Closing Bell - Closing Bell: Mixed session to end the week, Gary Vaynerchuk on Super Bowl Ads, Google employee dissent 2/10/23

Episode Date: February 10, 2023

The major averages saw mixed action to close out a mostly downbeat week on Wall Street. Warren Pies from 3Fourteen Research discusses the technical levels he’s watching in the S&P 500, and a potential false buy signal that could trick investors. Content and advertising expert Gary Vaynerchuk talks about the record $7 million price tag for Super Bowl ads, and why he thinks they’re still underpriced. Michelle Meyer from Mastercard breaks down the muddled picture on the consumer – as sentiment tops estimates but color from earnings calls comes in mixed. Plus the latest on employee dissent at Google over its AI unveil, and Lyft’s earnings disaster.

It is a mixed session for the major averages to close out a mostly downbeat week as attention turns to Tuesday's inflation report. This is the make or break hour for your money. Welcome to Closing Bell. I'm Mike Santoli in for Sarah Eisen. Here's where things stand in the market. The S&P 500 really been kind of twitching around the flat line most of the day. Now slightly positive actually did have a bit of a decline less than half a percent at the lows for the day the dow outperforming some of the defensive issues such as united health behind that the nasdaq giving some back tesla is a downside leader there uh 10-year note bumping higher above 3.74 percent here's the scorecard for the week on the major averages the nasdaq is faring the worst of course it was strongest year today coming into this, but it has shown declines week to date. The S&P 500 down about a percent, a percent, 1.2 percent or so at this point, still at more than 6 percent year to date.

Coming up on today's show, we'll talk to content and advertising expert Gary Vaynerchuk, whose agency has three ads in Sunday's Super Bowl. He'll tell us why he thinks the record $7 million price tag for a 30-second spot is actually underpriced. All right, well, let's take a look at the S&P 500, where this week's action, a little bit of a payback week for the S&P 500 has taken it. You know, we're kind of knocking around this 4,100 level. The highs for this rally, which started at the October lows, were last Thursday, a week ago Thursday, just under 4,200. So we're down 2 to 3 percent. It's really not that consequential a pullback just yet.

You're seeing some of the more defensive tone, though. Some of the more speculative stuff that ran higher, heavily shorted stocks, have given back some this week. But overall, relatively noncommittal ahead of that CPI number coming up next week. A lot of signs, too, that the economy itself is pretty sturdy, at least it was in January and coming into this month. Take a look at consumer discretionary on an equal weighted basis relative to consumer staples. This is a pretty good indicator of the cyclical or defensive tone of the market. This is a three year look. So essentially, you have consumer discretionary pulling out ahead again on this timescale from consumer staples.

And really, look at the aggressive move off the lows from late last year in discretionary, whereas you have more or less sideways action in the staples, which no longer seem real beneficiaries of pricing power, of inflation in the economy. So this is one of those cues that people are kind of leaning on to say maybe the market is sniffing out a better time for the economy. But really, a lot of conflicting messages coming out of the markets and coming out of where we are in the macro cycle. Our next guest says he sees a false buy signal flashing that could set investors up for trouble. One of those mixed messages. Joining us now is 314 Research co-founder Warren Pies. And Warren, I really appreciate you coming on today to talk about your latest

strategy piece, which I thought did a great job of sort of wrestling with some of these conflicting data points, some of which have a very long history of being reliable, such as the technical action in the market coming into this week. The tape looks much stronger. On the other hand, you know, Fed, macro and some of the other stuff gives you some pause. So where do you come down on how this shakes out? Yeah, thank you for having me. When you look, step back and look at the market right now, I kind of feel like depending on what your philosophy is and how you attack the market, you could see a totally different, have a totally different view. And so we come from a background

where we have macro and technical. And one of our old colleagues, Ned Davis, he was famous for saying his rules of research. And two of the big rules of research was, number one, don't fight the tape. Number two, don't fight the Fed. And as I see it right now, I think these two big philosophies or truisms are really running up against each other.

And so let's start with the technicals for a minute. We've had the S&P 500 break above its 200-day. We've seen the 50-day break above the 200-day. We've seen on the NASDAQ, it's broken above the 40-week moving average on record volume, volume we haven't seen for over a decade. And then at the same time, we've had a breadth thrust, which technicians love breadth thrust, they have great track records. And these are this happens when you basically have a large universe and you've broad participation. So let's say 90% of all issues in the S&P 1500, for instance, have broken above their 10 day moving average. So all these things have great track records, that's the tape. But on the other hand, the Fed is obviously doing the

most aggressive tightening cycle that we've seen in modern history, and then at the same time, running down their balance sheet, which I think is especially important at this point in the cycle. And so as we see it, when we start controlling for these two variables, what we find is that these technical indicators, they have long track records and they're good. And I know that price can see through a lot of things. But when you see them fire at this point of the Fed cycle, while the Fed is hiking aggressively or pauses following hikes, the track record is much less clear. And so for us, we see that we're siding more at the Fed. I think that's the dominant factor in the market, not to mention the fact that the market is now about 10 percent overvalued on forward earnings plus interest rate basis. So you're not just fighting the Fed, you're fighting valuations.

And I think an earnings outlook that's really baking in a soft landing. Yeah, it is absolutely a fair assessment of where we sit. And I think why, in fact, both more bullish traders and investors and the bears are pretty well dug in, in the sense that they're not persuaded necessarily too much by the alternate side. I guess the question is, when you have such a transparent Fed, you know, they've told you they're going to be this aggressive. They've projected where the target rate has to go to for a while. And we've been living with that cycle and it's slowing down. Whatever the Fed has left to do, presumably it's not too far from finishing.

Does that change the sense out there that you're not really fighting too hard against the Fed if, in fact, you're bullish right here? Well, I would push back on that a bit. I mean, it would be historically anomalous for October ultimately to be the lows of this cycle. So we've never seen the market bottom in modern history during a Fed hike cycle, period. We've only seen in the weird 1987 case one time where the Fed funds rate was higher 12 months following a major bear market bottom. And so we're not even at the pause phase yet. The Fed's still kind of pushing out this hike phase. The market's in the process of pricing out the cuts they had for the back half of this year. And then you have the balance sheet. And there is a lot of lack, despite the fact that we think the Fed's really clear on what they're doing, QT has not been totally defined. So will QT only go for six months or could it go for two years? This really comes down to how they define banking reserves. That's kind of technical, but the Fed's targeting eight to 10 percent of nominal GDP of bank reserves. But Governor Waller has said

this could include what's parked at the reverse repo facility, which is two trillion dollars. That could push QT out to next year. And ultimately, we see QT as a huge impediment to housing affordability. MBS spreads will not come down while the Fed's doing this round of QT. So for us, I think the Fed's pretty big headwind at this point. So clearly, it all comes together for you in saying that, you know, the risk reward for stocks doesn't look great up here, you know, 4,100, 4,200. What do you think we're in for? Is it essentially down to the lower end of the range? Are we going to, 4,200. What do you think we're in for? Is it essentially

down to the lower end of the range? Are we going to break below the October lows, do you think? Yeah. So if I had to guess, I think that we're in range bound trading. And I do think that before this cycle is over, we will see new lows. I don't think those come any time in the very near future, but I think that the near term, I wouldn't be adding to equity longs. Now, if you're riding this, you can still, we've always said, we build conviction on fundamentals, but we manage risk on technicals. And so if you're riding long positions, that 200-day acts as a good stop loss for you if you're going to let this stuff run and you want to trust the price action. At our firm, we have an S&P risk model that looks 21 days out and judges the probability

of a drawdown. It's showing low risk. That's mainly technicals and volatility. So we're telling our clients, watch the 200-day. Watch our risk model. Obviously, if you break below that, then you want to really get defensive. But I have no conviction based on the technical moves that we're seeing. And ultimately, if you ask me, I think we're headed lower, probably back to the lower end of the range.

We'll see what happens. We will, Warren. Appreciate you running through all that with us. We'll talk to you again soon, Warren Pies. Thank you for having me. All right. After the break, entrepreneur and advertising executive Gary Vaynerchuk joins us to talk about this year's Super Bowl, where some 30-second ads cost a record $7 million, and why he says that's actually underpriced. Plus, his thoughts on Twitter, TikTok, and much more. All that next. You're watching Closing Bell on CNBC. Some advertisers are paying a record $7 million for a 30-second spot in Sunday's Super Bowl. That's up from $5.6 million in 2021 and $6.5 million last year.

But our next guest says $7 million is actually underpriced. Joining us now from Arizona, VaynerMedia CEO Gary Vaynerchuk. And he has, well, VaynerMedia has three spots coming in this year's big game. Gary, great to have you on. Initially, just tell me why $7 million is a bargain for an advertiser this year's big game. Gary, great to have you on. Initially, just tell me why $7 million is a bargain for an advertiser this year. I mean, it all comes down to attention, right?

Like, the reality is attention is the number one asset and not potential attention. And you have the entire country actually focused on watching Super Bowl ads, which is unlike any other television commercial that runs in any shape or any form. Obviously, the commercial has to be good to make the thing happen, but the attention is underpriced compared to the cost per attention in every other environment that we see in digital television or traditional advertising. Is this just because, I mean, if 100 million people in the U.S. watch it, that's some of the estimates this year. If that's the case, that, yeah, it's always been the most widely watched event of the year, but compared to the single audience of any other program,

show, any place you could find people assembled, it's that much bigger on a relevant basis? Does that actually translate directly into return on investment? No, it doesn't. It's that Americans actually want to watch the commercials. Nobody wants to watch the commercials on the Grammys. Nobody wants to watch the commercials on the Oscars. Nobody wants to watch the commercials in the AFC and NFC championship game or the NBA finals. This is the only time people in America actually want to watch a commercial, thus rendering it the best deal,

while all the other commercials on television are grossly overpriced. How do you, if you're talking to your clients, you have, as I said, some ads in this Super Bowl coming up, Pepsi Zero Sugar, for example. How are they going to determine whether they got a good return on their investment? Sales, you know, amortized over time. It's not like the next day. But you look at sales in a window and you look at what you're able to do with the leverage of the awareness. Like right now you're playing a Mr. Peanut piece of content. You have plenty of people that watch this show.

I got previewed. I got like 30 texts right now. You have a real audience here and they're watching Mr. Peanut now. And subconsciously that may lead to them choosing a planter's product versus another product in the next week or day or months. But ultimately, this is about business. This isn't about making people laugh or being too silly. Like

it's great to have Steve Martin in this, but we want people to really focus on considering to try Pepsi Zero. And so this is about business. Yeah, it's interesting in the sense that the broader digital advertising environment has, to a large degree, been about targeting and point of sale type things and trying to be very actionable and narrow casting in a way. And so this is kind of the opposite. What are you seeing in terms of your clients right now? Let's say you're being a little more careful about overall ad spending. What are they prioritizing in those other platforms? Well, it's interesting.

You just talked about the difference between branding and sales. And to your point, digital has been very focused on conversion. The meta Facebook world really mattered and worked. Right now, what everyone's focused on is building brand in social. People are starting to realize that your brand is built in social much more than in regular TV commercials, non-Super Bowl, or in billboards, or in print. That social brand, not selling people,

but putting out content that makes them interested in the product or consider the product is exploding. And so it will continue to gain market share because social media is where a shocking amount of human attention is being allocated to. But what we finally are starting to see is the branding elements enter the social sphere much more than just trying to make it a sales conversion channel. Which platforms are best suited for that, in your view? I mean, TikTok, obviously now maybe the greatest number of minutes spent, but Instagram traditionally seen as being friendly to that type of thing, too.

It's a great call out. I would say it's where your strategic creative lands, meaning, believe it or not, LinkedIn for some consumer products is overperforming Twitter or Instagram for certain brands because they understand how to make the videos or pictures or written words that hit that audience better. It is a massive battleground for the advertising agencies like VaynerMedia and the Fortune 500 brands to outflank their competitors in creative strategy. We call it SOC, strategic organic content. Are you posting to just say happy Friday or are you actually putting out content to build brand? And so any of the platforms you just listed on the screen can dominate for brands is the punchline. Are you good at Twitter? Are you good at Instagram? Are you good at TikTok?

And certain humans are better at certain platforms, but the biggest brands in the world over the next decade will be built on the people that can execute best on all of the platforms so they're hitting as many customers as possible. Just to bring it back to the stakes involved in Super Bowl for the advertisers, is there a risk at, you know, everybody the next day reviewing the ads that ran during the game and saying, wow, that was a clunker, that really misfired, I didn't really think that that worked? Yeah, I mean, I'm less worried about the pundits, you know, talking about the content.

I'm less worried about the opinions. I'm more worried about the action. But there's a massive risk. A lot of Super Bowl ads are not great. It's just a punchline. They were trying to be too cute or clever or the agency was selfish about making a video instead of actually trying to sell stuff. And so there's the massive risk when you're spending $7 million just on distribution. It's $7 million just to show up on the Super Bowl. What about the talent fees, the agencies,

the production fees, the out-of-pocket fees. This is a huge bet for brands. And if it doesn't land with the 300 million Americans, it's a huge risk. Yeah. And I guess, look, last year, everything was so heavy with crypto. And with a year's time passing, maybe it doesn't look like all of them were well-timed. That was for different reasons, obviously, than brand, than ad quality. But we'll leave it there. Hey, Gary, great to speak with you. Enjoy the game. Cheers. Thank you for having me. All right. Let's let's check on the markets now. You have the Dow up about one hundred and seven points on the day. S&P 500 right around the flat line, down more than one percent for the week. Nasdaq underperforming on the day. Google employees are sounding off on CEO Sundar Pichai

following this week's AI chatbot reveal that cost the company tens of millions of dollars in market cap. We'll talk to the CNBC reporter who got an inside look at Google's internal message board. That's next. As we head to a break, check out some of today's top search tickers on CNBC.com. The 10-year yield on top once again, followed by Tesla, Lyft today, the S&P 500 and Walt Disney. We'll be right back. President Biden's billionaire tax on the wealthy outline this week in his State of the Union Union address may be dead on arrival in Congress, but on a state level, it is gaining traction. Wallmakers from eight states, including New York, California, Illinois, and Hawaii, are among those pushing bills to tax wealth and income. Joining us now to discuss CNBC's Robert Frank. And, I mean, Robert, those states I just mentioned are ones that are already suffering

some out-migration, have already struggled to keep wealthier residents in-house. I suppose it's not an automatic easy trade to say that they're going to get that revenue. You're right. And that's why I think it's important for investors to really keep an eye on this, because even though it's not imminent, certainly at the federal level, as you mentioned, and probably not even at the state level, the Democratic Party, certainly a wing of the Democratic Party, is just captivated by this idea of taxing wealth and now taxing unrealized gains. So we've got proposals in California to tax wealth over $50 million. In New York, you've got a proposal to tax all unrealized capital gains over a billion dollars. And remember, a lot of those

unrealized gains are stock. So if you own a lot of Apple stock and it went up during the year, even though you didn't sell any, they would like to tax that. And, you know, these states, as I said, some of the governors are going to oppose it. So it doesn't necessarily mean it's going to happen anytime soon. But as the sort of left fringe of the Democratic Party continues to push this at the state and federal level, it kind of moves the moderate wing a little bit closer maybe to being more amenable to raising the overall tax rate or raising the capital gains rate because there's so much impetus and energy put on the wealth tax, which is an extreme tax. It sure is. Yeah. And or even a movement toward an alternative minimum tax that actually acts like maybe it was initially intended to on very, very large earners. We'll see if any of that takes hold. Robert, thanks very much. Talk to you again soon. Thanks. So what's Wall Street buzzing about? Fallout from Bards blunder. Google employees criticizing

their own company on an internal forum after shares fell nearly 10 percent this week. Messages and memes describing the effort as rushed, botched and comically short-sighted. Let's bring in CNBC's Jennifer Elias, who broke the story about this employee dissent. And Jennifer, I guess the question is, is this a new wave of dissatisfaction? Is this particularly targeted at this kind of fumbled effort this week? Or is there kind of more unease welling up in the ranks at Google? Right. There has been unease for a bit that's been rising within the ranks. I would say because of the short span of time between the BART announcement and the fumble with that and then the layoffs announced

abruptly last month, that's sort of creating this compounded reaction from employees who are really feeling dissatisfied, embarrassed a little bit by the recent BARD fumble, and just really calling out CEO Sundar Pichai and the internal repository, which is normally kind of joking and funny. This week, it took a more serious tone. It's fascinating. So do you get the sense that there's embarrassment because of how the rollout was handled? Or does it go deeper into maybe Google's just not prepared for this technological shift, and maybe the products themselves are not ready, or the organization was not really in place to

capitalize on it? Yeah, well, I think that it's a combination of everything you had just mentioned, particularly with the BARD rollout. On Monday, you know, they announced BARD, confirming our reporting from last week. And that didn't have very many new details. And then they said they were having an event the day after Microsoft's event. And then that also didn't have any details. And it was sort of disorganized and disheveled. Then their own promotional video advertising part, had a mistake in it. And so all of these combined really made for a bad week in how employees view leadership. But it's been, you know, they also threw some words back at CEO Sundar Pichai

saying, how is this keeping focused? You know, this is seeming like a rushed reaction to what Microsoft is doing with chat GPT. And you just told us in December, according to an all hands meeting that we reported, that, you know, you were going to it was going to take time. They needed to slow down because they could do reputational damage if everything wasn't correct. So they sort of felt like it was a little bit of a backtrack from that as well. Yeah, it's all fair. And I guess, look, the culture there is one where, you know, employees have a voice. And I guess this has got a hard edge to it sometimes. Jennifer, thanks very much. Great to talk to you about this one. Thanks. All right. The latest read

on consumer sentiment hitting a 13-month high, according to new data out today. But messaging on the consumer has been mixed on earnings calls. Up next, MasterCard's Michelle Meyer joins us with her view on the state of spending, including some surprising areas of strength. We'll be right back. The American consumer has been under the microscope this week as Wall Street awaits Tuesday's CPI report and retail sales data on Wednesday. Today, the University of Michigan released its consumer sentiment number, showing it at a 13-month high, but companies have sent mixed signals about shoppers.

Ralph Lauren, Tapestry, Affirm, and Capri all reported earnings this week and saw their customers taking more precautions over the past quarter. Ralph Lauren says they're feeling the inflationary pressure and having to be more discerning on their spending. On the other hand, MasterCard, Kellogg, McDonald's, and Mondelez are seeing the opposite. Kellogg saying the consumer in their space remains incredibly resilient. Meantime, MasterCard's own spending pulse report came out today showing retail sales in January were up more than 8% from a year ago.

Joining us now is Michelle Meyer from MasterCard Economics Institute to talk more about these numbers. 8% is pretty strong. It's pretty strong. By pretty much any standard. Where is it coming from? And does this look like a trend or is it a blip in January? It's not a blip.

It's been pretty trend-like, strong spending on a nominal basis. But it really does differ by category. So that's the big story, this bifurcation in how consumers are spending, where certainly dollars are moving towards travel, towards experience-based spending, where some of those goods categories are seeing a bit more of a challenge, particularly those tied to the housing market, which we all know has been really problematic. Yeah, I mean, and just to break it down, I mean, restaurants, I mean, I guess we're a year past Omicron, right? So January of 22 is maybe a depressed level, but still, to your point, I mean, where are you seeing the big jumps?

And, you know, I guess what does it mean for the underlying condition of households right now? Yeah, well, I think there's the first big picture takeaway is that consumers still have the ability to spend. And that's very much consistent with the health of the labor market. Look at the last jobs report, the lowest unemployment rate in 53 years, strong wage growth, strong job creation. So income is being created today and consumers still feel reasonably confident they'll have income tomorrow. So that's providing a really big source of spend power. They still have savings, not as much as they had this time last year, but that's also some cushion. So I do think consumers have the ability to spend, but they are being more mindful

and they're taking care in the choices they make right now. Right. I mean, I guess December was a little bit of a lull based on the macro retail sales data, but here we are back strong. There has been some concern, I guess I would say, whether it's placed correctly or not, about the uptick in credit balances. So this idea that aggregate consumer credit has taken a big jump, but if you look at it longer term, it's really just coming back to the trend. So that's what I think is important, is to not look at the month-to-month or quarter-to-quarter changes, but to think about where we are in this credit cycle. After the pandemic, consumers did an amazing job balancing their balance sheet, paying down debt. They had

disposable income, really getting to a point where debt service and financial obligations ratios were really low. And then the last year and a half, in the face of higher inflation and less new stimulus coming in, we did see consumers start to adjust their balance sheet. And if you look at the Federal Reserve's data, credit card balances have increased. But the overall picture just shows kind of a timing shift in terms of how people adjusted their balance sheet. I assume you would expect if, in fact, the economy is going to continue to slow in aggregate, if somehow these recession calls look like they're more plausible in the next several months. I mean, the consumer spending side has to slow down.

I mean, that's just the way the math has to work, right? Right, right, right. So, I mean, part of it is think about it. We're looking at nominal dollars, nominal change. and we know that inflation is starting to moderate. Some of the disinflationary tendencies are starting to show up. That was apparent in the holiday shopping season, particularly for some of the apparel names that reported starting to see those shifts in consumer behavior. And also, the economy has to right-size. It has to rebalance. It wasn't running at a steady state for the last several years, in part because these covid distortions.

So that's what we're going to return to an economy that is more normal, that is more trend like. And the hope is that we can do that in a way that is pretty stable. But of course, it's a hard job and that's the job the Federal Reserve has. Well, exactly. Yeah. And I guess the question is, do they target those areas that most directly hit the consumer? Right. I mean, they feel that they have to soften up the labor market a lot more. You know, there's even talk. Look, inflation comes down. Real disposable incomes look pretty good. So people are going to keep spending. Right. So, you know, it is this balance. When you think about the Federal Reserve's dual mandate. It's price stability. It's full employment. And they're not meeting either right

now. Inflation is still too high and the unemployment rate is still too low when you think about a steady state or, you know, a stable economy. But they've done a lot already. And they are talking about the idea that they need to be more data dependent now. They're no longer as behind the curve as they were before. So, you know, the Fed, listen to the Fed speakers throughout this week. They're not done. They're going to continue to move accordingly until they feel like they've reached their mandate. But part of that does take out, you know, where there's been excesses in the economy.

And the labor market, there's been some excesses built. Sure. Yeah, we'll see where it goes from here and housing already feeling it. But Michelle, great to talk to you. Thank you as well. Thank you for coming down. Here's where we stand in the markets as we get toward the close. The Dow is up 154, S&P 500 now again in the positive territory at about five points. NASDAQ underperforming still and the Russell 2000 also peaking into the green. Adidas is sinking today as the company outlines the big cost of its breakup with Kanye West and his Yeezy brand will break down the new warning next. And you can listen to Closing Bell on the go

by following the Closing Bell podcast on your favorite podcast app. The split between Adidas and Ye, formerly known as Kanye West, is starting to manifest in money terms as the company outlines the potential cost in its preliminary outlook for the year, sending Adidas stock sharply lower. The unsold Yeezy stock could lower revenue by 1.2 billion euros, and if it fails to move those products, operating profit could drop by 500 million. Adidas also expecting one-off costs of up to 200 million euros. In a press release, newly installed CEO Bjorn Golden says, The numbers speak for themselves. We are currently not performing the way we should.

We need to put the pieces back together again. But I'm convinced that over time we'll make Adidas shine again. But we need some time. And this is not the only partnership dragging on Adidas. Earlier this week, it was reported Beyonce's Ivy Park clothing line is suffering from weak sales. All right, shares of Lyft losing around a third of their value today following weak guidance and a slew of analyst downgrades. We'll break down that quarter and why it differed so much from rival Uber. That story, plus Expedia CEO weighs in on hopeful travel signs and a new activist in Spotify when we take you inside the We are now in the closing bell market zone. Barbara Duran from BD8 Capital Partners is here to break down these crucial moments of the trading day.

Plus, Pierre Gervosa on Lyft's earnings disaster and Seema Modi on Expedia. Barb, it's good to see you. This week, down a little more than 1% in the S&P 500 after a pretty good run. NASDAQ coming off the boil a little bit, too. What's your read on it? You know, I guess all deep pullbacks start with modest digestion. But how does this feel to you? Well, this does feel like normal consolidation. It doesn't feel like a bear market is resuming and we're going to go even lower and deeper. I think this feels normal after such a big start. I mean, I think you yourself were annualized.

If we kept up that rate, it would be 100 percent in a year. So we knew that it couldn't persist. I think the initial spring was because of all the cash sitting on the sidelines. You had tax loss selling. You had bearish positioning. And, of course, you know, with the numbers coming in, it's clear the economy is slowing. But CPI data is looking promising. And we're going to find out next week. I think the 500,000 labor jobs last week spooked everybody. But there's indications the consumer is alive and well, full employment, 3.4 percent,

wages are high but moderating. And we've probably got, by some estimates, a trillion in unspent stimulus savings that is really boosting people's balance sheets. And yet within the relatively modest kind of churning action of the indexes, some pretty big moves and some pretty big stocks. I mean, Alphabet down 10 percent on the week. I mean, Tesla was up big before we got to today. But you've actually found your way to adding to Google at this point, even after the doubts about, I guess, the long-term competitive position of the search business? Yeah. And I think, you know, maybe I'm a little bit early in adding. It's been a core position for some years for me. But I really see this as akin to when Elon Musk inadvertently smashed the window on the car he was demonstrating or the truck, the Cybertruck, which is rather embarrassing. But the stock went on from, you know,

$50, whatever it was, to much higher. So I see this more as an embarrassment because I think it's more there's no question that Google has the AI tech. They have the resources to do this thing right. And, you know, they certainly botched this- this early thing and employees are upset. But I think that in the long run- it is going to be very hard to dislodge them. They've got the they've got the

power and the resources you know just to stay the course so. I think any more weakness is a good buying opportunity particularly because the P.E. stands historical lows. I was just gonna mention it basically trades at you know the broad market. P.E. for the first time pretty much ever, I guess.

Meantime, Lyft crashing after first quarter guidance came in short of estimates. The rideshare company blaming seasonality and lower prices for the miss. Total rides for the fourth quarter also well below pre-pandemic levels. That is a far cry from rival Uber, which reported earlier in the week that company crossing two billion rides in a quarter for the first time ever and guided for at least 20 percent growth in gross bookings in the first quarter. Let's get your dear Jabosa to break this down. I mean, what's the what's the big conclusion we draw from the vastly divergent fortunes here between these two companies? The conclusion we draw, if there had to be one, is that Uber is pulling away and this is all about

market share. Previously, it was thought that maybe this would be a duopoly. You'd have two major players here in the U.S., Lyft and Uber. But over the last few quarters, Uber has just been pulling ahead. Look at how both companies talked about being past the pandemic. Uber said that the pandemic effect was well behind them and they're going to continue to deliver adjusted EBITDA profitability and free cash flow. Lyft, on the other hand, their active riders are still 11% below pre-pandemic levels. Their adjusted EBITDA targets were taken way down, shocking the street. One analyst said this was one of the top three worst analyst calls that he has ever listened to, a debacle for the ages. And that's really what it was, Mike. You

said that they talked about seasonality. They also talked about lower prices, but it comes down to competition, which is code for market share. And that is where Lyft is losing. And that's why analysts are concerned about the long term proposition of this story, how it's going to win that back and at what cost and who's going to help them maybe. You know, it's interesting, Dave, because not only do you see the relative performance is really stark right now in favor of Uber and obviously the performance is better. But I also wonder if there's an industry that's not big enough for two players that were both in early, are the underlying economics of the business actually any good? I mean, Uber from

start to now has burned billions of dollars. It's not as if it's been sustainably profitable on a bottom line basis. I just wonder if they have the line of sight to when that actually does turn for them. It is a great question. Is Uber just sort of a better house in a bad neighborhood? And you're exactly right to talk about that gap profitability, because yes, they have us. They have the street looking at adjusted EBITDA, free cash flow, stock-based compensation still makes a huge portion of that. Uber lost $9 billion last year, to your point. Lyft lost somewhere around a billion dollars, I believe. And the unit economics, I mean, Uber's tried to show us a path of how they get to bigger free cash flow and eventual gap profitability, but we don't really know how they get there. And this

raises questions about the competitive landscape going forward, right? It's always been kind of a race to the bottom. If Lyft is out of this market, eventually prices are probably going to rise for all of us. And what kind of valuation do these companies deserve? Does Uber ultimately, even if it's number one, is it a transportation company, a taxi company, or is it a technology company? I don't know if the margins are there for a technology company in the long term, but that's what the street's trying to figure out. Like a mobility utility of some kind. Barb, either of these stocks tempt you here? Well, Uber, I have been a bull on for quite a while. And I think the differentiating thing, if you remember when we went into the pandemic, both Lyft and Uber were

buying, you know, very closely. Uber had worldwide more share. But going the pandemic, Uber had something obviously Lyft did not, which was food delivery. And that saved them. And I think that left them very well positioned for reopening in terms of having the resources and the cash and also the smarts. During that, they started the loyalty program, cross-selling, all sorts of way to increase customer frequency and use. And I think it's going to be very tough. I don't see how Lyft can catch up. If they compete on price, you still have a big problem. People will choose one or the other based on price, but not if it's like a minute for an Uber versus 10 minutes for a Lyft. And I don't see how they're going to have enough cars and drivers to close that gap. So I think

pricing, they're going to have to be competitive on pricing. That means bad margins. And it is hard to see how they're going to turn this around anytime soon. Yeah, a lift down to under $4 billion in market cap versus $68 for Uber. Pretty dramatic. Deirdre, thank you very much. Meantime, Expedia falling after an earnings miss. Severe weather in December, deterring travel and leading to a spike in cancellations. But CEO Peter Kern says he's seeing improvements in the first quarter. He sat down with Seema Modi earlier on CNBC. The trends have been really strong since January. We said in our call that we're seeing over 20% lodging demand, which is considerably higher than where we were in the fourth quarter, even x the weather. And so there's just been a ton of demand. APAC is starting to come back quite

strongly. That's helping in our B2B and our B2C business. Still a small part of our business relatively, but that's been quite strong. And generally, the market's been very robust across the board in the Western world and Asia and LATAM. Seema Modi joins us now. Seema, pretty upbeat message there from Peter Kern. However, the market is clearly not pleased with the results. Is there a disconnect here, or is it just last quarter's results are coloring the interpretation? Well, I think what's providing a floor under the stock, Mike, is the fact that Expedia is guiding for double-digit revenue and EBITDA growth in 2023, despite the fourth quarter miss, which you heard there, Peter Kern just chalks up to bad weather.

And the other big concern will be around the increase in marketing spending, in total up 20 percent compared to 2019 levels. There is some evidence that that is working. They're seeing record app usage. Loyalty membership is up over the last four years. But that will likely be a concern for Wall Street as it fixates a bit more on profit growth going into the new year. One of the downside risk scenarios brought forward by Oppenheimer this morning was if we start to see the airlines and hotels really push for direct bookings a bit more aggressively than we've seen in the past

as they focus on this travel recovery and how that could change the market share dynamics and put more pressure on the online travel operators like Expedia, not to mention Airbnb, which reports next week, as well as booking holdings as they all sort of increase that marketing spend, Mike. Seeing the stock down still about 8%. Should point out, though, it had a really good run even prior to yesterday's release, up about 35%. It did have a bit of a snapback coming into the report for sure this year,

Seema. Thank you. Well, Spotify shares higher today, while other tech names drag. Activist investment firm ValueAct has taken a stake in the company, disclosing it at an event today. The CEO calling Spotify ValueAct's newest investment, but not revealing the size of that investment. Shares of Spotify are up more than 50 percent this year, but still down 25 percent over the last 52 weeks. Let's bring in Julia Boorstin, who covers Spotify and maybe put it into context with, you know, Value Act, not always a hostile or even often not a hostile activist investor and Spotify already, you know, doing some things strategically and on the cost side that investors might want to see. Mike, this is all about cost cutting, as it often is,

and sort of echoing what we saw with Nelson Peltz pushing Disney to cut costs around its streaming service. I want to just give a couple more details about what Value Act said when it disclosed that stake today. It said that Spotify's costs have exploded, and now is the moment for Spotify to differentiate between what was built for the bubble and what was built to last. I think that's what is really coming down here. I think it's worth noting that Spotify has done cost cutting. They announced that they were doing layoffs and they're really focusing on building out Spotify's platform, figuring out cost efficiencies. They have this big event that's coming up in a couple of weeks. Their stream on event that's set

for March 8th. And I think we're going to be learning more when it comes to that event about their roadmap. But I do think that Daniel Ek has made it very clear that he cares about cutting costs and focusing on profitability, which does seem to be in line with what Value Act is looking for as well. Are we expecting potentially to hear much else aside from cost cutting at that event coming up? I mean, are they looking to get more aggressive on pricing? It seems like the model for success has always been somewhat Netflix in terms of being able to try to get pricing. Well, the key thing for Spotify is they need to make sure that you have no reason to ever drop the service.

Right. So if you're watching Netflix, you might watch for your favorite show. And then if there isn't enough content for you to watch, you might drop the service until another favorite show launches a new season. The thing about Spotify is that music in many ways is treated as utility. People want it all the time. They listen to the same songs over and over.

Spotify has tried to expand by having this big investment in podcasts, which seems to have really paid off. But also now they've talked about expanding into audio books. So that's the next frontier for them. And Daniel Ek hinted at there being other major verticals down the line, which would be similar monetizable opportunities. So I think the question is whether we get more granular information in their strategy around podcasts, as well as this newer area of audio books. And then what else we learn

about future verticals down the line. All right. We'll watch out for it. Julia, thank you very much. Barb, Spotify or anything like it appeal to you here in the content area? Well, in the Spotify, I mean, it's been it's up almost 60 percent. And obviously that's because they're initiating. It almost reminds me of Amazon, when for years they didn't make money and they put all their money into building a business. And that's what Spotify is doing. And so they're going to do a lot of cost cutting. But they still have big competitive competition out there. And you also have the big three record labels who have really controlled content.

So there's bigger risks out there. So right now I wouldn't chase it. But I do do like we were talking about expedia earlier earlier i think it's a great buying opportunity 12 pe versus booking is just booking.com is just under 20 everything's accelerating they're in the sweet spot for travel online travel right now all right yes certainly the value uh name in that group barbara good to talk to you barbara dur, thank you very much. As we head into the close, a little bit of an uptick in the indexes here. The S&P 500 is now up a few points, going to finish. Dow is up about half a percent. So we are still looking at about a 1% decline in

the S&P for the week. Today was more of a mixed day in terms of market breadth. You did see about half and half up versus down volume. So that's something that's pretty noncommittal. You have the VIX still going to go out above 20. They are looking at that CPI report on Tuesday. It seems like the market,

as we hit the top end of the range, people bracing for a potential surprise on inflation. We're getting pretty heads up going into the weekend. The S&P still up more than 6%, though, year to date. That is going to do it for Closing Bell.

Have a good weekend. We'll send it over to overtime with Scott Watman.