Closing Bell - Closing Bell: Stocks Swing, IBM's CEO On Tech spending & Taking Aim At A Deal For Robinhood 6/27/22

Episode Date: June 27, 2022

It was a volatile day on Wall Street as stocks finish in the red following last week's big gains. Citi Chief U.S. Equity Strategist Scott Chronert explains why he just cut his year end price target on the S&P 500 and why he sees more volatility ahead. IBM CEO Arvind Krishna reveals whether inflation and economic concerns are impacting tech enterprise spending. Mizuho's Dan Dolev reacts to reports that crypto exchange FTX could be eyeing a deal for Robinhood. And Bernstein's Toni Sacconaghi says he sees upside to Apple TV+ and discusses what that means for Apple's stock.

Stocks are trading in a fairly narrow range following the S&P's best day since 2020 on Friday. The most important hour of trading starts now. Welcome to Closing Bell. I'm John Ford. Sarah Eisen is on assignment at the Aspen Ideas Festival. She's going to join us in just a moment. And here's where things stand in the market. Well, you know, you can see the Dow is down fractionally. S&P down fractionally.

The NASDAQ down about a half a percent. Some days are a marathon. Some are a sprint. Some are that friend who's walking the 5K. And that's today. But check out action and energy. That's a little more exciting. By far the top performing sector as oil prices move higher.

And coming up on today's show, we are going to talk to Apple analyst Tony Sakonagi about the stock's big run in the last week and if it is the start of a broader rebound for the name. Plus, Citi's Scott Cronert just slashed his year-end S&P 500 price target to $4,200 from $4,700, still representing some nice upside into year- end. He's going to join us to break down that call. But now let's begin with the Aspen Ideas Festival, which is where we are going to find Sarah Eisen. Business leaders are gathering this week on a wide range of topics. NBCUniversal News Group is the media partner for the event.

Sarah's there, has some color from what she has learned so far today. Hey, Sarah. Hi, John. Good to see you and good to see everyone. This is the first time Aspen Ideas has been in person in the last two years. NBC, again, with a big partnership. So people are happy to be here.

And some key topics among the discussions include inflation and the economy. Are we peaking on inflation? Is the economy turning into a recession? Roe v. Wade, of course, where the country goes from here after that landmark ruling by the Supreme Court last week. The future of the workforce post-COVID. How much is going to be hybrid? What employees are demanding? And then climate, which is very interesting right now to talk about fighting climate change on the energy front in particular, because we're in a time where we find ourselves needing those fossil fuels desperately at the moment to reduce dependence

on russia john dore longtime partner at the big vc company kleiner perkins on squawk box this morning here's how they're thinking about it over there i believe we are in an epic transition from a fossil fuel economy to a clean energy economy. It's the largest economic development of our lifetimes. It ranks up with the Internet in terms of its impact. So clearly, clean energy is front and center for investments and certainly among the conversations here. We're here all week long talking to newsmakers. Tomorrow on Closing Bell, we'll have Intel CEO Pat Gelsinger.

He's going to be on a panel with me with Senator Rob Portman of Ohio. Of course, a lot of intrigue about what's happening with their big investment and their manufacturing plant there after that groundbreaking ceremony was delayed, trying to put some pressure on Congress to get the CHIPS Act passed. That'll be an interesting one. We've got Wells Fargo CEO Charlie Scharf in a rare conversation about small business and what he is seeing right now in the economy and the housing market. The CEO of HP, Enrique Lores, and Ramon Lagarta of PepsiCo on how to run a business with purpose. We'll also talk to Jessica Alba of The Honest Company. And, John, I just wrapped up a conversation with the IBM CEO, Arvind Krishna, about the future of work. Got some comments from him on what he is seeing on hiring right now,

where he thinks wages are going, and big tech spending. And I will bring it to you a little bit later on this hour. Look forward to hearing that for sure. IBM's got a huge workforce, lots of skin in the game, Sarah. Thank you. Now let's get to the market action, such as it is. Last week's gains have many wondering, have we reached the bottom, or is more volatility on the way? Well, not today. Those gains did not stop our next guest from cutting his S&P 500 year-end target from 4,200 to 4,200 from 4,700. Joining us now is

Scott Cronert, U.S. equity strategist at Citi and CNBC senior markets commentatorator Mike Santoli. Good to see you both. Scott, so, okay, this cut to 4,200, it's sort of like you've got a worst-case scenario, you've got a best-case scenario. This is somewhere in the middle. So how much is it going to fluctuate based on the data and indications that we get from here? Well, you know, so I think the issue is at hand here. The old target, 4,700,

was fairly clearly a soft landing scenario, which is something we've talked about on this program previously. And, you know, it involved ending the year with a clear line of sight earnings growth improvement in 2023. Given the uptake in terms of recession expectations, not still a certainty at this point, but certainly a growing possibility, we felt it more prudent to adjust that back. And so what we're incorporating now is let's call it a blend of a recession scenario,

which in our view has been 3650, which is a line in the sand that we draw through just a couple of weeks ago. And as I said, a little bit more of a soft landing scenario that gets us to 4,200, which by the way, also aligns with roughly 18 to 19 times where we think earnings for the S and P 500 will wrap up this year, right around the $226 level.

Okay, now Mike, that still feels to me like a very nice scenario where we end up higher from here. We just violated some levels a few days ago. I think it was, what, around 3850, where, you know, going below there, there was a risk that we were going to go down to 3500, supposedly. And then we were getting all these warnings. It's going to be choppy through the summer. They're going to be these bear market rallies. Well, here we are, low volume day. I mean, should we be optimistic? I think you should

at least say that we're retaining last week's bounce for the most part, up 6% last week. You're well off the lows. Interestingly, you know, Scott's kind of mild recession scenario at 36.50. That's basically where the low was. It was 36.66 was the low in the S&P 500 on a closing basis. So I think you can have a lot of people saying we've discounted a lot, not necessarily all the bad. What's fascinating today is that the market was indicated a little higher, maybe a little bit more of a rally. Then we got pretty decent durable goods and pretty good pending home sales numbers. Treasury yields lift a little bit. But, I mean, we're grasping at these sort of secondary clues right here for what the tradeoff is going to be between economic slowdown and whether we can see the end of what the Fed's going to do. And the market's struggling with that day by day, even when there's not really a decisive data point to really hinge our outlook on.

Scott, I know this is a wild question because the Fed and interest rates are like all we're supposed to talk about, right? But what about politics? What about midterms? So often there's a discussion of if one party gains too much power, that's bad for the markets or maybe good, I don't know. How much did what happened in Washington last week change the calculus on the outcome for midterms? And does that matter at all for these markets? You know, I haven't really gone down that path at this point. I think it's a sort of a secondary issue at this point. I really think when you think of the way this year has unfolded right and let's just kind of set the stage on this.

We've talked about this. He had a major valuation correction mainly on the growth side of the market. That's been a function of the ongoing step up in Fed commentary and with many economists now out there projecting Fed funds approaching 4 or 4 percent, even higher than that. And so the market's been in the grips of the valuation correction affected mainly on the growth side of the market. The value side of the market hasn't been so impacted thus far. So what we're trying to focus our view on is that from here, earnings growth drivers become an important part of this equation. At the same time,

any signs of the earlier comment on a relief in terms of the magnitude of Fed hawkishness can actually come back and benefit the growth side. The political side certainly is going to be relevant as we get into the end of the year, but I don't think it's the driver that we're thinking of in terms of the market setting up for a little bit better price action between here and year end. Mike, as long as we've got these low summer volumes, can we really believe it? Is it telling us anything serious? I think it's okay to actually take it on face value, mostly because the market has been under so much stress. You had a tremendous amount of liquidation that happened near the lows. So I do think that if the market is able to relax, if you can get one of these tension release episodes, that's information in itself, even

though it's not telling you we're going way higher. You know, we're still caught below whatever threshold you might put out there that would imply that this is proving itself to be more than just another relief rally because that's been the trap we've been in for a while. You get a bunch of these 5% or 10% bounces, and they've always kind of been short-lived and rolled back over. So we're still short of that testing ground. I would say 4,100-ish is where we're looking on the S&P. All right. Maybe a little melatonin for the market can't help.

Scott, thank you. Mike, of course, we're going to see you later. We always do. After the break, Apple is coming off a strong week of gains, but it's still down about 20% for the year. We're going to talk to top stock analyst Tony Sacanagi about where he sees that name going next and his new analysis of Apple TV+. You're watching Closing Bell on CNBC.

It's time for Mike Santoli's dashboard. He's looking at tech valuations and the impact some of the heavyweight names have on the sector. Mike? Yeah, John, still pretty top-heavy in tech, as you would imagine. What we're looking at here is the forward price-to-earnings ratio for Apple, Microsoft, and then the equal-weighted version of the tech sector at the S&P. So all stocks counted the same. And what you see is both of these guys, OK, 22, 24 times earnings. Apple and Microsoft together are more than 45 percent of the market cap of tech. If you kind of level that out, equal weighted, you're at 16 times earnings. So it really gets to that idea that a fair amount of the payback from the valuation excesses we got into maybe is done, at least with the average tech stock out there.

Now, this is relative to the S&P 500. And what you'll see is you're about at a market multiple for equal-weighted tech. The equal-weighted S&P, as it happens, is around 14 times earnings. But you see that Microsoft hasn't really given back a lot of that premium. Neither has Apple. Maybe it makes sense, John. Maybe they're defensive. Maybe they're good ports in this storm. But it does show you that the story is not necessarily

fully told by looking at the overall tech sector and saying, still looks expensive, still has more to go on the downside. So we'll have to see how that shakes out from here. Also, I mean, if they were to fall, would they fall in isolation or would everything else in tech freak out? Most likely, you're right. It would not be isolated to them, even if it is going to be mostly a catch down move by those biggest stocks that have held up better. Fascinating, Mike. Thanks. Well, for more on tech and specifically Apple, let's bring in Tony Sakonagi from Bernstein. Tony, I know you want to get into some Apple and certainly let's do that

Apple TV Plus specifically. But first, platforms. Right. So many of these big tech companies aren't just about individual products. They're like whole ecosystems where other things grow. Is that why they deserve better than a market multiple or do that? I think in general, John, that they do, because platforms lead to increased stickiness and they often lead to recurring revenue. And so, you know, that type of subscription or recurring type of customer or ability to expand an addressable market through additional products or services is something that investors are willing to pay for. Now, I would say it's important to understand whether the businesses are transactional and and or how much of the business might be recurring in revenue and profit. In Apple's case, they have a very strong ecosystem. Their customers are very loyal.

But most of their products, most of the revenue is generated from product sales. And that's driven largely by loyal customers. And if you get into a recession, the customers can delay purchases or delay upgrades. And so that revenue stream isn't exactly recurring. It's largely transactional. So it really depends on what the underlying business model is behind these strong franchises. In Microsoft's case, you know, there are a lot of software licenses that or, you know, or subscriptions that corporations have committed to and are more difficult to pay back during an economic downturn. I think that's a great intro to talking about Apple TV Plus, because you break down sort of the value of that to Apple, how investors should think about it. Apparently, on paper, it's costing Apple more than they're getting back. But isn't that kind of like trying to assign an economic value to getting flowers for my wife? I mean, like, what do I get right in return? Sure. So you're right. We estimate

that Apple might be losing about a billion dollars a year from an accounting perspective on Apple TV+. I think like with many of their services, Apple takes the long view. And ultimately, over time, this will very likely be accretive to their economics in the sense that it will contribute to profits. But it also enhances the ecosystem. And I think perhaps most importantly, it's something that can be bundled with other products and services going forward because the cost of Apple TV is largely fixed. You're paying for the programs. And so if you chose to give that away for free, for instance, as part of a services bundle, which which it could do or as part of a hardware bundle, that could be very attractive in uh in you know attracting or or getting consumers to upgrade more frequently and so i i think there's a strategic element to it as well john but isn't there also a defensive element to it if you're an investor shouldn't you think

well what's the cost to apple of not doing apple tv if they hadn't gotten into content at all if somebody else had gotten coda if microsoft et cetera, were able to build up an ecosystem where they were able to come out with a virtual reality headset or a phone or whatever it is and challenge Apple, since content is so valuable, wouldn't that be bad? Well, I think that that's arguably debatable because, you know, Apple is making the Apple TV Plus content available on other platforms. So if you have a web browser, you can still access Apple TV Plus. So you can do that from an Android phone. You can do that from, you know, various smart televisions. So it's not unique to Apple per se. And similarly or conversely, if you're, you know, if you're an Apple device user, you could still subscribe to Amazon Prime or other services. So I don't think it's essential in that it creates a lock-in per se, because most of the streaming services or almost all of them are available effectively

to whomever wants it. I think Apple is doing because. It can be a profitable revenue stream over time it has a subscription element whereas Apple's businesses largely transactional. And the market generally value subscriptions at a higher multiple. Than it does transactional businesses.

All right great analysis. Tony thank you Tony Sakunaga from Bernstein. Thank you got a market flash on Robin Hood Steve Kovac has the details Steve. Hey John yeah Robin Hood Tony, thank you. Tony Sakunagi from Bernstein. Now we've got a market flash on Robinhood. Steve Kovach has the details. Steve. Hey, John.

Yeah, Robinhood shares are surging about 14% right now on this report that Sam Binkman-Fried's FTX crypto exchange wants to buy Robinhood. Now, it's not saying it made an offer or informal talks. They're just thinking internally about how they could buy the company. And keep in mind, Sam Bickman Freed's firm separately had a 7.6 percent stake in Robinhood. So he's already has a big chunk of the company. And it looks like he's finding a way to buy the rest of it. Back to you, John. Yeah, it seems, doesn't it, Steve? And I know you don't necessarily focus on the crypto space all the time.

But there are a lot of crypto assets looking for other things to buy besides crypto. Yeah. And you've also got to look at this. It's like you got to think that Bingman Freed smells kind of blood in the water here with all these crypto companies just in pain with the volatility that we've seen with crypto. So they become good acquisition targets. We saw the moves last week, giving the loans to these companies that can kind of give them an option to be acquired later down the road. And now we're seeing it full out here with Robinhood. Yeah, got to be careful about crypto lending, though, as we're seeing from Steve. Thanks. Let's check on the markets. Meanwhile, the Dow is still down fractionally. You could almost call it flat, down just 41 points.

S&P down also just fractionally. And the NASDAQ down about half a percent. Russell is slightly in the green. We're going to have much more on this Robinhood news and the stock move ahead on the show. And now as we head to break, you can check out some of today's top searched tickers on CNBC.com. The 10-year yield is on top. It's that kind of day. Followed by Tesla, S&P 500, Apple, and Amazon. Closing bell. Be right back. Welcome back. Let's check out today's stealth mover, Old Dominion. The trucking company,

one of the best performers in the S&P 500, at least for part of the day, after Wells Fargo upgraded the stock to overweight from equal weight, hiked its price target to $300 from $280, citing increased confidence in Old Dominion's growth opportunity in the less than truckload freight market. It was up as high as $2.66 today, but it's given up a little bit of those gains. Now, up next, IBM CEO Arvind Krishna weighs in on whether companies are cutting back enterprise tech spending with fears of a recession on the horizon. Closing bell. Be right back. Welcome back. Business leaders are gathering all week at the Aspen Ideas Festival. NBC Universal News Group is the media partner for the event. And Sarah Eisen is there and just moderated a panel with IBM's CEO. Sarah. Hi, John. I hosted a session on the future of the workforce with IBM CEO Arvind Krishna. We talked about all the changes that have come from the pandemic. He said at the moment,

only 20 percent of his U.S. employees are at the office for three days a week or more. And he doesn't see a scenario where they get back to 60 percent in the office ever. Remember, this is a company that has 250,000 employees globally. We also talked about how hard it is right now to find workers and how inflation and the labor shortage is pushing wages higher. Listen. I think that you're going to get an adjustment in wages. We can see that in the past year. I suspect that we will see a decrease in the growth rate. So it'll step down. If I look at inflation right now, we have what, 9% give and take? Almost, yeah. I think it'll come down by the end of the year,

maybe early next year. I don't think it'll come down to two. I think it'll be well above two. That's what the Fed wants. The Fed has put two out there as its target state. So you think we're in for a lot more interest rate hikes and issues? I think we're in for a period

of more sustained inflation than 2%. I think the 2% may come back in three years, four years, but I think we are going to be above that from now until the end of next year. So you think we're going to have high inflation with a recession? I am one of the more optimistic people. How do you really get recession with full employment? So I think we got a different state of things than we've ever had that we've ever been used to. Normally, when you begin to get high interest rates and high inflation, you also tend to get employment building up.

And that's what everybody is sort of, that's the hard landing piece, right? So right now, if we have 6 million, 9 million fewer people here than we would like, that means effectively the unemployment part has been taken care of. If we have... You could have a sharp consumer spending slowdown. You could. Will it really cause a recession as in unemployment, or will it cause a GDP slowdown? That's the thing, the interesting question. Are you seeing a slowdown in tech spending and the tech environment? Not in the B2B space. So if I go back to, if you're a retailer, are you going to do more automation and more

automation in your warehouses and inventory? Are you going to do more on supply chain resiliency or less? If you're in pharmaceuticals, are you going to worry about how do you distribute drugs with a cold chain better or worse? If you're in biotech, are you going to worry more about how do you do your next four vaccines using computational techniques to come out faster or slower? If you go into banking, are you going to do more personalization around loans or less? So if I look at it, technology, I think, is a real differentiator. The same way as you kind of go through these epochs, right? 1700s, roughly.

I'm not a historian, so hold with me if I'm off by a century. It's the Industrial Revolution, which is that I can bring the power to the factory as opposed to the factory has to sit over the river and float logs down using gravity and water. You can go forward then to steam, which was railways and steamships and really global trade, which was 1800s. And we saw the rise of the Western powers. You can go to oil,

and that led to mobility as an automobile and that you could separate and not have to be as polluting as coal. We can fast forward to today's in terms of technology, which is why so much angst around semiconductors. And I would say that these things have shown that they improve human productivity, they improve the quality of life, and the nature of work changes to tie us

back to these. So the nature of work keeps changing. We also talked about some of the cracks that are forming in the technology industry at the moment. Layoffs we've seen, for instance, at Netflix, Robinhood, and a number of crypto firms. He said it's mostly the unprofitable tech companies, but that those companies do have a potential to turn profitable just at lower valuations. He said it's very different if you're trading at five times sales than if you go bankrupt. So they need to position for the long term. Perhaps a reason why IBM, for its part, is handily outperforming the market this year. The stock is up more than 7 percent, while the S&P 500 is down about 20. And then, John, on another employee issue, I asked, of course, about the court's historic ruling overturning Roe v. Wade and what he is doing for his employees on that.

We don't want to become a political hot potato, so we're not going to make any big public statements. That said, we have always been about giving our employees choice and protecting our employees. I'll go back to two simple examples. I don't think there's anything public about these. IBM put in women at equal pay in the 1930s. We had our first women executives in the 1930s. We had our first black executive in the 1940s. In both cases, the women had men working for them. The black executive had non-black people working for them. It wasn't segregated or isolated. We never went out and said any of these things. We gave same-sex benefits in 1994, I believe, a good 10, 15 years before same-sex marriage got legalized. Just because you've always had leaders that have prior rights?

We've always had leaders. So we want to do this for our employees. I'm not sure that we want to make this into becoming the hot button for politicians. Politicians will do what they need to do. And I do encourage our legislation to go get its act together, because that is, I think, where the answer lies. But so we will do what we can to protect our employees, but we're not looking out there to go create it. It's a deeply personal issue, I'll tell you that. These whole topics around, many of these topics are deeply personal to many people, and when you listen to both sides,

you do realize that forget is it exactly equal or is it not? But there is a lot of both emotion and fact on both sides. So that's what I was going to ask is how you determine as CEO and as a business, whether to weigh in on a political issue, because businesses have struggled.

We saw Disney in the debacle with Florida. We've seen Coca-Cola and the voting rights in Georgia. Like, how do you determine which issue to stand up for? Well, for example, one we did take on was the bathroom bills at North Carolina and Texas were after, I forget, three, four, five years ago, somewhere in that neighborhood. And we did say that we would have to think about where our employees and future employees are on that basis. That's the only power that companies have.

I mean, we do not give any money. We do not give any money to politicians directly. Actually, not to PACs, not to anything. We do speak up on policy issues, so we don't have a checkbook we can use. Do your employees want that? But we do have employees. They want you to speak up, the employees? Some employees do. Anybody who's deeply,

deeply passionate on an issue would want us to speak up. So we took those because we thought that that is the vast majority. If you look at those two bills, for example. So we did speak up. Where it is much more divided, you got to let the political and the judicial system carry its course out. I actually do strongly believe companies and corporations should not try to replace those. Certainly, our voice should be heard. So we are willing to make our voice be heard. But voice is through actions as much as through anything else.

What do we actually do for our employees? Maybe the most important. And then if people prefer employers like us, it'll speak for itself. Good window, I thought, John, into the thinking there of a CEO as to whether to make a public statement coming out against something like what we saw from the Supreme Court for it. Instead, he has said it's too divisive. It's too political and it's too emotional on both sides, therefore not a place for IBM to speak up. But of course, they are, like so many other companies that we've been covering in different industries, going to offer the protection via insurance for employees to have reproductive rights and go to other states if they have to travel for abortions. That's just the way that one company is thinking about it. But clearly, John, that has made it to the very top of the agenda here at Aspen Ideas about

what happens in the midterm elections, what companies are doing about it and where America goes from here. And isn't that the ultimate public statement, Sarah, is not only your policy, but your historical policy and culture? I mean, people can tweet whatever they want in a given day. But is that still going to be the company's policy five, 10 years from now when leadership is different? IBM has a bit of a track record. It's also interesting to me the context of IBM statements, whether it's about social issues or whether it's the stock. You know, in this down market, IBM's performance, which you mentioned, doesn't look so bad. And that, you know, 4.6 percent dividend yield doesn't look so bad either.

That's a big reason why the dividend yield, the fact that the fact that they have strong free cash flow and they're a profitable company. The fact also, John, that their turnaround story and seen as sort of a value play, which has worked better in this market environment. And it's something we talked a lot. And I know you've talked to Arvind about this as well. He spun out Kindrel. He is really focused, and this gets back to the workplace, on changing the culture of IBM. It's a big ship to steer with hundreds of thousands of employees, but wants to make them faster, wants to make them more competitive in what he calls the hybrid cloud, which obviously he sees as a big growth area, and in places like blockchain as well. And when we talked about workers, he said that the workforce is top three challenges and issues that he thinks about. Number one, right now, it's the challenge in Russia and just the lost business there and what they're doing

with employees. Number two, the competition, which he looks at. And he actually mentioned Walmart, trying to do their own cloud business as well. He's got to compete with them now on workers. And three, on the workforce, which is clearly a big issue right now, especially with such an acute labor shortage. Yeah, it's great that you spoke with him, Sarah. Arvin makes a really interesting point about those quarter million employees that he's got, many of them technical in the consulting business. He's saying that in a pressured labor environment, he's got the technical workforce that others need. So in a way, it's good for him. We'll see if that pans out and if it plays out in the stock. Sarah,

great stuff on your own show, of course. Sarah Eisen in Aspen, thanks for having me. Coming up, we will talk about the report that Sam Bankman Freed's FTX is looking to get a pathway to buy Robinhood. that stock is significantly higher. And analysts is going to weigh in on what that move would mean for shareholders. Closing bell, be right back. See, it's up 15%. Welcome back. Home builders outperforming the broader market today after a surprising increase in pending home sales. Diana Olick has the details. Hey, Diana. Hey, John. And yeah, it's also surprising the builders would get a boost from this May reading, given that several have already reported that the biggest slowdowns

in home sales began in June. That said, pending home sales did rise very slightly, up 0.7 percent compared with April. That beat expectations of a 4% drop and broke a six-month streak of declines. Sales still down nearly 14% from May of last year. This index from the Realtors measures signed contracts on existing homes, so shoppers out in the market in May when rates came down very slightly after rising since the start of the year. Of course, they then shot back up in June. More supply also came on the market in May. But even the Realtor's chief economist suggested May's reading is likely a blip in a much broader downturn in demand due to much higher rates. John. All right, Diana, thank you. Up next, Ritholtz Wealth Management CEO Josh Brown on today's volatility and whether last week's rally was a head fake.

That story, plus a potential deal for Robinhood. When we take you inside the Market Zone. If you unlock a door with the key of imagination, you're in the Market Zone. Ridd Holtz Wealth Management CEO Josh Brown is here to break down these crucial moments of the trading day. Plus, Mizzou host Dan Dolev on Robinhood and Leslie Picker on the banks. Let's begin with the market. Stocks trading in a fairly tight range today following last week's rally. Josh, not a lot of volatility to trade, but what's on your mind?

What are you paying attention to with today's action? Listen, I think all rallies are still guilty until proven innocent. We are still very far below the major moving averages, 200 day, 10 month, whichever you want to look at on the Dow, on the S&P, on the Nasdaq. But a lot of damage has already been done. So we're kind of in a no man's land. I think you probably don't want to get too excited every time we have a one day wonder rally like we did on Friday. But the fact that we didn't give half or more of it back today, I still think you'd have to say is a victory for the Bulls. So trying to remain somewhat optimistic while not getting sucked into all the enthusiasm just because we have one green day out of five. Yeah, a lot of traders

getting their ankles broken in this market. Speaking of, Robinhood getting a late pop today on a report saying Sam Bankman frees FTX, seeking a pathway to buy the company and joining us to discuss Dan Dolev from Mizuho. Dan, Robinhood's up more than 17 percent right now. What does that say? Well, first of all, about Robinhood and the chances of this happening and then about a bunch of these growth stocks that have been beaten down. Yeah, I mean, look, it's it's it's surprising and it's not surprising because it just shows you and we've always said it. And you remember, we've always talked about it, how great of a business Robinhood is. And there's going to be, you know, FTX, I don't know.

You know, I saw the news. They denied talking M&A. But there's going to be a lot of suitors for this business. It's a fantastic business with amazing engagement. They really captured a generation. And I think that if, you know, if it's not them, someone else is going to be interested. So I'm not surprised. I think the stock is going up.

And this is a great business. I think for the overall space, to answer your question, there's going to be probably more activity in the space given the valuations right now. Okay, Josh, great business. I mean, people were talking about a great business at 70, now it's at nine. Well, no. So Sam Bankman Freed is very smart. The book value here is $7 billion. They have cash on the books of like $6 billion. So basically, they can almost buy this company for is he recognized there's no need to hire hundreds of engineers in the middle of a bubble. So he's only got a couple of dozen engineers at FTX, and he is competing with companies that have hundreds of them. And I think immediately he takes some of the cost out of Robinhood.

But I still fail to see how this is a great business. The average user has $240 in their Robinhood account. The amount they make per user is declining, has been declining quarter after quarter and their user growth has now gone negative. They are net losing customers. I'm not sure what's great about this other than if the curve steepens, there is some net interest from from cash balances. What what else are they doing

here? Right. Dan, weigh in on this, because there's all this talk about Robin Hood democratizing markets, which I really thought E-Trade did a generation ago. I didn't see what the democratization was. And, you know, if there is very little cash on average in customer accounts right now to spend, and if all of this rah-rah options trading by amateurs is going away, why is this business good? And I want to push back on this one. And I think those are great points, but it's very easy to make these points on the back of the best year equities I've ever had, which is 2021. So everything in relation to last year looks awful. And the way we look at it is basically what is the second and third derivative doing? If you look in the numbers, basically a lot of these things that you mentioned, Josh, are actually they're bottoming, they're troughing.

Right. So the decline in the users is actually getting slower. The decline in the ARPU isn't that bad. So it's basically coming off a huge mountain of last year, and it's getting normalized. Remember, COVID is a round trip. Everything that went up goes down. And I think once you get that reset, you'll see that the engagement, people on Robinhood use the app more than people on coinbase more than on any other app and that is very valuable you cannot get it unless you have it right it's a very valuable

asset they really reinvent the trading and i think that they're getting that generation early on and that you know we look at it like in a five-year time horizon and i think it's very smart to you know what what's happening today. I agree with that. Yeah, Josh, in a way, isn't this a microcosm of the market? Like, have we gotten too negative on the market in general? You know, not believing last week's rally, perhaps, and we were in this pause moment of being able to consider what to do for the rest of the week. Have we gotten too negative on Robinhood? Is it possible? No. If you paid attention to what was revealed during the hearings,

the best week Robinhood ever had was also its worst week because they did not have the net capital in place to facilitate the level of volume during the GameStop trading frenzy. Thank God for Robinhood that immediately following the GameStop and AMC meme cresting, they had Dogecoin come along. But this is a company that has only ever gotten close to being profitable during months and quarters where there was a horrific investment bubble that was soon to rip out the lungs and hearts of the people who played along with it. It's literally a firm that rides along bouncing on top of bubbles. So you will be right that this

is a great business if and when we have the next speculative fever or bubble in the market, because Robinhood will push as many of its users as it can via the user interface and all kinds of other tricks within the app to take part in that bubble. But bubbles blow. And in the aftermath, you end up with what we have now, which is literally millions of teenagers and recently teenagers sitting with a couple of hundred bucks worth of blown up options trades and margin balances. And that honestly does not look like a great investment business. You can buy Schwab right now. You can buy Goldman Sachs. These are great businesses. This is really something that's very cyclical and needs a mania in order to make a lot of money.

Yeah, I was going to say, sounds like you don't like it still. Dan, thank you. And now from traditional finance. Hey, that's what we love. People don't have to guess. Big banks are expected, meanwhile, to announce their dividend and buyback plans after the bell following last week's stress tests. Leslie Picker joins us. Leslie, what are we expecting from the major firms this time? Hey, John. So it was a marketably more difficult test for the banks this year, which resulted in what's known as a higher stress

capital buffer. That is something that indicates how much banks can return either in buybacks or dividends. The higher the SCB, the lower the amount of buybacks and dividends they can return to shareholders. So a lot of analysts are expecting, at least among the big firms, you can see Bank of America, JPMorgan, Citigroup in particular, that there is expected to be a materially lower amount of buybacks this year compared to last year. And that's largely due to their performance on the stress test and also the expectation that perhaps some of these CEOs are going to want to preserve capital and maintain a more conservative balance sheet in advance of any kind of potential downturn or severe recession.

All right, Leslie, thank you. And now also after the bell, Nike's fourth quarter results coming out in about 15 minutes. Analysts have been lowering estimates for this quarter, coming down more than 5 percent in the past month, according to FactSet. Sarah Eisen back with a preview. Sarah, you could be in a Nike in a Nike type setting right now out there in Colorado. Very outdoor appropriate. Not quite in Beaverton, Oregon, but I'm closer. So Nike's stock, John, has come down more than 30 percent this year. It's worse than the overall market, even worse than the retail ETF, the XRT.

Here are three things to watch in this report. Number one, China. Nike relies on China for more than 20 percent of sales, but it has been the growth driver for this company over the past few years. And lately, first it was nationalist sentiment and then now COVID lockdowns, which have really hurt the business there and the entire growth story. And to make matters worse, Citigroup analysts did a recent survey where they found more than half of respondents in China saying the athletic category was more promotional lately. Number two issue, the strong dollar. We've seen how the surging U.S. dollar against everything, the yen, the euro, the Chinese currency, it's cut into sales and profits. At Salesforce and Microsoft,

those headwinds have increased. And Nike, of course, is a very global company with more than half of its sales coming from overseas. And finally, North America. Remember lately, the supply chain issues and shipping problems have hurt Nike's business in its home market here in the U.S. It just couldn't get enough product out to stores and on shelves and to customers. Has that improved? You'll see that show up in the North American business. Also, John, always keep an eye on direct sales. That's been a bright spot for Nike. Sales in its own stores, its sites, its sneaker as an app, that's really where they've revved up the growth. And it should be a good

indication of brand strength overall if that holds up amid some of these macro issues like China and foreign exchange. All right, Sarah, thanks, Josh. Thoughts on Nike, final thoughts on the market action. I mean, how much of the bad news is priced in? Look, I think we can say that a lot of the bad news has priced in in the technology sector. The problem with that is those are always going to be high beta stocks. So even if we get to a point where you say to yourself, OK, this is the cheapest I've been able to buy this particular software company in three years, it doesn't mean that that valuation or that discount is going to give you the cover that you need to feel good about taking a full position. So I would tell people who are bottom fishing right now, act as though it's a bottom, not the bottom. And the worst case scenario is you'll wish you bought more. But I think that that's a much better thing to have regrets over

than making all in bets at this stage in the game. I think we're still in a technical no man's land and these things tend to take a little bit of time to work themselves out. So you're taking a nibble on things here and there. Clearly not Robin Hood, but some of the quality names that are at a bottom, not the bottom perhaps worth playing? Yeah, John, if you go back and look at the last few major market bottoms, let's say just over the last 20, 25 years, you can always find large cap, well-known stocks that

had bottomed well in advance of the overall market. Amazon is a classic example of that. And we can find companies today that may have seen their worst levels. We'll only know definitively whether that's true on a case by case basis if we look back a year or two years from now. But I think it's reasonable to assume there are companies where their share price has more than discounted the challenging environment and has done going down. Well, speaking of Josh, thank you. We are heading into the closing bell right now with the Nasdaq near the lows. It's down almost a full percent. The S&P and Dow still just down fractionally. They've been in about that range all day. The Dow looks to be down around 70, 80 points.

The S&P off about a third of a percent. Meanwhile, you know, you got all of that, but the Russell has been performing better than those all day. It ends up fractionally.