all right. let's get a final check on the markets this morning. you will see right now, look out below. every movement -- every minute, it seems like we are moving lower on this. dow futures are down by 426 points with, s&p features down by 72, the nasdaq down close to 300. good luck with this. let's watch as we get close to the open. right now, it's time for "squawk on the street". good morning and welcome to "squawk on the street." i'm david faber with mike santoli and leslie picker. we're at post nine at the new york stock exchange. of course, carl and jim have the morning off. let's get a look at futures as we wait for the penultimate day of trading ahead. our road map begins with that fact, in fact.

those two days left in the trading year. big tech coming off a rough day last week. a number of sectors, as well, under pressure this month. >> shares of boeing are down after south korea ordered an inspection of all 737 -800 planes, that's the model involved in that deadly crash over the weekend. and remembering the life and legacy of former president jimmy carter who passed away last night. and that's where we begin, former president jimmy carter has died at his home in plains, georgia. carter was 100 years old. he was the 39th president, serving in the white house from 1977 to 1981. carter was awarded a nobel peace prize in 2002 for undertaking peace negotiations, campaigning for human rights, and working for social welfare. carter's death begins a series of memorial services that will take place in his hometown of plains, georgia, in atlanta, home to his presidential library. then to washington, where he will lie in state at the capitol. president biden declaring january 9th as a national day of

mourning. the nyse and nasdaq are both set to hold moments of silence, minutes from now, to honor carter's legacy. >> remarkable to live 40-plus years as a former president, and there are a lot of assessments going on of his life. just in terms of kind of, you know, even though it was considered to be a very dark economic moment when he left, wall street-relevant stuff. he appointed paul volcker. >> towards the end of his term. >> very significant. inflation under miller prior to that. >> exactly. and then, even though it's not really kind of like a top line priority or considered to be one of his policy pushes, deregulation started under carter, of the airline industry, energy, communications. so, obviously, that's just a real narrow window in terms of, you know, wall street investing and how that kind of set the scene for what would happen, you know, in the 80s, in a way. >> and obviously, there are a lot of people who look at today's market and take some lessons learned during that

period and the risk of stagflation, how to avoid that. the risk of lines at the gas station, how to avoid that. and, of course, geopolitics, as well. you can kind of harken back to a lot of important aspects of that period and, you know -- >> well, and unfortunately, the mideast today, he did negotiate that peace, of course, between israel and egypt, which is still in place, despite all of the the ultimate there. and of course, it was the years after, as mike said, his presidency, in many ways, that jimmy carter gets the most praise for. a great humanitarian. all right, let's turn back to the markets, of course, what you all care about, as we get ready for the penultimate day of trading. under pressure this morning, seem to be stocks, as you can see where we stand on the futures. mike, these last few days, few weeks, really, the equal-weighted s&p is down 6% for the month, and we've seen the resurgence of mag 7. nothing surging today so far, but that has been an interesting

dynamic to see, as this year ends. >> we rode that dynamic for a few weeks, as you say, and that kind of buckled in the last couple of trading days. and the nasdaq 100 names have succumbed to some profit taking, probably some pent-up selling. and i think the absence of the seasonal tailwinds to show up, and the idea that late december is supposed to be this kind of upside air pocket, and we're going to levitate, because it's an illliquid market and usually we do. the fact that we're not doing that suggests to me people are essentially saying, why wait until january, when there was generally expected to be a little bit of a gut check moment, just because we had been up so much. the equal-weighted s&p is actually back to levels like from early september. so really, you've lost that whole -- >> that's been a horrible month. a 6% loss has been a very rough month. >> a lot of that has occurred as treasury yields have marched higher. at the same time that economic data had been okay, but they've been soft, relative to expectations. so when yields are going up and

it's not because the economy all of a sudden seems to be accelerating, that's sometimes an uncomfortable combination. i also think that there's a sense in which we almost got trapped or some people got trapped by the idea that there was a playbook from 2016 after president trump was elected the initial time, to say, okay, here's what we do. we buy cyclicals, we buy small caps. yields are going to go up, but that's fine. by the way, the markets will tend to be able to ignore perceived policy chaos or erratic decision making. that was the set-up. that was all considered to be the baseline. now, i think there's a little bit of, we just don't know what we're going to get. and we're not just going to pencil in the optimum policy scenario. and the market was up 20-plus percent. mag 7 was up huge in the first half of this year. three stocks worth 21% of the s&p 500, that collectively raided 32 times earnings. this is not a market that was kind of underloved and

undervalued going into all of this. >> if we do get a negative santa claus rally, which we still have four more trading days to decide. >> including today. >> it would be back-to-back negative santa claus rally periods, which has only happened twice before, going all the bake to 1950. it is pretty unique. and i'm curious, mike, your take on whether it is that disappointing month leading into this that you think contributed. the fact that december supposed to be seasonally strong. it wasn't. so everybody just said, okay, rebalance. >> i think that's part of the backdrop. i also feel like equity exposures were pretty high, right? we've been in a two-year bull market. it's not as if people needed to rush to grab on to stocks to play the rally. they were there already in large part. so i think the final, you know, kind of implication of what you're saying, we had a bad santa claus rally this year, and we're up 25% this year. whatever magical predictive powers that period of time was assigned 50 years ago, when people came up with this, don't necessarily hold up year-to-year. >> mike, we spent a lot of the year, certainly the first six to

nine months talking about the enormous percentage of the s&p that was made up by a small group of stocks. then the s&p equal weight, kind of everything started to come along. we didn't talk about it as much, even though the merge didn't decline that much. but what do you make of this re-assertion of megacap tech at the end of the year. and the fade that we just talked about in the equal weight? >> part of it is that this is the way the market in this era plays defense. is to buy the known quantities, these companies that deliver earnings. and it's been such a mistake to bet in a sustained way against the nasdaq 100. i mean, for decades, to be honest with you. it's just always been giving you more return per unit of risk than you would be led to expect. so i think that muscle memory is part of the reason. the other one is, they're kind of impervious to what happens with yields and macro, and now, i mean, i just think there's certain limits to it. what's really fascinating is, nvidia's been essentially dead money for more than six months.

>> yes. >> it got to current levels, right in like early-to-mid-june, yet the market's been able to hold together. semis have been in an interesting spot on a two-year basis. they're really waning momentum. and i think an interesting question for next year is whether there's a bigger re-think of all of these companies doing so much capex and throwing so much money at whatever's to come in ai, and whether that turns from a benefit, because they can do it, and they're the only ones equipped to kind of build the future to, what are we getting for all of this? that's a big question. >> and microsoft has been dead money, too. >> that should come to the foremore often. the capex numbers, we'll get to this a bit later in the show as well, are just, they're beyond anything you could have imagined, really, even a number of years ago. when you look at just what microsoft alone will spend in 2025, not to mention, obviously, layering in alphabet, amazon, meta. >> and there's the opportunity

cost as well, of what they're not spending, because they're spending on capex. things like m&a, which is difficult in this environment, but maybe, you know, to be determined, whether it's easier -- >> to be determined. i think there's a broad expectation under the trump administration, there will be more deals, i'm sure. i've been hearing, certainly in the conversations i have. i've been sharing this often, that there's a lot of dialogue underway. i think it will be a little less predictable in terms of where antitrust raises its head around trump administration. but i think broadly speaking, there is an expectation that there is going to be a more robust environment. it's hard to imagine that would not be the case. >> especially right out of the gate. i have a feeling that the first couple of deals in a certain sector, certain area will get done, people will get excited, and then the anti-trust environment will start to clamp down and say, oh, no, that's a little too much in this industry. >> and we know from the first trump administration, it was harder to predict, whereas with the very strict regulatory environment we are now leaving, it was a bit easier to anticipate. in fact, often, you would just anticipate, that's not going

to -- >> you would assume the answer's "no". >> and if you're a company, you assume, the answer maybe no, but we think we can win in court. and obviously, that did happen, until the end of this year when the ftc had some important wins, whether it was handbags or supermarkets. >> exactly. >> all right. are we ready to move on here with professor siegal? we'll take a break and get to him in a bit. nat gas, by the way, is down sharply. it's one of the worst-performing successors overall. that would be energy. and our next guest is forecasting, it's not going to be a great year 234025 either.i. we're headed to a sharply lower open when we get started trading 20 minutes from now. a lot more "squawk on the street" for you straight ahead. . it's time to grow your business. create a website. how? godaddy. coding... nah. but all that writing...

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>> david, yes. >> we're coming off of two great years for the broader markets. can we make it a third in 2025? >> we could, but i think if you look at history, i think the only other time that we've had two 20-pluses go into the third year was 1999 and then we got way too overpriced and we got to 2000. so i really think we're going to take a pause this next year. >> you do? >> one thing is true about the markets, as an old saying is whatever you -- everybody expects something to happen to the market in the future, it's not going to happen. everyone expected that we're going to have the santa claus rally. everyone said, oh, yeah, it always rises between christmas and new year's. and i warned a few weeks ago, yeah, when everyone says that, they buy up before then, and then when it comes, there's

disappointment. and you know, i think maybe we're seeing a little bit of that right now. >> right now, okay. but does that apply to 2025? is there an expectation perhaps that we're going to have another strong year, and therefore going to be disappointed? >> i think there might be some disappointment. you know, as time has gone on, i think the probability of a correction next year, you know, which is defined as a 10% drop in the s&p is getting higher. i'm not saying it's a sure thing. nothing is a sure thing in the market. but the major forces to propel things upward, i think, have already been built in. we still have, you know, we talk about 22 times earnings on 16, 17% gains of earnings, which is, you know, you know, also far higher than historical. so i see a little bit more risk on the downside. i'm a bull on the market.

i'm long-term. i'm not saying "sell," but i see more risks. not as optimistic as tom lee was, right at the end of "squawk box." and i admire him dramatically. but i think that we have challenges next year because of all of the optimism that has been built in this year. >> what does that mean, professor siegal, for the long-standing rein of big tech. one would say those have been some key forces over the last few years that have pushed the broader s&p 500 upward? >> yeah, you know, we do still have a bifurcated market in the sense that you know, the mag 7 being 30%, the mag 7 being 30 to 35 times earnings, the rest of the market 18 to 20, which is much more reasonable, you know, i think 2025 could be that switch-around. now, of course, many of us thought that that would happen 2024. the narrative of ai is still

very, very strong. the spending is there. it's going to bring about all of these gains. now, the amount of actual gains it's bringing about is modest. it isn't, you know, it hasn't been implemented completely with so many firms. the hope is there. and i think, ultimately, it will prove to be very beneficial. but there is room for disappointment at the speed of implementation and how much that actually will affect profits. now, will it happen in 2025 or not? listen, history tells us that narratives go on much longer. they need to be punched down with many failures before they're finally dead. and, you know, at this particular point, that trend is in. but, you know, i'm looking at january thinking, hey, that might be a reversal, that big

buildup that mike talked about, that we got from thanksgiving up until a week ago in the mag 7, we really might find that, you know, reverted, at least down to the trend line that was established, you know, in september and october. so we might see a reversal earlier. and then we have the challenges that mike and everyone has been talking about. what is going to happen to tariff policies? what's going to happen with immigration policy, et cetera and so on. i mean, there's a lot of positive aspects. we also have to remember, in terms of, you know, we see the republicans did capture the house, but by one or two votes. some of the things are not going to come maybe as easily as everyone thought on november 5th, with the election. i do think, you know, they're going to work on the taxes and get that set, as an important priority, certainly, in the first two years of the trump administration. >> yeah, which is most likely to take the form of extension of

the current tax structure, professor siegal. how does the fed filter in? that is one aspect of the script that seemed to get scrambled here. on the one hand, probably less easing as inflation sticky and policy is uncertain. on the other hand, nothing necessarily wrong with the fed tweaking rates lower a few times and then going on hold. that's what happened in '95 and '96. >> a lot of people have been criticizing the fed. i think the fed has been right. listen, the normal situation, as you know, mike, is that long-term rates are above short-term rates. and we were in an inversion for two and a half, almost three years. almost the longest in history. and by bringing short-term rates down, we finally have the ten-year above fed funds, which we didn't have for three years. and actually, normally, it's more above fed funds than it is right now. i'm not criticizing the future -- the past 100 sis points, but i do agree, at most,

one or two next year, depending on the strength. and you know, if it's going to be much less than two, that's going to be the result of softness. >> yeah. professor siegal, we're going to end it there. always appreciate your joining us. happy new year to you. >> thank you, david. well, the nyc and the nasdaq will both be holding a moment of silence to honor the legacy of president jimmy carter. that will begin right now. [ bell rings ]

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welcome back to "squawk on the street." a boeing 737-800 crash-landed in south korea yesterday, killing 179 people. there were two crew members who were rescued from the tail of the burning plane. as the plane was preparing to

land, the airport warned the pilots about a potential bird strike and video does show the plane skidding across the runway on its belly and ramming into a concrete barrier at the end of the runway. and the massive explosion that followed. it may have been a bird strike that caused the hydraulics systems failure and prevented the pilots from deploying the landing gear. of course, mike, reaction would typically be to sell perhaps some boeing shares, even though it's completely unclear whether there was any mechanical failure that had to do with the specifics of this horrific crash. >> even if it just is because of the procedural inspections that have to happen, the context is also very important, which is the run that boeing stock has been on for the last six weeks. it's up like 30% since mid-november. there has been a lot of -- i think, sort of newfound enthusiasm about, you know, the management story, the restructuring, the pivot toward,

perhaps, positive free cash flow again. >> they're actually making planes again. >> exactly. >> and they're in production again. and technically, a lot of the chart folks are like, okay, finally, we have this long kind of malaise and base that was built. i think this pullback off of that, in the context of a pretty rough open, maybe it's, you know, you keep it in perspective. >> yeah, apparently, it was the deadliest year for commercial air travel since 2018, with 318 tragic deaths related to commercial air travel. two other close calls over the weekend. >> a number of them t the very end of the year with the azerbaijani airplane, which appears to have been shot down perhaps by russia. >> exactly. so, you know, i don't know what the implications of that are, but last year there were zero fatalities. this year, 318. >> yeah. of course, investors still remember the max with boeing, but again, as mike said, 2024, a year of seemingly endless challenges for the company, but

ending perhaps on a more positive note, as it is back to actually manufacturing, resolving that strike, of course, of the workers that took them off the assembly line for quite some period of time. still a large debt load there at boeing, not to forget, of course, two iconic companies we continue to keep an eye on. boeing and intel. the opening bell here at the big board. take a look at the realtime exchange back at our headquarters. a lot more red on that board given where futures were. nyc mamas give back doing the honors here. a nonprofit providing infant essentials to agencies and shelters that are serving pregnant women. over at the nasdaq, marine toys for tots foundation. mike, i'll leave it to you. >> we have a little bit more of this pent-up selling that looks like a vulnerable set-up, in terms of the unsettled nature of

leadership, that being that the big nasdaq stocks, and i don't really know how much we want to incorporate a lot of the noise surrounding, you know, whether big tech is pro or against the current immigration policies and the h-b1 debate. but but spoke mentions just now that if we are down 1% on the s&p today, be the first time that you had two downed 1% days in the last 52 days. so it does suggest how rare it is. one piece of it that i would also point out, though, is when you have a market this concentrated, you can get those big moves. if it's basically rotation out of big stuff into small stuff, the index is going to feel it and vice versa. that's the market we have right now. but it does seem as if, you know, there's not a lot of taking up the slack of the big

tech selling from the industrials and the banks and the other cyclicals that had done very well, right in the first flush after the election. >> while we're on the subject of superlatives and concentration, bespoke also has those numbers today, where they say the eight largest stocks in the s&p currently account for 35.7% of the index's total market cap, in 1999. this was 22.2%. >> yeah. >> just showing that concentration this year. there's also been a narrative this morning, just about the remarkable inflows into etfs, specifically the s&p and the nasdaq. obviously, contributing to some of the uplift we've seen, as well, and contributing to kind of this cyclical element of concentration given that the u.s. is really the only game in town from a flow standpoint. >> yes. >> and from a performance standpoint. >> this year. >> the global stock markets excluding the u.s., up 3% year-to-date. a lot of that's china. but even china had a good bounce. >> china had a bounce.

europe has obviously not been great. >> and obviously, since the fed maybe had this hawkish rhetorical concern, ing markets returning. if you look at the typical stock in the s&p is up like 8% year-to-date. it's not as if it's totally two different world. this sub-category of u.s. stocks that have done incredibly well. in terms of the tf flows -- >> just to stop you, this year is not going to dissuade people from just owning the index, the last few years. i don't know what will. >> i think a bear market. like a real -- a real bruising bear market will, because that's all that did it in the early 2000s. i keep pointing this out. everyone points to these like small-cap versus large cap relative charts or even value versus growth. and you had this huge upturn in the early 2000s. and everyone wants to play for that. it's like, wow, that would be great if we got mean reversion like that.

a lot of that came from growth stocks just imploding. the relative performance of value in small cap was pretty good, but it was because the rest of the market and was driving the index was so bad. the etf flows, i think at some point, etfs, exchange-traded funds, it's going to be like touch-tone telephone or color tv. in other words, that's the kinds of funds we have. no flows are going into traditional mutual funds, outside of straight retirement. and so it's just the instrument we use. it's been net outflows from non-exchange-traded mutual funds, consistently for years now. trillion dollars, it's a lot of money. that's stocks plus bonds, it's not all stocks. the s&p 500 is like a $50 trillion market cap right now. so that's a nice bit of flow. but to me, it's not enough to say, we have this massive push of public buying that's going to be sustained to drive stocks on themselves. now, we also got $1 trillion in share buybacks, a lot of that's offsetting offsetting dilution. off good flow story, but to me

it's not just about, oh, the index will magically work because people are putting money into index funds. the other thing about that, every stock in the s&p proportionately gets the same amount of money from an index fund investment. there's no particular reason that the largest stocks should get more benefit from massive flows than the smallest stock in the s&p 500. there's a small wrinkle in that, if you think the largest stocks are relatively underowned by active. but really, it's not about, you know, self-perpetuating concentration. i think the concentration comes from other places. >> but what does that say, just kind of broadly thinking, about the overall diversification of people's portfolios, heading into the end of the year? >> you're not getting it. >> you're not getting geographic diversification, not even getting much in the way -- >> you can get the diversification, but it's going to be a drag. >> dplt. >> yeah, exactly. >> that's one of the reasons the equal-weighted s&p has become a popular idea. >> as a mechanism of -- >> it's just hard to bet that we're going from 30 to 40% mag 7. >> it's a way to risk adjust to a certain extent.

>> yeah, exactly. and ultimately, i can work, and mean reversion works in your favor, it's not as expensive. and by the way, coming into his period, equal weight seems like this hack. i mean, it really did outperform for a long period of time. >> when you're saying that, what period of time are you talking about? >> look at like a 15-year. you know, if you go back a long way. again, it's going to be coming out of a bear market that it really does distinguish itself. >> which is not the moment we're in right now. >> ten stocks represent 40% of the s&p. isn't that roughly the top ten, around 40%. and we talked about the capex budget. you mentioned, of course -- >> and three stocks are in 21%. >> right. >> so apple, microsoft, nvidia are effectively 21% of the s&p 500. >> and to the question you raised earlier, mike, it may be one -- i'm sure it's one we're going to entertain almost every day, which is that return on invested capital and whether they're going to be getting, as we start to see true commercialization of ai and

apps, adgentics is the word that everyone is using, and whether that works. in fact, the one company that has been penalized, in part, for what has at least not been as strong a debut for that kind of a product has been microsoft. >> that's right. >> the stock is only up 12.7% this year, markedly underperforming the broader market in the s&p and most of its megacap brethren. >> now, microsoft had built up this huge premium, and it was really considered to be, okay, fine. we can actually do the math here. you know, it's, how many people subscribe to the co-pilot, times users, that right there is, you know, we can get our arms around that. and it was considered to be a very clean way to play ai leverage. and it may be a little bit disappointing or maybe there are these offsets with the new investments in open ai and how that flows through to their bottom line and all the rest of it. it is tough. i think the market loved the idea, initially, that the big piles of inert cash on these

balance sheets were being catalyzed and being put into something. i look back when microsoft bought linkedin. i think it was 2016. $26 billion. microsoft had a ton of cash. linkedin was not considered to be a big problem. it was like 5% of microsoft's market cap at the time. it would be the equivalent of like a couple hundred billion dollars in market cap acquisition right now if microsoft were to do it again. we say nothing, but the aggregate size right now would be big. and the market loved it. because they took cash that was earning very little or nothing into a business that they felt like could work well within -- >> the point is, nvidia, not that they're going to be doing anything, could do a $300 billion deal, correct now, which would be the largest deal we've ever seen. and yet, it would only be 10% or less of their market value. so completely conceivable they could do a deal like that. because they're not taking on a company risk there, so to speak. >> and it's fascinating, because nvidia is in a funny spot, because every other -- you know,

the cloud companies and the super scaleer sand things rs an that, they're writing these checks. the checks are being cashed by nvidia. nvidia has too much cash. pretty soon they'll have to do something with it, it will have to be a big buyback, dividend or something like that. what does the market think about that. that could be an interesting thing coming up, too. >> now the dynamic as you're actually earning something on your cash. >> for sure. >> whereas historically, you really weren't. back when microsoft bought linkedin, you know, they were earning basically nothing on the cash. they were just sitting on it. >> it reminds me as we come to the end. of the year here, berkshire are sitting on a whole lot of cash, too. and obviously, significantly reduced their exposure to apple. still the largest single position, i believe. you cover it more closely than i do, but 70% lower, less apple -- fewer apple shares than they owned. >> yeah. and they've been in a real good spot in terms of what the market

wants all year. loved insurance. it certainly loves quality, right? and so just a quality balance sheet. that's been a big factor that's been driving things. and for a lot of the year, the market liked kind of a broad play on the u.s. economy. cyclical stuff, housing related is a big chunk of berkshire. a lot of that's starting to wear around the edges, because it's not necessarily -- home builders have been really weak. i think you've had some giveback in berkshire. but in terms of what it's setting up the company for down the road, on to the eventual new regime, in terms of having all of this cash, whether it is a big special dividend or a blockbuster investment, very unclear. but it does preserve a ton of flexibility. >> occidental is the question here. >> when was the last time they bought an outright asset, a controlling position? >> geez, i would have to -- they bought this big truck stop private company. there's been these private deals they've done. they bought allegheny, which was a mini berkshire, but it's been

a little while since there was a real eye-catching one. occidental is an interesting one. they own all of these warrants. they just buy the stock when it gets below a certain threshold, even though buffet has said he's not particularly interested in owning the whole thing. we'll see if it happens in slow motion by default. speaking of energy, let's turn to that sector. it has been the second-worst performing sector of 2024. check out nat gas this morning. it is spiking following some cold weather forecasts ahead, and a little bit of run of cold weather we've had. john kilduff, again, capital founder and a cnbc contributor joins us now to discuss all of this. john, it's great to have you here. in terms of -- let's just talk about crude initially. it's been just really kind of stubborn in this range, to a degree. it seems like a well-supplied market, but the prices are not really backing off in a dramatic way. what's your read? >> it's been a torturous read now for months, mike, as you point out. basically, there's two very

significant competing inputs here. you have the efforts by opec plus and others to restrain supply to the market, which has been having some effect. and then you have the concerns, real concerns, about demand out of china, in particular, given their economic situation, which, you know, we weren't wrong about, given what the government there has announced about stimulus for the upcoming year and trying to revive that economy. but right now, you're still only looking at a china that might be able to grow possibly 4% next year, i think, at best. so to the tent that these efforts fail and the opec plus cartel can't necessarily hold it together, because they are being stressed on the edges by several countries there, you know, that makes the argument for lower prices. >> not to mention, john, they're selling an awful lot of ev s in china. when it comes to gasoline, they are starting to really see a

change in demand, as a result of, one in every two at least of new vehicles sold is ev. >> yes, they are in norway, david. and we're watching that closely. china has sort of indicated that they could be -- they might have reached peak gasoline demand. you know, we'll have to see. the uptake here, obviously, in the united states, one of the biggest gasoline-consuming countries in the world, not so great. but it's still there, and even here, we have seen weeks during -- in 2024, now for a while, that gasoline demand is not what it used to be. during the summer months, we only had a couple of really terrifically strong weeks. and even during this holiday season that we're just finishing up now, we only got over 9 million barrels a day for last week's print. the few before that were below that. and it will head back down significantly once we turn the corner here on new year's. so, that, again, will make for a sloppy market, although it looks like we're going to get

bailed out a bit on the heating demand side of the equation over over the next couple of weeks. >> i mean, nat gas, we've been showing it up 20% today. what is the overall take here. ukraine no longer -- who knew that they were still allowing and getting paid by the russians, given what's going on in terms of allowing natural gas to pass through the country. but what are your expectations then? is this an appropriate move here? >> yeah, well, sometimes, you want to buy the world a coke for peace. in this case, it's natural gas or crude oil. but what's happening here, david, is that we've got a -- first of all, all the problems of europe, you know, will remain with us. they're ripping through their natural gas stores. that's supporting the price. what you're seeing here in new york, though, trading this morning, is that we got a major upgrade in the weather outlook for january 9th going forward here. and i've got some bad news for folks really throughout the entire country. we could see oj freezeoffs, natural gas freezeoffs, and a

big potential, it's early now in the runs, but a major snowstorm now, potentially projected for the eastern seaboard, again, that week. and it's going to be sticking around for a couple of weeks. we are talking bone-chilling polar vortex weather, which has caused this spike in natural gas this morning. the modeling really all came together over the weekend, realtime. and you saw the leak last night when trading opened on sunday evening. >> yeah, i guess if you're long the futures, that's an upgrade in the weather forecast. but for those of us living through it, not going to feel like that. hey, john, appreciate the time this morning. thanks very much. happy new year. >> thank you all very much. take care. we've got chicago pmi out just moments ago. rick santelli has that for us. rick! >> david, big miss on december chicago pmi. we know manufacturing hasn't looked good in a while, it's been a long while. 36.9 is our december read. we're expecting the number around 43. that now makes 27 months, if you

look at the last 27 months, we've had only one reading above 50, and that was in november of last year. 27 months, one reading above 50. of course, this is a big miss. we can continue most likely not only to look at the slowdown in manufacturing, but many are assessing exactly what's going on in the service sector. interest rates are down, 455 and a 10 is down 8, 425 in a two-year is also down 8. we see still see 29 plus on 2s to 10s which is in the neighborhood of the steepest that curve has been since early june of 2022. "squawk on the street" will return after a short break.

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a few consumer names hitting fresh 52-week lows at the open. lennar, constellation, brown-forman among them. and after the break, microsoft spending big to capitalize on ai demand. the staggering numbers and what it means for the stock, next. with its customizable options chain, easy-to-use tools, and paper trading to help sharpen your skills, you can stay on top of the market from wherever you are. e*trade from morgan stanley.

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big tech's ai spending history is causing capex to balloon into the tens of billions of dollars per quarter. that includes microsoft, one of the biggest spenders. our own steve kovach joins us to break down the impact of all of these huge numbers. steve? >> yeah, mike. it might even be the biggest spender. microsoft is ending 2024, spendinging at least $53 billion at least in capital expenditures, and we don't even have the latest numbers for the current quarter we're in yet. we'll get that in a few weeks. nearly all of that is for artificial intelligence. and it's not going to stop anytime soon. microsoft implied to expect around $20 billion in these capital expenditures, each quarter, going into 2025. the risk, of course, investors losing their patience for a

return on all of that massive spending. by the way, microsoft doesn't even know when that's going to happen. ceo satya nadella and amy hood on recent earnings calls have said that the ai demand is there and microsoft is going to keep spending in order to meet it. over the last year, microsoft separately has announced at least 20 investments of $1 billion or more, at various locations around the globe. that includes spain, india, indonesia, london, here in the united states, and many more. those aren't just data centers, those are training programs and other things related to negligence investment. in the meantime, don't have a clear view yet on how well microsoft's suite of ai products are selling. microsoft has said it's on track to generate $10 billion worth of ai-related sales this year. that's after spending about $70 billion, probably, by the year end. a lot of that is coming from the azure cloud business, but still no concrete disclosures from microsoft on that or the rest. that includes co-pilot plus pcs, which launched this year, but without its murky ai feature

that was called recall. microsoft said in may it expected to sell 50 million co-pilot plus pcs over the course of a year, but no indication it's on pace to meet that goal. also no clue how well copilot for businesses is selling after more than a year on the market. i've heard from a few ctos that 2025 is going to be the year they assess if copilot is worth the enormous cost and either spend more or cut back on it. and of course, there's now openai. its losses are now bleeding over to microsoft, its biggest benefactor. microsoft says it expects openai's losses to shave a few cents off the eps in the december quarter, about $1.5 billion. finally, there's the consumer, outside of the enterprise business. microsoft hired mustafa sulyman to be ceo of microsoft back this spring, but right now he's reliant on openai for product development of the latest and greatest ai features that eventually make their way into microsoft products, guys. >> steve, we were talking about

copilot in particular earlier on the broadcast. in light of, of course, what has been a lackluster performance for the stock this year, at least versus its megacap brethren. down, what are you hearing? i know it's all anecdotal. i hear it, i'm sure you do from the enterprise, in terms of the usage of copilot, disappointed, happy. i'm just curious to get your thoughts. >> it's all over the map. basically, no one has a very solid answer of whether or not it's worth that $30 per user, per month. that is a huge premium on top of the normal price ctos kind of pay for their companies for the regular apps, the outlook, word, things that you and i use every day. this is extra. and it's really hard to just qualify that. and i've talked to a number of ctos all this year, and a lot of them are saying, yes, we've seen success, we've done pilot programs with a few hundred people here and there, and then this year, going into 2025, that's when the cfo comes in and says, is it really worth this cost? should we spend more or pull back on spending and kind of end

these little pilot programs. you hear a lot of anecdotes from microsoft as well, david. but nothing concrete as far as how many seats they're selling. >> for a company, as you just said, that's poised to sell $80 billion on capex next year, on cloud, on ai, at least, you would imagine investors are going to be very much focused on that. >> they sure are. >> steve kovach, thank you. we'll have fresh housing data after the break. we'll give you those numbers when "squawk on the street" comes right back. your travel is are so well written, they're on the best seller list. and you have access to lounges that don't officially exist. that's why you rent with national, where you can skip the counter and choose any vehicle on the emerald aisle. because travel isn't a competition. except that it is. and you're winning.

♪ good monday morning, welcome to another hour of "squawk on the street," i'm david faber with mike santoli and leslie picker. we're live from post 9 at the new york stock exchange. carl and sara have the morning off. the equities market is not a pretty picture if you are into it long. we are down sharply on all of the major averages. treasuries not really the culprit here, obviously we did have that spike in rates last week, not so much as you see a decline overall in the ten year

to 4.54. 4.547%. three big movers we are watching, nvidia off morning lows and in the green, actually. oh, no, down -- down about half a percent -- or a quarter of a percent at this point in time. the company is turning its attention to robotics saying nvidia will launch the next version of compact computers for humanoid robots in the first half of next year. officials in south korea are investigating a deadly plane crash involving a boeing jet after it landed and skidded off the end of a runway at an international airport there and erupted into a fireball as it slammed into a wall. transportation officials there now conducting a special inspection of all boeing 737 800 aircraft operated by airliners in that country. shares of boeing down more than 4%. more volatility in tesla and palantir, both still up double digits and some of the best

performers in the s&p in december, but coming off of those highs into year-end has them down about 3%. palantir down about 5%. >> let's get to pending home sales. diana olick has the report. >> david, pending home sales in november rose 2.2% month to month and were up 6.9% from november last year, that according to the realtors. that is slightly better than expectations and the fourth straight month of gains. remember, this count is based on signed contracts so that's people out shopping in november when the average rate on the 30 year fixed spent much of the month over 7% before coming down in the last week and ar's chief economist said in the release consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory. regionally sales fell in the northeast month to month but rose everywhere else with gains the strongest in the south, that may have been making up for declines in earlier months due

to several hurricanes and flooding. and it looks like we will be starting the new year over 7% as well on mortgage rates, as a result of home construction etf itb is down close to 17% month to month on pace for its worst month since march of 2020. david, with he remember march of 2020, not so great. >> no. that was not a great period. at all. diana, thank you. diana olick. turning back to stocks, we are in the midst of a significant selloff, of course, as we end the year here. let me turn to mike santoli. i mean, a lot of people are on vacation, a lot of perhaps people who run portfolios, but this is going to get their attention a bit. >> it will. yeah, liquidity works in both directions, usually upward draft in the last few days of the year. this is not the case right here. the nasdaq 100 down about 1.9% but it is sharply negative across the board. the big question with the rise in treasury yields over the last few weeks, obviously as it

always is, can the real economy handle it? we got the data this morning, the pmis, seemed like an extra leg lower in equities because of that. now, we have yields coming in today so that sometimes is the next phase where yields and stocks go down together, it becomes a little more of a true safety trade. volatility index up toward 19, that's not common for what's expected to be this kind of holiday interrupted calm trading period. i feel like it's pulling forward some of the profit taking that you might have expected in january, a lot of times january is characterized by the leaders of the last year being sold, laggards being picked up. not seeing so much in the way of leg guards being picked up today but the equal weighted s&p down 1.5%. pretty across the board. look at that, just a handful of stocks in the s&p are up on the day. maybe this leaves a little bit of a cleaner positioning story going into next year because one of the risks a couple of weeks ago looked like it was going to be all the strategists were bold

up, everybody was max long, the speculative stuff was running hard and maybe we're taking the edge off of those extremes. >> i think that's something that tom lee was talking about on "squawk box," the idea of doing the opposite of what you would see. do you have more of a bounce the beginning of the year? remains to be seen. there is no catalyst for the selloff. a little bit of data here, some yield pressure last week, but nothing -- >> i wouldn't say you would point to a very specific catalyst except for an economy that seems like it's in deceleration mode even as yields go up, you know, maybe because of just a little bit of a minor buyers strike as we had big auctions. no, i don't think this is a real -- it's not really an outright growth scare like we had in, let's say, august of this year. >> maybe more positioning and sentiment driven than anything. stocks kicking off the final trading week of the year with investors still hoping for a santa claus rally, maybe hopes fading a little bit today. despite weakness across big

tech, nvidia, microsoft and others. joining us citi private wealth chief investment strategic steven whiting. thank you for being here. what do you make of today's market action and how do you think it positions the market for 2025? >> i think for a little bit of perspective for everyone, prior to this morning the s&p 500 was up 25% for the year on what's going to turn out to be about a 10% earnings gain. so everyone just recognizing that around 6,000 for the s&p 500 is a pretty full level. we have had two good years here after a really bad one. the economy is going to grow. we have been through a period of just reconciling that the federal reserve is not going through some radical easing, we don't have a growth paradise, we have a good deal of policy uncertainty, but if we continue to have an outlook for economic growth through 2025 that there's more to come, you know, i think that we will, in fact, have a

decent year, but it's not going to be on the path that we've just had which, you know, over the two-year period was up 54% gain after losses in 2022. >> it's been a remarkable two-year period. so then should investors diversify away from the s&p 500 and if so where should they diversify? we were talking last hour about the fact that u.s. exceptionalism and particularly some of the big tech names have been the beneficiaries of a lot of flows over the last few years, which has helped drive them higher. where else should investors diversify if not for the s&p 500? >> right. well, look, you know, 30 times earnings, 20% eps growth, you know, seems to be like we should still have a position in u.s. large cap tech. that is where there's going to be a great deal of future innovation, but heavily priced. you really have to zoom out to what you just addressed. it's been 15 years of u.s. outperformance, about 20% in the latest 12 months which is big, but the 15-year mark is what i

really focus in on. so the rest of the world has been left in the dust, it's outside the united states, you know, the world share markets are one-third of global equity market cap and there is no real visit catalyst for why that should change. but if you do expect that the world economy is going to strengthen from some of the declines that you just saw in the chicago pmi, for example, the manufacturing sector across the world is still yet to really get to its feet, you probably see broader gains. if you think about how the premium on u.s. shares has picked up over 15 years' time i think you're going to see that the s&p 500 is not going to be the best performing asset class for ten years. after all, we got a 13% return for ten years through two very different administrations and a new one coming. i'd also look at alternatives. that if you think about some of the fixed income markets that can offer yields, i will give

you one in public markets, the loan market is probably going to return close to 8%, you know, over the next 12 months. i wouldn't substitute stocks for them, i don't take that as an alternative to u.s. treasuries, but as a yield enhancer and a diversifier with very low volatility, probably quite solid credit, this is an opportunity that we would add to portfolios because you won't want a portfolio that just looks like the s&p 500 for the coming decade. >> yeah, that pitch is definitely helped spur tremendous growth in that sector over the last few years as well. invesco global market strategist christina hooper also joining us today. do you think the market kind of honing in on technology? do you think it was discriminating enough when it comes to ai this year or do you think that anything that was just even ai adjacent went up? and what do you think that tells you about 2025? >> well, i don't think it was

discriminating enough, but that's the nature of something that is so ground-breaking and innovative, you tend to see that all ai adjacent, anything -- anything related tends to rise. i mean, with he saw that with dot-com stocks in the 1990s and it's just a normal part of the process. and then we do see greater discernment as time moves on and as we realize where the beneficiary -- where the greatest beneficiaries are and what the most compelling plays are. but i think it's just natural, it's human nature to -- when there is something that is so -- so -- so different and just has the potential to be transformative, that we would see just this sort of mass move into anything that relates to it. >> christina, what's your

snapshot take of the economy we have right now going into next year? i ask because you look at atlanta fed gdp tracking, it's near 3% real growth, and yet some of the numbers that have been coming in, the labor market has softened up, obviously manufacturing has not really come off the mat and you have housing-related activity also, you know, kind of retreating a little bit here. so what's your thought in terms of the growth trajectory into next year? >> so this is an economy that is slowing and cracks are clearly forming. it's been more resilient than we expected, i think than markets expected, but there are clearly cracks forming. we just saw credit card issues, greatest number of defaults since 2010. there are a lot of issues in particular areas of the economy, but the overall economy has been chugging along. what i think we're going to see is a lot of excitement that then

becomes something of a reality. we're going to see, you know, the deregulation begin quite quickly, i think that's going to be impactful and i think that's going to unleash animal spirits. so i think we're going to have a relatively strong economy in 2025. i think we could see some slowing in the near term, but i think we'll see a reacceleration. and it's not just going to be the u.s., i think there's potential for the chinese economy to rebound and i think major economies then bring along other economies with it, so i'm quite positive on the global outlook for 2025. >> all right. christina and steven, thank you both so much for joining us today. >> thank you. >> i really appreciate it. the new york stock exchange and the nasdaq will both be closed on january 9th, this is in observance of a national day of mourning to honor the passing of former president jimmy

carter. again, that will be january the 9th. as we head to break here is a roadmap for the rest of our hour, another year of underperformance for china-related stocks, our last guest was talking about that. what a trump presidency could mean for the group and of course what is still the world's second largest economy. plus big tech under pressure after hitting record highs. we will discuss what's ahead for the sector. and 2024's rise of the dupes, just what they are and how they're impacting retail this holiday season. a big show ahead. "squawk on the street" is back after this break. don't go away. >> university of maryland global campus allowed me to write my own story. they want you to succeed, and for me, it was a school of opportunity. i feel like i had a support system behind me within the school. they provided me the

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welcome back to "squawk on the street." tributes pouring in from world leaders following the death of former president jimmy carter. emily wilkins is in washington, d.c., she has more on that and what is going to follow in the days ahead as well. emily? >> david, tributes from world leaders they are pouring in. we now know that thursday, january 9th will be carter's state funeral and a national day of mourning, so the stock exchange and nasdaq will be closed on january 9th. biden and trump have paid their respects to carter. biden who was one of carter's earliest supporters outside of georgia during his presidential run praised carter for living a life of purpose, he also said it's a sad day but a day that brought back incredible memories. biden said that today america and the world in my view lost a remarkable leader. you also saw donald trump post to go truth social, praising

carter saying that he was truly a good man and of course will be greatly missed. trump added that carter was also very consequential, far more than most presidents, after he left the oval office. again, many world leaders are sending their condolences at this time, this includes pope francis, ukrainian president volodymyr zelenskyy, plus a number of middle east leaders are also praising carter for his camp david accords, this includes israel's president isaac herzog and egyptian president he el sisi. >> i can remember sadat and begin, emily, 1977 i believe it was, unexpected at the time, and in an obviously very war-torn area, egypt and israel still have -- still have peace. >> they do, and i think when you look at carter's record, i mean, certainly there were some concerns like inflation, concerns about foreign affairs, but certainly the camp david accords really hold out as a bright moment. a lot of what has been said

about carter, trump summed it up quite well, it was a lot of what he did after his time in office, the charity that he did, the election security he did, the traveling around the world, the working with health and diseases that really kind of helped cement his legacy, get him that nobel peace prize and really redefine what it means in a post-presidency. >> emily, thank you. emily wilkins in d.c. "squawk on the street" will be right back. don't go anywhere.

stocks in china underperforming the s&p for the year and if you go back it has been for many years, in fact, trade policy likely to perhaps bring more pain in the coming year. our next guest expects a battle between president-elect trump's pragmatic stance on china and the idealogical drive of the various hawks on trade around him. msa capital managing partner ben harburn joins us. hope springs eternal when it comes to china and i know you've been navigating very difficult markets for some time. are you hopeful for 2025? >> 2024 wasn't too bad for us.

our graded china growth etf was up 20%. i think the conditions are laid for a better trend in 2025. the chinese government has been troweling and erroring different forms of stimulus and it looks like the trading policies are working, general debt relief for the prevention governments is finally coming into full effect and they are unlocking a lot of money they owe downstream to local businesses, the real estate market seems to have stabilized, this month saw double the real estate transactions in shanghai than were there a year ago. i think that donald trump has the potential to bring in a brand of ruthless pragmatism into the dynamic that could see it find some constructive and concrete evolutions as opposed to just an idealogical back and forth. >> i want to talk more about that but when it comes to china, i mean, you talk about debt relief but we're also still talking about worries of

deflation. chinese consumer that, despite attempts to prod them, eems unwilling to increase their spending in a significant way. on the local property level is it going to be enough to change those two dynamics? >> well, we don't have to shift them into, you know, buyers again at the local property level, we just need to table lies the current prices and in some ways stopping future construction will actually help that. there's been a huge overcapacity across every sector in china, but none more acute than i think in real estate. so if that construction slows down, supply starts to stabilize, and, again, we're seeing it in the tier 1 cities that stabilization, but when that free-fall stops and housing prices, people stop feeling poor. when that feeling wears off that's when they start to get their sea legs back under them and come back to the high street. that is the critical litmus test, it's not even further real estate consumption, it's simply

stopping the bleeding. i think we're seeing signs of that now. >> ben, going back to geopolitics and the relationship between the u.s. and china, last week we saw president trump file a motion with the supreme court asking them to pause a ban on tiktok, which was set to take effect next month. that was a different stance than we saw from president trump a few years ago and i'm just curious what you think that implies about trump 2.0 and its relationship with china. >> trump's stance on tiktok was not surprising to us and i even have spoken with other senior officials that are highly influential within the republican party and within the kind of maga base and many of them are proponents of tiktok and the ability it has given them to address a much wider audience, let alone the kind of inter relation between some of president trump's largest donors and their investments in the application. so this outcome was not surprising, it's something we have advised to people for the

last year or so, but alongside of that you obviously saw president trump emerge from that meeting with the ceo of tiktok and saying that together china and the united states can solve all major issues. you saw him read articles about incoming or nominated ambassador purdue that he will bring a pragmatic touch to the relationship because of his experience at doing business in china. i think these will all lead to a highly pragmatic environment. >> ben, you mentioned the performance, i think, of your actively managed etf. i don't know what its asset number s i think it's fairly small, but i am curious are you going to continue to own the same names? any change in the construction of your own portfolio based on your expectations for what china will or won't do in 2025. >> >> we came into the year and came into this strategy thinking you need an active approach to china just because of the constant back and forth on the rade front, new names being added to the entities list or

other export restrictions side from the united states side and of course watching the immediate impacts of these stimulus measures, be it trade-ins or otherwise and their effect on consumers in china. we've been trading in and out not only of names but markets and i think that approach has paid off. we're beating our nearest competitors the like of k web by 5, 6% on the year. i think you have to be active on china, you cannot sit passively because there are too many things going on at once, too many variables. >> and, i mean, you know, we obviously talk a lot about the failure, so to speak, of the chinese economy to put up the growth numbers perhaps that have been anticipated but they are still a leader in solar, leader in evs, battery technology, a number of other areas. are there ways that you see that you can play those separate from the factthe chinese economy still continues to have its challenges? >> absolutely. again, we look at a very selective swath of names within china that we see as high growth

either because they're exporting globally the likes of alibaba who have large global presence, particularly in the united states. we are looking at names in the fully integrated supply chain, the likes of byd who are doing tremendously well building electric vehicles both domestically and abroad in china. they will be bigger as an electric vehicle market than the entire american car market. so, you know, a small china is still bigger than most of the world. and then of course any of these integrated hardware producers in the mobile phone space. our biggest holding today is shall me, a company doing tremendously well not only on mobile hand sets and iot devices for the home but electric vehicles producing hundreds of thousands of cars. you have to move in and out of those names but all of those are doing tremendously well in spite of the overall macro malaise. >> dozens of ev makers, there has to be some consolation,

doesn't there? >> possible. when we invested in neo, one of the first and largest investors i think there were 300 electric vehicle companies registered at the time. that consolidated to just four or so. so i think that that list maybe could add one or two names, but, no. and a lot of global names are actually consolidating into them. so european auto makers like vw are actually co-producing electric vehicles with the chinese. i think you will see more of that kind of co-branding across combustion and ev names globally. >> yeah. such an important market for so many of the german auto makers and obviously it's gone away in terms of market share to a certain extent. ben, thank you. as we head to a break check out the spike in natural gas as weather forecasts show freezing cold temperatures coming around the first half of january. nat gas is on pace for its best year since 2016, coming off a very low base, 25-ye ls arowin

prices about 10 months ago. we will be right back. stay with us.

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hello, everybody, i'm contessa brewer with your cnbc news update. the u.s. is spending nearly $6 billion in budget aid to ukraine. president biden announced $2.5 billion in security assistance, he's making a last minute push to help ukraine gain footing against russia before president-elect donald trump takes office. treasury secretary janet yellen announced $3.4 billion in budget aid, that goes to keeping ukraine's government running during the war. five people have been charged in the death of former one direction star liam payne. authorities in argentina say the manager and receptionist of the hotel where payne fell to his death in october now charged with manslaughter along with one of payne's friends. previously two other hotel workers were charged with supplying him drugs. tony award winning broadway

actor linda lavin has died, she was best known for her role as a waitress on "alice" which earned her two golden globe awards and an emmy nomination. she died of complications from recently discovered lung cancer. she was 87 years old. that's the news right now, david, let me send it back to you. >> okay. thank you. let's get over to emily wilkins, she has some news for us involving, i believe, the speaker of the house. >> david, yes, of course, mike johnson is going to be facing a battle for his speakership this friday as lawmakers will have to reelect him. you remember how that went for kevin mccarthy. mike johnson has gotten a lifeline from president-elect donald trump. posting to truth social moments ago telling republicans to not blow this great opportunity that we have been given. he said the american people need immediate relief from the biden administration and calls speaker mike johnson a good, hard-working, religious man. trump says he will do the right thing and we will continue to win. mike has my complete and total

endorsement. now, at this point we only know of one lawmaker, thomas massey, who said that he absolutely will be voting against johnson when it comes to the vote on friday, but we know that there are at least a dozen other lawmakers who have spoken out about their frustrations with johnson, the fact that he has had to go to democrats so many times to get various things done. they're worried he is not paying enough attention to his conference and they are looking into potentially other speakers. we saw steve scalise, and jim jordan throw their hats in the ring last time. at this point both of those individuals are behind johnson, does seem like johnson is the one most likely to get the 218 that is going to be needed but we will see exactly what happens on friday but at least for mike johnson right now he has to be feeling good with that endorsement now from trump. guys? >> emily, remind us how many republicans he can afford to lose. what's the margin? >> so it's really only about two to three and the reason we can't be more specific is that it is a

majority of whoever votes for a specific person. remember, you can also vote present, but democrats have 215, republicans, i think, are going to be coming in with 219 or 218, depending on how you want to count a lawmaker who is now not caucusing with republicans but is still a republican so the numbers are a bit all over the place. we will be able to provide more clarity as the votes actually go on, but really we're talking any more than two or three and johnson is in hot water. >> emily, thank you. we will keep an eye out on friday for that. appreciate it. stocks in the red just over an hour into trading, near session lows. bob pisani here at post 9 with more on what he's watching. we're glad you're working today, bob. >> we're all having to work this week. this isn't very pleasant but there is a basic thing that's going on here, first this morning we saw sell program come in, you saw the flight to bonds we saw earlier on but we are still getting season alley light volume. it's not pleasant to see things

go down, whether heavy or light volume, but that's what it is. the last time we had a notable up volume day was december 20th and that was the rebalancing. since then it's been season alley light. remember, still not comfortable. take a look at the major sectors, basically everything is down 1.5%, energy is the one little exception here, but consumer discretionary, tech, industrials, communication services. here is where these are not that useful anymore. when you have this tyranny of big cap tech, when you get a big cap tech selloff is drops all of the others. you can have apple and meta in the technology sector and you can have alphabet and tesla sitting out there, alphabet is in communication services, but tesla and amazon they're in consumer discretionary. these are all tech stocks essentially but they're cross platforms or cross sectors and when they are down they drag all the sectors down with them. that's what happens when you have this tyranny big cap tech.

santa claus rally not looking great. the last year we had a down year, 2015, down 2.3% for the santa claus rally. we're only halfway through, people think it's over, it's not. it's seven days and we are three and a half days through that. average gain is 3.1%. right now we're down about 1.3% on the santa claus rally. this would be a little unusual if we ended the year to the down side. think about things this way, think about 2024, what happened this year? s&p was up 25% and yet earnings were up 10%. well, that's a big difference and what made the difference up is we had a multiple expansion that was notable we are at 22 times forward earnings, a little over that when we started the year a year ago we were at 19.5. there is your difference in the multiple. that's a big, big change here. there are sectors out there, look at this, it is the estimates for 2025 because that's what we care about. tech is still leading but there's plenty of sectors that have very healthy expectations that are much more, shall we say, undervalued, in fact, some

of them in the value camp, including some industrials and material stocks, these are perfectly respectable yet nobody is paying much attention to them. here is your hope for the rotation trade here, the potential -- and if you look at some of these, mike, apple, the forward estimates for the big caps have flattened out as you know. apple, microsoft, alphabet, they are in the low 30s, amazon, mid 30s, meta, high 20s. they haven't gone up much at all. even nvidia has flattened out. broadcom has gotten attention because its estimates have gone up a little for 2025. i'm making the value call again here. >> sure. >> there is a reason with the numbers flattening out multiples flattening out for big cap tech, consider other sectors where there's respectable profit growth expectation. >> if you look back essentially there was a stealth earnings recession in the majority of stocks, not the big guys that drove the indexes but they're coming out of that now. you have earnings growth that's broadening out a little bit. the max decline is 8, 8.5%, most

years you at least get one full double digit correction. >> we will talk more about it in the next hour about the warning signs for 2025, but if you think about what motivates the stock market, which is the direction of earnings, are they growing or are they shrinking and profit margins, 12% profit margins. it will be the story for years, they're going to deteriorate. they're not. the profit margins is how much are they keeping from that revenue all the way to the top -- to the bottom line. 12% is just about a record. it hasn't slipped at all this year and that's why the stock market -- >> by the way, that's before the so-called efficiencies of ai really working its way to the enterprise if that happens. >> if that happens. one of the things i mentioned this morning is the threat to 2025 was people stopped believing the ai story. i think that's not going to happen. i think you are in the same camp as me. i think ai is going to provide remarkably great efficiencies out there, improvements in productivity. >> is that already being factored in? >> it's priced into certain stocks but it's not priced

into -- what happens with the entire world just becomes better, it manages their money more efficiently. look what software as a service did to the bookkeeping industry. there's nobody writing in books anymore and look how much more efficient corporate america is because of software as a service. here is a software that's going to eat all the other software essentially. >> productivity could go up. a key component of gdp. >> bob, thanks a lot. bob pisani. let's focus on apple a little more. stock under pressure this morning, putting a pause at least in its march to a $4 trillion market valuation. our next guest says apple is the most user friendly touch point for consumer ai and the cycle will take longer to materialize in 2025. martin yang joins us now. martin has a buy rating on apple, price target of 250. martin, let's start there. obviously you like the big picture apple story with a buy rating but your target is about

where it's trading right now. does that speak to current valuation? >> no, it speaks to a lag between update of product but our rating -- our conviction of apple as a stock has not changed. >> it's not changed. so tell us about ai as it is playing into the investment story for apple right now. it feels as if there was a little bit of a delay in investors embracing the idea, maybe that's ask theed for some of the outperformance the latter part of this year is folks maybe believing it a bit more. >> yeah, when we look at ai and its impact on apple, there's two aspects, one the investor perception and consumer perception. we believe investor is outpacing consumer perception. we are very early in the adoption of ai in the hands of consumers, their daily -- in their daily lives either for business or for entertainment and that will take some time, i think, throughout 2025 for the

consumers to get real benefit of those ai functions coming with the new iphones. >> and what does that mean for, you know, the ongoing, you know, iphone cycle right now? i guess there's been sort of a mixed evaluation of exactly how strong the current cycle it. >> yeah. so i think the sentiment definitely has changed or deteriorated to be exact. you know, going back to june in 2024 when we first got a first glimpse of apple intelligence everyone was very excited but it seems that the adoption will be a lot slower and will need the install base to gradually upgrade to the phones that are capable of running apple intelligence. that will get delays into later 2025, not early 2025. >> if that's the case and there is this persistent gap between investor perception and consumer adoption, do you expect to see a draw down in apple shares as it

kind of finds its footing relative to the kind of upgrade cycle that a lot of investors are pricing in essentially? >> we're not expecting any meaningful draw down. we may see some disappointment consensus versus apple's delivery, apple's reporting numbers in the first half of 2025, but i think as we go throughout -- as we progress towards the second half 2025 apple's real performance will be able to match investor expectations better. >> i guess just to circle back to the valuation story, i mean, we're at 32, 33 times forward earnings at this point. pretty much a high for the -- you know, the iphone era, aside from a brief period in the pandemic. what more can we expect out of the pe? >> yeah, out of the pe i think it's mainly focusing on the -- where apple historically has

been consistent expanding margins through a better mix of service revenues and then as we go through a better ai-driven replacement cycle, the hardware outperformance and earnings will also catch up, again, later in the 2025 cycle. >> and i know you think that the introduction of a lower cost model might help that. >> correct. i think a lower cost model is right now underappreciated story for hardware shipments in 2025 and that would maybe offset some of the negative impact we are expecting for hardware device or iphone shipments movement in the march and june quarter. >> all right. martin, thanks very much. appreciate you weighing in this morning. >> thank you. still to come, what a second trump presidency might mean for the banks in 2025 with the financial sector outperforming the s&p this year. we are back in three.

welcome ack. bank stocks looking to build on a strong 2024 campaign in the new year. the s&p financials up more than 25% year to date on pace for its best year since 2021. six of the universal banks all up at least 30% this year with goldman leading the way, up almost 50% in 2024, but one warning sign to note out of the ft this weekend, credit card loan defaults jumping to their highest levels since 2010. now, we have heard this from the consumer facing banks that those at the lower end of the income

sphere are struggling, they've drawn down their pandemic savings, you know, and they're struggling to pay off their credit cards and of course rates are higher because of where interest rates have been, but the banks are pretty well reserved for this type of thing and the larger banks in particular have such a diversity of clientele that it hasn't necessarily been seen as something that would be a major headwind for at least the stock prices, although the consumers are an important part of the economy. >> yeah. i mean, i would say, first of all, that that's a dollar value of write-offs. >> yes. >> as a percentage of outstanding credit card balances it's a lot lower than 2010. still up a lot from the lows. it's sort of up more in the normal range, longer term, in terms of charge-off rate, but, yeah, directionally not ideal. yeah. >> and you wonder what it means for the case for, you know, for deregulation which seems crystal clear that banks are going to get a lot of relief, whether that's on how much capital they

have to hold, reserves, how much stock they can buy back, whether they can merge, all makes sense. also late fees for credit cards people assume that's gone, the limits. >> leslie, as strong as the performance has been for the big banks i always tend to look at the alternative asset managers. you cover them. blackstone has a $207 billion market value at this point. it's bigger than goldman sachs. kkr is now up 77% this year at $130 billion. obviously we talk a lot about private credit, what that has meant in terms of as a competitive threat or alternative to bank lending to some extent, but it shouldn't, you know, be unknown to people. all of them other than carlyle group have been great performers. that's obviously a lot more focused on good old private equity stuff. >> the more pure play on private quity exposed you are, blackstone have real estate and private equity exposure and growth exposure as well. a lot smaller proportion of their overall portfolio, you're

going to underperform those like kkr and apollo that do tend to tilt more stoord that private credit. >> those kind of stocks numbers again, 78% for apollo, 78% for kkr. >> all the bullish arguments, somewhat been realized. all right. speaking of big winners this year, check out the top gainers on the s&p 500 for 2024 with just two trading days remaining including today. see palantir up 350% helping that class. we will be right back.

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a rise in social media shopping and influencers has accelerated the growth of knockoff brands and dupes this holiday season. courtney reagan is here and she can explain to me what we're talking about here. >> okay. so think about dupe like a duplicate, david. did you get something close to what was on your list but maybe it wasn't exactly the same thing? you might have been duped. fashion and premium brands have dealt with lower priced copy cats but social media has accelerated dupe culture. social influencers build business around dupes, consumers

use #dupe to find knockoff items. sprinkler ai ran a query with more than 2.9 million mentions in 2024 from public posts on social media sites along with sites like youtube, blogs and other sites looking for the word duped specifically. so sheinelle was the top brand associated with dupe at more than 19,000 mentions sfoeld by dior and apple. lululemon had a high number of mentions for consumers look for dupe products. in this case it means potentially losing the sale to someone else. while no one copy cat brand dam nated for sheinelle, dior or apple the top three searched for dupes sprinkler ai found 20 of the most common lululemon dupe requests came from the social's community suggesting similar options at walmart on eight of those 20 products, amazon for 5 of those 20 and shein for two. an example of the lululemon belt

bag and the walmart dupe that was often mentioned. now, for free people dupes that's owned by urban outfitters, amazon was the answer for 14 of the top 20 products requested. ugg was another big dupe request. here is an example of the ultra mini boot do you know that ego makes that came up in the data several times. important to note 94% of the mentions were not from influencers pushing goods for commission or a fee, but rather consumers, more or less crowd sourcing a look for less, saying does anyone know where i can get this item, a dupe, you know, for a lower price? and those were some of the answers that were generated. back over to you, david. >> court, do we see the companies push back on this at all? ip protection, citing anything like that? >> it's so funny and a good question. for many years this has been a question. there was a very famous lawsuit with christian louboutin and those red soles.

eventually it doesn't hold muster in the courts. you might want to use influencers to push your own products as a different way of going about it. >> courtney, thank you. >> thanks, david. >> thank you for explaining to me what you're talking about there. courtney reagan. we have the s&p off its lows for the session, but still down some 1.3%. nasdaq a bit worse at 1.4%. we have a lot more live market coverage for you of this gnict cle ghafr this. i love it. what i do is really important. you give eye exams. i give... fresh starts. better vision, healthy eyes... everybody wants that. that they do. and they don't want to spend more money than they have to. true. but good eye health? that's priceless. “hero doc saves vision!” - well, i- - “hero owl saves money!” use your vision insurance for exams, glasses, and contacts all at america's best. because eye care is healthcare and you deserve the best.

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good monday morning, and welcome to "money movers." i'm leslie picker, live with david favor at the new york stock exchange today. some undervalued sectors, a strong economy and an the market as good as it gets or is the rece