Closing Bell - Closing Bell: Nasdaq surges, Meta’s monster quarter, Digesting the Fed, Hot homebuilders 2/2/23

Episode Date: February 2, 2023

It was a mixed session for the major averages as the Nasdaq surged following Meta’s results, while the Dow pulled back a bit and the S&P 500 traded in-between. Mark Mahaney from Evercore ISI breaks down Meta’s surge and the read-through for Alphabet and Amazon. Analyst Angelo Zino previews what to expect from Apple. Former PIMCO Chief Economist Paul McCulley and G Squared’s Victoria Greene discuss the messaging from the Fed. Jonny Fine from Goldman Sachs talks opportunities in the credit market. Plus the latest on Disney’s activist battle, the CEO of homebuilder Meritage Homes on earnings, and why owning chickens to fight egg inflation isn’t all it’s cracked up to be.

That post-fed sugar high is rolling on today, at least for the S&P 500, sitting at its highest level now in five months. And the Nasdaq up sharply as meta surges on earnings. 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 broadly in the market. There's the Nasdaq up 2.2 percent. Dow is actually lower, 231 points. You have some earnings movers in their wing on the Dow,

plus some of the defensive names like UNH, UnitedHealthcare, shaving 183 points all by itself off the Dow right now. Caterpillar, Boeing, Travelers, all a little bit weaker. But you can see where the strength is. It's in technology today. S&P 500 is up almost three-quarters of 1% right now. Communication services, consumer, and tech, those are the three groups leading. That's why the Nasdaq is up more than 2% today. Meta is a big part of the story, but it's really a lot of these technology stocks that have been beaten up on higher rates all of last year.

Check out the standout winner of the day. That is Meta. It is on pace for its best session in nearly a decade. Solid revenue, a $40 billion buyback, and the promise of a, quote, year of efficiency from CEO Mark Zuckerberg. We're going to talk much more about Meta throughout the show. Also coming up this hour, we'll discuss the interest rate environment and the state of housing with the CEO of Meritage Homes, fresh off the back of a strong fourth quarter earnings report. Plus, we'll preview what to expect from a huge after-hour session. Apple,, Alphabet, Amazon all gearing up to report in just an hour from now. They're all surging today on the back of that meta news. It's meta Microsoft, Amazon, and Apple in the lead for the Nasdaq.

Let's break down this rally in big tech. Market dashboard with senior markets commentator Mike Santoli. It's the Fed, it's the ECB, it's the Bank of England. Positive reaction to all of them, and then meta is the cherry on top. Exactly, Sarah. Markets collectively saying, you know, the central banks are going to get it done. That's what you would say if you look at the second half of this year, where yields are. So inflation may be taking care of at least the stakes are lower for each Fed meeting, which are now six and seven weeks apart. Small rises, if anything. And then, you know, some of the things are happening. The technical

condition of the market is getting a lot more attention. The 50 day average is about to cross above the 200. Started talking a few weeks ago about how things were starting to line up. The textbook October low midterm election, big January effects, cyclical leadership, some breath to the rally. So a lot of those things have actually taken hold. Now it's starting to run a little hot, going a little vertical here. We're up six percent in two weeks at this point in the S&P 500. You're starting to see, you know, some of the more speculative stuff rip even harder. And, you know, you mentioned we're at a five-month high. We're

also at levels that we were trading at in here. That's in May of last year. What happened between May and now? Well, earnings estimates are down 10 percent for the current year. The Fed raised by almost four percentage points. So that's what we've endured to stay still. And that was all ahead of us in May. It's behind us now. That's the bright side way of looking at things. Now, talking about the big tech rally today, meta, obviously powerful move coming from very depressed levels, even though it had started to rally. This is a five year chart of meta, alphabet, Amazon, Apple. You seea here? It's almost exactly flat for five years. So that's how depressed it got down here at that low. It seems like there's not the makings of any kind of similar snap higher for these other companies, even though Alphabet is less expensive on a valuation basis

than it's been in a very, very long time, for example. So you just keep that in context. And then you see Apple. It really is the outlier here in just how much value premium it has built up. But I understand, Sarah, why those stocks are up a lot today, because the meta news, the idea that these companies are going to defend profit margins, that they're going to be able to have some leverage to pull to go against the slowdown in the end markets, it just made betting against the stocks a little bit too treacherous for one day. But as your chart shows, the setup was very different in earnings for Apple and for Meta. Meta was the cheapest fang, right?

It was the cheapest fang. It was down 75 percent peak to trough. I mean, that just shows you how washed out the stock had become. So the others definitely not in that category, even though, of course, you know, good numbers probably would be embraced. Yeah, especially on top of a Fed that was embraced. Dovish undertones from Fed Chair Powell. Mike, thank you. We'll see you soon. Mike Santoli. For more on the rally in tech and how the market is viewing the Fed, let's bring in former PIMCO chief economist Paul McCulley and chief investment officer of G Squared Private Wealth, Victoria Green. It's good to have both of you. Paul, is this the right reaction by investors to the Fed?

I think the investors are betting the Fed's going to be successful. It is really that simple. We have a disinflationary process underway. Fed Chair Powell acknowledged that. He didn't declare victory, but he acknowledged the process. And the marketplace is betting that the Fed's going to be successful. So it's a fundamental issue that the market is betting on the outcome where the Fed needs to deliver the outcome. What does that mean, Victoria, for big tech?

Clearly, it's a positive sign yesterday and today. Does that carry through? We've got more legs here. Call it animal spirits, call it irrational exuberance, call it FOMO, whatever it is, everybody's buying into it. And yeah, we hit oversold on some of these names. I am going to say I'm pausing a little bit until we get those three big boys this afternoon, Apple, Amazon, Google. We saw Microsoft come in a little weaker. They're not all going to be like Facebook. And you've actually parsed through Facebook's earnings. Generally, it wasn't amazing. We were expecting about $6 billion.

We got $4.7 billion in profits. We had 22% drop in ad revenue. And so you look at that, yes, we had 2 billion average daily users. Mark Zuckerberg is committing to this leaner company. But they also spent more than $4 billion on Reality Lab. So you wonder a little bit, okay, this is great. It's almost the adverse. But remember when they missed and they went down 26%, we're getting the flip side of that is they have a brighter outlook. So now they're up 23%.

I think the investors need to see what's under the hood this afternoon. But for right now, it's risk on. You've got the NASDAQ up 20%. That's a bull market. It could be the start here. So are you buying today? Not today. I'm going to wait. I am. I'd rather be a little bit late than a little bit early. I'm concerned on AWS, you know.

On Amazon. Yeah, the cloud. Yeah, absolutely. With Microsoft coming in week, AWS, and what profit margins look like with Apple with supply chains and FX effects, you know, and what MacBook sales are going to look like. And then Google, you know, we saw Snap come in light. We actually saw Facebook a little bit light. We like to ignore that fact. What does ad revenue look like for Google? So I am waiting for confirmation. Call me old fashioned, but I'd like to see what's under the hood. But right now it's risk on the junkier and crappier you are, the more you're rallying. I'm looking at you, Carvana and AMC. Like there's no reason for those stocks to be rallying in the face of these macro headwinds. Right. So, Paul, maybe, you know, financial conditions are loosening. Right.

Fed Chair Powell yesterday did not seem that worried about it, gave the green light to keep buying the junkie names. Maybe should he be worried about it? Is that going to stoke inflation again? I don't think he should be worried now, but I'm sure he's very attentive to it in the sense that the exuberance is very, very giddy right now. And he will have opportunities next week, literally with his major interview at the Washington Economic Club on Tuesday to fine tune his perspective. But I don't think he's in the business of fighting markets now like he was last summer, particularly going into Jackson Hole. He's basically looking at his mission of staying the course, which is erring

on the side of staying tighter for longer, whereas the marketplace is saying, if you stay tighter for longer, you're going to win this inflationary war. And we want to bet on the victory now because after the victory, we will have easing. So essentially, it's a timing difference as opposed to a fundamental difference in the market versus the Fed on the reaction function. Well, that's right. And the ECB, I would argue, and the Bank of England, it's not like anybody used the word pause and nobody really suggested it. I listened to President Lagarde, you know, more increases are appropriate. We've got the resolve to fight inflation. Powell said the same thing. The market heard something very different, Paul.

The market heard you're going to be successful if you pursue this policy of erring on the side of restraint, being firm, delaying pause, all of that sort of stuff. If you do that, we will get the inflation outcome that we are forecasting in the marketplace. So it really is just a matter of there are two different beats. The Fed and central banks deliver outcomes. Markets bet on outcomes. Finally, Victoria, there's the earnings. And you mentioned the three biggies after the close. What's set up now that we're seeing Meta get completely re-rated and up now more than 22% or so? Who do you like the best? Which is the best opportunity? If you're looking for most beaten down, that's Amazon. And we'll see they took a beating last time because they missed on AWS. If AWS comes in with 20, 20%

growth, that's going to really disappoint because that's such a big driver of their profit growth. But they've also been expanding into what they're doing with Prime, with subscriptions. We are paying more for Amazon Prime. And so when you look at it, I think we're concerned. How did profit margin goes? How much did they spend on marketing? What did AWS come in? Look, between ad revenues really weren't good news. I know we're willing to forgive Facebook because we're all excited about this new reality that this leaner company, but they still missed. They still had ad revenue come in much lower. So I think Google's at risk

because they're so much more exposed to ad revenue. And Apple's just a supply chain risk. But I also believe investors are willing to forgive a bad quarter for a good outlook and for CEOs and leadership to be cutting and cutting costs and protecting that profit margin. We've seen that time and time again this earnings season. We're willing to forgive a miss if you give us good news coming this next year. And for a lot of companies, it's the dollar coming down, too. You should have less FX headwind. Yep. And that continues posted. So it's all related in one big happy place right now for the markets. Paul and Victoria, thank you both very much. Good to see you.

Thanks, Sarah. Look at the home construction ETF. It's trading at a 52-week high today. Shares of Meritage Homes, part of that strength, jumping on the back of fourth quarter results. We'll talk to the company's CEO for his read on housing right after the break. The Dow is down 200 points, but don't let that fool you. The Nasdaq is surging 2.3 percent and the S&P is up more than eight tenths as we head into the final hour of trade. You're watching Closing Bell on CNBC. Homebuilder Meritage Homes raising the roof today. Shares are popping after beating earnings estimates and reporting a 29% increase in home closings for the quarter.

The stock also hitting a 52-week high today, along with the U.S. home construction ETF on the move. Earlier, we got some good news for the housing sector. Mortgage rates dropping to the 5% range for the first time since September. So they've now come down a full percentage point from the highs. Joining us now is Meritage Homes CEO, Philippe Lord. Philippe, it's great to have you on the show. Welcome.

Thank you. Good afternoon. Thanks for having us. So clearly the low point was the 46% sales order declines in the quarter. But you said that January is trending a little bit higher. Can you just tell us what you're seeing there in terms of demand? Yeah, we started out the year and it's been pretty strong. The spring selling season obviously starts right about now, and so we weren't sure what to expect. We let the street know that our sales per store had more than doubled since Q4.

Q4 was very, very soft given the interest rate climb that occurred. We had a lot of cancellations where people backed out of their home purchase, waiting to understand what the rates were going to do, kind of understand what home prices are going to do. But the consumer has reengaged early in January. It's a little early to tell whether it's going to be sustainable, but certainly January's numbers were promising. What's happening on pricing and costs? Because we've seen costs of lumber come down significantly. How is that impacting the economics? Well, prices are down across the industry, both existing homes and new homes, depending on who you talk to.

They're down single digits to double digits. In our business, we're focused on affordable housing. So we build throughout the southern hemisphere and we focus on the first time home buyer. Our ISPs are down from a high of, you know, 480 all the way around $3.80 since that time, middle of last year. So down about 20%. But we're seeing a big response to that as rates have risen. We're focused on that affordable payment and we're seeing consumers sort of re-engage. Costs haven't come down that much. There's some opportunities there. We've seen lumber fall off pretty dramatically. We're saving, you know, 5% a house on our lumber costs, but not nearly much of prices have come down. So margins are down. We reported our margins this

quarter around 25.5% down from, you know, 29% earlier this year or earlier last year. Some analysts were wondering if there's a price war happening in certain markets. You're in some of the hot spots, right? Texas and Florida, where everybody's building right now, especially larger competitors like a D.R. Horton. Is that happening? Yeah, I think, you know, you articulated well, it depends where you are. In the parts of the country where prices ramped up pretty aggressively over the last two years, specifically the Western Western markets, Phoenix, Colorado, parts of California, certain parts of Texas where prices were up 20, 25, 30 percent. Over the last couple of years, we've seen prices come down and you're seeing builders compete with incentives, all forms of forms of incentives.

I wouldn't call it a war. I would call it more of getting getting competitive, getting back into a payment that makes sense for our customers, given where the current rate environment is. So what does that mean for supply and the pipeline in these markets and how that's going to affect you? Supplies really low across the entire industry. I think that's why, in my opinion, housing is on pretty solid footing throughout the country outside of the demographics. The supply, we've just really been underbuilt in a lot of our markets. So there's not a lot of supply on the used home market.

Most customers that have bought in the existing home market have locked in on low rates, so they're staying put. And really, the supply is coming from the new home sector, which is where us and many others are operating. And then when you think about affordable housing, again, under $400,000 across the country, it's really undersupplied, which again is where we're specifically focused on. So there's not a lot of supply. The customers that are coming out and searching for homes, they're finding that there's not that supply. And I think that's why we're seeing new demand come into the spring selling season, a little bit of a resurgent, if you will. I guess I'm just trying. So is it as simple,

Philippe, as if you're trying to forecast what's happening in housing as figuring out where mortgage rates are going? And that's why all these stocks have rallied so much because rates are off their highs. Is there anything more sort of permanent in terms of the demand destruction created here by this big downturn? Well, I think interest rates are the number one factor. I think when rates are accessible and available to the larger population, you know, you see stronger housing demand. That being said, I think the lack of supply in the market and all the household formation that's occurred over the last decade, and then the lack

of underbuilding that has occurred as well, has created an opportunity where demand and supply is still very much dislocated despite what interest rates are doing. But interest rates is the key to the whole thing. And interest rates have stabilized. They've trended down. They've been in mid to low sixes, kind of settled down over the last 90 days. And they may be going lower based on what we're seeing today. And I think buyers are definitely reengaging at those new rates. They're probably fearing that rates are going to go back up, honestly. And so they're trying to get in now and get a home given the current rate. We offer a lot of move-in ready inventory across the country.

And that also seems to be a significant preference of consumers right now. They're wanting to move now. They're wanting to move in the next 60, 90 days. They want the ability to lock in that rate so they're not exposed to the rate volatility if it were to go back up. Hence what's happening in the stocks and I guess your trends in January so far. Philippe, thank you very much for joining me. It's great color on the market. Yeah, thank you for having me. Thank you. Philippe Lord, the CEO of Meritage Homes. Let's show you what's happening overall in the markets. Dow lower, down about 150. It's recovered about 100 points, though, in the last, I don't know, 15 minutes or so.

The story there is some of the weakness in the defensive names and some earnings movers. And the Dow-UNH is a big drag. S&P 500 is up a percent. And the Nasdaq continues to climb up 2.7 percent right now. It's up 4.4 percent so far this week. What is Wall Street buzzing about today? Inflation fighting chickens and a bid to fight those soaring egg prices. Some Americans are looking to raise their own hens, but they're finding out it might not be all that it's cracked up to be. We'll explain next. And as we head to break, check out some of the huge moves

in some of today's highly shorted names. Carvana, Upstart Holdings, WeWork, Beyond Meat, Coinbase. They're all surging. Coinbase is having its best day since August. There's another reason why on that stock. But you can see where the strength is today. A lot of these sort of ARK Innovation names, the ARK Innovation ETF, it's up 5%. It's having a good start to the year, 40%, but still about 45% off its highs. We'll be right back. What is Wall Street clucking about? The chicken and the egg. In this case, it was the eggs that came first. Surging prices have certainly caught the nation's attention. Carton of eggs costing 60 percent

more than it did a year ago. And some frustrated consumers have turned to raising their own chicks to save money. But that can get expensive, too, it turns out. The Wall Street Journal laying out some of the under-the-radar costs of starting your own flock. So chicken feed costs 10 to 20 cents per chicken per day, while a new coop can cost anywhere from $400 to $3,000 and more if you want one that's custom made. Other expenses include fencing to keep the chicks safe, heating at night in certain regions. Lumber prices are still nearly 60% above where they were at the start of the pandemic. Tractor supply is the country's largest seller of chickens, and the CEO, Hal Lawton, was on CNBC last week saying it's been

a big part of the company's recent growth. Across the board, we're gaining share, notably in categories like pet food and poultry. Poultry is a category that is in its fourth year of just remarkable growth. One of our producers was way ahead of this trend, luckily, and we've got video there of his family's chickens. That's David Gernon in Kansas. And those chickens, I'm told, are about to celebrate their third birthday, which is ridiculous. Up next, Goldman Sachs head of investment grade syndicate Johnny Fine on whether the bond market is now signaling a soft economic landing, some big moves across global bonds. He'll be here to explain. Investors are paying close attention to the wild moves in the bond market following yesterday's Fed decision and Chair Powell's news conference. Here's what Double Line Capital's Jeffrey Gundlach said last night on Closing Bell Overtime.

I still think that there's room to run in parts of the credit market because we've seen very dramatic flow changes in the bond market. The bond market was was tortured by outflows last year, basically the worst ever year in every way for the bond market. And this year is starting out with huge inflows into bonds because people realize that they're cheap, they're relatively attractive versus stocks. And the negative return days are over. That's been the story so far. Joining us here at Post 9 is Johnny Fine, head of the investment grade syndicate at Goldman Sachs, who we turn to for all things credit. Good to see you.

Good to see you, too. Thank you for having me on. Do you agree with this reaction, a big rush into bonds on the back of Fed Chair Powell and ECB President Lagarde and Bank of England's Andrew Bailey, all saying we're still fighting inflation? So I think I do. I think, yes, of course, they are still fighting inflation. But I think we've seen the clearest signs ever that they're winning the battle and the battle is almost won. And we're very, very close to being at the end of the hiking cycle. I think people are looking forward as to what that might mean in terms of growth prospects, inflation coming down, future cuts in interest rates to maybe stimulate more growth.

I think that's helped to drive a lot of the flow dynamic that Jeffrey was talking about and a lot of the support that we've seen in the bond market more generally. What do these bond yields, 3.4 on the 10-year, the two-year comes down, way down, what do they tell you about where the market expects growth to be? So I think it's certainly expecting lower growth

as we progress throughout the year. As you know, the market expects Fed funds rates to be lower at the end of the year than they are know, the market expects Fed funds rates to be lower at the end of the year than they are today. So that's either no more hikes and one cut or more hikes and multiple cuts. So I think that tells you that even though the Fed says no cuts this year, even though the Fed says no cuts this year, it's been very, very, I think, strict about saying that multiple times in the last several months. The market continues to not believe it. And I think really simply, it's just the market saying that, yeah, sure, there's some risk that we've maybe over-tightened. We might need to put some stimulus back in at some point.

The same message came from the ECB, and the market took the same sort of undertone. The German yield really plunged today on the back of some comments from Europe. So you think we're past the peak tightening and what? We've got a few more, like one more hike, two more hikes to go? Markets pricing in one more hike. Jan Hatzius and his team are pricing in two. I never like to disagree with Jan. I'd probably say my bias is probably that we only see one more. And then we're going to be, I think, unchanged for the remainder of the year. So I think the market is pricing in, I think, too much release later on in the year. I think we'll stay stable at elevated yields. What's all this meant for corporations? Because you see all the deal flow

on the bond side. It's been busy. And I think it's primarily been busy because of the shape of the yield curve. We're so inverted right now between six months and 10 years, around 140 basis points, that it's creating a real incentive that if you're a corporate treasurer and you're sitting there looking at markets and opportunities today, if you have any financing that you're looking to do in the next six to 12 months, you have a real incentive to go and do it today. Typically, financing early is like taking out an insurance policy, which you have to pay a premium for. Today, you're actually being paid to go and do that same trade. And that's generating a lot of activity. I'm expecting February to be very busy in the investment grade financing markets. And what kind of yields, like what kind of deals are you seeing? It's really across the spectrum. We've seen a lot

of financial issuance already this year. Now we're coming through corporate earnings. I think we're going to see issuance from all of the main sectors that make up corporate America. I think it's going to be, as said, very active over the course of February. So ultimately, do you see more support for stock prices here as well? Everything you're saying sort of jibes with a better equity environment. So I'd say that I would generally be of the view the worst is clearly behind us. I think the market's pricing a soft to no landing. And I think I agree with that. I think that's the right base case. But at the same time, I think it's probably right. And you see this in terms of the financing activity taking place. Corporations are taking some chips off the table. They're buying insurance when they're being paid to take that

insurance. And I think that'll be a driver of financing flows, and I think it'll be a fixture in the credit market in the coming weeks and months. So what would you tell investors at home that do this through ETFs or looking for some opportunity where, you know, 60-40 didn't work last year, but this year bonds are working in a big way? Well, we've seen the return of yield. We've seen the return of opportunities to invest in safe yield at a reasonable return. We don't have negative yielding government reasonable return. We don't have negative

yielding government debt anymore. We don't have negative yielding corporate debt, which we had a trillion dollars or so of during peak QE. And so that's clearly attracting fund flows in. We've seen robust flows each of the last three weeks. I think today was a very, very small outflow. I would expect fixed income as an asset class, both in investment grade and in high yield, to continue to attract capital in as investment capital into our markets. That's healthy. That's a healthy sign. I hope so. Okay. You're always optimistic, Johnny. Thank you very much. It's good to get the color. Johnny Fine from Goldman Sachs. Here's where we stand right now in the markets. About 24 minutes

left of trading. Just zooming on the NASDAQ. Look at that, up 2.8%. A lot of that is meta, but also you've got Google ahead of results today, Amazon and Apple all working. Those numbers coming after the bell. The S&P 500 now pushing higher, up one and a quarter percent. And the Dow's are raising a lot of its declines. It's down 84 points, just an hour away from those Apple numbers. Highly anticipated. Coming up, an analyst with a buy rating weighs in on the key number he is looking for. And a reminder, you can listen to Closing Bell on the go by following the Closing Bell podcast on your favorite podcast app. Down 86 points on the Dow. Be right back. Check out our stealth mover.

We've got a double for you today. Elf Beauty stocks big gains, making investors blush. Shares hitting an all-time high after lashing Wall Street's profit estimates and hiking its full-year outlook above forecast. And then here's the bonus one for you, which is related, putting a smile on the face of investors. Align Technology, it's at the top of the S&P 500 right now. The orthodontics company rallying after its better-than-expected earnings made a good impression on Wall Street. Look at that move.

Besting Meta today, up 26 almost percent. Evercore ISI's Mark Mahaney hikes his price target on Meta by more than $100 after the social media giant's revenue beat and $40 billion buyback. He's going to come here, make the bull case for the stock straight ahead. That story, plus a countdown to earnings from Apple, Amazon and Alphabet. All when we take youosing Bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Evercore ISI's Mark Mahaney here on Meta's surge and Kate Rooney on a big move for Coinbase.

We'll kick it off with the broad market. Mike, seeing a huge move in the NASDAQ. It's the Fed. It's the Fed. It's the meta move. Is it healthy that we're seeing such a strong start to the year for the Nasdaq? I mean, we came off a 30 percent down year. Now, I think best start to the year for the Nasdaq since the 70s. It's healthy that you have gathered up some momentum. And it's not only the Nasdaq and it's not only the laggard stocks that are working this year.

Now, that being said, today, certainly near the highs of the afternoon, it started to look a little bit grabby. The market started to run a little bit hot. It seemed like people were trying to chase pretty hard and get a little overexcited in the very short term. But I think you have to remember how we actually rolled our way through the bear market, you know, all the way to this point, starting really two years ago. Super speculative, high valuation, no profit stuff crashed first. Then you had the valuation pressure on the big growth stocks. Then you had downgrades of earnings estimates and in general that commodity shock and everything else.

And basically sell rallies was the rule all through the Fed tightening cycle. Now, it still could be the rule. We're still not up to a level where the market has unequivocally proven something, that the trend has changed. But things are moving in that direction. I think you've built up a cushion here where you could pull back 5%. And it's still OK. You're still looking like a pretty decent setup from the lows in October. I know you're sort of a stickler for how we name

things. So NASDAQ's 20.1% off its lows. Does that mean it's in a bull market? Not real. I mean, not in my view. It's more than just a percentage change off an arbitrary level. You'd like to see, for example, you have all these indexes crossing above their 200-day average, but those averages are still pointing lower. In other words, they haven't turned higher yet. So I think that we can quibble about the definitions. To me, it's all about, is it a dip buying market or is it a rally selling market? Do you have valuation expansion? Do you have much more broad participation? Those things we have to wait and see. And by the way, what's interesting is the sentiment work is now looking like it's a little bit over-optimistic if it's

still a bear market, but in bull market terms, things are still muted. So the market's no longer hated, but from where we've been in the last year, this is where typically you'd want to lighten up. Got it. Mike, thank you. We've got to hit meta. Monster rally after beating quarterly revenue estimates and announcing a $40 billion share buyback program. The stock is on track for its best day since mid-2013. This is an old school meta move. Investors awaiting earnings from two more FANG names after the bell, Amazon and Alphabet. Mark Mahaney of Evercore ISI joins us to break it all down. He just raised his meta target by more than $100 per share, $2.75 now from $1.70 and reiterated an outperform. So, Mark, you think this is a well-deserved rally and it's heading higher. Why? I do think it's heading higher. I think numbers went up a lot. Look, last quarter, the estimates got cut 20 percent and the stock got cut 20 to 5 percent.

This quarter, estimates went up 20 percent. So, of course, the stock got cut 20 to 5 percent. This quarter estimates went up 20 percent. So, of course, the stock goes higher. It's part of this, by the way, I just think is I'm not sure it's great management. I just think they were so volatile in terms of the expense guidance that they gave. I think they did themselves a disservice on investors, too. But that's the past. Going forward, you still have an asset that's trading at 15 times earnings. It's not like we're anywhere close to peak fundamentals. I mean, we're going to do what? 1%, 2% ad revenue growth in the March quarter. I think you're going to see a nice improvement in that. I hope. I think we will see a nice improvement in that as we go through the year. So we've got a lot of improvement in fundamentals coming up. And it's what I call this slingshot opportunity. You get this reacceleration in revenue growth and you cut

costs. That means earnings growth can really skyrocket. Like if you can get 20% revenue growth, your earnings growth is going to be materially better than that. That's the setup. It allows the stock to keep re-rating from here. I still like Facebook meta stock. It's so funny how the narrative changes so fast on this stock. I mean, everyone hated this stock. And I get that they've found religion on the efficiency thing. But, you know, TikTok hasn't gone away yet. That's still a big competitor, right, that they're found religion on the efficiency thing, but, you know, TikTok hasn't gone away yet. That's still a big competitor, right, that they're chasing. The macro environment is far from clear when it comes to the advertising market. They're not out of the woods, are they?

No, they're not. I think what really changed here was that, you know, there were a series of overhangs. You mentioned them. It's macro. It's TikTok. It's macro, it's TikTok, it's regulation. And then there was this concern by investors that it just was an irresponsibly run company that in a time with clearly slowing demand that they weren't managing down expenses. That was the takeaway from the last quarter, the September quarter. But they reversed it completely. And this quarter, and I think, you know, I asked Zuckerberg

about this on the earnings call, like, why now? I thought he gave a relatively convincing answer. I think he's acknowledging that the business is slower. It clearly is slower now, but it's more mature than it was in the past. And he thinks he stumbled across some real efficiency gains. And by the way, I think AI applications can really help them. And it's starting to show up. They're getting better conversions for their advertisers. So the ad units are getting better. But you set all that up and you eventually get that macro recovery. And Sarah, I don't know if that's next quarter or at the end of this year, but somewhere in that timeframe, you're really that up and you eventually get that macro recovery. And Sarah, I don't know if that's next quarter or at the end of this year, but somewhere in that time frame, you're really going to get this really nice reacceleration and revenue growth.

And I think you can buy the stock in advance of that. Again, we're not at peak fundamentals here. I think we're still far from it. That means there's a lot more upside in the stock, especially when it's trading at still a discount to the market. You want to buy Alphabet and Amazon into earnings? I guess both should benefit from the advertising tailwind, but also both have some potential challenging read-throughs from Microsoft on cloud. I think the setup is so different, Sarah. I think the read-throughs from Microsoft are more material, more germane than what you're going to hear from Google or Amazon.

Facebook, I'm sorry, Meta did not tell you that the ad market is recovering. Maybe they suggested it was stabilizing, but not recovering. So I think you're going to see softening trends at both Google and Amazon. But the big hint to the CFOs of Google and Amazon, last night, Meta Management mentioned the word efficiency 28 times in their earnings call.

You want your stock to go up? Mention it 29 times. Yeah, it used to be you just had to mention the metaverse. That doesn't do the trick anymore. Certainly for meta. Thank you very much, Mark Mahaney. Good to talk to you on some of those recent actions ahead of the reports over for ISI. Disney fighting back this afternoon against the latest challenge from activist investor Nelson Peltz. Peltz renewing his bid today for a board seat by calling to replace board member Michael Froman, who has been in the position since 2018,

saying he lacks experience. Disney defending Froman, slamming Peltz in a letter to shareholders this afternoon, writing, in part, quote, over more than six months of engagement with Mr. Peltz in both conversations and written materials, he has demonstrated that he does not understand Disney's business and he lacks the perspective

and experience to contribute to the objective of delivering shareholder value in a rapidly shifting media ecosystem. Tryon, in recent months, has amassed a nearly $1 billion stake in Disney. At issue has been Disney's succession plans, its $71 billion acquisition of Fox, its stock underperformance, Mike.

So is this going to go Tryon and Peltz's way? It's stock underperformance, Mike. So is this going to go try and pelt his way? It's a long shot in terms of getting on the board. It would seem to me it's a half percent shareholder position. It's not something where you can really have direct leverage. It's much more about kind of, you know, war of words, bully pulpit. And I'm not even sure it matters terribly much either to Peltz or to other shareholders whether, in fact, he gets on there and starts trying to influence strategy. To me, it's more about you have obviously a Bob Iger back there. They've had a couple of good box office wins. It seems like he bought at a very interesting moment when the stock was at a level

it had first reached eight years earlier. So he can kind of maybe win whether he wins or not in terms of the board seat. So I think it's the bigger stuff that's happening there with cost discipline and trying to make sure that they're spending the right amounts on content and trying to keep the subscriber base going in streaming more than any other strategic moves on the asset side. Yeah, I mean, I do think, though, the knock against Froman, he was the U.S. trade representative on this show many times. So citing his lack of experience, Noel Peltz, not necessarily in the media business, he's been on like 10 or 11 public boards. So the fight

intensifies. It is tough, though, when an activist identifies a specific current board member and says, you know, jettison that person. That's a little bit of a hardball tactic. Yeah. Let's hit Coinbase. Shares are soaring after experiencing a short squeeze. A federal judge dismissing a class action lawsuit against the cryptocurrency exchange. That's certainly helping fuel this rally. Kate Rooney joins us. So, Kate, what's the story? Hey, Sarah. Yeah. So Coinbase did get some relief on the regulatory front. A Manhattan judge dismissed a class action lawsuit. That seems to have sparked the rally that we're seeing today. But Coinbase is very much a momentum name. So really signifies some of the speculation and

froth returning to the markets that we've seen today. You mentioned at the top of the show, Sarah, this sugar high after the Fed. Coinbase is really a poster child of that. And then there's also been a lot of short selling in Coinbase and then in crypto stocks in general. So S3 partners sent us some data. The short interest for Coinbase is 25 percent or so. That's more than five times the average for most S&P stocks. But that doesn't come close to when you look at MicroStrategy.

And then look at Silvergate. Seventy five percent of the float is short. So that stock is also up about 30 percent today. So some of these names have really been set up for a short squeeze. Bigger dynamics here than just the headline news about regulation, which has been an overhang for Coinbase. But if anything, they have sparked this rally. And then we're seeing that momentum really drive Coinbase up more than 24 percent at this point. Yep. Helps to have the Bitcoin tail end and the Fed, too. Thank you, Kate Rooney. Apple, one of the major tech earnings after the bell as well.

It's going to be a busy afternoon. Let's bring in Angelo Zeno of CFRA for what to expect. He's got a buy rating and a 165 price target on the stock. The Apple setup, it's been more resilient than some of the other big tech players. What are you expecting? Yeah, no, you're absolutely right. It's definitely held up much better amid the downturn here in recent weeks. But for us, we're kind of looking at three things, really. I mean, clearly all about the guidance, right? I mean, we know this December quarter was atrocious because of the supply constraints

out there, looking at units down about 15% in the December quarter. But it's more about the March quarter, right? We're about 2% to 3% below the street there. But, again, it's more about what the street says in terms of some of those pro devices, those higher-priced devices, whether or not momentum is holding up there, especially relative to two relatively difficult comp years over the last two years with the 5G cycles that we had back then. I'd say also we're looking at services, of course, we're looking at about 5% growth here with the potential for that business to accelerate in the second half of the year as you kind of go through some of the easier comps from kind of some of the

softness on the app and the gaming side of things. And then finally, I think it'd be interesting to kind of see what management has to say on the margin side of things, not necessarily in the current quarter, but as we look ahead over the next couple of quarters. I mean, you've got higher ASPs with the pro devices, more favorable Forex coming due,

and then lower component costs. I mean, you're looking at, you know, 30 to 50 percent declines in certain areas like memory. So it'll be interesting to kind of see what the trajectory there is going to look like. Is there a good consensus? Do you have a confident number on iPhone sales? Because remember, this was the quarter where we saw the supply disruptions in China because of COVID and all these rumors and reports about what's happening with production and demand in that market. Where did you settle out? So we're looking at about 73, 74 million units.

I mean, it is kind of all over the place here, you know, because of those constraints out there. I think also when you kind of look at the broader smartphone market, you're looking at about a 15 to 20 percent decline here in the December quarter. So overall, it's been just abysmal for the broader smartphone space. But we do think Apple held up a little bit better. Why do you think that? Because PC market has been so tough. Are phones just not related? Does it not get hit by the same sort of issues on decreased spending on electronics and goods? Yeah, as far as the Mac side of things, especially for Apple, that's going to get hit a little bit tougher because of the extremely difficult comps that they had from a year ago with the buildup on their internally designed M1 chips. I think as far as kind of smartphone

units are concerned for Apple specifically, I do think kind of, you know, of course the buffer on the ASP side of things as they kind of migrated towards those higher devices, you're talking about kind of a lesser impact on the revenue side of things. We're talking about 70 percent revenue decline on our end. But on the unit side of things, listen, I think it could go any way here, but we're kind of sticking around 15 percent decline. Thank you very much for the quick preview. Angela Zeno from CFRA on Apple. We've got just about a little over two minutes to go here in the trading day. Continuing to march higher, the Nasdaq is now up more than 3 percent into the close.

Mike, what do you see in the internals? Yeah, they're very strong, Sarah, although maybe not as strong as you might think, given the level of the index move. So you see the Nasdaq up 3 percent, a percent and a half or thereabouts for the S&P 500. You've had about 70% of upside volume all day in the New York Stock Exchange. So it's essentially two to one advancing versus declining volume. Still a risk-seeking type market,

but not as all-inclusive as you might think. Take a look at the KCEs, the capital market stocks, ETF, asset managers, exchanges exchanges trading firms things like that you see real lift off here I've gone vertical up very similar to way it did outperform back in in twenty twenty two and I toward the top of the market I so that also shows you it's an amplified bet on the overall market and capital markets conditions right there the volatility index has been interesting actually had a bit of an intraday pop, went above 19. It's clearly a little bit of a hedging instinct coming out as the market comes to the top end of this range. And we obviously have the jobs number tomorrow,

where you are seeing some forecast that perhaps you might get a bit of an upside surprise to job creation. We don't know how the market would necessarily take that, even if Jay Powell seems okay with not getting unemployment much higher in order to do the job on inflation. Well, we just need to see wages continuing to moderate. Yeah, because he cited that even with the jobs market still tight. But that's a good sign on the disinflationary front. Mike, thank you. As we head into the close, take a look at the overall market. So the Dow's under pressure. It's down 48 points because it's got some of the more defensive names in there. If you look at what's working in the Dow, for instance, or what's dragging on the Dow, it's UNH, Boeing and Caterpillar. What's working is

Home Depot, Microsoft, Apple and 3M. The S&P 500 firm, 1.4 percent, adding to gains for the week. We're now at 2.6 percent for the week. Best performing group, Communication Services. I think we have to hit meta here into the close, surging 23% for its best day off earnings in almost 10 years. And the Nasdaq comp going out with a gain of 3.1% for the week so far. It's up almost 5%. Unbelievable close for big tech. Next test, Alphabet, Amazon, and Apple all reporting in minutes from now. That's it for me on Closing Bell. Send it now in overtime with Scott.