Closing Bell - Closing Bell Overtime: Fed’s Hawkish Double Down 1/4/23

Episode Date: January 4, 2023

The Fed minutes quickly took some of the air out of stocks. So, what does it all mean to your money in the months ahead? Josh Brown of Ritholtz Wealth Management gives his take. Plus, star analyst Dan Ives has cut his price target on Apple. He explains why. And, top technician Mark Newton breaks down what the charts are saying about Tesla.

Sarah, thank you very much, and welcome everybody to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started. From right here at Post 9 at the New York Stock Exchange, in just a few minutes, we'll get the technical take on Tesla from Fundstrat's Mark Newton. He'll tell us how low shares might go. He was pretty good in calling this slide, too. We'll find out what's next. Plus, star analyst Dan Ives is with us momentarily, too, on why he just cut Apple's price target.

Two big stocks making big moves lately. We begin, though, with our talk of the tape, a hawkish double down by the Fed. That is the take from today's meeting. Minutes, which quickly took some of the air out of stocks, though that was a nice flurry at the finish. More hikes are coming. That is the bottom line. And don't count on any rate cuts anytime soon either. So what does all of that mean for your money in the months ahead?

Just as stocks are trying to get something going here. Let's ask Josh Brown. He is the CEO and co-founder of Ritholtz Wealth Management, a CNBC contributor. Good to see you. Interesting finish to the session here, right? The minutes came out. They're pretty hawkish. Kashkari himself was really hawkish today.

Stocks sold off. And here they come back yet again at the finish what's it mean i think it means if you are still finding yourself surprised when the fed doubles and triples and quadruples down on staying tight and being more hawkish or etc like you you've been living in a cave, I guess. Like everyone understands that they have to thread this needle. It's actually a ridiculous job that they have. And they can't actually do the job solely with with raid hikes. They have to do it with their words. They always have. But the words become more important than ever. Think about what they have to pull off here,

Judge. They have to make the case that everything they've done thus far is appropriate and everything that they still want to do, which doesn't seem like much, but still will remain appropriate as they're doing it. Yet, they have to continue to acquiesce to the market's desire to hear them say things like, we get there's a cumulative effect to the rate hikes. It's not just the hikes themselves. We get that monetary policy operates on a lag. But they're not. Look at Joltz. Like they're they're not getting what they they need in the labor market. It's just not like it's not materializing. And they have to like really balance all of these um pushes and

pulls and it's hard to do so there's always a tendency for the market to uh anticipate when they're going to be done and they're even aware of that you look at their statement they don't want financial conditions to ease and the party to restart they don't want to repeat the 70s so it's it's a really tough situation. And stocks have to learn to live with that. It's going to be more of this. It's not going to be what we haven't seen the end of what they're doing with their words. But you just said of the Fed wanting to do more, quote, which doesn't seem like much. Isn't it the exact opposite? It seems like they want to do a lot more than some are willing to accept. If you look at

the minutes, nobody projects a rate cut for this year. As I mentioned earlier, not in the minutes, but who cares? It's Kashkari who's a known dove suggesting that you go 5-4 on the terminal rate and then keep it there for a while. They're unnerved by the strength and the tightness in the labor market. All of that portends to more hikes rather than less or finishing anytime soon, doesn't it? Yeah, but I don't think that's the thing that's bothering the market. I think it's for how long will conditions remain this tight? And, you know, unfortunately, everybody wants 2019 back. So I will stipulate 2020 was a funhouse mirror. 2021 took it up a notch. And I don't think anyone is looking for a return to that level of accommodation. But everybody wants 2019 back and they're not going to get it back. And there are structural reasons why the people that have retired in the last couple of years are not

returning to the labor force. That participation rate, it's just not budging. And the bargaining power that labor in the services economy has, it's not changing anytime soon. And so this idea that like we're going to go back to business as usual and we're going to have, you know, 2% interest rates and inflation at 1% and the Fed struggling to get inflation going. That's a fairy tale land from long ago and it's far away. And that's not what we're returning to. We're in a new paradigm. Everyone has got to accept it. A lot of people already have, but a lot of people have not. And I think the debate is going to be, we talk about the cumulative lot of people already have, but a lot of people have not. And I think the debate is going to be the we talk about the cumulative effect of rate hikes. The debate is going to be how long will it take for us to have felt the full brunt of all of these hikes? And it's going to be

a while. It happens quickly in the mortgage market, but it doesn't happen on the ground. And especially and the biggest problem is the trigger. Like, what would be the trigger for the Fed to not only pause, but start talking about the possibility of rate cuts? It's like millions of people losing their job. That's the trigger. Four and a half percent unemployment, maybe. Which is exactly where I wanted to go with you next.

This idea that the pivot is going to save the day. And I want your opinion. I want you to explain to our viewers this idea of the pivot is somehow viewed as universally bullish. Well, to your point, the only way that they would pivot is if you have millions of job losses, if the economy goes into the tank. But they're only going to pivot if, in fact, it does that. And how is that automatically bullish for the stock market if the economy has gotten so bad that they have to even think about pivoting in the span of this calendar year? So it's be careful what you wish for. Are you sure? Are you sure you're looking for rate cuts? Do you have any idea what those rate cuts would have to be accompanied by? Or do you have any idea what the trigger for those rate

cuts might be? And I think that's why you're seeing this market wide preference for stocks that do not necessarily need a Fed pivot. That's why you're seeing this market wide preference for stocks that do not necessarily need a Fed pivot. That's why you're seeing the value versus growth regime stay in force. But, you know, one of the biggest issues for stock bulls this year, and it was a big issue in the second half of last year, is that you have enduring competition for dollars. And that competition is coming from short-term treasuries. And why would that change all of a sudden? Even like the 10-year has pulled back, it's at three spots, six, nine. And the two-year is four and a half. And every dollar that an asset allocator like myself is going to put in play, that's a real hurdle. A hurdle the likes of which

we haven't seen, but for a fleeting moment in 2018 during the last weight hiking cycle. But think about this. Take a look at the percentage of S&P 500 stocks with a trailing dividend yield that's higher than the 10 year 3.7, let's call it. It's the lowest level in 11 years, only 15% of S&P 500 stocks have a dividend yield that is competitive with the 10 year. So if you want more than just dividends out of a stock and you want capital gains too, well, look at the economic environment that we're in. We know that we're going to be tight all year.

So where is the growth coming from? It's a very difficult thing to do to bring yourself to say, all of a sudden, that's going to change. I think almost the bottom line comment about the current environment came yesterday from Liz Young. When I looked to my left, sitting here on the set, where you've certainly sat before, and I said, what's the best part of the market right now, your favorite part of the market? And she said, bonds. She said the two year. It just underscores that somebody who

talks about equities almost exclusively, at least with us, halftime report, things like that. That's the best answer she could come up with right now. That speaks to exactly your point. When you ask people their preferred place to be, it used to be stocks, stocks, stocks and stocks. And now it's not. Well, I think I think a lot of that also, though, boils down to expectations and time horizon. So if you so one of the things that we're financial planners. So one of the things that we do is we're investing money in buckets. And for a typical household, there is a portion of their wealth that they're not spending anytime soon and that they need to grow much faster than 4% a year. Or they would like it to have the opportunity to grow faster than 4% a year. And they can compartmentalize the idea

that that bucket is going to be more at risk and subject to higher volatility. I don't think that's ever going to change. I don't think it should. And I don't think anybody should be investing on the basis of one year unless we're talking about one year money. But again, when we talk about a paradigm shift,

we had like a 10 year period where there was no alternative. And that's what's changed. There is an alternative. And so if somebody would have been an 80-20 investor, because even like what's the point of even the 20, that is no longer the case. You can build a portfolio now. You've got stocks at, let's call it 16 or 17 times this year's earnings, depending on recession or not. And a starting yield in the fixed stocks at, let's call it 16 or 17 times this year's earnings, depending on recession or not, and a starting yield in the fixed income portion that's around 4%. And when you think about the total return of that portfolio and what you're expecting out of each

bucket, you know, it's actually a better environment to put money to work in than we've had for a long time. It just doesn't feel that way because volatility is elevated. But our job as allocators is to take our feelings about what stocks are doing on a daily basis and put them aside and try to think bigger. So I think right now it's an easier time to invest. It feels like it's a harder time to invest. And the most important thing we need to do is not forget

that there is a world that we're going to live in that goes beyond the next six months. And we can't always be focused on, you know, what are these asset classes going to do in the next few months? If we do that, then very myopically, we might overweight to fixed income where there's a much bigger opportunity in equities looking out further. Let's expand the conversation, Josh, and bring in CNBC contributor Brenda Vangelo of Sandhill Global Advisors and John Mowry of NFJ Investments. Great to see both of you. Happy New Year. Welcome back to our program. John, I'm going to begin with you because you're arguably the most bullish person who's appeared on this program

that I can think of. And our last conversation was why you were even more bulled up than you were the prior time we had spoken. And here you go with the minutes today, which were decidedly hawkish. And I'm wondering how you can remain so positive on stocks in the face of all that lies ahead. Explain. Well, Scott, great to see you again. A couple of things that I would say. If you go back historically, there have only been three times we've seen the S&P down by this magnitude. And the subsequent years following those declines of 19 percent or more, the average return was 27 percent in the market. So historically, looking back, those were times to be bullish on equities.

If you think about near term, I think it's talk about seasonality a little bit. You have one of the well, step back before I go to seasonality with the January effect. If you look at price momentum, one of the most prevailing factors in the market, you see the widest spreads between good momentum stocks and poor momentum stocks going back historically when you look at last year. And when you dovetail that with a January effect, I think you could see a significant pop in equities. And I think that could set off a near-term catalyst for stocks. Personally, Scott, even though I don't know if the Fed's going to pivot or not or when they're going to pivot,

I think it's becoming less relevant because the second derivative is moving in our favor. They're not going to increase by as much. You're seeing rates peak to rollover. The 10-year's already rollover 7%, 8% this year. And you're not going to have a Fed that's going to be able to be as aggressive. Even though they want to keep the hawkish language, it's going to be harder for them to continue to raise rates. And you are seeing inflation rollover. So I think all those things are falling into place. And Scott, the dollar's already rolled over. Since Halloween, the dollar's rolled over 8%, 9%. So there's a lot of things that are lining up. I would argue you want to be stepping into equities when inflation is peaking, when the Fed is entering the end of their rate increases.

And we are seeing valuations very distressed in cyclicals, consumer discretionary, industrials and banks. I mean, banks are tremendous values here. Nobody wants to step in because they're worried about a recession. Well, what what I almost feel like saying, well, who cares whether they the magnitude of how they hike? If they take their foot off the gas a bit, but they still put the car on cruise control and they get to a further destination than you think they'll get to. Does any of that matter what you just said? Well, I would argue that valuations are the biggest predictor of future returns. You know, if you look at the K, that is going to be the biggest predictor of future returns. And if you look at valuations, I mean, Scott, for example, the Russell 2000 value is trading at 10 times earnings. I mean, that's cheap. You go look at any historical textbook on valuations, that is

very cheap. So we are seeing very retracted valuations in the small and mid-cap space. And I would argue that that's a better barometer for value than trying to identify exactly when the Fed is going to pivot. I think that's being a little bit too myopic in that specific area. If you look at what's going on in the emerging markets, I'll pivot there for a minute. We're seeing really tremendous opportunities there. And China, for example, Scott, that's up 40% since Halloween. And the S&P is down 1%. Nobody wanted to buy emerging markets. Nobody wanted to step into China. You're seeing those become very attractive to investors that are willing to take that risk. I mean, you're not going to have a large return if you're just looking for

safety. The two-year is an interesting place to sit and collect some income and maybe you get some appreciation if those move lower, if the prices move lower. But I would argue that equities have a much longer trajectory given the discounted valuations. I mean, Scott, if you look at Zoetis, for example, a stock we like in pharmaceuticals that's tied to more discretionary spending, has emerging market sales, it is trading at the steepest discount to big pharmaceutical companies going back to the fourth quarter of 18. And while I agree with much of what Josh said, one thing that I would maybe push back a little bit on is looking just at the absolute dividend yield for value, because Merck, Johnson & Johnson, Pfizer, those have significant yield premiums relative to Zoetis, for example, but they're much pricier. They're all-time high

valuations. So you have to be very careful searching for yield in this market because the defensive areas are pricey. All right. That's a fair comment, at least how you ended there. Let me do this. Brenda, give me your view here, and then we'll have Josh get in the mix and give us his opinion on what he's just heard. Brenda? Sure. I agree that some of the defensive areas are pricey and that some valuation areas within the equity market are still very attractive, particularly those outside of large cap equity. But when we look at the risk reward for large cap equity versus bonds, we really think that bonds are looking more attractive and we've been- adjusting our portfolios accordingly you

know when we look at I think that is. Absolutely a huge game changer when you can earn 4% in a money market fund out where there is no downside- I think that's different I'm not suggesting everyone should put all their

money in a money market fund. But that dynamic has really changed the investing outlook materially in our view. And we think if you stick with still investment grade bonds, you can earn five to seven percent. And even as the Fed raises interest rates, if they continue doing so, there may be some short term pain associated with bonds. But I think in the ultimate scenario there, we think that would that would likely lead to a recession and that bonds would really resume their historical role

in portfolios as being more of a protector in an equity market correction that we think would likely unfold in that scenario. So we really think that the dynamic has changed with bonds, bond yields being as high as they are today. And that has absolutely made the asset class a lot more attractive in our view. Josh, you want to hit at anything you heard from either guest? By and large, I agree. By the way, I'm not suggesting anybody should be favoring defensive stocks. I'm saying the opposite. I'm saying you have a serious competition for investment dollars coming from short-term term risk free fixed income. And and you've got a situation where there are very few dividend payers that are paying you more

than that. And that is why you have this preference in the market to just sit in a two year and wait it out. So I don't suggest that that's the best thing to do. I'm just telling you that is what people are doing and try and talk them out of it. Best of luck for people that are looking at, again, financial plans where a portion of their money doesn't need to take additional risk and would be happy collecting those interest payments. It's tough to beat right now. And I'm not really sure why that would change all of a sudden or why that will change anytime soon. It's nice that there's been a rally in Chinese stocks. We look at that as something that happens from time to time. There hasn't been a sustainable period of outperformance from Chinese stocks that's lasted going back to 2007. If you want to buy them up 40%, be my guest. I think the potential for a rally in something like consumer discretionary, how many times does the Fed need

to tell you that they're trying to make people lose their jobs? How many times do you need to hear that the Fed wants wage growth to stop? How many times do you need to hear that they want conditions to be worse, not better? And then to look at that as an opportunity right now, near term? I just don't see it. I'm not sure. So I think this is going to be a market where if you're shorter term and you're inclined to catch trends, things that are working right now, there are plenty. The gold and gold equities complex looks great right now. The chips, believe it or not, semis look like they want to take out that 50 day moving average to the upside.

Some of those stocks have become value stocks. Intel, one of the biggest weightings there is a great example. Like there are things that you can do that make sense in the short term. I highlighted the insurance stocks on halftime yesterday. All of those stocks, property and casualty, are a bull market. But again, these are specific areas. The overall trend is a no man's land. And you've got serious competition from risk-free treasuries. I don't think that changes next week or the week after. I think it's nice that the dollar has rolled over.

That's definitely helped. I don't know if it continues or not. I'm not a currency forecaster. That's definitely helped. I don't know if it continues or not. I'm not a currency forecaster, but I would agree. Like that is a big factor in why we've seen some strength in various areas. Gold is an obvious example of that, but it's still a tough environment. The principal argument that John makes, though, is that now we've priced in a lot, right? Market's down 20 percent. S&P was last year. Time to buy stocks now. Time to buy stocks now and favor cyclicals over defensives. So that's his view. And I don't think in any way, shape or form you would you

agree with that view. I know you don't. No, nobody would. Nobody would. Nobody would disagree. It's a it's a time frame question. Where are you going to get? He's not talking short term. He's talking long term. Neither am I. He's talking long term. I agree with him.

I agree with him. I'm 45 years old. 4% doesn't do it for me. So what we're saying is that we went from an environment for over a decade where there was no reason to do anything other than stocks. That is no longer the case. And for people who think we're going back to 2019 when that was the prevailing wisdom, I just don't think it's good. I don't think he's saying this either, by the way. I just don't think that's what's going to happen. So I think I think I think what we're really saying right now is that you can find things to do that are going to happen. So I think I think I think what we're really saying right now is that you can find things to do that are going to work in the short term. But those areas are few and far between.

And for most investors, I think they're very content to just sit where they're being paid to sit. And that looks like it could persist for a while. And I don't by the way, I don't think there's anything wrong with that. It's just the reality that we live in right now. John, give me your, give me your last word. And then I'm going to get one quick from, from Brenda. Do we go back and retest or take out the October lows? Just yes or no. I do not think we do, but I have to make one follow-up comment. I think that dividend growth is a great way to deal with the current market environment. You can get great dividend yields. You can get great dividend growth. That's an excellent way to dampen the effects of inflation because a dollar today is more valuable than a dollar tomorrow when you have inflation in the system. So I'd argue a much more upside

with dividend growth in the current market environment. And the one thing I'd say about emerging markets is they're as cheap as they were in the late 90s. I think 07 is an interesting point, but they're as cheap as they were in 98, okay, and 2001. If you stepped in in 98 or in 2001, you were still beating the S&P 500 today if you invested in the emerging markets. And they're back to that level. In fact, Scott, they're cheaper. So if you don't have EM stocks in your portfolio yet, you need to load up. Yes, but the major difference may be that you didn't have to worry about the government in China ripping the rug out from under you at any moment for whatever reason they so please.

That environment, at least, is a little bit different and more volatile, it seems today, than it might have been back then. Brenda, your last word would be what? Do we actually, I'll just ask you the same question. we take out the lows of october just yes or no i think we could if the economy does fall into recession and that's but my comment only applies to the s p 500 really where i think that valuation which is currently in line with historical averages just is not is not reflecting a recessionary scenario should that should that transpire all right guys thanks so much we're going to leave it there. Josh Brown, that's Brenda Vangelo. John Mowry, appreciate the conversation very much. We want to get to our Twitter question of the day.

Exactly the question I just asked John and Brenda. Will we retest the October lows? It's your turn to vote. You can head to at CNBC Overtime on Twitter. Please let us know what you think. We'll share the results coming up later on in the hour. We're just getting started here in overtime, though. Up next, star analyst Dan Ives making a big call on his favorite stock, Apple. He just took down his price target. We'll see where he thinks it might be headed from here. And later, the top technician Mark Newton says pump the brakes on Tesla if you're thinking of buying this pullback. Why he sees even more downside ahead, a target he has in his mind. We're live from the New York Stock Exchange, OT.

Right back. We're back in overtime. Apple rebounding today after hitting fresh 52-week lows a day ago, almost every day for the last week. Our next guest just took down his price target on the stock by $25 to $175. Joining me now, that person, Post 9, Dan Ives. He's the Wedbush analyst, of course. Your favorite stock. You always, you know, you lash out at the haters of this name repeatedly.

You just took the price target down by $25. But it's something. Why? I mean, it's really our Asia checks over the last week are showing some softening on non-iPhones when I look at AirPods, Macs, and some of the other hardware. So it was really to take down for that as well as what I view just a lower multiple in this market. But Scott, the reason it continues to be a top pick, it's just we believe iPhone demand can withstand what we see in the dark macro. And I just think a lot of negativity is in the stock right now in the streets value in the services business.

It's 700 billion for what I view as 100 billion. If we go into a recession, why would anybody run out and spend a thousand dollars plus on a new phone? If they have a reasonably new enough model, they would just wait it out. Doesn't that prolong the upgrade cycle and sort of put a thorn in your thesis? Sure, and I think it's a great point. I point out that we estimate about 240 million iPhones

have not been upgraded in four years. And I think that's what's unique about Apple and I think the Cupertino ecosystem, they have something others don't, that golden install base, which is why I think here on a sum of the parts and where this name goes, we sit here after we go through earnings and they ultimately cut numbers a bit. This is a stock I believe is starting to hit its lows. Did you consider cutting it by any more than 25? And does 175 assume no recession? Let's just start there.

So 175 assumes what I will view as a modest recession in terms of a slowdown that I already believe is factored in here in terms of the demand numbers. But but ultimately, the reason we didn't cut by more when we did our checks in Asia, it's showing not really significant cuts on iPhone 14 Pro, which that's why, you know, me and you have talked about, I think that's a rock of Gibraltar tech name that right now has the bullseye on its back. And I believe it's over. So I think we sit here a year from now and there's a stock that's much closer to 200 than 100. You see $50 more a share in this stock, let's just say, by the end of 2023. Given everything we're talking about, where the trajectory of the economy is more likely to get messy first before not, right? Where you need a substantial rebound.

There's no reason to also think that at 126, if the economy does have a bigger problem, that this stock couldn't go lower. I mean, there's technicians who think that it could. Jonathan Krinsky was on this program yesterday. He was talking like 114, maybe 100. Look, I mean, and on this name, I mean, the haters are, they're popping the champagne because they're finally- But he's not a hater. He's a technician looking at the stock. Why does everybody who could be negative have to be a hater? What about a realist? I think on Apple, it's a name that the bears continue to think

this is a name that's going to go to a market multiple or less. And where I strongly disagree is that you look at the growth of Apple here and you look at that ecosystem. And this is a company, on a sum of the parts, I believe, you could actually rationalize, could be north of 200 here. And that's why I think it's one where tech right now has the bullseye on its back. Apple is the one everyone's waiting for it to break. Scott, I think we sit here a month from now going through earnings,

and this is a stock that actually goes much higher from here, given what we believe a disconnect between fundamentals and our checks. Tesla is the other one, right? You recently cut the price target on that. You continue to say they're going to earn five bucks this year, right? That's what the expectation is. I have so I mean, I talk to money managers all the time who said they're not going to earn four bucks. They'll be lucky to earn four bucks this year. Not to mention the fact this person who I spoke with characterized Tesla right now as the single best opportunity to extract more froth in the whole market. How do you respond to that? Well, I'd say on Tesla, I bet about 70 percent of that is Musk Twitter driven in terms of that initial sell off. Now we're starting to see demand cracks,

as we've talked about. I think the reaction yesterday relative to that miss, still 40% growth in this market. I think that was overly done. And I believe they cut numbers. They still have potentially at $5 in 2023. And I just, look, I take a step back. This is still a company in its infancy of where growth could go. But it also comes back to Musk started the fire. He's the only one that could extinguish it. And that's a big part of, I think, what's happened, the overhang in the story. I want you to sit right there, OK? And I want you to keep your eye of being because I want you to listen to our next conversations

with Mark Newton. He has more with us now on the Tesla takedown. He, of course, the top technician for Funstrat. He's the global head of technical strategy there. Happy New Year. Welcome back. I mean, you just heard the fundamental you heard the fundamental case on on Tesla, as you suggest, technically, that this stock is is broken at the moment. Where do you think it's going from here? Well, it broke two months ago, Scott, out of almost a two year head and shoulders pattern. And so

that coincided exactly with when Elon Musk said he was starting to sell shares or had sold shares. It's dropped 60% in under four months. It's been a big, big drop. So I do believe the risk reward for long-term investors is getting better. But technically, it's very, very difficult just to stick one's neck out and say, here's the low based on fundamentals or anything. I think, you know, the biggest fallacy on Wall Street is that it's immediately right to buy dips on something that's down 50 percent. If 2022 has taught us anything, it's that, you know, that doesn't necessarily always work that well in bear markets. I mean, I think that when it gets down near 100, for me, by the end of the month, there will be some things that will line up to suggest the stock is a trading buy. And it could have a very sharp bounce. But I just think it's premature to think that that level is right here.

You think of these issues with, and we think of technicals versus fundamentals, it makes it especially tough when the technicals are telling you something at the same time, Mark, that momentum itself has not only broken down, but it's reversed. Can you talk about the powerful effect of that phenomenon happening at the same time? Well, as I've tried to always educate investors, you know, it's best to use technicals along with fundamentals. And when they both line up, then typically you get very, very good investments in or trades. You know, technically, this stock broke down two months ago. So for those that are fundamentally oriented, you know, it's wise to use prudent risk management to not be as, you know, quick to buy dips and to hedge longs if you do such a thing. But, you know,

I'm not a real buyer right now. I would be looking, you know, by Tesla's earnings by the end of the month, there is going to be some opportunity, I believe. And so, you know, if the stock falls about 10 percent more, then it's going to be a very good risk reward. And I think the upside could be 30 to 50 percent. But as you mentioned, the stock is clearly broken. I mean, for intermediate term investors, we almost need to get up above the area where it broke down 206 to really think that we're going to start a much larger rally, which is almost a double. So investors can't work that way. So you really have to look at buying dips. But once you see evidence of stabilization and or proper exhaustion, I mean, Tesla is just now getting oversold on weekly charts based on things like RSI that have reached levels that we saw back in 2019, 2016.

So, you know, I think we're all on board or most of us are. And what Musk is trying to do, the perception is anyway that, you know, clearly, you know, the stock has come a long way down in a very short period of time. I just view it still as being a very risky time to step in and buy just yet for those with short timeframes. If you have a three-month timeframe, if you have a 12-month or longer, then it does likely make sense if you have the proper risk tolerance. But for those that are looking two or three weeks from now, I think it's going to be lower by the end of January. Interesting. I appreciate that, Mark. Thank you.

I'm going to give you Mr. Ives. Mark, we'll talk to you soon for sure. Thank you, Scott. Happy New Year. Yep, you as well. We'll to give you Mr. Ives. Mark, we'll talk to you soon for sure. Thank you, Scott. Happy New Year. Yep, you as well. We'll talk to you soon. I know that. Take into what he said.

Consider, take into consideration what he said and give me your last word. That's one of the best technicians out there. And I think obviously technical is what's ruling the day. My view is that when we get through earnings and Musk actually starts to, but I believe, name the CEO of Twitter and you start to have less of an overhang, then this is a stock that's oversold and I think fundamentally goes higher.

But it comes down to he needs to continue to ultimately extinguish the fire that he created. Well, let's not forget, too, delivery's missed, right, by 10%. There are fundamental concerns at play, too, here. And competition increasing. It's not just a technical story that we've been witnessing. I know you would agree with that. We'll talk to you soon. Thanks for being here. All right. That's Dan Ives of Wedbush. It's time for a CNBC News update with Contessa Brewer.

Hi, Contessa. Hi there, Scott. President Joe Biden says he intends to visit the U.S.-Mexico border next week as his administration contends with a surge of migrants. Biden told reporters his team is still working out details for the trip. Already, he's scheduled to travel to a summit in Mexico next week to meet with Mexican and Canadian leaders. The mastermind behind the sprawling college admissions scam was sentenced to three and a half years in federal prison this afternoon.

William Rick Singer was the central figure in the scam, known as Operation Varsity Blues. Wealthy parents paid huge sums to cheat on standardized tests and bribe university coaches to get their children into elite universities. And Twitter will relax its three-year-old ban on political advertising. It's another change by new owner and CEO Elon Musk. He's really trying to pump up the revenue after some companies paused their ad buys on Twitter. The platform previously had banned all political advertising in 2019, reacting to growing concern about misinformation spreading on social media. That's the news, Scott. All right. Contest. I appreciate that.

Contestant Brewer coming up. We've got some top value plays for your portfolio. One big money manager giving his best ideas for the new year. We'll tell you the names he's betting on now when overtime returns. Welcome back. We have some breaking news out of Washington. The House now has officially adjourned until 8 p.m. tonight. That's after Kevin McCarthy lost the sixth ballot for speaker last hour. Keep you updated on any new developments as we get them.

It's been a messy process, as most of you probably know by now. We'll see what happens once they get back in session at 8 o'clock tonight. Value. It's been outperforming growth in a big way over the last year. You probably know that, too. Our next guest expects that trend to continue in 2023. Has a few ways to play it. Joining us now is Kevin Dreyer.

He's the co-CIO of Value at Gamco Funds. Welcome. It's good to see you. Happy New Year. Thanks, Scott. I think, you know, this prevailing thought is that value, this is the day. We've been waiting a long time for this day to arrive, and it's here. And it's going to continue? We have, and I think just this era of higher rates for longer probably lends itself towards value continuing to outperform.

Which parts of value, though, right? Because, you know, I could say, okay, well, staples. I want to be defensive. There's value stocks in staples. A parts of value though, right? Because, you know, I could say, okay, well, staples, I want to be defensive. There's value stocks and staples. A lot of them have gotten expensive, as have other areas of those kinds of groups. Which do you particularly like? So we just focus on really cashflow generating enterprises with pricing power, regardless of the industry. So it could be industrials like waste collection businesses. It could include staples. Some of those have gotten bid up, but there are still a lot of opportunities within that sector. I mean, you like Kraft Heinz and Diageo. Correct. Those are reasonably good

examples of what we're talking about. Exactly. So Diageo was actually down last year, so I wouldn't call that bid up. Spirits companies have always treated it a pretty big premium to the sector and really to the market. But that's no longer the case for Diageo, despite very good trends. You're overweight communication services. Is that right? Yeah. OK, that's probably the most contentious part of this conversation then. Why would I want to be overweight in an area that seems to be under some significant pressure in the weeks, if not months ahead? Well, I guess, first of all, at Gabelli, we're very bottoms up and stock specific. So however it comes out in terms of sector allocation,

that's really just an outflow of that bottom up process. We do have a core competency in communication services and media specifically developed over a long time. And right now, valuations are very, very attractive, even though the ad market is probably going to be a little bit choppy here this year. I mean, I've had enough conversations with Mr. Gabelli over the years to know his acumen and expertise in the media space, but some would suggest those stocks are cheap for a reason. You know, to be sure, I think you have to pick your spots and, you know, look for interesting opportunities where they're not value traps. All right. We'll leave it there. Kevin, I appreciate your time very much.

That's Kevin Dreyer again, the Gamco co-CIO. Up next, betting on the banks. The financials pushing higher today. One halftime committee member sees even more gains ahead. We debate that in today's Halftime Overtime. We're back. Today's Halftime Overtime focusing on the financials. That sector outperforming the major averages today following Fed minutes, which pointed to interest rates being higher for longer. But despite the lingering risk of a coming recession, Joe Terranova raising his exposure. He bought the XLF. That's the financials ETF. I want the exposure to financials.

I see the outperformance here in the near term. Activity has been solid. I think trading in 2023 is going to be a significant driver of revenue growth for a lot of the investment banks. And I think Goldman Sachs and Morgan Stanley are going to benefit from that, as well as others like Bank of America and Citi. All right. Douglas C. Lane managing partner, Surat Sethi, is overweight. The sector, he joins us now. It's nice to see you. Happy New Year. Thanks for being here. Our stock summit, which we're having on halftime thus far. Kerry picked the financials. Jenny picked the financials. Stephanie Link picked the financials. Joe Terranova said if he could have, he would have picked financials, but he likes real estate more. You're overweight big

time to this space. Bank of America, C republic jpm morgan stanley usb american express mastercard visa paypal blackrock credential wow you really think this is going to do that well this year i do i do and just by the way visa mastercard are considered technology but i do think of them as financials as well i do i like the space because i get your point but you know it's nice to correct you judge Judge, once in a while. That's true. And by the way, I pick financial as my sector, too. Okay.

But I do, and I like the space because of valuation. And honestly, I think they have earnings growth ahead of them. If you look at like a Morgan Stanley, Bank of America, their comps are going to get a lot better. The M&A activity has really, in the last couple of quarters, gone to zero. If you look at their wealth management businesses, all of that is going to now benefit them. With high interest rates, they make a lot more money just in cash sitting on their balance sheets for investors. And they also start making money when they start lending, which was hard to do initially because rates moved up so quickly that it was hard for banks to

actually make money. But as rates have moved up, they can actually start taking advantage of the curve. So you've got a combination of these factors. You've got valuation as a tailwind. And I think investors are looking for value. They're looking for opportunity where, hey, where are we going to go where we can actually see some earnings growth and resiliency of earnings? Well, let me ask you this. How do I balance, let's say, the best balance sheets in more than a decade, arguably, for the banks, versus the other scenario where rates don't actually go up.

They eventually, and maybe sooner rather than later, start to fall because of fears about the economy. How does all that play out in your mind? Well, I think if that happens, the fear on these stocks, which you're seeing now, is that credit quality deteriorates really quickly. But as your point, you know, your first point, the balance sheets are really strong. This is not like what they had in the financial crisis where they're sitting with a lot of

bad loans, real estate, other things like that, too. So I think that's an offset. That's why you trade it eight to 10 times on all of these banks. So if rates do go back down, you could actually see some other activity going on in the banks. You'll have a lot more M&A activity at that point as well. So you do want a diverse bank that can benefit from all that. Surat, appreciate it. We'll see you again soon, even though you corrected me. But you're always a loud one. You're always a loud one.

I will pay for that. I know later. Thank you. At least you know. Surat, take care, man. All right. Coming up, we're tracking some big stock moves in overtime. Steve Kovach standing by with that. Steve. Hey there, Scott. We got one biotech name giving up a lot of today's gains after delivering a promising blood treatment study. Plus, investors aren't loving a downgrade on a tech name in the smartphone app space. And we'll check in on shares on an iconic American brand spinoff into a new public company.

We'll have that for you when Closing Bell Overtime comes back after this. It's time to track the biggest movers in overtime. Steve Kovac is here with that. Hey, Steve. Hey, Scott. Yeah, first up, let's talk about At Lovin'. That's stuck under some pressure right now in overtime. That's after Benchmark Capital initiated coverage on the mobile tech company with a sell rating. It's been a steep decline for the company since going public in 2021, down nearly 90 percent in the last 12 months. Meanwhile, shares of the biotech firm Jaron are falling in the OT. The company disclosed plans to offer and sell 175 million of common shares in an underwritten public offering. This after announcing positive late stage study results for its experimental blood treatment disorder. Shares were up a whopping 33 percent, Scott, during regular trading today. The company says it plans to file for FDA approval by the middle of

this year and hopes to launch it in the U.S. in 2024. And finally, shares of GE Healthcare, the new spinoff from GE that started trading today, is giving up some of its gains. GE Healthcare, the new spinoff from GE that started trading today, is giving up some of its gains. GE Healthcare is one of three companies GE plans to split into. Eventually, the iconic conglomerate will be three separate companies, GE Healthcare, GE Aerospace, and GE Veranova, its renewable energy business. Scott, I'll send it back downtown to you. All right, and I appreciate that, Steve Kovach. Thank you very much.

Still ahead, Santoli's last word. We're right back after this. Let's do the results of our Twitter question. We asked, will we retest the October lows? The majority of you saying yes, we will. 62 percent. Get Santoli's take on that. And his last word next. Mike Santoli is with me for his last word. Let's start on the poll. Yes. Sixty two percent say we're going back to the October lows.

It gives you a real good idea where sentiment is. It shows you people are in a defensive crouch entering the year. Now, going back to the October lows, about a nine percent drop from here. Nine, nine and a half percent. It's not insignificant, but, you know, that can happen for any reason or none at all. Well, that assumes that you stop there. Well, exactly. That's a retest. You know, you don't always pass the test. But flows over the four weeks ending 2022 were really negative. Equity flows were really purged. So, yes, people are lightly positioned right here. I'm not saying that's the reason that the market held up OK on those Fed minutes. I mean, Fed minutes are three weeks old, really, based on when the meeting happened. But the fact that they were talking about not

wanting financial conditions to ease very much often is that signal that they're very focused on market conditions. Now, the thing is, conditions have actually tightened slightly since that meeting. That's why I think the market was able to take it. Stocks down small, bond yields up a little, corporate credit spreads widened out slightly, the dollar's up. So all the things that they would look at, the VIX is even up a little bit, are not saying that the market is partying too hard in the face of what they did in December. I would say that the Kashkari comments today were more substantial and potentially troublesome to stocks, which also didn't really react to that either. Not much. Him suggesting, you know, you go to 5-4 on the terminal and stay there for a while. We knew somebody was there. Now we know who, more or less. And that's not a welcome message.

Well, somebody who's very populist and he thinks this is now the populist message. I think that's the big change in the committee right now, is that people fighting inflation are the same ones who wanted to maximize employment in the last cycle. We'll see you tomorrow. Thank you. For your last word, that's Mike Santoli. Big show tomorrow, too. We have Lee Cooperman coming up.

He's going to join us exclusively, give his view on the year ahead. I'll see you then. Fast Money's now.