Closing Bell - Closing Bell: Another week of gains, Former Fed Vice Chair weighs in, Debating Tesla’s valuation 1/27/23

Episode Date: January 27, 2023

Stocks closed out another week of gains on a mostly positive note, despite a big drop for Intel on the back of brutal earnings and guidance. Analyst Matt Bryson and Emily Hill from Bowersock Capital discuss Intel’s pullback and the readthrough for the rest of the chips space. Aswath Damodaran, the “Dean of Valuation,” breaks down this week’s huge upside move for Tesla and the level at which he thinks the stock is fairly valued. Former Fed Vice Chairman Richard Clarida discusses new inflation data and how that informs the Fed’s thinking ahead of next week’s interest rate decision. Plus the latest on American Express, Apple, and a potential bankruptcy for a major sports network.

Big name earnings from Intel and American Express pulling the market in opposite directions today. But the major averages have climbed throughout the session and are pacing for a solid week of gains. This is the make or break hour for your money. Welcome everyone to Closing Bell. I'm Sarah Eisen. Take a look at where we stand. We're at the highs of the day right now. S&P 500 up almost three quarters of one percent. The Dow is up half a percent, about 166 points or so. Most sectors are green.

What's leading? Consumer discretionary, communication services. The REITs are higher as well. What's not working? Healthcare and energy. Only two sectors down. The NASDAQ comp up 1.3 percent. Just building on what is a strong week.

We're up almost 5 percent for the NASDAQ on the week, adding to the gains this year, up 11.5 percent so far this year. Check out Intel and American Express. Intel's getting pummeled after that huge miss, dismal guidance, while American Express charging higher on an upbeat outlook. We're going to have much more on these two moves throughout the show for you. Also ahead this hour, former Federal Reserve Vice Chair Richard Clarida will break down today's key inflation numbers

and what he expects from next week's all-important Fed decision. What do you expect the signal from Fed Chair Powell to be? Let's start, though, with the market as stocks pace for another winning week. Senior markets commentator Mike Santoli has more at the market dashboard. Resilient, strong market with names like Tesla leading. What is the why? There's not much more you would ask of this market if you were looking for some kind of a rebound or signs that maybe the tone had changed than what you've gotten this month and this week, Sarah. Also, a fourth straight Friday in a row and you've had strong gains. I noted that last week. Good to know that just observing a pattern doesn't immediately

undercut it. And here we are. I think that the combination of cyclical leadership relief on some of the economic numbers, something that's sort of compatible with the soft landing situation alongside very tame bond yields and a return of risk appetites and some momentum moves like in the testers of the world, that could eventually go too far. We could get a little grabby on the speculative stocks. Not yet. We're rushing to our next test.

That's 4,100. That's the highs from late November, early December. You want to get a percent or two above that before you really declare that that has been surmounted. The good part is, you know, you've kind of gone above that downtrend line. This really does, you know, look like a decent bottoming pattern so far. And if you have a routine 3% to 5% pullback, then it doesn't really take you back that far in time. That's always the key. Take a look at American Express, you mentioned, alongside the other consumer finance credit card companies that have really had these vertical moves in January. And you see this one year chart.

There was a lot of erosion of confidence in these companies. People assume the economy was on the downswing. Consumers were fatigued. They were going to start to see credit losses pile up. All of them over the course of this month have come out with numbers that were reassuring. Ally Financial, big auto lender, Capital One, Discover, card issuers. And then, of course, on the higher end, American Express, which is now basically flat on a one year basis. Kind of surprising. So I mentioned the Nasdaq year to date gains. Eleven and a half percent. It's been very strong. S&P is up, what, six and a half or so percent. And it's surprising. Everyone started the year thinking this was going to be tough. It's going to be recession. If you look at some of these year to date gainers, Lucid Group

up 100 percent. Warner Brothers, we've talked about some of the beaten down names, Tesla, Nvidia, Airbnb. Is it a signal that the market just thinks the Fed is going to pause and cut and is more confident in that move? Because they went down on the other way. Yeah, I think the idea that the Fed is close to a pause is definitely the background music to all this. It's not all about that. It's definitely the recoil from having been beaten down so much, especially those value names you mentioned. And when it comes to, you know, look, if you're going up four weeks in a row and all of a sudden it seems like there's some technical momentum in the market, it's not

surprising people start grabbing for the fastest moving stocks where you can make the most back in the heart. Again, you don't want that to go too far. And maybe it already has. We don't know. But yeah, I do think that the idea that all the things working against the market last year might actually be turning into tailwinds is in the air. ARK Innovation funds up 30 percent. By the way, Lucid's making a crazy move today. We're going to talk about that later. That's part of the story there.

Mike, thank you. Mike Santoli. Let's dig into the big move right now for Intel. The move lower. Shares taking a hit after the company reported dismal fourth quarter results. Though they're off the worst levels of the day. They were down as much as 10 percent or so. Guidance for the next quarter also comes in below expectations, not just for investors,

but also for CEO Pat Gelsinger. Here's what he said earlier on TechCheck. Clearly, the Q4, you know, we eked out at the low end of guide, but the Q1 numbers were well below our expectations. The big factor in Q1 is the market shift. And what we've seen is customers carried a fair amount of inventory in Q3 and Q4 for the back to school and the holiday refresh. Obviously, as they come into the new year and the macro situation for their business, major inventory adjustments. We're selling into our customers well below their sellout rates in their businesses. So it'll be the biggest single quarter of inventory correction that we see in the marketplace, literally in our history.

Joining us now, Emily Hill from Bowerstock Capital Partners and Matt Bryson from WebBush, who cut his price target for Intel down to $20. Matt? How many times is this company going to reset? I'm hoping this is the last time. But we've seen it from everyone this time around. It's not Intel specific. The difficult piece with Intel right now is to tell exactly how much the downtick is them resetting and dealing with the same struggles the rest of their peers are struggling or there are dealing with versus how much of it is the broader industry where uh and all their their customers but amd's customers videos customers they all have a bit too much inventory and have to work it down

so you're saying there is a ripple effect here from what intel told us it's not just intel specific and you expect the others to perform weaker as a result? We've already seen it on the PC side at AMD and NVIDIA. They told us this last quarter. Intel's a bit in arrears in telling us this.

I think the struggle with Intel is specifically that they are a share loser, particularly on the data center side. So when we get to the end of this inventory correction, it's a bit hard to tell how much of their decline to share loss versus how much is this broader industry struggle.

Emily, you like this group, right? Why do you like this group right now? When, as Matt describes it and as Intel described it, the sector's in a bit of an upheaval. Yeah, I think you need to be very selective in the semiconductor sector so the companies we like are companies like lamb research who are equipment manufacturers that actually their earnings came out in line with expectations i think the intel earnings were definitely a surprise and i think it's more than than just the semiconductor industry as a whole.

You know, Pat Gelsinger warned everyone that this was going to be a several-year-long turnaround. And I think part of the issue here is if you look at Intel over the last year, they've increased their CapEx expenditure substantially, but they're just not getting traction. I think they're losing some market share to the advanced micro devices of the world. I would defer Matt on this because I'm not a semiconductor analyst, but that's just my impression. So, yes, we still like the semiconductor sector

as long as you're not, you know, as long as you're willing to ride the ups and downs of this very volatile sector. But you've got to be selective. Yeah, no question they've been losing share. That's been a big part of the Intel story, Matt. The ups and downs really have to do with supply chain lately for this sector as well.

So much hand-wringing over the shortage of chips during COVID, and now we've got a glut. How bad is it, and how much longer do you see it lasting? That's a great question, Sarah. I think that's what everyone's struggling with. So certainly in the handsets space, it feels like a lot of that inventory has gotten worked out. In the PC space, I think you'll see it over the next couple quarters. I think the larger question is really with data centers. There, it was a pretty sharp correction that we saw in Q4 in terms of drops in spending at hyperscale, particularly memory disk drives.

And it's just unclear whether that's something that picks back up in the second half, whether we're going to have to wait until 2024 to see spending resume at the levels it was at before. All right, guys, we've got to leave it there. Thank you very much for hitting Intel in the semis for me. Emily and Matt, good to see you. With the Dow up 200 points now, we're reaching new highs here, 51 minutes left of trading. Up next, more promising signs on the inflation front. New data showing the Fed's preferred inflation measure rose at its slowest annual pace since late 2021. We're going to ask former Fed Vice Chair Richard

Clarida what it means for next week's important Fed decision. You're watching Closing Bell on CNBC. The economic data today, December's core PCE, which the Fed considers a key inflation gauge rising 4.4 percent from last year in December. That number coming in line with expectations, also marking, as you can see, its lowest annual rise since October 2021. This comes, of course, ahead of next week's Fed decision on interest rates. And joining me now in an exclusive interview is former Federal Reserve Vice Chair Richard Clarida. It's good to have you back, Rich. Welcome. Hi, Sarah. So is the inflation moderating fast enough for you and for the Fed? Well, it's starting to. You know, we had nothing but bad news on inflation for my last year as

vice chair and most of last year. But for the last several months, including today, inflation, even on a core basis, is starting to come down. You know, if you take the last three months and annualize them, it's the lowest rate of inflation in more than two years, under 3 percent. That's not far enough, but it's definitely good progress. And I'm sure the Fed will take it going into next week's meeting. So if it's good progress, why does the Fed have to keep raising rates? Well, part of the reason why inflation coming down is the Fed's tightened financial conditions. And they've indicated that they think they need to do some more.

We think rates will end up at around 5 percent. They'll almost certainly hike 25 basis points next week to 475 and then at least one more in March. But if the data keep improving, they may rethink their notion of getting to five and a quarter later this year, which is what they indicated in December. So it's not that far off with where the market is. I think we have the path of expectations for the Fed funds futures. Market expects them to keep raising, I think, till June, but then for rates to come down to four point seven five in October and down farther from that in January. Twenty four. Is that off or are they just ahead of ahead of the Fed?

No, I tell you, sir, there's a little bit of a misinterpretation, I think, in some of the data. You know, the Fed's rate projections are really what they call their modal or most likely scenario, whereas markets have to price in all outcomes better and worse. And so I basically don't think there's that much difference now between the Fed and where the markets are, because there are some scenarios where the Fed cuts some more and some less. So I actually don't think there's that much distance right now. So the whole notion of higher for longer, that they're going to raise rates all the way up and then stay high, is that a reality or you don't see that happening? No, Sarah, that is what they're saying. And they've also said they

want to keep at it till the job is done. So, yes, I do think that once rates get up into that 5 percent range, that the committee is very inclined to hold them there for a while, certainly throughout, I think, most of this calendar year, because that's what they think will be needed to make sure that inflation is reliably on a path to get back down to 2%. The important thing to keep in mind, Sarah, though, is that their projections also show that eventually they think a more normal level of interest rates is around 3%, maybe 2.5%. So I think as long as they keep that view, once the inflation numbers sustainably improve, they will be easing at some point. Right.

But also, what about unemployment? I mean, if it gets worse every day, there's another company announcing layoffs. Hasn't really showed up in the data, but it will, don't you think? And the economy could worsen. And we've got major debt servicing coming up here from the U.S. Treasury. Aren't all these problems for keeping rates very high for a very long time? Well, there is a lot to worry about, but it's also a big problem if inflation gets out of hand. And so I do think that the path that

they've laid out makes sense to me. There is some rise in unemployment that likely will be required. The Fed itself has penciled in about a percentage point. I really think there's a lot of uncertainty, Sarah, about the post-pandemic labor market. And I think as the year goes on, we'll get a better sense of how much adjustment in the labor market is needed. But you're right. So far, we see the headlines, but the overall employment data is still very strong. So you think we'll avoid recession this year in the U.S.? Well, you know, recession is sort of a technical term that the NBER applies and sometimes with a lag. I think we are going to see a growth slowdown.

But there have been downturns in the U.S. that are called recessions in which growth is actually positive for the year. So I don't see any need right now for there to be a deep or prolonged downturn or recession. But there will be some rise in unemployment likely and some slowdown in growth. And maybe at some point it'll be declared a recession. So, OK, so you expect 25 basis point hike next week from Fed Chair Powell. The question and really the market mover lately has been around the news conference and the tone that he strikes. I wonder how hawkish you expect him to be, given that I have said it like three times so far this hour, but the Nasdaq is up almost 12 percent so far this year, which is not necessarily what the Fed wants. Right. Yeah. Well, what I'll say about this, Sarah, is I do think that they're going 25 basis points

at this meeting. There are no projections that the chair has to talk about. So he will, I think, want to strike an appropriate tone. And my sense is that the press conference may skew a bit hawkish because I think he and the committee realize they do have some more work to do, maybe not a lot. You know, our view of Chemco is most of the heavy lifting they've needed to do. They got done last year and certainly got done in a hurry. So I do expect a somewhat

hawkish tone at the press conference. Do you guys think the dollar's seen the peak, the cycle, that it will keep falling from here? Well, I think a lot of indicators are moving in that direction. You know, the dollar got a boost in 2020 because of the pandemic collapse, so flight to quality, and then got a boost last year with the Fed really hiking rates aggressively. But again, most of those hikes are in the rearview mirror. We're also getting better news on inflation now three months in a row. I know three doesn't equal 12, but it's the first time really in more than two years

we've had a marked deceleration in the three-month inflation numbers. And all those together, yes, to me, indicate that we probably have seen the peak dollar in this cycle. It really also raises the question about what's happening in the rest of the world. And there was so much negativity on Europe.

We don't talk about it that much, but Europe, if the U.S. has been resilient, Europe has been amazingly resilient given their energy crunch, given the slow growth they came into this with, unlike the U.S. It's been a pleasant surprise that Europe hasn't gone into recession and that a lot of these CEOs have said they've expected weakness in Europe and we're just not seeing it this quarter. So what's the projection there? Great point.

Yeah, no, and I think part of it is simply that there was a very warm winter throughout most of Europe. I know that. I was in Rome for New Year's. It was very pleasant. But that means they haven't needed the natural gas. And as a consequence, all this natural gas they were storing, natural gas prices are now lower than they were before the Ukraine invasion. So as a consequence, you know, just as high gas prices are a tax on consumers, lower gas prices are obviously a support to the economy. So you're right. And we have seen the

sentiment indicators pick up as well. But does that hold? As long as the temperatures can stay as pleasant as Roman New Year's on New Year's? My crystal ball is not perfect and mostly focused on the U.S. So but I have noted the pickup that you have in Europe. That's for sure. Yeah. No, it's a tailwind so far. Richard, thank you very much for the time. Appreciate it. Especially ahead of the Fed. Thank you, Sarah. Richard Clarida, former vice chair of the Federal Reserve.

Let's show you what's happening right now. Almost at the highs. We've slipped a little. Dow's up 155, up six-tenths of a percent for the S&P 500, adding to the gains for the week and for the month of January as we look to wrap up the month in the middle of next week. NASDAQ is in the lead, up 1.3 percent. The lead today is coming from Tesla, but Apple and Amazon are acting well. NVIDIA has been a big story of a comeback this year. We're going to hit the chips a little bit more with Intel sagging. Also, after the break, Wall Street is buzzing about a potential bankruptcy of the country's largest regional sports network.

We're going to talk about that news and what it says about the current media landscape. Also, check out Chevron here as we head to break. It's moving lower, giving back some of yesterday's buyback-induced pop after the company missed on bottom line results. We'll be right back on Closing Bell. What is Wall Street buzzing about? The potential collapse of the country's largest regional sports network. Sinclair Broadcasting owns Diamond Sports Group, the firm that bought the regional sports networks from Disney back in 2019

when Disney had to divest them, remember, after the Fox acquisition. Diamond Sports increased its leverage to buy the sports channels, and now with declining cable TV subscribers finds itself in trouble. And now there are reports that the company is filing or preparing for bankruptcy. I spoke with Sinclair CEO Chris Ripley back in 2019 when this deal happened. Sinclair buying the RSNs from Disney. He called the networks a free cash flow generating machine. I asked him if he was worried about getting into the business with declining subscribers. Here's what he said. They are not declining businesses. As a matter of fact, they are one of the major pillars within the pay TV universe. We have really set Sinclair off to be the preeminent

business in local sports and news. And those are the biggest pillars in live viewing which have massively outperformed any other genre within the video business and for at the end of the day for less than the price of a Starbucks coffee you can enjoy in your local market almost every night a baseball game basketball game or a hockey game for your household. It's just an incredible value. Thanks to analyst Rich Greenfield for always reminding me of that interview every time there's a stumble here. We've reached out, by the way, to Sinclair for comment and have not heard back.

Our media reporter Alex Sherman joins us now. He was very bullish when that deal happened. It was a tough interview, and I remember it because he fought every every point on the leverage, on the declining subs. So what happened between then and now? I remember, too, Sarah, I remember talking to you about it before the interview, actually, about what what you should ask. And I part of it that I remember was that this idea that regional sports networks were not a declining business. Well, when you parse apart his answer, what he seemed to not allude to was this general idea that linear TV secularly was starting to fall apart. And what happened between then and now was the pandemic hit.

And when the pandemic hit, we saw the amount of people canceling traditional cable TV dramatically accelerate. So that interview was 2019. Of course, the pandemic hit maybe six months later. And then the acceleration of these millions of American households canceling cable for their bucket of streaming services hit. And every single person or almost every person that was paying for cable TV was paying for a regional sports network, whether they watched that or not. And so billions of dollars came out of the system over the past couple of years. And regional sports networks, as the model is drawn up, doesn't really work anymore, particularly because Sinclair paid more than

$10 billion for these 21 regional sports networks that they bought out of that Disney transaction. As you alluded to in the intro, almost all of that was debt. So that's why we're here now in this sort of situation of restructuring, because there's simply not enough cash flow coming in for the amount of money that they spent on the networks and that they owe all of the teams to broadcast their content. So what happens next to them? Yeah, that is the $64,000 question.

We don't really know. Sinclair has come out recent months, year or so, and said, look, we have a streaming solution. We'll charge $20 a month and people can get access to these networks. Again, the issue there is that it's not clear that streaming really works for a regional sports network because only the people that follow a given team are paying for this. And that amount of money, the amount of people that want to watch regional sports is way less, millions and millions and millions less than the amount of people that

were previously signing up for cable TV. That number was 70, 80 million. So now we're just talking about fans of the teams and fans of the teams that want to pay $20 a month to watch those scenes. It's just not a huge number. So what may end up happening here is the leagues may actually end up buying back the rights themselves out of bankruptcy. The first step will be that the creditors will likely take over ownership, then they would sell theoretically the rights back to the NBA, Major League Baseball, and the NHL. Those are the three major leagues associated with this.

This is just one solution, one potential solution I'm talking about. But if the leagues were to take back the rights, that would potentially boost the value of the leagues going forward there are some people that i've spoken with that even posit maybe the leagues themselves will go public one day and they will use these media rights as sort of another revenue stream to make that pitch to go public but that's likely years down the road but it's an interesting prospect and why they would want the rights themselves. Alex, thank you. Alex Sherman, good to see you. Up next, the Dean. Go Bengals. He taunts me with it. Up next, the Dean evaluation as softened to motor on on why Intel's earnings disaster could mean the global economy is actually slowing faster than

expected. Plus, we'll get his latest thoughts on Tesla after a huge upside move in the stock this week. Look at Tesla week to date, another big move today. It's up 35% on the week. We'll be right back. Let's check in on Intel again. That brutal earnings report dragging the stock down more than 6%. The company's performance also raising concerns over what it means for the global economy. Joining us now is Aswath Damodaran from NYU Stern School of Business.

It's good to see you, Professor. We always talk to you. You're the Dean of Valuations about whether a stock looks cheap or not. I feel like we could ask this about Intel for a while. It's had a lot of big, disappointing quarters and resets and guidances since well before Pat Gelsinger took over to turn it around. The stock's now trading at 14 times. Is it a good deal or hard to do when you don't have that kind of clarity about what's to come? There are two issues. One is Intel's been a mature company now for a while, even though people seem to have illusions that it can get back to growth.

The second is, especially in this earnings report, one of the things that has troubled me, made me confused, is the split between what economists are telling us about what 2023 will bring, recession is slowing the economy, and what analysts are projecting is earnings. There's a disconnect here because earnings have barely budged in terms of forecasts. If you look at how much they've dropped, it's like 2%. So this quarter's earnings are going to be a test of who's right.

Are the economists right that the economy is slowing down or the analysts right? And I think the Intel report suggests that maybe we're underestimating how much the global economy is going to slow down. And that, I think, is bad news, not just for Intel, but for semiconductor stocks collectively and cyclical companies overall. Overall, look overvalued if the global economy is worse than what we're expecting, which you think is a tell from Intel. Is that the idea? It'll be just not just a sector. It'll be a market correction, right? If we've is worse than what we're expecting, which you think is a tell from Intel. Is that the idea? It'll be just not just a sector. It'll be a market correction, right? If we've seriously underestimated how much the economy is slowing down, the market has to clean up its act. And I

think this is just a first in a series of reports we're going to get, which are going to give us an indication of where we're going with the market. I have to ask you about Tesla. You have long called this stock overvalued. I saw recently that you said it is still overvalued, but not as much as before. Are you changing your thinking here? After I said it, the stock was up $30. So it shows you how little I know about the company. No, but this is a company where there is no middle ground, right?

You either love the company or you hate the company. And it's always been the case. I've tried to find a middle ground and I get, you know, critique from both sides. Now, I, you know, my valuation actually reflects a pretty upbeat story about Tesla, a company with revenues of more than 400 billion in 10 years and margins of%. You know how many companies in the world have revenues of more than 400 billion and margins greater than 16% right now? Not one. I'm making Tesla an exceptional company and I'm still coming short. So, you know, the fact that the market disagrees with me is neither here nor there. But I think it's a reflection of the fact that with this company, we'll never get to a middle ground.

You're going to overreact. I mean, remember, on December 27th of 2022, the stock was at 109. I wish I'd bought it then. But hindsight is 20-20. So what do you think it's worth? What's your latest number? I think about 130 is my estimate per share, which was within shouting distance of the value when I did it, which was last three days ago. Now, of course, it's trading at close to 180.

So I'm back on the sidelines saying, you know, I have to wait. All right. Well, thank you for bringing us up to speed. I know people people pay attention to where you are on these valuations. Aswath, thank you. Good to see you. Aswath Damodaran. Tesla, speaking of, in other Tesla news, reports crossing this hour saying Elon Musk faces an SEC probe over his role in self-driving car claims. Phil LeBeau joins us now. So this is another potential SEC probe, Phil. Sure. Yes. And Sarah, we should point out, we have not confirmed that the SEC is investigating what

Elon Musk may have made claims about when it comes to Tesla's self-driving technology, often referred to as autopilot. He has talked about the ability for Tesla's to drive themselves for years. That, that is not new. The question is what exactly is the SEC reportedly looking at? Is there a specific statement or statements? You know, it's unlikely that they're just going to probe him saying, yeah, someday they're going to be self-driving cars. Was there a specific forward-looking statement? And we don't know at this point.

One thing we can tell you with certainty, and even Tesla would admit this if you asked them, they do not have fully autonomous vehicles. They don't have them right now. Will they have them in the future? Potentially. But there is no guarantee of that. And at the end of the day, I get this question from people all the time.

They're like, autopilot drives the car. No, it doesn't. It's a driver assistance system. That is important to keep in context here. You sound like a broken record because you've been saying that for years. How many times have we talked about it, to your point? So it's interesting that they're looking into it now. Phil, we also have to hit this crazy move in Lucid, nearly doubling at one point today.

Clearly, there's a massive short squeeze going on. Anything trigger it? Well, there's a massive short squeeze going on. There is also a huge market rumor that is out there. And let's put a huge asterisk on this. This is a rumor that has not been confirmed by a second party, somebody who has said, yes, this is true. There is a market report that was out there. And I say market report, an investor newsletter that had put out a report that potentially the Saudi investment fund

is looking to take Lucid private. That caused the stock to start rocketing higher. They halted it nine times during the day. We have reached out to Lucid in a statement. The company says, we do not comment on market rumors or speculation. For some perspective on the Saudi investment fund and its stake in Lucid. Remember, it was a huge backer when it went public through a SPAC IPO in 2018. It owns about 60% of the shares right now, 1.1 million approximately. And they invested an additional 915 million back in November. So they have a huge stake in Lucid.

And remember, the Saudi government, and this has been well publicized, has said it would like to buy 100,000 Lucids at some point. So there is a connection between Lucid and the Saudis. But again, we should we cannot make this more clear to people. This is strictly a market rumor out there on a stock that was beaten down badly with a lot of shorts in there. I mean, that's time for a stock to take off, you know, as much as it has today, up 40%. Yeah, there's the squeeze. Also, the Saudis were interested in taking Tesla private, something that Elon Musk took very seriously when he defended his tweet about funding secured. Correct.

Just more context there. That's what he testified to. Rumors and speculation. He testified to that this week. Right. Phil, thank you. Phil LeBeau. A lot of action in the EVs this week. American Express is the big winner in the Dow right now on strong guidance that offset an earnings miss. Coming up, what the company's outlook is saying about the state of the consumer. We're up 150 on the Dow. Be right back. Up next, a top analyst who says Apple could experience a tale of two halves this year.

That story plus Amex charges higher and Intel slides when we take you inside the market zone next. We are now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here as, to break down these crucial moments of the trading day. Plus, Kate Rooney's here on American Express and Bank of America's Wamsi Mohan on Apple. We'll kick it off with the broad markets. Mike, we've cut our gains in half here over the past 30 minutes or so. The S&P 500 is up half a percent, still going to end the week on a high note. Treasury yields are firmer. The dollar's firmer. Nothing too dramatic or extreme. What have you gleaned about the market positioning heading into a very important meeting, Fed meeting next week?

Yeah, there's no doubt that investors have hustled to just add exposure to this market as it has seemed like it's threatening to run away. It started out in a very, very defensive spot a few weeks ago. Right now, I think you're certainly back up more toward neutral. It would be understandable, I think, if you'd hesitate in front of the Fed. Everything the market has tried to tell us is that we're not set up for that same familiar routine of rallying into a Fed meeting and having the Fed express its displeasure with what the markets have done and sort of move the goalposts again on where they want rates in the economy to be before they ease back. At this point, it seems

like there's enough confidence in the downside to inflation, as we saw this morning with the PCE numbers, that we can basically have sort of a peaceful coexistence here of a market that's at a, you know, two-month high. At the same time, the Fed is looking to cinch rates a little more. We talked a lot about Tesla up 12 percent. It is carrying the whole consumer discretionary sector. But there's some other winners. GM is up 5 percent today. CarMax. So something going on there with autos. The cruise lines are doing better today. It's been kind of a mix of a cyclical kind of growthy rally to start the year. And that continues on days like today. We got to hit Intel, though.

It's the worst performer in the Dow after an earnings shocker. The top and bottom line coming in well short of estimates. Total revenue plunging 32% from last year, in part because of the decline in PC demand. And not expected to get better anytime soon. The chipmaker forecasting an unexpected loss for the current quarter. Declined to give full year guidance because of, quote, persistent headwinds in the first half. Check out Intel CEO Pat Gelsinger on CNBC earlier today.

We do have strengthening of the product lines. We do expect some improvement in the market conditions. And obviously, as we ramp our new products into the new factories, that will improve the situation in the second half of the year with more, you know, competitive products as well. But overall, you know, we still see the outlook that being pretty, pretty challenging in the first half of the year. Intel, well, underperforming the S&P 500, falling more than 40% over the last year. And also, Mike, leaving behind some of these other, I would say, underperforming, getting, leaving behind some of these other, I would say, underperforming, getting left behind by some of these other tech stocks like an IBM or ones that were considered

undervalued that were outperforming in this kind of economic environment. So what do you do with Intel? Yeah, the rest of sort of old value tech has really done better. I mean, Oracle, things like that have certainly held up better. I think one of the telling features of today's sell-off in Intel is that pretty much every other big semi-stock is up. You have AMD, Texas Instruments, NVIDIA, Micron. They're all up. So people are clearly saying that this is just kind of a deep problem strategically in terms of positioning and market share with Intel.

I think the hope you have, if you're an investor looking to try and, you know, sort of catch the falling knife in Intel, I think the hope you have if you're an investor looking to try and, you know, sort of catch the falling knife in Intel is you can just rebase earnings from a lower level and just have some kind of confidence it's bottoming out. It's hard to get to those numbers right now. We don't know. Earlier we talked to an analyst who said maybe $1.50 a share could be that number. And in that case, at $28, Intel doesn't look super cheap. But if you had confidence it wasn't going to go lower than that, then you start to rebuild. Everyone's talking dividend cut.

Probably should happen. Probably will happen. I don't think that would jolt the market. So you disagree with the professor, Azwath Damodaran, who says that it's a sign that all of earnings expectations are too high and the global economy is weaker than the market expects? No. I mean, look, there could well be further downside slippage in overall earnings, you know, as the earnings season rolls on. But I think Intel is just really dealing much more with its own issues in combination with

a super weak global PC market, which is a feature, I guess, of the global economic environment. Amex is the winner on the flip side in the Dow today. The credit card company missing on both the top and bottom line, but shares are charging higher thanks to stronger than expected guidance for 2023 and a 15% dividend boost. Kate Rooney joins us now. So what did we learn about the consumer from these Amex results, Kate? So, Zara, we learned that the high-end consumer, at least, which is really Amex's core customer, is doing just fine, according to executives. They said that they're looking at some of the macro indicators and everything going on out there, some of the warnings about a recession. And they said, we're just not seeing it in the

spending, that the consumer is strong. They're still spending. That's reflected in their revenue outlook. They're looking for between 15 and 17 percent revenue growth for next year. And they said, you know, they'll be conservative. They'll react if they need to. But a couple percentage points here or there, even if you get things like GDP or unemployment to move around, they said that that's still not really going to affect their outlook. And they seemed extremely bullish on the consumer. The CEO, Steve Squeri, was also asked about a white collar recession that people have talked about, the high end consumer getting hit by what's happened here with the stock market and the overall global economy. And he said the layoffs just have not started affecting their customer base. He's also got Visa and MasterCard, which are a bit more symbolic of the broader economy and the average spender versus

Amex's cohort, they said the same thing. They said the consumer is resilient and put out what they sort of described as more conservative guidance, but said the same thing. They just didn't have to change or lower any forecast based on the consumer. And it does sort of fly in the face of other things we're hearing and other macro indicators and consumer spending and savings levels. But especially for Amex today, it looks like a positive sign for the consumer. They're still spending out there. Yeah, no. And that's directly impacting the re-rating here that Amex is getting. Wolf Research just saying we're modeling now for more modest decline in the affluent spend after those positive comments. Kate, thank you. Kate

Rooney, we'll hit Apple. It's one of the big highlights of next week's earnings calendar. Our next guest says this could be a tale of two halves for the 2023 Apple stock. Let's bring in Wamsi Mohan, Bank of America, senior analyst, has a neutral rating on Apple, $153 price target. Explain the tale of two halves, Wamsi.

Yeah, thanks for having me, Sarah. So the way we look at it is really the first half has got a lot of headwinds, and these headwinds have really got to do with some of the seasonal dynamics that are at play, weak consumer demand globally, and the fact that you're entering a phase of a really weak iPhone cycle. When you look at the 14 and 14 Plus, they have been very weak from a demand standpoint. We do publish in our note our proprietary tracking of availability of these phones across Apple stores globally. And when you look at that, the 14 and 14 Plus have been just widely available all throughout, whereas the availability

of the Pro models was kind of muted given the supply issues that we've heard out of china and then they recovered since then but it's not that there was a huge amount of pent-up demand that again made the availability go low the availability has been very steady so it tells us that the demand outlook in the near term is kind of challenging a little bit weak as you go to the second half there is more momentum in the story just because you hop onto a new ip cycle, hopefully with better expectations. There is the launch of the augmented and virtual reality or mixed reality headset potentially coming. And so there are some external product catalysts. And then the services growth itself, too, which is kind of challenged

in the first half still because of advertising and gaming weakness starts to accelerate in the second half. And I feel like the other big wild card here, Wamsi, for I don't know when this falls, is the China reopening story and how that plays out and when that starts to boost Apple, right, from production and a demand perspective. Yes, Sarah, so to that point, look, I mean, from a production perspective, our checks are suggesting that production is already back to normal in China. The China reopening as a demand catalyst, it has been on the margin a bit positive. But the 14 and 14 plus, which make up roughly 50 percent of the portfolio, the reception of those products in China has been very timid.

So the problem that we see is that China demand in fiscal 23 is still going to be down on a year-on-year basis for all of Apple, right? When you think about sort of not just the phones where 50% of the portfolio is that sort of big demand, but then you're also comping, you know, the iPad comps from a COVID era that we think is going to go back to pre-COVID levels, as you're seeing in PCs. So some other pieces of the portfolio that benefited during the pandemic in areas, including China, are going to be very tough to overcome. So we're not huge believers that the China reopening is going to be this massive tailwind for Apple. Wanzi, thank you very much for joining me. Appreciate it. Head of the Apple results, big event of next week, along with the Federal Reserve meeting and many more earnings. Just want to show you what's happening with the overall market, because we

have lost most of the gains at this point. On the Dow, we were up 200 earlier in the hour, up most of the day, as you can see. We're barely positive now, up 12 points, Mike. Could break a six-day win streak. Still hot, nicely higher for the week on the Dow, the S&P, and especially the Nasdaq, which is up about 4 percent or more than that week to date. What sort of internals are you monitoring here? They were mostly positive all day, Sarah. I think the context for this pullback is probably just that the market was starting to run a little bit hot in the short term. I mentioned that this morning. If you just look at some of the short term indicators, it's getting just a little bit overbought and you're ahead of this month end and weekend when

it just seems as if you've actually got a lot on paper in terms of gains already this year. You see, it's not quite two to one advantage in declining volume. So that's not really telling too much of a story. But you were talking about a lot of the aggressive stocks, the Teslas, the heavily shorted names. Look at the high beta ETF on a month to date which is also a year to date basis compared to the low vol I mean that's where all the action is that's a massive 17 percentage point spread between the fastest most aggressive stocks in the market and the conservative one so that's been the story and we're just pulling back off of that volatility indexatility index, nothing to see there. Under 19, pretty much at the lows we've seen on every rally over the past year or so. We'll see if we represent the floor. Of course, Fed meeting on Wednesday is probably going to start to build in to expectations for

at least potential volatility, Sarah. As we head into the close, up 11 points now only on the Dow, lost a good chunk of those gains this hour. American Express is the biggest contribution on the high side, along with Visa, Home Depot, Caterpillar and Apple. And then Chevron, UnitedHealth, Travelers and McDonald's are the biggest drags on the Dow. S&P 500 still going to go out with a gain for the week, for the day, certainly for the month so far, with a few more trading days. Today, it's consumer discretionary leading, and that's a Tesla story, mainly up 11% here into the close. Tesla, by the way, having a great week, up 33%, 34% for the week. For the year as a whole, up 44% as well, but still well off of their highs. Got hammered at the end of last year.

NASDAQ goes out with a gain of 1%. It is the big winner. It's the fourth week in a row of gains for the NASDAQ and brings the gains for the week to almost 4%. That's it for me on Closing Bell. Have a great weekend, everyone. I'll see you next week.