Power Lunch - Microsoft Landing, and CEO Sit-downs 1/24/23

Episode Date: January 24, 2023

Wall Street is awaiting Microsoft’s big earnings report due out after the bell. And there are lots of issues at play, from layoffs to investments in AI. We’re also waiting to hear from the Dept. of Justice on an antitrust announcement. We’ll break it all down, and bring you the latest details as they happen. Plus, we have a couple of big CEO interviews on deck. We’ll talk defense with the CEO of Lockheed Martin, and lithium’s record run with the CEO of Albemarle. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch along with Tyler Matheson. Oh, wait, you're Tyler. No, you're Tyler Matheson. You would be Kelly Evans. I'm sorry. We are glad that you can join us today on Power Lunch. Coming up, Microsoft, the big earnings report due out after the bell. A lot of issues here. Recent layoffs, the cloud business, and more. The investment in AI will break it all down.

Now. Thank you. Plus, a couple of big CEO interviews. Coming up, we'll talk defense with the CEO of Lockheed Martin and lithium prices with the head of Alba Marl. We're also waiting to hear from the Department of Justice on an antitrust announcement, but first a check on the markets.

We see the Dow turning positive after a 300-point decline earlier. Fresh session highs up 112. The S&P up a point now. The NASDAQ lagging by 10. Let's go to Dom Chu and see what's moving. Hi, Dom. However, having some of those Dow components

on the move today right now in the earnings headline mix. First of all, you've got 3M, which is not helping matters much right now, down about 5%. This is the company behind everything from Post-it notes to industrial filters. It reports mixed results.

Earnings missed analyst forecasts slightly better than expected than revenues. 3M did also cut their full-year earnings and revenue guidance, as well as announcing 2,500 job cuts in their global manufacturing roles. Those shares down about 5%, just kind of holding near session lows. Also, Johnson and Johnson, which had mixed results as well. Earnings per share, better than forecast. Revenues, though, a slight miss. They did forecast, though, full-year earnings.

with the range midpoint that was above estimates. J&J helped along by stronger results in consumer health, thanks in part to demand for Tylenol and Motrin during this cold and flu season. Those shares down fractionally right now. And we'll end with a check on insurance giant travelers. Believe it or not, the outperformer catching a bid even after getting hit very hard last week

after pre-announcing results, including higher than expected catastrophe-related losses due in part to those deadly winter storms at the end of last year. Travelers earnings for the rest. record in line with estimates with those pre-announced numbers, revenue slightly better. Nonetheless, an upside gain 2.5 percent. Tyler, back over to you. All right, Dom, thank you very much. Let's turn now to Microsoft. So is that big earnings report? Well, that's the one we're expecting

after the bell. The stock flat today, basically flat for the year so far. The company announcing last week, it intends to cut about 10,000 jobs. So has that dampened optimism heading into the report for some answers. We turn to Steve Cobb. Steve? Sure answer. Yes. How about It's dampened optimism around the stock. Look, we already know it's going to be a costly layoffs. We were talking about this in the last hour. But on top of that, we're just seeing all these headwinds, Tyler, from failing PC demand, just consumer hardware in general. That hurts the Windows division. And we're also just, if you look at the analyst estimate, it's the most recent ones, only about 3% revenue growth for the quarter, which is going

to be their worst revenue growth in several years. So it's just a really tough environment they're going into. They'd love to say, do more with less. I keep, I've been joking about that. all day. They're going to have to eat their own words now and do more with fewer staff and more deliberate priorities that they're going after cloud being one of them, gaming the other. Where are they getting any help from corporate IT spending, or is that even? That's the real thing. So corporate IT spending expected to grow this year, and that's really important for small and medium businesses. The big guys, the Comcasts of the world, like our parent company, they're going to keep spending like gangbusters on these,

these IT products from Microsoft, but it's the small and medium businesses that become the concern, because they're going to be the first ones as we head into a recession or environment. They're the first ones to start cutting spending. Again, IT spending expected to grow, just not as significantly as we saw during the pandemic. Well, we've got breaking news now. We're going to go down to the Justice Department here from Attorney General Merrick Garland making an antitrust announcement about Google. Let's listen.

We're not shooting in our country. All of us at the Justice Department, including the FBI and ATE, will continue to support the Half Moon Bay community in the difficult days ahead. And as I said yesterday, the Justice Department is committed to doing everything in our power to protect our communities from the gun violence that is leaving no community in this country untouched. Today, the Department of Justice, joined by eight states, filed a civil antitrust lawsuit in the United States District Court for the Eastern District of Virginia against Google. We alleged that Google has used anti-competitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies.

These technologies, which are known as ad tech, automate advertising sales by website publishers to online advertisers. When an internet user opens a web page that has ad space to sell, ad tech tools almost instantly match the website publisher with an advertiser looking to promote its products or services to the website's user. This product and process typically involves a use of an automated advertising exchange. This exchange runs a high-speed auction designed to identify the best match between a publisher-sellable. internet ad space, and advertisers looking to buy it. As alleged in our complaint, for 15 years, Google has pursued a course of anti-competitive conduct that has allowed it to halt the rise of rival technologies, manipulate auction mechanics to insulate itself from competition, and force advertisers and publishers to use its tools. In so doing, Google has engaged

in exclusionary conduct to severely weaken, if not, not destroy competition in the ad tech industry. As detailed in our complaint, we allege that Google's anti-competitive conduct extends to three significant elements of the digital ad buying process. First, Google controls the technology used by nearly every major website publisher to offer advertising space for sale. Second, Google controls the leading tool used by advertisers to buy that advertising space. And third, Google controls the largest ad exchange that matches publishers and advertisers together

each time that ad space is sold. As a result of this scheme, website creators earn less and advertisers pay more. That means that fewer publishers are able to offer Internet users content without subscriptions, paywalls, or other forms of monetization. Our complaint alleges that Google has violated Section 2 of the Sherman Antitrust Act by monopolizing the market for the technology used by publishers to offer ads on their websites, monopolizing or attempting to monopolize the ad exchange market, and monopolizing the market for the ad network technology that advertisers use to buy digital advertising space.

Our complaint also alleges that Google has unlawfully tied its ad exchange and its publisher ad server in violations of Section 1 and 2 of the Sherman Act. And finally, we allege that the United States, as an advertiser, has incurred damages by reason of Google's violations of the antitrust laws. In addition to the declaratory relief, our complaint seeks damages and the divestiture of certain Google ad tech products. It also seeks an injunction preventing Google from continuing to engage in the anti-competitive practices described in the complaint and any other practices with the same purpose and effect as the challenge practices. I am grateful to Assistant Attorney General Jonathan Cantor, Principal Deputy Assistant Attorney General Doha Mecki, and the attorneys and staff at the Antitrust Division for their tireless work on this case. monopolies threaten the free and fair markets upon which our economy is base. They stifle innovation, they hurt producers and workers, and they increase costs for consumers. Today's complaint is only the latest example the department's work to challenge antitrust

violations that undermine competition and harm the American people. No matter the industry and no matter the company, the justice to Department will vigorously enforce our antitrust laws. We will aggressively protect consumers, safeguard competition, and work to ensure economic fairness and opportunity for all. I will now turn the podium over to Associate Attorney General, Vinita Gupta. All right, that was Attorney General Merrick Garland, giving the details of the Department of Justice's suit against Google. The shares again down about of 1% today. Let's get to Amon Javers to wrap up more of what we heard, Amen. And this, again, there's so much

many different issues with Google, but this is specifically about its monopoly on advertisements, both control, being the sort of the buyer and the seller here. What do we know? Yeah, that's right. What the DOJ is saying here is that Google has monopolized both the buy side and the sell side of these advertising transactions. And this 153 page filing that the Department of Justice made today, along with eight U.S. states, it goes back in history, as you just heard Merrick Garland say, to 2008 when Google acquired double-click for $3 billion. billion and says essentially since this time what Google has been doing is trying to build a moat around its an advertising business and control every aspect of that business, even taking financial losses in

the short term in order to ensure that it has control over the entire transaction and that advertisers really can't see exactly what's going on inside the black box of its processes. And when you dig into this filing, there's some interesting little nuggets in here, including some conversations that apparently happened inside Google. One of them that they cite here is a Google employee who raises the question inside the company, quote, is there a deeper issue with us owning the platform, the exchange, and a huge network? The analogy would be if Goldman or Citibank own the NYSE. So that's the allegation that the Department of Justice is making here.

This was fundamentally anti-competitive. We'll see what Google has to say about that and how long this takes in court to sort it all after. out what the Department of Justice wants here is for Google to divest itself of some of these businesses. There were reports last summer that Google made an offer to settle this in order to move some of these ad businesses into another unit inside Alphabet. Those media reports, those offers cited in the media reports, apparently not enough for DOJ. They're moving forward today in this long-awaited case, guys. All right, thank you very much. Amon, let's bring in Deirdre Bosa now, as well as Steve Kovac, who is still with us.

Deirdre, Amin just made the mention the magic word divestager. What would the Justice Department seek Google to divest? So as Amin was talking about, the DOJ really has a problem with Alphabet being on all sides of the transaction, the buying, the selling, as well as the auction process. So he mentioned also that $3 billion acquisition a few years ago for double click. That's an area where they could force a divestager. It could look even bigger than that. But I think the key, too, going forward, that's, I'm. unlikely. However, when you think about what Google can or cannot do right now, it would be very,

very difficult for them to make another acquisition in this space at a time when a lot of folks are calling for consolidation. So perhaps this hinders further growth of this industry for Google, but again, the DOJ would say that doesn't matter because they are the dominant player. I would note, and this is probably what Google would note as well, that its dominance has been declining a little bit. You've got players like Amazon that were able to build an advertising business and scale it up fairly quickly. But the fact remains, of course, that Google by far is a dominant player here. And that's what the DOJ is taking issue with.

And again, saying that maybe divestitures is a way of solving that. Steve, you were nodding there. It's a question of dominance, but maybe not being as dominant as it was. I'd like to get your reaction to that. And also to the idea here that we're not talking about search here. No, this is the ads that show up next to search. Yes. Kelly's favorite thing when you search for something and you see a gazillion ads.

It's all kind of related. If they push the legitimate stuff down, you have no choice but to pay for top placement. And if you're, I mean, to then have them control that market and raise the prices to such an extent. And it's the only spot. But I want to touch on what Deirdre said because that is super important. And if Google's going to, you know, show something that we're not as dominant, we're dominant, but we're not that dominant. And that dominance is weaking. Amazon is growing like crazy in advertising and do not sleep. I know I talk about Apple too much. Do not sleep on Apple as they put more and more. advertising into the iOS, they are going to eat a bigger piece of that pie too. So they can point to all these trends.

TikTok, of course, we know is just growing like gangbusters as well. Thematically, also, I know we were just watching Merrick Garland do that. I couldn't help but think of Joe Biden because this is what the plan was. From the moment he appointed Jonathan Cantor, from the moment he appointed to DOJ, replaced him at McAnne Delverheim, and from the moment he appointed Lena Con at the FTC, this was the plan. Let's go after these companies. Big Tech was a big part of their platform.

It's a big part from the beginning. And as soon as he nominated those people, this is where we're going. So we have on the FTC side, you have them going after the Microsoft Activision deal. They don't want Instagram to happen again, like Facebook buying Instagram. They don't want another double click happening. That's what this is about. And so, thematically, this administration is really going after these mega mergers. It's going to put a chilling effect.

But, Amin, they don't not want campaign donations from these companies, do they? That's always true. But of course, if you break them up, then there's multiple companies to offer campaign donations. Well, I hadn't thought of it that way. And to Steve's point, I don't know if we still have a live look in here, but Jonathan Cantor is speaking at the Department of Justice Presser that's going on right now. So he is a key official in all there. You see him at the podium with Merrick Garland just behind his shoulder. He's a key official in all of this.

And this does speak to the Biden administration's whole agenda here when it comes to technology and sort of corporate monopolies as they see them more broadly. The president, remember, had an op-ed in the Wall Street Journal just last week talking about his vision for what the technology industry would look like in the future and talking about a whole host of wrongs that he thinks that the technology industry is guilty of, and really looking to, in a way, break up some of that monopoly powers from some of these big tech companies and everything from, as you were just talking about, search and others. But on your specific point about divestiture, just as a point of clarity here,

The suit here is asking for Google to sell off specific things. They're saying they want to judge to order the divestiture of at a minimum the Google ad manager suite, including both Google's publisher and server DFP and Google's ad exchange ad X along with any additional structure relief. They're also looking for any damages that would be relevant under the law. So they're looking for significant changes to the way Google is structured and the way those ad businesses operate us. Although, Deirdre, just sort of a comment here as well, it seems as though as long as long as, as long as Google itself is the dominant search platform, that that is still where the dollars are going to be spent, you know?

I'm curious kind of opening up the ad process should ameliorate the cost of it somewhat, but it's hard to see how if we're ultimately all still bidding for the same, you know, centimeter of screen space, how the cost would change substantially. And I guess what Alphabet is arguing that is if the DOJ goes through with that, that will actually stifle innovation. It will raise costs across the industry. will be more broken up and maybe you wouldn't have as much data to pull. And that's their argument.

But I would like to respond to something Kovac said, Steve Ann Damon said, is that, yes, this is President Biden's agenda, but this is a bipartisan issue. This was also President Trump's agenda. That's when the first DOJ lawsuit was filed, and that's not even going to trial until later this year. And that is why you see skepticism or maybe you call it complacency among investors who talked about this not long ago, Kelly, in that they don't really think anything's going to be done because this is bipartisan. and everyone wants to do something, but does it happen?

These companies are very powerful. They spend a lot of money lobbying. And let's go back to the user. We know that regulators are on this, but the people that use Google Tech and the customers, too, that it trickles through to search, they may not have as big a problem with it. Let me cut to the stock chase here.

How big an overhang is this going to be on the shares of alphabet and for how long? Because these things... Several years. These things don't sell. No, this is a six months. These are multi-year, I remember the Microsoft case. It went on and on and on and on. And to Deirdre's point, this is the second one, and it's just going to drag on for, you know, better part of a decade. As far as the stocking

on. And here it is in the U.S., what's going to happen in Europe? We've been talking about these issues, Tyler, for like six or seven years now. Nothing has happened. You won't have to blame investors for being a little cynical that there's an appetite to actually do something more meaningful that can hurt the share price, that can hurt their profits. It was kind of adorable that Google thought they could spin these properties back into its parent company and be somewhat separate. That's not how it works. But look, and they offered these remedies that one being one of them, that clearly isn't satisfying these regulators. But whether or not they have enough teeth, whether a new administration comes in and has different ideas.

And to your point, it is, deirdre's point, it is bipartisan, and there's bipartisan animosity towards Big Tech. They just come at it from different ways and have different ideas how this should be regulated. that's another problem. Amen, go ahead. Final word here? I was just going to say, Kelly, the other set of stocks you might want to look at here is web publishers, because if this is resolved in their favor, there's a lot of money here at stake for those people. One more nugget from the filing, what they're saying here is that on average, Google keeps at least 30 cents and sometimes far more of each advertising dollar that flows from advertisers

to website publishers through Google's ad tech system. So if you're a web publisher and you're in the business of receiving ad revenue, That's been such a tough business for so many years. If this is resolved in your favor, some of those 30 cents out of every dollar might be coming to you. Yeah. So in effect, Google or Alphabet is a toll taker in this process. That's right. All right.

A lot of money at stake. Thanks very much to everybody there. Thank you so much. Ahead on Power Lunch. Two big CEO interviews first. Lockheed Martin's results out this morning. The stock gaining slightly an increase in defense spending boosting the quarter. But what about the talk in Washington about rain?

in some spending. And we'll also talk to the CEO of AlbaMarl about lithium prices. You can't imagine how well they have been moving higher. A key component in the electric car future, we will be right back. Welcome back to Power Lunch. A big day for defense with rivals Lockheed Martin and Raytheon both higher after results this morning. Lockheed topping EPS estimates, thanks in part to record order volume and a big beneficiary of the $27 billion in military aid committed. to Ukraine. But it also left sales guidance for this year unchanged, talking about some ongoing supply chain and labor challenges. Can they keep up momentum after shares surged 37% last year? Let's welcome in Lockheed Martin, Chairman and CEO Jim Takeda and our very own Morgan Brennan

Morgan. Kelly, thank you. Jim, great to speak with you on the heels of earnings this morning. I do want to start with that sales guidance, the fact that you're expecting flat sales this year, but a resumption to growth in 2024. What will fuel that growth as we look to next year, given the fact that you do have an order backlog that has ballooned to $150 billion? Sure, Morgan, good afternoon. Well, starting with the F-35 program continues to ramp up.

We expect to build between 147 to 153 aircraft this year and in 2024 and then up to 156 in 2025. So we'll have production increases in 2020, 4 and 5. We'll also have opportunity to build up on the CH 53K. That's going into full rate production. We've got activity going in our space business with the next generation interceptor

that can prevent ballistic missiles from hitting our homeland and a number of other programs. So we've got a whole set of classified and unclassified programs that we think are really going to start to catch fire in 2024 and beyond. 24 and beyond. Yeah, and of course, one of those program of records that's seeing that ramp in production is the F-16. You've got the Block 70 aircraft just today. It looks like this first successful test flight of the first of these fighter jets that will go to Bahrain. How does that speak to the fact that we are seeing this increase in demand for defense, not just here in the U.S., but among our

allies as well, and what that is going to mean in terms of translation to sales? Sure, just the reality of the geopolitical situation that's evolving. Obviously, Russia's invasion of Ukraine. In addition to that, China's been very active strategically in Asia and elsewhere. You know, I think it's well understood both by our administration currently and in Congress on both sides of the aisle that there's, you know, a heightened threat environment. Our allies feel the same way. We've come together in Europe to work together to help defend it. but there's increased demand, as you said, for the kinds of systems and products and platforms that you need to defend your country. We've got great relationships with the number of our allies. You know, F-35's got quite a few partner nations that help build the aircraft. F-16 is, again,

you know, taking off literally, again, with allies that may not have the authorization to buy the F-35 or have the industrial base to support it yet. But it's kind of an entry-level, opportunity. I flew the F-16 Block 60 a couple of times recently with our test pilots, and yeah, Block 70, very close and even more advanced version of that. Great airplane flies very responsibly, super acceleration, and the upgrades are largely around avionics, networking, better cockpit controls, and it's just a really fantastic plane in advance of, say, an F-35 fifth generation. Okay. Turning to Ukraine specifically, I mean, there's a lot of Pentagon money. It's something like tens of billions of dollars that have been appropriated by Congress,

dedicated to DOD, to put onto contract with companies like yours, replenishment of things like Haimars and javelins, which you make with Raytheon and the pack three missiles that are part of the Patriot system that's now getting shipped out to Ukraine. Is the pace of contracting beginning to pick up? And if so, how quickly can you, deliver on some of those supplies to replenish stockpiles? The pace of contracting is definitely speeding up. There's some real thought leaders in the Department of Defense that understand the issues and are helping to reduce those timelines.

I think there's a whole approach we can take with government and Congress to really advance the ball down the field on this issue. There's a number of elements. It's not just the contracting process of paperwork itself, but it's really having a number of joint initiatives. between industry and government, change your relationship to work together better in a few ways that will really help in the future. So, for example, we're intending and working towards doubling the high Mars production and the javelin production. It's going to take two to three years

to get that done in both cases. We got a head start on it about a year ago when I sort of went back to the Pentagon volunteered to spend about $100 million to start that process before we had any contracts or any paperwork going back and forth. So it was worth doing to demonstrate that we can get a head start. But there's four things I think that government industry can do together in the future. First is we need to have multiple supply sources for microelectronics, critical metals, things like that. So we have more than one source for key components and not just have to rely on one supplier who may or may not be able to ramp up. The second area is that we really would be great for especially small and medium supplier companies to have less regulatory burden to work with the DOD.

I know there's some ways to streamline that, given, you know, the history of it. There's also the opportunity to think about really investing early. And I say we've been, you know, working on a peacetime production rate over the last, you know, a couple of decades. What's two standard deviations above that like we're seeing now for, say, Hi, Hi, Mars and Javelin, you know, we should be prepped and ready. with reasonably small investments to ramp up like that if we have to. So those are just some areas where we could improve together. And then if the government got more accelerated, multi-year programs, other ways to really give the supply chain,

our suppliers more confidence that they should be investing in this industry right along with us. All right. It's a conversation we'll continue to have, especially as defense spending, is increasing this year, but is a little bit of a question mark looking to fiscal 2024, given some gridlock in Congress. I know you yourself expect that we are going to continue to see robust defense spending here in the U.S. We're going to leave the conversation there, Jim Takeda.

CEO of Lockheed Martin. Thanks so much for joining us today. And thank you, Brennan. You're welcome, Morgan. We appreciate it to both of you. Let's get to Bertha Coombs now for a CNBC news update. Bertha. Hey, Tyler.

Thanks for that. Here's what's happening at this hour. Germany has reportedly decided to send its advanced leopard two tanks to Ukraine. Reuters says Chancellor Cliff Schultz, Olaf Schultz rather, will also allow other countries, including Poland, to do the same. The move comms amid reports that the Biden administration is close to approving American tanks to be shipped to Ukraine. The man accused of killing 23 people in a racist attack on a Walmart in El Paso, Texas in 2019,

will plead guilty to federal charges in that case. This is after federal prosecutor said they would not seek the death penalty. But the suspect is still at risk of ending up on death row. He faces state charges, including capital murder. And a Georgia election probe by a special grand jury will remain secret for now. The report looked at possible interference in the 2020 election by former President Trump and his allies. Prosecutors argued against releasing the documents while they consider filing charges. based on that report.

Kelly, back over to you. Thank you very much. Bertha Coombs. Ahead on Power Lunch, lithium prices continue their meteoric rise. They're up 800% over the past three years. We know they're a big part of making batteries. And chemical firm AlbaMarl says the growth should continue.

The CEO joins us next. Welcome back to Power Lunch, everybody. Dow's turned positive by 94. We got about 90 minutes left in the trading day. So let's get caught up across the boards on stocks, bonds, and commodities. Bob Bassani kicks things off for us. And Bob, I mean, what happened? Have we figured out what happened at the Open yet?

Yeah, they're still trying to figure it out. Simply put, the prices were not accurate. We had the opening auction and there was no real print for the Open, and that caused a lot of dislocation. There's a trader talk out if you guys want to hear about this. The important thing about today, the earnings came out, and frankly, they were very mediocre, and yet we're about to go positive on the S&P 500.

Look at all these big names. 3M was a disappointment. Johnson & Johnson, Fair Not Great. Union Pacific, was definitely a bit of a disappointment. They missed estimates. Verizon was okay, but 2023, the consensus was kind of below expectations. GE was okay, but not stellar. Travelers pre-announced, they were in line, but again, not amazing. So the bottom line is mediocre, but market keeps going up. AMD didn't have earnings, but they got a big downgrade. And there's a lot of worries about

what the PC market is going to be looking like. Bernstein downgraded them. Finally, if you're trying to worry, figure out China, here's what the market's thinking about. Look at what happened with 3M. significantly slowing demand in China. But then Swatch Group came out and said, we got a big recovery in China post-COVID. So the market is believing the reopening story. They're believing the Swatch Group.

That stocks up 5% over in Europe. Finally, S&P 500, folks, we're on the verge of breaking that big downtrend that started in the beginning of January 2020. Market kept moving down, and now it's slowly starting to rise. We need to get just a few more points, maybe, Tyler, maybe 40-25 to 40-50 range,

breaking that long-term downtrend. Back to you. All right, Bob, thank you very much. Let's move now to the bond market. Rick Santelli, tracking the action for us. Hi, Rick. Hi, Tyler. A two day of two years should give you quite a bit of information.

A, we're not trading below yesterday's low yields. Remember that for a minute. And right around one eastern, you saw yields drop a very good two-year note auction. And when investors are flocking to buy two-year notes, most sensitive to the Fed, that gives you information in and of itself. Now, let's go to a two-day of tens. You can clearly see we're trading below yesterday's lows in tens. at 10 o'clock Eastern, it spiked.

That was S&P Global Services PMI, a bit better and expected, but Richmond Fed Services Business Condition reversed that. And if you look at the three months versus tens, it's at minus 123. Last Wednesday at minus 129 was most inverted close ever, so we're very close. Remember, if you look at the long-term chart,

other than this episode, minus 98 was the most extreme to early 80s record-keeping. And finally, dollar index on pace for its lowest close, in nearly seven months. That means it's 10.5% below it's September highs at 114 plus. Kelly, back to you. All right, Rick, thank you very much. Our Rick Santelli, let's turn our attention now to oil prices as we close for the day.

Pippa Stevens with the numbers. Yeah, hovering right around 80 bucks a day on WTI. But Nat Gas, once again, is the big mover here. And yesterday, Freeport applied to regulators saying, can we be asking to restart their Texas facility, which has been offline in June. And that is about 2% of U.S. So that's a big catalyst here. And while we're not seeing that much of a response in Henry Hub prices over in Europe,

those prices are down more than 10%. Their inventory is looking pretty good. And then if free port returns to full output, their levels are looking pretty good here. What about gasoline prices, which are up? We've talked about this 30, 40 cents. Is it really like just the past month here and they could be going high? Yeah, past month and continue to go higher. Probably we've seen Arbaugh future is rising.

And so definitely something to watch and, you know, pain at the pump. Yeah, it's coming. Not a great time either. Speaking of rising prices, if you think gasoline side, just look at lithium. Surging demand for those electric vehicles has sent those prices on a record run. And the big players are reaping the benefits, like Alamar, the Lithium Minor, posting upbeat 2023 guidance today telling investors things are looking good all the way through 2027. The CEO is here now, Ken Masters, for a C&BC exclusive interview with our PIPA Stevens.

Ken, it's great to see you. How can you have clarity through 2027? What about a recession? Well, we continue to have volume growth in our business. I think even with the recession, the volume driven by electric vehicle growth. And then we're not really forecasting what pricing, that assumption through 47 is that pricing remains relatively flat. Wow. So that's some decent, you know, people are looking for something stable. Prices have come up for quite some time and now you see that playing out. Is the EV market, did it get too big during kind of the pandemic boom? Is it going to

downsize or do you think the gains are going to continue? No, I think the market is growing. I think that transition is happening and it's going to see growth consistently. It's at different levels in different parts of the world. Asia, one rate, North America, Europe, slightly different. But every market is growing. It's just each one's at a slightly different place of adoption. And in terms of as you look to benefit from the surge in prices, your targets released earlier today show that at the high end, you expect to more than triple output by the end of this decade. And given that we've seen so many challenges with projects of this nature, including around permitting,

how are you confident that you can or reach those high-end targets? Yeah, well, we have multiple projects across that. So it's a portfolio. It's not one project that we're betting on. There's a portfolio there. And we may have some challenges in one, but we'll be able to deliver on another. So we think we get at least to the middle of the range and maybe to the upper end of the range because we've been executing projects like this around the world for a number of years.

Where is all the lithium going to come from to power all of the electric cars that are supposed to be sold over the next five or six years? And can industry like yours produce that lithium at a price that retains the economic viability of those electric vehicles? Yeah, well, the big locations where the resource itself is coming from Australia, South America, but we're starting to see resource coming. into North America. We have a facility in King's Mountain where we hope to open a mine there. In a couple of years, we actually produced today in Silver Peak, Nevada. So we have product from the U.S., we expect that to grow. But still the big producers, Australia, South America, Argentina, Chile, but North America is coming into its own. But you have a, you have, I'm looking at the prices from January of 2020 to January of 2023 and the, and the gains in prices,

if I'm reading the chart right, are just astronomical. You cannot continue that kind of parabolic price rise and maintain economic viability, it would seem to me, for the demand for electric vehicles. Yeah, that's, I mean, that's right. But when you go back to the numbers you're looking at in 2020, that was a very bottom part of the cycle. And our forecast, as we'd said earlier, out of 2027,

is that prices remain relatively flat from here. and that's an incentive price still to encourage companies to invest for all the demand that's necessary. We've seen this shift where OEMs are starting to contract directly with the upstream players versus, say, the cathode or battery makers. And do you think that as there's more concerns around a supply shortage that will continue to see these types of new contract structures? Yeah, I think, I mean, I think there is concern about reliable supply throughout the cycle and all the investments that the OEMs are making. So you're starting to see, you know, traditionally they allow the supply chain to manage that, and they contracted really just the battery maker. Battery maker contracted with cathode and material suppliers.

So you're starting to see battery players reach down to materials as well as OEM. So I think you'll see a mix of that as different people have different views of supply going forward. All right. Thank you very much. We appreciate it. Kent Masters, Pip Stevens. Thank you for being with us today. Thank you.

All righty. Bitcoin up 36% over the past month. Short positions wiped out. Crypto benefiting from the same macro factors that are boosting big tech. But is this turnaround only temporary? We will explore that one when we return. Welcome back everybody. Bitcoin making a big comeback up more than 30% in the past month. But Wall Street is skeptical about the turnaround. Kate Rooney joins us now. Kate, can it last? If so, why? If not, why not? Hey, Tyler. So the Bulls certainly hope it can last and it has been a good year so far for Bitcoin. As far as the reasons why it may not last, there's a litany of reasons that Wall Street has talked about this week. The first one is that some of the buying has really been fueled by existing crypto investors. So you can track money moving into Bitcoin. And for the large part, it's been moving from what they call stablecoins or the equivalent of cash, these dollar-based cryptocurrencies.

You've seen that money move into Bitcoin. It's seen as sort of recycled crypto. What you really want to see for any sort of breakout in prices would be new investor interest, which really has not returned to these markets. Bernstein put out a note this week describing it as a mean reversion rally as they put it, technically meaning that it's just returning to the historical averages for prices. They say that they're cautious to bearish at this point. Katie Stockton earlier this morning, a technical analyst said she was pretty skeptical

that this was sustainable. Yes, Bitcoin broke through its 200-day moving average. It's happened before. She said it often proves to be a false signal. She's not convinced. And then others have really pointed to last year's performance. Bitcoin was down about 65% in 2022. If you look at some of the investors here, they may be looking to lock in profits, and that could motivate some selling. So a lot of skepticism that this is a long-term rally. What's happening in Bitcoin happening in other cryptocurrencies? It is. And it tends to be sort of, a leader, it's by far the biggest. You tend to see sort of outsize moved, it moves in the smaller token. So when Bitcoin's up, say, 10%, you often see some of the smaller tokens up even more,

although they tend to be much riskier. So it's often a signal of risk appetite. When you see tech stocks rally, you might see some of these, what used to be called meme coins, if you remember, things like Dogecoin, tend to really, really be a barometer for some of the risk returning to the market. So it tends to follow Bitcoin, but the moves are. are often outsized and exacerbated from what you see in the world's largest cryptocurrency in the first one. And maybe tracking a little bit with these FTX developments as we follow how they might try to make that exchange work again. Recombeating people. But Kate, I also wonder, do we have a sense of where people are?

Remember we used to say if it falls below 22K or whatever the number was, you know, people kind of on net be in the red? Are people back in the black again? They are, Kelly. It's so interesting. You brought that update. There's some new data this week that the cost basis, the sort of the average. average price that investors got in is now around $19,700. So GlassNode, one of the firms out there, does some weekly updates on this.

That is the cost basis when people are above that, when the price is above that, tends to signal a little bit more optimism because people say, well, technically, I'm in the black, even if they haven't sold, they're in the black on paper. And we are above that level, which also tends to be in terms of crypto-specific technical levels, a pretty important one to watch. Oh, very interesting. All right, Kate, thank you. R.K. Rooney with the latest for now, we appreciate it.

Still ahead, Microsoft reporting results after the bell just a couple of hours away. We'll talk about the company's big investments in AI and chatbots and what it could mean for their future bottom line. Don't go anywhere. Well, let's get back to the big earnings report that is due out after the bell today. For more on Microsoft, let's bring in Gil Luria, senior software analysts with D.A. Davidson. Gil, welcome. What are you looking for from Microsoft today? There's going to be two lines today. One line is going to be about where the business is at, where spending is going to be over the next couple of years.

Mr. Nadell has already given us a preview that he does not expect spending to be very strong for the next couple of years. The second line is going to be about the investment in generative AI. There's been a lot of news breaking on that, some announcements from the company, and I expect there to be a lot of excitement communicated by the company about what those investments mean for Microsoft both and the company. short and longer term. You're talking specifically here about the owner of ChatGPT, correct? And how much money is Microsoft saying they want to put into that particular company? Well, they've said several billions. The reports are that it's about $10 billion.

But let's keep in mind that's really, mostly Azure compute that they're contributing to OpenAI. So in the short and medium term, they're actually going to get voluble. into Azure based on this investment in Open AI. And I think that's going to be one of the positives that could come out of this conversation. Even if in December those volumes weren't meaningful, Mr. Nadella last week says he expects up to 10% of all data and compute

to be generative AI by 2025. If Azure gets even its fair share of that, that's $7,8,9 billion of revenue and possibly as much as 50 cents of earnings. earnings. So it's a very meaningful contribution to their most important business that could come from this investment. That's super clever, and I missed that wrinkle that's, hey, we'll invest in you and you can use our computers for your massive data requirements. Are we turning slightly gill to the subject of Google and the antitrust suit today? Are they going to end up fighting

the last battle? I mean, is the battle front already moving to AI? And how does that implicate search? You know, it's ad markets and all the rest of it. Well, I think today was the second shoe. When we heard reports about Google going to Code Red, inviting Sergey Brin and Larry Page back to the fold, we knew that OpenAI's threat, Chad GPT's threat in combination with Bing goes after that Google search business. What we're now learning is that there's a concern now about the other part of the business. So Google is now under attack on both fronts, and it's going to have to have to be a business. to move quickly to adapt since these developments around generative AI, around Chad GPT, are happening

at a breakneck pace, and Google has the technology. It just has to move faster and incorporating it into its product set. How much of a, quote, cloud is hanging over Google right now or alphabet? I think it's been building. This cloud has been building, as you pointed out earlier in the show, But now this is a very real threat. But you also pointed out that 25 years ago, Microsoft was dealing with the same thing. They made it through. They adopted. And under Mr. Nadella, they've become far less of a monopoly and much more involved in the developer community.

I expect Google to maybe soften up in its development of its moats, which is a way of saying, protecting its monopoly going forward. But it doesn't necessarily threaten its business. in the short term. All right, Gil, we have to leave it there, unfortunately. Thank you very much for being with us today, Gil Luria. All righty, still to come. A new CNBC survey says the S&P 500's gains could be done for the year. We'll explain next. The S&P 500 higher right now, according to a recent rally, adding to a recent rally, excuse me, after a rough 22. So what a strategist saying about the outlook for this year? Dom Chu puts the results of a C.m. CNBC survey under the Microsoft Dom.

So we're looking at the CNBC strategist of market, basically strategists, right? And we're looking at the median survey, the highs, the lows, the everything else. But what it comes down to is after a nice start here, as you can see here to kind of get the year going, we've had a pretty solid move higher. And where does that put us in terms of where we are overall versus analyst strategists and their kind of forecasted results? Well, according to our CNBC strategist survey of Wall Street, strategists. Here's the number that you want to focus on. It's 4,100 as the median, all right,

the middle observation. So what that means is if you take that middle point of all of the analysts and strategists that we polled, 4,100 is where they currently think the S&P 500 will end this full year. Now, I just showed you, currently the S&P 500 is right around 4,020, right? So you kind of look at that, say, 4,020 versus 4,100. That's about 2% upside to where the year on target is. It's about 3% to where the average or mean target is as well. So if you take a look at the overall picture, does it get any better for stocks overall? One of the things that we want to look at here is who's the most bearish? We got Venu-Christian at Barclays at 3725.

We all know Mike Wilson at Morgan Stanley's kind of been that bear was right last year, 3,900. But if you take a look at some of those bearish guys versus the ones who are the most bullish, right now that distinction goes to Sam Stovall over at CFRA. he's got a 45-75 target for the S&P 500. So as we talk about what happens now with these strategist surveys, this is still very early in the year, early observations. There's a lot of stuff that can change between now and then, the Fed, what they do with rates, whether we go into a recession or not, whether there's an earnings recession, all of that comes into play.

But for right now, you could say, hey, selling may go away. It could be just selling January and go away for the rest of the year. Yeah, it's hard to say. I mean, these things are moving targets, and they and the prognosticators themselves may change their views. Not may. They will. I mean, we'll see them updated throughout the course of the quarter at the end of the year, at the half year point and everything else. So as we kind of take a look at the way things are shaping up, this is the baseline for right now. So we'll kind of make those adjustments along the way. And by the way, if you're looking for the other full results of that survey, you should check it out. I will tweet out a link to it later on. but it's on our website. You can see where all the strategies lie

and we'll kind of maintain that throughout the course of the year. I think we've got to get Sam Stoval on. I'm curious how he gets to 4,500. You know, is it down then up? What is the multiple? The concern I understand, that one I would like to unpack a little bit.

Dom, thank you very much. You got to get it. Thank you. And thank you for watching Power Lund. And closing bell starts right now.