Closing Bell - Closing Bell Overtime: Duolingo CEO On Surprise Effect Of TikTok Ban; Trump Day 1 Trade 01/17/25

Episode Date: January 17, 2025

Jose Rasco of HSBC and Jim Paulsen of Paulsen Perspectives break down market dynamics. Jared Holz of Mizuho delves into the intersection of GLP-1 drugs and Medicare, while Mike Santoli provides actionable takeaways with his dashboards.David Joyce from Seaport Research Partners analyzes Netflix’s latest moves, and Pramol Dhawan of PIMCO shares his expertise on emerging markets and India’s growth story. Luis Von Ahn, CEO of Duolingo, on the uptick in users learning Mandarin as TikTok ban looms, and Stifel’s Brian Gardner wraps up the hour with a look at Trump trade policies. 

Well, that bell marks the end of regulation for the week. The Memorial Foundation ringing the closing bell at the New York Stock Exchange. Adoro Clean Technologies doing the honors at the NASDAQ. And it's a strong end to a strong week as the major averages go out with gains across the board. Healthcare was the lone sector to finish the day in the red. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort. Morgan Brennan is off today.

Well, coming up on today's show, Netflix kicks off FANG earnings on overtime next week. Remember FANG? Coming off a very strong year and some on the street think there's a lot more upside for Netflix ahead. We'll talk to an analyst who just upgraded the stock ahead of that print. Plus, weight loss drug makers slimming down today on news. Ozempic and WeGubby have been selected for Medicare price negotiations. We'll discuss the impact on shareholders. And a surprising winner of the TikTok ban. Duolingo says it's seen a surge in users signing up to learn Mandarin as some TikTok customers turn to Chinese-based Red Note. We're going to hear from Duolingo's CEO about the spillover effect.

First, though, major averages closing a strong week of gains. The Dow up 3.7 percent. The S&P 500 up 2.9 percent. Almost closed above 6,000 for the week for the first time this year, but lost it in the last five minutes. The Russell 2000 up 4 percent week to date, while the Nasdaq finished up 2.5 percent. Let's bring in HSBC Global Private Banking and Wealth Management CIO, Jose Rasco. Ed Paulson, Perspectives, author Jim Paulson.

Guys, happy Friday. Jose, we had another strong day after those benign inflation readings. What do you think the chances are that the market, the S&P, has found a floor around 5,800 post-election. What do we need to see in earnings from here? Well, it's not just earnings for the market, right? It's inflation. The Fed has already told you growth is going to be stronger and inflation is going to be a tad higher than they thought. But what's important here is the inflation readings in January and February, which are going to determine if the Fed gets to ease in March. Right. We still have the Fed easing three times at HSBC. And I think the bottom line is earnings look really

good. We just had an upward revision to the fourth quarter numbers this this week. And if you look at the numbers for this year and next year, we've already had a pre-announcement on next year. Looks like double the gains in both years. So we think the fundamentals look pretty solid. Remember, the market is looking for the Fed to continue to ease. Remember the 90s, John. Fed funds averaged 5.3 percent. Economy looked good. Productivity took off. And the market certainly did well. Guys, hold tight. Want to get to Seema Modi with some breaking news on Moderna. Seema? John, we are watching shares of Moderna here in overtime. The U.S.

government has awarded the company nearly $600 million in additional funding to advance the late-stage development of its bird flu vaccine. As we know, the country has been refocused on vaccine development following that reported bird flu death that was disclosed earlier this month. Again, Moderna's late stage trial and moving forward here with a development of a bird flu vaccine. We are watching shares here jump by nearly 2.2 percent, John, in overtime. All right. Seema Modi, thank you. Want to get back to you guys in the panel. Jim, you think a slowdown in growth here in the U.S. economy is a real threat. How does the strong dollar play into that? I think a lot, John. You know, this is the first time maybe in this bull market where kind of the number of people worried about recession has really kind of gone away.

And people feel good. It's finally easing and reports look good. But I think to your point, we've had a lot of tightening here since September, since the Fed has eased. Bond yields, of course, have gone up almost a percent. Money growth is still only a little over 3%, which is too weak to support 5% nominal GDP growth. And generally, real GDP growth falls when that is the situation. And then lastly, to your point, the dollar has been amazingly strong, John. It's up close to levels of all time record highs of 1984. And we know what that did. That created a decade or more

of disinflation and falling yields and weaker growth. We're essentially pricing United States out of the world marketplace. I think this is going to come home to roost with weaker growth. We're essentially pricing United States out of the world marketplace. I think this is going to come home to roost with weaker growth, and maybe that could set off a recession scare. I don't think we're going to get one, but I think it could be enough to rumble the stock market a little bit during the course of the year. Interesting. Jose, what does it mean abroad, though? HSBC, you seem to think the rise of India and the Southeast Asian economies is a major theme for the year. We're going to talk about that a bit more on the show. But India's markets haven't been performing so well to start the year. So how does that play out?

Yeah, I mean, look, it's always been a market that has not been cheap. There's no question about it. And you're paying for quality in india it's a diversified young economy with a good legal system and it's become much more productive in recent years so we like india we like japan and asia the growth rates just look uh still very solid despite what we've seen some trouble in china and we think that can be straightened out in time but also the asean countries are providing some real upside but but at the end of the day, to Jim's point about the dollar and potential risk here, remember, one of the big opportunities we have is that we continue to see an inflow of capital into the U.S. markets. And we think that's a positive driver, a secular driver for a lot of the themes like the reinvestorization of the U.S. and the tech cycle

that we think will help keep the economy out of recession, just like he does. So, yeah. Okay. So, Jim, despite concerns about growth, you say don't raise cash, but do some reallocation instead. How should people do that? I don't expect a bear market or nor a recession to Jose's point this year, John. I think we're going to have another positive year. But year three of bull markets, which we're in, typically don't do as well and have more corrections. And I think that's what we're headed for. The problem is trying to predict corrections is pretty perilous. And so I wouldn't bet a lot of cash. What I would do is sell a little bit of your winners, maybe not all of it, but some of that, and move to some of these defensive stocks,

defensive sectors or high dividend yields or high quality. Some of those areas have really been beat up on a relative basis. And if we do get a sniff of a recession scare, they're going to do pretty well. And then you can sell them and go back to the more aggressive plays, again, sometimes later in the year. All right. Great perspective, Jim, Jose. Thanks to you both. Well, as we just mentioned moments ago, Reuters reporting that the U.S. has awarded Moderna $590 million for bird flu vaccine development. Moderna shares are jumping now up about 7 percent in overtime on the news. Joining us now is Mizzou health care sector strategist Jared Holtz. Jared, help us out here. If you pull out and look at the one-year chart of Moderna, it is ugly, but this pop is interesting. What does this mean?

Is it investable or just tradable? What's up, John? Yeah, I think it's more tradable. Obviously, the company has had a very difficult time keeping the momentum up subsequent to the peak pandemic. And we'll look for anything to kind of shine a light on in a positive way. I think bird flu, we don't know the longevity or the severity or exactly what's going to happen with respect to whether is this a real market or not. But they'll take anything they can get at this point. I mean, this is a $500 stock down to $35, $36.

So a positive headline, but I just think a trade. Okay. Well, we know there's a market for GLP-1s with humans, not birds. But what's the impact of this negotiation that's going to happen with a couple of these drugs? Could it potentially, you know, sap the pricing power across the whole market? Yeah, it certainly will. I think the interesting thing to consider here, we're talking about Medicare and Medicaid pricing. When you look at the GLP market as it stands now,

it's not heavily Medicare or Medicaid. These are younger, healthier patients for the most part that are taking these medicines. So I'm not all that concerned. Obviously, we're just getting going here. And so to already have these drugs under the surveillance of the government and under pricing regulation is just an unfortunate piece of this industry. That's why these pharma stocks in general traded such low multiples. But the more I've thought about it throughout the day, I think there is a silver lining here with respect to the pricing. And that's Novo, Nordisk and Lilly are so far ahead that all of the other competitors are now going to come into

the market with pricing pressure. And that's really not what you want. So maybe there's a chance that this kind of separates Novo and Lilly from the crowd and it disincentivizes other companies from wanting to kind of come in here and challenge them for the market. Can Novo and Lilly maintain their multiples here, though? That's a difficult question. I think we're kind of seeing them grow into their multiples. Last year and the year before, obviously, they were trading at massive premiums to anything in their peer group, you know, 30, 40, 50 times when the peer group average was 10 to 15, in some

cases even lower. So I think this is kind of like the growing pains era for both stocks or both companies. If you look at the long-term prognosis, though, even if pricing comes down, we know the population is massive. I just think we got to a point where the street, especially the analysts covering these stocks, became so liberal with their assumptions, and there was just no way for these stocks to go higher. All right. Well, I guess if you're in that market, dealing with growing pains is better than being stuck with the Golden Girls.

Jared Holtz, thank you. You bet. Well, let's turn to Senior Markets Commentator Mike Santoli for a look at the market's big gains this week. Mike? Yeah, John, and how it breaks down, actually. It was pretty broad, inclusive rally in the last week. Actually, the last few weeks. Here's the equal-weighted S&P 500 relative to the market cap weighted benchmark. This is a

three month chart. You see that they both rallied after the election pretty much in tandem. And then when yields started to get to a certain less comfortable threshold, you saw the average stock start to really buckle and underperform the S&P 500. that's now rectified itself a little bit now that maybe the bond market got a little bit too hawkish in the short term. Yields have backed away. The economic numbers have been OK. In fact, equal weight up about 2.8 percent year to date versus about 2 percent for the market cap weighted. Now, banks have been clear leadership recently, but I think there's some value in looking at where the bank index has come from. It's still just challenging the highs from the latter part of last year, which themselves are pretty close to where we were before the Silicon Valley bank crisis and

actually late 2021 before the Fed started raising rates. So you can see that this could really be seen as the upper end of a very long term range, in fact, one that goes back quite a long ways. So it seems like it's positive action from the banks, but also it's a little bit of a catch-up trade. Take a look at a one-year basis. Banks are really the best, recently the best cyclical group in this market, especially relative to homebuilders, which have obviously been on the losing end from this yield trade. Although, boy, look at them both had these very aggressive buy-the-dip responses this week. So we'll see if there's some evolution and maybe some convergence here in these numbers, if the numbers break the right way, John. Oh, three charts and one dashboard. We don't get that every day.

I want to go all the way back to chart number one. This move that we've seen in the equal weight relative to the S&P in general looks like the strongest since Election Day. No. And in that move, at least as it played out, it actually caught up. So what should we watch for from here as we trade in the first days of the second Trump administration? I mean, you could look at various different proxies. I do think that the equal weight is fundamentally outperforming when the economy is seen like it's on firmer footing and we're going to have room for the Fed to cut

rates and yields can stay tame. You have to have all those things kind of go right. I think where things get complicated, actually, is in this general consensus out there that we're going to have like a 10 or 12 percent up year in the S&P, but somehow it's going to be the 493 stocks that only represent two-thirds of the index that are going to be powering it higher. The math becomes pretty difficult if the MAG7 stays still for the rest of the market to get you a good gain on the index level. So, you know, I guess not everybody is expected to be able to forecast every nuance, but just keep that in mind when you wish for a broadening out of the market, because if the market has broadened out recently, it's actually become a little bit

more jumpy and less stable. OK, Mike, we'll see you again in just a little bit. Well, after the break, the bull case for Netflix. We will talk to the analyst who just upgraded the stock days before Netflix's fourth quarter earnings report. That's coming after the bell on Tuesday. And later, Pimco's head of emerging markets lays out the three parts of the world he's most excited about right now and how the strong dollar is impacting his global outlook. That's when Overtime comes back in two. Welcome back to Overtime. Netflix is set to report fourth quarter earnings on Tuesday right here after a blockbuster quarter that featured the second season of Squid Game and the NFL's Netflix debut on Christmas.

And joining me now is senior analyst at Seaport Research Partners, David Joyce, upgraded the stock this week to a buy. David, welcome. You did that in part because you expect the member ads to be much stronger. Yeah, so thanks for having me, John. I wanted to recognize that the stock had pulled back earlier in January in large part on FX fears, but I really think that the fundamentals really have a lot going for them uh as you mentioned you know squid games uh you had more than 68 million views in the new in the first episode of the new season uh uh nfl had uh nfl games like christmas had more than 24 million uh concurrent streams the paul tyson fight had uh you had 65 million streams. The WWE Monday Night Raw

did more than twice the ratings that they did last year on the USA Network. So they've got a lot of good content going for them. They've got a lot of great engagement going for them with the fans and the viewership. And with the pullback, yeah, I think that this gave us another opportunity to get more constructive again. Well, at the same time, I think at your price target, Netflix would be worth two times Disney. Is that justified? Well, there is a lot still going for it.

They've just really embarked on the advertising part of their business model. I think they'll do about $1.7 billion in advertising in 2024, but they can more than double that to over $4 billion next year. So there's a good growth trajectory there. attracting a lot of great new content projects, film and episodic content. They had the most nominations throughout Hollywood for the recent Golden Globes. So they have a lot of talent that wants to work with them and that's going to continue to bring in viewers and retain viewers, which makes it highly economic for them. Plus their margins on the studio are better than the other peers. So I think when you've got these positive trajectories, I think that all still warrants a better multiple than some of the other peers. That sounds good. But if I were going to argue the other side, as I am prone to do, I would say just months ago people were saying ads were a big justification here, but those don't

seem to be panning out as quickly as hoped. And then international growth was supposed to be the story, but the dollar is strong. At what point might those things start to matter now if they don't, you know, show up differently than they appear to right now? Well, I did note that some of these FX fears because of the the dollar uh did pressure the shares earlier in january uh and and the idea there would be if uh management's guidance of 11 to 13 percent revenue growth this year might uh might be brought down a little bit when they report on tuesday i think it'll still be too early in the year for them to you know to reduce guidance um but uh i think that you know the fx impacts are really only temporary i think that you know the fundamental aspect is

that uh they've got a global uh platform that nobody else uh matches at this point uh in terms of being able to have you know a single ad buy uh you know to reach you reach people really concurrently around the globe. And that's an area where the other peers like Disney are still lagging. They're still working on it. They're working on cracking down on password sharing. They're working on layering in the ad tiers. But I think that that's where Netflix has a bit of the advantage right now. We'll watch for all that in the report.

David Joyce, thank you. Thank you. We've got a news alert on Starbucks. Seema Modi back with that. Seema. Hey, John, we have Starbucks here filing an 8K in which CEO Brian Cornell, highlighting some of the changes and things he hopes to see in the future for this company. He emphasizes the need for a smaller support team, saying our size and structure can slow us down. And with too many layers, managers of small teams and roles focus primarily on coordinating work. He also says that

they've set a goal of a four-minute wait time in cafes and have provided additional coverage hours in over 3,000 stores. We know wait times have been a sore, have been a point of concern for customers. We have other changes here that he does discuss, but we are watching shares basically flat here in overtime as investors digest the latest from this 8K of Starbucks. Interesting updates from CEO Brian Nicol. Thank you, Seema. Well, up next, India had been a hot trade for much of last year,

but started cooling off in a big way in the fall. We're going to discuss that with PIMCO's Emerging Markets Portfolio Manager and why he says to buy the dips. And the next time the U.S. market opens, President-elect Trump will be in office. He'll be president. We'll talk about what could happen in the first week that could impact your portfolio when Overtime comes right back. Welcome back to Overtime.

India stocks cooling off in the past few months with the iShares India ETF down around 14% from its 52-week high. That would qualify as a correction, I guess. Seeing pressure as the dollar index strengthens. But our next guest says the outlook for India remains strong. Joining us now is Pramil Dhawan. He is PIMCO's head of Emerging Markets Portfolio Management team. Pramil, good to see you. So you say by the dips.

This is already quite a dip. Are you implying that we should expect more? by the dips, this is already quite a dip. Are you implying that we should expect more? No, I think it's moved quite a lot. And I think the by the dip is because the fundamentals still remain very strong in India. We're looking at growth, real growth in India at 6, 6.5% this year into next year. Inflation is coming down quite nicely around 4, 4.5%. So we think that's going to allow the central bank to be able to cut nominal interest rates by at least 50 basis points, more of the Federal Reserve cuts rates again this year. And that's going to really

help to stimulate the economy. And on top of that, we're expecting more liquidity injections in India, helping to support homebuyers and the consumer. So really, it's the fundamental backdrop that we see is going to be able to drive multiples in India. So that's why we like the story there. How should we expect to see India affected versus some other international markets, depending on how the Trump administration's tariff policy plays out? Yeah, so the tariff policy is really front and center of everybody's minds and it's strengthening the dollar, weakening emerging market currencies accordingly. I think the tariff policy is only one side of the ledger.

On the other side is the ability to be able to de-escalate some of these geopolitical risks that are going on in the Middle East and with Russia and Ukraine. And I think that's really, really important to be able to release capital into emerging markets and reduce the overall levels of risk premium. So it's really a double edged sword. On the one hand, the tariffs are a net negative. But on the other hand, the reduction of geopolitical risk premium should allow capital to flow and find those good opportunities in emerging markets, which we think that there are quite a number of them that are out there at the moment. OK, now I believe you like Turkey, Nigerian currency and Ecuador in 2025.

Given the kinds of shocks and instability that's possible, why those? Yeah, I think they're all idiosyncratic stories. So Nigeria, I think, has done a wonderful job in terms of stabilizing its currency. They've hiked nominal interest rates to north of 30%. Right now, they've stemmed the backlog of dollars leaving the country. In fact, net dollars are now coming into the country, again, being able to capitalize on that very high level of nominal interest rates. And the external balances have really corrected. They're sitting on a record 10-year record surplus in terms of their external balances.

So they have a lot of ammunition to be able to support the currency. And those are really the ingredients that you want to see from an international investor's perspective to be able to capitalize on the carry trade. That same sort of playbook played out really well last year in Turkey, yielding around 35% returns for currencies. A little bit less for equities, but we still think it is a currency trade this year. We're expecting less or lower returns in Turkey, but still the same playbook persists.

And in Ecuador, Ecuador is really an extension of just liking the Americas. We think under this new administration, we like the Americas a lot. At the behest of Asia, we think Asia is quite tight and overvalued. And we think some of that capital flow is going to come into the Americas. Ecuador and Mexico stand to be net beneficiaries of that. Ecuador has a forthcoming election in

February. And assuming that that goes to market expectations, we think that the market will validate the prudent policy mix there and push bond yields much higher. All right. Pramod Dhawan from PIMCO, you took us around the world. Thank you. Thank you. Time now for a CNBC News update with Bertha Coombs. Bertha. John, the United Nations says it has a 60-day plan to rebuild Gaza's decimated health care system. In the plan, the agency's representative for Gaza said that it will integrate prefabricated health care facilities into the existing health system and that aid could actually start arriving into Gaza as early as Sunday. The rebuild is expected to cost at least $10 billion. The Federal Trade Commission sued PepsiCo today in a last-minute lawsuit for the administration

accusing the beverage giant of price discrimination by alleging it gave Walmart an unfair pricing advantage, thereby forcing people to pay higher prices elsewhere. PepsiCo denied the allegations and said the lawsuit is wrong on the facts and the law. Walmart has yet to respond. And China's population declined for the third straight year. The country's National Bureau of Statistics reported 9.54 million babies were born last year. While it was a slight increase from 2023, the number of births lagged behind China's nearly 11 million deaths in 2024.

John. Bertha, thank you. Up next, the surprise winner of the TikTok ban, Duolingo, seeing a jump in interest to learn Mandarin as TikTok users migrate to Chinese alternatives like Red Note. Duolingo's CEO joins us next to discuss. And as we head to break, check out the move for Intel, turning in its best day since August after a pair of reports discussed potential M&A chatter around the name. Be right back.

Welcome back to Overtime. Shares of language learning and AI education app Duolingo popping more than 10%, I believe, this week on news that signups to learn Mandarin tripled as TikTok users tried migrating to a Chinese version of that app ahead of a possible shutdown. I spoke with Duolingo CEO Luis Von Ahn about that and how AI is showing more signs of boosting the company's business with English learners. He said the spike isn't unusual and tends to coincide with popular social moments. We see it with languages that are kind of smaller in terms of users when there's a big cultural moment. So, for example, Squid Game season two just came out about a month ago. We saw a huge increase in people learning Korean.

Whenever, you know, kind of specific shows in Swedish or Norwegian come out that are pretty popular, we see an increase in those. So that kind of happens. It's pretty interesting because we have a good pulse on what's going on in the world if it has to do with other languages. It turns out Chinese is actually not very big, contrary to what many people, particularly well-educated folks like you and me, we have a lot of people who are friends whose kids are learning Chinese because it's the important thing.

It seems to be everywhere. It's actually not true when you look at, you know, kind of globally. It's only about 1% of our users are learning Chinese. Vaughn An also told me more about VideoCall, a feature that lets subscribers to the highest tier plan practice real-time conversation with an animated character named Lily. You can see her there. Duolingo just opened VideoCall to Android users this week,

and Vaughn Ahn sees signs that it could unlock a lucrative opportunity. This feature is getting a lot of people to buy Duolingo Max. And so that's been really good for our finances, of course. And the other really interesting thing that we're seeing is this is the first feature that we've ever seen where people who are learning English use it twice as much as anybody else. And that matches our intuition because what happens is for most languages, you know, people who are learning French

or people who are learning Spanish, for most languages, the people who come into Duolingo, first of all, are mainly doing it as a hobby to learn French or Spanish, et cetera. And secondly, they're usually beginners. Whereas if you're learning English, you're not doing it as a hobby.

Usually you're doing it because you actually want to learn English. And most people are not beginners. They're kind of more intermediate. So we're really seeing this play out here that people are just a lot more interested in practicing conversation when they're learning English. The idea is even though Duolingo subscriptions are more affordable in developing countries, the volume of free users there is so high that if Duolingo can convert a fraction of them to max, it could be very good for business. In countries like Brazil or India, you know, some of these countries that are the real English learning countries, which are usually correlated with poorer countries,

people don't pay very much to turn off ads. They just don't pay for convenience. So historically, most of our money has come from countries like the US or Western Europe. But we've also known that the main real interest to learn a language is in learning English. So we've basically just always seen as a major opportunity to monetize English learners, but we haven't historically done that great of a job with it. However, with video call, we really are starting to see a lot of uptake from countries like Brazil or Vietnam or any of these countries that are majorly English-learning countries. We're seeing a major uptake in how much people are subscribing.

It's the early days still. I mean, we've only been at this for a few months, but we're hoping that over a long period of time, this is exactly what's going to help us monetize English learners. And we're very excited about that. Since OpenAI's chat GPT burst onto the scene a bit ago, Duolingo's stock has done a lot better than some other education names like Coursera and Chegg. We'll keep watching that. And cue the QR code because that TikTok connection leads in perfectly to the latest installment of my On the Other Hand newsletter. This week's debate, should the U.S. government shut down TikTok this weekend?

You can scan that QR code on your screen now to join the conversation. Well, we have a news alert on the U.S. debt limit. Megan Casella has the details. Megan. John, Treasury Secretary Janet Yellen telling Congress this afternoon, just a few minutes ago, that the U.S. Treasury is officially hitting its debt limit and will have to start using extraordinary measures on January 21st, on Tuesday, the very first day of the Trump administration, or the first full day. They're still using those extraordinary

measures to keep paying the bills. Now, she says that those are subject to considerable uncertainty, that Treasury is unable to forecast too far into the future just how long it will be able to continue using those measures. I've spoken to experts who say, especially since we're running through tax season, it's hard to forecast exactly. Experts do expect that they can keep paying those bills at least through the summer, likely early June, potentially several months after that, John. But for now, we know that they will have to start using extraordinary measures starting next Tuesday, January 21st. Back over to you. All right. A new president in Congress will have to get on that. Thank you. Up next, Mike Santoli looks at what's driving a jump in expected earnings revisions for this year and

what it could mean for the market. And check out shares of energy technology giant SLB, one of the big winners in the S&P 500 today, up 6%. The company formerly known as Schlumberger beating earnings estimates thanks to a 10% sales jump in its digital and integration unit fueled by AI growth. SLB also announcing a $2.3 billion stock buyback. We'll be right back. Welcome back to Overtime. Banks kicking off earnings season on a high note this week and Wall Street's getting more bullish about 2025 results overall. Mike Santoli returns with a look at what's driving that sentiment. Mike. Yeah, John, the absolute growth rates are pretty healthy. Most companies are beating as they usually do.

But there's been an interesting breakdown in terms of earnings revision. So this is as analysts update their forecast, which direction the new estimates go. It's for full year 2025 S&P 500 earnings. The historical pattern, the usual way of things, this goes back to the middle of last year, is that estimates tend to be trimmed as we get closer to the report. And then, you know, usually the companies beat. And so it's not necessarily a negative if those estimates are coming down. But what is interesting is tech's defying the trend. So S&P tech sector is still where all the upward earnings revisions seem to be taking place

in aggregate. And the rest of the S&P 500 outside of tech is basically tracking that historical pattern. This is according to the way UBS is slicing up the numbers. So for as much as I was just talking about a little while ago, for as much as everyone wants to see this broadening out of earnings growth, it might happen, but it's not happening because tech is sitting still or stopping its growth path. Not to try to rain on a parade here, Mike, but I can't help but wonder if with these revisions, folks are considering the strong dollar, the impact perhaps on guidance, and given a new administration at the same time, how CEOs and CFOs might not want to put too many chips on the table.

Yeah, I can almost guarantee that in aggregate, the foreign exchange effects of the very strong dollar are not really in these numbers. Historically, Wall Street doesn't really make a great effort at trying to handicap those things. Usually, its company guidance will get that in the coming quarters. Now, that being said, it's also not really the case that investors get too overexcited about currency related changes in earnings outlets. But bigger picture, I kind of agree with the with the suggestion that all the implications of potential trade and immigration measures are definitely not being filtered into the numbers right now. It's one of the reasons there's still some suspense about exactly how this is all going to unfold on the policy front and what that's going to mean for growth, inflation, everything else. Yeah, I hear you on currency in general, but this dollar move,

we were just talking about it earlier, is so historically big. Yes, it is. It's very sharp. It's at historic highs relative to almost all other currencies. I think that you probably see it in the stocks before you see it in the earnings forecast because the market tends to try to get ahead of this, especially, for example, if, you know, if Europe is a big destination for a company's exports. Let's hope it's priced in. All right. Yeah. Mike Santoli, thank you. Yeah. Up next, the CEO of one IT and cloud services company trying to ensure small businesses can succeed

in an AI world. And when the market opens Tuesday, we'll have a new president in office. We'll talk about the three policy moves the Trump administration could make in its early days that would most impact your money. We'll come right back. Small businesses need cloud services and software tools, too, and sometimes they need them in a package more tailored than what large enterprises get. Today, let's take time out with a CEO who's trying to serve that niche and keep him from getting left behind by AI. Patti Srinivasan is CEO of DigitalOcean, a public company that sells IT services to small businesses. His path to leadership in business came through tragic early circumstances.

Before he turned 10 years old, his mother died suddenly, and his father started his own small business to help the family adjust. When I was eight or nine, my mom had brain tumor. And from the time it was, she said, oh, I feel this headache is very persistent to not having her was like less than a month. And that was, that really changed everything in our house. My dad was working for the government at that time, and he quit because it was a single parent household, me and my sister, and it forced him to be an entrepreneur. So it was, and he was,

he was doing essential oils exports. So he used to source things like sandalwood oil or jasmine, patchouli oil and things like that, things that go into our day-to-day cosmetics. Today, as he leads Digital Ocean, Srinivasan is trying to super serve small businesses with the tools they need for success in a digital economy. He says that means understanding the areas where customers with only a few employees and limited budgets will need extra help. Part one of our cloud computing strategy is to help our big customers scale and also invite other customers that are dissatisfied with other cloud providers to come try us. So that's strategy number one. Strategy number two is

continue our journey of democratizing AI and make AI accessible to everyone, starting with our 640,000 customers, but also to any customer that doesn't have the sophistication or the budget to be able to do what a Capital One or JP Morgan might be able to do. So how do we get Gen AI to the masses? So the timeout takeaway, brace for AI logistics. Much of the public market is focused on how quickly AI capabilities will be adopted across the global economy and boost productivity, justifying the healthy stock multiples of mega cap tech and other software high flyers. Now, as I have in-depth conversations with leaders across different verticals serving different sized companies, a clear lesson has emerged that a plateau might be coming.

Even companies that want to adopt AI will need knowledgeable people or tailored systems to execute. Well, up next, the key policy trades that could impact your portfolio once President-elect Trump moves into the White House on Monday, becomes President Trump, and begins issuing executive orders. And as we head to break, CNBC's senior personal finance correspondent Sharon E Epperson, explains the earned income tax credit. If your income dipped in 2024, don't overlook this tax break, the earned income tax credit. The amount depends on income, filing status, and whether or not you have children. It's a refundable credit, so you could get a tax refund even if you don't owe taxes. Go to irs.gov to see if you qualify. For CNBC, I'm Sharon Epperson.

Welcome back to Overtime. Let's get another check here on Moderna, moving higher by about close to 4%, but off its best levels on news that the U.S. government has awarded Moderna $590 million for bird flu vaccine development. Also this hour, the Treasury Department saying it will begin using extraordinary measures to make its payments starting on January 21st, President-elect Trump's first full day in office. So how will that factor into the president's policy agenda? Joining me now is Brian Gardner, Stifel chief Washington policy analyst. Brian, welcome. So the debt limit has been this sort of leverage point and can to be down the road. You have for a long time. Might this be the moment where that goes away for good

with President Trump wanting to get things done and the Republicans in congressional control? Probably not. I think we're stuck with the debt limit for a while. Look, we knew this was coming. This is why some people in Republican circles pressed in December to raise the debt limit then so it wouldn't get in the way of the beginning of the Trump administration. And now they didn't do that and they're faced with it. And it's going to add some more complexity to an already active agenda. But in terms of the future of the debt limit, it's going to stay here. Democrats will never go along with it. And Republicans are split on it. You use the word leverage before. I don't think there is leverage. I think it's overstated. It's overestimated what leverage there is. But there

are budget hawks among Republicans who think there is leverage in budget limit fights. And so they will not I don't think they're going to support getting rid of it. I guess it's debatable whether there's leverage in a game of chicken. Oh, I don't. Yeah, I don't think there's a lot of money to have to be very effective. So border trade China, you say, are the focus points here. Which one has the highest likelihood of inspiring a market moving executive order first? Probably the tariffs. And I'll kind of link China and the tariffs on those. Look, I think the I think this could be some good news coming out of the border executive orders. They'll be early and the moves on the border subsequently, because I think they're going to be focused on illegal immigrants who are here with criminal backgrounds. And, you know, since they're already out, most of them are already out of the workforce.

A lot of them are in U.S. jails and they tend to be low skill workers. I don't think that's a problem for the labor market and the economy broadly. So I think that's kind of a sigh of relief. It's not the worst case scenario. After that, it's the tariffs. And China will, I think, will be the lead, the lead with the tariff rollouts that the Trump administration is going to do. And look, I think China is going to be the North Star on everything the administration does. And I think they're going to be aggressive vis-a-vis China. And I think there is some risk for companies with China exposure because of that. What's your expectation on the timing of a tax cut extension? So I'm probably a little bit outside of the consensus. I think it's longer than most people think. The speaker thinks he was calling for it to be done

by Easter. I think July 4th would be a tremendous accomplishment for them to do that. I'm taking the over on that. And I think it's probably after Labor Day. That sounds like it might cause market turbulence if it takes that long. I think markets think it's going to happen sooner rather than later. And I think we're going to be in for some volatility. You know, we're going to go up and down the roller coaster. They're going to drop the ball. It's resurrected back and forth. Ultimately, I think there is going to be an extension, most if not all, of the Trump tax cuts. But it's just going to be a longer ride than people anticipate right now.

How do you think this TikTok stuff fits into President Trump's China trade chess game? Yeah, so, you know, if I'm wrong on my earlier comments on China, we may get some clues about that from the TikTok situation. This may be an early signal that when an issue is near and dear to Trump's heart, when people think it affects or he thinks it affects his base, then he's going to have a lighter regulatory touch. So I guess, you know, maybe take a different take on it, John. I would look at it not through the prism of China. I would look at it through the prism of everything else that you can make an argument that some policy development is going to impact the Trump base negatively. It stands a good chance of surviving or not being enacted, I should say.

Quickly, do you think he cares about the AI chips the way Biden did? Yes, probably differently. I mean, they there's a there's a carrot and stick approach. The Biden approach was more of the carrot approach. The Trump approach will be more of the stick approach. I think they both care about it. They just come at different from it at it from different angles on how to address the issue. All right. Brian Gardner, Chief Washington Policy Analyst at Stiefel. Thank you. Happy Friday. And be sure to watch CNBC's special coverage of the inauguration that begins at 8 a.m. Eastern on Monday. Now, that said, we mentioned it before, but it was a strong week for the markets and popped right back up to those areas where the market was trading

Post election results for now that's going to do it for overtime fast money starts now