Closing Bell - Closing Bell Overtime: Critical 48 Hours for your Money 1/31/23

Episode Date: January 31, 2023

The next 48 hours will be critical for stocks and your money – with the Fed decision and news conference with Jay Powell along with some high stakes earnings. Virtus Investment’s Joe Terranova gives his set-up. Plus, top chips analyst Stacy Rasgon gives his instant reaction to AMD’s quarterly results. And, Snap shares got slammed in Overtime. So, could this spell trouble for Meta? Alex Kantrowitz of Big Technology breaks down what he’s expecting.

All right, Mike, thank you very much. Welcome to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started from post-night here at the New York Stock Exchange. Boy, do we have a busy hour ahead. We have AMD and Snap Earnings. Those in the next few moments, as well as the march up to that Fed decision now less than 24 hours away. Our reporters waiting for the results to cross. We'll show you the stock moves as they happen. AMD, as you know, yet another check on the chips, which are a real battleground right now, off to a really good start. And then there's Snap, perhaps giving an early read on Meta,

at least when it comes to the slowing ad market. And Snap, perhaps, well, we'll see what it does, because the stock is up a lot in a short period of time. And that brings us to our talk of the tape today. These critical 48 hours ahead, the big tech earnings, tomorrow's Fed decision, news conference from Chair Jerome Powell. All of it is front and center. For what's at stake, we bring in Joe Terranova. He, of course, the chief market strategist of Virtus Investment

Partners. Welcome. Nice pop into the close. So what's riding on the next 48 hours, Mr. Terranova? So the month of January, clearly the revenge of high beta. That's how we could define it. If the Federal Reserve wants to respond to the easiest fiscal conditions that have existed for the market since February of last year, they are going to have to go beyond the attempt that they've had in the last month, which is try to utilize the communication tool to signal to markets that, oh, you're getting a little bit ahead of yourself. I think they have to go way beyond that, and I'm suspicious that they're going to do it. I don't think they're going to do it.

I think they're going to fail in that endeavor. They're going to lose credibility by not being able to do that if they don't rein in some of the excessive speculation that's going on. What do you mean? So are you suggesting that Powell's going to be perhaps more hawkish tomorrow than people think because of the gains in some of the areas of the market that are synonymous with froth? So I think he has to deliver. And again, this is if the Federal Reserve intention is to walk back some of the easing in financial conditions, he has to deliver. And again, this is if the Federal Reserve intention is to walk back some of the easing in financial conditions, he has to deliver the Jackson Hole speech. But he's going to have

to stand there for the entirety of the press conference and maintain that demeanor, allow for markets to understand that the Federal Reserve is going to reach that 5 percent target. So you're expecting him to be hawkish? Jackson Hole was hawkish. It was eight minutes of hawkish scott what i'm telling you is what he has to do to reverse the easing in financial conditions that currently exist i said i'm suspicious that he's going to do it i don't think he's going to be able to do it i don't think the federal reserve is going to be able to temper the animal spirits that are present right now in the month of January. I think they're going to fail. I think they've lost credibility. You think as January goes, then so goes the near term for the market,

because the January effect can be pretty powerful. We've had a good month. Do you think it has legs? We've had a good month. I think it's a bear market rally in high beta. You still do. You still think it's a— In high beta, I think it's a bear market rally. You still do. In high beta, I think it's a bear market rally. In other areas of the market that are reflected, as we said yesterday on halftime, with a little bit of a lower beta exposure, more quality, more reliable earnings that are present. No, I think that in that instance, you could be invested. And I think you'll see that you'll be OK coming out on the other side of this monetary policy. So I'm going to ask you again, all right.

Does this rally have legs or not? That's what I want to know. And honestly, and that's what everybody wants to know. We're off to a pretty good start for the year. Sentiment was really negative. OK Sentiment has come around a bit. The internals in the market tell a much better story than they had in the past. Agreed. Is it all a head fake or not? Simple. The significant outperformance of the NASDAQ relative to the S&P, I am incredibly suspicious of. And no, I don't think that outperformance maintains itself.

I think the S&P will be fine. A rocky road through the course of 2023. The S&P ultimately will be fine. And it will close the performance gap that currently exists between the NASDAQ and its index. All right. So we're about five minutes away from snap earnings, at least in terms of what history suggests, recent history, of when this number and everything else could start hitting the tape. So we're going to be mindful of that. We're going to keep our eye on that. You have just undergone a significant rebalance of your ETF, the JOTI.

And I want to go through it a little bit because I think it gives people insight into how you're thinking about the current market conditions, the kinds of stocks that are going to do well, and those maybe that might not. Okay? You have 25 new buys. You have 25 sells. You say it's the second lowest turnover of the nine quarterly rebalances you've done since inception. Why is that the case? And as we're also showing on the screen here, you're selling Tesla and you're selling Microsoft, which is quite significant. Tesla, very much emblematic, I think it's fair to say, of what you were referencing a moment ago.

The high beta run in some of these NASDAQ stocks like Tesla, which has gone from $100 to $170 in a few weeks. So just take me through your thought process here and then we can get into the specifics. So we're using two factors. We're using quality and we're using momentum. Momentum is very difficult to find in this market right now. That's why the turnover is the second lowest since inception at 25 buys and 25 sales. Last year, we averaged 35 and a half on the buys and sells. Momentum is not present in the market right now. So you're relying more on quality.

It's also one of the reasons why I don't trust the high beta nature of the rally currently and a lot of the NASDAQ stocks that are seeing this remarkable performance recovery offer the decimation that they received in 2022. As far as Microsoft and Tesla. Give me Tesla first. OK, we're showing it on the screen here. You've had the stock in the in the JOTI for two years. You initiated it on on January 29th of 21. And here we are. Initiation price. It's pretty ugly. 264.51. I won't say it. OK, you just did. And you liquidated it today. We did on the close. Take me through it. So it is it is really about and it's remarkable because you have a nearly 40 percent gain for

Tesla year to date. But you can't overcome the loss of momentum in this equity name. It's been so dramatic. It's been so significant. It's really been the destruction of any technical formation. And what's interesting about Tesla is that the quality factors, the return on equity, the debt to equity, the annualized sales growth, the things that we look at, the study of the balance sheet are pretty good. They're actually OK in this environment. But you just can't overcome that dramatic loss of momentum that's inflicted this stock. And it's one of the reasons why it moves to the sideline. The factor of momentum is completely lost. Now, I want to get into Microsoft because, you know, in the bigger

picture, I think it's probably more significant that you removed it. And to refresh people's memories, you had picked Microsoft as one of your halftime stock summit picks not three weeks ago. Correct. Okay. When we did this. So now it's out of the JOTI and tomorrow morning, you're out of Microsoft personally as well. So this thing's out. Why? Well, I think it's very important for the people that invest in the strategy, the quality momentum, Joe, TETF, that they understand what they're investing is what I really believe in. And what I believe in is reflected in my personal investments.

So I'm going to eat my own cooking, so to speak, if the strategy is saying that it's time to take Microsoft and remove it from the portfolio for two-factor reasons. Number one, the loss of momentum, similar to Tesla, but also quality. You're seeing that the revenue growth is decelerating. I will acknowledge that it is decelerating. So you've got two factors here that are contributing to the reasoning why the rules have initiated the removal of Microsoft from the strategy. And my personal holding is going to reflect that. Listen, they could come back in again. This is a quarterly rebalance. It's a quarterly reconstitution.

Hopefully, I'm judged by the performance of this portfolio. It could come back in again at some point, but I'm not going to maintain a personal positioning when the ETF is no longer holding. All right. I guess my issue, if you want to call it an issue. I knew you'd have an issue, but you should. I do have an issue.

Okay. My issue is that you knew all of that when you made Microsoft your stock summit pick. Revenue growth has been slowing. It was pretty much telegraphed that that's the way it was going to continue. Momentum in the mega caps had already broken down. Correct. And when you made the pick that day, I questioned you on it thinking, how is this going to be a big generator of returns this year if it seemed to be missing the very keys that you look for when putting this in your ETF? Well, you never tell a judge that they're flat out wrong and you're not wrong. So I respectfully disagree. What I did not know at the beginning of the year would be the earnings that we got at the end of January from Microsoft. And Scott, candidly, the deceleration of those earnings was a significant contributor in terms of the quality factor deteriorating in the way it did. So electronic arts, I just want to bring your attention to it and just jump away from Joe for

just a second. Can we show that? There you go. It's down 6% on its earnings, too. We mentioned, of course, AMD and Snap that we were waiting for. But Electronic Arts is another name brand that's out here in overtime, and the stock is down. We'll try and get you some information on that before we get out of here tonight and give you the exact reason, whether it's the guidance itself. Gaming, I think, as most of you know by now, has obviously been slowing from the pandemic levels. Steve Kovac is here with us now. What's the issue here? Steve, what are we seeing? It's got another big name brand. It's Star Wars is the problem here. So

there is a big Star Wars game supposed to come out from EA this current quarter. It's being pushed back to April instead of March, and that's hurting their outlook for this current quarter. So they're missing revenue guidance here on the current quarter. They're seeing up to $1.77 billion in revenue versus the more than $2 billion expected because of this big Star Wars game that's supposed to come out. On top of that, it sounds like they're canceling some of their mobile versions of Apex Legends. That's a really popular shooting game on consoles and PCs that they've been trying to push into mobile. And it sounds like some of those games are going to get the ax, too. So, basically, pushing some games out and canceling others, that's hurting the outlook the current quarter and sending shares down more than 5 percent, Scott.

OK, I appreciate that. Steve Kovac, thank you. I'm sure we'll hear from you as this hour progresses. And you'll forgive me for looking at my machine here because I'm looking at Snap, which is out as well. Julia Borison, can you talk to me about what's happening here? I see a headline that says this company is warning of a sales drop because of its slowing revenue growth that, you know, they had already warned us about. You know, this company so well. Yeah, that's right. We see Snap shares down now over 12 percent. That's despite the fact that Snap beat expectations with adjusted earnings of 14 cents per share. That's three cents better than estimates. Revenues of one point three billion dollars pretty much in line, as were daily active users of three hundred and

seventy five million. That's the addition of 12 million DAUs in the quarter. But here's the big headline and here's the reason why the stock is down 13 percent after hours. The company says it won't give first quarter guidance due to uncertainty, but they do say that quarter to date revenue is down seven percent. And they also give some informal guidance that indicates a revenue decline of between 2% and 10% in the first quarter. That compares to analysts' expectations of revenue growth of about 1.5% in the first quarter.

So now we see shares down about 14%. Now, CEO Evan Spiegel, who announced a big restructuring of the company back in August, he writes in a letter to shareholders that they've taken action to refocus their investments on strategic priorities, including growing the community, deepening engagement with their products and accelerating and diversifying revenue growth. They did announce that now total time spent watching their spotlight content has doubled year over year. But we do see shares down about 13.5%

now, Scott. And it does seem to be on that warning about concerns about revenue growth in the first quarter. Back over to you. Yeah, I appreciate that, Julie. You come back on the minute you have more information, please. That's Julie Borson. Could we just throw up shares of Meta, guys, to see what the read through is? I mean, if Snap is projecting such a disappointing range of revenue, I can only imagine what Meta may be doing. And there you go. It's down 2%. There's obviously a lot of concern about what's going on within the advertising market. Meta does report tomorrow here in overtime, and we'll get a better look at all of that. But you can see the sympathy

decline here down by better than 2%. Joe Terranova is still with me, and we're going to bring in the panel in just a minute. But that seems to be the right way to read this, is this is an indictment of the quality of the advertising market right now, at least digital ads. Not just right now, but looking forward into the future. And I think that's the real challenge and the concern, not only for Snap and for Meta. I think Meta has a little bit more of a diversified model they have resiliency to be able to absorb some of the ads slow down I don't think all of it so don't get high expectations for meta but a lot of significant revenue ad exposure here well above 95% for snap

obviously this is not a good outlook yeah Yeah. So let's let's introduce you to our panel today is Greg Branch of Veritas Financial Group, Aya Yoshioka of Wealth Enhancement Group. But Greg's a CNBC contributor. It's good to have all of you with us. Aya, you first. Your read here to what we're seeing from from Snap down 14 percent as we all look ahead, really, to tomorrow here in overtime with Meta. Sure. Clearly, the ad market is slowing, as you had mentioned. And I think the competitive landscape for social media has just increased over time. We've seen the impact that TikTok has made across the social media landscape, and it makes it difficult for companies like snap to continue to grow revenues at the pace that they had been in the past you know Greg in many ways this stock spink snap is so emblematic of the market that we've all experienced over the last 30 31 days the stocks that were absolutely

obliterated last year and this was certainly one of them is up 28 this month before this decline that we're witnessing here i'm wondering if you can sort of speak to that and why gosh you got to be careful when you look at these gains and think about what they mean especially in light of what we're witnessing in snap yeah so i agree with joe here at the end of the day, I think that sometimes us participants have a hard time separating what we want from what we actually think in a data-driven way will happen. And so for me, Scott, it's like deja vu. It's like I'm sitting here with you again, January 2022. I have the exact same concerns. There's three of them that the Fed is going to be more aggressive

than anyone is discounting right now. These market levels are fine if we're going back to a Fed funds rate environment of one percent. Tlaib said that today and I agreed with him. But we're not. We're likely not. And so, you know, right now the market's discounting two more raises and cuts in the back half. And I think that that's unlikely. Therefore, estimates are too high. You know, Snap is a great example of that, although Snap itself has both secular and cyclical problems, right? The secular problem, as I intimated, was the competition.

You know, there's simply more mature platforms out there that's going to drive better pricing and more the ad dollars the cyclical is that the the digital ad market will come back I don't know if this is a great read through over to Facebook because at the end of the day like Joe said they're exposed to sectors that have pulled back a little bit less on the ad budget but they also just have less secular pressures than snap does and lastly is the consumer. consumer worry about the consumer

hold your thought hold your thought because you're on a roll there and i just want you to catch your breath for a second because i want to show everybody amd uh we'll come back to gregory in a second uh for more of his thought but they have reported as well in which we're going through that uh you can see the stocks up three and a half percent i got a beat on the top and the bottom um but again you're gonna you're gonna hear from our reporter, Christina Partsenevelos, in just a minute here. I guess there was some concern about this print after what we got, Joe, from Intel most recently.

They've taken shares, we know, from Intel. PC slowdown's hurting everybody. I think the real question here was, as we witnessed the continued slowdown in data center with Intel whether AMD was going to still You know have some of those issues to Analysts have downgraded some of them more recently going into the print what's your read here for a stock that you sold? I believe it was last fall. I sold this

October 31st went into Texas Instruments instead From a performance standpoint that wasn't the right move. From a beta perspective, I believe it was the right move. As far as AMD, this is a good enough report. And this is what should have been expected from AMD. AMD is one of the semi companies that from a earnings and revenue 2023 outlook, there's profitability expected. Single digits, low single digits, 3% and 6%. Overall, the industry, you're looking at both earnings and sales growth that's going to decline. So they are taking market share from Intel, clearly.

And I think there's been resiliency in CPU chips that's being reflected in this earnings report. Margins are OK here. Maybe they're, you know, weathering the storm, so to speak, a little bit better than Intel. Christina Partsinovoulos, our chip expert, joins us now. You've tried to get us prepared for this over the last couple of days. Christina, what do you make of this? Well, you did mention there's a top and bottom line piece. We know that. We know also Q1 guidance came in a little bit lower than anticipated at $5.3 billion.

So that was the big question mark. What were they going to guide for given all the other chip makers? Now, I'm going through the quarterly financial segment summary. And just to Joe's point, he brought up data center segments because that was a big question mark. What we're seeing is that for the quarter, it was $1.7 billion, up 42% year over year, primarily driven by strong sales of their server processors. So that's good news. But then when you look at the other segments, like client segment revenue,

which encompasses about 20% of AMD's total revenue, that was down 51% year over year due to reduced processor shipments resulting from a weak PC market. Then gaming, we know Steve just talked about that with EA, the gaming segment was down 7% year over year, driven by lower gaming graphics sales. And then we have the embedded segment, also a huge portion of their revenue. That was actually up quite a bit to 1.4 billion, over a thousand percent higher year over year. So those are the four important, sorry, I'm hitting my mic, but those are the four important segments that we're seeing data center strong, but weakness coming from the client segment revenue as well as gaming. You know, but the weakness, I think you

would agree, is coming from areas that we expected to be weaker. Exactly. And the data center is holding up maybe better than some expected. And some of the commentary, at least of which I read coming into this report, was that they've been better able to withstand the data center slowdown than, say, an Intel, because those who were suggesting that say they have just better products. And you alluded to the sales of those products within the data center group. So a few points. One, you can argue maybe that they don't necessarily have better products because Intel is going to be launching a new product very soon, so that's possibly part of the reason why Intel has been dropping the prices of many of their products. But yes, there's obviously some customers on both sides. But Intel warned about this. Intel warned about losing market share, not only to AMD, but to ARM as well. And so we're starting to see it.

The concerning point that maybe is not in this report, but might be on the call, is the pricing of some of these products. Have the prices dropped just to maintain this competition between both companies at a time when sales are a little bit weaker? Hopefully that won't be the case, but overall it seems like a pretty good report with a weaker Q1 revenue guidance. I'm glad you bring that point up. It's a good one, too, the pricing, because I know that Stacey Raskin, for example, is going to join us momentarily as well to give his first read, has been worried about pricing drops there, too. So, Christina, thank you. We'll talk to you again soon. And don't miss, by the way, tomorrow, Lisa Su, Dr. Lisa, Christina, thank you. We'll talk to you again soon. And don't miss, by the way, tomorrow, Lisa Su, Dr. Lisa Su on Squawk on the Street in the morning is going

to talk to these results and, you know, what her outlook is going ahead. Let me come back to you. You know, I wonder how you feel about this move in the market within the chip space. You know, some have suggested, well, it's confirming the overall move in the market. Others say it's just a head fake and a snapback like we've seen in so many other areas of NASDAQ related stocks. Sure, Scott. You know, similar to what Joe was talking about before in terms of the high beta trade working so far in January, the chips have definitely participated with that at least most of them have as you mentioned intel continues to have its woes uh you know losing market share to amd and others and you know you could see it amd you know when they did the xilinx acquisition

they gained a good product um platform so that they're able to customize workloads better for their customers. And so, you know, I think they will continue to gain share and that's going to allow them to sort of continue to grow revenues to a certain extent relative to others, even as the economy slows down. And so, you know, when we look at quality and sales momentum, at least, we think about those areas that, you know, on a relative basis can outperform others within the space. And so, you know, I think it's still from a valuation perspective, a little lofty. But, you know, I think you pay for sort of quality and leaders within certain areas of the market. Greg, I interrupted you before, and I apologize for that, but I wanted to get that news out as soon as we had it.

I'll let you have the last word as a result. And I know you were wondering whether, you know, this was company-specific to Intel, the issues there, or if it was a broader thing. What does AMD's print here tell you about that? Right, I think we have an answer to that, right? I mean, at the end of the day, not only did Intel say that they were going to be losing share, but they intimated that the addressable

market was going to shrink aggressively. And up 42%, AMD showed us that that's not the case. So I think this is a positive surprise. We expected, you know, client being down 51% is no surprise. We knew that there was a pricing war going on there with client parts on the shelf and that they were aggressively discounting their lead by Intel. But that server segment, that data center being up 42 percent, I think is a positive surprise. And I'll have to resharpen my pencils about my outlook for the cloud for the rest of the year based on that. Yeah, maybe you're expecting too many thunderstorms. We'll see. We'll see what happens. Greg, I appreciate it. Aya, you as well. We'll see both of you soon. Joe's going to be back with us before the end of overtime tonight. Let's get to our Twitter question of the day. We want to know what will be the best performing social media stock over the next 12 months. I mean, if you say snap, you got your work cut out for you, right? Meta reports tomorrow. Is that the one? Pinterest, maybe. Head to at CNBC Overtime. Place your vote.

We'll share the results a little bit later on in the hour. We're just getting started, though, here in Overtime. Up next, I said top chip analyst Stacey Raskin will join us. He will next, in fact, get his instant reaction to AMD's report. He just downgraded that stock a couple weeks back. So where does he stand now? And later, what Snap's report means for Meta. That company reports results tomorrow, as we said, in overtime.

Getting hammered right now. Meta's down as well. We've got the setup next. All right, we're back in overtime. Take another look at AMD. Just reporting results moments ago. Stock is higher. The company's conference call kicking off in less than one hour. For more reaction to the quarter, let's bring in Stacey Raskin of Bernstein Research. Welcome back. You

know, we last spoke, of course, when Intel left you speechless. Yes. How does this leave you? Not speechless. It's, compared to Intel, it's fantastic, right? I mean, like, the guy. The quarter was okay. A slight beat. Most of the beat, by the way, was on gaming. Data Center kind of in line-ish. Client was weak. The beat was gaming. The guide's a little soft, but compared to Intel's guide, it's not that bad. They're similar markets. They're guiding a couple hundred million below the street. Down 10%. Intel is a lot worse. The question that I've had has been on margins. I think you mentioned we downgraded the stock a week or two back.

Revenue guide's kind of in line with where we are. I've been wondering about margins. The margin guide is a little soft. It's 50% gross margin. It's down close to 300 basis points year over year. On mix, it should be considerably better because data center and enterprise should be growing. Client and gaming year over year are down. So I think that's probably one of the bigger questions to probe on the call. But like I said, compared to Intel, this is much better than the situation that Intel found themselves in.

What does that gross margin guide tell you about price cuts, which I think you and others have been worried about, discounting, obviously. Does this allay some of those fears? I mean, yes, it was down, you said, 300 basis points, but I suppose it could have been a lot worse. Well, I don't know. Like I said, it's fairly soft. So it's down, you know, sequentially year over year when mix ought to get better. And so it does bring into question, like, what is going on with pricing and discounting and everything else. And I think more importantly, what you'd really want to know is what does it look like through the year? And they have, as far as I've seen so far, they haven't guided the full year yet. They have a brand new CFO. So I don't know if they're going to guide the full year or not. But that becomes the question as you progress through the year. How do those margins progress? And does this 50

percent in Q1 represent a peak or a trough? So what does this tell you, if anything, in the broader picture about investors owning these stocks or continuing to, let's say, buy into the hype of this comeback that we've witnessed since the start of the year? Yeah, yeah. I mean, a lot of the semiconductor stocks that have been cutting have been working. And that's not an unusual way that the stocks tend to trade. Like the stocks tend to move before the earnings do. If you look broadly for the sector, the earnings actually peaked in June. And since then, for the entire sector, they're down about 30%. And so the general model of investing in semis is you want to sort of buy just before the earnings

trough. The rule of thumb, if you can time it perfectly, is you buy right before the last cut. And so I think that's the bet that people are making is the cuts are done. I think it's January, so it's still a little early to know. But that seems to be the bet people are making, that soft landing kind of bet. And by and large, the companies that have been cutting numbers have been getting bought. Gotcha. Stacey, I appreciate it. As always, it's good to get your first take here. That's Stacey Raskin joining us. Time for a CNBC News update now with Bertha Coombs. Hi, Bertha. Hi, Scott. Here's what's happening at this hour. French officials say more than one and a quarter million people took part in massive nationwide protests against pension reform.

The powerful union claims the crowds were more than twice as large. France's prime minister today acknowledged doubts about the reform plan, potentially stepping back from her comments that raising the retirement age was no longer negotiable. Two more demonstrations are planned for next week. Vice President Kamala Harris will attend the funeral of Tyree Nichols, who died three days after being beaten by Memphis police officers. Harris was invited by Nichols' mother and stepfather. The Nichols family and their lawyer, Ben Crump, are expected to speak on Tyree's case later today. And just in time for the Super Bowl, legal in-person sports betting

has begun in Massachusetts. The first wages, wagers are being taken at three casinos. Massachusetts joins more than 30 other states that allow sports betting. But I don't know, Scott, without Brady or the Pats, it's going to be wicked weird for people in the Bay State. I don't know. The Bruins are like on fire. So we're going to be wicked weird for people in the Bay State. I don't know. The Bruins are, like, on fire. So I'm going to bet on the Bruins or something. Yeah, but we're talking the Super Bowl here. Yeah, it's all right.

They'll figure it out. All right, let's get another look, Bertha. Thank you. Let's get another look at SnapShares sinking in the OT. Take a look here because they're down fairly substantially, I tried to say, down about 14%. Coming up, big technologies. Alex Kantrowicz, he joins us say, down to about 14 percent. Coming up, big technologies. Alex Kantrowicz, he joins us with his first take on the quarter, what it means for Meta as they gear up to report tomorrow. Overtime's right back. All right, welcome back. Take a look at SnapShares getting hit really hard this evening in overtime.

Julia Boorstin has more from that report. Julia, what else can you tell us here? Well, we have some more details on that revenue warning that Snap gave. Now, the company said that in its fourth quarter, it saw weaker demand from its brand advertising business. Those are the same kinds of ads you would see on TV. That part of the business declined 11 percent, but its direct response ad business performed relatively well, up 4 percent year over year. That indicates Meta could see a similar divergence between the two parts of its ad business. Now, as part of this revenue warning for the first quarter, Snap announced that it

expects to introduce new improvements to its direct response ad platform, which it says should drive results over time but but may cause a near term disruption to those first quarter ad results. You see shares now down over 13 percent. Scott. OK, Julia, thank you, Julia Borsten. Now let's bring in big technology founder and CNBC contributor Alex Kantrowitz. So welcome. It's good to see you again. Your immediate response, which was emailed to me, says guidance terrible, hasn't shown any progress on building an ad platform that works for advertisers and investors ought to be asking what's going on. I mean, really does leave you with a lot of questions. Exactly. And like this was a quarter that you would say we're going to see some progress.

Right. They had dropped 25 percent the last two prints and maybe this one they would say, OK, we've decided to focus. We've cut staff. We're going to build a performance ad system that's working. Now, meanwhile, they've had a slight tick up, but not a very meaningful tick up. And their top brand salespeople are out the door going to Netflix. So, you know, when Evan Spiegel talks about focus and building community, that's well and good. But the focus really needs for the business. It has to be on the performance ad system. And I don't think it's there yet. You know, it's the 52 week low on the stock is just north of seven bucks. I mean, it's it's amazing. What's more amazing is that the stock had moved so much into this number. What does

that tell you about where we are right now in the way that some of these types of stocks have been bid up? And then you come and get hit over the head with a hammer when you, you know, it's like a sledgehammer crushes you when you think, man, I thought this was legit. And then now the stock's getting destroyed. It's a great point. And I would say that context is the key here, right? Because you see what the stocks are doing year to date and you're like, oh, those numbers are great. So Snap, for instance, up 30 percent year to date, but down 65 percent over the last year. Right. I mean, that's tough to do. It's tough to be up 30 percent and down 65 percent over the

past year. And you have similar trends with Meta and Alphabet where you're seeing like, you know, down over like, for instance, Meta down 50% on the year or thereabouts, but up like 20% year to date. So I think that the gains that they're making are really on a low base. And yeah, they're at risk right now. Like, for instance, Snaps gains are at risk. But you're talking about the difference between like 11 and $10, whereas before you were talking about much higher numbers. Should I be worried about meta? You know, actually, the one that the fact that the snap did guide up a little or did show a little bit better results on direct response. I don't want to read too much into it. But to me, you know, I was going to say if there's a if there's a miss here, I wouldn't be too worried about Meta. If there's a positive here, I'll say, OK, there could be a good sign for Meta because ultimately I think Meta has a better audience.

It's not just young people and has better direct response tooling. So the fact that there was a little bit of a tick up for Snap, you know, for Meta, that could be a good thing. But for me, when I think about Meta, I'm really expecting a better Q1. So I would be shocked if Meta guided the way that Snap did today. But again, the fourth quarter was kind of rough all around when it came to the ad marketplace. And, you know, I don't think necessarily Meta is going to do better than this. But for people that say, OK, Snap missed or Snap's doing poorly, Meta's going to do poorly. It's a bit of a stretch for me.

All right. We'll find out in 24 hours right here in Overtime. Alex, thank you. Alex Kantrowicz, Big Technology, a CNBC contributor. Coming up, trading the China reopening. One halftime committee member buying more of one key stock. Betting that China is going to boost its bottom line. We'll debate that move in today's Halftime Overtime next. All right.

In today's halftime overtime, getting constructive. Caterpillar, biggest drag on the Dow today after earnings this morning. But Hightower Stephanie Link just bought more. Listen. Looked at the quarter and I studied it and it was much better than the headline. I think China is in the process of reopening and I think that's going to be your tailwind second half of this year into next year. So I think U.S. will stay strong. I think their digital effort will stay strong in all of the various different divisions around the world. And so you have margin upside from that, from pricing power that's going to offset inflation. All right. That's Stephanie Link. Well, Joe T. owns Caterpillar.

Competitor Deere back with us is Joe Terranova. What are you thinking about what Steph did with Caterpillar as it relates to how you have Deere? September 27th was a very big day for Stephanie and for investors in Caterpillar. That was the day that the value of the U.S. dollar peaked. Subsequent to that, that was the low for Caterpillar. It's really been the macro that's been the catalyst for Caterpillar. It's really been the macro that's been the catalyst for Caterpillar. Now, manufacturing is in a recession right now. Is Caterpillar going to be able to endure that environment? I think they will.

They have resiliency. But I think Deere is a better play. Why? I think Deere has a secular thesis about it, which is the move for farm equipment towards autonomous. And it's real. It's something that when you're looking at the age of farm equipment, it is particularly old. It needs to be refurbished. And the way it's going to be refurbished is through autonomous tractors. Those are tractors

that are going to be far more efficient for farmers. And I think that's a cycle that's not cyclical in its nature, but secular. What is that going to mean for farmer Jim? He's no longer going to have to drive the tractor? He's going to hit the button and it's just going to go? I can't see Jimmy doing that. I see Jimmy still on the tractor. What about industrials in general? Because there's a lot of hype around that space. Is that legit? I think a lot of the hype resides itself in the fact that it's value oriented, right? Strong balance sheets. And it's got the exposure to multinational businesses. And as long as you see the U.S. dollar behave in a good capacity, right, continue this downslide, I think industrials can do OK, not great. OK, leave us with a last thought before I let you

run for the day on what lies ahead now tomorrow. you've had a chance to see the results from Snap and AMD. We've got a Fed decision tomorrow. The news conference from Powell, by the way, we have Jeffrey Gundlach reacting first to that once again here in overtime. I think, you know, look, the conversation in 2022, because it was such a just universal decline in stocks and bonds, was should we invest? I think it's now how do you invest? And I think Snap's earnings are not validating the move we're seeing early in the year in the non-profitable businesses. The earnings resiliency from AMD, that's validating that you want to invest in quality businesses with strong balance sheets. Thanks for sticking around.

Thank you. We'll see you tomorrow at halftime, by the way. You're going to get into even more detail about the rebalance. Yes. Because there are other stocks that you need to talk about. Looking forward to it. We are as well. All right, coming up, we're tracking some big stock moves in overtime tonight.

Christina Partsenevelos is back with that. Christina. Well, shares have matched not finding love after a disappointing quarter. I had to, guys. And we've got more chip news, this time from Western Digital. More just after this break. Another check on shares of Snap and AMD. There you see Snap. Wow, that's the big story.

Down 14% on its earnings and certainly its revenue guidance. There's AMD up 2.75%. We're tracking some other big movers in the overtime. on its earnings and certainly its revenue guidance. There's AMD up two and three quarters percent. We're tracking some other big movers in the overtime. And of course, Christina Parts and Nevelos is doing that once again for us this evening. Christina. Let's start with Match Group right now. The parent company of dating apps like Tinder and Hinge. The stock under some serious pressure right now. Maybe investors are ghosting it after missing analyst estimates for both profit and revenue. Revenue was, in fact, down two percent year over year. But there was a bright spot. Hinge weren't on the street. It's the favorite out of a lot of people right now. Revenue for the app was up 44% year over year, and the company outlined details for Hinge's new

premium tier. Another major decliner right now is chip name Western Digital. That's despite revenue's topping estimates. The company posted a 42 cent adjusted loss. Guidance also came in a little bit light of what street the street was expecting. And that's why shares are down over six percent right now. The CEO saying the company is continuing to reset its business due to the post pandemic economic environment. So, again, Western Digital shares down over six percent. Lastly, shares of Striker on the move right now up about, let's see, three and a half, over three and a half percent. This is a medical equipment tech firm and the posted revenue and earnings beat along with a higher than expected full year revenue guidance. The company attributes the success to improve supply chains and execution. Scott. All right, Christina, thank you. Still ahead, Santoli's last word, the big setup into

tomorrow's Fed decision. And do not miss Kathy Wood. ARK's Kathy Wood on Squawk this morning. She's on pace, I think, for one of her best months ever. She's up 28 percent is ARK. Overtime's right back. All right. To the results of our Twitter question, we asked, what is going to be the best performing social stock over the next 12 months? The majority of you saying meta. What's interesting is that 13 percent say snap, even after tonight and that stock drop. Santoli's next. All right. Mike Santoli here with his last word. All right. It's all on tomorrow.

Yes. You know, it's such a habit the market has of getting up to this point of maximizing disagreement at the moment. You're getting the catalyst. Forty seventy was the high on Friday. We kind of got ahead of it on the S&P. Also still below the early December high, which is fascinating. Everything that's happened this year so far in the market has been within December's range. So you see homebuilder stocks hitting 12-month highs. All of it is suggesting not so much, I don't think that they're kind of calling out the Fed, but certainly questioning whether there is still as much urgency among Fed officials to promise more pain or to believe that to do the job on inflation, you have to guarantee much more unemployment. I think all those things

are subject to a lot of disagreement. I think maybe we'll settle some of the debates. What about the activity in the market leading into this meeting that, you know, you've spoken about it and we've spoken about it every day, the kinds of stocks that are doing well right now, this perceived froth is back narrative. Yeah. Does that impact what happens? I don't think it's at a point where the where the Fed has to take specific notice of it, because it is all it is definitely an echo effect. It's not actually, you know, kind of using up all the oxygen in the market the way it was, let's say, two years ago in January of 2021. I did see today that this month assets under management have

exploded in the ultra short QQQ ETF. In other words, yes, you have a lot of the junkie beaten down stuff that's gotten new life this year, but it's all kind of an aftershock. To me, it's not where the real game is. The real game is, you know, GM up 8% because all of a sudden the consumers are buying cars. That's not dead. And yet the stock is still below where it was in December. So you have all this give and take in there of we've gotten a reprieve. We haven't gotten the pardon. You've made the point, I think I've heard you say as well, that, you know, no matter when the next bull market cycle started or the next big burst, those were the stocks that were going to lead anyway or at least do really well. That's 100 percent right.

So you have a different frame for whether you assume it's a bear market rally, in which case, oh, this is a warning sign. People are getting overexcited again, and that's not good. Or you look at some of the sentiment indicators and some of the hedge fund equity exposure numbers that are saying, OK, we're reawakening the animal spirits. But there's no chance at which the actual launch of a new bull market is not going to be accompanied by people getting more bullish as it goes up and by people grabbing for some of the fastest moving, most aggressive stocks. What's the real risk tomorrow? Is that Powell is a little more hawkish than the markets are. Will it matter? I mean, don't we expect he's going to be hawkish, isn't he? I think he's going to be net hawkish, meaning he's going to say the job isn't done. Yes, the job isn't done. We're still going to be data dependent. Yes. But if he simply leans on the December consensus outlook and says this

is where we think rates have to get to, we're on the record with that, as opposed to kind of upping the ante a little bit on that and saying, look, you people seem to think this is possible that we get through this with unemployment staying below 4 percent. We don't think that's possible. If they really stick to that kind of tradeoff math between jobs and the economy and where inflation has to settle, then maybe you have a little bit of a challenge. Plus, any excuse or none at all could be perfectly sufficient to create a little bit of a pullback in a market that just jumps 6%. And I think I remember like 17 of 19 Fed members last time were at 5% or above. Now we'll see if it's 19 or 19 or where we are. Well, we don't get the outlook this time. So that's why he can just hide behind December. OK. All right. We'll see that. All right. Fast Money is now gunlocked, by the way, joins us tomorrow.