Closing Bell - Closing Bell: The Momentum Mess 2/20/25

Episode Date: February 20, 2025

Does the momentum portend a rough patch for stocks overall? We discuss with Strategas’ Chris Verrone. Plus, JPMorgan Asset Management’s Gabriela Santos and Invesco’s Kristina Hooper weigh in on this time of uncertainty for investors. And, retailing legend Mickey Drexler weighs in on the health of the consumer and tells us where he is seeing pockets of opportunity in that sector. 

Thanks so much. Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. Busy day. This make or break hour begins with the momentum mess. From Palantir to Applovin to Robinhood to many stocks in between, that strategy getting hammered today, as you know, has some wondering now whether an even bigger rollover could be in the cards. We'll ask our experts that very question in just a moment. In the meantime, let's show you the scorecard here with 60 to go in regulation. It has been ugly from the jump today for the majors, led by a big drop in the Dow Jones Industrial Average off the worst levels. We're still down by more than 1%. Walmart, you probably know that story by now, too. It's the big drag there after its outlook disappointed the stock,

having its worst day since November of 23. Far from the only culprit, however, JP Morgan, Goldman, American Express all getting hit as well today. And tech, not much better, although NVIDIA, it's been higher ahead of its key earnings report next week. We'll watch that over this last hour as well. It does take us to our talk of the tape, whether the reversal in momentum

portends a rough patch for stocks overall. Let's ask Chris Verone. He is partner and head of technical and macro research at Strategas. It's good to have you on a day like this. Great to be here. You're watching this Momo roll, and you're thinking what? Yeah, well, first I think we've got to put this in a little bit of perspective. We're 24 hours removed from a new all-time high on the S&P,

24 hours removed from a new high on the triple Q. So to say that this market's on the cusp of some great rollover, I think it's a bit aggressive. What we do have and what we have had are some divergences develop over the last number of weeks. We see it through the lens of momentum over the last 24 hours, hitting Palantir, hitting Robinhood, hitting Carvana, but also hitting Goldman Sachs and Blackstone and BlackRock. So I think the shot across the bow, I don't think we're on the cusp of some devastating bear market, but could we correct or consolidate into, frankly, a weaker seasonal period ahead of us? I think certainly a reasonable view. I mean, you would suggest, though, and you

are that when you look inside the market at the internals, that they didn't confirm the recent record high. It's the first time in really 18 months where the recent highs have not been met with this swell of breath, right? We only have 60% of issues above the 200-day moving average. The advanced decline line this week did not make a new high along with the S&P. Again, these aren't fatal developments, but it's certainly a change in the character. The language that we've been using is this is a very, very split tape. It's probably great for long shore. I think you've seen it all earnings season. This divergence between winners and losers has certainly been pronounced. But what I also think is going on to the surface is you have this subtle leadership

rotation taking hold. I mean, health care is quietly starting to perk up. We talked about it last time on the show. Abbott, Gilead, Bristol, quietly some turns there that I think is reflective of a more modest shift to some defensive sectors. Yeah, I was going to say that's not exactly the greatest sign for the overall market, which had looked a little bit tired lately, though really resilient. We've commented on that all week. Absolutely. And, you know, here's what I think is important, Scott. When we see cyclicality pausing domestically, I think the big takeaway is, though, it's not being extinguished globally.

I mean, the cyclicals in Europe are on fire here. The cyclicals in Asia are on fire. So it seems like anything cyclicality has just migrated to our east. And I think it's reflective, frankly, of a value trade that's starting to take shape globally. I mean, all these things we talk about, health care, some staples, Europe, China, are all part of a stealth value trade. I mean, are you a buyer of that, too? Because, you know, that's been a key part of the conversation as well, that the better value, the better return this year is going to come from Europe and China, not necessarily the United States. In fairness, we were early here, so early in this business is wrong. We were probably too early at this point last year talking about this turn in China or potential turn in Europe.

But I do think this is the real deal. When you look at just the expansion in breadth in Europe, the surge of momentum from China, the very pro-cyclical leadership, Chinese tech, Chinese consumer discretionary, frankly, it looks a lot like how our market behaved 18 months ago over there. The Qs were on the verge of a new high, too. I mean, the Nasdaq 100 was back, you know, a lot after sleeping for a bit. Money started to flow back into tech. You've been watching Bitcoin a lot, too, as it relates to the Q's. Yeah, it's an unusual dynamic where for basically the last two years, triple Q's and Bitcoin have been tied at the hip. And the last

five, six weeks, that has diverged here a little bit. So the extent to which both of these reflect risk on or animal spirits or this very pro-liquidity environment, it's not lost on us that Bitcoin has really not kept pace with the triple Q's here. We'll see what that develops, but it's kind of added to the package of some of these divergences that I think at least suggest consolidation for the broader markets. Listen, the trend is up. The long-term trends are still good. We have a lot of support underneath this market, 5,800, 5,850. But I think tactically there are some reasons for some caution. What happens if, and you're not just a technician, I mean, you look at the macro,

but what happens if too much good was priced in that may not come to fruition like investors thought? I'm thinking of a lot of policy out of D.C. Yeah, totally. Tax cuts, those aren't going to happen immediately. You have some, you know, whether it's CEOs or some of the world's best investors talking about the inability to invest with so much uncertainty around tariffs and other parts of, you know, Trump 2.0 policy. Well, I think what you just did there is you kind of described what our outlook for the year was, where we would be contending with very high expectations. And again, not that that's insurmountable, but I do think the bar certainly going into 2025 was a lot different than where the bar was going into 24. And you kind of juxtapose that with what we saw globally.

The bar is low. I mean, the bar is low in Europe. The bar is low in China. So I think the ability to exceed expectations is far within reach over there, maybe a little less within reach here. My gut here is we chop this market for the better part of the first half. I think the better part of the calendar is found in the second half of 2025 rather than the first half. I mean, the other thing that sort of counteracts any bit of negativity or uncertainty is the fact that earnings have been pretty good. The outlooks haven't been all that terrific of late, but earnings growth was right where people wanted it to be, right? 100 percent. The numbers have been good. I think 75 percent of companies have beat somewhere in that order of magnitude. But remember, the market's about the future, not about the present, right? The market's giving us a read on the future here. So what I really want to watch is, does the cyclical versus defensive softness that we've seen develop really since December? I mean, I think one of the

ironies of the election is it has not ushered in some great move to cyclicality. All that was priced before. So I think the big question going forward is, do cyclicals weaken further and raise the prospect of some type of a growth scare in front of us? Watch the bond market here. Two-year yield in particular, under 415 on twos, you begin to wonder if some type of a growth scare is out there. What's it telling us that discretionary is the weakest of the year thus far? Yeah, listen, I think we've got to look at this equally weighted. Discretionary equally weighted is really not that bad.

Okay, so you're saying take out Amazon, take out Tesla. You don't want to play that game where you're just taking stocks out of the index, but equally weighted, discretionary and staples are about evenly matched so far this year. I think the way that relationship ultimately breaks is going to be important. But Scott, it's a moment of big macro change all around us. I mean, look what dollar-yen here is doing. This yen strength, I also think, is another really important input as to how we want to view the world. I mean, well, since you're talking about that, I mean, I do hear some concern, too, about the potential breaking of longstanding alliances from some of the talk in D.C.

And we'll see what the actions are, whether they match the talk. Is that an issue for investors? Well, I think about it this way. There certainly seems to be great change underway in the world. So why would we not suspect there to be great change with security prices? And I think the most important of those on the macro front is what we're seeing in dollar-yen. I mean, if you look at all the yen pairs, frankly, a lot of them are back to where they were in early August when there was all this concern about the end of yen carry. I think we ought to revisit that and kind of understand what that means for east to west flows, right? That's been so dominant for a decade, money moving east to west. It seems like there's a reversal there now, and you see it with the strength in Europe, you see it with the strength in China, is money

starting to go the other way. It's good to catch up with you on a really busy day. Chris, thank you. That's Chris Verone, Strategas. Well, one of the other things on the mind of the market today, and certainly playing a role, at least somewhat, a bunch of hawkish Fed speak. Steve Leisman is here with that. And maybe, Steve, it was the later speaker of the day who had the biggest impact in the way we should think about what the Fed might be thinking could happen down the road. I think that's right, Scott. You know, and you and I were talking yesterday about the minutes, had the minutes yesterday and three speeches today. It's clear that the uncertainty you were just talking about over fiscal policy from the Trump administration, it has taken a central role in the minds of central bankers.

Fed officials seem more willing to muse publicly about the potential economic effects over these coming policies from the administration. Atlanta Fed President Rafael Bostic, he said this morning that, quote, pervasive ambiguity calls for caution and humility when it comes to making policy. Bostic still sees two cuts this year, but he said, hey, there's a pretty significant amount of uncertainty around that call right now. Chicago Fed President Austin Goolsbee, he said the more tariffs look like a COVID-sized shock, the more nervous you should be. He's really worried about the supply side effects there.

And then what Scott was just talking about, St. Louis, Alberta, Musa Lem, saying immigration policy and higher tariffs are a potential source of higher inflation, and it could be appropriate for the Fed to become more restrictive if inflation from that is sustained. He said the Fed could also look

through those higher prices from tariffs, but that the stakes are higher now because inflation is above target. What's clear is that the administration's policy path is now looming large and the Fed's thinking about its own monetary policy paths. Well, very, very few people came into this year thinking there was much of any chance of the Fed actually hiking rates. We could live with the fact that they were going to go from six cuts to maybe one or two. But when you parse through what Mr. Mousselin is saying for policy to become more restrictive, i.e. we may have to hike if inflation becomes sustained. That really hasn't been seriously considered. It hasn't really been talked about. It's not priced into the market, Scott. And

it's funny that you mentioned that one particular phrase, because I called up somebody who I talked to about the Fed with on Wall Street. And I said, am I reading this right? Is he kind of hinting that if it goes the wrong way, we could be hiking? And that's what he chose to talk about. And that's why we're talking about it now, Scott. It's the right thing. I think it's a low probability, a low probability event. But but it has to be on your radar screen. If these tariffs and just to be clear, if they raise prices and then then what Musalem was talking about was having second order effects that suggest that there's a broader issue. But the key here, I think, to emphasize is this is not 2018. And when Musalem says, look, things are different now, the effects are different, there's more at stake here, that's what he's talking about. The tariffs may not be as benign this time as they were last time.

Yeah, just uncertainty all over the place. It feels like at the moment. Steve, thanks. Steve Leisman, senior economics reporter. Well, the uncertain road ahead for Fed policy, perhaps one reason why stocks have done little since the inauguration. CEOs wondering how policy is going to play out, of course, which takes us to the cruise lines of all stocks, battered today on comments from Commerce Secretary Lutnick. Contessa Brewer joins us with more on that. Quite the rollover for these names today. Oh, for sure. I mean, but it was because Lutnick really threw down the gauntlet when it comes to taxes on cruise lines. He said on Fox News, and I'm paraphrasing here, that cruise companies don't pay taxes and that will change under Donald Trump.

Those stocks sank in response. Look at Royal Caribbean. I mean, down right now, seven and a third percent. You've got Carnival off by five percent, Norwegian off by four percent. Even one spa world that provides the spa and wellness services on ships. It fell eight percent today. The industry trade group told me cruise lines pay substantial taxes and fees in the U.S. to the tune of nearly $2.5 billion, which represents 65% of the total taxes cruise lines pay worldwide, even though only a very small percentage of operations occur in U.S. waters. And then they went on to tell me that foreign flagships in the U.S. are treated the same as U.S. flagships abroad where taxes are concerned. And the group points out that is

exactly consistent with the administration's fair and reciprocal plan for trade. Stiefel's analyst said, look, all these concerns are overblown and encouraged investors to buy the slump, to just get in there and take a cruise. Scott. Yeah, maybe brave today, given some of these moves that we've seen in the stocks. Contessa, thanks so much. Contessa Brewer. For more on these markets, let's bring in Gabriela Santos of J.P. Morgan Asset Management, Christina Hooper of Invesco. It's great to have you both with us.

How are you assessing what this market's doing? So I think as much as we've had a lot of headlines over the last 30 days, I think we're still in the environment where investors, CEOs, individuals are trying to assess the actual details around a variety of policy elements around taxes, around government spending, as well as the flow of goods and talent. And so for now, we're really counting on the momentum that the economy and earnings had going into this year, which was a good one. We still expect around two and a half percent growth. And we do think double digit earnings growth is feasible this year, which

is still a good environment for risk. But in terms of managing the decimal points of all of the major macro factors, we definitely have to have a lot more details on these policy aspects. And it's a tug of war there between aspects that can be good for growth or aspects that can be a little bit more concerning around inflation and margins. I mean, you're not the only one, obviously, thinking about what this level of uncertainty is bringing not only business leaders, but investors. I want you to listen to, both of you, listen to Ken Griffin today, who talked about this down at the FII

summit down in Miami. Listen. It's a very difficult time to invest because of the policy uncertainty that goes with this transformation. And one of the most difficult areas that we're all trying to navigate is not just the status of tariffs around the world, but who will be an important ally to America going forward, and with whom are we breaking down long-standing relationships? That's Citadel's Ken Griffin, of course, down in Miami. The point being, second time in two weeks that he has used a forum to make that case.

High level of uncertainty and very, very difficult to invest in it. Do you share that view? Well, I think it all depends on your time horizon. If you've got a long time horizon, I think it's important to be well diversified and to a certain extent put on binders. Because I do think it's going to be a bumpy road. There's going to be significant volatility because there is uncertainty. We just don't know who the winners and losers are going to be because there is so much in terms of unknowns with policy. I mean, we walked into this year thinking that we were going to have some positives for growth in terms of both

deregulation and ultimately tax cuts, but that would take a little longer, and that we would have some risks presented by both tariffs and if we were to get some sort of extreme immigration policy with a lot of deportations. Those still exist, but there are a lot of unknowns around exactly how, you know, what the depth and breadth of the policies will be the execution we've also added in their doge because that could create significant headwinds for the economy in terms of a cut in government spending and a lot of layoffs that could contribute to an economy where job growth has slowed as Jay Powell pointed out last month in the FOMC press conference.

But you seem to be suggesting to tune out or ignore a lot of the noise and focus on the long game. If you have a long time horizon, I think that's what's important to do. But I mean, Ken Griffin's not investing for the next five minutes, right? The problem is if you're a CEO and you're trying to invest for the next three, five or however many years, the policy uncertainty makes that a little more difficult. We came into this year thinking that it was going to be almost a layup.

Market's going to go up. Economy's going to be good. Animal spirits are going to take over. You're going to have more M&A. What if you just don't get that? Well, again, I hearken back to diversification. There are opportunities around the world in a lot of places. So to have an allocation to the U.S., but also ensure that you're not underweight areas like European equities, U.K. equities, Japanese equities, Chinese equities, some of the other EMs.

Again, we just don't know exactly how these policies play out. But we do know that over the long run, being well diversified and having adequate exposure to equities is typically a good thing. This is now the en vogue trade, the part of the conversation. It's like no one wanted to touch China. It's the third rail of the investing landscape. Europe was a mess, cheap for a reason. Economies in decline, going into recession. You know, their central banks, sure, were going to be more aggressive in cutting before we were. But now everybody's talking about, well, there's better bank for your buck elsewhere. I think it's what we've really been seeing over the last month is if you're a bit unsure about the direction, valuations become very important. And this

involves not just the directional policy and the general macro backdrop, but also around the AI winners, right, after the deep seek news. And so I think this is where the rest of the world comes in. If you take a look at Europe, for example, coming into this year, there was a 40% discount between Europe and the U.S. The normal discount is 15. And this was true in every single sector in Europe versus the U.S. For a reason, right? And then the question is, is there a reason for the discount to be that large? Or is something improving at the margin cyclically? It does seem like it is. There's a little bit of an improvement in manufacturing, in sentiment, in household actual consumption in Europe. But then there's a much bigger question,

and this is where we're not fully settled yet, is if structurally something is changing in Europe around fiscal spending, around more joint debt issuance in a way that's a true game changer. And that we'll see this weekend with the German elections and then perhaps related to some of the issues around the war in Ukraine as well as tariffs. What if there are structural changes currently underway in our relationship with Europe and the rest of the world? They're not cyclical. They become structural. Is that a problem for the market?

I think the question is how Europe responds. Does it seize the moment to join together and fix some of those structural issues that it has around low spending, low confidence, a lot of regulation, low innovation, low productivity or not? And this is where, for example, some of the discussion around reciprocal tariffs might be a useful tool for Europe to get together and think about lowering trade barriers, lowering regulations. These are some of the things that are being discussed, and that could be a pretty big game changer. The other one is around defense spending and having joint debt issuance to boost spending. Maybe some of the tariff talk, high prices on inflation, people paying for eggs,

for example, a lot of money. Are you concerned about a consumer rollover? Look, one of the reasons why we've been able to hit these new highs the way we have is because the consumer has remained so incredibly resilient. Through all of this, through 40-year high inflation, somehow the consumer hung in. Well, Walmart maybe has you believing that, OK, maybe times are going to be a little bit tougher ahead. Is that a problem? So I think it's a risk that has grown, but I still think it's relatively small. I think what Walmart was signaling today was that there are significant unknowns. And so we could see a weakened consumer. I think it all really depends on the job picture.

And again, if we see any kind of significant cut in government spending. We're having a lot of government cuts. For sure. And we could see the song rule triggered. I mean, the reality is we could be heading for something worse. Thus far, though, what we've seen is a very resilient consumer. The worst case scenario, of course, would be a stagflationary type environment. Well, people are entertaining that word. I mean, when you say that the risks are pretty small of a consumer rollover. But they're growing.

But they're growing, admittedly. We are a consumption-based economy. The market's not going to be able to deal too well if you get, you know, a Walmart turns into somebody else and somebody else turns into the next company and so on and so on. Especially with what has been a fairly rosy earnings outlook for this year. Agreed. We could see some volatility, some turbulence. Again, it's not my base case, but I recognize it's a risk and it's a risk that's growing. But there's always the potential for a reversal, of course. Already, some government workers have been hired back that were

recognized as being more essential. So we don't know exactly how this plays out. And that just contributes to the uncertainty. And here's where I think for the consumer so far, we've been continuously very positively surprised. Consumption grew four percent in the fourth quarter. So it seems like it takes a lot to knock overall aggregate consumption off course. But we're definitely watching consumer sentiment surveys, especially around price expectations. And so is the Fed. The last thing we've been thinking a lot about around stagflation is, to Christina's point around diversification, is what we learned during the pandemic is a feature, not a bug. You need

diversification for growth downside as well as an inflation shock. And that's what we still see a lot of clients working through. All right, ladies, we'll leave it there. I appreciate you being with us today. Gabrielle and Christina, we'll see you soon. Thank you. All right. We're just getting started here on The Bell. Up next, Capital Wealth Planning's Kevin Simpson will tell us how he is playing the growth names right now. Joining us right after this break,

we're live at the New York Stock Exchange. And, of course, you're watching Closing Bell on CNBC. All right, welcome back. Growth stocks leading the downside today. Looking to snap a four-day win streak. Here to share how he is positioning right now is Kevin Simpson, CIO and founder of Capital Wealth Planning. It's good to have you here. So what's your first take on the price action within this market today? I think it's a great day for trade school, Scott, because it really is an exemplification of why we need to hedge when we see these stocks, these momentum names really taking off. I mean, any given stock can move higher until it can't. And some of the trades that I hope we get to highlight today are how we've hedged some of the growth names in advance and ahead of this little sell off we're seeing today. Well, go ahead. Let's do that. Yeah. Well, you know, we started our new growth strategy, the Qdevo. And previously, when you and I would talk about option trading, it would always

be 30 days or less on a dividend company. In the growth strategy, you can have a whole lot more fun. There's tremendous price fluctuations, lots of volatility. With that comes a lot more risk. But when you're selling calls and you're generating premium, it's a lot of fun to bring in a lot of cash flow. So the first trade that I'll bring you is on what now is strategy, but micro strategy when we started it. We initiated this position in early November, got in the stock around $350 a share. And then into Thanksgiving, it ran to about $400. There was enthusiasm on Bitcoin. There was enthusiasm certainly on leverage Bitcoin with micro strategy, lots of volatility. We wrote a LEAP, a long-term option. And the acronym is long-term equity anticipation securities, which is a fancy

way of just saying options that expire in excess of one year so we went out to january of 2026 with a 700 strike price so literally we could double the share double the share price and we brought in 160 on the call like unbelievable so over the past few months time has decayed the stocks have come down a little bit. Bitcoin's come down. So the stock's trading in the 320s this week. We took the opportunity to buy that call back, and we literally netted $126 profit when we closed out that position. And on a $350 stock, it brings our cost basis now down to $224. So we're up about $100 on MicroStrategy, even though it's pulled down, and we can continue to write calls against dollar stock it brings our cost basis now down to two twenty four. So we're up about a hundred bucks on micro strategy

even though it's pulled down. And we can continue to write calls against it for the rest of the year so. Important day to think about. Really good stretch hedging strategies. The second one I want to cover it which is important today is

Robin Hood. You know you want to talk about this. You get we talk about a lot on the on the halftime report we love the stock. But look what's happening here. Lots of volatility heading into earnings implied vol. We wrote a leap, a one year call for a sixty five dollar strike and brought in thirteen dollars. Now that gives us up to seventy eight dollars of potential appreciation, which would be like a double round trip if it played out to fruition. But we expect that with any air pocket, we'll be able to buy this back. Hopefully, it'll be a similar trade to what we did with micro strategy. And the lesson is, you know, you can love a stock all you want, but when they go nuclear, it's not a bad idea to take a hedge. Yeah. I mean, you talk about air pockets. I don't know if this is the beginning of a bigger air pocket for the momentum stocks that we've been talking

about so much on the way up. What's your gut tell you when you see a rollover in some of these names like you are today for some more dramatic than others, obviously? Yeah, my gut tells me, Scott, that it's probably not over. You know, you look at some of these names and you can take your pick along the spectrum of momentum and they're up 40, 50, 60, 80 percent. Robinhood, which we're talking about, we bought it in February. And, you know, it's up quite a bit, 40 percent over the past two months. I think it's up 70 percent over the past three months. So this is a name that, you know, had made some massive trajectory to the upside. And when you look at this chart, relatively short,

you can you can see how it could come down to 48 or 45. And at that point, you can think about reentering some of these names. But if you're not in them, I would look at this as an opportunity to kind of get your list together, can start picking away at stocks as they pull down. But after the momentum, after the run, usually you're going to pull back at another opportunity. And I think that's where we're starting now. Not a massive rollover, not a sell off, not the start of the scary bear market, but just a little bit of a breather. That's a normal course of market behavior. How are you feeling about your NVIDIA ahead of earnings next week?

Pretty excited. You know, I wish we could own this in the dividend strategy. We have it in growth. It's a name that hasn't been talked about every five minutes. People aren't expecting it to double every day. So I think expectations for retail investors are a little tempered. And you can't expect 200 percent growth every quarter. But I still think that this is the horse that has to lead the market. They have to have incredible growth. They don't have to blow it out of the water. But we think the growth is going to be really positive. We learned that from the hyposcalers that they're going to spend money here. So I'll be shocked if NVIDIA doesn't deliver. What's your take on the hyperscalers?

Well, you know, we love Meta. It's our number one pick for the year. It's selling off just like we talked about more dramatically in the broader picture after a 20-day run. We also own Microsoft. We know what they're spending here on NVIDIA specifically in most cases. But we think they have the profits and the free cash flow to support it. So this is a stock, Microsoft, that's in the green today. A little bit of a surprise. I don't think I would be buying Meta here. I'd be waiting for it a little bit more of a pullback. But we really love the names

long term. They crushed it in 2024. And they still need to lead the way from an earnings perspective for 2025. Because ultimately, for the market to grow into this valuation, you need earnings to deliver. So far they have, but we really need to know these big names to keep that momentum going. Kev, we'll see you soon. Appreciate you. Thank you. That's Kevin Simpson. All right, up next, retailing legend Mickey Drexler is standing by with his take on the health of the consumer right now, the pockets of opportunity he sees in that space. We're back on the bell after this. All right, welcome back.

Walmart shares having their worst day in a couple of years today after the company gave a dour outlook. It does raise concerns about the health of the U.S. consumer. It's a topic our next guest spends a lot of time thinking about, retailing legend. Mickey Drexler is the former CEO of Gap and J.Crew, where he was also chairman. And he's now chairman and CEO of Alex Mill. Welcome back. We haven't seen you in a while. Chairman only.

All right, chairman only. We gave you a lot of titles. Okay, I like the title. The point is you're a retailing legend. Is that fair to say? Do you take issue with that? I don't like that because if I think that, then it's over. All right. Well, we think that about you, which is why

now is a great time to talk to you. Walmart gives a weak outlook. How do you feel? You're on the front lines of the consumer game. I don't know from the big monsters like Walmart and all that, but I think I do my call-arounds

to my friends. And business has been very tough in January. Business is tough in February. Might be weather. Inflation ain't going anywhere. I think tariffs, who knows what's going to happen with that. And everything, it's sale. Oh, and you know, the designers are getting not great PR these days. Prices are high. And I think people are worried about their jobs. I don't know that.

But you're not describing a landscape that sounds pretty good. Well, I always look at worst case. And then I'd like to beat expectations. But I don't think it's—look, I've been saying in retail that it's all about the product. It's all about integrity of pricing, good value. And I think today it's discount. You know, TJ Maxx has real prices every day. A friend of mine, I told him I was coming on, they said that Old Navy, which I started over 25 years ago, was the first day-in, day-out value fashion company. No sales. You knew exactly what you were getting when you walked in the door, the price you were going to pay.

Yes, and it was style and fashion, which is always part of it, but style that does not go out of fashion. I'm wearing a vintage outfit. Everything I wear is old. Maybe because I'm old, but, you know. Yeah, you do vintage well. No logos. Your company now, which you describe as aspirational, yeah, is doing pretty well. It's doing, I'm very happy to say it's having its moment now.

Part of it is style, taste, quality. I've said the same thing always. Style, taste, quality, value, and most importantly, it's clothes that never go out of style. So I amortize whatever I buy. And, you know, I'm wearing 40-year-old shoes, this vest from Belstaff. We did a lot of business at Jake, who is very old. My shirt's 2014. Since you say, you know, how's the higher end?

How's the higher end? Well, what I hear, and, you know, I hear it's very difficult. There's price issues out there, which, you know, some of the prices are whatever. And this big expansion and the people, I think, personal opinion, it's not such a big deal to wear a designer thing anymore. Logos, you know, the vintage business has never been better. The dupes, which I just learned about, you know, the vintage business has never been better. The dupes, which I just learned about, you know, the counterfeits, I hear never done better. Walmart had the working bag. You know, the Irma is working. So I think we're in a good place now. They trust us. We've come into our own a bit and we have nice clothes and you

don't throw them away. When you talk about tariffs, if you were running the day-to-day of a company like you used to, Gap, Crew or whatever, how would you manage the current environment? I mean, the CEOs have been through this once before, right? It's not their first rodeo. Trump 1.0. Now we're Trump 2.0. Right. We, they presumably expected that you were going to have tariffs because he talked about it all the time on the campaign. None of this should be a shock. Of course. So how would you deal with it? Well, what we did first, Trump, was we started moving a lot of our factories out of China. We didn't have time to do that here. But we're looking at sourcing worldwide.

And we haven't been very good at that at all. And so, but what do we do? You know, everyone's going to pay more money for their clothes. You know, tariffs. I don't know if it's going to pay more money for their clothes. You know, tariffs. I don't know if it's 10%. We're okay. I'm not worried because we do have an aspirational, but a lot of income, middle income, too. But, you know, our prices are very fair now because I don't want to be greedy ever.

Value, value, value. But if you were, let's say, you're sitting in the corner office at a company like Gap, it sounds like you'd have no choice, you're saying, but to pass the costs on to the consumer. Well, yeah. At what point do you make the decision, I'm going to eat the cost or I'm going to pass it on? It's a really good question, very hard to answer. In our case, we are known to give very good value for the quality. So we ride on that reputation, but we're going to be very careful. The thing is, you don't want to overprice and lose day-in, day-out business.

But the reality is, you can wait for sales in many companies. Some of my old jobs, they, you know, sale here, a sale there, a sale everywhere, new goods. So if you're a smart shopper, you just go online and look for what you're going to buy and then buy it online. Well, everybody likes a good sale, no matter what part of the income scale you're at. Part of the tariff issue, obviously, is trying to bring more jobs back and production back to the U.S. What's your take on the idea of just onshoring more manufacturing, making more of the clothes here rather than in Vietnam and China? I have an opinion. I don't think I want to say it on TV because... Well, you're always irreverent. No, no.

That's why the microphone's on you. Okay, well, there's reasons that things are made overseas. And it's a different environment. The needle and all my friends and people in the business, a lot of the stuff, we do all our jeans in L.A. And they have a great jeans, you know, kind of. You make all of your jeans in L.A.?

Yeah, all of our jeans, this one, L.A., we have a great factory there. And they know how to make a great jean. Well, you pay more, obviously, to do that here, don't you? We do, but it's worth it because it's L.A. made, or you can go to Japan and make jeans. Those are the two prestigious places. But I think there are a lot of experts around the world. I met with a guy today who manufactures. He lives in Belgium.

He makes goods everywhere. And he has a great business with great pricing and great quality. But, you know, it's like anything else. I don't know if the factories here are there with the same competitiveness as Asia. And I understand we want to get our fair share. But I think time will tell. I don't know if there's a negotiation involved with, you know, with Mexico or Canada and, you know, we just deal with it. And I think at the end of the day, value, quality, style, and not obsolescence in clothing wins.

Never obsolete, always stylish. Okay, well. Mickey, thank you so much for being here. Thank you, Scott. Stay there for just one moment. That's Mickey Drexler, everybody. Up next, we're tracking the biggest movers as we head into the close.

Steve Kovac is standing by with that. Hey, Steve. Hey, this is Scott. We got one gaming company soaring double digits after reporting their Q4 results. We'll give you that name after the bell. Let's get back to Steve Kovach now for the stocks he's watching. What do you see?

Hey, Scott, let's start with Chinese e-commerce giant Alibaba making some big gains today after reporting a beat on earnings and revenue for the third quarter. Those results boosted by strength in its cloud, intelligence unit, and e-commerce segment. Meantime, we just got this one. GameStop CEO Ryan Cohen also betting on the company. He's reportedly boosting his stake in Alibaba to a billion dollars. Shares are up around 9% right now and hitting a new 52-week high. Also helps

that Apple intelligence deal over in China. Meantime, look at Unity Software. It's climbing. The stock is up around 28, 29% now after reporting a smaller than expected loss and a revenue beat for the fourth quarter. The gaming company's guidance came in light, but investors are keying in on Unity Vector, which is a new AI advertising platform to take on rival app Lovin. And for more on those results, CEO Matthew Bromberg joins Overtime for an exclusive interview. Scott, go ahead. All right, Steve. All right. Thanks a lot, Steve Kovacs. Still ahead, a rundown of what to watch for when Block interview. Scott, go ahead. All right, Steve. All right, thanks a lot. Steve Kovacs.

Still ahead, a rundown of what to watch for when Block reports top of the hour. We're back on the bell after this quick break. Coming up next, get you set up for earnings from Block and Booking Holdings. We're hitting that in OT. That and much more in the Market Zone next. We're now in the closing bell Market Zone.

CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Earnings, we are on patrol today in OT. Mackenzie Segalis on Block. Contestant Brewer on Booking. Mackenzie, you first. Hey, so Block reports after the bell with Wall Street expecting 9% revenue growth to $6.3 billion. The stock is up 26% over the past year, but has pulled back 4% year to date. Now, peers PayPal and Affirm have already reported both beat on earnings. Investors will be watching to see whether Block's rival Cash App business, a major profit driver, shows similar expansion and if gross

payment volume picks up. Now, Bank of America calls Block its tops payments pick for 2025, also noting that it could be added to the S&P 500 and that underweight positions from large investors may help drive future gains. Now, another key focus, growth in Square's payment volumes, especially as a stronger macro backdrop supports a re-acceleration for U.S. small and mid-sized businesses. Now, we're seeing shares of Block slightly down with its recently changed ticker XYZ ahead of earnings. We'll keep an eye on it for you, Scott. All right, Mackenzie, thanks so much for that. Mackenzie Segal. All right, Contessa, how about booking? More important, Scott, than what happened in the fourth quarter is what's

happening right now and what's coming down the pike. Booking is juggling some significant headwinds. Analysts have noted moderation in travel demand in January. We know there are foreign currency challenges, especially in focus for booking with its broad book of international business. And then there's the rising alarm at the possibility that AI agents could supplant companies like Priceline or Kayak.com. Still, you've got shares up nearly 40 percent over the last 12 months, and the street's expecting bookings to report revenue of more than $5.2 billion, with EPS of 36.03. Right now, the shares are off by 1.7 percent, Scott.

All right, Contessa, thanks so much. That's Contessa Brewer with Mike Santoli here. We managed to dig ourself off the bottom okay today? Yeah, bent a little bit, did not break. Each of the last eight trading days, so basically since the beginning of last week, there has been an afternoon rally, meaning we've closed a good deal higher than a midday or a morning low. It shows today that Reflex is still in the It's still going to kind of try that until proven otherwise. You're going to feel it in terms of looking at the one day damage and things like

JP Morgan and Goldman Sachs and the leading crowded trades like Palantir, large cap banks. And then you have the hot flyers. As I said earlier, the best case scenario would be that the frothy parts of the market just calm down a fair bit. The overstretched mega caps like Walmart and Costco and JP Morgan can just sort of relax lower and the rest of the market takes up the slack. Maybe it's a lot to ask. I've been talking for over a week about how we're going to get through these expirations. The VIX products yesterday, the index options tomorrow. And after that, historically, you might be able to see the market get a little twitchier and have wider bands. Right now, though, it's been very disciplined around kind of retesting the old highs in the S&P, which are right here, 61.18. Yeah, as we, you know, tomorrow we'll start looking really ahead to NVIDIA next week. I wish I'll see that stock was green, too. All right. So we'll go off today, off of the bottom, as you see. We'll still be red, though, across the board. The Dow down a little more than 1%. We do have those important

earnings coming up in OT, which is where I'll send it for Morgan & Johnson.