Good thursday morning, happ new year jon fortt with Morgan Brennan and mike santoli live at the new york stock exchange. Carl has the morning off it is the first trading day of the month and the year stocks are rallying to kickoff 2020 fresh record highs for all major indexes. Bob pisani is with us to breakdown what could push the markets higher. What a different january 2nd makes. Remember this time last year, a year, what a difference. January 1st, last year, look whats going on, the market was pricing in earnings recession. Remember that phrase stocks were cheap. Fast forward a year. The opposite is happening. The recession didnt happen, earnings recession didnt happen, the economy is strong, stocks have gotten on the expensive side so the issue is whether we can finally return to Earnings Growth after an essentially flat year in 2019 most strategists are expecting mid Single DigitsEarnings Growth which would take pressure off the higher multiple the market has now early reports from Companies Reporting the end of november are mixed with big names like fedex, nike, micron, general mills, carnival. First quarter earnings reduced by analysts. A few others have seen estimates increase overall, the trend is lower than expected looking at risk in 2020, the markets are at new highs because many believe risk from trade and tariffs is lower theres lower risk risk from the fed many believe is lower, theyll likely remain neutral. Job growth, risk to u. S. Consumer also a lit lowbit lowe. A lot of people bring up buy backs. We have been buying back stocks, but people feel there may be a limit with that. Global growth is bottoming and turning around is high risk. Many believe there will be a bottom in the Global Economy thats been a big driver of the stock market nothing changed in europe, and few Structural Reforms another thing that shows up, wage growth concerns many believe wages are higher years to come, putting pressure on margins you guys know the stock market is a game of expectations. The thing that happened last year is we had low expectations, starting the year. Prices were lower. Now it is the opposite we have high prices, high multiple the expectations are high. Like you know, it is better for lower expectations than Higher Expectations thats the thing that concerns me most now. Yeah. So whats an investor to do with that talk about it. Bob, stick around. Bring in jason hellstein of oppenheimerer. Jason, you look at 2019, alphabet was up 28 , still did not outperform the s p so coming out of a year like that, you have outperform ratings on netflix, alphabet, uber, facebook given that the bar is so high, whats going to underperform theres a ranking we think certain stocks will be better than others within that list, we rank uber as having the most up side, 50 price target, followed by netflix at 19, google at 14, facebook at 12, and then 10 up side for amazon. But to answer your alphabet, google question specifically, you have a catalyst, a story sin dar becoming ceo of alphabet and google, we think that will take the pressure off the other investments and allow them to take more cash for buy back. Expectation is theyll have 120 billion of net cash and they dont need that much we think for that name specifically you have a catalyst for 2020 mike santoli, apple market cap is a trillion dollars, plus a disney, enough change to throw in a workday how does an investor avoid that, not to say apple will do badly, but it is heavily weighted in the s p, nasdaq 100. What are people saying about how you limit exposure to names like that i think implicitly what the market decided is not so much that it is the sum of the parts but that the massive profit base of apple, had been the most Profitable Company in the world is going to last longer than a year ago it is about the duration of it, not so much about hey, there will be lots of cool new stuff apple will deliver be aware that people have been buying apple aggressively for all sorts of reasons that have nothing to do with whats going on at the company. Theyre part of all of the indexes, it is the biggest component of the s p value index, so that might change as they rebalance thats a good indication how you have a lot of people that are kind of chasing it now it is a momentum stock, very high quality, and quality and Balance Sheet have been two things that worked the earnings keep expanding to deal with multiples, so were not dealing with a stupidly overpriced multiple for apple. One reason it stays in the value camp essentially. But now it is a premium for the s p. Well see if it can still qualify on that basis. Bobs point, the idea of value versus growth, thought we were seeing a rotation in the second half of last year if you look at what has continued to outperform, it is tech stocks, growth names. Any reason to think it doesnt change again i am not entirely in that camp value did well bank stocks were value stocks middle of the year beginning in october, they took off. We saw yields showing signs of bottoming. The fed did do a little liquidity, ill get emails, but it changed things. Value moved in particularly oil moved over 60, a lot of people were calling for Energy Stocks to do better for the 2010s. Dramatic underperformer in the last decade, tends to be that mean reversion im not entirely in the camp that everyone will pay anything for growth i think there are some elements here of value that can do very well jason, you cover netflix, you also cover roku. That stock did extraordinarily well in 2019 we have been talking about streaming wars, how 2020 is a big year to see how that plays out. How is an investor to play that, what are the milestones to look for to decide whether it is time to buy or sell sure. You talk about momentum stock, that would be the top of the list very highly value. Big opportunity if theyre successful next week is Consumer Electronics show the company historically puts out metrics on streaming hours and active accounts. Investors are trying to gauge what will be good enough then the question will be when they start to collect revenue for helping the disney plus, apple plus generate subscribers. As you reported, disney was incredibly promotional within the Fourth Quarter, deals with verizon, a lot of discounts. After that initial period ends, the rokus, relationship with amazon becomes a primary way you generate new subs. And they can exploit that for revenue. Thats what investors should be looking for. Jason, where is amazon headed this year. Saw the stock up double digits last year, still underperformed the Broader Market for most of 2019, amazon was probably most investors top positions. The company did a very good job managing expectations around margin pressure from one day prime, we started to see margin pressure around aws. The question in the short term, can they maintain growth at aws relative to what the pressure from microsoft and building pressure from google, and will investors tolerate pressure there if they can sustain revenue. For that stock specifically, they had a great Fourth Quarter on the ecommerce side aws probably did slow, but thats been the trend. The question is what is the tone for next year with margin around aws. Yeah. Were going to talk more amazon with mark mahaney later in the hour bob pisani, jason, thanks. Thank you. Still to come on squawk alley, what about chip stocks, can they continue the surge into 2020 we talk about it with a top analyst after the break. Stay with us and tie it all together with a worldclass software experience. We ended up creating, as you all know, so much more. Peloton is truly a category of one and were just getting started. Now, lets do this. Together, we are going further than we ever thought possible. Its a thirteenhour flight, tfifteen minutes until we board. Oh yeah, we gotta take off. You downloaded the Td Ameritrade mobile app so you can quickly check the markets . Yeah, actually im taking one last look at my dashboard before we board. Excellent. And you have thinkorswim mobile so i can finish analyzing the risk on this position. You two are all set. Have a great flight. Thanks. Well see ya. Ah, theyre getting so smart. Choose the app that fits your investing style. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Chip stocks coming off a big year, nvidia, micron seeing gains. A and dpch leading that group. Can the surge continue through 2020 how do you think about this group . What do you think is priced in in terms of strength and durability of the semi cycle investors anticipated a bottom, they bought stocks aggressively stocks retreat at five year valuation lows, sometimes seven year lows, it was up almost 60 . Whether it can continue next year, i think it will. The main take away is any trade resolution, even sub optimal, will drive chip stocks higher for a couple of reasons. Number one, business on the ground in china is pretty much frozen all of the companies i talk to that sell into china, nobody wants to build any inventory, they dont know what tariff rates will be. If youre a big Chinese Company or small company, youre not building territory then theyll start to rebuild. Second thing, historically levels of distribution inventory. Theres not a lot of excess inventory in the channel we saw a lot of significant order rate cuts starting in october of 2018, so were pretty much done with inventory correction that lasted more than a year, were coming to the bottom if we see a stimulus plan coming out of china, see a resolution on trade, then were going to see restocking in demand, it will pick up again says theres limited number of inventory, you could see a big rebuild. Where does intel versus amd go from here intel has pc chip supply issues. A and d could do well for awhile, only until intel got its act together things seem to have changed there. Is 2020 pivotal to see whether the narrative on that mega battle in chips has changed . This has been historical narrative on the cpu side as well as data center side i think that will continue the Bigger Picture is a return to spending by hyper scalers facebook, google, and microsoft and amazon, there was a big inventory correction in hyper scale spending the past year they returned to build out the data center. Thats having positive impact on intel and nvidia and other companies in the supply chain. There will be a number of catalysts next year for the Semiconductor Industry in addition to trade resolution were going to have 5g 5g on the smart phone side, all of my conversations in asia, discussions, talking between 175 million to 250,000,005g phones the rf content, semiconductor content will go up two to four x per phone. More frequency bands, more amplifiers and filters on the smart phone side infrastructure side, number of base stations built out by china mobile, same in south korea, will increase. Theres a lot of semiconductor content there. Second thing is memory memory is a key component to the overall Semiconductor Industry memory pricing is bottomed there are checks indicating pricing could be up 30, 40 next year were getting into a recovery and memory as well begs the question, what is your top pick within the sector . I feel like it is an important conversation to have, certainly key trends in 2020, many of them have already been anticipated by investors. I think thats a fair point and valuations are getting stretched. Were talking about back to peak levels of three or four years ago. However, the only thing i would say, consensus estimates are factoring 2 year over year growth, first half versus first half of last year. Thats not a lot of growth thats an easy compare, first half of last year, the group was down 17 we are coming off an easy compare. Thats one thing i want to say i agree we need estimate revisions upwards for 2020 and 2021 my top pick is on semiconductor which is basically supplies, image sensors, Power Management shifts for autonomous driving, Factory Automation forecast 3 of long term earnings in the next two to three years, the stock is around 25, long term earnings basis is cheap. Also like micron, the valuation will start to expand on price to book basis as investors realize that were coming out of a recovery, going into recovery and seeing demand. Micron is 1. 7 times book value median book value over seven years is two times so it is not that much to go and on 5g side, we like skyworks, supplying rf content in smart phones. Those stocks have run, but we think content will be significant. All of the oems are building aggressively, apple, samsung, or chinese oem. Whether they sell through or not is another story, but theyre building themes to play still after last year. Thank you. When we return, mark mahaneys top ten internet surprises, alphabet and amazon and others in there. Might not do what you expect were back after a quick break diarrhea . Pepto diarrhea to the rescue. Its 3x concentrated liquid formula coats and kills bacteria to relieve diarrhea. The leading competitor only treats symptoms it does nothing to kill the bacteria. Treat diarrhea at its source with pepto diarrhea. Details trickling out about Carlos Ghosns escape from japan. Phil lebeau has the latest to catch us up. Hey, mike, the big question is how was carlos ghosn able to be brought out of japan without anybody detecting him. He was under house arrest, they had cameras on his house, guards outside his house. Sometime near as we can determine between sunday and monday, taken by private jet first to turkey, then to beirut. Turkey today arrested some pilots linked to the ghosn escape, not charged with anything, but questioned by the turkish government in the last half hour, heard from carlos ghosn saying there has been speculation in the media that my wife carole and other members of the family played a role in my departure from japan all such speculation is inaccurate and false i alone arranged for my departure, my family had no role whatsoever meanwhile, police in japan have raided the home where carlos ghosn was at, and theyre trying to get clues, trying to figure out how did this happen and we have yet to hear from them, jon, in terms of explanation. Believe me, it doesnt take a Rocket Scientist to figure out, japan has egg on their face now for having somebody under house arrest with guards and cameras, and yet he popped up in lebanon monday, and a lot of people in japan are going what how did that happen . Phil lebeau, we are eagerly awaiting details to see if there are instrument cases involved among other things meanwhile, european markets are set to close in a few minutes. Seema mody has a breakdown, a lot of green i see. Thats right, jon a very strong start to the new year for european equities, boosted by fresh stimulus measures out of china, also shaking off a weak pmi reading from the uk. In terms of whats leading us higher, cyclical groups, financials, minors, and look at the european 600 banking index, hitting the highest level since may last year, in part because Analysts Expect captain requirements for european banks to stabilize in 2020 after years of increases now, despite gains and cool down in trade tensions between the u. S. And china, hong kong protests are creating challenges for the european banks hsbc forced to close branches, suspend some atms after protesters vandalized two iconic bronze line statues outside the main offices they defaced them as retribution closing an account linked to the prodemocracy movement and the uk is facing backlash over its stance on the hong kong protests multiple outlets reporting that china has temporarily blocked a planned crossborder listing between shanghai and london stock exchange, due to its support for the protesters certainly a development story, one were watching as it becomes more pertinent to the financial story. Thank you very much. Time for a news update sue herera has that for us back at hq. Good morning, sue. Good morning, mike. Here is whats happening at this hour, everyone australian Prime Minister scott more son confronted by angry residents as he toured new south wales. Locals criticized him for lack of equipment provided to deal with the devastating wildfires there. I am not surprised people are feeling, thats why i came here to be here, see it for myself, offer what help i could. You cant in every circumstance, everyone understands that. A hong kong legislator repeatedly sprayed in the face by police with pepper spray during a protest last night as hundreds of thousands packed the streets for a new years day protest march. Berkeley, california imposed a 25 cent fee on cups in restaurants and shops. It is called disposable free dining went into effect yesterday backers say it is meant to reduce number of cups that are thrown away. A number of states across the country ushering new measures like that this year. Thats the news update this hour back to you guys, morgan i have mixed feelings about that, sue. Not going to lie. A lot of people do. Sue herera, thank you. Two hours into the first trading day of 2020. Stocks rallying to fresh inter day highs. The nasdaq above 9,000 dont go anywhere. Back after a quick break legendary terrain in telluride, the unparalleled landscape of park city, or the famed peaks of whistler, youve faced the hassle of lugging your gear through the airport. With ship skis, youre just a few clicks away from having your skis, snowboard and luggage shipped from your doorstep to your destination. With unrivaled pricing, real time tracking ship skis delivers, hassle free. Ship ahead and go catch those first tracks on fresh snow. Ship skis. Your skis. Delivered. Welcome back to squawk alley. Rbc out with the top ten internet surprises of 2020 analyst behind the note joins us now. Mark, happy new year all right. I think we might have had a technical difficulty there well bring in mark once he is up and running meantime, getting a check where we stand with major averages the dow up 172 points. The s p is also up threetenths of a percent saw fresh record inter day highs for all averages in the first trading day of 2020,