Closing Bell - Closing Bell Overtime: New Year, Same Struggles? 1/3/23

Episode Date: January 3, 2023

Are investors in for any relief in 2023? Trivariate’s Adam Parker, Sofi’s Liz Young and CIC Wealth’s Malcolm Etheridge give their expert takes. Plus Cheryl Young of Rockefeller Global Family Office gives her 2023 big tech playbook. And, Mike Santoli’s first last word of the year.

All right, Sarah, thank you very much. Welcome, everybody, to Overtime. I'm Scott Walkman. You just heard the bells. We're just getting started for Post 9 here at the New York Stock Exchange. In just a little bit, chart expert Jonathan Krinsky on Apple's next stop. Hint, it's lower. He'll tell you just how low it might go, though.

We begin, though, with our talk of the tape. That's still struggling growth trade. The Nasdaq begins 2023 right where it left off. Lower. Is any relief in sight? Let's ask CNBC contributor Adam Parker. He is the founder and CEO of Trivariant Research. He is right here with us on set. Happy New Year. Happy New Year. Good to see you. Nice comeback for stocks, although the weakest link or one of them for certain again, tech.

Yeah. When's it going to start working again? You know, I feel like this is going to be a little bit of do the opposite of the consensus. That seems to be the right thing to do. Most investors I've talked to think the market goes lower in the first half of the year, then recovers later. So I wouldn't be surprised if we ended up higher in the first half and then faded later. Why? We talked about it a little bit, I think, last week, just briefly, which is what are the two big barriers to the market? One is the Fed was hawkish, and the other was the earnings estimates were way, way too high. Now the estimates are probably a little bit too high,

but the bulk of that downward revision is behind us. Right. And maybe the Fed will get a little more hawkish, but they're not going to get incrementally as hawkish as they were from, say, beginning of last year through now. No, but we're not going to get hit. A couple of hurdles are behind us. We're not going to get hit with the double tsunami, but the waves are still big and dangerous. I just think that the markets are second derivative, not first derivative mechanisms.

And that stuff is maybe still derivative, not first derivative mechanisms. And, you know, that stuff is maybe still declining, but the rate of change is slowing. So I look out and I think, all right, maybe earnings can come down a little bit. But all of a sudden people say, well, I can't own anything that loses money today. I can't own any software companies. You asked about tech? Really? I don't know.

A lot of software companies are pretty good productivity enhancing companies. Like what? There's tons of them that are in the sort of $3 to $20 billion cap range that are down 80% that will enhance productivity. And so we put out a lot of these idea screens that are names that we think have some revenue capability. So we'll see. I think this earnings season is going to be great. But if you're saying, Adam, look out in 2023, I'll bet you software outperforms. I'll bet you the software index beats the S&P 500 in 2023. And I think it's because the Fed will start getting less hawkish,

maybe even dovish by year end. Okay. And that will be good for multiples. Well, how far in advance of that? I'm sorry to interrupt. How far in advance of that is it safe, quote unquote, to buy some of these names that you think could actually have a good second half? Because I mean, if you're telling me that everything can have a good second half of the year. I don't think everything will have a good second half. I think the market will rally some here in the first few months just because, you

know, the bulk of the bad news is behind us. So we looked out. I wouldn't be surprised if we had a fade. It's really hard to make that double-breaking putt. You know I don't love that. But I would say is software businesses can grow. Businesses that lose money. There's a general view right now. I can't own any companies that lose money. How many reports do you get in your inbox saying,

I won't buy a negative free cash flow. I have to buy positive general. Rightfully so. What time am I going forward? Not backward, right? We're saying from now for the next year. From now for the next year, do you think there are no businesses today that lose money that will be good ideas to own over two, three, four years? Of course there will. And so I think maybe now that growth is really lagged, hyper growth stocks were down

26% in Q4, the S&P was up seven. That's not really how risk on trades work over the medium to long term. So I'm starting to think I got to own some growth. Maybe some of it's going to be software. And that might surprise people, especially when sentiment's low. EV to gross profit, enterprise value to gross profit is the number one valuation metric investors look at for software. The numbers have been reset massively from where we were. And so I just think the risk was getting from horrendous a year ago to not terrible.

OK. What about for an Apple, for example, which remains a focal point of pain, continues to hit new 52-week lows? It did yet again today. There are so many different components to this. It's so heavily owned. You have a large retail component to it, along with the Teslas of the world, which are yet another sort of stock at the epicenter

of all of this. How does this all factor into this market? Maybe having a surprisingly good first half rather than second, because I don't think that's going to happen if these two stocks continue to do what they're going to do. Yeah, I mean, look, I don't know how to value Tesla. I didn't understand when it went up a trillion, and I don't understand when it's down $400 billion or $500 billion in terms of what it's really discounting. So for me, I think that's one where I just say I don't know what makes it go up or down, and I'm not really paying a lot of attention to it. I know I've had an order to get one of their pickup trucks for two years, and I haven't got an update. So, yeah, when you miss your orders and the thing's crazy valued, you're going to go down. I think Apple's a more interesting one. I think if you look out two, three, four years, it's at some point

investors are going to say the jig is up. It's going to be hard for them to grow at the rate they did, compound the cash flow at the rate they did. And so that one, I think, is one to really keep an eye on. It's unclear they have as much kind of pricing power as some of the other businesses that have sold off hard, including Microsoft. Apple doesn't have pricing power? Their phones are like premium of the premium. They have the most China exposure. It's going to be hard. I mean, I'm talking about replicating what they built.

We're talking about the growth rate from 23 through 27 or, you know, that five-year growth rate. I think that one's gonna be a little bit harder to get way above GDP so we'll see I mean obviously they generate a ton of free cash but wait you're telling me that there are better opportunities in some of those software stocks yeah we're talking about an Apple yeah for sure we're talking about stocks going up we're not talking about you know we're saying can Apple go go up 100% in the next two to three years? I don't think so.

But can I dig in and find, I don't know, some HCP or some software ticker that can rip when their product works and helps on cloud computing and efficacy and product? Of course. But you need like a super-powered microscope these days to find those, don't you? Whereas before it was like, get the shovel. Oh, here's unprofitable software. Throw it in my basket. Now the basket got dumped over. Right. You may get a little bit of that when they get dubbed. You get the mold of expanding. But I think ultimately, all I'm saying is I do a bunch of dinners and idea events and every single person

says, well, I won't own profitless companies. And I'll say, wait a minute, Salesforce.com lost money for a long time before it went up several hundred billion market cap. So did Amazon. So did everything. So of course, there's going to be some businesses that have to invest now to make money later. And some of those are going to have pretty good ideas. So I'm not like hog wild bush. I just know what the sentiment is. And I know you like a little contrarian thought process. I'm just saying some software things will be decent. That's all I'm saying. Okay. Alan Greenspan, he did a end of year Q&A with the Advisors Capital Management Group, the details of which have come out today. He says recession is, quote, the most likely outcome. He doesn't expect 2023 to be as volatile in markets and says if there is a black swan event on the horizon, he'd be

worried about it's China invading Taiwan. What do you make of what the former Fed chair has said? Because all of it sort of plays into how we need to think about whether some of those things that you like are going to work or not. Yeah, I guess in terms of the recession part, I guess generally economists let us know six months after the fact whether it was a recession. I think the stock market predicts recessions. The stock market went down a lot, so it told the economy it was going to slow a lot. I think that's mostly in the price

at this point. Recession's in the price? Well, I mean, I think that a slowing economy's in the price. We had a terrible Q2 and Q3 last year, and the market knew the economy was slowing. Whether we have some recession or not, I don't know if it matters as much as what happens to S&P earnings, which, as we've talked about a lot, is a superior entity than the economy. I think we're going to in an eroding economy. It's going to slow. I think there's some growth businesses that can grow earnings through that. I think there's some cyclical businesses that can have balance sheet repairs. One of the things I'm most excited about sitting here today, and, you know, we published a big note on this this morning, is i think it's going to be a way better environment to pick stocks right now than it was

last year last year was just all about getting the feds hawkishness right and they either all went up or they all got mostly went down especially when you and i are on the show together right but if i look at this year i'm like wait a minute company specific risk is up correlation between the stocks is down the valuation dispersion is widening, meaning there's some things that are expensive and cheap, and I could probably do a much better job. So if I'm a stock picker, I think this year I'm more excited than I've been in the last couple to try to find some winners and losers. Okay. Let's bring in Malcolm Etheridge of CIC Wealth and Liz Young of SoFi as we expand

our conversation here. Liz, I'll go to you first. You've been sitting here listening to what Adam Parker has suggested. Is he off his rocker? I mean, a little all the time, right? Always a little off his rocker. No. So there's a couple of things I would say here. I do agree that it will likely be a stock picker's market.

However, there aren't that many people out there that are building their entire portfolio of just individual names. So we still have to talk about it from a broader market perspective. And I think that we've gotten sort of obsessed with this idea as we start the year of let's break it up into one half versus the other half. Let's just try to get through one month at a time. And I think January could be a pretty painful month. We've got kind of this leftover momentum on the downside from last year.

We don't have a ton of Fed data that's going to happen in January. And I also think that we're going to start to see the labor market crack as we get the December data. So I don't think the market is going to like that very much. And earnings revisions are also likely to come in. And I think the consumer is going to start showing some pain, particularly after we get retail numbers from Decembercember how do you argue with anything that liz just said sure uh i don't argue with the off the rocker part that seemed there's some evidence so i could that's why i mentioned that right off the bat you know that's probably in the price uh look in in q4 you had the sap up more than five percent you had consumer discretionary stocks down more than 10 that's the first time that's happened ever.

So it finally made sense to bet against the U.S. consumer. I think people know that the environment is slowing. The one thing I might quibble or we could debate is will wage pressure decline very much? Because I think a lot of corporates that I talk to, we do a lot of work at Tribarion for companies directly. They're raising wages. What they're trying to argue is, hey, we took you up 3% when CPI was zero. We're going to take you up 3% when it's seven, but hey, we're still good to you. So they're still going to take wages off. So I think the issue is really going to be on the employment numbers. You start seeing a lot

more firings and unemployment rate grow, but I don't think you're going to see the wages crack broadly, at least for the companies that I look at, the public companies. Malcolm, Adam has incrementally gotten more positive, I feel like, on the markets over the last many months, right? It's a different place now than where it was then. You were negative, and I started to feel like you had morphed into a bit more positive as well as we ended 2022. You feel better about the market layout this year than you did last? I do. I think that more than likely we can avoid that whole conversation about are we going to have a soft landing versus a hard landing?

I heard the comment by Greenspan about whether or not a recession was on the horizon. And I take Adam's point about the fact that when an economist comes out and tells you that something's going to happen, it probably already happened six months ago, right? I've been saying for some time now, months and months, that the recession already happened. And those of us who are willing to acknowledge that and kind of move past, like, where are we in 2023, are the ones who are saying that we've already turned the corner and started the recovery from last year's bear market. I think that the whole conversation about a soft landing can now be retired. I think that realistically, the 20 percent bear market that we just booked, which was the first in a very, very long time,

is the the the hard landing that we could get. It's the hardest landing that we could have gotten. And so I think just trying to find where do we find this this hard landing that's going to happen from Powell's lips to our ears? I think we got to get past it. I think it's already to use Adam's phrase that he tried to stay away from, but I'll throw it back at him. It's already baked in. It's already in the news, and it's not new news at this point. Liz? I mean, some of it's baked in, certainly. The deepest drawdown we had was 25 percent, which is definitely bear market territory, but it's not recessionary bear market territory. And if we're arguing that the recession already occurred, it somehow occurred and didn't reset the business cycle. So when you look at where we are from a

late cycle perspective, all of the indicators are still very much saying late cycle, including market signals like inverted yield curves across the curve. We didn't get back to early cycle. So there was no transition. We need inflation to come down. We need probably demand to come down in order to bring inflation down. And the economic recession usually follows an earnings recession. If we have negative earnings growth in Q4, that will be the first time that we have negative earnings growth since 2020. So that would be maybe the first quarter of an earnings recession. So I don't think the full recession has happened yet. And I think that it means that the market still has further down to go. So, Malcolm, I mean, you said we've already had a hard landing in the market. That suggests that

we are not going back to retest the older lows from the fall. That has to be what you're suggesting. Yeah, let me clarify. I think that artificially we will retest those lows after Q1 numbers come out and we have that heartburn and that quote unquote shock that suddenly folks look and a reason to be positive will turn their focus to the Fed. And if the Fed uses the word pause, even if it follows a quarter point rate hike, we'll use that as a means to say we're off to the races. Things have changed. This time is different. And I take Liz's point about us needing to focus on the business cycle more closely. But I also think that to use the point you guys were just discussing with unemployment, unless we think that unemployment is going to get significantly worse now than it was in 2022, at basically any point in 2022, that's what I'm also making the argument on, the fact that that whole thing around the conversation around employment

makes this time different. Dare I say it, this time is a little bit different. Go ahead. AP, go ahead. I mean, I think there's a lot of common ground here, and then there's some splitting hairs. But we talked a lot the last six months last year. I would say, Scott, man, I don't know if the market's going up 10 or down 10. I see it equally balanced.

I'm sort of confused about up 10. I do see a slight positive skew now. I don't know if it's down 7 or 8 and up 15 or something. I don't think there's any common ground. I think Malcolm is as positive as I've heard recently. This is as positive as you've ever heard me be, yes. Okay. I think Liz is sort of meeting back in C.

She's leaning negative, at least in the near term. Short term, though. I like the month-by-month thing. Yeah. But, you know, I think, you know, for me, a lot of my clients care about stock selection, right? They're picking winners from losers. And so I focus a lot more on that part, and I think it's going to be a richer playing field for that. And I think the main point I want to reiterate is what hurts the market is when multiples contract, meaning the Fed's hawkish, or when earnings collapse. And all I'm saying is more of that is behind us than is in front of us. were correctly negative for most of last year, you're kind of getting closer to thinking about buying stuff for the next 12, 18 months than you are waking up today saying, oh, wow, it's terrible,

and I'm going to start shorting stuff for the first time. What's the biggest risk, Liz, right now? Is it this idea that Malcolm puts forth of the pause means off to the races? Is that underestimating? Is that the biggest risk, underestimating the Fed's staying power, its durability, the degree to which it elevates rates and then stays there? Probably. I mean, there's another risk embedded in that is if the Fed pauses too early, which I don't think they're going to do because they continue to commit not to do this. But if they pause too early and don't take care of inflation,

then we've got a bigger problem a la the early 1980s, right? But if the risk is that we're not hearing them at their word, that they're going to keep rates elevated for the remainder of the year, then really what it means for markets is that we don't make a ton of progress. We kind of trudge through this in a stagflationary environment. We chop around and we finish the year, I don't know, maybe a little better than flat, which in an inflationary environment is negative, right? So that's probably the biggest risk.

The timeline is longer than we all expect. If you knew, Adam, if you had a crystal ball and you knew that the Fed was going to cut rates way later in 2023 towards the end of the year, would you buy stocks today? I probably wouldn't. rates way later in 2023 towards the end of the year. Would you buy stocks today? I probably wouldn't. I'd probably wait in the spring, go hog wild buying consumer discretionary stocks. Because if you go back to like January 07, when they did that surprise 75 bps cut, discretionary massively outperformed for the rest of the way. Here we've had discretionary lag a ton. And if they're going to start, you know, I would say three to six months anticipatory of that cut, you're going to want to max out on discretionary.

I think it's too early now. They've got inventory problems in that area. You know, but I think you'll get there in the middle of the year. The part that I agree with, I mean, a lot, is this inverted curve has, you know, troubled me some. You know, it's hard for me to say that's awesome that the market's discounting, you know, that, you know, things slow. Because, I mean, you know, that's part is that you guys like dump water over the heads of economists.

I mean, the curve is inverted for a reason. And the bond market's been correct. No, I'm just saying I worked with a lot of economists for a long time, and I never found their forecast for the GDP to be helpful for stock selection. Because when you actually regress it, the S&P predicts the GDP, not vice versa. But that's the same thing. So it's useless to know what the economy is. But that's the same thing as saying, well, strategists put out their targets on the S&P every year, of which you used to be one. And then you find it almost meaningless by the end of the year.

Now that I work at my own firm and clients pay me for my work, there's a reason we don't put out a target. They're useless, and people who analyze them know that, including all the folks who work at the Boltspacket firms. They know that. Go read all the... The reason I do my year-ahead outlook in January and not November is because when you do it in November, by the time it's January, you have to revise it already. Who wants to revise their year-ah ahead outlook when the year just started? That doesn't seem like a great business model. So we're just talking, Malcolm, about the consumer, trying to think of when the consumer is going to roll over,

if in fact that happens to any great degree. You just recently added a consumer name to your list. It's Costco. Why so? Yeah, so the thinking on Costco kind of goes back to the conversation we were having about whether or not the recession persists and whether or not we are turning the corner here or if this thing is going to linger throughout the remainder of 2023. And so we added Costco to our list of stocks that we like and we added to the watch list simply because across all the retailers, you know, who are having conversation and increasing our fears around inventories piling up and consumers having less spending power, all that's true, but less so for Costco, right?

They don't have to worry about higher income customers trading down like Walmart talks about and whether that's going to run out at some point. And Costco captures market share from each level of the customer value chain. So the most high end and the most budget conscious shoppers both shop at Costco. And so that's going to matter in the midst of a recession. If that thinking, if the conversation around the yield curve and anything else that tells us that a late stage recession is likely on the horizon for us this year, if that is true, Costco is the way to play that consumer that allows you to not have to be smart about whether it's going to be the higher end or the lower end consumer that

is most negatively impacted by it. Liz, the area in the market you like the best right now? Bonds, treasury bonds in particular. Not even anywhere in equities. And if, well, no, I still would wait out the equity story. I mean, defensives are frothy, right? I don't think that I'm quite ready to nibble on the equity side, on the risk side, on the cyclical side. But this is the moment for things like the two-year treasury. Before recession is confirmed and before we know that the Fed will have to pull back, this is when you buy treasuries. I still also think that credit spreads need to blow out.

They have not shown recessionary signals yet, and that is still to come. Therein lies the problem, right? To get people more excited about the market, you ask what's the area you're most excited about? It's bonds. Well, when you said the market, I didn't even know bonds was like one of the possible answers. I think the market is a stock market. It's a market. It's like the city is New York and the market is a stock market. The park is Central Park. It's one of the possible answers. The market is a stock market. It's a market. It's like the city is New York and the market is a stock market.

The park is central park. One of the clear problems. What do you mean the market? There are alternatives. For sure. And I think there weren't for years. You know what we talked about in the air six, nine months ago? I bought the two-year-old for the first time in my life, you know, six, nine months ago.

And I think I agree. That makes the staples unattractive for those who can choose between asset classes. A lot of people I talk to, they can't choose. They're trying to beat the S&P 500 long only. They've got to own stuff. What I'm telling you, you know, last year it was energy, energy, energy, and that was kind of all that mattered. I think you've got to hedge that a little bit. But I like software and energy this year.

I think those two will beat the market. We're also overweight health care. I think the more that's played out, I'm a little bit more worried about how crowded health care services have gotten. So, you know, we're kind of, you know, I'd say pumping the brakes a little bit on some of those names, just given how much they've worked. Industrials, too, you don't like. Our call, you know, you've got to be hedged when you're beating the market. You're overweight energy and materials. You've got to be underweight industrials. Otherwise, you get run over if you get a cyclical pullback. So I'm a little bit more worried about industrials because

their cycles got prolonged because of COVID, because they couldn't sell all the stuff that was demanded. I think their estimates probably still have to come down more than others. When you're trying to beat the market, relative estimate achievability matters. And if the estimates are more too high in industrials than they are elsewhere, I kind of play that risk award off. All right. You guys are great. I love the conversation today. Thanks so much and Happy New Year. Malcolm, thank you. Many times we'll see, I'm sure, in this year, along with Liz and, of course, Adam Parker right here on set with us today. Let's get to our Twitter question of the day.

We want to know, will Apple see a turnaround in the first half of 2023? You can head to at CNBC Overtime on Twitter. Cast your vote. That stock hitting another 52-week low today. We'll share those results later on in the hour. We are just getting started, though, here in overtime. Up next, the case for tech. One top-ranked advisor sees big opportunities in that sector.

We'll bring you the strategy. We're live from the New York Stock Exchange. Overtime, we'll be right back. Welcome back. Big tech starting the new year, much like it closed 2022. Our next guest made the case for that group in October right here in overtime. And she is sticking by that call today. Let's welcome back Cheryl Young of Rockefeller Global Family Office, ranked on Forbes' top wealth advisors list since 2016, currently number four on the top women advisors list, and numero uno, number one on the best in-state advisors list for Northern California. The trophy case is full.

Welcome back, and Happy New Year to you. Happy New Year, Scott. Thank you. All right, so we're staying with tech, and almost no one wants to touch that. I'm staying with tech. Almost no one wants to touch that. I'm staying with tech. Almost no one wants to touch it. Why? You know, last time you and I spoke just a couple of months ago, we talked about tech. I reiterate my outlook for tech. You look at the SOX index, it's up 21 percent from our discussion at that point.

I think there are a lot of beat up names and so a lot of opportunities. And the P ratios have gotten to a level that's reasonable now, whereas a year ago, everything was very, very expensive. So I'm seeing a lot of opportunities out there in the tech space still. Let me ask you this. So more reasonable than outrageous doesn't necessarily make them cheap enough. Why are they why are they worthy of of my money now? And why don't they still have some multiple compression to go? You know, there's a lot of mixed signals. I don't disagree with you. I think there is going to be pressure on the technology space really until the Fed at least points to a pivot. Whether or not they pivot, if they point to pivot, I do think we'll see a pretty big and strong bounce. But until then, I am fairly bearish on the overall market, not just tech, but on everything.

And we've seen tech leading the market down. I think we will continue to see that until the Fed's pivot. I think at that point, we will also see tech leading the market up. So the market's got a problem until we get that pivot. And the pivot point is the great unknown. That that is the great unknown. And for me, one of the biggest risks to watch out for is the level of unemployment. We've already seen some pretty big numbers hit the tape in December. We know this is going to be getting worse before it gets better. So if the Feds get it right and unemployment has sort of a soft landing and we end up with an unemployment number around four and a half, five, I think this market recession

will be very, very shallow. If the Feds overshoot, which is Rockefeller's outlook is that they will overshoot and probably overdo it, we could see unemployment get a lot worse and tech will continue to struggle at that point in time. With that said, in every crisis, there are always opportunities. And if I think about the past history of the world, every time we've had plagues, we've had the most major pandemic that we've had in over 100 years with COVID-19. Every time we've had war, you look at what's happening in Ukraine and Russia. This has always led to the most innovation, and that has also led to the most innovation in technology. Now, there's so many periods of time, though, certainly in more recent history, I know you

would agree, where we're boosted by the Fed. And this time, the Fed is not your friend. It's your foe. And I just wonder if, as I discussed with the prior group in our roundtable conversation about the largest risk lying with underestimating the Fed. And even though you suggest that the House view at Rockefeller is thinking they'll go too far, that they're not just going to go too far. They're going to stay off sides for a long time. They could. If you look at bond traders, bond traders are actually pricing in the opposite. And Liz Young just alluded to this as well. We have an inverted yield curve right now. And when you have a two-year substantially higher than a 30-year, that is telling us that the markets think bonds will go up but pull back down in the long run. So I think you have to watch the

unemployment numbers. You have to watch the Fed, but you also have to look for the opportunities that are resulting in this, again, crisis. Greg Fleming has built out a platform at Rockefeller of some of the best alternatives out there. So if you're worried about the public markets, you could look at the alternative space. We had 180 IPOs in 2022 versus over 1,000 IPOs in 2021. So I do think in the private space, there are going to be some unique opportunities. And I do think that while there is still a lot of pressure on this market, there are ways of getting in. What I'm advising my clients to do

is probably a little bit different than what most people think of, but I am a rock climber and I look at every opportunity and say, all right, if I'm climbing up this big cliff and I want to stay safe, I'm not going to go free soloing. I'm going to stay on ropes. I'm going to stay attached. I want to make sure my blower keeps me tight. So I am pairing every trade with options where I'm selling a call and using the income from the call to buy a put.

And that way my clients can stay invested, but have the downside protected, but still have some nice upside. And more importantly than anything, an income plan so they do not have to sell during a down market. Understand it completely. Covered call strategy has become very popular. In fact, some of the guests who routinely come on the halftime program and overtime have done that quite successfully. So I totally get it. Last question, because Apple is such a focal point and want to make it kind of an umbrella for our show today. We topped it, you know, with the fact that it hits another 52 week low.

We've got a chart expert coming on momentarily to tell us where that chart says it's going. What's your view as that stock continues to go down as somebody who's so heavily focused in growth and tech? You know, I have to be careful and stay away from individual stock calls, but I'll talk about the FANG stocks as a whole. And what I would say there, Scott, is any of the FANG stocks that are trading under a multiple of 25, I'd be doubling down on. So I'll leave it at that. Oh, OK. That says it all. It's great to talk to you as usual. Cheryl, we'll see you soon. Happy New Year again. Absolutely. Happy New Year. Thanks, Scott. All right. Thank you. We have breaking news out of Washington.

Ilan Moy is here with those details for us right now. Ilan? Scott, we are now on the third round of voting. And once again, California Republican Kevin McCarthy does not have the votes he needs to become Speaker of the House. He could only lose four Republican colleagues. Right now, there are 12 GOP lawmakers who are voting against him to be Speaker of the House. That means he does not have enough support within his own conference. In the previous two rounds of voting, there were 19 lawmakers who voted against him on the Republican side.

That number is likely to even increase this round. The holdouts are saying they will not blink here. Now, McCarthy's strategy appears to just keep on voting and potentially wear down his fellow colleagues, his fellow lawmakers until some resolution is found. But Scott, in the previous time that this happened, that was 100 years ago, it took nine rounds of voting before a speaker was eventually elected. McCarthy himself has said that this could take several days. So they'll just go until a speaker is elected? That's how this process is going to work, no matter how many days, hours it might take? I think the record is

two months, Scott, so this could take quite a while. Of course, it is up to McCarthy to call a recess or to adjourn at any time, perhaps cut a deal privately in some back rooms. But as of right now, this fight is being fought on the House floor in public view, and they appear to be at a stalemate with the holdouts actually potentially even gathering some support. Interesting. Elon, thanks so much for the update. That's Elon Mui in Washington, D.C., the latest there as we follow how all that plays out. Up next, how low can Apple go? It is the question of the moment. It's the question weighing on Wall Street yet again today.

Top technician Jonathan Krinsky is back with us. He's charting the key levels to watch for that tech stock. We're back in overtime right after this. We're back in overtime. Take a look at shares of Apple selling off again today, hitting a new 52-week low. The market cap falling below $2 trillion for the first time since March of 2021. And my next guest says there is even more downside ahead. Let's bring in Jonathan Krinsky, BTIG's chief market technician. Welcome back.

Happy New Year. Same to you, Scott. Thank you. It's been ugly. Chart's broken, technically. Where's it going? Yes. So I think, you know, there's three levels we'd be watching the downside. But, you know, first, we just stayed, as we discussed with you last week, you know, our primary focus is identifying the primary trend, which in this case, both in absolute and relative terms continues to point lower. But as far as levels,

we'd be looking at the first would be around 114. That's the 200-week moving average. It's been a while since we tested that. It tends to be decent support. I think that's about 7% or 8% lower. I think that's very likely to be tested in the near term. The second would be around $96. There's an unfelt gap from back in July of 2020.

So that's also, I think, fairly reasonable to assume that gets filled at some point this year. And then the final level would be down around $82, which is the pre-COVID highs from February 2020. That'd be about a 34% downside move from here. I think it's possible, but it's not necessarily our base case at this point. Yeah, it's just it's a I know you say it's the you know, the pre-COVID level, it would it just feels astounding to watch a stock trade like Apple where it was to ninety six, eighty two. You really expect it to reach those levels at some point? I mean, what's the probability in your mind that that happens? I mean, I think it's very reasonable if you think about the outperformance it had,

you know, leading into the peak last year. And it's still, you know, the largest market cap name in the market. It's still about 6% of the S&P 500. So, you know, this is what happens as bear markets progress that, you know, the names that have held up better and the bigger cap names ultimately, you know, kind of catch down with what's already been selling off. So I think, I think, again, the 114 level, I think highly likely 96, I'd say very, you know, very to pretty likely. But we'll see. We'll take it one, you know, one day at a time. All right. Yeah, we will. What about for Tesla? Have you checked out those charts recently? I know you've seen them, obviously. Everybody's checking them out recently. But have they given you an idea about where that could trade to? You know, Tesla is a bit further along. Obviously, in this bear market, it's,

you know, it's seen more of what we would consider capitulatory type selling with, you know, huge surge in volume. The issue is that, you know, the surge in volume does not always coincide with the final bottom. So we're thinking lower for Tesla as well. I think we're closer maybe to a decent bounce there, but that'd probably be an opportunity to sell. You know, we could get some targets, you know, down in, you know, 70, 80 as well for Tesla, which would not be that, you know, it's moving 10 to 12 percent a day. So that's not hard to to achieve in this market. Yeah, no doubt. J.K., appreciate it. We'll see you soon. Jonathan Kritsky joining us in overtime here. Coming up, top picks for your portfolio. The

halftime investment committee rolling out their best ideas for the new year in our stock summit today. We'll debate today's first round of picks. We're back right after this. In today's halftime overtime, kicking off the 2023 stock summit, the Investment Committee rolling out their top stocks and sector ideas for the new year. Shannon Sikosha of SVB Private set to unveil her own ideas on Thursday, but she joins us now to weigh in on the first round of picks. It's good to see you. Ready to go through some of your colleagues' picks here? Absolutely. Happy New Year, Scott. Happy New Year to you. Okay. Joe did his today. Microsoft, Prologis, Texas Instruments. His sector was real estate. What do you make of his picks, the relevant ones to you?

You've got some REITs, and you also have Microsoft, right? Yeah, absolutely. I mean, the multiple Microsoft is down at 24 times, still a premium, but this is a longtime core holding. 51% of the revenue is now from Azure, and so that's going to continue to improve profit margins. I like the REIT pick here, too. We have Equinix and American Tower, Scott. We'd like the data center exposure there. But I think REITs

could have a nice tailwind as we get in the second half of the year with rates coming down. Yeah. Estee Lauder is an interesting pick today. You own that stock, don't you? Yeah, this has been certainly an area that we've liked in terms of prestige beauty over the last couple of years. And although I'm not fully bought into the China story just yet, this stock absolutely benefits from increased international travel. And we're going to continue to see that through this year. Yeah. Ultra Beauty was Josh Brown's pick. That's the relevant ownership. NextEra Energy was one of his picks. You do own that one, correct? Yeah. So this is a really interesting business. Most people know this as,

you know, owner of Florida Power and Light, which is in a very supportive geography, but they continue to grow their customer base. And, you know, with a regulatory tailwind, I think that this could be the utility to own this year and into next year as well. Josh picked aerospace and defense as his top sector for 2023. You own L3 Harris. What do you think of the overall space, though? Because it's getting some love from the street today and it obviously has just come off of a pretty darn good year. Yeah, unfortunately, I think this continues. We continue to see geopolitical overhang, you know, not just, you know, as it relates to Russia and Ukraine, but also significant

increase in defense spending in Europe. I think that that's coming. I think that we have entered a new phase for geopolitical leadership globally. And I think that defense is going to, unfortunately, be a place that's going to continue to see some growth in the next three or four years. All right. Stephanie Link took General Electric, Broadcom and Starbucks. She likes the financials. You like Honeywell. I'm assuming that means you like it. You own it. You like it more than GE. Why would you pick one over the other? Buy this, not that, if you will. You know, there's an undercurrent of technology as being a theme for us longer term. I know tech stocks have been, you know, under a lot of fire and pressure over the last

couple of years. But you think about the way Honeywell actually manages their business. It's incredibly efficient, like the space here. As far as Starbucks, don't love this pick by Steph. I think that there's a lot of enthusiasm around China that's driving interest in Starbucks. And I think that's going to take some time before they really rebound in that region. OK, we'll leave it there. Shannon, thank you. We'll see you on Thursday when you have your own stock summit picks. That's Shannon Sikosha. Still ahead, we are tracking some big stock moves in overtime. Seema Modi standing by for us today with that. Hi, Seema. Scott, yet another Fortune 500 company unionizing, plus a rare downgrade of a real estate stock. And the stock

is moving here. I've got that and more coming up after this very short break. All right, we're tracking the biggest stock movers in overtime. Seema Modi is here with that. Hi, Seema. Hey, Scott, let's start with Microsoft. Workers are forming the company's first union. That, according to the Wall Street Journal, 300 employees from the company's ZeniMax gaming unit. This follows the FTC's decision to block Microsoft's acquisition of Activision Blizzard for $75 billion. The stock is flat and over time. You can see it trading at $239 a share, but keep in mind, losing about 30% in the past one year. Let's get a pulse on Victoria's Secret shares falling about 8% in the regular session as the struggling retailer goes through yet another leadership change. CEO of eight months, Amy Hawk, stepping down

at the end of March, and the stock is down in after hours as well. Just in the last few minutes, Digital Realty Trust. This is a real estate investment trust focused on data centers downgraded by Credit Suisse analysts to underperform, citing new headwinds. The price target cut from $91 to $81 a share. The stock trading at $100 a share and down about 2% here in the overtime. Scott? All right, Seema, thank you. That's Seema Modi for us. Still ahead, Santoli's last word. We'll find out what he is watching as we wrap up the first trading day of 2023 when we come back. I have an update on shares of Rivian, the EV maker just releasing fourth quarter production numbers.

Take a look there. Stock moving just a little bit in overtime. They produced just over 10,000 vehicles in the fourth quarter and more than 24,000 vehicles for all of 2022. That full year number coming in below the company's production target. Keep our eyes on that stock as EVs remain in focus. Last call. Weigh in on our Twitter question. We want to know if you think Apple will see a turnaround in the first half of this year. Head to at CNBC Overtime to vote. We'll bring you the results plus Santoli's last word. We'll do that next.

Let's get the results of our Twitter question. We asked, will Apple see a turnaround in the first half of the year? The majority of you saying yes, but, I mean, only 52 to 48. It's not like a runaway. Mike Santoli with his last word joins us now for his first last word. I mean, look, there's a lot of year left. So 52% of people say maybe. Battleground, ultimate battleground.

It's pretty fascinating. And part of the logic sometimes is that, you know, when the old things we perceived as safe and they seemed like they were bulletproof, they start to show vulnerability that we're somewhat in the later stages of whatever retrenchment we're involved with. You worked out against just how much capital is kind of bleeding lower and operating at a year and a half loss in Apple. So I don't think that the overall market trajectory depends on those stocks, but the psychology to to a large degree, does depend on how they do. You really don't think that if Apple and Tesla continue to move lower,

maybe even in the magnitude in which they have, that it doesn't matter for the overall market? If it gets real disorderly and sloppy and people are sort of selling other stuff because you have to cover the losses in the big ones, yeah, I can get that way. It could be some excuse for maybe a further flush. Tesla's getting a little sloppy. But look at the outperformance that you saw on the upside. That's the whole thing. It wasn't like the entire market went up a thousand percent when Tesla went up two thousand percent over a couple of years, you know. So I think that to some degree they're their own animal. And the macro stuff matters more for the rest of the market than it does for those sort of single name phenomenons. So we have a, you know, a pocket, if you will, between now and real critical

data and Fed. Yeah. How's it all going to play out, you think? Well, we do get, you know, Friday we get we get the jobs number. What's fascinating is for as convinced as many people are and economists in general are that at least some kind of modest recession is on the way because of the leading indicators. It's not happening on time. You know, you can sort of say, well, we should see more evidence of it. We should see the job market soften up more. And that creates the possibility for one of those false dawn type rallies. Or maybe it's a real one. Maybe it's going to be a soft landing, but you just won't have that determination for so long. So I do think that the early year flows matter. You know, people came in somewhat lightly invested, I think, you know, you could pretty

fairly argue. And we'll see from there. But I think that, you know, you had some strength in some of the financials today. The value trade, people still think, you know, there's more left in it. What do you make of the way that the market was able to recoup a bunch of its losses? You know, tech still finished, obviously, as the loser. Yeah. But elsewhere, it was pretty interesting going into the close. Yeah, I would resist the urge just to say, wow, that shows a tenacious market. We've been sticky in this area in the indexes for a few weeks now. So there clearly isn't a lot of downside push in the average stock. You know, I feel as if people got pretty defensive. And so we're fine, you know, for the moment. Treasury yields becoming less threatening is another thing to keep an eye

on. They came right in. They never got back to four percent. It seems like it could look like that, you know, that chart has to consolidate a little bit. It could give some breathing room for stocks. Yeah, I saw a stat today that the 10-year hasn't closed above 4% in a good while. And it only did it a relative handful of times this entire run. All right, we'll see you tomorrow. That's Mike Zantoli with his first last word of 2023. Everybody have a great evening. Fast Money begins now.