Closing Bell - Closing Bell Overtime: Netflix Gives A Peak At Viewership Metrics; Meritage Homes CEO On Housing Market 12/12/23

Episode Date: December 12, 2023

Major averages notched their fourth consecutive positive session as investors await tomorrow’s Fed decision on rates. Truist’s Keith Lerner and Crossmark’s Bob Doll break down the market action. Former Army Secretary Eric Fanning on the outlook for defense as Congress wrestles with the budget. Meritage Homes CEO Phillippe Lord on rates impact on the housing market and the company’s strong performance. Netflix released a new engagement report showing some of its top shows and how long users are streaming; Wedbush’s Alicia Reese on the key takeaways for investors. 

We are up again. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I am John Fort with Morgan Brennan. Coming up on today's show, we're going to talk to the CEO of HomeBuilder, Meritage Homes. It's up 70 percent this year with rates in sharp focus ahead of tomorrow's Fed decision. And we are awaiting breaking news this hour from the White House as President Biden gets set to hold a news conference with Ukraine President Volodymyr Zelensky. We will take you there live when it starts. We begin with the market, though, and another day in the green with fresh 52-week highs for all the major averages following this morning's inflation report,

which came in, we'll say, warmer than expected on the headline print, but in line on the core number. Meantime, oil pulling back sharply, pushing WTI below 70 bucks per barrel. Let's bring in Mike Santoli at the New York Stock Exchange. Mike, your thoughts on this as investors sit on their hands and await a Fed decision tomorrow. Yeah, Morgan, another data point that came in so close to expectations and so consistent with the assumed trend of, you know, we're getting disinflation running through the economy. The economy itself is weathering higher rates. OK, for now, it looks like fourth quarter and first quarter corporate earnings are more or less underwritten by these conditions, at least

roughly speaking. And we have this sort of seasonal lack of of sellers in this upside bias. So all that stuff feeding together, you're getting this upward drift in the indexes. It seems as if market is not too concerned about what Chair Powell might have to say tomorrow. You have, as we were just mentioning, the volatility index closing right around 12. It shows you it's this calm, gentle market. Macro is coming in as expected. Something always comes along to disturb a picture like that, but it hasn't happened yet. So, Mike, assuming that the Fed chair succeeds in not rocking the boat, which is usually his goal, what's the next potential boat rocker out there? It's tough to say, John. I mean, look, we have the PCE inflation report, which is, of course, what the Fed technically is fixated on. That's its inflation gauge. But it's not until the 22nd.

So it's a week from Friday. So you do have this relatively long stretch out there of market reacting almost to itself, to its own technical position, to various year-end flows. And I guess the occasional wiggle in things like commodities, because I think you have to be aware of oil looking a little bit oversold. Maybe it's going to bounce.

So it's not that identifiable, what we're looking at right now. And not too much concern on a single company basis either. You know, this drop in Oracle shares today, 12 percent. Almost every other software stock was up on the day. So people didn't extrapolate that as a broader problem for demand in that area. But maybe we'll see if they should. Mike Santoli, thanks. Now let's bring in our market panel, Keith Lerner of Truist, Bob Dahl of Crossmark Global Investments. Keith, you are saying that you can't keep your portfolio strategy on autopilot heading into 2024. So, I mean, today though might have been a day that autopilot might have been okay. What's going to change that? Yeah, great to be with you, John.

You know, the market overall has done really well the last few months. And, you know, off the October low on that pullback, we thought that was an opportunity. We're still in this seasonal positive period. And there's just not a lot of selling pressure. So I think we can continue to squeeze higher into the year end. As we move into the election year next year, what tends to happen is the first half actually tends to be a bit choppier. And as going back to why it's not a time to be on autopilot, I do think there will be tactical opportunities. When we look at all the different cross-currents

that we have, one, again, the election year tends to be somewhat bumpier. And then also, when the Fed cuts rates for the first time, when you look 12 months forward, the market is really dependent on whether we do achieve that soft landing or we move into a recession as far as whether you're up, you know, double digits to the upside or downside. So I think there will be a lot of things next year that's going to cause more volatility that, like I said, that's being suppressed now that will provide opportunities to go on offense or defense. But I think right now we enjoy the ride into the year end and then expect somewhat of a bumpier path in the first half. Bob, you point out that we're in a different economic and inflation environment than we've been in for the past decade. How should that

shape the way we think about 24? Look, I think it's seasonally strong now. So I'm in agreement there. But I look at my screen, I see stocks are approaching 20 times forward and over 20 times trailing earnings. We've had a great year in the last month and a half. Stocks up 13 percent. Like late October was a time to add. I'm not convinced that one shouldn't think about into year end taking some profits and anticipating some lower prices. Look, the expectation, as we all know, is inflation is going to continue to fall. The Fed's going to cut rates and earnings going to be up a double digit percentage. That's

a lot of good stuff that happens simultaneously. If we can make it happen, that's a big if in my view. OK, Keith, I mean, you talk about how important it is looking to 2024 to not be on autopilot. What does that actually entail? How does an investor position themselves going into next year? And what are the key signs or factors or data to watch in case you do need to be nimble and make changes? Sure. So right now, because the calendar changed, our strategy hasn't changed. We're overweight the U.S. on a global basis. We're still overweight large caps relative to small caps. And we're overweight high yields. So some things we've been looking for is, you know, if we have deeper pullbacks,

and we've had this little bit of a run in small caps, I don't know if that's a sustainable change. At some point next year, if the earning trends start to hook up, I think investors should be prepared that, you know, this cycle could be different, that small caps actually work better when the economy is somewhat slower. And normally small caps are first out of the gate. So maybe they start doing better later in the year. At some point next year, we are really underweight international. We have zero exposure to emerging markets. Again, at some point next year, they may come to a point where the price is right and we start to see an earnings inflection that we'd want to shift. So again, our message is stick with our current strategy. It's working.

But at some point next year, we think there's going to be several inflections. We're not going to try to press our narrative on the market, but be ready for kind of these inflection points in all these different markets, including going back to the bond market where we're focused on high quality. At some point, we think spreads will likely widen, which will provide an opportunity as well. So again, we're being patient in that respect, but also realistic that we are going to be in a choppy environment. Bob, I mean, markets not expecting the Fed to make any moves one way or the other tomorrow.

It's a pretty high bar to expect, probably shouldn't expect, the Fed and Powell to even be talking about the possibility of rate cuts, though we will be getting the dot plots and the forecast for next year as well. It's not a matter of if, but probably a matter of when and why the Fed starts cutting. How important is the why piece of this looking to next year and what that's going to mean directionally for stocks? Hugely important. After the last Fed hike, let's assume we've gotten that, stocks tend to do okay. They begin to struggle when the Fed starts cutting rates because they're doing that because the economy is weakening and earnings are suspect. That's what I'm worried about when we get to that point.

I think there'll be some more weakness, and therefore you need to be focused on companies with high earnings predictability, high earnings persistence, knowing we're going to have some disappointments down the line. Keith, finally, you want to go to sectors. You're underway consumer staples, health care materials. Health care has had a really rough go of it this year. And you say that you're prepared to shift things. So what is it, perhaps even in 2024, that would cause you to get more bullish on a sector like health care that, you know, demographically should be doing better, but has been struggling? Yeah, well, first of all, we're staying overweight technology and communication services. Their earnings momentum remains there. If we look at things like health care, utilities, materials, the relative trends are still weak and the earning trends are weak. So

I think to get more positive on things like staples or healthcare, what you're likely going to see is that the economy does weaken. So you'll be looking at things like credit and you'll be looking at things like initial jobless claims as well. Healthcare is an interesting sector. It always looks cheap. We call it the Charlie Brown of sectors. Every time it looks like it's starting to get going, it like loses the football again. So we want to see the earning trends move up. We want to see relative price turns up as well. And that means we're just going to be patient.

We're not trying to call the top or the bottom of what we want to be in the meat of the move. And right now, health care isn't showing any signs of turning around at this juncture. Oh, brother. See what you did there. Okay. Keith Lerner and Bob Dahl, thanks for joining us with the S&P finishing the day up almost half a percent, 46.43 now. Let's get back to Mike Santoli for the first installment of his dashboards, starting off with a look at chips, which have had a strong

month so far. Mike. They have. It's been a big comeback, Morgan. Actually, on a two-year basis, the semiconductor index, or at least the SOXX ETF, is now positive Morgan. Actually, on a two-year basis, the semiconductor index, or at least the SOXX ETF, is now positive again. Remember, we did this big two-year round trip in the overall market and in technology, and now just slightly outperforming the S&P 500 over that span, although owes an awful lot to NVIDIA. The more equal-weighted semiconductor ETF still trailing by about 15 percentage points, both the S&P and the SOX. So that's usually a good thing when you have semis in a leadership spot in the market. You've got to keep an eye on that relative trend.

Now, also, in today's CPI report, one of the real hot spots was transportation services. Biggest driver in year-over-year double-digit percentage price increases there has been actually auto insurance and, to a lesser degree, auto repair and maintenance. And that's related to auto parts prices. And here you see this is progressive. It's the public market's best play on auto insurers. You have Geico within Berkshire Hathaway. You have State Farm, which is not publicly traded. And that has been an excellent stock over two years. They have been pushing pricing out there quite a bit, advertising less to across the industry.

And this is O'Reilly Automotive, representative of the higher quality auto parts and service sector. Also big outperformers. So there are pockets of pricing power in there. We'll see how long they last for you. When we talk about the lagged effects of the Fed's rate hikes in the economy, insurance pricing is a good example of that because it takes a while to see the realization of those increases. But now we are and it's very meaningful. Yeah, they've been pushing through and it's obviously one of the things that, you know, consumers feel. There's always a sense out there you can get a better deal, as the advertisements always say, on car insurance. Less the case now. The question is whether we can still, after a two-year run of higher prices,

continue that out into the future? Or is this going to be one of those things that actually becomes more friendly to the inflation readings down the road? So it's one of those things that you don't, you're kind of paying for all the time, but you don't make the decision to buy it every day. So it's unclear how it fits into inflation expectations as well. Okay. That's a big move for Progressive, though. Mike, we'll see you later in the show. Thank you. We're still awaiting President Biden's news conference with Ukrainian President Zelensky. We're going to take you to the White House when it starts, and we'll talk to a former Army

secretary turned aerospace industry executive about the impact of the war on the defense industrial base. And later, Oracle finishing at the bottom of the S&P 500 today, falling double digits on light revenue. We'll tell you what that move could mean or maybe not for Adobe. That company reports tomorrow in Overtime. We'll be right back. Welcome back to Overtime. We are awaiting President Biden's remarks with Ukraine's President Zelensky, who is in Washington this week in an effort to secure new military aid for his country.

Joining us now is Eric Fanning, former secretary of the Army and currently Aerospace Industries Association president and CEO. It's great to have you on. We've got the White House shot up on the screen, so we're going to continue to monitor that. In the meantime, though, we're operating, the government is operating on a continuing resolution. And then we have this supplemental aid package, $106 billion that lawmakers are fighting over as well, even as aid to Ukraine runs out. How critical is it, Eric, to see some sort of legislation actually make its way across the finish line here in these final weeks of the calendar year? Morgan, thanks for having me again.

Good to see you. It's critical. There's broad bipartisan support for Ukraine and its war against Russia, the Russian invasion of Ukraine. There's broad support in the country. Still, a majority of Americans support Ukraine. But it's more than that. It sends a strong message to our allies and partners that we're there when they need us. And it sends a strong message to our adversaries that our allies and partners will be with us as a result when we need them. That's something we

have that they don't have. But more importantly, perhaps, it is an investment in our nation's industrial base, our defense industrial base. For years, we've been insufficiently investing in things like munitions, which has cut into our ability to our capability and our ability to surge. This supplemental helps us restock our supplies while modernizing them and increasing the capacity of that industrial base at a time when there are threats all over the world. Our warehouses weren't full when Russia invaded Ukraine. We've been surging goods there. We've been trying to pivot to the Pacific to deter activity there. And then, of course, what we've seen in the Middle East reminding us that we don't get to pick where there's activity in the world. Adversaries get a vote as well.

Yeah. Of this $106 billion supplemental, to your point, something like 55 percent of the overall number would be dedicated to U.S. weapons production, production capacity expansion, and the strengthening of the U.S. industrial base and basically the restocking of those stockpiles that have been depleted. I mean, is there a possibility that we see this funding broken out into different tranches and passed in different tranches? Or has that possibility come and gone? Well, I think we see historically on the Hill, certainly in the current environment, that when you break things apart, it just makes it more complicated. Part of why it's hard to pass these big bills is how long is how big they become.

But that's that's how we get things done these days. And so I wouldn't want to see it broken apart because I think that would just further complicate this effort. And we need to make sure that we are getting the right investment in place at the right time in order for the adversary to see that our industrial base can do what it needs to do and can do it for duration. That's important for deterrence, because obviously we want a military that can fight and win wars. But the best thing is never to get to that place in the first place is to deter it from happening at all. Eric, it seems like we potentially have a supply chain challenge in defense that's in some way similar to what we saw with retail and goods in general during the COVID year. So I wonder how long is this restocking process and what potentially happens after? Because it seems

unprecedented in a way to have this sort of near-term demand, and it's unclear how long it's going to last. Well, it's important to remember COVID certainly had an impact on supply chains in the defense and non-defense world globally. But that was on top of years of already insufficient investments in the defense industrial-based supply chain. We were essentially buying the munitions we needed to replace what we were using in training. And the defense industrial

base forms around those demand signals of many years and becomes very efficient, which is really the opposite of the ability to surge. But in order to make sure we build back that capacity, and lots of work is being done, The defense industrial base has been really triggering its supply chain, getting things up and running, trying to anticipate the demand that's coming. But to make sure that we protect that and build that for the long term, we need clear demand signals that are sustainable over time. You can't build a surge for one year and then go back to where you were before. That's going to be very hard for the private sector to respond and build around that. And so we need to make sure that the government's investing and doing all it can to support and send the right signal. That includes

getting the foreign military sales system in place and continue to reform that. That includes getting the amortization schedules for research and development expenses where they used to be a couple of years ago, where a company can deduct the dollar in the year it spends it, really incentivizing that private sector investment in R&D. And last but not least, it means passing a budget, passing it on time. We're still operating on a continuing resolution for the 2023 budget. So if there was anything baked into 2024 in response to these global threats around the world, we can't start that because we haven't been given the budget authority to do it. Where do you see the munitions types that are in demand

during this period most significantly changing from where they would have been, say, five years ago? Maybe investors can't see it now, but, you know, technology has moved forward. Technology moved forward, and that's one of the important elements here. We're not just replacing what we've been surging to Ukraine and elsewhere in the world. We're simultaneously modernizing, which is good for the industrial base, but it's really good for our nation's security. All that takes a while to line up. On the private sector side, you have to get the materials, the supply chain in order. But what's most important is getting the demand signal clear on the government side. The single customer for this entire industry is really the Department of Defense, even foreign militaries through the Department of Defense. And so that signal

needs to come. It needs to be clear. It needs to be many, many years and sustainable. And then Congress has to pass the budgets. It all raises the question about U.S. standing in this geopolitical landscape that's become more tense this year. I mean, just today, we've been talking about stalemates in Ukraine. But just today, a report in The New York Times that Washington is looking to implement a conservative strategy with Ukraine to hold existing territory, ramp domestic weapons production, and all of this hoping to, according to this report, compel Putin to enter into negotiations by the end of next year or sometime in 2025. You see what's happening with the hot war in the Middle East right now. You've got modernization and other types of efforts to counter China in this longer-term strategic competition. You've got saber-rattling in Venezuela.

You've got China antagonizing the Philippines right now. I could sort of go around the world. With all of these different dynamics, is the U.S. military, as we have this conversation about the defense industrial base, in a position to truly deter all of these potential threats? That's a great question because it reminds everybody when we talk about the size of the defense budget and compare it to any other country's defense budget that no other country is asked to do what we do. And we benefit from that. We benefit from stability that we've been able to bring around the world largely in the decades

since World War II. But it is a challenging time. There are challenges around the globe in numbers and in geographic areas that we haven't really seen in our lifetimes, I don't think. We still have the best military in the world, bar none. That's clear. But we stretch it thin at times, and we need to make sure we support it. And a part of that is making sure that we have the industrial base behind it that can surge quickly when it's necessary and send the signal to the adversaries that it can do that. So they wake up every day and say, today's not the day we're going to take on the United States. All right. Eric, thank you. Eric Fanning, former Secretary of the Army. And again, we are awaiting those remarks at the White House with President Biden

and Ukrainian President Zelensky. We'll bring you to those as soon as they start. After the break, the HomeBuilder ETF is up more than 50 percent this year. Meritage Homes is outpacing the pack, jumping nearly 70 percent. We'll talk to that company's CEO about the strong results, even in the face of higher rates. Welcome back to Overtime. Inflation is gradually moderating, but housing remains stubbornly sticky in its expense. Mortgage rates still high.

Shelters, the average household's biggest expense, increased by four-tenths of a percentage point in November, up 6.5% year over year, according to the latest inflation report. Joining us now is Philippe Lord, Meritage Home CEO. Meritage is one of the largest public home builders in the U.S., and the company's stock is up about 70% this year. Philippe, tell me not just what's happening now, but what you're betting on happening in the next year. Philippe, tell me not just what's happening now, but what you're betting on happening in the next year. You're buying up a bunch of acreage, for example, outside Charlotte. What sorts of

homes are you looking to build? What's the demand signal from the consumer showing you? Good afternoon and thanks for having me. Rates are stabilizing, it feels like. They've moved down around 100 basis points since they kind of peaked out at 8% and we're expecting if the rates were to stay stable that we can continue to see strong housing demand. This is one of the best years we've had in the history of the company and despite dealing with rates that are almost double what they were the prior three years, we're still seeing really, really healthy demand across all of the markets that we build in. So as we sit here today, if rates are to remain where they are or go down, as some people are predicting, we feel like we're going to see a healthy demand into 2024. How does what you're seeing in labor and materials costs perhaps counterbalance the

higher rates and at least in some pockets the strain that the consumer is feeling? Since costs reached the all-time highs that we've seen, our building costs, if you will, last year, they've trended down over the last few quarters, and we're seeing a much lower cost to build, as well as how long it's taking us to build homes. It was taking us close to six to seven months to build homes last year, and right now it's taking more, just around 120 days or four months to build homes. And that's allowed us to lower our costs and try to deliver a more affordable product despite rates being as high as they are. Most importantly when we can provide what we call move-in ready inventory, inventory that's ready to move in in the next 30 or 60 days

for consumers that need to move now, it allows us to solve a payment for them despite rates being where they are. So we can access the mortgage markets and buy their rate down or secure a longer-term rate for them at a lower rate when we have inventory that's ready to move in. And that's really what the opportunity has been for new home builders today versus where it was. With the existing home market being so chronically short due to the lock-in effect, new home builders have the available inventory for these people that need to move today, and we can really solve the payment in a different way despite the rates being as high as

they are. That was exactly where I was going to go with you, and that was the role that incentives are playing in this entire dynamic as you are talking about robust demands despite higher rates and despite the fact that home prices have been stubbornly high as well. Yeah, we've always had incentives. That's how we operate. But today, the incentive dollars are really being used to solve the payment for our consumers. We're an affordable builder. RASP is in the mid-fours. We build throughout the southern hemisphere,

and we really focus on trying to deliver affordable product to that first-time homebuyer. So it's all about the payment. They used to use incentives for closing costs, or they used incentives to put different features into their homes, or just take a discount on the price of the home. But today, it's really not about the price as much as it is about the rate. If you can move that rate from 7% to something in the 5%,

it lowers their monthly payment dramatically more than you could if you were to lower the price of homes. And that's really why the price of homes have stayed relatively sticky. In fact, Zillow reported today that prices are actually up year over year because it's really more about the interest rate and the payment. And as a new home builder and the rest of the industry, we have a way to solve that for our buyers, unlike the existing home market. So at a time where markets are hyper focused on when the Fed is going to begin cutting rates next year, what is your outlook for 2024? And as we do have this conversation about prices versus rates and affordability and what that means for the demand piece of the picture, what do you expect? Well, it's hard to say. I've gotten out of the prediction of interest rate and what the Fed is going to do. But based on the recent reports of inflation and the job market, my projection is that they

kind of stick where they are. I think rates are going to stay higher for longer. But I think if they stay stable, it's very easy for us to solve that payment for our consumers. And that's sort of what we're planning our business around. If rates take around here, around 7%, we can solve the rate into a five and a half or a five and three quarters rate, which is really a payment that makes sense for our consumer. And we're planning our business around that environment for 2024. Philippe, thanks for joining us. Appreciate it. Thank you. It's time now for a CNBC News Update with Julia Borsten. Julia. Thanks, Morgan. Senate Republican Leader Mitch McConnell said today that it would

be, quote, practically impossible to pass a supplemental funding package with aid for Ukraine before Christmas. McConnell added that a deal would require President Biden to reach a deal with Republicans who are pushing to link Ukraine funding to new border security measures. Any minute now, President Biden and Ukrainian President Volodymyr Zelensky are expected to hold a joint news conference at the White House. New York's top court ruled today that the state can redraw its congressional map. Democratic lawmakers significantly gerrymandered the map last year, forcing the state courts to toss them out in favor of a court-drawn map. Today's ruling gives Democrats another shot. The state's redistricting commission will submit new maps by the end of February, and the Democratic-controlled legislature will get the final say.

A dress worn by Judy Garland in The Wizard of Oz has been cleared for auction. A New York judge dismissed a lawsuit challenging the Catholic University of America's ownership of the iconic dress. It's expected to fetch between $800,000 and $1.2 million when it hits the auction block. Gee, I wonder who's going to be buying that iconic dress. Morgan? Does it come with the ruby slippers? I think the ruby slippers might be extra. Julia, thank you. When we come back, tighter bank lending standards have fanned the fears of a recession, but there's another part of the credit picture that could ease the mind of investors. Mike Santoli returns

to explain. And don't forget, we're a podcast too. You can catch that following the closing bell overtime podcast in your favorite podcast app. We'll be right back. Why fears over tighter lending standards could be overblown. Hey, Mike. Yeah, John. So a couple of things we've heard a lot about this year. One is the tightening of bank lending standards, that typical recession playbook people have been watching that says when senior loan officers are telling you they're tightening credit standards, that often precedes an economic downturn. The other thing we hear a lot about is the boom in private credit. A lot of private investors and pools of capital and hedge funds wanting to directly lend to companies. So Bank of America compiled this number. This is the percentage of overall commercial and industrial loan demand or outstanding loans that is now represented by

the dry powder in private credit, the private credit assets that have not yet been extended as loans. So it's up to 18 percent. And it seems to be kind of filling some of that gap that regional banks and others might otherwise have been servicing in terms of commercial industrial lending. The point being, there's a little more liquidity in the system for companies than you might have expected in past cycles based on what senior loan officers are telling folks and even, you know, other parts of the of the capital markets, what they would suggest. I guess that's true on the consumer side, too, with buy now, pay later. But I can't help but wonder on the small business side at what cost. Right. Because you're paying even higher interest rates going

the private credit route. There's no doubt. I mean, there's no escape from the fact that money's more expensive and therefore is going to be kind of scarce. There's a higher clearing price for the cost of money. Small companies, I mean, they're always kind of at the end of the line. Very, very small companies like the National Federation of Independent Businesses, they always in their surveys say that credit's getting tighter, not not looser. But I do think in general it sort of takes a little bit of the edge off the risk that somehow companies are going to be starved for debt financing. OK, Mike Santoli, thank you. Netflix releasing the results of its new engagement report.

Find out what more transparency from the company could mean for the stock when overtime returns. Welcome back. Netflix releasing its first ever engagement report today, ranking all of its shows and movies by the amount of hours viewed over the last six months. The company has had a long reputation for its lack of transparency, but now giving analysts a look into Netflix viewership statistics. Joining us now is Wedbush Securities Vice President of Equity Research, Alicia Reese. Great to have you on. I do want to get your thoughts on what this means for how you're going to be able to model your buy or sell or otherwise thesis on the stock moving forward, if it affects it at all? I wouldn't say it's a huge impact to how we model the company, although it's certainly going to impact how we view the productivity of the content. For instance, we'll look at the serial content in terms of, you know, a later season, say season four, when that comes out and how much that urged people or pushed people to watch seasons one through three again or for the first time leading up to that. So the productivity of content is really important. I think movie content is

proving to be a little trickier. Obviously, a lot of the studios and other conglomerates, content producers have gone back to post-COVID an exclusive theatrical release. And that's, you know, the best way to get profitability on a two-hour piece of content, whereas Netflix has kept it on a streaming service. And they just get a lot more viewership on the serial content. So that shift and also a lot of international content coming to the Netflix platform. I think they're going to do a lot. I think we just had a technical difficulty with Alicia's shot. We're going to work on that, see if we can get her back. In the meantime, we do have other tech news to talk about. We do. So let's talk about it. We're going to stick with the entertainment world.

Fortnite maker Epic Games winning a major legal victory against Google could result in some sweeping changes for app makers. Steve Kovac joins us here for more. Steve, Epic struck out versus Apple, but appears to have struck gold with Google. Don't know if that's because Android is just a more pervasive platform or if it's just because of the multiple levers that Google pulled to get its way across so many different partner categories. It was a bad look.

It also is a jury case versus the Apple case, which was decided by just one judge. But yeah, that was part of this whole case. Epic really painted a picture of a company that was kind of duplicitous, hiding, deleting emails that they were supposed to preserve for this case. So that was all not a bad look. Tim Sweeney spoke to our Kif Leswing on CNBC.com.

He's the CEO of Epic, saying, you know, they wrote everything down. Apple did not write everything down. And I guess the rule here is keep everything verbal as much as you can. But look, there are some differences between these cases. The Apple case, by the way, may go to the Supreme Court. This Google case, though, besides the jury, it's some other things that came out that were really interesting. These agreements that Android makes with the device manufacturers, that seems to be another sticking point that the jury kind of latched on to. You know, they talk about how open Android is and so on. But what they really did was make deals with all these device makers to make sure that their app store was the only one or the default one that you could use.

So while it is true that it is an open platform and people can play with the software as much as they want, you can download apps straight from the Internet. That's not the actual experience most people get because of these deals that Google did. And that was what the jury stuck with. I mean, there's a lot of antitrust scrutiny overall on Google, on Alphabet and really on these mega cap tech names writ large. How much does this set the stage for some of the other challenges that are coming Alphabet's way? It's Alphabet and Apple. Let's talk about both of them. It sets a huge stage for what's going to happen in the European Union in just a few months' time. Starting in March, a lot of what Epic and all these other app companies have been agitating for for so many years now is just going to happen in Europe.

They're going to force Apple to open up to other app stores. They're going to force them to use other payment services. It's a big question still how Apple finds ways to weaken those regulations or get around them. But the thrust of that law is going to really force what a lot of these app makers have wanted all along. I might argue, though, that Apple and Google are not the same. I mean, Google is going around making deals, perhaps strong-arming, some might say, these device makers. Apple is its own device maker, and its platform share is much smaller than Google's with Android. It just happens to be a heck of a lot more premium and more profitable. So Apple can argue, hey, what monopoly?

Look, Google's out there. Literally billions more devices. That is also true. But these rules were also in very specifically, you know, they didn't name Apple in the law. They didn't name Google in the text of the law. But the benchmarks that have to or the thresholds that have to be met to be considered under this law were very clearly written directly. So it could put Apple under it. So it could put Google under it.

But that's a good point. We're talking about this earlier today on Power Lunch, how there's this idea that it's kind of implicit when you buy an Apple device, you know you're locked into that ecosystem. Android kind of markets itself as open. But when these people, the jury, found out it's not as open as it may seem, that was kind of a bad look as well. So similar but different. But also, you know, it's going to be interesting to see just how these court cases affect each other, especially if that Apple one goes to the Supreme Court and we get a decision, you know, next summer. Okay.

We're going to be watching it. We know you're going to be watching it. Oh, yeah. Steve Kovach, thanks for joining us. Shares of Alphabet finishing the day down about half a percent. Let's get back. This is almost like old-fashioned Fang segment that we're having here. It was last time we talked about Fang.

Okay. So we've got Alicia Reese from Wedbush on the Netflix viewer data. She's back with us now, too. Alicia, want to get your thoughts on where we left off here. When we talk about some of this new data, how important is it going to be for Netflix as it builds out its advertising tier? I think it's very important in terms of the content that it's going to be for Netflix as it builds out its advertising tier? I think it's very important in terms of the content that it's going to be able to attract by pleasing its content creators and becoming, you know, just the best place for creative talent to work and to, you know, get those big sticking points out of the way from the recent labor strikes. They've long been the best streaming platform to attract the most creative freedom, and now they just want to please their creators even more.

And that will also incentivize, with this new platform, just incentivize the creative talent to make higher quality content, and that just gets more viewership. And certainly with more viewership, it's going to get better advertising dollars onto the platform. Alicia, when I look through this extensive list of titles and the data that Netflix has put out, and granted they're only committing to doing it twice a year,

but why do it? It's such a treasure trove, especially the stuff that's kind of in the middle and the bottom that you wouldn't have automatically known is popular? Does it have to do perhaps with some of the terms of the actor strike and having to put some of this data out there to the to the union anyway? So they figure might as well make it totally public. Or is there something else behind it that you think incentivize them? No, I think that's the crux of it. I think that, you know, they certainly needed to do it for the creative talent and for producers in order to, you know, pay for the content that's doing well

down the road and not just incentivize volume of content or incentivizing quality content by doing this. And, you know, why not give it to the press? Why not give it to the press why not give it to analysts why not at this point be the first one out of the gate to say look we're going to be completely transparent about this how great are we you know they long had didn't have incentive to do that because they didn't have as much competition but with the competition and with all eyes on them and some distrust about the quality of their content, viewership numbers, I think this should help with that in terms of getting those content creators on their side. Okay. Alicia, thank you. Thanks.

Up next, find out what Oracle's earnings fallout could mean for Adobe, which reports results tomorrow in overtime. We'll be right back. Oracle shares fell 12% today after revenue came in lighter than expected. And particularly concerning to some analysts, it was the second quarter in a row that Oracle Cloud revenue came in light. That's an interesting setup for Adobe, another large enterprise software name. Adobe reports tomorrow in overtime. After today's action, Adobe's market cap sits just above Oracle's at about $285 billion, a 52-week high,

less than 10% from Adobe's 2021 all-time highs. Adobe does face some headwinds. EU and UK regulators are both scrutinizing its acquisition of design software rival Figma. Consumer spending also has held up. But as we heard from real estate mogul Rick Caruso here on Overtime yesterday, some fear that that momentum won't last. Meanwhile, on the enterprise side, this earnings season has been perhaps sobering in some cases. Aside from Oracle, MongoDB, and Asana reported

a week ago. Both are down more than 10 percent since. And then Box and C3 AI also pulling back post-earnings on weaker demand trends. On the other hand, Samsara and Elastic are up. Both have tapped into the drive for efficiency and the path to AI. So investors have one more day of trading to puzzle over which of those trends Adobe might follow, Morgan. The whole thing is very fascinating. We keep talking about macroeconomic environment, all of the uncertainty, what it's meant for tech.

I mean, when we look at something like enterprise software or you look at like the cloudy forecast for the cloud business at Oracle, how much is this a leading indicator versus a lagging indicator of where money is going within the economy? Well, I think the difference is, can you get more from your dollar by pouring it into one category versus another? In the past, Adobe has suffered during periods when the consumer outlook was uncertain because it was like your typical marketing spending, oh, let's pull back on ads. But since they've shifted and become more of an enterprise software company and they've expanded their categories, now one might argue that they're more of an efficiency driver. Plus, they've been an early mover in generative AI, which should be an efficiency driver on the work front. You don't need as many creatives or it doesn't take that creative as much time to create different options, possibilities, mock-ups for where the project might go.

So does Adobe spending continue despite pullbacks in other areas? That's, again, what investors have to figure out. It's going to be key. And of course, we've been following this so closely. We've had so many of these interviews as Adobe has rolled out some of these new AI-enabled services and products and offerings this year as well. Something for investors to keep in mind, Shantanu and his team do tend to guide conservatively when there's fog on the road ahead. And then oftentimes it turns out, oh, maybe it was a little too conservative, but he tends to err on that side. So if you're kind of gaming out where you expect guidance to be, hey, I would keep that in mind. Okay.

We're going to watch that tomorrow here on Overtime. In the meantime, Ford investors thunderstruck by the automaker slashing production of its electric F-150 lightning pickup truck. Find out what that could mean

for rivals like Rivian when Overtime returns. Welcome back. Here's some shocking news. Ford is slashing production of its electric F-150 Lightning pickup truck because of slower than expected sales. Phil LeBeau has all the details. Phil, this really seems like an about face versus how they were putting investment to work in this just earlier this year. It is a reversal, Morgan. Ford thought that the market for the F-150 Lightning would develop much quicker and there would be greater demand, but it's just not there. And as a result, look at what their production plans are for 2024. They've been cut in half in terms of what they plan to build. Now, 80,000 annually was going to be 160,000.

This year, their sales are just over 20,000 vehicles. That's a steady increase, including the best November they've ever had, best month ever in November when it comes to F-150 Lightning sales. But overall, the market has shifted. And what you're noticing when you take a look at internal combustion engines versus hybrids versus EVs, hybrids have passed EVs in demand.

And I've talked with Ford dealers. I've talked with other dealers who have said people come in, they ask about hybrids before they ask about electrics. And that's what we're seeing here with Ford and this decision. Look, their F-150 hybrids, they outsell the Lightning by a two to one ratio. So as you take a look at shares of Ford, keep in mind that their market share, their number five in EVs in the U.S. with five percent market share. This is a prudent move by Ford. If the market's not there, don't overbuild. And that's behind this decision here to cut production of the Lightning next year by half of what it was originally going to be. All right, Philip. Oh, thank you. Tomorrow, John, we get PPI. We get the Fed decision in the afternoon. We get Adobe, which you just broke down a few minutes ago. But before we get to all of that, I do have to say happy birthday. Oh, it's a very special day. It's it's special for me and hopefully for my mom. Yeah. Forty seven today., tomorrow, Nordson reports. You don't want to talk about it, do you?

I mean, we talked about it. What's there to say? It's not a special. After you're 45, come on. You wouldn't know anything about that. But yeah, Nordson reports. Curious what kind of read on industrial demand after J-Bill lowered its guide a couple weeks ago. Yeah, we'll have to take a look.

Multinational, industrial, corporation, adhesives. So certainly a sticky part of the market. Thank you. That's going to do it for us here at Overtime. Fast money starts now.