Closing Bell - Closing Bell Overtime: Washington takes center stage for investors; bearish Nike case 1/8/26

Episode Date: January 8, 2026

Richard Bernstein of Richard Bernstein Advisors and Alan McKnight of Regions Wealth Management debates whether speculation has gone too far and why dividends, quality, and U.S.-focused positioning may be back in favor. The conversation then turns to Washington as policy developments and presidential missives whipsaw investors with Brian Gardner of Stifel. Technology investing in 2026 with Dom Rizzo of T. Rowe Price. Bear case on Nike with Needham analyst Tom Nikic. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Well, that bell marks the end of regulation. Babcock and Wilcox bringing the closing bell at the New York Stock Exchange. First United, doing the honors at the NASDAQ, it's a mixed day for the markets. The Dow up 250 points, S&P 500 flat, NASDAQ down about half a percent. The Russell, though, gaining more than a percent, and I believe at an all-time closing high. What worked, energy, the best performing sector, as oil rises, the consumer also strong, both staples and discretionary. Only two sectors lower, but one of them was tech, which has a lot. a big waiting in the S&P. The hot memory names sinking. So are some software stocks that rose yesterday. Well, that's the scorecard on Wall Street. Welcome to closing bell overtime.

I'm Morgan Brennan, along with John Ford. A day after President Trump sank the defense stocks with threats today, contractors rallying to record highs on hopes of a massive budget increase. It's not the only sector moving on every word coming out of Washington either. We will have more on defense, but also more on tariffs, housing, health care, oil. Plus Nike Under Armour Lulu Lemon all getting crushed over the past five years. 40% declines or worse. But we still see people wearing athleisure at the gym on the streets, on planes, especially on planes. So why are the biggest players struggling?

Well, let's get right to the markets. As big tech lags behind today, excuse me, Christina Parts and Avelas is here in studio. She's got more. Hey, Christina. Hi, Morgan. So, yes, Tumble, those traders really locked in profit from the AI trade, rotating into smaller firms. The Russell 2000 was the best performing index

while the Mag 7, you could say notably lagged, you know, essentially becoming the ATM funding rotation into other sectors. There was an exception today. You can see awful bit. I did hit an all-time high intraday, securing the spot, once again, as the world's second largest company,

my market cap shares closed 1% higher. Cantor Fitzgerald also upgraded the stock to over-eight, calling this, quote, the golden age of Gemini. They really said that there's a strong footprint across the entire AI, ecosystem. That's why they'll like the name. Apple, though. Apple shares continue to struggle down half a percent today, down for its seventh straight day in a row. It's longest losing streak since May. The rotation, also hitting memory stocks and data storage names. SeaGate,

Western Digital, Sandusk. You can see Seagate down 7% among the biggest S&P 500 Lagerts today, and I've got to stay with chips. InVIDIA actually close about 2% lower on profit-taking. So that's key. Profit taking, but headlines suggest China plans to approve some H-200. chip imports as soon as this quarter. Investors really have lived through these repeated starts and stops on China chip sales. So the markets are taking a wait and see approach with this name. That's for sure. All right.

Christina, thanks. Now to the bond market. Yields are moving higher ahead of tomorrow's jobs report. Rick Santelli is there in Chicago. Rick. Hi, John. Yes, big day. And it's a big day because of the data.

Whether you looked at productivity, look at that bar chart. It jumped up to 4.9%. and unit labor costs were negative. These are huge positive for the U.S. economy moving forward. But maybe the biggest shocker was, minus 29,000 on the trade deficit, consider that just a few months ago, actually March of last year, 2025, it was $136 billion with a minus sign in front. Now, just close to the beginning of the year,

we're at 29,017-year low. It hasn't that small since 2009. The reason that's so important because it's juicing expectations of fourth quarter GDP to the tune of over 5% at least based on Atlanta Fed GDP now. And if you look at a week-to-date chart of 10-year yields, something should really jump out at you. We're at the top of the range. And consider, we haven't closed above 419 since the first few days of September. Let's look at the next chart. And that really is significant because if we get to the time,

type of jobs report that gooses the economy, even at the expense of more Fed activity. Should we pop over that level? The market will probably find a lot of running room to the upside. Morgan, back to you. All right, Rick Santelli, thank you. Now let's turn to commodities. Meadows mostly cooling off today. Pippa Stevens is here on set with the details. Hey Pippa. Hey, Morgan. So we saw some pretty mixed performance today for the metals as the commodity index rebalancing kicks off. Now, this is an annual mechanical event that doesn't usually to big price moves. But this year could be different thanks to how much precious metals gained last year. More than $130 billion in passive capital tracks the largest commodity indices,

and those funds will be selling over the next five days in order to match new target weights. Now, the biggest move to the downside could be in silver, with TD estimating $7.7 billion in selling activity after the metals surge nearly 150 percent in the last year. Gold and aluminum could also be negatively impacted, but on the flip side, Gogo gain today because it's being reintroduced to the Bloomberg Commodity Index, but Deutsche Bank estimating demanded 83% of the open interest in the front month contract. Now, the metals surge has also lifted mining stocks broadly, with the COPX, GDX, and Exami all hitting records this week,

with names like Valle, Freeport, Rio, and Newmont outperforming in the last year. Now, it's not a one-to-one relationship, but the mining stocks do generally follow the underlying commodity, so we could see some selling there and cooling off of that trade as well. All right. A lot of action. Pippa Stevens. Thank you. Now we got some breaking news out of GM. Phil LeBow has those details. Phil. John, take a look at shares of General Motors. The company just dropped an 8K saying that it will be taking $7.1 billion in charges in the fourth quarter. Comes down into two buckets, $6 billion of impairment charges as it continues to adjust its EV business. Some of that is writing down some of the assets. Some of that is also for taking care of. supplier contracts in the EV business and another $1.1 billion in charges for GM's

China operations as it continues to restructure those operations. A big chunk of charges happened in 25 as they were adjusting that business. They're continuing to do those adjustments in the fourth quarter. They do also say that they expect additional EV related charges in 2026. We will get more details and commentary about this. I'm sure when the company reports its Q4 results on January 27. Guys, back to you. All right, Philibault, thank you.

Well, overall, stock starting off a year in the green, the Russell already up 5% and it's only January 8th. Small Caps take the lead, at least so far, is 2026 shaping up as a different kind of market year, and do investors need to move out of big tech and look broader? Joining us now is Richard Bernstein, advisor, CEO and CIO Richard Bernstein,

and Region's Wealth Management, CIO, Alan McKnight. Guys, welcome. Alan, we just talked. heard about what's happening in metals. We also heard, you know, GM following Ford backing away from EVs. Does this affect your big picture thesis on 2026 at all? It really doesn't. In our view, the consumer remains in good shape. And if you can see earnings come through the way they've been trending over the last couple of quarters where estimates continue to uptick and you see this growth overall with operating margins staying very stable, we feel pretty good about the economy. Now,

there are going to be some of these outliers, such as what we heard from GM, that's going to be a little problematic and adds more vol to the markets. But underlying, we think the economy is pretty strong. Okay. And Richard, welcome. We got these high valuations now. Sports betting is a new asset class. The story that drove this bull market in AI might be shifting. What should investors do differently, if anything? So, John, I think that for 2026, investors to kind of focus on boring investments. I know that's not what everybody wants to hear, but boring investments. I think people have completely forgotten about dividends and the extreme power of compounding dividends through time, as well as quality and international diversification. I mean, it's incredible to think that the

non-U.S. market significantly outperformed the U.S. last year, and nobody cares. This is sort of like the beginning of the bull market in the United States in 2010, 11, and 12, when the U.S. was outperforming, but nobody believed it. They all thought you had to invest outside the United States. And now it's kind of turning around. So we think, you know, basically boring fundamental type stuff is what people should be looking for. And I think, you know, anytime we see a broadening of the market that you were just talking about, I think investors should fully embrace that. That's the real fundamental story. The MAG 7 have not been the only growth stories in town. There's been many, many growth stories. So it's actually quite encouraging to see the market broaden because maybe investors are starting to pay attention to that broader fundamental story. Yeah, along those lines, Alan, I mean, you have an equal weight S&P that outperformed, you know, outperformed other averages today. You have a doubt transport's average that is at a record high, 1.1% higher today. How does that speak to this broadening out and to the comments you just made about the state of the economy? We think it's real positive because it's exactly what Richard talked about, which is when you start to see this broadening occur, more sectors, 9 out of 11 today, you know, hitting new highs and actually hitting what we would see as being more realistic targets.

after having been sort of in the doldrums through 24 and into 25, that's a net positive. And it's almost this Occam's razor view of the most simple explanation is probably the right one. If you can continue to generate earnings and cash flow, you're going to be rewarded, even with valuations where they are. Rich, you talk about boring is beautiful. Is that the case just inequities, or is that the case in another asset classes as well? I mean, we were just talking about metals. Gold, silver, precious metals. They've had a crazy couple of years now, particular 2025.

And the credit market is rocking and rolling right now, too. Huge issuance to start the year. Yeah, so Morgan, I think you're right. This boring is beautiful story is more than just equities. In fixed income, I think our firm, Richard Bernstein, Advisors, is light years out of consensus in that our fixed income portfolios have no credit risk whatsoever embedded in them right now, no corporate credit risk whatsoever.

And the reason why is because credit spreads are not quite, but almost historically narrow. You're not being compensated for the risk. And historically, when that's happened, it hasn't really paid to be in credit. So we understand the long-term story of credit. I mean, I was one of the first people to write about this 30, 40 years ago. I get that.

But entry points are very important. It seems like it's not the right time to take credit risk. In terms of gold, we actually view gold as being pretty boring. I know nobody else does. But we tend to carry a relatively consistent allocation to gold as kind of the spare tire in our portfolio. Why do you have a spare tire in your car? Because you can never anticipate a flat tire.

We have gold in the portfolio because you can never anticipate uncertainty. It's a very nice and expensive spare tire right around now. Alan, finally, the NASDAG peaked right around 24,000. Is the AI trade changing right now? And if so, what happens to these derivative plays in, like, energy construction equipment? Not exactly about the core technology. I think it's changing. And I think that's the key to the market over the next two years, really, is this transition from throwing all the money at it and just assuming something's going to work out, and instead moving into some of the peripheral opportunities, not necessarily electrification as much as we've seen of late, or necessarily on some of the data centers. We've heard some of the news of late regarding municipalities and some of the challenges associated with that. So we really like to see as more investment in the core infrastructure without necessarily having to go out quite as far on the periphery in terms of some of these smaller names. that have really been juiced and ripped over the last year.

Yeah, and along those lines, I mean, Caterpillar alone, just where that stock has been trading, sort of tells the story as well. Alan McKnight, Rich Bernstein, great to kick off the hour with both of you with a mixed day for the major averages with the NASDAQ under a little bit of pressure, everything else higher. Markets paying a lot of attention to news coming out of the White House this week. Defense, energy, housing. These are just some of the industries affected by presidential proclamations. And now retail names are rallying ahead of a potential Supreme Court decision on tariffs.

We're going to break down a busy week of news flow and what comes next when overtime's back in two. Welcome back. Investors' attention has been trained on Washington this week. Markets have whipsawed as the president's social media post, congressional votes. Anticipated Supreme Court decisions have sent stocks on a roller coaster ride. The latest? Well, the Senate voting to block the president from future military strikes on Venezuela. The vote was 52 to 47. Five Republicans joining the Democrats to pass the measure. The White House has already said it would veto.

Joining us now, Brian Gardner, Steeffel, Chief Washington Policy Strategist. And Brian, it's great to have you on. Let's start right there, because the geopolitical landscape has just been dramatic. Venezuela, Iran, Greenland. I could go down the list. And then, of course, you factor in

what we're seeing play out with defense policy right now. What's your take? my take is I was listening to Richard Bernstein in the previous segment and he said boring is beautiful and I chuckled when I heard boring. I'm like, what's boring? There's nothing boring going on in Washington these days. No, but everything is going on, right? So I think some of this was a little bit predictable. You know, we're going to talk about the court case in a second. We knew that that was coming. But in some respects, the other actions are coming out of the November elections, right, where Republicans lost badly. Democrats did quite well. and exit polls show that voters are very concerned about affordability, and the White House is really leaning in on a lot. And some of the things we're talking about is foreign policy, so you can separate that from the domestic policy issues. But a number of the domestic policy issues and tweets and posts that have come out this week are geared towards that affordable affordability issue. We're going to be hearing a lot more of that as 2026 goes on.

So if I just dig more deeply into that, I mean, how does that speak to what we're here? hearing from the president regarding institutional investors and housing, and I realize devil's in the details here, or even what we're seeing right now with Congress with Obamacare subsidies and trying to get those back across the line. Yeah, this is a different Republican Party, and so the base of the Republican Party is different than it has been. It's more working class. It's more blue collar. And so you're probably seeing more renters and fewer homeowners in the Republican party base than we have seen in the past. And the housing issue, we're going to put the, we're going to put the particulars of the policy aside, but the politics of it play very, it's very difficult

for Republicans, right? They want to be free market in one respect, but there are a lot of Republicans, more populous Republicans, those in the White House, that view the industry, the single-family rental industry with a lot of suspicion. So this is a very tempting target, and it's a bipartisan target for them. Who came out sympathetic and in support of what the president announced yesterday? It's not the first time we've seen her align with the administration on some of these populist issues. Yeah, I was reading, I think Gavin Newsom of California is looking to do something similarly, reportedly, too. It's certainly interesting. The defense piece of this, I want to get your take because, and I've been describing this in my reporting,

but it feels like a carrot stick approach, the carrot being a 50% potentially, 50% increase year over year in the defense budget to $1.5 trillion for fiscal 2027, assuming that can be pulled off. And I realize, again, devil's in the details. And the stick being an executive order that had been anticipated but was nonetheless signed last night that ties shareholder returns and executive compensation to defense contractor performance. As this administration wants to see a much more aggressive ramp up and industry investment into things like weapons systems. So how to understand that and what it says about how priorities are being, I guess, shaped moving forward for some of these big industries. I think there's a lot of frustration within the administration. I think there's probably some frustration up on Capitol Hill on the speed at which larger defense contractors deliver to the federal government under their contracts.

And if you look back into the fall to the National Defense Authorization Act, there are provisions in there that make it easier for smaller defense firms to get procurement contracts. So there is an interest, and I think it's, again, this is one. one of those bipartisan issues. Not a lot of bipartisanship in Washington, but this is one where I think there's, there's an interest in kind of shaking the large legacy firms out of their doldrums a little bit,

having them be more aggressive. And it's so, yes, you know, you said carrot and stick, I would say a lot more on the stick side though. It's not just the defense budget, but seeing the NDAA, pushing to open the door to smaller competitors of the large legacy firms, I think that's part. part of the overall strategy that's at work here.

And of course, part of that defense budget increased proposal is tied to being funded by tariffs. So how does that set us up with this AEPA tariff decision that is potentially imminent from the Supreme Court? We could get it as soon as tomorrow. Yeah, could be tomorrow. I think the court is going to rule against the administration. I think the ruling is going to be some form, some language saying that the president overstepped his bounds. What that means longer term, I think, is less clear because since the case was filed, we've had a number of agreements between the United States and trading partners.

So that kind of supersedes what goes on in IEPA. Now, there are a bunch of frameworks with China, with the EU and other trading partners that haven't been finalized. But when I step back and try and figure out, are those trading partners going to just tear up the framework or the signed documents and say, you know, we want in court, we'll take our chances. I'm kind of suspicious, a skeptical, excuse me. I think there are other plans that the administration, you know, other tools the administration has. So they can pivot to those tools. And I just don't think our trading partners want to take the risk of alienating the administration. So I think it's going to be a fairly toothless victory for the private sector. Okay. Brian Gardner. Thanks for joining us.

Thank you, Morgan. And we got even more news coming out of Washington. This time on Intel, the president's posting, Amon Jabbers, has details. Amen. Yeah, John, that's right. Intel moving on this social media post from the president just a couple of moments ago. Not much news in here, but sort of a rosy outlook from the president on Intel. He says, I just finished a great meeting with the very successful Intel CEO Liputan.

Intel just launched the first sub two nanometer CPU processor designed building. and packaged right here in the USA. The United States government is proud to be a shareholder of Intel and has already made, through its USA ownership position, tens of billions of dollars for the American people. The president goes on to say, we made a great deal, and so did Intel. Our country is determined to bring leading edge chip manufacturing back to America, and that's exactly what is happening. So all of that, you know, not new to the market, but an upbeat post from the President of the United States, certainly a status update on that partnership between the U.S. government and Intel.

an opportunity for investors here to take a little bit of a look at Intel shares here. Not every day. The president posts about processed technology and semiconductors. Haven Javvers, thank you. Intel stock up two and a half percent. Not every day. In overtime. Well, it was a happy holiday for Costco shareholders. Strong December sales sending that stock to its biggest day in nine months. Plus, the Dow and NASDAQ switching places lately. It's the Dow outperforming and making new highs. While the NASDAQ lags, Mike Santoli is going to look at growth versus value. you next on overtime. Welcome back to overtime. Shares of Costco higher by nearly 4%.

Its biggest increase since April, the company reporting an 8.5% increase in sales in December. Today's gain brings the stock to roughly flat for the past 52 weeks, as the stock did struggle with slowing growth. It had also been at high valuations, according to some analysts. So keep an eye on Costco. For sure. Well, value stocks may be showing signs of a comeback after a long stretch in growth's shadow. Senior markets commentator Mike Santoli's here showing two different time frames telling a story of values relative strength, but also just how far behind it is. Mike? Yes, John. So even if this is a turn, there's really a long way to go to prove that this is a sustainable move. So here's a one-year chart. You see, this is the Russell 1000 value ETF.

It's, you know, almost match growth over this one-year time span. You can see the clear convergence pattern since about two months ago, a little more than two months ago. So not too bad. Now, also year to date, by the way, value is up two and three quarters percent, and growth is basically flat. However, take a look at the longer time span and see where we've been and how much more of that proof is required here. So that's your spread, you know, something like 27 percentage points over a couple of years. I would also point out that, you know, we've got this broadening action in the market. So value in economically cyclical sector is really working well, equal weight, having a comeback against mega-cap tech. That's all to the good. But we also have a flat S&P 500 for the last

couple of months. And it shows you how tough it is to move the needle on the headline indexes when we do get this broadening action. Also, value stocks, cyclical stocks don't have as potentially as much open-ended upside to their valuations as you get when it's, you know, talking about tech in these massive addressable markets and secular growth trends, John. Off the top of your head, if I might, how correlated is value and say the Russell 2000 overall? Because noticing that it had quite a good day compared to the really major averages. They are correlated on days when it's basically about buying laggards and selling the winners. So if it's a broadening action, they have moved together.

The tricky part when it comes to the Russell 2000 is that a lot of the larger weights in the Russell are not particularly cheap stocks, and a lot of them are unprofitable. So it's kind of difficult to say that they're going to move right in tune with value, but to the extent that value is going to be moving on, hey, strong economy with the potential for lower Fed interest rates, that combination usually works both for small caps and for large cap value. Okay. Mike Santoli, we'll see you later this hour. Thank you. Time now for CNBC News Update with Courtney Reagan. Hi, Court. Hi, Morgan. The bipartisan duo, leading the push to unseal the Epstein files, asked a federal judge today, to point a monitor to ensure all materials related to the late sex offender are released.

In their request, representatives Thomas Massey and Roe Kana blasted the Justice Department for failing to meet the congressional required December 19th deadline. The DOJ said earlier this week it still needs to review more than two million documents. Omboys from Denmark and Greenland reportedly have begun a campaign to urge U.S. lawmakers and the Trump administration officials to back off President Trump's call to take over Greenland. According to the Associated Press, the delegates met today with the White House National Security Council officials. And White House officials unveiled plans today for the president's controversial $400 million ballroom as they seek approval from the National Capital Planning Commission. The architect said the controversial edition would match the White House's height, breaking longstanding rules,

and that a second floor would later be added to the West Wing to balance the building's appearance. John, back to you. All right, balance in Washington. Looking forward to that. Core, thanks. Well, memory and stored stocks tumbling, big losses for Sandus, Seagate, and others. But those names were the talk of CES, more tech talk coming up. And reports say the president has made up his mind about the next Fed share. But right now, the prediction markets are very close between Kevin Warsh and Kevin Hassett.

Warsh now seen as slightly more likely on CalShe. And a big interview tomorrow morning on CNBC, speaking of one of the top contenders for that job, Kevin Hassett, Joining Squawk on the street at 9 a.m. Eastern on the heels of the jobs report, we'll be right back. Welcome back to overtime. Some of today's underperformers were memory and storage stocks like Sandisks, Seagate, Western Digital. Those moves come after NVIDIA CEO, Jensen Huang, pointed out the AI inferencing industry's new demand for memory and storage, including an Nvidia collaboration with startup VAST data. At CES this week, I spoke with Renan Halleck. He is co-founder and CEO of VAST about why he believes flash memory. is the new bottleneck commodity in AI and why he was there at CES to get allocation from global suppliers.

Because this whole supply chain is shifting over the years, two years ago it was all GPUs. Last year it was all power. This year it looks like it will be NAND and SSDs because data accumulates and because we're moving from text to multimodal and because we're moving from training to inference. Those are three exponents that are happening in terms of. of data capacity that is required. I think they're looking at who is strategic for them, who is at the forefront of this AI revolution, and that's how they allocate.

Joining us now is Dom Rizzo, portfolio manager at T. Roe Price. Dom, is Renan right? Well, first off, thanks for having me, John, and all the reporting at CES was great. The Nvidia interview, the AMD interview, the vast data. They were really fabulous. Just, yeah, I do think he's right. We're really in extreme shortage for the entire memory industry right now, whether it's DRAM or NAN. The way we've primarily allocated in our strategy is through Hynix because of their leadership in high bandwidth memory,

but we're seeing tightness across the entire memory supply chain. And I think what we're going to see is the memory and logic continue to come closer to closer together. And that's why we saw that Bluefield DPU announcement out of NVIDIA this week at CES as well. But, Dom, there is no area of tech more infamous for boom bus cycles than memory, right? So how should investors navigate that? Is this stretch of time when there's going to be this AI-driven demand for memory so long that there's more upside significantly to some of these stocks? Or is this a time to really get choosier? Well, you know, the issue right now in memory is we basically have a completely inelastic demand curve, right?

It's whatever the price is, people are willing to pay it. And the question on a lot of these stocks is what's going to actually happen come the quarter because, you know, everyone's doing simple math. Memory prices are up 50 to 80% quarter over quarter over quarter. What does that mean for earnings? And the reality is that this is going to take a few quarters to play out, right? Because much of the demand is already contracted from six months ago when many of these contracts were written. So I actually think the best way to invest in the entire space right now,

maybe semi-capital equipment. You know, you have names like ASML that have just started their move higher, still trade at relatively reasonable valuations, and I think will benefit from this memory up cycle. And that memory up cycle will always be coupled with a logic up cycle, right? They go hand in hand. So is this good or bad for names like Pure Storage and NetApp, which I guess in a way still need some of this allocation,

but also are trying to add value on top of it? for some of these data center systems. You know, I've always struggled with those names, to be honest, John. I've really struggled with this concept of being able to add value on top of that memory storage, particularly in the context of Nvidia attacking every problem from a system's architecture perspective. So I'd just say remains to be seen. It sounds like you're, in a way, trying to stay away from the core players in this space because they break your ankles so often.

And that's why you're looking at the semi-cap equipment. Am I reading you right? Well, I think, look, we have Hinex, we have Samsung. It depends on the situation. But what I'm really trying to do is make sure that we navigate all the different markets responsibly. And I think that semi-capital equipment is the best way to play both memory and logic. And what I'm so excited on the logic side is that I think we actually are really in place for a CPU renaissance in 26. I think that's the part that the market's completely missing right now.

AMD and Intel should see fabulous growth on their core CPU. business heading into next year. All right, big data, big storage, big questions. Dom Rizzo, thank you. Great seeing you. Well, if the shoe fits, Nike is the worst performing, fourth worst performing Dow stock over the past 12 months. But coming up, we're going to hear from one analyst who does not see value here. Value trap. Well, in fact, he just downgraded the stock. Find out why he sees more headwinds. That's later on overtime. Today, we are launching CNBC Cures. This is a new initiative focused on raising awareness of rare diseases and improving outcomes for people who have

them. Now, it's a cause that is near and dear to our friend and colleague Becky Quick, whose daughter Kaylee is one of the 30 million Americans living with a rare disease. Now, six years ago, Kaylee was diagnosed with a rare neurodevelopmental condition. Becky and her husband and CNBC colleague, senior executive producer Matt Quayle, are telling their story, starting with the shock of Kaylee's initial diagnosis. You start to peel back and worry about what might not happen for her. And I remember at first thinking, okay, being mad when he said maybe she's not going to be a Fortune 500 CEO.

And then thinking, if we could just get her to college, that would be great. And then thinking, well, she doesn't have to go to college. If she can just find something that she loves doing. And then you start rolling it back. And it's like, if she can just walk, if she can just talk, if she can just talk. If she can just talk. Uh-oh. If she can just find a friend.

I want to say it was the first birthday party. It felt like awake. There was something so wrong with it. And we were just, we knew we were trying to be happy, and we were trying to celebrate it. Happy birthday, too. But she couldn't blow out the candle, right? Like, we weren't there yet.

And she wasn't able to do that, so we kind of faked it because we wanted. wanted to make it feel like it was normal. And it wasn't normal. And we knew it. Well, you can learn more about this new CNBC initiative and Becky's rare disease journey right now at CNBC.com. And make sure to check out Becky's new rare disease podcast series, The Path with Becky Quick. This is must listen content. We talk so much about scale in business. You know, is it big enough and profitable? But real life happens at this really small.

personal level. That's what makes rare diseases so challenging and why I hope we really do focus in on this issue. Well, just don't do it. Up next, an analyst who just downgraded Nike and thinks the athletic apparel giant might be making a major misstep with its turnaround strategy. And later, Mike Santoli breaks down what an unusual rise and the long-term unemployment rate could mean for the market ahead of tomorrow's key December jobs report. Welcome back to overtime. Check out shares of Gap, which are gaping higher today. UBS, upgrading the clothing retailer from neutral to buy, hiking its price target from $26 to $41, implying more than 50% upside from Wednesday's clothes. Analyst there thinks Gap's investment in its handbag and beauty business. That's handbags at Old Navy. You heard that right. As well as improving sales at its athletic brand will drive earnings growth this year. Well, sticking with retail, Nike shares defying a bearish call today by closing out the day 3%.

higher, a little over 3%. Needham downgraded the stock to hold this morning, saying the turnaround is taking longer than expected. The analysts also citing China and wholesale concerns, but despite today's gains, it is still one of the worst performing stocks in the Dow over the past 12 months. So can it get

off on the right foot this year? Well, joining us now is the author of that note, Tom Nickich from Needham. Tom, it's great to have you on. You downgraded Nike. Why? So first off, thanks for having me on. I appreciate it. You know, so look, like this is a turnaround that just seems to be taking a lot longer than I thought it would.

You know, I think very highly of Elliott Hill, the CEO who came in, you know, about a year or two ago to sort of, you know, rescue the company from the doldrums. But I think it's clear that some of the issues that they had were deeper seated and deeper rooted than we thought. And then there's a few things that are just out of their control. You know, the China market is very, very tough. The US retail market is very promotional. There's a lot of inventory out there. And then sort of the kind of straw that broke the camels back for me was really the big disparity between wholesale growth and direct consumer last quarter, especially in North America.

You know, I think wholesale being up, you know, almost 25 percent in an environment where demand is not that strong for the brand, I'm worried that it could cause, you know, some inventory issues in subsequent quarters. So in light of that, what would you be watching? for this to not be a value trap, but to be a value opportunity? I mean, honestly, we would need to see better demand trends from consumers. We need to see some product innovation. You know, they've been struggling for a long time to find that next big thing.

And since they didn't have a next big thing to rely on, they leaned on classic retro styles, Jordans, dunks, et cetera. But, you know, that can only take you so far. and those are franchises that are built on scarcity. So, you know, you need something new and exciting, something to kind of galvanize the consumer, which we haven't seen from them recently. Tom, I hear you, but if we can throw up a 10-year chart of Nike,

it sure seems like a lot of that bad news that you mentioned about Nike that's been happening is priced in. I mean, 65 a share on Nike is like October. 30th, 2015 levels? You know, that's true. And obviously, the stock has been very, very pressure in the last few years. The kind of point to that would be that the company is earning a lot less money than it did several years ago.

And the profit margins are a lot lower than they were a few years ago. And, you know, a lot of that has to do with being promotional and discounting a lot and selling a lot of stuff through outlet stores and through lower quality distribution channels. And that's all stuff that needs to get fixed. And I think we're learning that it's not a quick fix. You know, it takes time to correct those things. And so I think, you know, it's going to take quite a long time

before Nike gets back to its prior. When you say quite a long time, though, by the next Summer Olympics, right? Will it be, I mean, if they're investors who are looking for things, we know AI is hot now and all these. these derivative plays, but that could perform over time. Do you think Nike has fundamentally lost its cool in an irrecoverable way, or just that you

got to be patient? I don't think it's irrecoverable. I think they've had these moments in time in the past, and ultimately they've been able to pull themselves out of it. So I think it's more a function of being patient and waiting for the next big thing. Just remember that this is an industry with really, really long lead times. product development cycles can take, you know, 18 months. So, you know, as they kind of keep working on and keep trying to find new innovations and new products to come out with, you know, hopefully they can, you know, reverse the ship and make back the profits that they've lost.

But it's not, you know, an overnight fix and, you know, certainly not by the Summer Olympics. Okay, so you don't like Nike, at least not right now, but you do like VF core. Why? So I like VF. You know, I think VF is farther along on the turnaround than Nike is. They have, you know, two of our three biggest brands. The North Face and Timberland, I think, are performing very, very well. I think they've benefited from a lot of the cold weather we had in the Northeast and the Midwest this quarter. And the Vans brand, which has been a bit of a problem child for VF for a while.

We see some green shoots there. And then lastly, the balance sheet, which has been a big problem for them. And, you know, they were, they were really highly levered. The balance sheet's getting a lot cleaner. And as they, you know, continue to generate free cash flow and work down the debt balance, I think it becomes a more appealing name for investors. Okay. Tom Nickich, thanks for joining us.

Thank you. Wall Street is anxiously awaiting tomorrow's December jobs report. Up next, Mike Santoli looks at what a new record low in job finding confidence could mean for the market and for the Fed. And don't 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. Let's get you set with tomorrow's trade today.

The December jobs report should make the unemployment picture a lot more clear. Economists expect non-farm payrolls to rise 73,000. The consensus is for the unemployment rate to fall slightly to 4.5% and for average hourly wages to rise 0.3% year. over year. We'll see. Also, on the economic front, we'll get both the September and October housing starts and building permits reports, as well as the preliminary reading of January

consumer sentiment. Speaking of the jobs report, first look at a full monthly jobs report in a while. And with it a test of whether this labor market is bending or whether it's possibly breaking, Mike Santoli is back with a chart that suggests what's happening now with long-term unemployment rates is anything but typical. Mike? Yeah, it's been an unorthodox cycle in many respects, Morgan, and the pace of the upside in the unemployment rate since its trough level of about 3.4% almost two years ago, it's unusual in that it's relatively gradual. You don't usually see this kind of grudging increase in the unemployment rate up to about 4.6% now over such a long span of time. As you can see, when we're going into recession, you see a little bit of hesitation and then acceleration. And it really gets this sort of escape velocity.

That's been one of the big concerns of the dubs around the Fed and among economists that once the unemployment rate starts to go up, it tends to sort of be self-reinforcing. It's not really happening. And of course, if we do get a downtick in the unemployment rate tomorrow, it'll show a level of stability. Obviously, there's a super long-term chart. I will point out the late 60s, we had this sideways action at very low unemployment rates as well, pretty much full employment for years. So, you know, there are obviously many ways it can go, even though it hasn't gone this particular way many times before. Take a look here at a fresh piece of data from the New York Fed this morning. It's part of the consumer sentiment survey that the New York Fed does.

This is the perceived likelihood of getting a new job within three months if somebody lost their job today. So this goes back to 2013, and it's the lowest kind of average probability that we've seen in this survey. So it shows that at least in terms of perception, it's been this low hire, low fire environment for a while, and that has gotten entrenched in people's mindsets. Also, this number breaks down by education level and other metrics, and it's pretty much across the board. So maybe it's the AI stuff has gotten into the psychology or just, in fact, that it's been a lower metabolism hiring market for a little while now, Morgan. I will tell you, I'm starting to have these conversations and have been for a number of months now, but they seems to be increasing within certain CEO's circles and certain industries, that there is a bifurcation that is taking root in the labor

market. And it is those college educated, white collar, et cetera, workers, where maybe you're seeing some softening or you're not seeing as much hiring, or you're seeing, you know, numbers roll off and people not getting replaced. But that skills, tradesmen and women, folks that are doing stuff with their hands, folks that are, you know, laborers in other types of things, construction, infrastructure, et cetera, that those jobs, there aren't enough workers right now. I've even talked to rocket makers who say they can't build rockets fast enough because they don't have enough people to do it. So I wonder when and how this gets captured in the data. Well, the way it gets captured most simply is you don't see growth in payrolls in those areas because the jobs can't be filled if that's the case.

And so I do think it contributes to this idea that you're really not adding many jobs in the headline level. Of course, labor supply has also come down across the board. Non-health care hiring in the private sector has been anemic. for a while. Maybe it's, you know, companies protecting margins given we've had uncertainty and tariffs and maybe that's passing right now. So that's one of the many reasons that tomorrow's numbers are going to be pretty interesting to kind of, you know, get inside of and see what's been developing in the few months since we had a timely and complete report. Mike Santoli. Thank you. Speaking of this topic, Morgan, the AI narrative is so complicated

and nuanced in AI itself and how it potentially affects jobs and the job market. And even if you at data center placement and some people in city saying hey data centers don't employ a bunch of people they use all these natural resources i'm not sure i want it here yeah i know and it sort of gets at the idea that it it's not just a financial question but it starts to move into the realm of being a political question and we are starting to see that especially where things like power are concerned that does it press here at overtime fast money starts now