Closing Bell - Willing to Overshoot, Moderna's CEO On Vaccine Pricing & Getting Smoked 1/9/23

Episode Date: January 9, 2023

Stocks closing well off session highs after Atlanta Fed President Raphael Bostic said the Fed is willing to overshoot. Citi Private Bank Global Head Ida Liu says investors need to buckle up for more volatility, but reveals where she does see buying opportunities right now. Shares of Lululemon plunging after issuing a gross margins warning & Macy's selling off on a sales warning. Former Macy's CEO Terry Lundgren discusses whether retailers are starting to see cracks in consumer spending. Moderna CEO Stephane Bancel discusses his new Covid vaccine pricing strategy for when its government contract ends. And Tilray CEO Irwin Simon discusses the cannabis company's big revenue miss and whether there is any hope for a marijuana legalization bill in Congress now that the House is controlled by the GOP.

The Fed is willing to overshoot. Those words from the Atlanta Fed President Rafael Bostec cutting into today's rally. 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 broadly in the market. At the highs of the day, we were up 304 points. We're now negative on the Dow, just about 74 points or so. S&P 500 is up two tenths. Technology is leading today. The growth stocks, NVIDIA is up, AMD, Salesforce. That's what's carrying the market higher today. That's why the Nasdaq is up more. It's up a full percentage point. What's lagging? Health care, which has been defensive all year long, lagging on the back of this J.P. Morgan health care conference. We're going to check in there in just a bit. But overall, the 10 year yield lower 3.5 percent.

So bonds are getting a bid today as well. Look at tech stocks. We just want to dive deeper because they are the big winners today. Chip stocks in particular after Wells Fargo naming AMD and Nvidia the top 2023 picks, saying the semis could hit a bottom during the first half of the year. Coming up on the show today, the global head of Citigroup private bank on the market strategy she is giving to her ultra high net worth clients, Ida Liu. Plus, a first on CNBC interview with the CEO of Moderna, live from the JP Morgan

health care conference, where he just announced a new pricing strategy for his company's COVID-19 vaccine. First up, though, let's head over to the market dashboard. Senior markets commentator Mike Santoli, what are you watching today? Not just the chips, NVIDIA, Microsoft, Amazon, Apple, they're all higher as well. Yes, and so that reflects to me, Sarah, a little bit of a mean reversion feel to this tape, right? The winners of last year declining. Some of the stuff that's been beaten down pretty hard, including last week, by the way. Apple, Tesla, Microsoft all down in an up week for the market last week.

Did get some relief today. Bigger picture, the market did surmount this 3,900 level in the S&P 500 last year, making a bid to suggest that this is a decent little base. People came into the year pretty defensive. If you have any downside momentum, if you have any downside momentum in inflation while the labor market stays OK, people are looking ahead to what that could mean for the Fed potentially being finished. And, you know, yields are down. The dollar is down again today. So still some fears about the growth picture falling away. But for now, we are back at these roughly three to four week highs on the S&P, waiting for that CPI number on Thursday. Take a look at the credit markets. Actually been a very

strong part of the financial markets this year. People came into the year feeling like bonds presented a pretty good risk reward. This is the spread of investment grade corporate debt relative to treasuries. So when it's going higher, people are running away from risk. And that's very bearish for risk. And here what we see is you had this March higher as people got concerned about the economy and as the Fed kept hiking rates through last year. And then we've come down pretty hard. In fact, it looks a little bit like the recession scare and the Fed is going to over tighten scare at the very end of 2018 where we kind of got some relief there and the market stabilized equities had further upside now, of course We don't know if the Fed is going to actually reverse what it's been saying and doing this year

But what this means is the nature conditions have eased. That may or may not be acceptable to the Fed, but it means that companies are willing to issue at this higher rate with spreads in decent shape and that buyers are there for it. As far as the action today, I know we're focused on some updates from conferences like health care and retail, which we'll talk about in a moment. But the Fed speak. Yeah. Is it any surprise that the Fed speakers are leaning hawkish away from this Fed's going to pause narrative that they've got a job to do? Yes, not a bit. Because that's what that's that's what appears to be getting the market's attention today. Look, I mean, the more times it's repeated and the higher the stock indexes actually are, when the same words are

said, you might get a different reaction to that. And I think a lot of it is just the regular sloshing around of, you know, can we believe it or not? Because, yes, the Fed is going to be speaking like this, as we've said many, many times up until the moment it actually changes the policy. It's not going to try to anticipate it. It's not going to try to get people conditioned to the idea that they feel like they've tightened enough. It's going to be sudden, most likely, because in the market is betting that there's some downside push to inflation and that they will either be forced to or allowed to ease back. Everybody watches the Mannheim Index. Used car prices.

Such a leader came out today, down 15% year over year. Exactly. Good to see that. That's what sort of led us into this. For sure. And services is the next thing people are very focused on. Mike, thank you. We'll see you soon. Mike Santoli. Shares of Lululemon getting hit today after forecasting a decline in gross margins for its holiday quarter.

And then Macy's also plunging today after warning sales will come in light for the quarter. Earlier today at the ICR retail conference, Macy CEO Jeff Gannett expressed some concerns about the consumer, saying in part, as we think about 2023, we do think the consumer is under pressure, especially in the first half. Let's bring in former Macy's CEO, Terry Lundgren, for more. So, Terry, how nervous do you think Gannett and the industry is about the consumer right now, based on some of these warnings? Well, Sarah, first of all, I think what happened, what you saw this holiday season is as anticipated, the consumer came out guns blazing, spent heavily during the gift period. But what Jeff Gannett pointed out and others have done as well is that in between those gift giving moments, the week before Christmas being important, Cyber Monday being important, All those peak giving periods were very, very strong. But in between, when consumers tend to buy for themselves, that weakened.

And that's a bad sign for the longer term, because obviously we don't have the holiday spending momentum to carry us into January, February, and March. So I think that's what the concern is. I think that's why the warnings have. I think that's why the the warnings have been out there, not just by Macy's, but by others as well. Lululemon, you pointed out and others. And so I think they're seeing this as a bit of a concern. Consumers getting a little bit nervous about whether or not they're going to continue this this torrid spending move that they've been on for the last couple of years. I just want to dive into that idea a little further because so your successor, Jeff Gannett,

and the statement that they put out on Friday with this warning said in part, Black Friday, Cyber Monday sales were in line with our expectations while the week leading up to and following Christmas were ahead. However, the lulls of the non-peak holiday weeks were deeper than anticipated. So I guess I need you to translate that from Macy's CEO speak to what that actually means, because obviously in between holiday periods, you don't get the same kind of boost that you get during the holidays. So what does that actually mean in terms of cause for concern? Well, what that I think just demonstrated, those comments just demonstrated, is that the consumer was stepping up, spending for those important gifts that they wanted to give and they wanted to be proud of the gifts that they gave. But when it came time for while they were in the store in between, just browsing and looking at opportunities for themselves, for their own events, they cut back, they held back.

And that's what I think the concern is, Sarah. And I think that is reason to have some concern and some pause about the first half of 2023 in terms of discretionary spending. But on another category of spending, you know, you all have been talking about this a bit earlier in your program, is that consumers are spending on experiences, and that includes travel and hospitality. And so if they want to have those trips that they haven't taken, and they definitely still have not satisfied that need from early COVID days, that is going to use up a lot of what they could have otherwise spent on discretionary goods i get it but you know my next question terry which is going to be is this department store specific are are we just reverting back to a period pre-covid when department

stores were being further pressured than some of the other retailers because we aren't really quite hearing this broadly yet that's right you're not but obviously Lululemon's not a department store. But that's a margin. I mean, they still raise their revenue guidance. They just warned on margins. They're still growing 20% to 30% a quarter. Well, I think what the Macy's argument was is that their inventory is actually in very, very good shape

and well below 2019, as well as below their own original anticipated numbers going into this current period. That's critical. So there was a tremendous amount of top-line growth driven by promotions by many of retailers who had too much inventory going into the fourth quarter. The key question is, what do those inventories look like going into the first quarter, January, February, March, April, into this coming year? Because if the inventories are still heavy, over expectations, if the inventory is higher than last year on a relative basis to their sales expectations versus last year in the first quarter.

That's where I see a problem with margins. I think others are getting their inventory in position and they're going to protect their margins. I think the margins are actually going to be OK with those retailers, but they won't have the aggressive opportunity to go after the top line sales growth. Understood. Terry, it's very valuable having someone who's been in the chair join us to talk through some of these warnings. Appreciate it. Terry Lundgren, former

CEO of Macy's. Up next, Citigroup private bank global head Ida Liu lays out her investing playbook for 2023. What she is telling her ultra high net worth clients to buy and sell right now. Dow is down 64 points. S&P 500 still higher by about a quarter of a percent. You're watching Closing Bell on CNBC. We are well off session lows. The Dow is now negative, but the Nasdaq's up one full percent. Dow's down about 100 points right now. At the high of the day, it was up 300. Joining us right now is Citi Private Bank Global Head Ida Liu. Ida, happy New Year. Good to have you here. Thank you. Happy New Year. Great to see you, Sarah. What are you telling your clients, your ultra high net worth clients that are wondering

whether this year is going to feel as rough as last year? Well, investors have come off a beating last year where the markets took a $30 trillion hit. Global equities down 19%, global bonds down 16%. That coupled with the Russia-Ukraine war, seven rate hikes, and obviously 40-year highs in inflation in June last year. So it was a really tough environment last year. And we primarily did four things for clients. At the start of the year, we did a lot of hedging, so both on the asset and the liability side. We moved a lot of cash into fixed income, which was a very compelling trade, which we're still doing right now. We shifted equity positions into high quality dividend paying equity positions. And for suitable investors, we added a lot of alternative investments, I think private equity

and hedge funds as well. And now as we're sitting at the start of 23, it's going to be a very different year than 22. And I think there's going to be a lot of opportunities ahead for investors. Why? What is going to be so different about this year? Well, we are projecting a recession, hopefully mild, in the first half of the year. And as you and I both know, bear market bottoms are never hit until a recession starts. So therefore, we think investors still need to buckle up for a lot more volatility and potential downside in the markets in the months and weeks ahead. So there will be some more opportunities there for sure. But nonetheless, we think there's a lot of

opportunity because we think rates will peak and we think inflation will come down to roughly three and a half percent by the end of the year, not to mention China is open. Right. So you're telling people longer term to position more bullishly, it sounds like. We are, because when you think about it, in the past, whenever a market has detracted 25% or greater, the following three years yield about a 40% cumulative return. So we want to make sure that you're buckling down now, but that you don't sit on the sidelines too long because then you're going to miss the opportunities going forward. But nonetheless, we do think that there is a compelling case to continue to invest in fixed income. As you can see, for U.S. taxable investors, the muni rates are still very attractive at high single digits, as are U.S. treasuries. I mean, think about the fact that six-month treasuries at the beginning of last year were at 0.25 percent, and today it's 4.8 percent. So still rotating a lot of the cash

on the sidelines into fixed income investments as well. What about technology? I didn't hear you mention that yet in terms of some of the bigger tech areas of the market that have been hit the hardest. Well, there's three areas that we think are unstoppable trends. So as an industry, we love tech. And specifically within tech, we love digitization. So think cyber. I mean, Sarah, which CEOs have you talked to that haven't listed cyber at the top of their list in terms of areas of focus or areas that they've been invested?

But those stocks have been volatile, and the valuations get high. Yeah, they've been volatile, but they've also taken a bit of a beating. But think cyber, think fintech, think AI, think robotics, and also think about the brains that drive all of this digitization, which is the semiconductor industry as a whole. So we definitely think room for growth in the coming decades ahead with certain areas of tech.

Secondly, as I think of unstoppable trends in our investors' portfolios, I think it's important for investors to add immunity to their portfolios by adding health care. We really like health care. We continue to like health care, Sarah, because they're high cash flow, high dividend paying. Think the big pharma companies. They're counter cyclical. They don't move with the economy.

And on top of that, there is a massive aging population. By 2025 and greater and beyond, you're going to see 25% of the world's population at 65 years or older. So you're only going to see that consumption story for health care continue to accelerate. Couple that with all the innovation that you're seeing in the health care space with drug discovery, with telemedicine. I think it's a compelling story as well. So tech, healthcare, and we love clean energy on top of it. And you don't discriminate within healthcare. It's already, as a sector, really outperformed. It's pretty much flat over the last 12 months. It's defensive. And that's why we like it. We like it because it's defensive, but we also like it because of

the strong cash flowing positions and the high dividend payments that the healthcare industry provides. And also the fact that we think the consumption story is going to be massive in the coming decades ahead. So that's the advice portion. Ida, I'm curious what the sentiment is like among your clientele toward equities, toward bonds. It feels like people are still feeling pretty bearish and not expecting the Fed to cut rates anytime soon, even though the market's gunning for it by the end of the year? Yeah. So generally speaking, as I mentioned, we're expecting to have a recession in the first half of the year. We're hoping it's mild. But investors are also looking longer term. And we're looking at what's going to happen beyond 23. And I think that there's going to

be a compelling rotation that's going to happen midpoint through the year and into the second half of the year. And it's really important not to sit out too long. Otherwise, you're going to miss that potential rally. But are your clients bearish, would you say? Are they cautious after the year they've had? Well, they're cautious because we think there is going to be a lot more volatility and a lot more downside potentially. Because as I mentioned, bear markets never start before a recession hits. So we think there's more downside.

So buckle up, but don't stay in the bunker too long. Got it. The advice from Ida Liu, the head of Global Cities, Global Private Bank. Thank you so much for coming by. Thank you, Sarah. Great to spend time with you. You too. Ida Liu, the CEO of Moderna.

Speaking of health care, just announcing his plan for pricing COVID vaccines commercially once it gets government contract, once that government contract that it's had ends. He's going to join us next in a first on CNBC interview. Dow's down 92 points. The S&P and Nasdaq in particular hanging in there with the Nasdaq up almost a percent. We'll be right back. Shares of Moderna. Take a look. Getting a boost today after announcing $18.4 billion in COVID-19 vaccine sales for all of 2022. And the company is considering pricing its COVID vaccine in a range of $110 to $130 per dose in the U.S. Joining us now from the J.P. Morgan Health Conference

is Moderna CEO, Stefan Bonsal, and CNBC reporter Meg Terrell. Meg, over to you. Sarah, thanks so much. Stefan, it's great to see you. It's over to you. Sarah, thanks so much. Stéphane, it's great to see you. It's great to see you. Welcome back, Meg. Thank you. So let's start right there with the COVID vaccine. You know, the $110 to $130 a dose.

Is that where you are thinking of potentially pricing this once you switch to the commercial market? And how do you kind of think through when that switch is going to happen? Sure. So we've not decided the price yet. What I shared with the journal this morning is that the question was, what do you think of Pfizer range? And I said, well, this seems like a reasonable range based on the value of a vaccine in terms of savings for the payers. And so we are still going through that process. The U.S. government has asked us to be ready to be able to go kind of private setting, commercial setting versus pandemic setting this year,

which we're all doing in terms of discussing with pharmacies and payers and hospital networks and so on, as you would expect. And so we're all getting ready to do that. Right now, as you know, the U.S. government has ordered a lot of products. So we're able to provide the pharmacies. But it's really the goal is to be ready for late summer early fall for the next booster season so thinking about how you've modeled coveted vaccine revenue you know 18.4 billion dollars in 2022 you said a minimum of 5 billion this coming year you still could potentially strike more contracts but how do you see the covid business sort of playing out over time sure so i

think indeed the 5 billion is the contract that I already signed in Canada, Australia, and more countries. This number does not include any sales in the U.S., so that would assume we sell nothing in America, which I don't think will happen, of course. And no new contract in Europe and Japan and Middle East and

Latin America and so on. So we just wanted to be clear to the market, this is what has been signed already, and what we think is a fraud. That's how we characterize it. And so we're going to be working like in any pharmaceutical companies, like I used to do at Lillino before, where you go and you just go and negotiate contract and so on to, to, to, to, to see where the year will land. It's clearly a transition year.

I've never managed a company from pandemic to endemic. So I'm going to learn like everybody else. I've never managed a company from pandemic to endemic, so I'm going to learn like everybody else, I think. I think there's been a lot of COVID fatigue this year, but I think even the infections we're seeing for COVID and RSV and flu, I think more and more people are going to be more interested to get to their booster next year. And it really varies around the world. As you know, in the US, the vaccination rate for boosters, Omicron booster, is not very high. But in other countries around Europe or in Asia, it's much higher. So I'm hopeful that over time, the data and reason will help people get protected.

It's Sarah, Stephan. No, just on that note, you mentioned Asia. What about China? Do you think that they are going to eventually order mRNA vaccines as COVID surges there? So, morning, Sarah. So we are in discussion with the Chinese government. We have been for quite a while.

As you might be aware, the FT reported last week that Europe tried to give mRNA vaccines to China, which they refused from what was reported by the EFT. And so at this stage, there's nothing to announce because nothing was signed. We're actively in discussion. I'm hoping that something will happen. But of course, it's a decision of the Chinese government of where this lands in the end. That's good to know. At least you're still in discussions with that.

I think that's newsworthy for people looking for some relief on the China story. My other question to you, Stéphane, was on the vaccine you're working on with Merck as it relates to melanoma and how game-changing you think this is and how big it could be. Sure. I mean, if you look at the data, we compared our product to K2-Dry alone, so our product plus K2-Dry compared to K2-DRA alone. It was a randomized study, it was powered so we could know is it working or not. As you know, because I was on CNBC in December when the data came out, we saw a 44% reduction of risk of recurrence of disease or deaths, which is very material. We think we have a few even solutions technologically to potentially improve it and so what we're working with our colleagues

at Merck is how could we start a phase three as fast as we can in melanoma but because the mechanism is the same in all cancer which is how can we teach the T-cell, the immune system how to recognize what they missed? Because we all have cancer all the time and our immune system has the tools to take care of cancer cells. And if our cancer grows, is that something weird happens? And so we think it's applicable to other cancer type. Could it be applicable over time even earlier?

Could you see a world down the road where you have a technology like, you know, liquid biopsy like from Illumina, Grail, where you see tumors very early on in blood and you make a product for people as soon as you have that information to help them very early on in their disease to help them, that's also a possibility. So we're going to be exploring a lot of things. We think it's very game changer for patients and so Merck and us are very committed to invest aggressively. As we shared this morning, we're increasing our budget for R&D in 23 to 4.5 billion dollars. That's a very, very large number.

And a big component of that, of course, is cancer. That is really exciting. And I'm very interested to talk with you about the multiple applications you can do across cancer with personalized cancer vaccines. But of course, one of the near-term opportunities is flu, another is RSV. You said you're expecting to have data in RSV, what is it, within days potentially? I would say days to weeks. So it's tough because the team is analyzing everything and so on. But we indeed crossed the threshold of number of cases because it's a case-driven, phase-free efficacy study. And so we know we crossed it. The team is analyzing everything. We could very, very soon have the data out.

As soon as we have it, of course, we share it. And that will be a product that could be approved very quickly. As you know, there's no vaccine approved on the market. We also shared this morning that we bought during the Christmas break another voucher to be able to accelerate and get fast track approval for the FDA. And so we already had one from COVID, but we also have a flu product. So potentially there's two vaccines we could file this year for approval. So that will be a big game changing for Moderna. Wow, the donning of mRNA vaccines for multiple respiratory viruses. It's pretty exciting. Stéphane Bontel, thank you so much for being with us. Thank you

for having me. Thanks, Sarah. Back to you. They need one, like a COVID-RSV-flu combo shot. Meg Terrell, Meg, thank you very much. Wall Street is buzzing about how political unrest in Brazil could have a ripple effect on the market and your money. Details when Closing Bell returns. What is Wall Street buzzing about? Brazil. Market fallout from violent protests at government buildings, including Congress and the presidential palace by supporters of the former president, Bolsonaro. Seems reminiscent of January 6th here in the U.S.,

the invasion of Trump supporters of the U.S. Capitol. The market impact? Well, the real is getting hurt. You can see the dollar is up strongly against the real. It was up even more than that earlier. ETF ticker EWZ is in the red. That tracks Brazilian stocks. And then yields on the 10-year bond have jumped to more than 13 percent. Here's what Wall Street is saying about all this. From a JP Morgan note this morning, quote, different from what we saw in the U.S. in 2021, there is no clear demand from the protesters called criminals and terrorists on several networks. We have a situation here that the president already took office.

The cabinet has been named and the government is functioning for eight days now. And while JP Morgan analysts expect a negative market reaction, they do see it as short term. UBS says it expects volatility to remain high here for the coming weeks. Some flagged a risk here that President Lula, the current president, gets politically stronger and could push for a more radical left agenda. He has signaled a flood of budget-busting tax and spending policies and a more interventionist approach to state-controlled companies like Petrobras. The iShares MSCI Brazil Exchange Traded Fund has dropped 10 percent since October 30th when he won the election. Some companies to watch on this story in the U.S. with

outsized exposure to watch here. Mosaic has more than 40 percent of its revenue coming from Brazil. Ball, FMC, Corteva and Fleet Corps, just to name a few in the Russell 1000. They'll at least be hit as the currency weakens, as those local revenues become worth a lot less when brought back home into U.S. dollars. The bottom line, political risk is alive and well. It's not great for sentiment. At a time where things should be improving in emerging markets, in Brazil in particular, as China reopens and the Fed starts to shrink the size of its rate hikes.

It does muddy the economic and policy outlook for the domestic economy on top of a heavy dose of policy risk that has plagued Brazil since the election. Here's where we stand right now in the U.S. market. We've been losing steam this final hour. The Dow is now down 113 or so points. S&P 500 is flat, about to go negative, losing an earlier rally. The Nasdaq off its highs as well, still higher, though, up eight tenths of one percent. Technology is in the lead today, and that's on the strength in

semiconductors and big cap tech. What's weaker today? Health care and some of the other consumer staples. Retail is under pressure as well. Up next, Tilray brand CEO Erwin Simon discusses whether there's any hope the Republican-controlled House of Representatives would take up a cannabis legalization bill under newly elected Speaker McCarthy. That and more on his quarter as well when Closing Bell returns. Shares of Tilray getting smoked today, down 6.6%. This comes after the cannabis company missed on revenue estimates, mainly, though, driven by currency headwinds. The company also saw a slowdown in Canadian adult use and medical use.

But Tilray did see growth in its beverage and wellness categories, supported by the acquisition of Montauk Brewing. Erwin Simon joins us now for a first on CNBC interview. The CEO of Tilray. Erwin, welcome back. Good to see you. Thank you very much. Nice to be back. So people are fretting about swinging to a loss and the missed results. What is happening with the underlying business right now? So at a constant currency, actually, we're up over last year. We're up quarter over quarter.

And actually, there's been some significant price compression in Canada, almost $12 million year over year. So, you know, I'm happy considering what's going on in the world today and the economy. I'm happy in regards to what's going on in the cannabis world. Listen, I think, you know, over 60, 70 percent of consumers want legalization happening. And in Canada, you know, we have the largest share in canada we're strong in adult use we're strong in medical and our plan is to drive our canadian sales by organic growth innovation and we'll do some more acquisition there the canadian market's a seven billion plus market so there's lots of opportunities in the canadian market for us. In Europe, same thing. Go ahead. No, I was just going to ask about the oversupply in the Canadian market and how you think about that excess capacity and what it means for pricing.

Listen, there's over 900 LPs in the Canadian market. And with that, listen, the opportunity in Canada for somebody to really take that leadership role. We have over 12 brands in Canada. We have a tremendous amount of innovation. And I think, listen, we're a four-year-old company in regards to cannabis. You know, in regards to Tilray Brands, we're a two-year-old company. We're out there building brands. We're out there building distribution.

We're out there innovating, you know, on products. There's still a $5 billion to $7 billion opportunity in the Canadian market, which will set us up one day once legalization does happen in the U.S. and Europe. When is that going to happen in the U.S.? Or when you saw that debacle that was the House speaker vote, 15 of them, they couldn't even elect House speaker. How are they going to pass legalization, especially when Republicans aren't even seeming so sure that they want that? What are your expectations here? Listen, Sarah, you know, what we have to do now is ultimately not depend upon the government. We have a strong business in Canada. We have a strong business in Europe in regards to medical. In the U.S., hey, what we're doing is we've gone into the spirits business.

We've gone into the beer business. We've gone into the wellness food business. So right now it's to grow our U.S. businesses into consumer packaged goods with adjacencies. You know, I've said, you know, last year that we want to be a $4 billion business dependent on legalization. That's going to depend upon legalization. I don't see that happening anytime in the near future. So our strategy is to grow our businesses through acquisitions, through other categories with adjacencies. But listen, look at New York right

now. Look at the lineups of the cannabis stores that have opened in New York. The demand is there. The want is there. Look how long it took for prohibition. So ultimately, I see a big opportunity, a big industry. And with Tilray, with its balance sheet, with its brands, with its technology, its innovation, its global footprint, we'll be there. It just, hey, depending upon what, we'll be a diversified company into many categories, but built around brands. Okay. So on that acquisition strategy, I know there was a lot of talk of it on the call and there are a lot of questions. How are you thinking about it? Is it other beer and liquor brands in the U.S., craft brands, or could you do a potentially bigger deal? And

could you see a scenario where CPG makes up a bigger percentage of revenues than cannabis at some point. And absolutely, that's what I see today. You know, the cannabis business in Canada, you know, it's interesting. And over the last couple of years, we've paid over $220 million in taxes in Canada. So look what the governments are missing by not legalizing Canada. So the plan is to grow Canada, do other acquisitions in Canada, and cannabis as consolidation. But the U.S. right now, the focus is to grow Canada, do other acquisitions in Canada and cannabis as consolidation. But the U.S. right now, the focus is on CPG. And yes, looking at some bigger opportunities out there in the wellness space, which I know well, looking at other opportunities in the beer and spirit

space. And, you know, I don't mind Diageo's or Constellation or other, you know, spirit companies, multiples out there in their margins. Same with Europe. I like Europe. I think the opportunities are going to be tremendous in Europe. You know, we've got a great infrastructure in Europe. We combined all our European businesses, our CC Pharma, our cannabis business, and ultimately we're looking at other opportunities in Europe in the consumer packaged good industry that are adjacencies to the cannabis business.

So once it is legalized you know we'll have that brands we'll have the products we'll have the know-how and we'll ultimately be that global company yeah well reminiscent of the haine celestial days on wellness and cpg erwin thank you very much appreciate the time thank you very much thank you very much erwin the time. Thank you very much. Thank you very much. Erwin Simon, Tilray CEO. Up next, Canaccord Chief Market Strategist Tony Dwyer on whether recent market strength can really be trusted. That story plus Gaga for Baba and Coinbase soaring when we take you inside the Market Zone. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day, as always.

Plus, we've got Deirdre Bosa on Alibaba and Kate Rooney on Coinbase. We'll kick it off with the broad market, though. Dow's negative. The S&P 500, though, Mike, has just joined the Dow in negative territory. Strength in technology, materials, utilities, and discretionary, but weakness in health care, the defensives. Consumer staples, financials are under pressure, energy is down, even though oil prices were higher and gold prices were higher. What do you see as the big the big driver ahead of a CPI report on Thursday and coming off of that celebration on the slower wage growth in the jobs report Friday? Well, I think that a little bit of a backing off of the reaction on Friday, that celebration of the jobs number that seemed a little bit faintly Goldilocks-like is probably what we're observing today.

You often do on a big up jobs day see a little bit of a give back. I don't think today's action in particular has a very sharp story to tell aside from pretty mechanical bounces in some of the huge growth stocks that got beat up nicely. It's defensive groups that are selling off even as yields come down. It's just a little bit of a noisy bit of action aside from the fact that we spent weeks with the S&P very sticky around the 3800 level. Here we are at 39. We overshot to the upside, hitting some potential resistance up there. The 200-day average is actually below 4000. So I think that's mostly what we're seeing, a little bit of a consolidation of a good start

to the year we got last week. Also, the hawkish Fed speak never helps. And we had a lot more of that today. Look at shares of Alibaba. Big winner on news, co-founder Jack Ma is giving up control of Chinese fintech giant Ant Group. That move could ease tensions with Chinese regulators and help revive Ant's massive IPO. Remember, it was canceled back in 2020. Alibaba owns a large stake in Ant, also possibly helping the stock. Goldman Sachs adding the company to its conviction list

on reopening strength. Deirdre Bosa joins us. Deirdre, how significant of news was this about Ma and Ant? Well, investors are seeing it as sort of a path towards Ant being able to IPO, though the company says it doesn't have plans to anytime soon. It's not just Goldman, though. Morgan Stanley also adding it to its top picks of 2023, citing easing regulation,

particularly of fintech, which it calls a key catalyst. I mean, look at what's happened to Jack Ma. He was once known as the people's billionaire. He was thought to be untouchable because of his popularity within China, but also just globally. Now he's sort of seen his empire crumble. He's a persona non grata at the companies he helped found. That's Alibaba and Ant Financial.

I guess the question going forward is, can those companies continue to succeed without him at the helm? Yes, one of the risk factors may be taken out along with the reopening, but can they grow at the same pace? I suppose that's what investors have to ask themselves. Meanwhile, though, it's not just Alibaba. All Chinese tech ADRs have started 2023 off on a roll, continuing that outperformance from last year, Sarah. Yeah, I mean, the reopening also may be just another signal that their massive internet crackdown from the Chinese regulators is winding down, cooling off.

I don't know, hard to read into the signals there. Deirdre, thank you. Deirdre Bosa. Check out shares of Coinbase, one of the beaten down growth stocks surging today after Jeffries analysts said the company is best positioned to weather FTX headwinds in the long term. The firm initiates as a hold with a $35 price target. Kate Rooney joins us for more. Kate, what is the case here? Hey, Sarah. So a couple of dynamics are playing out here. You mentioned the note from Jeffries.

That's bringing a little bit of optimism and then pockets of risk and growth you've seen rallying today. So crypto tends to be a bellwether of that. For Coinbase specifically, it is likely a short squeeze playing out as well. So it's been one of the most heavily shorted names out there in recent weeks, along with a lot of the other crypto stocks, which we've also seen jump today as well. S3 Partners had some numbers of this on Friday. They said that about 28 percent of the float or essentially the available Coinbase shares out there, were shorted. And the average S&P stock is about 5% for context. So it was becoming a crowded short position, was looking to be set up for a potential short squeeze. And that appears to be what's happening now.

Traders are buying to try to cover that. A grain of salt, though, you mentioned the Jefferies note. They did say that the FTX impact in the near term, they say it's decidedly negative. They talked about trading volume facing some pressure. So this does seem to be more of a technical rally and short squeeze. If you look over the 12 month period, Coinbase is still down more than 80 percent over the past year or so. Kate Rooney, Kate, thank you, Mike. And 14 percent higher for Coinbase, which doesn't even make it the best performer in the ARK Innovation Fund, which is up sharply today. You've got names like Exact Sciences up 25%, Fate Therapeutics, and then some of the other growth names like Robinhood, DraftKings,

NVIDIA, they're all higher today too. Yes, they are. And you really do have to broaden it out. We're almost two years past the peak in this category of stocks. That's when the IPO index peaked. That's when the ARK Innovation Fund peaked. So just about two years where the charts all look like rolling down a steep hill, and now we're bumping along flatter ground. So I do think that they have remained heavily shorted. People are taking in their directional bets, both on the long and short side. That's this mean reversion we've seen so far this year.

Naturally, it's going to be company by company. We had another LBO in a software company today. You know, you do have this sense out there that the down cycle is maturing at this point. But I would absolutely not look to this area of the market to be the thing that leads you higher. They'll be very volatile. It's going to be jumpy. It's going to be squeezy. And there'll be some that emerge out of this. They are building some bases. Zillow is another name that's working today that looks like it might be building a base, but it's not back to the good old days of, you know, 2020 and early 2021. The AABs as well. Tesla Lucid is up 7 percent as well. Look at the S&P 500. Well off session highs in the final minutes here of the trading day. We

gave up an earlier attempt to extend Friday's rally. While stocks have rebounded from October's lows, our next guest hasn't seen any signs of a market bottom yet. Canaccord Genuity Chief Market Strategist Tony Dwyer joins us now. So what are you waiting to see, Tony, before calling a bottom? Well, Happy New Year, Sarah. So whether it's a bottom or a bottom, typically you get one of three things. In Fed induced bear market like we're in. You really need them to do more than just signal that they're slowing down on rate hikes. And in other words, the percentage of yield curves that are inverted has led to a recession every time when it's hit this level. The conference board leading economic indicators, anytime they've hit a minus four where they're at year over year, you've been pretty close to a recession.

The ISM manufacturing and services, which I believe give investors the ability to look through that coming negative economic outlook or weaker earnings. That or you get the earnings and valuation are reflecting recession. Clearly, that's not the case with growth expected in 2023. Our number is calling for about a four and a half percent decline in S&P operating profits. And then lastly, some kind of wash washed out condition. As you know, we're looking for a summer rally and then the year end rally. Both were predicated on you were just getting smoked in the market and all the indicators were historically extreme. On the Fed point, Tony, would it be good enough if the Fed just takes a pause and doesn't cut interest rates? Because that feels like where they're going. It doesn't feel like they're going into cutting. The last minutes told

us none of them are expecting a cut in 2023. They're trying to make that point pretty clear. Yeah, I can only find the, it was a soft landing environment in 1995 where the Fed paused and that really kick-started a run really into tech and it created the last half of the 1990s. Clearly, I don't think that's going to be the case here because, again, it would be historically unique with those indicators I mentioned to not go into recession. The thing that I find interesting, Sarah, is the Fed is trying to regain credibility here. Like I try to exclude all the silly stuff people like me look at and use a little bit of common sense. They're trying to reestablish confidence in the market that they know what they're doing. And the market is absolutely ignoring everything they're saying.

So if anything, I think they're going to be more hawkish because they're trying to get that credibility. Whether it's right or wrong isn't important. That's why I think they're having the tone that they're having. Well, it's important if they're wrong and then they take us into a deeper recession than we need to be with inflation already coming down. Well, it may already be too late based on those indicators. And that's our that's really our call. And honestly, I think what's interesting here, Sarah, is the bull story, I don't think is a soft landing because that means you have higher interest rates for a much longer period of time and likely will therefore have an inverted yield curve for a longer period of time. How about if the bull case for the year

where it ends positive, which is our case, is that they start cutting rates aggressively, re-steepen that yield curve and allow investors to look through. It's worse economic news that you need now, not better economic news. And I think that'll be the focus as we move forward. That is something we do not hear every day. We usually hear the soft landing is the bull story. Tony Dwyer, thank you very much. It's good to check in with you always. Canaccord Genuity as we head into the close. We've got two minutes to go in the trading day. Mike, what do you see in the market internals? Yeah, the strong breath that we started off the day with has actually stuck around. So it's been a little bit stronger internally than the headline indexes would have you think. Two to one, actually very strong breath on Friday. So it's been a couple of good

days. Doesn't really create a huge momentum push, though. Take a look at the 10-year treasury yield. It's really starting to look like kind of rolling over, breaking the one-year uptrend to a degree, if you kind of draw the line a certain way. The high back in June was, I think, in the 340s, 348 or something like that. So it's looking pretty heavy there. The highest point on the yield curve, I believe, is the six-month bill at the moment. So very inverted. The volatility index bumping up here on a Monday. That typically happens.

Still in the low 20s. We've got the CPI Thursday. It's probably going to keep it bid more than it would otherwise in an otherwise gentle index move, Sarah. Yeah, these inversions, the three-month 10month tenure, especially inverted right now, most in decades. Take a look at the market heading into the close. The Dow is being weighed down by Amgen, Travelers, and J&J. It's down about 100 points. On the plus side, you've got Salesforce, Goldman Sachs, and Microsoft contributing the most on the upside. The S&P 500 looks like it's just around unchanged. It's flipped negative here in these final moments.

Technology, materials, and utilities are strong. What's not? Healthcare, staples, financials, energy, industrials, real estate, and now communication services just dipping into the red. Looks like NASDAQ is going to go out with a gain because of the outperformance today

in the chips like NVIDIA, Tesla, Microsoft, Amazon. Those are all helping today. Also, we've got lower yields and a weaker dollar, both helpful. That's it for me. I'm closing now. See you tomorrow, everyone.