Closing Bell - Closing Bell 3/1/23

Episode Date: March 1, 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, Kel, thanks so much. Welcome to The Closing Bell. I'm Scott Wapner. Our make or break hour begins with a countdown to some key events today. Tesla's highly anticipated investor day and earnings from Dow Components, Salesforce amidst a flurry of activist activity and questions about that company's road ahead, both less than 60 minutes away now. We will also debate the future of value investing.

What David Einhorn told me earlier today in our exclusive interview, how it could impact where you put your money in the years ahead. Let's check the scorecard as we begin this last hour. Rates very much the story again today. That 10-year note yield reaching 4%. So what will the fallout be for stocks? That is our talk of the tape today. Let's ask Adam Parker, the CEO and founder of Trivariate Research. He's also a CNBC contributor, and he is with me at Post 9. I don't even have stocks pulled up on my screen. I have treasuries, and I'm staring straight at the 10-year because

that's where we're at. Four percent, we're going to call it that, hasn't been there or closed above that since November. Is that the big story? I mean, our research this week, what we published to our clients was no matter where you were three, four months ago, it's very, very hard to be more optimistic now than you were then. Reason number one, interest rates, as you point out, and perceptions about rates. When we were at 4% in November, the market was two and a half turns cheaper. The valuation's really expanded. Speculation has gone rampant, right? Bitcoin's up 40% from the lows. ARK's up 40%. So you can't argue speculation isn't more rampant.

Valuation's more rampant. The two-year yield is more or less at a 17-year high or plus or minus. 489, so basically 490. Right around 2005 to 2007 levels, right? So that's an attractive alternative. And I think the thing that's also come in recently that's made me a little more cautious is the 2024 earnings estimates have now been sort of posted. Analysts got the year-end 22 numbers. They sort of sharpened the pencils. They posted 12% earnings growth are now in the numbers. So I think you're worried about a V-shaped

recovery in the numbers that doesn't feel likely in terms of an eroding economic backdrop. So I'm looking at now saying, okay, wherever you were three months ago, the rate environment and perception about rates is worse. The earnings expectations are more optimistic. Speculation is more rampant. Valuation is less compelling. So the bull case is harder to articulate. It's probably something like we modestly have a decline in CPI. Instead, the Fed kind of pauses and then positioning is offside. Yeah, but you're searching hard, though, right? It's not a great, it's not the most compelling bolt case where a few months ago you could have one.

Hey, you know, and I think that's what's changed and that's why we wrote that note. So David Einhorn, I mentioned, he was on with me on Halftime Today, exclusive interview, said rates are going higher, higher than people think. It's one of the reasons why he remains bearish on stocks. Let's listen. The Fed does want stock prices lower. They've made that clear. Somehow they think if after watching the stock market go up, I don't know, seven or eight times, seven or eight fold over maybe 15 years, you know, they think if the market went down 15 percent, everybody would feel poor and the economy would slow and it would spoil Christmas. That seems to be the way that

they're conducting monetary policy. I think it would be better if they cared less about the stock market in either direction. But they certainly spent a long time seeming to want to drive it higher. And now they seem to want it to go lower. And the market, at least for the time being, is mostly cooperating. Fed's the elephant in the room. I mean, as long as the Fed's leaning on the market in Einhorn's mind, how can he be positive stocks? Do you agree with him? He's obviously way more connected than I am.

But I don't know the Fed wants something specific about the stock market. Well, they're not disappointed that risk assets got hit, are they? No, I think that I agree with the answer. I don't know if we showed our work, we'd have the exact same logic stream. But I agree with the answer. I think if you're incrementally hawkish and you think the 10-year yield is going to end up at a higher level than others, you cannot be bullish on multiples. And so then the only way You cannot be bullish on multiples. And so then

the only way to be bullish is on earnings. And that just doesn't, you know, if you're sitting here and saying, I'm not an economist, but the world I'm living in is a probability it erodes higher than the probability accelerates. I think so. So I think it's hard to be positioned in an incredibly optimistic way for U.S. equities right now. But how are you, you like small caps. Isn't that, wouldn't that portend optimism? How do you like small caps in the kind of environment you're describing? If I showed you a 30-year chart on price-to-forward earnings for mega, large, mid, micro, and small cap stocks, they were very, very dispersed in 2000. Then all traded the exact same multiples for about 10 years, and now they're very dispersed again.

So the answer to your question is micro caps are at seven times earnings, and the market's at 18.5. So the mega caps are above 20. So I think to your question is micro-caps are at seven times earnings, and the market's at 18.5. So the mega-caps are above 20. So I think the question is how much of that's priced in. I would say maybe the micro-caps are, you know, maybe, okay, fine, they're priced where they are. The other part of it's overpriced. Yeah, that's right. I agree with that.

But that doesn't necessarily mean that micro-caps and small-caps are the place to be. They're cheap for a reason. It could be, but it's on a relative basis if something's at seven times something at 20 your outlook for 20 is probably too optimistic and your outlook for you know maybe maybe more achievable it's a relative best of cheap ability game you may want to own nothing but i do think there's so much cash on the sidelines that you'll start to see some m a pickup for these seven and eight times multiple stocks you still think there's a lot of cash on the sideline? I do.

Because positioning sort of, people think, maybe fueled this January rally that kind of dissipated in February. You know, it's funny. I think the private equity businesses have a lot of things they could deploy in the public markets. You started seeing that last November when Blackstone made a $10 billion investment in Emerson. You've seen Coupa. You've seen something start to percolate. There's a lot of $3 to $10 billion market cap software companies that have come down a lot that probably look attractive to some of these firms. I think the broader question you're asking, though, is challenging. It's not just mutual fund flows and retail flows and the things that old school people used to look at for cash on the sidelines.

It's how much can the platforms borrow from the big banks? Because they're running a huge gross exposure, right? So if they feel like they can pick winners from losers, even if the market's going down, they could actually access more capital and that could cause a positioning disconnect. All right. Well, let's expand the conversation, bring in Keith Lerner of Truist Wealth and Victoria Fernandez of Crossmart Global. It's good to see you both. Victoria, you first. What's this month going to hold? Is risk reward better or worse for investors as we turn the page? Yeah, I think investors are going to need to continue to be cautious. We think there's going to be continued volatility, not just this month, but for the rest of the year. We actually don't see the S&P ending much higher than where we sit right now. So if you're an investor,

I don't think you're going in and you're making large bets at all on any sector or on any specific allocation that you have. We're trimming things. We're tweaking things. We're adding a little cyclical component. We're also adding some staple components. I mean, names that we've added this week alone, a little bit of American Express, a little bit of Gilead Sciences. But I think you have to be cautious. And look, there is nothing wrong if you're a longer term investor with adding a little bit of fixed income into that portfolio. The one year and the seven year part of the curve are the cheapest part of the curve right now. So go in and add a little bit, generate a four and a half, five percent yield

and collect that for a year. Nothing wrong with doing that. I think you have to remain cautious because the Fed in our opinion is not near being done. Neither is the ECB. So I think you've got a long road ahead of you of volatility. And I think also let's let's look at this Scott that the economy is different than it was back in 08 or 09. The economy is not as sensitive to higher rates. So the fact that the Fed is trying to squash demand and stop inflation by raising rates is different when now you have only 10% of mortgages that are variable rates versus 40%. And you have people spending on services.

Services are not as subjective to higher rates as goods-producing items. They already bought all their goods. So it's a very different environment, and I think it means the Fed is going to push more. It's going to be higher for longer, so be cautious. Which is why, Keith, I'm surprised to read the notes today, and you say risk-reward is actually improving for somebody who's been pretty cautious, if not downright negative. So how do you come to that conclusion?

Great to be with you, Scott. You know, when we were with you in mid-February, the market was around 41.50. We were saying to fade the overall market rebound, and we thought the risk-reward was unfavorable. Our latest note this week is basically saying the risk-reward has slightly improved, but it's far from compelling. And we're still not being aggressive at this point. We're still more on the defensive side. We just, you know, we've had a 5% pullback in a week. We've seen some of the, a little bit of the froth come out of the market with these high flyers come back down and we're around some technical support levels. But our overall view has not really shifted. We're just acknowledging that we've had,

you know, a bit of a pullback since we've raised some cash. And if you think about it, I mean, there is a consensus even on this program today, but it makes sense, right? I mean, we have the one-year yield on the Treasury at 5%, and that's the highest since 2007. And for you to want to go aggressively into stocks, you have to think the return outlook is well above that to compensate you for the risk. And even today with this pullback we're at seventeen and a half on a forward P. Adam mentioned this before that

thought that forward earnings number probably has some downside. So that's far come before that's far from compelling. And on a relative basis the bonds that stocks actually have done somewhat worse. But again our initial

view is just acknowledging. A little bit of the pullback that we've seen over the last couple weeks. As we've done. bit of the pullback that we've seen over the last couple of weeks since we've been on the show. What do you think? The only thing that I probably differ on is from Victoria a little bit, where I think you can make industry and sector bets that are pretty active versus the bench weight. I think if you have a declining or eroding economy in earnings,

there's going to be some pretty big differences between winners and losers. So, you know, I like things that are either cheap cyclicals that don't have optimistic earnings expectations, energy, metals, consumer finance. Those have all been areas we've been recommending this year. I think you can avoid things where they have inventory problems, select machinery industrials, or where they're expensive and you're overpaying for the defense, like, you know like in Staples. So I do think we're recommending a lot of active industry bets. I think you saw we wrote a big note on semiconductors last week where we think they're overvalued

and we'll have some meaningful downward revision. So I do think there's a lot of active things you can do in the stock selection, industry selection level, even in sort of a market that looks less compelling than it did a few months ago. What I'm trying to figure out, Keith, is how you can be even incrementally more positive and say that risk-reward is incrementally better than it was simply because stocks have come back 5% from the rally as rates continue to go incrementally higher from their already moving higher base. And you talk about the possibility of more earnings revisions lower so how

is the environment conducive to risk-taking at all again so we haven't changed our position we were a lot of people were bullish in mid mid-february even on the program we basically said that we were standing by we thought 4200 was the top and basically we've gone from 4200 to about 3950 in a short period of time we're just acknowledging more from a technical level that you're getting a little bit modestly oversold on a short term basis. But the note was the part of that was risk reward slightly improved but far from compelling. We haven't made any changes from an asset allocation perspective. I'm on that again which acknowledges that markets don't move in a straight line.

Also I think Adam brings up a really solid point. I mean. You know there are opportunities below the surface and this market you had on on earlier today this is a lot different market than the last decade whereas. You know people just index and put in the fame names. You have to work harder

it is probably a better environment for active- we also are fans of the industrial sector is one of our favorite we've been there for some time. You know, there was one thing, and I was just talking with our equity team this morning, the Inflation Reduction Act, in that bill, it was $500 billion, $550 billion of incremental infrastructure spending over the next several years.

So look at that sector. Look at the defense sector near, you know, cycle highs. And also, we have reshoring going on. So there are opportunities within the market. But from the broad index level, you know, the upside. And also we have reshoring going on. So there are opportunities within the market. But from the from the broad index level, the upside seems somewhat capped. And we are actually overweight fixed income and overweight cash without our asset allocation today. All right. So, Adam, lastly to you, I mean, you do have some individual stock picking. You like Pfizer in terms of large caps. Yeah. Exxon. Yeah. I mean, our themes, you know, I think

I just looking at Pfizer over the week when we wrote that note of why we feel worse than we did three months ago. It's down 20 percent this year, maybe save three to four million lives, you know, pretty cheap. You know, expectations are pretty humble. Exxon, look, I'm bullish on energy. I think that's the chicken way to play it. But it's, you know, really high free cash yield, down a few percent this year. I think there's a chance that energy stocks have upward earnings revisions in the second half of the year because I think ultimately the current softness in inventory will change and demand growth will exceed supply growth over the next two to three years.

So I'm just trying to find things that I can relatively outperform in a more cautious backdrop. And some of the things that have low expectations or are cheap probably are a good place to start. Good seeing you back here post-night. Thanks for having me. It's Adam Parker. Good to see you guys. Pete and Victoria, we'll see you soon as well. We're just getting started here on Closing Bell.

Up next, raising the red flag. Earlier on the half, David Einhorn had some choice words about the world of value investing. I don't mean value investing as a strategy is unlikely to do well, but as an industry, it's dead. We've got a value investor and a growth investor standing by to debate what Mr. Einhorn said, which brings us to our Twitter question of the day. We want to know, is traditional value investing dead or not? Head to Ask CNBC Closing Bell on Twitter. Vote. We'll share the results a little bit later on

in the hour. We're back on Cl closing bell. It remains one of the biggest questions in this market is value investing as a strategy finally ready to outperform after taking a backseat to growth for the past several years. Noted value investor David Einhorn weighing in on that topic earlier today during our halftime exclusive. Listen. I don't mean value investing as a strategy is unlikely to do well, but as an industry, it's dead. The money has moved from value investors into index funds and it's not coming back. And people who used to be able to charge a management fee and have a staff of research analysts and used to get money every month to invest in new ideas, you know, that's been switched to eight basis point index funds.

While our Bob Pisani joining me now with more, Bob, pretty provocative for Mindhorn today. Value investing as an industry dead. Yeah. What do you think? The parameters have changed a lot. So just let's look at the numbers. Since the market low in October, value stocks have actually outperformed growth as traditional value stocks like energy and bank stocks have rallied. But this year they've been neck and neck. So the S&P 500 value is about even with the S&P 500 growth.

Both of them are up about three percent year this year. Now, there's two problems when talking about growth versus value. The first is the long outperformance and investor preference for growth and indexing has left a shrinking pool of value investors. The second problem is that growth and value can be very difficult to pin down these days. So growth is traditionally associated with companies that are growing earnings, of course, usually technology. But value is associated with companies that paid high dividends and had low P.E. ratios. Those were usually banks and energy in the old days. But those rules don't necessarily apply anymore. Things are getting mushed together. The largest holdings in the S&P growth sectors, take a look at them right here. Amazon, Microsoft, Apple, Nvidia, Tesla, Google, Alphabet. OK, those are old old fashioned growth. But Exxon is now in

the growth area that used to be a value stock. Look at the largest holdings in the S&P value. Microsoft, Amazon, Cisco, Meta, Berkshire and J.P. Morgan. Wait a minute. Microsoft and Amazon are also growth sectors, too. They're in both indexes. Cisco and Meta, they used to be growth stocks at one time. Not anymore. They're now value stocks. Many banks, you see, like J.P. Morgan, are still in value. So, Scotty, there's not only a preference towards indexing, but there's a preference, a difficulty defining exactly what becomes value versus growth these days. But according to Einhorn, Bob, I mean, it's that preference towards indexing, almost as if, you know, passive ETFs have killed the business of value investing. Everything now is, I mean, where the money flows are going. Everything's about index investing, thematic ETFs, and things that are deemed to be much more sexy, so to speak, than just plain old value. On a broader level, it's about the persistent underperformance of active investors. And this is a problem that went back into the mid-2000s. When they saw that, not just with growth, growth did outperform, but with anything, more investors put

money into the indexing funds. And that, of course, is why we cover ETFs so much, because those are primarily index plays, Scott. Follow the money, like with everything else. Bob, thank you. Bob Pizzani here to discuss and debate the road ahead for value investing. REO Vice Chairman Charlie Bobrinskoy, EMJ's Eric Jackson. It's good to have you both. Charlie, I go to you, right? Value investing, you're bread and butter. I'm wondering what you make of what Einhorn said about the industry itself being dead.

Like Mark Twain said, reports of our death is wildly exaggerated. I'm reminded of the Businessweek cover in 1979 reporting on the death of equities, which managed to almost perfectly pick the absolute bottom in equities. And we had the best 20-year run in equities ever following. It is a very positive sign that people are being so negative on the sector, clearly out of favor. There is no denying the last 15 years, with the exception of last year, and I'll come back to that in a second, there was 15 years of headwinds for value. Why? Because interest rates declined for 15 years, and value stocks earn their money in the near term. And so we don't get helped as much by a

drop in interest rates as companies whose earnings are 30 years into the future, who get helped a lot by a drop in interest rates. So that is not going to continue forever. It already stopped last year. And value stocks beat growth stocks by more than 16%. Russell does a much better job of differentiating between value and growth than S&P does. And the Russell value index beat the growth index by over 16% last year. So we are, reports of our death are exaggerated. Eric, I mean, Charlie makes a good point. Fed-induced, right?

You've got all the money pouring into the system. Of course growth is going to outperform value. You don't need to be a rocket scientist to figure that out. So why in the world would it continue to outperform value at a time where the Fed is taking that money out? Well, Scott, I think that interest rates get overplayed as sort of this reason why value underperformed or why growth overperformed. Obviously, it's been a big headwind for growth in the last year, but growth stocks did just fine in the late 90s in the middle of the dot-com bubble when interest rates were much

higher. I think the reason why growth stocks in general and I agree with Bob that you know the definitions are important here because things get murky but I think the reason why people are attracted in general to growth stocks is because surprise surprise they grow more their growth rates are higher than value stocks and I think eventually that's the siren song that calls investors back to these kinds of names because they get attracted by these high growth rates. And I think that is going to happen again. Growth obviously has had a bad two years, not just one year, bad two years. But people are always going

to want to come back to the specific names that they think have the best chance of growing over the next little while. Which is why, Charlie, some suggest that, you know, this couple steps forward that value has taken for the first time, and as you mentioned, a number of years, is going to be short-lived. That Eric's right. When the environment is right, it's going to go right back to growth. But this is not two steps forward in an otherwise backward-moving story. For the hundred years, the University of Chicago and the Center for Research and Security Price has been calculating value versus growth since 1926. And value beat growth for every 10 year period, every single one, until we got to 2005.

The value effect has dominated growth for a long period of time why it's because of what was just said people want to own growth popularity bids up the price and brings down the returns he's absolutely right that more people want to own growth than something going growing at four or five percent that's why they overpay for growth stocks and why we can pick up better returns. And maybe, Eric, you know, Charlie's right in that in this new environment that we are in, people are going to be more selective. Stocks with lower valuations, as Einhorn points out, the ones that are being ignored are going to be the ones that are more popular, the ones that are returning more cash to shareholders. The landscape's changed and so too is this

conversation. I think I think it's you're making the case Scott for active managers you know because act you know passive indexes have hurt active growth managers just as much as they hurt active value managers which which David was

talking about today. I think it gets down to, you know, which names are you going to invest in? Right now, I could pay 44x forward PE for GE, as Jim Chanos has pointed out on your show, or 40x forward PE for Clorox and, you know, something like, you know, mid-teens for Google and Meta. So, you know, what's the best stock? I mean, you've got to do your homework. I think there are some profitless tech companies that, you know, always seem to get a bad rap by a lot of folks these days. That, you know, if you look one year out, two years out, are going to have stellar returns.

They are just being left for dead at the moment. So the point I'm making is you really have to do your homework and put your bets on very specific names, which is kind of what David talked about today. His names, I thought were fantastic names, like very low. These were not GE, you know, type forward multiple names that he was he was talking about on your show. I love the way you put that profitless tech getting a bad rap. OK, that's a new one. type forward multiple names that he was talking about in your show earlier today. I love the way you put that, profitless tech getting a bad rap. Okay, that's a new one. Charlie, I give you the last question. Marco Kalanovic, J.P. Morgan, puts forth something that it's in the wheelhouse of this conversation. I want your opinion of it. Value versus growth run has stalled. The next trade is likely to be outright underweight value. You want to take that on?

Yeah, I don't think that's right. I think the value right now is overweight, cyclical and banks and energy, all of which are well positioned. The world thinks we're going to have a recession. The world, the market is positioned stocks as if we're going to have a recession. There's obviously a chance we're going to have a recession, but I think that it's going to be a soft landing. It'll be a relatively modest landing.

When we get on the other side of that, these value stocks that do have a cyclical component are going to outperform very nicely. There was a lot of pent up demand for houses, for cars, for material consumer goods, and the consumer is in very good shape in this country. I think we're going to get on the other side of watching the Fed pretty soon here. All right, we're going to leave it there. Guys, it's great to have this conversation. Charlie, welcome to our new Closing Bell.

It's good to see you. We'll have you back, obviously. Eric Jackson, you'll be back in the market zone a little bit later on as David Einhorn gives us something big to chew on today. All right, up next, we are tracking the biggest movers as we head into the close. Christina Partsenevalos is standing by with that.

Christina? Feast your eyes on these names. Warby Parker and National Vision Holdings, both down. I'll explain why after this break. 30 minutes to go in this trading day. Let's get a check on some top stocks to watch as we head into the close. Christina Partsenevelos is joining with that. Christina?

Today's theme, eyewear. Warby Parker shares are lower as investors digest its quarterly results from yesterday morning. But analysts this morning at Citigroup, Bayer, and Telsey all cut their price targets for the eyeglass retailers. Citi's was actually the harshest. It went from a target of $26 a share to $13 a share. Warby Parker down 6%, trading at about $12.20. And quite the spectacle. National Vision Holdings, ticker I, is on pace for its worst day ever after a miss on revenue

and a wider than expected loss. Like Warby Parker, I's outlook was dismal due to demand weakness, especially among its uninsured customer base. Shares are down a whopping 38.5 percent. Scott, I think you've seen enough. I'll throw it back to you. All right, Christina, thank you. Christina Partsenevelis, let's send it over to Meg Terrell now with a big move in one biotech stock. What do we see here, Meg? Yeah, a huge move, Scott. We're looking at Riyada. That stock is up almost 200% on an FDA approval after the market closed yesterday for its rare disease drug. Now, there was some controversy over whether this drug was actually going to get approved, some questions about the efficacy. The approval came

in and the label, the indication was more favorable than analysts had been looking for. On top of that, they priced this drug at $370,000 a year. Barclays had been looking at $175,000 for the price. So that also driving the stock higher. Analysts seeing an opportunity here perhaps of more than a billion dollars for this drug. Scott, back over to you. All right, Meg. Thank you. We'll keep our eyes there. Wow, what a gain today, Meg Terrell. Up next, we are talking speculative stocks. Greenlight's David Einhorn weighing in on that space as well. Senior markets commentator Mike Santoli gives us his take, what it might mean for the broader market. Closing bell. Be right back.

Biggest story of the day. Want to show it to you on your screen. There it is. Four oh four percent on the 10 year. And since November, since we closed above that. So we've got to keep our eyes there. No surprise. Stocks not able to get much going today as a result of that, particularly growth stocks. The high growth ones are weighing on the market today, big time and Greenlight Capital's David Einhorn telling me earlier he sees more pain ahead for those high flying speculative names.

I think we created a very bifurcated stock market because we spent six years basically putting value investors or people who care about financial statements, you know, out of business. On the other side, we basically had a big speculative bubble where things of little value went up to really, really high prices. And people got really enthusiastic about that. And that bubble's in the process still of deflating. And so I think there's really more to go on both sides of that. Well, Mike Santoli is with me now.

He highlighted the rally in speculative stocks earlier this year, the relationship to rates. Yeah. What do you think? Look, a lot of the reckoning has already been seen in this area. Now, there was a real big kind of an echo boom in January in a lot of these stocks. But if you looked at it from the point when they all peaked, February 12th of 2021, I think, was really the blow-off top for things like the ARK Invest portfolio, the IPO index, SPACs, and all that. You went down 80%.

And then after the massive January rally, you were down like 70% off the highs. So, yeah, you've seen it. But relative to the average stock, there hasn't been a lot of kind of rebuild of those excesses. That still could mean a lot of that stuff's too expensive. Everything that David was talking about today, I go back to the 2000 to 2002 period. And you said, yeah, once the NASDAQ went down, 50 percent had more downside.

You know, and so it followed. ARK has followed the path of the NASDAQ of those days. And the resulting companies, like not a lot of them really thrived after that. Right. So it was a lot of wreckage. Yes. And he points out in his letter, you know, dated in January that, you know, he didn't think we would see another reckoning like we did in 2000 to 2002. And in his words, we were wrong given what happened last year. And I think you also heard him say that they've got, I think, their fifth so-called bubble basket of stocks that they're betting

against, including, it was obvious to me, one related to the ARK stocks. Sure. There's no doubt about that. And that's fair. I mean, those stocks have not had fundamental improvement, even though their stock prices are way down. For the most part, they haven't. So I get that. I just don't necessarily see it as being something that's going to be a market-wide driver from here on out, right? Because, yeah, the NASDAQ itself of today, the current day NASDAQ, which has the most profitable companies in the world at the top of it, down 30 percent. You had the ARK portfolio, which really resembled in terms of its ascent before the peak, the Nasdaq of the late 90s. Sure, sure. And so that did have the same kind of a decline as we saw in the Nasdaq in those days. So I get it. But you've also had this massive

rebound in value over growth. The pure value segment of the S&P 500 has outperformed pure growth in the last, let's say, 15 months by 30 percentage points, right? It's not like it's- Which Charlie Brinskoy was just talking about. Yeah. And so it's worked. The thing is, it only just looks like a partial comeback from those periods. The final point on that early 2000s experience is value versus growth was a great trade for years, but mostly it was because growth kept imploding. It wasn't necessarily that in absolute terms, value portfolios went a lot higher every year. It was

just they held their value better. There was more to hunt for there. And look, higher yields, more cyclical exposure. I also do think there's a way to sort of blend these things. If you look at like the free cash flow ETF, cash cows etf it's got meta it's got paypal and it's got a ton of chemical and energy companies in there you know so it's kind of its own thing measuring free cash flow uh but it kind of captures some of the cheaper growth and maybe better position value talking about meta too it used to be a growth stock yeah value stock now it's a good conversation i'm glad we were able to have it we'll see in the market zone in just a few it's the last chance to weigh in on our Twitter question.

We want to know, is traditional value investing dead or not? You can head to at CNBC closing bell on Twitter. Please vote yes or no. We're going to bring you the results right after this break. The results now of our Twitter question we asked is traditional value investing dead? And the majority of you said no, it is not. 65 percent. In fact, up next, Salesforce results in overtime.

Tonight, star analyst Dan Ives is here with the key themes he is watching in that report. Ask him about Tesla's investor day, too. 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 Brenda Vangelo and Eric Jackson on Tesla. Its investor day is just moments away. They both own the stock. And Dan Ives, as we count down to Salesforce in overtime as well.

Mike Santoli, I bring it to you first. I said the 10 years at 4%. Yeah. And the stock market's kind of hanging in. Yeah, it's certainly apprehensive. You can't escape the shadow of what rates are doing. Last time we got to 4 percent, you know, from below 4 in November, as people are talking about, the S&P had already been

rallying and it just sort of chopped sideways. It wasn't as if it was an immediate breaker. So it's not to me some trigger level, but it's part of this ongoing, somewhat low intensity test we're having in the stock market of these support levels, the moving averages, the trend lines all coming together. But I still will pull out a message that's not all that discouraging from it because it's still the rate sensitive defensive sectors that are leading to the downside, underperforming today, whereas you have things like semis up this week and industrials still hanging in there. Your point's very well made. The Nasdaq obviously is the biggest loser today. And by hanging in there, I'm looking at, of course, the Dow, which doesn't really tell you much. The S&P 500 is at thirty nine fifty or thereabouts.

And that's a more critical area. And you have small caps up to that. So it's or for flat. Yeah. And then, you know, look, in a matter of days, we're going to be talking about another jobs report. You're going to get a CPI, the Fed all in the same conversation of, well, rates are moving higher into all of that. Without a doubt. You know, this repricing has been steady. It was like a big rush and now it's just kind of incremental. I do think it's interesting that now the market, if anything, has priced in more Fed tightening in the next several months than the recent Fed speakers have been willing to commit to. So, you know, you say there's no disconnect. The credit markets continue to act well. So to me,

that's almost a little bit of a tiebreaker between stocks and Treasury. So we'll see, you know, how it plays from here. But without a doubt, it's hard to escape the idea we're in this range. Most of the last 10 months have been spent in the S&P between 3800 and 4200. And we're just about in the middle of it. Yeah, it's the chop just continues. All right, Brenda, Eric Jackson, Brenda, you first. We're counting down to that investor day for Tesla. I don't know how you feel about the stock you own, which has doubled, doubled since the January low. As you head into here, I wonder if it's going to be a sell on the news event, given that in and of itself, Bren.

Well, no doubt it certainly feels a lot better now to be a shareholder than it did earlier in the year but nevertheless I think the growth story here hasn't changed. And I think this. Then you have the analyst day is going to be a great opportunity for the

company to reiterate. The growth ahead really coming from what is not going to be here in the near term but more of a twenty twenty five event. With their generation three automobiles and how they're going to cost engineer those. And then

looking at the solar business which is a tiny piece only about six percent of revenue. Anticipated this year but nevertheless a growing piece on the on the energy side I think it's a real differentiator versus especially versus the

other automobile companies. As so I think this will be an opportunity to talk about potential growth. Do I think the stock is going to As so I think this will be an opportunity to talk about potential growth. Do I think the stock is going to rally on that this this event. Possibly not given just how much. The stock has moved

recently I think we could see a period of consolidation as the company kind of. Rose into the multiple here. But in our view that doesn't change the longer term growth story which we think is still. Really a standout especially amongst the

larger cap peers within the S. and P. Tesla really stands out, still taking significant market share from a traditional industry and still growing significantly in a first mover. That's just not many other companies in that market cap range where you could say that same thing is true. EJ, what do you want to hear today? What's most critical in your mind in an environment where the stocks doubled in just six weeks? I think it's all about deliveries, Scott. And so I think there are two topics that they could touch on in the investor day that would relate to deliveries that would make people bullish and could actually counter the usual sell and use event. So they have to go from 2 million deliveries expected this year

to 20 million in about 10 years from now. So they might give some clues about just how they're going to expand their capacity and their different factories around the world or just new factories that they plan on building, which could possibly impact capacity for output this year. That would get people excited. And I think there's been hints that they're going to talk about a Model 2, basically a lower price version of the Model 3, which has already been getting a lot of tailwinds with the tax credits from the Inflation Reduction Act and has been driving interest in that stock. So if there's an even cheaper model that's going to come out fairly soon, that's going to get analysts and investors excited as well.

I mean, deliveries get all the hype, but what about battery manufacturing? How much do you need from that today? Well, I think that's an important part of the story. I agree with Brenda that they'll probably talk about how the solar city, energy, you know, with Tesla and maybe even a little bit of SpaceX all comes together. I think that sort of counters the narrative, like why shouldn't this be priced like just another dumb, low gross margin auto company? But I think deliveries is what really gets people

to sit up and take notice with this stock. Yeah, no doubt about that, guys. Thank you. That's Eric Jackson, Brenda Vangelo, Dan Ives joining me now. You with this stock. Yeah, no doubt about that, guys. Thank you. That's Eric Jackson, Brenda Vangelo, Dan Ives joining me now. You cover this company. What are your own expectations? Look, I think really it's going to be a lower priced vehicle. That's key to get to the masses, to get to that five, 10, 15 million deliveries. It's a sub 30K car. I think that's important. It's capacity. It's going to be a flex the muscles moment in terms of showing production globally.

And I think they're going to announce some, you know, we'll call it Mexico, potentially Indonesia and some others. And then it's really ultimately just laying the groundwork for the coming years that they're able to do this from a margin perspective. And I think this is going to be another shining moment for Tesla. You know, I think as it speaks to this EV arms race that's playing out. Speaking of margins, I'm glad you used that word because that's going to be top of mind with Salesforce, isn't it? Got the activist pressure. They want some margin targets, maybe moved up. In fact, what are your own expectations today? I think the Cinderella story is over for Benioff.

I mean, now frustrations built. You've seen activists come in droves. It's about margins, giving targets against that 25, 30 percent. I think strategic options on the table. Do they eventually spin off or sell slack or tableau? And then ultimately laying off some sort of strategy around a succession plan. I think this is one. Investors don't want the cookie cutter conference call. Pressure is growing. It's a golden plan. I think this is one investors don't want to cookie cutter conference call. Pressure is growing. It's a golden asset. But I think Benioff understands what he needs to do tonight on the conference call. Wow. Cinderella story over. Do you think he delivers? I mean, there is the news, too, that our own David Faber had been reporting earlier

today about the slate from Elliott. Well, I think Benioff's going to read the room, and I think he is. And ultimately, everything that he's built, Salesforce, one of the best franchises, not just in software and technology, they have a huge opportunity. Slack, clearly a disaster, ripped the Band-Aid off situation. Now it's how do you navigate going forward? Give those tenants margins, give the succession plan and talk about revenue growth and giving confidence. He does all that. You know, I think this is one that continues to move higher. And that's our opinion. This is a 200 hour plus stock.

You know, once this all takes place. Mike Santoli, you got an opinion here on what is a highly critical conference call for Mr. Benioff. Yeah, I mean, I think there's room for them to express urgency on the cost side and whatever other strategic maneuvers. It does seem as if whatever the consortium, loosely speaking, of activists wants to have happen, I mean, has buy-in at the company. I do think, though, it's happening at a time where there's legitimate questions about the moment in the cycle we're at in terms of cutting deals and demand for their services. So it's not just about where you have this sort of static revenue pool and let's just cut the expenses. The growth rate is definitely something that's under question, too, because it's going to slow down because of the size of the company already. And, you know, can they instill some confidence that it's not just going to be, you know, harvesting the margins and it's going to restart growth at some point? Dan Ives, I mean, two stocks, both in Salesforce and Tesla, that have, you know, come off the mat, so to speak,

with a lot of those higher growth names. What does that mean going into both events? Look, I think you're starting to see more of a risk on it. I think Tesla, it's clearly been the price cuts we've seen with demand so far. I think Salesforce is important because it speaks to what we saw with Microsoft, with Amazon, with Palo Alto. How much are things slowing? Street was factoring much more of a slowdown than is happening here. And I think bellwether, this is just a very important

night for disruptive tack between Musk and Benioff. All right. Good stuff, Dan Ives. Thank you for your last word. Now, Mike Santoli is going to give us his as we inch towards the close here. We got less than three minutes. We're about to get the two minute warning. Of course, we got some key events. It's Tesla. It is Snowflake 2, another one of those once high flying names in the software space. What are you thinking about? For Tesla in particular, this should be a pretty good test of weather, the old trick of focus everybody on the magical future. We're going to solve all the problems.

Here are the models to come. Because this is now a company supposed to have $100 billion in revenue this year. It's no longer all about what's to come. We know what the order situation is in China or we think we know. And it's not a great story right now. So can you divert attention? And I would also just say there's a massive gulf between, as Eric was saying, a boring, old, dumb, legacy, low margin car company at single digit multiples and Tesla now back to a 50 P.E. on on forward estimates. You know, Snowflake, we didn't give it much press today,

but demand enterprise demand. I mean, it is a key report for a stock that really was in the stratosphere not that long ago. Not at all. So it's like a third of the market cap of of Salesforce. It's about a tenth of the revenue expected, let's say, in a year or two. So clearly, everyone assumes it's got the better mousetrap. It's a much less towering valuation than it was. It was up near 400. Yes. And not that. I mean, it was at 272 within the last 52 weeks. So there has obviously been a lot of, you know, kind of gravity on this stock right to this point. So, again, we're in this process of figuring out which one of the moonshot stocks really deserved to be anointed and which ones haven't. And Snowflake, I think, is in that category of they're here to stay.

They're a market share gainer. And they have certainly a better platform. But what do you pay for it? And what's the pace of that growth look like right now? I just looked at another non-moonshot stock in the word you use, but it flashed on the screen. Apple down again today, right at 145. Got to watch that stock, too. In particular, and, you know, I push back against the rates are all that matter for Nasdaq, but a stock like Apple, where it really is not

valued on super growth in the next couple of years, it's very stable. It's a it's a pristine balance sheet. It's bond-like in a lot of ways because it is a capital return story. And so it does trade in line with yields. And that's not too big a surprise. When Apple's going down and dragging the S&P a little bit negative on a day when the equal weighted S&P is down 0.1 percent, that's not a bad day for the overall market. You know why it's happening. It's not sending a bad macro message. All right. So we will keep our eye on interest rates again. The 10-year right at 4 percent, right on your screen right there. Tesla, Snowflake, Salesforce, all in focus in overtime with Morgan and John.