Closing Bell - Closing Bell 3/17/23

Episode Date: March 17, 2023

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves tohow investors are reacting,Scott Wapner,Jon Fortt,Morgan BrennanandMichael Santoliguide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. We are live from Post 9 at the New York Stock Exchange. This make or break hour begins with the stock sell off picking up some steam, returning down to the lows of the morning in the S&P 500 as investors continue stressing out over the banks. Anxiety surrounding financial stability, pressuring bank stocks further, dragging down the broader S&P 500, which is trying to hang on to a small gain for the week. And that is our talk of the tape. What does this all mean for the economy? The Fed ahead of next week's rate hike decision. To talk about all that, we're going to bring in Dan Greenhouse and how you should be positioning ahead of it as well, Dan. Dan Greenhouse is chief investment strategist at Solus Alternative Asset Management. And so, Dan, this is one of those Fridays, you know, in a little bit of a mini crisis period. It's kind of the fog of war.

You can't disprove the idea that there's other shoes to drop in the banking system, but you also don't know for certain that that's going to happen. What's your read on the week's action in the context of what has had to occur with the banks? I don't know that you can really read too much into it. There's a lot of conversation about cyclicals outperforming and how gold is doing. And I think to your comment about this being in the midst of the fog of war, I think it's really hard to make any consequential decisions right now, since to your point, we don't know when the next shoe will drop, if the next shoe will drop. And so I would be hesitant to read too much into just about anything right now.

The broad outlines of the way the markets are behaving is it seems as if, again, we're bracing for the recession playbook to kick in in a sense, right? Oil cracking, even though you just said don't read too much into what the market's been saying. Oil cracking, two year note year yield plunging market, at least on the surface, anticipating the need for Fed rate cuts in future months. You know, you could go down the line leading economic indicators. Well, the rest of it. Having said that, let me amend what I just said. So I was talking about positioning within the market. This is going up and this is going down unambiguously. The message being sent by the Treasury market, the oil market, is that there's a recession coming.

And to be clear, the outcome of this debate in the regional banking sector, irrespective if you have one view or another about how it started, who started it, and all that, you're talking about lower net interest margins, probably a curtailment of loan activity, lower valuations, blah, blah, blah, blah, blah. But on the decreased loan activity, that's going to do some of the Fed's work for it over the next six to 12 months. Because if you're a bank and you need to shore up your balance sheet, there's a couple of different ways you can do it, one of which is make a few less loans.

And I think that's probably what's going to happen. You know, on one level, doing some of the Fed's work for it is not the worst thing in the world unless it goes too far and all of a sudden we're in contraction mode. So how do you try to assess those probabilities? Well, listen, regional banks only have about 40 percent of the country's deposits. They do about 50 percent of the lending. And whether they lend here or there or more is besides the point. A lot of lending activity is done at the regional banking level. And I know everybody's talking about who's exposed to office, who's exposed to commercial real estate, which, of course, is going to be where attention is going to turn. In terms of how to gauge this, I mean, you can do, I have not done it myself, but you can do economic analyses

to say the level of curtailment of loan activity we think will lead to a couple of tenths of economic activity contraction over the next couple of quarters. I think that's likely to be the case. Admittedly, most everything is a couple of tenths off of economic activity, just whether it's two tenths or four tenths. It's a big economy. It's tough to move it far. It's tough to move it far. Yeah. But so I think going forward, I think that that should be your expectation. And to the point about the Treasury market and oil, I've been on here, as a number of people have, talking about the likelihood of a recession. I find it shocking that people are shocked that the Fed would hike by 500 basis points in a year and something would break. This is amazing.

Well, maybe not that shocked, right, because we are kind of holding in here, at least on some levels. In fact, you mentioned the Fed equation. It's unusual five days out from a Fed decision to have this much suspense around what they're going to do and what they're going to say afterward. We've actually spoken to a bunch of guests, obviously, this week on that. Let's bring in some of those comments of people saying what maybe the Fed should do. At this point, the Fed is not going to go 50. I would think 25. And I know that people are wondering if they're going to go up at all.

I just think to save kind of the program and their credibility, they'll probably raise rates 25 basis points. I think power really has to raise interest rates sooner or later. I can't talk about next week or even next month, but inflation is the worst thing an economy can have. And I think people underrate that. I think what's going to happen is they are going to do 25, but the message is going to be a likely pause. They won't commit it, but I think the language is going to be totally different from the language we had after the last meeting. What do you take there? So let me just say, the next time you show that graphic, it should be gunlock, Siegel, ICON and greenhouse because obviously, but Monday, we'll do it,

please, on Monday. So so I think that, listen, nobody knows for sure. Obviously, my gut is that they're going to do 25. My feeling is they should do zero. There's enough stress right now that you have to tread very gingerly, I argue. That's not to say that inflation is not a problem. And the other stuff that happened before last week isn't still a problem. But you have another meeting in one month. And I don't think there's any harm given everything going on and saying, hey, we're just going to take the month off. Not because inflation is not a problem, not because we think our job is done, but because we want to make sure, even though we don't think, but we want to make sure that we're not causing more stresses, that we don't think this is a one-off or a two-off.

And I think the market would probably give them a pass and understand. That said, if they hike by 25, I think you could just make the equally appropriate opposite argument. It is six weeks between the meetings, but that's splitting hairs. Maybe it matters. We'll see. Let's bring in Kristen Bitterly of Citi Global Wealth. And Kristen, good to have you here. How do you boil all this together in terms of what an investor ought to be thinking about with regard to the Fed, how much it matters what they do and what they say? Yeah, so I'm in agreement that in terms of what the Fed, there's a difference between what the Fed is going to do and maybe what they should do. What they're going to do, we're in the camp that it's going to be 25 basis

points that they are going to stay the course. But we came into this year, our outlook for 2023 was to not fight the Fed, that the idea that all of this cumulative tightening was going to have an impact on corporate earnings. We're calling for a 10 percent earnings contraction and was ultimately going to have an impact on the economy. And so I think we're starting to see that, obviously, in very idiosyncratic fashion and everyone trying to explain it away that it's idiosyncratic. But the truth of it is, is that tightening flows through to the economy, it flows through to corporations, and it flows through to the consumer.

What does the don't fight the Fed maxim have to say about the moment when the Fed has convincingly backstopped the financial system and then stopped raising rates? Are we still not fighting what the Fed has done over the last year, or is it time to get a little more aggressive and cyclical? Well, I think the interesting discussion that's happening right now is about the Fed's mandate and this whole debate around price stability and financial stability and this idea that you could separate out the two. We heard that out of the ECB yesterday and Lagarde's comments around the

fifty basis point hike in the need to separate out the two I don't see how that's possible I think that when you the tools that you're using to basically address one of them is going to influence the other and so here's the truth of it if the

Fed is actually changing course to address financial stability obviously that's not good for growth obviously all of the actions that we've seen an activity is going to, obviously that's not good for growth. Obviously, all of the actions that we've seen and activity is going to be something that's actually going to take liquidity out of the system. Lending is very tight. It's very restrictive. And that's still, regardless of what happens from here on out, it's going to continue. Yeah. And let me add, the conversation all week on the network has been, should they do 25, 50, zero? I haven't seen much

conversation about the quantitative tightening, so-called, side of things, which is a much more difficult conversation. Because not that what just happened with the balance sheet was QE, it was not. And I know there's people making that argument. In terms of discount window borrowing, and the balance sheet expanded last week. But it's very hard. The Fed's going to be hard-pressed to argue that it should continue engaging in quantitative tightening, draining liquidity from the system, a system that appears to be increasingly starved of liquidity. And so whether they continue to hike rates or not aside, I think the more immediate question that people should be discussing is exactly what happens on the QT side of things. It really, when they come down to deciding what factors matter most, it also partially

is about are they going to try and look ahead to what, you know, the early indications of whether it's a calming down of inflation expectations in the University of Michigan sentiment survey today. That was something that they used as a bludgeon on the markets last year when it was way higher. Things like a little bit of a trickle higher in some, you know, softening of labor market, things like that. Whether they're going to look past it after they spent the last year, Kristen, saying we're going to wait for the actual inflation numbers to come into line before we change policy. This has been the challenge all along, right? This idea that the Fed's mandate is one that is based on lagging indicators.

So they are looking at inflation. They're looking at employment, but when you looked at leading indicators, even over the past couple of months, just think about how the market has been trying to hold on to narratives. January was the narrative around disinflationary forces and wage growth declining. February was then the opposite. And so when you look at leading indicators, it is telling you that their medicine is indeed working and that there are contractionary forces at play. Whether they switch from here on out, I don't know. Like that will be seen next week for sure. The narrative of this week in part has been all this scary stuff that's going on. You can kind of hide from it in huge growth stocks.

Now, that can go only so far, but that's what's been happening right now. Kristen, you've kind of been recommending for a while sort of a quality bias in equities and fixed income. You look at a lot of those quality screens and it looks like the top of the NASDAQ sometimes. So how do you treat that? I think it's the price action that happened this week. I really do think at first you have that knee-jerk reaction that when rates come down, obviously tech gets a bid. I think the other thing is everyone's pointing to the relative outperformance of the NASDAQ versus the S&P 500. Well, the NASDAQ doesn't have any financial stocks in it. So I think ultimately, though, to really go aggressive in risk assets, this type of financial tightening, it is a higher cost of capital. It is going to impact all companies. And the companies that are best prepared to be able

to withstand that are the ones that have their balance sheet in order the ones that have strong leadership. And can consistently. Of grow their earnings in contracting conditions or recessionary conditions so yes there can be some mega cap stocks in there

that are doing that from a tech perspective yeah but it's not a broad brush. Let me add it's not just. The big tech names who admittedly have earnings growth rates revenue growth rates balance sheets that are all. Phenomenal in relation to the rest of the S&P 500 or the investable universe, but semiconductors have had a really great week.

The software names have had a good week. Amazon, which is not exactly in the same category. We're talking different flavors of tech here. Sure. No, no, no. But there's this idea that those big five have been. It's broader than that in the information technology space. But again, the point I would. It's also everything from another sector that looks like growth tech.

Edward Life Sciences is a leading stock today. Market Access, which is a digital bond exchange. You know what I mean? So it's going back to that playbook of companies that don't need to borrow and generate cash and seem like they have a story besides the macro. I agree. And also, if you're going to argue that we're closer to a recession today than we were a week ago, then you're going to rotate into some of those bigger, stronger balance sheet cash flow generating type companies that, at least for the moment, disproportionately are those big five tech names. Kristen, what are your clients doing principally at this moment? Because there was some talk, look, there's no penalty for hiding in short-term bonds or in cash or anything like that right now. In the last week, as people have some kind of a trigger to maybe rethink some

things. Well, I would say the demand for bonds and the demands for essentially cash and cash equivalent six-month T-bills, look at that just seismic action that we've seen on the the rate side I mean we were at five thirty just what was that like eight days ago two weeks ago. And so we have seen a really really strong bid for for treasuries. We've also seen just for investment grade

corporates more broadly so hanging out in quality but basically saying a little short in duration and taking advantage of of flight to quality. Honestly Dan does the broader credit space seem like it's got a correct fix on what could be the lag effects

kicking in? I mean, for a long time, credit spreads looked okay. We didn't have to worry about that. There wasn't sending up too many alarms. And here we are with having a little bit of a panic about the growth picture. No, but I don't think the credit market still is telling you anything that the equity market isn't. Obviously, there's been a repricing. Credit spreads in both IG and high yield

had compressed to not the lowest we've seen, but pretty close. And IG was about 120 basis points. Sub 100 is exceedingly tight. We're now back up to somewhere around 160, 170. A similar type move you've seen in high yield. But in the credit space, again, I don't think it's telling you anything that the equity market hasn't. The issue for the credit space is really going to come in the next 12 to 24 months as refinancing risk starts to increase.

Because one of the benefits of COVID from a corporate balance sheet standpoint is everybody termed out their debt. And so what we call the maturity wall in the credit space looks like a bell curve, but further out than it normally is. So companies are going to start running into that refinancing issue if rates have to stay up at these levels, starting really at the second half of this year, if not early next year. Kristen, has anything changed about the relative attractiveness of non-U.S. markets, assets in all of this? Well, in our portfolios, one of the things that we did do was add European exposure over the past couple of weeks.

So this was in an area where we took our gains on our precision in gold and added European exposure. We added some short duration. European banks? Not European banks. We were looking at, again, these like same type of companies exist in Europe that I just went through. These dividend growers, these quality companies that have been able to consistently grow their earnings, their dividends. I mean,

the interesting thing about the European economy was that it was heavily influenced by the China reopening and that trillion dollars of excess savings in China was going to. And we saw this. We saw European luxury companies, consumer discretionary. So a lot of those multinational global companies still have a very, very valid place within portfolios and are defensive in nature. All right. Kristen, Dan, appreciate it. Thanks very much. All right. Let's get to our Twitter question of the day. We're asking, are our stocks heading back to the October lows? Head to at CNBC closing bell on Twitter to vote.

We'll share the results later in this hour. That's about a 10 or 11 percent drop from here for the S&P would be to the lows. Up next, a look at the state of the consumer as high inflation weighs on sentiment. Will the latest stress of bank turbulence add to the woes? We'll discuss. Getting another check on where things stand right now as we head toward the close for the week. The Dow down one and a quarter percent. S&P down just above that 3,900 mark where it had bottomed earlier today.

The NASDAQ still outperforming, but lower. And the Russell 2000 has been the weak point all week. It is down 2.6%. We'll be back in two minutes. Welcome back. Got 41 minutes left in the trading day and week. Get a check on the markets here. S&P down 1%. It spent most of the day roughly down that approximate amount, although it is above yesterday's lows. NASDAQ and POSIT still outperforming a little bit, down seven-tenths of 1%.

Christina Partsenevelis has more for us on that. Christina. Yeah, I got some two stocks I want to talk about. FIER is over the financial system stability. I have sent investors back into crypto this week, and that's been good for Coinbase, which is up over 12% today and up 42% just week to date. It's tracking for its best week since January. But it's also worth noting the stock is still 60% below its most recent high. And then we know the concerns about the global economic growth have put industrials also under pressure.

United Rentals is the biggest lagger today and on pace for its worst week since June. And then the airlines have also been hit hard, along with names like Parker Hannafin and Caterpillar. Mike. A lot of charts look like that Coinbase chart. Down a ton, but up a lot off of the low, Christina. That's why it's always good to zoom out, right? Perspective. I totally agree.

Reframe. Excellent. Talk to you again very soon, Christina. This week's bank turmoil, meantime, is not helping consumers, to say the least. Our next guest, though, says pockets of strength do remain. I'm joined by John San Marco, who manages Neuberger Berman's Connected Consumer ETF. John, good to have you here. Broadly speaking, how are you thinking about consumers here? You simply have a split opinion here about, well, we still have excess savings. Wage growth

is pretty good. Inflation has peaked. On the other side, you know, you start to see some strains in the household balance sheet. Yeah, thanks. Great. Great to see you. I think you set that up well. But a lot of the good guys are getting less good. So we had this really flush consumer balance sheet the last couple of years. And those savings levels, the excess savings have largely depleted. Inflation is coming down, but it's still too hot for the consumer to feel particularly good. And you're seeing that in the consumer confidence data. And when you layer on top of that some of the bank-related headlines we've seen this week, that certainly doesn't help. I mean, we've seen it unnerved depositors. We've seen it unnerved capital markets. And certainly

not going to have a good positive impact on the consumer's degree of confidence. And the next thing to look out for is whether that drives some credit tightness and difficulty accessing credit for the consumer. That's one more headache to potentially worry about. And on top of all that, of course, you've had this shift towards spending on services over goods, which has pressured some of retail. I'd like to get to where you go in that environment in terms of stocks that you actually like. Dollar tree is one. What's the, I guess, maybe the macro and micro story here?

Sure, sure. one what's the i guess maybe the macro and micro story here sure sure well to your point on services we think we think that wallet share shift is probably coming to its end we're in more of a steady state environment as far as consumers spend between services and between goods but to to dollar tree we think they're positioned perfectly for this uh environment our thesis there really starts with a new management team. This new team has already run the dollar store turnaround playbook with tremendous success at Dollar General a decade ago. And one of the first changes they made when they came in was they changed the pricing architecture at both the family dollar banner as well as the Dollar Tree banner. They operate.

And we're seeing in the data that we track, the business is responding quite well. New customers are coming in. Better customers are coming in. They're behaving more loyally. So, you know, what we think we'll hear, they're going to have an investor day in June. What we think we'll hear is how this translates to faster store growth in the years ahead and much higher margins over the years to come. All right. And I do want to get your take on Walmart here. I mean, is it just purely defensive and the move towards Staples or are there things happening at the company that are also interesting? Yeah, they're certainly in the right place at the right time.

So I think the question is fair. I also think they have some idiosyncratic self-help, which we're drawn to here. And that's really the way I sort of position it is they've operated at an extraordinarily high level the last couple quarters, and then they built so very little of that momentum into their 2023 guidance. So we think one of two things must be true. Either that guidance and expectations are way too conservative, or the rest of retail perhaps is in really big trouble.

Either way, both of those are scenarios where you want to own a big defensive name like Walmart. And what we're seeing in the data we track, again, very similar to Dollar Tree, they're bringing in a more affluent consumer who's putting together big baskets and really engaging with them in multiple channels. And we think all of these things, you know, auger well for them continuing to take market share. And, you know, it's been common to say that luxury could be insulated, even to the fact that, you know, higher interest rates kind of flow toward people who own a lot of bonds. I mean, it sounds crazy, but it seems as if that's a resilient area of the market. Is that going to remain true if we still see this banking stress take front and center?

Sure. You know, we've seen the resilient consumer cohort sort of fall down like dominoes. First, the very low end ran out of their excess savings and started to behave differently in the ways you might expect. And then, you know, kind of that second quartile of income cohorts, they started to shift their behaviors when gas prices really surged. And now you're starting to see some of those more distressed behaviors bleed up. Now, I think the customer that brands like Moncler or LVMH, Caring, companies like that are selling to. These customers are, I think, in most cases, so exceptionally insulated.

And we really dig in in the data to define the brands that are really selling to a very well-positioned consumer who's not feeling too much pain right now. Montclair is a name we own in our portfolio that fits that description quite well. All right, John, I appreciate it. Thanks for running through it all with us. John San Marco. Thank you. When we return, tech, been a bright spot among the market carnage this week. But will the run continue?

The chairman of Renaissance Macro joins us to discuss that. Closing bell is back in two. The Dow is down 372. Big tech back in the spotlight for investors this week as the Nasdaq 100 has been outperforming the S&P for the past 12 trading sessions. That's the longest such streak since July of 2017. Our next guest says the charts are signaling improving trends for tech. Jeff DeGraff is the chairman of Renaissance Macro Research. Jeff, great to see you. I'd love to get just your broader take on the week's action. We've actually managed to find a little traction each day. It hasn't really spilled in a kind of messy way,

given the banking stress. Do we take heart in that or does it seem fragile? You call that traction? I guess. Each day, I said. Yeah, you know, you're right. You're absolutely right. Look, I think, if anything, I've been most impressed that the market's actually held up fairly well. We're big believers when we're in an uptrend of a 65-day low that levels around 37.65. We've been able to hold that. You know, obviously there's been pockets of weakness in the market, but really I've been more encouraged by the pockets of strength and what we're seeing in one of those, as you alluded to, being tech. And, you know, semiconductors have been strong now for about two months. They've been the leadership component of tech. They have a high

degree of cyclicality. They continue to look really, really good. And now you're sort of bringing along software. Now you're bringing along some of the comm services names. I get it because they're a little bit more high quality. They're a little less economic dependent than, obviously not semiconductors, but than some of the other areas. But I think there are signs of improvement there. And importantly from us, they do fall into that cyclicality bucket. And so they're right there with industrials, right there with consumer discretionary.

So call me encouraged. It's not an A plus, but it's certainly more encouraging than not in my book. How does the recent relative performance surge in some of the real big cap NASDAQ names, the old favorite types, the Microsofts, fit with the general stance that says, you know what, once you have a bear market, the prior bull market leaders are not really going to be the leaders of the next up phase? Is this just kind of a sort of a short term move and mean reversion? Or do we think that the

text is changing a little bit? Well, I think they're probably just marginally above market performs. And, you know, when you get down to it and you start looking at beta adjusted, I don't know if they're going to provide a lot more than, you know, what the market would with just the beta. But, you know, at the same time, keep in mind, you know, energy was leadership. So it's not necessarily the sequential leadership. Tech is about too removed now from being leadership. So I think there's pockets. I don't think we're going to go back to just pick any tech stock and it's going to outperform.

I think there's going to be winners and losers. That's not that unusual after you have these big deflationary events for those names. So I think that we're in the selectivity phase, but the good ones are going to do well. And those are the ones that are relative strength leaders right now. You're seeing it in things like cadence design, synopsis, obviously ADM and the like. So stick with that relative high list, and that's going to guide you to who's leadership, who's got the proper businesses that are going to thrive in the next cycle. I know you mean AMD rather than Archer Daniels, but that's that all works together. No works. You know, in looking at things like the banks, obviously just really disorderly liquidation type stuff going on.

You can't really handicap the scenarios. What would you look for in terms of, oh, man, it's so bad, maybe it's going to be good because it's all washed out type of a moment? For banks specifically, it's so hard because, you know, there's so much leverage involved. There's such a unique industry group. There's such a unique sector. You know, it really, I mean, as a technician, it's hard for me to say, but it really does come down to the fundamental difference between sound businesses and unsound businesses. But even there, I mean, you know, you get a bank run or you get some whispers out there and even, you know, the strongest, most stalwart can start to look pretty shaky. You know, we look for deep, deep oversold conditions. Clearly, we've had that. And then we just look for the baby with the bathwater. And that's 52-week lows. That's nowhere to run, nowhere to hide. And those provide bounces. But keep in mind that the relative performance of banks, you know, particularly the regionals, started to turn on a relative basis, on an equal weight relative basis, at least in our work, back

at the beginning of the year, they weren't signaling that we're going to have this kind of calamity, but they certainly were signaling that they were substantially weaker than the market. And until you really sort of clear the decks on that, we just step aside and let it play itself out and just see what happens. But mostly because there's so much leverage involved, and I'm an ex-Lehman alum. There's so much leverage involved that you just have to be careful with these things because they are very unique situations. For sure.

It's very good color. Jeff, appreciate it. Thanks very much. Have a good weekend. Thanks for having me, Mike. Take care. All right. Let's get over to Christina Partsenevelis again with a look at what's coming up next.

Hey, Christina. Well, hi. With a more constrained financial market, where does that leave lofty IPO valuations and unprofitable public tech firms? We will discuss this after the break. The fallout from SVB's collapse is causing a cash crunch in the financial system, which could possibly lead to a wave of M&A activity across the tech sector. Christina Partsenevelis joins us now with that story. Christina. Well, there's a desperation right now for cash among smaller tech firms now that they're dealing with a more constrained financial environment post-SVB fallout. And that could mean two

scenarios. The first one, more M&A activity. So think smaller tech firms. And I want to stick with the public ones like what you're seeing on your screen, PagerDuty, Twilio, Atlassian, because they rely on small to medium-sized businesses for their products. So if customers are cutting back, it doesn't bode well for their bottom lines. GitLab, for example, earlier this week warned that customer cost cuts were hurting GitLab's ability to expand. And you can see on your screen, the stock plunged on Monday. So according to Morgan Stanley, software names contribute 16% of the outstanding leverage loan market, by far the largest share of any subsector. That means credit tightening may prompt a rethink of

their current market caps, if public, or their valuations, if private, all while the cash balances of S&P 500 companies remain high. And, you know, there's only so much you can do with dividends and buybacks, making it an opportune time to snap up smaller players. Wedbush predicts this current financial weakness will spur a 20% uptick in M&A activity within technology. And then here's scenario two, IPOs could come to market quicker. But expect IPO valuations to come down from the pandemic era. I have one example.

Payment processing firm Stripe's latest round of funding showed its valuation is down by almost half from its peak of $95 billion two years ago. So investors probably would shun IPOs lacking a credible path to profitability. Yes, that's likely. Although I will say from past cycles, when things were very tough in the markets and you had companies that were going public because

they had to, not because they want to, it can mean it's actually a good deal for investors, whereas a lot of IPOs, when they come out too expensive, are a bad deal. So who knows? We just need one to break the ice. That's exactly it. So you're looking at the positive side for investors, also positive for maybe some of these larger tech or medium-sized. I don't have to focus on large tech firms that want to buy some of these startups, late-stage startups that choose not to go public. Hey, these valuations will come down. Maybe they won't go to the public markets.

Maybe a big public guy will come in and snap it up. So, yes, it's bringing things back down to reality, and all of us could benefit if we get in early. big public guy will come in and snap it up. So, yes, it's bringing things back down to reality. And all of us could benefit if we get in early. Yeah. And the strong, as often happens, get stronger. Christina, thanks very much. Thank you. All right. Last chance to weigh in on our Twitter question. We asked our stocks headed back to the October lows. Go to at CNBC closing bell on Twitter. We'll bring you the results right after this break. Let's get the results of our Twitter question. We asked, are stocks headed back to the October lows?

And there it is. A majority, 57% of you said yes. That would mean, as I mentioned, more than a 10% drop from here. Up next, one bright spot in a down tape. This stock is looking to close out the week with big gains. We'll tell you what it is and break down if it has more room to run. That and much more when we take you inside the market zone. We are now in the closing bell market zone. The Wall Street Journal's Gunjan Banerjee is here to break down these crucial moments of the trading day. Plus, Stacey Raskin of Bernstein on NVIDIA's big move this week. And Piper Sandler's Scott Seifers on the latest sell-off in the banks.

Welcome to you all. Gunjan, really eventful week to say the least. I think really one of the standout features of this is the intensity of the volatility, perhaps particularly in bonds and relatedly in bank stocks, which, if nothing else, suggests that people were wrong footed coming into this and or I guess the range of possibilities for what could break from here is is pretty extreme, to say the least. Absolutely, Mike, you know, I didn't think anything could outshine the volatility we've seen in stocks like First Republic, some of these other regional banks. But the move in the bond

market has been eye-popping. And that's what traders have been talking to me about all week long. The two-year Treasury yield has logged some of its biggest declines since 1987. I think that tells you everything you need to know about just the amount of uncertainty out there, how people are positioning for the Fed next week and over the next few months and just how much the world and the economy has changed in one week alone. You know, I was seeing some reporting on these statistical models that suggest how markets ought to trade and what moves represent a true extreme. And the two-year Treasury yield moves this week by the models should not have happened except once every 50 million years. So it probably tells you something's wrong about the models as well as telling you just exactly how wild the moves have been.

And when we have this type of action, I think the instinct is to wonder just who ended up on the wrong side of it, just what sorts of investors, whether we're going to see losses surface in one category style of hedge fund or something like that. That's right, Mike. And I think a lot of the traders who were who were caught wrong footed and believe me, many were a lot of traders were very, very bearish heading into this week's move. A lot of them were computer-driven funds, quant funds, CTAs, who had really bet against Treasuries heading into this year. And honestly, who can blame them? Think about the messaging that we've gotten from the Fed in terms of further interest rate hikes.

And a lot of people were positioned for that. So what I've been hearing is that this huge move in the two-year and 10-year, the types of moves that we have not seen in decades, they were driven, of course, by a flight to safety that benefited assets like gold as well, but also this really wrong-footed positioning, as well as poor liquidity in the markets. And all these different forces were kind of coming together to help drive this incredibly violent move in the bond market. Yeah, the really patchy liquidity has absolutely been very evident here, too. And I know you sort of track a lot of retail trading flows as well. We have an options expiration of quarterly one big volumes today, an index rebalancing, things like that.

But we've also seen yet again a rekindling of some excitement in some of the biggest names, you know, of the Nasdaq, let's say. You've seen the runs in NVIDIA, in Microsoft, that muscle memory seems to have kicked in again. I think muscle memory is exactly the right term. I mean, it's so reflexive. Anytime you get a move lower in yields, higher in yields, it seems like the NASDAQ kind of moves in tandem. And it's pretty remarkable to see that outperformance this week. It's up, what, 4%, 5%. And it reminds me of 2020 when tech kind of became the safe haven trade. It was like, oh, everything's dropping. Let me buy Apple. Let me buy Nvidia. And that seems to be on display here. I think one thing to watch out for is when I speak with

individual investors, when I speak with some of these retail brokerages, it does seem like there's some fatigue in terms of buying the dip. You know, last year we saw people pile in during some of that volatility. And I've been hearing that people are just getting getting tired of doing that. I think especially weeks like this make it tougher to justify sometimes just because there's so much uncertainty ahead. Absolutely. Hey, we're basically more than two weeks past the actual speculative peak in a lot of those areas of the market, February of 2021. Gajan, great to speak with you. Thanks very much. Thank you. Take care. Do want to get to Stacey Raskon here on the chips. Been, as we've been talking about, Stacey, a bright spot here, not just necessarily perhaps as a shelter from the macroeconomic storm,

but because I guess there's growing confidence that perhaps earnings estimates have finally bottomed and some of the longer term trends have kicked back in. What's your read? Yeah, so semis in general have been pretty strong year to date. The sector's up well over 20 percent versus like single digits for the S&P. And it is this bottoming thing, like estimates for the sector peaked in June. They're down one third since then. It's one of the largest negative revision cycles for the sector since the financial crisis. And there are some end markets um pc smartphones graphics cards um where you can get some confidence that we're now under shipping demand after many many quarters of overshipping and you can get some comfort that the bottom at least is in sight so people have been buying

the group broadly on that kind of bottoming theme in the hope of a second half recovery now nvidia has been something special though nIA is up almost 80% year to date. Some of it is these same things. They had a pretty awful year last year as the crypto bubble burst and GPUs, graphics cards plummeted and everything else. We're kind of through all of that now. We're at the beginning of two product cycles tactically, one in gaming and one in data center for them. And both of those should actually drive pretty good growth through the year. So that's a positive.

And now on top of that, people have been getting really excited finally about artificial intelligence and generative AI and chat GPT and all this stuff. And NVIDIA probably is the purest way to play that theme. And so that's been driving a lot of demand, I think, for the shares. And it's really been supporting it as that narrative has been playing out over the last, especially over the last couple of months, as this has really sort of struck the public fancy. Sure. I mean, I know you've actually been supportive of NVIDIA, but I just wonder at what point do you say, look, it's kind of overdone in the short term

or maybe you have to downscale your expectations? We've not even traded higher than this in NVIDIA except for just a few months right around the NASDAQ peak. Yeah, I mean, you got to remember, like, NVIDIA is always expensive. I mean, the day I launched on it, 2017 or something, it was like 45 times earnings. And as it turns out, it wasn't expensive. It was incredibly cheap because the E was wrong in the price to forward. The denominator was wrong. It was orders of magnitude wrong. And so that's the thing. But the thing with NVIDIA, though, it is in some sense, you will have near term volatility.

Like in any near term horizon, it can do anything. But over the long term, it is kind of open ended if you want to believe it is, you. It is accelerated compute and AI where we're very early and they're in the pole position and the penetration is really low. There's a whole software story that's playing out. There's a new cloud story that we're going to hear about next week. They've got their GTC event on Tuesday. We'll hear more about that. It's not hard.

If you want to dream the dream, it is not hard to dream. In some sense, it's open-ended. It can be as big as you want. And I have pretty strong confidence if you're looking at like five years, I think it's going to be a lot bigger than it is not hard to dream. In some sense, it's open-ended. It can be as big as you want. And I have pretty strong confidence if you're looking at like five years, I think it's gonna be a lot bigger than it is today. Over five days, who knows? But I think that long-term story looks really, really good.

Yeah, without a doubt, the market loves when you can dream the big dream and don't have to worry about banks and retail sales and all the rest of it. Stacey, appreciate it. We'll catch up with you again soon. Scott, obviously just super dramatic action in the banks right here. You have some with sort of existential questions around them,

and others are just worried. I guess investors are just worried about their longer-term profitability. Are you seeing opportunities, or is it just time to stay out of the way? Yeah, well, I mean, the market's still obviously pretty jittery. I think that goes without saying. I think the broad reality is that most banks will end up getting through this OK, but there are going to be some some longer term ramifications once the dust settles and and they'll be serious. So I don't want to don't want to minimize that. You know, it looks like the the largest banks will probably come out of

this looking the best simply because the market has sort of concluded hey they're too big for the government to allow them to fail they must be the safest places to custody money. So if anything you know those types of largest banks will probably see inflows of deposits ideally some customers that'll stick around once the dust settles. The much smaller end of the range I think for the most part it's business as usual their customers and management teams are sensitive to what's, I think for the most part, it's business as usual. Their customers and management teams are sensitive to what's going on. But for the most part,

they'll be impacted, but sort of only tangentially. It's really that sort of either 50 to 250 billion or 100 to 250 billion in asset bank that really looks like it'll get more squeezed in terms of kind of profitability longer term. And that'll take a few forms. It'll mean, you know, higher deposit costs as people really get serious about their funding and the value of it. I imagine those banks will probably kind of pare back their appetite to lend as well, just as they look to create capital. You know, you'll probably see, you know, share repurchase start to get pulled back a little again as these companies build capital. There'll be a heavier regulatory infrastructure as well. And then, you know, presumably whatever downturn we were going to have

maybe gets a little harder if banks are more reticent to extend credit. So there will be some ramifications, but, you know, I think we'll be okay longer term. If most are going to survive, as you say, which, of course, is the case by definition, there's been a lot of playbooks out there in terms of which ones to look for, whether percentage of uninsured deposits or just the diversity of the deposit base, maybe exposure to commercial real estate, things like that. Are there any rules of thumb you're following in terms of saying which stocks have been punished too much? Yeah, you bet. I mean, JP Morgan is really always a good go-to in times of skittishness,

you know, just excellent liquidity, excellent capital, excellent management, excellent overall risk profile. So they'll do, I think, extraordinarily well. If we look in the regional space, a couple of names we like include Citizens Financial here in the Northeast, you know, very good capital structure. They've got a really good kind of granular and diversified deposit base as well. So, you know, good liquidity. And I think they've got a good risk profile. Similarly, if we're to go out to the Midwest, name like Fifth Third down in Cincinnati, you know, really good capital profile, good risk management, really well managed as well there. So those are a few names that we like. And just quickly, the sell rating on B of A, what's that based on?

Oh, you know, B of A, that's an excellent company. There's no question about that. Our underweight rating there has really been more of a function of perhaps, you know, their NII outlook or their broadest revenue outlook, maybe being a little more aggressive vis-a-vis their closest peer, J.P. Morgan. But, you know, it's an excellent company and will do well longer term. It's just that we prefer J.P. Morgan of the two. Got it. And just a final word. Are you expecting deals on Monday? Oh, you know, who knows? Ask me back on Monday and we'll have that conversation in a bigger way. Yeah, I know. Nobody knows. Trick question. But we are in suspense as we go into a weekend.

Scott, great to have you. Thanks very much. Thanks. All right. As we get toward the close of the S&P 500 hovering around the level it's been at for a while, down more than 1 percent, about 3916. The low for the week was set right at the start of the week as we got news about that SVB backstop. So not going out at new lows. Actually also going to go out the week with a gain on the S&P 500. The volatility in that

has been up above 25. People bracing for potentially more moves over the weekend. That's going to do it for Closing Bell.