Closing Bell - Closing Bell: Retail Sector Reality Check 1/16/25

Episode Date: January 16, 2025

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 Mike Santoli in for Scott Wapner. We are live from Post 9 at the New York Stock Exchange. This make or break hour begins with the indexes struggling to hold on to Wednesday's powerful relief rally with the majority of stocks making further progress so far today, offset by some pressure on key mega cap names. Here's the scorecard with 60 minutes to go in regulation. The S&P 500 been churning all day just around the flat line. You see it's almost exactly dead flat at the moment around that 59.50 level. The equal weighted version of that index, though, is up more than half a percent, about two thirds of one percent. As a matter of fact, you do see a little bit of broader strength. Yet the Nasdaq has been the weak spot all day, held down by a further pullback in Apple shares. That stock, you see now down 3.4 percent.

It is off some 12 percent from its recent record high on chatter of further sluggish China sales after the stock's pretty steep ramp in late 2024. Now, the broader tape is supported by further slide in Treasury yields after yesterday's big drop on some friendly inflation data. See the two-year down below four and a quarter, the 10-year around 4.6. It takes us to our talk of the tape. With the S&P up some 3% off Monday's low, will the coming rush of corporate earnings be enough to power a further run toward new highs? Let's get to the two big earnings themes of the day. Christina Parks-Neville is here to talk Taiwan Semi and related chip names. And Leslie Picker is digging in on the latest crop of bank reports. Christina, we'll come to you first on that Taiwan Semi report. Well, Taiwan Semi's earnings matter far beyond the numbers. The world's largest chip manufacturer gives us really a crucial read on

the entire chips sector. And yes, Q4 net profit was up 57 percent, a record high. The company's fastest growing area of business was high performance computing, including AI chips. They also confirmed their Arizona plant is now in production amid concerns of delays. But investors really are laser focused on two key themes, early full year sales forecasts and spending plans. TSMC's capital expenditure came in higher than street estimates. And here's why that matters. When TSMC opens its wallet, it creates a ripple effect. Their spending directly benefits chip equipment makers like KLA, Lam Research, Applied Materials, ASML, and look at the share price, the sea of green,

all over 4% or more. This sales forecast, though, tells us an equally compelling story about AI demand, since it dominates high-end chip production. TSMC forecasts its overall revenue will increase at least 20% annually over the next five years, which is a bullish sign, thanks to demand, of course, from NVIDIA, which counts TSMC as its primary manufacturing partner. AI revenue for TSMC will double in 2025. That's a big jump, and you can see NVIDIA shares were trending higher, came down a little bit lower in the afternoon. These positives, though, are offsetting the expected Q1 softness in smartphone sales, which is part of the seasonality.

But it's also negatively impacting Apple and Qualcomm today. Mike? Yeah, Christina, pretty stark contrast there. I guess to what degree was this bump in CapEx by Taiwan Semi a genuine surprise? It's kind of fascinating how the market continues to reward bigger numbers when it comes to expected capital spending. So I guess this is essentially saying, look, the food chain continues to thrive for as long as we can see. It wasn't even that big of a deal. There was a range between $38 or $39 billion to about $42 billion. That high end of the range came in higher than anticipated. CapEx increased 41% year over year. So it's an increase, but it's not a massive one. And yet the market is reacting, possibly because the SMH and

the whole basket of non-AI plays have been hit so hard that this is kind of the little boost that that sector needed. Yeah, there's no doubt that the setup maybe did prime the sector for a little bit of a bounce. Christina, thank you very much. Leslie, you know, pretty hard to find much fault in a lot of the banks. How are they doing today? Yeah, well, yesterday they certainly had a standout day, but today the banking sector is facing a bit more of a mixed picture. Morgan Stanley, the standout performer today after reporting better than expected gains in equity underwriting and prime brokerage after the election when clients were taking on more risk. Bank of America, though, that one in the red today, which analysts really pegged to guidance for net interest income. That's that profitability metric for loanmaking. And that came in a bit below what the street had been hoping for. I am currently,

though, here at Citigroup headquarters, which announced a massive multi-year buyback yesterday that sent the stock soaring yesterday. And I asked CEO Jane Frazier a short while ago. Why now? I was very pleased to announce the 20 billion program yesterday, as well as an increase in our share buybacks for this coming quarter. Why now? Capital return is very important to our shareholders. I know that. We know that. And we're very committed to doing it. I followed up and asked her whether the buybacks were predicated on Basel III rules, which are likely to be scrapped entirely or at least come in neutral to capital under the new administration. And she said they'd have to wait and see what the actual structure looks like. We also chatted broadly about her priorities for deregulation

as the newly elected chair of the Financial Services Forum, which represents the biggest eight banks in Washington. Frazier said she wants an environment that allows for clients to transact as well as ensuring the system isn't overcapitalized in a way that impedes growth. Mike, I guess if your city and your stock trades at 80 percent of book value, I mean, that's when it makes a whole lot of sense if you have the wherewithal to buy back that stock. And, you know, in theory, that should help out in terms of the entire capital structure, Leslie. Although I wonder about the themes that you're seeing here,

the breakdown of where there was strength and where maybe there was not. I mean, you see things like, you mentioned Bank of America, but U.S. Bancorp also struggling. It seems like if there was less investment banking and trading in the mix, maybe slightly less impressive. That's the perfect way to put it, Mike. I would say the Wall Street tilted businesses did really well during the quarter. Things like investment banking, sales and trading. I mentioned prime brokerage. Even at Morgan Stanley, we saw IPOs and equity underwriting coming in relatively strong

for the quarter, at least relative to what we've seen over the past few years. But the business of lending, and we're going to start to get a lot more regional banks in the upcoming days that are far more exposed to the lending business, that was a bit more of a, I would say, broadly struggling. We did see some loan growth with Bank of America, but the other key lenders saw that lending decline in the quarter. And so a lot of that is just a byproduct of still high interest rates. And the fact that there's some uncertainty on the trajectory, people were hoping for those to go lower, which could spark demand. But now that they appear to be maybe settling at these levels, it's a big question mark.

What's to come in 2025? Yes, for sure. I mean, there was a little bit of a change of the thought process on that whole thing with the Fed in the last few days. We're going to talk more about that. Leslie, thank you very much. Let's bring in Hightower's Stephanie Link and Schwab's head of fixed income strategist, Kathy Jones. Stephanie, of course, a CNBC contributor. Great to see you both. Steph, let me just start here by, you know, the front edge of earnings season. You can't always draw a direct line reading through to what the banks say, but

I guess the economic backdrop is at least reassuring. What are your expectations and what are your big takeaways? Yeah, I mean, like so far, so good with in terms of earnings. The banks always trade a little funky, Mike, as you know, around earnings. So it's actually was very encouraging yesterday, the action. Today, a little bit mixed, but the numbers are still really good as you guys just went through. I would say that the earnings growth for this quarter is likely going to be, the fourth quarter should likely be about 10% plus. That largely has to do with the economy doing better.

I mean, today's numbers that we got, retail sales, the control group at 0.7 percent, the consumer is just fine, absolutely just fine. And we've been saying that, I've been saying that for a long time, and that's 75 percent of the economy. And then most interesting is, well, initial claims were kind of getting used to it just being really low historically and really good trends. But I thought that the Philly Fed manufacturing number, while it's very volatile, and I don't pay real lot of attention to the regional manufacturing series, what it does, though, it confirms what we're seeing in the ISM manufacturing parts of the economy, which is certainly starting to see an increase. You're up about 200 basis points from the lows, still in contraction, but that's really encouraging. I think you add it all up,

and I think you're running something like 3%. So economy in good shape, that equals in my mind about 10% earnings growth, maybe a little bit more with margin expansion. Yeah, I guess also the Atlanta Fed GDP tracker for the fourth quarter was also bumped up to an even 3%. Again, it had been there a little while ago. And Kathy, I know that you've thought that perhaps maybe the jobs report we got on Friday probably put the Fed on hold for a while. But I'm interested to hear your reaction to what Chris Waller had to say to us today about what he thought might be in the cards. Let's listen to some of that. We'll have to wait and see whether this continues. I believe it will be. We'll see some base effects come out.

But last year, we got a shock with inflation in January and February. They kind of put us back in terms of our progress for cutting rates. I'm hoping that doesn't happen again so that if we continue getting numbers like this, it's reasonable to think that possibly rate cuts could happen in the first half of the year. And Kathy, numbers like this, he was referring, of course, to the slightly softer core CPI reading yesterday. So, I mean, he was pretty dovish about his take on the inflation trend. How do you think that that sets the Fed up here? My impression is that there's kind of a wide

divergence at the Fed right now between those that are in the Waller camp and expect inflation to come down and open the door to some further rate cuts and those that are more in the let's wait and see camp. And I think it'll come down to the labor market as much as the inflation numbers. So they need to pay attention to what's happening in the labor market. If unemployment starts to drift up from here and wage growth continues to drift down, then the Fed may say, yeah, as long as inflation is contained, they'll have some space. But they don't have a lot of space.

And I think the market may have overreacted to the CPI number because we need more than one month. Right. You need three or four months in a row. I'd be very surprised if we get a rate cut in the first half of the year, barring some big surprise in the labor market. It's interesting. Yeah. I mean, arguably that dramatic reaction in Treasuries yesterday, that real big drop in yields, seemed like an overreaction. But that's maybe because they had been up in a straight line pretty much for a couple of months. You still think there's upside to treasury yields from here, Kathy? I think it's possible when we look at where Fed funds rate may end up, it looks like it's going to be closer to maybe just under 4%, 3.75% to 4% as a terminal rate. If that's the case, then it wouldn't be too unusual to see a 5% 10-year Treasury yield. Now, we have a long way to go. We have a whole new set of policies

coming out of Washington. We have a whole new set of people in Washington to determine policy. So a lot of the uncertainty that we're dealing with will only get compounded over the next couple of months. And I think that that may open the door to another test of 5 percent on the 10 year yield. Interesting. And Steph, I mean, I guess at this point, the economy has shown that 4 percent plus Treasury yields, something close to 7 percent mortgage rates, have not really kind of held it in check. It's obviously been able to grow through it, at least for now. I guess the big question and the risk that the market seems to perceive is that, you know,

these rates at these levels might undermine the growth story a little bit before we might get any policies that could be a boost to growth. Yeah, I mean, I guess it all depends on why you think rates are going higher. And I think rates are going higher because, as I mentioned earlier, that we're growing at about three percent. And so the Trump administration is inheriting a pretty good economy. And then on top of that, you have pro growth initiatives from Trump, which should help keep it around that two and a half, three percent level, because that's important because we're not going to get nearly the amount of fiscal policies that we got over the last couple of years. So you will need Trump and the deregulation, lower taxes to stimulate growth and and to be able to continue to see

above trend growth overall. So if rates are up because higher growth is because growth is higher and as a result, maybe inflation is a little bit higher. We can live with that, especially from the corporate side, from the investment side. Right. Because that will be good for earnings. And that's the most important thing for equities. For sure. And obviously, earnings season is always a little bit of an obstacle course. Steph, I wanted to get your thought on UnitedHealthcare. They did obviously have earnings. I mean, they kind of squeaked through underlying trends, maybe not that great stock down five and a half percent. How does that sort of set it up?

Yeah, well, I recently added to the to the name I as a new position and I added more today because the stock has been very volatile as of late. It really was an underperformer last year. But this is best in class in the managed care space. Mike, you know this. They're growing double digit earnings. They're going to eventually get back to double digit in revenues. Their balance sheet is very strong. I think today the reason the stock is down is, A, it was up 7 percent on Monday. So it's just giving back some of that because of regulation and that sort of thing. More favorable regulation, if you will. And today it was a little bit more disappointing on the medical loss ratio, right? So margins are going in the wrong direction. I think it's fixable.

I think that we will see an improvement throughout the rest of this year. And I think you're getting best in class on sale at about 17 times earnings when the historical average is about 24 times. So I'm staying patient. It's not going to fix itself overnight, but I do like it long term. All right. And should mention it's draining about 200 points off the Dow. It always has an outsized impact on that index, UNH, today. Steph, Kathy, thanks so much. Appreciate the time today. Thanks for getting us started. Meantime, our next guest says the pressure

on tech threatens the market near term setup. Joining me now is Fairlead Strategies' Katie Stockton. Katie, it's great to see you. We've been, I guess, in this sort of choppy range. Leadership has been flagging a little bit. Low momentum for maybe six weeks. How do you think it resolves here? I mean, December was a really rough month in terms of market breadth and also the momentum, which has fallen off not just for tech but more broadly.

So we do think that we're already in the midst of a corrective phase, and we think it probably has a few more weeks to it, if not longer, based on what we're seeing in our intermediate-term metrics. That loss of upside leadership, especially from the mega-cap growth sort of segment of the market, is an issue. We know that tech has such a huge footprint, 33% or so, within the S&P 500. And really, it's only year to date, so meaning this year, January, we've seen the ratio of the technology sector spider ETF break down, break a short-term uptrend line relative to the S&P 500. And that suggests we'll see more of the same in terms of downside leadership there. And what do you think the

ultimate destination is, let's say, for the S&P 500 through this phase? The next support, we've already seen a short-term breakdown. Next support is at the 200-day moving average, really simple to reference. It's just shy currently at 5,600, and that is about 6% below. We do think that's possible as a downside objective for the corrective phase. But rather than looking for a key level, we also watch just our indicators. We want to make sure that we have a more convincing low being established. Right now, we're seeing a little bit of maybe a B wave to the ABC corrective wave with this bounce, which in some cases looks like it has some more room, especially in the value complex. But we do look for another down leg. And that down leg, once it generates more widespread oversold readings on the weekly charts, that would be a welcome development.

There's usually like a little bit of a retest, like a retest of oversold territory. And that tends to be when we get the best entries. We have correlations running very high, typically when the markets are going lower. So unfortunately, what that means is that even if you're seeing an outperformance from the likes of value or pharmaceutical stocks or defense stocks, areas that do look poised to outperform, it doesn't necessarily mean that they're going higher. So we don't feel like there's a great buying opportunity yet at hand. You mentioned the XLK, the technology sector spider, having really kind of buckled a little bit here relative to the S&P. Obviously, Apple, a huge part of that.

It's like 14 percent, I think, of of that fund. And that stock has actually been a big downside leader so far this year. How does that shake out? It did have a really good run toward the end of last year. Yeah, without question, it's been a source of downside leadership this year, but that's within the context of the long term uptrend and longer term outperformance from Apple. So we are still viewing this as a corrective phase, not necessarily the start of a bearish reversal. However, what I will say is that on the monthly chart of Apple, we do have some countering indications from our Demark indicators to suggest that, like the broader market in some cases, we could see a trading range develop

for more than a few weeks, but really more like a few months as the gains that we saw last year are effectively digested. So we're looking for more of a range bound environment, perhaps to unfold for Apple and also for the major indices that are so heavy in these tech names. And that makes it a little bit more challenging. I think it begs for active management, meaning that the next low that we feel is unfolding, you might want to be a little bit less committed to that low. Maybe it's not a long-term entry, but a short to intermediate-term one. And just this downside reversal in, let's say, the 10-year Treasury yield yesterday, in your work, does that look important or decisive at all?

We had a breakout in 10-year Treasury yields before this pullback, so we feel like it's just a countertrend move. Obviously, it rallied pretty steeply, so we feel like it will persist in the near term, and it's certainly an influence on market sentiment for equities. So it does matter, but we don't think it's a lasting reversal lower. Our work suggests that 10-year Treasury yields can continue to climb after this pullback and reach 5%, if not secondary resistance, around 5.25%. All right. Yeah, 5%, I guess, is the high for this cycle.

We only touched it briefly. See if that pulls us back up there again. Katie, great to see you. Thank you. Thank you. All right. We are just getting started. Up next, top retail analyst Simeon Siegel is here with his first reaction to today's retail sales data and the name he thinks has some serious upside. He joins me at Post 9 after this break. We are live from New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back.

Target shares slipping on the back of some fresh sales data. Courtney Reagan here with the details. Hi, Courtney. Hi, Mike. Good to see you. So at first blush, Target's business update looks pretty good. But then you realize there's still a lot we just don't know. The stock action today kind of reflected that. Shares rising initially pre-market and then selling off. So Target said sales for November and December grew 2.8 percent,

with comparable sales up 2 percent and record high sales during Black Friday and Cyber Monday. But those are big promotional selling periods. Discretionary categories for Target also gained traction, like apparel and toys. Those have been weaker for a number of quarters, if you'll remember. Now, the retailer raised its comp sales guidance as a result of all of that to 1.5% from flat. However, Target only reiterated not raising its earnings guidance. It's a pretty wide range, too, and no mention of margins, what those might be looking like. So the question that many are asking, did Target have to discount aggressively in order to spur those sales at the expense of profitability? Why did apparel and toys re-accelerate during the holiday period when they had been weaker before? And when I asked

Target those questions, they weren't able to give me any answers. So I guess we're going to have to wait until the full results are out in early March and the investor day to hear a little bit more. Mike? And Court, I guess the extension of that question is to what degree would we generalize those trends, right? In other words, everyone said in holiday time, well, it's a value-seeking consumer. Maybe there's going to be a lot more attention to price. So does Target reflect what was happening industry-wide or is it, again, a Target issue? Yeah, I mean, even if you look at a name like Abercrombie, which you may not say is a direct competitor of Target, but hey, they sell apparel too. And that was strong for Target. They actually had pretty strong results as well. And so they too were looking more positively, at least

at the sales action for the quarter. But for them, their EBIT, they just went ahead and sort of reaffirmed that as well. So maybe some disappointment because then we saw those shares sell off as well. So it's a little hard to know exactly. I think we still have a lot of questions. What does it mean for everybody else when it comes to margins, to profitability, and to sales and how that equation may or may not have worked together? And a lot of the commentary from the analysts after they've been hearing from executives at these two major retail conferences this week were sort of, look, holiday was pretty good, maybe not blockbuster. The consumer is value seeking, but also resilient. were sort of, look, holiday was pretty good, maybe not blockbuster. The consumer is value-seeking, but also resilient. So sort of hanging in there,

but maybe not awesome. But we'll ask Simeon about that. Yeah, we certainly will. Thank you, Court. And let's bring in BMO Capital Markets top retail analyst Simeon Siegel. Just take it from there in terms of, first, a comment on just the general operating environment. Okay. I think everything Court said makes a ton of sense. I actually need to be a dad for one moment. Yes. Have you ever heard of Flat Stanley? Yes, sure.

So, you know, Flat Stanley, the idea is kids take, elementary school kids send something to a star that they want, athlete, politician, music, whatever. Yesterday, I got an addressed envelope to me. You get the photo with it, yes. And you're supposed to take that photo. My son sent one to me, and I didn't realize I got that yesterday, which is like this nice dad moment. So I need to bring for Micah, his flat Stanley. Sorry. Excellent. It was as I walked out today. But I think that the idea here that Courtney is talking about

is it makes a ton of sense that businesses are doing well. The operator's doing well. You and I, Black Friday, not that long ago, talked about the difference between taking risk to multiples versus taking risk to numbers. We're not seeing any problem with numbers. We're seeing problems with multiples. And your guest right before and before that, we're talking about the same thing. We're seeing markets sell off, not businesses. And all my conversations this week, the conference that she's referring to, you're hearing a lot of companies look at their stocks and they're confused. They're confused because the stocks haven't reacted well to numbers. But that would assume, I suppose, though, that the stocks at some point had outperformed the fundamentals to get expensive. A hundred percent. And they were confused about that, too.

They just didn't want to admit it because it was working in the right direction. But I think what we saw, what we've learned through this week, through the ICR conference, giving updates through Target today, through everyone else, is that people are spending if you give them a reason to. Well, that reason might be promotions, but it's not always. But you have to decide what you want to spend for those numbers. And so are we going to continue to accelerate? Are those numbers going to be amazing? That's what happens to these stocks. That's why I think it's important when we go back to that conversation of, do you want to pay for the multiple or do you want to find a turnaround? It is important you know what you own because Abercrombie, I don't know if we pulled up

that chart when she referenced it, but it did not have a very good day. If you looked at the results, you would have been very surprised by the reaction. Yeah, no, fair point. And so taking risk on the valuation as you presented it back when several weeks ago was things like TJX, right, where they do nothing wrong in terms of the actual results, but it's an expensive stock.

And it's the idea of just deciding, do I need to find you a surprise in the business, or do I just rely on the fact that it's a great business, it's expensive, but it's expensive for a reason. And so TJX is one of those. There's other ones that fit that bill where I can't give you a material earnings surprise, but I can give you compounding. And those are one category. The other category, the ones where you have torque, the ones where you have real positive movements and surprise,

those are ones where you have to be willing to get a little bit more dirty. Well, and let's get to that because then you have the question of is something cheap and neglected for good reason or not for a reason. So Capri Holdings is one I think that you're betting is more than meets the eye. So I love this one. We haven't spoken about it because I just upgraded it last week. So this is a fairly new idea that I love. But I think you have a business, Capri, which owns Michael Kors, Versace, and Jimmy Choo. I think at this price, you're effectively getting Versace and Jimmy Choo for free.

I don't think anyone has ever said those words. Like, you get these two luxury businesses. But you have very low—you're going to love this. Very low revenues, very low margins, a lot of debt by the stock. It sounds ridiculous. But the point is you have a lot of pressure points. As each of those pressure points goes away or loosens, I think you're going to see the stock move a lot. And I think what happened in a way that's different than other turnarounds you and I talk about, when brands overextend, they fill the field with promotions, they fill the field with logo and you have to

pull it back. You have to clean it up. Nike's going through that right now. I think what Michael Kors did, I think the Capri management walked away. They were supposed to get bought by Tapestry. I think as soon as that announcement started, everyone left because they felt you didn't know what your job was going to look like a year from now. And if you're management, you just made the deal of your life, except you didn't. What's the cadence, though, of, I guess, that restoration effort? I mean, how many quarters are we talking about? So here's the beautiful part. Before we even talk about the company, debt represents more than 60 percent of this market cap right now. The only other time it was that high was during COVID. Neither of those, it's not because they took on

more debt. It's because the market cap collapsed in both instances. When that happened during COVID, the market cap versus the enterprise value versus the actual value to the business exploded. Why? Because that generates a lot of cash. And so if you can generate cash and improve that net debt, you actually get the stock go up well before the business has to improve. I think that's going to happen again. Either they sell assets, either the Versace and Jimmy Choo are up for sale, or Michael Kors generates business. That will, I think, be the first opportunity for the stock, and I think it's material. Then we go back to this point of Nike needs to clean up. That takes effort. That takes work. If I'm right, if my hypothesis is right, that Michael Kors just needs to turn the light back

on, people need to come back into the building, I'm being hyperbolic, but only a little bit, well, that fix can be much quicker. Are you getting asked, you know, under the new administration is some kind of a deal like they just walked away from or were forced to walk away from back on the table? Yes, I would be surprised. I think that that price was dramatically higher than where we are right now. I think, and I'm speaking beyond out of turn, this is my own opinion, I think that if both sides came back to the table, I think Tapestry would ask for it.

Yeah, the bid ask is wide. Yes, and so I don't know that this is as simple as new administration, it's back on, because everyone was so happy to have it in motion. Sure. But we are talking about their special sitch. We are talking about some assets up for sale. Sure. And so figuring out who wants what, could it be that different businesses want a piece of Capri? I mean, that could be. They're very. Michael Kors is a very different business than Versace and Jimmy Choo.

Yeah, sure. Interesting. A lot of optionality. Yeah, for sure. Good to talk to you, Simi. Thank you. Great to see you. All right. Up next, Tesla shares tumbling as the company shifts its Cybertruck strategy. Details and what it might mean for the stock coming up. Closing bell. We'll be right back. Welcome back. Shares of Tesla slipping today. Phil LeBeau is here with the details of what seems to be behind that move. Hey, Phil. Mike, there may be some people who are wondering,

are Tesla shares falling because of new incentives added to the Cybertruck to increase sales? I'm not sure that they're moving because of that, but certainly whenever you're talking about a new vehicle having incentives put on, it raises the question, is there a demand issue or is there an inventory issue? Either way you look at it, the Cybertruck discounts have been added. And this really started yesterday. We started to see these reports of this coming out of the press that follow closely the website for Tesla and the Cybertruck, the incentives anywhere up to $2,600. For 2024, the Cybertruck was the best-selling quote-unquote pickup truck in the United States. Among electric trucks, its sales were $38,965, well above the F-150 Lightning and very well above the Rivian R1T. And there you see the GMC Hummer at the bottom there.

As you take a look at the EV market overall, Tesla remains king of the hill in the United States, but its market share has dropped below 50%. What's the future of the Cybertruck in terms of production, whether or not they're a little bit concerned about inventory? You can bet that's going to come up in a couple of weeks as you take a look at shares of Tesla. On the 29th, we will get Tesla's Q4 results after the bell. We are assuming Elon Musk will be on the call. And the Cybertruck may come up.

There may be a few analysts asking questions, though. Mike, the bulk of those questions on the 29th, I guarantee you, they are about AI. They are about RoboTaxi, Optimus. All of those things are going to get They're about robo taxi optimists. All of those things are going to get a lot more attention than the auto business. Not that the auto business should be ignored, but that's just the way it's been in the last couple of conference calls. Yeah. And obviously the auto business is somewhat kind of steady state. It is what it is. You can kind of get your arms around it. The other things are bigger kind of options within the business.

Although I do wonder there was another line of chatter aside from the Cybertruck discount story, Phil, about just how many used EVs are going to be kind of coming back onto the market or off lease or things like that. And whether people tracking the resale value of those things, too. And it just, I guess, shows you the maturation of the market. But in a sense, Tesla's big market share to this point means there's just a lot of used ones out there. And the used market is an interesting one, Mike, because with the federal tax incentives, you can get a federal tax credit for buying a used EV if it is under a certain price point. Look, a used Cybertruck is not going to qualify for a federal tax credit. But that is a part of the market that has, to a certain extent, fueled demand for used electric vehicles.

Let's see what happens with that, especially with the Trump administration saying it's going to get rid of those federal tax credits. Yeah, for sure. Could absolutely change the math. All right, Phil, thank you very much. Up next, we are tracking the biggest movers as we head into the close. Christina, standing by with those. Hey, Christina. Well, we're getting an upgrade as well as a Swiss luxury giant defying the slowdown in China, and that's helping retail names.

And a Wall Street watchdog known for taking down corporate giants suddenly disappears, and it's helping a few stocks. We'll say what it means for your money. That's next. 18 minutes until the closing bell. The S&P 500 just about at the flat line. Let's get back to Christina for a look at the key stocks to watch. Let's start with Carvana catching a break. RBC upgrading the used car retailer to buy with a new price target of $280.

You can see shares at $232, so still a ways to go. Carvana recently was rocked by Hindeberg research as well. Allegations of fraudulent accounting and questionable loan practices. And that's why it's seeing its shares just soar today, not only from that RBC note, but also Hindenburg, the short seller, announcing its closure. JP Morgan maintaining a neutral rating, but hiking their price target for Estee Lauder to $79 from $74. Shares are trading at just shy of $78 right now. That hike and a 10% jump in third quarter sales at luxury powerhouse Richmond, which is the owner of Cartier as well as Van Cleef, helping retail names across the board. Richemont, as I should

say, is seen as a bellwether for the luxury goods space. So that's helping Estee Lauder as well, up almost 5%. And then shares of Snap falling. As the FTC says, it's referring its complaint to the Justice Department concerning the messaging app's use of its AI chatbot X. The FTC claiming it negatively impacted young users. And shares are down 4%. Mike?

All right, Christine, I'm glad I didn't have to correct your French pronunciation because it would have been a problem. Richement. I don't know. Somebody watching is going to say something. That's right. Yeah, I wouldn't have. It's all right.

Thank you. Still ahead, shares of UnitedHealth sinking following its quarterly report. We'll drill down on those results with an analyst. Closing bell. Be right back. Up next, we'll run you through what you need to watch when J.B. Hunt reports in overtime. And don't forget to tune in to CNBC's coverage of the inauguration of President-elect Donald J. Trump this Monday, January 20th. Market Zone is next. We are now in the closing bell market zone real estate names making moves today Diana Oldick is breaking down those gains plus John Ransom from Raymond James on why United Health

just posted what he calls a quote winning ugly quarter and Frank Holland is looking ahead to J.B. Hunt reporting today in overtime. Diana, obviously chasing the rate moves here, but talk to us about some of these moves in the real estate sector. Yeah, Mike, real estate is having a good day. And like I said, shocker, it's all about interest rates, both on the commercial and residential side. First, the homebuilders are reacting to falling mortgage rates. The average on the 30-year fix down 15 basis points just since Tuesday, according to Mortgage News Daily. Lennar and D.R. Horton, both higher, and KB was off a little bit today, but that may be because it shot up so high earlier this week after better-than-expected earnings. Now to commercial and the S&P real estate sector, which is the second-best performer on the day. Again, interest rates, the 10-year is down six

basis points today to the lowest since January 6th. Two of the best performing REITs today are American Tower Corp and Crown Castle, each on pace for their best days since mid-July. The stocks are rate sensitive and have been trading closely with mid and long-term bond funds in recent periods. Mike? Yeah, Dan, it's a great reminder that a lot of the REIT ETFs and indexes are cell phone towers and data centers and things like that, that we don't necessarily think about as commercial real estate. But, you know, on the residential side, we did also get some homebuilder sentiment data today. And I know the rates kind of dominate the whole discussion. But what were the nuances within that? Well, actually, there were some concerns in that report specifically about tariffs and the effect that that would have on material costs for the builders and about the overall economy. They said they were optimistic in

general about the economy. But again, rates were playing on. In fact, the sentiment about, you know, future sales came down quite a bit. And that was because of that mortgage rate issue. You know, we're around 7 percent, over 7% right now, and that's creating affordability issues for buyers. Yeah, have been with us for some time. Diana, thank you very much. John, this drop in UNH down 6% right now. I guess investors seizing on the ugly part of this winning ugly quarter. Talk about the details. Sure. I mean, there's been a vacuum of information since the tragedy of the

analyst state. And so the market was probably a little bit off sides. In the quarter, there was some real volatility in the interest segment. Optum Insight was a lot better. Optum Health was worse. And they had a curious revenue shortfall that had to do with some year end true ups and some contracts and a CMS program. So none of that was expected. And so it just got a little messy. It's been a popular trade to be long payer short providers this year under the Trump trade. So we're seeing just a little bit of unwind of that. But our view is that none of this should affect people's views on 2025 and 2026. And so we're looking at a stock that's $34 of earnings in 2026. It's about a 15 multiple. It's traded as high as a 24

multiple. It usually trades in the zone of a market multiple, maybe a 10% discount. So we think that there's opportunity here. But you probably need to get a little closer to 26 for people to see the dream, if you will. Yeah. So obviously, there's opportunity here. But you probably need to get a little closer to 26 for people to see the dream, if you will. Yeah. So obviously, there's just some noisy elements here in the report. So I guess you're suggesting that investors shouldn't necessarily be too concerned either about the medical loss rate trends here or just overall kind of membership levels. You think those things will true themselves up? So my state school math reminds me of numerator-denominator. So what's interesting about the medical, the medical loss ratio was

not great, but it was a denominator problem with revenue. If you looked at actual trend over membership, it showed some signs of stabilizing. So without this one-time revenue true up, the actual ratio would have looked better. And so we're seeing signs that medical costs, there are a lot of puts and takes with medical costs, but some of the stuff that drove it up this year, you're going to lap next year. And we think that there's going to be a quarter in 2025 where the payers actually beat street expectations on medical cost ratio as we get into the third year of tough talks. I mean, you allude to the tragedy, obviously, that's really not that far back at this point.

Is there any way to think about the company and how it has to kind of present its results and its profitability and whether there's a little bit of a restraint on kind of talking about how profitable it can be, whether it's by managing medical payouts or anything else at this point? Well, the world's not rational. At the same time, we're mad at all these insurance companies. They're paying out a record amount of their revenue and medical costs. So we should be happy with them, not sad. They were paying a lot less out in 2022. Look, one thing I heard, as you know, Mike, there's been a lot of controversy about PBMs. And I thought the CEO did a good job.

Andrew Woody did a good job laying out what PBMs do. And the fact that they passed through 98, United passes through 98% of their rebates back to their customers. I mean, we're a customer of United. We get 100% of the rebates in our PBM contract, for example. And their goal is to get that to 100% by 2028. And that's a pretty simple change in contracting. So I think at the very least on the PBM side, they corrected some of the misperceptions. And look, I get why pharma is mad at them, because they're the only guys that can

really negotiate against brand prices. Our government doesn't set brand prices except for the 10 drugs in the IRA. So so, yeah, I'll take a little different tack. I think they're getting back on offense a little bit, but they chose to start with some of the misinformation, if you will, on the PBO side. Yeah. You did highlight, you know, what you think the earnings path is down into, let's say, 2026, $34. So if you put what you think the proper multiple is on that, where does that get the stock to? Yeah, so it's about 15 times now. So a year from now, you know, we'll be looking at 26, 27. So if it goes back to this historic multiple, you know, and let's think 18 months out, people, you know, could be paying 17, 18 times and then take the $34 and grow it even at the low end of the range.

And so you're looking at a stock well into the 600s a year from now, if the multiple. But look, they have to stop winning ugly. Part of the multiple issue here is, and winning ugly means you get the number on investment income and tax rate, and you miss on medical, and you miss on OptumHealth. So you've got to start beating your operating income targets at a segment level, particularly again. And the market's got to see some evidence. Now, just one other quick thing I want to mention. healthcare really is a medicare advantage company the outgoing administration has gone after medicare advantage hammer and tongs with sort of backdoor rate cuts a coding change is taking away about 15 billion dollars from united

over three years they've made stars harder to get as you know. They've done a number of things to make life hard on the plans. And so part of the rhythm of this trade is that we think at least if somebody stops beating you on the head with a hammer, it feels pretty good. I don't think you have to be amazingly beneficial, but maybe just the overt backdoor hostility we think will start. And that actually started with the advanced rate notice. It was actually a little bit better than people thought. All right. Well, we'll look for that to unfold as the months go on. John, thank you very much. Appreciate it. Thanks, Mike. Frank, what should we be looking for here for J.B. Hunt? Way there, Mike. J.B. Hunt, the biggest container trucker in

the U.S. It's outperforming the debt of transports and the market since last earnings. This quarter, revenues forecast to fall by 5 percent, with profit increasing 10% year over year. So the real question for the quarter, that's going to be pricing power. Volumes are expected to be strong from a pull forward in freight because of port strike and tariff concerns, as well as the holiday peak. U.S. container volumes on rails, they jumped double digits higher in November and December, with the exception of the week of Thanksgiving. That's the down week in that trend. J.B. Hunt gets 50 percent of revenue and profit from container shipping. The other question this quarter, it's guidance in this Q4 report. J.B. Hunt last reported before the election. On the call, investors will be looking for any commentary

on tariffs, also on freight shifting from east to west coast ports that benefits J.B. Hunt. All right, Frank, we'll get those numbers in just a little bit. Thank you very much. As we head into the close, about 45 seconds, the S&P 500 just below the flat line, down about two-tenths of 1%. But that really is about Apple's weakness. That stock down 4%. The equal-weighted version of the S&P 500 is up about nine-tenths of 1%.

Market breadth is positive. Small caps have also turned positive. So this has been one of those broadening out days. And that's been aided by Treasury yields further getting out of the way, adding to yesterday's slide in the 10-year Treasury note. So a pretty decent day below the surface, even if the S&P 500 is going to be down by about one quarter of one percent.

That's going to do it to close the bell. Finishing overtime with Morgan Brennan and Jon Smith.