. bond yields have come up which makes bonds more interesting. cash is going to come down but if you balance your portfolio, now is not the time to be a hero and swing for the fences when the magnificent seven is up 107%. we are putting money to work in value stocks and gap stocks, but overall, this is this environment. there is a statistical study that this is an academic study. soccer goalies do better if they stay in the middle instead of jumping. >> three months ago, the bears then were like, this is not the

time to be a hero because this isn't real to begin with. it's another bear market rally. variables will show up and i will show you, and the bears are being shown the door. >> i don't think so. i think you will hear the bears loud and clear because the debt maturity wall is only coming, right? thick about mortgage rates. they are coming down. the average mortgage in the u.s. is 4% and the coded mortgage rate is 7.8%. we don't use the same analogy with corporate debt. that's been extended. this is all just pushing the maturity wall. if you want to get scared and give the bears food, you talk about commercial real estate. >> they've been talking about that for 12 months. >> but it's rolling and happening. i feel like you want me to give the bear argument. >> i don't want you to give anything, i think you continue

to give the bear argument or site it and i am suggesting, i'm not trying to give the bull argument. the market speaks louder than me. the market is suggesting that it believes the soft landing, it believes the fed cut story, it believes the tide has earned. >> i agree, and they will tell you that fed funds are pricing rate cut in corporate earnings are expected to go. we are in and everything is awesome, complacent valuation environment . i go back to equity risk premium being compressed to 2007. i'm with you. the market is crushing the bears and it's been crushing the bears, but it's led to elevated valuations. you balance it out. >> for a select group of

stocks. you know the argument, if you take the magnificent seven out, the market is not as expensive as it would otherwise be. >> if you look at the all country world index, this has emerging-market stocks, large- cap stocks, the global stock market. 19.7, historical average 19.5. that is fairly priced and that explains why we are at neutral between stocks and bonds. bond yields are attractive right now. it .9% on high yield with a decent yield in investment. that is despite having compressed spreads. this is an environment where the market discretion is crushing the bears so much that it has priced them out. there is complacency. >> will see. that's what makes the market and that's what makes the debate fascinating. thank you. we appreciate it.

next, amd results. stacy joins me with a rundown of what we are watching. "closing bell" is closing right -- coming rit ghback. ♪♪ ♪♪

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welcome back. amd is set to report earnings, but cannot justify the 80%

rally in amd shares over the past three months? let's ask one of our top chip analysts, welcome back. i take it your answer is no, you call this "the most expensive of all of the ai stories by a wide margin." >> it is, it's 45 times earnings , as many as 30 or 31. intel is 32, even. expectations, you talk about the stock a lot. expectations are clearly up a lot. i think the company did something smart. all that matters is really the ai number. right? they gave a forecast and said they will do more than $2 billion. i see the expectations are considerably more than that and i think that's what determines what the stock does. how do they instruct the trajectory through the year? how much more is it over what

time frame, when does it hit, and how can the present that? especially in the wake of a core business that might not be doing as well as we might have hoped, given the intel last week. that's what people look for. >> i mean, this is a stock that seems to be benefiting from the nvidia halo. i think that's fair to say. i was reading a note and i want your take. when you look at the projections of amd's new ai chip, relative to nvidia, in 2025, we are talking about apples and oranges. the projections i saw, 800,000 units of amd's chip relative to $2.2 million for nvidia, what are we to make of that? >> that would still be a relatively sizable market share. it took them seven or eight years to get to a share on that order. that was against a competitor

that had fallen down. we will see. i think i've said this on the show before, this is one reason people are in amd because no matter what they do, if they do $2 billion, $4 billion, $6 billion, that would be disappointing. these are rounding errors. it's very small in the context of the overall size of this market. that could be attractive because they don't necessarily have to do $60 billion right away. many people might be happy with it. in the grand scheme of things, they are going to be, it's a second source and probably not big relative to where nvidia goes if the market takes off. it's their game to lose. they are not showing signs of losing. >> it's interesting, when i look at it. i get your market rating because the stock is ripped so much. is it correct that you are

price target is hundred and $20, $50 lower than where it is now? >> look, i said this before. don't read too much into price targets at any given moment. we took the target on the beginning of the year. i'm not in the habit of adjusting targets on a daily basis. expectations have ripped in the last several weeks, between the beginning of the year and the print. we will see what is justified after the report, tonight. i wouldn't read much into it. >> lastly, you don't look at like, i know it's a bigger step to downgrade a name, but on valuation basis, are you close to a valuation downgrade on amd? >> so, look. we talked about this last time. we downgraded a year ago, and

the call of that was gross market earnings. absolutely true, they miss numbers every quarter and the stock more than doubled. why? the ai story was able to take hold. it's only a narrative. this will be the first quarter we see something material in numbers. there is a possible scenario where numbers themselves continue to miss and yet, they keep the ai dream alive. i understand why. at 45 or 50, i have a hard time getting behind it. it's a hard call to make but i understand why it's working, sure. >> i mean i think we all do, that's the great conundrum of the stocks that continue. at some point, you've got to live up to the hype. we will see. i appreciate your time, thank you. i should let you know that amd's ceo will be on tomorrow morning and the other side of

the earnings. we are tracking the biggest move into the close. kate rooney is standing by. >> we have a bleak forecast on two companies, one delivery giant is trying to cut cost and we have an appliance company struggling to stay in check. we will talk about that, coming up next. rylee! from rylee's realty! hi! this listing sounds incredible. let's check it out. says here it gets plenty of light. and this must be the ocean view? of aruba? huh. this listing is misleading. well, when at&t says we give businesses get our best deal, on the iphone 15 pro made with titanium.

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we are less than 15 minutes from the close. get back to kate rooney. >> let's start with u.p.s. shares tanked after missing revenue expectations and putting out a bleak forecast. they are looking to cut $1 million in cost as they come off of what executives describe as "a difficult and disappointing year." cut 12,000 jobs and they did top profit expectations and up to the dividend. got whirlpool, which shares lower after their own disappointing forecast on sales and profits. they have been struggling to keep costs in check and executives say the red sea attacks will start to impact their european business. back to you. >> we appreciate it. starbucks is among the names reporting in overtime and we will give you a breakdown of ato lowh tok for for when "closing bell" comes back.

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icy hot. ice works fast. ♪♪ heat makes it last. feel the power of contrast therapy. ♪♪ so you can rise from pain. icy hot. next, your big check setup and so much more. microsoft and outlet of the first of the mega caps report . rnings, at the top of the hour we will tell you what to watch for. there's a lot. after the break, we go inside the market zone.

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we are in the "closing bell", market zone. we are breaking down the crucial moments of trading day and what we are looking for. alphabet, microsoft, amd, and others. we also have kate rogers with what to expect from starbucks when they release their results. mike, we didn't get to it. stacy called amd, p 80%, the most expensive of the ai plays. maybe that's the one to watch. >> that's the ne i think is the farthest out on a limb. it's also one that gets the benefit of the doubt. people love the momentum and management and the story.

they are coming from a near zero based on ai, so i agree. it's the rest of them that i think is more crucial to the valuations, you can't say it's a layup in terms of satisfying the street, but if guidance is positive, the stocks are okay. >> at some point we will learn about the halo effect. at some point, we have to learn who is legitimate. i'm not saying they are not, but monetization legit in a reasonable period of time versus the pretenders that have been lifted by the great ones. >> that's why amd is the placing of ai speculators because it's coming off a low base that it's not a massive revenue chunk. we might, it might be a trap. it's obviously a momentum move but unlike nvidia which added

$800 billion in the market cap, this is a story where i think it can swing more wildly around a positive trend. >> it's amazing that microsoft and alphabet come out on the same night. you are going to hear, you will get all the reasons why one is over $3 trillion and may get some of the reasons as to why the other one is perceived to have missed something. >> 1.7 trillion or whatever. >> you have to believe the story that off of that will try to tell, which is that hey, we are here, we are here to win, and don't call a second place. will tell you the reasons we are not. >> the difficulty has always been that it's core original business is the most profitable thing in history of capitalism. anything else they do feels like they don't have as good a shot. they can talk around it. >> on many nights, starbucks would get a lot of oxygen.

it may be crowded out of the room but it's important. what do we expect? >> starbucks is said to report earnings for the first quarter after the closing bell. it was down 3% in 2023 and analyst expects $.93 on revenues of 9.58 billion. store sales will be the key metric, estimated to climb 7.2%, up 5.8% and international comps are up 13.2% according to the facts. analysts are warning about softness in sale trends. first, whether in the u.s.. there's a potential impacts from consumer boycott at license shores and middle eastern markets, china, the second market with consumer spending and local competition. >> we will see what happens.

can't wait, thank you very much. it's just another inside look. what is not happening? >> i wonder if they have diminished expectations for what starbucks can deliver from that market. you are seeing a rethink with apple. it's a less challenging valuation and domestic comps could be what makes or breaks it. >> so looking ahead to tomorrow, what do you want to say about it? >> i think if they ratify the markets, understanding of the framework, that says that policies are more restrictive than we need. the numbers are going in our favor on economic resilience and inflation and we get the implication in rate cuts, slowly down the road.

>> it's a huge move in the market. >> it's going to be exciting. microsoft, alphabet, amd. let's send it over. mixed picture for the scorecard on wall street, especially for big earnings. we are here with morgan. it >> the tech sector is dragging down the nasdaq ahead of a trio of earnings this hour. coming up, instant analysis of today's liners. >> while we wait