Closing Bell - Closing Bell 2/22/23

Episode Date: February 22, 2023

From the open to the close, "Closing Bell" has you covered. From what’s driving market moves to how investors are reacting, Closing Bell guides listeners through each trading session and brings to you some of the biggest names in business.

Welcome to Closing Bell. I'm Scott Wapner. This make or break hour begins with a countdown to what could very well be the most important earnings report of this late season. NVIDIA on deck in overtime. That stock surging to start the year and taking the Nasdaq with it. Now so much riding on those results. Top analyst Stacey Raskin with me a little later to walk you right up to that earnings report. Famed short seller Jim Chanos will also be here in just a bit for a CNBC exclusive on the markets and one of the latest names he is now betting against. We begin, though, with our talk of the tape,

a tug of war between rates and stocks and what the outcome is likely to be for your money. Let's ask Dan Greenhouse of Solus Alternative Asset Management. He is here with me at Post 9. Welcome to our new show. It's good to have you. It really has been a tug of war, right?

And, you know, bond yields kind of taking a backseat for a little bit to stocks until now they pulled stocks into the sandbox a little bit, haven't they? I mean, you've seen a real repricing for Fed funds expectations, which has obviously gotten a lot of attention, but less so you've seen a real repricing for Fed funds expectations, which has obviously gotten a lot of attention, but less so you've seen a real repricing on the inflation side of things. Inflation pricing at the one year and the five year tenors have gone straight up over the last couple of weeks. And I think it complicates the Fed's position here and investors position in the sense that if you think they were almost done, some other parts of the market, not the equity or the credit markets, are telling you maybe they have more to do.

So are we just in the stages now of the stock market catching up to where the bond market was leading things? Probably. I mean, last time we were on, listen, I think there's a lot of conversation that the market was ignoring what was going on in the bond market. And my point last time was,

you know, let's not dismiss that there are positives going on. The China reopening, the lack of a recession in Europe were two things to which I pointed. Those are still true today. But at the end of the day, the speed of the rate adjustment was so much that the equity market probably couldn't ignore it. I mean, Fed minutes today, you know, like the market didn't really react all too much. The bottom line was you basically had everybody think 25 was right. Now that maybe it's settling in, you know, the Dow's down 143 points as we watch it now. China reopening and Europe should help the U.S. Elevated chance of recession in 23.

Nothing's shocking. No, but listen, I think there's an important conversation that we're not having here. We're lost in the 25 versus 50 right now. But there's a bigger conversation about whether everybody, myself included, not everybody, most people are misunderstanding the economic environment and how the Fed is supposed to respond to it. Meaning you've hiked, let's call it 500 basis points, and the economy is doing a lot better than a lot of us thought. And so the question becomes, is that equilibrium rate, the rate at which you start to choke off activity, higher than we thought? And if it is, then the Fed needs to go even higher

still. So we're talking about what everyone calls the terminal Fed funds rate at five or five and a quarter. That number might be 550, 575 or even six. I mean, even though like, you know, let's say Bullard, for example, somebody who's been, I think, more hawkish than most. I think that's fair to say was on our network today. 5.375 is where he talked about taking it. That's not out of the crazy realm of where the market has moved to. It implies three more 25 basis point hikes. The street is now coalescing around 550. The only bank that I know of off the top of my head is Matt Lizetti over Deutsche Bank.

They're at 575 for the final hike but everybody else is moving to 550 if they weren't already there yeah bear with us just one second because we do have some news that's breaking at this very moment and it regards third point of course daniel loeb's hedge fund and bath and body works which we want to show you the stock here because there's a report out that they are initiating a proxy fight against bath and body works got the letter that literally has just hit i'm one of the first to get a chance to take a because there's a report out that they are initiating a proxy fight against Bath & Body Works. Got the letter that literally has just hit. I'm one of the first to get a chance to take a look at this.

And they are really taking issue with corporate governance at this company, executive pay, what they call an eye-popping sum of nearly $18 million. The former chair of the board was paid to become the interim CEO. They say, and this is a misnash that they're referring to, they say, and I'm quoting here, the outsized pay package is a red flag for shareholders, signals a massive governance failure. We're concerned that misnash, by virtue of the windfall, is what they're calling it, is no longer, quote unquote, independent. I got Ken Squire on the phone, of course, 13D Monitor, in what has been really an interesting year, I'd say the least, Ken, to start with activists.

What is your reaction to hear in what is a very Loebian letter, so to speak, to Bath and Body Works? Yeah, so somewhat Loebian. I haven't read the letter yet either. It just came out. But, you know, Dan invented the poison pen letter in a time when poison pens were needed. Today he's kind of changed his tone a little bit to be more amicable and friendly, which is what's called for today.

But you're right, this is a little bit of maybe more confrontation. Again, like you said, Scott, this is a board that put in as an interim CEO, the chairman who had another full-time job and paid her $18 million for seven months. And now she's back to being chairman again. Gina Boswell, I'm sure, will be a good CEO. I doubt Third Point has a problem with her. She's new. But I think this board just needs refreshment and needs more shareholder directors, people that, like Dan Loeb likes to do, help management and support management in implementing their plan, but holding them accountable if they fail to. Yeah, they're going all out, too. They say in this letter, again, which we've been able

to have a look at here, they plan, this is third point, they plan to make a books and records request under Delaware law to assess the Human Capital and Compensation Committee's analysis that they suggest the board surely relied on to justify what they characterize, Ken, as an astonishing payout. I guess part of the point here, too, is that the environment that we're in feels ripe for activism. It's not a surprise, I suppose, that you've got five different ones in a Salesforce or you had a Pelts in a Disney. And we could probably go on and on and on. It seems like a rebirth of this activity, to say the least. Yeah, the activism, it's incredible. We haven't seen activism like this maybe for 10 or 15 years. And when you point to Salesforce, Scott, yes, there's five different brand name activists in there.

But these are not five people that are anyway a group. These are five activists that independently made a decision to do a big activist campaign. And they coincidentally happened to be at the same company. This could just as easily have been five activist campaigns at five different companies, in which case we would have had seven or eight huge ones by now. So activism is has a there's more activism now than we've seen in years. Yeah, I appreciate you coming to the phone so quickly to react to this breaking story again. Third point is going to launch a proxy fight, they say, against Bath and Body Works. They really take aim at that pay package for Sarah Nash, chair of the board, who's now interim CEO.

And we will see where all of this development leads us. So thank you to Ken Squire. And Scott, just one thing. She's back to the chairman. They have a new CEO. She was interim CEO. And now Gina Boswell is the CEO. Yeah, yeah, yeah.

I appreciate that, Ken. Thank you very much. We'll follow this developing story for certain. You want to comment, Dan Greenhouse, just on the idea here of a pickup in activism, how this dislocated market and some of the uncertainty we've seen, some of the big declines in stocks have certainly led to more activity, it feels like. Yeah, no, I think it's fair to say that the type of environment in which we find ourselves lends itself very well to an activist campaign. I will say, knowing almost nothing since I was traveling over here and didn't read the letter about Third Point's campaign specifically, in the world in which we live at Solus,

we deal with management incentive plans all the time. And I can say that I am certainly an ally of everybody and anybody who finds excessive executive compensation in the right circumstances egregious and worth fighting for. That's certainly an idea with which I would agree. All right. So of all the stuff happening in the market today, I told you we're going to walk you right up to NVIDIA's results, which are in overtime. Really what feels like a critical moment for that report to hit. And on that note, let's expand our conversation and bring in CNBC contributor Brenda Vangelo of Sandhill Global Advisors. So great to have you. Brand because you do

own. NVIDIA and what are you thinking about. As we what we're about fifty or so minutes we think away from the release of that report. Right well I think if we look at the semiconductor industry in general and there's no question.

That it has been in a recession and it's likely to continue to be in a recession. At the shorter term here. So I think we look at Nvidia in the stock has had a tremendous move this year. So I think it's going to take a lot to get it moving higher from

here in the shorter term. We think about what we're expecting for this quarter. I think we'd like to see that there's some improvement on the inventory problem they've been having in the gaming sector. And that the that they're. That they're. Your

poor business of data center business is really holding up fairly well. But outside of that I don't. Gonna hear a lot of real incremental positive news we look at expectations for the quarter. It really is for a pretty whole lot border

of down a versus last quarter and certainly down year over year. So I don't think there's a lot to expect here but I do think the stock has moved significantly, perhaps on some excitement over what is to come in the future with their AI business and the GPU side. But I don't think we're going to hear about that today. I thought Josh Brown made a really interesting point earlier on halftime.

As much as you know that he loves NVIDIA, like most of the shareholders who've been in this name for a long time do. But he made the point, given the near 50 percent move that we've already seen to start the year, if he didn't own it, he wouldn't buy it here ahead of the number. Can you sympathize with that perspective as well? Absolutely. I can certainly sympathize with that. We're in the same same boat. We own it. Will we buy more here? No. I think we'll likely get a better opportunity to do that. Just as we think, you know, this year, I think we're in for some choppiness here. Obviously, we had a really nice start to the year, but I don't think we can expect that that's going to continue over the remaining, you know, eight months or so that we have left. So, you know,

I don't think we're out of the woods yet. And so I think there will be more volatility. And so the opportunity to buy a really high quality name like NVIDIA, we will probably get a better chance at some point. I don't feel like, Dan, we can overstate the importance of this report at this very moment. Obviously, given the market cap size, it's always going to be an important moment in time when NVIDIA does report the results. But if you look at what the stock's done, as we said, near 50 percent year to date, the NASDAQ has had such a good move and a surprising one to many as well to kick off the year. So these results have to be good. And maybe they have to be better than good to justify not only the move, but then you wonder what happens on

the other side for a NASDAQ that already feels a little bit shaky given the move in rates. Yeah, no, listen, I think it's not one of the largest companies, the Apple, Microsoft, that are. But it is like it's 1A, the Tesla, NVIDIA, Visa tier that's right underneath it. So it's obviously closely watched. And of course, as Brenda touched on, the data center, the gaming, it's got its tentacles everywhere, which brings me, as I understand it, their Hopper architecture, which this is not what I do, and I certainly don't want to expand too far enough, but their Hopper architecture is a say that would be, I think they're going to spend or should spend a good amount of time on the idea that they're going to be contributing to this. Because obviously, chat GPT and AI and language models are all the rage right now. And so why not spend a good chunk of your call talking about something? We've gotten to the point where we are counting the number of times CEOs say efficiencies and things like that.

So let's count today or whenever the call is, frankly, whether it's today or tomorrow. The number of times they say AI on that call is NVIDIA. Thank you very much for being here. That's Dan Greenhouse. Bren, thank you so much as well. We're going to see what they deliver again tonight in overtime. Let's get to our Twitter question of the day. We want to know, will NVIDIA be higher or lower tomorrow after those results tonight?

You can head to at CNBC Closing Bell on Twitter. Please vote. We're going to share those results a little later on in the hour. We're just getting started here on Closing Bell. Up next, legendary short seller Jim Chanos is with us. It's an exclusive. We'll find out what he is forecasting for the markets. We'll talk about one of his latest shorts as well, along with a few others.

Don't miss it. We're live from the New York Stock Exchange. Closing Bell, right back. All right, with the bet on the offensive, there seems to be plenty to bet against in this market, at least according to our next guest, famed short seller Jim Chanos. He's the founder of Chanos & Company. Joins me now. It's good to see you. Welcome back. Good to be back. And congrats on the new show. No, I appreciate it very much. And it's good to have you in the earliest days.

It's been an interesting start to the year, to say the least. I'm wondering how somebody who sits in the seat you do looking at the kind of stocks I know you do, how you would view how we've gotten here to start the year and the things that have led us. So if we go back to the beginning of the year, Scott, there were three sort of givens that the market via market pricing was discounting. It was looking for 12 percent earnings growth this year. It was looking for a reduction of inflation to two to three percent by the end of the year. And it was looking for Fed ease in the second half of the year.

Two of those three are gone as of mid-February, the inflation outlook and the Fed. Investors are still pretty sanguine on earnings, however, but very interestingly, earnings estimates for the S&P, bottoms up operating earnings, have been coming down about a dollar a week since the beginning of January. So at the beginning of the year, people were looking for about $227 in the S&P. Today, they're looking for 220. Now, the good news is they brought down fourth quarter numbers, too. So to 196. So we're still looking at like 12 percent growth.

We're just getting there kind of the wrong way by shrinking both the numerator and the denominator. So, you know, you know, we don't have a view on the market per se. We're pretty much always hedged. But, you know, things are not cheap. I've said that for a while. And we continue to see rallies being led by lower quality stocks. That was certainly the case in January. Similar cover shorts, chase momentum, and then things sort of sort themselves out. So that's about the best I can do for you. Are you more aggressively, though, positioning for more downside in the things that you are betting against? We're about the same as we were coming into the year. You know, our shorts

have a higher beta than the market. So, you know, we're adjusted for that. We're probably 80 some percent invested, which is where we were coming into into the new year. Don't worry. It gives us plenty of chills and spills in the portfolio, though. That's for sure. Let's let's talk about a name that that I believe is still in your portfolio on the short side. That is Coinbase. Yes. You're still you're still short. We are still short. OK, so obviously we had the earnings yesterday. You know, and I'm curious, your read, obviously, for a stock that, you know, was down so significantly last year, but up so dramatically into the report. How do you view it? Yeah, so Coinbase is a wonderful example of what I was just talking about. I mean, it had

a number of very similar rallies last year and throughout late 2021 and throughout 2022 and into 2023. These 50 to 100% rallies are not new to Coinbase because it's a narrative stock. It's not a fundamental stock. And by that, I mean people buy it because they have a view on crypto prices or crypto survival or what have you. And the fact of the matter is, as we saw last night,

is Coinbase is still losing money and i kind of quipped last night you know if not now when right we've had a 40 to 50 crypto rally in 2023 uh you would think retail investors would be leading the charge but i think you actually pointed out before the before the results that it was apparent that retail was not leading the charge into crypto and and coinbase's results last night where they indicated trading revenues of about 120 million in january which would be 360 million for the quarter is not much above the 322 in trading revenues they did in the fourth quarter. So what's intriguing to us, Scott, is where they're making more money. Remember, they're losing money, of course.

But they're making it in two areas. One, they actually raised commission rates for retail effectively in the fourth quarter. Round trips for the fourth quarter were costing retail investors 3% up from 2.7% in the previous quarter. So they actually somehow raised commission rates on their customers, which I think is going to go against the grain of things like your friend Josh Brown discussed, which is as Fidelity and Vanguard and others get into this business, commission rates are heading down. And number two, they're not paying interest on customer deposits. That was a huge source of interest income in the quarter. And I just don't think that's a sustainable model as we go from zero percent interest rates to five percent interest rates. Not paying interest on customer deposits will also be competed away in our opinion. I feel like a key thesis or, you know, the key part of your original short was based on fee compression, the likes of which you're talking about now,

which they suggest, you know, are not are not being seen to this point. I'm wondering if you now think you may be right directionally about the stock, but in a sense for the wrong reasons. The right reasons being that, you know, retail is sort of exit stage left from crypto right now. There's obviously a lot more regulatory scrutiny from the SEC on this company, but the key part of what you thought was going to take place hasn't really happened yet. No, but we think it will. And that's the key point going forward. We think that's still in front of it. The need to pay interest to customers. And by the way, customer deposits burned off in a dramatic way in the fourth quarter. So it's not as if the customers aren't noticing this. And second of all, I just don't think you're going to be able to keep

retail commissions at 3 percent around trip. I mean, just think about that. You do four trades a year. That's 12 percent gone from your capital before your P&L. And compared to retail stock stock commissions, there's only one way those are ultimately long term going. You know, you you alluded the last time you were on with with our friends at 5 o'clock about General Electric, but you didn't explicitly say that you were short. Are you short GE? We are short GE. And GE is a really interesting story because as people have rushed into, besides low-quality stocks,

the other area that you know that investors have really kind of rushed into in the last three four months has been industrials and GE is up 75 percent in the last four months since the end of the third quarter and it's up because they begun their long-awaited the breakup plan which was announced way back at the end of 2020. And the first spinoff occurred in the first week of January. They spun off health care. So GE's had a monster run. It's trading in the mid-'80s.

And what's fascinating is that since they've announced a split-up plan, earnings estimates just continue to get cut. So when they announced the fourth quarter, and I joked that there were pages and pages of adjustments in that earnings release. You can go back and check it out yourself. You'll be surprised at just how many pro forma adjustments GE makes to its earnings. The estimate was cut for this year to $1.60 to $2. Well, with a stock in the mid-80s, we know that GE is not trading on a PE basis, right? It's not trading at 40 to 50 times. So what it is is it's trading on a sum of the parts basis.

The analysts have said, okay, they'll spin off aerospace or they'll sell renewables and power generation and keep aerospace, whatever. The problem is, is that the sell side hasn't done their homework properly. In all of the models that we've seen on some of the parts, which value the stock on average at about $89 on a breakup. Mind you, the stock is trading about $5 below that. They're using net liabilities of anywhere from $0 to $14 billion for GE. Now that we have health care spun off in January, we can actually do the numbers, and we can see what the long-term liabilities are. And if you give GE 100 cents on the dollar credit for their current assets and all of their investments, including their 20% remaining stake in GE Healthcare, and you subtract the liabilities and preferred stock, the net liabilities are $39 billion. So our numbers are anywhere from 25 to 39 billion dollars worse than the sell side,

which means that you get a breakup value of somewhere way below the current stock price. And just to be clear, I mean, those are your numbers, as you say, and we're going to have to see what sort of bears out there. But how do you view, you know, GE as we know it with, you know, the ticker GE is going to be aerospace, which is a great part of their business. You know, they just announced, you know, Boeing announced the huge order with Air India. GE is going to supply the engines. Now, obviously, this is not taking place in terms of the full split for some time into the future. But how will you view that once, in fact, it does split? Will you still be around to see those days, which could prove to be a bit different than where GE stands today?

Well, GE right now, Scott, is trading at over 20 times EBITDA. So our point is this is a really interesting risk-reward trade on the short side because the market is already giving them full credit for the value of all these parts, but is not giving them full credit for the liabilities that remain. And that's why it's an interesting risk-reward. If everything goes right and the bulls get the numbers they think they're going to get for aerospace, renewables, and power, you know, on average, they think the stock is worth $89. It's at $84. So, you know, the risk-reward is a handful of points, we think,

on the upside and many, many points on the downside. GE just came from $48. It was there in September. So again, it underscores just how much some of these industrials have gone up and what's being built into the valuations on these. It's pretty full, to say the least. Are you still short the, I guess it's a solar place, Sunrun, which, by the way, reports earnings as, I don't need to tell you, you probably know in overtime tonight, what we used to call after the bell. Yeah, I spoke at Delivering Alpha about this one with Carson Block. This is, we are short. They're reporting tonight. I joke that this is a science project, a very dark science project of a company. They lose buckets of money. They have $7.4 billion in net debt

and negative EBITDA. They use this sort of cockamamie net present value calculation to get you to focus on the value of the panels they install on on roots we would joke this is a roofing company with a subprime mortgage subsidiary and and they want you to discount back these twenty to thirty year cash flows from the leases at five percent meanwhile their debt trades of twelve percent

of the have those who are cool pontette outstanding and of course no one in the right right mind thinks their weighted average cost of capital is 5%. Treasuries are at 5%. So they go through this ridiculous exercise. We can't believe the auditors and regulators are letting them get away with this type of pro forma calculation. In the meantime, they're losing hundreds of millions of dollars per quarter. And so it's somewhat bizarre. It kind of gets to what I've been talking about, which is the misuse of pro forma metrics

as a major source of fraud. And then finally, there's just one darker element that I think they need to address, which people like Gordon Johnson and others have been talking about, which is that it appears that Sunrun is using two different valuations for investment tax credit purposes would you buy these or lease the systems or would you buy them for cash or you finance them and uh... you know that's inconsistent with i r s rates

as to what people claim on their uh... for their i t c's i think they're going to get some questions about that on the call tonight. All right. Interesting to catch up with you, especially given where we started this year. Jim Chanos, you'll be well. We'll see you soon. Look forward to seeing you soon. Take care. All right. Likewise. Yep. That's Jim Chanos joining us exclusively up next. Elves, Sally Krawcheck has made it her mission to get more women involved in the markets. She'll join me right here at Post 9 next. LVEST, Sally Krawcheck has made it her mission to get more women involved in the markets. She'll join me right here at Post 9 next. It was seven years ago that our next guest set out to

change the face of the financial services industry, quite literally. Today, LVEST is the only wealth tech company catered exclusively to women, both in how they invest and who does the investing. Sally Krawcheck is the co-founder and CEO of Ellevest. She joins me here at Post9. Welcome. It's great to see you. Good to see you, too. So it's been a good run. I mean, what have you learned over that period of time about the way women not only invest, but the specialized services that they want? Yeah. So I think one of the things we've learned is it's not their fault. When I was on Wall Street for all those years, women don't invest as much as men do. It's because they're risk averse. Maybe they're not good at math. They don't like investing.

They need more financial education. We had all the excuses. And Ellevest was really the first that said, wait a minute, maybe no one's actually built an offering specifically for them. One whose investing algorithm takes into account, we unfortunately earn less, our salaries peak sooner, and we live longer. One that recognizes that women understand every dollar they invest has impact. They just want to know what that impact is and drive that impact in a positive way. I was surprised to read, just given how tough the market was last year, you had record AUM. You had inflows every single week of the year when a lot of people were looking at outflows. Why? When the industry was looking at pretty significant

outflows. Why did that happen? The research has always shown, but it's been hard to find it, you know, because women have been such a minority of investors. But the research has always shown that women are better investors than men, that women outperform men. And one reason is because when they build a plan, they stick to it. Some two thirds of our women, of our clients have recurring deposits and they just kept putting those deposits in during the downturn rather than checking their accounts and saying, oh my gosh, this is depressing. Let me get out. So we found that women commit to it, invest, continue to invest, and have earned the returns. 100% of your financial advisors are women, too. Women speaking directly to women.

Yes, yes. That matters. We love men, by the way. But whereas the industry today is 85 percent men, we are 85 percent women. We're half people of color. And so what we're really working to do at Ellevest is not only serve underrepresented groups on Wall Street, women, but to represent them so that we are them and we intuitively understand what drives them. What kind of priority is something like ESG for you at a time where it feels like ESG is under attack? Not at Ellevest. It's not. More

than half of our clients are investing for impact. And Scott, that was even when we hit it on the website. So you had to sort of go through and look for it. But again, they understand a couple things intuitively. We're all gender lens investors. We may, oh, I don't believe in gender lens. Well, you're investing 98% in men, right? At Ellevest, we work to change that equation so that it's more balanced. And your money is a vote. Every dollar you invest, every dollar you used to buy is a vote.

Just knowing what that vote is and therefore being really intentional about it without giving up financial returns. That's one thing about women. They're not either or. They're and. I want a financial return and I want an impact return. You've really done it all on Wall Street. Are we done talking about a glass ceiling here?

Well, look at where we're sitting. The current president of the New York Stock Exchange is a woman. The past one is a woman. The CEO of NASDAQ is a woman. Jane Fraser, first female to run a major institution. We've made great strides. And fintech venture dollars, where the innovation is, do you know how many of those dollars women CEOs raise? One out of every 10,000.

Name a bunch of other women who have started fintech businesses and grown them to Series B. It's a very difficult thing to do. At the same time, women have been under attack. Women have been under attack. Reproductive rights have been under attack, which you know is a financial and economic issue. So we can look at a few things and say things are better. But for women overall, it's tough. The Ellevest Women Financial Health Index shows that women are at a five-year low in terms of their financial health because of the attack on reproductive rights, which again is a financial issue because of inflation, because the gender pay gap is not closing. I really appreciate you coming to the set and having this conversation.

Thank you so much. Glad to be here. All right. That's Sally Krawcheck again, Ellevest. She's the founder, CEO, of course. Up next, we are tracking the biggest movers as we head into the close. We'll bring you those names. Closing bell is right back. Let's send it to Seema Modi now for a look at a couple of key stocks to watch today.

Seema. Scott, we've got biotech on our mind. Shares of Charles River Laboratories are lower after issuing a downbeat profit forecast. The company says it received a subpoena related to a Justice Department investigation into illegal smuggling of primates, which Charles River counts on for lab testing. That's stocked down 11%. Cathie Wood favored CRISPR therapeutics, though shares are surging over 9% after the biotech firm posted a narrower-than-expected

loss. William Blair Analysts maintained their outperform rating, citing the biotech's gene-editing therapies in development, one of which treats sickle cell disease. You'll see the stock up about 7% right now. Scott, send it back to you. All right, Sima, appreciate that, Sima Modi. Last chance to weigh in on our Twitter question. We want to know, will NVIDIA be higher or lower tomorrow after its earnings tonight? And over time, you can head to at CNBC closing bell on Twitter. We're going to reveal those results right after this break. It is time for the results of our Twitter question.

We asked, will NVIDIA be higher or lower tomorrow after its earnings tonight? You said lower, which is interesting. The stock's been on a huge run into that report ahead our next guest raising the red flag of what he says is the real biggest risk to the market it's not the Fed that and much more when we take you inside the market. Let's do it we're now in the closing bell market zone cbc senior markets commentator mike santoli here to break down these crucial moments of the trading day plus eugene profit on the biggest risk he says lies ahead for stocks and bernstein stacy raskin on intel and of course nvidia which is about to report earnings in just a bit in overtime.

Mike Santoli to you first, though. Rates moved off of their lows, and stocks seemed to move a little bit lower after we tried to digest the minutes. Just sagging a little bit. I mean, this is your 5% pullback, actually, at the level the S&P is at right now. It's 5% from the highs on February 2nd, three weeks ago. So routine in that respect, I don't think there was anything in the minutes that said people got to hit the sell button. It was much more about, OK, I guess we're still in this process. We're still in this. How fast do they have to go?

How much longer? And so we're not liberated from that. So I would attribute that to the slight loss of energy after 2 p.m. All right, Eugene Profit, interesting headline you bring to us today in the market zone. Consumer sentiment, not the Fed, is the biggest risk to equities right now. Why so? Well, not just sentiment, Scott. Their ability or willingness to spend. And I think it's because as interest rates have increased, prices have been able to be passed on to the consumer and consumers continue to be able to buy the products. But all the earnings announcements that are coming out are suggesting that that's stopping outside of the travel industry and experiences. And so if the consumer

weakens, the margins are compressing. You're seeing that in all the earnings announcements. And if you look at like Home Depot's earnings, you had the company did well relatively. However, because they were not able to have higher lumber prices as they had in the past, their earnings actually came down. Revenue was somewhat fine. So I think that they go hand in hand with what's going on with the Fed. I have a little bit more reliance that the Fed can bring us into a soft landing, but it really is dependent upon whether or not the consumer is able to continue to keep spending where it is to keep the economy humming along. I mean, demand wasn't really the issue at all from Home Depot, for example.

And the consumer has been unbelievably strong, whether it's, I know, spending on their credit cards more and maybe delinquencies are picking up, too. But has that surprised you? Because it's a big if in terms of whether and when the consumer might roll over. Yeah, it has been somewhat surprising, but I think that because you're only hearing it and travel and experiences, I think that's the last leg to kind of fall over. And you are right. Credit card balances have been expanding quite dramatically. Right so um the fact that the savings rates i guess were so high which have come down now has allowed the fed a little bit more latitude with respect to on the pace of interest rates increases but the fed has their

eye on it i mean i think in the minutes of the day when they said essentially the risks of the economy is to the downside i to some extent that's what they were referring to in the lag effect from the rate increase at bay. So I think that net-net, we've just about tapped out the consumer. Hopefully we hang in there and we're able to keep the interest rate increase to about 25 basis points. But I do think that that risk is as prevalent as the Fed increase. All right. We'll keep our eyes on that. Eugene Proffitt, thank you very much.

Big event today from Intel cutting their dividend by a wide amount. Stacey Raskin, he's Bernstein's research analyst, one of the top analysts who covers that company. We're going to do that first, and then we're going to do NVIDIA. Intel cutting the dividend, which you described, which at one point would have been, in your words, unthinkable, now inevitable. Why? Well, they're out of money. They're out of free cash flow. They're burning cash and they need enough to keep the businesses going concerned. And number two, to protect their credit rating. We've already seen some downgrades. I think it's

important for them to keep that credit rating at an A level or above. And so I do think this has been widely expected. You sort of run the math. It becomes obvious that something had to be done. And so they they did it. They did it today. So it's interesting. I had a shareholder on the halftime report with me who said, well, two dollars of current earnings gets back to five dollars a share. That's why she is staying with it. When do you see that possibility happening, if at all? And you're you seem to be laughing as I'm asking you this question. Well, my numbers go out to 25. I don't think I've got them getting back even to the $2 number, let alone to the $5 number. For some context, I think I'm at $0.60 this year.

And I think I'm at $1.60 or give or take next year. So, Godspeed. Yeah, right. Okay, so let's turn our attention to NVIDIA. What really feels like an important report, just given what that stock has done and what the market, the Nasdaq, has done, obviously, along the way. What do you expect? Yeah, I mean, it's been a monster so far year to date. It's probably over 40 percent. And I think it's all about the data center segment, both the quarter. And I think more importantly, the guide and any commentary they give us kind of going forward. That is where the focus is. Now, we've seen some cracks in that end market. You know, China's been weak for a while. Enterprise has

been weakening. And now we've more recently seen some of the hyperscale spending start to lag off. And we had some numbers even from Intel and AMD that were not great. They both sort of implicitly guided data center down double digits into Q1. At the same time, I do think that spending on AI, artificial intelligence is probably holding up better. So I think that's what people will be looking for. The guide may be a little weak on data center, we'll see, but I do suspect that it should hold up quite a bit better than what we saw from some of their peers. I knew you were going to say AI. I'm sorry, I knew you were going to say AI and I was going to ask

you what is the over under in your mind for the amount of times that they say AI on their earnings call? Because that's where all the hype is. You know that. I mean, even when it's not being hyped, they say AI an awful lot on their calls, right? So probably more on this one, I would guess. But certainly that is an area of their business which is critical and where they're very well positioned. So they say that word a lot. Yeah, they do this run literally you know honestly does the run from the beginning of the year you know more than 40 does it make sense to you yeah so look at least they've cut a lot they've got two new product cycles both in data centers as well as in gaming um with with probably a significant amount of pricing that they're able to take um so on on that context i i think it's

good now i'll be honest, I'd rather it wasn't up, you know, 20% in the last couple of weeks into the print, like, sure, you'd rather have expectations get a little lower. Even so, though, people have been getting very excited about a lot of these new trends, chat GTP and generative AI and large language models and everything. And I doubt that any of that that's going on right now really drives the numbers in the very near term. But like over the longer term, you can imagine some some very big opportunities from from these. And it's something that the company is really enabling. So as long as it is that that that trajectory or that view is there, in some sense, the stock can be open ended if you really want to believe it can be as big as you want it to be. And that's why it gets the multiple

that it does. All right. We'll see what happens in less than five minutes, we think. Stacey Raskin of Bernstein, thank you so much for being here in our market zone. All right, Mike Santoli, all eyes on NVIDIA. And that's exactly what has to happen. Who knows what the first reflex response is going to be to the numbers today. But once you've gotten to the point of 60 times forward earnings again,

you've got this super premium valuation. By the way, sales growth for the current year that we're in right now, this fiscal year, is only supposed to be like 8 percent. So you need a few things in there that enable that cohort of investors that just flocks to NVIDIA and Tesla for the magical long-term change the world stories. They have to see those drivers of the top line kicking in or at least hinted at. It's going to help decide what happens with the NASDAQ in the near term, don't you think? Sure, absolutely. I mean, it's got its weight in there. I mean, it's interesting because the NASDAQ now is not monolithic.

You've seen a lot of stocks really break down and then have a little bit of a renaissance, whether it's meta, you know, alphabet. So it's not really been monolithic. The Apples and the Microsofts are over here because they're the safe ones that you can put away for a while, whereas NVIDIA, it's where a lot of the adrenaline of the index is going to come from or has to come from. So, yeah, it'll matter on that score.

Semiconductors in general have acted better. Yeah, they have. They've actually broken above their late 2022 highs. So it seems like there's a lot to talk about there in terms of what it could mean sentiment-wise for the market. But I think we're still kind of trapped. We're trapped between different macro scenarios for the moment and trying to see if we're well-supported in the near term. We just had our two-minute warning version in the market zone here as we creep towards the close and we head towards these numbers. I'm

watching a couple of round numbers today, too. 4,000 thousand on the S&P we've got some work to do real quick or we're going to close below it and thirty three K on the Dow we were just right at it we're you know a little bit above it but I'm feels like we've been playing with those numbers on the Dow for a really long time so it sort of shows you how much churning we've done over multiple months four thousand little bit less important in terms of where the supply-demand comes together than levels right below where we are right now. 3,950, 3,940, 3,900. That's what's required to maintain that look of a market that's still in recovery mode from the October lows.

Otherwise, you kind of slop around in that same trading range. If we do lose those levels, that's just purely on a technical basis. Clearly, people perceive we have a valuation issue. And on some level, we do. So that sort of creates a ceiling on the market that keeps people from really just sort of running it beyond what we've seen after the beta chase of January. So, you know, we'll see. As I said, yields gave us a little bit of a break today, but we still are in that mode of feeling like if the Fed, people on the Fed believe we're going to have to run faster and farther, it's going to keep us in check. Your first word in the market zone was about interest rates, Chris. You're getting ready to ring the closing bell here. But also,

here is your 5% pullback, which you should have expected after we got a 20% run off the line