Closing Bell - Stocks slip, META takes heat, Disney drops, Private market warning 12/19/22

Episode Date: December 19, 2022

Stocks fell in Monday trading following two straight down weeks for the major averages. Dan Suzuki from Richard Bernstein Advisors weighs in on the market move and the most important catalyst for stocks in 2023. Tech was hit hard, with Meta among the underperformers as regulatory headwinds rise on both sides of the Atlantic. Brent Thill from Jefferies joins to discuss the impact of EU and FTC fights on the stock. Ruchir Sharma from Rockefeller International breaks down his warning for private markets. Plus the latest on Moderna, Tesla, and Disney’s post-Avatar pullback.d

All right, thanks very much, Kelly and Tyler. Stocks under pressure in Monday trading as we head into the final two weeks of the year, sitting right now at our near-session lows. Now, this is the make-or-break hour for your money. Welcome to The Closing Bell. I am Dominic Chiu, in for Sarah Eisen today, and here's where things stand in the market right now.

You can see the Dow Industrials down just about 1% or so, 30,618. The S&P 3804 down 1.25%. The Nasdaq Composite down 1.75%, 10,520. The Russell 2000 small caps, 1.5% declines. And the 10-year benchmark Treasury note yield drifting higher to 3.58%. Here's a look at the biggest Nasdaq 100 laggards, those decliners today, Atlassian, Splunk, Vertex Pharmaceuticals, Airbnb, Meta Platforms, all down roughly 4% to 6% on the trading day so far.

Coming up on today's show, we've got Rockefeller's Rashir Sharma. He's got a warning for private markets saying they're more vulnerable in this tight money era. He'll join us to explain just why. Plus, Meta's mounting headaches. Talk about the regulatory issues surrounding the company. We're going to dive into some of those, including new objections from the European Union and mounting pressures from our own regulators in the FCC and the FTC, rather, over on our side of the markets. Let's begin with the market as well as the sell-off gains scene. Mike Santoli is joining us now with his market dashboard. Mike, what exactly are you watching right now as things start to lose momentum into this final hour of trading?

Yeah, Dom, I mean, unfortunately, some familiar levels getting retouched. We hadn't been down this low in close to six weeks. I mean, the keep it simple story is that a downtrend is in place until proven otherwise. And the rally off of that October low did not prove otherwise. It stopped right where it would have been gaining the benefit of the doubt if it had crossed above it. It didn't get that. We're also down in the S&P 300 points since the high on Tuesday after that positively received CPI report. So we sold the good news of the CPI, got through the Fed meeting,

and it still became a matter of worrying about growth and also the downward pressure good news of the CPI, got through the Fed meeting, and it still became a matter of worrying about growth and also the downward pressure on some of the big tech stocks. All that stuff matters. Now, also, we're back to that level of November 9th, which was right before we got that previous good CPI report. So in other words, you've unwound the relief from the positive declining inflation news. And now it's a little bit more about growth and year end pressures, perhaps on some of those losing stocks with downside momentum such as tech. Take a look at Apple, another name that's in an interesting spot right now. It is now declining. It's a three year chart of Apple. It's declining to just about where it was at the June lows.

And they go all the way across early 2021. That was kind of the speculative peak in the smaller cap, high growth NASDAQ. And this right here too is interesting. That's August 31st, September 1st. That was the momentum peak and relative outperformance peak of the NASDAQ. Apple four for one split.

All that stuff is right in this zone. Apple as recently as August was outperforming the S&P year to date by more than 20 percentage points. It's basically underperforming since then. So it's clearly done its job to some degree as a source of stability. But it and Microsoft are having outsized influence on the downside in the S&P today, Don. So, Mike, I mean, it's interesting when you point to the charts there, especially for the broader S&P 500 and Apple as well individually, you mark those levels of kind of this support that we are seeing. Is it then fair to say that some traders are looking at this in the broader S&P

and in key stocks like Apple as a place where if we don't hold, things could get worse and we test the lows that we saw this fall? It seems that way, Don. For example, in the S&P 500, the close the day before that November 9th, you know, level where we got a boost on the CPI, it's around 3750. So you go down one plus percent from here. You'd be testing that. And if you if you if it were to hold, it would actually look OK. Right. It would look as if, OK, that's a new trading range perhaps. But, you know, if it breaks, then you have to open up the possibility of getting back to those old lows.

3,800, interesting, too, because that was a downside target from back in the early part of this year for a lot of traders. We obviously have gotten there and through it, but have only spent, I don't know, 10 weeks or something all year below that level. That's a fair amount of time, but it's not as if we've mostly been below that this year. All right, Mike Santoli, we'll see you later on. Thanks for the update there on the markets. Let's now turn to one of the key stocks driving the action, Meta, as regulators on both sides of the Atlantic ramp up pressure on that company. Today, the EU is saying that Meta has breached antitrust laws surrounding classified ads, and that comes as Meta faces the FTC here in the United States in court over its merger and acquisition strategy. Steve Kovac, our tech correspondent, has the latest developments for

us here. Steve. Hey there, Dom. Yeah, let's start with that EU antitrust complaint, which centers on marketplace. That's the classified ads section of Facebook that everyone has. Now, look, the EU is saying it's making it hard for third-party services to compete with that marketplace product. EU saying it gives Facebook users no choice but to use marketplace to sell stuff. Now, Meta tells us the EU claims have no merit and they're going to work through the process with regulators. But the fine could be hefty, Dom, up to 10% of Meta's global revenue. That was $117 billion last year, just for context. Now, the EU has been far

more aggressive with tech regulations, even forcing Apple to allow third-party app stores in a couple years here. Meanwhile, let's go over to the U.S. In San Jose, California, where U.S. regulators going after Meta as well. FTC is suing to block Meta's acquisition of the VR fitness app called Within Unlimited. Meta's CTO, Andrew Bosworth, you see him walking in here, was testifying in that case today. Meanwhile, Mark Zuckerberg may also make an appearance defending the deal this week as the trial winds down, Dom. All right, Steve Kovac, stick with us here.

Let's bring in for the conversation Brent Thill. Covers Meta, a lot of these other social media names. He's over at Jefferies. Brent, Steve lays out an interesting case developing right now. It has echoes. It feels like deja vu with maybe Microsoft back in the day with the European Union, some of the problems at Alphabet and its subsidiary Google has had with European regulators in the past as well.

Can you put it in context for us, Brent? How significant is Meta's problem with the EU compared to, say, Microsoft's or Alphabet's back in the day? I think right now it's really hard to handicap, Dom. It's impossible. But I think we can say this, that Meta stock is embedding a lot of these key concerns, trading at a low teen earnings multiple. It's the cheapest name in large cap internet. So a lot of these concerns are already embedded. The number one question we get on the internet side of Jefferies is, what about regulatory for Amazon, Facebook? You go through the list. And ultimately, no one really knows exactly what the outcome will be. I have a hard time believing that 10% of their global revenue

is fair for trying to put classifieds into a social media network where if you're looking for something, you should be able to find something that you'd want to buy or sell. Seems kind of common to do that. So I think the EU has probably been a little too overreaching. Obviously, you have the U.S. issues, I think. The U. S. are regulatory. Is not going to get any easier and maybe get more difficult. Here as well so I think this is an overhang for the group. And it's

something investors should consider when they're coming in the group. But again I think it's really impossible covering tech for the last twenty years it's impossible handicap these situations. Other than the saying they're already train

it discounted multiples the fear of the recession recession, the fear of a reset to numbers still. We think a lot of that's in the stock today. All right. So, Brent, if that's the case, you have, in essence, in a way, handicapped it, right? You're trying to play the odds as best you can with the information that you have. So in your mind, at what point does meta become that screaming buy if things are already built in and the stock has lost a tremendous amount of its market value over the course of the last 12 to 18 months? I think everything starts to become more baked in in early 23. And the reason why is that all these companies still have to clear the deck for the pending recession. Our house view, again, is that we these companies still have to clear the deck. For the pending recession our house view again.

Is that we're in for a hard landing not a soft landing as we go into next year. Our accounts have forecasted a bigger pullback. Later in the year in terms of the overall environment. So that's the case and it's worse later in the

year. This could be- stretched out and it could be recovery could be. Two thousand twenty four we hope that's not the case. But in that situation, investors will start to look at clearing the DACA numbers for the back half of 23, early 23, and won't start looking at these names probably until 24 numbers. That would mean it would be until the fall of next year would be a bearish scenario when tech investors would start to come back in. Is it a possibility?

We think it is based on the overall environment. But I think ultimately Q1 and Q2 for overall tech are going to be very difficult earnings periods. And the realization of the headwinds that are coming in at us, I think, will have to be put in. Now, the multiples have been compressed. We need all the companies now to really fully cleanse the numbers, if you will. And once that happens, tech investors will jump back in the pool. Until that happens, they're not touching it. And you can see it today with all of tech down again. Yeah. I mean, so, Steve, it's a fair point. If you look at all these stocks right now,

they are all down and they're moving lower. They're losing momentum for meta platforms in particular, though. This is this is about leadership. This is about the person at the helm. The guy whose grand vision has led to the two thirds of its value being lost over the course of the past 12 months. This is about Mark Zuckerberg and what the metaverse holds for Facebook slash meta platforms. So what's the next story? What does he have to pitch investors on? What does he have to say with the benchmark that was met in order for us to say that we're moving in the right direction? And I'll just point out that some of his own people don't think he's moving in the right direction. Dom, just last

Friday, John Carmack, legendary technological wizard, was the CTO of Oculus when they bought Oculus. If anyone believed in the metaverse vision, it was this guy. He quit. And on his way out the door, criticizing Mark Zuckerberg for the way he's executing the metaverse vision. So even the believers don't necessarily believe in the way he's going about it. But look, when our colleague Andrew Sorkin interviewed Mark at the deal book conference, all Mark Zuckerberg had to say was, oh, we're focusing on the core business. We're focusing on WhatsApp. We're focusing on Instagram and reels. Boom, people start liking it, eating it up. So as long as he can refocus the conversation, it seems,

back to the core products, the actual money-making products, then it works out for him. All right. There are some investors out there who've given a lot of companies like Amazon or Meta, in this case, some runway, I guess, to look at some of these things. All right. Steve Kovach, thank you very much for the thoughts there. Brent Thill, always great to get your thoughts. Thank you. We appreciate it, sir. Coming up next on the show, Rasheer Sharma from Rockefeller International is raising a red flag about the private markets in a brand new op-ed in the Financial Times. He will join us to explain why he says there will be nowhere to hide in a tight money era. Those are his words.

You're watching Closing Bell right here on CNBC. Keep it right here. Welcome back to the Closing Bell. Have private markets become an escape from reality? According to a new op-ed in the Financial Times, yes. With recession risks, sticky inflation, and rising debt among private firms, a bubble may soon burst. So joining us now is the author of that op ed, Rushir Sharma from Rockefeller International. Rushir, thank you, as always, for joining us here.

I guess maybe that the first question is, if these private markets are a bubble right now, what then does cause them to burst? Well, I think if you have a protracted downturn and this era of easy money has truly come to an end, which I believe it has, which is that the biggest beneficiaries, arguably, of this easy money era has been private investing, because a lot of these funds have taken on large amounts of debt. They've juiced up their returns on the back of their debt. And also, that's what I think a lot of people today are hiding. I'm just shocked to know that you have some family offices, public funds, which today have a target allocation for private markets possibly higher than those of public markets. And the reason they're doing that

is because they are living in the past and thinking that that's where the excess returns are. And also, I think, to avoid volatility, which is that because in private markets you don't have the daily P&L, they want to sort of think that they are taking a much less volatile option.

And once though that adjusts properly, I feel that volatility in these assets will go up dramatically. So, yes, I do feel that the private markets are a bubble and are in the process of popping, triggered by the end of the easy money era and the persistence of possibly higher rates. All right. So, Rashir, the liquidity issue, the rising rates are a big part of the story. I wonder how much of it is also investor psychology. For the longest time, folks wanted to get into private markets because there was the velvet rope mentality, right? They weren't allowed in. Everyone saw the returns from decades ago saying, I want a piece of that. Now I can get it. Do we think that there is still that appetite

for that kind of private investment, especially when there is still that kind of gate up there for certain investors out there? Oh, yeah. I think that many people are still seeking private investments. But as I write in the piece that there's no good story which too much money can't spoil. So what began as a pretty sound idea led by legends such as David Swenson at Yale University, where he sought to invest in private markets as a way of providing people with long-term capital to try and get long-term returns. When he was doing it, he was among the very few people doing it, among the pioneers to do it. Then he got great returns out of that. The problem is that in the last few years, you had a rush of capital. So you have so much money chasing the few deals out there because everyone wants to get in, that there's a massive valuation premium on

private investing now. And I think that that's where things have gone wrong, that there's far too much money chasing the few deals. And they're all looking at past returns without realizing the fact that it's a different story when you have little money out there and that's selectively chasing deals. So, you know, at the top of the hour, you had a great discussion about, for example, tech companies. And I think that this is what's really going on. The big winners of the easy money era were the U.S. market as a geography, tech funds

as a sector, growth investing as a style, and private investments as the vehicle. I think all four of these are going to be appended by the change of this regime towards a more hard money era that has begun. And we have already seen the effects of that in the other markets. And a lot of people are still hiding in the private markets because they have not been forced as yet to mark to market fully but i think the longer this downturn lasts and the more protracted this uh rate rise cycle is you're gonna have no choice all right rashir sharma and we we didn't even get to talk about the transparency aspect of mark to market and everything else we'll have to save that part for another discussion. Rajesh Sharma, thank you very much. We'll see you soon.

Let's now get a check on the markets right now. The Dow is right now down, floating just above the session lows, just down about 1% or so. The S&P 500, you can see they're also down roughly 1.25%. We are again near the session lows, not exactly at them, but the tech heavier Nasdaq composite down about one and three quarters percent. Shares of Moderna have lost some of their pandemic gains so far this year. But Michael Yee from Jeffrey says COVID is an old story and there's a new opportunity and story for shareholders. He will join us next to break down his brand new upgrade on MRNA when Closing Bell comes back after this.

All right, welcome back to the show. So how is this for an outperformer? Take a look at shares right now of Madrigal Pharmaceuticals. They're surging by roughly 250, two five zero percent in today's session. The company is reporting positive study results for a drug used to treat a certain liver disease, sending their shares to the highest level since 2018. They are currently two hundred twenty three dollars and seventy one cents. To give you an idea, they closed at sixty three dollars and eighty cents just yesterday. Now, sticking with biotech shares of Moderna in the red today and down roughly 25 percent on the year. But Jeffrey sees an opportunity in upgrading that stock to a buy rating, saying that COVID is the old story and that their pipeline for drugs is the new story. So joining us now is the author of that report, analyst Michael Yee of Jeffries.

Michael, thank you very much for being here. Let's start with a big question about Moderna. Why is it that COVID is now part of the past and what is in their future? Well, great to be here with you. COVID is definitely a bit of an old story. Certainly, we're now into year three or four of the outbreak. And as you look at what the stock has been doing, it's already been down 75 percent over the last couple of years after reaching the highs. And people are quite fatigued on Wall Street about talking about the covid sales. So looking forward, we tell you about the extremely positive personalized cancer vaccine data last week in partnership with Merck, which

is extremely bullish and a whole other wave of pipeline programs that are coming. And so now investors are looking forward to what's around the corner, not talking about the old COVID story, which everyone's pretty tired about talking about. Now, the big part of this story in your mind is PCV cancer. We're talking about basically a very, it's not extremely rare, but it's a type of blood disorder, right? And the possibilities that mRNA type vaccine products could help solve that issue. How big of a market are we talking about? And could this lay the blueprint for other types of cancer treatments down the line? That's a great question.

And it's exactly what we're talking about, is that the cancer vaccine, the personalized cancer vaccine, which was partnered with Merck, showed stunning melanoma data last week. And Merck is quite bullish. The point is that Merck is also starting a lot of new studies, including in lung cancer. And essentially, this program could work in many, many tumor types. It could be a $10 billion type of opportunity. So if you take the cancer indications, which obviously show the power of the platform, as well as imminently soon RSV vaccine data coming up imminently. And of course, I know everyone in New York and around the world have been hearing about RSV. There's a lot of stuff coming over the next month, the next year that are going to be important to send the stock a lot higher this year. And before we let you go, mRNA is a big deal. We know that. We know that the technology

being used has also been used by Pfizer in concert with BioNTech with regard to their COVID vaccine. What other people out there could be beneficiaries of this kind of cancer advancement? Well, look, I would just say that the bottom line is Merck, as I'll say again, is keenly interested in it, paid them a bunch of money and was quite bullish on the last earnings call. They've spoken positively about that. Certainly other big pharma companies as well, I'm sure, are taking a close look at this given the recent data. And so going forward, I think the bottom line is a story that has obviously come well off the highs. If you take a look at the stock chart, certainly poised to rebound in 2023 as people look to the new pipeline. All right. Michael Yee on the upgrade over at Jeffrey's. Thank you very much. We appreciate it. Now, it's been a rough year as

all for the banks on the whole with names like Citi, Bank of America falling more than 25 percent and some regionals down a whole lot more than that. Up next, RBC Capital's Gerard Cassidy lays out why he's optimistic about the banks in 2023, even in the face of a potential recession. Welcome back to Closing Bell. The KBW is in the red today, and it's been a rough year for the sector, for banks overall, with that ETF having underperformed the broader market. But our next guest says he is cautiously optimistic with the outlook. Joining us now is RBC's Gerard Cassidy.

He covers the banks for a living. Gerard, I got to say, the financials have been a call for a lot of folks for a long time, and they just haven't really worked out for a long time. So why are you optimistic about the banks? What's changed in your mind? Dom, I think what you're going to see is that the bank stocks should do pretty well once the Fed reaches its terminal rate for the Fed funds rate. If you go back to the last four tightening cycles, including the 1994-95 cycle, and you'll notice that the banks do quite well once the Fed reaches

its terminal rate for Fed funds. And if the markets are accurate, they're calling for a terminal rate sometime in the spring of 2023, between five and five and a half percent. I'd also point out that the banks were doing really well from June or July 1st through about three or four weeks ago, and they outperformed the market. But since, to your point, the last three or four weeks have been really rough for the banks. So, Gerard, there was a point in time when people used to look at the steepness of the yield curve as a way to kind of gauge whether or not the banks would be, generally speaking, healthy. Meaning if higher rates were higher and lower, lower and shorter duration rates were lower, that meant that the spread that they could make was bigger. And that was a good thing. It's been inverted deeply so for a while now.

So what has to happen? Does the yield curve need to un-invert basically before we can get the banks a tailwind? No, that's a good point. I would suggest that the banks, when you look at the sensitivity to interest rates, they're far more sensitive to the front end of the curve than the long end of the curve. Now, granted, of course, when they make commercial real estate mortgages, it's off of the five or the 10 year. Of course, auto loans sometimes are off the five or seven year. But most of the lending is done off the front end of the curve. And so banks will tell you that when they see rates go higher, 75 percent of the

benefit of rising rates comes from that front end of the curve. So the yield curve itself, yes, we'd like it to be steeper, but it's more important that front end of the curve stays high. So if the Fed raises rates, let's again say 5, 5 and a quarter percent, and they stop, and they don't move on rates for 12 to 18 months, well, then you're really going to see the banks do quite well because the margins are going to hang in there like they've done in the past. Is there going to be any kind of a mean reversion, Gerard, in your mind with regard to bank valuations? Right now, despite the underperformance, J.P. Morgan still trades at a hefty premium

on a price-to-book value basis versus, say, Bank of America or Citi, other than those money center-type banks. Are you playing for better times ahead for BAC or Citigroup or regional banks versus JPMorgan? Yeah, I would say the regional banks may be the better place to be initially because everything is going to really be focused on what I call the right side of the balance sheet. It's been 15 years, Dom, that anyone's really had to focus on deposits and deposit costs. Because as you know, since the financial crisis, the cost of funding has been zero to 25 basis points, with the exception of 2018. Well, if we get a Fed funds rate of 5%, wholesale funding costs are going to

be quite expensive. Therefore, banks with concentrations of consumer deposits, even though those deposit rates will move higher, they're still going to be considerably less than wholesale funding. So banks like Bank America or some of the regional banks like a key corporate fifth third, these companies have considerable amounts of consumer deposits, which will benefit in a elevated rate environment, which is likely what we're going to see for most of 2023. And Gerard, before we let you go, we know there's a lot of talk of recession. Even Jamie Dimon at J.P. Morgan himself is bracing for what could be a big recession in the coming year. Are banks OK if a recession comes? That is the $64,000 question.

It's a very good one. And it really comes down to the severity of the downturn. If you think it's an 08, 09 recession as a bank investor, that's the severity of this one. They don't own a bank stock. On the other hand, if it's a mild recession like 01, then you can own bank stocks because their revenue growth from the net interest income that they're generating, even with a stable interest rate environment, will more than cover the cost of higher credit. So we would say it's really going to come down to the deepness or shallowness of the recession. A shallow recession, the banks will do well. All right. Gerard Cassidy, RBC Capital Markets, covering the banks. Thank you very much. We appreciate it.

You're welcome. Here's where we stand in the markets right now. We got the Dow, the S&P, and the Nasdaq all drifting lower here by roughly three-quarters to one and three-quarters percent. Disney shares are dropping today following the release of Avatar 2 over the weekend as box office results missed expectations. Coming up next, we'll discuss why the movie is so important to Disney's future. Let's check out today's stealth mover. It's waste management.

Investors are trashing the stock after Stiefel downgraded the disposal and recycling company to a hold from a prior buy and cut its target price to $171 a share, citing a revised free cash flow outlook. But the stock has been anything but a dumpster fire this year. This year, it's really handily outperforming the major averages, just slipping around 6% or so and so far in 2022, the S&P is down 20% in that same time. So you can see pretty decent move, relatively speaking. Now, after the break, Dan Suzuki from Richard Bernstein Advisors says the Fed will not be the main driver of markets next year. He tells us what the key catalyst will be and what he's watching instead.

That story, plus the latest on Tesla and Disney when we take you inside the market zone. All right, you know what that means. We are now in the closing bell market zone. We have CNBC Senior Markets commentator, Mike Santoli here to break down these crucial moments of the trading day. Plus, Alex Sherman on the disney and avatar story also dan suzuki from richard bernstein advisors on the key catalyst for markets in the coming year let's start mike santoli with the way this market has set up we were looking like we might find

some stability post fed in that post fed sell-, and we've kind of just been losing steam throughout. Nothing panicky, but just downside motion. What do you make of the price action? Yeah, it's the continued drip of, Dom, you know, we're down. We were talking about this 3,800 area on the S&P 500. It also happens to be exactly 1,000 points off the all-time high set January 3rd of this year. So pretty unrelenting decline, although you do have that backstop of a pretty well-developed sense that peak inflation is now the mode. Maybe that puts a floor under things

above the October lows. At the same time, you have this recession anticipation, which no matter how high the conviction level is or low the conviction level is about a recession on the way in the next several months, you can't disprove it in advance. So that seems to be the capper on this market. The big mega cap growth stocks, though, continuing to lead the downside, also just says, look,

their valuations continue to bleed lower from premium levels, and maybe there's some tax loss selling in there. And it's sort of a prolonged give up phase in that trade. All right. So there we're showing kind of what's's sort of a prolonged give up phase in that trade. All right. So there we were showing kind of what's happening with the mega cap stocks right now in the markets. We're also going to talk a little bit about what's happening with Disney at the bottom of the Dow today after Avatar's debut missed box office estimates. This is the big sequel to 2009 in that James Cameron film that took in one hundred and thirty four million dollars in domestic sales versus, by the way, an expected $175 million this past weekend. China's sales were no better. It was expected to make $100 million there,

but reported only making $57 million. That's a big part of the downside today in the Dow and the Disney side of things. CNBC.com's Alex Sherman joins us now. So, Alex, this is a big deal from a story standpoint. How important is it to Disney that Avatar 2 succeed? I mean, it's super important when it comes to their film business. There's no question Avatar is right at the top of their list for high budget intellectual property that Disney owns. I mean, this Avatar 2 cost at least $350

million to make. That is a wildly high number in terms of cost and movie production. And remember, this goes beyond box office. Avatar, after it gets through its theatrical release, then goes to Disney+, so it has legs on that side of the business, too. I will say, while the early numbers don't look very good, the question will be what type of lasting power does Avatar 2 have? If you look back to the first Avatar, it did quite well in weeks two, three, four, five. So we'll have to see if the same thing happens with Avatar 2. So, Mike Santoli, we have a specific catalyst right company specific catalyst for the downside in disney today but there are a whole heck of a lot of macro headwinds that have been facing media for quite some time now how much of this is bigger

downdraft for media overall and how much of this is specific to just Disney and that story with Avatar and maybe other parts of its portfolio? Yeah, I mean, Disney in some ways sort of exemplifies in the most prominent way all the other forces that are driving media, right? So is the streaming economy going to actually reach profitable scale? That's a big one. What's the fate and the pace of decline of the overall cable bundle? They have exposure to linear networks. And then the reliability of these event franchise blockbuster releases that still do go to the movie theaters. I think that's a secondary concern, although, you know, there's another little wrinkle with this one, which, of course, the Avatar franchise came to Disney by way of the Fox acquisition that was made a few years ago.

So it was one of those pieces of IP that came along with it. I agree it's too early to say that this is some kind of a bust. It's still going to make a lot of money. But it's far from the days, though, when you could look ahead to an annual slate of Disney releases and say, you could just pencil in $500 million to a billion for any of the various animated or Marvel-type releases. I mean, good points being brought up by Mike. So, Alex, I'm going to give you the final word here.

It's not lost on me, and I'm sure others out there in our viewership, that this is coming at a time of transition for Disney with the old CEO, now the new CEO again. We're talking Bob Iger. How much is Bob Iger's tenure going forward at Disney going to be complicated by what's happening with just the Avatar release and the movie studios in general going forward? Well, the unique thing about Avatar is we already know an Avatar 3 and an Avatar 4 are in the can here or being worked on. So this is not your normal film. So that's concerning, right? If this doesn't pan out, you're already committed to two more movies at least.

So I think there's real concern among the Disney crew that Avatar holds up. But you have to remember, Disney is a very diversified company. So the fate of Disney does not rise and fall on Avatar. It's theme parks. It's streaming business. These are the things that investors are looking at closely in terms of the future of Disney, trying to get that valuation up. Disney trading at a 52-week low today. So look, I guess Bob Iger walks into a situation where he hopes there's nowhere to go but up. All right. CNBC.com's media reporter Alex Sherman, thank you very much.

Mike Santoli sticking with us now. Tesla has been volatile in today's session as well. Now, that stock did pop at the opening bell after Twitter users voted in Elon Musk's poll yesterday, with a majority advising him to step down as CEO of the social media company. Tesla also getting a downgrade from Oppenheimer to a market performer neutral rating. So the reason? Musk's management at Twitter. Colin Rush, who wrote the note, says banning journalists without consistent standards puts the Tesla brand, Twitter to Tesla, at risk. Here's what he had to say earlier today on Squawk on the Street. The brand and the backlash from consumers is substantial at this point. And certainly

the foray into Twitter is not helping that brand. And as we go into a period of time where we see more competition and folks have more choices because we've been supply constrained for so long on the EV side, we think there's some real risk around, you know, what that means for Tesla. So, Mike Santoli, the concerns of, I mean, and Colin Rush is basically echoing what a lot of people have been concerned with for quite some time now. Is there a resolution if, in a hypothetical world, Elon Musk would step down as CEO of Twitter for Tesla shareholders? You know, potentially, Dom. I think part of what Colin is doing is essentially articulating why Tesla has performed so poorly in the last couple of months since the Twitter deal closed.

I would assume that you have to not only have somebody else running Twitter day to day, but you have some kind of assurances that that company won't need a ton more capital, won't drive further sales by Musk of Tesla shares, and all that kind of negative spiral that the stock has been caught under. What is interesting too though is, Colin Rush did not cut his earnings forecast for Tesla, so it's essentially like the fundamentals of Tesla, even if there is tarnishment of brand,

he's not saying it's visibly hitting volumes in the coming year. And so it's really still about Tesla shares coming down to meet where the fundamentals always were. They had been puffed up by, to some degree, a lot of excitement about the next thing Musk does and about the momentum of the stock and the fact that it remains up four or five hundred percent in the last three years, even with this drop. All right. A volatile trade today. It started off up big, went negative, went positive. Now just about flat, maybe down fractionally for Tesla. Now, Costco shares are lower in trading today. Now, CEO Craig Jelinek painting a mixed picture on the consumer during the holiday season this morning on Squawk on the street, saying that there are signs inflation is easing and prices are coming down, but also saying the company

is slowing down purchases on some big ticket items. I think we're being very careful in terms of what we buy in jewelry, televisions and probably furniture and maybe relatively careful next year of what's going to happen in apparel. I think right now, you know, unemployment is still in a relatively good place. But every time you turn around, particularly in some of the technology jobs, people seem to be getting laid off. And I think people are saying, wait and see, and let's see what happens going into next year. All right. So it's a retailer and some folks like to look at it kind of akin to Walmart,

like a consumer staples-ish type play because of the nature of the products it sells and the regularity with which people go to it. Mike, how much is Costco a barometer for the consumer economy and maybe more so for the broader markets, if at all? I would say a bit more than Walmart is. There is a kind of a bigger ticket, small business, discretionary type aspect to Costco that's not quite as fully present in Walmart, which is much more grocery. But I also think what he's essentially saying is echoing a lot of the color we're getting from a bunch of retailers. People spent the two years coming into this year buying a whole lot of stuff. They don't need as much stuff, even though incomes remain higher, substantially higher on average, and gasoline

prices are way down from the spring and summer. That would seem to enable people to continue to spend if they choose to, especially with inflation coming down. But being more careful makes sense. So all all that stuff i don't think it clears up the outlook for next year but for a costco it maybe plays to their strengths they keep margins very thin on purpose to basically pass along value to the customers they pay their workers better than average so they've always had these structural reasons why they're not maximizing profit today they're playing the long game and if supply chain and and all that stuff comes back into line it's probably a help for these structural reasons why they're not maximizing profit today. They're playing the long game. And if supply chain and all that stuff comes back into line, it's probably a help for Costco, even if the consumer in general remains less aggressive. And of course, there's that recurring revenue from the membership fees every single year. Mike Santoli, I pay those every year.

Thanks for being with us. We'll let you go to get ready for overtime at the top of this hour coming up. Now, let's get back to the for overtime at the top of this hour coming up. Now, let's get back to the broader market. Stocks are on pace for their fourth straight session in the red. Let's bring in now Dan Suzuki. He's the deputy chief investment officer over at Richard Bernstein Advisors. Dan, thank you very much for being here with us. Throughout the course of the hour, we've explored a lot of different big picture and company specific themes. Generally speaking, it is not panic, but it feels as though the market is heavy and it wants to go to the downside. What can get this market stable and back to the upside again? Yeah, Dom, I think, well, first of all, thanks for having me. You know, I'd say right now

there's a tug of war going on between, you know, the slowing growth dynamic and the pace of that slowdown. And I think we all I think the general consensus is that growth is going to slow into next year. But people have gotten really confident about the idea that that's going to be a pretty dramatic first half slowdown. It's very, very possible that that slowdown takes a lot longer than what people are positioned for. And that could actually result in a near term sort of dynamic where things aren't as bad as they seem and things actually surprise the upside. I think there's way too much focus on the Fed.

You know, I think more or less the market's pretty priced for that. That's why you're seeing a very different dynamic in terms of, you know, the reaction to the Fed function, because I think that's not going to be the surprise going forward. What will the surprise be, Dan, going forward? Because it begs the question. Yeah, absolutely. I think the big surprise factor is going to be growth and the trajectory of that growth. I think right now, you know, you have basically people that think we're headed for a soft landing, that this is basically as bad as it gets and things are going to re-accelerate here. You have another camp that things are going to completely collapse in the next three months. I think, you know, both ways you could see surprises or you could see something in the middle, as I was alluding to,

something that drags on for a lot longer than people are positioned for, which could actually hurt both sides of that trade. If you're looking at the growth side of things, then that means that you have to be scrutinizing what the earnings story is going to look like, especially for this all-important fourth quarter for many of the consumer companies out there, because we are a consumer of a nation in America with a lot of our GDP tied to that consumer picture. So what exactly then do we have to look for in this upcoming earnings season that would either validate that view on slowing growth or surprise you and say, hey, maybe things should get better from here? Tom, I don't think it's going to be a rosy earnings season by any stretch. I mean, the reality is we're going into an earnings recession.

I think that's what the fourth quarter will bring with it. And at the same time, you have companies that are seeing this slowing environment. They're seeing the profits recession, and they're going to have to set guidance for next year. You'll probably see a lot of companies actually pull guidance and say that the environment is too uncertain. And you'll have a lot of companies actually have to set the bar a lot lower than where the analysts are. So I think from that perspective, that's something you've got to be mindful of. And the reaction from markets may actually not be that bad to that, depending on, you alluded to the idea that markets are pretty pessimistic. But I think that, you know,

the course of the next couple of quarters, that's going to be a continual drag is that lowering of earnings expectations. And that's going to be a tough headwind for markets. What's going to be, Dan, we've got just about a minute left here, maybe a little less. The key parts of the market that we have to talk about, we have to scrutinize. Is it going to be tech and comm services? Is it still energy and oil? Is it that resurgent healthcare trade that's kind of played out over the course of the last several months here? Tom, I mean, obviously,

I think you have to scrutinize every part of that trade that you just mentioned. I think tech, innovation, and growth, you want to continue to avoid that area of the market. I think we're in a bubble that continues to deflate. There's more air that has to deflate. And the fact that we've had the bear market tells you that that's not going to be the leadership of the next cycle.

So we should be thinking about what that leadership is. But for the very here now given that we're going to a profits recession giving that liquidity is continuing to tighten. I think the number one thing you should be focused on is defense high high quality defense, and then looking in the next couple of years into where those value and long-term opportunity trades are. All right. Dan Suzuki over at Richard Bernstein Advisors. Thank you very much. Great to get your thoughts. We'll see you soon. All right. Now, as we take a look at what's happening with the markets right now, we do have a situation where the Dow is down 150 points. Now, that's important because that is well off the lows of the session.

So we saw this slowing picture throughout the course of the intraday session, only to see now in just the last half hour or so a real reversal trying to gain back some of that ground. It's been more impressive in the Dow and the S&P 500, less so in the Russell 2000, less so in the Nasdaq composite, which is a little bit tech heavier on that side of things. We have seen a little bit of performance in terms of overall picture with technology leading some of those declines in the downside. And of course, meta platforms is a key focus for that as well. So keep an eye on what's happening right now. We've got Rockwell Automation ringing the closing bell at the New York Stock Exchange at the NASDAQ. It's Ocugen that does it for us here at the closing bell. We'll send it over to Overtime with Michael Santoli.