Closing Bell - Closing Bell: Strong GDP boosts sentiment, Tesla drives a Nasdaq rally, Diageo buzzkill 1/26/23

Episode Date: January 26, 2023

Stocks rallied after GDP came in above expectations, giving a boost to investor sentiment, while the Nasdaq surged on strong Tesla earnings. Council of Economic Advisers Chair Cecilia Rouse joins to weigh on the state of the economy and inflation, and how that meshes with the recent wave of tech layoffs. Rouse also discusses news that Chevron is undertaking a $75 billion buyback, and how the White House views that use of capital. Meantime shares of spirits-maker Diageo fell on concerns about North American growth. CEO Ivan Menezes joins with his read on the US consumer and the boom in tequila. Plus the latest on Nike, IBM, and Southwest’s big hit from its holiday disruptions.

Stocks moving higher as stronger than expected GDP boost sentiment with the Nasdaq getting an extra lift from Tesla's solid results. 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. There's the Nasdaq up a nice 1.3 percent. Thank you to Tesla for that one. The Dow's up about 130 points. High of the day was 177. S&P 500 is up eight tenths of one percent. Energy is the leading sector today after that Chevron buyback that was announced. We'll talk more about that, of course. Consumer discretionary, communication services, technology, all leading sectors. In fact, you've got most of the sectors green right now. What's lagging? Consumer staples and health care. So two defensive

groups. And again, the Nasdaq in the lead up one point three percent. Thank you, Tesla, Microsoft, Apple, Meta, Amazon. They're all higher today. Look at Tesla in particular because it is adding to strong gains so far this year, following record revenues and earnings that topped Wall Street estimates. We're going to talk more about it later in the show. Also ahead this hour, Council of Economic Advisors Chair Cecilia Rouse joins us to talk about today's GDP print, plus the White House's response to news that Chevron is undertaking that $75 billion buyback,

something the administration has been very critical of in the past. We'll start off, though, with the Market Dashboard Senior Markets Commentator, Mike Santoli. Kind of a broad rally, Mike. What are you focused on? Yes, Sarah, and I would just emphasize another sort of tenacious showing by the dip buyers today. Yes, it was a reassuring GDP report that started things out, but it could have been taken the other way. We could have started to reprice and rethink what the Fed's going to do. Could have maybe started to feel as if the negative elements of the GDP number were going to start to come through. But it seems like the bulls are making a further bid to perhaps win back the benefit of the doubt.

Now, nothing is determined here, but you know the line. We basically crossed above that downtrend line that's been in place for a while. The next thing to keep in my word, about a six or seven week high, 4,100 early December. That line is setting a higher bar than just going flat. I think you do have to overshoot it a little bit to really get the benefit of the doubt back. But clearly, you no longer have tech really leaning on the indexes. At the same time, cyclical stocks really started to perform relatively well. Take a look at the buyback ETF alongside the S&P 500 over five years, as well as the dividend aristocrats ETF. Now, this is simply meant to show that it's not as if companies that

buy back a lot of their shares automatically tend to outperform. In fact, it's for long periods of time not the case at all. Here's the S&P 500. On this span, it was really outperforming both dividend and buyback strategies for quite a long time. Yes, it helps the overall market. It puts cash back in the investors' hands, out of the company coffers. But it's not necessarily the kind of thing where you can automatically goose your share price, Sarah, simply by repurchasing your own stock. You wouldn't know it, though, from today. Right. The reaction. It is. Well, yes, if you have great cash flow and you can also invest at the

same time like Chevron, it does help. Just want to run through a headline here. Take a look at shares of Bed Bath & Beyond just putting out a filing saying that the company does not have sufficient resources to repay amounts under its credit facilities. There's the reaction down 27 percent. So here we go. Yes. So this is a not unexpected further shoe to drop here once Bed Bath has already talked about the perhaps difficulty they're going to have to service the debt. In fact, the way that the company's corporate bonds trade basically said it's a done deal, that they're going to have to restructure this thing somehow. So we know it's a meme stock. We know that it gets-

The meme traders never got to the bond market. No, of course not. And you know that it's still going to be a story. Even after this, I already saw some of the chatter saying, you know, we still can squeeze this thing higher. So this is something that sort of suggests that things are getting worse more quickly. Mike, thank you. We'll see you soon. Mike Santoli. Our next guest is calling this market a Cincinnati Bengals market, which is why you know he got the invitation to be on the show, saying the rally this year is real and doesn't get the respect it deserves.

Joining us is Carson Group chief market strategist Ryan Dietrich. Agree regarding the Bengals. They don't get the respect that they deserve, and I think we're proving that, aren't we, Ryan? What about the market? You think the bull market is just not loved or believed? That's right. I did wear my Bengal orange here sitting in the city of Cincinnati.

You think about it, no one believed the Bengals. They just proved it last Sunday. They're legit. And we see this bull market, right? I was on with Mike the second week of October saying, this is near a major low, We're probably going to rally. And we gave me a funny look when I said that. But look at what's happening. And stuff Mike just said, the cyclical areas that are leading tech is finally participating. You know, you've got

the credit spreads are still tight. The economy is not perfect, but all that negativity. I mean, everyone that comes on this show, right? What are they saying? Things aren't that great. But from that contrarian point of view, with the leadership we're seeing, the strong market breadth to us, October was the lows. And this year could surprise a lot of people, much hopefully like the Bengals will, and be a really good year for investors. All the way. We're going to win it this year, the Super Bowl, Ryan.

So I get that people started the year really negative. There was a lot of bearish sentiment, a lot of concerns about the economy collapsing. Twenty three is going to be the year of recession, all this stuff. And so people were too negative. But that can only take you so far, right, where you get offsides on positioning. What is the actual bull case for why you should be in stocks right now with earnings and the economy set to slow? Yeah, exactly. I mean, well, let's not forget, right, the stock market tends to lead the economy.

And you think about this U.S. dollar is so much lower that that strength dollar last year hit earnings hard, and we're seeing that now. What we think is the dollar weakens as we continue with the fact inflation's coming back sooner, the Fed's likely got one or two more hikes, then they're going to pause. Those are all in there, but I'll tell you,

at the end of the day, it's the consumer, right? I mean, look what MasterCard said, what Visa is probably going to say, the GDP number. The consumer still is strong. It's not perfect. But that is one of the reasons the Carson Group, we've been saying the whole time, we don't see a recession this year. By the way, it's the third year of a presidential cycle. We haven't had a recession in the third year of a presidential cycle going back to World War II. And we all know you get a third. Well, maybe you don't know, but here's what you need to know. There's a 32% bounce on average off of a midterm year low, okay? We just had the midterm year low October 12th. That would get us

close to all-time highs. We're not saying we're going to make all-time highs this year, but it's not as crazy as it sounds when the strength and tendency of a third year of a presidential cycle. Got it. So you're talking about the cycles and the seasonalities and the and that sort of the patterns, which I know you do a lot of work and I follow your tweets on that subject. So, Ryan, who's the, you know, Cincinnati Bengals might be underestimated, but we do have some stars and people don't underestimate them like Joe Burrow. Who's that of this market? Where do you look for leadership? Yeah, we're sticking with the cyclicals, right? Those cyclical value, your industrials, your financials are starting to come in, their materials, right?

As China reopens, look at copper, look at those base metals. Those are some things a year ago right now, Sarah. A year ago, what was leading? Utilities, maybe some health care, some staples. It is a 180, right? Are people listening to what the market's telling them or not? But we are getting leadership from the right areas now. And those are the groups we think can continue to lead as we likely avoid a recession and actually get better economic data the second half of this year, thanks to that weak dollar. But isn't it predicated on the dollar continuing to weaken and treasury yields continuing to fall? Yeah, not the whole thing, not all of it. But yeah, I mean, clearly, if the dollar were to

soar again, that would be a headwind for the bulls. But again, with what we've seen with global banks, the Fed did its hikes already, and now the rest of them are catching up. We still need to pressure the dollars to the downside, and likely that can be another tailwind for the bulls. I feel like what could work against your case is that there's a feeling that the market is too optimistic about the Fed pause, a potential Fed pivot into cutting, and that a lot of this rally is predicated on that. You know, we just got this 2.9 percent GDP number. It's not good news. The Fed is trying to slow growth and slow inflation. I guess it's good to have economic growth, but not at a time where the Fed is hiking. And now there's an expectation it

will have more work to do. Now, you're right. And let's be honest, the next two quarters, we might see negative GDP. We'll see. We saw that obviously last year when we came back. So maybe that's what the Fed wants. But the truth, again, if you look under the surface, right, we've talked on these shows before, rents are lower, used cars are lower. Those are things you wanted to see come back, right? And they are. And it's going to continue to kind of press inflation lower. And that likely will give the Fed the leeway again to just kind of take a look around and say, OK, we had 40-year highs in inflation. We're comfortable where it is. And we think that's what's going to be the case here. How long have you been bullish? Have you always been this bullish? Well, we were even

weight equities until the last week of December at Carson Group. I think December 23rd or so, we went to overweight equities, and we're expecting between a 12% to 15% bounce this year in stocks in the S&P 500. Got it. All right. Ryan, thank you for joining me. Appreciate it. Thank you. Who day? Thank you. Oh, it's good to have a who day. Ryan Dietrich. Still ahead, Council of Economic Advisors Chair Cecilia Rouse swaying in on news of Chevron's buyback, plus her take on the state of the economy following that GDP print this morning. You're watching Closing Bell on CNBC,

up at 120 on the Dow. Look at Chevron. It's soaring today, the entire energy sector up a bunch after Chevron announced a $75 billion stock buyback, along with a dividend hike. The news prompting backlash from the White House and officials telling CNBC, quote, for a company announced a $75 billion stock buyback, along with a dividend hike. The news, prompting backlash from the White House and officials telling CNBC, quote, for a company that claimed not too long ago that it was working hard to increase oil production, handing out $75 billion to executives and wealthy shareholders, sure is an odd way to show it. We continue to call on oil companies to use their record profits to increase supply and reduce costs for the American people. Joining us now first on CNBC on this, the economy and more, the chair of the Council of Economic Advisers, Cecilia Rouse. Chair Rouse, good to see you again.

Thank you. It's great to be with you. Just on the Chevron buyback story, what exactly is the problem that you guys have? Because this is a company, along with many others, that's spending $14 billion on R&D to increase production in this country. So look, we learned today, as you noted in your earlier segment, that in the last quarter of 2022, the last half of 2022, that our economy grew at a solid pace. We got annualized 2.9 percent GDP. We saw that. We also had unemployment insurance claims today. We see that unemployment insurance claims remain near historic lows. All the while, we see that the quarterly price index for GDP has moderated. I have not seen the monthly change. I'll get that later today and we'll report that

tomorrow. But we see that inflation, CPI, PPI, that's easing. So we see an economy that has been resilient. We see prices easing. And all the while, if we think about what the president was just talking about, all the investment that we are in the process of starting to do and will continue to do of investing in America, this president, his entire focus is on making the important investments so that we can increase productivity here and generate economic growth that is sustainable and that is more widely shared. So, you know, the issue with Chevron's buyback is they made record profits. They could choose to invest that. We know we have big challenges in energy going forward. They could choose to invest that. Instead,

they chose to do stock buybacks. This is a president that is focused on our future, focused on making investments, making things here in America, ensuring that Americans have jobs here in a way that is sustainable and, again, more equitably shared. I think just on this point, and then we can talk about the broader economy, just on the Chevron point, it fuels this idea that the president is at war with the oil industry, and they're not speaking the same language,

when in fact these oil companies are increasing their production, their capex. And as far as capital discipline, they're doing it the best way they know how. I think back to the early 2010s when the oil companies just spent everything on production. And then we had a glut and then we had six years of a bear market that crushed their that crushed their companies. So I don't know. It feels like a difficult thing to tell them how to manage their capital. Well, look, the president understands that companies need to make their investments and

they're making their decisions. But what we can see is that the price signal suggests that we should be making these kinds of investments. Energy is crucial to our economy. The president believes in, again, forward-looking. We need to be making investments to ensure we get that we have the energy we need to power this economy. You know, he's a president also that believes that the kinds of revenues of rents should be more equitably shared in this among Americans. So the president is mostly

focused on the fact that we need all hands on deck as we focus on investing in our energy sector. And he expects the energy companies to participate in that. Yeah, well, I think they would argue that they are. But on the economy, Chair Rouse, you know, the GDP number certainly looked good on the surface, but one and a half percentage points of growth was inventory bills, which isn't necessarily what you want to see for healthy growth, is it? Well, so look, as we've all understood, the in 2021, 5.7 percent, it was largely fueled by our recovery from the pandemic recession. That was unsustainable. So we've known that we're going to need to make this transition to a lower level of growth that is more sustainable, that is powered by productivity increases. And that was going to involve, you know, easing off of the altitude that we achieved last year. So we expect it to cut to that.

We expect GDP growth to slow down. We believe this is part of the transition and that we are we are again, as I mentioned before, we're looking forward to achieving the kind of productivity growth that's powered by increases in productivity that are solid and sustainable and therefore will, you know, and generate that we have economic growth going forward for decades to come. Here at CNBC, we cover the companies and every day there are at least a few high profile companies, whether through their earnings reports or separate announcements that are laying off workers, thousands of workers. And now it's expanded from high growth tech companies

that boomed during COVID to other companies like IBM, Dow Chemical. I mean, we're showing a wall with some of the recent announcements. What do you make of this growing trend? How concerned are you? So we do keep our eye on the data. What you're citing are

individual companies making these announcements. I just noted that if we look at unemployment insurance claims this week, if we average over the last four weeks, if we go back, they've remained low. That said, we are keeping our eye on these data. We're looking at the Warren data as they come out. And we will, you know, look to respond as we go forward. But at the moment, we are you're responding to and we're keeping eye on as well individual companies, but they're not they are not reflecting at the moment the broader economy. When you say we will respond, what do you mean? What would be the response from the White House to increasing unemployment? Well, we look, we understand that we're going to have to have a renormalization as we get through. We are still working through the effects of the pandemic.

So we know that there's going to be a renormalization. What I'm responding to is the fact that we understand that there may be some, as the Federal Reserve cools the economy, there may be some response in the labor market. But we have counter-cyclical measures, unemployment insurance. We have, again, these investments that we see through the bipartisan infrastructure law, the Inflation Reduction Act, the CHIPS Act, where we are starting to make these investments, which will also call for increasing, we're just getting started on implementation, that will call for increasing jobs for Americans.

So we believe that that some of those investments will provide a kind of counter cyclical measure as the as the Federal Reserve is also easing inflation. So, you know, we're we are keeping our eye on we are keeping our eye on the economy. But so far, we understand that these individual companies have made these announcements, but we're not seeing it yet in the in the broader data. No. Yeah, it's it's been a question mark, too, for us, even when we look at the monthly data. So on the inflation story, which is really what it's all about for the markets, the economy, the Fed, do you think we've seen the peak and how fast do you think it comes down from here? So I, you know, I don't pretend to understand where we're headed. But what I can say is we've been seeing what has become what, you know, largely a trend. We've seen a deceleration in inflation, monthly inflation of the last half of the year. Again, when we look at the price index of GDP from the quarter, we saw some easing there as well.

So certainly it's all trending in the right direction. There are threats on the horizon. We still have Russia's unprovoked war in Ukraine. We have it's all trending in the right direction. There are threats on the horizon. We still have Russia's unprovoked war in Ukraine. We have China's reopening. We have the threat of the debt ceiling, which would also generate some turmoil in financial markets as we get closer. We need to raise the debt ceiling. We need to be paying our debts. So we have those debts on the horizon. But what we've seen to date is inflation. It has now. It's not just been one month because we don't like to focus on just one month.

But we have seen a trend of inflation that looks like it's headed in the right direction. Chair Rouse, thank you so much for joining me today on GDP Day. Appreciate it. Thank you. Cecilia Rouse from the White House. I want to point out shares of Southwest. They are sinking today after the company outlined the damage done from the holiday travel meltdown. Philip O. spoke with Southwest CEO earlier, joins us more.

Phil, did he have good explanations for folks that are so angry at this company? Not the kind of explanations that I think people want to hear. Look, they admit that their system just could not handle the level of cancellations and the cascading effect of rebooking tens of thousands of passengers in a very short period of time. The impact of that, we saw it in the bottom line. They reported a worse than expected loss of 38 cents a share. The street was expecting a loss of 12 cents a share. The impact of the meltdown itself, $800 million. Here's CEO Bob Jordan talking to us about what happened

and why he believes they can make sure it doesn't happen again. It wasn't, just to clear it up, it wasn't a failure in the scheduling software. What happened was we got to the point there were so many transactions to solve that we got behind, and the software is not designed to solve past problems. The good news is DE Digital already has a fix in place that's in test today that will be able to handle that condition if we get there again. They hope they don't have to get to that point again, and they know that they are already feeling the impact of that meltdown here in the first quarter. It's going to be an impact of $300 to $350 million from people canceling flights,

bookings slowing down. They believe that bookings will accelerate and get back to a more normal level starting in March. We'll have to see. It's a little bit too far out at this point. As you take a look at shares of Southwest, keep in mind that spring and summer are going to be critical for us to get a better perspective about whether or not there is any long-term damage here, Sarah, in terms of the brand, in terms of customers saying, I've had it. I'm not coming back to Southwest. A little too soon to say that at this point, but again, it's clear the numbers today show the impact of the fourth quarter, and we're also seeing it here in the first quarter.

Yeah, you certainly got that vibe on social media if you followed it. Phil, thank you. Phil LeBeau. Let's check in on the broader markets right now. Dow's up about 155 points or so. The high of the day was about 170. As far as what's working in terms of the sectors, you've got steel, oil and gas. That's the best performing. But a lot of the consumer sectors are working too, like casinos, for instance. Energy is at the top of the market. Consumer communication services, those are the top three. Talk about a buzzkill. Shares of Diageo, the parent company of Johnny Walker and Captain Morgan, falling today on the back of earnings and concerns in particular about North American growth. Up next, you'll hear from the company's CEO, his read on the U.S. consumer, plus his thoughts on inflation, supply chain, and of course, the boom in tequila, when we come right back. Shares of spirits maker Diageo,

parent of brands like Johnny Walker, Kettle One, they're moving lower today on the back of fiscal first half earnings. The company topping sales estimates, but analysts are pointing to results in North America, which still showed growth, but not as much as expected and weaker volumes, too. I spoke earlier with CEO Ivan Meneses and began by asking him about the business in the United States and what's happening here. The U.S., actually, the consumer offtake is robust. So what we're seeing in the US market is through COVID, growth rates had accelerated. You know, our US spirits business is 45% bigger than it was pre-COVID.

And when you look at consumer offtake trends, the market has come back to about mid single digit growth, which is what we've always expected. And we're holding share. So what you're seeing in our reported sales results is a bit of the supply chain discontinuities from last year, restocking from last year, and replenishing stock into distributors. So underlying health with the consumer strong, the top end premiumization strong, and I remain confident about the U.S. consumer and the spirits market fundamentals. So it's not, it sounds like you're saying it's not necessarily consumer recession behavior. We're

trying to figure out a lot of mixed messages here on the U.S. economy. Yeah. So the way I, if you look at consumer behavior and even if you look at the retail sales through November, December in the U.S., I think what you have at work is the consumer is savvy, very smart in terms of how they shop and what they want. So if you looked at November, December retail sales in the U.S., grocery and beverages did well. They were 6%, 7%, 8% growth. Things like electronics and furniture declined. Apparel was weak. And so what you have with the consumer is they're making very deliberate choices, places they want to spend and where they want to cut back. And we fortunately belong in a category because people

long for socializing and celebrating. The on-trade restaurants and bars are very strong and doing really well in the U.S. And so our sector and our category belongs in the bucket of people wanting to spend to make those moments count and to make them more special. And that's why we see premiumization strong. I mean, single malts, for example, were up 60 percent in these numbers in the U.S. Brands like Lagavulin had a terrific time. Bullet Bourbon was strong. Tequila continues to grow off a very big base now. We grew 28% on tequila with Casamigos and Don Julio.

So the two trends that persist through this period is consumers prefer spirits to wine and beer, and they're drinking better. And so premiumization has held up. What's happening with pricing? Are your costs coming down, and are you able to moderate those higher prices for the consumer? Well, we're fortunate in that we have multiple levers to deal with inflation. Inflation is real. It's high. We had high single-digit goods inflation. But we use a combination of productivity inside the company, which we continue to step up. The fact that we are selling more

premium products where we make better margins. You know, Johnny Walker Blue Label doing very well gives us higher margins. Half our liquids are aged. So the whiskey that goes into a bottle of Lagavulin or Johnny Walker Black Label was distilled 12 years ago. And then we look at price. So we are taking price but we have more levers to offset that and that's why I'm pleased in these numbers where we grew sales 9%, we were able to expand margins, we grew profits

10% while we were investing back in marketing and digital and capital spending in the business. So we use price in a very targeted and judicious way because our goal is to ensure we keep consumers. And we had volume growth globally of 2% in these numbers. 2% volume translating to 9.4% sales growth. And we think that's really important to keep volume growth going. Finally, how does January look so far, Ivan? Is dry January really a thing or is it just a thing people talk about?

Our January start is positive right across the world. So we're seeing the market strong and we're feeling good about the strength in December and the continuing strength into January. And clearly in the US, in Europe, right across the emerging markets, in China, the reopening will take a little while, a few weeks or a quarter or two. But we're very confident about China coming back strongly as well with the consumer.

I also asked Menezes about the growing popularity of tequila. He said it will be a strong growth engine for the company, noting that just 15 percent of American households are drinking tequila versus 30 percent for whiskey and for vodka. So long runway there. It is the fastest growing spirit right now. Up next, former Cisco CEO John Chambers on the recent wave of tech layoffs and why that could result in dramatically lower turnover in Silicon Valley going forward. You've got the Dow pushing higher, up 174. Now we're nearing the highs of the day. Salesforce, Chevron, and Microsoft are doing the heavy lifting. We'll be right back. Welcome back. Let's get to the big picture on tech. With all the hand-wringing over the mega caps and the major pullback in enterprise spending, some of these

earnings are not proving as bad as feared. Look at IBM, a beat on sales, but the stock is down more than 4%. Concerns about the miss on cash flow, some deceleration in the hybrid cloud business. But as for overall spending demand, CEO Arvind Krishna tells me he doesn't see a slowdown in enterprise spending, especially in Europe, where he had expected to see weakness. He also points out that their layoffs, 3,900, are just 1.5% of the workforce, lower than that we're seeing in other places around technology and only in the parts of the business that are not the primary focus, like Kindrel, which was spun off. Look at ServiceNow. Software is a service player. Stronger

quarter anticipated after our interview with Bill McDermott, the CEO in Davos last week, when he was very bullish. We saw 20% revenue growth, and it would have been 25% without currency exposure. And then Microsoft, even though guidance came in below consensus, the company's revenue is still growing, 2%. CEO Satya Nadella says usage of Windows is up 10%. The bottom line, take out some of the tech players that have big consumer exposure that expanded and boomed during COVID and are now having to give that back. Look what's happening with underlying trends in business spending on IT and software. And the picture's not as gloomy as many in the markets might think. For more on the tech landscape, let's bring in former Cisco CEO John Chambers.

He says we're in the middle of a fundamental shift in labor dynamics. John, always an optimist. What is your take on all these layoffs we've been seeing across tech? First, I think it's a very small percentage of the total workforce. If you'd looked at the headcount in both these companies and in the startups three years ago, it was up like 40% in three years. And in the last year, many of these companies grew their headcount almost at twice the rate that they were growing their revenue. So half of this was self-inflicted, but the numbers are relatively small.

The points that you made, Sarah, are very good, and I'll compare it to 2001 in a positive way. In 2001, the companies were growing very, very rapidly. But boy, when the spigot got turned off, I'll use my prior company's example, Cisco, we went from 40 quarters in a row of 50 to 60 percent growth to in 45 days a negative number, which is mathematically impossible. So these are relatively small on the correction side. Arvind from IBM said it well. I've got 20 startups. We see no weakness in enterprise spending. It is remarkably solid.

There are areas that are more solid, such as artificial intelligence and cybersecurity within that. And for the tech companies, I think, especially the smaller ones, it was a good reset. When you have free money, you don't develop the basics like the profitability and free cash flow. I've done that pretty well with our startups. I have now 11 unicorns. Now we had two the last time we talked about a year and a half ago. And almost all of them are growing. So it's solid. That's the negative, however. The economy is stronger than people anticipate. You commented about MasterCard and Tesla on the consumer side and the business side. So I think

until you see a slowdown and a flattening out of the Fed activity and the first step down, that's probably when I would be more optimistic about the market moving. So the question is, is the resilience in the tech space and enterprise spending in particular and everything that's exposed, is it just because the economy has more strong fundamental demand than we anticipated going into these rate hikes? And is the weakness coming? Or do you think this is something secular that's going to insulate certain pockets of tech? I don't think anybody's insulated from a recession. But I think the question you're

leading me to is tech is here to stay. If you look at the top 25 jobs, best jobs in America, half of them are tech jobs in every category imaginable. If you look at every company going digital and everyone in the market looking at how they gain competitive advantage, use automotive as an example, you differentiate your cars on your electronic dashboard, your electronic car system, and self-driving. So almost all the big moves over the next decade will be tech. Now, having said that, Sarah, you and I have seen this movie before. Out of the top, let's say, 20 tech players today, you'll probably only see 10 be in the top 20 10 years from now,

and there is no guarantee on who wins. I would anticipate out of the top six or seven tech companies, two or three exit the decade in no longer a leading position anticipate out of the top six or seven tech companies, two or three exit the decade and no longer a leading position in terms of the opportunity. They will be filled by others. It's hard to stay on top. Do you have an opinion on which ones? Yeah, the ones that I really like, and the numbers are pretty solid here, is the cloud companies who are also moving into the application stock. So out of the four large cloud players, you look at Amazon, you look at Microsoft, you look at Google, you look at Oracle,

they are positioned remarkably well. Probably one of them will stumble. That's just the way the market works. I personally like Oracle. I think what Larry Ellison and team is doing there is very, very creative. You talked about service now. That's kind of a new player into this market. Bill McDermott's a tremendous CEO and a great friend for many years. I like that one. And while we're on favorites, I want Cincinnati to win this weekend, but I want them to play the 49ers here shortly.

There's Ronnie Lott, Jerry Rice, and Steve Young signatures behind me. So I love Cincinnati. I lived there for a while. I want you to beat that very well on this weekend. But I'd love to see you. You know what? That would be a problem for my household if it's 49ers versus Bengals. That'll be a marital strife, but would be an exciting game. John, thank you. Appreciate it. John Chambers, always good an exciting game. John, thank you. Appreciate it. John Chambers, always good to see you. Your perspective on tech. Thank you. Former Cisco CEO.

Look at Nike, one of the best performing Dow stocks over the last three months with a nearly 40% rally. Coming up, the top ranked retail analyst on Wall Street. That's JP Morgan's Matt Boss. Here to explain why he thinks the stock is heading even higher after just hiking his price target to 156. We'll be right back. Check out today's stealth mover. It's Boot Barn. The stock is a real barn burner. Shares of the Western Apparel and Boot Retailer are roping in big gains after reporting revenue came in at a higher range than Wall Street estimates, although it did miss on the bottom line.

Shareholders are encouraged by momentum in same-store sales and inventory reductions. Stock is up almost 17%. I think the Western theme is still trendy. Tesla shares are electric today and significantly outperforming the broader market after better-than-expected earnings. Look at the stock, up more than 10 percent. Up next, what CEO Elon Musk is saying about demand for EVs. That story, plus the top ranked retail analyst raising his price target on Nike when we take you inside the market zone.

We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli is here to break down these crucial moments of the trading day. And we've got the number one ranked retail analyst on Wall Street, J.P. Morgan's Matt Boss, with a new call on Nike. We'll kick it off at the broad markets, though, Mike. We are going strong near the highs of the day. NASDAQ in particular up 1.8 percent. And some new names on the 52 week highs list. Starbucks, Chubb and Oracle. John Chambers is famous favorite tech company, as he just told us

right now. Pretty nice, resilient market. Yeah, without a doubt, Sarah. I mean, really, the market is doing pretty much everything the bulls would ask of it in January in terms of how broad the rally is. You mentioned some of those selected new 52-week highs. You have 52-week highs in general outpacing lows by a decent clip. Part of that, again, is because we're more than a year past the peak of the market, but it still shows you some traction. People feel underinvested. The S&P above 40, 50 essentially gets above that sort of downtrend that everybody's been watching for months and months, which has capped rallies in the past few attempts in recent months. So I think it's all to the good.

We don't have a good earnings beat rate in aggregate. The market is looking a little bit beyond that. The soft landing story is still kind of building evidence for the case, though it has not proven anything. So we'll see. We've got inflation numbers, and we have to see if the Fed is going to take this kind of relaxation in the markets as further ammo to push back against it. The market right now is not positioned as if it fears that.

Let's hit Tesla. A big part of the story today, charging higher after a record-breaking quarter. The automaker posting its highest ever sales and beating on the top and bottom lines. CEO Elon Musk also forecast production could be as high as 2 million cars this year. And he spoke of high demand on the company's earnings call last night. Listen. Thus far in January, we've seen the strongest orders year to date than ever in our history. We currently are seeing orders at almost twice the rate of production.

So it's hard to say whether that will continue twice the rate of production, but the orders are high. And we've actually raised the model at Y price a little bit in response to that. So we think demand will be good despite probably a contraction in the automotive market as a whole. Shares have certainly recovered from some of the losses seen last year. Worries over weakening demand, price cuts, must focus following his purchase of Twitter all had been weighing on sentiment. Mike, he needed this. He needed this good quarter to prove that what they're doing is still working. For sure. It's without a doubt a relief to people who thought it could be an ugly set of results and guidance and everything else.

And certainly it's, I guess, encouraging. He's saying that the lower prices have elicited more orders. So you do have the demand response. But nothing really has yet changed the questions about what it's going to mean for margins given the lower prices. Earnings estimates have still been going down in general for this year and next year. And then it becomes a debate like any stock of what to pay for those earnings. I think the company has an investor meeting coming up in a month or so. They're going to want to dazzle investors with a lot of new product stuff. And here we're still going to be creating the future. But right now it's about where are margins going for the number of cars you're

likely to sell this year and how much do we want to place a multiple on that. So I don't think it's a full turnaround. Stock's back to where it was in mid-December. 58 percent off the highs and 57 percent off the lows. There you go. Which gives you a picture. Let's hit retail. J.P. Morgan's Matt Boss, number one retail analyst on Wall Street, just raised his price target on Nike to 156 from 128. Keeps an overweight rating, of course. Boss saying the overarching takeaway from a management roadshow is that it has emerged from the pandemic as a stronger direct-to-consumer brand

with a full product pipeline. He also raised targets for Foot Locker over its Nike ties, but kept a neutral rating. Matt joins us now. So you had a bunch of meetings, Matt, with management here at Nike. What did you learn that made you feel more confident? Yeah, thanks for having me on, Sarah. So we spent the last two days with Nike. And like you said, the overarching message here was this company is exiting the pandemic in a stronger position than they entered. Very robust product pipeline. They talked about basketball, running and women's all impacted during the pandemic and all with a pent up pipeline. The best that they've

seen in years. They're resetting the marketplace. Full price selling is strong. You have 20 percent of revenues that historically have come from China. I think there's a micro story in China and now you have a micro and macro reopening story emerging. Plus the self-help margin drivers over the next two years, the recapture of freight, as well as some of the inventory actions. And they believe coming out of their fiscal year, which ends in May, they will be clean across the board from an inventory perspective, which I think is a huge, huge positive for the overall athletic industry. So, you know, some of the arguments that you get

on the other side, first of all, that it's widely loved, it's expensive, you know, it's outperformed. Also, you know, people aren't buying as much of that kind of clothing anymore now that they've they've started to go out. You know, they had they had their moment during covid along with other covid winners. And the China story is far from certain. So somebody is buying it. Twenty seven percent constant currency in the second quarter growth, strongest demand over the last two quarters that the brand has seen. Full price selling, even excluding some of the units liquidation, is strong double digits. So they're hitting at least, if not better than their historical financial algorithm. Layer in the

recapture of freight as well as some of the inventory actions, you have a 25% earnings growth story for the next two years. That takes you in excess of high teens operating margins multi-year, in my opinion. This is a more efficient company from an SG&A perspective on the other side of this pandemic. And it's very well run with an extremely deep bench. And look, I think that TAM, the total addressable market for active, is tied to casual. And look, I think that TAM, the total addressable market for active is tied to casual. And I don't think anybody could argue coming out of this pandemic that that is larger on the other side than what it was before. And this is your industry leader. Sure. Ten seconds. Do you like it better than Nike or Lululemon? Because I know you've

always liked that story, too. Look, I think both operate in that active segment. I think Nike has more self-help over the next 12 to 18 months. And Lulu is the story that if they continue to operate as they are, there's so many areas of that business that are still in early innings growth. Matt Boss, thank you very much for keeping us posted and everyone on the opportunity you still see in Nike shares. We've got just about under two minutes to go here in the trading day. We're at the highs of the day. Mike, what do you see in the market internals? Yeah, strengthened throughout the day, Sarah. It seems like a little bit of a chase underway, about two to one advancing to declining volume.

That was more like 50-50 around midday at noon. So clearly, again, the breadth of this rally has been one of its stronger points. Take a look at the steel sector. This is a steel ETF relative to the market, and it's basically threatening highs from early last year. And so this is part of that sort of heavier industries, global growth proxies that have been doing very well within the cyclical group. Take a look at the volatility index. It has really come in below 19 now, pretty much at the lows of the last year or so. Clearly, the market not believing that there's really a lot of shock value in the PCE inflation number tomorrow as we're going to be heading into

a weekend before we get to the Fed meeting. Fed meeting next week, Mike. Thank you. As we head into the close, looking strong, up 1% on the S&P. On the NASDAQ, almost 2%. There's the Dow. It is higher by about 181 points at the highs of the day. Salesforce, Chevron, Microsoft, Goldman Sachs, those are your leaders in terms of the biggest contributors. IBM is the biggest drag off earnings. Home Depot and Amgen, too, at the bottom of the list. Energy is your best-performing sector. And you can thank Chevron and a number of the other oil companies that are rallying along with it after that big buyback. Consumer discretionary is strong as well, thanks to Tesla. And so is the Nasdaq comp, which is going to close up one and three quarters percent,

led by Tesla, Microsoft, Apple, Amazon, Meta, Alphabet. They all are higher today. On a day where we got better GDP numbers and better jobless times as well. That's it for me. I'm closing now.