Closing Bell - Closing Bell: Overtime: Averages End First Week Of 2024 Lower; Hottest Sectors for 2024 Dealmaking 01/05/24

Episode Date: January 5, 2024

The first trading days of 2024 are in the books and the major averages snapped their 9-week winning streaks. Lindsey Bell, 248 Ventures Chief Strategist, and Nathan Sheets, Citi Global Chief Economist, discuss what’s ahead for the markets. Moody’s Chief Economist Mark Zandi breaks down the December jobs report and what it means for the Fed. Barclays Co-Head of Investment Banking Taylor Wright talks the IPO pipeline and what sectors could see the most dealmaking in 2024, while Oppenheimer senior biotech analyst Jay Olson talks the health care sector and what stocks he is watching in the year ahead.  

All the major indices in the green just barely, and I should count the Russell. That's down. Everything down for the week. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford with Morgan Brennan. It was a volatile day for the market as the major averages snap a nine-week winning streak. We started lower, we ended higher. Coming up, Moody's Analytics Chief Economist Mark Zandi on what the stronger than expected December jobs report could mean for the

Fed and the economy. Plus, Barclays Co-Head of Investment Banking Taylor Wright on which sectors could see the most M&A activity this year. Well, let's get more on this. Rough starts the year for the market. Mike Santoli joins us now from the New York Stock Exchange. Mike, I mean, we just said it. It was a volatile day. We started lower. We ended higher. We had a hotter than expected jobs report.

We had a softer than expected ISM services report. What to make of it all? You know, Morgan, it seems as if the market was a bit apprehensive in terms of how to interpret the economic data, but it didn't stray too far from the premise that we have a slowing economy, but one that's not falling apart. There's still support of worker income growth. You still basically have the unemployment rate at 3.7. ISM services, can we shrug it off? Can it bounce back? That's a question right here. I don't think the market wants to see a lot more weakness. But at this point, after a nine week 16 percent rally in the S&P 500, you're backing off by two percent. The most kind of heavily favored stocks of 2023, the ones that had a lot of deferred profit taking, have led the way down. It just seems relatively orderly and routine at

this point, even if we're still in a bit of moment of confusion about how to price what the Fed's going to do and what yields might do from here after they've leaked higher to about 4 percent in the 10 year. Mike, I want to talk about Apple for a moment, because in the two o'clock Eastern hour, right after the New York Times headline crossed about the DOJ going after Apple potentially over antitrust stuff, the major indices dipped, ended up in the green, but didn't recover. At least, you know, the S&P, the Nasdaq didn't up in the green but didn't recover, at least the S&P, the NASDAQ didn't, all the ground that it had lost. This one's fascinating to me, not because it's a shock. We've known that the DOJ and some others have been after bigness. It's that Apple, of all of the big tech companies, to me, is nothing close to a monopoly as a platform that's got less than 50 percent share.

I mean, it doesn't have monopoly share in watches. You have to create a market that exists as Apple into itself. Premium smartphones or it has a monopoly in software on its own devices in order to create something. Big tech has been such a big part of public markets for the last couple of years. This kind of assault potentially on them is market relevant. It is. And, you know, traditionally, and by that, I mean, over the last couple of decades, when you get one of these headlines, when regulators are said to be really looking into the competitive mode of one of these big companies and the stock reacts, it's tended to be a fade. In other words, you tend to want to bet against the idea that this

is going to really be relevant for the long term in terms of the value of the company. That said, I do think that there's a relatively sweeping nature to this reported investigation. And even if Apple does not have absolute dominant market share. It has a massive market share. And if they are said to be excluding other apps that compete with their own products within that ecosystem, I think a case could be made. I don't think the market, I mean, look, it was down a little, what, less than 1% on the day. It's down 10% from its high. You had fragile sentiment in Apple as it was.

And I think there probably also was a sense out there of, oh, wait, maybe this is what the stock was partially telling us in its weakness recently, that there was this work underway. But I think you have to pay attention to it, along with the idea that maybe there's less urgency to the iPhone upgrade cycle, that maybe they've seen the peak of their own kind of brand dominance in certain areas. You know, no panic time, but it is something that I think you're going to have to filter into the valuation. Yeah. And of course, this idea that maybe multiples were stretched, right? I mean, and you talk about it was just like a week, two weeks ago that you saw Apple testing that $200 level. I guess it was the middle of December, which was basically the same level it reached during the summer. It was an all-time high. So that was being watched as sort of a key technical factor on whether this was going to be a bullish breakout for Apple

or whether we were going to see a pullback here. So perhaps some technical positioning as well as we start the year. And by the way, not just Apple. That's right. Yeah, it's somewhat emblematic of what else has been going on in some of those other stocks. Now, Apple has underperformed some of the other ones. So, you know, you have to keep that in mind. It does not have the tailwind of just this organic top line growth that's just there and you can rely on for a while.

So that's been part of the struggle with that stock in particular. All right, Mike. Thanks. We'll see you again in just a bit. Morgan, I think the question here with this Apple thing for me is, are we China or are we a country where the capitalist system sits on top of rule of law, where if you want to create a law where bigness is bad when you tie ecosystems together, then create it. But to try to enforce a law that doesn't exist or to try to, through the court system, create law, business can't sustain that in an unstable environment. And that, to me, is why you end up with these pockets of time where people are saying, well, is the Chinese market investable?

Because, you know, the government does something and stocks tank because we don't know what to expect. I get the comparison, although I think there's still, like, a very stark difference, especially when we talk about rule of law between the U.S. and China and what that means from an investor standpoint. But to your point, I do think there is a ticking clock here because we are in election year in terms of regulators who have been making the case, building the case for a number of years now to try and get those cases out there. What

that looks like, how it goes through the court system, et cetera, et cetera, time will tell. But the fact that it will go through a court system, assuming that this actually moves forward and a case is actually presented, I think is the big difference. There is a difference. Is it stark? That to me is the question. Well, let's get to our market panel. Joining us now is 248 Ventures Chief Strategist Lindsay Bell and Citi Global Chief Economist Nathan Sheets. Guys, happy Friday. Nathan, going back to the jobs report this morning, doesn't this take six cuts off the table or no? Is that what the market was in part trying to digest? I think today's data overall were very much a mixed bag. Yeah, you got a bit of an upside surprise on the payrolls numbers, but it still paints a picture of a gradually slowing

economy, maybe a little bit of wage pressure that the Fed's going to want to keep its eyes on, but on balance, an easing labor market. And then that was reinforced by the services ISM, which was quite soft, probably influenced to some extent by seasonal adjustment issues. But if you entered the week thinking the Fed was going to cut in March, I think you can leave the week with that same view. My personal perspective is I wait and see. I kind of expect them later in the year, maybe later in the second quarter. But nothing to really move the dial today or during the past week. Lindsay, you think the Fed cuts in March and six cuts are even possible? I don't see six cuts, but I think there's a lot of moving parts that you have

to take into consideration. I think a March cut is really going to be predicated on what happens with inflation. And we get three inflation readings, the first of which comes next week before that March meeting. So I think there's a lot of data that we need to digest. The Fed needs to digest. They're going to continue to be data dependent before making any decisions. But I do think that the minutes that we got from the Fed this week from their December meeting show a Fed that is, while they believe rates may have peaked, they don't necessarily want, to me, they took the march cut off the table in those minutes. So Chair Powell was pretty dovish in the press conference after that December meeting, but these minutes were much more hawkish. And I think that's what investors

grappled with all week was mixed messages, even contracting messages from lots of different data points this week. Which, by the way, the market hasn't been, the market has been wrong before. It's that old mantra in some ways, Nathan, of don't fight the Fed. The other piece of this puzzle, though, and certainly one that, you know, there's skepticism surrounding, is the consensus estimates for 12 percent S&P 500 earnings growth this year. Is that too lofty? Well, I never want to count U.S. corporates out, but by the same token, that is very rapid earnings growth in a macro environment that is likely to be lackluster. You know, it is consistent. What we're seeing is consistent with the soft landing, but that means slower nominal GDP growth.

And I think that that will take a bite out of those earnings from the corporate sector. Lindsay, it sounds like you had thoughts on this too. Yeah, no. When I think about that 11%, 12% estimate, depending on what estimates you're looking at for a consensus, it sounds rosy. Sure, it's above the historical average rate of about 8% to 10%. But we're coming off of a year where earnings are basically going to be flat to down slightly in 2023. So that's a nice rebound that we're expected to see. Comparisons are much easier. And of course, we're going to see sales slow into the year ahead, but probably to a more normal range. And so I think a normal earnings

growth rate of 10% to 12% is quite doable this year. Of course, I think we're in a show-me year, and part of that show-me is going to be about GDP growth coming in better than perhaps the Fed or the consensus expects, which is pretty weak versus historical averages, and really seeing that come in better than expected, and then therefore earnings being able to come in better than expected. Lindsay, finally, I want to ask you about something I see in the notes here. You said you're looking at tech, comm services and health care as quality defensive plays. In what way is tech defensive?

Well, it goes back to the beginning of the pandemic, really, John. Tech really became this defensive play because it is a sector where earnings growth can continue despite the economic environment. Because we've become such an economy that is reliant on tech development and tech innovation that you see growth within this sector. When I look at tech and communication services and the magnificent seven earnings growth of above 20% for 2024, which compares that to 11% or 12% for the overall S&P 500, that is pretty safe betting right there. And to me, that's a defensive play. So I think that while the multiples for some of

these stocks have become stretched, I think that investors, especially in the first quarter, the waters may be a little bit choppy while we really try to figure out what the Fed is doing with interest rates, if fundamentals are catching up, if growth is going to remain slow and can potentially catch up later in the year. I think while we figure all that out in the first quarter, you want to probably have some defensive exposure. And to me, tech, communication services, and then health care, which has underperformed the market in the past year, has an opportunity. Granted, more recently has done better, but I think it has an opportunity to do well in the months ahead. Interesting way to look at it. Lindsay, Nathan, thank you both. Now let's bring back Mike Santoli with his first dashboard. Mike. Yeah, John, fun to look at,

let's say, a six-month chart of the S&P 500 to see where this little pullback we've gotten in the last five trading days or so has brought it, which is exactly to the point of the December 13th Fed decision day rally. So that that day we closed at forty seven oh seven. He started the day around forty six fifty closed today right within that zone. It suggests that the market had to almost kind of check back on that level to say, OK, we still OK with this premise of what the Fed's going to do and the fact that this inflation is there and that that we basically have a pivot in hand. Maybe the market in the final couple of weeks of the year may overshot a bit in terms of its excitement on those things. We're testing it at this point. I also think down to forty six hundred still

remains a very routine pullback. So not necessarily make or break levels just yet. Also, take a look at 10 year Treasury yields. Nice and tidy. Also checking back to exactly where they were at that point on December 13th. They were right around just over 4 percent as well. So similar story right here where you maybe got a little bit of a, you know, kind of an overextension of the trend at the end of the year, taking it back a little bit, maybe just a half step back, and then we're resetting sentiment and positioning along the way. Mike, I think you said a few days ago that 45-50 maybe was a level that you were watching. But in that context, why is January, why do people so closely watch what happens in January as potentially indicative of what's going to happen for the rest of the year? Not so much from a cause effect predictive way, but why do those two things go together? It's a very good question,

actually. And I think there's a lot of things about markets that should not really be as sort of regimented as that. We have these kind of calendar biases. Every time we say, oh, it's we've never had a month that the market went up X or Y. We mean calendar month. We don't mean 30 day period. Right. So that's at the outset. The other thing is, though, traditionally, there is a sense out there that big investors reallocate assets and set their sort of risk budgets at the beginning of a year. So there might be some additional information content on how the market trades in early January or the full month of January. But usually it's overtaken by events, so it's only a weak tendency or kind of a weak signal of what might be to come.

We got a lot of events coming in 24 for sure. Mike Santoli, see you again in just a bit. Now, he was one of a few economists to correctly predict a recession, that it wasn't in the cards for the U.S. last year. And of course, one didn't come. Up next, Mark Zandi is going to tell us whether the better than expected December jobs report means the economy is going to remain strong in 2024. And merger mania, fueling a rally in biotech stocks

over the last two months. Coming up, we will discuss whether more deals could be announced during this weekend's J.P. Morgan Healthcare Conference. That's going to kick off into next week. In the meantime, Overtime is back in two. Welcome back to Overtime. We have a news alert on Bitcoin and Kate Rooney has the details. Kate. Hey, Morgan. So investors have been expecting and awaiting a wave of Bitcoin

ETF approvals. Bloomberg just reporting that the SEC commissioners do plan to vote on these ETF filings next week and that some of these filings have cleared what they're describing as a key hurdle here. So there are two steps as a little bit of background here. The SEC first needs to approve the S1s that come from the companies and the applications. And then there are these separate filings for exchanges known as 19B4s. So both of those need approval before any of these ETFs can start trading. Bloomberg reporting that the SEC told several of the exchanges and some of the issuers looking to list that they didn't have any more feedback or commentary. They should submit final versions of those key documents today.

So it is looking like potentially next week, the SEC does have this deadline of next Wednesday to approve or deny the ARK 21 shares application from Cathie Wood. They're among 13 firms vying for an ETF to track the underlying price of Bitcoin seen by investors as a way to really widen the audience of Bitcoin buyers. And one of the reasons we've seen the price spike in the past couple of months here, guys, but some incremental news there on the Bitcoin ETF. Back to you. Okay, so just to be clear, we got 13 applications. The deadline is January 10th for the first application.

Are there other dates we should be watching in terms of these other 12? So that's the key date, Morgan. The expectation is that they approve these in a group and sort of a bundle. You've got Fidelity, you've got BlackRock. And so the expectation is that, yes, that's the deadline for Cathie Woods. But since the applications, the filings are so similar, the SEC will most likely, I'm told, approve multiple applications at once. So you can see this wave of approvals and they may or may not start trading next week. It depends on whether the exchange is also going that necessary approval. Yeah, it's going to be one to watch, especially given the run up we have

seen in the price of Bitcoin ahead of this. Kate Rooney, thank you. Thanks, Morgan. Today's jobs report was better than expected, showing that the U.S. economy added more jobs than anticipated in December, while the unemployment rate held steady at 3.7 percent. Here to share his take on the jobs data and what it could mean for the Fed's path forward is Mark Zandi, chief economist at Moody's Analytics. Mark, it's great to have you back on the show. To me, the takeaway here, OK, we saw the previous two months revised lower. We had the stronger number in December. We know December tends to be a little noisy.

But to me, the real takeaway here was the fact that wages continue to grow and they're growing faster than inflation. What does that tell us? Good news. Wage growth is 4%-ish. Inflation, CPI inflation is about 3% and moderating. So that means real wage growth is positive, about one percentage point. That means consumers' purchasing power is improving,

and that's the fodder for continued spending. And, of course, it's the consumer that kind of drives the train. And as long as they're doing their part, hanging tough, spending, and with those real income gains they should, the economy should continue to move forward and recession remain at bay. So good news. Okay. Last year at a time where at least to start the year, everybody was saying, oh, we're going to get a recession in 2023. You were like, I'm not so sure that's going to happen. Your call proved to be the right one. So given what you just said, your expectations for 2024 and what are the key metrics or data that you're going to be watching to know that, in fact, a so-called soft landing is upon us? Yeah, well, thanks for calling that out. That's very kind of you, Morgan.

I appreciate that. And I feel pretty good about 24. Growth may not be quite as strong as in 2023. Fiscal policy is going to be a bit of a drag as opposed to a bit of a tailwind to growth. But the key always, in my mind, does go back to the consumer. They do drive the train. And, you know, there's just a lot of, I think, favorable conditions there. I mentioned real wage growth. Debt service burdens are low, and consumers have done a very good job of locking in. Stock prices and housing values are pretty close to the record high, so people's net worth is up. Got a lot of excess saving, particularly among high-income households,

high-middle-income households. So lots of good reasons to think that consumers are going to continue to hang tough, do their thing. They're not going to spend with abandon, but we don't need them to or want them to because that could be inflationary. But just as long as they continue to grow, spending continues to grow at about 2% real, which is what we've been doing, we should be just fine. Mark, you mentioned stock prices and housing values, those being high, only good for the upper middle class and the upper class, right? And I wonder in 2024, if the lower income consumer, the middle class consumer, not just in politics, but also in the economy, might matter more. And the wages certainly are important for them, but so is the stretched credit, the higher interest rates on credit cards. How much of an issue is the relative lack of good news for people who don't own assets? Yeah, no, you make a great point, John. I mean, I think folks in the top two-thirds

of the income distribution, no problem. Everything is fine. They should continue to spend. And that's where the bulk of the spending occurs. So that will allow the economy to continue to move forward without recession. But the bottom third of folks in the income distribution, they are indeed under a significant amount of pressure. Their real incomes have, until recently, been declining. They're now starting to rise, but that's after a period of declining real wages because of the higher inflation. They do have, they have taken on a lot of debt

to supplement their income in the high inflation period. So credit card debt, consumer finance loans, that kind of thing. And you're right, they don't own stocks. Only 60% of Americans own stocks, and they don't own homes. Only two-thirds of Americans own homes. So they're going to be struggling. Now, the good news is the job market is very strong. We're creating lots of jobs, a lot of good-paying jobs. Unemployment is low uh below four percent we've been there for two years and it's helping all groups uh high income low income all demographics you know white males and

black and hispanic populations so that's all very good news so as long as inflation continues to moderate you know as long as gas prices stay down and we get some relief in terms of rents and and food prices uh and as long as interest rates continue to move south, hopefully the Fed can follow through and cut those interest rates because that'd be really very important. Credit card rates are tied directly to what the Fed's going to do. I think conditions should improve for those lower income households. But as you point out, they've been under a lot of stress. Yeah. And continue to be, Mark Zandi. Thank you. Sure thing. News breaking last hour that a $17 billion energy merger could be in the works. We're going to have the details and get the outlook for the deal and the deal space in

general with Barclays, co-head of investment banking. That's next. And as we head to break, here's a check on the biggest S&P winners of the week. And, because we can say this right now, the year. Take a look. Moderna's at the top of the list. It was one of the worst performers last year. Welcome back to Overtime. A report in the Wall Street Journal last hour sending two natural gas producers higher,

Southwestern Energy and Chesapeake, in talks to join forces as a nearly $17 billion giant. The deal could come together as early as next week, at least according to the journal. This as NatGas has its best week since June, both stocks spiking in late-day trading. Joining us now is Taylor Wright, co-head of investment banking at Barclays. Thanks for coming in. You're right here with us. Thanks for having me. Happy New Year to both of you. Happy New Year. So it is the deal environment now after a big year overall for equities last year, just sort of more free flowing. Yeah, look, I think I think last year was an interesting year for deals generally, right? Effectively, we've gone from an investment banking business standpoint almost perversely the best of times,

which was 2021 in the midst of COVID, where the investment banking wallet was $133 billion to a 14-year low in activity last year, $66 billion by our numbers. And so, you know, we do expect an improvement on 2023 and going into 2024. You started to see it in the fourth quarter. You had, you know, a billion dollar or trillion dollars, rather, of announced M&A activity in the fourth quarter against $3.1 trillion for the full year. So that's a positive. And then you've started to see some elements of stability or consensus around economic conditions, rate outlooks, and things like that. In fact, listening to you guys in the last 10 minutes or so,

it's interesting nobody's talking about, well, will the Fed hike anymore? They're just talking about how many cuts, right? And so our perspective has really been three cuts, and we've been a little bit lower as a consensus matter around earnings growth in the S&P 500. So it seems like it's coming around to that. But it's a more predictable environment where we think people can make decisions around M&A and investing, and we think that's a more conducive environment for activity. But what about IPOs?

I mean, so many of the early, well, late-stage private company founders that I'm talking to, at least in tech, are saying, eh, not yet. And normally when you see the S&P at these kind of high levels, people are chomping at the bit to go. Yeah, it's interesting. I mean, I was at a client meeting the other day, and I sort of said to them, well, if I told you S&P 500 closed at 52-week high, NASDAQ, same thing, Russell, same thing, strong rally into year-end, rates at 4% on the 10-year end, VIX in the low teens, you'd think there'd be a lot of activity. So all those things are quite conducive. I think the IPO market takes some time to start. So,

if we look at the activity at the firm in terms of how people are spending their time, the bake-off activity was picking up in the fourth quarter, the restarting of processes that have perhaps been shelved because of market conditions or other factors have kind of restarted. So, we do think IPO products are gonna come. And when IPO markets open, usually what you need is, it's an exercise in confidence building, right? So most of the time investors will say, bring us a large-ish cap, liquid IPO with profitability.

And if that deal goes well, we'll participate. And so that's, there's been a couple of fits and starts around that last year. There were hopes around it at the beginning of the year. The RMIPO was a hope for a positive outcome, and it's been positive for investors, but didn't really restart the market. So, you know, we think the market sets up well, and, you know, we need a few deals to come to work, and we know investors are looking to invest. So when we talk about exit strategies, whether it's in terms of M&A or acquisitions or whether it's in terms of going public and the IPO pipeline, what are the types of companies, what are the types of industry sectors,

the types of metrics that are going to matter most for those companies that see these types of strategies come to fruition this year? Yeah, look, I think if you look at just large secular trends, right, you know, we still think technology is going to be, technology is always a big driver of the IPO market. Technology, we think, will still be there. Health care will be there. It's been kind of a very slow year for health care, but you've already seen some early deals this year. We think healthcare and life sciences could have a big year this year. Energy transition and the re-industrialization of the broader

infrastructure economy we think is also a key theme. And you have a number of other factors that are driving those decisions around sponsor exits, sponsors needing to monetize and return capital to LPs. So I think those all set up very well. But again, I think people are going to look for the first deals. They're going to want them to work. They're going to want a company that is scale, either in in absolute terms or in the market or in a scale market that has predictable profitability or a predictable path to profitability. Okay. We appreciate your time. Thanks for joining us. We hope you'll come back.

Sure. Thank you. All right. Thanks. Time for a CNBC News Update with Bertha Coombs. Bertha. Hey, Morgan. House Majority Leader Stephen Scalise shared an update on his cancer treatment this afternoon. The House Republican successfully completed his current chemotherapy treatment for multiple myeloma and will now have a stem cell transplant. He says the treatment will require him to work remotely for now and return to Washington in February. Two book authors are suing Microsoft and OpenAI in a potential class action lawsuit claiming the two companies stole from the writers' works to help build the AI chatbot, ChatGPT. This latest lawsuit follows on the heels of the New York Times lawsuit for a similar copyright infringement claim.

Microsoft is a major investor and supplier to OpenAI. And pandas may return to the U.S. by the end of the year. Chinese Foreign Minister Wang Yi said at an event today that preparations were underway for the cultural symbol to return to California. Giant pandas in Tennessee and Washington, D.C. were returned last year, with panda fans fearing that tensions between the countries would keep China from leading them to

American zoos. Thank goodness they're back. Back over to you guys. We'll take the pandas. All right, Bertha Coombs, thank you. Up next, Mike Santoli breaks down what was last month's higher hourly wage growth could mean for the Fed and inflation. And if we had to break, here's a check on the S&P's biggest losers of the week and the year. Enphase Norwegian, NXP, NF Corp. We'll be right back. Welcome back to Overtime. The December jobs report came in better than expected this morning. And one surprise is the uptick in hourly wage growth. It saw its biggest gain since June. Mike Santoli returns with his take on the latest jobs data.

Mike. Yeah, Morgan, 4.1% annualized average hourly earnings growth. That was the number that was hotter than anticipated. Now, part of that upside surprise was that the number of hours worked had declined. So therefore, the average hourly goes up a little bit in some measures. So I think this is a better, more comprehensive measure. It's total weekly payrolls, which encompasses the number of jobs gained, the average hourly earnings and the hours worked. So essentially, if the whole country was a company, this is your

weekly payroll growth over this period of time. And you see the three-month annualized has now gone down below 5%, brings us right into the pre-pandemic range. And then you see the year over year is just around 5%. So you're seeing continued deceleration in this measure. And I think it's also worth noting that back here when when you had this measure in the upper fours and toward five overall economy wide inflation was below two for most of that time or at around two. So therefore, it's not the case that just because wage growth or payroll growth is above the target rate of inflation, that somehow it's going to push through and actually feed services or other inflation. So I think that it's a little bit of a sort of bit of context. You can you can say that things are still moving in the direction

the Fed wants to see while still being consistent with a slower growing economy. It raises questions about whether economic models have to have to change, which I feel like is a conversation we've been debating for a while now. But also, how do you pair it against? I realize we touched on this the beginning of the hour, but how do you pair it against a December ISM services that was softer than expected with an employment index that was the lowest since July of 2020 with prices paid index down as well? Because it's just the mixed messaging from all the data continues. It is definitely mixed. And I think at inflection points or at deceleration points, you're going to see a little bit of a push pull in the numbers. Now, the private sector,

let's remember, in the official jobs report was weaker than the overall numbers. So ISM is going to be measuring ISM services, private sector jobs. It's also a diffusion index, which means 43 on the employment side means 43 percent of the respondents are reducing or increasing payrolls or something like that. So in other words, it's just telling you directional. It's not telling you that people are firing workers. All right. Mike Santoli, thank you. Yeah. Now, inflation is cooling, but prices for necessities like food remain high. Up next, how that might impact the way you invest. And if you love this show, of course you do, and you can't get enough, we're cooking up even more content you won't find anywhere else on Overtime's LinkedIn page.

Just search CNBC Overtime on LinkedIn. I'm John Fort. And I'm Morgan Brennan. Here on Overtime on LinkedIn, we're keeping score of your money, the markets, and the economy. Bringing you the sharpest analysis on companies from experts who know the data to get you and keep you ahead of the game. Welcome back. The latest numbers in the economy suggest it's still a tough environment for mainstream consumers, with rate cuts not likely soon, prices still high.

What will this mean for businesses and how you invest? In a new segment, John's taking time out with a founder or CEO for insight on this. Yeah, over time, time out. I recently caught up with Abhi Ramesh, founder and CEO of discount grocer Misfits Market. We talked about how even though inflation has slowed, prices are painfully high for consumers who are increasingly turning to credit cards to pay for necessities and looking for places to cut back. When Abhi and his family first moved to the U.S., they had to adjust to the idea of eating well on a budget and going for distance runs as a family.

At the time, my family would eat fast food probably four or five times a week. So we'd eat like, you know, for McDonald's, eat Whoppers multiple times a week. And we didn't think twice about it. We're like, that's what you're supposed to do here. You know, it's quick, it's cheap. Like, let's just go get a Whopper on the way back from school. And then my dad came back one day from, from his MBA program. I was like, guys, I realized something. We are, we are killing ourselves and our bodies, one, by eating this food and two, by not, you know, running and then having cardiovascular activity. And that's kind of what got my entire family into that sport. And now he's in the food business. When I talked to Abby more recently, he told me people who are willing to shop at four or five different stores for groceries in the pandemic are now looking to

consolidate and save on minimums and shipping fees. In general, I think we're seeing as a consumer that is willing to trade down on certain items in order to save $20, $30, $40 a week. And I think that's in line with a lot of the kind of economic analyses that have been coming out, right? I think you're seeing the actual impact of higher interest rates. You're seeing the impact of student loan repayments restarting, SNAP EBT, emergency SNAP EBT benefits winding down post-COVID. So the takeaway here, efficient scale. A little more than a year ago, Misfits Market bought out competitor Imperfect Foods. And for the last year, Abhi's been combining operations, streamlining. He says he beat his targets for lowering delivery

and labor costs, and he's passing those savings to consumers. But customers also want a one-stop shop. So he's planning to grow Misfits assortment 40 percent in 2024. Now, that says to me that in some areas, maybe power is going toward consolidators in 2024, either companies with the balance sheet strength to make opportunistic acquisitions, as we were just talking about, or the operational discipline to cut costs and give strained consumers, as we were talking about with Mark Zandi, a deal. Yeah, it certainly seems that way. And you would imagine that in an environment where inflation or I guess the pace of inflation is slowing, disinflation continues, that the folks that have positioned their companies to do just

that are going to continue to reap the rewards. All right. So invest accordingly. All right. Well, we will have much more in the State of the Consumer Monday when we are joined exclusively by Abercrombie & Fitch CEO Fran Horowitz. That stock jumped 285% in 2023. It outperformed NVIDIA, to put that in context. It's the final countdown to the first flight of the United Launch Alliance's new rocket as well. So up next, how this launch could have a huge impact on the entire space industry. And don't 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. When United Launch Alliance's new rocket, the Vulcan Centaur, makes its maiden flight as soon as early Monday morning, it will mark a milestone for the launch industry, but also for America's moon ambitions. The Vulcan will carry to space startup Astrobotics Lunar Lander, which, if all goes according to plan, could become the first privately owned spacecraft ever to land on the moon. In a mission contracted

with NASA under a public-private program called Commercial Lunar Payload Services, CLPS, to help deliver cargo and conduct research ahead of the return of humans to the moon later this decade. Our first mission will fly and land at the surface of the moon for on order of $100 million. We don't go to specifics on how much we've actually generated from the customers, but it gives you just a sense of scale. Typically, missions like this would be in the hundreds of millions, multi-hundreds of millions. So we're really breaking the paradigm on that. So liftoff is scheduled for 2.18 a.m. Eastern Monday morning from Florida's Space Coast.

The lander will carry payloads for seven countries, plus commercial customers, including the remains, the cremains of some Star Trek luminaries. But it is also a crucial, crucial Boeing-Lockheed Martin joint venture at United Launch Alliance. A decade in the making, billions of dollars in the making, Vulcan is ULA's powerful new rocket to replace legacy ones powered by Russian engines. Jeff Bezos' Blue Origin

is actually supplying the new engines. Customers include the U.S. government and Amazon. And this comes as the launch landscape has dramatically shifted in recent years as Elon Musk's SpaceX has become the dominant player with a record 96 successful missions launched last year, whereas ULA, as it transitions to Vulcan, did just three. Now, as for Astrobotic, it isn't the only company launching a lunar lander either. Intuitive Machines, which is publicly traded, but a small cap, small market cap,

it's aiming to launch its commercial lander mid-February, hopping a flight with SpaceX. Be sure to check out the full interview with Astrobotic's CEO on my podcast, Manifest Space. It's this week's episode. It's available wherever you get your podcasts. We talk about it a lot, but it's worth reiterating, John, this is a new era for the space economy. This is case in point, the commercial space race as it's playing out. Yeah. We'll see how much money the billionaires continue to have and investors continue to have to make this stuff happen. Awesome. Wall Street saw a surge of pharmaceutical M&A at the end of last year.

Up next, a top biotech analyst is going to tell us whether more deal-making will get done at this weekend's J.P. Morgan Health Care Conference. Over time, we'll be right back. Welcome back. J.P. Morgan will be kicking off its annual health care conference in San Francisco next week. Industry leaders, experts and investors will come together to explore the latest breakthroughs in health care. Joining us now to discuss is Oppenheimer Senior Biotechnology Research Analyst Jay Olson. Jay, what are you going to be watching for next week? Hi, thank you so much for inviting me to join you. Yeah, you know, biotech is highly idiosyncratic.

So I think next week investors are going to be focused on previews of 2023 performance and updates on 2024 plans. And to that, you'll get specific items to biotech, such as news on FDA regulatory processes and clinical trial progress. But one of the things we'll be watching most closely will be M&A activity, especially after three years of underperformance of the XBI. I think we started to see a little bit of tailwinds starting in November of last year, thanks in part to M&A activity, which is an important part of the biotech ecosystem. So a lot of investors will be listening and watching for any M&A announcements on Monday morning and throughout next week. So in light of that, what do you see as potential, I guess, takeover targets?

Where are we going to see this M&A activity manifest when we know some of the bigger players are really looking to acquire new capabilities for their pipelines? Yeah, you know, there's a couple of different dimensions to think about that along. First of all, you know, different disease areas are hotter than others in my coverage there were a number of acquisitions in oncology i think some of those names have become out of favor and undervalued and then there are other disease areas that also have become of interest like psychiatry there's were a couple deals towards the end of last year so i think you're starting to see some M&A activity in some of the traditionally underappreciated disease areas. So looking at it across disease type is an important dimension.

But also looking at the technology behind some of these therapeutic options is important. You know, I think that especially with the Inflation Reduction Act, which includes a provision for negotiating Medicare drug prices, and it kind of defines drugs along traditional small molecule pills and then large molecule biologics. drug technologies. For example, we saw the first FDA approval of a CRISPR gene-edited therapeutic at the end of last year with CRISPR and Vertex-Casgavi for sickle cell disease, a major breakthrough for patients in that area. So I think that innovative technologies that potentially provide longer life cycles and differentiation from existing technologies will also be potential targets. So on specific stocks, you like Amgen and Viking Therapeutics. Tell us why those are the pick of the litter. Yeah, so, you know, obesity is an area where drug developers have sought solutions for decades, and we finally have effective drugs that

are safe and well-tolerated. And that's, in my opinion, going to be the next wave of biotech investing. There are other disease areas that are exciting, but the progress that's being made in obesity is really impressive. Obviously, Eli Lilly and Novo Nordisk are the leaders there and dominate the obesity drug market, partly in relation to their heritage in type 2 diabetes. But for some potentially new players in that area, we have a couple of ideas. One of them is a large cap name, Amgen. We have

an outperform rating and $350 price target. I think it's one of the highest on the streets. Now, that's a $160 billion market cap name, and it's involved in a diverse range of diseases. In fact, I like to think of Amgen as one of the premier biotech companies that kind of wrote the book on providing innovative biologic treatments to relatively common diseases at an accessible price that's affordable to large patient populations like obesity. And they have two drugs in development. So Amgen's one. And then just quickly. Jay, we appreciate the time. We're starting to bump up here against the end of the hour. So Amgen's one. And then just quickly. Jay, we appreciate the time. We're starting to bump up here against the end of the hour. So we will be watching from afar for the JPMorgan

Healthcare Conference. We appreciate your insights ahead of it. Jim Cramer will be heading to San Francisco as well for that conference and speaking with some of the biggest CEOs in the healthcare industry. That kicks off Monday throughout the day on CNBC. Plus we have ICR. Plus we have CES. So healthcare, AI adoption, and consumer resiliency. And bank earnings on Friday. And CPI. It all kicks off. Right, right, right. Bank of America, J.P. Morgan, Wells Fargo, and Citigroup. All right. That's going to do it for us here at Overtime.