Squawk on the Street

SOTS 2ND Hour: Las Vegas Cybertruck Explosion, Tesla Delivery Miss, ETF's Record Year 01/02/25

The second hour of CNBC’s "Squawk on the Street" with Carl Quintanilla and Sara Eisen is broadcast each weekday from the floor of the New York Stock Exchange, with the up-to-the-minute news investors need to know and interviews with the most influential CEOs and greatest market minds. Squawk on the Street Disclaimer

Duration:: 45m
Broadcast on:: 02 Jan 2025
Audio Format:: other

Squawk on the Street Disclaimer

At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think, with Capella University. Learn more at Capella.edu. Global Markets, up to the minute, front page news. Wake up to Frank Holland at Worldwide Exchange, weekdays 5 a.m. Eastern, CNBC. Live Embitiously. Good Thursday morning. Happy New Year. Welcome to another hour of Squawk on the Street. I'm Sarah Eisen with David Faber. And Mike Santoli, live at post 9 of the New York Stock Exchange. Sarah has the morning off, starting off the New Year with green on the screen. The S&P is up 3/4 of 1%. This comes off of a string of losses into the holiday. NASDAQ's up 8-10 of a percent. So the rally resumes. Will it be enough to get a Santa Claus rally? We're still in the zone today and tomorrow to get it done. But going into today, we were down 1% in that period. Let's see what happens because we're clawing back a lot of these gains. Treasuries just quickly want to show you what's happening here. It's been a story of higher yields, which has maybe stood in the way of the equity rally. Those the other way today, the 10-year yield 4.5.5. So there's buying across the curve, the two-year yield below for an quarter. We're 30 minutes into the trading session. Here are some big movers we're watching. Tesla shares falling on the back of its latest delivery numbers. The stock now down more than 20% from its post-election high, much more in Tesla in just a few moments. Fellow Mag 7 member Apple also trading down, tech giant offering rare discounts on its latest iPhone models in China as it tries to defend its market share against rising competition from the domestic rivals there, like Huawei. And then Bitcoin kicking off 2025 in the green, alongside related names like MicroStrategy and Coinbase more on the crypto trade later this hour. For now though, let's get some economic data that just crossed the tape, and Rick Centelli has that for us. Rick, yes, construction spending, this is a November number, we're expecting a number up three tenths, a positive number, comes in zero unchanged, and last month's up four tenths gets upgraded by one tenth to up half one percent. How does unchanged fit in? Well, unchanged equals where we were in July to find a lower number. You go to June of 24, when it was minus 1.1. So we have seen construction come back from some of those June lows, seems to be slowing just a bit, at least based on this data. In terms of ISM manufacturing that's supposed to hit the wires, I do not see it yet. We will come back and let you know when we do get those data points, Sarah, back to you. Okay, Rick, thank you very much. I'll just throw some other data points at you, what we got today, which jobless claims more signs of stability and good news in the job market. So the number of Americans filing for initial jobless claims actually fell 9,000 last week, 111,000, that puts it at a multi-month low. And speaks to the fact that businesses, employers are holding on to their people. Continuing claims, I also wanted to highlight, which is a gauge for people that are continuing to be on these unemployment claims benefits. It's been an elevated number, it's caused a little bit of consternation in recent weeks, but guess what? We saw that go down to 52,000 to 1.844 million, another, I would say, good sign in the debate about whether the labor market is deteriorating and whether the economy is cooling off and whether the Fed needs to keep cutting interest rates. You just don't see it in these jobless claims. You just continue to see a picture of an economy that is growing 2 to 3 percent right now is where we're tracking for the fourth quarter and the labor market that is holding up. It is holding up. Obviously, around the holidays can be a little bit of noise in the data, but it's absolutely encouraging, especially given the market action in December, which definitely registered some concern in terms of the kinds of stocks that did well and didn't do well, that in fact, the economy might struggle to handle higher bond yields where they are right now and maybe less Fed easing into this year. So I think that it's certainly a net positive. Also, I'd point out that the overall equity index got a bit of a lift on that beat for PMI manufacturing, even though maybe not a core thing. I think the market is definitely craving confirmation that the economy hangs in there. And by the way, industrials and banks in December, they're like eight or nine percent off their highs. I mean, they really was a big gut check in the sickle trade as yields went higher and I think you have a little bit of relief on that score right now. Just more broadly, I would also point out, we had the makings for a little bit of a relief trade higher, the majority of stocks, very weak last month, market looking, oversold the median stock in the S&P's down six and a half percent in December. Obviously, you get new money flows, a little bit of that by the laggards and sell the winners effect at the open, as we saw on Tuesday. But right now, it looks like a pretty broad rally. Just to be clear on the data, so the market PMI came out earlier, 9.45. That one was a little elevated, but still under 50. The official December PMI manufacturing comes out tomorrow at 10 AM. So we'll get further evidence. But it boils down to the consumer, and this has been obviously a really important time for the consumer. And so far, from the spending numbers we're getting from places like Adobe or Mastercard, which put out new numbers last week, here's the Adobe ones, and you can see we're doing pretty well. The purple is where we are this year compared to where we've been in the previous few years for Thanksgiving, Black Friday, both higher, tracking a little bit lower on Cyber Monday than last year, but still with some nice growth. And I mentioned the Mastercard numbers also showed better growth than they expected, and that we saw last year, almost 4% growth there. And then Bank of America showed us where that growth is coming from when it comes to the consumer in the market. I thought this was a really good sort of deep dive in their consumer note. The themes that worked in the market relative to the consumer in 2024, e-commerce, we've seen the online spending boom supermarkets, Magnificent Seven, which, as it relates to the consumer cruise lines, had a really good year. But it wasn't universal, China revenue exposure has been a weak spot because of the growth there. Fast food restaurants didn't have a particularly great year, and neither did Las Vegas names. So wasn't all inclusive, but overall pretty good performance for the consumer. I have to imagine Walmart was in that supermarket's performance data was up 70%. But Kroger had a career. Kroger had a career. It was up 35 or so. Yeah, for the year. Absolutely. It's been strong. Costco had a really good year. But Walmart to stand out really in the big box and tellers last year. Meanwhile, the investigation continues into that New Year's Day truck attack in New Orleans. This morning, at least 15 are dead and more than 30 are injured. NBC News reporter Chris Polone joins us from Washington with more on that, as well as the Tesla Cybertruck explosion outside Trump Hotel in Las Vegas, Chris. What can you tell us? Yeah, Sarah. We know that authorities in New Orleans, federal, state and local, will be having another briefing about that deadly incident on Bourbon Street in about an hour from now. We know authorities want to reopen Bourbon Street and intend to reopen it probably before the kickoff of the sugar bowl, which takes place at four o'clock this afternoon, Eastern time. This all coming a little more than 24 hours after this deadly attack that authorities are investigating as a possible incident of terrorism. Authorities say that around 3 15 central time yesterday morning, a 42 year old man named Shamsud Dinjabar from the Houston area took a rented Ford F-150, drove around a parked police car and barreled down Bourbon Street, mowing down everything in his path, killing 15 people, injuring 30, and then opening fire on police officers, hitting two. They were able to return fire and kill him. President Biden said last night that there was an ISIS flag attached to that rented truck also explosives in the vehicle. They're trying to find the motive and President Biden said in his news conference last night that this person, Jabbar, had posted videos in the hours leading up to the attack expressing sympathy for ISIS and also for his intent to kill people. So that investigation is underway. There were search warrants executed both in Louisiana and in Texas trying to piece together whether others were involved. Authorities say they believe that Jabbar did not act alone. However, there's no manhunt for any specific accomplices going on right now. Then just a few hours after that in Las Vegas, another tourist hotspot rented Tesla Cybertruck pulled up in front of the Trump International Hotel off the Las Vegas Strip and exploded. Authorities just revealing to NBC News confirming that the man who rented that Cybertruck, his name is Matthew Livelsberger. Now, authorities are not sure if he was the person inside the truck that was killed. They haven't been able to positively identify that body just yet, but that is the suspicion that they are working on. And the motive in that case is not known. Authorities say that they have been able to trace the rental of that vehicle. It drove from Colorado to Las Vegas yesterday morning before pulling up there and exploding. Seven people outside the truck were injured, but they are going to make it. And the motive in that attack is entirely, or incident is entirely unclear at this point. Authorities are trying to figure out whether the fact that both people involved here appear to have military backgrounds, Jabbar in New Orleans was in the Army for nearly a decade deployed to Afghanistan. And it's believed that Livelsberger also was in the military. And the fact that they both rented vehicles from the thorough, peer-to-peer vehicle renting app, whether those are just coincidences or whether there is some sort of connection between these two incidents. But that is unclear at this point as the investigations continue. Do we expect any kind of update, Chris? Las Vegas, they haven't announced any updates in Las Vegas just yet, but we do know that officials in New Orleans will be holding a briefing in about an hour. Okay, Chris, thank you. We will continue to monitor the story. By the way, speaking of Tesla, the company did report fresh delivery numbers. That was the last hour. The shares you see down about three and a half percent. Filibos got some of the details for us, Phil. David, the fourth quarter came in below expectations in terms of Tesla deliveries. The total number, 495,700, or excuse me, 570 vehicles. The estimate was about 9,000 vehicles higher, over 504,000. As is usually the case, Model 3 and Model Y made up the vast majority of the vehicles delivered by Tesla in the quarter. The significance of the fourth quarter coming in at 495, below expectations, is that for the year, Tesla is going to fall about 20,000 vehicles shy of topping what they did in 2023. So Tesla will see its first annual drop, or it has seen its first annual drop in deliveries, not by a lot, but they did not hit 1.81 million, which is what they delivered in 2023. They still retain their lead as the global leader in EV sales, that 1.79 million. That is still more than what we saw in terms of pure electric vehicle sales from BYD. The Chinese company that is coming on strong when it comes to electric vehicles, as well as hybrid vehicles, but in terms of pure electric vehicles, should take a look at shares of Tesla as well as BYD. The thing to keep in mind with BYD is that the company reported about 1.6 million in total sales for all of 2024, but its fourth quarter EV sales, 595,000. So 100,000 more than what Tesla reported in the fourth quarter, that shows you the growth that BYD is seeing right now. Take a look at the Chinese EV stocks, and we're showing you these, because in December, compared to December of 23, EV sales in China up 48%. Guys, we have talked about this time and again. The EV market in China continues to grow at a very rapid pace, and while Tesla has been able to grow its sales according to registration data in China in the fourth quarter, it's not growing at the same pace as the market overall, and you see the BYD numbers. So while Tesla is still number one for 24, in terms of global EV deliveries, BYD continues to grow at a very rapid pace. It's very close. I mean, again, they sold 4.3 million, I believe, EVs and hybrids in 2024, BYD. And I've got it here as 1.76 million EVs last year, so very close. Yeah, very close to what Tesla's doing, and to your point, that Chinese market, the Shanghai plant for Tesla obviously fills the domestic market there, but then also other areas and regions nearby as well, isn't that right for Tesla? For Tesla, China is an export center, production center. So while it supplies the bulk of its vehicles go to the China market, it also supplies markets in Europe, as well as Southeast Asia, and Southeast Asia has really become an area where Chinese EV companies are targeting their growth. They're targeting their growth overall for auto sales in Southeast Asia, but especially when it comes to electric vehicles, and while we may not give a lot of attention to some of these markets, you add them up, David. You start to see where the growth is globally for the Chinese EV players. Yeah, well, I remember your trip to what countries were you in when you were taking a look at South America, which countries Chile, yeah, that was very interesting. Not a huge market, not a huge market, but China has come on strong there just as they have in Israel, Australia, Thailand, you bring this up to people and they say, "Yeah, well, how big is the Thailand market?" You start to add all those up, the rest of the world becomes very big and very important. Yeah, and as we pointed out a number of times, of course, one of every two vehicles sold in China itself is now an EV, which has implications far beyond just the EV makers, even for, as you might imagine, gasoline sales, which may have peaked in that country. Phil, thank you. Phil Labo. You bet. Tesla shares had a great year last year, of course, particularly towards the end of the year, up about 60%. Down though, more than 20% from what was the post-election high, our next guest has an outperform rating on the stock, joining us now, William Blair analyst, Jed Dorsheimer. Jed, good to have you. What do you make of the delivery and production numbers that we just got? Doesn't look like Jed's list able to hear me. Yeah. He's ready. Standing by. That's not him? Oh, it is him. Oh, I'm sorry. Mike's not all right. Oh, my fault. Okay. Until we work on getting him, the bulls will say the delivery number, that's not a reason to buy the stock. They're never valued on exactly what the numbers are. There's no way it's a $1.2 trillion company based on the cars. Right. But the bears will say, look, they're not producing as many cars as they need to fill into this valuation. That's the source of the cash flow. They continue. Right. They'll point to a lot of things. And in fact, this last quarter in particular energy storage, and I know Jed actually follows that part of the story closely, 11 gigawatts an hour of energy storage products versus 6.9, the last quarter, and year over year, very significant gains in energy storage. It's becoming a real significant part of Tesla's business. And as we pointed out many times, of course, Elon Musk has said previously on conference calls, don't own us for the sale of the automobiles on us because you believe in full self-driving and the robo-taxi and you believe in robotics and what we're going to be doing there. But energy storage also. He's the richest person in the world because he's gotten investors to pay him up front for the promise of some future. That's the reason he's where he is. And now the cars are not the future, really. They're the present. He's waiting for the future. All right. I think Jed can hear us now. Is that correct, Jed? Do we have you? He does? Jed? Yeah. There he is. All right. Great. Jed, we've been talking through it a bit in terms of the delivery and production numbers and energy storage. First, just give me your quick take on the delivery numbers. How big a disappointment from your perspective? Well, if you look at it, the disappointment's really with the SX and Cybertruck. So that's a pretty big disappointment. It's a variance of 23%. If you look at the Model 3 and Y, that's basically flat. I do think that there's an issue in the higher-end vehicles, which might speak to consumer fatigue more than anything else. So that could be fixed with a hatchback or the Model 2. Yeah. So that's how I would read the delivery numbers, certainly a disappointment in terms of where they came in. I mean, is your expectation that the fight for market share is going to become a lot more intense given the rise of the Chinese EV makers in particular BYD? Yeah. I mean, definitely in Europe. I mean, Europe is probably going to be your battleground between China and the US. I think from a US perspective, I don't... You don't see that as much of a battleground area, and quite frankly, I think Elon's position with the Trump administration probably helps from a market share in the US. Yeah. Jenna, while we were sort of trying to get you online here, we were talking a bit about energy storage as a component of the business overall. How important is that? Because it is growing very quickly for Tesla. I mean, that is the win here today. If you look at the silver lining, energy storage coming in at 11 gigawatt hours, we were at 10.3. We were kind of the high on the streets with respect to that. My position is, I think the return on a vested capital is the greatest in that business. And quite frankly, I think the demand side for energy storage is much larger than what most people expect. It's not just wind and solar. It's actually to stabilize our grid, and if you look at the trends in AI, where you're going to see that the greatest bottleneck is on the physical energy. And so I think that's the silver lining here. Jed, in terms of the market's evident excitement about Elon Musk's closeness to the incoming administration and what that might mean for the business, can we get specific about it in terms of what types of regulatory relief is a lot of talk about how at the federal level, it's really nothing that's constraining. Things like full self-driving in a particular way, Waymo's doing what it's doing. So I wonder if you can see specific things you would expect to improve on the regulatory front that's going to come to bear it, Tesla? Well, I think when you look at the timing and the growth, I think you need to separate both a play on XAI and sort of the ability to invest in that side of the business, which I think is just as important as kind of Elon's position with Doge and what people might be reading into that. Hard to quantify. I mean, if you look at the last administration or the current administration, they were about as negative on Tesla as you could be. And so I think the potential for relief around autonomy is certainly an area that seems to be a positive talk to quantify how that will impact. What about just the running and operation of Tesla? And this comes up every so often just because he runs so many different companies. But now that we see that Doge and the administration is occupying a lot of his time and we see a lot at Marlago, I mean, people buy the stock for Elon Musk. How much is Elon Musk involved in Tesla? I think he's still very involved. I mean, I've known Elon for 15 years. I mean, we're not friends or, you know, I've known and had several meetings with him. And I think what you do get with any of Elon's companies is a level of focus that is just, it's a different level than what you get with other companies. I mean, you have engineers that are going to have direct meetings with Elon where he is taking a first principles approach to everything that the companies are doing. So far, he's been able to manage all of the balls that he has up in the air. So that could change at some point. But right now, you know, his companies are, you know, we used to say they're bringing a machine gun to a knife fight. And I think that is a, you know, still holds true in terms of the competitive advantage. Jed, appreciate your time. Thank you. Thank you very much. As we head to a break, let's give it a road map for the rest of the hour. Goldman Sachs is out with some new conviction picks. What investors should know, we'll do that this hour. Plus, more on the outlook for rates and the economy with one former Fed governor warning, don't count on lower rates to save you. And a deep dive on one beaten down name that Jeffrey's calls an opportunity in the New Year. Big Show is still ahead. Doub's up 167. Squawk on the street. We'll be right back. Don't go anywhere. Is it time to re-imagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals, like business management, strategic planning, and effective communication. And you can apply these skills right away. A different future is closer than you think, with Capella University. Learn more at Capella.edu. Local markets, up to the minute, front page news. Wake up to Frank Holland at Worldwide Exchange, weekdays 5 a.m. Eastern. CNBC. Live Ambiciously. Take a look at shares of auto retailer Carvana. I'm actually hired this morning, even though we got one of those reports from Hindenburg Research. You may know the firm, of course. They focus on the short side, ostensibly doing a lot of research. They talk about Carvana and say that, well, in addition to being simply overvalued, they call the turnaround there a mirage. It was a very strongly performing stock last year. Of course, it was not that long ago where there were a lot of concerns about the financial viability of the company. That was resolved last year, but clearly, Hindenburg might have some issues with it in looking through some of their various data points that they cite. Kind of interesting, though, that the market's not reacting at all. Not much. Yeah. I mean, just, I mean, crazy perspective. I mean, in 2021, the high end of the stock is like 360. Yeah. Went down below five when you say it was like definite survival risk in there. Apollo came in there in a significant way. New capital. Invertible preferred, if I recall. Yeah. You know, the insiders, the founders put more money in. Pretty good. So, yeah, it's still at last report, almost 11% of the float was short. I have to imagine maybe in the last few weeks, some of that. It's gotten covered, but who knows? So, it is a sort of a popular one, especially if you compare it to any of the traditional auto dealers, and you consider that maybe there's some credit risk in there in terms of the loans they make. But, yeah, interesting. And the market, not really taking heart in it at the moment. Well, a lot of the report is focused on just how overvalued the stock is, not necessarily fraudulent or anything like that, which he's done in the past. But for every $1 in net income that reported the company has added 139 in market cap, a $34 billion market cap increase, also goes after some of the insider sales from some of the family, for instance. Yeah. It talks about a toxic loan book in terms of at least the loans they're making to their buyers. Yeah. I mean, he's, look, I think it's worth noting that Hindenburg has had some successes, right? Pointing out the Nikola. Nikola, of course, right? You will forget the truck that was rolling down the hill and not actually being powered, as they said it was, yeah. For sure. But that said, Sarah, to your point, they, it's kind of mixed, I think. Mixed. Not after a super micro in the latest. I could see why Hindenburg might think this is a decent spot to try the short case, again. It has had such a great run. Okay. All right. Well, 2024, a historic year for ETFs with a record breaking $1.1 trillion in inflows. Our next guest lays out the investment playbook for 2025. Tim Urbano, it's innovator ETFs, chief investment strategist joins us now. Tim, great to have you on. Just, I guess lay out a top, top line, your, your setup for 2025. We obviously coming off two great years, lots of retail participation as that ETF inflow number shows. Where does that leave us? It's great to see it. Happy new year. We really think 2025 is going to be all about keeping your foot down on the gas pedal. While simultaneously hedging our tail. We think the S&P 500 can get to about $6,700 this year, but that is fragile, more fragile than any time we've seen over the last couple of years. We have pretty high confidence in the earnings outlook. We think consumers are in great shape. Their balance sheets are in great shape. You have the pro growth administration coming in, which really should help deliver that 10% plus earnings growth figure, but really where the fragility comes in is on the valuation side. The S&P 500 valuation increased 20, 30% over the last couple of years. That is a high starting point. You have animal spirits that are running like crazy. So that just means if any of this news doesn't go as planned, as good news doesn't go as planned, those drawdowns are going to be much more significant. So yeah, I mean, 6700 if you just close your eyes and say that there's a shot at that. That's 13% up from here. Why do I have to be hedged? Well, it's a good year, but I think when a lot of the expectation is on momentum and sentiment continuing to be high, that's really where a lot of the downside risks come in. The market is expensive. It's in the 93% relative to history. So we are seeing a tremendous amount of interest in options based ETFs. One of our top ideas for 2025 sticker QFLR, this gives you NASDAQ 100 exposure on the upside while simultaneously having a 10% floor against losses on the downside. So you're getting 70 to 80% of the participation if these tech stocks keep running, which we think is incredibly important. But again, given where that valuation is to start, those drawdowns could be significant, which is why that floor is so incredibly important in 2025. Yeah, I mean, I know that obviously that's one of your funds and I know that investors have shown an interest in these structured ETFs where you do have some downside protection, but really in bottom line terms, what's an investor paying for that embedded option, that hedge? Well, with QFLR, it's a little bit different. Obviously, we're going out, we're buying 10% out of the money puts. But in order to fund that, we're really capitalizing a lot of the short dated options trading that's out there. We're going out and selling two weeks out of the money calls for that strategy. So that really helps offset a lot of the cost of protection for the strategy. So it is a give and take, but for a lot of investors right now, when they're looking at the starting point, again, where the starting valuation is, yes, there are bullish catalysts, yes, we shouldn't be in a pro growth environment. But again, with those downside, the downside being so potentially significant, if any of the good news doesn't fall into place, fiscal policy, monetary policy, whatever it is, we think that cost of protection is worth it at this point. All right, Tim, appreciate it. Thanks a lot. Great to see you, Mike. Goldman adding three new stocks to its conviction list this morning, fiber optic manufacturer Beldin, plus Norwegian Cruise Lines, and Uber. More on the movers to watch in just a moment, we're back in two. Is it time to re-imagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals, like business management, strategic planning, and effective communication. And you can apply these skills right away. A different future is closer than you think, with Capella University. Learn more at Capella.edu. Take days at 5 a.m., be first on world markets, first to the global business conversation. Get a jump on the investing day, every day. With Frank Holland, success starts early. Worldwide exchange, 5 a.m. Eastern, CNBC. Welcome back to Squawk on the street. I'm Pippa Stevens with your CNBC news update. President Biden will honor former representative Liz Cheney and Congressman Benny Thompson today for their work leading the House committee that investigated the January 6th riot at the Capitol. The president will award them with the presidential citizens medal at the White House, the second highest civilian award. President-elect Donald Trump has said they should be jailed for their roles in the probe. Ukraine started the new year by halting the supply of Russian natural gas through the country, marking the end of decades of Moscow's dominance over Europe's energy markets. The gas flowed for nearly three years of war between the countries, but Ukraine said it let the pipeline agreement lapse yesterday. And pregnant workers in New York will now be able to take paid medical leave to attend prenatal appointments. The first in the country law requires private sector companies to provide up to 20 hours of paid time off for pregnancy-related medical appointments and fertility treatments. Sarah? Pippa, thank you. Still ahead, no sector should be counting on lower rates to save them. That's supporting two, one former Fed governor talking about the outlook for the year. He's going to join us next with his forecast for interest rates in 2025. Back in a moment. Crypto a big winner in 2024 and off to a nice start today in the new year, Bitcoin closing the year up 120 percent for its second straight big annual gain, the fifth positive year out of the last six that follows a 157 percent gain in 2023. The big run for Bitcoin giving crypto-related stocks a nice boost as well. MicroStrategy has had a tough run in December, but finishing the year up more than 300 percent. Robinhood also up 200 percent in that stretch. Coinbase up almost 60 percent, all of them though, did pull back last month. In the weird world of correlation, the dollar also had a pretty incredible year. One of the best it's had in nearly a decade, so it wasn't like a dollar alternative. Not at all. Yeah. People have said about Bitcoin. Narrative is evolving too. It's a risk asset store-of-value liquidity play as opposed to NASDAQ, maybe a gold alternative a little bit. There you go. Yeah, for sure. Digital. U.S. Treasury yields are lower as we mentioned at the top of the hour to start the year. policymakers expected to hold rates steady this month. Our next guest says the Fed is unlikely to be cutting much this year if the economy stays on track. Former Federal Reserve Governor Randy Krosner joins us now. How many cuts do you think will get this year, if any? I mean, the Fed has penciled in roughly two-quarter percentage point cuts. That seems reasonable, but it really depends on how the economy evolves. If we continue to get a very strong economy, and if inflation is really resistant in that the classic last-mile problem, inflation has come down a lot, but getting it to that 2% goal from where it is now, that may be pretty tough, and so we might not get many cuts at all. So how should we think about that? The economy running hot? The economy seems to be running pretty darn well. The labor market's still quite strong, GDP seems to be strong. We see a little bit of slowdown during this next year, but if it continues to be strong on both the labor market and demand side, that doesn't leave a lot of room for inflation to be coming down. It's interesting, in a year where the Fed cut interest rates, 100 basis points, I just mentioned the dollar's performance, it was up like 8% against other major currencies. Rates ultimately ended higher. Mortgage rates now are sitting at the highest they've been in weeks. So what do you think the Fed will make of the fact that as it cuts rates, they've gone the other way? Well, I think the Fed understood that even though they're cutting the short rate, the long rate, the tenure rate, which is what mortgages are based off of, was not going to be coming down dramatically. We had this unusual situation of a dramatically inverted yield curve, and although it's been that way for a number of years, that's the unusual situation, not the normal situation. So I think the short rate coming down will lead obviously to lower shorter term rates and money market rates, but I don't think the long rate is going to be coming down that much. You've got a lot of investment demand because of excitement about AI. You've got a lot of concerns about continued deficit spending, and so I think that's going to lead the long rates to stay in the range that they're in now, even if the shorter rates come down. Six months high, I should say, on that 30-year mortgage rate that we got last week, which is not great, I guess, do you expect it to start crimping demand and the overall economy, the fact that we have these firmer rates again? Well, we're finally getting significant real interest rates, significant positive real interest rates, that is, adjusting for inflation. Until the Fed raises its rate above 5% and the inflation rate fell below 5%. The real rate, the inflation just rate, was still negative, and so that was a great time to be borrowing. Now real rates are higher. I think we'll have some impact on the housing market. It'll also have some impact on sectors like commercial real estate, where a lot of people were expecting, "Ah, well, rates will come down. Everybody will be able to refinance cheaply. I don't think that's going to happen." Randy, you mentioned AI. I'm just curious. Do you have any expectations in terms of its contributing to productivity increases in the year ahead? Well, certainly we've seen very strong productivity growth, and we've seen signs not just from productivity growth, but also other signs of new business formation and very much excitement about investment and investment opportunities. That's also coming from expectations about President Trump deregulating and boosting a more positive business environment, and so I think that's all contributing to expected higher investment, expected higher productivity. We'll see whether it pays off quickly. It often takes a long time for these things to come through, but we are seeing stronger productivity growth. Really quickly, how do you think about the impact of tariffs? Is it a one-off inflationary impact? Is it a rolling inflationary adjustment that the Fed would need to respond to? Primarily the way the President has talked about is going to be a one-off. If there's a trade war, then of course you go back and forth, back and forth, and things go higher and higher, but if it's just a one-off, let's say across the board, 10% or 20% tariff, that's a one-time change in the price level. That's not going to be something that'll lead to a longer-term inflation. You have to remember that imports are only 15% of US GDP. That's substantial, but it's much less than for most other countries, and so even a 10% tariff on that leads to one-and-a-half percent, at most one-and-a-half percent increase in prices, but that will happen over time. Okay, Randy, thank you. Appreciate your outlook, Randy Krosner, former Fed Governor. As we had to break, check out the following mystery chart. It's the worst-performing Dow stock in 2024, and just around 50% of the street calls it a buy from here. We'll tell you what it is in a moment. We'll just walk on the street after a quick break. Following the worst-performing stock in the Dow for 2024, it was down more than 30%, and that was after actually a significant comeback in the latter part of the year. It's the worst year, by the way, since 2020, here with her take on the path forward for the company, it's Jeffery Chilica, and Galushi joins us now and has a buy in the stock. I think your base case is $200, which when you wrote it actually, the stock was a lot lower than it even is now down today, but you're looking for what revenues up 28% this year and 16% next year? Yeah. How confident are you in those numbers? Sure. I mean, it rallied 30% since November 14th, once the strike ended. So what we're really looking for is free cash flow improvement. We're burning $14 billion in 2024. That's what we're expecting, $6 billion in 2025 and positive $8 billion in 26. And what's driving the rally is that improvement in production now where that we're getting deliveries started. So we're going to get a 60% increase in deliveries next year off of MAX, which drives 50% of Boeing's free cash flow. So really, it's the MAX that's improving, but you also have two significant losses in '24 that continue in '25. One of them is the 777X, they're losing about $4 billion there and $3 billion in defense this year in 2025. Yeah, defense continues to be a real weak spot for the company. I think it's the biggest risk that we can't rank that because it's on five development programs that are still in different stages. So that's a watch item as is the 777X, but hopefully the MAX gets going. And in 2025, we still have pretty depressed earnings on the MAX because you're so delayed from the strike. You're so delayed from Alaska this time last year that you're giving away the airplanes essentially for a very discounted price. Yet you are expecting they're finally going to exit this really years-long downturn and just, I mean... Six years. ...series of events that have been nothing but bad for the company. Yeah, I think we've seen changes in management to potentially fix that, right-sizing of the workforce. Boeing's reducing 10% of its workforce. Its workforce is one of the most inflated, which is surprising. And maybe a culture change more focused on safety, not that it wasn't before, but clearly there's been lots of shortfalls to say the least. I was going to ask about the culture changes because at the depths of the problems, and every time we had a new CEO come in, it was time to change the culture. Around the safety, what ultimately you know better than we do? What went wrong in terms of prioritization and where the focus was? I mean, what we're right, I think, is the right question. Not much, right? We went from bidding on defense programs, essentially buying lost-making programs, taking on that risk to build a defense business. I think that was one of the most critical errors in 2019. And then in 2020, it was just speeding up production and just not taking the right steps. So we'll see where Boeing gets to. Ultimately, we think they get to about 40 a month on the max. They did about 18 and 24 on average. That includes the strike, so it's a bit deflated. But in the peak, they hit about 50, and that was it. So we'll see how quickly they could produce these aircraft. But everybody else outside of Boeing is essentially up to pre-pandemic levels. Yeah, I was going to say, I mean, this entire multi-year struggle period for Boeing has happened while the macro, I guess, demand fundamentals for commercial aircraft has still remained strong. I mean, is it still where it was pre-pandemic when it was, like, as far as the eye can see, we're going to have this secular increase? We're finally over that 2019 level where we've been historically behind. So we need about 1,500 to 2,000 aircraft annually. We're projecting from 2025 to 2027. We did 1,200 last year. So Boeing's shortfall is definitely impacting it. And that's why the aftermarket stocks really worked well last year. Heiko, FTI, Transtime, these stocks were up, GE, over 50% last year, up 100%. And so you saw that, and now you saw that pull back over the last 45 days and see your end given Boeing's starting production in 11 days. Cashflow, obviously, very important given that debt load, and the rating agencies are not unimportant for this company as well. It seems like they're holding the line on investment grade, though. They're not looking to downgrade it, and now with a $24 billion cushion, I don't think that's a risk. Okay. Sheila, thank you. Thanks. Thank you. Sure. Losing a little bit of steam here in the market, tech, information technology has got negative in the S&P on the session. Tesla, Apple, Palantir, Workday, those are some of the ones that are weaker in this session, though, we're still holding up. Big winners last year. That's been the rule. That's a theme, right? Sell some of the winners. Energy is the best performing sector right now. It was among the worst last year. Utilities is having a nice session. Healthcare, these, again, were some of the underperformer. So you get a little bit of that, usually, toward the end of the year and the beginning of the year. Consumer discretionary and real estate, both negative as well. We'll take a look. I mean, we'll see what happens. And as the gains have been cut in half over the past half hour or so. Next hour, the outlook for pot stocks under Trump 2.0. We're going to talk predictions with the CEO of Tilray. More Spock on the street when we come right back. Stocks maintaining their early gains on the first trading day of the year. Three stocks up for everyone that's down so far. Let's get to Dom Chiu with more on some of the big analyst calls on the street today. Hi, Dom. Yes, sir, Mike. So let's get started with shares of Alphabet in the green. That's despite a downgrade to a market perform from an outperform rating over JMP Securities. Let's say potential anti-trust penalties from the DOJ could impact Google's US distribution of search. Those shares, by the way, are coming up a 37% rise in 2024. Turning out of travel, shares of Norwegian cruise line holdings are climbing just about maybe 2% or so after Goldman Sachs added the stock to its conviction buy list. Analysts there say the post-pandemic boom in cruises has still more room to go, so Norwegian up. And then Uber is also higher after being named to the list as well. Goldman says Uber will continue to see bookings, growth and further penetration in dense markets, but analysts at JMP are less bullish on the stock. They downgraded it to a market perform from outperform saying they want more clarity on how it will manage their transition to autonomous vehicles. We'll round things out with shares of meta-platforms about maybe 2% or so higher after being named at top pick at JMP Securities as well with a $750 price target, expecting investments in extended reality like the highly publicized Ray-Ban glasses to pay off in the new year and for generative AI to contribute to advertising growth, so keep an eye on meta. And by the way, for more of those top analysts' calls today, just head over to cmdc.com/pro. All opinions expressed by the squawk on the street participants are solely there for the market, but it's not as easy as we are looking at. But it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market. But it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market. It's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at the market, but it's not as easy as we are looking at Learn more at cappella.edu. [BLANK_AUDIO]