Closing Bell - Closing Bell Overtime 2/9/24

Episode Date: February 9, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business. 

Well, there you have it. The S&P 500 closing above 5,000 for the first time. 5026, it looks like. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off today, but encouraging earnings and inflation data sending the benchmark index to a record close. The tech and consumer discretionary sectors, the top performers today. Every major stock index higher on the day and on the week except for Dow Industrials. Coming up, 314 Research Warren Pies on why he says a pullback from these historic levels would be a buying opportunity. Plus, eToro's U.S. CEO on how retail investors are putting their money to work in this market. And if they have been cashing in on crypto's big run,

we had a big run there this week. Thank you. All right, we're going to go to Mike Santoli now for a look at this, I'll call it a historic moment, because 24 hours ago, 23 hours ago, you said this is what you watched today, the close. Exactly, Morgan. So closes are more important than intraday levels and weekly closes for a lot of people are more important than a daily close. Exactly, Morgan. So closes are more important than intraday levels and weekly closes

for a lot of people are more important than a daily close. So pretty much the market continues to tick off these boxes. It's acting like a bull market, which is to say it's managing to seize upon the good news, the fact that rates are staying tame, the fact the economy is better than expected. The Fed's going to move lower, but it doesn't have to be very quickly. Earnings, as I say, tracking in the right direction. So all that stuff is feeding in. Plus, you have this real momentum and energy behind the secular growth story, which probably is starting to get in the short term a little overdone, but it's doing its job at the index level. And it's pretty impressive. We first got about 4,000 in 2021. You kind of blasted higher through it. I think right now it's a little more of a challenge to really keep piling on the gains

from here. Yeah, I mean, you're starting to hear that conversation about valuations being extended, about the market being overbought. To me, one of the most notable things about what we've seen this week is that you have, except for the Dow, you have the major averages moving higher. You have the S&P at this record level. But we have seen treasury yields move higher over the past week as well. And that marks a real change from what we saw in the final months of last year. Yes, it is. Now, I would say that the huge mega cap Nasdaq leaders that have piled on most of the market cap in this run have shown themselves to be fairly impervious to what's going on in yields. But the average stock has been held in check by higher yields historically over the past several months

and Russell 2000, things like that. This week, you started to see signs that they're able to shake it off. Now, it could just be the yields have not gotten up to any critical level. It doesn't look like they're able to shake it off now it could just be the yields have not gotten up to any critical level it doesn't look like they're shooting higher the 10 years still below four and a quarter which might be a little bit of a trip wire we have to see if that's the case but it is without a doubt true that if the treasury markets go yields are going higher in part because the economy is better than expected and the fed can wait a lot while longer then it's something that the stock market can live with okay stay, stay close, Mike, because we're going to come back to you in just a few moments.

In the meantime, let's bring in another voice on this record close. Joining us now is Drew Pettit, director of U.S. equity strategy at Citi. Drew, it's great to have you. I'm going to start right there. Stocks at records, broader market at record. Do we go higher from here? Look, we're getting really close to our year-end 5,100 target. Admittedly, we're still constructive. At the end of the day, we've had a lot of really strong earnings. It's been a great earnings season. I think Mike touched on it before. That's what's driving the market higher. And then on top of that, look, good news is good news right now. That's been a big change. If we had this conversation, let's call

it three, six months ago, higher yields, a little bit hotter inflation print at the beginning of the month, real GDP beating expectations. Market might not have reacted well to that, but we're into a new regime right now. And good news is good news. OK, so does that mean you take some profits here or does that mean you continue to pile money into equities? So I wouldn't say just pile money into equities right now. Like, look, you touched on valuation being a concern for people. We don't think it's as alarming, but look, by no means is the market cheap. Sentiment's starting to get extended.

We think it's just way more prudent right now to buy on pullbacks. Look for volatility. We still have elections ahead. With valuations higher, that's going to put some more pressure on earnings to deliver. And if inflation and rates stay a little bit higher for longer than we expect, that just means we need more productivity to drive earnings growth going forward. That means there's going to be volatility. So don't chase. Buy the pullback. That's our recommendation to clients. I mean, it's been another strong week for the big tech stocks. And we've talked about how much of a lift they've done in terms of powering this rally. More recently, the Nasdaq, for example, finished this week up 2.3 percent. That said, though, the Russell 2000 and the Dow Transports also have two

handles in terms of their gains for the week. Does the rally broaden out from here or do you stick with what's been working so far? So we think it does broaden out from here. Look, we're secular bulls on industrials. We've been talking about this for a long time. There's a lot of business models there that have seen a lot of improvement, better ROEs, better margins through cycles. We think that's going to play out, but we really need earnings growth to inflect. So right now, earnings growth is being driven by mega cap growth by the growth side of the market. You know, we're another quarter away from seeing small cap earnings growth inflect and seeing the cyclicals more definitively inflect into positive territory. So, yeah, it's going to broaden. Might take some time. Might be a little bit of a show me story.

But I think it's going to happen this year. And we definitely would be buying on pullbacks. And it's buying the cyclicals on pullbacks. OK. When you talk about earnings inflecting, I mean, how much does this hinge on cost cuts? How much does this hinge on the top line and revenue continuing to grow? I don't think it's as top line driven for a lot of businesses as we all think. Even when we look in the mega cap space, some of these companies are seeing earnings growth decelerate year over year. Still positive, but decelerating. But this is a big productivity story,

and that shows up in operating leverage. So it's more of a margin story. I don't think it's necessarily cost cuts. I think it's going to be better spending on CapEx initiatives that have near-term cash flow drivers or will drive near-term cash flows. So at the end of the day, yeah, revenues get slow, but earnings can still inflect higher. And that's where we think that's where we want to stock pick within this market. We think that helps drive the majority

of names higher this year. Over the past week or so, I mean, we've seen Fed funds futures reprice based on what Powell has said and the flurry of Fed speakers we've gotten since then. How much does the bond market matter to equities right now? Or is the story more fundamental in terms of earnings? Right now, it's fundamental. I think longer term, the bond market will matter for what kind of multiple we can sustain on the market. So honestly, I think you need 10 years to probably come in sub four again if you're going to get anywhere close to our bull case of 5,700. The Fed probably needs to cut if you're going to have a real blow off top on this market. So until then,

you know, look, we're going to make gains. It's going to be very earnings driven. That's kind of a tough part of the year. And rates could give you a tailwind. Okay. Drew, thanks for kicking off the hour with me. Appreciate it. Thanks, Morgan. All right, Drew Pettit. We have a news alert on Amazon. Let's get to Steve Kovac with those details. Steve. Hey, Morgan. Yeah, this football season's not even over yet, but why not talk about next season? Amazon source telling us we'll get exclusive rights to stream an NFL playoff game next season, very similar to what we saw with our own NBC peacock doing it this year. This is, of course, going to be on their Prime video.

And, of course, we know Amazon has been doing the Thursday night football regular season games, but this will be their first time getting a playoff game, Morgan. Okay, we'll watch that. And we'll watch that. All right, Steve Kovac, Morgan. OK, we'll watch that and we'll watch that. All right. Thanks. The dollar perking up recently thanks to a strong economy and diminished expectations for a rate cut, at least a rate cut right now. Mike Santoli is back with a look at the impact on U.S. equities. Mike. Yeah, Morgan, as you suggest, the dollar going higher relative to most other currencies for the right reasons,

at least right now. Essentially, U.S. growing faster than elsewhere. The Fed were pushing out the rate cut schedule. And you see on a two year of the U.S. dollar index, we're really still in this range we've spent most of the past year in and not quite up to the highs of last fall when you had stocks a little more under pressure. In fact, in this way, it looks quite a bit like the 10 year Treasury, where you've come up off the lows since the beginning of the year, right around the same time, the last week in December, but not yet challenging those levels where it seems to kind of put a little bit of a damper on risk appetites. Now, if you want to look at the global impact on equities U.S. versus the rest of the world, not really visible here. So this is the total stock market index in the U.S. relative to all stock markets outside the U.S.

So basically, this is just the rolling ratio of performance of U.S. versus the rest of the world. And you see, obviously, at a new all-time high and very much kind of hanging on this same long uptrend line. The big tech stocks in the U.S. are clearly a major distinguishing factor. This is not just about the economies. This is about where we get our market cap from, and it's in the very unique secular growth tech stocks. Nonetheless, it suggests that, you know, the currencies are not acting as a tailwind. If anything, a stronger dollar suggests that, you know, the U.S. is a destination for global capital, which includes probably the stocks. Got it. I wonder how much we should be factoring in China to this conversation,

especially when you talk about the U.S. versus everything else in the world and those dynamics. Because you could talk about American tech and the fact that that's powering the rally here, but Chinese tech has actually been weighing on equity markets there. Absolutely has. I mean, the Chinese equity market is really down to a level in terms of size where a global investor can almost set it aside and not feel as if they're going to miss anything if they don't own it. So it is very unique in terms of the business models here and the shareholder friendliness. And probably some might say the overvaluation of some of our tech stocks, but they've been able to hold those valuations. Huge distinction from the tech in China. Okay, Mike, since I have you here, Pepsi,

Capri Holdings, Newell Brands, they're all under pressure. We saw some pretty big moves today. Look at Newell down almost 19 percent on what's, we'll call it a read-through to the consumer, ahead of another week of quarterly results as we get some of the big retailers starting to report next week. I mean, is there a thread? Is there a thread to be woven among some of these companies and some of the moves we've seen, especially when you've got a PepsiCo that was under pressure in part because of what weakness that they saw in North America as consumers push back on on price increases? Yeah, I mean, obviously been messy in terms of the overall run of consumer earnings. Pepsi's comment about consumers feeling squeezed, however they gauge and measure that, by the way, that there's some resistance to what have been two years of

aggressive price increases. That, to me, is the more relevant point. Now, Newell is not a company probably that has enormous pricing power, Rubbermaid, Sharpie, Yankee Candle, things like that. It's also been a really difficult run for that company for a while. So I'm not sure exactly what's happening there unless it's very specific. But in general, yeah, I think that's why investors are also within the consumer area, sticking with what they perceive as quality. Costco has been the best consumer related stock anywhere. And that's because it feels as if it's the quality name. They basically have the scale, and you don't have to worry so much about pricing power

because they don't push on that lever very much. Yeah, you could probably make that argument about Chipotle, which reported earnings earlier this week as well and continues to see that resilient, growing same-store sales growth. All right, Mike, thank you. We'll see you a little bit later in the hour. Up next, quote-unquote bull market paranoia. Our next guest says investors should not be worried

about the paranoia running rampant through the record bull market. 314 Research's Warren Pies explains why history says investors should be buying on any pullbacks. Plus, the U.S. CEO of eToro on what her clients have been buying and selling during this record run. Stay with us. Welcome back to Overtime, the S&P making history yet again after closing above the 5,000 mark for the first time ever. So, is there room

for a rally to run or cause for concern? Here to weigh in on what he calls the bull market paranoia is Warren Pies, co-founder of 314 Research to Discuss. Warren, always great to have you on the show. I'm going to start right there. Paranoia, what are we talking about? Yeah, great to be here. I sense that it's logical, right? I sense there is a lot of paranoia out there and fear in the market. And I think there have been a lot of people who missed the rally. And we're up 19%, at the end of January, at least, the S&P 500 was up 19% in 63 trading days. So that's, for people who don't count in trading days, that's one quarter. And that puts us in a top 3% kind of move. So it's been a massive move, a crazy run, and we're overbought. I mean,

and logic tells us that the next move should be some kind of serious correction. You give a lot of those gains back. And so I'm prone to the paranoia, prone to the skepticism and pessimism, just like everybody. So what we do is we use data to combat that. And we look at the data and study the history of overbought markets like this one. The message is really clear. It's actually a bullish phenomenon. You end up with a pullback or consolidation. And the pullback is usually pretty mild.

And then you continue higher in the year following. So we've had 12 of these events, these 19% surges, as we call them. And there have been very little pullbacks in that data set. And so I think that the paranoia and the concern about an overbought market is really misplaced. You should probably flip the way you look at the world and think of this as there is a lot of demand for stocks. And there's a lot of people who want into this as. There is a lot of demand for stocks and there's a lot of people who want into this market. So it sounds like you think we're going to get some sort of pullback, maybe a mild one, consolidation. And when that happens, you buy. Yeah, I mean, we haven't adjusted our positioning.

So we've been our message since November has been you can't be underweight this market once the Fed made its pivot, verbal pivot, that is. And so we're not adjusting our position. We're not trying to time a top or anything like that. I think that's a really mistaken strategy. If you have some dry powder, we have a cash overweight, we've been running a bond underweight, and that's funding our cash overweight. And so the idea is if we do get a big, sharp correction, say 7%, 10%, then yeah, I think you put that money to work assuming all of your data and framework is still constructive. But at the end of the day, I don't really think the market's going to give you that picture-perfect pullback. Honestly,

I think a lot of people are under-positioned, too afraid of this market. And behind the eight ball, I think the best bet is still what we called for is that the market gets to 5,200 by May. That's the first Fed cut. You end up with a 10% rally from the six-month period before the first Fed cut and a soft landing. That's our script. I think that's what we're following in the market has been actually even better than we expected from that perspective. So, yeah, if we get a pullback on buying it, but I'm definitely not anticipating that here. Okay. Two things you said I want to parse out out the first one. We know this rally has been top heavy. We've been talking about the Magnificent Seven and the role that it's playing in the gains that we've seen. Is that where you continue to put money to work? Are we going to see this rally

broaden here anytime soon? And the rally is broadening. And so that's part of the paranoia and bear concern out there is that the breadth has been so poor. And so you're seeing things like percentage of stocks trading above their 50-day. It's starting to trend lower a little bit. It's still decent. And so you see that as a concern. But when we control for interest rates, you're starting to see sectors like financials, sectors like industrials, sectors like health care, even consumer discretionary join into the tech sectors and participate in the rally. So I think you have to control for interest rates because that's been your dominant factor in the market. How do you play that? You know, you don't want to be underweight, the mag seven. I mean, this is just a momentum train that you

don't want to miss. But our view has been a little bit nuanced. We want to be in high-quality stocks within the S&P 500 in shade. If you can find those high-quality stocks that are not MAG7, that's going to be your sweet spot. We run a system. We call it our full cycle trend system. It's up over 8% this year. It stuck with the market last year and beat the market by 10% in 2022. Quality is really always the consistent factor that outperforms.

I wouldn't chase cyclicals. I wouldn't chase value. Very quickly, I think you said you're underweight treasuries. Why and what would change that? So we think fair value on the 10-year is about 4.2. So we're pondering getting back to benchmark weight on treasuries. But yeah, you have some issues like supply. And ultimately, I think that the bond market has discounted a lot of the Fed cutting. On the other hand, the Fed is going to cut. So I think these kind of factors,

I see a lot of bearishness calling for 5% on the 10-year. And we saw that and expected that last year and went overweight when we saw that. But I don't see the 10-year going back to 5%. I think we're going to trade a range 4 to 4.4, let's call it, for the foreseeable future as you fight supply versus Fed cuts. And you're at fair value now. Yeah. We had some good tests with all those auctions this week, Treasury refunding and whatnot. So one to watch. Warren Pies, thank you. Absolutely. Thank you. The Hartford has been one of the top performers this year as the S&P closes above 5,000 for the first time. Up next, the company's chairman and CEO on whether he thinks soaring insurance premiums will keep rising. And check out shares of Cloudflare, one of the big winners on Wall Street today after

beating earnings estimates and issuing strong full-year guidance. Those shares finished the day up 19.5%. We had some big moves in both directions with earnings movers today. Stay with us. Welcome back to Overtime Insurance. Getting interesting in California. The Hartford is the latest insurer to cut back its offerings in the Golden State, joining a growing list of firms to do so, including farmers, allstate, state farm, and USAA.

But joining me here on set to discuss California, to discuss the consumer, and so much more, the Hartford CEO and Chairman Chris Swift. Chris, it's great to have you here. Welcome. It's great to be here. Thank you for inviting me. I want to get to California. I want to get to a couple of things. But first, in a week and on a day where we saw CPI revisions and we know things like auto insurance premiums

have continued to grow, what is your outlook for inflation or maybe I should say disinflation this year from your vantage point? Sure. You know, what I would say from a larger economic perspective is one thing, and I think there is a subtext on particularly auto inflation that affects the insurance premiums. But generally, I think we're pretty encouraged that the Fed's fight to lower inflation is occurring. Whatever metric you want to choose to look at, it's headed in the right direction and I think it will get better in 2024. I don't think the Fed's going to cut until the second half of the year. They're going to continue to be disciplined in their approach, which is probably a good

thing for long term. So we're quite constructive on the macroeconomic outlook. And when the economy does better, Hartford does better. We ensure more exposures. There's more employees working. And that's all good for our premium base and ultimately our margins. Yeah, and of course, you do have auto.

You do have homeowners. You do have commercial. You're also offering workplace benefits. Soft landing, do you think that's in the cards this year? Yeah, I really do. I'm fairly sanguine on the environment and what we can manage to. And actually, on our fourth quarter call, I was pretty bullish about our ability to grow and produce consistent margins, which are at all-time highs. I think the inflation question, though, on the auto side, if I didn't answer it, is it's disconnected from broad-based inflation, because there's been much more used car pricing pressure.

There's much more labor pressure in auto repair shops these days. there is some pressure from litigation in the field of just who's at fault. But we see that pressure actually starting to come down. And again, we think we'll trail in 2024. But from a consumer side, I would still expect premiums to be elevated, you know, compared to, you know, history. Okay. Personal lines, speaking of your recent earnings, premium growth, 9% last quarter. Autos is part of it. Homeowners is another part of it. We did just tease it. What we've seen in places like California, where you've had wildfires, you've had floods even just this past week, you've had some natural disasters and weather-related risks.

But you've also had a regulatory environment that hasn't necessarily been the friendliest to the insurance industry, is my understanding. Your thoughts on and how you're thinking about business in that state and whether it's a situation that you're considering in other states as well. Sure. California is a big, important state economically. We sell all our products there, whether it be commercial, personal lines, benefits, even our mutual fund business. So we want to be in California, given the size and scale of it. The unfortunate decision that we had to take because we weren't earning an adequate return

on our homeowners' business, we are return on our homeowners' business. We are pausing new homeowners' business. We're renewing our existing customers, but we're pausing it. And it's really because of the environment. It's a complex environment from a regulatory side, and we just didn't feel we can earn a risk-adjusted return on the capital we would allocate. And we're really encouraged that the governor, the insurance commissioner are really getting serious about reform so that we have

regulatory reform along with adequate pricing. And then we'll come back into the market. Okay. I do want to talk about commercial lines, which speaks to businesses and specifically small business and the role that's playing as that part of your business continues to grow too? Well, I would say small business for us is the crown jewel of the firm. It's a business that we've created 40 years ago. We've sort of perfected. We've grown it to $5 billion of premium. Margins are stellar, and it's our growth and profit engine going forward.

So we know the segment very well, and principally because we have the products that people really want, we're easy to do business with, and we're accurate, we say what we're going to do, and we don't take a lot of people's time. So small commercial will continue to grow for us. And all the outside sources of data that we have, small business formation is still positive. NFIB, you know, it says things are growing. If you look at the ADP data on wage growth for small businesses, it's all positive. So we think it's a big,

important segment to our economy, and we're glad to support it. Yeah, and of course, it feeds back into, I think, the soft landing or even potentially no landing discussion that we do have here about the economy, what that's going to look like this year and beyond. Thank you so much for joining me on set. Chris Swift, Hartford CEO and chairman. I should also note, number one insurer on the list of America's most just companies, which is a list we know well. Good to have you. We're very proud to have you as a sponsor.

And it's the sixth time that we're on that list. And I think it just speaks to us operating in a highly ethical way and doing good for society. All right. Chris Swift, thanks for being here. Thank you. Well, it's time now for a CNBC News Update with Christina Partsenevelis. Christina. Thank you, Morgan. Well, on the heels of yesterday's special counsel report on President Biden's handling of classified documents, the White House announced today that Mr. Biden will name a task force charged with protecting classified materials during presidential transitions. A 5.7 magnitude quake struck off the Big Island of Hawaii this afternoon with reports of strong shaking all the way in Honolulu,

which is about 200 miles away. However, authorities say no tsunami is expected. Residents of the big island tell Hawaii News Now items jumped off shelves and pictures fell from the walls. There were no immediate reports of heavy damage or injuries. And Iran's supreme leader Ayatollah Ali Khamenei can no longer use Facebook or Instagram. According to a meta statement, the accounts were permanently removed for repeatedly violating its dangerous organizations and individual policies. Back to you, Morgan. All right. Christina Parts Anabolous, thank you. Are retail investors all in on this market as the S&P 500 closes above 5,000 for the first time?

E. Toro's U.S. CEO is going to weigh in on that next. And do not forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back. It's an historic day for the S&P 500 closing above 5,000 for the first time. So how are retail investors taking advantage of this rally? Well, joining us now is Lule Demise. She is eToro U.S. CEO. Lule, it's always great to have you on, especially on a day like this. And we were just having a conversation with one of our earlier guests about how many people have been negative about this rally and sitting it out. I wonder what you're seeing on the platform. Yeah, we're seeing a lot

of interesting things. So first of all, wonderful to be with you. I turned into my green shirt after what I saw at the close. So everybody's pretty much excited. So what you do see is actually retail investors, the buys are stronger than the sells. I'll give you an example. For January, we had about 55% was buys and about 45% was sells. So you're still seeing this sort of like discerning selling where they want to take profits and then also buying when they're seeing an opportunity. But definitely the bulls are out more than the bears. Interesting. What are they buying? So the top, they are no suckers. So they're leaning into the Fed fund, sort of the Fed thesis, right? So they're buying high quality tech stocks, they're buying where they see opportunity and earnings quality in the technology space, in the healthcare space,

in the semiconductor space. The other thing we see also, Morgan, is that a lot of our investors, because they are on the younger side, you see a ton of AI lean, right? Whether it's AI to buy and hold or whether it's AI to actually see it as a tool in their investing thesis, which is something that we are seeing more of. Yeah, I was actually just going to go there with you because I'm looking at this list in my notes of AI stocks that are top of mind for eToro investors. And it is. It's all the heavyweights that you would expect that are operating in the AI space. Some of them, like Palantir, for example, which had a huge week, actually realizing and monetizing those AI capabilities as well.

Yeah. So we saw a lot of action in Palantir today in our options platform, a lot of action in Microsoft. And then, of course, they're also taking part in looking at what's happening to the indices. So we saw a lot of QQQ and SPY action as well. All right. Interesting. I want to talk to you about crypto because I know that's big on your platform, too. That also had a big week. We had Bitcoin, I think, highest level since January 11th. And we've seen crypto related stocks like Coinbase, MicroStrategy and also the crypto miners like Marathon Digital and Riot Platforms had a very, very strong week. I wonder what you're seeing, especially in the wake of the Bitcoin ETFs that began trading. I don't think you've been on with us since then. What activity looks like around all of this?

Yeah. And remember, Morgan, on our platform, you can actually buy the actual coins, right? Not just the ETFs, which we also list. And what we did see is like you saw in the marketplace where there was a little bit of pullback when the ETFs launched, you know, as the market sort of took a little breather. And then we're seeing more leaning in. It's still the big winners, you know, Bitcoin, ETH, Doge. Those are the big winners. But you do see sort of like others lifting as well as the crypto thesis starts to awaken again. We keep talking about the democratization of trading and investing. And even just this week, we had news that Bill Ackman is going to launch an NYSE listed fund for, quote unquote, regular investors. And I wonder how it speaks to, as your point, there used to be a time where, maybe not that long ago, where retail investors were considered dumb money. But as we have seen more folks become more involved,

the cost of access come down and more sophistication come into the mixes, as you've talked about what that means now in terms of that market opportunity. Yeah. And, you know, what's interesting is like, you know, it's wonderful that everybody's coming in with new ways for retail investors to engage. But remember, because of the democratization, people can buy fractional shares in almost anything without needing another layer of an asset manager on top of it, right? So that's one aspect of it is getting closer and closer to what I call the raw material on platform like ours, where you're getting access to that investment. So you don't see a lag of an asset manager's overlay on top of that. But you also see,

for instance, 40% of our retail investors we just surveyed told us, I plan to take on more risk even though I'm keeping some powder dry. So again, this sort of like idea of like being opportunistic while I'm also keeping powder dry for the next pullback is what we're seeing. OK. Lule Demise, great to have you on a day like today. Avitoro, thanks. Thanks so much. Up next, Mike Santoli's back. He's going to look at the inflation surprise index and what that could mean for the Fed and your investments. And during February, we're celebrating Black Heritage. Here is Ogilvy Global Consulting Partner, Kai Wright. I'm proud of Black Heritage because of the resilience, ingenuity, and adaptability that exist. And I'm encouraged by the collective action of the DEI pledge and organizations and people that are attempting to make change permanent.

Welcome back. Inflation rose at a slower pace than what was originally reported in December. That's according to revisions the Labor Department released today, and that's specifically on the top line, not core. Next week, we're going to get inflation numbers for January. So are investors getting comfortable with this inflation story?

Let's ask Mike Santoli. Mike. Yeah, Morgan, over the last several months, it seems as if there has been greater confidence that the path of inflation is lower. One of the reasons is not just, of course, that the absolute inflation levels have come down, but inflation readings have in general been coming in below forecast and also in a relatively narrow range, close to forecast. So not very volatile in terms of the month to month prints. This is the U.S. inflation surprise index. So basically when it's below zero, it means inflation has been running below projections. And then, of course, you see what happened here. Twenty twenty one into twenty

twenty three. Just wild. So not only was inflation very high, nobody could get a handle on it. Nobody could predict it well. And it was coming in consistently way hotter than anticipated. So here over there, you see the last several months were below zero. You poked above it for one month. It's clearly not a trend that you can completely be secure in, which is probably why the Fed needs a few more data points here over the next couple of months before deciding to change rates. But this does explain, I think, why inflation has had some of the suspense pulled out of it and why people have been able to, I think, take as a premise that disinflation is in train. I mean, what's fascinating to me is that this was really seen as a risky report that we are going to get today

in terms of these revisions, given the fact that that was the case this time last year. But to your point, I mean, the disinflation trend is pretty clear in the data. Without a doubt. And, you know, I think the market's always kind of bracing for the thing that they didn't see coming last time. I think this also applies to a lot of the Treasury auctions that we've been seeing. They're big and they're very hotly anticipated. And people are wondering if Treasury supply is going to send yields soaring because that's what happened out of the blue when not many expected it last late summer and into the fall. So I do think it's natural for the market to essentially, you know, look for those danger

signs where they didn't see them coming in the past. It's often, of course, not exactly where the next problem comes from. Yeah. So arguably a sigh of relief for investors with a number of, I guess, a number of potential catalysts this week. How does this set us up for CPI next week and some of the other data that we're going to be getting, including, for example, another round of earnings that are very consumer facing? Yeah, I think in terms of the CPI, there's some of the work out there that suggests, OK, there might be for technical reasons, the year over year headline. Maybe it's going to be firm. And so I don't know that people are going to extrapolate too much from that. The key to me is, is the decline in shelter costs going to be registered there and really how the bond market just absorbs all of it?

Because we've been discussing bond market has not been a prime mover of what's going on with stocks for now. In terms of earnings, I feel as if a lot of that cake is baked just on the overall trajectory of fourth quarter and first quarter expected earnings. Seems like mid-single digits. Obviously, we got company-by-company surprises. But we're in the process, I think, of putting the earnings reversal higher in the we-got got this box, at least for now. OK, Mike Santoli, thank you. The Army unexpectedly canceling a next generation helicopter program. Up next, a look at which defense contractors will be impacted the most by this surprise decision. And if you love the show, who doesn't love the show?

You want even more Overtime? I know you do. Scan the QR code on your screen and follow us on LinkedIn, where we'll post exclusive content. Overtime, we'll be right back. Welcome back. The San Francisco 49ers and Kansas City Chiefs are set to square off during Super Bowl 58 on Sunday. But before they do battle on the field, they are coming under the intense pressure of Contessa Brewer's quiz on some of the most pressing issues facing Wall Street. Contessa, what happened?

Well, it was like maybe not so much a quiz, but I was posing the questions we ask every day on the air here at CNBC. And perhaps no professional players are living, may I say this, more ambitiously right now than the Super Bowl teams. And boy, were they good sports. They tackled even the toughest questions. What's your expectation of a Fed rate cut this year? What was that? I think they're doing a soft landing. Timing-wise? Timing-wise, probably end of the month or early Q2. I hope it happens, honestly. I bought my home last year, so I'm kind of, I missed the train on that. I think towards the later part of this year, maybe Q4, we'll see a rate cut. Obviously, Jerome Powell has continually fought against that,

but I think he's just trying to signal the market not to get too hot. Crypto still has a part, for sure. It definitely has slowed down. I was never with crypto and just still learning about AI. I'm into more crypto. I'm personally not a fan of crypto. I feel like it's too volatile for my portfolio. As far as AI and crypto, I made a couple grand off of NFTs, but then I realized they were kind of scammy, so I stopped doing that. Technology is crazy.

I wouldn't be surprised if I have a clone sitting next to me in the next couple of years. Which do you think has brought more fans to NFL? Gambling or Taylor Swift? Taylor Swift. Taylor Swift, no doubt. Taylor Swift. I think, no doubt. Taylor Swift. I think it is sports gambling.

Taylor Swift or sports gambling across the nation? I don't know, but that's a deadly combination. We heard from FanDuel and Caesars about the boom in betting they attribute to Taylor Swift. But Bank of America analyst Sean Kelly says Penn's ESPN bet may actually be the sports book to benefit most of all because of all the women players that Penn already has, Morgan. The women players, are they betting more actively than the men or do we not know? Is it just sort of across the board? No, it's just that generally speaking, I'm drawing broad brush strokes here, that like slots players tend to be women.

And so if you all of a sudden have women more interested in sports, more interested in football, they also have been more interested in placing bets, say, on Travis Kelsey for touchdown. In fact, what we heard from Caesars, Morgan, is that there have been more bets on Travis Kelsley to make a touchdown in the Super Bowl than on the San Francisco 49ers money line and spread combined. But when I asked the Niners, hey, does that make you guys feel like the underdogs going into the big game? They looked at me like I had two heads. They're like, no. What's been the most surprising thing for you? Because I know you've just had a flurry of CEOs on the air over the last two days. You're just on the ground doing all this reporting ahead of the game. What do we need to keep in mind?

I just think it's really interesting when we were talking about F1, it was really about that ultra luxury, high net wealth player and visitor to Las Vegas. And the expectation was that the Super Bowl would be more democratic, that you would get kind of a broader spectrum. And I think that's the case. But the people who are coming here are still spending way more than any previous Super Bowl. And Super Bowl always sells out Las Vegas. It's pretty incredible. I know.

Record highs for ticket prices, too, again this year. Contessa Brewer, great coverage. Thanks for coming on. Thanks, Morgan. We have anotheressa Brewer, great coverage. Thanks for coming on. Thanks, Morgan. We have another CNBC Pro story for you. It is another busy week of earnings. Next week, Pro Team has zeroed in on four names signaling momentum heading into their reports. In the last three months, all four stocks have had five or more upwardly revised earnings per share estimates. EPS estimates have been trending higher, and there have been higher analyst price targets.

So here's the four stocks fitting the criteria. Applied Materials, Akamai Technologies, Howmet Aerospace and ConEd. You can check out the full research behind the picks on CNBC.com slash pro. S&P 500 above 5,000. That's going to do it for us here at Overtime. Fast Money begins now.