Closing Bell - Closing Bell Overtime: Stocks Struggle to Start 2024, Tech Wreck & Agriculture Impact On Commodities 01/02/24

Episode Date: January 2, 2024

Stocks kick off the year mostly in the red although the Dow did finish slightly higher.  Evercore ISI's Julian Emanuel lays out his 2024 playbook and discusses whether investors should be buying on pullbacks. Strategas' Chris Verrone says the burden of proof is on the bears to begin the trading year. The tech sector sharply selling off after Barclays downgraded Apple to sell over lackluster iphone sales. Goldman Sachs' Eric Sheridan discusses whether that's a warning for other mega-cap tech stocks. And CNH Industrial CEO Scott Wine on the demand for agricultural equipment like tractors and how that could impact commodity prices. 

Well, the Dow's barely in the green. Lots of red, though. That's the first scorecard on Wall Street for 2024, but winners stay late. Welcome to Closing Bell Overtime. I am John Fort with Morgan Brennan. Happy New Year. Happy New Year. It's good to be reunited again. Well, stocks struggling to kick off the new year, although the Dow did close in positive territory. Coming up, we're going to get the 2024 investing playbooks and best investing opportunities from Evercore, ISI's Julian Emanuel, and Strategas' Chris Verone. Tech tumbling today after Barclays' downgrade of Apple to sell. We will discuss whether that's a warning for the rest of the Magnificent Seven. With today's losses, though, the S&P and Nasdaq could be in danger of snapping their nine-week winning streaks.

Mike Santoli joins us now from the New York Stock Exchange. Mike, perhaps not so surprising to see some of the biggest winners of 2023, some of the biggest losers of the first trading day of 2024. But we've been talking a lot about the Santa Claus rally. And with this recent selling here today, we're actually negative in terms of that rally for the major averages. We are one more day to go in that period that people look as a little bit of a potential forward-looking barometer of what the market might hold for us. I'd say it's not foolproof. The last time we had a negative period, last five days of one year, first two of the other, was 2015-16. Now, you did have a deeper correction into the first part of that year, but 2016 as a whole ended up, I think, 10 percent or so on the S&P 500 after a post-election rally.

Another thing we can look back toward, you mentioned we could be in danger of breaking a nine-week winning streak. Extremely rare to have nine straight weeks up in the S&P 500. We had it in January of 2004. That was early in a bull market, about a year into a new bull market. But you did have a sideways to choppy period for a couple of months there that time, too. So wouldn't be any surprise, I think, to sort of give back a little bit in terms of what was up the most last year. You can't read too much, of course, into one day, Mike, but health and utilities, the strongest sectors, tech and industrials, the weakest. It's a little defensive, right? Yeah, defensive and also just reaching for the laggards.

It feels as if the investor consensus going into the year, often what it does is extrapolate what's been going on for the last couple of months. And that is, you know, the grab for the laggard stocks, the ones that didn't really hold up well in the first part of the year. Look for small caps, look for either kind of beat up cyclicals or defensive stocks that haven't worked and then sell the stuff with a lot of profits in it like like big tech. So, again, it seems really tidy to tell that story and it makes some intuitive sense. It's just not clear to me that that's the start of a real new trend as opposed to a day one of a new tax and portfolio year. All right. I guess eventually, Lord willing, we'll see. Michael, we'll see you in just a couple of minutes.

Now let's bring in our first guest, Evercore ISI Senior Managing Director, Julian Emanuel. Julian, happy new year. Now, you say January is especially important this year in setting the table for what could be a lot of volatility. So what should we expect to learn that's going to influence how we invest? Well, first of all, you've got a lot of event risk geopolitically, obviously. You've got elections, you've got primaries, you've got potential government shutdowns coming. But what you also have is the start of the fourth quarter earnings reporting season.

And if we look at the last few seasons, basically, it's been very much a stock by stock type of market. And I think what we're going to find out here, again, going back to the question that you just posed a few moments ago, is whether the laggards from last year, we happen to like health care and we like consumer staples in a more defensive environment can hold up. And just how much downside is there to the leaders who really had tremendous, almost record-setting runs last year? Now, what about what you don't like as much? So the Nasdaq 100 is exactly where it was two years ago after kind of weirdly bottoming almost exactly a year ago. AMD and MongoDB are a couple of names that are among the worst performers.

They performed really well throughout last year. So what happens with those growth names? So, again, this is more of a stock by stock, not that we're prepared to comment on either of those. But what I would say here is, given our view that you're likely to have a slowdown at mid-year, some of the growthier sort of more cyclical names, semiconductors in general, have had an absolutely enormous run, as you know, are likely going to be subject to some profit taking as are other more cyclical areas of the market, such as materials and industrial. We saw that today, right? Semi's worst day for the SMH since December of 2022 to kick off the new year. Julian, we have been seeing this expansion beyond

the Magnificent Seven and beyond some of these big tech names. In recent weeks, the equal weight version of the S&P, even today, holding in pretty well relative to the broader S&P and the Nasdaq. Are we priced for perfection, though? Like how much needs to actually go right this year for the market to realize gains from here? So you talked about it earlier again, nine straight weeks to the upside, the rally off of the October lows, about as ferocious a fourth quarter rally as one gets. And frankly, if you think about it, the difference sentiment wise between now and January of 2023, it couldn't be more opposite. There's a huge amount of optimism that the Fed is going to get the soft landing, that the economy is going to be OK, that inflation will be tame. And frankly, when it looks to earnings, that you actually are going to have a kind of earnings growth that's more typical of a no-landing scenario rather than a soft landing scenario. And much of this could come to pass. However, when you set it

against all the geopolitical backdrops and machinations, the risk is that there is disappointment, which we do think sets the market back, ultimately giving us a better buying opportunity in mid-year. JPM just closed at a new record high. You've got Citi at a fresh 52-week high here. What are the banks telling us, especially as we know they will be kicking off earning season here just a little bit later this month? So the banks are telling you that the underlying situation in the economy is fine right now. And we certainly know that. And the market itself has said that. And when you

look at the credit markets, you're not really seeing any stress there. But again, it's sort of this idea that if there's any negative news that comes in, it's likely to have a more adverse impact given the scope of the rally that we've seen over the last number of weeks. But in general, when financials are trading OK, it tends to mean that for now the market itself is OK as well. OK. You also got to wonder whether six cuts priced into the market is going to be realistic here. But of course, we're just starting the year. Julian Emanuel, thanks for kicking off the hour with us with the S&P finishing down about half a percent, 47-42, but a mixed picture overall for stocks. It was a volatile trading day for Tesla after the company reported fourth quarter deliveries.

Bill LeBeau has those details for us. Hi, Bill. Hey, Morgan, the stock is trading a little bit lower in part because I think people are looking at the overall market. And there's also been the run up in EV stocks over the last six weeks. But look, you cannot quibble with the Q4 results if you are a Tesla investor. They came better than expected in both production and deliveries. Production coming in, $495,000 for the fourth quarter, essentially $485,000 in terms of deliveries. 95%, as has been the case for several quarters, are Model 3 and Model Y. They carry the water for Tesla.

Deliveries for all of 2023 came in at 1.81 million vehicles. That was better than the company's guidance of 1.8 million. What is the guidance for 2024? We'll find out in a few weeks, but the street is expecting 2.1 million vehicles, which would only be an increase of 16% compared to 2023. As you take a look at shares of Tesla, as I mentioned, they were a little bit higher, and then they started trading off a little bit as the day went on. We will get the full results on the fourth quarter,

and we'll hear from Elon Musk after the bell on January 24th. That's not the only EV story today. There's also the story of Rivian and what's happening there. Deliveries, well, they came in basically in line with the expectation, 14,000. You know what? That was down 10% compared to the third quarter. That was the impetus for the stock to start to sell off. By the way, if you look at their overall deliveries, now topped 50,000 annually, nice improvement compared to 2022. But it's the production side that is the good news if you are

a Rivian investor. The guidance from the company was to build at least 54,000 vehicles. The company built 57,000. We'll get more about the guidance from Rivian for 2024, guys, when that company reports its Q4 results in February. February 21st, to be exact. Guys, back to you. Okay. So, Phil, does this validate these deliveries? Does it validate Tesla's price cuts during 23 or that it hurt rivals more? Or is it problematic that they have to cut prices to meet

that deliveries number? A little bit of everything, John. Look, you don't want to cut your prices if you don't have to. But clearly they had to, especially with the price competition in China. And they also felt the effect of a slightly slower market here in the United States. They've got the hammer when it comes to pricing, John. So take advantage of it. And I know that investors will say, well, yes, but that's hurting your auto gross margins. And they were lower in the third quarter than people were expecting. We'll find out how they came out for the fourth quarter.

In terms of the competition, John, you have to look at this and say Rivian is essentially meeting expectations, but it's going to be a choppy production for that company in the second quarter and the third quarter. And they've already told the market that, that they're going to be adjusting their production. Remember, they got three vehicles that they're building in central Illinois. And as they adjust that production, they're going to see some choppy numbers in there. So I think there may have been a little bit of the sell-off for Rivian today, in part because people are looking at 24,

and also they're looking at the 40% gain over the last six weeks in Rivian. All right. Philip Bo, thank you. Let's bring back Mike Santoli with his dashboard. Mike. Yeah, Morgan, the two-year chart of the S&P 500 begins January 3rd, 2022. That was the date of the all-time closing high for the S&P 500. It looks like, you know, just one almost symmetrical round trip from here.

So we obviously close here 47.42. It's like 47.97 is that old high. Historically, when you've spent more than a year without making a new all-time high and then finally break above it, It tends to be generally positive at least if you look out a few months based on the known patterns here. I would say a pullback to the sort of forty five fifty to forty seven hundred area. That's where we traded early December kind of launched from there would probably be no big deal if that's going to happen. It would just look like a little bit of a test of that breakout. Also, the beginning of every year, I always watch the December low. It's a little above forty five hundred. When you break the December low in the first part of a new year, it's, you know, Wall Street superstition says that could be a little bit of a difficult omen. But we're well above that right now. How if you look at another anniversary, which is about a three year anniversary from the peak in the unprofitable tech, all the speculative names, the SPACs, the ARK Invest ETF, FinTech,

Cloud, very, very similar patterns here. The trajectory was big down, 60 to 80 percent down, peak to trough, and then a long stretch of sideways. And then these sort of tentative breakouts, you can look at each one of them, and they're just sort of nosing above the upper end of these ranges that it set in for a while. So I would say you can't declare, you know, there's sort of like a springtime for speculative stocks yet, but it's they're trying to sort of maybe make the case that some of the risk seeking money is going to find their way there. We'll see if this rally lasts long enough to give them the leeway to do that, because short covering and money rotating toward the blasted areas of the market was a big part of the fourth quarter rally.

I mean, it's incredible to me that it's been three years. The world was completely awash in record amounts of liquidity three years ago. I mean, you could use the word bubble, especially when you look at this chart, in terms of a bubble bursting. It raises the question, even if you start to see some of these riskier parts of the market begin to reignite, are they going to ever re-reach the levels that we saw of early 2021? Yeah, it'll absolutely take a while, I'm sure. You know, I think back to the biggest bubble in memory, which is the Nasdaq bubble when it peaked in 2000, troughed late 2002, 2003.

It was another decade or so before you got back there. So I think it kind of doesn't matter if you're looking at them prices right now. But it's a good thing. Once you've had micro bubbles, you had the excesses wrung out of those parts of the market and haven't quite made their way back in just yet. All right. Mike Santoli, we'll see you again in just a bit. Meanwhile, Apple, one of the big losers in the Dow today after Barclays downgraded the stock to underweight. And up next, we're going to discuss whether that's a red flag for other mega cap tech stocks. And later, strategist Chris Verone explains why he thinks the burden of proof

is on the bears to begin the trading year. Overtime is back in two. Welcome back to Overtime. Shares of Apple fell nearly 4% today after Barclays downgraded the stock to underweight, citing lackluster iPhone sales they expect are going to persist throughout the year. So could this be a warning sign for the rest of the magnificent seven stocks, those big tech names mostly in the years to come? Joining us now to share his outlook, Eric Sheridan from Goldman Sachs. Eric, happy new year. Welcome. So you like Amazon, so you must not think this is bad for everybody. But Amazon had a great 2023. It was up, what,

almost 80 percent during the year. So where's the upside to make some of these stocks, Amazon in particular, a top pick for you? Well, thanks for having me on, John, and happy new year to you as well. When we look forward to 2024, I think the most dominant theme you have to continue to watch is who can put up sustained high single to mid-teens type revenue growth with a rising margin profile. Our top picks in the internet sector were really informed by that broad view in terms of the themes we saw that could potentially be drivers for growth. And then the margin dynamic gives you some valuation support as people grow into valuations looking further out than just 2023. The interesting thing about Amazon would be if you look beyond just the recovery in 2023 and look over multi-year views, the stock

has traded sideways for long periods of time going back to 2019. And one of the key parts of our thesis is returning to the profit level seen pre-pandemic, plus the drivers of the ad business can power the stock from here. Now, what about media? Media is a mess, I'm saying on TV, but you like Netflix, I think. It's been pushing higher for a year and a half. So what's the upside in picking that one since it's number one in the streaming era versus trying to figure out who's going to be number two? We're actually neutral rated on Netflix. I would say in streaming, what we're watching for is the consumption trends continue to move in the direction of the streamers and away from linear media. The ad supported tiers and one of the ones that just was launched or

announced was Amazon that will go into effect at the end of January. We think there could be another interesting tailwind for Amazon's advertising business in 2024. But YouTube and the growth we're seeing there in consumption and the engine of revenue growth that YouTube could continue to be a surprising force to the upside for Alphabet would be something that informs our positive view there as well on Alphabet and Amazon. And it's interesting when you think about it, bringing the power of intent being expressed on platforms to dynamic ad insertion into video platforms is going to be an interesting dynamic to watch for in terms of an advertising tailwind in 2024. You like Uber, excuse me, you like Uber too. And the inclusion of the S&P 500 does what for that name? Yeah, it's brought a lot of people into the conversation.

When something's not in the S&P 500, I can tell you a lot of mutual funds and folks that are tethered to the index and trying to outperform it just don't have to bother and don't have to talk about it. So I think there's been two interesting backward looking unlocks for Uber stock. Number one is the profit goals the company laid out at their investor day in 2022 and how they've executed against those goals through not only 2022, but 2023. So we're now talking about gap profitability for Uber as a driver going forward. So when you marry an ability to value the company on gap profitability with the index inclusion, you bring a much wider array of investors into the conversation. And

it's frankly been probably one of the cornerstones of some of the incoming I've gotten from institutional investors around Uber, where, frankly, that was not there two plus years ago. OK. I mean, what do you steer clear of in 2024? I see you got a sell rating, for example, on Airbnb. I mean, we were talking about the shift from goods to services. I would imagine they would continue to be a beneficiary. You have a couple other sell ratings here, too.

But what what do you steer clear of based on your thesis in 2024 and why? Yeah, travel is quite interesting because we're watching for the normalization of travel. We would rather play that through our buy rating in Expedia, where they've announced a buyback and you're going to buy, they're on track to buy back upwards of 40% of the company over the next couple of years. Airbnb was a pandemic beneficiary. We were able to work and live in a hybrid manner for a long period of time. And as travel normalizes and we get back to online travel being more of a high single-digit grower with certain levels of marketing intensity, we just worry about Airbnb's exposure to that normalization theme and the risk-reward it

presents right now as a stock. And generally, what we try to stay away from is either normalizing growth, the need to invest in business models, or slowing growth in some of our more negative skews from a risk reward standpoint among our coverage universe, where if you look among our top picks in the year ahead, the hallmarks really are high single digit to mid-teens growth, rising margins, and valuations that present more interesting risk rewards looking out over the next 12 to 24 months. But it's interesting, not with the same return profile from a year ago. You know, a year ago, I was on with John, and we were talking about 50%, 60% returns

in some of these stocks. You're not going to see the same level of return in internet stocks in 2024 that you saw in 2023. Okay. Keep that in mind, investors. Eric Sheridan, thanks for joining us. Thank you. We have a news alert on Blumenbrands. Steve Kovac has the details. Steve. Yeah, Morgan, shares are going up over 6% after Blumenbrands. This is the company behind Outback Steakhouse, Carrabba's, and retail or restaurant chains like that. Reach a deal with Starboard, bringing two new board members from Starboard to the board. Of course, Starboard owns about a 10 percent stake already that they took last year in the company. And you

see shares here up six percent. Back to you. All right, Steve, thank you. Up next, the CEO of Zscaler on the growing cybersecurity needs for government and the defense sector. And check out shares of Moderna. It's the best performer on the S&P 500 today at 13 percent after Oppenheimer upgraded the stock to buy, citing its drug pipeline potential over the next 12 to 18 months. Remember, Moderna was one of the worst performers in the S&P last year. What were you going to say? I didn't mean to cut you off. No, I was going to say public and private sectors, cybersecurity. It's going to be a big year. We've got to get the outlook from Zscaler. Yeah, even data centers have to wear protection. We'll be right back. Welcome back to Overtime. As we head into a new year, which brings the presidential election and

companies continue to grapple with new AI technology, cyber attacks remain a real threat. According to a recent report from Zscaler, 86% of all cyber attacks, including malware, ransomware, and phishing, were delivered over encrypted channels between October 2022 and September of 2023. The most targeted industry for the second year in a row, manufacturing, with education and government organizations seeing the highest year-over-year increase in attacks. Joining us now is Zscaler CEO Jay Chowdhury. Jay, it's great to have you on the show, and that's exactly where I want to start with you, because we're seeing geopolitical tensions flare.

We're seeing not just an election year here in the U.S., but this is a record year for elections across the world. More than half the world's population is going to cast votes this year. Plus, we have this ongoing transformation of cloud technologies, adoption of generative AI. What is your outlook for fiscal, or I should say for calendar year 2024, and what is that going to mean for cyber budgets? So Morgan, thank you for the opportunity. It's a perfect storm. Elections show political issues, bad actors trying to make money without working hard. We're seeing a big increase in all these threats, especially in crypto threats. So it goes without really a lot of research that threats are increasing. They will keep on increasing.

The good thing is the security providers are also coming up with better and better technologies. The key for enterprises is to embrace these new technologies, to fight back these bad guys. There's no lack of funds in cyberspace. There's no lack of technology. It's the inertia that's holding most of the companies back. Hackers do not have inertia. Enterprises do. So our job is to make sure we work with progressive companies, government agencies, to really have them embrace zero trust technology. And that's really the best defense we can have.

And of course, we're also seeing the implementation of new regulations as well. You have these new SEC disclosure rules that went into effect last month. You've got similar regulations being adopted by other countries right now as well. What does that mean in terms of an opportunity for growth and for more deals for Zscaler? So I talked to lots of CISOs, lots of CIOs. A number of them are pretty nervous about some of the SEC regulations, and they should be.

When SEC says you must disclose in four days, when SEC starts filing lawsuit against SolarWinds and personally the CISO, it becomes a little bit scary. But I think some of the regulations are needed. When government goes too far, it starts having side effects that are not very good. I do believe that some of these regulations will start increasing, but industry and government needs to work together so we come along the right level of regulations. And companies like Zscaler are out there to help customers to meet those regulations. For example, Zscaler

released a new AI-powered service, which can actually generate a report automatically that discloses all the risks that a company has. So the solutions are available. If we work together, we can be ahead of the bad guys. So, Jay, Happy New Year, first of all. Thank you. Asking you about your leadership team. You brought in a lot of new C-level execs. I think four announced in September. A lot of go-to-market experience. How long is it going to take for them to get to full strength?

So the leadership team keeps on evolving and up-leveling all the time. I've done it from time to time. Recently brought in our president for global sales, CRO, from ServiceNow, who has taken the company up to about $6, $7, $8 billion. We have ambitions to go from two to five or seven billion dollars. And we brought a CMO who has great experience. We brought a CTO last year who actually comes from scaling the technology. So this is a part of a plan to keep on scaling Zscaler to next levels. These leaders know us well. So I think we are well on our way to execute. We have a significant lead over the competition. We got a great, what I call zero-trust architecture that we pioneered. So we

are going to stay focused on building solutions, providing to our customers and taking care of our customers. That's key to success. I'm very proud of our NPS score of over 70. Jay, tell me, how do you do this in an environment where largely enterprise spending is slowing down? I know it's different for cyber. People feel like they have to spend on that. But how do you effectively target C-suite customers and not just deal with the sales force and get more than your fair share during an environment where budgets in general are continuing to be tight? John, yes, cyber is harder, but CIOs, CISOs do have finite budget.

So if you can do good cyber and save money at the same time, you can get deals done. ZSkill is one of the few companies that replaces a number of point products. When ZSkill gets deployed, you eliminate lots of firewalls, VPNs, a number of technologies. So when CIO says, Juan, you can improve my cyber, you can have better experience and lower cost. That's when customers like us. That's how we are winning business and growing. All right. Jay Chaudhry, thank you. Thank you so much, John and Morgan. Time now for a CNBC News Update with Contessa Brewer. Contessa. Hey there, John. The Biden administration is calling on the Supreme Court to approve its

efforts to cut or move razor wire fencing installed by Texas on the U.S.-Mexico border. The federal government claims the fencing blocks agents from reaching migrants who've already crossed the border. Governor Greg Abbott's administration put the wire up last year near the Rio Grande River at Eagle Pass as part of an effort to deter illegal immigration. Social media site X, formerly Twitter, is adding headlines back to article links. It reverses a change made in October by owner Elon Musk. The look is a little different than before. Headlines are appearing over the images that link to the article.

But if the title is too long, it's just, well, it's cut off with an ellipsis. That leaves a lot of room for interpretation, doesn't it? Philadelphia made history today at the mayoral swearing-in ceremony. Mayor-elect Sherelle Parker is the first woman and the first black woman to hold the city's highest office. The former city councilwoman and state representative is also the 100th person to serve as the mayor of the city of brotherly and sisterly love. I'll send it back to you, Morgan. Contessa Brewer, thank you.

Shipping giant Maersk saying it will extend its pause of all shipping through the Red Sea and Gulf of Aden until further notice. This after one of its container ships came under attack from Iran-backed Houthi militants over the weekend. The decision coming near the end of the market day in its main trading market, Copenhagen, but shares ending the day more than 6 percent higher. The Sunday attacks represented an escalation with U.S. Navy helicopters after taking fire, sinking three of four Houthi boats and killing the crew on board. That's according to U.S. Central Command. Reports of an Iranian warship entering the Red Sea briefly sent oil prices higher overnight, but crude futures have since turned negative and finished the day lower. Smaller

German peer Hapag-Lloyd also saying today it continues to avoid the area and will reassess next week. RBC Capital Markets estimates 12 percent of global trade and about three million barrels of oil pass through the Red Sea per day, which through the Suez Canal connects to the Mediterranean Sea. The consequent reroutings around Africa mean delays of up to 15 days. One stock to watch, Zim Shipping, a market cap just over a billion dollars. The Haifa Israel-based container ship operator is up over 13 percent today. You're seeing shipping rates skyrocket again in recent weeks in light of all of these tensions. UPS and FedEx also outperforming the market today, too, as air freight is seen as an area that could potentially see more demand as well. Up next, strategist Chris Verone gives

us his 2024 playbook and where he sees the biggest opportunities in this market. And don't forget, still in 2024, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Wall Street clocked major games in 2023, but can stocks keep it up in 2024? Chris Rohns, head of technical and macro research at Strategas and Mabel, can tell us. You think maybe so, or at least the burden of proof is on the bears? Well, I think definitely the way you phrased it, the burden of proof being on the bears,

is exactly how we're starting the year. When you think about just the momentum surge we saw to end 2023, we're talking about things that are rare. Two weeks removed from a surge in new highs. When you look at that stuff historically, it generally portends pretty good things if you have a time horizon of the 6- to 12-month range. You can get corrections in the short term, particularly with a primary season about to begin here, particularly with sentiment on the hotter side. But I think the longer-term setup, you have to look at the trend in the market

and say it's still very much up here. If you're looking to hedge your bets, what do you do with sectors, though? That's where I think the biggest changes are actually underway right now. I don't think the real change is at the kind of overt external trend of the market. It's under the surface in terms of where the leadership is going. You may have noticed there's a pretty big trend line break between value versus growth. Value has really started to exert itself, not just the last couple of days or last couple of weeks, really the last two months. And it began down the cap scale. Small cap value turned up for small cap growth all the way back in June. So this was a move that began with the small stocks. It's now migrating up the cap

scale to the bigger ones. I also think you see it with the equal weight S&P versus the triple Qs, right? So the average issue, and not just the last couple of days, but for the last couple of months now, has really started to assert itself. That, I think, is the big shift, the leadership, the factors, the tone change into 24. All right. If I do look at the broader market, though, the S&P 500, it hasn't declined in a presidential reelection year since 1952. Is there any reason to think that that pattern gets broken again here this year? I hope you didn't jinx it. When you look at presidential year seasonality, it actually tends to be different than the typical year. You have not had a down year in year four of a term before, but you actually tend to get returns that are

below average and you actually tend to get corrections early in the year. So if you look historically, it's the February-March timeframe where you have tended to see market corrections in presidential election year. So be mindful of that in the short term. I think the other big story, just putting that in context, is watch your back with some of the sentiment stuff here. The put calls are low. We've started to see the flows get hotter. I don't think we quite have the same sentiment springboard today that we had a year ago at this time. Okay, so we saw Treasury yields move higher today.

We actually saw the dollar strengthen pretty aggressively today. But in general, the trend has actually been the reverse of that here in recent weeks, with yields coming off, with the dollar weakening as well, expectations that the Fed's going to cut and cut aggressively this year, which, of course, you could have a whole debate just about that and whether the market's right there. But at what point do you see yields moving lower actually being a negative indicator for the economy? I think this is the big question for the year. and whether the market's right there. But at what point do you see yields moving lower actually

being a negative indicator for the economy? I think this is the big question for the year. And the way you phrase it, Morgan, at what point really do yields down no longer reflect an easing of financial conditions, but reflect actual stress in the economy? I will always take the market's intuition over my own. So we watch relationships like consumer discretionary versus staples or industrials versus utilities to gauge that answer. And so far, those are still OK, right? We look at the cyclical parts of the market and say, how are they holding up versus the defensive corners? Until you see a big shift there, I'm not too concerned about the decline in yield or the breakdown in oil or the new high in gold. I do think there will be a point, though,

where the real test on that stuff comes. The one nuance, I don't like nuance, but the one nuance to that is in Europe, the European discretionary stocks have started to weaken here a little bit. I don't know if that's foreshadowing anything domestically, but it's the one place where we're starting to see a little bit of weakness in the— But they're also more leveraged to China, too, right? China has been not as strong of a growth story as everybody thought it would be. 100%, but in all fairness, that's been true for a long time now. And they were very good for much of last year.

So it just seems in the last couple of weeks, there's been a little bit of shift in the European kind of pro-cyclical consumer names. I think that bears watching. All right. We'll watch it. Chris, thanks. Thank you. Great to be here. Up next, Mike Santoli is going to look at whether a soft economic landing might already be priced into the market. Overtime will be right back. Welcome back to Overtime. And Mike Santoli is back looking at whether a soft landing is already priced into stocks. Mike? Yeah, John, the good news is you never get to a moment where you say the soft landing is here and we already figured that out.

So now we have to sell the news. But the collective wisdom of all market participants are suggesting that cyclical areas of the market, as Chris Verone was just saying to you guys, are still holding a leadership spot over defensive areas. So as a macro message, it's reassuring. Now, whether, in fact, there's still upside for people coming on to the soft landing bandwagon is another question. I think what it means is you need incremental progress in all the incoming data that says inflation is still on the decline. Growth is holding up OK. And we can probably still continue to make progress on that as we get confirmation that maybe fourth quarter and first quarter S&P earnings seem like they're in the zone of being plausible in terms of returning to growth. So a soft landing is not necessarily priced in and earnings are going to figure into sentiment as well? Yeah. I mean, look, you never can sort of really discern what at any given moment is priced in. I think what I would more do is defer to how the market is positioned,

which is to say it's not showing that you have to really worry about imminent economic downturn. That being said, it's sort of it won't be that easy to shrug off bad news considering the cyclical stocks have already gotten this lead. It is interesting to hear more people starting to bandy about the idea of possibility of no landing. Yeah, for sure. We'll talk about that more. And you can also, if they say that to you, say, what exactly is the difference between a soft and no landing? Because it's all eye of the beholder. All right. We will do that.

Mike Santoli, thank you. Up next, we will discuss the outlook for agriculture equipment spending and the impact that could have on commodities with the CEO of C&H Industrial. Stay with us. Welcome back to Overtime. C&H Industrial shares about flat today in a down market, a market in which the industrial sector was one of the worst performers. This is the first day the maker of agricultural and construction machinery is trading solely on the NYSE,

completing a voluntary DD listing from Euronext Milan. As far as 2024 goes, the company's saying it expects a tougher ag market environment than in 2023. But joining us now is CNH Industrial CEO Scott Wine. Scott, it's great to have you back on. You've been at the helm at CNH for three years. You've been on this mission to make the company simpler, more of a pure play construction and ag company that investors can really wrap their arms around. How does delisting from the Italian stock market enable that to continue? Well, Morgan, thanks for having me on and happy new year.

You know, the delisting from Milan, I mean, the Euronext Milan has been a great source for a secondary listing for us for the last decade or so. But, you know, what we've been trying to do is just make our story simpler, make it easier for investors to find liquidity in the market, which they will get with a single listing. Also, the opportunity for us to get into some of these passive index funds. We've already had some good success with that. We've probably got a little bit more opportunities there in 2024. But really, it makes the story more simple. One of our cultural beliefs is make it simple. And I think this is a great example for that. I also mean, I think our overall structure at this point, you know, we're taxed on the UK, which is very favorable. We're incorporated in the Netherlands, which is very similar to Delaware and gives us lots of benefits there. And we've got a really large supportive shareholder in Exxon in Italy. So really feel

good about what this single listing on the New York Stock Exchange does to add to that overall good corporate structure we have. OK, so what are you expecting for 2024? Because we are coming off of several years of super strong record, even farmer income. We know that's starting to reverse and that that is tied to agricultural equipment demand. So how are you preparing for that in 2024? What do you expect that to look like? Well, remember, farmer incomes are down, but they're also still at a relatively high level. And the age of equipment is also quite high. So we think while markets are going to be slower, it's nothing like some of the slowdowns we've seen in the past. So overall, you know, we're expecting I think one of our competitors came out and said down around 10 percent. That's not

inconsistent with how we see the market. But, you know, what we feel like is we've got the company in a position coming off of record earnings for both our agriculture and our construction business. And really a whole host of new product offerings and not to mention great technology coming with it. We feel like that we can be very competitive and win in a down market. And I think the second half of the year, the way that Derek Nielsen and his team did a great job protecting and gaining market share in some cases was really a positive momentum as we head into what could be a more difficult year. Scott, South America looks particularly rough. And I'm wondering how much of that is because of the dryness and the flooding in Brazil specifically, and how much of it is just an overall economic and demand signal, you think, what South America is going to be continuing to go through in 24? You know, South America was a record year for us in 22, and we're, you know, our largest market share position, highest debt promoter scores, highest dealer satisfaction.

We're really, really strong in Brazil. And that market really slowed down. John, I tell you, it's been a bit of a head scratcher for me because mostly what's happening is farmers are just not selling the grains. They're harvesting and just waiting for grain prices to rise. Now, I think we did see in the fourth quarter some of that start to flow into the market, but there's still a lot of harvested but not yet sold grains in South America. And if they're not selling, they're not buying equipment. So which happens first, a slowdown or normalization of the construction boom that's happening in North America,

or you think the rebound in ag in places like South America? You know, don't forget, South America is an incredibly strong market. And I think for decades from here on out, it's going to be good. They surpassed the U.S. in corn production and exports last year. And we believe that that market is going to be good. And I also think Argentina, you know, Millay's got his work cut out for him. But I do believe that could also be a very strong agriculture market for us over the next several years. So we like our positions in

South America. We think it's just going to be a continued weakness, a little bit in 24 and then rebound in 25. I think construction, we're still seeing strong demand through the end of the year. And I think that's got a little bit of legs. I think some of the government spending is going to flow in and we're seeing that come through municipalities and really seeing much continued strong demand in construction, much more so than I would have expected. You also mentioned earlier that, you know, it's older equipment, it's older machines that many folks have their hands on and that there will be demand signals there. Precision agriculture and connected machinery, which has been sort of a topic for

the broader sector, how does that type of autonomous technology play into that demand signal? What does that do to help propel that despite what's happening from a macro standpoint? You know, Morgan, my fundamental belief that everything farmers do is about productivity and yield. And, you know, precision and autonomy and automation as well really gives the farmer the opportunity to enhance their productivity and yield. You know, we've spent over $2.2 billion, first with Raven, then with Augmenta, and more recently with Hemisphere, to give us the tools that we need to give our customers the best-in-class tech stack offerings that they need to be able to provide.

You know, we're going to loss completely autonomous tillage in 2025. So that's just 12 months away now where farmers will be able to sit in their kitchen, have their tractor go out and do the tilling work for them. And that's just an example of where we're going. You know, Mark Kermish and his team have really built a powerhouse capability of our ability to accelerate and deliver an enhanced tech stack. And I'm really excited about whathouse capability of our ability to accelerate and deliver an enhanced tech stack. And I'm really excited about what that means for our farmers and customers in the future. OK, Scott Wine of CNH Industries. Great to have you on. Thanks, Morgan. Happy New Year.

You too. Autonomous driving. Here's one of the places where it's happening first. Yeah. Tomorrow, investors will focus on the Fed and some key economic data. Details when Overtime returns. Welcome back. Tomorrow's going to be a busy day of economic data featuring the ISM manufacturing report, the job openings and labor turnover survey, December auto sales, weekly mortgage applications, and the Fed minutes from their latest meeting. But every day is a busy day at Morgan's house. Here are the live report.

Every day is a busy day at CNBC, in the studio and at the house. And of course, this is always a family affair and it is a family affair here today as Max, Nico and Remy are here visiting on set. Remy, what are you watching tomorrow? I don't know. No. Are you going to watch the are you going to watch the Fed minutes? Yeah, maybe. All right. What are you watching for 2024, Nico? Monster Trucks. Monster Trucks? That's always a good one. How about you, Maxie? You're just watching whatever comes your way, right?

Yeah. Okay, I think so. He's watching the mic. So you're watching your back. All right. Well, and of course, you know, we had a... Monster Trucks and Lady Bugs. Lady Bugs, too. Monster Trucks and Lady Bugs. all right well and of course you know we had every play the ladybugs monster trucks and ladybugs i think that's all the sectors i i think for a toddler i i think it is and of course you know this was this was a mixed day for the markets to start off 2024 but uh we know election years tend to be strong years uh for. So we'll be watching those too. Lots of volatility in your house

and in the markets most likely. My kids are 13 and 15 so I remember fondly these days. It sounds like you're up next. That does it for us here at Overtime.