Closing Bell - Closing Bell: Routine Refresher or Warning Sign? 01/12/24

Episode Date: January 12, 2024

Are investors right to declare virtual victory over inflation and position for an easier fed? And is the stock market’s two-week pause a routine refresher or a warning that the late 2023 rally ran too far? Dan Greenhaus of Solus and Invesco’s Kristina Hooper weigh in. Plus, a CNBC exclusive with Citi CFO Mark Mason following that company’s earnings report earlier today. Henry McVey breaks out his playbook for 2024 and tells us where he is seeing opportunity this year. And, it was an ugly day for airlines. TD Cowen’s top analyst Helane Becker reacts to that sector’s sell-off.  

Welcome to Closing Bell. I'm Mike Santoli. And for Scott Wapner, this make or break hour begins with stocks headed for a 10th winning week out of the last 11 as the big cap indexes hover just below record highs. Encouraging news on wholesale inflation sparking a strong treasury rally today as the market grows more sure of Fed rate cuts in coming months. The two year note yield, that's where the most dramatic move is. It's now actually below the 30-year yield for the first time in about eight months. Did have some mixed reactions to bank results. Citi announcing it's going to be cutting roughly 10 percent of its workforce in the next two years, as it reported $1.8 billion in losses for the quarter. Citi CFO Mark Mason joins us exclusively this hour. Plus, concerns over airline fundamentals crop up in the kickoff to earnings season while UnitedHealthcare weighs heavily on the Dow after its own report. It all brings us to our talk of the tape. So are investors right to declare virtual victory

over inflation and position for an easier Fed? And is the stock market's two-week pause a routine refresher, maybe a warning that the late 2023 rally ran a bit too far? Let's ask Dan Greenhouse of Solus Alternative Asset Management and Invesco's Christina Hooper. Both join me here. Good to see you both. Thanks for coming by. And Dan, I guess just your take here. We're hovering, as I said. We actually crossed over into, you know, record high territory, 4,800.

We're slicing it pretty thin here. Most stocks are pulling back, though, as we come into this year. So how are you reading the action so far? You've got to take the pullback, as you know, in pretty thin here. Most stocks are pulling back, though, as we come into this year. So how are you reading the action so far? You've got to take the pullback, as you know, in some context here. The rally in November, December for the stock market was as strong an end of the year as we've seen in the last, call it, 40 years. And for any two-month period, as strong a rally as we've seen over that same time period. So some digestion here. It wouldn't be out of the ordinary or shouldn't be completely surprising. And that's what you're getting at the same time. The stock market's flat

today. But under the hood, there's some big movements. Oil stocks getting a big benefit from the price of oil. You mentioned the airlines. They're leading on the downside here. So even though the index as a whole is flat today, there's some stuff going on underneath. Yeah, some of the big growth stocks still kind of protecting the index. And Christine, I wonder if you, I think, think the market has it correct in terms of taking heart in the inflation data this week. You know, the bond market yesterday pretty much looked through a slightly higher than anticipated CPI headline. And then today, of course, PPI, it sort of confirmed what we were looking for. So do you think that we're OK here in anticipating what the Fed's going to do? Or you think we have

a little bit of a check on that belief? Well, I think markets are right in assuming that the Fed is going to start cutting soon. But I do believe that we should be prepared for some volatility because we're going to hear from Fed officials that are going to continue to spew hawkish speak. And so we're going to be rattled. And let's face it, the inflation data is not going to point to perfect disinflation. There are going to be some imperfect data points, some that might be concerning enough to cause some turbulence and cause some downturns in the market. So do you think that that's strictly a matter of, you know, the Fed wanting to, you know, keep the reins a little bit tighter on on the market, on financial conditions? Or do you think that

there's genuine disagreement about the ultimate path of inflation here? Because it feels as if the market, it almost wants to call the Fed's bluff here. It's saying, you know, the two year Treasury yield is now, I don't know, 120 basis points below the Fed funds rate. It seems like it's kind of dialing ahead to that moment when the Fed needs to get moving. The market wants to call the Fed's bluff because I do believe it's all about tamping down and easing of financial conditions. Let's face it, the Fed has been wrong before and terribly wrong. If we go back to December of 21, the dot plot indicated an expectation of ninety basis points for the fed funds rate at the end of twenty two and it was about four hundred thirty three basis points so

the market has some experience with the fed and it's calling its bluff rightly so certainly at inflection points i wouldn't disagree with both of you the market is not the market is calling the feds bluff i mean credit spreads are at extremely tight levels. IG spreads, investment grade spreads are sub 100, which is a really tight level. High yield spreads, not exactly a spread product, but are pretty tight as well. And the stock market is, as you mentioned, basically at a high. So clearly the market is, both the equity and the credit market, is telling you something here about the economy, about earnings, and about the Federal Reserve. It's not a theoretical thing. It's actually happening. Well, I don't know if we have to characterize

strength and risk assets as believing that the Fed has it wrong. If the Fed is saying, we think there's room for a few victory or peacetime rate cuts, right? So they're saying we're going to allow a soft lane and it'll happen if we get that lucky. Of course. I just mean in the context of

Fed members coming out and giving hawkish clearly that's not working. Oh, it's not working in terms of trying. Oh, they are trying. It's just not working. The right ones have to say the right things at the right time. Also true. Also true. But again, with the stock market at high and spreads of tights. Yeah. The it's not fully priced in. And we can argue about how you have one would do that. Sure. But clearly the soft landing is what investors are betting on. So the line that I have been returning to is that just because you have the S&P 500 around 4,800 and you have the Fed funds futures market anticipating 100 plus basis points of cuts this year,

doesn't mean that we're at 4,800 strictly because we expect that many cuts. Do you think that's the case, Christina? Or do we actually, are we that dependent on an aggressive easing cycle for equities? The stock market has been incredibly dependent upon monetary policy really since the global financial crisis. So I'm of the opinion that this is a lot about, not entirely, but largely about monetary policy and expectation for rate cuts. Dan, what do you think?

I disagree with that also. It's Friday. Let's have some fun. The idea that the stock market is where it is, and I don't want to fully characterize what you just said, but largely because of monetary policy, I totally disagree with. I mean, you could look at trailing 12 months earnings

and the growth since, call it 2008, 2009. It explains a huge chunk of the market move. Now, you could argue that the Fed has taken what would have been a bigger problem in 2010, what would have been a bigger problem with Silicon Valley, and ameliorated those problems, thus laying the groundwork for the higher earnings. But at the end of the day, let's not pretend that earnings haven't done exceedingly well over the last 15 years, thus justifying a huge portion of the move. To be clear, we are trading at 20 times. Yeah, we, we are trading at 20 times. Yeah, we went from like 12 to 20 times.

But that's what bull markets do. Yeah, I understand. That they go from low single digits or low double, I'm sorry, high single digits or low double digits to teens or in this case, 20 percent earnings. That's not totally unusual. Where does it leave you, Christina, just in terms of trying to set up an investment strategy for this year. We had this nice move from the few leaders into a broader list of stocks late last year. Some of that has

backslid so far this year. And I guess if you expect the economy to hang in there, you know, what does it mean for whether we can believe the earnings estimates that are on paper right now? So my expectation is we will see a deceleration in the first half. It's not going to be dramatic. I'll call it a bumpy landing because of tighter credit conditions, but it's going to be brief. And then I think we're going to see a reacceleration in the back half this year. Stocks typically discount six to nine months out. So what we're seeing now, I think what we'll continue to see is a discounting of that reacceleration, that mid-cycle reacceleration. And so I would anticipate a broadening where we'll see small caps perform better, cyclicals perform better.

And because long rates are coming down, tech's likely to hold up quite well in addition. Yeah. So it seems like not exactly an either or type market. I mean, I guess, Dan, I also keep coming back to the idea that pretty much everybody wants to see the market broaden out. I mean, there's sort of this sense out there. There's a discomfort with, you know, seven stocks kind of being the whole story, even if it wasn't really fully the case last year. How much does it matter? Do you actually have a view on that? Well, if you're a money manager and we're again for the hundredth time, we're a hedge fund.

Yeah, we take single stock risk. But if you're a closet indexer or a broad money manager and a majority of the gains are being generated by seven stocks, you can't keep up. I just point Joe Terranova's made on the show repeatedly. You can't be seven, 8% weighted towards Apple or Nvidia or whatever it is. So a broadening out means it's easier for you as a manager to perform.

Again, that's not what we do. But that said, does a market overly reliant on those seven names mean something necessarily bad? I don't think so. I've made this point again. These are not just seven stocks. Microsoft owns 10 stocks that used to be public, LinkedIn, Twitch. Obviously, Amazon owns MGM and Whole Foods and a whole bunch of really large companies. So it's not just seven. But listen, that used to be public, LinkedIn, Twitch. Obviously, Amazon owns MGM and Whole Foods and a whole bunch of really large companies. So it's not just seven. But listen, you want to see the market broaden out

because it's better as an investor to have a broader market. But I don't think it necessarily means something negative on its own. I mean, I defy you to locate the portion of the $1.6 trillion in market cap of Amazon that's attributable to MGM at this point. But I know what you're saying, that these are kind of corporate nation states essentially, and they kind of run on their own on their own rules. Christina, what about the rest of the world at this point in terms of opportunity or where you would look? Incredible move in the Japanese stock market feeding off of some of its own dynamics. Obviously, China's complete opposite.

And then, I mean, a kind of a muddled period in Europe at this point. So I think this is a perfect time to be looking outside the United States and looking for opportunity. I anticipate the U.S. dollar will weaken this year. That should provide a tailwind. And I think where we're likely to find the greatest opportunities is going to be in Asia emerging market equities. China, I'll separate out. I think there's certainly potential there. But Asia EM, including India, there's a lot of growth there. Valuations look attractive with the exception of Indian equities. And in general, though, going outside the U.S. is a good call right now. I think European equities valuations are attractive. Typically, valuations aren't predictive in the short term. But I think the cyclical exposure

European equities have, the cyclical exposure emerging markets equities have, will bode well in this environment. Dan, are you going to disagree? Let's go for the hat trick, and I'm going to disagree again. Listen, I'm in my mid-40s, and I have been told since I came into Wall Street, you need to diversify sector-wise and geographically. And the U.S. stock market has repeatedly, routinely, and consistently outperformed. Maybe this year is the difference. Right. Well, there was a period from like 2000 to the financial crisis where it was the case.

Sure. It was a value-driven market. It was a value-driven market, but that includes 2000, 2003, which is a lot of this depends as always on your starting point. But I think that if you believe that the tech names are going to do what at all they're expected to do, and again, in this case, we're talking the largest names, but including like Salesforce, Adobe, ServiceNow, et cetera, et cetera. The reason we traded a premium valuation to Europe, of course, is that we have a larger concentration of technology stocks.

They have a larger concentration of more value-oriented financial stocks. So if you think that tech is still the place to be, and I'm not saying that you do, but a majority of investors I think do, then certainly you would want to be overweight in the U.S. if that's your viewpoint. Well, you can achieve all those things with diversification. So you can just increase on the margins. Even just a simple rebalancing of your portfolio after strong gains in the past year would bring you a little more exposure to Europe, a little more exposure to EM. And that cyclical component, that overexposure there, should bode well if you anticipate, like I do, that there's going to be a reacceleration in the back half of this year.

And it's not just the U.S. It's going to be a global reacceleration. I mean, it's also kind of easy at this point to forget that the Nasdaq 100 lost a third of its value in about 10 months. So it's not as if it's a one-way trade. We're always going to just be able to ride. And this is the point a lot of people make about Facebook, that how many stocks fall 77 percent or whatever it fell and then shot right back to a high. It's been it has not been without pain. No. But then you also come back to the idea that we've basically just had a two year round trip in the in the big indexes and maybe things aren't as far ahead of themselves as maybe last year. To that point, when you look historically, it's not very often outside of a recession that the S&P 500 is unchanged on a two-year basis.

And that's exactly more or less where we stand now. And if you are not going into a recession, and I think, again, the consensus is that you're not, then this is a tremendous buying opportunity, even at elevated valuations and at what is effectively a cyclical and secular high. Yeah. Well, as long as the music keeps playing, we'll see. All right, Dan, Christina, great to see you. Thank you. Thank you.

All right, let's send it over to Christina Partsenevelos for a look at the biggest names moving into the close. Christina. Thank you, Mike. While defense stocks are higher as tensions in the Middle East escalate, Houthi officials are pledging retaliation after the United States and the U.K. launched strikes against the group in Yemen following a wave of attacks that have destabilized trade routes in the Red Sea. after the United States and the UK launched strikes against the group in Yemen following

a wave of attacks that have destabilized trade routes in the Red Sea. Names like Lockheed Martin and Northrop Grumman are among the gainers there. But you can see we've switched on to Boeing. Boeing is down right now sitting out the rally as scrutiny over last week's door plug blow continues. Several passengers now from the impacted Alaskaaska airlines flight are now suing boeing over the incident citing physical injuries and emotional trauma separately the federal aviation administration says they will audit the planemaker's production line and could bring in

an independent third party to oversee inspections boeing says it's going to cooperate fully and supports actions to improve safety you can see see shares, though, are heading for their worst week since May 2022. Christina, thank you. We are just getting started. Shares of Citi volatile today. They are now in the green by about six tenths of one percent on the heels of its earnings report and some big announcements. Citi CFO Mark Mason joins us exclusively after the break. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back to Closing Bell.

City shares up slightly after reporting earnings this morning. The company also announcing it will lay off 20,000 employees over the next two years. Let's send it over to our senior banking and finance reporter, Leslie Picker, who's sitting down with Citigroup CFO Mark Mason. Leslie. Hey, Mike. Thank you. And Mark, thank you very much for being here and for hosting us here at the Citigroup headquarters. Let's get right into it. You said in today's call, quote, we're not satisfied with the performance and returns in our businesses, and therefore we

are laser focused on executing against our strategy, simplifying the organization and right-sizing the expense base. So how confident are you that you'll be able to achieve it all? Well, first of all, Leslie, thank you for joining us here at headquarters today. Today was a very important day. We announced earnings. And to answer your question, I'm very confident about achieving it all. And I'm confident about it because we set a new strategy at Investor Day to be the preeminent partner for institutional clients, to be a leader in wealth, to be a valued player for U.S. personal banking and our customers here in the U.S.

And we're making great progress on that. I was disappointed in the quarter, but I really want to talk about or think about the quarter in the context of the full year. And we've made significant progress throughout 2023, and we're well positioned to continue that into 2024. And it really is about being a simpler bank. Yeah, the stock price reaction would indicate that the market is looking past the quarter as well. But in terms of executing on this strategy, you have a situation right now where you're cutting expenses while also trying to grow the top line and really refocus and reprioritize the growth of the business. How do you do that

without sacrificing growth in the area you're targeting as you're doing this all kind of simultaneously? Look, it's about balance, right? And we've got these five core businesses that we're focused on. They all are businesses that over the cycle will produce top line growth and over the cycle will produce strong returns. And so it's about ensuring that we allocate enough resources to those businesses like our treasury and trade solutions business, like our security services business, while at the same time investing in our infrastructure, our transformation, our risk and controls, and making the appropriate recalibrations as the cycle evolves. And so you've seen us make investments in services.

You've seen us make investments in our investment banking business. You've seen us make investments in wealth. And in instances where that hasn't produced revenue, our wealth performance was less than we would have liked, we've dialed back that spending. But what we haven't compromised and won't is the investment in our operations and our infrastructure and our risk and controls. But it is about striking that balance. We've got these five businesses through the cycle produce very strong returns. Our services business produced a 20 percent return on tangible common equity in 2023. Right. And our wealth business through the cycle will produce high teens, low 20 returns as well. As Andy Sieg, who's joined us,

starts to turn that around, starts to drive top line investment fee revenue growth and really starts to streamline that expense space. So it's about that balance. In terms of resources where you are extracting from different areas, of course, you announced today 20,000, you know, in terms of a reduction in headcount at Citi. Can you share some color in terms of where those will come from, where, you know, you see the most reductions taking place in terms of how you're thinking about allocating those resources? Sure. And I think it's important to put that into context, because that 20,000 reduction, which is intended to happen over the medium term,

is directly linked to the strategy that we talked about at Investor Day and we've been executing against. And what I mean by that is we talked about exiting 14 countries. We talked about a simpler organizational structure, and just a couple of months ago, we eliminated two segments, and we eliminated the regional construct. And those two things in particular, along with the benefits from the transformation over time, are what's going to allow for us to be a simpler

bank and allow for us to take those headcount and resources out of the organization that's going to take time but we've made significant progress on that in just the org simplification announcement that we made a couple of months ago and the significant restructuring charge that we booked this quarter and there'll be more of that in the first quarter here in order to drive those saves up. I know that Jane said on the call that $2 billion was the cost savings that she anticipates from those headcount reductions. In terms of additional expenses, we can see tied to severance. Any ballpark there?

Well, so in 2023, we booked about a billion five of severance and restructuring related costs. In 2024, we're estimating somewhere between 700 million and a billion dollars of severance and organizational simplification related costs. Let's talk about the consumer. Net credit losses were just shy of two billion in the quarter. That was up 22 percent sequentially, 69 percent annually. Although the losses are still relatively low by a historical standard, do you think we're starting to see a deterioration in the quality of the borrower at this point in the cycle? No, look, we haven't compromised our underwriting through the cycle at all as it relates to our card customers. What we're seeing is that if you think about what happened in COVID, spend levels were down, loss rates were down. And as we've

come out of that, spending has picked up. We've seen good purchase sale activity. We've seen payment rates that were high start to come down a bit. We've seen loan growth start to materialize. This is what drove the 12 percent top line growth in our U.S. personal banking business, which is also 16 percent for the full year. So we've seen that top line growth, but we've also seen the loss rates mature and materialize through the through 2023. And we expect that to continue through 2024 and peak in 2024 before starting to normalize. So in some ways, this is a maturation of a portfolio that has come out of COVID combined with new acquisitions that we've done since then, maturing at a more normal pace. And that's what's driving the increase that we've seen. Interesting. Thank you for that clarity, too, on the 2024 peaking. Lastly, I want to ask you about geopolitics, because we're in just such

an increasingly complex world as it pertains to geopolitics. There are dozens of elections globally this year, and Citi is the quintessential global bank, as it's been built up over the past few decades. You know, this quarter we saw significant losses as it pertains to exposure in Russia and Argentina specifically. How do you navigate through this and how do you handle and deal with the risks associated with being in all these markets? I know you are streamlining to a certain extent, but in this increasingly complex world, how do you grapple with that? I think what's important here is to really recognize that our strategy is about being a global provider of services to our institutional clients. So we're in over 90 countries because that's where our clients are. That's where they do

business and that's where they need us to be to help facilitate that activity. When you think you mentioned Argentina and you mentioned the reserves that we booked there, those were not credit reserves. That was not about loans that we have in that country or in Russia, for that matter. Those were reserves around transferability of capital risk. And that's very different. That's not an exposure that's tied to credit. It's the devaluation of the currency.

Well, the two things. You have the devaluation of the currency that flowed through and hit our top line. And then you had the reserve that's tied to transferability of capital, which is in a way linked to that devaluation. So it's important to point out we're well-reserved in both of those countries, in Argentina and in Russia, against that risk. And importantly, when I look back over the 100-plus years that we've been in Argentina, serving over 1,300 multinational or clients, I should say, and 700 multinational clients, we've lost $5 million in the last ten years five million dollars, right? So we're very careful about how we manage the risk a lot of these clients are Multinational clients a lot of the loan exposure that we do have is backed by the parent company

And this is again part of our strategy when I look at the returns that we generate, if you think about our TTS, our security services business, 20% returns in TTS. That compensates, if you will, for the risk that we take in many of these markets. And so we're in these countries because this is where our clients are. We've been in them for a while. We know how to manage that risk. And the returns make good sense for us when we think about the business we do with those clients. So certain markets you will stay global. Yes. Mark Mason, CFO of Citigroup, big day for you. You've got fourth quarter earnings, this transformation strategy. We appreciate you coming on CNBC to help us make some sense of it all.

Happy to be here. Thanks for having me. Thank you. Mike, I'll send it back to you. All right, Leslie, thank you. And thanks, of course, to Mark as well. Up next, glass half full. KKR's Henry McVeigh is back. He's breaking out his playbook for 2024 and telling us where he sees some big opportunities ahead. He'll join me here at Post 9 right after this break. Closing bell. We'll be right back. Major averages slipping just a bit here as we head to the end of this this week. Earnings season is, of course, getting underway. Joining me now post-9 is KKR's Henry McVeigh. Henry, great to have you here. Thanks. Great to be here. Coming into this

year, I mean, the markets have almost gotten to the point of trying to sound some kind of an all clear, you know, whether it's on the policy front, the soft landing front. What's your assessment of whether that's correct or not? Look, I think, you know, our view is that the market actually bottomed in October of 22. And so we're long term investors typically on a one, three, five year basis to stick with it, stick with it. I think we're we are above consensus this year on growth and we're actually calling for a mild recession. So that should that should tell you where cinnamon is. So the idea being, yeah, growth is universally considered to be like weight, like 1% or something like that. And so you think it'd be better than that, but with a little bit of a dip.

And I think what where KKR would differentiate is around the labor market. I think we're seeing a totally different behavior pattern from employers with their employees, city group aside, is generally people are keeping their employees on the payroll. And there's some real demographic issues where we do business in areas like Japan, Germany, even the U.S., where when you find quality labor, you stick with it. One of the elements of, if you look back to that famous soft landing I keep talking about in the mid-'90s, was the Fed sort of allowed the labor market to be stronger than they thought it could be, with inflation staying tame.

I mean, have we stuck that landing here? I mean, central banks around the world seem to be making the turn. Yeah. I mean, if you think about in 2022, almost 90 percent of the top 25 central banks were raising rates. Today, that's zero. That's an incredible statistic. Do you want to be rolling the rock up the hill in terms of headwinds or rolling it down?

And our view is it'll be a better environment. We're less, I'd say, bullish and averages going up in the way they did in 23. I think our message, though, is that the cost of capital, the difference between the bid and the ask will narrow. And that's actually going to lead to more activity in the deal front and the issuance front. That will be what's different this year. You saw that today with BlackRock. You've seen more deals in Chesapeake yesterday. We think there's going to be more activity. Obviously, we are both a deployer and a monetizer of capital around that,

and things are getting busier on that front. Yeah, obviously been a completely absent factor last year, even though it looked otherwise in many ways, like a bull market. Interested about the thoughts around the world. Paying a lot of attention to this breakout in Japan, the stock index is there anyway. Seem to be feeding off of some specific dynamics in that country, but how would you approach it now?

Okay, I'm going to come back and say the same thing we've said the last two times. Buy Japan. That's right, so you've been there. So we're still very active around the private equity side. I think the new tool in our toolkit has been real estate. We made a big acquisition there. And so we've been active on that front, too, and even in infrastructure. So we have a dominant presence there.

We continue to want to be active. And I think you really see this in government policy, that they want corporates to do more and become more efficient. That's a big deal. Second, India continues to be an active market for us and Asia. I would say switch to Europe. What's interesting in Europe is the periphery

is actually growing faster than the core, kind of the UK and Germany. That to me is an opportunity. I don't think long term that Greece is gonna outpace Germany and Spain is not done as well. I mean, to me, you go find the good companies in those markets that are maybe having a cyclical downturn. Come back to the U.S. The U.S. continues to defy people.

Look, innovation is a major differentiator here. equity front last year in the U.S., in private equity around corporate carve-outs, public to privates, and other acquisitions with existing companies. You didn't mention China. Is it remain just kind of a problem at this point? So what's interesting to me doing this 30-plus years, China, Japan's having inflation. China is having some form of deflation. We're still active in China. I do think this housing market story

is going to continue. I think there's more to do that. That's the cautionary tale. The offset is there are two areas of focus that people are underestimating. One is around digitalization of the economy on the industrial side. Most people talk about China technology on the consumer side. We're much more focused on the industrial side. And then second is they are decarbonizing very aggressively. And given the size of their economy, that has ripple implications, implications that ripple throughout the world. So you have to know what's going on in China, whether you invest there in China or the rest of the world around this decarbonization thesis. Certainly seem ahead on that front. Henry, great to see you. Thanks so much.

Thanks as always. Absolutely. Up next, we're tracking the biggest movers as we head into the close. Christina, standing by with those. Thanks, Mike. Well, more margin pressure for Tesla and a possible smartphone revival helping one chip name. I'll explain all the details after this short break. About 21 minutes till the closing bell. S&P just around the flatline. Let's get back to Christina for a look at the key stocks to watch into the close. Christina. Well, Mike, shares of EV maker Tesla are under continued pressure after a slew of negative news. Today, specifically, the company announcing price cuts in China again for the Model 3, this time in the Model Y. Reuters reported late yesterday that Tesla plans to suspend

most production near Berlin due to supply delays caused by the crisis in the Red Sea. And then customer inventories. Oh, I'm switching. I'm just going to switch gears, but I'd like to say that Tesla's down about over three and a half percent. Now talking about Qualcomm, customer inventory levels are looking to be replenished on the smartphone market. That's according to Citi analysts, and that bodes well for mobile chipmaker Qualcomm. The analysts raised their estimates for 2024 revenue as well as earnings per share, also citing improved share gain with Samsung as another bullish thesis. The stock, eh, up, you know, three-fourths of a percent right now, but up 25% in the past three months, which is outpacing the SMH semiconductor ETF.

Mike? Christina, thank you. Thanks. All right, let's send it to Pippa Stevens for a look at why uranium stocks are climbing today. Pippa? Hey, Mike. Well, uranium stocks are jumping after Kazatomprom, which is the world's largest miner, warned of a possible production shortfall. Now, the company has long-term contracts they need to deliver on, and so if their production does fall short, they'll have to turn to the spot market where supply is already really tight.

Spot uranium prices surged above $100 yesterday, hitting a 16-year high amid this global resurgence in nuclear power. There's also growing calls to sanction Russian uranium, with the House passing a bill to ban imports back in December, which could add to pricing pressures. Mike? All right. Yeah, that's quite a move in the last little while. Pippa, thank you very much. Up next, Bitcoin ETFs slipping on their second day of trade along with the coin. Bill Miller, the fourth of Miller Value Partners, joins us with how he's playing that space and what he thinks could be next for crypto. And don't miss the NFL's first ever exclusively live stream playoff game tomorrow night on Peacock at 8 p.m. Eastern when the Super Bowl champion Kansas City Chiefs host the Miami Dolphins.

Closing bell. Be right back. Bitcoin ETFs tumbling today on their second day of trading. The top funds saw more than four billion dollars in trading volume yesterday. That was a day after the SEC gave approval for their launch, the move seen as a crucial step in cryptocurrency's broader acceptance. Let's bring in Miller Value Partners CIO and Chairman Bill Miller IV. Bill, it's great to have you on and certainly we'll get your take on legacy financial assets in your portfolio. But as an owner and believer in Bitcoin,

what does the advent of the ETFs mean, if anything, for the fortunes of the asset class? I think it represents an enormous step forward for institutional capital accessing the asset class. But I think there's actually something out there that's already exposed to Bitcoin, which we've owned for quite a while, which is actually better than a Bitcoin ETF. And that is MicroStrategy. MicroStrategy is better than, in my assessment at least, is better than a Bitcoin ETF for a couple of reasons. Number one, it's more liquid. So it's the largest owner of Bitcoin in the world. Not only that, there's no fees attached to it. And so you think about the optionality of owning a new technological asset and being the largest owner of that asset, it provides enormous optionality over the long term. Not only that, you've got a CEO who owns

a billion dollars worth of stock, who owns $750 million worth of Bitcoin personally. He's a technologist. He's got 31 patents to his name. So he gets it. So, you know, we can talk about the ETFs, but there's already something that's more liquid out there already. And it's more liquid out there already. And it's really interesting to consider that. Although that's a micro strategy. I mean, it's perhaps more liquid at this point for sure. But its value is also going to deviate from the value of the underlying Bitcoin. Of course, there is also a software business in the public company as well.

Absolutely. And that's one of the things that makes it super interesting to me. And that if the value deviates from the intrinsic value so if the underlying if the price goes above intrinsic value michael can sell more shares into the open market and use that cash to buy bitcoin that's an enormously value accretive thing to do if you think about the history of fiat currencies always debasing themselves right and? And then you've got something whose supply, Bitcoin, is completely independent of the demand for it. That's a very value-accretive thing to do is sell something in dollars and buy something in Bitcoin. I guess that's good if you already own the stock, but maybe don't be one of those buyers of a new

equity offering at a big premium to intrinsic value if it's just, you know, essentially an arbitrage? Well, selling shares at a premium to intrinsic value benefits ongoing shareholders. So we don't mind that at all. On the other hand, if the value dips well below, right, the intrinsic value of the software business plus the Bitcoin, you can always buy back shares. So, you know, having somebody at the helm of what is effectively a closed end fund, allocating that capital is enormously value-accretive longer term. Gotcha. So as somebody who, you know, who looks at individual, you know, equity and bond

opportunities out there with a value orientation, how are you finding the markets right now in terms of whether there's, you know, a rich set of opportunities or it's picked over after this big rally last year? No, I think the backdrop right now is enormously positive for equities if you look at what's going on. Last quarter, one of the things that was really interesting to me is that long-dated government bonds were up double digits. Not only were they up double digits, the stock market was also up double digits that's a really interesting combination historically speaking at least when bonds are up double digits equities are tanking because people are buying safety in this case when you see both of those things move up at the same time it probably suggests the market believes inflation is reined in and very much under

control which is supported by today's uh ppi coming in a little light. So now the bond market, the Fed funds futures market, is predicting roughly an 80% chance of a cut from the Fed by the end of the first quarter. And that's really interesting. If you think about GDP annualizing at 4.5% for the past two quarters, with the Fed looking to cut rates, that hasn't happened in 40 years. So that's an enormously positive backdrop for equities. So we're really bullish on the environment right now. And I guess that would suggest that, you know, you mentioned that the trailing GDP growth rate is pretty high if the Fed's going to be cutting rates.

You think that the economy has still got some momentum and is going to be able to withstand, you know, the lagged effects of what's happened with rates? I think cutting rates right now would be a good thing to do. The bond market doesn't expect them to cut it at this next upcoming meeting, but I think it would not be a bad idea to cut rates 25 bps just to let everyone know they're not asleep at the wheel. As you point out, there are lag effects, but things are still strong. Unemployment's low. Commodities are at three-year lows measured by the CRB. Things out there broadly are pretty good, actually. Yeah, certainly what we could observe at the moment.

Bill, great to talk to you. Appreciate the time today. Thanks, Mike. Appreciate being on. Up next, shares of UnitedHealth are falling, seeing the stock's biggest drop in seven months. We'll break down what's weighing on that name just ahead and much more when we take you inside the market zone. We are now in the closing bell market zone. United Health, the biggest drag on the Dow. Bertha Coombs is here to break down what's behind that move. And airlines selling off. TD Count's top airline analyst, Helene Becker, reacts. Bertha, let's start with you and this move in UnitedHealth. You know, Mike, they beat on the top and bottom line as far as earnings, but the big number that gave investors pause was the 85% medical loss ratio. That's the percentage of insurance premiums

that were spent on medical costs. And it was a full point higher than expected. Now, UnitedHealth said some of this was the surge in COVID late last month, which saw higher Medicare inpatient costs and seniors who were hospitalized at year end were a lot sicker than what they had seen most of the year. But the other driver, which is something that all of the Medicare Advantage insurers have been calling out all year, is the continued rebound in patients getting outpatient orthopedic surgery. United Health and its peers say they have priced for this in their 2024 Medicare Advantage plans. But the news today is sending the orthopedic players to fresh highs after a nice run that

they've seen over the last three months. Mike? Bertha, thank you very much. Meantime, airlines sharply lowered today after the FAA said it would audit Boeing's production line. Delta's more cautious full-year forecast also weighing on the group. The airline trimmed profit estimates on geopolitical headwinds, energy prices, and ongoing supply chain issues. That news overshadowing a better-than-expected quarter for Delta, which benefited from strong international demand. CEO Ed Bastian telling CNBC earlier he expects domestic travel to also pick up in the first quarter. We expect to see an inflection point in the first part of this new year in terms of our domestic unit revenues turning positive. And also corporate travel is up again. It finished the year strong and it's picking up again. So we're now probably back almost 90 percent of where we were pre-pandemic levels

and continuing to build. Let's bring in Cowan's top analyst Helene Becker for reactions. So Helene, I know you actually are recommending Delta. It seemed like the guidance is what perhaps upended the stock today. What was your take on the quarter? Hi, Mike. Thanks. Yes, exactly so. So we were above consensus on Delta's fourth quarter. And actually, they're the only ones we're above consensus on. For everything else, we're at or below.

And for the guidance for the first quarter, I don't even think it was the quarter as much as it was the full year. Prior to today, they were talking about $7 in earnings for 2024. And all of a sudden today, we heard six to seven and seven is aspirational and still achievable. And I think that upended the market, to your point. And I also think the concerns that you mentioned in your opening remarks on geopolitical higher fuel supply chain are also weighing on the share prices today. And not only the Delta, but you saw the whole group is down quite a lot. Oh, for sure. Yeah, it has absolutely sort of spread elsewhere. You know, it's interesting though, if you go to the midpoint of the new guidance for the full year, six to seven gives you 650. It's at six times that number. I mean, clearly the market in general is not necessarily

willing to extrapolate that the recent and current earnings levels are going to continue. Do you disagree with that? So I'm going to give you the typical analyst yes and no answer. So on the one hand, I can't disagree too much because we ourselves wrote a report on December 1st where we talked about North Atlantic traffic being under pressure this summer, not so much because of Delta or United where they're just restoring seasonal capacity, but because the industry is adding more than 8.5% capacity to the North Atlantic. And we're expecting pricing to come down from last year's very elevated levels. So that's sort of the bad news for North Atlantic. And they also have very tough comps. Now, the good news for Delta in our view and

why we still can have an outperform and have it be our best idea for 2024 is the Pacific region where they're adding a lot of capacity. Traffic into Incheon is improving and really traffic in the whole Pacific region is improving where we have relatively easy comps. In the fourth quarter, we saw capacity up 44 percent for them and we saw revenue up 45 percent. So we think that will carry into 24. And how is how are we to view what's going on with Boeing, with these reviews, with, you know, the potential prolonged grounding? I know it's not a lot of aircraft and all the rest of it, but is that part of the story of why investors are taking a half step back? Probably, yes. For Delta, it's not as big an issue because they're not as big of a Boeing operator as they are an Airbus operator. And they did mention on the call this morning that they're not really seeing a benefit

in Seattle from Alaska Air's issues, primarily because Alaska's canceling flights days in advance and is able to reaccommodate passengers. If this happened last month, it would be a disaster. But happening in January is not the end of the world. This is after the first, I would say, week. It's a seasonally week period. So W-E-E-K versus W-E-A-K. And then business doesn't pick up again until mid-February and then continues. And then, of course, we have the benefit of one extra day, which adds one percent in the quarter. And then Easter, March 31st, you have, yes, the return traffic going home April 1st or 2nd, but you have all the March traveling for Easter holiday or spring breaks in March, and that should benefit. So I think we're getting a buying opportunity,

frankly, in the shares today. And I think the reaction in the market is really overdone. All right. We'll see if that plays out. Yeah, got to be mindful of those calendar shifts always when it comes to the airlines. Helene, great to see you. Thanks so much. Have a good weekend. As we head into the close, the S&P 500 has poked into the green for the day, just barely about one-tenth of a percent. But for the week, it is up about 1.9 percent. So it will be a winning week just that one week in between this 11-week span where they've almost always been up. You also see 100 new highs in the New York Stock Exchange compared to only 26 new lows. So there has been a bid underneath this market.

We traded above 4,800 early today on the S&P for the first time in two years. Obviously, could not hold the full extent of that rally, but we are going out on the stronger side, with the exception of the Dow Jones Industrial Average, and that's at just about flat. That does it for Closing Bell.