Closing Bell - Closing Bell Overtime: UiPath Co-CEO On Growth Prospects With AI; Lawmakers Wrap Up Meetings With Media, Tech CEOs Over China 4/6/23

Episode Date: April 6, 2023

All three major averages finished positive on the day. For the week, Dow was positive but S&P 500 and Nasdaq were lower. PIMCO’s Tony Crescenzi and Wells Fargo’s Darrell Cronk break down the market action and lookahead to next week. LinkedIn’s economist Guy Berger on the rising trend of people working two jobs. Citi’s Stephen Trent gives his top airline picks heading into summer travel season. Former Atlanta Fed President Dennis Lockhart on the high-wire act facing the Fed. Plus, UiPath Co-CEO Robert Enslin on client demand in enterprise software and how AI is changing his industry. Our Steve Kovach reports on media and tech CEOs meeting with lawmakers over China. 

Oh my, in the OT, while stocks reversing higher in this final trading day of the holiday-shortened week, with the NASDAQ leading the way. That's a scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off. We are awaiting breaking news on the Fed's latest balance sheet data. That report has been closely watched following the collapse of Silicon Valley Bank, and we will bring it to you as soon as it is released. Plus, we will get instant reaction from former Atlanta Fed President Dennis Lockhart and find out why he thinks there is a heightened risk of the Fed overshooting. But let's get straight out to our market panel.

Joining us now are Tony Crescenzi from PIMCO and Daryl Kronk from Wells Fargo. Good afternoon to you both. Daryl, I'll start with you. We had a lower week for the major averages, but we did reverse higher in this trading session today. Despite the weaker than expected data we've seen all week long, you're a buyer or a seller of this market? Boy, good afternoon, Morgan. Still have to be a seller here. I think the interesting thing underneath the surface, beyond the broad index, when you

look at what happened this week, small caps plumbed new lows. You had industrials roll over hard, if you look at the charts. And banks still continue to languish. Financials can't get off their back. There's no bounce there coming off the March problems. So when you look underneath the surface, the technicals and fundamentals don't look good minus tech and discretionary yeah tony the r word is back in the picture recession the fact that we did see this string of disappointing data including much weaker than expected labor data ahead of that jobs report tomorrow are we

on the precipice here of a meaningful slowdown, a possible recession, when it comes to the economy? Well, Morgan, the U.S. economy has been in a slowdown for a number of quarters now, and it does seem like it might be in what's called a growth recession. A growth recession is where it's not an outright recession, of course, below 0 percent contraction in economic activity, but below potential, which is said to be around 1.8%. A growth recession can feel like a recession with, for example, rising jobless claims, which we're seeing today, and declines in output, which we've seen four of the last five months, and a decline in retail sales, which we've also been experiencing some evidence that it may be

occurring now. And so we might be in the midst of this growth recession that can be very beneficial to the bond market. It's clear in yields plunging in the last few weeks, probably on this notion. Okay. I want to get into some of your specific ideas around the bond market. But first, Daryl, earnings start in earnest next week. Banks will be in focus. Do estimates need to come down? Yeah, I mean, if you look right now, you've got basically top-down estimates at 210 for the S&P, bottoms-up estimates at 220. So top-down are starting to come down. They're still not low enough. We still think the year finishes around 200 to 205. It'll be interesting because what will matter this quarter is margins will matter most. And as pressure continues at that margin line, we're seeing it spill through to earnings. So earnings overall are projected to be down 7% to 8% for the quarter, basically flat revenue.

But it's going to be acutely negative in places like health care and in some of the discretionary. The only real positives coming out of the quarter will be energy, and industrials will actually show some positive earnings growth. Yeah, looking no further than Levi's today, which got hit pretty hard in part because of that miss on margins. Tony, I said I was going to talk about it with you. Where are you seeing opportunities in the bond market right now? How should investors be positioning themselves? Well, clearly there's an allure to short-term interest rates. They're higher than long-term interest rates as an inversion of the curve.

But one can't be fooled entering a recession into those instruments, or shouldn't be, because they don't provide you with the total return. So a good strategy for investors is think about total return-like strategies and also income strategies that will take advantage of the potential for a recession or should benefit from. Specific securities, there's weakening occurring now in part because of the idea of asset sales in the agency mortgage-backed securities market, a liquid market with good spreads relative to treasuries and swap rates. So those are good places to be. Enhanced cash strategies, as I said,

these money market funds, again, can be a fool's game in the long run because you want protection, diversification, protection of safety, et cetera, by having some duration. Yeah, I'm looking at your notes and you say investors are fortunate that there is a playbook for the late cycle dynamics that are now underway. So it sounds like you just laid some of that out. Daryl, I want to get your thoughts on this. How are you advising clients to be positioned in this market given all of the uncertainty right now? Well, I think Tony's right on the bond market. So right now we would be barbelling the bond market. So in other words, we'd have our exposure on the short side of the curve and on the long side of the curve and basically hollow out what's called the belly or the intermediate section of the curve. We don't find a lot of value

there. We still think it's way too early, though, Morgan, to go down the credit stack or lower your credit quality exposure. High yield spreads this morning are about 480 basis points over. You've got to get those numbers upward closer to 657, 750, in our humble opinion, before things really look attractive there. And if history is any guide, recessionary indicators and pressures will push them there before it's said and done. So too early on credit and barbell your duration exposure between short and long. Okay. Gentlemen, thanks for kicking off the hour with me. Thanks, Morgan. Daryl Kronk and Tony Crescenzi, have a great long weekend.

You too. Wall Street is on alert for the March jobs report that's coming out tomorrow morning. CNBC Senior Markets Commentator Mike Santoli joins us now from the New York Stock Exchange. He's taking a look at what an uptick in the unemployment rate means for the economy. Hi, Mike. Yes. Hey, Morgan, we've been bumping along historic lows, as you know, in the unemployment rate. Three and a half, plus or minus a little bit. A 50-year longer-term look at this indicator in relation to recession shows usually

there is a slight trend higher in the unemployment rate in advance of a recession. Sometimes it's a long time in advance. Sometimes it's not. You had an oil shock right there. That was pretty sudden. But here you see, you know, leading up to the 1990s recession, usually there's a little bit of a hint that something is coming. And we haven't quite gotten that. Now, you see on a one month basis, we tick just barely higher. But you want to see if there's going to be a trend. Now, of course, with COVID, there was nothing because it was, again, a sudden stop to the market. You can have a lot of big picture questions around this indicator, Morgan, where it's OK, structurally, because of population changes and demographics, do we have structurally lower unemployment? Are we not

expecting to see companies fire as quickly? Maybe so, but every other cycle, there's usually been some softening up in advance of when you actually get the recession. So with all the caveats out there, you still have to keep in mind that's one of the things we're looking for in that number tomorrow to see if there's a trend change as opposed to just perhaps a reduced number of net new jobs created. It's such a key point, Mike, because even as we've started to see some of this other labor data this week, and of course, the claims revisions today were eye-popping, as we started to see it loosen and show signs that maybe the labor market isn't as ultra tight as it was just a short while ago. We're still at these elevated, arguably distorted levels when it comes to certain aspects of the economy, whether it is

how tight the labor market is, how low that unemployment rate is, or how stubbornly sticky and high inflation is, too. And it raises the question, what's the Fed to do? Well, exactly. I mean, companies, corporate behavior, they're not that far removed from operating in a world of extreme labor scarcity. So are they going to immediately switch to really being aggressive and shedding jobs? And then, yes, the Fed. That's why the Fed is, in my view and many view, many people's view, is not taking for granted that the downslope of inflation is going to be steep. It's very fair to say next week on Wednesday is the sixth month anniversary, so to speak, of when inflation was set to peak in October of last year. That was

also the bottom in stocks. We fed off the peak inflation story. Now it's about can the economy hold together even if inflation is coming down? And how does the Fed finesse the entire relationship? The S&P finished basically at 4100,,105, which I know is this key technical level that's been watched by traders in recent days. The fact that we did reverse, we started the day lower and we reversed and eked out some gains here on this Thursday afternoon. Is there much to be made of that right now? Well, I think you can make something of the fact that there was no aggressive selling response, even all week. The indexes were kind of overstretched coming into the week, and there's

been a lot of movement of rotation under the surface. It's pretty much a push in the sense of neither bulls nor bears can really declare victory on a week like this, except we're kind of hovering at the upper end of that range. You could point today, once again, as we have for much of March, that it is a handful of big Nasdaq stocks that sort of flatter the indexes. And that's why we're not worried about things being much lower. But, you know, yields didn't have a big move today.

They actually retraced a little bit higher. So it does seem as if we've pulled into neutral, waiting for that number tomorrow and then the CPI next week. All right. Mike, we'll see you later in the hour. Mike Santoli. Revisions to jobless claims data raising new concerns about the labor market. So up next, LinkedIn's principal economist on whether that's flashing a warning sign about the economy.

And we are awaiting that key Fed balance sheet data, which will be released in just a little bit. Coming up, former Atlanta Fed President Dennis Lockhart will join us for instant reaction. Overtime, back in two. Welcome back. Let's dig a little deeper into the job market. The morning's data showed 228,000 new claims for unemployment insurance in the latest week and revisions to previous weeks. The orange line you see in that chart right there showing more filings than previously thought. Joining us now to dig into that data, LinkedIn's principal economist, Guy Berger. Guy, thanks for being on with me. I do want

to get your thoughts on these big revisions we saw to claims today and how it speaks to the weakening in labor data that we've seen all week ahead of that report tomorrow. Yeah, I think that we've heard all these questions the last few months. We keep reading these stories about layoffs at all these firms. When are they going to show up in the labor market data? Well, here they are.

They're showing up. I think it's part and parcel of the cooling we see in the hiring data, in jolts and job openings data. I think this is gradual, not quite recessionary cooling we're seeing in the labor market right now from the extremely hot levels we had in maybe 2021, early 22. So how do you think this sets us up for that non-farm payrolls report that we're getting tomorrow? And I ask that because it has, for the last 11 reports, surprised to the upside and been much stronger than economists were expecting. Yeah, I think that if you'd asked somebody a year ago, you know, the Fed's going to be raising rates really fast. What's the late market going to do? They would be surprised at where we've

ended up with still these very strong numbers. I think it's important to remember, though, job growth has slowed a lot. It was running at around 600,000 a year ago. Now it's at around 300,000, give or take, maybe a little lower after tomorrow. You know, the Fed's taking a whack at the economy. Hiring's come down. Layoffs have come up a little bit. If this keeps going on, at some point you're going to put enough pressure on the economy that we might start heading into job losses.

It just seems like it's going to take longer than people thought. When you see some of these typically higher-than-average paying jobs, for example, in the tech sector, you see tens of thousands, even hundreds of thousands of job cuts announced in the last couple of months. Does it raise the possibility that we could be seeing a more bifurcated labor market? And what I mean by that is the possibility of a white-collar recession specifically. Definitely possible. And I think that would be sort of the flip side of 2008, 2009 that was so concentrated in blue-collar jobs like construction manufacturing.

I think it's still early to really talk about white-collar recession or any recession. Some white-collar sectors in our data are like education, healthcare. You know, the government are still doing relatively well in terms of hiring, holding up reasonably well. So I think it's possible. But the other thing that could happen is what if, you know, what if the Fed's tighter monetary policy hurts construction, hurts manufacturing? I don't think we're yet at the point we can call that some sectors of the economy are going to be immune and other ones hit harder. Okay. Another trend that I think has been flying below the radar that folks are not really talking about, but has come up in some of my recent conversations with senior executives of certain types of companies is this idea of people holding

down multiple full-time jobs. And in in some cases maybe not even telling both of their employers that they're doing this because they're able to work remotely and they're able to sort of continue continue on persevere if you will in in multiple positions how how common is that do we know and how much is that affecting labor data yeah Yeah, I love this question because it's data that have actually been falling from the BLS for about a year now. And it's interesting, we're now at a record level in terms of the share of employed people that have two or more full-time jobs. I think it's not super common sense. We're talking about a few hundred thousand people across the economy. It is higher than it was in the past. And there are specific things going on now

that make it possible. The job market's hot. People that want another job can take it. And remote work makes it easier to do it by cutting down on the overhead. So, yeah, it's definitely picking up and more common. Interesting. Do you think it's going to become more, I mean, it's more, it's getting more common. Do you think it's going to become, especially if we do go into an economic downturn or recession, that it's something that is going to perhaps reverse, a trend that's going to reverse and go away? Yeah, it seems likely. I think that the key theme of recessions and downturns is people want more work and they can't get it. And, you know, not everybody wants two-file-time jobs, but the key thing is that people do want them, can get them. And so I think what would unfortunately

happen is that those people would potentially fall back to one job or no job in many cases. I do think it's a cyclical phenomenon. Interesting. Guy Berger, thanks for joining me. Thank you. Well, the market may be closed tomorrow, but Squawk Box will be open for business to break down the March jobs report. That special edition of Squawk Box kicks off tomorrow at 8 a.m. Eastern. Now, some news on the defense front. The U.S. Government Accountability Office denying Lockheed Martin's protest of Army contract

for the future long-range assault aircraft, or in the wild world of military acronyms, the FLURA program. FLURA is the program to replace the service's Black Hawk helicopter fleet. It is a contract that was awarded to Textron and its Bell Helicopter Unit's V-280 Valor back in December. Now, as is the case with government contracting in that process, competitor Lockheed, whose Sikorsky segment partnered with Boeing, was able to file a protest with the GAO to challenge that competition outcome. With this decision, the Army is now clear to proceed with FLURA with Textron. Sikorsky and Boeing saying, quote, we will review the GAO's decision and determine our next steps. Next steps could, for example, be a suit in court and continuing to challenge this outcome.

It's a big win, though, today for the Army and for Textron for a program that some analysts have estimated could ultimately be valued in the tens of billions of dollars over its lifetime. I've seen numbers as high as $80 billion over the coming decades and the full lifetime of this program. This is one of those contracts that has been closely watched not only by the defense industry, but by investors in aerospace and defense, with even Mario Gabali of Gamco earlier this week, an investor in Textron, talking about how important this GAO outcome could be. Shares of Textron initially popped on the news coming into the close before moving back towards, and as you can see, falling just below the flatline. Airline stocks, meantime, have been grounded over the past year. But up next, a top analyst reveals which carriers could take off ahead of the summer travel season.

And we are still awaiting that key Fed balance sheet data. We're going to bring you that as soon as it's released. Stay with us. Welcome back to Overtime. It is time now for a CNBC News Update with Julia Borsten. Hi, Julia. Hey, Morgan. Here's your CNBC News Update at this hour. The White House releasing a report to the public on the 2021 troop withdrawal from Afghanistan that left 13 U.S. military personnel dead. The report states that President Biden's options were, quote,

severely constrained by conditions created by his predecessor, blaming a lack of planning by the Trump administration. Congressional Republicans will likely raise strong objections when they receive a classified version of this report. Greece said it will provide more support to Ukraine to help the country in its fight against Russia. After a meeting between Ukraine and Greece's defense ministers, Greece offered more artillery and small arms ammunition. The country vowed to help Ukraine for, quote, as long as it takes. And Sweetgreen is renaming its Chipotle chicken burrito bowl to resolve litigation from Chipotle Mexican Grill. The decision comes two days after Chipotle sued Sweetgreen over trademark infringement, saying the name was too similar to one of its own offerings. Sweetgreen's new menu item will now be called the Chicken and

Chipotle Pepper Bowl. Back over to you. Julie Borson, thank you. Airline stocks are falling this week as oil prices crossed above $80 a barrel. But proprietary data from our next guest shows booking demand remains strong over the next few months, especially here in the U.S. Joining us now is Citigroup airline analyst and managing director Stephen Trent. Stephen, thanks for joining me today. Talk to me about this proprietary data. What are you seeing? Yes, good afternoon and thank you very much for having me on. We are seeing very good movement in the U.S. domestic booking curve. When we look at ticket revenue growth for June travel, for example, we see that the revenue is up 16

percent versus 2019. When we look at some of the international corridors, such as the transatlantic, the data is even stronger. So I know there are some cost headwinds out there. I'm not 100 percent convinced that this week's oil spike is necessarily going to set the tune, per se. But the data we're seeing on the top line side still supports our constructive view on space. Okay. So in light of that, in light of the fact that we did see a lot of these names fall this week, what are your top picks? So we really like Delta Airlines. And when we look at the momentum from the revenue side, you know, what are people going to be talking about one year from now? I think it's going to be the strength on the transatlantic,

those various corridors. I think trans-Pacific strength is going to play a role as well. You look at Delta. You also have to consider, I think, the significant increase that the carrier is showing in terms of its loyalty and co-branded card revenue. So that kind of working capital tailwind wasn't there during the last major economic crisis. And not to mention that, you know, this is a fast-growing piece of the pie. We're also constructive on Frontier Airlines. And I think, you know, looking at the domestic market, assuming we do get some moderation in economic activity over the coming months, there's a possibility that a lot of consumers are going to trade down looking for cheaper tickets. And in that economic moderation, we get some oil price roll-off. The airline with the best seat model cost profile is going to do well.

Okay. Two names for our viewers to consider. Stephen Trent, thanks for joining me today. Pleasure. Well, CNBC Senior Markets Commentator Michael Santoli is back. He's taking a look at the stress in banks. Mike. Yeah, Morgan, maybe just a slight bit of relief today. The bank sector was up a little bit, but has not really won back a lot of the severe losses. Take a look at the way it breaks down here, the way the market has tried to isolate financial weakness from the rest of

the indexes. So you see the S&P 500 X financials up 9 percent on a year to date basis. Really not bad at all. Outperforming the overall S&P 500. And there you have right here. We know when that was. That was a month ago when SVB went down. The financial stocks have basically been the huge drag. That's the upside case is that somehow this remains isolated. Maybe the systemic issues are manageable.

And we're going to see maybe we get a clearing event in the form of a lot of the banks reporting earnings. Now, take a look at the implications right now for an investor on the dividend side. This is the dividend yield for the KRE. It's a regional bank's ETF. See, it shot up above 4 percent. It's only really done that in panicky situations. That's the COVID crash right there. And of course, this is the great financial crisis. Some of the takeaways from a high stated dividend yield is one, the market does not really believe that those dividends in aggregate are going to be sustainable. So you might get some dividend cuts or that 4 percent plus on dividends is really not enough to compensate for the continuing potential risk of owning these stocks,

which, of course, we've seen can go up much more than 4 percent or down 4 percent in a given day. I mean, it certainly speaks to the underperformance we've seen in the Russell 2000 in the past month as well, given the fact that so many of these regional banks are in that index and it's so heavily weighted towards financials. But I want to go back, Mike, to the importance of the banks to the underlying underlying health of the economy, as well as the broader market. I realize the financial sector is not necessarily it does not have a large weighting, per se, in the broader S&P. But it gets back to something Lizanne Saunders was talking about on our air earlier today. And that's this sense that the rally we have seen has been so narrow. And when it comes to something like the banks, they are so indicative of where the economy is headed.

Right. And that is the sticking point. And really, other cyclical areas of the market have started to soften up and give way a little bit. So, you know, consumer discretionary has definitely struggled. You've seen industrials kind of buckled this week, just, you know, caterpillar and deer. So, yeah, there's no doubt about it that more broadly the unknown and, you know, most people would say the potential downside risk is that the banking sector is just going to be in contractionary mode. And that starves a lot of the economy of capital. And so that's clearly going to be a risk that's with us for a while. But I do think, you know, the more the financials go down and the more the consumer discretionary goes down, the market cap of the rest of the S&P 500 is just by default, so to speak, going to be more growthy. And it's going to be more stable and less cyclical and less financial.

That sounds silly. But if you're a buyer of the S&P today, you're buying less financial risk than you were a month ago. That's a key point right there. Mike Santoli, thank you. We're just moments away from the latest Fed balance sheet data. We're going to get instant reaction from former Atlanta Fed President Dennis Lockhart straight ahead. And do not forget, 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. As we await key data on the Fed's balance sheet, let's bring in former Atlanta Fed President Dennis Lockhart. Dennis, it's great to have you on the show. I do want to start with all of this data we've gotten this week that has been so much weaker than expected,

including so much of this labor data. Are you surprised to see that we're starting to see this shift? You're starting to see this turn where the labor piece of the puzzle is concerned? I can't say I'm surprised. And I think in many respects, from a Fed committee point of view, it's a welcome development to begin to see the labor market move toward balance, I guess is the way I would put it. Today's claims information and the revisions, that was a bit of a surprise. Revisions are always a little bit of a surprise. But at the same time, I would not overreact to this. I think it is the beginning of a tipping point or a breaking in some of the trends we've seen up till now.

And the Fed will take it on board, but not necessarily view it as conclusive. Yeah. And of course, we're getting another inflation reading next week. We get CPI next week, too. How does this position the Fed for the possibility of a hike versus a pause at the next meeting? And I ask that given the fact that we have seen India and Canada and Australia this week all hold pat and in some cases actually surprise the markets by doing so? Well, I think the matter that is most important in the question of whether to hike by 25 basis points at the next meeting or pause is really credit contraction. And therefore, the series like the senior loan officer series, which normally is not given a lot of attention, those series of data

are really important, I think, now, because that's the critical factor. If they think they are getting serious credit contraction, there could be a leaning on the committee to pause. But in my opinion, they're not going to have a lot of evidence or a lot of convincing evidence by the early part of May. In terms of that data, we did get that Dallas Fed District survey, a survey of 71 banks, that has shown that since SVB went under, we've seen this dramatic reversal in loan volumes in that region of the country. And I say that knowing that we don't have a lot of this data in real time, but how quickly could we see this potential contraction? And how long does it take

that contraction to make it out into broader economic data? Well, the first part of your question, I think you could see it very quickly. I think banks are already probably adjusting their appetite for risk and for certain kinds of loans. You know, they're, like all markets, anticipatory, and they're anticipating that the broad economy might, in fact, begin to weaken pretty dramatically. So they're probably taking action at this time. How long can it take? Well, I think that could take a little bit longer. There's lags, of course, in the use of credit lines, the availability of credit, actually constricting activity. But I think by summertime, we'll know whether

SVB has produced a credit contraction. So is it fair to believe, and we've heard a number of Fed officials in recent days, suggest as much that this banking crisis will do some of that work, that tightening work for the Fed? Yeah, I think that's on their minds. The question on my mind is, if they base it on data and they base it on hard evidence, how much will they have by May 2nd and 3rd? And as I said earlier, I'm a little bit questioning whether they'll have enough convincing evidence by the next meeting to back off an otherwise, let's say, likely 25 basis point hike. The flip side of this, and the markets have certainly been grappling with this this week, is this notion that maybe perhaps we're starting to see a hard landing path emerge as the data does

begin to turn. How real is the risk of stagflation here? Well, it's hard for me to see a stagflation scenario. I would distinguish that from a hard landing, which would just be a recession, and a recession probably with, you know, not bad employment situation associated with it. But this is a very difficult path that the fed is navigating at this time because when you add the credit contraction potential you in you have something that is adds to uncertainty and is rather hard to gauge that will take a few weeks, if not months, to play out. And so the chances of overshooting, I think, are just greater than they might have been four or five weeks ago. And therefore, the chances of a hard landing have to have increased. Dennis Lockhart, thank you for joining me today. Thank you, Morgan. Up next, the co-CEO of UiPath, which makes enterprise

automation software on the outlook for AI and whether he sees any signs of customers cutting back on spending. And as we head to break, take a look at shares of WD40, that company reporting earnings of $1.21 per share, revenue of $130 million in its second quarter. As you can see, shares are down 3.5% in the after-hours session right now, though volume is light. More Closing Bell after the break. Welcome back to Overtime, the buzzword for Wall Street over the past month. How about AI? One stock that's benefited is UiPath, up some 8% in that time, while the S&P 500 is up just 1%. The software company has been using AI in its growth strategy for some time and says it should benefit as artificial intelligence integration becomes more common in business.

Let's bring in UiPath co-CEO Robert Enslin. Robert, thanks for being on with me today. Thanks, Morgan. Break down UiPath's use of artificial intelligence and what regenerative AI and all this talk and flurry around chatbots actually means in terms of future possibilities. Yeah, look, we think AI is going to transform how businesses innovate in different industries

and enterprises. And at UiPath, we've been utilizing AI for many, many years now. And so now AI is at to the fore when how business can actually utilize it to actually drive and deal with digital disruption. One of our customers' paychecks as an example, dealing with 40 million emails a year.

And our AI technology is able to drive and understand each email and create actions upon that email. And that's the same as the financial sector with UBS and Farfetch on how they drive it. When you look at AI, we definitely have to also see that we are focused on security, guardrails and putting that, and we've been doing that for many years as well. We have a policy of using open AI, open AI and many other open technologies in our AI platform. We think that the time has come where innovation will be at an all-time high in how companies deal with innovation in the future.

There is a lot of talk about the need for guardrails and security. The fact that you've already been implementing a playbook, I guess give me some specifics about that playbook and whether you've had to or are going to have to rethink some of those rules of the road, if you will, as this technology continues to evolve. Yeah, we're continually looking at that. But if you look at the guardrails and regulation and security around the world, many of these are in place today for enterprises, how enterprise operates, where the data needs to be stored, how we look at the data, where our customers want their data to have access. So it's up to our customers to

determine where they access the data. And it's up to us to make certain that we secure it in a way that they understand it. So that's how we look at security, the guardrails in an open and flexible environment. Let's talk a little bit about client demands, because on the one hand, many companies are tightening their belts and pulling back on their spending and their CapEx. And on the other hand, they're looking to increase productivity and profitability, too. Are you seeing more demand or slowing in demand? Look, we see an opportunity to help customers navigate this massive levels of disruption that they're dealing with today. Our customers are really focused on saving costs, driving efficiency, dealing with saving time, and being able to figure out how do

they actually deal with digital disruption, which is happening every week. Our technology is built to deal with those kind of episodes with customers in a very very short period of time. If you look at our fourth quarter, we had a record number of deals above a million dollars. We also had record revenue over $309 million. So we feel really good about how AI is driving automation. And together, the human machine and automation is really changing how companies have an opportunity to deal with this macroeconomic situation that we all are facing today. Uber, as an example, is utilizing our technology as the growth came back to streamline the operations, streamline the global operations, and ensure that they are compliant with regulatory compliance.

So many customers are benefiting from what we're doing with automation and AI together. Yeah, it's a conversation we'll continue to have. Rob Enslin, thank you for joining me today, the co-CEO of UiPath. Thank you, Morgan. We'veO of UiPath. Thank you, Morgan. We've got breaking news on the Fed. Steve Leisman has the details. Hi, Steve.

Hey, Morgan. Yeah, the Fed's balance sheet actually shrinking again down quite a bit by $73.8 billion to $8.59 trillion, and that since last week. So maybe a little two more signs of stability in here. Barring at the Fed's discount window fell by $18.5 billion, and that is the third decline in a row. Originally, after the bank failure of Silicon Valley Bank, banks went to the emergency discount window and they borrowed in size. And the past three weeks, they have reduced that total borrowing. It's still at $69.7 billion. They went to the bank

term funding program. That's the new facility the Fed put together. And that allowed them to basically give paper at par value, at least, and get a loan on that. That actually increased. So they're definitely showing a preference for the new funding program, which seems to be a bit of a better deal for them than they are for the discount window. That went up by $14.6 billion to $79 billion. And there's that bridge loan that they gave. That's down slightly. At least it's not getting worse in terms of the total fund of $174.6 billion. So, you know, Morgan, I'm thinking of calling this the Fed salad buffet is what I'm thinking of calling it, where you can go and get all sorts of things from the Fed salad buffet. And they're taking, they like the bank term funding program. They're taking that.

Meanwhile, the Fed is kind of winnowing down the size of the buffet in general, because remember, quantitative tightening is still going on. And so the Fed's total number of treasuries went down by about $50 billion week to week. So that's where we're at. There's still some level of stress out there, more than there was before the failure of Silicon Valley Bank, but it's certainly not as high as it was in the immediate weeks after it. All right. I like salad buffet better than Fed's H4 one reports. I'm still working on a name there, but that's what I got. Yeah. And I tasked you with that with that responsibility last week. So so I appreciate the fact that you came loaded for this. I'm just curious, is this in terms of these different offerings that you have from the Fed,

is this could you call this a real time case study in terms of what what works for the sector if we do see any more fragility emerge as the Fed does continue its tightening path? You know, I think that's a really good question. It seems like the Fed created a program. Maybe it had this in the works previously. it saw what the problem was. And the problem, remember Morgan, is not a problem of collateral. The banks had plenty of collateral and plenty of good collateral. That's all a sort of post-Dodd-Frank thing of having high capital liquidity ratios, plenty of stuff. It just had the wrong marks on it because they were out a little bit too far relative to the liquidity that was maybe needed

because people got nervous about their deposits in the wake of SVB. So here's the thing. If you had a hole in the dike and you were saying, OK, I need to create something, I need a piece of stone to fill it, this seems like the right solution to the problem. And Jim Bullard from St. Louis was talking about today. He says he thinks that it seems to be working. It seems to be, okay, look, some of the bank stocks were even up today, even though they're obviously from a very low level. So it seems like on the fly, the Fed designed the right program for the specific problem that's there.

And they still have the discount window. They needed this new program that said, if your mark is 80, come to me and I'll fund it at 100 and there won't be any loss for anywhere in the system here and you'll pay an interest rate on it. Okay, Steve Leisman, thank you for bringing us that breaking news on the H41 report, a.k.a. the Fed's salad buffet. Have a good weekend. Thanks. All right, well Levi, one of the biggest losers on Wall Street today, despite beating earnings estimates. Find out why the stock is

getting hit so hard when Overtime returns. Welcome back to Overtime. It's day two of meetings between bipartisan lawmakers and CEOs of media and tech companies over China. This is something we asked venture capitalist Josh Wolfe about yesterday on the show. Government than ever before. I can tell you people like Congressman Mike Gallagher out in the valley right now, he's going around and making sure that Silicon Valley venture capitalists are returning to their roots. And those roots are not, you know, garages where we were just developing computers and and halting and catching fire as the TV show went. The roots of Silicon Valley were electronic warfare. And so I think we're going to see a return to Silicon Valley to matter that matters, as we like to call it at Lux. All right. Well, let's bring in Steve

Kovac for the latest on those meetings. Steve, you've been monitoring. How's it going? I got some new details for you, too, Morgan. So members of the House Select Committee on Chinese Communist Party are in Stanford's campus today hosting a slew of tech executives. It's like a TED Talk on China and tech to discuss they're discussing America's business reliance on China, also AI safety and cryptocurrency. And tomorrow, those committee members head to Cupertino for a separate meeting with Apple CEO Tim Cook at Apple's headquarters. But right now, there's a luncheon happening with execs, including Google's chief legal officer, Kent Walker, and Microsoft's president, Brad Smith. Also expected to show up,

Palantir CTO, Shyam Sankar, and Scale AI CEO Alexander Wang. Now, this morning, Smith gave a presentation on AI. And the big takeaway from that one, China and the U.S. are neck and neck in the AI race when it comes to training those large language models that make products like ChatGPT possible. There was also a presentation on rare earth minerals. I know you like that one, Morgan. I do. And reliance on China for those. Now, presenters saying even if the minerals are mined here in the U.S. or another country,

China controls the processing needed and they need more options for processing outside of China, especially for magnets. Magnets are in everything, Morgan. So now tonight there's more coming. There will be a dinner for the VC crowd, including Marc Andreessen and Vinod Khosla. And in the morning, they will focus on cryptocurrency and regulation in China. So a lot going on. They're talking about everything. They're talking about everything. I mean, potentially the biggest American player in all of this, and I know this happens tomorrow, is going to be Apple.

We've seen the diversification, slow diversification of the supply chain into places like India. But without China, you're not getting your next smartphone. No, exactly. And it's not just the manufacturing in China, Morgan. It's also the consumer base. As much as 15 percent of annual sales come out of China. So they need the consumer there and they need the manufacturing. And China needs Apple because they provide thousands of jobs in these manufacturing facilities. So that's one thing that's going to be discussed at this meeting. I'm also told another thing they're going to talk about are those protests that we saw at the Foxconn iPhone factory last fall that shut down production. We saw security forces come in, harm those protesters, keep them from getting out. That

is something that these lawmakers on this committee were not happy to see and also not happy to see Apple's silence on the matter as well. Yeah, we're going to be watching that closely. Do we expect that there's going to be any kind of legislation that actually emerges from this? What I'm told right now, this is very preliminary. This is almost like a fact-finding mission. So they're just talking to people. It's behind closed doors. They're not dragging these executives in front of Congress, as we've seen so often, and getting their sound bites in, all these lawmakers. Instead, it's behind closed doors, and you've got to wonder if it's going to be more productive that way.

Yeah, the rare earths piece of this is going to be key to watch. Ninety-eight percent of processing for those rare earths happen in China, so it doesn't matter where it's mined. Yeah, there's going to be more, I think. You're going to see more around that policy from both of these countries. Steve Kovach, thank you. Well, let's bring back Mike Santoli. It's all about the jobs report tomorrow. Mike, what are you watching?

For sure. It is about the jobs report tomorrow. And then on Wednesday, it'll become about the CPI report. And I think this kind of sets us up where we've been for a while, which is trying to stay in that safe zone between too hot inflation and too weak growth. And the jobs report is going to perhaps tell us whether we've tilted toward genuine economic weakness or just deceleration. And then, of course, the CPI numbers next week may be going to tell us what the trends are. And it catches this market at a point 11 months ago today, Morgan, the S&P closed at like 4120. We're at 4.05 right now.

Two years ago Monday, it was just over 4,100. So we were up 700 from that point at one point. We were down 600 from there. So we're kind of, you know, these offsetting currents have kept this market largely pinned in this area. If October was the low, we may have gotten off pretty easily with a relatively modest bear market. But if it's just now, the economic weakness taking hold and earnings estimates have a lot more to go down, which we might get a hint about next week, then maybe we're not so lucky and we have to at least revisit the lows. Yeah. There's going to be a lot to digest next week, Mike. Appreciate all of your insights this hour.

I hope you have a wonderful long weekend that is gonna do that do it for us here at overtime fast money begins right now