Closing Bell - Closing Bell: Positioning for Trump 2.0 12/12/24

Episode Date: December 12, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with optimism about stocks, as President-elect Trump delivers this message to investors right here earlier today. I think you're going to see some very good days ahead. A lot of incentives are going to be given. You saw yesterday a billion dollar investment that we give you very fast approvals. Nobody's come up with that one yet, although it seems pretty simple. I think you're going to have some great days ahead. Well, that expectation, a big reason why markets have rallied recently to even more record highs and coming up, we'll ask our experts how much more they can rise in the new year. In the meantime,

let's look at the scorecard here with 60 minutes to go in regulation. We are mostly lower today, mostly red after the PPI report came in a touch hotter than expectations. Many of the mega cap names are also pulling back a bit after their torrid run. And that's kept the Nasdaq mostly muted today. Staples and utilities, they've been among the best sectors, though. Staples, the only one in the green right now. It gives you an idea, at least, of the defensive tone to this market today. It does take us to our talk of the tape, the road ahead for your money. Let's ask our panel,

Ankur Crawford with Alger Jotirinova of Virtus and Max Kettner of HSBC Global Research. Good to have everybody with us. Ankur, I'll turn to you first. I mentioned this optimism in part because of a new Trump administration. You heard the president-elect himself, who was right over there hours ago. Do you believe in that story? Is that a principal reason to be optimistic going into 25? I do think it's a reason to be optimistic, and in part because the regulatory environment, he's going to loosen that up. We're going to have more M&A.

We will have, you know, I think more IPOs will come to market. And the as we talked about last time, like the financial engine will start to hum again. And that kind of, you know, creates an economy that is more fluid than we've seen over the last few years. What's that mean, do you think, in practice of what you think stocks can actually do? What, you know, Kramer's first question I just thought was put so perfectly. You know, what's your message to investors? You heard the president elect give his answer. So now what should investors think knowing what they were told? Well, I mean, they should think that GDP should be stable to at least growing a little bit,

at least in the first half of the year. They should think that, you know, can consumption actually start to accelerate from here? It seems like any talk of a soft landing is now off the table, for sure. In other words, no landing. There's no landing at this point. So, you know, the animal spirits are indeed back into the market and the valuations are actually not that aggressive. Yeah. Max, I mean, the president-elect really set the stage, I think, today. It was a moment, as they say. And, you know, it doesn't happen

that often down here at the Stock Exchange where you have either a president-elect, a sitting president appear here. And his message was was clear you know what investors are banking on are they going to get it yeah look i do actually think sometimes we're giving perhaps a little bit too much credence and put too much emphasis on the politics and on the day-to-day politics and i do think yeah on the regulatory side i think that is pretty supportive for you know for sectors like health, particularly for sectors like banks as well. But I think what's actually more important, even though it's perhaps a little bit more boring, is actually the policy setup that we go into next year. I think we are talking a

little bit too much about the day-to-day rumblings on the political side, whereas when we look into next year, I think what's still unchanged, we can see that in the data. We can see, for example, consensus expectation for the upcoming fourth quarter earnings season, which, of course, will be overshadowed by the inauguration. But let's not just forget about the numbers just because the numbers and the figures might be our day to day job and are a little bit more boring than, you know, the exciting politics behind it. But when we look at the S&P consented earnings expectations for the fourth quarter, they're basically flat quarter over quarter. So we've got, once again, an incredibly low bar to beat when we look at GDP expectations.

It's the same thing. We started this quarter with less than 1.5% consented expectations. GDP now from the Atlanta Fed pins it at around 3.5%. And for next year, when we look at Q1 and Q2, they're still not even 2%. We're still looking at 1.7% and 1.8% for Q1 and Q2 in consensus. So once again, I think what is actually very, very, very important is that we're going into 2025 with, once again, pretty subdued expectations,

both on the earnings and on the GDP expectation side. So from that angle, I think it's pretty easy to deliver and even to overdeliver. And that should be really, really, really bullish for stocks and risk assets in general. Joe, if we assume that the baseline is to be bullish, how bullish should we be? I think we're at the point of optimism. I don't think we're at the point of euphoria right now. I think the reason to be skeptical about the ability for the market to have another significant positive year like it's had the last two years is the fact

that everyone is bullish. I also think that we're at a moment in which it's not about the chase for beta. I don't think we're going to be in an environment where everything rises. I think it's more about creating alpha opportunities, looking at particular sectors, finding companies that are able to thrive in the upcoming environment and outperform their peers in a particular industry or sector. Ankur, I hear the argument, well, valuations are already stretched. So I don't know if we're going to get multiple expansion in 2025. I don't know that we can. But what can really deliver is earnings growth. So where you might take a backseat to

valuations expanding, you can have good enough earnings growth to justify a higher move in stocks. Make sense? Absolutely. But I would say that you know people say that valuations are stretched on a historical basis. However if you look at our market today- the composition of the market is a little bit different than it has been

historically so. You know I just looking at the top. 50% of the S. and P. on average the average operating margin is about 40%. Through Meta and Microsoft, which is an anomaly relative to our history. And so when we look at the market's valuation on context of its own history, we have to take into account that the operating margin and the free cash flow profiles are wildly different

for the market, which does warrant a higher multiple, multiple structurally. I said it was a moment here earlier today, and it surely was as the president-elect was here ringing the opening bell, making his way around the floor. Bob Pisani was here on the floor of the New York Stock Exchange because I saw you sort of taking it all in and you did have a chance to speak with the president-elect, too, which I noticed. Just give us an idea of what the moment was like, a little bit of color for the stuff that people couldn't see,

and then you can tell us what you asked the president-elect, too. You know, it's been a long time on the floor for me, 27 years, and rarely have I seen such rapturous reception, not just for a president, but for anybody. The president-elect came onto the podium and then to the floor to rapturous applause. This is Trump territory down here. I would estimate 80% of the floor probably voted for him.

I did get a chance to ask the president-elect about his proposed 25% tariff on all Canadian products. Canadian officials have reacted angrily to that proposal. The premier of Ontario, Doug Ford, suggested that he will cut off energy shipments to the U.S. if the president-elect imposes such sweeping tariffs. I asked Mr. Trump what his response would be. Well, that's okay if he does that. That's fine. But the United States is subsidizing Canada. It's really a subsidy. And we shouldn't have to do that. And we have a great relationship. I have so many friends in Canada. But we shouldn't have to subsidize a country.

We're subsidizing for more than $100 billion a year. And we shouldn't have to be doing that. Afterwards, the president went to speak with Pete Giacchi. He's the head of floor trading for Citadel Securities. They are the largest market maker on the floor. Pete presented him with a Citadel jacket and told him he was one of the greatest capitalists this country has ever seen. There's Pete there. And this is Scott emblematic of the reception he got. I've been here 27 years on the floor. You've been here a long time. I've seen thousands of bell ringings, kings and queens and rock stars and a lot of hooting and hollering. But this was extremely warm. And I would describe it as rapturous. I think it helped a lot. He brought most of his

cabinet, her proposed cabinet along. J.D. Vance was waded into the crowd, was greeted like a rock star. Scott Besson was on the floor. A number of CEOs that we saw, mostly from the banking industry, although Brian Cornell of Target was here as well. It just doesn't happen that often. Maybe we take that for granted and we think that every president ultimately makes their way through here. There's a picture around the corner famously of President Reagan here in the 80s and the crowd that was so large gathered beneath him. But this was one of those really, really rare and extraordinary moments from a president-elect as well, somebody who hasn't even taken office. Now, of course, he's been in the White House before, but this time he didn't come here

from 2016 to 20. Yeah. What was wonderful was just to see the floor so packed. You know, when I got here in the mid-1990s, there were 4,000 people working on the floor. They did 80% of the volume. Today, there's a few hundred. That's what electronic trading does. But you could not move on the floor anywhere, in both the back rooms, the front rooms, anywhere. It was like 1997 again.

And the minute he hit the floor, USA, USA, you could just hear it. And Vance was like like they were all around. They were like rock stars in a major, warm, affectionate way that I haven't seen in a long time. Yeah, investors have high hopes. There's no doubt about that. Bob, thanks. Thank you.

It was a good moment today. It's Bob Pisani here. It makes me think about, you know, Max, as Bob was asking the president-elect about tariffs and a response by Canada, perhaps, whether we're taking those sorts of risks into account enough. Talk about all the euphoria, all the optimism and excitement, part of the reason why the stock market has hit these new highs almost every day or thereabouts since the election. What about the risks? Yeah, look, I do think when we look

at some of the tariff baskets, in fairness, actually, when we look at it, for example, the European tariff baskets, a lot of them have really repriced since about the mid to end of September. So I would argue quite a lot actually in those names is already in the price. So I wouldn't really agree on saying, OK, we're not taking into account these risks at all. Of course, the market does give, I think, more weight and more credence to the growth story, which it should, because, you know, let's not forget, aside from, again, the politics, let's not forget that for two years we've been talking about that eventually the long and variable lags of monetary policy will need to hit growth and so

on and here we are again and it's the fourth quarter and we're printing another three three and a half percent GDP growth apparently and expectations are still really really subdued and I would say what Joe was saying on the positioning and said the sentiment side is exactly what we're seeing as well we're seeing pretty much everyone talking bullish so we're seeing as well. We're seeing pretty much everyone talking bullish. So we're seeing all these sort of S&P forecasts around 6,500, 6,600. However, at the same time, we've got an awful lot of talk around, well, in the near term, you probably have to be a bit more cautious. You know, the idea of around selling the inauguration, because perhaps then the honeymoon period is over and we're going to get a dip. But then, you know, absolutely, we've got to buy that dip again. That idea has become incredibly consensus, I think, really over the last couple of weeks.

On the one hand, we've got volitionists, yes, but I don't think people are, you know, they're talking the talk. I don't think they're walking the walk in terms of actual positioning going into next year. If anything, we've seen more people de-risk, I think, in the last couple of weeks. On perceived risks, Joe, and that the market's already counting for those, I feel like in some respects that people assume, at least to some degree, that President Trump uses tariffs as a bargaining chip and that he doesn't necessarily put them into practice. I know there's that thought in some corners that it's just some bluster, it's some bargaining use, but that he's not going to go to the extremes that he has talked about in terms of numbers. That is a risk that,

in fact, he does. And then there's retaliation. And then we have trade wars that we're talking about again. And stocks are unsettled. So I think consensus is that we avert the worst, the worst possible outcome. We don't see the universal tariff of 20 percent. We don't see the Chinese hit with 60 percent tariff. You know, everyone could point to Treasury Secretary-elect Scott Bessett. And what does he want, Scott? He wants 3% growth. So if you want 3% growth, you really don't want punitive tariffs to disrupt that growth and to introduce the conversation surrounding inflation. I think

you're right. I think that is consensus. I think that a lot of people view this as more negotiation than anything else. I think the biggest risk as we turn the calendar into 2025 is two things. Next week, you get a hawkish cut, I believe, from the Federal Reserve. I think the Federal Reserve is a potential risk in 2025 if, in fact, they're going to pause longer than maybe the street expects. And then I think it goes back to what you mentioned before, which is earnings, because earnings are the reason that we're here today. Earnings are the clear driver. And if we have the inability to grow earnings and keep profit margins above 13 percent for the S&P,

then I think the market's going to be challenged. By the way, it's not like I go back to the Greg It piece of now a couple months ago, which was like whoever wins the election is going to inherit a strong economy. It's not like, you know, a President Trump comes in and has to rebuild a broken down economy in his own way. Now, he's going to put his own touches, obviously, on what is an already what the Fed chair himself called remarkable economy. That's why there's a lot of optimism. Let me ask you this, Ankur. If you look sort of beneath the surface of the markets,

we talk about like the here and now, or is the market poised to go up a bunch from here? Mega caps have been working really well lately. Below the surface, though, not so much. Breath of the market, there's been like more down stocks than up for, I think, eight straight days. Is that a problem? Well, sure. The rest of the economy has to start kind of coming to life.

There have been parts of the economy that were definitively in a recession, whether it's the transports and parts of consumer. They have almost had recession like characteristics for the last two years with negative volumes, negative foot traffic. And so, yes, they do have to come back to life if we want for the economy to start to grow again. That said, I think that the market, oddly enough, is a bit bifurcated from that real economy. And in part because, again, the earnings drivers of the market isn't necessarily that portion of the economy as much as it used to be historically. What about the breakdown recently in momentum as a factor? Because a lot of stocks that had gone up so tremendously high, you know,

Applovin is on your list of stock picks, not shorts, stock picks. Yeah. And that's like the poster stock for the momentum trade in many respects you can show a year-to-date chart if you would please because it's up you know what's up almost nine hundred and fifty percent on the year well seven hundred twenty five percent still looks good until you realize what I said that it's down substantially in a very short period of time as momentum has rolled over. Right. Why do you like the stock from here, given that? So, look, I came on three

months ago and we talked about it was 90 as a pick and, you know, went to 420. That last little kind of $50 of the stock came from the optimism around them being added to the S&P they didn't get added and the stock rolled back over however I think this is a very Nvidia esque phenomenon that's happening today with a beloved that you know that the stock has gone up a lot and the numbers are still not correct on the street because this is in discovery phase of where the numbers can go. And really, when we think about where Applovin and what this business model is becoming,

it could be a contender to Google and Meta. And if you put it in that context, the valuation doesn't seem egregious. This man right to your left here owns this stock. Oh, yes. And he has for a while now. I'm wondering how you're thinking about it as well. I think it's been a spectacular name to own. I think there's some fundamental justification surrounding its AI platform

that's connecting advertisers to publishers. But obviously, when momentum deteriorates the way it has during the last week, I'm utilizing that as a primary factor. I'm going to uncover what's the reasoning behind it. And I have to tell you, doing the research on it this week, the big risk that I see is not so much in these individual names, but really the fact that momentum has supported two major sectors, financials and industrials. And if we're in a moment where this momentum is going to roll over, it's going to enter 2025 with a lot of people off sides and you're about to see a significant rotation in which people are going to begin the year down. What if I asked you, OK, weak breadth in the market plus a rollover in momentum equals what? We've been going into mega cap a lot towards the end of the year. What if there's some picking off of the top of mega cap as you turn the calendar? And then you have bad breath and momentum breakdown.

So is there a greater problem? I think, yeah, I think that leads to. Would there be? Do you anticipate that? That's a correction. Is there any reason to think that would happen? You have the early warning signs of it in place, for sure. Because again, I'm troubled by the fact that financials and industrials,

one of the two favorite sectors, my strategy is significantly overweight both of those. You're beginning to see a little bit of a rollover in price. If that continues into the new year, now you follow that up with a reduction in the overweight allocation that most people have towards it. And the other side of that equals the word that we don't like, correction. Let me just ask you real quick, Ankur, then I got to go because you're heavily weighted in large tech, right? You love these stocks or have. What do you make of what's happened recently with these names as a resurgence for sure and whether it carries over into the new year? Yeah, I think what we've seen recently is a catch-up trade.

I mean, until three months ago, Amazon, Microsoft were flat for the year. The fundamentals for Meta and Amazon are actually getting better through the quarter and not worse. That's what's driving those. And the valuation frameworks are what are driving, you know, Amazon and are driving Microsoft and Google. And so, and Tesla is a a it's its own beast. So we don't have to talk about that one. But but yeah, I think it can continue to next year because, again, the valuation frameworks are still showing that they're they're not

aggressively priced. All right. We'll leave it there. Max, thank you. Joe T, thank you. Thanks to you as well. And congratulations on your milestone at Alger. Oh, thank you. You're marking today as well. We're getting some news out of Washington today. Emily Wilkins is here with that. Hi, Emily. Hey, Scott. Well, now we are just getting some news that the powerful House Financial Services Committee oversees the Fed, oversees banking, has a new chairman. French Hill has won the chairman race for that committee.

He will, of course, be following Patrick McHenry. And look, French Hill, his pitch to lawmakers was all about his experience. He actually ran a Delta Trust and Banking Corporation. He was its CEO. He worked in the George H.W. Bush White House. He's worked in Treasury. He's worked on the Hill. And he says that his main priority is going to be looking at

regional and community banks, making sure that the regulations there allow them to have an equal playing field with larger banks. And for French, we do expect to see a number of continuations from what we've seen with the last couple of years with McHenry. He has a focus on crypto. He actually was the one who sponsored a crypto bill this year that would have kind of set the rules of the roads, whether crypto is a security or a commodity and when it's one of each. And so he is now going to be leading that committee, leading a lot with crypto, leading a lot with banking. And of course, when it comes to overseeing the Fed and overseeing regulations, he is going to be the top guy in the House.

Scott. OK, Emily, thank you, Emily Wilkins. We're just getting started. What does Silicon Valley want from the White House? Well, the biggest names in tech are meeting with the president-elect. We will look at what is at stake for those companies next. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Alphabet CEO Sundar Pichai expected to meet with President Trump today at Mar-a-Lago. News first reported by The Information. It comes as more big tech CEOs are making a Palm Beach pilgrimage of late. Meta founder Mark Zuckerberg recently dining with President-elect Trump and Meta donating a million dollars to his inauguration.

President-elect Trump also telling our very own Jim Cramer this morning that Jeff Bezos will soon visit as well. Big technology' Alex Kantrowitz joins us now with more. It's good to see you. Thanks for coming by. Great to see you, Scott. What's this all about? What do you make of this? I mean, I don't think it's any secret that if you're a tech CEO, you're going to want to be on Trump's good side. Now, remember, we went through the tech clash in 2016, where all of a sudden people started to realize the power of these big tech companies and how they might be applying it in ways that are illegal. That started under President Trump. So we went into a moment during

the Biden administration where all the heavy guns like Lina Khan were brought in, trying to basically hold these companies to account, even though some of the cases started earlier. And now you have the Trump administration returning. And there's going to be a moment where they're deciding, do we want to go back to that original policy? Do we want to be a little bit more friendly to business? And I think these companies are trying to sway President Trump and make him do what they want. Do these CEOs fear the administration or think that it can be helpful or is in some cases a little bit of both? I think it's a little bit of both. I mean, there's certainly Trump threatened to throw

Zuckerberg in jail or suggested that might be an idea that he pursues. So if you're Mark Zuckerberg, I don't think donating a million dollars to the transition is the worst idea in the world. I mean, it probably alleviates some of that pressure. But I do think that they really see opportunity here. Remember, they haven't really been able to acquire companies for the past four years with Lena Khan running the FTC. So they're probably trying to push President Trump along the way to say, hey, can we acquire again? By the way, we're competing with China. What are you going to do with TikTok? Which is still a matter that, you know, seems decided.

But there's actually more wiggle room there than you'd expect. And then, of course, tariffs is a big issue. So these are all pressing matters that these companies need to sort out. And, yeah, there is fear for Trump, but also some optimism. Well, I mean, the past four years, let's not be naive either, have not been great in terms of regulation on all these companies. You go down the list and there has either been talk or action or attempted action against most, if not all. So maybe they think that, OK, we're tired of that. And if we go down to Mar-a-Lago, kiss the ring. And, you know, you got Musk there and some others from Silicon Valley

who have made their way in and around the White House that things can be better for us. Yeah, I think you're right that there's absolutely some flexibility there with Trump. I mean, if you think about the DOJ, the DOJ has two cases against Google. You think that's not going to come up with Sundar when he goes down there? Of course, it's going to come up and he might ask Trump to sway the cases one way or the other. The one thing I'll point out, though, is that I'm not sure that Elon Musk is necessarily the advocate for these companies in the way we might imagine. He's called Facebook creepy. I don't think he loves Google. Remember, he started opening AI with Sam Altman as a check against Google putting AI into

production under their corporate system. So he tried to counterbalance that. So he might be like, all right, go and do what you need to to Google and meta. And he has Trump's ear. Well, you know, so then what do you make of what Sam Altman told Andrew, Andrew Ross Sorkin in the last week at Dealbook and Sarah Fryer now at OpenAI as well, essentially saying, look, we understand this, you know, this contentious relationship that now exists, but we think that Elon's going to do the right thing. We don't think he would use his sway and muscle in Washington to hurt our businesses. We just don't believe he would. Are they naive? I think that's what you have to say if you're trying to influence the new Trump administration

one way or the other, trying to influence Elon one way or the other. If you come out of the gate adversarial, you're going to get adversarial response from these two people because that's just how they operate. So I think the plan is diplomatic, butter them up a little bit, say that you don't think they would work to hurt our businesses and then hope they follow through. But I think if you put Sam Altman in a lie detector and told him, do you think you're totally fine with Elon there? I don't think he could answer.

I'm going to be okay. You mean he'd say, I'm totally in trouble? I don't think he'd say, I'm totally in trouble. But he would say there's a risk. There's definitely a risk with Elon. Look, Elon does not like Sam. If you wanted to invest in an opening eye's latest round, there was a stipulation there you can't invest in XAI. Maybe not written, but if you were an investor and you said, I want to invest in both, OpenAI would tell you no. So there's animosity between

the two of them. I don't think that's going away just because Trump has won. In fact, yeah, I would be nervous if I was OpenAI. I mean, let's not also forget that, you know, Andreessen has been sort of close in the conversation. David Sachs is taking on a role as, you know, AI and crypto czar. Andreessen's had his own sort of history with big tech. Let's not forget, he was one of the pioneers of the Internet. And his company's trajectory and anthology, in many respects, changed because of Microsoft and how the world changed as a result of some of these companies. So you have some really interesting dynamics to think about.

Yeah, I think that we have to wait to see how much influence Marc Andreessen actually has. I know he said he's been in all these meetings. Let's see, I would say Elon is probably a lot more influential than him. But for the VCs that are in there, the Andreessens, the Sachs, I think the main priority is going to be like, can we just let big tech acquire our companies? We invest in these companies.

The IPO market has been in and out. We need an exit. And big tech has often been the exit. Now, it's been looked at as anti-competitive by some of the agencies. But Silicon Valley VCs need to be able to sell the companies that they invested in to big tech to get the return that they've been looking for. And I think that's going to be the number one issue. A couple of years from now, we're looking back and we're saying, OK, wow, we're surprised by the number of deals that were actually able to happen in the context of everything that we've talked about. A friendlier FTC, sure, but all of these other personality clashes and policy issues that are there behind the curtain. I think that we're going to see lots of deals that will happen here. I don't know if there's going to be a lot of surprise.

I think that we've gone from an administration that wasn't really friendly to M&A to one that's going to be much friendlier. I mean, Ferguson, who's going to lead the FTC, is not exactly big tech's best friend, but he's been more open to the notion of like, let them acquire these companies. I got a story right in front of me now from the information as well. TikTok suitor Bobby Kotick waits for Trump, right? That if he is the biggest and most thoughtful acquirer of TikTok, just wait for Trump and then I'll try and make a deal and we'll see what happens. It just goes to show what we're talking about. Thanks for being here. Alex Kantrowitz, Big Technology here, Post 9. Up next, speaking of venture capital, we do have star VC

investor Rick Heitzman back. He'll tell us what he's forecasting for the tech space in the new year. Had an IPO today. Is that the beginning of the great thaw? He'll tell us next. All right, welcome back. Service Titan trading sharply higher today in its debut up at the Nasdaq. So does it signal a coming thaw in the IPO pipeline? Let's ask Star Venture capitalist Rick Heitzman of First Smart Capital with us here on set.

Welcome back. Thank you. Wow, an IPO. What's that? I know. I told you it was going to start the thaw. Q4. A little bit late in Q4, but the markets are starting to thaw, and the capital markets,

I think, are going to be strong next year. Do you, I mean, let's show the chart again, because I just, what does a reaction like we're seeing today here tell you about the bigger picture? Are these, is this an idiosyncratic reaction to a idiosyncratic story? Or is it the sign, in some respects, too, of just the hunger, the hunger for these companies to come to market? I'll take the latter. So ServiceLight is a good company, but it's not the best company with the best metrics. It has profitability and unit economics are average. So I think it's just, hey, there's a lot of money on the sidelines.

The markets are hitting new highs. People want to buy IPOs. People want to get excited about a new story. And they just happen to be there to capture that demand. Yeah. I mean, you had, you know, CEO of Goldman Sachs on the florida day when the president-elect was here among others from the financial services industry and i mean we know that there's budding optimism in these hallways of these shops on what lies ahead animal spirits i hear yes uh todd bowley you know told me that a couple of months back in in beverly hills you know that these ceos are thinking the same is that what you feel months back in Beverly Hills. You know that these CEOs are thinking the same. Is that what you feel? We're hearing the same thing, whether it's large companies, corporate development offices are staffing up,

the Googles and Microsofts of the world, whether it's the banks that are staffing up after standing on the sidelines for a while. They're planning on a huge year. So it's not only the IPO pipeline, but a thawing of the M&A markets, both by the hyperscalers, as well as just normal M&A that's happening on a day-to-day basis. You know, Moneyline got bought for a billion dollars. Those deals used to happen a lot, and it got thawed. And then it got frozen. Everything was frozen, and now nature is healing. Is it a software world and everybody else is just living in it kind

of thing? It feels a little that way. I mean, if you look at the performance of software stocks versus, say, chips over the last couple of months, it really diverged dramatically. Software well outperforming what chips have done. It feels like the market's separating itself a bit. Well, software has tremendous scale in their business model, right? So in downturns, they get compressed more and upturns, they get excess profits. So that's when people say, hey, everything's shifting. And there was an enterprise software recession in 22 and 23. And now you have kind of easy comps in 24 that people expect are going to beat. But as we look at the IPO pipeline, it's not only software, it's kind of software adjacent AI with things like CoreWeave. But even if you think about kind of deep tech and next generation tech, you know, Anderle and defense tech, maybe even Starlink spinning out of SpaceX. I think you're going to

see a next generation of great IPOs. What about these companies that are, you know, raising money from you and other VCs and they're just staying private longer. The allure of the public market to them isn't what it once was. And not only that, the need of the public market isn't what it once was, because now there's all of these other avenues of capital available to them. Well, Databricks, which will probably be one of the most anticipated public companies, is going to stay private longer. They have a pretty liquid secondary market. They do quarterly liquidity for their employees. They just raised $8 billion and that's their quasi IPO. And the public is going to miss out on a lot of that appreciation.

And that's going to go to later stage investors. But I think once the IPO market opens, entrepreneurs and CEOs are going to see the upside that exists. And there's just better access to capital, cheaper capital, and more liquidity for all stakeholders, including employees. It makes me also think that once these companies eventually do go public, they're much more mature than they would have been otherwise. So their growth trajectory and maybe growth rates aren't what they were.

So investors have to take all of that into consideration too. 100%. And therefore the returns aren't going to be there. So the returns aren't going to be there differently than Microsoft or a Cisco that went public with a couple million dollars of revenue, a couple hundred million dollar market cap that have appreciated a thousand times in the public markets. A lot of that is going to be captured by the private markets going forward

and you're not going to see that value creation for public market investors as much. How is it we bill you as a star venture capitalist? Because you are. I mean, you've done some great deals. When you look to Washington and you see Silicon Valley having a presence on Pennsylvania Avenue, that is truly unprecedented. Yes. What does it make you feel? Optimistic?

Do you think it's going to be a benefit to the industry, people like you? I think it's definitely going to be a benefit. I think our voice hadn't been heard, and to have people like Marc Andreessen or David Sachs or even Peter Thiel being able to have some input in maybe how, what's really the FTC's function? Maybe it should be looser rules, maybe for IPOs. And people are talking about restructuring the IPO rules so more people in the public can participate in that value creation. And then M&A is kind of creative destruction.

And there's going to be a lot more opportunities. There's a lot less public companies now. That's a lot less opportunity. I think the number of public companies will increase even as M&A increases in the next four years. I'm sure you're watching like we are. We just did a segment before you came up here about, you know, the CEOs like taking a number outside the gate of Mar-a-Lago. Do you think that the effort will pay off for those big tech companies, which have really been not only under the microscope, but, there's a Freudian slip, under attack in some respects from the regulators.

Yes, so I think that it'll be a little bit looser FTC, and that's been, it was about as tight of an FTC as you can imagine under Lainey Kahn, and that's gonna be loosened up, and the hyperscaler's gonna be able to buy companies again, and that's generally good. It's generally good for the ecosystem, It's generally good for the consumer. And, you know, there'll be scrutiny by the FTC and even the new chair of the FTC has, you know, talked about big tech sometimes getting

too big, but it's going to be looser for even venture companies who, you know, need to be part of that whole M&A process. Appreciate you, man. Thanks for being here again. That's Rick Heitzman, First Mark, right here at Post 9. Up next, we track the biggest movers into this close today, and Seema Modi is standing by for that. Hi, Seema. Scott, you were just talking about software. Adobe, the biggest laggard on the S&P 500. We're going to tell you how this one stock is impacting the broader software trade.

That's after this break. ...15 from the closing bell. Let's get back now to Seema for a look at the stocks that she's watching. Hi. Scott, let's take a look at Adobe once again. Weak fourth quarter revenue guidance, concerns about just how much skin it has in the AI game. That's what is contributing to its underperformance today.

Analysts at TD Cohen, downgrading the stock to hold from buy and lowering its price target from $625 a share to $550 a share, saying management emphasized artificial intelligence adoption over monetization, where the street was hoping for more clarity. CEO Shantanu Narayan remains bullish, though, on Adobe's suite of AI tools in the demand. Going into next year, we're looking at the stock down over 13 percent at this hour. Meantime, Warner Brothers Discovery

shares are surging after the company announced a plan to separate its cable TV business from its streaming and studio operations. The cable unit will include names such as CNN, HGTV and Food Network. Streaming platforms Max and Discovery Plus will be in another division along with Warner Brothers Pictures and New Line Cinema. WBD expects to complete the restructuring by the middle of 2025. Scott. All right. Seema, thank you very much. Seema Modi still ahead. We're going to run you through what to watch for when Broadcom reports results in overtime. We are back after this quick break. We're now in the closing bell market zone. CBC Senior Markets commentator Mike Santoli here to break down these crucial moments

of the trading day. Plus, Melissa Repko standing by with what to watch from Costco's numbers in OT. Seema's covering Broadcom as well. Mike, I begin with you. PPI a little hot. Yes. Market not so great. There are some standouts, but what's your take? Yeah, I mean, the market's getting to a point where it's pretty much going to have to prove that this is just a routine consolidation. The majority of stocks settling back literally every day this month because it is getting to be just a little bit more of an anxious churn. Really, we're barely off the highs in the S&P 500. But today was a day when we didn't have enough of the big guys really pulling higher. And you do have another negative breath, cyclical stock suffering, 10-year yield above 4.3. And so I

think this market has wanted to push the hard questions into the new year. It's like, look, we'll circle back after the holidays. Let's not get in the way of it. And that still could absolutely happen. I mean, you're supposed to have a little bit of a stutter step in the first half of December. But I do think you have to be aware of it's a very bullish setup. And everybody's been repeating why it's a bullish setup. But also everybody knows it, and it wasn't like the market was in desperate, skeptical condition before we got this bull case. All right, Melissa, tell us about Costco. What do we need to watch? Hey, Scott. So Wall Street is expecting the company to report earnings per share of $3.79 and revenue of $62.08 billion. It's the first quarter since Costco, the warehouse club,

hiked its annual membership fee, which drives a significant chunk of its revenue. That increase went into effect in early September, and it was the first time Costco raised its fee for members in about seven years. Costco will also share clues about how consumers are spending on food, gifts, and more during the holiday season,

which could be an indicator for other retailers. One unusual challenge for Costco this quarter, it's lapping a year ago period when gold bars became popular on its website. The gold bars, sometimes selling out within hours, added as much as $200 million a month in sales for Costco, according to Wells Fargo. Melissa, thanks. Melissa Repko. All right, Seema,ma tell us about broadcom which has had an extraordinarily good year of more than 60 percent and now the final earnings report of 2024 listen it's had a great year sky but bernstein analysts worth noting did adjust their estimates slower ahead of today's results on the expectation that broadcom's wireless business is dealing with some tough seasonality that's why it all comes down to artificial intelligence we know broadcom has been partnering with a number of hyperscalers like Meta and Amazon,

reportedly working with Apple on designing their own in-house chips that they hope will one day compete with NVIDIA's GPUs. Overall, Wall Street is betting on a over 50% jump in fourth quarter sales. Guidance will be key, especially following rumors that there's been a hiccup with its Google partnership. Broadcom's AI Outlook 2 will provide a good gauge on CapEx budgets for 2025, Scott, and whether the spending continues despite this broader debate on AI's return on investment. As you point out, shares up over 60% this year.

All right, good stuff, Seema. Thank you for that. That's Seema Modi. Mike, I'll turn back to you since we're talking tech. Apple is a machine. Yeah. It's up again. It's been like nine. Mike, I'll turn back to you since we're talking tech. Apple is a machine. It's up again for like nine straight days of intraday highs. Looks like we're going to get another closing high for Apple. You've got the $4 trillion in market cap knocking up or hanging right around the rim on that. Yeah, I don't know if we have a kind of a Wall Street rule of thumb that all stocks that get to $3.75 trillion in market cap usually get to four trillion. But, you know, naturally, it's a it's a story that you don't have a lot of people pushing back on. That's not to say that everything is bullish and growth is accelerating, but it's one of those

things where it's an easy one to own when the price action is this way. I don't want to overthink it beyond that. We've talked about these big tech companies where there's a perception that the CEO is going to be in the good graces of the new administration. And crucially, the stocks were not extended coming into November and December. And they were not. You know, if you look at a lot of these names, they peaked in the middle part of the year. In fact, Broadcom had its basically it's started trading around today's price in mid-June exactly when Nvidia did. Nvidia brought them at the same cadence of year-to-date charts. Of course, Nvidia's magnitude of gains is higher.

So I think that's what this market is doing. What hasn't already been completely used up in terms of potential upside. Also, the momentum trade, even though it hasn't been as dramatic in the last day or so, it continues to show some wear and tear. So it's not as if the high flyers of last week have just picked right back up. So again, it's a noisy picture. It's not necessarily fully negative. It's much more just waiting for the next beat and watching what bond yields are doing in here. All right. So it's a historic day, no doubt, here at the New York Stock Exchange. It's going to end red, though, across the board. Dow showing a loss of about a half percent.

Same with the NAS. NAS-DEC, that has to be as well.