Closing Bell - Closing Bell 2/27/23

Episode Date: February 27, 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.

All right. Thank you very much. Welcome to The Closing Bell. I'm Scott Wapner. This make or break hour begins with stocks trying to hold on to gains after an up and down session. Here is the scorecard of where things stand with less than 60 minutes to go now in regulation. Volatility, the name of the game again today. Interest rates remaining at multi-month highs. And that is capping the action in stocks, which are trying to rebound from the worst week of the year. And that brings us to our talk of the tape, whether it is once again time to be bearish, as so many are, or bullish, like some of the most steadfast optimists are attempting to be. Let's ask Victoria Green, G-Squared private wealth chief investment officer, also a CNBC contributor, and with me right here at Post 9. Welcome. It's good to see you in person

here. You describe yourself as a reluctant bull, though it was like two weeks ago, not even, that you said we're in the beginnings of a new bull market. I know, I know, and I'm so reluctant to say we're in a bull market, but you can't ignore what the technicals have done. If you look at where we put in potentially a lower, a higher high and a higher low, sorry, and when we look at the markets, we look at the tape, you've got to look at this and say, hey, we're holding here. We're holding at the 200-day moving average. We're holding at the retracement levels. We're holding that new potential uptrend, downtrend line. And so you can't fight the tape on this one. And earnings, most likely, we are going to see

revisions start to kind of go positive. We think earnings revisions are going to bottom out here in Q1. And then once the earnings revisions bottom, which we've seen right now, they're holding water in February. So you're calling for a trough in earnings right where we are now. I am, a little bit. I know, I know. It's scary, it's scary.

I get it. We don't have the fundamentals necessarily to support it, but everybody hates the beginning innings of a bull market because it makes no sense whatsoever. There's nothing really supporting it on the fundamental or the macro side. It feels like the bullish case is like the talking points around it are much harder,

right? Positioning is not what it was to start the year. Hedge funds aren't really giving you a bid right now. And I would say even technically, right, we're watching S&P as we're having this conversation. Gave up 4,000. We broke the 50-day. It's not like the multiple on the market is cheap either. Never got super cheap. But remember, I remember a couple of months ago we were talking about this when we were in the bear market and you said, well, can the market rally without tech? And the answer was no. Obviously, you can't rally without the big cap, mega cap tech. But now, can you have a bear market if tech is rallying? And I don't think you can. And right now, there's a lot of reason, a lot of momentum behind mega cap tech rallying.

And so I think it's almost the inverse of what we saw in October when markets were coming down. You couldn't fight it with the big cap falling apart at the end of Q4. But now, tech is what's leading us out. And it's the same thing. Don't fight this bull market. Don't fight these mega cap leadership. Okay. Now, I want to bring up something that dropped just a little while ago.

OK, it's from Marco Kalanovic over at JP Morgan. Right. He's one of their big strategists there. And when he talks, people pay attention. And it has had at a time the tendency to move markets. I want to read you what he wrote, because I want your reaction to it kind of flies in the face of what you're arguing, which is fine for a debate. History implies that for the current level of real rates, the S&P 500 multiples two and a half times overvalued. Higher for longer rates create negative externalities,

including demand destruction, lower margins, higher interest costs for leveraged assets, especially real estate and small caps, and asset write-downs and credit losses. As such, risk-reward for equities remains poor in our view, reinforcing our underweight equity stance. This is from somebody who was bullish for longer than most until he saw the writing on the wall. And I get that. You are fighting some macro headwinds.

Without a doubt, if you were to look at the technicals, the fundamentals and the macro, the macro headwinds are huge. And you're looking at that inflation looks entrenched. And I get that there are problems there, but the consumer hasn't broken. Everybody's waiting for the consumer to break. When is consumer spending going to break? When are we going to see unemployment break? It hasn't broken.

So I look at some of this and say, they're expecting this to roll over and die, and equities and the econ have been stronger than anticipated. I call it a Teflon market. When you look at it, yes, we are expecting the consumer, the spending and income ratios haven't been where we want to see them. But if the consumer doesn't break, you're not going to see these things happen. And the consumer has been extremely strong. And so I'll bet on the U.S. consumer. How do you counter what he calls this bond equity divergence? Right. You've had rates move higher. Sure. And for the most part, stocks have yawned

until now. Until February. Yes. And then the most part, stocks have yawned until now. Until February. Yes. And then we saw the correlations increase. One, I think the dollar is still going to roll over. And if you look at the headwinds, yields coming back up, dollars coming back up in February, we went back to trend and that was back to 2022 trends. But I think if you look at this, a lot of it, I would say, is more dollar than yields because the dollar comes back down. That helps everybody in multinationals. And yeah, I do think yields were testing, but we couldn't get back above four on the 10 year. That ceiling held. So I don't think necessarily yields are going to go higher. And I get the yield cover inversion. I understand that looks really, really ugly. But I think if you step

back, you realize that there are a lot of positives in some of these stocks and I'm not going to fight a mega cap tech rally. But how do you make a credible case now? And let's just go with the bond idea. How do you make a credible argument right now that stocks are more attractive than bonds, for example? We're not. We're long bonds. We think bonds are going to have a good year. We think this is a great year for fixed income. We like the treasuries. We like some of the credit. I think credit spreads are a little narrow right now to load into credit. But I do. I think there's going to be a time and a place for duration. I do think equities are attractive, but I think you want to maybe look a little bit growthier because you aren't getting

paid your dividend yield on the S&P 500 well below the 10-year treasury. But I think you're going to see these rallies happen. I'm not saying throw it all in. I'm not advocating that this is, you know, going to be a stampede. I'm just saying I think the lows are in, and I do think this could be a decent year on the market. Doesn't mean we're not going to have corrections at all or consolidations like February. We may see a little stumble here or there. Generally, though, I'm bullish and I have become a buyer of these dips versus a seller of RIPs. You're a big believer in, you know, this mega cap move. Why do you think it can continue, especially if you say, OK, well, some of it was positioning

because nobody was positioned for that. Rates went down, those stocks went up, and now we're normalizing yet again. And it's only a matter of time before the mega caps and the rest of technology and the Nasdaq, by the way, roll back over. Oh, did it? No, no, no. I'm saying it's only a matter of time. Some say before that happens. Right. Hasn't happened now. But why do you think it will continue? Because I think we're capped out at four on the 10 year. I don't think yields are going to move higher, even if the Fed goes three times now instead of two. I think you've got that June hike coming in because of the sticky inflation. But I think we've we've reached probably peak rates in the 10 year.

We can have these periods of up and down volatility, but I'm not about to fight that. I think those the lows are in. I think we've got some good, you know, where our resistances are now our supports. And I do think so look at this. The sectors that led us last year, you have energy, you had industrials, especially energy two years in a row. We still like our energy companies. They're just out of favor. Historically, you don't see a sector lead the market for three years in a row. You saw people jump in. Wouldn't we all like a time machine and go back and buy Facebook and Tesla in October? Like, who wouldn't want to go back? But some of that was they got cheap.

They got repriced. And I'm not going to fight some of these momentums. If you look at short interest, if you look at where they're trading, know their PEs are expensive. Nothing got super cheap. And that's the argument that the bears have right now. We never got super cheap. We really never hit fully oversold like a

14, 12 time. Never had a crazy capitulative moment overall in the market, which some say is still yet to come. But let's bring in Mira Pandit now of J.P. Morgan Asset Management and Nicole Webb of Wealth Enhancement Group to our conversation. Ladies, it's great to add you here post nine. So, Mira, I mean, you've heard this topic. I read you Kalanovic's note. What do you make of it? I'm not sure that we have to retest the lows that we saw in October, but we still be a little bit cautious from here. And here's why. If we think about where we came into the year, markets were pricing a terminal rate of the federal funds rate at about 4.9 percent. Today, they are pricing 5.4 percent. And yet we haven't seen a huge sell-off associated with that repricing. So I'm a little bit nervous around the fact that the market is still up year-to-date.

That's kind of what he's pointing to, right? This divergence of, as you say, these rates moving up in the equity market, sort of just whistling by the graveyard, so to speak. Either the stock market is going to hold in remarkably well, or we're in for a little bit of incremental downside. I would be biased towards a little bit of incremental downside because we've continued to see that markets are reluctant to give up rallies when they happen. And I think that we need to see a little bit of capitulation there, not a massive amount, because, again, the journey we've been on is from 0% rates

to 4.6% rates here. The Fed is moving from power to finesse. So what we're seeing incrementally here is the fine-tuning, and therefore I think the market also trades in a bit of a tighter range, which is why I don't think we have to go back to $3,500. But at the same time, right now where we are feels a little bit too optimistic. Nicole, how do you see it? Wide range bound rest of the year. Really flat market overall.

And with that that just the consistency thematically here is the market hasn't really responded to pricing in as high of a terminal rate as we're all talking about we went into the year expecting five and a quarter we're starting to change our tune that we might push further the Fed is firm in its regard that it is managing to 2% while we're having conversations about is 2% even real given the changes to the money supply? We have to price that in at some point. Whether we test October's lows, we don't really buy it,

but range bound here on out throughout the course of the year. I mean, S&P, NASDAQ now at session lows as we keep our eye there as we have the conversation. Now, Victoria, even you admit that the Fed isn't done. No. You're going to get, what, three more hikes, 75 basis points total. So you go from what is eight is not enough in terms of hikes. You get to 11 hikes and we're still going to be in a bull market.

Yeah, because that's what's anticipated now. If you look at how the market absorbed this, hey, the PCE numbers or the inflation numbers on the job print, it said, OK, we're putting in another hike and it barely blipped. I mean, yes, it's gone down. It's been down in February 200 basis points, give or take whatever index. But it's also been able to absorb it because it sees an end in sight, though I did hear a really great analogy. I have to credit the man group on this. You know, the Fed's going to go after inflation like Terminator and Sarah Connor. So you've got to go full bore on Terminator. Got to go ahead and put him in the low molten lava lake. You can't leave any bit of inflation around.

You've got to kill it. And so I do think the Fed is going to be in kill mode, and they're going to stay higher for longer. I also think that's priced in. I think the only thing the market hasn't priced in is a bad earnings recession or that we see a hard landing. Or a recession to begin with. Or a very hard landing.

That's fair. What do you think is priced in to the market right now, Mira? I would agree that we aren't seeing the worst of things priced in in terms of recession. Even a mild recession, I don't know, is reflected in the price right now. At the same time, I don't think that we're totally priced in for the upside of avoiding all this. We don't think we're going to avoid a recession. We still do believe that the economy falls over in phases, and we're in those early phases where things like housing and manufacturing are weak. Profits are weak and getting a bit weaker. Employment is still very strong, but we can't hang our hats on that too early. So we still

want to be prepared for the fact that things could get a little bit worse. But has housing rolled over? I mean, we had eight and a half percent increase in new home pending new homes. Well, I mean, let's not act like the party's restarted again. I mean, rates have come down. It was a one-month thing. Let's back it up with another solid month as rates have moved a lot higher before. One month? No, I'm just kidding.

We had two GDP quarters where you had a 25% contraction in that housing component. And we have seen a lot of the numbers roll over pretty significantly on a year-over-year basis. There's some bit of upturn. And I will fully acknowledge that we've seen some more momentum in the economy over the last month. But look, when you order a cup of coffee, it comes hot. Fifteen minutes later, it's a lot cooler. I think that's the trajectory the economy's on. So how, Nicole, would you address this idea that bonds have gotten just too attractive versus stocks, which carry too much risk, too much unknown. So why even bother at the moment when you have a much more attractive alternative?

Because the pivot point is too sudden. And I think that's where it's investing, not trading, becomes the narrative for this year. The buy and hold analogy, going back to some of these other points, I think what we're seeing is strength in the top line, weakness in the bottom, labor costs continue to adjust for that. How that flows through across sectors is going to be important.

So when we talk about a cooling economy, the strength and the resilience of the consumer is predicated by the strength and resilience of the labor market, which just pushes on that wage growth aspect. And so it is hard to price in a recession until we see some movement in the labor market. And I think that is where Wall Street is hanging its hat right now.

That's why the robustness of investing in equity is because where are you putting the money when those treasuries come due? So, Mira, even though you think you could get some incremental pullbacks, you do suggest that it's OK to buy into some more favorable valuation areas in the market, which are what? That's going to be the hardest question for people to try and figure out what is cheap enough. When we think about what is cheap enough on the equity side, we're certainly seeing that from an international perspective. We're seeing international stocks traded a 28 percent discount to the U.S. Usually maybe you see a 10% to 15% discount. Because that is so pronounced, I think there's some more room to run,

especially because I think that is where you might see some positive, not only growth surprises, but also potentially earning surprises. The Fed pauses. The dollar comes down a little bit more. That should also be a tailwind. And, you know, when we think about the cyclical sectors and some of the areas that can do well in an environment where inflation is high, where rates are higher. You have 40 percent, 47 percent cyclical exposure in Europe. You have about 27 percent in the U.S.

So to get a little bit of more balance and diversification at a good price, I think you see that in international stocks. And then, again, bonds. I mean, when you have yields at this level, we had a lot of clients saying at 3.4 percent where we were just a month ago, oh, I missed that opportunity to get into the bond market. That's my point. Here it is. Here it is. Right. If you missed it here, you got another great opportunity. But let's finish on the idea that Victoria puts forth about tech, right, that maybe this move that we've had, this, you know, counter trend move in technology to start the year is sustainable, which it has to be in your

mind for this rally to actually be a legit bull market. Do you, Mira, believe that it is or not? It doesn't sound like you do. I think there are a couple of conditions that we needed to see in mega cap tech. And I think we've mostly seen some of them. So valuations came into last year very high. They've reset quite a bit, still expensive in some places, so want to be a little bit cautious there. We have a much more realistic expectation of what some of these companies can do from a profits perspective. And they're making some of the necessary tweaks to hiring and expenses in order to bring that further in line. And we will get a pause in rates at some point, and that should alleviate some of this uncertainty around tech. So I don't necessarily think tech is a bad place. but what I would say is if you own U.S. equities,

you probably own a pretty good slug of tech already just because of the concentration in the index overall. So something to be mindful of in terms of how much exposure you have versus how much you want, especially because those growth rates from the last 10 to 15 years in tech are probably not going to repeat themselves in those same companies over the next decade. All right. That was great. I love the conversation. Thank you all for being here, Mira, Nicole and, of course, Victoria. Thank you. All right. We are just getting started here on Closing Bell. Up next, quote, economically illiterate legendary investor Warren Buffett slamming buyback critics. We will debate that and break down what it could mean for your money, which brings us to our Twitter question of the day. We want to know. This is a simple one.

Are you in favor of share buybacks? You can head to at CNBC closing bell on Twitter. Vote yes or no. We share the results a little bit later on in the hour. You are watching Closing Bell on CNBC. We're back with 40 minutes left in the trading day. Let's get a check on some top stocks to watch as we head into the close. Christina Partsinovalos is here with that. Christina. Well, just in the last few minutes, Scott, we've got two big developments on some new deals. First, private equity firm EQT is nearing a deal to buy Radius Global Infrastructure for potentially more than $14 a share. That's according to Bloomberg. That report sent the stock soaring just over, what is it, 16%.

You can see just after 2 p.m. the stock is now trading at $13.63. And now for that other deal. We could see the FTC step in to block Intercontinental Exchange's $13 billion takeover deal for mortgage data company Black Knight. Due to what? Antitrust concerns. And that's according to Political. Black Knight shares dipped lower than the news came out this afternoon as well. You can see down a little bit over 13 percent. Scott. All right, Christina, thank you. See you in a little bit. Christina Parts in Novalos. Well, the war on share buybacks drawing in a major new player to defend that practice.

Only the world's most famous investor, Warren Buffett, writing in Berkshire Hathaway's highly anticipated sharehold letter this weekend. When you are told that all repurchases are harmful to shareholders or to the country or particularly beneficial to CEOs, you're listening to either an economic illiterate or a silver-tongued demagogue, characters that are not mutually exclusive. Well, joining me now, CNBC contributor and Serity Partners chief equity strategist Jim Labenthal and Ed Yardeni, Yardeni research president and the co-author of the book, Stock Buybacks, The True Story. It's great to have you both with us.

Ed, as we say, you literally wrote the book on buybacks. What is the truth? Well, the truth is more complicated than the politicians care to understand. Some of the buybacks, I estimate about a third of the buybacks are actually associated with employee stock compensation plans. So when they pay employees in stock, they're trying to avoid dilution. They're not trying to increase the earnings per share. They're trying to avoid a decline in the earnings per share by doing that. Now, the legislation that I've seen, tax legislation and all that, does seem to understand that.

But then the other side of it is stock buybacks are just another way of returning cash to investors. And it's a legitimate way to do it. And it certainly is an alternative to dividends. And it benefits everybody and anybody who happens to own stocks, not just the CEOs. So Buffett is right on. What kind of tax advantages, though, does a company have for doing buybacks? That's what some of the pushback would be. Well, I think that clearly when they pay out the dividends,

then the investors have to pay tax on the dividends. And so if they buy the stocks back and that has a positive impact on their shares, I guess there's really no stock. There's no tax implications right right up front. But that's something that the tax laws maybe need to address rather than politicians need to address with a tax increase. Jim, you ever buy a stock because of a buyback strategy? I don't buy it because of the buyback strategy, but Scott, I really like buybacks. What it does when it's executed properly is it concentrates the amount of earnings that I as a shareholder retain.

Now, Ed pointed out something that a lot of times these share buybacks just sop up excess shares that are given out by share-based compensation. I don't really like that. I like a company like Apple or a company like Citigroup, and this may surprise you, but both of those companies, you look at their annual reports year after year, their share counts go down. Probably doesn't surprise you with Apple. It does surprise you with Citigroup probably. But the point being is that I, as a static shareholder, am now getting a larger percentage of the earnings than I otherwise would have. So I like share buybacks.

Would you rather own a company who had a good dividend or a good buyback program? Buybacks, because of what Ed was pointing out. Really? Because of what Ed was pointing out. If I get the dividends, I get taxed right then and there. If I get the share buybacks, I now have an increased share of earnings that may or may not be paid out in the near term. Maybe they're going to reinvest in the business and give me even greater dividends way out in the future. But those taxes are now pushed off. So the tax advantage that Ed points out is very much felt by me in preferring buybacks. So, Ed, what would your response be

when you hear an investor like Jim Labenthal say, I'd rather buy stock in a company that has a great buyback strategy rather than a dividend? Well, I think in many ways, the buyback strategy of corporations solves the problem of the double taxation of dividends. I mean, the money that you get as an investor's dividends has already been taxed at the corporate level before they were able to pay that out. It comes out of after-tax corporate profits. And then what's left is retained earnings that goes into corporate cash flow. This notion that the buybacks are at the expense of employee compensation or that it's at the expense of proper capital spending is ridiculous because the reality is that, you know, this, particularly now in this very tight labor market, workers are certainly getting their share of the pie.

And at the same time, corporate capital spending has been basically at a record high. But I mean, the other, if we want to call it truth in all of this, since, you know, that's how your book was was titled just because a company had buybacks is stock doesn't mean that it was done at the most advantageous time doesn't mean that it was necessarily quote-unquote cheap when they did it and certainly doesn't mean that it's going to have some accelerated you know route higher as a result of a buyback does it well we don't really have, I haven't seen data where it breaks out the buybacks between companies buying back shares to increase their earnings per

share versus companies buying back shares to offset employee stock compensation to avoid dilution. If we had that, I think we'd have a better handle on exactly what the buybacks really are all about. And I think we would find out that a majority of them are, in fact, related to trying to increase earnings per share as an alternative to paying out dividends as another way to pay shareholders. And then I think a substantial amount is also used for stock employee compensation. Maybe all buybacks, Jim, last word to you, are not created equal. Maybe that's part of the moral of this story, too. That is part of the story. So, and Ed's pointing it out, and I think this is what you're alluding to. I don't like it when there's a huge

buyback program, and I look at the share count on the quarterly or annual reports, and it even goes up. That just tells me is that they're sterilizing the issuance that they've been doing in share based compensation. Also, just to the point that you and Ed were talking about, yes, sometimes companies buy back shares and then later the shares go down. But let's face it, in the grand history of time measured over decades, a well-run company, i.e. a company that would generate cash with which to buy back shares, generally their share price goes up over long periods of time. Yeah, there's your big list this year of the stock buyback announcements.

There's been some massive ones, as you see Chevron and Meta certainly leading the charge. And that's really when you start to get the the ire of politicians, to say the least. But this is a debate that will be continued. Ed, thank you. Jim Labenthal, our thanks to you as well. Up next, trading the swings. Bank of America's Chris Heisey is back. He gives us forecasts for the Fed and how you can best position your portfolio amid the uncertainty. We are back on The Closing Bell right after this. All right. Stocks are trying to stage a rebound today with the major averages coming off their worst week of the year. Our next guest says investors should remain patient to take advantage of further weakness in the coming months.

Joining me here post nine, Chris Heisey, Maryland Bank of America, private bank, CIO. Welcome back. You know, we tried to bounce today and we're not doing that great of a job of it. We're only 33 points higher now on the Dow. Risk reward still not good? It's not bad, but it's not bad. The risk reward, you know, there's still a big fluid environment out there. We characterize as being humid, which is there's a lot of distortion still trying to renormalize. We all talk about them. Right now, that seems to be at the top of the list is yields, trying to renormalize the back end, at least heading a little higher, putting pressure on risk assets. But I'm not going to say this is typical of a workout after a cyclical bear like we went, because nothing is really typical right now. You're not looking at typical capital markets repricing something in that we haven't seen in a long time.

So for us, the risk-reward is not bad. It's not great. But how is it not bad if you point out what rates have been doing? It seems as, you know, some are suggesting, as I read earlier, you know, this Kalanovic note, Marco Kalanovic, right? Yep. That the fade-the-bond equity divergence. Bonds are telling the right story. Equities haven't woken

up to it yet. Thus, risk reward for stocks isn't that great. Well, I ask the question, what haven't equities woken up to yet? I mean, did the move last year indicate that where earnings deterioration is going to be this year? Maybe. And right now we're just backing and filling because investors are trying to reposition portfolios for the next cycle, not necessarily the cycle we left. So there's a lot of room to go there. And the big market cap sectors are what's pushing pressure down. But when you look at the old economy areas, the market cap there isn't as large. So we can't get out of our own way. So it's a backing and filling type of environment. And weakness this year, in our opinion, should be bought. Oh, so you're a buyer of weakness, not a seller of strength.

That's correct. Yeah, we're a buyer of weakness to prepare for that next long-term bull market. And that should be driven by real earnings versus PE expansion. And if you get real earnings, that's a much better bull market than PE expansion. Well, how much weakness do you think we might get that'll give you a greater opportunity to buy into? There's three or four different big scenarios that can play out. I'm not going to even talk about soft versus hard landings because the reality is it's probably somewhere in the middle when you roll it all together. So you could see another five, possibly

10% weakness. Regardless of what the weakness is in terms of its magnitude, we have to think about what's the driver after that weakness. And if you believe it's earnings and free cash flow, in equities at least, then you need to buy it. Now, secondly, in yields, there's a bull market in yields as well. Look at what the front end is giving us, the opportunity to gain cash flow, to take that cash flow and reinvest it back into equities. That's why I'm saying people who say, well, the risk-reward is better for stocks,

then go right to, well, the bonds are attractive. Where's there more value right now? Bonds or stocks? Where's there more value right now in the very, very short term for the next, say, three or six months or so? I know, but those opportunities have existed for the prior six months too, have they not? Not necessarily, because yields have been going back and forth. They've been on a constant move up at the front end. The back end is telling us that some sort of a recession is coming. So what do you want to do with duration? You probably want to begin to extend duration at these levels. Use the front end of the curve, get the cash flow, reinvest those in longer duration assets, which happen to be equities and the back end. Give me your best've got to go. But best idea in equities right now is what?

Old economy. Old economy. Energy and infrastructure. And industrials, which have... Industrials, part of the industrial sector. And at the heart of that is automation. All right. It's great to see you. You too, Scott. Thank you. It's good to have you back. That's Chris Heisey joining us. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is standing by with that.

Christina. Well, we have more regulatory scrutiny that could kill a major media deal. I'll explain who's involved after this short, short break. We've got 20 minutes or so before the close. And there you go. There's your Dow, which may just go negative while we're having this conversation with one another. The Dow was good for 373 at its peak, but it's basically given all that back. We're watching rates, which are at multi-month highs.

NASDAQ has been the leader today, but it's given up a lot of its gains, too. So we'll just keep our eyes peeled to the market over the final 20 minutes of regulation time, as we say. In the meantime, let's get to Christina Partsenevalos for a look at the key stocks to watch. Christina? Well, let's start with shares of digital media firm Tegna. They're plunging right now, almost 20 percent lower after the Federal Communications Commission requested more scrutiny on Standard General's bid to take over Tegna. The extra scrutiny has investors worried the deal will be less likely to be cleared, forcing Tegna to pay at least $136 million in break fees. Sticking with media, Dish Network shares are about 7% lower right now,

hitting the lows of the day after two price cuts came from JPMorgan analysts as well as RBC, and that's on lack of wireless momentum. However, the company itself also reported a systems issue on February 23rd last week, and the service is still down. I just went and checked Dish.com. Not working, and it's one of the worst S&P performers today. Scott. All right, Christina, thank you. Last chance to weigh in on our Twitter question. We want to know, are you in favor of share buybacks? You can head to at CNBC closing bell. Please vote yes or no. We'll bring you the results after this break. Let's get the results now of our Twitter question. We asked, are you in favor of share buybacks? And more than 70 percent of you said yes, which is interesting because I was actually

thinking it might be even higher than that. But thank you for voting. Up next, top tech plays for your portfolio. Annandale Capital's George C. back with us with the best ways to play that sector, that and much more when we take you inside the Market Zone. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, George C. of Annandale Capital gives his tech outlook and top stock picks. Meg Terrell on a potential mega deal in the biotech space as well. It's good to have everybody here. All right, Mike, I want your

opinion of the Kalanovic note late this afternoon. Risk, reward, bad. Time to fade the bond equity divergence. What do you make of that call? I think what we've been doing for three weeks is seeing bonds kind of drive a little more hesitation in stocks. So whether we have to precisely reconnect at a certain index level that corresponds to where bond yields were, I'm not sure. Now, the idea that we added a projected Fed rate hike over the last couple of weeks due to strong data and that somehow stocks should radically reprice according to that. Well, I don't know. As I pointed out, the S&P was at this level last May. That's before we got the last like three or four hundred points of basis points of Fed tightening. So why are we supposed to radically, you know,

go down on another quarter point out in front of us? Right. So I don't know that there's a precision way to tune where stocks should be based on the bonds. But I also don't think there's some kind of comfortable margin of safety in this market. But he would say that maybe it's not on each incremental move. It's the collectiveness of higher for longer brings things that are being underappreciated by stock investors. It's a very fair point. And I think that it's a reason that you should be open minded about the fact that we have not really seen the full reckoning on that. So, again, the most bullish people out there are the ones that looked at the technical performance of the market in January. Beyond that, I think it's a lot of, you know, well, it's not so bad. Maybe

the cycle lasts a little bit longer. Nothing wrong with a strong economy. It's a tougher trade at $4,000 on the S&P than maybe at $36,000. All right, George C., Annandale Capital, you own a lot of technology stocks, which I think are in the crosshairs right now. NASDAQ, for example, yes, it's leading today, but just feels more uncertain because of the move that Mike was just talking about in rates. Are you concerned? Scott, I think the market is really uncertain as to what it wants to do right now. Obviously, the art complex and growth stocks and tech stocks have wanted to rally since the start of the year, and we had a massive short squeeze and all that. But nobody really knows what the Fed is doing. Sometimes markets are conducive to bottom up stock picking where

there's some clear differences in prices and attractiveness. Right now, I think we're really a macro story until the Fed's done. I don't think anybody really knows what to do. And will the Fed stop at five and a quarter or five and a half or six or six and a quarter? Nobody knows. And what that terminal number ends up being is really going to affect when stocks are attractive. So the market chops. But that sounds like a tough place to be for a growth investor like yourself. Yeah, the good news for me is I'm a barbell investor. We've got quite a bit of value stocks, commodity stocks, underpriced securities, as well as our technology exposure. So we're kind of in a barbell situation.

So we've got a little bit of both. We never want to have one foot all the way on one side and none on the other side. So what we've been doing on the technology side is emphasizing blue-chip tech stocks and maybe trimming some of the more fast-growth speculative tech stocks. We're out of Netflix at this point. We're out of Tesla. NVIDIA and Tesla basically doubled overnight. I mean, it's just been crazy.

So they're much less attractive than they were a month or two or three months ago. But we're looking really hard at Texas Instruments. It's not cheap, but it's not expensive either. And I've liked Qualcomm for a long time. So we're playing a little bit of chicken tech right now. Some of the lower priced, more blue chip, slower growing names of tech. You know, I thought it was really interesting what Kathy Wood had to say today, George, who's been trimming some NVIDIA.

And, you know, people always pick it, you know, the way that she picks stocks. And they say, oh, look at what she's got. So many of these things trade at ridiculous valuations. But she mentioned NVIDIA loves the company, loves what they're going to do. They're at the pinnacle of what you want in terms of AI, but said, you know what? I don't know. Valuation's not that attractive, even in a name like that. What do you make of that? I think Kathy gets made fun of a lot by investors because she's picking these incredibly high growth names that have huge multiples. But she strikes me as a very high quality person. He's got really good judgment. Her track record, except for last year, obviously,

has been really, really good. So if I were an investor and she's trending a stock, I'd pay attention to that. What about, what do I do with some of the mega cap names, which she's obviously not known for, but the ones have also had a pretty good year? I mean, you used, you know, the words short squeeze. Now, I know that you weren't directly relating the move in technology and some of the mega cap names to short squeeze. They're not the more highly speculative names or the ones with high short interest. But nonetheless, they've done really well. Is that sustainable or not? I think the market's going to chop. I think we're going to have periods of dramatic moves to the upside with people hoping that the Fed's nearly done.

And then I think we're going to get pretty significant sell-offs this year. And I think it's going to frustrate the maximum number of investors because I think we're still in a workout period. Until the Fed says we're done and you're not going to get any more rate increases, you might actually get some rate cuts. I think the market's going to have a hard time sustaining forward momentum. Well, I don't know when the Fed's going to come out and say we're done, but it might be a while. George, appreciate it. We'll see you soon. Meantime, Pfizer reportedly in talks to buy biotech firm Cgen, a deal said to be worth more than $30 billion. Let's bring in Meg Terrell with more details here.

What do we know, Meg? Well, Cgen is a company that has been in the crosshairs of M&A before, but that fell through. Last summer, there was talk of Merck and Cgen potentially heading toward a deal. You can see now Pfizer getting a little bit pressured on this report, which came out from The Wall Street Journal, about potential early stage talks between Pfizer and Cgen. Cgen up there almost 11 percent on this news. This would be a more than $30 billion deal because that was its market cap before this report came out. And of course, the stock has been pretty volatile amid all of

this M&A talk. And after that Merck talk fell through after the summer last year, they hired a new CEO, not somebody who is seen as somebody just brought in to sell the company, but potentially to keep building the company. That's David Epstein from Novartis. So we'll have to see how this transpires. But we do know that Pfizer is a motivated buyer. They have stated a goal to add $25 billion in revenue by 2030 to help sort of combat a cliff from patent expirations and also the change in revenue they're facing from the sort of lack of use of their vaccine after the acute stage of the pandemic. They've already added 40 percent of that goal through deals including Biohaven, which was more than $11 billion last year, and Global Blood Therapeutics, more than $5 billion.

So Pfizer potentially looking to buy here, but this is early stage, and we'll have to see how this pans out. Scott, separately, I do want to call your attention to some late-breaking news this afternoon that's pressuring a handful of biotech names. These are all focused in the neuroscience area. And it's because the FDA, which has now confirmed to us, said that their head of neuroscience division is leaving. This is a guy who is closely associated with real flexibility around neuroscience drugs. This was first reported by Stat and Endpoints. You can see Riata Pharmaceuticals down there the most

because they have an FDA decision date tomorrow on a drug, and there's a lot of speculation this is somehow related to that. But I was talking with Miles Minter at William Blair, and he said it's very likely the decision was already made there, and that is not actually something related. But you can see that not just that company, but also Amalix and Sarepta, other neuro focus names also getting hit hard here by this departure of Billy Dunn. Scott. Wow. Yeah, we'll closely watch that. That's a really interesting angle. Appreciate you bringing that to us. Meg Terrell. All right. You want to go pine on? I

mean, deals, deals are going to start happening again. They just got to be really specialized in the really right place. Yeah, and this is, again, the model. And we were talking about Pioneer last Friday as well, where it's like the big, slower-growing, good balance sheet company being opportunistic in certain areas. I think we're probably due for a little more in biotech and pharma than we've had for a while.

But, yeah, market stabilizes for a few months. Probably see a little more of it. All right, the other thing I want to mention, Zoom video. Obviously, it's way off as pandemic highs heading into earnings in overtime today. ARK Invest, Kathy Wood is still a believer. That stock, the second largest holding in her ARK Innovation ETF. This Wood shared her bull case on Squawk on the Street earlier. Listen. Zoom and Microsoft are going to take this market. It's a $1.5 trillion market per year. And so when people say, oh, well, Teams is going to kill it, no one's going to rely on just one service for communications. And we do believe that Zoom is

very creative and with artificial intelligence is going to deliver some very interesting products and services over the next few years. All right, that's Cathie Wood. I mean, it is one of these words that have made its way into the lexicon, right? You're going to Zoom somebody, like you're going to Google something. Is she right? Yeah, this is what survival looks like. I don't know if it's what rapid growth or thriving looks like for a company like Zoom. I don't know where the

$1.5 trillion a year is coming from. She's saying that's the market size. All global enterprise software is like $800 billion a year right now. So it's probably, you know, encompassing all communications of all types. Nonetheless, Zoom only has $4 or $5 billion of revenue of it. So there's plenty of room overall for it to grow. It's like 20 times earnings. It's like single digit percentage growth. It's a boring story now, but not necessarily in a bad way. It's just kind of, you know, making progress. I do think she's probably right. It needs another act.

It needs to actually find a way to do more than just be a player along with Microsoft in this kind of commoditized world of connecting people by video. I mean, the epitome of a post-pandemic stock, one that still will likely have a lot of relevance. It's just what do you pay for it? I think of DocuSign in very much the same light. We're not going to go away from DocuSign. But as a stock, what are you willing to pay for it? That's exactly right.

And, you know, again, Zoom has done probably a lot of what has to be done. What I find interesting is the street is pretty negative on Zoom. You know, you only have like, you know, 20, 30 percent of the analysts recommending it. So it seems like it's been enough of a frustrating story. Of course, they're doing some big cost cutting after saying they might not have to. So it's, you know, there's some messiness in there. But I think it's much more of a stable business than was given credit for a while. The other thing that Kathy said today, which I thought

the whole interview was interesting, because anytime she talks about her portfolio or the world, you can't help but pay attention to what she says. The idea that, you know, this is not that, when she referred to the bust of the dot-com and the telecom thing, when talking about the great upset, not only in her portfolio last year, but just in the types of stocks that got absolutely destroyed. I don't know why you would shy away from that conclusion if you look at the way that the hyper growth segment of the NASDAQ looked a whole lot like the NASDAQ did in 2000 to 2002, after which most of the damage was done. Not all of it, but most of it was done.

We are two full years past the peak in those types of stocks. So to me, it is a similar type reckoning, probably not the same magnitude. I think she would probably argue that the businesses, because they're more software oriented, are better. It's not like back then when we're talking about communications equipment. It was cyclical hardware stuff. There was a lot more leverage in the NASDAQ back then versus now. So I get that there is a compare and contrast. But in terms of that long multi-year period when you're trying to pick up the pieces and figure out which ones are worth holding for a longer period of time, it's kind of where we are. M&A is going to be part of that.

Private equity is going to be part of that. And companies going away is probably going to be part of that. We just had our two-minute warning, if you will, as you probably saw on your screen. I'm watching yields, too, Mike. The two years at 479, almost 480. Ten years getting a lot of chatter today at 392. This is going to be the thing that drives the train. There's no getting away from that.

They're taking a breather today, but it's not really persuasive. I think you'd want to see some downside moves. The two-year especially, because, you know, that's the one, it was up earlier and it actually is the one that's been stickiest. So that's where the, you know, the battlefront is to some degree. There's a certain level at which you can be okay with it if that's where we're going to stay, right? I mean, it's always the case. Massive high velocity moves, huge swings in fixed income volatility. That throws everybody off balance. And right now it's about, you know, how are the data in February going to confirm the story of January of like an overheating economy in some areas? You want to leave us with a thought just as you as we said earlier, you know, you had plus 375 on the Dow.

And OK, we got back to the flat line, but now we're up about 74. What do you just make of the action today? It's one of those deals where you've got a Monday morning pop, and then all day people are waiting for the index to go back and revisit the opening to see if it was real. And so we're bouncing off that. We're just hovering above support. I do think that's relevant.

Probably no month-end flows to speak of in one direction or the other, because both stocks and bonds were down this month, so usually that doesn't mean major rebalances. Yes, they're going to close below 4,000 on the S&P. That's it for us. I'll see all of you tomorrow.