Closing Bell - Closing Bell: Stocks make another big comeback, Microsoft’s messaging, Sir Martin Sorrell on DOJ’s case against Google 1/25/23

Episode Date: January 25, 2023

Stocks staged another impressive intraday comeback in Wednesday trading, with the Dow erasing a 460 point loss. Microsoft was a big part of that reversal, initially falling on soft guidance but gaining ground throughout the session. Analyst Keith Weiss and Barbara Doran from BD8 Capital Partners discuss the messaging from Microsoft and the readthrough for the rest of tech earnings. Ad titan Sir Martin Sorrell joins to break down the DOJ’s case against Google, and what it means for other players in the space. Plus the latest on earnings from Boeing and AT&T, and why Wall Street is buzzing about Fed vice chair Lael Brainard.

Stocks starting the day on a shaky footing amid a wave of earnings reports, but take a look, we've made a serious comeback throughout the session. The Dow was down 460 points at the worst levels of the day earlier, and now we're at the highs, down only 15. This is the make or break hour for your money. Welcome everyone to Closing Bell. I'm Sarah Eisen. Take a look at where we stand broadly. There's the Dow down 15, the S&P 500 down about six points or so. You've got a few groups going strong. Financials having a good day, despite the fact that treasury yields are lower. Consumer discretionary is also higher. You've got a lot of the e-commerce names and the travel names working well today. Retailers

too having a good day. The Nasdaq's down about a quarter of 1%. Technology is underperforming. We're going to talk a lot more about tech and the Microsoft reaction, looking ahead to some other earnings later in the show. Check out some of today's key earnings movers. Microsoft and Boeing both making a pretty big comeback. Microsoft at one point popped positive after it was lower on the back of guidance. AT&T jumping on strong subscriber numbers up more than 6%. Coming up on the show, we will talk to ad titan Sir Martin Sorrell about the Justice Department's case against Google, what it means for other players in the space. First up, though, let's get to the market dashboard to break down today's moves with senior markets commentator

Mike Santoli. A little indecisive on how to take these earnings reports. We have been, and there have been enough beats and misses. You know, if you look at the top and bottom of the index today, the S&P 500, it is all earnings movers. They're mostly offsetting. But I do think this dip buying instinct we saw today shows a somewhat different character, at least so far this month, relative to what was going on most of last year. I think typically if we got a 3% to 4% opening drop in a 5% S&P weighting like S&P last year, you're probably going to stay under pressure. So it's a strong month, a strong week within that month. Now, where it takes us is a

very familiar place, right? We keep drawing that same line and it's imaginary, but it means something to somebody. And that's where we are. Perhaps this is now a test of whether we can break above. I mentioned yesterday the fact that we basically went nowhere after a back-to-back 1% gain day. He showed you there was some traction within this market. We will see if it continues. We've got GDP, PCE inflation, and the Fed in the next five trading days. Take a look at Microsoft relative to the NASDAQ 100 on a valuation basis. This perhaps partly explains why the market was able to absorb the lower guidance from Microsoft.

Not that the stock is cheap, but that the valuation is down an awful lot from the mid 30s down to 22. It's now in parity with the Nasdaq 100, which itself is in the low 20s and therefore, again, not inexpensive on a historical basis. This is a 20 year look. I did want to point out right in here is where Satya Nadella took over as CEO. So Microsoft at a discount to the Nasdaq 100 all this decade. And then through the focus on the cloud, the boom in the cloud and everything else, the M&A strategy, it did go to a premium. So right now, still having to decide whether, in fact, big tech has kind of got enough payback and is sort of more reasonably valued or not. But I do think in general, Sarah, the cyclical areas of the market continue to show some strength.

Consumer finance today, like Capital One, Teledyne, some of the industrials as well. So it's not a monolithic story of market bracing for economic difficulty. Yeah, hence the financials at the top of the market right now and then consumer discretionary. I feel like one of the most important things to happen today came from our neighbors up north, the Bank of Canada. So they raised interest rates as expected, but then they signaled a pause. And they said, even though economic activity remains robust, we're going to pause basically and see the tightening effect. I pointed out because they were early on tightening. They were early on this whole notion of front-loading, big tightening moves in order to calm inflation down. And then they were ahead of the

Fed in October when they came out and scaled it back to half a percentage point on tightening. So every step of the way, Bank of Canada has led. I wonder if this signals that the Fed is closer to pausing as well. I think it's on people's minds that we're at this moment. There's the loony. It's weakening on the pause. That's right. We're at this moment where the Fed's going to move again, but that could be,

maybe we get a signal they're going to go data dependent after that. At the same time, we might get a 2% to 3% GDP number tomorrow from the fourth quarter. So the economy itself seems like it's chugging along.

And therefore, you're in this little bit of a, you want to call it the eye of the storm. You want to call it a January thaw. If nothing else, it seems like things aren't getting worse on either front, at least right now. No, and even getting back, did you see the mortgage refinancing data today? It showed a pickup in the last few weeks.

There's offsets, exactly, from lower rates. After all the doom and gloom on housing. Anyway, it's confusing out there. Mike, thank you. Mike Santoli. Let's talk more about Microsoft and the read-through for Tech More Broadly. Joining us, Keith Weiss of Morgan Stanley, Barbara Duran of BD8 Capital Partners. Good afternoon to both of you. Keith, I guess you're not so surprised to see the stock turn around intraday. You're pretty bullish on Microsoft. What are you hearing from your clients today? Yeah, I think while, well, first, thanks for having me on the show. Second of all,

in terms of what clients are looking for, this isn't necessarily disappointing. There's two things that you really want to see from Microsoft. One is a stabilization in their cloud business. In the December quarter, they did well in their cloud business. It exceeded expectations. The guide was more conservative than people looked for, but we still believe in the underlying secular growth trends. The other thing you wanted to see from Microsoft was good support for operating margins and earnings growth. And with the restructuring and with better expense control, even in the current quarter, Microsoft's now pointing us towards low single digit OPEX growth when you get into their June quarter, which should yield better operating margin leverage, should yield better EPS growth. And I think that's what people are willing to look

forward to is that better EPS growth on the horizon. Barb, are you willing to give Microsoft the benefit of the doubt despite missing on the revenue forecast? Oh, absolutely. I mean, Microsoft was down 30 percent last year because it was already beginning to discount the economic slowdown. You saw it in gaming. You saw it in advertising softening on LinkedIn. And of course, PC sales down a lot. So it's really not a surprise to see it softening on the all-important iCloud area. So I think that this is the stock at 24 times is not cheap, but it's come down a lot. And probably the downside from here is limited, given that it is a great secular growth story

and it depends on your view obviously on the economy if the if you think the worst case is mild recession to no recession and if the Fed is near. It's a peak interest rates as a little bit more to go. Then I think you can look through this and

by year end Microsoft should have reestablished its- a set up so. I think it's a quite interesting here and also how it's behaving but it's quite interesting here and also how it's behaving. But it's not just Microsoft today that's behaving well. Right. So talk to me, Barb, about what you read into the Microsoft numbers as far as what it means for some of the other cloud stocks, which were initially down on these results, Amazon, some of the

cybersecurity names like Palo Alto. Yes. No. And also the pure cloud plays. I mean, there's there's three different categories here. One is the broader market. Then there's the pure plays like Datadog, Snowflake. And then you have obviously the big, you know, the big gorilla, you know, Amazon, who still has leading market share, although they've been giving up share over the last four years, you know, to Azure and obviously to Alphabet. Both of those companies, by the way, report next Thursday. But again, if you look at the performance of these stocks in the last year, they are really discounting a lot of slowdown. But we're not talking a major recession or suddenly the Fed came out next week and said,

oh, we're raising rates, you know, dramatically. That's a different story than the whole market would sell off. But, you know, I think that obviously people are going to be very interested to see these reports next week and how much it's affected their business, because you're also trying to gauge what's happening with market share. Right. So, Keith, on that. So maybe you can tell us what's happening with market share and what's happening with cloud growth overall, because it's hard to figure out, you know, it's pretty cyclical, right? If you expect a pullback in the economy or recession, then enterprises should cut back on spending. But it hasn't been

that simple. Yeah. And I think that's what a lot of investors are kind of trying to foot out, the cyclical versus the secular elements that are going on underneath these cloud names. In the near term, we're dealing with a cyclical impact. A lot of people are talking about optimizing their cloud spend. It's a consumption business. So you can ratchet it up and ratchet it down in terms of how much you're spending on those cloud services. And while people are worried about their budgets, they're ratcheting it down a little bit. But the underlying trend, the underlying secular trend, is much more positive. We see CIOs, and we see this in our surveys, and we see it in our conversations, are still planning to move more aggressively to the cloud on a go-forward basis.

That hasn't diminished at all. So you're getting to the point where people are feeling more comfortable about the macro, more comfortable about the spending environment, and more willing to look towards that underlying secular trend versus the near-term noise that you're seeing from cyclical weakness on these consumption models. So who's a winner and who's a loser, Keith, of who you cover right now on the market share question and on the secular winners? Yeah, so on the market share question in particular, I think Microsoft is doing well in terms of market share, right? They're acting as a consolidator in the space in several different areas. Cloud is one of them, but also in security. They talked about their security business getting to a $20 billion plus run rate. They're doing well in endpoint

security. They're doing well in security analytics. On the other side of that security analytics, you worry a little bit more about a name like Splunk, who's the legacy vendor in security analytics and has been growing a little bit slower in the near term. They're doing well in consolidating onto Office 365 and getting a lot of the productivity functionality getting consolidated onto that platform. So they're talking about doing better in stuff like telephony. So maybe you worry a little bit more about a name like RingCentral, who's also trying to be that pure play software cloud telephony vendor. So the names in the focal point of the consolidation of what Microsoft is doing, that's where you're incrementally more concerned because this environment does seem to be pushing

more CIOs to have more functionality come through fewer vendors. And Microsoft's a real winner in that regard. Well, I know you like it. 307 is your target. Keith, thank you. And Barbara Duran, great to hear from you as well on some of what you're interested in here in this environment. And the Dow's gone positive, up 32 points right now. After the break, Sir Martin Sorrell joins us to talk about the DOJ's lawsuit against Google surrounding the advertising market. Plus, his take on a new report saying ad spending on Twitter is down big time since Elon Musk's takeover.

You're watching Closing Bell on CNBC. The Department of Justice in eight states filing a lawsuit this week against Google targeting its online advertising business. The tech giant capturing more than a quarter of all digital ad dollars and more than half of search ad spending. It's the most common ad tech partner among buyers and sellers, according to research firm eMarketer.

Joining us now is S4 Capital founder and executive chairman, Sir Martin Sorrell. It's great to have you back on the program. Thank you for joining me. Good to be with you, Sarah. So we immediately thought to call on you on a story like this to figure out whether Google really does have the dominant position specifically in ad tech, the buying and selling of ads, and whether you thought this was a reasonable case that the Department of Justice was bringing on.

Well, I'm probably a little bit subjective about it, given our business, which is based in the digital advertising sector. But I think it's a bit like shutting the stable door after the horse has bolted in the sense that Google's position has market share position has eroded. There are a lot of competitors out there, Sarah. Meta, TikTok, Amazon, a new entrance like Apple and Microsoft. I mean, all of them are building formidable advertising presences. I mean, there are smaller platforms such as Snap and no doubt we'll get into Twitter as well and what's happening there and Pinterest. But there's a significant amount of competition. I mean, the irony about this is that, what was it, 15 years or so ago,

all the regulatory authorities gave approval for these deals that Google did. It came out of double-click and the advertising exchange and putting that business together. It's true they have a very significant position, but I don't think they've abused it to the extent that the regulatory authorities are suggesting. If you went through the pandemic, I mean, the small and medium-sized businesses, which probably make up the bulk of both Google and Meta's advertising revenues, 60%, 70%, came from small businesses, which wouldn't be alive today but for those platforms. And the other thing I would say is that having a strong tech sector, it's quite clear from the tensions that we see around the world, whether it be in Europe or indeed in Asia, having a strong tech sector, which the Chinese government themselves are realizing, is really fundamentally important to having a strong country.

So eroding the position of the major tech companies, I think, works to the disadvantage of any country. We had the Colorado attorney general on the show yesterday, and I said that argument. I said, but there's Amazon, and it's growing its ad business faster than Google and Meta. And there's Meta, which is also a major player. And he said it's distinct from Meta. So Meta offering ads on its platform, he said, is distinct from a publisher who wants ads on its website. And those publishers need ad tools. He also said that Google has dominated ad tools or the ad tech market, and that's harmed competitors and consumers. I don't know. Does that make sense? Well, look, I think it's fashionable or politically, it's a bit like bashing China. It's politically acceptable or justified to bash tech companies.

I mean, the searchlight has moved a little bit away from Meta and Facebook to Google and others. But it was fashionable about six months or nine months ago to be blaming Facebook, I think, unreasonably for every social evil that occurred. So I think a lot of this is a reflection of the political climate. My own view would be that it will be hard for the Justice Department to push this through. We'll see what's happened. We've seen it before with, ironically, Microsoft and others over the years. This will take a long time to press. And the market situation will shift in time. I mean, you look at the growth of some of these platforms, such as TikTok.

I think Meta will revive this year quite significantly in terms of ad spending, too. So the competition, Netflix and Disney coming into the ad spaces, too. Netflix boosted by Microsoft, which is going into gaming as well, as well as open AI. I mean, look at the competitive threats. I think Google issued a code red alert in relation to open AI, although they have an AI part of Google, an alphabet, which is of significant size and scope already. So we'll see. I think the environment in the digital marketplace has actually become far more competitive in the last few years. And I know the regulators take time to consider their positions, but I think this is something that is being a little bit too late, Sarah. OK, so I want to mention two of the competitors because they both are in the news

in a big way. Twitter, you mentioned. OK, we spoke to you in, I don't know, October, November. You said don't bet against Musk, but let's wait and see because it's very volatile. Reuters reporting ad spending on Twitter fell by over 70 percent in December. Does that jibe with what is happening with your clients' ad dollars? And what are you telling them? Are you telling them to stay away? Well, we have to get into perspective. Twitter at its height probably was about $5 billion of ad revenues out of a total of about $4.50 globally. In the U.S., probably $2.50, $2.75.

So it's not a rounding error, but it's more around. In fact, in relation to what Elon Musk wanted to do, it was probably achievable. But content moderation, moderating the content on the platform is absolutely critical. He's lost a lot of people either because of what he's done or because of people's reaction to the bid and the takeover. Whatever it is, sorting out content moderation is absolutely critical. No advertiser wants to advertise with extreme content. Any CMO doesn't want to receive a call from his CEO or her CEO saying, what the hell are we doing advertising on a platform where there is extreme content or content that we disapprove of? So controversy, particularly in slower growth or

recessionary times, that's critically important, Sarah. And so any whiff of a problem of this nature is a problem for the advertiser. And they just pause. And that figure for voices, I think it was in relation to December, ad revenues for twitter down about 71 percent yes it is not a surprise in the context of what we're seeing so it has to sort out the content moderation so what about tick tock and and problems that may present because you mentioned that up top on the on the new competition but there there's a political war here in this country against TikTok and concerns about the Chinese government and propaganda. Is that a cause for concern for advertisers and a potential opportunity for some of TikTok's competitors if we continue to see this push against it?

Well, of course, TikTok management, ByteDance management say that TikTok international business, which looks as though it went from about $5 billion of revenue, so roughly the same size as Twitter and Snap, to $10 billion or twice the size of Snap last year in 2022. We have numbers for ByteDance. I think they are scheduled to do about $90 billion in terms of ad revenues and e-commerce activity in 2023 versus $60 billion last year. My own view would be that they would be best sort of keeping their heads down, a little bit under the radar. Going for an IPO or going further in terms of public activity might be disadvantageous for the reasons that you say. The China phobia that we see in America, the invective against China, and indeed, you know, it's a two-way process. I mean, both the Chinese have had their wolf warriors, although interestingly,

recently President Xi removed one of the significant war forays from the foreign ministry. And maybe we'll have a little bit more moderation. But the invective, as I said, is at a very high level. And with that high temperature and with it being, again, it's rather like bashing tech. Bashing China is politically advantageous. It's a bipartisan issue. Both Democrats and Republicans espouse it. So you're right to point it out. And it is a background issue. And I think the best thing that TikTok can do is continue to develop its business as effectively as it can do without raising its profile too high.

Sir Martin Sorrell, thank you very much for weighing in on all the hot topics across advertising right now. Good to see you. You too. Let's check in on the markets. We've turned negative again on the Dow, down 37 points. But this morning, about an hour after the open, we were down 460. We're now down about 37. McDonald's, Disney, American Express are helping fuel the comeback.

Travelers, Amgen, and Chevron are the biggest weights on the Dow. The S&P 500 down less than two-tenths, thanks to some strength in the financials, consumer discretionary, staples, and materials. They're all positive. What's not working as well? Utilities, communication services and industrials. NASDAQ's down a third of one percent. After the break, Wall Street is buzzing about a potential shakeup in some of the country's top economic posts. I'll tell you about possible changes at the Fed and the White House next.

What is Wall Street buzzing about? Fed Vice Chair Lael Brainard. Multiple reports today saying she is currently the frontrunner to replace Brian Deese as the director of the National Economic Council. Deese is expected to leave soon, though no official date yet. Other names under consideration, according to reports, Commerce Secretary Gina Raimondo, Deputy Treasury Secretary Wally Adeyemo, Gene Sperling, a top advisor to President Biden, has led the NEC twice. Also, Sylvia Burwell, former Health and Human Services Secretary and current president of American University. Brainerd is an obvious pick. She worked as undersecretary to Treasury during

President Obama's administration. She's a Ph.D. economist, deep knowledge on global economics and policy. She's been on this show multiple times. Jimmy Pethigoukis from American Enterprise Institute likes the pick, says the main job of the NEC director is, quote, not to be chief economist for the president. It is a job to coordinate flow of ideas and policy information and recommendations. So it's helpful to have someone with a broad range of experience in the position. But the truth is she may be needed more as the Federal Reserve vice chair at the moment, as the Fed tries to walk a tough tightrope here, taming multi-decade high inflation while not sinking the economy into a deep recession. It may actually be a more consequential

role to stay there as co-pilot. Ed Mills, a Washington policy analyst for Raymond James, tells us this role is a step down, that it's unusual for a vice chair or someone in leadership to go to the White House. And the real question, he says, is what the next job is that she wants, not what she gets. It's either Treasury secretary or Fed chair. One research note out this morning thinks the Brainerd switch would be bearish for stocks. Adam Crisofoli from Vital Knowledge says stocks won't like it because she's been a dovish voice versus her colleagues at the Fed. It also would potentially leave a big position for Biden to fill for vice chair of the Fed, someone who gets a vote at every meeting and whose voice is very important in the policy debate, especially lately.

And it needs Senate confirmation. Biden has already lost a Fed confirmation fight. Remember, Sarah Bloom Raskin should be easier this time with 51 votes that the Democrats have in the Senate. But either way, with Wall Street focused almost entirely right now on the Federal Reserve's policy and every word from every policymaker, especially the vice chair, especially Vice Chair Brainard, there will certainly be consequences for investors. When we come back, block. It's up 30% or so, so far this year. Up next, an analyst who just downgraded the stock on why he thinks investors should consider taking profits now. Squares up about two-tenths. Dow's down 12 points right now, still managing a pretty stunning intraday comeback from a deep 460-point loss. We'll be right back. Senator Elizabeth Warren delivering a keynote at the American

Economic Liberties Project today, focused on the ups and downs in the crypto industry. Eamon Javers with the highlights. Eamon. Yeah, some interesting stuff today. Senator Elizabeth Warren blasted the crypto industry and called for more intensive regulation of the sector from Washington in that speech that you're talking about to the American Economic Liberties Project. That group advocates for more antitrust regulation over corporate America. Now, Warren endorsed the SEC's efforts to regulate crypto and said the industry is scared of a strong SEC and that the crackdown is why it's the industry is spending millions of dollars each year lobbying to escape SEC oversight. She called for the Department of Energy and EPA to require crypto miners to disclose their energy use and environmental

impact. And she said banking regulators need to ensure the banking system is insulated from the risk of crypto fraud. She also said Congress needs to give regulators the resources they need to get the job done. I am not willing to trade the life savings of millions of retail investors, the integrity of our energy grids, the soundness of our banking system, or our national security for a bunch of hyped up promises. And Sarah Warren also said she wants Treasury's Financial Crimes Enforcement Network, known as FinCEN, to be able to force crypto firms to operate under the same anti-money laundering laws as banks and other financial institutions. Back over to you. All right. So some tangible

ideas there, Eamon. Let's see what she wants. Thank you, Eamon Javers. One name we're watching in the crypto space is Block. The stock making a comeback along with tech today, but was down 4% earlier on a downgrade from Oppenheimer to perform, saying the 40% upside move in the past three months could evaporate. Joining us now is the analyst behind that call, Dominic Gabriel. Thank you for joining us today. Call of the day, certainly. Reading your note, it seems like it's almost more of a macro stock market strategy call because you say it's a barometer for risk a first mover for risk on and you expect stocks to take another leg lower so is this square specific there are some square specific features that are built into this note part of what we're thinking is that the account acquisition could

become harder, given the fact that really Block has made some tremendous room through the pandemic. And so we think that the account growth is really going to slow quite a bit. And we think that spending per active account is likely to slow as well. Because when we think about whose blocks customer really represents, it's the low and mid-income consumer. And they've seen a lot of stimulus gains over the last year or so. We think some of that is going to move to the sidelines. And we think that some of the numbers consensus has are just too high. And so if you put all that together with seller also seeing some headwinds, because remember, they really focus on micro and small businesses. And so those tend to have high

fail rates more than the average businesses when we have kind of a recession or a down period. And so we just think block is going to be much more volatile than some expect. And after the 45 percent three month move, we just think it's time to take some chips off the table today. I guess I guess it's all a game of expectations here because, yes, it had a big run up, but I mean, it's still down, what, 30 percent or so over the last 12 months and had a pretty sharp fall. So you say at this point now it's overshot on the upside relative to where you expect earnings to come in. That's right. We're, you know, we're about 10 percent on average below the street on

gross profit expectations over the next two years. And so if you think about that's how the stock really gets valued is off of gross profit. And actually, our original thesis of why we were outperformed was because we thought that they could protect adjusted EBITDA. And unfortunately, a lot of investors really don't care about that. And so they really are focused on the growth story of Block. And they are amazing executors. When they enter a segment of the market, boy, do they dominate. But as we go through this tougher period, we just think that the valuation has kind of reached above where we would expect it to go near term,

given we see downside for the market and for this stock in particular. Dominic Gabriel, thank you for joining me with a quick take on the square downgrade, or block, I should say, from Oppenheimer. Appreciate it. Thanks so much. Thank you.

Let's take a look at where we stand right now in the markets as we head into the close. We're down 12 points or so on the Dow. It went positive at one point this hour. Couldn't hold the gains, but we are well off the lows. And, in fact, pretty little change. S&P 500 down a tenth of a percent. Again, it's the financials, and it's not just the banks. It's some of these, like Block, but some of these other names in here.

Capital One, the credit card names, Synchrony, Progressive, Discover, Fueling Some Gains, Market Access Holdings up 10%. That's helping the group rally to the top of the market. It's been a bumpy ride for shares of Boeing after reporting an unexpected quarterly loss despite an increase in demand for planes. Coming up, a top analyst on whether there could be more turbulence ahead for this stock. Be right back. Check out our stealth mover. It's a stealthy one.

It is Monroe driving higher today, up 11.4%. The auto repair and maintenance company gaining traction after reporting better than expected quarterly revenue. Strong same-store sales and higher demand for tires were the real spark plugs for those results. Speaking of autos, look at Tesla. It's higher ahead of its earnings after the bell. It was lower. It was down 4% this morning.

Another big intraday turnaround. Coming up, we'll break down the key numbers investors need to be watching for. That story, plus AT&T takes off and Boeing shares grounded when we take you inside the market zone. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here as always to break down the crucial moments of the trading day. Plus, we've got RBC's Ken Herbert on Boeing's bounce back and Julia Borsten on AT&T having a big day off earnings. Let's kick it off with the broad markets right now because it's been a big comeback for the overall market. Mike, a big comeback for Microsoft after the guidance was disappointing, the sequential decline,

particularly in Azure growth. Is the overall feeling that earnings could be worse if we're talking about a weaker economic environment? And that goes for guidance, too? I think certainly that's one of the takeaways, along with the fact that the market did do a lot of work on the downside coming into this earnings season. And we've been aware that consensus was coming down. And I also just try to read the tape itself and get a feel for how people did not come into this year being particularly bullish and being positioned for good things. And so the market acts in a way as if people are willing to to reload on risk and buy dips. Now, part of this is January stuff. Part of it is a lot of stuff overshot to the downside in December. And it's getting some relief today. So you want to be aware of not sort of declaring victory and saying the bull market is back on just because of all this.

But a lot of the signals are lining up that suggest that the economy looks like it's less worrisome than we might have expected for the moment at the same time that people were underexposed to the stock market. And earnings are good enough in that context. No, I would also point out that two declines today and yesterday. But we're still up a percent for the week. And, you know, it's only Wednesday. Up 1%, 1.5% for the NASDAQ on the week so far. Let's hit some movers here.

Boeing making a surprise turnaround as well midday. Stock was selling off earlier after a disappointing quarter. Strength, though, in deliveries and its first annual positive cash flow since 2018, perhaps offsetting an unexpected quarterly loss and a revenue miss tied to supply chain issues. Boeing CEO David Calhoun telling CNBC earlier he predicts a choppy year. I have confidence that we'll get through this year. It'll be a bumpy year for sure. All the other major tier one guys in our world are on the same page. Transparent discussion about what's required, what's going to be needed to hit the next rates, etc.

RBC Managing Director Ken Herbert joins us now. He's got an outperform rating on Boeing. $225 price target. Ken, was this a good quarter or not? Yeah, I mean, the quarter in and of itself was mixed, I would say. I mean, obviously, they hit their free cash guidance for the quarter, which was good. They didn't change their full year 2023 outlook, which they'd initially provided last November at their capital markets day. And that's a fairly robust outlook. So that was incrementally positive. I mean, there were some cautious comments around supply chain and some of the execution issues. But until we get negative data points on there at the high level, you've got a reopening in China. You've got a public, in our view, that wants to travel again.

You've got a supply chain that seems to be getting better. And I think that's all incrementally positive for the stock here. So where are we on execution issues, particularly surrounding, Ken, the delivery of 737 MAX and the 787? Because that's been the focus for investors, right, in the past few years and a big overhang. Oh, certainly. You're exactly right. I mean, those are the two key programs where Boeing has had a number of issues. I mean, we've had four issues of significant supply chain headwinds and execution issues here. And those are the two most important programs if you think about the cash profile for Boeing over the next several years. You know, Boeing's guided to 400 to 450 max deliveries this year. It sounds like they're still struggling to stabilize at 31 a

month. We think a lot of suppliers are still struggling to maintain these rates. But at a baseline, if they can maintain that production level, I think that's incrementally positive. And the 787, they've guided the 70 to 80 deliveries this year. Again, a program that's had a lot of manufacturing issues over the last 18 months, which appear to be getting better on the back of some good deliveries in the fourth quarter and into a strengthening wide-body a lot of manufacturing issues over the last 18 months, which appear to be getting better on the back of some good deliveries in the fourth quarter and into a strengthening wide-body marketplace. So, you know, I'm not going to say it's probably too early to say that we've completely come out of the woods in terms of the supply chain and the issues there. The recent data points, though,

have been encouraging. I can't tell how bullish you are from your tone and from your price target, frankly, at 225. It's not that far from where we are now. Well, it's a fair point. I mean, keep in mind the stock, you know, been up 40 percent in the last six months, you know, 12 percent so far this year, give or take. I think the stock could have a period of consolidation here while the earnings and confidence grow into, you know, what has been a pretty strong move in the stock. But this is a stock, as you think about some of the tailwinds in terms of China, and we talked about on the travel recovery and an improving execution story. And again, if there's a sentiment around sort of risk on and less economic headwinds, this is a stock that I think

investors want to own and should continue to work for the remainder of this year. Again, assuming the execution story really holds up. Ken Herbert, Ken, thank you very much from RBC. Let's get to our earnings movers. AT&T, one of the big winners in the S&P today. The telecom giant reporting better than expected profit thanks to a jump in subscribers. The company's free cash flow guidance also comes in better than Wall Street estimates. Earlier on CNBC, CEO John Stanky says he doesn't see demand significantly dropping off despite increasing concerns right now about the consumer. For us, it's been a pretty stable environment right now. Do I am I cautious about what the future might hold when we provided guidance? Were we clear today that we said,

you know, we have an outlook that's a more moderated outlook of growth in the industry, and we still expect some inflationary pressures as we move through 2023? I expect that to occur, and I expect a more moderated growth environment for the aggregate of 2023. Julia Borsten joins us now. I'm just looking at the stock, Julia. AT&T has been a quiet outperformer. It's up over the past 12 months. Verizon's down 24 percent. It's always, yeah, I have to always talk about competition when you talk about the telecom giant. So where does AT&T stand right now versus the rest? Well, it is up over the past 12 months, but it has underperformed T-Mobile.

T-Mobile is the one that over the past few years has really taken share. But I think what was so interesting hearing from Stanky today is he said even in an environment where the opportunity to keep growing subscribers is relatively limited, he sees his subscribers really using 5G and being willing to pay for it. So this idea that they're going to be able to sort of generate more revenue from their existing subscribers. He also, Sarah, talked a lot about the opportunity in the enterprise use cases for 5G with autonomous vehicles driving demand for the auto sector with sort of the whole manufacturing space as well as the medical space. So I think he's looking at these untapped opportunities in the more nascent areas that are starting to use 5G in the enterprise as well. The market likes what they heard, up 6%.

Julia, thank you. Shares of e-commerce platform Shopify are surging today after the company said it was hiking prices, noting on a blog post that fees have been largely unchanged for the last 12 years. Shopify says basic plan charges will now increase 34% to $39 a month, with other fees jumping by a similar amount. With today's gains, the stock is now up more than 30% this year,

but still 50% or so below its 52-week highs. Let's bring in Kate Rooney for more. So clearly, the street was waiting or looking for something like this, or maybe not expecting something like this. How does it fit into the overall strategy and what the growth trajectory looks like for Shopify? Yeah, definitely a pleasant surprise here, Sarah. And one gamble that analysts have pointed out when it comes to some of these price hikes is you risk potential attrition. But you've seen competitors of Shopify like Wix and Squarespace raise prices with not much of an impact on retention.

So that's something that analysts are pointing out today. Competitors are already charging more. So unlikely, as they put it, that users will go elsewhere. So that's helping the stock absolutely up more than 10 percent. And the consensus has been that Shopify has been underpriced relative to some of the other enterprise commerce platforms. You heard what the COO said. It's been about 12 years since they've meaningfully changed prices. This is better for margins and that it positions Shopify for more growth going forward. Also a way to potentially offset some of the slowdown in e-commerce that is expected and has been talked

about. Shopify was one of the big growth names during COVID. They said that they really overestimated the e-commerce pull-forward effect. And that was one big reason they did layoffs. So this will hopefully offset that in the eyes of Wall Street. But absolutely a good thing in the analyst community from what we're hearing. Kate, thank you. Mike, it looks like that Shopify is not the only one. A number of these sort of work-from- COVID, winter stocks have really seen a surge lately. Yeah, there's a handful of them.

And you could say it's a surge certainly off the lows. But in the broader context, I think what you saw is huge boom, really dramatic bust, and then a long multi-month process where they just kind of went sideways. They were in convalescence mode, built a little bit of a base, and now we're picking up from there. And I would consider Shopify, DocuSign, Zoom. You certainly can't go out there and just scoop up, you know, every one of the favorite stocks of the first quarter of 2021 and say this is going to be a big comeback story. But there are those like these which seem like they're actually net winners and seem like they're finding new buyers,

stronger hands to own them. Yeah, helping the ARK Innovation Fund for sure, which is up nicely this year. We're just minutes away from Tesla's earnings. The stock has had a sizable rally to start off the year as well at more than 30 percent and an intraday turnaround as well. Phil LeBeau here with a look at the key numbers to watch. Phil, what will you be focused on? Sarah, look at the automotive gross margins. This is the one metric that people will be focused on when the earnings numbers come out in just a few minutes. Look at where they were in the fourth quarter of last year, over 29 percent. Third quarter at just under 27 percent. Most believe they're going to come in at about 26.2 percent. Look, if it's around there or

26.3, 26.1, I don't expect any reaction at all. If the stock or if the number is way below that, then you might see the stock fall out of bed a little bit. But the expectation is that it's going to be a little bit north of twenty six percent. But again, that is the one metric to watch when the numbers come out in just a few minutes. And does Elon join the call? I forget. Is he doing that these days? Well, he says if it's if it's something important to discuss, what else would he discuss? Yes, I think he'll be on the call. If he's not on the call, then I think people are going to say, what are you doing? Right. Stocks still gotten hammered down about 52 percent in the last 12 months. Phil, thank you. Mike, how does Tesla look set up here into earnings?

I mean, it's trying to to find its footing here in the in the 140 area. It just seems like a treacherous story here, both for longs and shorts. And, you know, essentially, I keep looking at the three year chart and how much of a, you know, kind of momentum it build up and then loss. So it's still way ahead on a three year basis. I think people have to remember that, that this thing got into the top 20 of S&P 500 weighted companies. It's more than 1% of the market still, you know, even though it feels like it's done nothing but lose for a year or so. Well, Tesla is a gainer today, but the Nasdaq not quite getting it done. Looks like it's going to be down again for the second day.

What do you see in the internals? It's very mixed, Sarah, but even at the lows today, it was not really one way to the downside. So take a look at the breadth split. It's now positive. It did turn over the course of the afternoon, almost $2 billion advancing volume, $1.3 billion declining. Net new highs and lows, that's also been a more positive story all month. You're starting to see highs on the NASDAQ outpace new 52-week lows. That's just somewhat the passage of time,

but that's how the tape heals ultimately over the longer term. Volatility index really never got rattled today, even when we were selling off just barely above 20, and here we are back around 19, ahead of some decent macro catalysts potentially coming up in the next few days, Sarah. All right, as we head into the close, I'm going to go ahead and say that the most important chart today is the U.S. dollar versus the Canadian dollar, which is called the loonie.

Loonie weakening after Canada signals a pause. It's central bank, perhaps a leading indicator for the Fed. Who knows after a rate hike today as we head into the stock market close. Take a look at where we stand. We're unchanged on the S&P. The Dow is just pop negative. You do have strength in groups like the financials today. Consumer discretionary, consumer staples, materials, real estate and health care all going to end positive. Everybody else is down. NASDAQ composite down two tenths. Everybody's still up for the week, except for the Dow transports, which are lower now for the week. Amazon helping the NASDAQ. Alphabet weighing the most. That's it for me on Closing Bell.