Closing Bell - Closing Bell Overtime: Buying Opportunity for Apple & Big Tech? 12/29/22

Episode Date: December 29, 2022

Despite today’s bounce, it is still the worst year for Apple since 2008. So, is now the time for long term investors to buy? Virtus Investment Partners’ Joe Terranova gives his expert take. Plus, star venture capitalist Rick Heitzmann gives his outlook for the tech sector and Silicon Valley. And, Mike Santoli gives his Last Word ahead of the final trading day of the year.

All right, Michael, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wapney. You just heard the bells. We're just getting started from Post 9 here at the New York Stock Exchange. In just a little bit, we'll get the outlook for tech in 2023 from someone who's made a lot of money investing in that space over the years, star venture capitalist Rick Heitzman. He is here.

Is there more pain to come? Would he put fresh money into Silicon Valley startups right now? We'll ask him as valuations continue to get slammed. We begin, though, with our talk of the tape. Despite today's bounce, is it it is still the worst year for Apple since 2008? Many mega cap stocks, as you know, have struggled mightily through 2022. Have those stocks, though, now come down enough? Is it right for the long term investor to buy? Let's ask Joe Terranova, Virtus Investment Partners Chief Market Strategist,

a CNBC contributor. It's good to see you. I mean, somebody was buying today. I mean, NASDAQ led the way, right? Nice pop for Apple, which haven't been able to say that much lately. What do you think? Well, I think tomorrow at the same time

as we're sitting here today, you're going to be saying that this is the worst year for SOX since 2008. I don't think we're going to be able to erase that. I think we're going into January staring at mega caps, saying to ourselves, is a bottom in place? Is there further downside ahead? And quite candidly, the answer to that resides itself in earnings that we're going to be hearing about in the next three weeks. I mean, earnings for big tech have not been bad. Exactly. When they've been questionable, it's been, oh, supply issues, not demand issues.

Enterprise spend has held up largely to this point. I wouldn't expect a fall out of bed kind of reporting from almost any of these. So where's the pressure then? The pressure is exactly to your point because the technicals are lousy for all of the mega caps. Boy, those fundamentals need to remain in place. You need the resiliency of earnings to make the argument that this is a moment to step in and either add to mega cap positioning or to introduce it to a portfolio. Well, I mean, let's say like Apple, OK, for example, yes, had a nice pop today. It's still below 130. Right. Would you

buy that stock today? As much as it's come down, the worst since 08 performance this year. I mean, at some point, people are going to step into what has been the most popular and most loved stock in the market and say, you know what? Enough's enough. And even if I don't get it all the way down to what it might settle out, who is going to do that anyway? So if I'm a long-term investor, why not now? Spot on. So if you don't own Apple, yes, you could buy Apple stock right here. Will you incur further downside pressure? I'm sure you will.

If you do own Apple stock, raise your hand. Most of America does. That's why I bring it up. If you do own Apple stock, the question comes, what did you do in 2022? Did you give yourself a degree of position flexibility? I traded Apple horribly personally through this year. I did make a decent move, though, at the end of October. And really, that move was dictated from what I saw in my quality momentum strategy. The quality momentum strategy recognized that you began to see the momentum wane. So Apple was my largest position going into the end of October. Price then was about 153.

I took that position. I made it equal weight with everything in the portfolio. That was a good move for me. Gave me a little bit of flexibility. I can increase the position sizing to Apple. If we get on the other side of earnings. And I like what I hear. Maybe, you know, you should do the Kramer method of Apple. Right. You know what he says. I know you know the saying. He says it every time. Right.

What does he say? Well, he says, don't trade Apple. Own it. Right. Because it's too hard to mess around with the ins and the outs for what is still a company with tremendous earnings power. The fundamentals are great. The execution is great. Right. I mean, OK, so it's a product of China. Supply chain issues have happened. Multiple re-ratings for all of the mega cap techs. But you can't point too much on the

demand side, the fundamental side and say, you know what, this company's better days are behind it. For a passive investor, yeah, Jim's got the right approach. And I point towards the balance sheet as the evidence for why I think Jim's right. Fundamentally, this is a company that's going to return capital to its shareholders. Right, they do a huge buyback. it's going to make sure that margins are strong so that from that perspective Jim's correct there are others in the market that may choose to be a little bit more nimble and for people like that I always say portfolios are like fingerprints they're all unique to the individual so for a strategy that might work for Jim that doesn't necessarily work for myself or for others and the strategy that works for, that doesn't necessarily work for myself or for others.

And the strategy that works for me is not going to work for myself or for others. But for someone who's really just sitting there, Scott, and truly is a passive investor and just going quarter to quarter and opening the statement saying, oh, that's what the market did. Apple is not the type of stock that's going to hurt you very much. But is it going to help you along with the other mega caps in 2023? I mean, to give you an idea, right? The level of confidence for that without question has declined in the last year. It has, because as we said, you know, $10 trillion worth of losses have come out of U.S. stocks this year. Half of that's within like seven of the mega caps. It's the tried and true ones that we talk about all the time and you know if you added nvidia and tesla to that list you have about

half that number related to those those losses so we've been so reliant on them both on the way up and then we've been punished by them on the way down. Well, there's a lot there in that analysis. First of all, let's understand the reasoning behind the outperformance over the last several years was the abundant liquidity from the Federal Reserve. That's gone, not coming back. In fact, I think the Federal Reserve is going to drain even more liquidity in 2023 out of the market than they did in 2022. What does that mean for you as an investor? You really can't passively invest anymore because you're not going to have the top of your batting order that's going to be hitting 350 with 30 home runs and really scoring all the runs for you. As an active ETF manager.

Who's equally weighted. Now, equally weighted strategies have come back into favor in 2022. And I would say, given the evidence, until we're able to get clarity on monetary policy, the economy and earnings, I think that's the right approach. Why? What does it incorporate? Diversification. And diversification ultimately is for every investor the best financial tool you could be utilizing. I can't wait for earnings season because I mean really it's just around the corner too and these are going to be among the most highly anticipated reports given what the performance has been. Let's expand the conversation. Bring in Sean Cruz of TD Ameritrade and Victoria Fernandez of Crossmark Global

Investments. Good to see you both as always. So Victoria's sentiment is so bad. It is so bad. I read this factoid yesterday and I did it today earlier. I'm going to do it again. Bespoke, right? They have the individual investor bullish sentiment survey. This was the first year in the history of that, that bullish sentiment was below its historical average every single week of the year. So we know where we have been. What lies ahead? What are we getting ourselves into in a new year? Well, Scott, I think it's a really difficult question in the sense that you can take the same data and have two completely different stories for it. So I can sit here and say, look, I think next year is going to be pretty decent. We've got a strong consumer because the

labor market is strong. Wages are up. The demand is still there. We haven't seen that contract. There's still stimulus savings. About 50% of what was there originally is still there for some of the consumers. So we're sitting in a pretty good spot. But that same data, then I can turn around and go, yeah, but what does that mean? Well, that means that service inflation is going to continue to be high. That means the Fed is going to continue to raise rates and hold them higher for longer. And I do think that's what they're going to do. I don't anticipate rate cuts in 2023. And so then it's a question of which story is right.

I just don't think we know the answer. So what are we looking at in 2023? I think we're looking at continued uncertainty. Earnings, you guys are talking about earnings, I think are going to be key in the first quarter of the year. I think you're going to see the Fed hike rates at the first two meetings and then hold for the rest of the year. So there's going to be a lot of volatility. And I think we'll see a small recession, which doesn't bode well for the economy. But I don't think it's going to be a deep recession.

So I think we'll be able to muddle our way through it pretty easily. Well, your point is so dead on based on what the predictions are for 2023. Sean, I mean, you've got, you know, upside predictions of 4750 for the S&P all the way down to 3300. It really underscores the range of forecasting that is out there for next year because no one really knows what to make of it. Is it going to be a bad first half and a good second half? How do you see it? So one, I think the first thing that we're going to look for is how fourth quarter earnings come in. I have a sense the big item I'm keeping an eye on going into January that is really going to pop up out of nowhere will be what analysts do with their expectations. Some are going to wait until we get the fourth quarter earnings. expectations. Some are going to wait until we get the fourth quarter earnings. I think some are going to be a little bit ahead of the game and

start doing their revisions almost immediately coming out of the new year. So those are going to be the first two that the first thing I'm going to look at. The other thing I'm going to look at is once we do start to actually hear from the companies on how their fourth quarters actually went, not just analysts updating their expectations, that might really be what sets us on a course up towards the higher end of the range or potentially sees us break down towards some of the lower ends that some of these analysts have out there for the S&P as a whole. Joe, this really is going to be the year of the great unknown. And those numbers alone, which Pisani has been talking about for the last couple of days, really make that point crystal clear. The Tom Lees of the world say, look, you may have a slow start to the year, but you're going to have a huge ramp, a 25 percent move

in 2023, where others say it's going to get ugly and it's going to remain ugly. And you may have what you had this year. You could have some bear market rallies that make you feel like maybe the worst is over. And then you get, you know, the reality check shortly after that that says we're still in a world of hurt. So the constant is an elevated and persistent volatile environment. I mean, that's that's obviously clear and it's going to be challenging and it's going to be difficult. And before the show, I was talking to you a little bit about January. I think a lot of investors are saying, OK, what what can we look towards in January?

If you go back, you study the last 30 years. There is no statistical significance in either direction for what January is going to be. You could say, OK, well, in 2018, the market was down 6% on the year. And in January of 2019, you followed that up with the best January up over 7.5% since 1987. Let's clap. That's a great statistic. The other side of that is you could say, okay, following 2008, here comes January of 2009. That's the worst January on record, down 8.5%. So there is so much that is unknown right now,

and I think that's why investors, focusing on risk, have to maintain that defensively oriented type of position. Problem is, is, Victoria, a lot of the historical and classic defensive plays have gotten stretched from a valuation, from their own historical valuation standpoint, too. So where do you, quote unquote, hide out in what is still an uncertain and, as Joe suggests, a likely volatile environment. Yeah, so I think it's interesting. Obviously, fixed income is an area that more and more people are going into. I manage fixed income portfolios, and we're seeing flows coming into that area because you can lock in a 4.5% yield on pretty short paper, and that's giving you a better

opportunity many times than what you're seeing on the short paper. And that's giving you a better opportunity many times than what you're seeing on the equity side. But even for our equity clients, we're saying, look, you need to have that balanced approach in this portfolio. You can be a long term investor. You guys are talking about long term investors with Apple. You can be long term and still be tactical. You just can't get greedy. And I think that's the key here, Scott. Trim a little bit on some names. We like Coca-Cola. It's the key here, Scott. Trim a little bit on some names. We like Coca-Cola. It's got a great dividend.

But we trimmed a little bit of it because it was up 2.5% this month. We went into some names that were down. We went into some Bank America. We did a little JP Morgan. We trimmed a little bit of our energy holdings. You can be tactical by doing small moves and going into things like fixed income as well without swinging for the fence and getting yourself caught on the wrong side of the market. So, Sean, if you're

going to be tactical like Victoria is, where would you do it? Where would you zero in on as areas where you think, you know, you can either make some money or not lose it? So one thing I think is one, looking at companies that just have strong fundamentals, and that can just be margins that they've always been able to maintain. You feel like they have some pricing power out there. I think quality is really gonna be a key here. An example of where you can look, and just speaking about Coca-Cola having a good dividend,

you wanna look at those companies and how they're returning capital to shareholders. It was a little bit of an example, I don't think it made waves, but it caught my eye, was CarMax coming out and talking about cutting their share buyback. I think you want to look at the companies that you are counting on some of that return

of capital to shareholders that are a little bit borderline. They may be the companies that have to look at paring that back, cutting it, or maybe not growing it as much as was originally expected. Those are the companies that could get an eye on. So quality companies, I think Coca-Cola would be one of those. Shouldn't have too much of a problem with that, but there are probably some companies hiding out in portfolios that you might get blindsided with some cuts to dividends or share buybacks at the very least. It's going to be all about, Joe, strong know, strong cash flow. And as Sean says, you know,

returning money to shareholders. Dividend strategies have worked pretty well this year. You know, evidenced by Jenny Harrington on halftime. Is that a pretty good year relative to some others because of her strategy has worked? Does it continue in the new year? I think a dividend strategy, a dividend growth strategy is the right strategy. There's so many in our universe doing that. Jenny Harrington's doing that. Kevin Simpson's doing that. I think you want to stay anchored with that type of approach. And I think you have to go at the heart of the question. And a lot of people ask me this all the time. They ask me about the non-profitable technology, consumer discretionary, emerging software. And I don't want to just say Cathie Wood stocks, but the stocks that in 2021 seem to have that stratospheric valuation

and no one cared. Do you buy those stocks in 2023? Because so many people attempted to do it. And I really believe the evidence is saying, no, you don't. And if they're going to be selective, though, within that group, rather than just make a blanket statement that everything that ran up with a wildly exuberant valuation, not all of them may never get back to those levels before. Some of them are legit. Some of their prospects are better than others. They're not all based on a total addressable market eyeballs and a lot of the other nonsense that we've heard over the decades to justify lofty valuations that couldn't hold up. Agreed. I will not say that they are going to all be universal failures, but from a risk management perspective in 2023, let's just say I'm not smart

enough to know selectively which the right ones are going to be. If that group goes up in 2023, don't you think the market's going up with it and we're going to make money behind it? So why assume the risk that you're catching the chainsaw, right? Why assume that risk in buying these stocks when there could be further downside pressure? Avoid them. Invest in quality companies like you've described before. And if those stocks go up, believe me, you're going to make money. The market's going up. Those stocks are not going up by themselves without the market. Victoria, what about tech? Not necessarily the ones that we're speaking of now, but as a broader

space, we can include mega caps within that, too, since many have just suffered through their worst year since 08. Yeah, they have. But we're still being a little cautious when it comes to some of those mega cap names. I mean, obviously, we've seen semis take a big hit and those are really high beta stocks. And we're just not comfortable getting back in with some of those really high beta areas within tech. Look, we still think there's an opportunity for that the market is going to go lower. I mean, you look at things that are reaching their relative lows from October, things like the Russell 3000 breadth line. You look at cyclicals versus defensive.

Transports versus industrials is another example. So it tells us the market's still going to go lower. These high beta sectors will go lower with it. We think you hold off a little bit longer. Doesn't mean you have zero exposure, but I would hold off for a little bit thinking you're going to have a better opportunity. Sean, wrap it up. Same question, maybe a different answer. What's your view on tech here? Wrap it up. I mean, I think I would agree. You're not going to see those names that were, you know, just something as a service that wasn't expected to be profitable for three to five years, if that. I don't see that coming back

into vogue anytime soon you're going to see some of those more core low beta tech names will probably be the first shoe to drop before you get further out there in the risk spectrum in terms of tech names guys we're going to leave it there Sean thank you Victoria as well happy new year to both of you we'll see you on the other side in overtime I'm sure Joe's going to stick around and come back a little bit later for some halftime overtime. Let's get to our Twitter question of the day now. We want to know which of these NASDAQ 100 losers could be 2022 winners. Let me read that again.

Let's do that again. Why don't we do that? Which of these NASDAQ 100 losers in 2022 could be winners in 2023? Is it Tesla, Meta, Zoom or PayPal? You can head to at CNBC Overtime on Twitter to vote. We'll share the results a little bit later in the hour. We are just getting started here in overtime. Up next, Silicon Valley concerns. Star venture capitalist Rick Heitzman. He is here with his forecast for tech and what could be in store for the sector after an ugly year of trade.

We're live from the New York Stock Exchange. Overtime is right back. No sector has struggled more than tech this year, with the Nasdaq suffering one of its worst performances ever. That pain felt from Wall Street to Silicon Valley, where valuations continue to get slashed. Is a turn in the cards? Let's ask venture capitalist Rick Heitzman, who led early investments in Pinterest and DraftKings, among several other high profile companies. Welcome back. It's good to see you. Good to see you, Scott. Happy holidays. Yep. Same to you. I mean, yet another reminder this week, right? Instacart from thirty39 billion a year ago to $10 billion now. It gives you an idea of the pain.

How much more lies ahead? I think we're almost halfway across the lake here. What we've seen so far is just kind of a decrease in market multiples, especially for non-profitable companies. And now we're going to see how people survive what seems to be a recession. What does that mean for business models? And what does that mean for outlook and profitability? And I think Instacart is a company who's both struggling with unit economics as well as growth. And I think that they're right in the sweet spot of two areas that were really hurt hard this year. I mean, on that note of how these young companies and even more mature know, mature, more mature ones, certainly like Instacart, obviously is are going to handle things.

It's interesting what you just said, because Alex Ohanian, Alexis Ohanian, excuse me, was with us yesterday and with Sarah and said he's telling founders to get ready for, you know, a storm of sorts, the likes of which many have never lived through before and may have to batten down the hatches for quite a while. What are you telling the same types of people? Oh, I serve on a board with Alexis. He's a great guy. We've been saying that for a year since I've been on here that, you know, when things started to crack about a year ago, you had to go back to lessons of past recessions. The cash is king. Focus on your unit economics. Focus on your profitability. And I think in general, the message has been received and generally heard, especially among the youngest companies where there's no way to get to profitability, so they'll need to raise capital.

So for the next leg of the journey, which we think is going to be somewhere between six and 18 months before the market starts functioning again in a normal basis, you have to be able to last till at least 2024 without having to access the capital market. So whatever you have to do, you know, the three great ways you can finance your business, obviously revenue from customers, cutting expenses. But obviously, the third choice is always external capital in these types of markets. You know how this works, though, better than most and certainly better than me. You go through these cycles, and we say in times like this, valuation matters and cash flow, free cash flow and profitability

matters. And we're not going to make the same mistakes that we did in the past. The problem is that history, if it doesn't repeat, it rhymes. And we often do. So is this just a moment in time where, yes, we will be more strict in the way we think about these kind of investments? But a few years from now, we'll be right back to chasing the next dream. I think we will. I think it's a human condition. You know, I live through I've been doing this since the tech bust of the early aughts. And then we made the same mistakes, you know, 20 years later. I can imagine that folks will still be making the same mistakes in 20 years and that,

you know, the next the next great thing will seem wonderful. There'll be fortunes made and people will lose their mind and lose track of fundamentals. But I think that's just the part of the human condition. I think folks who've been around the block a couple of times at QRI, it's our job to remind people that history tends to repeat itself. There is going to be a next great thing though.

Oh, there may be 10 things that aren't, but something or some things are going to be a next great thing, though. Oh, there may be 10, 10 things that aren't, but something or some things are going to be. What areas are you most excited about? I think when the things we're seeing in generative AI, you know, chat GPT and some of the things that you're actually beginning to see of really computers being able to write narratives, computers being able to generate graphics or edit images in a certain way, that AI is getting really, really good. And it's being able to mimic a lot of human type interactions. And I think what you're seeing and the next great thing we're seeing out of the startup community is really great generative AI that acts and feels just like humans. And I think that's going to be this next trend that people might get a little bit more excited about over the next 12 to 18 months.

You think that the IPO market is dead for the next 12 to 18 months in this industry? I think it's dead for the next six months. So I think 12 to 18 months could be far away. Interest rates stabilize and even go down at the second back half of next year. I think, you know, 12 to 18 months could be far away. You know, interest rates stabilize and even go down at the second back half of next year. I think we could be in a better place. I think the companies that were ready to go public in 22 who've adjusted their unit economics and business model might be in a better place to be to be a public company by the end of 23. So the first half of this year, I think it'll be dead. This was the worst year for IPOs in the tech industry in 20 years. There was nothing going on after a very strong 20 and 21. 23 will be dead the first half of the year. And I think you'll see things start

to come out, especially enterprise businesses that are calling less shiny, more meat and potatoes, good unit economics, great logos for customers, and good recurring revenue. Is there a name or two that we should keep our eye on specifically? I would say Stripe, obviously, on the payment side. They're really a fast-growing company, one of the more valuable private companies. Despite recession and the consumer being hurt. You're seeing that company continue to grow revenue tremendously. If you look at enterprise infrastructure and where the enterprises are still able to drive ROI,

they're continuing to buy. A company like DataIQ, which does data science tools and is really the next generation of that infrastructure, very similar to Snowflake, is going to be out there and probably will be public in the next 12 to 18 months. And then the other area where we have a lot of confidence in is cybersecurity. And obviously, security is only becoming more and more important. Companies like Arctic Wolf, we believe, will be part of this first wave out of the box in the back half of next year. Forgive me for jumping on you there. I'd love to get your take on what we're witnessing almost daily with Tesla and how, you know, somebody like you views what's going on there at the particular time we're talking about

it. Well, I think there's three things that have really destroyed Tesla and that people did not pay enough attention to before. I mean, the first one is no different than every other company we've been talking about for the last 18 months. Valuation matters. And Tesla was worth more than the entire auto industry globally at one point, probably about 18 months ago. And that couldn't persist. So valuation matters. The second thing is the structure of ownership matters. And if somebody owns a large part of your company and there's a very small float and that person needs liquidity, if they want to go and buy a company, let's call it Twitter, that's really going to matter. side are selling, which will put pressure on the stock. The third thing is someone like Elon Musk has a tremendous amount of fans, is definitely one of the tremendous entrepreneurs of this generation, but probably had too many people who were buying into his story rather than business

fundamentals. And all three of those strikes were underestimated as risks a year ago, but have all kind of come home to roost and might continue to come home to roost over the next three to six months. Wow, that's an interesting perspective that you have there. I mean, do you personally weighed in on the debate of whether it should be valued as a car company or a tech company? As I know, the seat in which you sit in is on the certainly more on the tech side of how someone may view it. But how would you answer that question? They haven't proven that they're a platform company.

So if you're not going to get out of being an auto company, you have to be a platform company. They've talked about being SolarCity plus Tesla. They're going to be your energy company, everything from your cars to panels on your house. I don't know if they've proven that to the broader world. So there's still a very high margin, very high end auto company for now. And I think that's the only way to value them till they're able to prove that they're kind of the next generation way to run the energy across your auto home and other facets of your life. Now, the most obvious follow-up then would be to suggest that the valuation must then still have to come down from where it is now,

because if it was at its peak, let's say it was in the 80s, around 80 forward, and now it's about 18, 19, the legacy OEMs are way, way lower than that. I mean, in some cases, we're talking like, aren't we talking single digits? We are. And historically, that's where they were. Tesla still has a higher growth rate, still has higher margins. So they should trade at a premium to them. But at the same time, they're seeing more and more competition. They really were the tip of the spear on the EV market they've done some great things, they've built great cars but every single both emergent EV maker like Rivian and legacy player

is coming right after them so I'm not sure if those margins are going to be able to be sustainable, I'm not sure if growth is going to be able to be sustainable, I'm not an auto analyst but I'm interested to watch. And I think there's probably more downside than upside at this point. All right. We'll see. It's been a pleasure having you with us this year in overtime, Rick. Thank you. Happy, healthy new year to you. Look forward to more appearances in the new year. That's Rick Heitzman. It's time for a CNBC News update now with Frank Holland. Hey, Frank. Hey there, Scott. Here's what's happening at this hour.

Federal prosecutors are reportedly investigating incoming Republican Representative George Santos. Sources tell NBC News that the probe is at a very early stage. Prosecutors are looking at Santos' finances, including loans he made to his campaign and other potential irregularities in his financial disclosures. The Pentagon has released dramatic video of a Chinese fighter jet buzzing a U.S. reconnaissance plane. It all happened in international airspace over the South China Sea. The planes coming within 20 feet of each other. U.S. officials say it's just the latest example of increasingly dangerous behavior by Chinese military aircraft.

And the praise is just pouring in for soccer legend Pele following his death this afternoon. Argentine superstar Lionel Messi calling Pele an icon. Fellow Brazilian soccer powerhouse Neymar says Pele changed everything by transforming soccer into art and entertainment and by breaking race barriers and becoming Brazil's first black soccer star. Pele, dead at the age of 82 years old. Scott, that's the latest. Back over to you. Yep. Sad news. All right, Frank, thank you. That's Frank Holland. Up next, your 2023 Market Playbook continues. One top strategist drilling down on where he sees stocks going in the new year and how he's navigating volatility and recession risks. Overtime, we'll be right back.

Lock in your membership now. Join Jim Cramer and the CNBC Investing Club with the special year-end discount. Go to CNBC.com slash club new year or scan this code to sign up. We're back. Executive from Southwest Airlines just hosting a call to update the media on the logistical nightmare stemming from last weekend's winter storm. CNBC.com's Leslie Josephs was on the call, joins us now with the highlights. Leslie, what are they saying? Hi, Scott. So what we did hear from Southwest executives admitting that this is going to hit fourth quarter results.

They do not have details yet. Of course, they are still working through this. This is a pretty fast-moving situation, But it is going to hit their fourth quarter results. But they are coming from a very strong place. The rest of the quarter was very strong. Fares were high. Lots of travelers were traveling. They are also working through the reimbursement request. As you can imagine, hundreds of thousands of travelers were impacted by this. And you have everything from people expensing strollers and diapers to actual hotel rooms and rental cars to get home for the holiday. They also vowed to invest more

in their technology. They said that it is a years-long process to do this. You know, we've heard from labor unions warning the airline for years that they had to upgrade some of their technology. And that technology was a weak link when this all went down. And they were really handling this manually and assigning flight attendants and pilots to planes. What we do know also is that tomorrow looks like a pretty normal operation. Very few cancellations, a couple dozen. That compares to about 2,300 today, 2,500 yesterday. So they do seem to be back on track.

But we are waiting for that information on the financial impact of the Q4. Yeah, going to get some help, I guess, from better weather, at least in this part of the country. Leslie, thank you. Thank you. Yeah, that's Leslie Josephs joining us with the latest there, Southwest Airlines, talking to the media this afternoon in overtime. The major average is staging a rebound today, nearly erasing all of the losses from earlier this week. But our next guest believes stocks could still start the new year in the red before a potential buying opportunity emerges in the second half. Joining me now, Scott Cronert, U.S. equity strategist at Citi. So it sounds like

to me, Scott, that, you know, you're singing pretty much the same tune as many others. Rough start, maybe a better second half. That's the way we're seeing it. You know, going into Q4, we've been using a risk on rally target of 4000. We hit that. We've begun to pull back off of that. It was all predicated on the view that you'd see a peaking in rate expectations, which transpired into November. Now, the sell off that we've been facing recently has been on the backdrop of rates ticking higher. As we go into the first part of next year, we continue of the view that we're going to be facing sort of a three-pronged headwind. The first is ongoing, you know, more hawkish Fed rhetoric. The second is sort of this persistency

of weaker economic activity against this rate backdrop. And then the third point is that we think the Q4 earnings period will come with it a number of 23 outlook expectation resets by many C-suites. The combination of that kind of sets up for a pullback into the start of the year. We begin to come out of that as we go into the spring time frame. But the bottom line, and I want to make sure my viewers have heard us correctly here, 4,000 is your end of year target for the S&P 500. So we end up not doing all that much. We end up not doing that much. But I think a theme that we're really starting to focus on here is what we've seen historically around recession periods. And that is a market pickup in dispersion effects within the market.

So we actually think that the backdrop is going to be really interesting here for whether it's industry group, sector, or stock-specific differentiation. So against a flattish full-year backdrop, our message is be attuned and attentive to stock selection opportunities as a main approach to navigating this ongoing recessionary backdrop. I have to say, as I look at your sector ideas, based on your overall sort of worldview, if you want to call it that, I'm kind of surprised that real estate is an area that you like. How does that mesh with how you feel about the overall environment and market? So we're playing sort of a barbell approach, as you can see here.

Health care is sort of a ongoing defensive positioning. We've been on this sector all year. It's been a good call for us. We upgraded a couple of weeks ago these three other sectors, which include industrials and energy, which is going to be a little bit more of a risk on economic sensitive attribute. And then the real estate component, also historically a more defensively positioned sector. That's a function of the fundamentals that surround the sector. But what you really need for this sector, in our view, to kind of maintain some relative outperformance,

it's a little bit more confidence that we're looking at peaking rates, which we think is underway right now. Scott, we'll talk to you soon. Thank you. Happy New Year. Look forward to visiting with you in the new year. That's Scott Croner of Citi. Coming up, tech's big bright spot. IBM is bucking the broader downturn this year. So how should investors trade Big Blue in the long term? Now we debate that in today's halftime overtime. In today's halftime overtime, big blues, big year. Shares of IBM have been outperforming the broader market. It's one of the only positive tech stocks this year. But despite IBM's mixed longer term performance, SVB's private SVB privates, Shannon Sikosha, I always mess that up and broadcasting legend Al Michaels are sticking with it into 2023. In the year of the tech wreck, it's the only stock,

and you can take a look at it right there, it's up $1.40 right now on the day and up almost 6% on the year. So I've been able to hold on, but it was one of those things where, and I'm sure like a lot of people, you hold something and you're going, you're ready to sell it, but you just can't. And I'm glad I've held on. If this is just the first year, I think of a multi-year story in terms of management execution.

And I would definitely hold on to this here. All right. Joe Terranova is back with us. Al's been hanging on. He's been in that stock for, he said, about 30 years. Had, you know, had a shaky hand every now and then thinking maybe I should get rid of it. He didn't. He was rewarded this year. Well, first of all, Shannon gets to be in a sock with Al Michaels.

I've been doing this 15 years. I don't. He's a childhood idol. I like IBM. I like IBM. I like the strategy of IBM. You're talking about an old tech value company, OK, that is potentially pivoting towards growth. It's the third best performing tech stock year to date. It's a cheap valuation, has a beta score of 55, 0.55 rather. And it's got 39 percent exposure to the United States. So any degree of contraction for the U.S. dollar is going to benefit this company. I don't call it a great place to hide because you're also getting a four point seven percent dividend yield. So this is definitely a quality company that's actually beginning to gather some momentum. I won't take it any further than to say this definitely is a candidate for inclusion in the JOTE ETF. We'll definitely take a look at it.

So this wasn't just a moment in time stock with a few others of the old tech, so to speak, regime that had their moment. And what makes you think that that's going to continue as we move forward? I think you've got a paradigm shift for this company. I think IBM has done enough from management to kind of take what was a battleship and turn it in the right direction, get more diversified and emphasize the growth opportunity. Are you going to see the type of growth that we've witnessed from Microsoft in the last several years? No, you're not. But I think there's enough there. I think the climate is right.

I think for myself personally, owning IBM is what I'm doing a lot of personally with my holdings. I'm trading out of higher beta names like an NVIDIA. I'm going into a Texas Instruments. I'm looking at a company like Visa. I'm personally owning that as well. I want these companies that have the balance sheet and have the lower beta. I mean, they may not be the sexiest names in the marketplace, but those are the ones that I mean, you're speaking more broadly about these these so-called old style, old style. Yep. Boring. No disrespect to to the companies, obviously, but that's how many investors have

viewed them over the last few years. There's so much more exciting stuff going on in tech elsewhere. Right, because they were focused on the revenue growth. What was the revenue growth going to be? They were dismissive of the dividend yield. Well, you didn't need the dividend yield if you're getting the appreciation that was being thrown off by consistent 40% revenue growth. Now, potentially, that begins to slow the cost of capital rises. The dividend growth matters more. A company like IBM, where Al and Shannon are currently, I think that's a good place to be. If I recall, before I let you go, I want to just get to one quick matter.

You picked Amerisource Bergen as a final trade yesterday. So let's go through what you do. Well, let me give the news first of why I even bring it up, that the government has filed a civil lawsuit accusing that company of contributing to the opioid epidemic. So that's the news that was out today. So what do we do with it today? Okay. So first of all, I gave that as a final trade yesterday. Right now, from the moment of giving that final trade, the stock's down about one and a half percent. I will say the stock did not decline as much as I expected it. I would when you hear DOJ and opioid and a civil suit, you would expect that there'd

be more downside. But let's take back that final trade. If you followed me into the trade yesterday at that moment, you're down about 1.5%. Take the loss. Move on. There's a lot of uncertainty that's going to unfold here in the coming months. Wait, so you're telling people to sell it already? I would move away from it given the regulatory potential punishment that might unfold. You don't know what the settlement's going to be.

You don't know what the punitive measures are going to be. There's no sense sitting there. Take a small loss. Small loss. Okay. All right. Thank you for that. All right. That's Joe Terranova with us. Coming up, we're tracking some big stock moves in overtime. Christina Parts and Novelos is standing by with that. Christina. Sorry, Joe. Nothing boring here. Some board changes at MovieChain AMC and one name soaring to levels we haven't seen since Clinton became president. Can you guess which year that was? Details next. Now we're tracking the biggest movers and over time, Christina Partsenevelos is here with that. Christina. Thank you, Scott. There is or has been some board changes at the largest theater

chain in the country, AMC. Lee Whitlinger from Silver Lake was resigning from the board after Silver Lake sold its equity stake in AMC last January. Dee Clark, who's been a tech executive at Warner Music and Hasbro, as well as Carrie Putnam, who once served as the CEO of Sundance Institute, are both joining the board in the new year. And even though markets closed higher, there was only one S&P name to make a new 52-week high today. Insurance firm Chubb, trading at levels not seen since 1993. Did you guess correctly? That's the year Bill Clinton was inaugurated as the 42nd president. And lastly, we haven't talked about in a while, but Bitcoin and Ether moving ever so slightly higher right now in the OT, even though the largest corporate buyer of Bitcoin, which would be MicroStrategy, announced today its first ever sale or announced that it had made its first

ever sale of Bitcoin. Yet it still remains a net buyer. Bitcoin down, what, 64 percent a year today, Scott? All right, Christina, thank you. Christina Parton-Novel is still ahead. It's Santoli's last word, what he is watching ahead of the final trading day of 2022. By the way, don't miss the CNBC special report taking stock 2023, focusing on China tonight, 6 o'clock Eastern. OT is right back. Let's get the results of our Twitter question. We asked you which of these Nasdaq losers this year could be winners next. The majority of you saying Tesla, not giving up hope, 50%, in fact. Up next, Santoli's last word.

All right, let's get to Mike Santoli for his last word, almost your last word of the year. Yes, I guess we'll have to do something special for that one. Maybe we'll have something special to talk about tomorrow. Yeah, exactly. As for today, it's interesting because if it were just going to be kind of a technical reflex bounce, this is pretty much how it would look. You know, you get the most beaten up stocks that were under some sort of non-fundamental selling pressure for a while.

They have some pressure lift off of them. And the overall indexes do manage to rebound. We go positive for a while. They have some pressure lift off of them. And the overall indexes do manage to rebound. We go positive for the week. I think it's interesting enough that the market is sort of refusing to give all that much for the moment. What I find more interesting, though, is looking back to where we were and what we were thinking a year ago relative to now in terms of what's been done, what's been accomplished in the market. So a year ago, you were looking ahead for S&P was at 21 times forward earnings. We thought the economy was going to reaccelerate.

We thought inflation was transitory. We did. We thought. And meanwhile, the Fed was just about to start. Now the Fed's about to finish. Now we're at 16 plus times earnings. And we have a cushion from bonds. Right. You have four or four to five percent yields available and safer bonds, whereas back then it was under two percent. So are we in a better spot now or is it just kind of we have another wave to ride lower in terms of, well, now it catches up to earnings, it catches up to the corporate sector? I think that's a it's a it's a good debate to have. It's the one we're going to be having for a while. But again, last year, everyone thought it was going to be a magic rotation from tech into financials and other cyclicals. And that was going to be perfect. And it worked for financials and other cyclicals. And that was

going to be perfect. And it worked for a day in January or a few days. And then, you know, we got a little bit of a story change. Been a tremendous rotation out of tech, as we know. It really has. And maybe washed out. It remains the biggest question mark going into the new year. We'll see you tomorrow for your real last word. All right. That's Mike Santoli. I'll see you tomorrow morning, by the way. That's true. All right. Have a good one. All of you as well. Fast Money begins now.