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tv   Closing Bell  CNBC  January 13, 2022 3:00pm-5:00pm EST

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lasted write off the computer all of that. very nice. thank you so much for being with us even though you brought us disappointing news that's okay. everybody else, we'll get it over it, too thank you for watching "power lunch." >> "closing bell" starts right now. welcome to "closing bell," je everyone i'm wilfred frost at new york stock exchange the nasdaq under the pressure down more than 1.5% heading boo the final hour of trade. >> welcome i'm sara eisen let's look at what's driving the action tech falling hard again after strong start to the week fresh data once again raising concerns about higher inflation. producer price index jumping from last year though the monthly increase below estimates. airlines have a strong session after delta tops
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boeing with progress in china. coming up on the show today, fed president of philadelphia patrick harker joins us to talk about the rate hike guidelines and hearing from kyle bass with the latest thinking on china, the market volatility and the boom in energy to start the year. >> first up, the big stories of this hour. mike santoli tracking the action josh lipton with a look at the nasdaq and joining us on delta and the pop in airline stocks connor cunningham from mkm mike, what are you watching today as we see tech take it on the chin again. >> the big nasdaq stocks with a bounce yesterday we are selling rallies in the big groewth stocks i keep trying to say how much in the short term is this rotation.
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people have more of the big crowded expensive growth stocks to sell. 4700 right? that was the lid on the market in the latter part of the 2021 index is struggling around there in the last few days making it look like a fake-out up to the upside equal weighted s&p is slightly green. it really is concentrated not just in tech but in the big growth stocks that people were kind of thought of as compounders. chipotle is 20% off the high sell tower stocks are leading to the downside everything else is holding together okay. hire's a picture of the whip end of this rotation going on. metals and mining section of the s&p 500 almost straight up and then software which was a strong recruit for a couple year just the other way does it look familiar? yes. we saw it in the first quarter
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of last year piled into those reopening ptype names. tech did very lit stle into the beginning of last year it is a rhyming dynamic. sentiment came into the year fairly muted i don't think despite the fact of highs in the s&p 500 people expected great upside there. take a look at the bull versus bear ratio why down toward the post-covid lows. this is more bears than bulls. it is not in itself that much of a tradeable data point it's definitely part of the backdrop i see positioning data that seems like people are cautiously or neutrally positioned. all else being equal that's a backstop to the market that people didn't get too far over
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the skis. >> we have taken a leg lower now down 293 on the nasdaq close to 2% now. keeping an eye on that the dow down .2% having held on to gains most of the session and will keep an eye on all of that with mike later why don't we dive into the nasdaq worst performing of the major averages and josh lipton has a deeper dive on that. >> some of the movers and names, microsoft in the red in today's trading. the giant firmly in the red this year, too. of course remember in 2021 that stock soared 51% amazon down as well. down so far this year declining. the stock flat in 2021 up about 2% why check out tesla falling today. pull back the chart. still up about 30% in the past 3 months look at the chips. taiwan semi is sharply higher.
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guidance for q1 and 2022 exceeding expectations on the ore hand nvidia down. all three double digits now off the highs. cloud stocks clou etf tracking that sector lower tofd shopify hit. fastly too salesforce 25% off the november high back to you. >> thank you session lows on the nasdaq down almost 2%. now to a bright spot in the market shares of delta higher by 2.5% of earnings that beat expectations this morning. ceo weighing in on the results on cnbc earlier noted omicron is expected to impact the rebound. >> what we see the president's day weekend forward look our numbers then the bookings continue through this period
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people are ready to travel ready to book the spring plans they know omicron is not a threat to them at that point and they want to get out and they want to reunite with friends, family, the world. get on with their life. >> whole group with a pop today. let's bring in connor cunningham was it a surprise to hear the positive tone and seeing the reaction today >> i wouldn't go so far to say that i think that this earnings season as people are expecting, first quarter is a real challenge. but you can really point a picture of a positive outlook in the summer months. this is potentially 2022 as an endemic and if that's the case we get out and about and return to normal life at that point. >> do you think, connor, a lot of the potential positive good news of omicron is already
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priced in to the sector? >> the stocks are up quite a bit year to date as mike was talking about before there's a big rotation from tech to reopening trades and whatnot. there is a fair bit of robust expectations now given where the stocks are i would say again like it's all catalyst driven at this point. if we are at the peak in terms of cases then going forward is about spring break travel being strong and the summer and then return of business travel in a big way. if that's the case the stock should move higher with upward surprises in revenue than downward. >> is there any visibility, con new yo nor, into the return of travel and how much do the stocks need that >> expectations are low i would say for business travel.
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a lot of the current variant has delayed return to office so that's going to delay the unde underlying return of business travel we exited 2021 down 50% to 60% for business volume and should only get better. the expectation is to exit -- we'll probably be 10% off the 2019 highs at that point in terms of business travel in general. call the year down 25% so a nice solid improvement as the mix generally improves positive for pricing consistently the airlines reduce capacity given the near term headwinds with oil, with staffing that's only going to result in the airlines looking to push prices aggressively as they can. as long as demand starts to
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trickle back towards the summer months things should be good for this year. >> thank you so much for joining us good to see you. >> thank you. we have continued this sell-off, the start of the final hour of trade. down almost 300. almost 2% on the nasdaq. we'll keep an eye on that. also discussing this week's hot inflation data what the fed might do about it with vice chair krishna guha you are watching "closing bell" on cnbc.
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a tech sell-off on our hands. there's the nasdaq 100 heat map. nasdaq 100 down about 2% as is the nasdaq looking at the worst levels of the session and the names in the red are largely tied to tech m microsoft, tesla, netflix. the bright spots are having to do with bio tech some media names like parent comcast and food stocks like a pepsi. another tech sell-off after three days of a reprieve and today yields are lower usually the fear of rising rates and yields are hurting technology not seeing that dynamic today. >> also interesting is the big caps down quite significantly in previous sell-off days led by the smaller names. but the apples and microsofts
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decl dec declined 5%. >> ark innovation down 4%. so they're down. >> ark rarely gets a strong performance on tech selling days. brainard testifying today. she reiterated that fighting inflation is a top priority. >> inflation is too high and working people around the country are concerned about how far their paychecks will go. our monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone. this is the most important task. >> let's bring in krishna guha great to see you as always clearly expectations for rate hikes and outlook for inflation
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picked up in the last month or two but rates surged year to date but as sara mentioned plateaued in the last day or two. do you think rates caught up with expectations sufficiently in the short term? >> i think there's still potentially room for some more obviously these things never move in a straight line and consolidation but i think the bias is still rates higher bias is still yields higher. the inflation data this week, cpi sh ppi, keeping the fed under pressure and the labor market data. right? unemployment plummeting and wages at multidecade highs today we have got the atlanta fed wage tracker up at the highest level since 2002 it is a combination of wages with the more persistent elevated inflation that keeps pressure on the fed.
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>> in terms of what could be a trigger for yields to surge do you think it's rate hikes or the end of bond buying which is more relevant >> i think the end of bond buying is discounted by now. that's not the big deal but qt, actual balance sheet rolloff reduction, that's a much bigger deal clearly the things that the market is wrestling right now is how many times is the fed going to hike this year? they will start in march and when they kick in that qt? how aggressive will it be? the market -- if the market has to digest at the same time we think four rate hikes this year and aggressive qt and balance sheet reduction, that's a lot for the market to digest. >> charlie evans on the tape a few minutes ago coincided with
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the fall in the market saying the balance sheet is very large. the fed will likely shrink it sooner he is as dovish as itgets lately and talking about balance sheets shrinking what happens to the economy when that starts? >> first of all, you are absolutely right that the big guns on the dovish side are all swung in a big way towards this new focus on inflation so right now there aren't any doves left. it's a focus on the idea i think charlie used the phrase is not well positioned right now. here's the problem the fed has kept the pedal to the metal until they have got unemployment down. inflation is well above the target and the gap between where they are right now and where they might find a neutralish policy setting is big
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right? still at an emergency era settings zero rates 9 trillion balance sheet even if you think that neutral setting isn't too high, 2% on feds funds and get there over four years or so that is to coin a phrase this week a long road back to normal so as the data comes through the fed is under pressure to close that gap back to normal. faster even if they're not yet convinced that they will have to hit the brakes at any point in time. >> so krishna, this week jamie dimon thought four or more rate hikes next year and that that wouldn't derail the economy because it is only 1% or whatever in total opposed to rates getting up to 2, 3, 4. do you agree that that level wouldn't derail the economy? >> so yes with a very important
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caveat right? caveat is this there's a tension thinking about these things between the delta, the change, and the level. so jamie's exactly right but if the fed hikes four times a year which is my expectation and starts the balance sheet runoff in principle this year fund rate of 1%, a balance sheet that's say 300 billion, 400 trillion off the peak, that's still a supportive, a stimulative set of policy the caveat is the change that's a lot for the market to digest it is hard to pin down how much tightening you get but it could be one or two hikes in this year alone or more. so there's a lot for the market to digest in terms of that level. while in the classic macro
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models the things move smoothly is risk is you get a nominal tightening of financial conditions to slow things down. >> they don't seem worried about that yet with the market sell-offs. thank you for joining us. >> my pleasure take care. >> we have an interview about this topic next hour when we are joined by philadelphia fed president patrick harker he'll talk to us on "closing bell." up next, much more on the nasdaq sell-off. down 2%. the mega caps hit hard with microsoft, tesla, apple. check out the top searched tick irs on cnbc. 10-year yield goes down today to 1.70 buying bonds yields come down. the high fliers are whacked.
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welcome back we're down 2% on the nasdaq. at session lows. dragged the dow down more than 1% and negative territory. and mike, interesting to see both the intraday selling and the scale and where it is focused are the mega caps are suffering. microsoft down nearly 4% apple doing better but down 1.5% of course more focused on the shopifies of the world but interesting to see the names,
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b bigger mega cap names sell off. >> if you see liquidation in the qqq this is how it might look. looking at nvidia, the 1-year chart shows this is surrendering in a hurry the breakout in premium built up in november, december of last year and just coming back down to where it started to accelerate in the fall for a stock like that it looks like we're pulling it back the destination is looking at energy the composite flat today but on the other hand you have the cloud software stocks and the etf covering that and months of grinding declines and that's much more on the whip end of the kind of no profit, on the come type of speculative growth stocks
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this is getting to the larger stocks the public hasn't really given up on the idea that's where you go when the market dips. maybe you have to see that dynamic change before there is real capitulation there. but for the largest stocks is about coming back to a longer term trend than basically some kind of market verdict that the story changed with those companies. >> a lot of talk about higher interest rates and fed moves and yet what's so interesting is 10-year low is lower went as high as 180 in the week. the dollar lost a full percent this week and they don't usually happen when there's a lot of fear of rising rates and inflation so that's interesting to me and i called dan ives on
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the way into the studio, the tech annalyst at wedbush and he says when you look at software and chips in particular the fundamentals of these businesses are accelerating they're growing. so really this is a macro driven market something to remember when they look to buy on the weakness but looking to see if there's something wrong with the portfolios not like they are weakening. >> oh no the businesses aren't necessarily weakening and i don't think that microsoft's business got 53% better last year and that's how much the stock was up there's an ebb and flow around the fundamentals and people say that corporate spend on a lot of microsoft products front loaded to a fair degree and the yield story, look.
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i'm on the record. i don't think it's a magic indicator of the stock that is go up and down and mostly the reason that tech is going down the fact that yields have been going up but today in the zone i think you have broken momentum in the growth areas. that's a little more important than - >> hold on you don't think it's the 10-year yieldly dragging on the nasdaq but think that the nasdaq is under pressure in recent sessions and today on the talk of tightening policy and in that environment? >> well, yes except what it really means is the fed is looking to be tighter in response to a more inflationary environment, to an economy that they believe is operating at a pretty good clip or about to that drives money into other areas of the market at the margin and that means growth into value and cyclicals
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not only growth stocks are impacted by the liquidity effects from the fed when the fed was raising rates you sold the car stocks and consumer cyclicals they were going to slow down the economy so now i think it's more coincident than causal. >> you mentioned earlier how sentiment with caution and not much measure to come what's the vix telling us up now to 19.5? de decent move higher. >> reflecting the indexes. you see a 1% move in the s&p why what's interesting is below 20, entering earnings season and stocks tend to go their own way based on company by company fundamentals and news and reactions. that often pulls in different directions to leave the index stuck or all else being equal
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not moving everything at once and allows the volatility index to remain suppressed because the index is what drives it so i don't think it's a clue. it is not an overreaction. it is just 1% and still above monday's lows. >> let's hit the individual market movers. a winner kb homes soaring the home builder issuing positive outlook for the year noting an increase in the average selling price of a home. stock up 16% coinbase's buying fairx to get coinbase into options and few which y future trading tune in tonight, a cnbc special "crypto night in america" i will
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be hosting at 6:00 prm trying to commission carrie underwood to do the theme song haven't gotten there. >> we will be watching with theme song or not. it is time now for a cnbc news update with rahel solomon. >> hi. the supreme court has struck down the biden administration's vaccine or test mandate. the court's conservative majority concluded that the administration overstepped the authority. the liberal justices argue that it was the court overreaching substituting judgment for that of health experts but allowing a vaccine mandate to proceed for health care workers. president biden saying he might not get a voting rights bill through congress but fighting for election reform saying changes in some states pose a threat. >> it's about election subversion, not just whether or not people get to vote
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who counts the vote? that's what this is about and makes this different. the united nations chief says nearly 9 million afteghans are on the brink of starvation back to you. >> thank you so much. still ahead, kyle bass will join us with his latest thoughts on the wild market action. plus, big blue with high marks for going green. we'll talk to the ceo of ibm here's another check on bonds. pullback for yields. 10-year around 1.70 as we speak.
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earn about covid-19, the more questions we have. the biggest question now, what's next? what will covid bring in six months, a year?
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if you're feeling anxious about the future, you're not alone. calhope offers free covid-19 emotional support. call 833-317-4673, or live chat at calhope.org today. 24 minutes left of trading the s&p 500 down more than 5%. technology is the big drag nasdaq down 2% at the worst levels of the session. dow down about 100 salesforce and microsoft the biggest drag oil prices are down and been on a tear in the past month the sector up almost 14% joining us is kyle bass at heyman capital manage. welcome back. >> happy new year.
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>> happy new year. pretty terrific start to the year given the out performance last year and the wobble in the market. >> there's a huge mismatch i think in policy and reality and looking at the reality of hydrocarbon demand and oil demand to 2040, we think it is about right where it is today although higher before it moves back to this level and for six years we have been pulling cap x out of the oil patch because we want to immediately switch to alternative energy with wind and solar and cheap clean power to run the country. the world. the problem is you can't just turn off hydrocarbons. it takes 40 or 50 years to change fuel sources. i think you should buckle the set belts.
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we could see $100. the same situation will apply that took oil below zero and omicron will peak in late january. and we will be -- will get the world reopened sometime mid year and demand will go back to the highs. you can't just flip on an oil well there's enough money drilling. private equity is pulling back only people funding the oil patch are family offices we'll see high prices soon. >> the administration's going to hate it especially trying to bring down the prices from here. looking at wti prices over $100? >> i think well of 100. >> would you buy the oil stocks? >> yeah. look if you have the capacity you want to be out there with proper
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geologists and smaller companies. so few fund cap x. buy oil equities and front end oil few which utures i think yoe numbers that people aren't ready for. >> in terms of china, i'm interested on the take of stocks to rally the year given underperformance and given the news changing tone as it relates to their economy from very negative tone late last year and early this year. >> number one, wilfred, i would disagree with you. i think i'm a china realist and not a bear. >> that's what all bears say. >> that could be the same thing. still bearish. >> over a third, about a third of china's economy is driven by
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the real estate markets and what xi figured out is with the money printing on the same scale as ours of the economy and the rampant speculation in real estate in china prices got so high you saw the birthrate went down to 1.2. you need a birthrate of 2.1 to sustain the population you have an aggressive population decline because the chinese families, the men can't afford to buy the homes because they're 20 and 30 times the average annual income and don't have kids living in their parent's basement. this is not a market crackdown maybe a billionaire crackdown in china and will happen but i think it's important to note that xi needs real estate prices down and them to stay down people kind of betting on a bounce i think that's a fool's
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game especially knowing that chinese equities again don't submit themselves to western audits and how does anyone discount xi jinping risk you won't fool me twice. i think people investing in chinese equities are breaching their fiduciaries duties to clients. >> fair but they have space to move on fiscal and monetary policy they also haven't really had a recovery or reopening. if that happens at once china bounces back in a big way and some internet names have been beaten up to low valuation that's the bull case. >> yeah. you know what? not with my money. maybe with your money or someone's retirement money but the factors exist. you don't know if the numbers
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are real you don't have real audits xi jinping throwing switches when he sees fit and companies delisting in america they're going to move to hong kong and stay unaudited. it's kind of a fool's game i don't understand people that buy the stocks maybe i'm just too old school. >> pivoting you back to the broader markets here in the u.s. near session lows today. down on the nasdaq are you fearful for the outlook given the run of the last decade >> yeah. if you look at the most recent let's say prediction, basically calling for i think four hikes this year. four and a half starting in march. you have a scenario to talk about quantitative tightening
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and running off the balance sheet as early as june or july i tell you look we saw that movie in december 2018 the stock market dropped 20 pater20% in a month. going into qt raising rates with dead on balance sheet this i think the curve is going to flatten. i think long end of the curve to invert and the fed doesn't have the stomach for the market to drop what's the nasdaq? down 8% already. down 20, 25% i think the fed stops raising rates. i don't think they can raise more than 100 to 125 basis points before they have to stop. >> nasdaq down off 8.3% from the highs. do you think we'll avoid a recession or an economic downturn in the face of balance sheet shrinkage because the fed will look to market reactions?
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>> yeah. we already have massively negative real rates of return in the bond market. we all know real inflation is probably 14 or 15 or higher. if the fed follows the policy that i think people are discussing today again with interest rate hikes concurrently with tightening there's no way the stock market goes up this year if they stick to that plan i think they have to back away from that plan once they start hiking one thing to note today is really fascinating to me you see the 10-year bonds up rates down today have you seen mortgages? mortgages are actually selling off. rates going higher bond market is taking rates lower but mortgage rates are
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higher with full employment. they have to stop buying mortgages and try to shrink the balance sheet just rates from 0 to 1 that is a massive delta from 0 right? not the same thing as 5 to 6 i think that's what the world has seen in japan and europe and so i don't buy the neutral fed funds rate at 2.75 although inflation is big double digits and if we're right about oil that will confound people's inflation problems. >> kyle bass, great to see you as always. realist, a bear on some tollics, a bull on oil. we'll see if you're right. thank you. >> thank you. when we come back, taiwan semi jumping today after forecasting strong growth. you can watch or listen to us live on the go with the cnbc
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app. we'll be right back.
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coming but we go into the "closing bell" market zone senior markets commentator mike santoli is here. today we have stephanie link with us, as well let's kick things off. stocks are selling into the close with the nasdaq leading the way lower. down 2.4% now. right at the session lows. s&p now down 1.4%. it's really picking up steam. >> yeah. the overall index can only withstand so much. the kind of broader tape down a quarter of a percent and pronounced selling in the nasdaq stocks seems as if a lot of people agree this is probably a year where there's going to be a lot more kind of push/pull between the sectors and valuation compression going on people bracing ahead of tighter
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monetary policy and the bumps spilling money from things like the nasdaq 100 today. >> information tech nothing down 2.6% got utilities and staples higher steph, remind us of your strategy of tech right now with nvidia down 5% servicenow down 9% today's not the first day this is happening. >> yeah. i'm not surprised that the s&p taken a leg down, too, because technology and comp services is 38% together of weighting in the s&p 500. you know people are loaded to the gills with these things, especially after 4q when the top five faang plus microsoft really led the charge at the end of the year and seeing unwinding because it's crowded valuations are hard to supporter
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even in faang. i'm underweight with tech and comm services. that being said i own a big chunk of technology. i do like semiconductors and the end markets they serve and the value tech, too. i think today is all about inflation. talking about better growth with a handle on omicron and jamie dimon did a great job and ed bast we know that on the growth side and the economy is okay and with that comes higher inflation. i know yesterday the cpi didn't meet the whisper number and today's ppi a record and will go higher because energy prices rebounded this year. own reflation stories and be
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diversified. they will be difficult in the short term. >> i want your thoughts on when you might buy the mega cap names. you sold out of alphabet believing you'll buy it at a lower rate and already vindicated on that congrats on that with that pullback what sort of pullback do you want to see to think that's enough and going back in because these are companies to do well over the long term >> first and foremost, alphabet was up and putt it in facebook that's down tofday, too the risk/reward in faang is not that great i only own apple and meta.
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the others i sold out of i think 98% sell siders with a buy. i don't like that risk/reward. i try to buy low and contrarian and where stocks and valuations i believe are reasonable i don't think apple and amazon and facebook for that matter are expensive but overowned and selling them first and try to stem the losses if you are overweight and comm services and tech is a big weighting. if they fall 10, 15, 20% i would take a look but we'll have to wait and see. >> session lows. nasdaq down 2.5% taiwan semiconductor shares are surging. josh lipton with the details josh >> so the chipmaker reporting and pleasing share holders the guidance with mid to high
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20% sales growth support growth with the budget at 40 to 44 billion. a record matt bryson sees positive read throughs from the print. higher cap x levels to benefit equipment suppliers. tsmc with strength in high performance computing services back to you all. >> not reflecting that in the stock today. thank you. mike, this gets back to what i was saying that the fundamentals are accelerating and taiwan semi gave you evidence but they're hit hard today. >> sure. probably a silver lining that taiwan semi is rewarded in the
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market for this mover. not that people think it's good money after bad. but yeah i think there's plenty to be skimmed off of the nvidias of the world and ran a lot. we have to get used to the idea that the market is going to deviate from the fundamentals in the short term you have seensome value semis do better. been a big kind of last shall be first trade in january but yeah. definitely not steering clear of it semis look better than software just relatively speaking. >> a tech stock down 10% is snap it is under heavy pressure let's get a breakdown of why julia boorstin has that for us. >> snap shares down on a downgrade to market important on near term headwinds cutting the
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price target to $45. the stock off 28% over the last 12 months. cowan citing near term concerns with snap's measurement, targeting and attribution for the direct response ad units and noting that the comps get tougher this year and saying that the valuation for snap does remain high. wilf >> thank you so much. steph, your take on snap >> i don't think this call is the reason why the stock is down 10%. we have known about the ios changes for a long time and have challenging comps in the first two quarters of year stock down 53 pshs from the highs. 16% year to date already i think it is caught up in the growth trade this is a price to sales story and after the pullback 14 times
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next year's numbers. momentum is great on the upside but it is hard on the downside to support valuation and a valuation call i think it's a no-touch if the growth rotation continues. >> we have snap down 10% there my apologies two minutes left of the session. mike has more on the market internals. down around 2%. >> internally things have softened up. started out youhad solidly mor stocks up than down and the volume split positive. that has given way with the selling and not dramatic you basically have 1.6 shares up for every 2 down and certainly some wear and tear on the internals. the s&p is nine trading sessions
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compared to the regular weighted s&p. there's a percent and a half or better this is the flip side of the weakness the typical stock is holding up better. a pretty good performance spread for a short period of time it is relatively concentrated on the pain volatility index bumping higher. we have challenged the 20 level. it is not kicking off any real alarms there was a down trend it shows you an unsettled environment here we have the fed meeting in a couple weeks i think it is filtering into the mix as new january money collides with this idea that maybe we are hitting a little bit of a speed bump coming to anticipation. >> we do have three sectors still higher on the s&p. utilities, staples and
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industrials. the other eight are lower. the dow down 0.6%. nasdaq down 2.6% the worst performer of the three big indices. as the bell goes sharply lower for the tech in particular the s&p down 1.5 the dow down 0.5 ♪ looks like closing at the lows of the day. welcome back to "closing bell. i'm sara eisen here with wilfred frost and mike santoli, cnbc senior markets commentator this hour philadelphia fed president patrick harker joining us and talking about why he's open to three rate hikes stephanie link is still with us from hightower there's some new all-times in
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the market kroger met life berkshire hathaway what does that tell you about the market and the defensive or safe stocks in the portfolio right now? >> i think it's prudent to have some defensives and some sick welcomals. if you look at industrials this week they caught a bid out of nowhere. led by boeing but looking at cat and deere. they held up remarkably well i think what you see is the overowned tech stocks and the growth stocks people are selling them and kind of putting them into the sectors that lagged and also benefit from higher inflation. they also have pricing power a lot of them do industrials and energy and so i think you want to have a basket like i own a bunch of cat. you know that i also own a ton
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of coke. it's a mini barbell within the strategy on construction it is a good time to look at sectors and outperforming on a relative basis it wasn't a terrible day but that's not the case for people with growth. >> mike, it will be interesting to see the can keep the market going if the rotation's already done and i guess banks coming with earnings. with interest is energy with wti rolling over seemingly down 1.4% despite kyle bass' views >> that's sort of an index math is tough if the groups can't really keep racing higher and the mega caps on the downside. so far not seeing a worrisome
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macro message in this. equal weighted industrials slightly up today. so so far, it is a matter of the index thwarted by the rotations and can be messier with capital like leaving the biggest stocks in the market. may not go directly to other stuff and need a pullback. nasdaq 200 below the low from monday it is thursday it looks like it's precarious for the market kind of spinning the wheels here but at this point it seems broadly speaking rotation and not kind of an exit all around. >> s&p up 3.3% from the highs. mike, tpg went public today and closed sharply higher. this is the private equity company. not new, new lu public
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i wonder what it says about the appetite for ipos after a lot of ipos didn't have a good run last year maybe a good first day of trade or the oappetite and growth stocks, too. that's where tpg focused investments. >> i think it says a lot more about the appetite for tpg and the great year they had last year blackstone up 80 something percent in 2021 and pulled back hard a lot of them did. it's more about a new entrant i this sub sector. people like with asset flows in that direction it is not typical of the run of ipos 30-year-old firm the financials are pretty clear. right in front of you in terms of the business as opposed to a younger company coming public
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with promises and not that much of a proven record. >> talk about fintech stocks all took a big hit today traditional banks set to kick off earnings tomorrow. let's bring in david ellison at hennessey funds. good to see you. >> thank you. >> what is your take on that fintech sell-off that we've seen of late? long overdue a buying opportunity >> i think it's a -- some regulatory issues. i think the firm down big today on the concerns of regulation but the space is tough a while last six or eight months are difficult. people are rotating from the growth they see and see the banks as more traditional banks as a better place to be with
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rates and potentially long growth it is a swapout. they were buying paypal and selling bank of america, jpmorgan and now doing the reverse. i think it's as simple as that. >> have the traditional banks moved up too much ahead of earnings >> been doing this a long time getting runs like this it is hard to say no these aren't tech stocks not going up tenfold and there is a valuation ceiling on these things they won't trade at ten times revenues 30 times book. they have to deliver on earnings tomorrow and loan growth and hopefully hang on to the great earnings from wall street. but again these are very profitable company just people have a pretty good conviction about what the earnings are going to be. there's no surprises coming and why they hold up i think the market is -- the
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bigger market story for me is the market's losing the conviction about companys that are going to do great in the future maybe not. seeing some pretty significant declines i've seen bank stocks go down a lot. the funds that everybody's talking about, there's been significant loss in value here that's not showing up in the indexes and i think worse than even the worse case and you guys are saying it but it's ugly out there in this growth tech sector. >> speaking of tech and banks looking at the holdings of the large cap financial fund the number one holding is apple. explain that. >> yeah. i've owned apple many years in that fund. started out as a very small position and shows you what tech
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has done real tuf to the banks it outperformed. apple is in there because they have got the big network effect and they're a significant -- can be and should be a significant player in the financial sector why that is a case of it shows you what the faang stocks did relative to the bank stocks. it is not the biggest anymore but a lot of these positions are very close together. it is not like if one goes up 1% it movers a lot bank of america was a 1% position and just shows you what happened to that sector relative to banks. >> steph, we know your positioning in the banks as a group do you fear that the short term run-up taking profits
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and looking to top them up in the short term >> i'm not going to trade around them you know my biggest two morgan stanley and wells fargo but up a lot to your point. wells fargo up almost 60% last year the risk/reward to tomorrow is not terrific i like it. the most asset sensitive bank. at 16% to the earnings one way or the other that's positive. i think citigroup sets up interesting. it really was a laggard last year up 12 pshs into the print. bank of america which also is asset rate sensitive up 10 %. they trade crummy on earnings. people do the homework they're complex. i like them as rate plays.
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of course valuations is attractive going to bide my time and stay patient. >> nice to see you. >> yep. >> before we let you go zone in on one of the best trade ideas right now. what is it >> when they reported a month ago the cycle was stronger for longer underproduced and caught my attention. especially since the stock trades about 7 times but they're posed to do closings for 2022, they have been roe of 30%. and they have dominant market share in the growthier states. stock's down 8% on the year. i think they're overdone so this is a best in class home builder to have exposure to.
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>> steph, thank you so much. great to see you >> thank you. we have a news alert on microsoft. josh lip tton with the details. >> the company board is now saying there will be a review of the company's sexual harassment and gender discrimination policies last year shareholders did vote to publish the report. that came after bill gates stepped down from the board why the board saying there's a review and this new review will mean the public release of a transparency report and the rort to summarize they say the investigations against members of the board, senior leadership and the allegations against bill
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gates and be aired there's a review of sexual harassment and gender discrimination policies at the giant. >> thank you. breaking news on social media companies. julia? >> that's right. the tech giants are phasing subpoenas as part of the kongs at select committee's investigation into the january 6 attack on the capitol demanding records from alphabet, red ddit and twitter. we are reaching out to all four companies for comment but of course this comes amid growing scrutiny on capitol hill. >> thank you for that one. keeping a eye on that. mump man 0 the homebuilders.
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a top pick ivy zel mman will join us patrick harker will join us and ics the fed may raise rate quker than thought we'll be right back.
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for just $30 per line per month when you get four lines or mix and match data options. available now for comcast business internet customers with no line-activation fees or term contract required. see if you can save by switching today. comcast business. powering possibilities. welcome back three rate hikes this year might not be enough. in a speech today philadelphia fed president patrick harker said he could be in favor of further tightening if inflation doesn't get under control and joins us now welcome back nice to see you. >> good to see you thank you for having me. >> so are you concerned that the federal reserve is behind the eight ball on inflation? >> i wouldn't say i'm concerned that we are behind but i think action is required it is a three-part action in my mind one, finish the taper.
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two, lifting off the zero bound and then we can argue what that is, say 100 basis points then we start thinking about the balance sheet normalization process. but i don't want to do that all at once. i think that's the wrong way to go do them in stages. >> potentially four hikes next year >> yeah. omicron wacked us all unfortunately and hope fle we can recover and other country's experience will be ours and we can get through the wave and learn to live with the virus that said, we do need to take action on inflation and it is measure persistent than we thought. i have been off the transitory team for a while now i think we need to take action, it is appropriate to take action
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this year. four is not out of the question. >> the biggest question is how you do this without tipping the u.s. economy into recession especially when the fiscal stimulus is withdrawn. how do you do that >> right we do it carefully and m methodically let's start to raise rates let's then away from zero move into a normalization process putt that on a glide path that will be steeper than we did the last time around nominal size of a balance sheet is larger. let's just put that in place and let it run and if we need to adjust we use the primary tool which is the fed funds rate to adjust the policy. >> president harker, if you see that the - >> hi, wilfred. >> -- the inflation rate is well above target, that unemployment
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is still nicely lower to 3 or 4% but the market really falls out of bed do you just inspector general -- ignore the market >> no. i have three increases, 25-base i point increases in this year let's step back and look at inflation. we have reached the maximum employment mandate in my mind. inflation is two forces that are driving this one is demand. that we can effect through monetary policy. the other is supply. supply of labor. goods and material that we can't. both things have to be solved at the same time. one in our hands one not in our hands i am more optimistic tend to be an optimistic i like to solve problem just i
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think we are solving the supply chain issues the labor supply we can talk about. this will be solved and will learn to live with the virus if we do that we can get the economy back open full throttle. >> just to be clear in order to complete the management of the economy you will consider the stock market as a relevant factor to that >> sure. markets generally. transmission of monetary policy happens through the markets. that said i think if we again do this in a way where i'm not in the camp of just overshooting what i think is a terminal rate for the fed funds. like 2.5%. i think we shouldn't have overshoot that and come back down let's watch how the markets
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evolve >> you mentioned the labor market i do want to touch on that because clearly you guys think there's enough progress to move on rates and still 3.6 million jobs short and still several percentage points lower than pre-pandemic have we made enough progress there on jobs? >> what is the reason that is the case is it lack of labor demand absolutely not we have got millions and millions of job openings the problem is supply constraints, lack of child care or schools closing and opening, fear of the virus. these are the reasons we can't get people back to work. not due to lack of demand. you have to look at the root cause of the labor supply issue is not just say from the macro 101
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textbook out reaching maximum employment keep rates low that's not the medicine to cure the disease of having not enough people in the labor force. >> how fearful are you that inflation is becoming kind of se several fulfilling it's altered expectations? >> the evidence is it's not yet come to the point where it's altered expectations from what i have seen in a major way that's a real risk and why i think us taking action sooner rather than later, that will help us to anchor the expectations. >> how tricky is it to shrink the balance sheet? that's a fairly new phenomenon
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here and could be bumpy. when you started to talk about in it minutes from the last meeting we saw a big sell-off on wall street and fears that the fed is more aggressive than expected. >> again i look at three 25-basis point increases and starting a process and doing that in a methodical way steeper than before but not dramatically so. put this -- last time we talked about letting this run and being as boring as watching paint dry. well, may not be as watching paint dry but we want to get back to that use the fed funds rate not the balance sheet to adjust policy. >> do you think that $9 trillion balance sheet is important for pockets of speculation in this market with cooling off with crypto and spacs and tech
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companies? do you see bubbles there >> yeah. there are troughy parts of the market there always are i'm not overly concerned about that right now i think we need to get policy back on the path of normalization. >> we appreciate you talking about it and giving us your view. >> thank you. >> good to see you p philadelphia fed president up next, the stocks that appear attractive in housing ibm ceo on increasing competition in the cloud and their new very strong nkraing of most just companies in america we'll be right back.
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kb homes surging today after beating expectation just the company says the outlook looks good and thinks 2022 revenues will increase 30% from the midpoint of 2021 joining us is ivy zelman great to see you thank you so much for joining us a big picture question we have been talking about the
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way the market cooled off to start the year the stock market and pulled back year to date is that going to happen for the housing market in the year ahead? >> we think the housing market which is extremely strong right now is definitely set to moderate as we continue to see interest rates moving higher married with more supply coming to the market and supply is the lack of supply has been what i think is a key driver and allowing for very strong momentum that's continued. >> which regions or price points in particular are most ripe for correction >> we actually just published the home building survey for december sixth con ssecutive month of ore activity on a normal basis so it's better than normal across all price points seeing strength continuing at entry level but throughout the
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price points with luxury seeing a disproportionate increase which is driven by second home purchases and we also are seeing investor purchases >> square that view with what we got from kb homes. stock rocketed higher today after the company painted an optimistic picture for housing demand. >> i think that the builder community in general is o optimistic and what we appreciate is that the last two years has been unprecedented whether you talk about the stimulus that the federal government provided excess unemployment benefits, a lot of tip ral types of factors that have been held up like foreclosures and eviction moratoriums and the free capital drivering the market
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the increment alibier is more a nonprimary buy irand looking at interest rates rising and the home owners locked in disincentivizes them to move unless you're a 1% to move from new york to miami or california to texas or boise, idaho affordability is pressured right now with the monthly payment up prehf rate increase the monthly payment for an entry level buyer up17% so we are seeing affordability concerns mounting but if rates go as much as 50 to 75 basis points higher from here we can see the market materially
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slow down. >> what do you make of the recent resurge higher in lumber prices >> i think that that pressures builders overall profitability but given the strength of the pricing power which increased in september on an analyzed basis over 12% they can offset the costs. the pricing power is allowing the stock to come in and will be a theme in the fourth quarter earnings period. >> kbh was a pick. kudos on that. where else would you position with the cautious outlook that yaw laid out >> the home building stocks are momentum driven so looking at the space what we saw is a
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dislocation with kb trading in the mid cap, small cap group at a significant discount trading at let's say 1.2 times book prior to the earnings release and mid caps at 1.5 times book the group is trading closer to overall at two times book at a pe ratio six times and stocks like dr horton closer to two and a half times book. we look for opportunities where we can pair names where we have a long idea like meritage. for the clients that are able to short but we are looking at really valuation that we think is compelling and kb is a name that was a standout to us. >> thank you so much for joining us. >> thank you best wishes for 2022.
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>> and to you. mike will look at auto shares we'll be right back.
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welcome back time for a cnbc news update with shepard smith. hi. >> hi. thank you. from the news on cnbc, queen elizabeth dumped prince andrew today stripped him of the royal and military titles. now the second son will face a sexual abuse lawsuit as a private citizen. this move comes a day after a judge in new york rejected prince andrew's bid to throw out that lawsuit against him a woman named virginia is suing him for millions in damages claiming he abused her at 17 prince andrew denies the allegations. his lawyers say there's no current plan to settle. the investigation into a traffic stop of gably finds mistakes made by the responding officers officers investigating a fight between the two but allowed the
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couple to leave after telling them to spend the night apart why the report says officers should have issued a citation after gabby after admitting to hitting laundrie and the police should have taken a statement from the person that called 911 saying they witnessed the slap she was found dead more than a month later after he drove home and named a person of interest in the death and then he killed himself tonight a very bad day for president biden's agenda on voting rights and employer vaccine mandate j we'll break it down. >> thank you see you then. ford closing a $100 billion market cap -- at a $100 billion market cap today let's go back to mike with ford and tesla, mike? >> yeah. a couple years ago "ford versus
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ferrari. this is the more interesting race ford has a catch up. what does this mean? 100 million for ford 100 trillion for tesla still look at the last two years when tesla is up more than 900% against ford why what that means is not that they're valued on the same terms but the read is a lot of sell side commentary on the overall auto group is not just pent-up demand and a backlog into next year but the ev opportunity for ford that's fueling the enthusiasm here and the idea in a sense that they're valuing the legacy production almost nothing and all about the progress on evs. if that's right or not is worth questioning. about 100 times current year earnings for tesla clearly not being treated the same but ford is getting that
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cast there is a chance of a disney where the market valued disney on the streaming opportunity and then set aside and a reality check as you might have difficulties in progress on the new business and then meanwhile the old one is what it always was, guys. >> what about gm it is also transitioned the model around evs but didn't get the momentum of ford. >> certainly the stock has done okay it's picked up more recently it looks cheap gm does seems as if in terms of the ratio of potential volumes doesn't seem as if it's attractive as ford a final point. often noted this ford as a stock always has a huge following
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in part because it was a low priced stock and here it is at $100 billion and mid 20s instead of being a high price and that's a weird wrinkle. >> $100 million. thank you. forget big blue. you can call ibm big green thanks in part to the environmental efforts to earn it a top spot in the just capital rankings ceo arvind krishna joins us. jack dorsey rushing to the defense of bitcoin developers. we'll explain why later. bitcoiclindon osg wn 2.4% but above the 42k mark mom becomes a...oh, is that te
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[music: “you can get it if you really want” by jimmy cliff] sell-off on wall street. stocks closed about the low point of the session s&p 500 losing 1.4%. most sectors lower technology the hardest hit nasdaq composite down 2.5% small caps down .75% fears of higher inflation rates and tighter monetary policy from the fed continues to be the dominant narrative microsoft the biggest drag just capital without with the 2022 just 100 list this week, a ranking of the largest u.s.
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public companies on esg issues important to wokkers, customers and the environment. among the names making the list ibm ibm. coming in overall 19, 1 in the computer services industry and joining us is ibm ceo arvaind krishna. we don't often get to talk about the issues so much in the swirl of earnings and the economy. workers i think is number one issue weighted the highest you scored really well and in the tough environment in a pandemic with the really competitive market and a labor shortage how do attract and retain employees in this environment? >> sara, look, as you said attracting workers is about wages, jobs and the attributes are we serious about
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sustainability and making actions about it or not? people are willing to play a premium for sustain companies and we think that the workers also care about it you have to be competitive on wages and benefits and have a career path to believe and the work you do is serious and it benefits society. we believe we do pretty well on the things and that shows up in the ranking here just capital rankings is about workers, customers and investors and how well do you do on sustainability >> you do really well on the customer front and have privacy policies and you allow the customers to hold their own data how different is this the other
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cloud players out there? >> we are very straightforward the customer's data is their data even if somebody comes to us we cannot possibly decrypt the data and give it to anybody when we hold data we don't use it for any other purpose we believe that these cross principles are important on the sustainability part as you know we have committed hard to be net zero meaning clean energy only by 2030 and not enough for an end point and 65% by 2025 and we already over 80% of the nontoxic waste we recycle. so all in all, pretty good track record we think. always more to do and we believe
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that we do well and that shows up in the rankings being number one. >> do you think investors give you credit for the policies? esg is such a priority right now. >> i don't think so. looking at where we have been. however, i think investors look for business results combined with these rankings. i think the two put together are going to get us a lot of credit and next quarters should show that. >> i'm interested that the level of focus you're putting on esg internally both because of sara's question whether you should be prioritizing in the short terms at least of the share price and also the pasz with which and the scale of which you saw an improvement over the rankings. is it a top priority ahead of anything else?
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>> no. i'll be clear. number one priority is revenue growth with that is cash flow growth and then all the attributions along esg. it is an and and an and. to get revenue growth we have to attract employees we have to be just, equitable. we get more employees across communities. we believe that being sustainable is not instead of profit but we recycle and use less energy so the bills go down and it is an and it is not an or. i think it benefits everybody including investors. >> in thinking about employees, it is a whole different environment with the pandemic. i think robinhood said it will shift most employees to remote why how do you handle that
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conversation and what happens to the workforce when hopefully we can put the pandemic behind us >> i believe that there are people in our industrial, a lot of employees are creative. they cannot work remotely all of the time but i believe that we are going to be much more accommodating of hybrid environment where people work sometimes in a workplace or a client site and sometimes remotely be it from the home or elsewhere. we have to put the forward tools, management systems to permit that to happen and the fact we have done for last 21 months now tells us that we can do that and be as productive than before. it's all of those things and i think there's a generational shift going on people don't want to be in the workplace only they are wanting flexibility where they work from but to
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create culture, to learn from others i believe that some amount of time in the workplace will be essential to get the knowledge and experience. >> i'm in the workplace today. i quite enjoy it we have been talking about attracting talent. do you find it difficult though you rank well on the key issues, do you find it difficult to compete with the faster growing stocks when you look for top software engineers in this tight environment? >> we have 3 million plus of resumes and applied to us. we hire tens of thousands each year be it scientists, data scientists, developers, business analysts people in finance. et cetera. am i paranoid about wanting to get access to the right talent
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always let me acknowledge that. that said we take great pride in the fact that the churn rates are slightly lower than the industry the fact that we can hire and get higher acceptance rates is something we take great pride on and paranoid and work hard at it and on because we work really hard at it and try to get people careers and problems they can work on to solve like supply chains or quantum computing, to take something immediate, to take something down the road, we think we can attract the right people all that said, sarah, it is something we should all be really cautious about and all be paranoid about because there's so many opportunities today. >> ceo arvind krishna, thank you for joining us today and congrats on the high ranking >> pleasure to be with you, sara and wilfred. >> for a list of america's just 100 companies, point your phone
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at the qr code we'll flash at the bottom of the screen tomorrow the interviews continue, we have another just capital ranked company, hp's ceo enrique lores joins us, 4:00 on this show, wilfred, love these interviews >> looking forward to that one next, jack dorsey making a veg push to help bitcoin delopers and what it might mean for crypto. mean for crypto. "closing bell" back in a couple. and thinkorswim® is right there with you. to help you become a smarter investor. with an innovative trading platform full of customizable tools. dedicated trade desk pros and a passior community sharing strategies right on the platform. because we take trading as seriously as you do. thinkorswim® by td ameritrade
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the ready. set. save. sale today. comcast business. powering possibilities. crypto selling off across the board today, following stocks lower meantime jack dorsey is creating a fund to address bitcoin developers' headaches. kate rooney is here with more. what is this, kate >> reporter: hey there, sara, that's right, it's called the bitcoin legal defense fund in an email jack dorsey sent to a group of developers, he says the purpose of this fund is to help defend those developers from lawsuits around their activities in the bitcoin ecosystem. that could be working on bitcoin itself or any other related projects it plans to give legal advice and resources to some of those developers and is meant to, quote, minimize legal headaches that discourage software developers it comes after some software developers have walked away from
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their roles with bitcoin in recent months. this will rely on volunteer and part-time lawyers, board members including dorsey will decide who gets the help, though. it's dorsey's latest sign of support for bitcoin and that community. he is still of course the ceo of block, which has a few different bitcoin-related businesses but evaluatehe has stepped downm twitter last month >> the stock was down another 6% or so today. kate rooney. i will be hosting a cnbc special, "kryptonite in america," 6:00 p.m. eastern time tonight. you don't want to miss it. michael saylor is going to join us >> great guests and an even better host. i look forward to 6:00 p.m still to come, se omof the biggest lenders gearing up to report results tomorrow. we'll preview what to watch, we'll preview what to watch, next
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tonight, new action on covid. how the military is helping hard-hit states. plus inside the simulation that lets you be president. welcome back banks earnings tomorrow, kbw bank index up over 50% since the start of last year and an impressive 12% year to date. so the bar is certainly high what's going to be interesting, guys, is that the results looking backwards will match
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that share price performance probably all of the big banks will release record all-time high revenues for the entire year but the focus as to whether those share prices can hold up, mike, will be the guidance, both on capital markets and the net interest income, the interest rate for parts of the business it remains to be seen whether that will be strong enough given this short-term run-up in share prices >> the group is trading near the highs. i would say in valuation terms it's a little bit short of where the big banks got to let's say in the last tightening cycle, 2018 and consumer, that's an emerging area of concentration in terms of what kind of footing the consumer is starting off the year on when we're kind of lapsing the stimulus from last year >> including loan growth, which some say is picking up but others are not sure about.
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don't miss our interview with the wells fargo cfo at 3:00 p.m. tomorrow jpm has its fingers in all the business lines, kicks things off at 6:30, 6:45. we look forward to all of this >> financials are holding up better than the market which closed more than 1%. that does it for "closing bell." "fast money" begins now. tonight we are talking "fast money" and fast cars ford flooring it the stock hitting its highest level since july of 2001 this rally is ford tough or is it trying to pump the brakes delta soaring, what they say about the future that has investors betting on the not so friendly skies later on, rotten call. wall street analysts

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