Closing Bell - Closing Bell Overtime: Stocks Sink Again, Cashing In On The Consumer & Under the Radar AI Plays 01/03/24

Episode Date: January 3, 2024

It's been a rough new year for the bulls as the major averages sink again. Tech and small caps among the biggest underperformers. JPMorgan Asset Management's David Kelly and BD8 Capital CEO Barbara Doran react to the sell off and whether this is a buying opportunity for investors. Former Fed Vice Chairman Alan Blinder explains what the Fed is looking for in Friday's December Jobs Report – and what it could mean for the central bank's interest rate strategy. BMO Capital's Simeon Siegel reveals his shopping list for retail stocks in 2024. And Melius Head of Technology Research Ben Reitzes has his own shopping list: under the radar AI plays. 

Now we're closing near the lows across the board. That's a scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I am John Ford. Morgan Brennan is off today. It has not been a happy new year for the Bulls so far. Traders like Matadors out there bullfighting, and it has especially been a rough start to 2024 for tech stocks after a huge rally last year. Coming up, we're going to get the names of some under-the-radar tech names that might be ready to take off. Plus, former Fed Vice Chair Alan Blinder reacts to the latest Fed Minutes and how Friday's December jobs report could impact interest rates. But for now, let's get to Mike Santoli, who I believe is going to give us a little bit of a take, yes, on what has been happening in the markets.

Mike, we're near the lows on all the major indices, energy and utilities, the strongest sectors. That usually doesn't mean that people are feeling particularly aggressive. No, not today, John. Yesterday was much more just this pure rotation type move. Everybody had decided the market ought to continue broadening out. You sold the really inflated mega cap growth stocks where people had a lot of gains on the first day of the year. Today was a little more across the board, just stepping back from risk. People feel like they owned enough. I think the most negative thing you probably could say about the market entering 2024 was that everything went right for it for two months coming into

the year. And so that the market kind of got priced accordingly. Slightly soft economic data today with the labor market jolts report and then ISM. I don't think that's really changing the underlying fundamental story, but it is, you know, having people pay attention to the idea that the soft landing remains contingent. There's not a moment where you declare victory and you have to monitor the progress as you go. I like to look at what's doing especially badly for maybe a hint of what's going on arc, you know down about 4% Bitcoin down almost 5% the WC LD a lot of you know, you know Riskier stocks in there closed down more than 3%

Yeah, it's the recoil effect of the most volatile highest beta parts of the market that tends to be spring-loaded in both directions, I would say. So it seems as if there's a little bit of a question as to whether the character of this market changed as much as the November-December rally may have suggested it did. The Russell 2000, small caps, huge run, bit of a catch-up move later part of last year, is now back within its long-term range. I mean, almost two-year-long range with a drop of, you know, almost 2% today, or 3% rather. Yeah, yeah,

you mentioned the Russell. That was down 2.5% today. So if you like small caps, ouch. Mike, we'll see you again in just a minute. Now let's get to our market panel. Barbara Duran of BD8 Capital and David Kelly, J.P. Morgan Asset Management's chief global strategist. Happy New Year to both of you. David, it looks like you rightly predicted job openings being weaker here. So what does that say about labor market tightness, inflationary pressure, implications for stocks even beyond these first couple of rough trading days? No, we expected to see a decline in job openings. In fact, they revised the prior month up, so it wasn't anything significant. But the key point about job openings is it's still well above the highest number of job openings we ever had before the pandemic. So we've still got plenty of job openings out there. All that's happening is the economy is gradually normalizing.

And this may be the last leg on the long road back to normal, but that's really what's going on here. So I think we're looking at moderate economic growth, but we had a lot of good news in markets packed into the fourth quarter of last year. And I think there's a little bit of a hangover from that going on in the first few days of the new year. Yeah, maybe a little bit too much eggnog from the market. Barb, you sold Expedia and Airbnb, speaking of eggnog, in late December. How does that fit in, if at all, to what we're seeing these first couple of trading days? Well, it's a couple things. One, you know, you're looking ahead to what's going to happen this year. And I agree with David. I think we're continuing to see growth slowing, but moderate consumers, healthy spending will continue.

And that impacts directly on the travel issue. As we know, there's been incredible pent-up demand that we have seen, whether it's in airlines and entertainment and hotels. And right now, it looks like those trends are going to continue well into 2024. So the question, and I was not sure about it, but I took profits in Airbnb and Expedia because those are direct plays on that. And I think travel trends will normalize, I think probably not till later in this year. So I may have left some money on the table. But the fact is, when I bought these stocks, they had a double in a short time. And I said, I'm not going to be greedy, particularly because given the overbought condition, the big run-up we had into year-end, nine straight days in the Dow ending up 24%. I think this, what we're seeing this first few days, and it'll probably continue for a bit as the market has discounted a lot of

rate cuts this year. So I think this selling, you know, the mega cap techs and the stocks that had big profits is not unexpected. And so that's really the Expedia and Airbnb. We're tying into that, but also the travel theme. OK, now, David, let me get your sense of this. You're saying that investors should consider diversifying out of treasuries and large caps into value, small caps, international equities. Now, the Russell 2000 really took it on the chin today. And that's kind of been a trend when things get volatile, small caps suffer more. International equities outside of India, Japan, maybe one or two other places haven't done that well. Why does that change now?

Well, look at what happened last year. You know, this time 12 months ago, pretty much everything was cheap. But what we saw last year was a very narrow rally across financial markets, which was really concentrated in large cap growth US stocks. And it left value on the table in terms of value stocks, in terms of small caps, in terms of international equity. So really what we're saying is, look, particularly for investors who haven't rebalanced, they're probably overweight large cap growth stocks right now. And it makes sense to rebalance.

On the international story, we are at a record low valuation of international equities relative to U.S. equities. I mean, they're extraordinarily cheap. And there is an opportunity. People always ask me about the catalyst. But over time, we think that the U.S. is going to ease monetary policy more rapidly than overseas. That should help bring the dollar down. You get a few years of dollar decline, it's going to start ramping up those international returns. And then suddenly people get enthusiastic again. So I just don't want to be very underweight international in this environment, given how cheap international is relative to the U.S. and given the potential for a long-term dollar decline. Okay, interesting. And Barb, you bought Walmart recently. Does that mean you expect tougher times, Ed, for the consumer? They tend to shop for value and go to Walmart when things are tough, or is something else behind that? Well, there's a couple things. Walmart has been a core holding. And when it sold off on disappointing numbers last month, this is really not a change in their business model. It's one of those buying opportunities

that one gets. However, you are seeing, I think that the lower income has stabilized in terms of jobs, inflation. But the moderate income, you're starting to see some pressures there and people trading down and going to the Walmarts of the world. And I think the Walmarts and the Costco's have superior business models and will do well through thick and thin. But I think it will be I think we are seeing consumer spending under a little bit of pressure, although it was very strong over Christmas, up three plus percent better than the year before. But I think those names will continue to do well. David, real quick, if I'm reading this correctly, you expect the jobs number to come in way light on Friday, 145K total payroll versus 163K consensus. Is that right? Yeah, well, that's not way light. I mean, if we get the number within about 50,000 to 60,000,

that is a huge hit. We overreact to these month-to-month numbers. The broad picture is the labor market growth has got to slow down. But we added 2.7 million jobs last year. I just think that we're all a little too pessimistic about this economy. This economy performed really well last year. We just don't think it can perform quite so well this year. Yeah, the market did too. David, Barb, thanks. Thank you. Thank you. Now, fourth quarter auto sales feeling another very strong year for the industry. Our Phil LeBeau has some details. Phil, people like cars. They do, John. And I just heard from a consultant who tracks all the numbers on a month-to-month basis with LMC Automotive. He tells me that we might see December's pace coming in December only,

16.2 or 16.3 million. That would be the biggest month that we've seen in the U.S. in at least a couple of years. In December, a couple of things, the pace, 15.5 million. That was the estimate going in. We're clearly going to blow past that. This was the best year. 2023 was the best year since 2019. Hybrids remain hot. How hot? Take a look at Toyota. Sales for the month or for the fourth quarter up 15.4%. Sales in December for their hybrids up 63%. Hyundai, also because of the hybrids and also their EVs are getting traction up a little over 5%. And there you see GM, slightly positive, 0.3%. GM sales actually down about 7% fourth quarter compared to the third quarter. However, as you take a look at shares to GM, the company does end 2023 with its market share

increasing compared to the previous year. Now it's 16.3%, number one in the US. Nissan, nice fourth quarter, up 5.6%. And finally, we'll end with a look at shares of Ford. You might be saying, well, what did Ford do in the December in the fourth quarter? We'll get those numbers tomorrow morning. One thing I can tell you right now, John, the F-150. Once again, number one selling vehicle in the United States. I think it's going on like 47 years, something like that. Not a surprise.

The F-150 is the king of the hill once again. And again, Ford numbers tomorrow morning. Phil, is there some sort of anomaly underneath these numbers that investors should be thinking about? Because I'm just thinking, prices for new cars are higher, it seems to me, they've been in a while.

Auto loans have these really long terms and credit has gotten more expensive. And there's been a shortage of used cars, at least there was a couple years ago out there. Is there some odd concoction of data that's causing people to buy more new? Well, obviously the pricing on used vehicles and the interest rates, those are two huge factors that have a lot of people saying, I'm not going to pay that if I'm going to go into the used market. A couple of things to watch here, John. While we

are seeing strong sales in December, maybe over 16 million as far as the sales pace, at some point here, I think we start to see the automakers really ratchet up the incentives in order to drive volume in the first half of 2024. If that happens, then you're going to see a real focus on margins and how much they're going to feel the impact of the greater incentives. And look, we're already seeing with GM and its EVs, they're going to lose the impact of the greater incentives. And look, we're already seeing with GM and its EVs, they're going to lose some of the federal tax credit, $7,500. That's fine. We're going to give you $7,500. That's one example of an automaker saying

we will do what we need to do to stoke the market. In this case, it's GM and electric vehicles. All right. Well, maybe Tesla was early to the incentive game, too. Thank you, Phil LeBeau. And now let's bring back Mike Santoli with his dashboard. Mike. Yeah, John, take a look at some recently outperforming sectors that are levered to the economy that are having a pretty sharp pullback here. I think it tells you two stories. One, we still have cyclical leadership in this market. And two, maybe it got a bit ahead of itself. This is equal weighted consumer discretionary as well as equal weighted industrials relative to the overall S&P equal weighted over two years. You see, they've really moved in sync with one another here

over the last couple of years. But you have had times where it got a little bit stretched relative to the broad market. Now we're curling lower, still not really jeopardizing the longer term trend. But this is definitely the position a lot of parts of this market found themselves in with that really vertical ramp that we saw coming off of the October lows. Somewhat similarly, take a look at these two sort of risk bellwether sectors, homebuilders and semiconductors. And I actually, you know this, I love when you get this kind of synchronicity between two parts of the market that wouldn't necessarily seem like they have to move together. But over the two-year time frame, this has been where it's at.

A lot of long-term secular drivers people are in love with with regard to semis and homebuilders. But you see, again, just curling lower from pretty piping hot levels after that rally late last year, John. Any guesses on why homebuilders and semis have been moving together? I think it's mostly just about, you know, both growth cyclical areas. And they're high beta, they're where you people chase if the market is feeling good about the economy. So you have the combination of, look, we think there's something structural happening here that's to the advantage of both new homebuilders versus existing and also, of course, semiconductors and NVIDIA, a big part of that with AI. And then they have a cyclical gearing as well. So

they kind of operate in both ways. All right. It's an odd couple. We'll see you again in a bit, Mike Santoli. Now, CalMain Foods earnings are out. Steve Kovac has those numbers. Steve? Yeah, John. And shares were down as much as 6% since these earnings came out, now down about 4%. And this is on 35 cents of earnings on $523 million in revenue. Now, year over year, that revenue looks pretty bad. They had a little over $100 million in revenue in the year-ago quarter. Inflation story right here, of course. There was that bird flu issue.

They had to kill a lot of the chickens that were laying the eggs and so forth. Some comments on the inflation stuff here from the CEO saying significantly lower average selling prices for eggs, but total volumes were up. But again, because prices have fallen so much, you're seeing it here. The share's down about 5 percent now, John. Yeah, giving up a couple of weeks of gains, but still above the December lows. Steve Kovac, thank you. Yep. And now, well, maybe forget about that magnificent 7. Up next, Mellius Research, head of tech research, is going to unveil his top under-the-radar AI plays for 2024. And later on, the top retail stocks that should be on your shopping list for 2024. Overtime's back in two.

Welcome back to Overtime. Two tough sessions for tech stocks to start the year. Datadog and Atlassian both down more than 7 percent. And the iShare software ETF with top holdings like Salesforce and Adobe off 4 percent so far this year. Joining us now, Ben Reitz is Mellius Research's tech brain. Ben, Happy New Year. So I'm tired of talking about the MAG-7 all the time, especially when a lot of them are near their highs and you've got a lot of application software companies in these indices that are well off their highs. So there must be some AI gems in there if they perform as some people think they can. Yeah, I think so as well. One of the names

we're talking about is maybe not a fully clean software play, but it's IBM. They have consulting and a little infrastructure hardware. But we think IBM is poised for a pretty good 2024 because they have software modules that companies need to perform AI for the enterprise. And right now, that is the big shift and big place that we think enterprises are going to invest, especially later in the year. OK, so since you started with a bigger name, let me put Adobe next to it, because I know you like that, too. Now that that $20 billion acquisition that a lot of people thought they were paying maybe too much for is off the table. That stock's down almost 10 percent from its highs.

Which do you like better, IBM or Adobe, a name that has been stuck in a range for arguably a decade and a name that's really taken off for a decade? Well, we have pretty similar upside to both targets, but both are different. I mean, Adobe is a consensus AI winner. Now, I will say it didn't go up as much as like ServiceNow and Salesforce last year, a little bit of underperformance versus them, but it was up really nice. We think there's a little digestion period here while they get Firefly out in the marketplace, but then earnings upside really kicks in when the adoption of Firefly across their creative portfolio in particular gets going. And in 2025, we think that there'll be a document cloud AI assistant as well that'll have some uptake.

So I think Adobe is in a great position. It looks expensive on earnings. It's cheaper on EV to cash flow. And they are very well positioned. A little digestion, though, for the near term is probably warranted. But we have complete confidence in Shantanu and the team. How will investors know if enterprise specialists like Autodesk, like Atlassian, are really going to get the benefit in margin and revenue from AI in 24? I think as we go throughout the year, investors are going to be much more laser focused on the real AI numbers.

We, you know, onesies, twosies won't really cut it. We got to really see real numbers. I personally think that Microsoft and Adobe are better positioned to articulate real numbers than almost anyone in software, where they have real things that we can tangibly touch, like Microsoft with their Copilot, which will take some time to ramp, and Adobe with their Firefly, whereas some of these other ones are a little tougher tangibly for folks like us, where you have the Einstein for Salesforce, not everyone will use it, and the other things for some of the other application software folks.

I think it'll take a little time for that to work itself in. ServiceNow has had a great year. They are doing a great job getting AI into the hands of more enterprises. But that one, you probably see a little more sooner than the others. But Adobe and Microsoft are probably the ones most tangible. And frankly, they performed those last year, even though they were up a lot. Now, I said I didn't want to talk about the Mac 7 too much, but that doesn't mean not at all. Apple's now under 185. iPhone hasn't been growing, but they still own this premium luxury consumer. And they have the benefits of this services business, all this loyalty. Where do you value, how do you value

Apple and when should you add to it? I think you should be, for a long-term investment, be adding right now. I think that, look, some folks want to say that Apple is slowing, etc. I think that was last year's news. I think this year's news is that Apple's re-accelerating. You know, iPhone could actually have a little downside, but all three other major segments are re-accelerating and growing and taking them towards mid-single-digit growth within a few quarters. So I actually feel like Apple stock, the narrative is actually going to, you know, it's a little negative right now, but the narrative could change over the next few quarters. You got re-accelerating revenue, especially outside of iPhone. And then you have an AI event probably in June where they're going to unleash new services

that could see an ARPU lift. And I think if there's an AI narrative around Apple and revenues re-accelerate, even if it's 2, 4, 6 on the revenue growth rate, it's going to be tough for the stock to massively blow up. The wild card is China. So we'll see what happens. But I feel that Apple deserves at least a high 20s multiple and probably into the 30s, given the stability of its revenue streams.

Wow, 30s. And we've got to watch that iPad, I guess, since they didn't update any of them at all in 23. Maybe there's a decent upgrade cycle in 24. It's coming. It's coming. Yeah. Thank you, John. Take care. Happy New Year. Happy New Year. Now, natural gas rallying roughly 15 percent since mid-December after falling more than 30 percent last year. Up next, a top energy trader is going to tell us whether there's more room to run or if this comeback is out of gas and check out shares of sofa speaking of out

of gas at least for the moment one of the worst performers on wall street today after kbr cut its rating on the fintech company to underperform on valuation and concerns about earnings sofi shares were up well they more than doubled last year down down almost 14% today. Overtime will be right back. Welcome back to Overtime. Natural gas has fallen nearly 24% over the last two months. Joining us now to discuss and share his outlook on the energy sector is Bill Perkins. He's the CEO and head trader at Skyler Capital Management. And apparently, he is on Perkins. He's the CEO and head trader at Skylar Capital Management. And apparently he is on a boat. I'm getting Lonely Island vibes from you. Yeah, that's nice. That's a good way to

start the year. So last year, Bill, you were short natural gas and cleaned up because supplies were strong. This year, you're saying wait and see? Yes, definitely wait and see. The market has dropped significantly. We are now burning as much natural gas through power plants and not burning coal in order to balance the market. Producers may be rethinking their growth and it's winter, so it's going to get cold. There will be some cold shots and we can always have a rally at any moment on any cold shot. So there are a lower number of rigs and fracking crews out there, but production is still flat or growing. Yeah, never doubt the American driller or American

ingenuity. They are finding ways to get more and more efficient, doing more with less. They're now not fracking. They're not double fracking. They're not double fracking. They're trimule fracking. That's a new word that I learned this year. And the efficiency gains keep coming. And so it's a little bit difficult to match rig count and frack crews to supply. But the market is figuring out that, hey, we have a resilient producer and we don't know where the pain point is. And the price of production keeps getting lower and lower. And the light in your shot keeps changing because you're on a boat. Meanwhile, zooming out, we've got a war in the Middle East, supply complications in the Red Sea. Why isn't that messing with prices? Well, it definitely affects prices in Europe and it tangentially

affects the prices in the U.S. We may have to run our exports a little bit higher, utilizing our LNG export facilities, and that might be a boost to demand. And it also, if we ever needed to stop exporting, it changes the price point in which the market has to go. And so the market has to solve for that and balance the price to take to take into account that risk. It seems like a really dangerous year for traders, because on one side, you've got, well, economies slowing down in a number of places. So that usually means that demand is lower and energy prices might go down. But then on the other side, you've got all of this geopolitical uncertainty and something could blow up at any minute and send prices higher.

No. Yeah, you definitely have geopolitical uncertainty. What the producer is going to do, whether the renewables will come in at the rate that we think they're going to come in. What you know. And last year we had or a LNG facility blow up here in the United States of America. Nobody expected that or the year prior. So, you know, you have a lot of moving parts and right now we're in the middle of winter. It's been mild, but it can get very, very cold. And, you know, I've been hurt pretty badly in the past from, from some serious cold shots or polar vortex and the winter's not over. Well, you say that, but I'm looking at the background behind you and I'm not believing it.

But I know. I just love surfing. Can't blame you. Bill Perkins, thanks for joining us. Thanks for having me on. Up next, Mike Santoli breaks down what the latest job openings and labor turnover survey could mean for the Fed and inflation. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. Overtime will be right back.

It is time for a CNBC News update with Contessa Brewer. Contessa. John, SpaceX has been accused of illegally firing eight employees. According to a complaint issued to the National Labor Relations Board, the employees were fired in 2017 for circulating a letter that asked SpaceX to distance themselves from Elon Musk's social media comments and to clarify and enforce their harassment policies. The case is set to go before a judge in early March. Ford is recalling 112,000 F-150 pickup trucks for roll away risks if an axle hub bolt is damaged. The National Highway Traffic Safety Administration

says the recall affects model years 2021-2023 equipped with the trailer tow max duty package. A fix is, quote, currently under development. And rescue crews responded to a massive fire at the home of Miami Dolphins star Tyreek Hill on Wednesday. Hill was notified of the fire during practice. He left to deal with the situation. No injuries were reported. According to NBC South Florida, Hill bought the house in 2022 for $6.9 dollars. That looks like a mess, John. Yeah. Hope everyone and everything is OK. Contessa, thank you. Now, Mike Santoli is back with a look at today's Jolt's report, Mike. Yeah, John, reminder stands for job openings and labor turnover survey. So it's a little bit of a below the surface look at the labor market supply and demand. Here are some

of the numbers that get a lot of attention, especially since the Fed started flagging job openings as something they wanted to bring down through in part through higher interest rates to cool off the labor market. Well, kind of mission almost accomplished here, it would seem the quits rate. This is essentially the rate at which people voluntarily leave their job down to two.2 percent last month. That brings it below the pre-pandemic level. So essentially back to something like long term normal. Then you have the hiring rate, which really has also become very subdued even below those levels of of 2019. Now, not shown here is the layoff rate. So involuntary separations, that's still down near one percent,

pretty much near rock bottom level. So it's not as if companies are actually actively shrinking their workforces. But there is absolutely less power that employees feel to voluntarily leave a job, go to another one. And employers are slowing hiring. So it's kind of what the market wants to see, what the Fed wants to see. But, of course, you never know if it's going to tip into outright weakness. We'll get some more information tomorrow with weekly jobless claims and of course, Friday with the monthly payrolls report. Or is it a calm before a storm? I recall a bank a couple of weeks ago, maybe about a month ago, saying fewer people had quit than expected. So they're going to plan to lay off like fewer quits, fewer hires and fewer layoffs. It's fine if you've got exactly the workforce you want. But if

not, that means something's got to happen soon. That's right. It's equilibrium if companies are happy with their level of staffing. And it can tip into feeling as if they're overstaffed, if they really need to preserve margins. So this is what we're essentially on alert for, is these indicators that show slowing, and we're hoping it just gets slow and not stops. And might this also mean that employers aren't as afraid to let people go going forward? There was that huge period of being understaffed, and then when things were a little bit volatile, employers didn't want to let people go. Well, if these earnings numbers over the next couple of quarters aren't as strong as some hope,

might that, you know, CEO sentiment have shifted? It's the kind of thing that hovers out there. We don't know quite if there's a tipping point in that direction. We'll say the absolute number of job openings, while it was slightly below forecast and still showed a decline, is still higher than levels, as David Kelly was saying earlier, than we saw typically before the pandemic. So there still is a sense out there among a lot of companies of labor scarcity, just not as acute as it was a year or two ago. Closer to equilibrium. All right. Mike Santoli, thank you. Next, cashing in on the consumer. A top analyst is going to reveal his 2024 shopping list for the best retail stocks to buy this year. And later, former Fed Vice Chairman Alan Blinder on what Friday's highly anticipated December jobs report

could mean for rate cuts this year. Over time, we'll be right back. Retail stocks have rallied over the last three months thanks to a better than expected holiday season. Joining us now with his top picks for 2024 is BMO Capital Markets Senior Research Analyst Simeon Siegel. Simeon, happy new year. Happy new year. That was a mouthful. It was. And I tried to say it maybe a little too fast. You did a great job. I got to work on my name. Well, that's good. Nike and Planet Fitness, you both like both of them. You expect them to rise about 10% from here. Why is that? 10% is a lot.

10% is a lot. You know what's funny? You think about how much Nike was down in a day, and 10% seems like a blink. Yeah. So two different ideas, two different stories. Planet Fitness, listen, we're in the season of New Year's resolutions. This is Planet's month. And frankly, with all the concerns we're talking about, you want a business that has both convenience,

many locations close to you at the right price. And so I think Planet is its own story there. I'd expect it to compound. And what's interesting about Planet is they actually did not participate in this material rally simply because of rates. They saw their bump earlier because of earnings. I'd like them to catch back up to the right rally, too. So that's Planet. I think there's an interesting story there, and I'd love to see them compound.

Nike is a reversion trade. So Nike, we just had this print where you lost, I think the headline was more in one day than in 26 years. This was a huge drop, except if you rewind and you realize three weeks earlier it was flat. And so when I look at Nike, the one thing I want to focus on is the operating profit dollars. Sounds obvious, but people normally look at revenues. They look at a story. They focus on other things. Nike's business profitability grew 15%, and the stock was down the most in whatever, 26 years.

Okay. That's a big number. That is. That is. Okay. So you say this rally over the last quarter has been a sentiment rally, not fundamental. So what impact are earnings going to have when we start getting that data that drives the fundamentals for each stock, especially since in the different

categories, luxury, discounters, et cetera, we've seen such differences in execution. So I love that you brought that up because what I keep hearing is that everything is clustered. We're either high income or low income. We're either low. It's just all over the place, but it's clusters. And it's just not been true. For the last three years, it's been true because with COVID, it was all about the macro. There was no inventory. There was too much inventory.

There was no price promotions. There was a ton. Supply chain constraints, the world. You can play micro stories now, and that's a really good thing. And so we watched companies that sell the exact same thing to the exact same people have exactly different results. Coach was up. Coors was down. Athleto was down. Lulu was up. Like, you can keep them at big box, off price. Like, you watched similarities, but execution

divergence, and that's great. And so your question, so what happens now in a rally where valuations changed, but multiples did not? But, sorry, but numbers did not. Well, those numbers better grow into those valuations, otherwise we're going to have a problem. And so what's interesting, and that's why I brought up Nike, in October, we were a world apart, right? Everything is so great now. Three months earlier, it was wild despair. And so October, everything was negative. The retail group as a whole was down tremendously. And then Nike comes out and reports their earnings, because they're always early or late, depending which way you want to look at it. And they give you a reminder that they're a real business and the stock erupted. So what traits of these companies

or their management teams are going to matter most in this cycle? Is it going to be just operators who can have that look at inventory and keep it tight? Is it going to be innovators who can come out with just that right product to create a halo? Innovators are great. They tell great stories. Disruption's fun. We're in the operator's age.

And it's not to say we're not going to come back. And you and I talk tech a lot, and that's the other side of the world. But right now, so Bath & Body Works, like you and I talked a month ago, and Bath & Body Works was my team's favorite idea. Not a very sexy story, but an interesting. It's just replenishment. They sell scented candles. But we loved it because the stock was down on earnings despite EBIT dollars, despite profitability growing. The last month, it exploded. That stock was up, I think, 30-plus percent, thereabout. And so that's what I want to see. So what is the metric? The metric that I care about is the one

that's going to drive profit dollars. Because the multiple, the sentiment, we have to fight over deciding what we want to pay, how many turns we want to value something at. What you and I can't fight over is the denominator. If profit goes up, and these are businesses that trade on profit, they talk about revenues, but they trade on profit. And so anything where you get any profitability growing, and I don't want to see it through just cost cuts, and that's not just because that's a human element. You also want to know it's a viable business. You see profit grow,

the stocks will follow. You mentioned replenishment. Does Bath and Body Works continue to work? Ulta Beauty, Elf, these, you know, makeup has done really well. But are the valuations there as a result of that so strong that the bar is too high for them to continue to do well? So some are. So if you think about it, listen, Ulta has had a beautiful run, to their credit, and they've been a very strong company. But at some point, we have to decide, are they still the growth business that they were? And so when we talk about a stock as opposed to a company, you can look at Ulta as a very good company and question the stock. Bath & Body Works, which had this great catch-up, I think it's worth asking that question, but it's not expensive, right? When we think about expensive multiples, it still does trade at that discount. And so if

they can show that replenishment, if you and I start buying more scented candles because we're finally watching that tis the season burn its way down, then that business is still cheap, right? By all meanings of that valuation number. Obviously, if they don't, that's another story, but that's why it's so interesting that the whole group ran. Finally, who's the retail bellwether, you think, for this holiday season? Whose report is going to define, oh, they had the right amount of inventory or they didn't? They had the right product mix or they didn't? They beat on the top line or they didn't? So for better or worse, that's normally Nike. And I think we all want to hope it's not Nike because Nike just did it. And so that's what, by the way, that was not intended, but I'm going to own that. Nike just did it. So at the

end of the day, Nike reports a month later than everyone. So they gave us the first look. It wasn't a great look, but it was good for North America. So what I think we'll find out, and there's a big conference where we start getting a lot of results over the next week or so, what I think we'll find out is the beginning of holiday was great. I think everyone saw a strong Black Friday. I don't know about you, but I shopped a lot over Black Friday. And then it slowed down. And I think that's what holiday used to be like. Yeah. And so now we're going to start recalibrating those expectations. And so I think more likely than not, holiday grew, holiday performed, but it probably didn't perform to the extra excitement that we created once we saw that

strong Black Friday. I'm getting a lot of discounting emails. Oh, yes. Which makes me wonder. Makes me wonder. Is it just those players or is it a lot of them? Simeon, thanks for coming in. Good to see you. Good to see you.

Well, Disney CEO Bob Iger winning a powerful new supporter in his boardroom battle against Nelson Peltz. Get you some details when Overtime returns. Welcome back. A pair of hedge funds are now backing Disney's boardroom battle against Nelson Peltz's triad. Julia Borsten has the latest details. Hey, Julia. Well, John, Disney announced an agreement with activist hedge fund Value Act. It will advise Disney on strategy and support Disney and its slate of board of directors that are being proposed for the next annual meeting.

Now, Value Act owns five million shares, according to sources, helping Disney defend against Tryon, which votes nearly 33 million shares, including about 25 million owned by former Marvel Entertainment chief Ike Perlmutter. Tryon saying that Disney's Value Act deal does not change its proxy battle. Analyst Gordon Haskett saying Value Act is an important backer. Disney will, quote, put this endorsement to work while it campaigns for votes ahead of the annual meeting. Last month, Tryon nominated Peltz as well as former Disney CFO Jay Rizzullo to Disney's board. This after in November, Disney bolstered its board with the appointment of former Morgan Stanley CEO James Gorman, who's had experience with proxy vice and succession planning, as well as Sir Jeremy Derrick. He's former head of Sky Media. Now, another activist firm, Blackwell's, which owns just about 55,000 shares,

nominated three of its own directors, but they say they support Iger. Back to you, John. This seems weird to me, like all of this activist clustering. We saw it in a different way around Salesforce, and I think they were all sort of angry at the time, but that quickly reversed. Here you've got, it's almost like mercenaries coming to Iger's defense. I just wonder why they would do that or if Iger is just that influential. Well, look, Iger is certainly influential. Value Act, I would suspect, would say it sees an opportunity to come in into the stock at a price when they see the stock as being depressed and they see a lot of upside opportunity here. Obviously, they're getting something from this equation here. They've actually signed a confidentiality agreement.

So Value Act will actually have access to information about what's going on at Disney in order to be able to consult to them. So this is a consulting dynamic here. So certainly we'll be able to have influence on that sort of leadership strategy at this crucial moment in Disney's trajectory. But it's a battle of the of in Disney's trajectory. But it's a battle of the of the activist hedge funds. And it's going to be fascinating to see how it plays out. The next step, John, is we're waiting for the preliminary proxy filings from all these parties. All right. Palace Intrigue Media Stock Edition. Julia, thanks. Up next, former Federal Reserve Vice Chairman Alan Blinder on how Friday's key jobs report could impact

the Fed's interest rate strategy. Overtime, we'll be right back. Welcome back to Overtime. Fed minutes out this afternoon showed that Fed officials in December saw rate cuts likely, but the path uncertain. Meantime, we've got some big economic reports coming out this week, including the December jobs report on Friday. Joining us now, former Federal Reserve Vice Chairman Alan Blinder. Alan, good to see you. Happy New Year. So a couple weeks ago, you thought the Fed won't cut rates until the second half of next year.

You still feel that way? Yeah, sort of, with a big cloud of uncertainty. I mean, you can't read these minutes without coming away with the view that the committee taken as a whole is very uncertain. That is to say, there are different views on the committees, on the committee, and how likely, how soon rate cutting will start. But I think we can almost eliminate March from based on what was in the process. So second half is not looking too bad, but it could squeeze into the first half, depending on data. Okay.

Is good news good news? I mean, after seeing the job openings, labor turnover numbers today, quits lower, you know, hires lower. Are things tightening up so much that you expect something surprising with this number? Use the phrase tightening up. It seems like sort of normalizing. I mean, we've gotten used to getting very abnormal numbers out of the labor markets, like gigantic numbers of vacancies relative to people looking for jobs, super low unemployment, job creation. Yeah, I should have said loosening up. Relative to trend. We got used to that. And things are simmering down to normal, which is, first of all, inevitable. And secondly, I think is making the Fed happy.

Sure. So what's the most important number, do you think, on Friday? Does it have to do with wages versus just the raw jobs number? I think it's always the payroll employment number. Wages are coming in second place in importance. I think there are lots of numbers on, well, there are lots of numbers on both, but the jobs number really sticks out. That said, I'm not expecting it to move the Fed very much

unless it's either way higher than people expect or way lower than people expect. If it comes in in the high 100s, which is where market expectations are, I think it's a yawn. Just talking with Simeon Siegel about the cadence of the holiday season and consumer spending such an important piece of this puzzle. Did you have any sense of how either the market might react or even what the Fed is looking for in how the back end of the holiday season might have played out? We saw some strength in the front end. I think the Fed is, the easy answer to your question is the Fed looks at everything. You can do that when you have 400 PhD economists. You know, they're watching consumer spending for sure. It's not just holiday spending, but consumer spending in general. But especially nowadays,

really especially, they're watching the various indicators of inflation. There's CPI, there's PCE, there's CORE, there's headline, there are trend means and a whole lot of things that would bore most people, but have Federal Reserve eyes riveted on the data. Well, not CNBC viewers. We're all riveted by that stuff, of course. Now, I wonder, how does the geopolitical situation fit into this? There's been a lot of instability, but not perhaps as much aftershock and ripple effect as some might have expected. You know, if you're sitting on the Federal Reserve Board, you try to and generally succeed in ignoring the political environment. Look, they all know there's an election coming up in November. They probably watch the news as we do. I presume they do, and it's more about politics than it is about the Fed.

But when they come into the room, they try to put that out of their mind. And in my experience, now it's many years ago, but I don't think this has changed. They generally succeed, and you don't hear people talking about politics at all. So, I mean, if in particular what you're thinking, and many people do think this, is that the schedule, so to speak, of rate cuts might be influenced by the proximity of addiction,

I really don't think so. All right. Well, we'll have to leave it there. Alan Blinder, thanks for joining us here on Overtime. And that's going to do it for Overtime.