Closing Bell - Closing Bell Overtime: Time to Play Offense? 2/6/23

Episode Date: February 6, 2023

Is it time – for the first time in a long time – to play offense in this market? Vantage Rock’s Avery Sheffield gives her take. Plus, EMJ’s Eric Jackson makes the case for a slew of growth stocks. And, Mark Newton from Fundstrat breaks down the key levels he is watching to start the week. 

All right, Mike, thank you very much. Welcome to Overtime. I'm Scott Wapner. You just heard the bells. We're just getting started from post nine here at the New York Stock Exchange. We have more earnings breaking any moment from Pinterest, Take-Two and Activision. So much on the line for all three of those companies. And of course, our reporters are standing by to give us the details. We'll show you the stock moves as they happen. I'll also speak today to Fundstrat star technician Mark Newton on why the charts are telling him to stay bullish on stocks. So now he'll tell you where he thinks they can actually go from here. We begin, though, with our talk of the tape, whether it's finally time for the first time in a long time to play offense in this market. Let's ask Avery Sheffield, Vantage Rock co-founder, CIO, senior portfolio manager with me once again here at Post 9. Let's ask Avery Sheffield, Vantage Rock co-founder, CIO, senior portfolio manager with me once again here at Post 9. It's good to see you again. Good to see you, Scott. What about that question? Is it time to start playing some offense? Sorry, because you've been kind of negative. Have you changed at all due to what's going on in the market? So, I mean, we're fairly

balanced. We remain, you know, we remain concerned about certain areas of the market, but we continue to be enthusiastic about others. Do you feel like the move that we've had so far is justified? I ask you that. Barclays, for example, says their headline today, the price isn't right. Equities are trading too rich with respect to most outcomes. Do you agree or disagree? Well, I think it depends on the stock. So I think that there are a lot of names that are very frothy, right? We're even seeing the meme stocks like a massive rebound, right? So and meme stocks, some of which have potential bankruptcy filings, get moving around like, I don't know, children bouncing on a trampoline or something.

So but but mostly up in the air right now. So you don't believe any of that hype, right? It's like the the most shorted names, the unprofitable names, the most speculative of names, and you use meme stocks as one sort of version of that. Yes, like I would be very cautious. I would be very cautious expensive names that are pricing in a lot of growth because I think that the backdrop we're seeing, right, it's mixed.

I don't know that it's terrible. I mean, we're seeing some signs in the market that are much more positive than you would expect, right? Used car prices have actually been up the past couple months. Like, whoever would have guessed that that would be? I mean, just a little bit, but not falling anymore, right? The housing market, a week or so ago, was off to a better than expected start. You're seeing travel and leisure continuing to be strong. So there are areas that are still strong, but there are other areas where, and even construction outside of new home construction is still holding in there. So there's some things to be

like, at least feeling somewhat good about. Yeah, sediment's definitely gotten better. Some of the internals of the way the market's been acting is better. I feel like the bears are in some respects getting a little bit nervous. Okay. Mike Wilson, Morgan Stanley, I know you know the name. Huge fan. While we didn't get the definitive reversal last week for equities we were expecting, the door is still very much open for our call to play out. It's been negative. Though it could develop at a bit slower pace, i.e. we thought things might fall apart by now. They haven't, but we're still sticking to our guns. Yes.

So I've seen the signs of the things I just mentioned, as well as consumer credit is deteriorating, but it's not deteriorating as much as people think or thought it was going to. Inflation in energy is negative now, right? You've got it in natural gas and in oil. You also have food inflation. I mean, Tyson's report, meat prices actually down year over year. Other areas of food inflation, there's still inflation, but it's at a decelerating rate. So those things, along with a strong labor market, wage growth is decelerating overall, but that might be mixed shift.

It's fine, basically. The consumer's in a better place. So that's positive a better place. So that's positive, you know, for the economy. So, you know, we're constructive, kind of some consumer names that are particularly cheap, that are particularly beaten up, that we think can outperform this environment.

And while they have moved nicely this past month, they're still very cheap. Does one start with an M? One does start with an ammo. I know we've talked about this name before, and I like to be more diverse in my recommendations. I do have other recommendations, but this one is particularly interesting.

Macy's, exactly. So Macy's, I think, remains very interesting. And the reason we like it is really, there's been really a transformation in how the management is approaching their business, right? They've been very tight on costs, incredibly tight on inventory management, and also on merchandising. They're going to be launching numerous new private label brands. They're also, you know, re-engaging with their brands in a very constructive way, looking for new brands. So, you know, will Macy's get to the other side and become as compelling of a retail destination as the old Macy's? I don't know, but they have many shots

on goal. And the stock in this, who knows where earnings are going to be this year, is trading at about six times this past year's earnings, which we know are, you know, fairly much in the bag because they basically pre-announced in early January. And, you know, so, you know, with a stock in kind of the low to mid-20s, having made over $-announced in early January. And, you know, so we know with a stock in kind of the low to mid 20s, having made over $4, having made $2.50 pre-COVID, taking out enormous costs. Like, I feel like there's a real margin of safety and valuation with a management team that really knows what it's doing. I mean, I'm glad you mentioned the consumer. It's one of the reasons why people like Mike Wilson say, well, OK, maybe this develops at

a slower pace because the consumers remained strong. Yes. The Fed hasn't been able to really crack the labor market. Yes. My question, though, and by the way, take two in Activision. They are out. We're going through it. You're going to hear from our reporter momentarily.

We'll show you what both stocks are doing. But it sets up tomorrow for Powell's speech. Yes. And whether the jobs report on Friday is a problem now for what he might say tomorrow, different from what he said in the middle of the week, of course, when they had the decision. J.P. Morgan's Marko Kolanovic just added another hike to his outlook, right? They're going to go again in May, says it, quote, pours cold water on the Goldilocks soft landing trade. Look, I think that the strength we're seeing suggests that things will be better for longer. And that means rates will be higher for longer. What I think that

does, though, is that puts more pressures on enterprises because wage, the labor market is tight. Wages are going up. So they're trying to save in other places like the cloud, like enterprise software. I think that's dramatically underapp other places like the cloud, like enterprise software. I think that's dramatically underappreciated by the market because those stocks are still very expensive. Oh, you still think software is too expensive still? Absolutely. Yes. Very expensive. Most, I mean, not necessarily every software stock, but yes, by and large, it's very expensive. People are acknowledging that software spending is slowing, but they all think it's going to pick up in the back half of the year. Like, why is it going to pick up in the back half of the year. I'm like, why is it going to pick up in the back half of the year?

Maybe it was overbought. Maybe also the companies are dealing with wage inflation, and so they don't have as much money to spend on software because the labor market is tight. The same thing with the cloud. These stocks are expensive because people think this is just a minor cyclical blip. But maybe it's actually a structural shift in the demand for these products moving forward because of the overbuying, because of other pressures on their cost structure. And that's actually where you should be more

cautious and conservative. So does that mean you're more negative on tech as a whole because of that? We are. Absolutely. Yes. Yes. You don't think valuations have corrected enough? No. And they've really expanded a lot. Well, not all. Not all. But, I mean, look, we do own a couple companies in the tech space, but we're very selective. We're very selective because we think that's an area where there's still too much fraud. Wow. We're looking at Pinterest here, which has reported as well. You'll hear from Julia Boorstin in just a moment. Guys, just tell me when she's ready.

The stock's down some 14%, and it has fared better than a lot of social media stocks. But like many in the tech universe, we're talking about slower revenue growth and trying to adjust to that and adjust multiples to everything that's happening there. The video game makers are out, as we said, too. Activision and Take-Two. Our Steve Kovach is going to come on with us in just a moment, too. But this is one stock to keep an eye on here. You've got an outsized move, I think it's fair to say, down some 14 percent from shares of

Pinterest. We were looking for 5 percent revenue growth. So I'm looking out for that number. Just to give you an idea, it was 20 percent revenue growth in the fourth quarter of 2021, year on year, just dramatic declines. And the full year number for revenue growth was even more stark in terms of how much it has corrected itself. But we'll get you the full story there. MegaCapTech, I want you to give me an opinion on that because that is not in the same universe as I know what you're speaking to. Yes. So we like some MegaCapTech and I'm not going to name names on MegaCapTech, but there's some Megacaptek that we like. And it's, I mean, you could guess because it's the less expensive names that, you know, in one case has a real,

both of them have significant cost savings opportunities that they are starting to execute on that we think will help protect from a weaker demand environment on advertising. See, I play along well. You don't have to mention the names. I'll mention the names. Exactly. It's like telepathy. I'll try and figure it out myself. It's a guessing game. Guys, we go on to...

Who's ready? Tell me again. Julia Borson is ready on Pinterest. Hey, Julia. Hi. That's right. Pinterest earnings actually beating Esmith with an adjusted earnings of $0.29 per share, Julia. Hi, that's right. Pinterest earnings actually beating estimates with an adjusted earnings of 29 cents per share, two cents better than expected.

But revenues falling short of expectations coming in at 877 million versus the 886 million that were anticipated. Also, monthly active users coming in a bit shorter than the anticipated growth. The company adding 5 million monthly active users to finish at 450 million. The analysts had expected the addition of about 7 million, so 2 million short there. But I actually think the main reason the stock is trading down over 11 percent right now is the fact that the company is guiding to revenue growth in the low single digits for Q1 and saying that takes into account slightly lower foreign exchange headwinds. But I think what's key here is that analysts had been anticipating Q1 revenue growth of 7 percent, expecting 5 percent revenue growth in Q4. The

company reported 4 percent revenue growth and also expecting much better than expect much better than the company guided to 7 percent revenue growth in Q1, whereas in fact here they're seeing low single digits. So I think that's the source of the shortfall. Also, just want to point out here that the board of directors authorized a buyback of up to 500 million dollars and also that the CFO, Todd Morgenfeld, is leaving after six years. Stock now down about 10 percent. Scott. All right, Julia, we'll hear more from you. I'm sure that Julia Borson, by the way, we're going to hear more on the whole buyback issue, too. As you might have heard, the Biden administration is really upping its ante in their battle against what companies are doing in terms of buybacks.

We have more coming up in just a bit. In the meantime, let's add more voices to this conversation. Lauren Goodwin is portfolio strategist at New York Life Investments. Samir Samana, senior global market strategist at Wells Fargo Investment Institute. Good to have both of you. Lauren, you're here. I mean, you heard what Avery had to say about the rally. It's still not very much liked, this rally. Do you like it any more than you had in the past? I don't like it at all. See? That's what I said. Everybody's so negative. Look, I... Still. We, as wild as this economic cycle has been, I actually see the evidence pointing towards further slowdown and recession as being clearer than it's ever been.

I mean, again, weird economic cycle, not weird in the way that the indicators have developed. Housing, manufacturing, typically the first sectors to topple, they've toppled. Then would come services paying close attention to that, and then the consumer in the labor market. And so the fact that the labor market is still strong only suggests to me that we could see further movement, at least from the market's perspective on where the Fed will go. Downward pressure on economic growth, downward pressure on valuation. So look, nice, growthy, high beta rally, a good example of why it's so important to stay invested across the cycle. But I'm using this opportunity, this rally, to reposition, reallocate.

Oh, a seller. A seller on the strength. Samir, you also don't think it's a good time to be buying stocks. You know, let me start with kind of the North Star, right? Our target for year-end on the S&P is 4,300 to 4,500. So we do see the markets ending higher at year-end. You know, when I was on a couple weeks ago, the S&P was south of 4,000. The 10-year was closer to 3,300. And that was probably a pretty good time to put money to work in equities, right?

The equity risk stream was at a much higher level. Now you've got a 3,600 on the 10-year, and you're north of 4,000 on the S&P, as high as 4,200 last week. So it probably isn't a bad time to pull back on some of these high-flying names. Now, that being said, you know, look, there are areas that do very well if the Fed does have to go further from a rate standpoint. There are more durable areas like energy, like health care, which have been, you know, kind of left behind in this rally. And we think there's a really good opportunity there. All right. I'm going to jump back to our reporter, Steve Kovac, because he has more now for us on Take

Two and Activision. Steve, what do we have? Yeah, take a look at Take Two shares, Scott. They're down about 2% here on a revenue miss and also some weak guidance. Let me go over the numbers real quick, though. EPS is a 91 cent loss. We're not comparing that to quick, though. EPS is a 91 cent loss. We're not comparing that to estimates, though. Revenue also a miss, $1.38 billion versus $1.46 billion adjusted that was expected.

And then that guidance also coming in lower than expected, $1.31 billion, ranging up to $1.36 billion. The street looking for up to $1.5 billion for that revenue guidance for the current quarter. And some interesting comments here, Scott, from CEO Strauss Zelnick, just talking about the macro conditions that caused them to miss these estimates, even their own lowered guidance that they gave last quarter. Let me just read this quote real quick. Quote, as we believe that consumers shifted their holiday spending toward established blockbuster franchises and titles that were offered with pricing promotions in light of macroeconomic conditions. Also announcing a $50 million cost reduction plan

that includes layoffs. No detail in this release, though, how much is there. So cost cutting like we've seen through so much of tech. I'll move over to Activision real quick. Obviously, this stock only trades on any news on the Microsoft deal, but they are reporting EPS of 78 cents. We're not comparing that to the buck 51 the street was looking for. Revenue, though, that's a beat, $3.57 billion versus $3.16 billion adjusted, likely due to that new Call of Duty game that was just setting records like crazy, Scott. I'll have more of when the call starts from take two just in a couple of minutes here. Okay, Steve Kovach, thank you very much. I look forward to talking to you again in just a moment.

Back to our conversation on the markets with Lauren Samir right here on set. Are you worried about, Lauren, what Powell might say tomorrow in his speech? I expect that Powell is going to be as remarkably consistent as, frankly, I've read him to be over the past several months, which is to say, look, we've expected that a terminal rate in the 5% to 5.25% range is an appropriate place to pause and let these long and variable lags play out. The market hasn't believed us. And based on the jobs report that we saw on Friday, are the Fed's estimate may have been a little bit better. Now, we haven't seen the market meet the Fed yet. And so that's one of the reasons why I do expect that we'll see some of the growthier high beta bump that we've seen in the last six weeks unwind in the weeks

that follow. Do you think that Powell makes a concerted effort to try and bring the market closer to him, so to speak? Well, I think that one of the interpretations that the market had after the press conference last week was that Powell had given up the gun, especially on the financial conditions question. But the reality is, is that this is actually an appropriate time to say, the risks are pretty balanced from a Fed funds rate perspective. We have a couple hikes to go. That's not that much compared to how much has already happened. It's appropriate to start to slow our roll. Now, whether that's really good news or not is, I think, the gap between what Powell is saying and what the market is expecting. I don't think that sticking around five and five or five and a quarter for nine months is particularly good news for the trajectory of the economy. And that's what it's going to take to break the labor market and to break inflation.

You know, Samir, you have a take that's certainly different from others who have come on recently. You like the U.S. over international. And there have been a flood of calls that are the exact opposite of that. Why are you making that? Yeah, I mean, it's still much too early. We think there are some opportunities that are starting to emerge in the international space. We would stick to developed there over emerging. We think, again, because of what's going on with China with geopolitics, emerging markets are a long ways away from a place where you want to put money to work. But really, I mean, U.S. firms are just so much more profitable than their peers. I appreciate that the valuations are higher, but there's a reason for that. It's because they do tend to be much more resilient, much better operators than what you find

internationally. But I mean, the jump in international stocks has certainly been more impressive than U.S., no? It's all the dollar, right? And that's basically what's happened is the dollar got as high as around 115 and went all the way back to about 100. And now what you're seeing is as the dollar slowly makes its way back up, international has underperformed for the past week or two. So again, we think the dollar probably trades in this wide range. We think 105, 106 would be a good place for it to go next, especially if the market reprices the Fed's path. And that may be an opportunity to start to get a little bit more involved in the international side.

The last thing I want to do is have a bit of a debate right here on the desk about tech e-commerce. You like Lauren Avery? No, like you don't like it, right? Why do you like e-commerce here? Because I mean, it's a pretty good debate in the market right now, whether this move in tech is legit or not about to reverse. I hate to mess up the debate, but I actually don't like e-commerce as an equity play. I do think that as a structural change that the markets have experienced in areas like real estate, it's really interesting. Not necessarily positive, but really interesting. So allow me to explain. E-commerce increases steadily over the course of

the last 20 years since the internet was invented huge structural uptick when the pandemic hits that is a structural shift in adding to the the office space shift that we've seen post-pandemic in the the types of spaces that are going to be needed the way that they need to be used etc and so. And so I think that the changes in e-commerce have been enormously important in the way that growth equity has outperformed over the last couple of years. But we are moving away from the pandemic environment. We're moving away from low rates, low stable growth and inflation. And that's not an environment where I necessarily expect any of these names to outperform. Avery, last word to you.

Yes. So I completely agree. E-commerce has actually had a massive structural shift on the entire economy. I actually think it's one of the reasons why the labor market is so tight. When you look at the jobs numbers and where have jobs really increased since the pandemic, but even further back than that, like warehousing and e-commerce related jobs have been a real driver. And I think that's one of the reasons why we're going to see a tighter labor market. That said, we have not really seen any very economically feasible business models in e-commerce. And as e-commerce growth slows, I think that presents real challenges for e-commerce companies.

All right. We're going to leave it there. Everybody, thank you. Avery, thank you. Lauren, thank you. Samir, we'll talk to you soon. Let's get to our Twitter question of the day now. We want to know, was October the bottom for stocks? You can head to at CNBC Overtime to vote. We'll share the results coming up a little later on in the hour. We're just getting started, though, here in Overtime. Up next, going for growth.

Top tech investor Eric Jackson is up big this year, thanks to some serious exposure to a number of high-flying growth names. Can that rally last, though? We're going to ask him what he thinks. And later, we're following those late-breaking developments out of Washington. The president expected to take even bigger aim at corporate buybacks in tomorrow's State of the Union address. We have the full details ahead on that. We're live from the New York Stock Exchange. Overtime is right back. We're back in overtime. Gross stocks have been on a tear this year. Just look at these

year to date performances for the likes of ARK coming off its best January ever. Maybe it's best month ever. Uber, Shopify, Tesla, Coin, just a few. Look at that. Coinbase up nearly 110%. Obviously, crypto has been on a huge run as well. My next guest in all of those names, Eric Jackson of EMJ Capital joins me now. I mean, last year was rough. So you're off to a great start. No shock. I think it's your best month ever. A little birdie told me that you really think this can continue. Congratulations, by the way. Hey, thanks, Scott. Thanks for having me. Can this really continue, though? I mean, you really expect it to?

Well, listen, Scott, when I was I was on with you in December and I said then, even though we were in the depths of market pessimism at that moment and the tax loss selling, that I didn't know if it was going to happen in January. But I said, watch the CPI number. When that drops below 6.6%, it could start a huge market rally. Because last time it happened was in August of 1982. It started a 10-month rally. When it dipped below that number. The market

participants said, hey, the Fed's finally got inflation licked. And that 10-month rally led to a 100% increase in the NASDAQ back then, 110% increase in the Russell, a 70% increase in the S&P 500. So yeah, unlike a lot of market strategists that come on the network and are hesitant and nervous and say, sell the rally. We could be in month one of what could be a 10-month rally ahead of us this year, which nobody's expected. Well, because they say, well, it's just a reversion to the mean. It's a lot of short covering. It's totally speculative. I mean, look at Bitcoin, right? You think the bounce in Bitcoin is legit, for example? I ask you almost, you know, rhetorically. So they suggest that this is all early year action and it's sure to fade.

How do you respond to that? Look, consensus is usually wrong. I mean, nobody thought anything was really going to come out of Jackson Hole. It ended up being this huge negative catalyst for the market. Everybody coming into the Fed last week said it's going to be another Jackson Hole. It ended up being this huge negative catalyst for the market. Everybody coming into the Fed last week said it's going to be another Jackson Hole drubbing on the head of the market. And it was just the opposite. NASDAQ was up 3.3% for the week. Dow was negative for the week. So consensus has a poor track record over time. A lot of people obviously coming into this year

were leaning on one side of the boat. And we are just getting coming into this year are, were, you know, leaning on one side of the boat and we are just getting the opposite. Now, last year, they can point to the June rally to the, you know, early August and that, that got faded and they think that's going to happen again. Does, you know, history doesn't always just repeat itself. This could be the start of something much, much bigger. What happens if Powell tomorrow is a little more hawkish now to try and bring the, you know, the train back into the middle, so to speak? Doesn't that have the possibility of if, you know, you know what's going to happen, right? If rates move up in any meaningful way, those stocks aren't going to be higher. Well, Powell was a ball and chain on me and a lot of

investors in 2022. Me looking at tech stocks in particular, it almost didn't matter what these companies did fundamentally. It was just Powell was constantly coming down and raining on everyone's break. I'm feeling positive going into this year and even before last week's meeting, but definitely coming off off the heels of last week's meeting that, you know, it really doesn't matter what Powell says anymore this year or other Fed heads. Of course, they have to keep talking down things. But the market is looking ahead. This this you know, there has been enough pain, especially in tech land, where multiples have contracted so much over the last two years. I don't know what people who say, you know, tech is still expensive are looking at.

They're not looking at the same stocks I am. A lot of stocks are back to 2017 levels. You know, a lot of SaaS stocks are back to like 2014 levels. So I think enough work has been done in taking the air out of those stocks where we can have a meaningful rally and it can continue this year. So of the ones that we mentioned, Coinbase, Shopify, Tesla, Uber, which do you have the most excitement around over, let's call it, the next couple of months? I think Coinbase is still underappreciated, even up 100% this year, because this thing is still cheaper on an EV to revenue basis than Charles Schwab. It's the dominant crypto market exchange. They're going to have likely 120 million verified users by the middle of this year. One of their big competitors imploded a few months back, FTX. They got the dominant

part of that market share, which the market really didn't price in. Also, I'll point out that Toby Luck, who's the founder and CEO of Shopify, is on the board of Coinbase. He bought $3 million worth of Coinbase stock on the open market himself in December, January at an average price of $38. If this thing goes back to not 2021 levels, but in terms of ARPU, you know, for the bigger user base now back to 2020 levels, and it gets a premium to a Schwab type multiple, this could be a $300 stock before the end of the year. You know, I'm looking, you mentioned Shopify and I'm looking at it as we speak, and I see that it's up 60% over the last three months. Now, I'm

guessing that a lot of that has happened over the last month alone. But also next to that nice column that says P.E., it says not applicable because it's not profitable. Right. So, you know, that goes back to the whole idea of people willing to start buying these unprofitable tech stocks again in any meaningful way and those who cast just simple doubt on the prospects that they will. Well, but in their case, a couple of weeks ago on a blog post, they announced that they are raising, not cutting, raising prices by 33, 34 percent across all different types of customers. So if you take that price increase, if you assume that they're going to roll that out as this year rolls on, by my math, by the end of this year, they're going to have $2 billion in EBITDA

when they, you're right, they have been a profit-challenged company. They've also taken the medicine, probably listening to the likes of Brad Gerstner of the world, of doing a big, big job cut. So we have that to look forward to in terms of them being even more profitable this year. And if they get a little tailwind from, you know, more business and so forth and the weaker dollar, then that's going to add to the party. That's another one that I think could have huge upside ahead of it this year. All right. Well, we'll see what happens. Eric, I appreciate it. Certainly

off to a great start to the year. We'll see if it continues. That's Eric Jackson joining us once again. Do not miss, by the way, Tesla investor Ron Barron is going to be on Squawk Box tomorrow morning, 730 a.m. Eastern time. It's time for a CNBC News Update now with Kate Rooney. Hi, Kate. Hi, Scott. Here's your CNBC News update at this hour. In Turkey alone, some 15,000 search and rescue workers are looking for survivors of this morning's massive earthquakes. Thousands more are combing through rubble in Syria, but some are still waiting for the search to begin for their loved ones. The death toll has now risen above 3,100, with another 15,000 reported injured. The Pentagon is releasing

some details about the suspected Chinese spy balloon. A top general says the balloon was over 200 feet tall and was carrying at least 2,000 pounds of equipment. He says the large size was a factor in waiting to down the balloon until it was over the Atlantic Ocean. Divers are now searching the debris field, which has spread over nearly an entire square mile. And in New York, police say an 82-year-old woman was pronounced dead in her nursing home, only to be found breathing at a funeral home three hours later. She has been taken to a hospital. No details yet on her condition. The case has been referred to the New York attorney general's office. Scott, back to you. Oh, my goodness. All right. Kate, thank you.

That's Kate Rooney. Up next, late breaking developments out of the White House. President Biden now expected to turn up the heat big time on corporate buybacks. That's in tomorrow's State of the Union address. We bring you the very latest, what the implications are for you, the investor. Overtime's right back. Take a look at shares of Pinterest and Skyworks. Both companies reporting results in the last 30 minutes, both announcing new buyback programs. And now the Biden administration upping the ante in its war against corporate stock buybacks. Let's get right to Eamon Javers with more on this developing story. Eamon, what do we know here?

Well, Scott, we know that the White House is signaling what the president's going to be talking about in the State of the Union tomorrow, including a new tax on corporate buybacks. The president, according to the White House just a couple of hours ago, is going to call for quadrupling the tax on those corporate stock buybacks. The White House making the case here that those stock buybacks are a way for companies to pass tax-advantaged payouts to oftentimes foreign investors or wealthy investors rather than through dividends, which investors would have to pay taxes on. So they're saying they're going to up the taxes on that if the president gets his way. Certainly going to talk about it tomorrow night in any case.

Also, this billionaire minimum tax, the White House putting out a line item here saying that the president's going to talk about this billionaire minimum tax tomorrow night, given that he doesn't think it's fair for billionaires to pay 0% tax or a very low single-digit tax. He's going to propose that minimum as well. All of these, Scott, you can look at his talking points tomorrow night. Remember, Republicans just took over the House of Representatives. Not likely that the president is going to get through his wish list of agenda items through Kevin McCarthy and the Republicans who are in control of the House. But he's going

to signal where he would go if he was in charge. Yeah. And stay with me. I mean, I want to do more on this. Let's bring in Ben White, Politico chief economic correspondent and a CNBC contributor. Ben, it's good to have you join the conversation. What's your reaction to this, if you want to call it proposal? I guess Chevron at 70 billion and Meta at 40 billion, among others, touched a nerve. Absolutely did, Scott. I've been talking to some people in and around the White House about this after it came out. And I agree with Eamon completely that this is political messaging. They're not going to get a quadrupling of the tax on buybacks.

I mean, if you remember the Inflation Reduction Act that they got through, they wanted 2% in there. It got knocked down to 1%, you know, which is relatively minimal. Republicans complained at the time, well, that opens the door to going up from there. It got knocked down to 1%, you know, which is relatively minimal. Republicans complained at the time, well, that opens the door to going up from there, but not under these circumstances, not with Republicans in control of the House. But it is good politics. I mean, if you look at the polling on it, it's popular, generally soaking it to Wall Street, anything. You can make the argument that five acts are used in very useful ways, and you don't want to gum up the flow of capital with more taxes, but it is a popular political argument right now, so much so that there are some Republicans like Marco Rubio who like to talk about hitting buybacks as well.

So this, they think, is good politics, along with the Buffett tax, the billionaire tax, things that are not going to happen between now and 2024. But they like where they are on it politically. See, Eamon, Ben raises an interesting point that it's not like no Republicans have been talking about the issue. And I'm just wondering more broadly where Republicans as a whole in Congress would be coming down on this issue, because let's be honest, it's not as though the alleged party of business has been all that friendly to business over the last couple of years, certainly willing to engage on on some issues that they may not have in years past. Yeah, I think that's absolutely right, Scott.

And you can see a universe where there is sort of a populist argument for some of these things. But I think practically just in the red versus blue team sport that we're in in Washington these days, if these ideas come out of Joe Biden's mouth at the State of the Union, you're not going to find Republican support for them, even though, you know, you might see a populist argument for it. But you were exactly right, Scott, to point your finger to the oil and gas companies. Here's a line from the White House press release on this earlier today. They say, last year, oil and gas companies made record profits and invested very little in domestic production and to keep gas prices down. Instead, they bought their own stock,

giving all that profit to their CEOs and shareholders. So oil and gas companies certainly got the attention of the White House. And that's part of what this is about, is that at a time when the White House was really anxious to be bringing gas prices down, the oil and gas companies weren't doing that. They were doing buybacks. I guess, Ben, also, right. Yeah. It is. How would increasing the tax? Let's just for argument's sake, say it happened to even some degree how that would influence corporate behavior. And I bring to your attention a CNBC CFO Council survey. Fifty five percent of CFOs said such proposals would, in fact, impact their behavior as it as it relates to buybacks. Yeah, no, I think that it would not at one percent.

But if you quadruple it, then you have a much more significant chance of altering CFO behavior and how they, you know, use their capital either for dividends or buybacks and be less likely to do buybacks, which, of course, we know can be, you know, anti-dilutive and be useful in M&A and other transactions. But, you know, Emin is right that the White House is incredibly angry over the Chevron buyback. I think that may have been the thing that pushed this into the State of the Union and oil and gas more broadly, what they view as taking too many profits and soaking everybody with gas prices and then not doing anything with it but enriching themselves. So that may have been what brought it to be. But yeah, at 4%, I think you're talking about real money. At 1%, obviously, stocks gyrate enough that it doesn't make that much of a difference. But you quadruple it, then it will change behavior for sure. Of course, I mean, it just goes to the bottom line question of that. I know some will have is, you know, who is Congress to determine how, you know, a business,

a huge business, you know, multi global business, a global business, excuse me, to how should they influence or why should they be able to influence how a company should use its cash? Well, because of the United States Constitution, right? I mean, they write tax policy. That's why. And look, you can do all sorts of things in tax policy to incentivize behaviors that you like. That's why politicians like tinkering with tax policy, right? You can create incentives to do things you like and create disincentives to do things you don't like. In this case, though, this is not happening. This is maybe, you know, the president could talk about his campaign for a second term, maybe in the first term of a second Biden administration, if he gets Congress, then you could start talking about this being a

real idea, but not going to happen in 23 or 24. Yeah. Well, good for us to talk about nonetheless. Guys, thank you. Ben, Eamon, we'll talk to you soon. You bet. All right. Up next, key levels to watch. Top technician Mark Newton says the charts are telling him to stay bullish on stocks. He'll tell us where he thinks they go from here. Overtime is right back. All right, we're back in overtime. Major Average is posting another day of declines. However, our next guest says the charts are calling for a near-term buying opportunity. Joining us now, Mark Newton. He's head of technical research at Fundstrat. Welcome back. Thank you. Bottom line from all this is that you remain bullish, right? 100%. Look, I think that there's three main things for investors to look at. One

is that momentum and breadth have improved substantially in the last couple of months. The second is that we are in a seasonally very bullish period. Pre-election year seasonality for the first quarter is better than any other of the 16 quarters that make up the presidential cycle. The third is that we continue to see pretty excessively bearish sentiment across the board. Now, we have to differentiate that. You juxtapose that. The near-term sentiment has gotten a little more optimistic. However, if we saw anything from recent reports of investor risk, people are very much on the sidelines. We're seeing very high levels of investor cash. That makes me think that we are in very much a bull market that can continue.

A bull market. So starting from the lows in October, this is a new bull market? I think the lows were put in in October. I don't think it will go necessarily straight up all year, but I think that we do see signs of technology now coming back with a vengeance in the last couple of weeks. Tech is now the third best performing sector on the year. And that's obviously quite important. But being 27 percent of the S&P. I know. But why is it wise? What leads you to believe that that has any staying power?

I mean, that's that's the biggest debate in the market. Almost everybody is saying the exact same thing. The market is not getting the Fed's message. And that's really interesting to me. They all say that the market should be lower. They're trying to figure out how this market can rally. If anything, it's gone from extreme pessimism to now skepticism. We haven't reached bullishness yet. We haven't reached giddy type feelings about the market. So look, it's a market where the market's respecting inflation selling off sharply, as well as a pivot potentially with the Fed, at least in the U.S., far more dramatically than what we'll see in Europe.

The market certainly respects that, and cyclically, we're still doing quite well. So you're telling me that the value overgrowth move is over. It's done? That was it? Well, it's interesting because you see a lot of tech stocks are now put into the value bucket and a lot of energy stocks have been put into growth. So you have to really understand. But you know more broadly what I'm talking about. I think energy is going to come back. I think both health care and energy have a chance of snapping back. But I also see technology as being a phenomenally, you know, a good sector to position

in for 2023. I think interest rates continue to come down over the course of the year. That should fuel growth. I think growth comes back and tech outperforms. You think the Fed cuts rates this year? I'm not a... I know you're not a funder. I know that, but you can't have a view. Your view doesn't work if rates continue to go up or, at minimum, stay where they are. Well, rates haven't continued to go up. We've gone from 420 down to 340 in a very short period of time. We have a two-day bounce. We're seeing evidence of rates pull back, not move dramatically higher.

If rates get back to 4%, then I agree. There's a very high correlation between treasuries and equities, and that likely could be problematic. But that's where we said that before, though, about the market and the Fed being off sides with one another. So let's take a look at the dollar and selling off substantially and say that Europe remains committed to hiking much more aggressively than the U.S., and that should be actually a bearish factor for why the dollar can sell off further. And that likely is going to be a tailwind for U.S. equities, along with rates pulling back. So those two reasons, coupled with, you know, maybe the consumer is, the labor market

obviously is in good shape, and maybe that's the last shoe to drop. But we haven't really seen any strong evidence of that. Technically, you know, markets have been resilient, and it's only been technology that has lagged. We're seeing substantial rallies in Europe, EM, China, everywhere on the globe except for U.S. and now technology is coming back. And so investors are on the sidelines watching this happen saying, well, how can this happen? Well, bottom line is we don't care about the economy. We care about the market per se, right? They're both important in the long run, but we need to really recalibrate how we think about the market and using earnings as a way of forecasting the market, because rarely do they line up in the short term. Last year, we saw

earnings higher, stocks went lower. This year, earnings are down, stocks are up. So at what point do we say the model of seeing where earnings are is truly the right way to look at the market? Just give me a number. I really got to go. We're at 4,100. Where are we going on the S&P then? What do the charts say? A lot of it. My target is 4,500 by the end of the year. I really got to go. We're at 4,100. Where are we going on the S&P then? What do the charts say? A lot of it. My target is 4,500 by the end of the year. I think even in the short run by February expiration, we likely lift up above 4,200 in the near term. Okay. Great to see you. That's Mark Newton joining us here. Coming up, we're tracking some big stock moves in overtime. Kate Rooney standing by with that. Kate?

Hey, Scott. So it's all about earnings today. Some disappointing results at an ed tech and a software company dragging down two stocks. But it's not all doom and gloom. We've got some green shoots as well with an upside earnings mover. We'll have all of that after the break. Closing bell overtime. We'll be right back. We're tracking the biggest movers in OT.

Kate Rooney is back with that. Hi, Kate. Hey, Scott. So first up, shares of ed tech company Chegg, losing about a fifth of their value right now in overtime. That's despite Q4 earnings and revenue. The top of the street's expectations, guidance, though, came in light. Q1 revenue and full year revenue, both disappointing analysts and management pointed to reduced enrollments and uncertain economic conditions, as well as subscriber growth problems. We'll hear more from Chegg CEO Dan Rosensweg tomorrow on Closing Bell as well. Another decliner right now today, Scott, Zoom Info, the software company

in the red after posting Q4 earnings per share of six cents and revenue of some $300 million. Let's end on a positive note, though, with one name in the green. You already mentioned it, Skyworks. Earnings missed estimates. Revenue came in line, but current quarter guidance was also below estimates. We did get investors cheering a $2 billion buyback announcement, though, and that stock higher right now in overtime. Back to you, Scott.

All right. Kate Rooney, thank you very much. Still ahead, Santoli's last word. We'll find out what he is watching as we kick off a fresh trading week. OT, it's right back. Let's get the results of our Twitter question. We asked you, was last October the bottom for stocks? The majority of you saying yes, it was. Mike Santoli's next with his last word. All right, Mike Santoli here with his last word. You were just flagging some Bed Bath & Beyond headlines as you were coming up here.

It appears they filed an offer, some convertible preferred shares and warrants, really just trying to capitalize on this little ferment out there. The stock was ripping today. You know, this is probably the right thing to do for their own balance sheet. Now, they have some corporate debt, Bed Bath does, trading below 10 cents on the dollar. So it's not as if this is going to be a way out to save the balance sheet ultimately necessarily. But what's interesting about convertible preferreds is that it's kind of debt. It's convertible into equity.

And if you have really juiced up options prices, there's kind of an embedded option in there. So it's the way to essentially capitalize the overexcitement of short-term traders. It's an AMC type of move. Short-term. It's only up 340% a month. What are you talking about? Yeah. I mean, obviously, the reference point matters a lot here. But it's wild. It's a really wild world here where the company has given you the warnings about, you know, they've already, I guess, defaulted on certain paper. And yet there's enough excitement in the equity. Now, Hertz, remember, they tried to do a common stock offering into one of these type of situations and it didn't work. Although they had already filed. Less than 20 seconds. But looking ahead to Powell tomorrow. Yeah. We're on alert for it already. I feel like he's just going to remind us the job isn't done.

What's interesting to me is it could be the no landing scenario. So we'll see how he characterizes the growth picture. We'll talk about it tomorrow. That's Mike Santoli with his last word. I'll see you tomorrow as well. Fast Money's now.