Closing Bell - Closing Bell Overtime: Where Retail Is Investing; What Today’s Ruling Against The FTC Means For Microsoft, Activision Billzard 7/11/23

Episode Date: July 11, 2023

Back-to-back positive sessions for the major averages. Canaccord Chief Market Strategist Tony Dwyer breaks down the market action. Jefferies analyst Andrew Uerkwitz on the FTC losing its bid for a judge to temporarily halt the Microsoft acquisition of Activision Blizzard. eToro US CEO Lule Demmissie on where retail investors are putting money to work. Goldman’s Salveen Richter on top picks in the biotech sector. Wyze CEO Yun Zhang on why the reward is worth the risk of putting his products on Amazon’s website. KBW Analyst Michael Brown on why he is upgrading BlackRock.

Well, the major averages closing really close to the day's highs and the year's highs for all three. That's the scorecard on Wall Street. Winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. And coming up this hour, the U.S. head of online broker eToro is going to join us to talk about last week's spike in retail investor trading, the names her customers are buying right now. Plus, an active day for Activision. The stock jumping on news that the game makers deal with Microsoft could be a step closer to the finish line. We'll talk to an analyst about today's developments. Back to back positive sessions for the major averages, closing near session highs. As I said, the Dow posting its best day since June 30th, the S&P 500 and Nasdaq

having their best days since July 3rd. Joining us now is Canaccord Chief Market Strategist Tony Dwyer. Tony, good to have you. So this market thus far in 23 has caught you by surprise how good it is. You're saying to keep some cash waiting for a recessionary pullback. But for those playing at home, how much extra cash and how long are you going to wait? Well, so that's a great question. And I think it's important to differentiate the market. I think Mike had a great comment, John, a little bit earlier about the real bull story here is you take a little bit of profit out of the mega cap names and throw them into the smaller and equal weighted indices. And it doesn't take a lot. If Apple is as big as the entire market cap of the Russell 2000, it doesn't take

a lot to move those smaller cap names. And you're getting the money flow there to do it. So that's a great question. What would it take? And our call has been to be what we call light and tight. 18 months into this, we've been defensive for the better part of the last 18 months. 18 months into this, now is not the time to go out and get short and get really negative. It's the time that we're looking to be a little bit lighter in exposure because you're getting paid to wait with cash. But you also want to have some cash if you do get this recession based or bad news becomes bad news drop to take advantage of it because it's with lower interest rates that that happens. So that's where I think I've made the mistake this year is the low of the outlook for lower inflation has given a better lift to those mega cap stocks. And now some of the cyclical names versus the higher interest rates. That's what has

surprised me a little bit. So you mentioned inflation. What's the most important thing investors are going to learn from CPI tomorrow. It's going to influence your timing. John, it won't. It's like the employment numbers. It is stunning to me that we trade the market so actively on numbers that get so highly revised. So I try to look at the trend of the numbers and the trend of inflation is better. John, it's supposed to be better. If you're having an economic period of economic weakness, which even though it's supposed to be better. If you're having an economic period of economic weakness, which even though it's been better than expected, it's still weakening, you should have, especially given the base effect, and for the viewers that aren't familiar with that term, that's

when you roll out the year-ago level so it changes because of that you're rolling out that higher number. It changes it and makes it more attractive. But you're supposed to have lower inflation at this point. It's not being reflected in short-term interest rates, which I think has caught myself and some others off guard. But again, 18 months in, you're looking to take advantage of weakness. You're not looking to bet on it. That's been our call. Why do you think that hasn't been reflected in short-term interest rates? Is it just because the Fed has continued to be hawkish and you have something like another hike in play now for July? Or is it something else? I'm a little bit baffled by that, Morgan.

You know, I'm going to break the cardinal rule of strategists and say I don't know. There's time so that, as you know from my note earlier this week, the summary line was when you're on a muddy road, don't jerk the wheel. So when you think about the market, the Dow Jones Industrial Average is up about a little under 4% so far this year. The New York Stock Exchange Composite is up about 4% this year. So you really have to differentiate what market we're talking about. That said, there's been, I called it the hustle and the rustle, starting in June 7th when we put out that note. You are seeing this money flow and broadening out of the marketplace that is kind of going in the face of higher rates. And I like to think about the line, Morgan, don't fight the

Fed. Why isn't it follow the Fed? Because we fight the Fed every time. So again, I think we do have this period where we're going to go into a recession. How deep it is is going to be dependent upon how quickly the Fed starts to cut interest rates. OK, Russell and Hustle. I'm into that. I might borrow that. Hustle or the Russell. OK, Hustle or Russell. You talk about in your note that your view has been that a soft landing could be the worst case scenario. That got my attention. Why? Morgan, a soft landing scenario is what we've got so far, right? So what that keeps is growth, which makes labor inflation stay high.

There's three major components to the core PCE, which is what the Fed tells us they use. The first one is goods inflation. The second is non-durable goods inflation. Those two have absolutely tanked. That's the disinflation that Jerome Powell talks about. Unfortunately, the bulk of core inflation is services inflation and a soft landing where the consumer keeps spending and service employment stays strong. That's what's making the fed continue to raise rates so the soft landing scenario is good for now it keeps earnings maybe from being negative sooner but ultimately

that keeps the fed tighter for longer which means you can't roll over that debt remember what what typically take i look back morgan at the two prior soft landing scenarios, 1966 and 1995. And in both of those scenarios, what generated the soft landing and actually the rally in the market was a sharp drop in rates from about 6% to 4% to 4.5%. Obviously, that's not true here because off the October low, rates are up about 125 basis points and the six-month T-bill is making a new high. So something's got to get one way or another. It's too hard for the consumer or businesses to spend when you have a higher interest expense number and a higher price that you're financing. So at some point, a soft landing is going to give way to either a reacceleration,

and I don't know how you do that when rates haven't dropped. Where are you going to get the kickstart for that new money? Yeah, that's the key question. Of course, what we're trying to parse through as we go into the second half this year and beyond. Tony Dwyer, thanks for joining us. Thank you, Morgan. Let's get to senior markets commentator Michael Santoli at the New York Stock Exchange. Hi, Mike.

Hey, Morgan. You know, one thing that opened the door for stocks to get some upside today and actually the last few days has been yields calming down. Take a look at the five-year Treasury yield. And you see they've tested the nerve of equity investors by going right back up to the top end of its range. The five-year is interesting going into the CPI number tomorrow. It's where Fed policy rates at the short end kind of meet longer term inflation expectations in longer term bonds. And you see here we've sort of turned down from those highs. Four thirty five to four forty five has been about the cycle highs here. So this

isn't decisive, of course. We've got to see what the reaction to CPI and everything else tomorrow. But if it stays in this range, it's probably somewhat more comfortable for stocks to handle. Now, also a lot of attention after yesterday's announcement that there's going to be a rebalancing in the Nasdaq 100 to the role of market cap weighting and alternatives to market cap weighting, what it means as the tail wags the dog. So here you see the S&P 500. That's, of course, market cap weighted relative to the equal weight, which we look at a lot. And this is now a two year basis. So you see slightly positive for the S&P 500, that's, of course, market cap weighted relative to the equal weight, which we look at a lot. And this is now a two-year basis. So you see slightly positive for the S&P over two years, slightly negative for the equal weight. Now, what's that over there?

The Arrow reverse cap S&P 500 ETF. It's a tiny, tiny ETF, which what it does is it takes the smallest market cap companies in the S&P and weights them the highest. So it just turns the S&P 500 upside down in terms of a weighting scheme, not obviously as concentrated at the top as the regular S&P is, but you see how that's lagged behind after keeping pace for a while. So if you believe that we're going to have money flowing from the few to the many, this would be the kind of thing that would perform better. And it's not so much like small caps because they're large companies. It's just that you'd be weighting them somewhat differently. It's also very much a value and defensive tilt as opposed to more aggressive growth. Yeah. I mean, it's interesting

because we're having this conversation about rotation or about this rally broadening out in terms of breadth. We're just talking about with Tony Dwyer and then you come up with this chart to go back to the NasdaQ 100, this rebalancing, how meaningful is that? How much could that impact that average and the mega cap tech stocks that have so far led this rally? I think most of the mechanical adjustment in price happened yesterday. So you saw very dramatic moves at a couple percent declines in the largest stocks. And you're able to very roughly quantify what the effect is going to be. So trading deaths all over the place. Now, it's not yet determined. You're going to wait to the end of this week. You're going to have

a reweighting. You're going to see exactly how much money has to come out of the larger stocks into smaller ones. But I don't think what we're talking about from here on out is the actual mechanics of the rebalancing itself. It's a little more of this is an occasion to assess just exactly how concentrated all the bets have become across the market. Also, maybe put in people's heads, that's almost there's an upside limit structurally to how much these indexes are going to allow these stocks to get much larger. So to me, it's more about maybe a longer term change in orientation among investors and where they want to put their money, as opposed to just this special rebalancing and how that's going to swing things from here.

All right. Some good context there. We'll see you later this hour. Mike Santoli. Okay. Activision shares rallying big today on news that a federal judge has denied the FTC's motion to halt Microsoft from completing its acquisition of the video game publisher. Microsoft shares ending the day about flat. Focus now shifts to the U.K. as the competition and markets authority there said it is prepared to evaluate proposals from Microsoft after rejecting the deal in late spring. Joining us now is Jeffries Managing Director Andrew Erkwitz. Andrew, I wonder about the implications for the rest of the gaming ecosystem. Unity was up, I think, about 10 percent today. Applovin was up almost four. Are there

companies that are going to need to bulk up now or invest differently now that it looks like Microsoft Activision is going to happen? Yeah, no, I think there is a belief that, you know, big tech, they've all been wanting to do games, right? The Amazons, Disneys, Netflixes of the world want to be in games. And now if this deal gets through, which it looks like it's likely, now all of a sudden, you know, all these other companies need to assess, are they serious about games? If they are, who do you acquire? Because you can't do this organically. And so I think, you know, the investors were out looking for who could be the next acquisition in the space. So does that mean pure play gaming companies that are larger? Would it mean smaller? I mean, this sort of clears the way for vertical acquisitions in a way, like more than before,

but it also seems unlikely that Amazon's going to come out and buy EA, for example. Yeah, I think maybe a year, maybe 18 months ago, that was much more likely. Today, I agree with you. I don't think it's that likely. Amazon's got some other problems. Disney's got some other problems. Cost of capital is a lot more expensive. So, you know, I think people might take the approach Microsoft originally started on. You go back to the 2018 to 2020 period, they started out buying small acquisitions and slowly

balked up. We might see that to see if some of these companies start testing the waters to see what's out there and whether these strategies ultimately work. Unity, Apple oven being up. Apple oven is a little unusual. It's more of an ad tech company. Unity being a game engine company would make much more sense to somebody who wants to build an ecosystem like a Facebook or something along those lines.

When you have Electronic Arts and Take-Two Interactive hitting fresh 52-week highs today, big moves in both of those stocks. Are they warranted then? I think so. I mean, they both have great fundamentals. So if we were wrong about maybe Amazon is serious, you know, and you think about who's got the best IP out there, there's none better than EA and Take-Two. Yeah. I mean, there's some talk out there that you could see this deal potentially closed by Monday, maybe with an asterisk next to it. A, are you surprised to see the court rule the way it did today? Because it did seem like for many months there had been trades out there assuming in the marketplace that this deal was going to get scuttled.

And B, if you still have some legal overhang, is it to Microsoft's benefit to go ahead and move forward and close the deal with an asterisk attached? Yeah. So on your on your first question, we weren't too surprised. I mean, I mean, we've written quite a bit about the fundamentals of this deal. It made sense that it would get done. We didn't see any harm to the consumer, and the FTC had to prove harm to the consumer. The FTC really only proved harm to Sony, and the judge saw right through it and approved the deal. Now, in the UK, you know, it looks like they're willing to negotiate and get to a settlement by Monday. I think Microsoft would much rather, you know, get rid of that asterisk before the Tuesday merger agreement deadline. And we do think

Microsoft is very serious about getting this done. It's imperative to their gaming strategy and their cloud strategy. So we think it gets done by Monday with some sort of deal. So, Andrew, what's the future of gaming now? It doesn't appear to be cloud gaming. That sort of got poo-pooed through this process. The metaverse is no longer in vogue. So what's exciting? Yeah, you know, it's funny.

Gaming moves slowly. You know, if we look back at the biggest games five years ago, it looked very similar to what they are today. You go back 10 years ago, it starts getting very different. And so I would push back a little bit on cloud. I think cloud's a feature today, could be the future, very much could be the future in five to 10 years. You know, at the end of the day, interactive entertainment is something that is growing its user base. It's growing its monetization. People really associate with it with the social features and on the competitive side. So it's not going away.

It's getting bigger. And so, you know, I think it's the slow moving sector of entertainment that's slowly becoming the primary sector of entertainment. Andrew Erkowitz, thanks for joining us. Thank you. Don't miss Activision CEO Bobby Kotick on Closing Bell tomorrow live from Sun Valley, Idaho.

That's tomorrow at 3 p.m. Eastern. And that's not all. More from Sun Valley on Thursday. David Faber sits down with Disney CEO Bob Iger. That's 8 a.m. Eastern on Squawk Box. Well, retail investors poured around $7 billion into equities last week. That's according to Morgan Stanley. Up next, the U.S. CEO of online brokerage eToro tells us where her customers are putting their money to work.

Overtime, back in two. Welcome back to Overtime. Retail demand nearing levels not seen in seven years for stocks last week. Investors buying some $7 billion in equities while U.S. hedge funds trimmed global exposure. That's according to a new note from Morgan Stanley. Joining us now is Lule Demise, U.S. CEO for online social investment network and trading platform eToro. Lule, great to have you back on the show. Good to see you again. Are you seeing similar inflows at eToro? And if so, where are retail investors putting their money to work?

Yeah, we definitely are seeing retail activity. As you know, eToro is both in the U.S. and a global platform. So we get to sort of see the footprint from a global perspective as well. We already have investors that are more tech leaning and they to sort of see the footprint from a global perspective as well. We already have investors that are more tech-leaning in their outlook. And so the top ones we saw this quarter were Tesla, Amazon, Apple. And then when we sort of double-clicked and said, what do you think is your top AI play? It was NVIDIA, Meta, and Microsoft. That was really the three that stood out. What's interesting, though, is we still see C3.ai as the highest surge of activity on our platform

quarter to quarter, over quarter. Interesting. When you say that your customers, your clients, are tech-heavy, is that a reflection of what we're seeing in the market and what's been moving in the market, or is that a reflection of the demographics of your customers? I think it's both, right?

So in general, there's a tech bias on our customers because the majority of our customers are either millennial or younger, right? So there is a bias already of sort of the tech heaviness. But I do think that in the last few years, as tech got beaten up, there was an element of additional bias that leaned in. Like you'll see, for example, when I last joined you, we were talking about how older investors on our platform that were older than millennials were leaning into AI in ways that we've not seen in tech, for example. We'll say not as young. I mean, because there are no old millennials coming from a generation. I was going to say, from millennials coming from a gen X. All right. So tell me that this isn't the classic case of the retail investor jumping in at the top. I mean, what are you seeing? Are these investors who pulled out of the market at the end of Q3, beginning of Q4, probably more beginning of Q4, and are getting back in late?

Or is this disciplined behavior? So I think, you know, I'm waiting for that day, John, where I feel like the wisdom of the crowd is not going to be the tail wagging the dog. But I do think that it's a mix of both. We did see people hold when we saw the downturn happen. People didn't sell at the bottom, at the trough of it. But there were people who were, you know, when they were opportunistic, they bought, they held cash, and now we see them coming in. I mean, at the end of the day, it's hard to know when the timing of the market is. But I do think that retail investors are reading the news and

seeing what's happening and realizing that AI is going to be transformative to our industry. And we saw it in our research recently, We just did our investor beat research. And what we find is that it's not just about investing in AI that's interesting. It's also they're actually active users of AI as a form of information in their investing behavior, which I think is also an interesting paradigm. A little concerning, right? Because your survey shows there are quite a few investors, you know, around 40 percent who are embracing the possibility of using generative AI, chat GPT style AI to pick investments for them and to do the trading. So you got to not just know what to buy, but when to buy and when to sell. That's not the sort of thing that AI has been

good at thus far. Yeah, I mean, I think that part of it is you have to think of it as augmentation to research. I think that's how a lot of them are thinking of it, is that they think in the future that AI will actually outperform. 34% think it'll outperform money managers, for example. They do trust it for research pieces, but that's no different than any other analytical research that people look at that is not validated in order for them to be able to rely on it as input for their investing. I think anything new, John, is concerning if there's a frenzy around it. But I also think there's something about retail investor wisdom that we shouldn't be deaf to, which is that they are leaning into technology and saying, OK, what can I do with it? And I think that that's an interesting paradigm for us to examine. Yeah, it's interesting. I'm just worried

that you're believing in something before it's maybe proven itself as being good at that thing. We will see. Lule Demise from eToro. Thank you. Thanks so much for having me. Well, biotech has been a bust this year, significantly underperforming the S&P 500. Our next guest sees some pockets of opportunity in this area. We will get her top picks next. And check out a couple big movers today, Roku and Shopify, both moving higher after the company said they were partnering on technology to allow Roku customers to buy products directly through their TVs. Roku finishing the day up 11 percent. Shopify, too. Stay with us. Welcome back. The biotech sector has been a notable underperformer so far this year,

down more than 3 percent. Is now the right time to jump in? Well, joining us is Salveen Richter. She is the lead analyst for the U.S. biotech sector at Goldman Sachs, joins us here on set. Salveen, welcome. It's great to have you. Great. Thanks for having me. So there's been a flurry of news and reports for us to work through here. Maybe, though, let's start with something that happened last week, and that was Alzheimer's and this approval with Biogen. Yeah, so we saw the full approval, which was expected on the back of accelerated approval and the full data sets. And so at this point, both Biogen and ACI are launching really kind of the key drug in the market for early Alzheimer's disease that impacts about 1.6 million people in the United States. And so we're going to be watching this launch as it plays out, first in the context of the demand, but also in terms of bottlenecks that may play out through infusion centers and

limited ability to get drug initially. But then through blood-based testing as well as a sub-Q formulation, meaning you won't have to use infusion centers, the ability to kind of really unleash this opportunity where we're looking at about 10,000 patients to be treated within the first year or by April of next year, and then 100,000 patients in the U.S. to be treated over three years. Okay. Meantime, there's another name that you have a buy on, and that's Moderna. And we saw a deal struck in China specifically for the Chinese populace. Why do you like this name right now? Why a buy?

Yeah, I mean, I think with Moderna, we've only seen the beginning of the story in light of what we saw with COVID and vaccines. And we're clearly seeing them expand beyond COVID to flu and RSV. And with this idea that you're going to create a bespoke vaccine for the global population. And now what we're seeing them do is move into other areas. So they had some really good data in cancer with cancer vaccines. We're going to get data from rare disease. We're going to get data from heart disease. We're going to get data in the lung with cystic fibrosis partnered with Vertex. So it's just going to be interesting to kind of watch this unlocking of a technology beyond the vertical that we all know.

Salvina, I'm looking at the VanEck Biotech ETF, and it's trading around where it was, I think, in May of 2020, just as we were starting to get that pandemic recovery way off of its highs. What's the story now about what's going to power this whole area higher? How much investment is there in technology like AI to drive more efficiency, faster discovery? What should investors be thinking about? Yeah, I mean, I think there's so many reasons why biotech really rallied and you saw the market where it was and why it's come to the level that it is today. And there's macro factors.

There's also the investments that came in during COVID that have exited the group. But when you look at the group overall, it's very bespoke and you have to pick your areas. So if you're going to look at the names that are going to benefit from what we've seen with AI and that convergence with healthcare, there are certain names that are going to benefit from what we've seen with AI and that convergence with healthcare. There are certain names that you would want to play

where you think you could see proof of concept. So, for instance, in large-cap biotech, Amgen could be one to kind of follow, given the acquisitions they've done with these biotech or tech bio companies, as well as the way they're thinking about integrating it in their platform. And I think NVIDIA highlighted them as one of the names to kind of follow within three areas. What about in tools and diagnostics?

So in tools and diagnostics, I mean, we're watching to see where everything goes, but I guess we're looking at names like Acuvia too, with MedTech, Intuitive Surgicals. But there really is this idea that we're going to be able to better design drugs, reduce cost, impact efficiencies, and even use generative AI in aspects of better designing a trial design or creating personalized medicine, perhaps you'll go to a doctor and instead of a doctor really laying out for you and looking through data to decide what cardiovascular drug you may need, you may have a screen telling you what you should take. All right.

Salveen Richter, lead analyst for the U.S. biotech sector at Goldman Sachs. Thank you. Great. Thank you. Time now for a CNBC News Update with Pipp sector at Goldman Sachs. Thank you. Great. Thank you. Time now for a CNBC News Update with Pippa Stevens. Pippa. Hey, John. Millions of Americans are sweltering once again under triple-digit temperatures. The National Weather Service issued heat alerts for 60 million people with the most brutal temperatures in the Southwest. California's Death Valley may reach temperatures between 125 and 130 degrees, and the city of Phoenix is poised to tie or break the record for most consecutive days above 110

degrees. The House Oversight Committee might get some answers on the bag of cocaine found just over a week ago at the White House. Secret Service representatives are scheduled to brief the Republican-controlled committee on the discovery Thursday morning. It's unclear how long the cocaine was in the White House before it was found, and officials have set low expectations for finding the person who brought it there. And a jury decided the handwritten Aretha Franklin will found in the late singer's couch is valid. It will now override a 2010 will that was discovered in a locked cabinet at Franklin's home in suburban Detroit. The main difference with the later version is that it leaves her main home to one of her sons and her grandchildren.

It also no longer requires her sons to take a business class in order to benefit from the estate. Morgan, back to you. All right, Pippa Stevens, thank you. Up next, Mike Santoli looks at the recent changes in the Fed's balance sheet and what it could mean for the market. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast in your favorite podcast app. We'll be right back. Welcome back to Overtime. Let's get back to Mike Santoli with a look at the shrinking Fed balance sheet and what it doesn't mean for the market. Mike. That's right.

That's the key, John. The headline, of course, is that it is shrinking again. Of course, you remember going back to March of last year as the Fed started to raise rates. They also started to allow the huge Fed balance sheet to start to shrink by letting those securities mature and not buy any more of them. But we did have that huge jump in assets at the Fed after SVB, Silicon Valley Bank, failed. And they created that new program to allow banks essentially to stow more cash at the Fed. So we saw that uptake of that facility. And now it started to decline again.

So the actual balance sheet size is below where it was before that. And it's down about 7 percent in the last year. That's about 600 billion dollars in shrinkage total. Now, I overlay the S&P 500 against it, which, of course, is up over that time by more than four trillion in market cap and maybe about 10 or 15 percent, simply to show that there has never necessarily been any real time true correlation between the size of the Fed balance sheet and what equities do. Now, it's a very controversial statement. I don't think it should be. But forever, we've seen people overlaying the increasing Fed balance sheet size with the equity market capitalization as if it's all about the Fed

just increasing somehow the supply of liquidity and finding its way into equity. So at least for this period of time, no relationship here. And I would argue that, of course, if you go back farther, you know, the size of the balance sheet has doubled since before COVID. So clearly it's very large. The Fed would like to get it down. But to me, it's not a real time mover of what happens in the equity market. And this seems to show that for now. So is it that there's no relationship or no relationship anymore? I imagine some people might say, well, COVID broke the relationship

and then it was about stimulus or something. Well, look, the people pretending or purporting that there was a very tight relationship, causal relationship, they would say, goes to way back before that. It goes to after the global financial crisis when the Fed started quantitative easing and building the balance sheet. I would argue that the relationship has been very loose and almost more atmospheric. It's about signaling. Yes, they've taken the supply of securities off the market. Maybe they've suppressed yields and bond volatility. And it serves as a signaling mechanism for whether the Fed intends to get easier or less easy or tighter down the road. But in terms of that one to one relationship saying all you got to know is the direction of the Fed balance sheet, you'll be able

to choose which way stocks go. That seems not to be the case and perhaps never was. Interesting. It's a it's a very telling chart there, although I'd also argue that you can make that you can make a case for a lag effect in terms of the equity market and what you see. Except that's not what people were saying since 2009. They were pointing it out every week. You might be right. There you go. You're very passionate. I'm really, I'm here for it. I got, it's like 15 years worth of frustration coming. I love it. I love it. Keep it coming. All right. All right. Up next, the CEO of Wise Labs on how much revenue is being generated by Amazon's buy with prime option on its company's Web site Amazon Prime Day sales will increase 10% from last year, totaling more than $8 billion.

Joining us now is Yun Zhang. He is CEO of Wise, an Amazon partner for the Buy With Prime product. Yun, how does this work, right? Because you're not Amazon, but you're getting an advantage from Prime customers? Yes. Buy with Prime is a very strategic program, a new program from Amazon. So as a Prime member,

you can shop off Amazon.com at D2C site, such as wise.com, and you can use your Prime benefits such as seamless checkout, free and fast shipping, and easy returns. Why is that good for you? Because it seems like the loyalty accrues to Amazon and you might get commodified. I think it's a great program for Wise because Wise product is featured to millions of US-based Prime members. And also the shopping experience happens at Wyze.com so we can build a direct user relationship and brand loyalty.

So the value proposition of this is compelling to you versus say a Shopify or a Walmart, it sounds like. Now we've got an Amazon Prime Day event that's going on as well. Expectations about what that's going to mean for sales for your products? We have a very high expectation from this program. And half day through, we are seeing very positive results. Our traffic and orders today so far has been over doubled comparing to Prime Day last year.

So how much of that is because of this relationship with Prime, and how much of that is because of the consumer or because of your products and the market for your products growing specifically? I think a significant portion of this today's early result is driven by this new buy with the prime program because we have a very exclusive blue cameras, exclusive buy with the prime deal for this program at wise.com. How sensitive are you seeing customers being to price? How much are they trading down or really only looking for big deals to drive their behavior? How much are they filling

up their carts? I think customer is pretty sensitive to consumer electronics. Wise, we are a consumer smart home tech company. For example, our flagship product is Wisecam. We sold over 10 million Wisecam in past five years. For this specific exclusive buy with Prime deal, this Wisecam, a blue Wisecam, the deal price is at $28.78. So it's a very good deal. I think customer just love it. So it was, say, a couple of years ago, the idea that Shopify was trying to arm D2C companies with the tools they needed to control their destiny. Is that still a valid thesis for a company like Shopify?

Or is Amazon as much or more an ally to you than companies like that? I think it's a win-win situation for this whole e-commerce ecosystem. For Wise, we got a chance to present product and brand to meetings of Prime members. And for Prime members, they continue to use this Prime shopping experience they enjoy, they love, they trust. And for Amazon, just adding a lot of daily value to the Prime membership. All right.

Yun Zhang, thanks for joining us, CEO of Wyze. Thank you. Great to be here. Turning now to another story in the Jeff Bezos orbit, CNBC.com reporting this afternoon that a Blue Origin rocket engine exploded during testing. The incident happened last month when a BE-4 engine detonated about 10 seconds into the test. Blue Origin said nobody was injured and that an investigation is underway. Blue Origin makes the BE-4s both for its own orbital rocket, New Glenn, that's under development, and for the new Vulcan rocket from United Launch Alliance, which is a joint venture between Boeing and Lockheed Martin.

This engine had been slated for ULA. You can find more on the story on CNBC.com. And for more space coverage in general, check out my podcast, Manifest Space. This week, I sit down with another rocket maker, Firefly Aerospace, to talk about the broader launch services market. And North Carolina may be this year's top state for business, but it has been dealing with a major brain drain. Find out how the Tar Heel state is trying to end that trend when Overtime returns. Welcome back. This morning, CNBC revealed North Carolina is America's top state for business in 2023. John and I both got that one wrong.

Yeah. The state has a long heritage of innovation, but not the best record of capitalizing on it. Scott Cohn is back with us from Asheville, North Carolina, with a look at how they want to change that. Scott. Yeah, Morgan, you know, North Carolina finishes sixth for technology and innovation this year. Not bad, but they'd like to do better. This is nothing new. Remember, the Wright brothers flew their airplane at Kitty Hawk, but they opened their business in Ohio. This state is great at inventing, not so good at investing, and that way they want to change.

At East Carolina University, Rukia Vandross-Anderson has developed a treatment for aggressive cancer. We have a drug that kills cancer cells, which is really important. But on top of that, what it does is it stimulates immune cells. Immune cells that can kill even more cancer cells. Now, the really hard part, moving beyond the lab to large-scale testing. That costs money. We're talking several million dollars. Leaving her and her team in North Carolina at a crossroads. If we can't find that here, we'll have to move to a place that really understands and nurtures innovation. That's where a new public-private partnership called NC Innovation comes in, seeking a $1.5

billion endowment from the state. Former Homeland Security official and venture capitalist Bennett Waters is CEO. BENNETT WATERS, CEO, NC INNOVATION, It's about homegrown innovation, and it's about a rising tide that will lift all boats. The program links innovators with mentors and with capital, focusing on rural parts of the state, just what the doctor ordered. I'm a scientist. I am not a business person. And she's not in this for the money. This work started after both her parents died of cancer. Thinking about them is just powerful. It's a stimulus for me

and it helps me to keep going forward. She has named her business after her parents, Clarence and Adele. She would love to keep Clara Adele Pharmaceuticals in North Carolina. You can read more about our study at topstates.cnbc.com. Huge team works on this every year. Go on the website, take a look at their work. I wish I could single out everyone, but I will single out our producers this year, Jessica Golden and Dawn Geel, who put up with me for several months here. And we think we like the final result. Guys, back to you. Great work, all of you. Scott, thank you. And now this financial stock just getting upgraded to buy. Up next, the analyst behind that call reveals the name

and why you can bank on it being a big winner from higher rates. And take a look at Cody getting a boost after hours. The Wall Street Journal reporting that Kim Kardashian is in talks to buy back the minority stake of her beauty business from Kody. The business previously known as KKW Holdings was valued at $1 billion when Kody acquired the 20% stake three years ago. Kody shares are popping. They're up about 3%, almost 4% in after hours trading. Keeping up with the Kardashians. Welcome back to Overtime. KBW out with a bullish note on BlackRock just days before earnings,

upgrading the stock to outperform and calling it a high-rate beneficiary. Let's bring in the analyst behind that note, Michael Brown from KBW, a Stiefel company. Michael, great to have you on the show. We get earnings from BlackRock on Friday. The reason for the upgrade ahead of that. Sure. Yeah. Thank you for having me. For BlackRock, I mean, BlackRock is the largest, most diversified asset manager in the world, with over $9 trillion of assets under management. So really what we like about the stock here is they deliver best-in-class growth consistently over time, and they've got multiple growth avenues to continue to do so.

So when we look forward here, we see a tremendous opportunity in terms of the fixed-income flow potential. We expect fixed-income flows to accelerate later this year and then continue through 2024 and beyond. In addition to that, we also like the outsourcing opportunity as institutions continue to look for opportunities to outsource their investment capabilities to third parties with scale, such as BlackRock. And finally, they continue to deliver really unmatched growth across their platform. And private assets is another area where

we expect them to continue to really deliver strong growth. And at their investor day recently, they actually talked about that business being able to double its revenues over the next five years. So you're saying higher rates for longer benefit BlackRock in their fixed income business because people are going to lock in those longer term yields and the cash flows from them? Yeah, I mean, what we've seen so far is a lot of money moving out of deposits and shifting over to higher yielding investment products, whether they're kind of shorter duration ETFs or moving into money market funds. Folks are looking for yield, and they don't have to take a lot of duration risk. But eventually, once the Fed finishes its

rate hiking campaign and central banks around the world can finish up their rate hiking campaigns, we expect investors to start to allocate more to the fixed income market. Right now, over 60% of bonds in the market have a 4% plus yield. That's something we really haven't seen in over 15 years. So the traditional 60-40 portfolio can almost get flipped on its head and you can actually start to see greater allocations to fixed income and you'll be able to get, really reach your return hurdles with a greater proportion of assets allocated to fixed income and you'll be able to get really reach your return hurdles with a greater proportion of assets allocated to fixed income and take on less risk than you had traditionally. All right, Mike, thank you. Michael Brown.

Now, top media and tech moguls are gathering at the annual Allen & Company Sun Valley Conference. Our Julia Borsten just caught up with Paramount CEO Bob Backish there. Julia. Hello, John. That's right. With Paramount shares up over three and a half percent today and speculation that Paramount might be looking to sell some of its assets such as BET. This afternoon, Paramount CEO Bob Backish and chairperson Sherry Redstone arrived here at the Allen & Co. Conference in Sun Valley. I caught Backish as he in, and I asked if he's concerned about a possible Actors Guild strike, which could start as early as this Wednesday night. I'm concerned about a lot of things. We'll see. What's your take on the box office?

I'm feeling great about it. We're opening MI7 this weekend. It's a great film. Tracking on it's awesome, and it's a thrill ride, so you're going to have a'm feeling great about it. We're opening MI7 this weekend. It's a great film. Tracking on it's awesome and it's a thrill ride so you're gonna have a lot of fun watching it. And the fact that Disney has had some recent disappointments, does it impact your outlook? No. What about M&A? Everyone always talks about M&A here. Are you looking to do any deals? It's always a fun topic, you know. You always listen, talk to people, people who knows we'll have a good time among the other ceos here who may be contemplating deals and divestitures disney ceo bob eiger he's here fresh on the heels of a new report that disney is exploring strategic options for its star india business there are also questions about his plans for espn as well as the remainder of Hulu, which Disney is expected

to buy out from CNBC's parent company, Comcast. Now, speaking of deals, Activision Blizzard CEO Bobby Kotick is also here, fresh on the heels of a judge ruling in his favor of his company's pending deal with Microsoft. I will be interviewing Bobby Kotick tomorrow in Closing Bell about the remaining hurdles for the deal and what is next for Activision Blizzard. And coming up in the next hour, I'll be sitting down with IAC CEO Joey Levin here in Sun Valley. John, back over to you. All right. Another reminder, thank you, Julia, do not miss David Faber's interview with Disney CEO Bob Iger. That is Thursday, 8 a.m. Eastern on Squawk Box. And we're talking about content, right? So many changes here.

Microsoft Activision News, big today. It had Activision up 10 percent. But there are potentially, as, you know, Backish was kind of not saying, more deals that could be done here. He seems open to it, but excited about MI7. Well, yes, and the box office could use that. And Sun Valley is notorious for deal-making activity year after year, so it's going to be one to watch with that. Tomorrow, CPI is the big one in focus. We also get the beige book today, rally in stocks.

And by the way, the transport's hitting a fresh 52-week high, so joining the move higher we've seen across the major averages. Industrial is doing quite well, too. But yeah, CPI going to be huge. You know, the jobs number surprised a lot of people. We'll see what CPI does. That's going to do it for us here at Overtime. Fast money starts now.