Closing Bell - Closing Bell: Overtime: CEA Chair Jared Bernstein On The Biden Economy & Targeting Overdraft Fees; Prologis CEO On Commercial Real Estate 01/17/24

Episode Date: January 17, 2024

Stocks bounced in the final hour but it wasn’t enough to turn the averages positive on the session. Ariel Investments’ Charlie Bobrinskoy and BNY Mellon’s Jake Jolly on how to position as earnings season ramps up. CEA Chair Jared Bernstein talks the state of the economy and the Biden administration’s plan to target bank overdraft fees. Piper Sandler analyst Patrick Moley on Charles Schwab’s sell off after earnings; Oppenheimer’s Dominick Gabriele on Discover Financial earnings. Fairlead Strategies founder Katie Stockton on why the technicals support more upside for Nvidia, despite its wild 2023. Prologis CEO Hamid Maghadam on the company’s latest quarter and how the macro environment is impacting logistics.

All the major averages lower but not the lowest they've been all day. The Russell, the small caps, faring the worst. That's a scorecard on Wall Street. The winner stay late. Welcome to Closing Bell Overtime. I'm John Ford. Morgan Brennan is off today. Strong retail sales data and rising treasury yields a double whammy for stocks. But we are closing well off the lows, as I mentioned, of the session. And coming up, Council of Economic Advisers Chairman Jerry Bernstein on whether better-than-expected economic data could push back any Fed rate cuts and the White House's new fight against bank overdraft fees. Plus, we're just moments away from a trio of big earnings from Discover Financial, Kinder Morgan, and Alcoa. Instant analysis of all the numbers straight ahead. But first, let's get more on today's market action. Mike Santoli's back at the New York Stock Exchange. Mike, a lot of trending around here, still above 4,700. I mean, nothing definitive has happened to move things that much, right?

No, John. I mean, some apprehensive trading for sure. Parts of the market are bending, not yet breaking. You're definitely seeing enough rotation, you know, that's benefiting certain stocks that's keeping the overall index from really buckling. Today, the beneficiary of things like health care and some other areas that had not really been leadership. It's obviously, you know, choreography. You can't count

on continuing for a very long time, but ultimately a decent snapshot of the consumer in the last month of last year with this retail sales number. Maybe the strength was overstated. We don't know. But it just showed you economic resilience plus tame bond yields. And maybe the Fed's going to become easier down the road. That all remains in play. That was the premise coming into the year, even if we've had to doubt both legs of it. Just how much is inflation going down and will the Fed ease in time to forestall further economic weakness? We still don't know those things, but the stakes aren't that high at this point when we're just less than 2 percent from the highs in the S&P. All right, Mike, we're going to get to those dashboards, the first of them in just a couple of minutes. see you then. For now, let's continue the conversation with our

market panel. Joining me now is Charlie Berbinskoy of Ariel Investments and BNY Mellon's head of investment analysis, Jake Jolly. Guys, good afternoon. Charlie, there's so many disconnects here. People seem to be feeling pretty good about the economy, but talking really bad about it at the same time. Small caps not performing today. What do you do? Anything different than was your game plan heading into 2024? I think we've been consistent, John. I think we've talked about the fact that we had a pretty big rally at the end of last year,

and that took stocks from being underpriced and being great value to being fairly priced. I wouldn't say we had a bubble in small cap value or mid cap value. We probably did have overpriced stocks in large cap growth. Now, what has changed and which I don't think has gotten enough publicity in the last two or three days is China. China had the lowest growth rate that it's had since probably 1990. They've had a drop in population. They're rattling their sword around Taiwan, which would not be good for the markets. So I think things are a little soft in China. China's been a source of global growth, and that news has hurt some parts of the economy. Okay. Now, Jake, tell us your market thesis here

and the challenges to it. Is 2024 playing out as you expected? Well, it's pretty early, so I won't jump the gun here too much. But I think pretty clearly the market got a bit ahead of itself with the everything rally in the last two months of last year. Obviously, a large part of that was predicated on this pivot. It was very aggressive, the moves that we saw in yields. Now we're seeing a bit of a backup. We're seeing markets needing to reprice those expectations, particularly around the March cut that was priced in pretty aggressively. That's been repriced as of today. I think we're closer to 50-50 for that first cut coming in March. I think that's much more today. I think we're closer to 50-50 for that first cut coming in March.

I think that's much more reasonable. I think when we were pricing in that 80% probability, that was way too aggressive. And certainly, now we're getting to something that's probably a little more realistic. This is a market that is still very sensitive to expectations around what the Fed is going to do. So unfortunately, that means that those kind of repricings based on a package of data today that was by and large pretty decent from the housing sentiment that we got, from the Beige Book, from retail sales, all of those things need to be digested by this market. And that's certainly, you know, making the outlook still pretty difficult to read. OK, Charlie, you say that small and mid caps are fairly priced, whereas the large caps are overvalued. And China, as you mentioned earlier, is the risk.

So do you sort of average in particularly to certain small-caps that are not overly exposed to China? Yeah, that's one of the beauties of small and mid-cap stocks is they tend to have less international exposure, less exposure to China. So, for example, we have building product companies like Mohawk that makes carpets for homes. There are a lot of those stocks that are very attractive. There are parts of the U.S. auto business that is very attractively priced. There's still a lot of pent-up demand for cars and homes. And those things are not going to be hurt by less demand in China. And frankly, they get helped when there's less growth in China that can soften commodity prices, which can be good for those companies that I mentioned.

So we would emphasize small and mid-cap value. Obviously, that's our business, so I probably have a bias that way. But objectively, we do think there's more value there than large cap growth. Jake, what can we learn from these financials earnings, particularly the regional banks? Yeah, I mean, look, the earnings season is obviously very critical. We need to keep it in context that Q4 was still a pretty strong quarter in terms of the economic backdrop. We are expecting that there was a slowdown in growth, but as I already mentioned, the package of data that we got today is suggesting that growth was actually probably a bit stronger

than we expected. Revisions, downward revisions to the Q4 earnings mean that it's probably going to be a pretty strong earnings season in terms of beats. However, really, we all know that the most important thing is guidance for 2024. What are companies thinking? And coming into Q4, the trend, or coming out of Q3 season, it was weak demand, weak demand. That was really what you were hearing. Whether that

sort of continues to be sort of the main narrative, I think, is going to be critical. And then obviously the health of the regional banks, right? Are they still underwater? Are they going to be able to come back? That is really sort of the heart, the bread and butter that keeps sort of the economy going. So if they continue to struggle, it's probably a sign that the boots on the ground are struggling a little bit. Yeah, that's an important factor. The KRE has dipped back below 50. I've been watching that. Charlie, finally, when it comes to real estate, are you watching that at all? And the REITs, not particularly office even, we're getting ready to hear from prologists. Yeah, this is not going to be brain surgery, but higher rates are not good for REITs.

And obviously, people have been anticipating lower rates. And so REITs got their prices bid up in anticipation of the 10-year and short-term rates dropping. And now that that seems to be reversing, a lot of those real estate names have been heard. So they're off to a bad start. You do have to watch office. There's a lot of concern about who owns the losses in office buildings and that we have not seen the last. There are going to be a lot of calculation of and taking of losses in the office space still in 2024. All right. We are watching that as well. Charlie, Jake, thank you. Thanks, John. Now let's bring back Mike Santoli with his first dashboard. Mike.

Yeah, John, trying to track what's sort of the median stock in the S&P 500, the equal weighted S&P, which has pulled back a little bit more and really is back into what was about a two year range. You have the regular S&P market cap weighted still in the breakout zone, not too far from a two year high. But you see right here that you've kind of lost that little December breakout. Nothing critical. There's nothing magic about this. But it's just proof that that broadening trade, everybody was applauding at the end of 2023, wanted it to continue, was hoping it would continue. It's kind of backslid a little bit.

Now, that's gone on as we had an overbought market that we're having a general digestion phase in. But worth keeping in mind, the small caps look something similar to this. At the same time, anticipated volatility and actual volatility have perked up a little bit from very low levels. This is the CBOE VIX, the volatility index, on a one-year basis. And it, again, doesn't look high on an absolute basis, and it's not around 15. But you have had this little kind of run here of higher lows, higher highs. Today was the expiration of VIX futures I've been talking about a month ago. In December there, it was that little blip higher, and you did have a bit of a clenching up.

So it's just worth keeping in mind that we're still in this phase of sort of accounting for the excess, bullishness, optimism, kind of taking for granted of the soft landing. It's all in the routine zone for now. But this is what you would want to monitor to see if things are getting a little bit more unsettled and sort of spring loaded inside the market. And I guess that first chart, the equal weight S&P raises the question again about the small and mid caps. Is that signal that, hey, here's a chance to get in or is this the top of the roller coaster? Well, yeah, that is absolutely the question. I mean, I don't know that you have to think about the bottom of the range being immediately in play. It's much more about where's the leadership in this market. And it shows you that it's still pretty selective at this point.

This is going to track things like the mid cap index very, very well, the equal weighted S&P. So it's kind of what it's telling you. Also, though, this is where you will not find as much valuation excess. It's more like 15, 16 times forward earnings as opposed to 19 ish at the S&P 500 market cap level. And that's part of the reason why Charlie likes it, I suspect. Mike, thanks. See you again in just a bit. Now, Kinder Morgan earnings are out. The stock is lower initially. Pippa Stevens has the numbers. Pippa? Hey, John. Kinder Morgan earning 27 cents during the fourth quarter. We are not comparing that to estimates. Revenue coming in at $4.04 billion.

That missed expectations of $4.4 billion. Full-year guidance was roughly in line with estimates. Kinder also saying that it bought 31.5 million shares during 2023 for $522 million. That stock now down about 1.3%. John? All right, Pippa, thanks. Still ahead, we're going to get more insight into the state of consumer spending when Discover Financial reports earnings, plus instant analysis on what those numbers could mean for other credit card related stocks and shares of Charles Schwab under pressure despite an earnings beat. You can find out if that could be a red flag for

the state of retail trading when overtime returns. Shares of Charles Schwab slipping after reporting a revenue miss. Net income also falling down to nearly a billion dollars. And joining us now for the read-through on retail trading is Patrick Moley from Piper Sandler. Patrick, good to have you. So Schwab's guide, I guess, was a bit light. We got numbers from Interactive Brokers yesterday. What's this telling you about the state of the retail trader? Yeah, so I think that Schwab results today had more to do with retail behavior from a cash standpoint, what retail customers were doing with their cash balances. Over the last year or so,

Schwab has come under significant pressure as customers have moved cash out of their sweep brokerage deposit accounts in search of higher yields into things like money market funds. That's put significant downward pressure on Schwab's net interest margin. It's forced them to tap high cost short-term funding. But what Schwab showed today was that in the last two months, we've seen transactional cash balances, those brokerage sweep cash balances, increase two consecutive months. It's the first time that's happened since the Fed started hiking rates. So what that tells us is that as we look into next year, assuming deposits remain on the balance sheet, we don't continue to see a runoff,

Schwab should be able to start paying down those balances, and that should lead to NIM expansion and NII growth into the next year. And one of the things that I think corresponds with those balances or those deposit balances not rolling off the balance sheet is retail investors identifying opportunities in markets. You look at this coming year, we have an election coming up. We have potential for rate cuts. So I think investors are looking to maybe hold on to cash. They're looking to possibly deploy it into opportunities they see in the market over the coming year. So which do you like better here, Robinhood or Schwab? Well, Schwab, I think, is my top pick for 2024. I think that we'll see some headwinds over the next year. Their guidance today came in

a little bit, I think, softer than what a lot of the street was expecting. But if you look into 2025, if you look into those outer years, there's a lot of things to get excited about with Schwab. Last year, they worked to integrate all of the legacy, or 90 90% rather of the legacy TD Ameritrade clients onto their platform. That was a deal that was closed in 2020. So for the first time this year, those TD Ameritrade customers will have access to Schwab's full suite of product offerings. So in addition to expense synergies from bringing those customers over and consolidating everything onto one platform. I think there's significant opportunity for revenues as well. If you look at TD Ameritrade customers, they're only 10% of those customers utilize advisory services. Schwab customers is closer to 20%. So if Schwab can bring that 10% up closer to what their customers have historically

trended around, I think there's significant opportunity for revenue growth there as well. Patrick, finally, we've been through this weird, maybe, I guess, four-year stretch where very active trading has been so popular, even though history tells us that the more retail investors trade, the more they tend to lose, right? So does that activity continue? Are you betting on it to continue? And if not, what types of companies, what types of strategies from these financial players are likely to win based on what you expect retail investors are going to be doing over the next, say, three years? Yeah. So what we've seen is, you know,

you sort of look at retail trading from a pre-pandemic and post-pandemic perspective. You know, volumes across the industries significantly picked up when COVID hit, whether it was government stimulus or people working from home and wanting to trade stocks. Volumes were up significantly. They've come down by about 35 percent since then as cash equities. But what people tend to forget is that just prior to the pandemic, the entire brokerage industry went to zero commissions. So I think that has created tremendous staying power for retail investors. What we've seen over the last few years is those retail investors have migrated

away from holding cash equities, and they've moved into things like options and futures. So that's kind of showing a maturation of retail. They're becoming more efficient with their capital. They're utilizing options. And another thing I'll just add is that typically when the macro narrative is focused on rate cuts and everyone's focused on big picture, are we going to a recession? Are we not? People tend to focus on broad-based indices. So we've seen this big explosion in zero-days to expiration trading in S&P or SPX option contracts. And those contracts, the proprietary trading license for them is owned by the CBOE. That was our top pick last year. It's performed very well. We'd expect that

stock to perform very well as retail likes to utilize those index option products. Well, I hope they use them well and they know what they're doing. Patrick Moley, thank you. Thanks for having me, John. Now, Alcoa earnings are out. Pippa Stevens back with those. Pippa. Hey, John. Well, Alcoa reporting a loss of 56 cents per share adjusted during Q4, smaller than the expected 86 cent loss. Revenue coming in at 2.6 billion, which was in line with estimates. Now, the company said Q4 saw lower pricing and lower shipments for alumina and that Q1 benefits from lower raw material and energy costs will be fully offset by other factors. The stock up about 1 percent. John. All right, Pippa, thank you. I also want to mention

Discover Financial Services. Earnings also out. We are going through them. The initial move is down significantly, about 5%. I'll get you those numbers in just a moment. Not only was NVIDIA one of the top stocks in the S&P last year, it's the second best performer in that index so far this year, and that's despite closing lower today. So how far can the momentum go? Joining us now is Katie Stockton, Fairlead Strategies founder and managing partner and a CNBC contributor. Katie, good to see you. So first on NVIDIA, how does it look? Well, it's a breakout. And for us as technical analysts, we love to see breakouts because they tend to foster additional upside momentum. And NVIDIA in particular had been range banned for several

months, and that range was about $100 wide. And a very typical way of deriving a price objective from this kind of breakout would be simply to add the width of the range to the breakout point. So that would get Nvidia to above $600. It has already moved pretty far, pretty fast to around 560. And it is exhibiting very positive momentum. And that's across timeframes. So it's not just short term. It's sort of resumed its trend in terms of intermediate term momentum and also also seems now placed to outperform. Katie, hold tight for just a moment. We want to get to Discover earnings. They are out. Kate Rooney has those numbers.

Kate? Hey, John. So a beat here for Discover, at least on the revenue side. $4.2 billion is the number compared to about $4.09 billion that the street was looking for. We've got the GAAP EPS number, John. We're not going to compare that. It's $1.54. Also a headline here about the board declaring a semi-annual dividend for preferred stock

and quarterly dividend for common stock. There, a quote from the interim CEO, John Owen, talking about steps to strengthen risk management and compliance and some of the factors that leave Discover poised to generate strong shareholder value in 2024 and beyond. Also, total net charge off rate was 4.1. That was higher than the previous period. They talk about higher delinquency trends as well. They stocked down more than 4% here, John, which could have to do with some of the delinquencies and charge off rates. But we are looking through the release here and we'll get you any headlines as they come. Well, we appreciate it. All right, Kate, and we'll get you any headlines as they come. Well, we appreciate it. All right, Kate, thank you.

I want to get back to Katie Stockton now. Yes? Katie, you were just walking us through that breakout in NVIDIA. Tell me, are there read-throughs to some other names associated with artificial intelligence? I'm thinking Microsoft, AMD has been doing quite well. Also, Supermicro. Well, yeah. So you've sort of identified two more breakouts there with AMD and Microsoft in particular. Microsoft has completed a bullish cup and handle formation. I think we were talking about that back in October and then has had since then a subsequent breakout from a consolidation phase. So really impressive breakouts that we've seen. And the read-through

from NVIDIA even is beyond AI. It's for the broader market. And that's because not only was it a source of upside leadership last year, but it really drives the trend behind the semiconductor sector. And the semis tend to exhibit upside leadership in strong tapes. So it suggests that we're in a strong tape, even though we've seen a pullback in the major indices, that it's something that should ultimately provide an opportunity here to add exposure. So tell me, what are you looking at timeframe-wise from a technical perspective? Kind of does this continue or what kind of things in NVIDIA and Microsoft in particular, because I know they're influential

stocks, are you questioning and looking to see? You know, I think in terms of timeframe, we can have a pretty comfortable, bullish, intermediate and long-term outlook at this stage with the breakout setup occurred. Short term, there are some that look overstretched, but we really have no cell signals in Microsoft, Nvidia, AMD, or the like. So the lack of cell signals, the strong momentum, to me means that you want to own these names. I've been telling our clients not to really get too cute

in terms of waiting to add exposure. We are hoping that the stochastics will give us an indication of a good entry point more broadly. But for names that are breaking out, you have a positive technical catalyst to act upon. So we want to take advantage of that in real time. Finally, let me take a hard eastward turn to the Hang Seng Index, Hong Kong. It was down quite a bit, taken out of December low. What's the chart telling you? You know, it was a 3.7 percent decline in one day. So you can imagine the impact on the chart, which has already really been under pressure and for a long, long

time here. So there's still, of course, negative momentum across timeframes behind the Hang Seng and really more broadly in China. And with the breakdown, the short-term breakdown that we have with this move, it is now testing some important long-term support between the 2022 low and also all the way back to the 2011 low. So this is a key juncture for the Hang Seng index in particular. A lot of the Chinese benchmarks are testing very long-term support levels. We don't yet have any counter-trend signals, but we could see at least a short-term one unfold as early as this Friday based on our metrics. So we're kind of hoping that we see this support level tested successfully and some stabilization on the back of that signal. Yeah, we were just talking about those China headaches earlier.

Katie, thank you. Of course. Now, logistics, retail, real estate company Prologis% after being down 10% in the regular session. Pippa Stevens is back with that. Pippa. Hey, John. Yeah, this stock is plunging here after Plug Power announced plans for an up to $1 billion share offering. This comes as the embattled hydrogen maker has faced a lot of challenges, of course, issuing a going concern warning in the fall

as it burns through cash trying to scale up its operations. It's pushed out its plant timelines several times now and really has failed to make this green hydrogen story work. And this is just another issue the company is now facing. Once again, announcing plans for an up to $1 billion share offering in that stock, now down 14%. John? Yeah, 12 months ago, above 17. Pippa, thanks. Now, real estate, the worst sector today, prologis the warehouse and logistics landlord under pressure after missing estimates

for fourth quarter rental income. They did, however, show year-over-year growth in revenue and earnings. Co-founder and CEO Hamid Moghadam joins us now. Hamid, good to see you. Welcome. So it looks like your fiscal 24 forecast shows you're going to have quite a bit of activity going on, more than in the past fiscal year. What are you planning? Well, John, let me just correct something that you started out by saying. We completed 2023 at the high end of our range of guidance and pretty much in line with the highest estimates on the street. So the company, from an earnings point of view, is doing great. And the outlook going which were very positive. And we actually came out today and said that looking at it from this point of view, we're even a little bit more bullish as to the next 12 months.

So our earnings were really good and they're expected to be better going forward. And our track record of consistent growth in earnings and cash flow and dividends is over 10 percent a year for over 12 years. So I think we're doing pretty well. Yeah. And the street seems to think so, too, noting the notes that I saw that you guided ahead of your unofficial guidance, maybe two cents a share below consensus at the midpoint, but that could be chalked up to conservatism, I suppose. What about what's happening in industrial right now, in particular? There seems to be continued strength there. What can you say about geographically where you're seeing that and how likely you find it to continue? Yeah, the industrial market in the context of the last 40 years that I've been involved in it is in a very healthy situation with market vacancy rates to increase to about 6% by mid-year because of a certain

amount of supply coming on that's going to exceed projected demand. But it's going to turn right back around because the pipeline is pretty dry. And we think by the end of the year, we'll be back to where we started the year in terms of vacancies and then declined from there into 2025. Now, that's the market. If you look at Prologis' portfolio globally, we're over 97 percent leased. And if you consider the deals that we have under negotiation, 99 percent of our space is either committed or under negotiation. So I don't know how we could possibly be doing better. Which raises the question for me, just kind of strategically and vision-wise, in the new facilities that are being built out, what's the next higher level requirement? How do you improve margins and please customers at a

level that's better than your competition camp? Sure. First of all, our margins are always better because we have tremendous scale and cost of capital advantage. And as you know, capital is the raw material of the real estate business. So we have some very significant and sustainable advantages when it comes to GNA efficiency and also cost of capital. But where I get my sense of the market and getting better is that you can look at supply-demand balance, as I discussed, and the supply picture, there's a little bit of a surge coming. But right behind that, anything that's going to come on board at the end of the year would have started by now. So we know the market is getting tighter and pricing power is good today and it's going to get even better. So again, bullish. Now, in terms of the next stage in growth, customers have put their needs, their CapEx

needs on hold in 2023 by and large. They haven't been doing large network expansions because of all this talk about recession and the like, which, by the way, we never subscribe to. And we've talked about this program and then some. And they can't hold on. They had a very strong Christmas season. Sales were higher, particularly on the commerce level. And if they want to compete with their competitors, they need more space to continue their growth. And obviously, we're seeing those advanced discussions today. It hasn't translated into actual numbers, but that will take some time. But again, the outlook is pretty positive. Pent-up demand certainly doesn't hurt. Hamid Moghadam, CEO of Prologis, thanks for being with us.

Thank you. Let's get to a CNBC News update now with Julia Boorstin. Julia. A shipment of medicine for hostages held by Hamas arrived in Gaza today after France and Qatar mediated the first agreement between Israel and the militants since the November ceasefire. The agreement also includes delivery of humanitarian aid to residents in Gaza. A senior Hamas official said that for every box sent for the hostages,

a thousand would be sent in for Palestinians. Golden State Warriors assistant coach and former Serbian star player Djan Milošević died today after suffering a heart attack. He was hospitalized in Salt Lake City after collapsing at a team dinner last night. The NBA postpones tonight's scheduled game between the Warriors and Utah Jazz. Milo Kovic was just 46 years old. And there's no let up for Buffalo as it is under a lake effect snow warning until tomorrow evening where an extra one to three feet of additional snow is expected. The system bringing whiteout conditions and wind chill below 20 degrees. Several cities

and towns across western New York have issued travel bans. Back over to you, John. All right, Julia, thank you. Now, the latest city U.S. economic surprise index turning slightly negative. Up next, Mike Santoli looks at what that could mean for the Fed's interest rate strategy. Plus, Council of Economic Advisors Chairman Jared Bernstein on the White House's move to slash bank overdraft fees when overtime returns. Welcome back to Overtime. Citi's Economic Surprise Index dipping slightly negative. Mike Santoli is back. Mike, are you surprised?

You know what? Modestly, only because we've spent a ton of time in positive territory on this indicator. Now, keep in mind, this is the trend in how economic data are coming in relative to forecast, not an absolute term. So it shows you that, you know, the economy for almost all of last year was holding up a lot better than economists had anticipated. We did dip slightly negative. That was in the spring. That was around the time of the SVB collapse. And basically, markets went very risk off and data did take a stutter step. So we've dipped a little bit negative.

This probably does not capture today's upside surprise in retail sales and industrial production. But it does show you why I think maybe investors are going to become a little more sensitive to any real wobble in the growth picture. So, yes, we know that people generally anticipate Fed rate cuts. We definitely want to see inflation to continue on its downward track. But that's all kind of predicated on the economy hanging in there pretty well. So, again, you can go negative for a while, and it doesn't mean the GDP absolutely goes negative. But we've sort of averted that fate for a while. We'll see how it goes from here. Mike, we're about to talk to Jared Bernstein.

And so this is one of those maybe disconnects that I'm trying to understand. Economic surprise, like, is it that people were expecting things to be worse and that they were better? Or is this different based on maybe how much money you have, whether you're owning capital or you're renting? In this case, in this case, John, it's really just about the Wall Street economist consensus on how the data are going to print. So this is really when we talk about, hey, retail sales was, you know, up nine, up six tenths. It was it was anticipated to be up three tenths. It's not how the average person or typical investor is feeling about things in this case. So for here, it's much more about what the economist models are telling us and then how it plays out in the actual numbers.

Right. But often when that happens, it seems in that chart, it's been because things are a lot better than in this case. It's in this case, I think people have generally anticipated things were going to be OK and maybe slow and steady growth. And it's been slightly better than that for most of the past year. Well, you're welcome, I guess, from the data. Mike Santoli, thank you. Up next, much more on the Fed's rate cut plans and how they might impact the economy when we're joined by Council of Economic Advisers Chairman Jared Bernstein. Over time, we'll be right back. The White House taking action today on bank overdraft fees, proposing new rules to limit how much banks charge customers. Joining us now in a first on CNBC interview, Council of Economic Advisors Chair Jared Bernstein.

Jared, good to see you. And I want to get to the overdraft fees, but I got to start with people's feelings once again on the economy. President Biden's approval ratings in the low 30s, that's approaching George W. Bush's in the financial crisis. What is it about this Bidenomics message that just isn't resonating? Well, I think sometimes you have to get under the hood. If you actually ask people about some of the very specific components of Bidenomics, you're going to get poll results that are in the 80s. Ask them how they feel about affordable broadband, about clean water replacing lead pipes, about standing up domestic semiconductor industries,

EVs, EV batteries production here in this country, some of the biggest numbers we've seen in terms of inflows to investments in new manufacturing facilities. All of those poll off the chart. So I think there's probably something lost between the cup and the lip when you go more broadly. But when you drill down into the individual policies, you do get better poll results. Yeah. And when something gets lost between the cup and the lip, we've all experienced that. Not pleasant for the one trying to do the drinking. OK, onto the overdraft fees. This is an important issue because is this sort of a cost of doing business where banks should be providing these services

at cost? Or is this something that should be more thoroughly regulated in how much banks are allowed to charge? Or is it just a big old junk fee that ought to be taken out in the trash? And that's certainly how President Biden views some of these overdraft fees. I mean, look, if you consider this action, a new action by our administration, it's to close a loophole where some of our biggest banks, and remember, this only applies to institutions with assets above $10 billion, exploit this loophole to charge excessive overdraft fees. Now, to get more to your question, there are a bunch of banks who don't do this, and they remain highly profitable. So look, if your business model is making profits by ripping people off, that's not okay with this president. And so we're going to cut those fees in half.

This saves $150 on average for households who are hit with these fees. And if you aggregate them up across the country, that's $3.5 billion yearly savings by taking down this exploitative fee. So we're happy to go there. Okay, so let's go back to the macro things overall feeling good for a lot of Americans economically, though clearly not everyone. Here's what J.P. Morgan CEO Jamie Dimon said about the outlook for the economy from Davos this morning. I think it's a mistake to assume that everything's hunky dory. And, you know, and when stock markets are up, it's kind of like this little drug we all feel like it's just great. But remember, we've had so much fiscal monetary stimulation. So I'm a little more on the cautious side that we are facing a lot of things

in 20 and 24 or 25. Do you agree with that? Jared, what are some of the things that are on the horizon that you would be concerned about? Well, first of all, the president, of course, takes much more of a kitchen table than a Davos approach to where the middle class is right now. And there, I think, if you look at the current state of the economy, there's some important things happening. I agree, by the way, that there's always risk factors out there and we should get to them. But if you look at what the president's kind of vision was, his plan that he urged his team to execute on, it was maintaining the tight labor market while easing inflationary pressures and lowering costs. And the combination of those two dynamics leads to rising real wages. We've now seen wages beating prices for middle wage workers for nine, 10 months in a row on a year-over-year basis.

That is a positive development. Now, look, there are things going on across this globe, geopolitical stressors, including in parts of the world where energy is an important commodity that we have to keep a very close eye on. But if you just look at how workers are doing, how consumers are doing, and you look at their spending record, you look at the job market and the real pay gains, that looks like it has some momentum to me. All right. Thank you, Jared Bernstein, chair of the Council of Economic Advisors. Now discover financial under pressure in overtime despite reporting a revenue beat up next an

analyst tells us what he wants to hear from the company on the earnings call and if you love the show of course you do and you want even more overtime there's a qr code you can scan for that there it is it's right there you can follow us on linkedin we'll post exclusive content for now overtime we'll be right back. Take a look here at Discover Financial Services. The stock is down more than 5% after its Q4 earnings report earlier this hour. Let's bring in Oppenheimer Senior Analyst Dominic Gabriel. Dominic, you said you saw some potential, long-term potential in this stock before this pullback. With these results, you still feel the same?

Thank you so much for having me. And I think the key here is that what we also said is that we think it's got to get to around $95 first. And so I think that once we get this next sell-off, which is probably going to start happening if charge-offs are going to keep rising the way we saw about a 90 basis point increase in charge-offs quarter over quarter in credit card for Discover, we're probably going to start to see some of that pressure as a lot of the conversation from here, given where people have been talking about interest rates and the health of the consumer, they're not baking in very much that charge-off increase. And so it's after that sell-off that we think that there's going to be a real long-term buying opportunity for Discover shareholders. What does that charge-off trend tell you about the overall health of the consumer?

We're talking about how good the economy is, and yet not everybody's feeling so great. Yeah, it really is a K-shaped recovery. And I know everyone's heard that so many times, but it's so true. The only difference, though, is that maybe it's starting to creep up a little bit into some of the higher FICO bands and discovers really a prime focused business, very solid credit quality in general. But we've been really worried about where consensus expectations have been because we still see this continued rise in delinquency formations, which would have called for higher charge-offs, which is what we're starting to see. So that's why you like American Express? It's the tallest giraffe here? That's right. I think that spend-centric model with about 80% focused on fees versus loans and therefore less charge-off pressures that can impact the provision and EPS growth in the coming year,

it's clearly our favorite in the specialty finance space. I will say, though, that we like Visa, MasterCard, and Fiserv a lot better. Oh, better even. Okay. Dominic Gabriel, thank you, from Oppenheimer. Thank you. First, Amazon got into the NFL, and now the company is firing the latest salvo in the streaming wars by making a big bet on the future of regional sports. Details when Overtime returns.

We have a news alert on Boeing from our Phil LeBeau. Phil? John, Boeing CEO Dave Calhoun, along with the Spirit Aerosystems CEO Pat Shanahan, addressing workers at Spirit's facility in Wichita today. Here's a quote of what Dave Calhoun said to some of the employees there, similar in tone to what we heard him say to Boeing employees in Renton, Washington last week. We're going to get better, not because of the two of us are talking, but because the engineers at Boeing, the mechanics at Boeing, the inspectors at Boeing and the engineers at Spirit, the mechanics at Spirit and the inspectors at Spirit. They're going to speak the same language on this every way, shape and form.

And we're going to learn from it. Then we're going to apply to apply, apply it literally, excuse me, to everything else that we do together. Bottom line is this, John, what we are seeing is Boeing and Spirit trying to get their arms wrapped around this as quickly as possible to reinstill confidence, not just with investors, investors, but with regulators in Washington, though it's still unclear what the FAA and NTSB investigations will come up in terms of the cause behind this door plug being ripped off of an Alaska Airlines plane on January 5th. John, back to you. All right. And I'm sure customers, too. Phil LeBeau, thank you. Now, sports has become a new battleground in the streaming wars.

Amazon making a big move to expand its offerings. Julia Borsten is with us. Julia, what's the strategy? Well, John, Amazon is buying a minority stake in Diamond Sports Group. This is the largest operator of regional sports networks as part of a restructuring deal, which will allow Diamond to emerge from bankruptcy. The deal also makes Amazon's Prime Video the primary seller of streaming access to the local Diamond channels. The companies have not yet announced pricing and availability yet.

Diamond owns 18 RSNs, regional sports networks, including MLB, NBA and NHL games, along with pre and post game programming. It also produces 4,500 telecasts each year. Now, this is part of Amazon ramping up its investment in live sports, no doubt the most valuable content for advertisers. Insider Intelligence saying this allows Amazon to quickly expand its sports streaming options and to develop relationships with local TV advertisers. This comes after just yesterday, Netflix announced its licensing inside the NFL from the CW and amid reports that ESPN's talks with the NBA and NFL to potentially take a stake in the company are heating up. Now, as we saw with Peacock's wildcard game Saturday, drawing a record

23 million streaming viewers, all of the streamers and media companies are working to tap into the value of live sports. John? Julia, this reminds me of Amazon's playbook of taking a niche product category and trying to get more out of it through the scale of its platform. Any problems with that here? Well, look, I think it's really interesting to note also that they're going to be able to tap into the local advertisers as well. I would not underestimate Amazon's TV business. I'm sorry, Amazon's advertising business and how they're using this burgeoning TV business to expand their strength in advertising. Amazon's number three in terms of the digital ad players behind

Meta and Google, but it is growing very quickly. Indeed, Julia, thanks. And that'll do it for Overtime.