Closing Bell - Closing Bell: Does Bad Breadth Matter? 2/6/24

Episode Date: February 6, 2024

Anastaia Amoroso from iCapital, Veritas’ Greg Branch and Keith Lerner of Truist debate where they see the rally headed from here. Plus, Aswath Damodaran – the so-called “Dean of Valuations” �� reveals the one Magnificent 7 stock he thinks is “priced to insanity. And, New York Times Columnist Jim Stewart breaks down what is at stake for Disney when it reports in Overtime tomorrow. 

All right, Cora, thanks so much. Welcome to Closing Bell. I'm Scott Wagner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with everything other than the mega caps and why one of our experts today says now's the time to buy those stocks. We'll get to that in just a moment, of course. First, your scorecard with 60 minutes to go in regulation looks like that. We've been mixed for most of the day. It's the Nasdaq mostly muted, Nvidia giving back some of its massive gains today. Amazon and AMD also under some pressure, as you see there. AMD down by about 3.5%. We are also watching shares of New York Community Bank today, as that stock trades, but it is under $5 a share.

Treasury Secretary Janet Yellen on the Hill today, saying she is watching that situation around regional banks and commercial real estate closely, adding she is, quote, concerned but thinks it's manageable. Those are her words. Also keeping an eye on yields, they're holding firm following comments from Loretta Mester. The Cleveland Fed president suggesting rate cuts, quote, later this year are likely appropriate, while also throwing some cold water on the idea of that first one coming in March. It takes us to our talk of the tape, the state of this rally, whether it really matters,

whether it's broad enough. Let's ask Anastasia Amoroso, iCapital's chief investment strategist with me here at Post 9. Welcome back. Good to see you, Scott. That's the debate. All roads lead to that. Too narrow or no big deal? Well, it is too narrow once again. And it's a new year, new hopes, but it's the same story, which is, as you know, we've all been calling for the broadening of the rally. And whether it's unprofitable tech, whether it's the equal cap S&P 500, equal weight S&P 500, none of that is delivered. But it boils down to one simple thing, which is we don't know when the Fed is going to cut rates. And there's obviously greater hopes that the Fed may cut in March that's now having to get pushed back. So that's why a lot of those catch up trades are in the holding pattern. And I don't think you can blame the

investor, Scott, for sticking with a playbook that worked. You know, mega cap tech works because they have revenue growth and obviously that's accelerating. They have now buybacks. They also have a dividend. So why fix what's not broken? So the answer to the question we have there on the screen, does bad breath in the market, does it matter? We said it's the same, but does it matter? I don't think it matters as long as the big tech leadership delivers. And obviously, going into last week, we've seen some mixed messages from parts of that complex but when medic came out when Microsoft came out- you know when Amazon

delivered that clearly tells you that this leadership. Is not frothy it's not just by accident but I think it is sustainable. Now clearly we would like to see other parts of the market to participate. And by the way Scott there's

also point to be made on positioning. You know as much as everybody is maybe uncomfortable with the leadership and it's being so narrow, guess where people are putting their money? They're putting it in tech. If you look at the fund flows over the last 12 months,

all the other sectors have really not gained except for technology. If you look at the call options that are being bought, last week was tremendous volumes in big tech, and that's what retail investors are chasing. So as long as that's where the crowd goes, I think it works. But does it weaken the foundation of the market? Does it weaken the foundation of the rally if the upper floors are putting more and more weight on themselves? Yeah. I mean, I don't think it's sustainable on the long term, right? Because at some point, if those big heavy hitters carry the whole weight of the market, their valuations will get to levels that raise eyebrows. And you can't point to P-E ratios adjusted for growth and say that's OK.

So I do think at some point that should change. But Scott, to that point, I think it will. You know, we clearly push back the expectations for the March rate cut. But by the way, once we get to March, that's still two PCE reports away. That's still two PCE reports away. And I think when it comes to March, the Fed is not going to be able to sit there and say, well, we're not yet confident. You know, when inflation hits 2.6%, as we expect by the end of March, I think the Fed will have to change its tune. So you make the argument, as I said at the very top, that one of our guests today says now's the time to buy the dip in those catch-up trades, the underperformers. Why is now the time? Because others would argue, you know, if they were going to work, they would have already

worked. And maybe you need to wait for that first rate cut before you feel confident enough to buy those stocks. I don't think you wait, because as you know, the market's pricing things in advance. Normally. Normally, yeah. And well, I mean, that's what we've been doing for the last three or four wait because as you know the market's pricing things in advance and normally normally yeah and well I mean that's what we've been doing for the last three or four months but I think what's likely to happen in the next couple of months is as we wait for the March meeting we're going to whipsaw around we're probably going to chop around and we're going to be just so glued to the PC reports and the Fed speak and all of that and that's probably not going to move us all that much because data is strong and the Fed is uncertain but once we get to March and if we're right saying that the Fed is not going to be able

to deny progress on inflation, they're not going to be able to say we're not yet confident when every measure of inflation you look at is on the path to 2 percent. I think that's what will catalyze the stocks. Now, I don't think today is the only day that you have the opportunity to buy them. But over the next month and a half, I would be buying in and stepping in and buying those areas of weakness leading into the March FOMC. Do you think it matters if they go in March or if they go in May or June, as long as you know that the likelihood appears to be that they are going to cut rates this year? I don't think it matters all that much. I mean, clearly, for some of the catch-up trades we're talking about, I'd rather them go sooner than later. But for the economy, I think if they deliver the rate cuts in the first half of the year, I think that's preemptive enough. Scott, we talked about, you know, kind of the piles of debt

that are out there. And the reason I'm not concerned about this very moment is because they will likely be refinanced at lower rates if the Fed delivers the rate cuts in the first half of the year. Well, I mean, that might be a big if, you know, there are still concerns about commercial real estate. I mean, you heard the Treasury Secretary today herself, Janet Yellen on Capitol Hill saying, you know, I'm concerned about it. She used the words manageable, but nobody truly knows what the fallout is going to be there. I think people are starting to figure it out though because we've been talking about commercial real estate for over the course of the last year and where the problems in commercial real estate are they're in the office space you know 17 or 18 vacancies you know that's what's going to be really hard to refinance

at the same values as before but you look at multi-family where vacancy rates are four or 5%, that's not the issue. If you look at data centers, if you look at logistics, all of those are huge areas of growth. And then, you know, also, Scott, if I look at the debt service coverage ratios, even if rates stay around these levels, you know, double what they were when those loans were first taken out, most of those commercial real estate properties can still refi, it can still cover those interest rate costs. Bottom line, you're positive on the market. Yeah, I'm positive in the market. I'm positive in the market. I think we've obviously come a long way in a short amount of time. I think we are due for a pause, a consolidation. But what do you do in the meantime? You hold some of those winners. But I think you start legging into some of those laggards in anticipation of March and that first rate cut.

All right. Let's expand the conversation. Bring in Greg Branch of Veritas Financial Group and Keith Lerner of Truist Wealth. Greg's a CNBC contributor. Both are here at Post 9, which we're so happy about. It's good to see both of you. So to be here. So, Greg, you heard everything that Anastasia had to say. I did. Finishing with she's positive on the market. And your response is? Look, there were some things that Anastasia said that I do agree with, and there are certain things that I would obviously differ with. The first I'd say is that it is actually very important when those cuts occur. We're looking at 12 percent EPS growth right now in consensus for the year. And if we have those cuts earlier in the year, obviously it's more likely that we can achieve that.

If we don't have those cuts sooner in the year and they actually come in the fourth quarter, as I expect, there's probably no path to 12% earnings growth across the market. And so we saw in the fourth quarter, for example, that consensus started at 8%. That was decimated by the end of the quarter to 1.6%, which is where we're at right now. That actually used to matter. Downward revisions of that magnitude, and I think that they will matter again when the market returns away from the euphoria of thinking that we have a new paradigm on inflation. Remember, we had that jobs report of 150,000. We're now back in the 300,000 numbers. Wage growth had come in. It's now back at 60 bps.

And so I think away from the euphoria of we're setting new paradigms, downward revisions are going to matter. I'm going to come back at you with some debate points, but let me get to Phil LeBeau first, because we do have some developing news regarding Boeing. What do we know, Phil? We have a statement from Boeing, Scott, regarding the preliminary report from the NTSB regarding the Alaska Airlines door plug that was ripped off mid-flight. Just to recap that preliminary report's conclusion, there were no bolts in that door plug. And that was a contributing factor, the primary factor, when the pressure hits the plane, that the door plug was ripped off in mid-flight. So now Boeing out with a statement saying, and this is coming

from Dave Calhoun, CEO of Boeing, whatever final conclusions are reached, Boeing is accountable for what happened. An event like this must not happen on an airplane that leaves our factory. We simply must do better for our customers and their passengers. We are implementing a comprehensive plan to strengthen quality and the confidence of our stakeholders. It will take significant demonstrated action and transparency at every turn. That is where we are squarely focused. Two things that are changing, Scott, as you take a look at shares of Boeing, which really aren't moving a whole lot since this report came out. First one, new inspections for the door plugs. And second to that, because the NTSB pointed out that this door plug had been removed as part of work being done on the fuselage prior to delivery.

Well, now there is a new protocol that Boeing has put in place, including signs within the fuselage saying, OK, the door plug has been removed. Here's the protocol for making sure it's put back in place the bolts are in there and that it meets all of the standards and conformance requirements that are supposed to be met before a plane is delivered two changes from Boeing also quickly take a look at shares of Spirit we also have a statement from Spirit we're not going to read the whole thing essentially what the company is saying is we are focused on working with Boeing and our regulators to ensure the highest safety standards. There you go. Statements from Boeing as well as Spirit following the preliminary report from the NTSB. Scott? Phil, I appreciate it very much. Thank you, Phil LeBeau.

The latest regarding both of those companies, you see the stocks both higher in today's session. So, Greg, let's get back to our conversation where you make the argument, at least in one respect, that the jobs report was too hot. It shows the economy is too blistering hot to keep inflation from coming down. Seasonal factors were obviously at play. Employment cost index was where it should be. And the PCE is on its way to 2%.

You make the argument as well that you still think, you told our producer, that it is more probable we see a hike before a cut. Now, that's way out on a limb. I mean, let's be honest. What leads you to believe something that even the Fed chair himself has suggested is highly unlikely? Right. So it goes back to the data, right? And so we've had now two months of over 300,000 in job growth. We have a 3.7% unemployment rate. The Fed has also suggested that to get to 2% sustainable, that the unemployment rate needs to be 4.1%. They have said that within the last two weeks. They implied that in their dot plot. The question becomes, how do we get there?

If all of the employment data and all of the jobs data is moving the other way and not towards 4.1 percent? And I just don't see yet, and maybe it'll emerge somewhere, I don't see yet how we get to that number, if that's the number that they're sticking with, without them putting their thumb on the scale a little further. Now, I mean, I'll give you the fact that today Minneapolis President Kashkari was talking about, I think he used the word conundrum in describing where the route of inflation is heading as long as the jobs number and the employment market remains as strong as it is. Right. Keith, you're bullish? Still positive. You know, the way I look at it is, you know, market's been up 13 out of 14 weeks.

We had that big fourth quarter after doing nothing nothing for two years, we broke out. Historically, when you look forward a year, you're up 13 out of 14 times. The one negative ally is when you have recession. We think recession risk is low. I have a little bit of a different view. If the economy remains strong, I'd rather take a strong economy with less Fed rate cuts than a weaker economy with more rate cuts. Because look at 2001 to 2008. We had a lot of Fed cuts that didn't avoid a recession and that didn't avoid a big decline in the overall market. So I think the economy being healthy will help earnings, input costs are going lower.

And listen, every year the earnings for the current year are too high. They're always revised down. That's an enormous step, that major turning point. So that doesn't scare me. And looking at forward 12-month earning estimates, they just hit a record high as well. So I look at that overall picture saying the economy is pushing forward. Forward earning estimates are at a new high. The technical backdrop is still positive.

I agree with Amorosa that it would not be unusual to see some type of consolidation here because the sentiment's a little bit stretched. But overall, I think you have to respect the underlying trend, which is still positive. I mean, Anastasia. It's a lot of A's. It's all good. Don't you think that the whole idea around a strong economy, Greg, has changed? I mean, even the Fed chair himself has suggested that it's not a problem that the economy is doing well. It's actually a bonus. Not only in that it allows them to achieve the so-called soft landing or perhaps no landing,

it gives them currency to wait to cut rates. Why do you continue to hang on the idea that somehow this strong economy is a great big issue. Now, the focus for the Fed, I think, has changed over the course of this hiking regime, don't you think? Well, let me actually put my own words in my own mouth. It's not that I hang on this as a problem. It's that I think that two things cannot exist together. It cannot exist together that you have an economy running this hot and you say we need 4.1 percent unemployment to get to a 2 percent sustainable inflation. If they come out and say we can get to a 2 percent sustainable inflation with 3.7 percent, then I have no problem. I want a good economy just like everyone else does. I like earnings

growth just like everyone else does. But there's no suggestion at this point that we need to see a big, you know, a huge pickup in unemployment to get inflation to come down to target. I didn't say huge. I said exactly what they've said. I said 4.1%, which is the number that they've used. But can I just say on that, I mean, the Fed has said a lot of things over the last year. In fact, they've said a lot of things over the last three months, and they continue to pivot, and they continue to shift the goalposts. Because I think, Sky, you're exactly right. Before December, it was about, oh, no, we have strong labor market. That's bad and we're

not going to cut rates. But there was a big pivot point in December to where the Fed has seemingly become solely focused on the trajectory of inflation. So for me, the fact that jobs market is strong, for me, that the economy is strong is actually a good thing and I don't think is going to deter the Fed from cutting rates because they're watching amongst other things, they're watching the real interest rates and the further inflation falls and the longer they stay at these current levels, the more restrictive the real rate is going to be. So they're trying to engineer this perfect soft landing.

They can't really let that real rate stay that positive for that long. The market isn't exactly as narrow as some would like you to believe. Now, more lately, certainly, it's narrowed again. And the mega caps are the things that have carried you of late because their earnings were so strong. But, you know, from November 1st until today, the Russell 2000, I think, is up 15 to 17 percent. Now, the S&P or the Nasdaq is up, for example, you know, 21, 22 percent over that time frame. Are we judging this fairly? I think the point you brought up is a really smart one because, you know, the calendar shifts and people forget about that big rally where small caps went up 25% in a short period of time. I, like I think other panelists here, would like to see the things boring out.

I will say this. The equal weight S&P is trailing the market weight by about 20% over the last year. That's one of the most in the last 30 years. So we are at a point where I think we're going to start to see some reversion on this. I know we've been waiting for that, but we're seeing a little bit of that today. And even with small caps as well, they have much more exposure to industrials and financials relative to tech. But even looking at tech, we're all talking about the Magnificent Seven. Now I'm hearing this week the Magnificent Five. So

that story can change as well. And Scott, you've been around long enough to remember the Four Horsemen from the late 90s. So we like tech. It has the strongest earnings momentum. We're overweight. But I think you have to be careful about being just solely concentrated in one sector. History tells you that's a risk. What would your, Greg, positioning look like right now, given your view? Right.

So a couple of things Anast, said are pertinent to my current view. I also had to broaden exposure when the Fed went into its posture pivot on December 13th. And to what Keith said, while that rally was broadening and tech was underperforming, that is when we started to add there and broaden our exposure. Because what we think at the end of this year is that we will have looked back and have witnessed those that are attached to AI, those that are attached to cloud, experiencing those generational secular tailwinds. They're going to grow earnings by 20 percent plus. The rest of the market is going to grow earnings low single digits. If that, because I do believe that the slowdown is in front of us, it hasn't occurred yet.

So you're overweight the mega caps relative to everything else? Everything. I wouldn't say all mega caps. Everything tied to those secular tailwinds. So some of the smaller semis are tied to those secular tailwinds. Cyber security is tied to those secular tailwinds. And so those are the things that are going to put up the relative superior earnings growth. And so I think that this narrowing will get more acute before it runs out.

But I'm confused then. Why have such a broadly negative view on the market and just say or suggest you just need to be super selective in what you're investing in at the very top end? If you're investing in those stocks, the stock market can give you the kind of returns that would be fantastic. That plus is the 6% at the short end. I mean, I didn't have a catastrophic year last year, right? And so I think you always make my view a little more draconian than it is,

Scott. No, no, no, no, no, no, no. When you say we're in a market bubble, when you say that we're going to have a hike before a cut, when when you when you suggest that you know the the earnings aren't going to live up to the hype that the economy is going to have to be crushed more to get the unemployment rate to where you think the feds still use the word cross but i mean how are you how how are you going to get how are you going to get the unemployment rate to 4.1 percent i think what's going to happen i think that's that's my question I think that's going to happen. I think that's my question. I think that that's a legitimate question. And let's take all of those things you said one by one. Yes, I do think it's more likely we need to get a cut because I can't see any other path to getting unemployment in that it hasn't budged in the last two years. I think we do need a hike to get there, right? And so every

single component of what I said is not necessarily saying that a catastrophe is coming. Everything I'm saying is about being selective and where you should get your exposure. I'm trying to figure out what you need to see because, look, there have been some bears who are capitulating, and you can see it. They may not be willing to fully say it, but you can tell by some of their actions that they are. Why aren't you? I mean, what has to happen in this market for you to change your view, which has been consistent? I'll give you credit. It's been consistent. Right. I'd like to see an aligned consensus and not two different worlds of thinking about things. So, for example, we've moved off of a credible argument for a March cut. And we saw the market come in as we did that. I think we'll start

to... For a minute, the market's up since then. Can I finish, Scott, please? It's up since then. I think we'll move next off of a credible argument for six or seven cuts this year. And I think when we move off of that and consensus comes down, as it did for the fourth quarter, and as we get to a more singular view of the world, I think that that's a place where I could grow more comfortable about the broader market. What if it's three or four cuts and not six or seven? Does it make any difference? It does make a difference. Whether you're talking about 400 basis points of lowering interest rates or 200 basis points, of course it makes a difference. But you know that the trend has changed. Right. And we all know that this is coming. But when it comes and the magnitude in

which it comes, of course that's important. Because at the end of the day, while we're talking about theory, this has practical application in terms of what companies earn. It has a practical application in terms of what households can spend. And so, of course, these things matter. Anastasia, last word, then we got to go, because I think we're already grandly. I think it sounds like, you know, if the market does reprice to maybe what the Fed is saying, then there's going to be a pullback and therefore a better entry point. My last point is I think the one part of the market that is broadening out is actually artificial intelligence. It's not just about NVIDIA,

but it's about other companies that are seeing their earnings get upgraded. And to Greg's point, they're growing at 20% plus over the next few years. So I think AI is front and center. We just got a taste of it. So I'm sticking with that. Yeah, we're going to leave it there.

Thanks, everybody. Thank you, Scott. Keith, Greg, and Anastasia, I appreciate it very much. We're getting some news out of Washington now. Megan Casella has the story for us. Megan? Hey, Scott. The Treasury Department is out with some fresh estimates today showing that tax revenues could rise by $561 billion over the next decade.

Now, that's as a result of the roughly $80 billion that Congress passed in 2022 to beef up the IRS as part of the Inflation Reduction Act. If the funding is extended, those revenues would increase by as much as $850 billion. Now, these estimates are far higher. They're more than double the previous projections. And Treasury officials say that reflects the impact of a more modernized online system that makes it easier for more taxpayers to file, as well as the deterrence effect of stricter enforcement and more audits. In this IRS, funding has been contentious on Capitol Hill, where Republicans have been pushing to pare it back. But with concerns over the national debt rising, Democrats have been saying that this is one way to bring in more revenue. Scott?

All right, Megan, I appreciate it. Megan Casella, thank you. Let's send it over to Christina Partsenevelos now for a look at the biggest names moving into the close. Christina. Well, Profit is the name of the game for GE Healthcare Technology, the company which only went public early last year, posted better than expected earnings driven by price hikes and operational process improvements. Despite management warning that in Q1, which is this current quarter, they would see the lowest growth possible, or lowest growth, I should say, of the year. Shares are still 11% higher.

DuPont, up after the industrial company topped earnings estimates and boosted its quarterly dividend, and said it was launching a new buyback program of $1 billion. Investors like it, and that's why shares are up 7.5%. Scott. All right, Christina, back to you in a little bit. Thank you, Christina Parts of Neveless. We're just getting started. Up next, the big valuation debate.

NYU professor Aswath Damodaran, the dean of valuation, back, and he's flagging the one MAG-7 stock he thinks is overpriced. He'll tell us after the break. We're live at the New York Stock Exchange, and you're watching Closing Bell on CNBC. Welcome back to Magnificent Seven, seeing nice gains following Q4 earnings with the group now up about 9% for the year. My next guest says, while the names are richly priced, only one is, quote, priced to the point of insanity. Let's bring in the dean of valuation, Aswath Damodaran, NYU Stern School of Business. Professor, welcome back. Thank you for having me. The one that's priced to insanity, you suggest, is NVIDIA, which is interesting because you own

it along with all of the others, correct? No, you bought these stocks at the right time. They were amazing buys at some point in time. At today's prices, I mean, all of the stocks looked overpriced. But I think Nvidia stands out as particularly overpriced. I mean, just to get a collective sense of what these seven companies account for in the S&P 500, these seven stocks alone account for 70% of the overall market cap of the index. They account for 11% of the revenues, but they do account for 27% of the gross profit. So they're very profitable, very valuable companies. And you can get pretty close to the current prices for the other companies. NVIDIA, I can't even get close.

I'm surprised somewhat, if only because the valuation of NVIDIA has come down as its earnings and guidance have gone up. So in some respects, what was perhaps insane has actually been justified in some respects. Now, in a sense, there is an adjustment process going on. I don't know where it'll end up. The truth is, when this process started, people assumed that NVIDIA's domination of AI, the chip part of the business would continue in perpetuity. I think the other chip companies are waking up. Things are going to start to scale down. So I think in spite of the come down in price, I am more wary about NVIDIA than I was simply because it's, I mean, last time I valued NVIDIA was at $400. Gives me some kind of perspective in terms of at 682. I mean, that's a stretch that's given the current earnings potential

in cash flows. I just can't get that. Maybe I'm just missing some part of the picture, but to me, it doesn't make sense. I mean, you're not alone. That's for certain. Look, price target went up to 800 yesterday from one firm. And today on my earlier program, the halftime Report, Josh Brown, who's been in NVIDIA longer than anybody I know, sold 20 percent of it. I want you to listen to what he said. And let's react on the other side. It just feels like there are people who are so bullish they've run out of superlatives and ways to describe Nvidia's market position and their technology dominance. And they're just like raising price targets. It's almost on a weekly basis. It's become breathless. I just felt like the chart went vertical and people have just like lost their minds. I'm as excited about generative AI as anyone else, you know, and I'm bullish. I'm just not that bullish where I think

a stock should go up, where I think a stock should go up, you know, 20% every month just because the alarm clock went off and the sun came up. What are your thoughts? No, I agree with him. I think AI has become this buzzword that people use to justify pretty much anything they want. I mean, I think collectively, AI is become this buzzword that people use to justify pretty much anything they want. I mean, I think collectively, AI is going to be a net negative for markets. It's going to be great positive for companies like NVIDIA. But I think the laziness with which people attach premiums to companies just because they see the word AI, and you see that partially with Microsoft as well, is, I think, terrifying because at some point in time,

reality is going to play out and it's not going to match those expectations. I'm wondering when you look at these other some of these other companies within the so-called Mag 7, which which seems to be maybe decreased by one or two of late, like a Microsoft, for example. So Microsoft's 10 year historical average is low 20s. Now it trades in the low 30s. But what was Microsoft doing over the last 10 years? Is it legitimate that its multiple now is in the low 30s relative to how profound this relationship with OpenAI can really be?

I think it's a company that's closest to creating a subscription model around AI in which it can make money. I can't think of another company that's as close. So part of that increase, again, comes from the reality that AI is going to open up new businesses. But as a long-term owner of Microsoft, again, I'm looking at $404 or $400 per share, and I'm saying, you know, I'm definitely happy that it's gone up to $400 per share, and I'm saying, you know, I mean, I'm definitely happy that it's gone up to $400. But again, a lot has to go right for this price to be the right price. And pricing in that expectation sets you up for, you know, unpleasant surprises down the road. I mean, the forward P,

we're looking 38. So I hear you. What about Apple? Let's leave it with Apple. What are your thoughts here? I think there are two companies in the seven that if you really, really wanted to buy these stocks, you've never owned them. You said, I've missed out. One would be Tesla, which will surprise you because I bought Tesla just a couple of weeks ago at 180. And the other would be Apple, which I think has adjusted down. It's still a cash machine. But Apple over the last 15 years has lived from iPhone upgrade to iPhone upgrade. It has a bad year than a good year based on whether there's a big upgrade during the course of the year. So I think Apple will bounce back a little bit. It's a slow growth cash machine and people have to be realistic about what they're getting. But I think that at $188, it's as good a buy as any of the other seven.

So Apple and Tesla would be my two buys among the seven if you really wanted to add two of these stocks to your portfolio. All right. We'll leave it there. The so-called Dean evaluation and the active trader, clearly. Thanks for your time. I appreciate it. Not a trader. All right. Active investor. Active investor. All right. That's Aswath Motor did it trade? All right. Active investor. Active investor. All right.

That's Oswalt the Motor and NYU Stern. All right. Coming up, we're drilling down on Disney, the media giant. Reporting results tomorrow, we'll hear from Jim Stewart. He wrote the book on Disney. Tell us what's at stake for the company and the stock. Closing bell's coming right back. We're back with Disney's moment of truth when earnings hit the tape tomorrow. Shares have been outperforming heading into that print, despite recent box office disappointments,

profitability pressures, and a boardroom battle with triads Nelson Peltz. Let's bring in New York Times columnist Jim Stewart, knows this company better than anybody. Jim, welcome back. Nice to see you. Thank you. Good to see you, Scott. What are your expectations here? Well, I think we're going to see some decent numbers, although, again, they're wild cards stemming from the strike and the fact that costs were suppressed, that they didn't get as much new content out there. As we know, the holiday box office was very weak for Disney. But I think you're going to see solid theme park results.

And I'm thinking that we're finally going to see some improvement in the streaming losses. And that's where investors, I think, are really glued for clues to the future of the big Disney streaming bet. You feel like there's a bit of a conundrum here in that, you know, Bob Iger, the now returned CEO, has clearly made it a focus to spend less money. And he's under pressure to do as much from whether it's shareholders, activists, and whoever. But at the same time, the company's criticized for the lack of compelling new content. How is he supposed to navigate that?

Well, I think he's going to look at the data and the subscriber results I mean in the last quarter earnings I was somewhat surprised to see that despite the lack of new content going on to Disney Plus because of the strikes the numbers the subscriber numbers held up pretty well and I think we've seen lately with Netflix reducing but are revealing what people are actually watching an incredible amount of viewership is being spent on old material. It's like reruns of beloved previous series. So the new content may not be quite as important as a lot of people once thought it was.

Now, that said, many people believe that when Iger said, look, I'm cutting content by 30 percent, that was a signal to his rivals. And number one of those is Netflix that, you know, whoa here. Can we like maybe kind of put a brakes on this nuclear arms race of spending that's been going on on content? And those hopes were dashed when Netflix came out recently, said, no, no, no, no. We're pouring the money and we're putting the pedal down. We are still spending, you know, 17 to 20 billion dollars a year on content. So that remains to be seen. Like, how important is the new content going to be?

And can Netflix now increase its dominance as it maintains or steps up the spending while others are being forced to cut back. What do we do about the whole activist issue here? And I'm curious as to how you're thinking about it as well as you know this company and have known Iger presumably for many years. So Blackwell's now today has the definitive proxy statement to elect three nominees. You got Peltz there. Blackwell's is against Peltz. And Blackwell's is also suggesting the possibility of splitting the company into three entities. Before we get to that suggestion, just on the activist angle in general, how does this

all play out? Well, I think from a shareholder perspective, it's probably good. I mean, I think a lot of the recent improvement in the Disney share price is because of this activist involvement here. And I realize that incumbent management doesn't like these people coming in and criticizing them and saying they know better and stirring the pot like that. But it does put pressure. And in some ways, it gives someone like Iger an excuse to say, look, we've got to move fast. And we don't have the luxury of like, you know, spinning our wheels for a while deciding what to do. We have an activist breathing down

our neck. We have a proxy fight. We've got to show some results. And above all, we've got to share a price up. So it gives him an excuse to accelerate some things that he might otherwise meet with greater resistance. So I don't think there's any harm from a shareholder perspective to have these people involved. You take any, you know, I'm curious, what are your thoughts about this idea of splitting Disney potentially into three separate entities? Well, I haven't studied that in any depth, but I can't believe that that's going to get serious traction. I mean, I've looked at their proposal a little bit. There's something about, you know, spinning off the real estate. You know, an interesting thing about a lot of activists' ideas is it's not like Disney has never thought of these things. I mean, they have much more data than the outsiders do.

They have internal strategic planning people. I'm sure they have looked at the real estate situation. They've also, I'm sure, looked at, you know, splitting up the company somehow. I mean, Iger himself, you know, at Sun Valley, now he's kind of walked this back and said, well, you know, we have non-critical assets, maybe non-core assets that we could sell or spin off. And I think, as I said, he's kind of walked that back. It's not as easy. I would have to say that with Disney, like the big assets, you know, the film studios, the theme parks, there have always been pretty impressive synergies there that make Disney a unique company. I mean, they take the intellectual property from the imagineering side, the movie side, the streaming, the series side, and then

they spin out rides and they also get movies out of the ride. So it's I would be very cautious about ideas about just breaking up the company. I don't see that as being in the cards. Jim Stewart, I thank you very much for your time today. We'll see you soon. All right. Up next, we're tracking the biggest movers into the close. Christina Partsenevelos back with that. Christina. Well, we have a set of earnings winners, Spotify emphasizing user growth and Palantir guiding higher free cash flow. I'll tell you how their stocks are reacting after this short break. We're less than 15 minutes from the closing bell. Christina Partsenevelos joins us once again with the key stocks she's watching.

Christina. Well, let's start with Palantir shares. They're soaring, what, 30, 31 percent right now after the software firm not only saw strength in its earnings report from the commercial market, but also guiding well above estimates for its gross margins and free cash flow. The company is known for its defense and intelligence work with the U.S. government. Spotify posted revenues a touch below estimates for the quarter, but posted a beat on gross margins, which is a popular measure of profitability. The streaming audio service said subscription revenue actually jumped 17% year-over-year, with more monthly active users as well. And that's why shares are up almost 3.5%.

Scott. All right, Christina, thank you. Christina Partsenevelos coming up, counting down to crucial earnings in overtime. Snap, just one of the key names we'll be watching. A rundown of what to expect from that report is still ahead. Closing bell comes back after this quick break. All right, coming up next, your earnings rundown. Ford and Snap among the big names reporting.

At the top of the hour, we have our reporters standing by with a breakdown of everything to watch for when those numbers hit. That and much more when we take inside the Market Zone. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus two earnings we are watching closely in overtime tonight. Phil LeBeau with his eyes on Ford.

Julia Boorstin on what to expect from Snap. I turn to Mike Santoli first. Getting hard to push this market down. I think we're learning that day by day. Yes, it's finding a way, rotating in one direction or the other to stay afloat, stay within 1% of the all-time highs. I don't think we settled any of the big market debates today. I mean, the market was in a very narrow range, but it did almost seem to respond to this crescendo of chatter that the momentum stocks were way overheated, that it was way too narrow. We kind of went the other direction. The majority of stocks up. Materials or, you know,

other other things. The others are doing OK. Right. And so I think at some point this kind of choreography fails and we slip and we get a proper real pullback in both the indexes and the average stock. The thing is, the average stock is at a head start, right? You had the percentage of stocks that are in an uptrend. It's kind of rolled over to about 50-50. So it's interesting. For the moment you say we're too narrow, it's too top heavy. And then the minute those stocks pull back, you say, well, I guess we kind of been correcting internally for a while. So we'll see if that's how it goes. Look, we're due for something more than a cursory one or two percent pullback. All right, Phil LeBeau. So we had you earlier with the latest on Boeing and Spirit Aero Systems. Now

your attention turns to Ford in overtime. Yeah. And I think the three things that people are going to be looking at for Scott is, first of all, the Q4 numbers. We know about the costs that were incurred because of the UAW strike, et cetera. And they're going to be higher. To what degree? That's what we're going to be looking at. Will we see more hybrid production? Now, this is not necessarily something we're going to hear about in the earnings release shortly after 4,

but maybe during the conference call a little bit later on or when we talk to CFO John Lawler, as well as the EV Outlook. And as you take a look at shares of Ford, we're showing you the last month. Look at the change, Scott, that we've seen over the last week. I know it's not a huge move, but relative to what Ford has done in the last six months, this is an indication that people are saying, wait a second, maybe this was beaten down a little bit too far, and the ICE business should do well. Hybrids, we know they're number three in the U.S.

This is a stock perhaps people are trying to say, maybe we take a second look at it. We're going to be talking with John Lawler, the CFO of Ford. We'll talk about the outlook for 2024, as well as hybrid production, EV production, all of that, coming up on Closing Bell Overtime. Scott, we have the numbers in about 10 minutes. I look forward to that. I mean, the number on the screen isn't compelling enough, about 4% into the print.

So we're going to see. Phil, thank you very much. Julia Borsten, numbers here today, not great for Snap, pairing 10% of the workforce. What are we looking for here? Well, Snap stock has been on a tear. It is up over 80% since its last earnings call. So now we'll have to see if that confidence

over the last quarter about a strong digital ad market and progress of the company's direct response ad platform pay off in its fourth quarter results. Now, analysts are projecting accelerating revenue growth of 5.8 percent just ahead of last quarter's 5 percent revenue growth, while earnings per share are expected to decline to six cents less than half the year ago earnings. Now, the question is whether Snap's announcement on Monday that it's laying off 10 percent of its staff bodes poorly for profits or simply indicates that it's following meta and focused on efficiency. Scott, we're going to be talking about all this and more when we have an interview with Evan Spiegel,

CEO of Snap, tomorrow morning in the 11 a.m. hour Money Movers. All right. I'll look forward to that always. Julia, thank you. Julia Borsten, we'll see you in overtime with the actual numbers from Snap. I turn back to Mike Santoli here. About two minutes to go, and we're adding a little bit as we speak. Dow is 38,500, so we're about 125 to the plus. And, you know, as the market does this seesaw thing where some stocks work on a given day and the indexes stay kind of trapped, the volatility has gotten

just strangled. And that's kind of what happens here. People were tensed up for something. You got the VIX above 14 into 15. I'm seeing a lot of people scrutinizing just exactly what the market expects in terms of jumpiness. Because right now, it seems as if there's been a ton of bets on continued stability, a lot of selling of options, a lot of people saying, look, nothing can seem to knock this market off course. That works for as long as it works. And you don't want to necessarily fight it. It is a bull market. You should treat it as such. That being said, the market's sort of reacting a lot to itself. You know, it didn't find a lot of macro to chew on today. The bond market backed off in yield. That two-day spike

in yields we got has cooled off. That's probably to the good, keeping stocks kind of calm. But I just have the antenna raised for this idea that there could be some instability waiting for us. Maybe it's going into NVIDIA earnings or after NVIDIA earnings in a couple of weeks. We got CPI in one week as well. You know, you mentioned, you know, sort of the market ripe for, you know, some kind of consolidation, something. Look, we've had these sort of little moments, December and even some respects a point in January. It just never got big. That's right. And when you got worried, it still didn't get big. We haven't had a 3% pullback in over three months. That means it's a strong market, right? That means it's the kind of persistent rally that you have to respect. But at some point, your luck runs out and the

risk-reward just changes a little bit up here. And, you know, earnings season has done its job, rewarded the winners, and the rest are doing just enough to keep it together. We're going to go out on the high. And everything right now, positive, too. NASDAQ is going to fight it to the finish. But it's trending that way as well. I'll see you tomorrow into OT with Morgan and John.