Closing Bell - Closing Bell Overtime: Luxury Stock Earnings, Avian Flu & Fed's Progress on Inflation 1/16/25

Episode Date: January 16, 2025

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

That's the end of regulation. FloCo ringing the closing bell at the New York Stock Exchange. Superior Group of Companies doing the honors at the Nasdaq. A seesaw session following Wednesday's big rally as Blue Chips, Apple, and UnitedHealth tumble. But defensive sectors like utilities and real estate climb. It looks like all the major averages finishing slightly lower. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And we've got a big show coming your way. Neuberger-Berman President Joe Amato will

break down his latest thinking on the market and whether Treasury Secretary nominee Scott Besson's hearing today gave clarity to investors about the Trump economy. Plus, we'll get a read on the state of transports when J.B. Hunt reports results in just a few moments. And you've probably noticed sky-high egg prices at the grocery store lately. Costs are up more than 30 percent since last year. We're going to talk to the CEO of egg producer Vital Farms, whose stock nearly tripled last year, about how bird flu has impacted business. But we start with Apple. Among the worst performers in the Dow, the S&P 500 and the Nasdaq 100 today, turning in its worst day in months on the back of a pair of headlines. First, a report from research firm Canalys says Apple's reign at the top of China's smartphone market has ended

with Huawei and Vivo overtaking Apple in 2024. The firm says iPhone sales dropped 25 percent in the fourth quarter, capping off four quarters of contraction. And that news comes as Raymond James puts out a note saying Apple showing signs of technical weakness, quote, consistent with a new short-term corrective phase taking hold, citing weakening price momentum, relative strength stalling and selling pressure as institutional investors reduce exposure. Apple shares now down more than 10 percent from their recent highs. Yeah, well, for more on Apple and the rest of today's market action, let's bring in Charles Schwab, chief global investment strategist, Jeffrey Kleintop, and Vital Knowledge founder Adam Crisafulli.

Adam, I'm going to kick this off with you because Apple did have a down day to the tune of 4%. And we know in general, tech and the mega cap tech names specifically had a very weak day, even as most of the sectors in the S&P finished in the green. Yeah, and I think that's a great point. The equal weight S&P today was up about 80 basis points, which is a very strong performance. And then you saw a lot of heavy selling. And like you said, mega cap tech, Apple led on the downside. There was some negative fundamental news. There have been a few headlines out in the last couple of weeks talking about, you know, diminishing market share in China, a lot of headwinds with the iPhone in that market, negative reviews for Apple intelligence, et cetera. But it really does seem to be more of a sector-wide, market-wide trend of investors kind of pivoting into some of the more valued cyclical

groups and added mega cap tech. Now, again, this follows huge outperformance for mega cap tech. So the year-to-date outperformance in the equal weight S&P is very, very modest compared to the last two years. We'll have to see if this continues. But I think it's much more a technical rotation than it is anything that's terribly negative with Apple fundamentally. Okay. Jeff, I want to get your thoughts on the market here, especially given the fact that whether we're talking about Apple, which has been a buyback beast, or we're talking about some of the banks and financials that have kicked off this reporting season, including Citigroup today with a $20 billion buyback. You have some interesting thoughts on what 2025 brings in terms of that buyback process. Yeah, this is usually buyback. You have some interesting thoughts on what 2025 brings in terms of that buyback process.

Yeah, this is usually buyback season, not just earning season. Usually companies up their buyback programs for the year when they report their fourth quarter results, which is right about now. But Citigroup and some of the others could be outliers. We've now got a much more expensive environment for funding buybacks. Back in 2020 and 2021, the yields on U.S. triple B bonds were below 2%, and that funded a massive surge in buybacks. But now the funding cost is over 5%. Stock valuations are much higher, and the demand for capital among big mega cap players being put into AI expenditures may take precedence over buybacks. So we could see maybe a buyback recession this

year, and that could erode some of the support for some of those highly valued stocks, for example, like Apple. Adam, I wonder what you make of the signal that we're getting on the consumer right now. Targets report kind of signaled that discounting was an issue because overall sales were good, but profits weren't. And that reminded me of what we heard from the kind of Signet jeweler as well. The people were kind of looking for bargains. Richemont, different, smaller luxury segment, but the overall consumer that the likes of Signet and Target are appealing to while they're buying, they seem to be buying carefully. Any new insight out of that?

Well, that's for Adam Christofouli. Sorry. Yeah, I would say the news this week on the consumer on an absolute basis was encouraging. You had more upside pre-announcements than downside ones out of ICR, with a lot of companies saying the holiday season ran a bit ahead of expectations. Like you mentioned today, Rice Farm was very encouraging encouraging for luxury which has been very beleaguered and then the banks which have probably better insight into the consumer overall than anyone else also that's consumers resilience are still spending etc definitely still at the lower end of the consumer's income spectrum um you know they're still they're still struggling

and they're being a little bit more judicious in how they're spending. But I think in aggregate, the news this week for the consumer, I thought was pretty encouraging and healthy. I want to mention J.B. Hunt's results are out. We are going through and we'll bring you those as soon as we've looked through. Jeff, I want to touch on international stocks here. You suggest adding international diversification for 2025, perhaps considering what happened in the first Trump presidency? Well, you know, the market's broadening beyond mega cap tech, as we see today, and maybe beyond the U.S. Since Election Day, we've seen the market interpret Trump's America first policies as good for U.S. stocks and bad for international stocks, even worse for emerging market stocks. And that's exactly what happened after Trump's win in 2016, when U.S. stocks led the gains and emerging market stocks suffered the most. But that quickly changed. Think back to the first year of Trump's term back in 2017.

Emerging market stocks were the best performers. China led the way with a gain of 56 percent, developed international stocks, outperformed the S&P 500 that year. And the reason was non-U.S. economic growth reaccelerated in 2017. That's exactly what we expected to do. This year, more cyclical stocks were rewarded. Many of those are in non-U.S. indexes. That's a lesson in how markets can surprise investors and how they may want to consider adding to international diversification in 2025. All right. Jeffrey Klein, top from Charles Schwab, Adam Cusifulli from Vital Knowledge. Thank you both. Let's turn now to the banks. Back in focus today is Morgan Stanley and Bank of America report results. Leslie Picker has the

details. Leslie. Hey, Johnny, after yesterday's blockbuster reports that pulled much of the sector higher, today's reports were a bit more of a mixed picture with Bank of America trading lower. Morgan Stanley, though, gained about 4 percent in today's trading, both beating estimates thanks largely to higher numbers in investment banking and trading and wealth management. Within investment banking, Morgan Stanley generated 25 percent gains in the quarter, while B of A saw a 44 percent jump. Bank of America's Brian Moynihan said on Power Lunch that the prospect of deregulation is reigniting the large cap M&A markets. They've been sort of sitting there saying, if I want to do a $5 billion, $10 billion transaction,

buy another company, or I want to sell my company, or I'm a private equity firm and I want to put a company in the market, that's been held up because of concerns about antitrust and things like that. Their belief is with the incoming administration, that'll uncork a lot of activity. That was also a big priority of Citigroup CEO Jane Frazier's when I asked her earlier on CNBC what her deregulatory priorities are. Her other one had to do with capital. We want to make sure that the capital system and the capital structure is looked at holistically, that we have the right amount of capital in the system, but we're not overcapitalized because that ends up impeding growth

and it ends up having a big impact, trickle-down effect on the rest of the economy. Just yesterday, Citi announcing one use for capital, a $20 billion multi-year buyback, guys. All right, Leslie Picker, thank you. J.B. Hunt, earnings are out. Frank Holland has the numbers for us. Hi, Frank. Hey there, Morgan. Our shares of J.B. Hunt, they are moving lower after revenue was in line, but earnings, that actually missed estimates. Earnings came in at $1.53 per share. The estimate was $1.62 per share. Looking deeper in here, the intermodal business, that actually beat expectations slightly. Within the

report, the company referred to the potential of a strike at the east and Gulf Coast ports, saying that they saw increased volume going into the west coast ports going eastbound. Didn't mention them directly, however. The company also said that they saw less pricing power than expected. Intermodal pricing per load was down 6% year over year. But again, volumes were higher. There's a pull for it of freight due to strike concerns and also ahead of possible tariffs coming up with the inauguration coming up on Monday. Another segment that's very important for them is dedicated services. That's full truckload services. That revenue decreased by 5% year-over-year. That's especially important because while it's not as big of a revenue driver as their

intermodal business, it is a big profit driver. They get about 43% of profit from there. So again, in line when it comes to revenue, but a miss on profit. Profit came in at 153 a share. The estimate was for 162 shares of J.P. Hunt, moving three-quarters of 1% lower right now. Yeah, this is an interesting report to me, Frank, in part because that intermodal business, which is their largest, as you just mentioned, and they have seen those dynamics of anticipation of tariffs and, you know, a possible East Coast port strike. The fact that they talk about demand trends for intermodal service seasonally strong and particularly on

eastbound loads out of Southern California got my attention because not only is J.B. Hunt a read-through to other trucking names, it's also a read-through to the railroads and specifically the intermodal business, and perhaps most notably to a name like CSX in the eastern U.S. It reminds me of what CSX's CEO said last quarter to me, where he said, actually, when you see the diversion of freight from the East Coast to the West Coast, because of that interchange with Intermodal, sometimes it's actually more profitable. So it'll be interesting to see what the railroads have to say about that dynamic when we get more of those results next week. Yeah, absolutely. Last quarter, J.B. Hunt said that that shift of freight from the East Coast to the West Coast, a tailwind for their

business, more of that freight that comes. Obviously, they get more pricing power. Really, what happened here is that also the J.B. Hunt and other truckers are actually getting competition from the rails. You're talking about the rails, just a quote-unquote freight recession over the last two years, making rail prices a lot lower, making it more competitive with trucks. Trucks were obviously faster, but for shipments that are not time-sensitive, of course, you can put them on a rail and potentially save some money. J.B. Hunt apparently faced some of that pressure. Frank Holland, thank you. Well, let's turn now to senior markets commentator Mike Santoli for an in-depth look at Apple's bad day. Mike. Yeah, John, deep in this pullback that Apple's undergone here so far in the last several weeks,

really wiped away months worth of gains. If you just look at a one year chart where it's taking us back to pretty much challenging these kind of midsummer highs. In fact, the Nasdaq 100 remains a couple percent above that July level. The S&P 500 is also a few percent above there. So, you know, that's kind of the you might consider it at the top of the prior range. And so we're perhaps challenging it. You mentioned the technical pressure on the stock. It's below the 50-day average, though still well above a 200-day. So at this point, it does seem like maybe just reconciling a little bit of a steep overshoot into last year. And, in fact, a few weeks ago showed this chart, which maybe isolated a little bit of a pattern,

which is when we're in a bull market and when Apple has had a very strong finish to a calendar year, it has almost always had a pullback of some description into the next year. Right. So that's a strong December. And then you have these sort of peak to trough drops of a minimum of nine percent from the December 31st level into sometime in the first quarter. It didn't happen, obviously, after 2022, which was a bear market year, but it did happen last year. You had a very strong finish, and then it gave it back.

Now, I don't have a very strong theory of the case as to why, in particular, you have this single-stock seasonality with Apple. It does seem like it might be kind of a consensus, window-dressing-type name to ride a fourth-quarter rally and sort of remain exposed to big-quality stocks at the end of the year.

But be that as it may, it's not unusual, if you saw that going into mid-December, that's where the stock was, to have expected maybe a little bit of payback coming into the new year. Very appropriate that you bring up the pattern, Mike, because the actual news today about loss of share in China, not exactly surprising. This was part of the case against Apple getting much higher to begin with, given that the AI software features aren't out there yet. It's very true. I mean, everything that you kind of look at as to the cover story for why we're seeing the sell-off here,

it doesn't necessarily seem like it would explain all the movements. It probably is flows. Now, who knows also if there's some collective assessment of what the whole policy setup is. I mean, we thought all the tech CEOs cozying up to the incoming administration was benefiting their stocks for a while. It did seem to be the case. I don't know if this is breaking from that trend or if it's just a little bit of single stock noise here for Apple. All right. Mike Santoy, we'll see a little bit later this hour. After the break, Wall Street gets acquainted with Besant. We're going to bring you

the highlights from the Treasury Secretary nominee's confirmation hearing. And we'll talk to Neuberger-Berman President Joe Amato about how he's positioning for the Trump trade. And there's a rise in egg prices. It's no yolk, jumping more than 30 percent from last year. We're going to ask the CEO of Egg Producer Vital Farms, whose stock has been on a tear, if any relief is on the horizon. Overtime's back in two. Welcome back. Treasury Secretary nominee Scott Besson facing questions today from senators in Washington.

Perhaps the most anticipated confirmation hearing by Wall Street ahead of the Trump inauguration next week. Megan Casella has the highlights for us. Hi, Megan. Hey, Morgan. So it was really a hearing with two main themes. It was tariffs and it was tax cuts. On tariffs, Besson said several times that he does not believe they raise prices on U.S. consumers. He talked about using tariffs as a revenue raiser, suggesting in doing so that they would be staying in place for some time. And he said that they could be used sometimes in place of sanctions. And then as for the tax cuts, Besson said the economy would come to a, quote, full stop without full extension. Take a listen.

This is the single most important economic issue of the day. This is pass fail. that if we do not fix these tax cuts, if we do not renew and extend, then we will be facing an economic calamity. Now, Besson is a deficit hawk, but his view is that the U.S. doesn't have a revenue problem. Instead, it's a spending problem. And to be clear, this is one of the things that got me out from behind my desk and my quiet life in this campaign was the thought that this spending is out of control. Now, Besant committed to making those spending cuts, but he did say that both Social Security and Medicare would remain untouched. Guys.

All right, Megan, thank you. For more on the Trump trade, let's bring in Neuberger Berman President Joe Amato. Joe, good to see you. So Besson tried to play Trump's translator here. Did you come away any more or less confident in the potential impact of tax and tariff policy? Well, I think Scott talked about things that are well telegraphed in the marketplace and that we do expect. So I think his testimony, from what I've seen a bit and seen the headlines, is quite consistent with that. I think the three issues that they appropriately were focused on were the tax situation and avoiding a major tax increase going out when

these tax cuts expire. And second, tariffs question. I think he made a compelling argument for tariff policy. And then thirdly, deficits. Really, those are the three things that he needs to be focused on. And look, we know Scott well, and I think he is a very, very smart guy, an experienced guy and understands global capital flows, tax policy, tariff policy, rates, the implications of the dollar. So I think I think he's the right guy for the job. OK, so when it comes to the economy more broadly, you already said a couple months ago you expect growth in 2025 maybe to be a little bit stronger than some of your peers out there. But you've also said now that you expect inflation might not be as much of a problem as some fear. Why is that?

So we have a bit of a Goldilocks scenario, admittedly. You know, our expectations on the GDP growth for the U.S. economy is two or three tenths higher than where the market consensus is. We think that's driven by two things, a consumer that remains strong. We saw retail sales number today that confirmed, I think, that the consumer is still in reasonable shape. The control group number was better than expected. We saw a strong employment report last Friday, so I think that bodes well for the consumer. And the second, we think non-residential investment will be stronger than the consensus expects, and some of that will be sort of the animal spirits that are created by the changeover in administration, the expectation of lower deregulation or more deregulation. So I think that'll spur investment

and that'll increase the level of growth in our view. On the inflation side, we're lower than consensus. So that's why I think we're a little bit of the Goldilocks scenario. And we see some of the things that have been a little bit stubborn within the inflation picture coming down. There's a lag effect, for instance, in owner equivalent rent. So in the number that we saw yesterday, which spurred a really strong rally in the bond markets, I think confirmed that we think inflation is moving in the right direction. Yeah, I want to stick with that for a second, Joe, because there's a lot of we've had a lot of guests who've come on. We've heard from a lot of Fed officials who are saying tariffs are going to be inflationary. They're very concerned about what

this Trump trade, so-called Trump trade, is going to look like in terms of trade policy moving forward. We've hashed it out. We've had quite a few debates about this. David Zervos has been talking about it. We covered it with Marco Papich earlier this week. And Kevin Warsh has an op-ed in The Wall Street Journal that was published in the last 24 hours, where they're basically saying, OK, any inflationary effect of tariff policies likely going to be of a smaller magnitude versus the disinflationary influence of deregulation and spending cuts. Is it time for Wall Street and investors to rethink the way they're approaching this dynamic? Well, I think broadly we would agree with how you summarized it, Morgan. I do think that you've got to weigh the tariff implications. You know, we don't know how many products are

actually going to see tariff increases, right? If you go back to 2017-18, the expectation was you're going to have a huge number of products that were going to see tariff applied. And in fact, it was a much smaller amount, right? So that negotiating back and forth that Trump is famous for was seen, right? So if you look at that narrow group of products that in 2018 saw tariffs, the price composite for those were three to four percent higher than they were a year ago, but it's a one-time effect uh and i think that that was more of a surprise at that time than i think tariffs are going to be here so i think suppliers buyers and sellers have more time to adjust to what they expect to see so i think the implication is going to be a bit less than people worry about okay joe amato thanks for joining us thanks for having me we have some news on meta. Julia Borson has the details. Julia.

Meta's chief technology officer, Andrew Bosworth, told staff members in a meeting that the company had mishandled communication and the rollout of Meta's content policy changes. This, but this report and the information said that the company handled parts of its recent changes to its human resources and content policies clumsily, and that it does plan to correct some of those changes. Last year, we got a shock with... Dog whistle term in its new hateful conduct policy. So effectively going out there and saying there had been mistakes that the company will look to correct. We will see what comment we get from Meta on this report. Back over to you. All right. Julia Vorsten, thank you. And we've also got some news on Starbucks. Board member and former board chair Melody Hobson saying in a filing she will not stand for re-election to the company's board.

Hobson saying, I have never sold a single Starbucks share and plan to remain a steadfast investor. Up next, more on today's after hours action. We're going to talk to an analyst about J.B. Hunt's results. Were those shares, last I checked, negative? And the read through for the rest of the transports. And later, why jitters about a slowdown for the luxury consumer might have been overdone. Overtime will be right back. Welcome back to Overtime. J.B. Hunt shares falling off the truck a little bit right now, down about 2% after a Q4 earnings miss moments ago.

Joining us now is Jonathan Chappelle, Evercore Senior Managing Director covering surface and marine transports. He has an outperform rating and $207 price target on J.B. Hunt. Jonathan, what do you take away from the lack of pricing power here? Well, it's a little bit of a mixed bag, this report. If you look at the headline only, it looks like they missed on earnings, but you have to strip out an impairment charge that no one would consider recurring. And if you take that out, they actually beat consensus by a little bit on better than expected revenue. But there's several different segments that they operate in. The most important is intermodal.

Volumes did much better than expectations. Pricing was about in line, to your question on pricing power. Dedicated was well below expectations. And then the other much smaller businesses were a little bit above. So when you net the whole thing out, there were some positives and some negatives. I think from a volume perspective, very positive. From a pricing perspective, kind of moderate. And I think the most important thing is going to be the commentary on the conference call that's coming up in the next 30 minutes on how the first quarter is shaking out

and really how to think about 25 in general. So your price target is about 25 bucks higher from here. Are you still feeling good about that, or does all that depend on the commentary? Well, it will all depend on the commentary for sure, especially the first quarter. We're not going to change our estimates before the conference call or before we speak to the company tonight. I'll say we're taking a longer term view on J.B. Hunt's positioning, but I am really concerned about the near term. You know, a theme we've been speaking about quite a bit is pull forward. And if you look at the volume growth that J.B. Hunt's put up as the proxy for U.S. Intermodal the last two quarters, the pull forward has been very tremendous. And you see that in the import numbers as well.

So the question is going to be, when we get to the first half of 25, are they able to maintain that type of volume momentum? Probably unlikely. And what happens to the pricing needle in the first half of 25? Are they able to actually turn it now with some of this volume providing positive operating leverage? Or is it going to continue to be a struggle like it's been for the last three years? Yeah, we were talking about it earlier in the show, Jonathan, the fact that J.B. Hunt is

in some ways not just a proxy for other types of truck carriers and brokerages, but also for the railroads in part because of that big intramodal business they have. And because they are the first ones within the freight part of the transports to report, they're sort of seen as setting the stage for the rest of the earnings season. So how should we read through to some of the other names that have yet to report? I would say not a huge surprise and probably not great. What investors want to see is the turning of the pricing momentum, because ultimately margin depends on price. We know there's been a huge pull forward. We've seen the import data over the last six months. There was a threat of an

East Coast port strike. There's big threats around the tariffs and what that means. And based on our analysis, we feel a lot of this has happened already. So if the volume momentum that we've seen in the last six months doesn't then translate to price and then margin and then EPS, then it's more just of a volume story on a short-term nature. And that's how it looks right now. And again, we'll see what they say about the commentary. Bid season is very important. The trucking spot market's turned up a little bit seasonally. And also because of some weather issues, you're not quite seeing the contract market yet. So we're pretty cautious on the entire earnings season. We just updated all of our estimates for rails, for

trucking, and we barely raised any. We raised one by a penny, I think. I think it's more of a function of waiting for this volume to eventually turn to price and hoping the price turns before the volume starts to moderate again. Okay. Jonathan Chappell, thanks for joining us with shares of J.B. Hunt Lower. Time now for a CNBC News Update with Julia Borsten. Morgan, the Israeli cabinet will meet tomorrow to vote on the ceasefire deal that would end the war in Gaza and bring home the hostages. The announcement comes after Prime Minister Benjamin Netanyahu said the delay in voting was due to Hamas creating a last-minute crisis. Hamas said it was committed to the deal.

While Secretary of State Antony Blinken said earlier today he was confident the deal would continue as planned. The Food and Drug Administration gave the green light today for sales of 10 flavors of Zin. The agency said Philip Morris' tobacco-free nicotine pouch products may help adult smokers cut back or quit cigarettes. The decision does not mean that Zin is safe, just less harmful than older alternatives. The approached flavors include coffee, mint, and menthol. And the surrealist writer-director David Lynch has died. Lynch was known for works including TV show Twin Peaks and movies The Elephant Man, Mulholland Drive, and Blue Velvet. In August, Lynch announced he was suffering from emphysema as a result of many years of smoking.

He was 78 years old. Back over to you. Julia, thank you. When we come back, pulling out the staples. We will look at why sellers of essential consumer products have been falling hard since late November. And overtime comes right back. You are full of dad jokes today. We have a news alert on the Supreme Court.

Let's get to our Eamon Javers. Eamon. John, that's right. The Supreme Court just updated its schedule to say that it may have some announcements tomorrow. We'll watch around 10 a.m. tomorrow morning. The expectation is because of the late lateness of this addition to the schedule that this could be about TikTok. Of course, that deadline for the TikTok ban looming on January 19th, one day before President-elect Donald Trump is sworn in on Monday, January 20th. So the expectation is this TikTok decision is coming. And this may be an indication that the court may issue its decision tomorrow morning. So that's a lot of caveats to say it's possible we'll get that

decision tomorrow. We're going to watch that closely, John. And meanwhile, NBC just reporting within the past couple of minutes that the Biden administration is not planning to levy billions of dollars in fines against companies that allow access to TikTok in the final hours of the administration on the 19th. That means that all of that implementation of the law, if it is allowed to stand by the Supreme Court, possibly tomorrow, all the implementation of the law would take effect under the incoming Trump administration, starting on Monday at noon.

And so the question there is, what does the Trump administration want for TikTok? How would Donald Trump handle this? Trump has signaled that he likes the app. We know that he has invited the CEO of TikTok to come to the inauguration. We know that Trump has said that this is something that's a priority for him. How will he handle this? It gives Trump enormous leverage over this valuable asset and all of the American tech companies that would like a piece of it, guys. All right. We know you'll be

watching it closely and covering it for us here over these next couple of days. Eamon Javers, thank you. Consumer staples starting off the year on the wrong foot. They're currently the worst sector in the S&P 500. So does this present an opportunity for investors? Well, let's ask Mike Santoli. Mike. Yeah, Morgan. I mean, it comes down to whether the action in these stocks is so bad it's good. In other words, they're in liquidation. They're really a steep angle of decline.

So I have here the consumer staples ETF. That's weighted by market cap. You see it really diverge from the equal weighted version. And that's, as I've talked about before, mostly because of Walmart and Costco and their great performance within it. And also their heavy weightings within that sector. If you look at the equal weight, that really tells you the story. And in fact, you're kind of challenging lows from a couple of years ago at this point. Also, on a valuation side, things maybe arguably are looking washed out.

You know, you basically have relative price earnings multiples that is compared to the S&P 500 for both the market cap weighted and the equal weighted plumbing depths that you haven't really seen, at least not since for the cap weighted back in the tech bubble days. Now, why is this going on? Obviously, terrible news flow. You don't have as much consumer goods inflation. They lost some pricing power. They obviously are some of the products, especially on the food side, are seen as being on the outs, whether because of GLP-1 drugs or because the incoming administration is now somehow targeting processed foods. You have all this bad news. But also in a good economy, when people want to own cyclical stocks, these are the exact ones that do not get any inflow.

So now really the big question is, is it kind of a close your eyes and buy because these are some good brands that are really cheap? Or do you just stay out of the way, Morgan? Yeah, value or value trap. But what's interesting to me here is, to your point, they've always been considered safe haven, more defensive. On a day where utilities and real estate are the two top performing sectors in the S&P, and we know the equal weighted S&P did better than its peer, they still were only up half a percent today. So it raises a bigger question to me, and that is, is this still even a defensive play? I would say yes, it's defensive in terms of if we really thought it was going to be a bad economy, you would grab for these stocks.

They're going to be more stable in a tough earnings environment and they'll probably have better dividend yields. What they're not is as rate sensitive as those other groups that you mentioned. So, you know, the degree to which yields are moving down, but not because people are worried the economy is softening, that's not necessarily the right formula for staples. I guess you'd also argue that both real estate and utilities in the current world have leverage to bigger trends that are not just about playing defense, obviously, including AI and data centers and things like that. All right. Mike Santoli, thank you. Well, check out this stock's excellent performance. It's Vital Farms. Shares have nearly tripled over the last year thanks to soaring egg prices. Up next, the company's CEO lays it all out, whether he sees any signs that prices could

be peaking. We'll be right back. Welcome back. The sky-high cost of eggs has left many shoppers feeling scrambled at the grocery store. Yesterday's CPI report showed egg prices were up 36% from a year ago, up 3% from the previous month. Well, joining us now is Russell Diaz-Conseco, the CEO of egg producer Vital Farms. That stock rose more than 140% in 2024. Russell, welcome to Overtime. It's great to have you on, and that's where I want to start with you, is what you're seeing in terms of egg pricing and in terms of the industry overall, as we are seeing this supply-demand dynamic in the midst of bird flu play out. Thanks so much for having me.

You know, a lot of people know Vital Farms from our eggs. We've grown to become the second largest egg brand in America. But a lot of people don't know that we became a public company four and a half years ago, and our hyper growth has gotten us to about $600 million in revenue. That said, most of that growth has come from volume, not price, even though the overall category is seeing so much inflation. The biggest category or the biggest driver of that price inflation at retail has been the ongoing challenge of avian influenza, which is destroying tens of millions of birds, 12% of all the laying hens in America just in 2024. Interestingly, we've only had one example amongst our 425 small family farms in the last 12 months, which is less than one third of one percent of our eggs. So

while commodity eggs are certainly seeing those price increases, we're not seeing the same impact on our operation. That's very impressive, given what we're hearing on a weekly basis in terms of impacted flocks. How have you been able to do that and avoid the outbreaks? And perhaps just as importantly, I think about coming out of the pandemic, the COVID pandemic, there was a shift in thinking around supply chains to more diversified supply chains. Are we going to see something similar happen within agriculture and within the egg market coming out of avian flu? Great questions. So in terms of how we've been able to protect our birds, it goes back to our approach to doing business.

We invest a lot of time, energy, and our own money to help make sure that we attract and train up the very best farmers in the business. And we have an enormous network of them. Again, we announced on Monday that we now have over 425 small family farms in our network. And yet, despite how big that network is, they add up to the number of hens that even when one of our farms is affected, as one was last year, it only affects a small fraction of 1% of the total production.

That said, I think keeping those birds safe has a lot to do with training, has a lot to do with high engagement when the farmer owns the farm and owns those birds and has a lot of commitment to doing a great job on that farm. And when our employees have wonderful training and a dedication to the best in biosecurity measures, I think it pays off in that safety. Russell, looking at the stock, it's nearly tripled, it looks like to me, in the past 12 months. My concern from an investor perspective would be that the stock has benefited from higher prices in the market overall. But your egg costs are inherently maybe a little bit higher because you're not a traditional big mass production farm. So eventually when the overall markets prices go back down, your product might look more expensive, you would argue, because of higher quality. How would you respond to that concern? Yeah, you know, it's funny. At a time

like this, when the cheapest eggs in the market become more expensive, it can feel like maybe that creates a tailwind for a premium brand like ours. You know, and our pricing reflects the higher quality, the higher cost of doing egg production the way that we do, higher pay for our farmers, and a premium gross margin, which I think reflects the brand that we've built. The reality is that our eggs were more expensive than the cheapest eggs long before we saw this inflation and yet we drove outsized growth year after year after year with strong margins so we've had a healthy income statement a healthy balance sheet and a healthy business model both when there's high egg price inflation at the commodity

level and when there's low egg price inflation at the commodity level and that's really what we're focused on an enduring model that is successful in good times and bad okay and of course you announced this week more investments in your farm network expansion it's great to have you on with us russell diaz conseco of idle farms appreciate it thanks very much shares moving higher as he was speaking yeah up next a trio of top tech leaders on how board members are now driving change more than ever in Silicon Valley. And speaking of driving, check out shares of Rivian, accelerating in overtime after the company said it finalized

the Department of Energy loan agreement for a Georgia manufacturing site. We'll be right back. Technology issues are big strategic challenges in 2025, whether it's threats from cyber attacks or opportunities from embracing data and artificial intelligence. I explored that today with members of CNBC's Technology Executive Council. John Rogers is Chief Data and Analytics Officer at CoreLogic, a private company that serves the real estate industry. CoreLogic is based in Southern California and put out a report in recent months that highlighted the extreme wildfire risk.

We're working already on how we can recover the homes and provide a more resilient future. So CoreLogic is a data and analytics company. We literally procure over 22,000 data sources on all things property and locations. And obviously that's absolutely right for using AI on top of it and providing resiliency scores back out to the home builders, the state officials to, you know, once the dust has settled, we can recover these homes and build a better future. So, yeah. On the cybersecurity side, Ignite co-founder and chief security officer Chris Lahiri said board members now want more just wanted to hear that you got it. Okay. They

are like, look, as long as you are doing all the stuff, I don't want to hear about it. I need to focus on the business. But over the last five years with such news grabbing headlines around, oh, this thing got impacted or a nation state. These are terminology that every board member now knows. OK, they know what a nation state attack is. They know what ransomware and ransomware gangs are and all of that. Right. So now they're a lot more concerned. So they ask more pointed questions. And when it comes to engaging with partners, ACTA's president of customer identity said he's working with them to get their leadership the detail they need about preparing for threats. They either don't always understand their real needs or will struggle to gain support required to move key security initiatives forward. So we're working with our customers and our partners to make sure that they understand that securing identity is a board level concern.

And so we're doing everything we can to educate our customers and our stakeholders so they can take those insights, whether it's threat insights or best practices back to the board. Well, CNBC's Technology Executive Council is a membership organization for C-level technology executives from any industry. I've started a series of tech talks to pick their brains about how they're tackling various challenges. If you'd like to apply for membership, you can head over to cnbccouncils.com slash TEC. Well, up next, new signs that luxury retail may be back in fashion after a very difficult year in 2024. And space is the place. Jeff Bezos' origin marking a long-awaited milestone as its powerful New Glenn rocket flew for the first time early this morning. The rocket, which carried a company space tug prototype, reached orbit, but the first stage booster, which is designed to be reusable, missed the attempted landing. Meantime, Elon Musk's SpaceX is set to launch its own new rocket, Starship, on its seventh test flight at some point in the next hour here.

Starship will attempt its first payload deployment. And SpaceX is also hoping to catch its reusable booster back at the launch tower. Stay with us. Welcome back to Overtime. Luxury retail brand Richemont reporting much better than expected third quarter sales despite the ongoing drag by consumers in China. Robert Frank looks at whether that could be a sign of a comeback in luxury demand. Robert.

Morgan, good to see you. Well, Richemont shares up 16% today on that sales beat. Revenue is up 10% in the quarter. Analysts had been expecting a rise of only 1%. Now, most of the shine came from jewelry. It's Cartier, Van Cleef, and other brands up 14%. Geographically, the U.S. was up 22%. Europe also strong in large part from American tourists. Now, several analysts saying it's a sign that the luxury recession may be over. LVMH, Hermes and Caring also up today on hopes for a strong 2025. But China remains weak, down 18% at Richemont. And while jewelry is strong, if you look at watches, fashions and accessories, those are slower or even declining.

LVMH, of course, is the big bellwether. They report on January 28th. Guys, I just wonder if when we're looking at these luxury brands, we need to strip out China kind of some or discount it similarly to what to what investors, I would argue, do with Apple these days. Yeah, the problem with that, Morgan, is that for the past decade, China has been the engine of growth for luxury and the promise of why they'll continue to grow in double digits every year. So if you take that out, then you have to say, unless the U.S. can carry the load on its own, it's going to be slower growth. Okay. Robert Frank, thank you. Speaking of, we get China data tonight, including GDP.

That's going to do it for us here at Overtime.