Closing Bell - Closing Bell: Stocks pull back, CVS CEO on multi-billion dollar deal, Under Armour founder on inventory, Bard’s Blunder 2/8/23

Episode Date: February 8, 2023

Stocks pulled back in Wednesday trading amid more earnings and concerns around the Fed’s rate hike path. CME CEO Terry Duffy breaks down the trading environment and the signals he sees from chair Powell. CVS CEO Karen Lynch joins for an exclusive interview on the back of earnings and a multi-billion dollar deal for Oak Street Health. Under Armour founder Kevin Plank and interim CEO Colin Browne discuss earnings and inventory issues. Plus the latest on Uber’s pop, a hiccup around Activision’s deal with Microsoft, and Bard’s blunder that sent shares of Alphabet lower.

Stocks pulling back today with the Nasdaq seeing the sharpest decline. It's down now around one and a half percent as we head into this final hour of trading. 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 overall in the market. We're lower by about a percent on the S&P 500. Every sector is down right now. What's getting hit the hardest? Technology and utilities at the bottom of the market. Consumer discretionary, consumer staples right down there with it. The Nasdaq in the eye of the storm. Alphabet, Apple, Amazon, Meta and Costco are the biggest weights there. Tesla is actually having a good day. It's a relative outperformer. And the Dow is down about half a percent, 165 points. Home Depot, McDonald's and Honeywell, the biggest losers on the Dow. Check out our chart of the day. And that would be Alphabet falling sharply after the company held an event showing off its AI

technology. We'll talk more about that move in just a bit, down 7.4% right now. Also ahead on the show, we've got a great lineup of executives for you to break down their latest earnings and what they're seeing in this economy. We'll talk to CME Group CEO Terry Duffy about the trading environment. CVS CEO Karen Lynch will join us to talk earnings and the multibillion-dollar deal today for Oak Street Health. And then later, Under Armour's founder Kevin Plank and interim CEO Colin Brown will be here to give us their read on the consumer. First up, let's get to the market dashboard with Senior Markets Commentator Mike Santoli. Mike, pressure on tech, even though yields and the dollar are lower. Yes, and tech, of course, had raced higher.

You mentioned the alphabet move. That alone is good for about a quarter of a percent of downside on the S&P 500. So roughly one-fourth of the overall decline we've seen so far. Now, if you look at the S&P, it really is kind of a bunch together in a tight range over the last several days. This pullback, in fact, all of today's range is within yesterday's range. So, you know, you see that sort of tight little range right there in the last several days. We're still well above even, let's say, the February 1st lows on the S&P, which were around 40, 30. And that's the area that I would look at to say, OK, if this pullback just goes down to that level,

it's perfectly routine. It's nothing. In fact, if anything, it would be to be expected to some degree after the run we've had. So I wouldn't make too much of today's decline in terms of the macro interpretation. It really does seem as if things had overrun a little bit in the short term and are pulling back. But it's not to say nothing is going on macro ways. Take a look at the one-year Treasury no yield or Treasury bill yield. It's actually been really steady since October. And then what you see over the last couple of days is a pop higher. So this is basically the highest yield on the curve.

It's pretty close to where the six-month is. It's just under 5%. What does that tell you? The market is essentially pricing in greater chance of maybe an additional quarter point hike after we got the hot jobs number, after you have the Fed speakers talking about short term rates getting to five, five and a quarter thereabouts. And that's the range we've been in for a while, five percent plus or minus, but now tilting a little higher. Now, consider that this is the one year yield. This matures in February of next year thereabouts. So it's essentially saying we'll get up to that target and maybe there's some room,

depending on the path the economy takes, of a cut from there, or maybe we stay here. So to me, this is the one that's most sensitive to what the path for the Fed is looking like. So this is the big debate right now. And we're all sort of still trying to figure out, I think, that really strong jobs number

and what that's going to mean for the Fed path, including Chair Powell himself, I would argue, after yesterday. Here's what I want to know. Strong jobs, tight labor market. Does that feed into the soft landing narrative or the hard landing narrative that the Fed is going to make a mistake and over-tighten? Right. Well, it would be you're on course for a soft one,

and the Fed has to really slam on the brakes in the economy to bring about a hard one. There's this other idea of a no-landing scenario where it's essentially the economy continues to perform OK. The issue is, can inflation get back to target in that environment? We simply don't know. The Fed won't commit one way or the other. What the Fed did not do, what Powell did not do yesterday after the hot jobs number, is imply it really changed the picture very much. He's not going to assume we're at a 500,000 job a month pace. But suggested if we keep getting hot jobs numbers, it could make them go higher. And so we're absolutely data dependent. And that's why

the market's not going to go too far in one direction. Pricing uncertainty about the path. Yeah. Tenure today, 365. Mike, thank you. Mike Santoli. Shares of CME Group take a look, popping today after beating earnings estimates this morning, the company calling 2022 the best year in its history, with average daily volume up 19% from the year before. Joining me now is CME Group CEO Terry Duffy. Terry, welcome back. Good to see you. Thank you. I appreciate it very much, Sarah. So I guess all these Fed hikes and uncertainty over the future path is ultimately good business for you. Is that what's happening?

Well, I mean, that's part of the equation, Sarah. There's no question about it. But, you know, we're a multi-asset class institution and a lot of all of our asset classes were up in 2022. As you just said, we're up 19 percent%, which is a record year for CME. It's the biggest year in the history of our company. So, you know, we're quite proud of the achievements and we kept our costs down. So, you know, we feel like we're getting a little rewarded for that today. And we'll see where it goes from here.

But the markets have been, you know, relatively exceptional. Now we're here in the month of January and we're averaging, you know, roughly 23 million contracts a day in the month of January, which was about the average for 2022. So we're off to a really good start in the first month of 23 as well. So that was my question, is what you expect for 23. You're off to a good start. But if the Fed does start to move closer to a pause, which is what the market is expecting, and commodities normalize from some of these crazy moves that we had around the war last year, what happens? Well, it's hard to predict what's going to happen, Sarah, but I think when you look at where the market is pointing to,

you're looking at the next Fed meeting, you've got a 90% probability that there will be another quarter percent hike, and then you have the meeting after that in May with a 70% chance of a quarter hike. And I think what's interesting is that, you know, the Fed Fund futures is pricing in potentially by year end, maybe a pivot on the downside. So we'll have to wait and see what happens. You know, Charis Powell's comments yesterday were, I think, caught a lot of people off guard. I heard you talking to Mike Santelli about that. So I think that's quite fascinating about, you know, you keep talking about hard landings and soft landings. I'm still waiting to hear about the landing. I mean, we've been talking about this for a year now and we've

yet to come to a conclusion. I think it's just, you know, the time that we live in, which is a complete age of uncertainty. So I think that's where we're at right now. And I think that bodes well for CME Group. You mentioned the Fed funds futures pricing and starting to price in cuts this year, even though the Fed, numerous Fed officials, including the chair himself, have said we don't see cutting rates this year. We're not planning on it. It's not not the scenario. So so how should we interpret what the market is telling us there? Well, I think that's the beauty of the market, right? I mean, people can express their views on what they think is going to happen over the next several months. As I said, 90% chance of a probability of a hike and then 70% chance. And then near the end of the year, they're actually talking about a potential small cut. That's the market's reaction to what they think is going to happen. It doesn't mean

it's going to happen. So I guess we'll wait and see to other data that comes out, as Mike Santelli said, and I agree with him, we're going to become so data dependent. But yet, you know, we're going to have to wait and see how the Fed reacts. These job numbers, I think, are catching a lot of people off guard. You know, the market rallies off of the Chair Powell's comments yesterday, and then it sells off again today. Tried to get higher for a little bit a couple hours ago. That didn't work. So the market's kind of going back and forth, and that's why I say it's the age of uncertainty. It's just, you know, minute by minute,

we're just really trying to weigh and decide which way the direction's going to be. And speaking of that, I saw in a few trading notes this morning, a Deutsche Bank trading commentary note talking about these trades in the rate market, right? An outsized new position in options markets, September 23 options targeting a Fed policy rate as high as 6 percent, a $17 million position on that that could pay, what, 60, 70 million if that comes to fruition. Are you seeing a lot of these kind of moves? And if so, what does it tell us? Yeah, I think it was an $18 million position.

And if in fact you saw the rates go somewhere just north of 5.5%, it paid out at 60 million, if it hit 6%, we're talking about over $100 million payout. Something to that effect, I think, is what you're referring to, Sarah. Yeah. And listen, there's a lot of people coattailing that trade.

We've seen our open interest reflect that, which is the positions open on our clearinghouse in these particular products. And we've seen a massive uptake in so far options. You know, we went from basically nothing open to a year ago to record open interest bigger than our Yodar complex when that was in full swing. So, you know, we're really seeing an uptake in position. So people are making the bets here on potentially what the Fed may or may not do. But I did see that supposed outside trade that's on our books here at CME. So interesting. Yeah, no kidding. What about Bitcoin products, futures? What are you seeing in terms of demand, especially on the institutional side, Terry. You know what, Sarah?

It's really been interesting what's going on with Bitcoin. After we saw what happened at the end of last year with some of the issues going on in the industry, you know, the whole industry of crypto kind of suffered. And then we saw an uptick in our open interest starting and our trade starting around November, December, and it's continuing on here. So I think people are looking at the regulated market, especially the institutions, and, you know, if we're going to trade this stuff, we're going to trade it on a regulated exchange like CME. So we've actually seen an uptick in our crypto products, Sarah.

So, you know, we're quite pleased by that. All right. Very good color. Thank you very much for joining me, Terry. Appreciate it. Thanks. I appreciate it. Thank you. In a big way. Terry Duffy, CEO of CME Group. Look at shares of CVS also getting a healthy bounce today on the back of earnings and revenue that topped expectations and confirmation of a multi-billion dollar deal for Oak Street Health. We'll speak exclusively with CEO Karen Lynch about that news and more right after the break. You're watching Closing Bell on CNBC, down 212 right now on the Dow. Low of the day was down 241. We'll be right back.

CVS shares moving higher today after the company beat on the top and bottom lines in its Q4 earnings report. The company also confirming it is buying Oak Street Health. It's a primary care health network that focuses on older adults for $10.6 billion, including debt. The move comes after CVS bought Signify Health back in September, remember, for $8 billion. Joining me now for an exclusive interview to talk about all of this is CVS Health CEO, Karen Lynch. Welcome back, Karen. Good to see you. Hi, Sarah.

Good to see you, too. So talk me through the strategy here of this deal, because you're in retail pharmacies, in health insurance with Aetna, and now in primary care. Why Oak Street? Yeah, so think about December 2021. We basically laid out a comprehensive strategy that we wanted to extend into health services. And we were clear in our articulation saying that we wanted to be in primary care, we wanted to be in the home, and we wanted to have provider enablement capabilities, all really so that we could build a vertically integrated

ecosystem to support improving the overall health care of Americans. And we basically have executed on that strategy. And today, as you know, we announced Oak Street Health. of Americans and we basically have executed on that strategy and today as you know we announced Oak Street Health and we were very comprehensive in our assessment of our primary care capabilities what we said we wanted to do is we wanted to have the right technology the right management the right ability to scale and this asset hit every single one of that criteria

and we feel really good about oak street and we we're very excited about what this transaction will do for the company and for the future growth of our company investors feel good about it too the stock is up nicely karen i think that analysts they talk to are bullish on the idea that all these services that now you offer can be integrated and you can see a lot of synergies there. But how heavy of a lift is that going to be? Well, first of all, we actually have to close our transactions with Signify and with Oak Street. But what we have is really the premier multi-payer value-based care assets between Signify and Oak Street. And the way to think about this is really, think about Signify Health. People are in the home,

and they determine that one of their patients need primary care. They have the ability to refer that patient into primary care. And then when, you know, we continue to evaluate their opportunities, we have assets that in our MinuteClinics on our health hubs that can have additional capacity, that can have extended care services, and then we can really wrap around all of our services including our specialty pharmacy. And anything that we do will support our medicare advantage members and also our customers because this will be a payer agnostic approach i was wondering if you if you anticipate any regulatory pushback here i know you said it's all vertically integrated so not no real competition but

obviously a huge medicare population that we're dealing with here yeah this is these are complementary assets and they're extending um businesses that we aren dealing with here? Yeah, these are complementary assets and they're extending businesses that we aren't currently in. So, you know, obviously we're going through the process in Signify and we're very much down the path and we anticipate that this will close at the end of 2023. And one thing you're getting here that you don't have is doctors, right?

And nurse practitioners. And is that a good business to be in? Yeah. Well, remember, primary care, although it is a small portion of the overall health we have the ability to improve quality and reduce overall health care costs. And this is part of the comprehensive approach to health care. And, you know, this is an important asset for us. Yeah. I want to talk about the quarter also, Karen, because your earnings were beat, revenues too. How much of it was the impact from what we've all been experiencing this winter,

a tough season of COVID and flu and RSV and strep and all the other things that my kids have brought home? Well, the good news is, Sarah, we have beaten raised every single quarter this year. Every one of our foundational businesses performed well. We had strong results in our healthcare segment. We had strong results in our pharmacy services segment. And we had strong results in our retail segment. So overall, the foundation is exceptionally strong. And also what's underappreciated with our business is we had very strong cash flows of 16.2 billion dollars so where where are you on covid because because it does feel like for vaccines and treatments there is a decline in terms of the

uptake where how do you map this out yeah so co you know obviously kovitz on the decline we are expecting um you know, significantly lower COVID related results, we expect to see lower OTC tests, and then we expect to see annual vaccines for COVID and for flu. But we've been doing a lot in our businesses, because we knew this was coming. We've been improving the operations of our retail locations, take locations, improving through expense efficiencies, changing our merchandise, and really using technology

to improve the customer interaction with us as well as our operational efficiency. How's the pharmaceutical supply chain, which like so many supply chains lately has been tested and we've seen shortages of key drugs? Yeah, for now, you know, we've got very strong in stock. There are certain parts of pharmaceuticals that have been pressured. But overall, the performance of our supply chain is very strong. And finally, just wanted to ask you about a story that that's been percolating in the last few days. 20 attorneys general warning you and Walgreens against selling abortion pills.

And I'm curious what your position here is, Karen, and whether you're dispensing those pills currently. Yeah, so we're a health care company, and our goal is to provide affordable access. We have our North Star to make sure that women have access to health care products and health care needs. And obviously, we pay attention and follow every state and federal law with any of our dispensing of our drugs. Do you think this is going to be a fight? What I said is we're going to make sure that we have accessible capabilities and drugs for women's needs. Absolutely. Karen, appreciate you commenting on that and all the other big news today.

Thanks for the time. Thanks, Sarah. Thanks, Sarah. Karen Lynch, CEO of CVS Health. Just show you what's happening in the market right now. Down day. All sectors lower. Dow's down more than 200. NASDAQ's getting hit the hardest, and we've taken a little lug lower, in fact, in the last few moments, down one and three quarters percent.

Still ahead, another can't miss earnings interview. We're going to talk to Under Armour's founder, Kevin Plank, and its interim CEO, Colin Brown, about their quarterly report that initially sent the stock higher and then got a sharp decline after the open. Later, dissing Vard, shares of Alphabet plunging amid concerns about the accuracy of its AI bot. We'll explain when Closing Bell comes right back. Time for the big picture. Today, we're focusing on the luxury consumer and a rare miss for Capri, the high-end fashion company behind brands like Versace, Michael Kors, and Jimmy Choo. The stock is sinking today. A 6% revenue drop, a bigger profit fall, and the company lowered guidance. Michael Kors was hit the hardest. China definitely a part of the story here with COVID store closures and bumpy COVID reopenings. But the main issue that was highlighted, the wholesale business. CEO John Idol specifically called out the department store chains, which he said have not kept up the pace of growth all throughout the year.

He called it disappointing, said we had expected that to have an uptick, especially during the holidays. But unfortunately, that did not happen. One reason Idol cited could be the adjustment to higher price points of their bags and clothing and accessories, as Michael Kors, along with everyone else, has raised prices. And so they're adjusting now investments and spending accordingly, since Eidel called the business unprofitable. The takeaway? Look, the good news is Capri doesn't signal a big decline in the consumer overall.

The company's own brands and stores did well and have kept their strong pricing power, but it certainly is a red flag on the department stores. They're all trading lower today, of course, with the market. It is a warning, though, that that particular customer may be really starting to push back on higher prices and overall apparel spending. When we come back, speaking of, Under Armour founder Kevin Plank and interim CEO Colin Brown here to discuss the athleisure company's earnings and discuss the state of consumer spending as that stock pulls back. Under Armour shares under pressure this afternoon, down around 9% or so. That's despite a third quarter report that tops the Wall Street's expectations. The company also raised its earnings outlook for the fiscal year. Investors keying in on rising inventory levels despite heavy promotions during the holiday

quarter. But even with today's moves, the stock is still up about eight and a half percent so far this year. Joining me now to discuss Under Armour founder Kevin Plank and interim CEO Colin Brown. Gentlemen, it's good to see you both. What happened? The stock was up this morning before the call. It was a beat and raise quarter. And now it's down sharply. It was. I mean, we had a good quarter. We had a solid quarter. We did what we said we were going to do. And as you said, we're looking to land the year. We have line of sight to kind of closing out the year pretty well. Inventory, as you rightly called out, is a story. But our inventory situation, I think, is a little different than many other people out there. We didn't quite have the same hangover from COVID, excuse me, as others did. So we're actually really quite comfortable

with how our inventory is looking against our growth expectations for next year. You know, margin is challenged, of course, because of the large promotional activity that's going out there at this moment in time. But, you. But we're focused on our strategic priorities, executing what we said we were gonna do. We have new leadership in North America and we're focusing on doing and making sure that we grow in this important market. So explain the inventories just a little more,

because I think it came as a surprise to people, Colin, who had seen you previously as more lean with inventories. When does that come down to more normal levels? Well, our inventory was very lean last year. If you go back and look at what we published last year on inventory, it was very tight. We were running a constraint model for the past couple of years. And to that, we decided that we were going to cancel a number of orders as COVID really bit into the supply chain. So we didn't have the same hangover from an inventory perspective as we came into this year. But obviously, we're now seeing as the ebb and flow of the business continues to grow, and we look to set ourselves up for success for 2024, you know, our inventory is right sizing.

And our inventory is running around about three times what we, three turns, which is kind of what we were expected to be and what we needed to be for this types of business that we have. So, Kevin, ultimately, the question is, what is the strength and performance of the brand? Is it resonating? And why aren't we seeing growth in key spots like North America and in apparel? Sarah, thank you.

It's great to be with you all today, too. First of all, it's a brand new day at Under Armour. First of all, I have a lot to thank to Colin sitting right here getting us to this point. But with new leadership, a new CEO, and Stephanie Lenartz coming on board, Patrick Whitesell, Carolyn Everson joining our board recently, we're really excited about where we are. The brand, I think, is in a terrific place. And if you look at how difficult it is in our industry, A, to break through, one of the things that we've been able to do was establish this good, better, best. You think about the landscape of what product or apparel looks like. That good, better, best is broken for Under Armour is that right now

we've built about a $6 billion with a lot of good, with some better, and nowhere near enough best. The focus for this next chapter of the brand is where we're going to run, really chase ourselves into, I think, doing it the right way. You feel that happening with the brand right now. We're going to have things that you can look and you can point to, like our new Slip Speed launch, which will be kicking off next week in New York City. We've got in the Flatiron District, we're opening a pop-up store for it, but a concept that we teased out in October of last year. We'll be doing the global launch this quarter. And it really puts us in a position as we think about that next $4 billion.

If you look at $10 billion, the way we have outlook for growth, we've built $6 billion that we have of that good, better, best mix. The next $4 billion that comes, we see really prioritizing on the better and best side of things. And I would just add, you know, if you look at the growth we're seeing in Europe, you know, the brand's doing incredibly well in Europe. So the model works, and that's the strategy of how we make that work in the U.S. I guess, Kevin, the question is, how do you sort of reignite the brand around some of your growth areas,

like, I know, varsity sports and, you know, overall team sports in a difficult promotional environment and potentially deteriorating macroeconomic environment? Well, Sarah, you said it. We're still coming off of, as we move into this new strategy that we have as a brand, we have, we've renamed our target consumer as the 16 to 20 year old varsity athlete. That means whether you're a freshman, whether you're a senior, whether you're someone that just used to play high school or team sports, we're still making product that's relevant for you,

but we're doing it in the light of something that actually increases the TAM of this company. So our adjustable market went from about $100 billion under the previous strategy to more than $300 billion. That's going to take us from focusing just on what the athletes were wearing when they're actually competing on field, on court, on pitch, in the arena, that's focusing on those other 22 hours of the day. Actually, something we're focusing on those other 22 hours of the day. Actually, something we're focusing called tunnel walk, which is how do athletes get in and out of the stadiums and how they look with style. But of course, it'll have the UA DNA of performing everything that we

do. So Colin, how would you describe the consumer environment? Are you seeing any evidence of a slowdown tied to the economy in North America? Well, it's not easy out there, is it? You know, we've seen a lot of people, other people post results. I mean, but at the end of the day, we're focused on doing what we do and keeping the main thing the main thing. You know, we're confident with the strategy we have in place. And we believe that as we continue to lean into that, we have line of sight to a pretty interesting year next year. We're seeing opportunities, certainly more on our own DTC channel. And there's something which we're focusing on and continuing to invest in.

How much longer is it going to be promotional like this? Let me say this, is one of the things we think that we have been able to see is the beauty of being a global business now, it gives us a lot of tentacles to see around the world. And we look at Asia Pacific, when we look into EMEA, you know, EMEA was plus 30% for us this year.

And so we actually have it, quote, unquote, going on in North America. What we are taking as part of our strategy is a real hone in and focus here at home to make sure that we win in North America. So that we win those hearts and minds and really focusing on kids. And you'll see our strategy. You'll see our dollars. But we don't feel like giving up any ground. We don't think we have to do that. We have the momentum working in other parts of the world.

But really honing in and focusing on winning here, winning in our own stores, winning in our DCC, and supporting our key retail partners is really part of the focus. And they're going to do that with great product. I mentioned Slip Speed before, but that's just a metaphor of what you can expect to see from Under Armour, which is product that is unique, differentiated, and only we can make. So you mentioned you've got a new CEO. Stephanie's coming in at the end of February, and I know Colin will stay on as well. Kevin, what is the mandate for Stephanie? Well, I think first and foremost, it shows how we are deepening our bench here by, you know, Colin being here and moving into that CEO role again to be able to drive, I think, one of the, if not the most prominent logistics experts in our space. When we think about for Stephanie, there's a lens that we've applied here at Under Armour, and we call it our decision lens. Should we make this decision? Should we not make this decision?

And priority number one is, number one, does it inspire our team? You know, everything we do should have our team saying, wow, that invigorates me and wants me to be here. Number two, does it inspire our team? Everything we do should have our team saying, wow, that invigorates me and wants me to be here. Number two, does it give confidence to our key stakeholders and, of course, our shareholders? Is that a decision of whether it's one of the signings we make of looking at some of our critical partners like the Notre Dames of the world, our league relationships, et cetera? Do they like the choices that we're making? Decision number three that we're riding on, and Stephanie is on board with this, is what we're about to do going to instill fear into our competition. That's the way that we're thinking about this next chapter for UA and how we expect to run and probably what you've seen maybe in the past, but more importantly, we're not looking to play free bird. We're going to run the new version of that. And one of those things we're going to do

is bring, bring into celebrating the 20 year anniversary of protect this house. That's something you'll be hearing from us this fall. Uh fall and maybe a little bit earlier than that too. But Under Armour is going to be playing offense. We're ready to run. All right. So final question to you, Kevin. What is the status now that Tom Brady is officially retired? Again, what is the status of that relationship? Because he has his own sort of competitive apparel line, doesn't he? It's a terrific relationship. Is he still with you guys? We still have an amazing partnership and we completely support Tommy and everything that he does. And he's one of our biggest advocates. And I tell you, the world's fortunate to know that there's people like Tom Brady that exist. And hopefully this weekend is a great celebration of sport with someone like Tom

who just represents football. So we love what we do. We say that sports can bring people together. It's going to be a lot of people sitting on their couches together watching this big game. And Tom Brady for once maybe can kick his feet up and just enjoy this one with his kids too. So that's a pretty good day. That is. All right. Got it. Thank you both very much for making the time. Appreciate it. Stocks come off the lows. Kevin Plank, Colin Brown of Under Armour. Take a look at where we stand right now. The market's come up the lowest too here. We're down 184 or so on the Dow. We've got 20 minutes left of trade. The S&P is still lower by a full percent. So we're giving back yesterday's gains

and we're now weaker on the week overall. Everybody except for the Dow, which is pretty much flat overall, but still every sector lower. You've got utilities, technology and consumer discretionary at the bottom of the market. Look at Uber taking investors on quite a wild ride after reporting an unexpected quarterly profit. Coming up, Wedbush's Dan Ives discusses how much more upside there is here in this talk. And during February, we're celebrating Black Heritage through the stories of some of our CNBC teammates, contributors, and leaders in business. Here is New Street Advisor CEO, Delano Sopora.

So as the Young Black Kid, the people that I looked up to when it came to, you know, focusing on my career path were one for sure, my dad. He's a lawyer and he's someone that always drove, worked hard and was passionate about what he did, helping people in immigration law. When it came to finance, I was really intrigued by one of the books that I read, which was by Reginald Lewis and his story and his life when it came to working in corporate America as a black professional. And those are some of the things that drove me, gave me motivation and inspiration to do what I do on a daily basis. What is Wall Street buzzing about? Apple stumbled today. Call it a blunder for Bard.

Investors have been bidding up anything related to AI this week, but this may be the first example we've seen of a stock going in the opposite direction because of AI. The catalyst? Some reports pointing to this tweet from Google showing off its Bard chatbot, giving an incorrect description of the James Webb Space Telescope. This just hours before a Google event in Paris where executives showcased Bard. Investors apparently not impressed. The stock is down over 7% right now, shedding over $100 billion in market cap for its worst day in four months.

Underwhelming, according to the analysts. So we're just minutes away from Disney's quarterly report. Up next, a look at the key number to watch as Bob Iger returns to the earnings stage. That story plus Uber rallies and Activision sinks when we take you inside the market zone. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Wedbush's Dan Ives on Uber's beat and Steve Kovac on a setback for Activision. We'll kick it off with the market, though, down 214 on the Dow, about a 1% pullback. A little more than that, Mike, on the S&P 500.

Nothing working. What's the catalyst here? Yeah, it's interesting, Sarah. You know, I've been focused in recent weeks on how much better the market's been acting. It's been gaining some credibility for this rally, how broad it is, how you've had this intraday strength most days in the last couple of weeks. So all these things that point to basically people reaching for risk and needing to feel exposed to a market that was on a good roll. I think we're getting to a point where you have to say, all right, what's next? We have to absorb the potential for a data dependent Fed to have to do more on rates.

We're now within sight less than a week, I guess, before the next CPI report. And I do think you have some hesitation there. So I see it as normal digestion, consolidation. The Nasdaq in particular really had a sprint to the recent highs. And so that's where I think you're seeing most of the consolidation today. I wouldn't draw too many conclusions from today's action in terms of whether the rally's over, but a very understandable breather that we're getting here. Yeah, and it's pretty broad. Big tech, some of the apparel and retail names, homebuilders, restaurants, the semiconductors, they're all underperforming today. Uber's rallying, though, after an earnings beat and revenue estimates also came in better,

what it calls its strongest quarter yet. Total sales up nearly 50% from a year earlier as the rideshare service hit 2 billion trips in a quarter for the first time ever. The company posting a full year net loss, but Uber's CEO telling CNBC earlier he's aiming for profitability this year. Year before last, we talked about being EBITDA positive. We hit EBITDA positive ahead of street expectations.

Last year, we said we'd be free cashDA positive. We hit EBITDA positive ahead of street expectations. Last year, we said we'd be free cash flow positive. We got to free cash flow positive ahead of street expectations. This year, we're putting the marker. We are going to be gap operating profit positive. And, you know, we'll hit it in due course. We're not talking. We don't want to focus on quarters. We want to focus on many years. This ahead of rival lifts earnings after the bell tomorrow. Dan Ives of WebBush joins us. He just reiterated an outperformed rating on Uber, raised his price target to 40 from 38. So you're impressed with these numbers, Dan.

Yeah, look, I think Dara and team, they've talked the talk now. They're walking the walk. In terms of profitability, look at that EBITDA. That was a blowout. And you're really starting to see now that growth rebound. I'd say it's their best quarter, really, since the IPO, after what's been a rocky start. I feel like some green grass ahead. Does it bode well for Lyft? Or is that on a different track? Look, I think Uber definitely has the opportunity because of the global scale that's

enabled them to sort of flex their muscles from an EBITDA profitability perspective, as well as even growth because they got the delivery that continues to hold in there. I think a lot better than expected. Lyft, it sets a high bar. I do believe Lyft will be better than expectations. And Sarah, I think when you take a step back, these are really under-owned names across the board. Many threw them out in sort of what we seen the last year. I think now we're seeing a rebound in these management teams. There's adults in the room finally after a few years. So, but if Uber is proving that it can get to profitable growth, has Lyft proven that yet as well? Not yet. And I think that ultimately it's set a high bar. Now, look, Lyft does have different levers. And because they're domestic,

they don't have some other things that Uber does. And I think Dara has done a great job in terms of scaling things back. I think for Lyft, there's more and more pressure for them to cut costs. But that driver rebound is significant in terms of what we're seeing. Especially over the last few months in terms of major cities, we're seeing a significant rebound in terms of travel return to office. And these ride sharing players are really starting to benefit now, finally, post-pandemic. What have we learned about Uber and Lyft's susceptibility to the macro environment? I mean, COVID was weird.

It distorted everything. But now that drivers are back, people are back, gross bookings are up, what have we learned about? If there's softness, what happens? Yeah, I think now we're starting to see different business models than even when you go back a few years ago when, you know, obviously coming out of IPO, they're really disasters. Now the scale, cutting back costs, you can see that they can scale from a profitable perspective and from a macro holding in well because it's a duopoly essentially. And that's important in terms of ride sharing. Can they raise prices? What does that look like in terms of demand? We're seeing demand hold in there. And that's super impressive, especially after what's been some white knuckle few quarters

for both Uber and Lyft. Do you say they're still under-owned? Why? What is the pushback you get when you talk to clients about these names? I think many investors institutionally, they're just skeptical about their ability to further expand margins. Can they do it if there is a further price war? Many are sneak bitten in these names because what we've seen the last few years. I do think sentiment is starting to change, especially more and more of a risk on across tech. You look at what Uber is doing here. It's still a cheap stock.

I think Lyft's as well. Todd's changing. And I think that's really result driven in terms of it all starts today. Got it. Dan Ives, thank you very much. Raising the target on Uber. Appreciate it. Let's turn to gaming. The UK objecting to Microsoft's $69 billion deal to buy Activision Blizzard, Britain's market watchdog, arguing in a provisional decision that the proposed acquisition would hurt gamers by giving Microsoft's Xbox unfair dominance over Sony's PlayStation. Steve Kovach joins us now.

Pretty similar to what we heard from the U.S. regulatory authorities, right, Steve? Similar, but a little more narrow, Sarah, than what we saw from that lawsuit from the FTC trying to quash the steal here in the U.S. What the U.K. is talking about is really the cloud gaming market, which is where Microsoft really sees this whole industry going. Instead of buying an expensive console, you stream the games to different devices, which is why it wants to beef up its library with Activision games. So they're really focusing on that, whereas the FTC is focusing on that, plus the console market alleging that Nintendo doesn't even really count in the console market. We're going to focus on the high end of Sony and Xbox. On top of that, though, there's

still a long ways to go, though, Sarah. So the next step here is by March 1, we have to hear Microsoft has a deadline to respond in a formal way to these allegations by the CMA. And then in April 26, we're going to get the final decision from the CMA whether they approve the deal or not. And it looks like based on what we saw today, they don't want to approve this deal. And that could be the nail in the coffin for the $69 billion acquisition, Sarah. So I'm watching Activision down three and a half percent. I mean, how has it affected the company? Obviously, this is a huge uncertainty to hang over a management team and an entire workforce, not knowing whether this company is going to end up in Microsoft's hands. Whether they're going to get bought or not. And I would refer back to Activision CEO Bobby Kotick, who was on SquawkBot yesterday talking about just that.

You know, he still said he wants the deal to get done. He believes the deal will get done. But if it's not done, he did say, look, we're in a good position where we're still growing. And he also pointed to we have 12 billion dollars on his balance sheet. And by the way, sir, there's still opportunity for M&A within the gaming space. So let's say for argument's sake, this deal falls through. We could see an Activision try to combine with a Take-Two to really beef up their libraries. Or Ubisoft over in Europe is another name that you should be watching. So just because Microsoft might not be able to get this deal done, doesn't mean M&A activity is just going to completely end in the video game world. Mike, is the market pricing Activision as though the deal is dead?

Market's pricing, and it has for a while, as if there was a pretty long shot chance that the deal would get done. Remember, it's a $95 cash offer. It's always traded with a very widespread, presumably because of the regulatory risks that we're now seeing brought to bear. So what that probably means is if the deal were to be called off entirely, there might not be much downside at all in Activision. It's trading on a valuation basis, pretty much in line with peers at all in Activision. It's trading on a valuation basis, pretty much in line with peers at this point, like Electronic Arts. Even the performance over two years, despite the fact the bid came in that period, has not been that different from EA. So at this point, I think anything that looks like progress toward a deal would obviously help the

stock. But it's not as if right now there's a lot embedded in the shares, a chance of a deal. Right. Yeah. Yeah. A long way from that ninety five dollar deal price. Thank you, Steve Povak. Let's hit Disney, Mike, because it is the big name set to report earnings after the bell today. Investors will certainly be paying very close attention to these results, especially from the streaming services business. And what Bob Iger has to say about potential cost cuts, it's his first quarter back as CEO, and he's facing pressure from investor Nelson Peltz, who wants a seat on the board, and is now looking at a proxy fight. So there's a lot at stake here.

There is. It's probably one of those situations where it's a wait for the conference call to really make a judgment as to how good a quarter it was and whether really there's a credible seeming plan to investors for exactly what the run rate of content costs is going to be. They're going to reaffirm the subscription growth estimates that are on the books right now for Disney on the streaming side of things. Domestic parks should be strong. See if that comes through naturally coming back in terms of Shanghai. Disney should be something that's working ahead of it. Very good box office, by the way. They're going to be able to point to with Avatar and the Black Panther movie. So there's things working here. The issue is the stock's also up 20% or so from the lows late last year.

And so you need to have a little more of incremental reassurance that we have a path forward. And I doubt we're going to get conclusive ideas on real big stuff like the Hulu potential purchase or disposition and maybe what to do with ESPN. So probably around the edges. But he's got to address some of those concerns around streaming profitability and underperformance that Nelson has pointed out. Mike, we're under two minutes to go here in the trading day. Talk about what you're seeing in the internals, more than 1% decline on the S&P. A bit listless, but not really a washout in the internals today. So remember, it's been some strong breath. We have some give back on that front today,

basically 2 to 1 decline into advancing volume. It's been that way all day, although the mega caps are weighing pretty heavily on things right there as well. Take a look at interactive brokers. A lot of talk of the comeback of retail trading. This is a stock making new highs. Schwab's not. These are much more high volume retail traders, as well as some hedge funds. So you see that that's reflected there in some of that action. You're not really seeing it in things like asset management firms, but definitely on interactive brokers. Volatility index popping a little bit today. As I said, we've got the CPI ahead of us. People worrying if we might have to sustain a little bit today. As I said, we've got the CPI ahead of us, people worrying we might have to sustain a little bit of a pullback in the near term. So under 20 still there. All right, Mike, thank you. As we head into the close, down 180 on the Dow. McDonald's, Home Depot and Honeywell

are the biggest drags right now. The S&P 500 has noted down a percent. Every sector looks like it's going to close lower on the day. Tech and utilities are at the bottom of the pack. NASDAQ down 1.6%. Alphabet is a heavyweight. We mentioned the disappointment around the AI chatbot. Also Apple, Meta, Amazon, Costco, they're all weighing on the NASDAQ. Tesla's an outperformer, though, as the market closes lower for the week now and for the day.