Transcripts For CNBC Squawk 20240704

Oracles cloud revenue surging by growing ai needs. The boeing challenge citing delayed aircraft deliveries, rethinking the 2024 financial forecast. Lets begin with the Market Reaction to cpi. We mentioned a tenth hot at. 4. Shelter and gas 60 of that. Surprises in here, mike. Apparel up. 6 , a topic of discussion. Yes. I think what the market did, there was a quick reflection when they said, okay, this is hotter than expected. Stocks back up. Then the rethink was, well, the things that matter and that will translate into what the pce inflation number is going to say combined with how high a threshold was set by powell last week for changing their premise that they are preparing for likely rate cuts in the summer. I think all that fit together. The core services, stubbornly firm, inflation readings there, dont translate that the pci will go in the same direction. Thats part of the mix. We are also geared for shelter being stubborn. You didnt see the uptick like we saw in january. All that mixed together combined with i think the equity market saying, the ai trade is back on. Nvidia is going to bounce today. It was a whole day and a half of weakness. You got the oracle numbers. You have amd saying happy things. Bofa raising the earnings forecast because of ai. In other words, we got cpi out of the way. Well see if we can make something of it beyond that. Well get to the bofa. David, as for more cpi, i guess people will look to some relief in food where we got a couple of goose eggs. Yeah. Again, i sort of leave it to you guys and a lot of our other experts to go through the numbers themselves in terms of why Transportation Services was up 9. 9. Shelter we keep an eye on at 5. 7. As you take a look at futures. Mike, ive got to skom back to you. It was a day and a half, 36 hours of concern about the ai trade and now were back. I heard you say that. I want a little more. I dont even know if it was concern about the big picture trade. It was concern the leading stocks in that area had become too overheated, overowned, crowded, vulnerable. Now, im not saying its over. But you had two days of almost Pitch Perfect rotation out of the big leaders, and there was benefit on some of the recent weak stocks like alphabet and apple. People talked about this. My favorite poster child for all this has been costco which was down 10 off its friday morning high because its in the nasdaq 100. Thats kind of the silliness. It was also at a record high valuation going into its own earnings. No real change of the underlying story either with ai or costco. You did have this mechanical effect or repositioning effect that i wont say has run its course, but definitely giving way to the old playbook of buy the leaders today, at least in the premarket action. We mentioned jamie dimons comments, covered a lot of ground talking about the broad economy saying the u. S. Is in kind of a boone, covered the possibility of recession, covered the fact that he will never buy bitcoin itself. Take a listen. If you look at the world economy, the United States, for example, its kind of doing fine. You can almost say its a boomer right now. They kind of price in 70 or 80 . You see the stock prices, not a bubble yet but theyre high. Youve seen credit spreads. I think the chance of the soft landing over the next year or two is half that, which means i think the chance of something a mild recession or hard recession like 65 . And the worst case of recession would be stagflation. Thats almost off the table if you look at the projections. I wouldnt take it off the table yet. He goes on to say, david, ai is pretty much central to every conversation right now. I think he called the innovation thats taking place unbelievable, and then had comments on the election. Youve got two men, on the older side, neither can get sick. Its nerveracking. Its going to be a circus. Yeah. We use jamie in part because he doesnt hold back and he sort of says whats on his mind. Even though he is not a founder, he talks like one in some ways because he doesnt have Corporate Counsel in his head saying dont say that or Corporate Communications head saying dont say that. You do get unvarnished views from him. Mike, hes been much more negative as long as i can remember in terms of the course of the economy than any number of his other peers perhaps who run banks and or the broader prognosticators out there. He continues to be as you just heard. He cuts in half the chance for a soft landing versus what seems to be the consensus. Yes. He says over the next year or two. Once you stretch it out to two years, i think everybodys macro forecasts start to lose conviction. Youre absolutely right. By temperament and orientation and maybe professional necessity or preference, he decides to focus on the potential risks because, if the economy is fine, jpmorgan is going to thrive. If theres no rate shock, they can handle whatever is coming. In fact, if things get a little worse, theyre likely better positioned to weather it. I do think that its all an outgrowth of that general perspective that he has. Hes long thought, when rates were much lower, that it was ridiculous and they should be much higher. He seems to be anchored on an 80s, 90s norm for where rates should be. When youre within the fed and you have your models and you have your framework and you say rates are above 5 , and even if inflation is sticky here, its th threeish , that tells them theres room to normalize. I dont think theres a big nasty argument going on between jamie dimon and what the fed is going to do. Maybe its a matter of exactly pacing and priorities in terms of what theyre trying to accomplish. Carl. Is the discussion right now, mike, about theyre going in june for sure . Odds will tell you that and its more about the total cuts for the year . At this point, yes. Something would have to come along to disturb that. Well get the summary of Economic Projections next week after the fed meeting. That will bring it up to date in terms of what theyre thinking theyre going to do i do think thats now the default assumption, is june looks pretty likely. After that, whether they follow it in july and they want more in september, three seems like where things are coalescing. I think its important to remember it wasnt long ago several weeks ago that powell took march off the table . March has been off the table for that long. Still 16 in may. Exactly. So theres always something might break kind of an insurance policy in there. Markets have been fine. There was a time when we thought, uhoh, its march. Make or break for the markets. That clearly wasnt the case. Lets move on to oracle this season. Surging in the premarket to open at a fresh record. Revenue gets a lift on Strong Demand for the cloud driven by ai. David, they throw a couple mentions of nvidia in there last night. Jefferies to 150, barkleys 147. An upgrade over at at least one upgrade. William blair. Yeah. There are a number of very positive pieces as you might imagine. Listen, the numbers themselves in terms of where they met much of the consensus, but the guidance seems to certainly be hardening those the position of those who believe they are in the midst of back to jamie dimon, in the midst of an ai renaissance. Theyre the beneficiaries in terms of reiterating their fiscal 2026 guidance, 65 billion in revenue indicating potential for upside to these targets. Obviously talking there about the cloud offerings in particular, the great beneficiary of, again, this trend we talked about in its earliest days. Generative ai, the demands it puts on data centers, on obviously the chips that will run it, namely nvidia, and everything that goes along with it that can be offered to a certain extent by oracle and its cloud offerings as they move into this new world as well. Oracle Cloud Infrastructure is where the beneficiaries of the business lie. Its very interesting, when you have these companies that for years were just cash cows. Its slow and steady, Free Cash Flows, buybacks, financial engineering. Now theyre capturing a huge part of this business and are well positioned. Yes, Free Cash Flow is coming down in the near term for oracle relative to earnings just because of the investment, but the market seems okay with it. Because it has this legacy tech earnings, its not 40 or 50. If you aggressive in valuing the parts of the business seeing tremendous demand that they cant meet and revenue estimates go up, it gets revalued in a hurry. One quarter ago there was big disappointment. A lot of that was capx plans. Only have of all sell side analysts have a buy on oracle. There is room for people to be persuaded that maybe the story is real and durable. To that point, im looking at a citi note saying the cloud revenue remains sluggish, strong bookings offer opportunity for recovery. Theyre neutral to your point, mike, as are a number of firms on the stock, would like to see further traction on improving cloud Gross Margins and the autonomous database modernization. There are still some who are less than positive, perhaps that that should be seen as a positive as well because their opinions can get turned. Theres always that little bit of an impediment of, sure, i want to own oracle because theyre going to be a big player in this new world. When you buy oracle, you buy a lot of hr software and theres been a rollup, some integration issues with recent accusations, whatever it might be. In other words, its not a clean pure leverage play on just ai. So people would prefer to get those. Thats where the valuation difference is going to come in, carl. You mentioned the bofa note today. They take s p earnings to 250, they were at 235. Thats 12 yearonyear growth. They talk about what savita says, it starts with ai investments, moves to semis and networking. She goes on to talk about electrification, utilities, commodities. Then she ends up with 25 eps at 275, up 10 on that. Yeah. Perhaps we havent talked about it. Mike may have been focused about it with other reports during the course of the day. But the move with some of the utilities has been somewhat interesting to watch with this idea that were going to need more power. Of course, that doesnt happen overnight. Youve got to actually build it. Thats a long time to come. To your point, carl, or at least some of the referses shes making in this note, the data centers that are going to be built already have access to power. Thats the first thing you lock in prior to even putting a shovel in the ground to a certain extent. You are going to have it as a gating issue potentially in terms of building more of these to fuel the future of ai. Were going to need a lot more power. But whether, mike, that move in the you utilities and those who provide power in this country, justified based on that. You can only get so much capacity out of what theyve got. A lot of it is years and years away and its a highly regulated business as well. I think in the very near term, the utilities trade was this area is washed out relative to index. Massive outflows to utility funs. When we were selling the winners and buying the losers, when we can supply power and price it right, yeah, much bigger question. Thats to me not what the past couple days have been trading on. When we come back this morning, tough morning for southwest and where boeing fits into the picture. A lot of airline news including comments from delta this morning and alaska air. Well get to earnings, a couple calls on dks and dollar tree as futures hang in there in a moment. With tailored education. Get an expanding library filled with new online videos, webcasts, articles, courses, and more all crafted just for traders. And with guided learning paths stacked with content curated to fit your unique goals, you can spend less time searching and more time learning. Trade brilliantly with schwab. You know doug, ever since switching to workday youve been a real rock star. Rock star . What do you know about rock stars . Billy idol . I mean wheres the skintight leather . My shoes are leather. Wheres the unnecessary zippers . That thing billy, rock star is just how doug feels when he uses workday. Thanks, rory. Ill show you rock star be a finance and hr rock star. Workday. For a changing world. Billy idol just stole your golf cart my name is oluseyi and some of my fo favorite momentsd. Throughout my life are watching sports with my dad. Now, i work at comcast as part of the team that created our ai highlights technology, which uses ai to detect the major plays in a sports game. Giving millions of fans, like my dad and me, new ways of catching up on their favorite sport. Shares of southwest are down sharply in the premarket. You can see that. The airline says its reevaluating full year guidance and cutting boeing jet deliveries forecast. Lets get over to phil lebeau who can explain whats going on. David, you have an allboeing fleet, youre going to pay the price when boeing is going through what its going through. Southwest, as you look at shares down as much as 8 premarket, pulling its fullyear guidance maybe not pulling but saying were reevaluating it. We will give you new guidance, our latest guidance when it reports q1 results. Its cutting max delivery planes, now expecting 46 this year. Originally they thought they were going to get 79. Clearly thats not going to happen. They wont get any max7 deliveries. The plane hasnt even been certified yet. Highly unlikely well see the max7 deliveries, maybe not even in 25 depending on the it gets through certification process. Meanwhile, delta giving different guidance. We heard from them earlier on squawk box, the company expecting q1 earnings near the top of its guidance. Theres no change in the guidance, they are expecting to come in at the top end between 25 cents and 50 cents a share. The street was at 36 a share for the First Quarter heading into today. Here is ed bastian talking about the strength of demand right now. Continues to accelerate. Its our highest margin product. We continue to put more of it out into the marketplace. International is also something thats at its highest level. Last year our highest performing routes in our system were international, particularly transatlantic. That was a change from where we were precovid. Ed bastian talking about the strength of international demand. Transatlantic was hunl last summer, huge this summer as well. We should point out americans q1 loss, they expect that to be near the low end of the guidance they have previously given. So not a change there, but clearly theyre seeing pressure on the cost side, especially when youre looking at jet fuel. Carl, back to you. Phil, quick on the southwest and the alaska impact, not just the capacity that theyre not going to get as expected, but also the impact, in the case of alaska, what that one flight did to demand. Huge. You cannot overstate how much importance the industry has when it comes to deliveries of new 737 maxes. This is the year when so many airlines, alaska, southwest look at ryan air, it has to bring down expectations in terms of 2024 because its not going to take delivery of as many maxes. The implications here for the entire industry are enormous. The max is the bread and butter for boeing just as a 320 and 321 are the bread and butter for airbus. Those are the main planes that fly people around the world, those narrow body work horse planes. The max right now, the production is just not there. Then theres the audit. I know you brought it up with bastian. The number of iven stances in which there was alleged noncompliance is pretty startling account in the times today. 33 out of how many out of 89 production checks that the faa auditors were looking at. This is according to the New York Times. By the way, we heard from the faa. We asked them to confirm the details in the New York Times article. They have declined to confirm the details, simply saying the audit was finished, but they will continue to be aggressive in terms of checking on the safety and quality at boeing and limiting production capacity. Remember, its limited to 38 a month for this year, for the foreseeable future until the faa says were comfortable that youre doing what youre supposed to be doing. One other note, guys, the audit about spirit is just as damaging in this report in the New York Times. Half of the production checks that were checked more than half of the production checks that were audited, they failed. So this is a damaging report both for spirit as well as for boeing. Phil, appreciate that. Good roundup of all the aviation news. Theres a ton of it. Still to come this morning, shares of ahn taking a hit as the Company Reports a double miss. Coceos of the athletic footwear and apparel maker will join us later this morning. The premarket trying to halt some gains as yields remain elevated. Tenyear north of 414. Dont go anywhere. Ented ocean voyages, designing allinclusive experiences for the thinking person. Viking voted worlds best by both travel leisure and conde nast traveler. Learn more at viking. Com. Investment opportunities are everywhere you turn. Do you charge forward . Freeze in your tracks . Or, let curiosity light the way. At t. Rowe price, we ask Smart Questions about opportunities like advances in healthcare and how these innovations will create a healthier world tomorrow. Better questions. Better outcomes. Moving forward with nodepositive Breast Cancer is overwhelming. But i never just found my way; i made it. And did all i could to prevent recurrence. Verzenio reduces the risk of recurrence of hrpositive, her2negative, nodepositive, early Breast Cancer with a high chance of returning as determined by your doctor when added to hormone therapy. Diarrhea is common, may be severe, or cause dehydration or infection. At the first sign, call your doctor, start an antidiarrheal , and drink fluids. Before taking verzenio, tell your doctor about any fever, chills, or other signs of infection. 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Meantime, opening bell coming up in just under five minutes. You can catch us any time anywhere. Listen to and follow the squawk on the street opening bell podcast. Weve been talking about some of the jostling going on in the bond market post cpi as the tenyear gets back to 4. 14 or so. Fitch says the data is a sober reminder of the tendency of inflation to perpetuate itself. They look specifically at threemonth annualized core which was 3 in october and has gone to 3. 8. The socalled super core, if you want to narrow it down, it has turned higher in the last couple months. It goes along the same lines. It really comes down to the markets tolerance and the feds tolerance for us being one percentage point shy of target. By the way, on pce, were closer to the 2 target. It does seem right now, it seems like the suspense is still there in terms of what ppi is going to have on thursday and how that feeds it going into the fed meeting. Yeah, you have an Immediate Response in the bond market, twoyear plunge and elevated from there. Well see how the stock market handles it. All yields are still within that ring. [ bell ringing ]. A. Celebrating Capital Markets day. At the nasdaq its red bull racing, celebrating its partnership and commitment to diversity in formula one as we try to hang on to the mid 50, 100s. 1. 3 off the alltime high, Something Like that. Theres not been a proper pullback in the broad index. We talk about the rotation. It seems like weve got a couple days of that. Today it seems like the story is going to be oracle. The leader in the s p 500, up almost 10 in the early going. Then nvidia does seem like were bouncing almost 3 . Approximate 10 correction off the intraday high on friday. Even with, lets say, bank of americas s p 5002024 target, youre at more than 20 times that. You still have this psychological high hurdle for exactly how good things have to be to get you to buy the overall market and say that we have a lot of upside here after an 8 run going into march, which is what weve had on the s p 500. To me thats not going to go away, this idea that the market doesnt owe us much. But within it, youve seen this real willingness of investors to allow equity exposures to stay high. Credit markets are strong and yields are well behaved. Although sav vitae would say equity allocations are where they were in 1995. After retarget increase is accompanied by reassurances that valuation is not crazy. You can hive it off and say the rest of the market looks cheaper. To say things like equity positioning looks like mid 90s, not late 90s, that still leaves the question are we ever getting back to late 90s. I agree its not as though retail has overleveraged stocks. More tactical positioning looks aggressive. Not to say weve got to go down a lot, but the market has done peoples reallocation into equities for them to a large degree. I think even bofas private client, up to 62 equity, 65 a couple years ago. Theres upside to that. The mag 7 is not as expensive on earnings as it was in late 2021. The macro stuff you can come at it from either direction and make a case that theres theoretical upside. We can get a little more fully positioned than we are now. You mentioned nvidia. I remember people saying in february, two big cad lifts of the month, fed meeting and nvidia earnings. This month its fed meeting and gtc. Its hilarious. Its definitely taking over the hearts and minds trade in terms of people who look for opening growth. A lot of back and forth as to whether the conference next week would be just an obvious sell the news event or whether it would be something that would recharge the story and push it out multiple years. I dont know how to handicap that, but thats absolutely true. As much as id like to say, listen, this should be about broader Earnings Growth, where we are on the cycle and whether the fed is going to stick the landing. It is really about can we get incrementally more excited about the longterm ai trends. Even sav vitae at the event talking about ai, are there any net losers from that . Where is the money coming from . One theory would be that buybacks suffer and capx benefits. Which works in the short term. Nvidia had a chance to Say Something at the Morgan Stanley conference. I know cramer is going to be all over that event in san jose. Nvidia is the Market Leader sorry oracle the Market Leader at the moment followed by 3m which has a big management shuffle after a tough sixyear run for mike roman. Newly appointed ceo who came out of harris, kind of the defense contractor. Very much a win in investors minds in terms of how that company was managed. I think theres also a general sense out there that this is a company that the conglomerate structure worked for a really long time to kind of have this nice smooth Earnings Growth that hasnt worked for years. So reshuffling the portfolio. People probably have in mind what culp has been able to do over at ge in terms of deciding what are we good at, what are we not . It seems like an extra reason to think that 3m might be able to get some of the glory of the broader industrial sector which has been incredibly strong but very much in specific areas, these Earnings Growth machines like eaton corp and textron. If jim were here, he would comment on the way that roman tried to manage some of those legacy costs. Yeah. We talked so often about the enormous cost of litigation, whether it be pfas and the various settlements or the military issues in terms of the hearing the things you put in your ear to stop the loud noises. I forget the technical term for it. Entering to note, yes, roman has been in the job for some time, as you point out, carl, he has faced any number of challenges, given the litigation that we mentioned. You can take a look at what the stock price has done during that period. Its not like theyre turning to a younger member here of management. Brown is 61 years old. Ive got to check mike romans age. I havent had a chance. Maybe you guys can. I think he may even be younger. This is an interesting change. Roman will continue as exec chair, as i think weve already pointed out. So there is that. All right. Roman is a little older im told. But its not as though youre bringing in a youngster. Its always nice, guys, when the ceos are still older than i am. Like the pilots and the dentists. Applause to that from my side here. I did want to note that. I think hes a wellregarded executive. You can see the reaction in the stock price is quite positive. To mikes point, well see in terms of portfolio realignment in some way, but really the big issue thats been doggin company for quite some time has been the cost of litigation related to groundwater and mitigation. As for media, david, we did get decent oscar ratings, fouryear high, almost 20 million. Good news for disney. We had the video going after peltz yesterday. Referring to the axios report about apollo. Paramount is so little. We talk about it. Obviously people care about it. Apple spends in one day the market cap of this company. The competition when you look at the broader picture in terms of the big tech companies, whether it be apple or amazon or even netflix, obviously which is far smaller but is lumped in there, theres no real comparison. That said, the efforts continue, carl, to some extent to try to see if theres a way to have a change in control here. I talked often about the red bird slash David Ellison partnership which would involve buying national amusements, paying redstone a premium there and taking control that way, paramount merging in skydance with paramount studio. There would be a process that would require a special committee vote. You wouldnt do one unless you can do the other. What do you offer in terms of public shareholders, not to mention theyre going to need to raise a lot of money in terms of putting the capital structure in a better place, as much as 3 billion is what ive been hearing. So there is no shortage of challenges to a potential deal here. Apollo has been hanging around. They like some of those local stations, for example, cnb cbsrelated things. Im not hearing what would be the big thing which is just a Major Company stepping up and buying the entire thing. David, it already kind of has in lbl capital structure. Its not as if you have that juice you can do if youre a new buyer. Exactly. You cant add a lot of debt. My point is youd need to sell 3 billion of equity for paramount itself. Thats sort of the plan. So you take control, then you raise more money via the equity additional equity that is diluted. Carl, well update people as we see fit. Certainly responding to any number of these stories that are out there, i guess weve got to do that some time. Well see if apollo really gets anywhere. Speaking of selling equity, arm holdings, big lockup expiration i believe today, as stocks almost doubled since the september new issue. Theres been a lot of discussion, david, about what a big test the stock faces this week. Weve remarked so often about after earnings, that incredible move. And pointed out many times, of course, the float is very small. Heps, you have those kinds of potential moves that did not seem reflective, mike, of the overall fundamentals, not that they arent strongly but were they really that strong . You can see what the sixmonth chart looks like. That move of late, much of that percentage move took place just in the few days after earnings. More shares out, mike, typically does mean it doesnt always happen, but many people do shorten when they think the lockup is coming or when theres more shares to be able to do that with and to borrow. For sure. The high on that chart is around 150. It is 25 off of that. It was very squeezey on the way up and the reaction to earnings. I dont know that it would be a gamechanger to have a wider float on the stock. At some point it gets put into the index and that gets sort of soaked up to some degree. So i dont know if it would necessarily be the thing that would hangover the stock for very long unless, of course, you have your big anchor investor that wants out. Yeah, which they have indicated they dont. Obviously its a great win for softbank, certainly given where the thing went public and the gain they have right now. I think their frustration to a certain point is their own stock price doesnt really reflect the underlying value as much as they might like at softbank given that enormous move in value that they have seen with their what, 80something percent control of the economics there, mike. Well see over time whether they do choose to sell any of it at least to sort of realize some of those profits. Tesla, weakness continues. Its taken out its lows for the yeartodate, once again getting into the 173 range. Going to take you back to levels last seen in may of 23. A few things going on. Musk is expected to visit the berlin giga factory possibly tomorrow where the arson attack took place. Morgan stanleys adam jonas talking about how the correlation between the share price and bitcoin has broken. And then Deutsche Bank yesterday saying they expect deliveries to miss this year by a pretty wide margin, even as theyre trying to catch up to this slowing demand with price cuts. Yeah, exactly. Even jonas, what does he attribute in terms of the stock price value . Like a fifth. That has been the main wait, the idea that you cant count on ever increasing market shares for evs and Tesla Holding the shares of those. In terms of bitcoin, that really broke down last summer in a decisive way. Thats because nvidia has taken over. If you look at nvidia versus bitcoin versus tesla, and really those things trade in exactly the similar way in the types of people who want to put a lot of money in an aggressive way behind the big picture, world changing technology, how ever you define that. Nvidia, charismatic founder, you have kind of a cult forming around his vision. Similar to the kinds of energy that was driving tesla for all those years. You see its not that dissimilar on a oneyear or yeartodate basis in terms of nvidia and bitcoin. Then youve got this Washington Post story, david, where they say former President Trump asked musk last summer whether hed be interested in buying truth social, according to two people with knowledge of that conversation. It didnt go very far. I guess its not a bad time to refer people to dwac which is of course Digital World acquisition corp. That is the spac that is going to very soon despac with the accusation that is planned of trump media which includes truth social. I know people may have a hard time sort of working through the numbers in terms of how many shares are going to be outstanding. I had it in front of me not that long ago. I apologize because i didnt know it was going to come up right now. Theres going to be a lot of shares out there. This thing is at 38. 93. It will have access to as many as 100 million shares. I want to do more, would, guys. The point is, even though hes locked up for six months, and i dont know how to view this story from the Washington Post, but hes going to conceivably at some point have access to an enormous amount of potential money if the stock stays where it is at 39. The vote is scheduled for march 22nd, guys. This thing will close soon after. Ill take a closer look. We may have more on it in the days ahead. Its something to keep an eye on. Definitely. Meantime, dow has gone red here, about 30 points. Talked about the tenyear approaching 4 and the teens. The big news after the cpi will be the tenyear note option today. Well keep a close eye on that. Were back in a moment. Theyre waiting for you. Hey, do you have a second . Theyre all expecting more. More efficiency. More benefits. More growth. When you realize you can give your people everything, and more. Thank you very much. [applause] ask, now what . Heres what. You go with prudential to protect, empower and grow. With everything you need to deliver, you guessed it. More. One more thing. Whos your rock . Learn more at prudential. Com its been a rough road for bayer, down over 60 . A lot of that caused by again, back to litigation in this case, the key product of monsanto, one of the worst deals of all time. What about a turnaround at the company . Well talk to bayers relavetily new ceo bill anderson. That will be in the 10 00. Dont miss it. [ominous background sounds] this is what it feels like when cyber criminals breach your network. Dont risk the health of your business. Crowdstrike. We stop breaches. Glpwith lexarias patented loss oral delivery technology, early studies suggest a better way. Lexaria bioscience. Morikawa on 18. He is really boxed in here. Su not a good spot. Off the comcast business van. Into the vending area. Oh, not the fries wheres the ball . Anybody see it . Oh wait, there it is back into play and. Aw no, its in the water. Wait a minute. Are you kidding me . You got to be kidding me. Rolling towards the cup, and its in the hole what an impossible shot brought to you by comcast business. Welcome back. On holding known for its athletic footware and apparel reporting a revenue miss. Shares are down better than 17 . First on cnbc interview mark moore on holdings ceo and coceo and cfo. Thanks for coming in. Thank you for having us. Mark, is it about 4x, broader than that . Whats going on in the first half . I think were not commenting on whats going on in the stock market. What were doing is were very much focused around executing on our mission, wisconsin going to be the most premium Global Sports wear brand. Were happy with where consumer demand is and growing and running, growing apparel, growing on retail. I think everything that were doing is according to the strategy and its according to what we communicate and were happy where we stand. You cant look past whats happening with currencies, right . Yeah. I mean the swiss franc just gave value against every other currency but for us its about how many shoes do we sell, so thats how we measure success. We had a super successful year. 55 more volume we sold in 2023. Very strong holiday season. We are a premium brand, sell full price, high margin and we expect 30 growth in this year. Thats above our expectation to double our business in the next three years, thats ha we communicated. Were very positive. I guess, mark, given that youre growing so fastand, obviously, therefore, taking a lot of market share, can you get a read on underlying consumer demand or behavior at this point . Lets say this year relative to a year ago . Yeah. I think we understand it well. We have good sellout data from our accounts and how consumers convert and consumer demand is there. I think our big opportunity is to increase brand awareness. Were relatively small brand compared to some of the bigger players and we have ample opportunity in the u. S. But also in asiapacific to increase brand awareness. This is where we will invest in. More people should get to know. And we have enough point of sale with our wholesale partners. That increase brand awareness. Gross margins did improve, 60 plus at this point . Yes. 59. 6 for last year. Our goal this year is to be at the 60 mark. So again, its a testament to the premium position that we have. Its a super strong margin and now we have a lot of leverage in our sgna to really improve profitability, economies of scale. Retail will be growing. The channels will change more to see. So this will drive other ebitda. We did see and here we have a u. S. Cpi number this morning where apparel was up 0. 6 month on month and some are arguing were bringing as much goods deflation out of the goods market. Are you seeing cost pressures sort of reaccelerate or be stubbornly high . Not at the moment. Were in a good position. We still have Pricing Power and we can use this if we need to. We are still growing and we still have economies of scale on the factory side. The supply chain is in a very good position at the moment. We only have a low share of air freight we need. That helps us to know focus on executing the business towards the customer. Youre a premium brand and you want to stay that way with a link towards more performance. Does that limit things in the long term . In other words, not so much about fashion or casual, but it has to be, you know, someone who is somewhat serious or very aware of the branding . No. We dont think its limiting at all, right. I think in the end were bringing a premium product and a performance product and were bringing a product that becomes more and more sustainable to the market and we can do that in more. We spoke about growing apparel and we see demand for apparel way above our forecast which is very, very positive and we are showcasing some of the pieces that will launch soon too and then we can, besides growing and running we can enter like training. We will for the first time launch a tennis collection around Roland Garros and the french open. I think theres a lot of categories we can still tap into and continue to grow as a Premium Sports wear brand. Speaking of that, its getting a lot warmer here on the east coast this week. Summer season will be here. People will start running outdoors. The olympics in july and august. Is seasonality more pronounced than your peers, would you say . Were a global print. Things are setting each other off and we are also basically catering to consumer that is running, but is also doing other kinds of sports. Its not a strong impact. You mentioned the olympics and thats our big focus. Its a big moment for us. Paris is very close to our home, so we have our own Athletics Club team ready to compete. Our tennis player ready to compete. We have a big story already in paris and we expect to open a second one. Really big on the top street in paris, so were very excited. Ill be there. Well meet you there, i guess. Well catch up in paris. Thanks for coming in. Thank you. Mike, thanks for joining us this hour. Still a lot more to come as the dow ieto htrs old on to gains once again. Dont go away. You need partners. Mining partners. Technology partners. Education. Supply chain. Energy. What if one partner could do it all . That partner is ontario, canada. With all the Critical Minerals to make electric vehicle batteries. 65,000 stem graduates per year. One of north americas largest i. T. Clusters. A fully integrated supply chain. All powered by one of the cleanest grids in north america. Ontario. Your innovation partner. good tuesday morning. Welcome to another hour of squawk on the street. Im Carl Quintanilla with leslie picker at post nine of the new york stock exchange. David faber is at cnbc hq. Sara on assignment this morning ahead of a big interview with city dells ken grinffin. We got swings in yields as the number comes in about 0. 1 hot. Some signs of relief in specific areas like food. Were 30 minutes into the trading session. Three movers we are watching today. Southwest airlines take a look at this stock cutting capacity plans and reevaluating its forecast for the year due to boeing its sole supplier its shares plunging right now. Watch 3m naming William Brown the former head of aerospace and Defense Company as its next ceo. He will take over may 1st with mike roman remaining on the board as executive chair and those shares up 5. 5 right now. Oracle soaring on better than expected results beating estimates with net income up 27 year over year. Shares in the Cloud Services business rose thanks to an ai and Cloud Infrastructure contracts. Lets get to the latest inflation data did it show up a pickup in some price Steve Liesman is here and has context. I love the way the markets are going back and forth. Its a good bad report. The inflation data is not getting a lot worse, but its not Getting Better and the fed worries cpi stalled at rates that showed not a lot of progress in the past couple months in the feds battle against inflation. Here are the numbers up 0. 4 on the headlines that was in line with expectation up a tick from Higher Energy prices. Headline year over year does tick up to 3. 4 . The core 0. 1 hotter, actually it was 0. 36 rounded up and that was unchanged about 0. 1 higher than expectations. Core year over year does tick with base effects with prior numbers dropping out that were hotter. Food unchanged. Energy, theres the surge in gasoline prices on the month. New vehicles down a month. New cars up 0. 5. The pesky rent did come down, down from 0. 6 to 0. 4 on the month. What happened to the fed probabilities . Before the cpi may was at 21 and now 13. June at 70, now down to 68 . Heres the question at next weeks meeting for the fed. Fed officials still project three cuts this year or does the number change that. The cnbc nrf retail monitor powered by credit card spending data shows a rebound in Consumer Spending in february. Retail sales were exauto up 1. 1 compares to 0. 2 decline in january. Take out autos and gas year over year up 6. 3 and go to the core retail which takes out restaurants up 1 . This number was helped a bit by the leap year or the leap day in the month, but if you take it out it still shows pretty good gains that were out there. Yes. Thats right. Up about 0. 4 . The february inflation data may have effects on one Time Beginning of the year price hikes. Could cool off if thats the case, but the consumer strength has shown in the retail monitor could play a role in the stubborn Inflation Numbers and could mean that lower inflation might ultimately require a slower economy. It seems like that notion is getting more into focus. I had a separate question about Something Else on your beat which is the Bank Term Funding program the emergency Lending Facility that the fed launched in the depths of the Regional Bank crisis a year ago and that closed up shop yesterday. The program seemed to have worked for most, i would say a good part of 10 months of that programs existence with no largescale Bank Failures during that time period. Do you think the fed would be quick to put Something Like that back on the map if there were additional turmoil instances in the future . I think they would, but i think theres also a contingent on the fed that wants to get away from emergency programs and what they should have is a facility in place that is part of the existing arsenal, whether or not they make that into something permanent. I think the fed want to get out of things, leslie, that end up working counter to their monetary policy. If you remember the fed was trying to bring down the Balance Sheet, reduce some of the liquidity out in the market and, of course, this program forced them to reverse course on that and cause the Balance Sheet to rise again. And then theyve been bringing it back down as a result. It just seems like not the perfect way to do business that if you need to fix these things, you should do it on the supervisory end to begin with and not get into situations where these banks have these problems that have not been recognized and taken care of through the regular existing means of taking care of. More preventative, less reactive. Steve, thanks for that summary for us. Appreciate it. Lets get more reaction to the inflation print. Former pimco chief economist Paul Mccauley is an adjunct professor at Georgetown University and joins us now. What do the gains for this report mean for the tone of next weeks fomc meeting . I think the beige data is very consistent with the best Case Scenario the fed will start easing in june and will probably ease three times this year. So i think the data is consistent with what chair powell has been preaching, and it wasnt, you know, truly warm and fuzzy, but it wasnt hostile either and most importantly, oeer cracked and that, if it continues, will get us firmly into that 2 handle for the core and i think that really matters. But if you look on a threemonth basis, sixmonth basis, still above that 2 target, and kind of digging into the numbers, Car Insurance up 21 year over year, gas up, nonprescription drugs up 9 . So what changes in those instances between now and say june that would give the fed more comfort to cut at that point . Its a whole constellation of things that fed is looking at. I cant over emphasize the importance of the o. E. R. Disinflating. The other numbers will bounce around, but the big thing we needed to see was o. E. R. And remember, the fed does not need to get to 2 to start the easing process. They told us that categorically. I think a 2 handle would be thnice for them. I dont think its absolutely required. Were on a good path towards where the fed wants to get. This 2 number is aspirational. The fed will pound the table. Thats where they want to go to. But as a practical matter, they are restrictive and they want to tart dialing back. They will still be restrictive, but they dont need to be as restrictive as they are. I think as steve was noting, they would like to see a little bit softer Economic Data as well, but fundamentally, theyre dialing back restriction as opposed to, quote, unquote, easing monetary policy. Well see if we get some of the softer demand data out of retail sales this week, paul. I am curious, though, on rent, and o. E. R. , i mean the chair was asked about this on the hill a couple days ago and specifically referred to new leases and watching them get folded in. But then you get these redfin numbers out of february where median asking rent had its biggest monthly jump in a year. I wonder whether you think that has the potential to stall out as well . Short answer is i dont know, carl, but fundamentally, i think the market and the fed underst understands the o. E. R. And recognize its hugely lagging and i think they will be comforted by what happened today. No guarantee whats going to happen next month. But i think fundamentally we need to come back through the proposition that they want to head towards 2, but they dont need to get a whole lot closer to 2 and fed chair powell has said this. They dont need to get a lot closer to 2 to start the easing process. I think its a done deal and well bounce around in the marketplace as we are today, but fundamentally, we are have a destiny of an easing process later this year and this doesnt change this in the margin and probably reinforces it because of the crack in o. E. R. Well, it seems like the market is agreeing with you. The major indices significantly higher throughout the session. Paul, appreciate it. Thank you. Thank you. As we head to break heres our road map. Tesla the work stock in the s p so far this year now facing even more intense competition in one of its biggest markets. Plus the ceo of aspirin and roundup maker bayer will join us. And a new call saying apples selloff is overdone. The analyst who lays out three catalysts that couldake tthe stock higher from here as squawk on the street continues after this. When i was your age, we never had anything like this. What . Wifi . Wifi that works all over the house, even the basement. The basement. So i can finally throw that party. And invite shannon barnes. Dream do come true. Xfinity gives you reliable wifi with walltowall coverage on all your devices, even when everyone is online. Maybe well even get married one day. I wonder what i will be doing . Probably still living here with mom and dad. Fast reliable speeds right where you need them. Thats walltowall wifi on the xfinity 10g network. Welcome back to squawk on the street. Tesla is the biggest laggard on the s p since january. Headwinds continue overall for the sale of evs in terms of at least reduced growth rate. Greater competition in one of its biggest markets. Lets get to phil lebeau who has headlines for us and always the context as well. Phil . David, have you seen the xiaomi su7 . That is the new electric vehicle that was unveiled late last year, but now xiaomi, handset Operator Company out of china, says they plan to make their first deliveries this month. So theyre getting into the electric vehicle business. You might be saying why are they doing that . Why wouldnt you do it if you were in china . It is the Worlds Largest ev market and by the way, theyre going to be working with stateowned manufacturers, so youve got the government helping you there, capacity 200,000 vehicles, the goal according to the ceo of xiaomi, and press reports yesterday, he said they want to be a top five automaker. Top five. Think about that. Right now you would have to be about 8 million, 7. 5 million vehicles to be in the top five. They have none as of right now and they are investing 10 billion through 2023. Chinas auto exports we talked about this when we were in chile a couple weeks ago and the boom in exports around the world, they are number one worldwide in terms of vehicles exported from a country but 71 of what they send out, 5. 2 million by the way last year, 71 are internal Combustion Engine vehicles. They do not get as much attention as the evs. Evs are 29 of the exports from china. But its a big 29 especially if youre an ev manufacturer. Byd gets the most attention. Their sales growth according to the wall street journal is slowing down. Now that doesnt mean its going backwards. It means that rate of growth is not as great as it has been in previous years. The target, 400,000 ev sales outside of china this year. By the way, they sold 1. 6 million evs last year. They were number two in annual deliveries behind tesla, though they did beat tesla in the Fourth Quarter and as you take a look at shares of tesla tesla delivered 1. 8 million evs worldwide last year. Tesla was number one last year in ev deliveries. One other note regarding tesla Insurance Institute for Highway Safety out with a report taking a look at the Driver Assistance Systems in a number of vehicles, not just tesla, with the autopilot, but teslas autopilot one of 11 of 14 systems rated by iihs that came in as poor, not a surprise there, guys, because we hear this regarding all of these Driver Assistance Systems. They are helpful to a point. They are not autonomous drive systems, which is sort of the misnomer out there. You hear people say i have autopilot and i can drive anywhere and dont have to have my hands on the steering wheel. Not the case. Its meant to assist you as a Driver System technology. It is not complete handsfree driving all the time. Phil, im curious going back to the chinese automakers and xiaomi, looking to expand internationally, the wall street journal piece saying its become difficult for byd to expand mentioning the companys, quote, inexperience, handling of mold in cars, piling up of thousands of vehicles in european warehouses. How long do those issues tend to last in terms of their ability to expand internationally . It depends on how quickly they can ramp up and really get refined production down. Its one thing to say were going to put a plant in mexico, which is what theyre looking at doing or expand in europe as they are doing right now. Its another its another thing to have the quality and consistency to grow at the rate theyre looking at. Theyre not going to have that Quality Control right off the bat which is what youre seeing one of the headwinds theyre facing. It sounds tried to say this, but you need to get that manufacturing process down. You just cant say were going to Start Building here and because we are the largest in ev sales in the Fourth Quarter, were going to have Great Success in another market. Phil, thank you. Phil lebeau. Still to come right here, take a look at shares of bayer, behind products from leaf to roundup, the old monsanto product, a big under performer over the last year, five years. The companys ceo joins us and will talk about how he is changing their aroh ppacto the business. Were back in two. Old school hard work meets bold new thinking. laughter at 88 years old, we still see the world with the wonder of new eyes, helping you discover untapped possibilities and relentlessly working with you to make them real. Old school grit. New world ideas. Morgan stanley. Municipal bonds dont usually get the Media Coverage the stock market does. In fact, most people dont find them all that exciting. But, if youre looking for the potential for consistent income thats federally taxfree. 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Whos your rock . Learn more at prudential. Com roundup and monsanto maker bayer under scrutiny the ceo highlighting quote broken area, high debt load and ongoing litigation following the 2018 acquisition of monsanto saying these are greatly limiting the companys Growth Prospects moving forward. Talk about it with bill anderson, chairman and ceo of bayer. Bill, great to have you. Youve been in the job since i believe june of last year. This Capital Markets day was a big day for you. Lets start off with what may have surprised some, the decision in no way to pursue a breakup of the company. Why the choice to keep it all together, whether its Consumer Health, farm or Crop Sciences . Yeah. Thanks, david, for having me on the show today. As you said, an important question for sure. Maybe to remind folks bayer is a Company Playing an Important Role in medicine, in agriculture, in providing consumer with selfcare options, and the idea of a breakup has that appeal of, you know, creating pure play companies, which makes a lot of sense, but its also important to start with where we are. Where we are is we have these it three great businesses with a lot of innovation happening, but we also have four key challenges that limit our flexibility and weve got to tackle those challenges. Weve got to put all the management, leadership, and frankly the focus of the people squarely on that, and we think thats the best way forward and we have a period of two to three years of rejuvenation of the company at which point well have the flexibility to take whatever structural measures we think are most appropriate. Give me a better sense then as to why for the next 24 to 36 months, as you say, its not never, but the next 24 to 36 months, this is the best way to go instead of saying lets sell Consumer Health which is a strong business, for example . Yeah. Let me give you one example. One of the challenges we face is an inordinate amount of bureaucracy and that gets in the way of bayer people being able to get their job done every day, being able to serve the farmers, serving consumers, it gets in the way of innovation, and we have an opportunity to radically change that. We have a system we call dynamic shared ownership. Its essentially putting 95 Decision Making in the hands of the people doing the work. This has been tried and tested in a number of leading companies, in other industries, and we have an opportunity to bring this to bear. Its an all hands on deck exercise and a total change in approach. It puts customers in the center and innovation in the center. We cant do that and at the same time be breaking the company into pieces. Well, you get to i guess what was the key point of your presentation as well, the discussion of something you call dynamic shared ownership, which as you described is sort of a way to at least for you to attack these bureaucracies and eliminate the hierarchies. What exactly is it youre pursuing an when will you know whether youve been successful when it comes to dynamic shared ownership . For sure. Its a systemic and thorough redo of how business is done in the company. We have 100,000 people serving customers, working in labs, working in the trial fields for our crop products and its basically, instead of having 11 layers of hierarchy that are deciding what gets done and doesnt, we flatten that out and taken out multiple layers of hierarchy and put the Decision Making with the people on the front lines, 95 of decisions are there. I have a lot of experience with this from my past jobs. It brings dramatic results. Its cost savings. Were targeting 2 billion of cost savings in the next two years, but also thats just the beginning because it speeds up everything. It makes customer intimacy a reality instead of a concept or a slogan. Were really excited about what it can do. We had 50 teams operating in the new model at the end of last year. We have 300 now. By the end of this year well have thousands. Its going to affect every part of bayer. Yeah. You know, 90day cycles explain that to our viewers as well. Because that seems to be a key component as well of sort of this process. Yeah. Typical Companies Operate on annual plans. If youre lucky enough to get your idea included in the annual budget maybe you can get it done, okay. We throw that out. Everything is on 90day cycles. If your idea doesnt get in this 90day cycle maybe it gets in the next one. Thats a key part of it. Thats part of why we call it dynamic. Youre speeding up everything. The one a day vitamin team in the u. S. , they had an 18month plan for developing new packaging, new branding, new positioning. They adopted the system in q3 of last year and now theyre launching that now. Six months after they started. They cut a whole year off the launch timeline. Thats just the beginning. Well, you know, you didnt hold back in terms of the challenges that this company is facing in this Capital Markets day weve referenced. So im curious how long is it all going to take and how should we judge you . You know, hopefully you come back as a guest in the future. What am i going to be asking you to say hey, youve delivered or you havent . Yeah. I think thats a very reasonable question. On dynamic shared ownership, you ought to see that its affecting every part of bayer that were delivering 500 million in cost savings this year, 2 billion in 2026, and faster progress on innovation, in pharma, in crop science and consumer. In terms of the debt weve announced were going to recommend a reduced dividend and you ought to see our debt level heading us back towards a single a rating and so i think thats clear and measurable. On litigation, weve got to contain the litigation. This is a big topic. Its important for American Food security, for American Food pricing and were going to work really hard on that so you ought to see progress on that. Ha does that mean . I know there may not be that much you can share, but at the same time to the extent theres a different approach on this matter that has destroyed so much value as a result of the monsanto deal, what are you doing differently that your predecessors didnt do in terms of your approach . In the past we focused almost exclusively in the courtroom and we have to recognize this isnt just a legal matter. This is an important Public Policy matter. You know, americans are paying more today than they have in 30 years as a share of their paycheck for food. Thats a problem. Has been estimated to hold the price of food down by up to 30 . An america without glifosate this would be a dramatic effect on food prices and food availability in the world. We have to make sure that everyone understand that, that the situation we face with litigation, is tremendously damaging to america, American Food security, American Food affordability, and so we have to food beyond the courtroom into the Public Policy realm and make sure that theres a broader understanding of that. And finally, bill, to the extent you chased away a lot of the shortterm shareholders looking from a shortterm bounce as a result of the breakup of the company, youre presenting challenges. To the extent you can draw in a longterm Shareholder Base im curious, what do you then want to tell them . You know, as you look forward, as to why, given all the challenges this company has faced as a result of that horrible decision, frankly, i would argue to buy monsanto years ago, that they should look to the future with hope . Yeah. We have an opportunity, i think, thats tremendous. We have these three great businesses. Tremendous innovation, ten blockbusters were going to be launching in crop science in the next ten years starting with short stature corn this year going into the fields. In the pharmaceutical division, 13 inds in the last two years. These are molecules going into man for the first time. Some of these are in cancer n cardio cardio cardiovascular disease, autoimmune disease. Were serving about 600 Million Consumers a year and going for a billion. We have a plan to make that happen. So as we address those four challenges as i mentioned during the next two to three years, we see a Company Emerging not only with the challenges moving behind us, but those three opportunities, squarely in our vision, and already achieving them. So i think thats, yeah, we find that very compelling and exciting and hope investors will find that as well. All right. We look forward to future conversations and see how youre progressing. It is bayer not bayer. Yes. In germany its bayer and in america its bayer. Thats what were going with. Thank you. Take care. Byebye. Carl . When we come back, Fundstrats Tom Lee will join us with his take on the latest inflation data and stocks ahead. The analyst who says apples selloff is overdone and he will lay out three catalysts to unlock that name which defended 168 last week. As were at session highs dow up 220. You know doug, ever since switching to workday youve been a real rock star. Rock star . What do you know about rock stars . Billy idol . I mean wheres the skintight leather . My shoes are leather. Wheres the unnecessary zippers . That thing billy, rock star is just how doug feels when he uses workday. Thanks, rory. Ill show you rock star be a finance and hr rock star. Workday. For a changing world. Billy idol just stole your golf cart music unnecessary action hero for a changing world. Unnecessary. Was that necessary . No. Neither is missing your daughters competition to do payroll. With paycom, employees do their own payroll so you dont have to miss your daughters big day. Time to shine. Get paycom and make the unnecessary unnecessary. What is cirkul . Cirkul is the fuel you need to take flight. Cirkul is the energy that gets you to the next level. Cirkul is what you hope for when life tosses lemons your way. Cirkul, available at walmart and drinkcirkul. Com. Welcome back. Im kate rodgers with your news update. The special counsel who investigated President Bidens handling of classified documents is on capitol hill right now. Robert hur is facing questioning from both parties over his decision not to charge the president while characterizing him as an elderly man with poor memory. The white house has pushed back heavily against the report. Internet influence andrew tate and his brother detained in row an mania and handed an arrest warrant. The warrant says the brothers are accused of sexual aggression. The two deny the claims. Haitis Prime Minister resigned in a short speech following a week of gang violence, looting and destruction across the country. Ariel henry said his government would dissolve once a Transitional Council is set up and gave the announcement following seven hours of highlevel talks involving secretary of state Antony Blinken and 40 representatives from haiti. Back to you. S p is up 8 this year up more than 25 from the october lows asyou know. Our next guest says there is still gas left in the tank despite todays higher inflation print. Joining us from the airport tom lee, Fundstrat Global Advisors head of research. We were looking at your photo on social media a moment ago. Thank you for joining us even from the gate. Yes. Glad to be here. Carl. Tom, where you wrote before the cpi print that there could be a nonintuitive outcome and that is, you get a hot cpi print, markets rally, and thats what you would consider to be a bad news priced in scenario. Is that what we have . Yeah, it looks like. I think the bond market was bracing for a hot cpi print. Thats why the inflation break evens have drifted towards 4 and equity markets were nervous since friday. So weve got sort of the rip the bandaid moment where it was a hot cpi print and the markets are rallying. I think when people look at the details of that cpi report i wrestle with the idea residual seasonality that make the january and february cpi look worse than it is and in the next couple months it should start to normalize and thats going to be what the stock market is discounting. Youve been pretty candid in recent months, tom, about warning clients about what you see as sort of tactical, treacherous territory. I think it was maybe last august you said look out, tactically we might be in for pain. Are you seeing any repeats of that . Its i think its still early days. It is a maturing rally because were in the 20th week, longer than the last two rallies since october of 2022, the longest before that was 19 weeks. I think theres fundamental anchoring supporting stocks should rice and positioning is light and we could see it in the margin debt being lowered and record cash on the sidelines. We feel theres gas in the tank and our head of technical strategy still sees good breadth and a healthy market. Today is a good sign. We had a bad cpi print in market i take it you disagree with the notion that jamie dimon shared yesterday that there is a little bit of bubble in equity markets right now . I mean, i think its hard to distinguish like whats a bubble versus what a markets reprising, because this year, you know, 30 of the s p Earnings Growth came from nvidia. Thats not a bubble. Its really just a big step up in demand, and weve seen a lot of use cases for ai and companies talk about how much of that like klarna, a buy now, pay later company, there is a fundamental story anchoring this causing future growth to go up and could feel like a bubble, but its really a market recognizing a mega trend. Tom, at what point do cuts become critical to supporting these valuations versus the prospect of cuts . I think its going to be important. To me, if the fed raises rates this year i dont think s p would be going up because it means that we the framework has been wrong. So i think a fed not cutting is also not a great outcome. I think cuts have to have this year. I think theres some patience in equities because i think that investors are starting to understand the residual seasonality making january and february look like inflation is picking up but probably starts to tank in the second half. Appreciate that. Nice call tactically today if the gains hold and safe flight. Talk soon. Thank you. Pivoting to apple, shares down more than 10 year to date but our next guest says the selloff is overdone at these levels. Evercorp joins us now and an outperform rating and a 220 price target here. So amit, lets get to it. What do you think reverses the Downside Momentum and brings the stock back to your target of 220 . Listen, i think one is i do think as they flush out more of their ai narrative around local inferencing and we think local inference is really a better way to go about doing this versus the cloud, its cheaper, its faster, more secure, to the extent they play that out that will require you to have more ram on the iphone and thats one thing. Do we get apple into the ai beneficiary bucket and we think that happens starting in the june timeframe. The second thing is capital allocation. I dont think apple is done buying back cash. I think net cash neutral is an intermediate target. I think eventually what they will Start Talking about is getting taking leverage to two times net ebitda, for example, and that could unlock another 250, 300 million buyback for apple as we go forward. The third thing services is really well and should offset some of the china worries that investors seem to have right now. Those are the three things we talk about in the note that could drive the stock higher and where the selloff is over done. In your note what caught my attention in the ai bucket is the idea theres been a rotation from apple to nvidia as part of the desire to have more exposure to ai. What does that say about apple in terms of kind of safe haven stock and if there is more of a risk off posture in the market, does that money flow then back to apple or can does apple need to capitalize and lean in to the whole ai phenomenon and thats the way to get those dollars back . Listen, we think thats in the near term, the under performance is more driven by asset rotation, right, to your point, dollars more to its ai name nvidia, taking away from apple, right. I think this can change in two ways. One is actually put apple in the ai beneficiary bucket. The other would be the extent the rally is overdone, apple has historically for the last five or six years back to the pandemic time been perceived and has been much more defensive name. There are two ways this could work out. Either the market cools off and its risk off or selling the june timeframe and wdc happens apple gets put in the ai beneficiary bucket over time. Those are less than positive on the stock would say, but what about growth . Its great, you know, pay a higher multiple for Services Revenue that keeps going up, thats good. Returning capital is what youre talking about. What is your view in terms of if youre right about june and the addition of generative ai to the iphone experience, whats that going to mean for buying the 16 when it comes out . , you know, weve done some analysis and the average iphone today is pretty close to 4 years old right now. The only reason people upgrade the iphone is when it breaks down. To the extent we could have an iphone super cycle with iphone 16 with super inferencing. You could get double digit kind of iphone growth out of apple and if that happens at the same time the service is doing really well, up 15 right now, that could put apple back in the doubledigit growth rate. Not super high growth but more than what people are expecting right now and what we have seen from apple in the last couple years. Doubledigit growth rate there you would think would super charge the stock to some extent. What about, you know, the changes in apps overall that may occur as generative ai makes its way to the phone itself and to the User Experience across the board . Do they benefit, given that they take 30 of everything downloaded . Yeah. A little less in europe at this point but 30 is the number that they take broadly speaking, right. Listen, in a way the app store is the greatest store that was never built and apple will be monetizing it. The biggest challenge through this whole local narrative that we have that we think about is, what are the killer apps that are going to make you want to get this phone, right . To the extent you believe you hand this over, there will be more apps ai enabled and apple will, to your point, gate 20 get a 20, 30 of the app transactions moving forward. It should be a nice extension of the app store Services Revenue that apple has had. Interesting. Thank you very much for joining us on this note. Thank you. After the break, a ban on tiktok imminent . A look at the challenges from the company and creators as tiktoks ceo heads to capitol quk t see i. Sawonhetrts back after this. Lty hi this listing sounds incredible. Lets check it out. Says here it gets plenty of light. And this must be the ocean view . Of aruba . Huh. This listing is misleading. Well, when at t says we give businesses get our best deal, on the iphone 15 pro made with titanium. We mean it. Amazing. All my agents want it. Says here. inviting pool. Come on over too inviting. Only at t gives businesses our best deals on any iphone. Get iphone 15 pro on us. the future is not just going to happen. You have to make it. And if you want a successful business, all it takes is an idea, and now becomes the future. A future where you grew a dream into a reality. Its waiting for you. Mere minutes away. The future is nothing but power and its all yours. The all new godaddy airo. Get your Business Online in minutes with the power of ai. Encore energy, americas clean energy company, now in production in south texas. Energizing america with reliable and affordable uranium for Nuclear Energy fuel from our environmentally friendly extraction process. [thunder rumbles] the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . [thunder rumbles] the efforts to ban tiktok here in the United States continue to move forward. The house expected to take up that bill to ban the incredibly popular app as soon as tomorrow, and expectations are it very well may pass the house. Its fate in the Senate Perhaps less assured. If, in fact, it were to be passed by the senate, and they were to approve it in conference and send it to the president , President Biden has indicated that he would sign a ban, so to speak. Of course, what that actually means is a question and continues to be one, and what that would mean for our relationship with china, for the company byte dance that owns tiktok, and for its fate here in the u. S. , well, that remains somewhat unclear. 170 million users may certainly care. The company itself again these are numbers ive heard from investors, but its a private company byte dance and they dont share these numbers but as much as 10 billion in revenues from the u. S. , tiktok, 170 million users, how much time those users spend on the app, and yet they are spending an enormous amount of money in the u. S. The cash flow numbers, ebitda numbers, may not be nearly as strong as might be thought for that revenue number given project texas and what theyre trying to do in part to meet some of the objections that have existed over time. Take a look at the ceo testifying previously in front of congress. That said, byte dance is an enormous company. We pointed this out any number of times and has a gigantic business in china itself that is not just its not tiktok its all sorts of different apps, video and things of that nature. Doing as much as im told what could be 120 billion or so in revenues, and as much as 25 billion in net income, which could be a higher number if not for what im told may actually be losses on u. S. Tiktok because of the amount of money theyre spending here in the u. S. What does that all add up to . Im not sure what to tell you at this point and, obviously, you might imagine those who are investors in byte dance are trying to are trying to figure it out, but hopeful given the strength of the business in china and around the world, a loss of the u. S. , so to speak, would not be impactful on the overall value of the company. That said, there is also a thought that given that 170 million users and the revenue number, you could have a business worth as much as 100 billion in the u. S. , if you include the algorithm along with the source code. And thats where things get very complicated, because no one expects that the chinese and bytedance are going to let any buyer of this, if that were to even happen, get ahold of the algorithm and the source code. The question then becomes, what are you getting . Youre getting a user base, i guess, and left with having to try to figure it all out. And put some sort of an engine on this thing that will make people continue to want it in the way they obviously have in the past. That has made it so effective. Continued questions about what a ban would look like, what it would result in, whether theres a Capital Market transaction that bytedance can accomplish somehow in the u. S. , and, of course, leslie, whether or not they would ever consider including, which seems highly unlikely the algorithm and source code along with it. And even if you do include the algorithm with it, theres a finite number of buyers that could stomach a multihundred billion dollar transaction, right . Theres two that could even run it without that and thats meta and alphabet. Nobody is going to let regulators are not going to let them buy tiktok. Then you have this idea that was floated that would there be a buying group, maybe they could step up if there was no algorithm and source code because it becomes a lot, lot cheaper and you can try to figure something out and hire data scientists and the like and computer scientists to try to recreate something. You know, there is another question, carl, if this were in reverse, if china were to say, hey, tesla, were going to make you sell your chinese operations to byd, you know, what would the u. S. Say about Something Like that . Perhaps a valid question. Yeah. Meantime, the lobbying efforts appear to be shifting to the senate side where passage is a lot more cloudy. I think the ceo is on the hill today. Not every senator is agreeing to meet with him. Well see how that effort goes, david. Pretty interesting. I know youre all over it. Meantime, after the break, the latest numbers on closing the wage gap. A big interview coming up this afternoon on closing bell. Sara eisen alongside citadels ken griffin from boca raton, florida. Get his take on the markets, the economy, the fed and a lot more. Glp1 drugs used in weight loss treatments stand out as the biggest global blockbuster, but these treatments require cumbersome injections. With lexarias patented oral delivery technology, early studies suggest a better way. Lexaria bioscience. Welcome back. Today, march 12th, is equal payday, a day that symbolizes how far women must work into the year to equal what men earn. Today this equal payday, were releasing our annual cnbc survey monkey women at work study. It finds a female workforce frustrated with fewer raises and less career advancement. The survey, the sample of 10,000 women found 39 of women secured pay raises this year, down from 44 who got raises the prior year. 17 of women say their salary is actually lower than it was a year ago. More than 15 of respondents who reported a pay decline last year. Women are also struggling with setbacks in promotion. 18 of women said their career experience setback as many who said their career advanced. Many women are looking for a change. 9 of women say they quit their jobs last year and 22 say theyre thinking of about quitting. Its not just frustrations with pay and promotion that are prompting women to quit or consider quitting. Work life balance is in the spotlight with one in five women saying that the balance has worsened in the past year. Among half of those saying its due to increased workload. Parents and women of color are increasingly concerned about career penalties that might come from pursuing flexible work. Now, desire for flexibility is not due to any lack of ambition. 88 of women say theyre either very or somewhat ambitious. So, a key point there. You can find more from our survey on cnbc. Com. Back over to you. Julia, thank you. Julia boorstin. With the markets rallying nicely off the back, perhaps, of that cpi report, the nasdaq up 1. 25 . Our market coverage is just getting started. Dont go anywhere. So this is pickleball . Its basically tennis for babies, but for adults. It should be called wiffle tennis. Pickle yeah, aw whoo these guys are intense. We got nothing to worry about. With e trade from Morgan Stanley, were ready for whatever gets served up. Dude, you gotta work on your trash talk. Id rather work on saving for retirement. Or college, since you like to get schooled. Thats a pretty good burn, right . Got him. Good game. Thanks for coming to our clinic, first ones free. Theyre waiting for you. Hey, do you have a second . Theyre all expecting more. More efficiency. More benefits. More growth. When you realize you can give your people everything, and more. Thank you very much. [applause] ask, now what . Heres what. You go with prudential to protect, empower and grow. With everything you need to deliver, you guessed it. More. One more thing. Whos your rock . Learn more at prudential. Com good tuesday morning. Welcome to money movers. Im Carl Quintanilla with Courtney Reagan on the floor of the new york stock exchange. Citi lays out the case for 125 basis points of cuts this year beginning in june. The firms global economist going to join us straight ahead. New this hour, february boeing orders, southwest down big saying boeing cant meet demand