Our road map does begin with tech stock volatility. Adobe shares are tumbling. Microsoft, though, record highs. Tesla and nvidia, those stocks, at least recently for nvidia, saying its a struggle may be an overstatement, but they certainly have not been going up. The nasdaq 100 pointed to its first backtoback weekly loss since last october. Plus tiktoks owner, bytedance, on track to surpass Metas Facebook as the Worlds Largest social Media Company by sales. And the chamber of commerce suing the s. E. C. Over new Climate Disclosure rules, a lot to unpack there. And were going to begin with the road ahead. In particular, for what has been driving this market for quite some time, and that is namely what we call the Mega Cap Technology companies, a. I. , particularly generative a. I. , and mike, ill turn to you. We just mentioned, of course, nvidia shares, which, yesterday, we discussed. I mean, jim and i, years ago, developed this thing called the key to this market, and it does feel like most days, in some ways, it could be considered that. Its certainly the key to what kind of market day were going to have. Nvidia is in a 10 correction. It doesnt look like anything on the chart. Its down 9. 7 from its high. Its obviously just had this wild run. We have the whole, you know, confab next week. I dont know that anybody wants to get too negative into it. Others are saying, you know, there are parts of this market, mostly exemplified by nvidia, broadcom, amd, that just needed to cool down. No matter what else was going on, no matter how great the story was, and thats been the case for a couple weeks, and honestly, it sort of happened on some level. The s p 500 is down six of the last nine days, but is up over that period. So, theres been just a little more chop. Yesterday, the market was barely down. And the equal weight was down 1 . You had, when yields up, the broader mass of stocks goes down lately, and you can have this defensive move in some of the big tech stocks. Yesterday, microsoft made an alltime high, and its because thats what people want when things are a little bit less certain. So, up days are bigger than down . This week, yeah. The nasdaq composite, were up on the s p a 0. 5 , nasdaq 100 is flat. Your key to the market, i made a chart for it, actually, without talking to you before. Thanks, sara, for the top of the 9 00. Goldmansachs had a trading note this morning, i thought, really visualized just how important and how much these stocks have outperformed. If you look at they did the six, right . Excluding tesla. They go from january of 2023 until now. Thats the blue line, and it just shows you whats whats been the key and how much theyve outperformed. The middle line is the s p, and the 494 remaining s p 500 companies are below, which are still up, i will say, from that period. Thats that is part of the bigger story is that even though you have had this massive outperformance and added trillions of dollars in market value in six stocks, you havent been to the complete disadvantage of the rest of the market. Actually, though, the big six there was also flattened out over the last few weeks, so theres just been a little more churn in this market. Today is a big rebalancing of all these index products. Its quad . Its no more quad. Triple. Quarterly expiration. But they do have the xlk, the Big Technology sector spidr. They just reweight the stocks and nvidia and broadcom are being brought down in weight. Microsoft and alphabet are being brought up, and the market seems to have anticipated that. I think its silly that we think this is driving the action. Its a 64 billion etf, and the tech sector is 12 trillion in market value. Whi why should it matter . Id like to come back to microsoft for a moment. Theres an argument to be made its a strong reflection of enthusiasm around generative a. I. , and it diverged yesterday from nvidia, for example, so i dont know, i mean, is it tech im just curious what may be behind that. If its not, if were not seeing that enthusiasm reflected in some of the other typical names. I think its a matter of theres this kind of push mepull you, right . Microsoft did nothing for weeks. It kind of just went sideways for a little bit, and you know, has not been one of the leaders, and as i said, with a defensive tape, microsoft is a net beneficiary. So, i think weve done a lot of this, taken money from one pocket and putting it into the other when the macro has been quiet, but of course, sara, the macro hasnt been entirely quiet this week because of whats gone on in yields, because you got like a Third Straight higher than anticipated inflation number and were rethinking the fed path. So, i think thats also what has investors hesitating and the average stock hesitating, even if tech is driving the market. Tech can only go up so much. Thats not exactly what im getting at. I thought you were admitting that. No, because its not been true for a long time. But its not a coincidence that this week yields have gone up on the back of two hotter inflation reports, and were now at twomonth highs. Thats absolutely true. I just dont think it unusually yeah affects tech. It affects small caps a lot more. Affects cyclicals a lot more and consumer stock. By the way, barclays wrote on this. More room to run, they say, fundamentally here, but the caution is that big tech is not a safe haven for macro derisking. Major jumps in big techspx correlation occur around market selloffs. We have had this helpful divergence, not only among sectors but among stocks within sectors, so dispersion has been high. The Overall Index has a gentler ride. When its a macro shock, when its really risk off and people want to liquidate and reduce exposure across the board, then everything gets correlated, and tech is not exempt. And i think thats the point barclays is making. Today, adobe shares, not exempt from a downdraft as well, this after earnings and worth hitting at this point. The stock could be down as much as 67 from what had been 570. You know, talking about 260 billion company. You can see it there. It was the guidance, perhaps, that missed some of thestreet estimates or maybe even more so, some of the buyside estimates, and then theres been this overriding fear, you would call it, of a. I. In general and the threat that it represents to adobes business. You remember the stock sold off pretty dramatically after the introduction of sora, this new openai program, essentially, that lets you create full motion video kind of things and the like. At the same time, you know, the bulls would say, listen, theres no sign as of yet that the lower cost competitors such as canva or even figma are really hurting overall growth, even though they may be taking business away. Theres also a thought that perhaps theyre increasing the total Addressable Market by having people get into this artistic side of things more cheaply and then move up in terms of what theyre willing to use the pay the subscription fees of adobe, for example, to use them. And mike, you know, trades at what you might call about 23 times 23 free cash flow, which, again, those who own the stock have said, i think thats pretty cheap. Its below, you know, roughly in line with oracle. Youre talking about 40 plus margins, and there is a hope that theres going to be an acceleration in the second half, and that is what the companys ceo discussed on the call last night as well. For sure. I just think the burden of proof is a little higher now for them to prove that a. I. Is an enhancement, not a real challenge. Theyre going to have to fight that battle for a while. The pricing issues, maybe, were more fleeting, but does seem that right now, it does have that premium valuation. Now, it used to trade at well above this. Right. In terms of in terms of multiples, yeah. Free cash flow, multiples, things like that, because it just seemed such an autopilot grow grower, huge directionable market, massive subscription growth, and i think its a little bit of a rethink of exactly how immune theyre going to be. They also addressed sora, by the way, yesterday on the call, and the president saying theyre actually they work with openai, and he said, we are obviously going to see us develop our own model, but its all a tailwind because the more people that generate video clips, the more they need to edit that content. Should mention as well, 25 billion buyback over some period of time but thats 11 or so of the current market cap or 10 of the current market cap, so not nsignificant. Guys, ive been following sara, you have been all over the place this week, but i know you watch and have been following this tiktok story very closely. It is fascinating to say the least in terms of where things stand and where theyre going. Right now, of course, and im sure well hear over the course of the day from Emily Wilkins in d. C. In terms of where things stand in the senate, how quickly a bill to ban tiktok in the United States there will be created, will it be part of the appropriations bill . You look for Maria Cantwell to play a key role, as well as lisa monaco from the doj, im told. The journal reporting today, and i have been bringing up any number of times the likelihood that the chinese are not going to say, okay, bytedance, you can sell this, and you can sell it along with, by the way, the algorithm and the source code. Now, you can make your own algorithm, but you need at least some time to be able to copy the source code, and i went back three and a half years. I found my notes, finally, after a bit of a search from three and a half years ago when we were going through all this. Back then, it was about ten million lines of code. Now it could be as much as 40 million lines of code. It could take a long time, conceivably, to copy that code. That said, Large Language Models make it easier and more possible, but the problem is that while Steven Mnuchin may be interested in buying it or perhaps there will be some others out there that certainly might be, youre not going to get a chance at this point to actually do so, and so we are left with a real possibility that if the senate acts and passes the bill, and President Biden, as he said he would, signs it, and then theres some time period and there potentially is litigation, nonetheless, that this actually could disappear in the United States, as hard as it seems to imagine, because what youre buying without the source code or access to the source code is virtually impossible. Obviously, youd like the algorithm as well. Steven mnuchin addressed this on squawk box yesterday when he was asked about, when he will, what do you do if you dont actually get the technology . Theyve blocked because they were not happy about the technology transfer, and i would have to convince them and the u. S. Government that there was a way to do this. And that continues to be a key question. You know, theres been some talk about bobby kotick, as well, the former ceo of activision being involved. The sense im hearing is, sure, if there was something to do. He was involved the last time along with oracle and microsoft and walmart when they were thinking about what they could do as a ban seemed potentially possible and we got that executive order from then President Trump to ban it. Not right now. Theres nothing, seemingly, you know, mnuchin may be out there, may be able to raise some money around it, but you got to actually have a deal that you can do, and so well keep a close eye on the senate and how quickly this bill moves. For sure. And its so interesting because i cant get away from the idea that this is all happening at a moment, arguably, when tiktoks financial growth rate and kind of cultural sway might be peaking. Yeah. You know, this is the way these things tend to go. Its very of course, you know, 170 million users here in the u. S. , still not profitable. Again, ive talked to any number of people who say, because theyre spending so much money on project texas, which has been all about moving all the data to oracle servers in texas, that costs a lot of money. That said, theres a belief that if you were, the chinese were to allow the technology transfer, the thing could be worth 100 billion. Youre talking about something that could be generating, just from the ad business, at least 5 billion in operating income. Put a multiple on that and figure it out. Bytedance, though, extremely valuable regardless, and there doesnt seem to be quite as much pushback from owners of bytedance around all this, because they have such dominance not dominance, but such significant position in the Chinese Market. Last time there was a ban, there was a talk it was australia, u. S. , new zealand, uk, it was all the english sort of speaking tiktok that would have been involved. That doesnt appear to be the case so far this time. Theres also the users and the influencers who make a lot of money, and the celebrities and the and tiktok is waging a pretty active campaign, getting them to call their senators right now and lobby against this, and i do wonder if were going to continue to hear political opposition on things like First Amendment really heat up. Yeah. And of course, finally, big beneficiary if this were to happen would have to be meta. Oh yeah. Without a doubt. Thats what President Trump says. Thats what President Trump says. And that seems to be i mean, vertical short video. They created reels just for that. I know. You know, the chief of staff of the jeff saenz, was a board member. Just saying. Tony dwyer is going to share his strategy as we reach the midpoint. Its the ides of march. You can make money the hard way as a bullfighter or a human cannonball. Or save money the easy way, with xfinity mobile. Existing customers can get a free line of our most popular unlimited plan for a year not only will you save hundreds but youll also be joining millions who have connected to americas most reliable 5g network. Sure is a lot safer than becoming a stuntman for money. Get a free line of unlimited intro for a year when you buy one unlimited line. Visit xfinitymobile. Com today to learn more. Some new data just out moments ago. Want to hit february industrial production. Rising 0. 1 . That was a little better than economists were expecting. They expected it to be unchanged, capacity utilization, 78. 3 compared to forecasts. All in all, i think we have seen better indications for manufacturing, which has been one of the harder parts hit of the economy lately. Things are looking up. Things are looking up . Little bit. On manufacturing at least. Not as much on the consumer after retail sales. Lets get back to the market, see if thats looking up. Were about halfway through a month in which the s p 500 and the nasdaq have both hit record highs. Tony dwyer joins us now, give us his take on the road ahead. All right, so, do that, tony. We just i dont know if you heard the data as well, but where to you stand in terms of how you see things unfolding . I think its going to get its been choppy. Its going to get choppy underneath the service. I think one of the most important things thats not talked enough about, so much of the i ask myself when i get up in the morning all the time, wheres the recession . Ive been on a recession call for a while. You had an inversion of the yield curve thats been historic in terms of duration and extent, and bank lending last year shut down over the last 15 months, so how have we not gone into a recession . Most people would think that, well, you have excess savings from the pandemic, you had fiscal stimulus, but i really think its the private credit market that has held up companies that would have ordinarily not had access to capital. So, the question becomes, does that just push out a recession, or does that eliminate one or avert one . And i think it pushes it out. I think as we get some weaker economic data, especially on the employment front over the course of the next few months, that may put a little bit of pressure on stocks, but ultimately, it should turn out to be a really good year when the fed starts to ease. Tony, we have had this conversation with you in the past as well. Sara put up a chart at the beginning of the show, showing the outperformance of those six mega cap stocks versus the rest of the market, and weve talked so often over these first two and a half months of the year about a broadening. What are your expectations in terms of that, whether it continues, and what it means for the overall performance of the s p as the year moves ahead . Well, coming out and talking about the broadening and how its great right at the peak of the broadening, so ultimately, david, how is what differentiates a trade versus a longer duration sustainable advance in that relative performance of small and equal weighted s p . Ultimately, like everything else, it comes down to earnings. I think what most people dont realize is that if you exclude the mag seven from 2023 earnings, they were actually down 1. 2 , according to tj dylan at lseg ibis, so when you actually look at why the mega cap stocks have gotten such a big percentage of the gain over the last 15 months, its because thats where all the Earnings Growth has been, even in the Current Quarter, if you exclude, meaning q1, if you exclude the mag seven, youre still in a interview Earnings Growth environment, so what creates that sustainable advance versus a trade, i call it an owner versus a rental of stocks. What creates that relatively performance sustainability is going to be evening out of Earnings Growth, and that comes to us and starting, really, in q4. So, thats i think that earlier this year, maybe the market was sniffing out thats going to happen. I think its generational. I dont think its going to be one of those quick trades when you get that earnings performance coming in. Any time you have had the top ten stocks, its such a big percentage of the market cap of the s p 500, youve gone into years of relative decline of the mega cap. Tony, just because you just threw out the recession word and expect one, where first of all, its not in the market, so i think you have to defend it a little bit. Certainly not consensus. Where do you see signs of recession . Well, its been wrong. Again, sara, thats why i brought in the idea of why hasnt it happened when its happened every other time . The Capital Markets shut down, money supply went negative fo