Closing Bell - Closing Bell: Hot retail sales helps sentiment, Sam Zell slams tax proposals, DOJ focuses on Apple 2/15/23

Episode Date: February 15, 2023

Stocks gained momentum throughout the session following a much stronger-than-expected retail sales print. Matt Shay from the National Retail Federation joins to discuss his view of the consumer, and why spending remains strong despite higher prices. Billionaire investor Sam Zell weighs in on the real estate market, the Fed, energy investments, and why he thinks some of the tax proposals being floated in Washington are “crazy.” Plus why Barclays sold off, a mixed bag of chip stocks, and why the DOJ may be taking a closer look at Apple.

Another mixed session here on Wall Street as investors weigh a red-hot retail sales number against stubbornly high inflation. 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 in the markets. Lower on the Dow, 59 minutes left of trading, down about a quarter of 1%, down 77. The low of the day, though, was down 256 points. S&P 500 is unchanged. That's because you have strength in groups like communication services. Paramount is leading the charge there. Berkshire Hathaway upping its stake in that name. Consumer discretionary, utilities, industrials, materials, and technology. Those are all your sectors in the green. What's not working today? Energy, staples, real estate,

and financials. The 10-year treasury yield a little bit higher, up 3.8% on the back of strong data. Check out some of today's biggest earnings movers as well. Roblox, Airbnb, analog devices, all jumping on results while Devon Energy pulls back. Coming up on the show today, we will talk to National Retail Federation President Matt Shea about today's much stronger than expected retail sales. Why he says CPI really isn't the best measure right now of inflation. And then later, a rare conversation with billionaire investors Sam Zell. Everything from the state of the economy to real estate, the Fed and much more. But first, it is time for the market dashboard. Senior markets

commentator Mike Santoli joins us. Mike, what are you watching? Well, really, the intraday strength, Sarah, continues to be the story. Really not dramatic index moves. But if you look at where we sit right now on the S&P 500 in the 4130s, it's exactly where we essentially closed the week before last. So it's been a week and a half of sideways digestion. That 7 percent or so gain in January has basically been held. Also, the more aggressive parts of the market are outperforming. So you're seeing that there's a little bit more risk appetite in this market. Defensives have been soft. So not really resolving anything, but certainly remaining supported as the market consolidates right here in the face of those hotter than expected economic data. It's a high pressure economy, higher pressure than we thought coming in. 2.4 percent. Atlanta Fed tracking first quarter

GDP growth versus zero. We thought now it's early in the quarter. But take a look here at the U.S. dollar index because it's reflecting a similar sentiment there. People thought there was going to be downside risk, not just to growth, but then the Fed perhaps being finished sooner than later. Well, you've seen a real bounce in the U.S. dollar index. We went back to sort of springtime levels, pulled back toward, you know, 105-ish, 104-3. And you've bounced from there. Now, again, we're way below the highs, just as with Treasury yields. We're significantly below the highs of late last year. But it's kind of rebuilding in that direction.

So the market for now, Sarah, seems okay with the idea that the Fed might have to do a little bit more because it's maybe going to be at a measured pace slowly. There's probably some yield level that matters a lot to stocks, but we haven't quite hit it yet. No, yeah, seems pretty cool with the whole yield rise. So far. So far. Thank you, Mike. Mike Santoli.

Well, January's retail sales took many by surprise today, climbing 3% from the previous month. Despite inflation remaining high, consumers have shown resiliency thanks to low unemployment and wage growth. Joining us now is Matt Shea, CEO and president of the National Retail Federation. It was a hot number and a surprise, Matt, wasn't it? Hi, Sarah. Yeah, it was a hot number and it was a surprise to the upside. I think everybody saw that and is trying to dissect what it means. You referenced there a couple of things. I think everybody saw that and is trying to dissect what it means. You referenced there a couple of things. I think if we just look at January as a discrete month, we know that we had pretty good weather, which plays a role. We had very good, strong job growth, which surely contributed.

We saw the Social Security adjustments, the cost of living adjustments. Those things all played a role. But we just have a really hot market. We have very resilient consumers. People are out there spending. And in spite of what they know and they tell us about concerns regarding inflation, they're still finding a way to get out there and spend. And we saw that in a surprisingly big way in January.

Yeah, it was a broad report. Every category within the retail sales rose except for gas stations. The big, big jump in restaurants and bars, spending up to 7.2 percent. Matt, so does it suggest to you that the Fed has to do more to fight inflation? Because now, better than expected retail sales, better than expected jobs report, and hotter than expected inflation rate yesterday. Yeah, well, Sarah, I guess we've all, whether we do it for a living or not, many of us have become sort of interested observers of the Fed, and we're all Fed watchers one way or another.

And I think the real issue here, and the chairman of the Federal Reserve has been signaling this all along, other members of the board of governors said these things yesterday, it's ultimately about services and services inflation. There's been some deflation on the good side, but it's about the jobs market. And if the jobs market is strong, that means there's competition for employees. That means wage growth is high. That means people are going to spend and that impacts inflation. And until they can really figure out how to attack that, I think it's going to be a challenge. We still have the JOLTS study, the job openings, the labor turnover study from earlier in January. We're still 11 million unfilled positions, about five and a half million people state they're unemployed. So it's 1.7 or 1.8

unfilled jobs to workers looking for jobs. There's about a million in retail alone. So the labor market is very tight, and that doesn't seem to be changing very quickly. But what are you seeing in terms of some of the metrics we would look at? And we have been watching as it relates to pre-recessionary indicators. The savings rate, for instance, has gone way down. People have tapped into their savings. The more credit card debt on their balances.

What are sort of the indicators that you're watching here, even with this spending boom? Yeah, I think you touched on some of those. I mean, the savings rate really expanded dramatically. It was up to almost 30 percent in the early stages of the pandemic. People had the pandemic paychecks and the bonuses that people got from the federal government, all the stimulus money. That went way down to about 2 percent, 2 or 3 percent last year. It's come back up maybe 6, 7, 8 percent. So it's getting closer to what we would consider a historic norm. But, you know, that'll and some of that's going to continue to play out.

There's probably still a trillion dollars there. The debt service ratio is actually really pretty good. It's below 10 percent of disposable after tax income. Historically, that's a 40 year low. So we people have debt, but they're able to manage it and finding ways to service the debt, even though they've taken on more revolving credit. So those things look pretty manageable at the moment. And with that savings still sitting there pre-pandemic, a trillion more than we had going in. And I think that's your question about the Fed is how long can people rely on that consumers, households, working families to offset the differential between what they're earning and what they're spending on their monthly expenses? And we're also seeing some of that rotation from goods back into services. You know, that ratio really shifted and went as high as 36 percent on goods during the pandemic from a historic. Usually it's about 31 percent relative goods

to services. Now it's halfway back, maybe 33 percent. So goods are still elevated, but it's coming down, going back into services. And that's really driving that and the labor shortage, driving all the services inflation. And that's, I think, complicating the Fed's job. That's what I was going to ask about the winners and losers. It's not like a rising tide lifts all boats here. Yes, all the categories were strong. But if you look at some of the performance of some of these retailers and just look at their stock prices, like a VF Corp or Hasbro, these are stocks that are still 40 to 50 percent

off their highs. Even Target is 30 percent still off its highs. Bath and Body Works. So what does it take right now? What are the sort of categories of what's working for consumers? Well, Sarah, I think some of that is reflective of what we saw this time last year, maybe late last spring, early last summer, when inflation really took off and retailers had to pivot very quickly because consumers changed their behavior. And because in the holiday season of 2021, there were such acute shortfalls and lags in the supply chain. It was so backed up that inventories and orders were sort of passing each other and they weren't in on time.

And then they came when people didn't need them anymore. The seasons changed and that all sort of came together last spring. I think that's mostly been resolved. But maybe some of what you're seeing in some of those retailers still reflects last year, 18 months ago, supply chain challenges. I think looking forward and you made the point about a rising tide, during the pandemic when consumers had $5 trillion of fiscal stimulus from the Congress, and there was $5 trillion of monetary stimulus from the Fed, that's 30% of GDP to fill a 6, 5, 4, 5, 6% GDP hole in the bucket. We had way too much money out there, but that's not true now. And so I think the companies that are well positioned are those that are healthier. They have a good strategic plans, a nice, strong balance sheet. They'll weather the uncertainty of the year ahead more

comfortably than those that don't. Matt, thank you. Matt Shea, good to talk to you, especially on a day like today. Nice to see you. From the National Retail Federation. After the break, a CanMiss interview with billionaire investor Sam Zell. We'll get his outlook on the economy, real estate, the broader market, and much more. You're watching Closing Bell on CNBC. We've just cut our losses in half, down 48 on the Dow. We've got a news alert here on Sam Bankman Freed. Eamon Javers with the details.

Eamon. Sarah, we just got the answer to one of the bigger mysteries in this whole FTX crypto collapse over the past couple of months. That mystery was who were the two people who signed bond sureties allowing Sam Bankman Freed to go free. They co-signed along with Sam Bankman Freed's parents. Those two names had been sealed by the court until a short time ago. One of the people involved in this, we learned just a short time ago when his name was unsealed, was Larry Kramer. Larry Kramer is the dean emeritus at the Stanford Law School. I emailed him and I asked him why did he co-sign that bond surety on behalf of Sam Bankman Freed.

And he gave me a statement over email. I want to read it to you. Here's what he said. He said, Joe Bankman and Barbara Freed have been close friends of my wife and I since the mid-1990s. During the past two years, while my family faced a harrowing battle with cancer, they have been the truest of friends, bringing food, providing moral support, and frequently stepping in at moment's notice to help. In turn, we have sought to support them as they face their own crisis. My actions are in my personal capacity, and I have no business dealings or interest in this matter other than to help our loyal and steadfast friends. Nor do I have any comment or position regarding the substance of the legal matter itself, which is what the trial will be for. So that is from the Dean Emeritus of Stanford Law School, who is supporting Sam

Bankman-Fried in this because, as he says, of his personal relationship with SBF's parents. The other name that was unsealed today as signing a bon surity in all this is Andreas Papke. Now, that name matches the name of a research scientist at Stanford. We've reached out to that scientist to see if he is, in fact, the same person. And we'll get back to you with a statement from him if we do get that. But this really brings out some of the emotional and familial relationships that are playing out alongside all of this legal and billions of dollars of crypto drama that's playing out here. As you say, and we were all wondering who was underwriting that bond. Eamon, thank you. Eamon Javers in Washington. Well, the recent monthly reports

on industrial production, on retail sales, on jobs, all coming in better than expected. Some economists expecting the latest data will reinforce the Fed's rate hiking strategy, maybe even increase it. But will this result in a recession

later this year? Billionaire investor Sam Zell of Equity Group Investments joins me here at Post 9. It's good to see you. Good to see you, Sarah. So there has been a bit of a rethink in the markets about recession. Is that something you still expect?

I haven't gone through that rethinking. You're still negative? Negative is the wrong word, but when you spread out free money for years at a time, you create, you know, significant drag. And I just don't see how we're going to avoid a slowdown as that whole process comes to an end. Well, I guess the idea would be that the Fed would get really lucky and engineer a soft landing here because the data is strong, the labor market is super tight, and inflation is starting to come down. Yeah, but is the definition of coming down going from nine to six? Well, yes,

and then it has further to go. Well, but the point is six is a serious problem. So you think the Fed's going to have to do even more than the market expects? I think the Fed screwed up by allowing the zero interest rates to go on for too long. I think we're just beginning to pay the price for that. And it'd be nice to say that it'd be great if the Fed got lucky. I've been around for 50 years and I've never seen the Fed get lucky. All I've seen the Fed do is mistake in terms of not acting fast enough. So how do you take that view and prepare some of your companies and your portfolios

for that eventual outcome? Well, I think you basically do two things at the same time. One, you prepare for higher interest rates and higher costs. And then at the same time, you also prepare for dealing with inflation. So a year and a half ago, we went to our companies and said, hard to imagine we're not going to have significant inflation. And we need to prepare for it, not respond to it. So in effect, we reached out and changed a number of our policies to prepare our companies for escalating costs. Are you now preparing for disinflation or you're just not convinced it's there yet?

No, I, you know, I, you know, preparing for disinflation would be a very optimistic thing to do at this point. I think it's going to take a while for, you know, the inflation pressures to ease. And I think that's what we have to look forward to. Sounds like you think the stock market may be a little too excited about this notion that inflation is coming down and the Fed's going to pause. The stock market has a long track record of being too excited about everything, both negative and positive. And I think, you know, when the stock market reflected the fact that interest rates were going up and inflation was a problem, it was a little slow to pick that up. And then at the first opportunity, the stock market has gone and

flipped and said, oh, everything is wonderful and we're going to have a soft landing. I think both those extremes are unsupportable. What about real estate, which is a big business for you? It's what you're known for. How much is real estate off the lows, if at all? Because we have seen mortgage rates come down. Yeah, but, you know, think about the fact that if you had bought a house in January or February or last November, your mortgage rate would have been two.

And today it's six. That's still high. That's a pretty staggering jump in a relatively short period of time. And I think there's just going to be, you know, I think the real estate industry as a whole has got to deal with loans and all kinds of things that were the result of very, very low, unrealistically low cost of capital. So you see more pain for the residential market? Well, for the whole real estate market. Now it's the cost of, you know, remember real estate is a leveraged industry

and it's an industry with a lot of, you know, debt plays a very big role in it. And I think that, you know, we need to understand the cost of debt has more than doubled. And it's kind of naive to think that the cost of capital doubles and there's no impact. But you sometimes do the buying when times are really tough. Right. Is that not that time? Because you think it's going to get a lot tougher? Not yet. What are you waiting for? I'm waiting for the sellers to readjust their thinking to the reality of the situation, which hasn't happened yet. In other words, if you were

going to sell something and the value six months ago was X, and now the value is X minus something, you know, do you really see that minus coming through? And I think that so far there hasn't been enough reality. I'm curious about commercial real estate in particular with the vacancies in office, some of those leases coming due, the tech layoffs that we've been seeing. What is the outlook there? I think the outlook there is pretty dire. The office market, generally speaking, what most people didn't understand was that prior to COVID,

the office market was overextended. And it was overextended because we had unrealistic vacancy numbers because companies like WeWork and similar companies were taking down four and five years of supply immediately so the numbers showed that gee everything was terrific but the reality was WeWork wasn't filling the space. So you just changed the definition of vacancy from the market to those companies. But the net effect overall was still oversupply. But unfortunately, when you have those kinds of numbers being produced, the result is that you end up building new buildings for which there isn't demand. Right.

Or as we've seen here— The zombie offices. Or as we've seen here in New York, you're building new buildings. Tenants are going to those new buildings because they're fancy and they're terrific, et cetera, but they're leaving huge, you know, swaths of vacant space, both New York, Midtown, Chicago, LaSalle Street, San Francisco Market Street. They're all suffering. So are you optimistic about this move to transform them into affordable housing? Is there value there? Deals to be done for you?

I'm a cynic. You know, I think affordable housing is the ultimate oxymoron. It goes with military intelligence. And the reality is that it's not affordable housing. It's subsidized housing. And I think that that's not a winning formula. So is there a pocket of commercial real estate where you do see value right now? If it's not office? I don't, I've basically been a seller for the last seven or eight years.

Wow. All right. Well, Sam, we have a lot to talk about. We're going to take a quick break. Stay with us if you would. We want to talk to you more about, certainly get your reaction to President Biden's billionaire tax and energy policy. We're going to take a quick break. Closing bell back in a moment with the Dow down 61. Welcome back to Closing Bell. Equity Group Investments Chairman Sam Zell still with us. And Sam, I always like to get your thoughts on the political environment and, of course, policy proposals,

including President Biden's recent one in the State of the Union, the so-called billionaire's tax, where he wants to increase a tax, a 20 percent levy on households with a net worth of more than $100 million. Somehow, I think, as a billionaire with strong opinions, you will want to weigh in on this one. Well, I just, you know, I just think that the government, the idea of taxing unrealized gains is crazy. I think that putting people who are successful at risk of liability and no cash makes no sense whatsoever. And I think it would have a significant impact in how you think about investing. So part of the goal here from Biden and the Democrats is to reduce inequality and to deal with the deficit, which are both good goals. Yeah, but, you know, so is mom and apple pie. I mean, you know, those are also, you know, good goals, but they're not

practical. I mean, you know, all kinds of countries, France, Germany, Belgium, all put in wealth taxes and have all reversed them because they don't work and they don't produce the kind of results. I mean, if we had that kind of tax like Biden is suggesting, that would change the way people invested and the way they thought about it. And certainly, if somebody was levying 20% on unrealized gains, I'd have a very different view of unrealized gains. I mean, the great fortunes in our country have been the result of unrealized gains. I mean, if Bill Gates had to pay taxes at the end of every year

on the appreciation of a Microsoft stock without it getting cash, that would modify his behavior dramatically. Same thing with everybody else who's been very successful. I think the politics of envy are very, very negative, and they're very negative for our society. The reason the United States has been so powerful and so successful is we've avoided the politics of envy, which Europe has not done. And the results in terms of growth are significantly different.

Are you backing anyone yet for 2024? Too early. No, and I've never really been a back somebody kind of person. The answer is I'm involved and I make contributions to various things, but it's really a function of how these people react and, frankly, how will they react to this Biden proposal, which I think is crazy.

He also wants to tax buybacks quadruple the rate that— Yeah, I mean, you know, again, I just—I don't understand it. In other words, I don't know what that accomplishes, except that you can wave a flag and say, I tax buybacks. He wants it to, I guess, encourage growth and to get companies investing more in their businesses and their people. Companies, I mean, I run a number of companies, and we invest in our growth, period. And we do that when we see the opportunity.

When we don't see the opportunity, then we look at our capital base and say, we have too much capital because we can't invest it intelligently. And so let's reduce our economic or our equity base. So I think it's a very logical thing to do. And I think it's just become a shibboleth that people bang on. Speaking of investing in Washington policy, you do own energy assets. Is that a place where you're investing right now? I think what we're doing now more than anything else is what I call generational investing, where we're providing liquidity to private companies and basically dealing with families that have built businesses. Not necessarily in energy. Not necessarily in energy, but in lots of different places. We've always been industry agnostic, so we've always had an enormous variety

of different kinds of businesses that we're investing in. Interesting. Sam, thank you. It's always a treat to talk to you about a variety of topics. Great. Great to see you, Sarah. Thank you for coming in today. You too. Sam Zell. Apple shares. Take a look on a rollercoaster ride

on a Wall Street Journal report that the Justice Department is accelerating its antitrust probe into that company. The stock is actually up now 1 percent. We'll talk to the reporter who broke that story later on Closing Bell. Check out today's stealth mover, Krispy Kreme. Investors are eating up the stock today. The donut chain beating Wall Street's earnings estimates as holiday specialty donuts and strong e-commerce sales brought in a lot of dough during the fourth quarter. Stocks up 6.5%.

Here's where we stand overall in the markets heading into this final half hour of trading. The S&P 500 has moved higher, but just barely. It's a tale of various sectors because you do have communication services, utilities, and industrials all jumping. Technology is up as well. But groups like energy down almost 2 percent. Health care is down half a percent. Staples are also lagging today. The Nasdaq is higher again, six tenths. We continue to see this outperformance for the Nasdaq. It's up two and three quarters percent so far this week. Up next, the co-founder of alternative investment company Blue Owl, big stock mover today, telling us where he is seeing opportunities

in the private equity and credit markets. And during the month of February, we are celebrating black heritage through some of the stories of our CNBC teammates, contributors, and leaders in business. Here is Closing Bell's very own director, who we love, Elizabeth Donovan. Often in my career, I have been the first black woman to hold

my position, sometimes the only black person. People will question everything you do and ask how you got here, as if not by hard work. When you are successful, you internalize to survive the spaces that were not made for us. My advice? Be courageous, be bold. Don't diminish your gifts. Today, you may be first, but hopefully tomorrow, you will be one of many. Check out shares of Blue Owl Capital.

The alternative investment manager is higher today and adding to strong gains on the year, up around 30%. The firm reported results this week with revenue coming in well above expectations, strong double-digit growth. Joining us is Mark Lipschultz. He's Blue Owl's co-founder and co-president. Mark, it's good to see you. Thank you. Thank you so much for having me, Sarah. So you've really been able to grow this direct lending business pretty organically and significantly during 2022. How does that work as the Fed is raising interest rates?

So, you know, we've been very fortunate. We've been able to build a series of strategies at Blue Owl that have a common thread. The common thread is about capital preservation, safety, security during times of uncertainty with very strong current returns, current yields. And that applies to our triple-naught real estate business, our GP solutions business, and most directly to our direct lending business. And in direct lending, we're really providing capital solutions to companies, financing solutions to companies on a floating rate basis. So in this environment, the two attributes from an investor looking at our products that's appealing is it's about durability through times of uncertainty, and actually our returns go up when

rates rise. So this has actually been an upward trajectory for returns in our direct lending business over the last couple of years. So if the Fed is getting close to a pause here, let's say with terminal rate of 5% or so, how does that affect it? So at the end of the day, we do floating rate, which means when rates go up, we rise with them. If and when rates come down and inflation presumably correspondingly, then some of our yields will come down. But the beauty of the business and the power that we provide to someone's portfolios, you don't have to take a static view on that today. You can invest with our products and you will float up and down with

those variants sitting here today and trying to call, are we at the end of the pause? Talk about retail sales, blowout numbers. Very strong. You know, we've seen strong numbers this week. So maybe we are, maybe we aren't the beauty, dare I say, for us. We don't have to know that. And investors, thus, don't have to know that in our products because they're going to get the floating rate one way or the other. I mean, there's been such strong appetite for alternatives, private equity.

We've seen that. But now that there's more competition in the public markets with higher rates, is that a headwind for alts? It's been a really interesting evolution. You know, I've been in the alternatives business since 1995. It wasn't called alternatives back then. And there's a really interesting dynamic in this arc. What's happened with private assets, and I think over the last five years as visible as any, is they become, of course, a much larger share of the market, but actually a much more stable and durable share. Think about post-pandemic. Think about 2022. Direct lenders remained very active providers of capital when the public markets disappeared. So if I think back to the 90s and we think about private alternatives, think about LBOs, as they were called then,

was very opportunistic. The public market was steady, and the private markets would kind of come and go. There's a bit of a reversal. And actually, private markets, direct lenders, for example, kept the capital markets going in 2022 when the public markets retreated. Right. So there's the defense on the private lending. You raised your dividend, as expected. A lot of people watch your story as a dividend story. Some sales side analysts say it can get up to $1 per share by 2026. Is that realistic? That is our plan.

We're looking to deliver $1 of dividends in 2025. We have a very unusual model because we don't have carry interest. We don't have performance fees in our model. Ours are about steady, predictable growth. The Blal model is. It's about delivering, predictable growth, the Blalow model is. It's about delivering fee-based income on permanent capital. Very important. 94% of our revenues, 94% come from permanent capital pools. So our trajectory is upward and very predictable. Do you think that your stock market performance would have been better if you did not

go public via very complex back merger double merger you know just a traditional IPO how does it impact your the holders of your of your company and do you think it's held you back yeah I think that it would have been better when look it was a necessary tool to accomplish the strategic end we wanted to accomplish and it worked we're able to bring together these GP Solutions capabilities with our direct lending capabilities, now our triple net lease capabilities. So it was the right thing to do, and it worked. However, it means we had to spend more time educating more investors about our business because we didn't have that traditional

IPO route. So I think the silver lining, I think there's a lot of upside from here as people come to understand, listening to our earnings this week, they'll start to see a real difference between Blue Owl. We delivered exactly what we talked about publicly in the spring when all our peers, for reasons that are understandable, are not able to deliver what they thought in the spring because the world got more uncertain. Times of uncertainty, we still continue to perform. One thing that was uncertain with some of your competitors, like a Blackstone or a Starwood,

is they put up these gates on some of their private REITs. Anything to be concerned about that something like that could happen with you? So, you know, listen, they're great firms doing a great job, and those are great products. We have very different products. Our products are about, in fact, we've been increasing our distributions. And so we actually are a very meaningful participant in the individual

investor market. We really do believe in the democratization of access to the performance of alts. So we participate. But this continues to be a great area for us. We raised $2.2 billion in the private wealth channel, wealth channel. And we only had about $180 million in redemptions for the whole quarter. So different set of circumstances for us, but those are great products. I'm sure they'll do well. Well, the stock is breaking out here, up more than 4%. Thank you very much, Mark Lipschultz. Thanks so much, Sarah.

Good to get an update from Blue Owl. That's the co-founder. Well, it's a tale of two chipmakers on Wall Street today. Up next, why analog devices and Taiwan Semi are heading in very different directions. That story, plus Apple's antitrust concerns and Barclays selling off when we take you inside the Market Zone next. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Zantoli here to break down these crucial moments of the trading day. Plus, we've got Christina Partsenevelis on chip stocks and The Wall Street Journal's Aaron Tilley on Apple's battle with the DOJ. We'll kick it off with the broad market now. We are seeing the Dow actually climb back to the flat line. Mike, I would say overall,

the market action, the S&P is now higher. So we've really accelerated here in the last few minutes and all day had this comeback. It's pretty impressive given the string of hot data releases, including today's retail sales, the move up in yields and the idea that this is going to make the Fed's life harder. Right. I mean, the market keeps getting tested by, you know, really testing the soft part of the soft landing scenario at this point. You were down about three quarters of a percent of the S&P at the lows of the day. It has kind of ground its way back. It's all very sort of benign. I love to poke holes in the market action and say, ah, it's really less than it appears.

It's a little bit more than it appears right now. It's more high beta stocks working. The equal weighted S&P is up, you know, a third of a percent while the S&P itself is flat. So it's traction right now. We're not carving new upside, but certainly in a very benign way going sideways as investors get a little more comfortable maybe with yield levels if they're here because the economy is strong. Let's hit the chips. Pair of chip stocks making big moves on Wall Street in different directions. Analog devices rallying after beating analyst estimates for both earnings and guidance thanks to strong demand from industrial customers. Meanwhile, Taiwan Semiconductor, under pressure after Warren Buffett's Berkshire Hathaway,

revealed it slashed its stake in the stock by roughly 86 percent. Christina Partsenevelos joins us on what has been a really rollercoaster ride lately for the chips. What are your takeaways? I guess with TSMC, the thing that really, I guess, spooked some investors today and why you're seeing the stock down so much is the fact that Berkshire Hathaway made a move so quickly. They got into the stock. They entered the stock in Q3. They spent over $4 billion on a stake. It became one of the top 10 holdings for Berkshire Hathaway. And then literally the next quarter, they slashed their holding by 86%, like you mentioned. And so the question is, why did they do that? Does it have to do with cyclical trends? Does it have to do with the fact that TSMC is spending on fabs in Japan and the United States? Does it have to do with maybe the U.S. ban on technology to Chinese firms? These are all questions that people are asking.

And in regards to analog devices, why it's a different story is because of their exposure. You mentioned industrial customers, but it also has to do with auto. Both those categories really helped offset the weakness that we are seeing in consumer end products. And that's continuing with a lot of other companies. NXPI is another benefit, too. They are highly exposed to the auto sector, and that's why they did well. So really, it's about exposure with a lot of these chip names. And the run-up, you know this, a lot of it has to do with the ai conversation nvidia is an excellent example up what 55 year to date yes yeah we had the analyst on yesterday who said that you know he raised his target said they're a major player

lead the ai arms race if i remember correctly from his exactly no right that was the report that's all that was like the most bullish thing you can say in this market christina thank you christina parts and evils the justice department reportedly turning up the heat on apple the wall street That's all. That was like the most bullish thing you can say in this market. Christina, thank you. Christina Partsenevelos. The Justice Department reportedly turning up the heat on Apple. The Wall Street Journal this afternoon writing that the DOJ has drafted a potential antitrust complaint that targets the tech giants App Store and its mobile operating system. Aaron Tilley is one of the Wall Street Journal reporters behind the scoop. He joins us now. So, Aaron, is the news here that they're ramping it up or they're approaching this case differently or what?

The news is, you know, they've been investigating Apple since 2019. And in recent months, they've been really ramping it up. They've expedited requests for documents. They've added more litigators to the case. They've just been moving ahead. And they're also looking to clear their top antitrust chief on the DOJ, Jonathan Cantor. He has worked on previous cases against Apple in private practice, and now they're looking to clear him to go ahead with the Apple case. So this is all signs towards momentum, towards filing a case, potentially in spring. In the spring. Okay, that's what I was going to ask. So what are we looking at in terms of, do you know size and scope of what Apple is going to have to deal with here? Yeah, the DOJ appears to be looking at the App Store, but also a bit broader than the

App Store into the operating system level, specifically iOS, the iPhone operating system, where Apple allegedly has this sort of unfair advantage against third-party developers. You can see this happening in sort of hardware with, you know, the AirPods or their AirTag devices. Against competitors, they get a lot deeper access into the operating system and the iPhone hardware. And that creates, allegedly, an unfair playing field for competitors. Right, and I think you probably would have

a lot of developers lining up to argue against Apple on this front as we've monitored. So what does your reporting indicate is at stake here for Apple? What's the worst case scenario? from the app store allowing deeper access for for developers into the operating system this is certainly something the european antitrust authorities are looking for too separating out the app store increasingly so i I think just kind of further allowing a more fair playing field for players. Yeah. Thank you very much, Aaron, for coming on and sharing your reporting. Moving Apple stock all around today. It's now higher into the close. Aaron Tilley of the Wall Street Journal. Barclays having its worst day in nearly a year after reporting a 19 percent drop

in net profit for 2022, though it did beat estimates. One big hit to profitability, litigation costs and fines tied to over issuance of securities in the U.S., which include a 200 million dollar charge from the SEC after its investigation. Like other banks, Barclays also suffering from a steep decline in dealmaking activity. Mike, anything to glean for the rest of the group or the economy or is this some Barclays also suffering from a steep decline in dealmaking activity. Mike, anything to glean for the rest of the group or the economy, or is this some Barclays-specific stuff? You know, Barclays was subject to a series of things we knew were going on. We knew about that trading glitch, that issue. We didn't really have it quantified. Also, of course, know that the investment banking environment has not been particularly strong. But that on top of, I think, disappointing guidance about net interest margin and maybe a lower than expected buyback authorization.

So all these things come together on a stock which, we should keep in mind, was up a lot off the lows along with the other U.K. and European banks. It's still up some 8 percent year to date. So just giving back doesn't seem like it's going to be able to capitalize as much on higher yields in a firmer economy than people thought. Just, I would note, as we go into the close here, Mike, the strength in some of the big cap techs like Apple, despite that Wall Street Journal report we just discussed, Netflix higher, Alphabet higher, Airbnb is rallying 13% off of earnings. But in general, how tech has been leading this market, even in the face of sort of yield march higher? Yeah, tech has been able to participate because it's because people

are getting a little more comfortable with select companies that the downgrade to earnings estimates are finished. Yields, while they're up, they're still in a range. Let's keep it in mind. And also, I've been really trying to say it wasn't really just as purely simple as yields up, tech down, even when that was the predominant phenomenon last year. It was a lot about the underlying fundamental issue kind of eroding a little bit. And by the way, when the NASDAQ goes down 30 percent, rates become a little bit less of an issue than does earnings estimates and where they're headed. Well, it looks like we're pushing higher here into the close. At least we're well off the lows.

We were down 250 at the low on the Dow. We've now turned green. S&P is up two-tenths. What are you seeing in the internals? Yeah, it's been firming throughout the day, Sarah. Certainly not a dominant showing by the bulls, but more upside than downside volume. About two to one, not quite that on the New York Stock Exchange. Take a look at the VXF.

This is known as the S&P Completion Index ETF. This is everything in the market except for the S&P. And this is weak to date. What's in there besides small cap stocks? Well, things like Uber that are not in the S&P, Airbnb, all the private equity firms, Square. So a lot of the high octane growth stocks are driving that index right there. It's a very good sign of risk appetite and sponsorship for some of those names as long as it lasts. And then volatility continues to recede. We're down in the 18s again, scraping the lows for this cycle as the indexes themselves remain in a very narrow range. This has been a 3% range this month so far. As we head into the close, take a look at the Dow, which has just gone positive after being down again as much as more than 250 points right now.

It's been spent all day lower and we've just crossed into positive territory. Caterpillar, Goldman Sachs, Home Depot and Apple are what are helping the Dow out the most. J&J, Microsoft and UnitedHealthcare are the biggest drives. S&P 500 now up a quarter of one percent. They've been building on gains throughout this final hour of trade. Consumer discretionary has now taken the top spot as far as what's working best right now. And that's strength in Etsy, Norwegian Cruises, Domino's, Target, strong retail sales. A lot of those stocks are working.

Communication services also doing well. Energy is at the bottom of the market again. And the NASDAQ outperforms again. Looks like it's going to close up almost a full percent, adding to gains for the week. We're up 3%. And the NASDAQ outperforms again. Looks like it's going to close up almost a full percent, adding to gains for the week. We're up 3% now on the NASDAQ so far this week. That's it for me. I'm closing down.