Closing Bell - Closing Bell 3/28/24

Episode Date: March 28, 2024

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

All right, welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with another big month for stocks and all that lies ahead as the rally is at five months and counting. We'll ask our experts over this final stretch where we are likely to go from here. In the meantime, take a look at your scorecard with 60 minutes to go in regulation. The S&P looking to extend its best start to a year since 2019. Energy once again an outperformer. We are watching tech closely. We always do. It's been down three of the past four weeks. That's interesting. Look at those stocks. They're lower. Apple, Microsoft and Meta. NASDAQ all but flat on the session

today. The big news of the week really coming tomorrow morning, as you know, the Good Friday release of the PCE inflation report. Markets closed, but we will have that for you 8.15 a.m. Eastern time on CNBC.com. Don't miss that. Interest rates, they're a touch higher ahead of that as well. Takes us to our talk of the tape. What's in store for this rally in the quarter ahead? Let's ask Cameron Dawson, New Edge Wealth's chief investment officer with me once again at Post 9. It's nice to see you again.

Good to see you. All right, so the curtain, as I said earlier, is coming down. We're going to turn the page to a new quarter. Do we still have momentum to keep this going? The market certainly does have momentum, but the catch is some of the momentum stocks have started to stall out a little bit. And that's what you mentioned in talking about tech. Tech has certainly started to lose a little bit of its momentum.

Now, it's not outright weakening, which means that the market is still able to go up because you're getting the benefit from things like energy, financials, industrials, materials all doing better. So we're watching tech really closely into the second quarter, because if that goes to weakening, that would be something that could be an issue for the market. It could be an issue, even as you suggest, and rightly so, the broadening that we've seen lately. As tech has weakened. Other sectors have picked up the slack over the last month alone. One, two, three, four. Technology is the seventh best performer. Energy is the best. Materials, utilities, comm services, industrials, financials. Isn't that what we want? It is what

we want. And the important thing here is that tech is still in an uptrend on an absolute basis. The weakness in tech has been more relative. It just means it's not doing as well as the other parts of the market. And so if tech actually flips into outright weakness, it's such a large part of the index. That's where the index could have challenges. But the breadth is really powerful. Eighty five percent of names are trading above their 200-day. That's not something that you typically see at market tops. Breath weakens going into a top. You don't have a top and a top in breath at the same time. How should we feel about earnings, which are going to get hot and heavy real quick? Expectations have come down. I mean, the numbers have for the first quarter, they're about half in terms of earnings growth from where they were when this rally started in October.

Yeah, I think your point on halftime was really interesting is that you've seen this all be about multiple expansion as you've been cutting earnings and earnings estimates have gone up slightly for the full year, mostly for 2025. But this has been all multiple expansion, even in those cyclical parts of the economy or the parts of the market, multiples have gone up by 30% plus for industrials and materials. So you really do have to see earnings deliver in order to make sense of a lot of these multiples. You think we will? I mean, there's a thought that we will. You know, Wolf had a positive note out today, says outperformance

is going to continue. I think that you're set up for better cyclical activity, most certainly. So PMIs, we think, are bottoming. Early indicators and PMIs are telling you that you're seeing a cyclical recovery, which suggests that earnings can do better, mostly now that you've lowered the bar for earnings. But if we're continuously seeing that trims in the out years on earnings, I think that's something we'll have to watch closely. Are you skeptical that the sectors that have led over the last couple, three weeks can continue to do it? Are these like one off anomalies or is this the start of what you think could be a new and positive and more broadening trend? I think we have three to six months on this cyclical trade. So cyclicals typically do well as you're starting to see activity bottom.

The risk you have is once activity bottoms, earnings estimates go up, then you're trading at a peak valuation on peak earnings, and that's when you have a challenge. So there is still air left for this cyclical run to happen. I think you'll have to watch. Once PMIs get into the 53, 54 territory, that's when you might want to take some chips off the table. How reliant are we in this quarter about the Fed? I don't think we've been that reliant because we've gone from six and a half cuts to now three. And if three becomes two, will the market really see an issue with that? We think the reason,

the key reason why the market continues to do well is because GDP forecasts continue to go up. They've gone from 1.2 percent for 2024 to start this year to 2.2 percent. Risk assets love that. So the key thing to watch may not be the Fed. It may be GDP forecasts and the expectations about the economy, which would drive the market up or down. What about PCE tomorrow? All plays into the Fed story, interest rates, etc. Yeah, I think that if you get a hot PCE, then Waller looks to be beating Powell. Waller coming out and saying, hey, there's no rush. Powell's saying, yeah, we can do it. If PCE moves against Powell, then it might be that Waller and likely that or Bostic even with the one cut this year looks to be winning out. Do we need any cuts at all? You know, James Gorman of, you know, still of Morgan Stanley, but not in the CEO role, said, you know, maybe we don't get any this year. I think we still have an expectation baked in to interest rate sensitive parts of the market that you are going to get cuts.

Like what, small caps? Talking about the Russell, right? Exactly. And small caps have been trading better. But you have to remember that they have a lot of floating rate debt. They have a lot of debt in aggregate, and they're 40% of the small caps are unprofitable. These are companies that do well in a high growth falling rate environment. So their strength suggests that there are still expectations for rate cuts. By the way, the Russell's up 5% in the first quarter.

The Dow's up 5.5%. So it's matched that. Now, the S&P has doubled that, so it sticks out. And so much of the focus has been on NAS because of the mega caps. But the Russell feels like it's ready. It just needs some confirmation that there are going to be rate cuts sometime. And what we've seen with the Russell is that there are a lot of mean reversion or catch-up trades. The Russell trades at a significant discount to the S&P 500. So in a broad risk on tape, there's a lot of room to catch up. The question is, is that sustainable?

And if we start to see rates stay sticky or higher for longer, or if growth slows down, that would be something to maybe take some chips off for the Russell. higher for longer, or if growth slows down, that would be something to maybe take some chips off for the Russell. But for now, it's interacting great with this 50-day moving average. It's an uptrend. All right, let's bring in the gentleman to your left, Joe Terranova, of course, Avertis Investment Partners, a CNBC contributor. You share Cameron's thoughts? Are you pretty positive going into a new quarter? Oh, I think for the entirety of 2024, you have to be positive. We've overcome the entirety. Absolutely. We've overcome so much in this first quarter. If you think about it, the yield curve actually inverted even more. You've got earnings revisions that have moved

lower. We've had significant challenges. The market had every reason to go down. It has not gone down. As far as momentum itself and looking at technology, as long as semiconductors continue to perform well and they are the strength of technology right now, that's the center of universe. If my semiconductors are doing fine, I could dismiss the fact that hardware and software in the technology sector is not doing well. And I think there's enough positioning that needs to be rebuilt in this broadening out theme in other sectors like the financials, industrials, health care, energy and materials coming into the year. Those sectors were not carried at a significant overweight. So capital can still be treated really well in those sectors. And I think

that's going to be the theme. Scott, I just have a hard time believing on any pullback. Look, maybe the market doesn't gallop higher at the pace that it has in the first quarter. But on pullbacks, there's going to be a lot of demand for equities. I mean, I just worry or wonder, maybe better said, if a lot is hinging on the semis, a lot of the semis have gone up a lot. They've already expanded their multiples. Their stock prices have gone up a lot. That maybe increases some more risk of those stocks slowing down, no? But they have the margin expansion. You look at Q4 earnings for S&P 500 companies, the majority of margin expansion is coming from the semiconductors itself.

And, yes, of course, we all know that NVIDIA is leading that concentrated in margin expansion. But the revenue growth is real. It's not just isolated to NVIDIA. It's Applied Materials. It's KLA Corp. It's Lam Research. It's Micron. They're all participating right now. capital spending from large cap technology companies like Apple, like Amazon, like Microsoft

that are spending building out the infrastructure for generative AI. Are we all systems go, so to speak, Cameron, on the tech trade, the AI trade, the chip trade until and when NVIDIA has some kind of stumble? Yeah, I think that if NVIDIA does have a stumble, a lot of it would unwind. It's likely that there still is room to run. Even though you've seen it lose a little bit of momentum, it's still, again, in that uptrend. But I think Joe's point is really important, where tech is the only sector over the last 12 months that has seen meaningful inflows. Every other sector has seen outflows, which just means that they are under-owned. The thing that gives us a little bit of pause is that those under-owned sectors, industrials, materials, financials,

are already back up to near 20-year highs in valuation. So you're putting a lot already in those valuations for an earnings recovery. Energy, Joe, top over the last month, 52-week high yet again today. You have a lot of holdings there. Are you a believer that this trade is going to continue to work? Because you thought it was. It didn't. Now it is. Will it continue?

Clearly, the spot price of oil is breaking out towards the high for the year. But I think it's more than that. I think a lot of the deal activity at the end of 2023 is telling you that management believes that they need to go out and buy the production at this point, that the organic growth on the production is not there. And I think that makes a compelling case for the supply-demand balance being in the favor of a lot of these energy names. So, yes, Scott, to your point, I do think it continues. And I think, again, it's another sector that's indicative of where positioning can be rebuilt significantly. If I asked you both for a contrarian type idea, what would one of yours, do you think, Cameron, to put you on the spot, be? In some ways,

it's been a contrarian type market in that, you know, last year, not a lot of people were positioned for mega cap to do what it did. Surprise. Now we've got, you know, the better performance in things like energy and materials. I don't know that there was a lot of great positioning for that. So how would we assess that here? The most contrarian idea I have would be utilities. They're trading at 16 times forward earnings. That's down from 21 times back in the early 22. A lot of that is rates, meaning that they are dividend paying stocks. So rates moving higher, staying higher is hard for utilities. But if we look and say utilities are a risk off part of the market that would do well if growth forecasts were to fall,

then that says that that's even contrarian. Because look at growth forecasts, which are now resoundingly no or soft landing, meaning that nobody's predicting any kind of economic stumble. So if we were to have one, utilities being cheap would do well. What would you say? It's difficult for me as a momentum player to look at contrarian plays. And I think the momentum so well entrenched so far to date. But I would say this. I do think at some point we've already witnessed the Nasdaq and the S&P 500 recover from a multi-quarter earnings recession. At some point, the Russell is going to follow suit. And when the Russell comes out of that earnings recession, I think the center of opportunity, the proxy for

that is going to be in large cap regional banks. Hear what I'm saying? OK, large cap. I hear you. I hear you. I'm glad you went to the banks because, you know, obviously the financials kick off earnings and they've done quite well in the quarter, up almost 12 percent. In the month, up about four and a half. So do you believe

in that trade? The big ones, not the big regional. Absolutely. You're talking about super regionals. Correct. Bigger than that, like the money center banks. Correct. Bank of America yesterday was my final trade on halftime. I think Bank of America very quietly is having a very strong performance while everyone's talking about Citigroup. I'm personally long Morgan Stanley and Goldman Sachs and JP Morgan. So yes, I do believe that the five money center banks that we tend to focus on can continue their current price appreciation. And I would even throw Wells Fargo in there

as another opportunity. Yeah, I mean, it's capital markets players, too, obviously, Goldman, Morgan Stanley and the others that participate in both areas of big banking. Are you are you positive on the financials? I think that they have some pretty significant tailwinds, which is that you have some pretty significant tailwinds, which is that you have a slightly less inverted yield curve. You have loan standards that are actually easing. Pull up that sluice survey and loan standards are coming in, which just means some of the stress and lending is going away.

You have the recovery in capital markets business, which just suggests that there could be an earnings recovery ahead. And they're only trading at 1.2 times book, which is not at all stretch versus history. Is there a level of interest rates, for example, on the 10-year that would make you, Joe, especially nervous? We're at 420 right now. There was a note earlier this week that said, OK, if you go to 435, then maybe you get a problem. And they've been reasonably sanguine of late. What do you think?

We were at 435. What's interesting about the correlation between yields and where I want to invest in the market is at the beginning of the year, a lot of people liked real estate and utilities, right? And they liked real estate and utilities as that cyclical play and the belief that rates were going to move more. Well, what happened? You didn't get the move lower in rates. The market still moved higher and things were OK. I think it's important to understand that in the third

quarter of 2023, we saw Treasury yields make the move to 5 percent. And I think it's the velocity of the move more than anything else, Scott, that would trouble the market. If, in fact, we see a very fast rise in Treasury yields, that's where equity investors are going to get very uncomfortable. So I don't know if it's a particular price point, but I think it's the velocity of the move similar to what happened in Q3. You know, I'm looking at some headlines related to the ECB from an official who says the ECB will probably start with moderate rate cuts, unimportant whether it starts in April or June. They should start in the spring. I bring it up because it just points to what is a pivot, a shift from global central banks that we're done with this tightening regime, that there's enough confidence that inflation everywhere

is coming back to the level that they want it to be, and that you're going to be in a global cutting rate environment for the foreseeable future. And I think that's why, Pal, even given the confluence of data that was stronger GDP and higher inflation, was so dovish, which is this idea of the last one out is a rotten egg, meaning that the last one to start cutting would have too strong of a currency. And I think that's one of the reasons why the dollar has been so strong. Imagine if Fed, Powell, had not been dovish at the meeting.

How strong would the dollar have been over the last couple of weeks? Yeah, I wonder, you know, we're record high extending it here for the S&P 500. Dow's at the highs now, too. I wonder, Joe, if some of that is in response to these types of headlines moving, just once again signifying the environment's going to be different. Yes. It's going to be different. Yeah. Yes, in fact, I believe you're absolutely correct, Scott, that that is the case.

I also believe we're at the end of the quarter, and you'll see some strength here as we push towards the close of what has been a remarkably strong quarter in itself. All right, guys, we'll leave it there. Cameron, thanks, Joe. Of course, thanks to you as well. Tomorrow, by the way, you can watch CNBC.com. Another reminder for that key inflation read, the PCE. It's the Fed's preferred measure. Morgan Brennan, Steve Leisman, Rick Santelli, they're

going to bring you full coverage of that report. It starts at 8.15 a.m. Eastern time, and that's on CNBC.com. I know you won't miss it because we're all going to be watching that. Let's send it to Christina Partsenevelis now for a look at the biggest names moving into the close. Christina. Thanks, Scott. Well, luxury retailer RH, formerly Restoration Hardware, is soaring about 17, 18 percent right now after providing some reassurance for investors in the company's latest earnings report. And I say reassurance because RH management said they expect demand to, quote, accelerate through the rest of this year, 2024, despite a sticky housing market and interest rate environment. That forecast, though,

was enough to offset the earnings share miss and other management comments that warned of revenue lagging demand for this year so take your pick Bank of America analysts labeling Estee Lauder a quote Cinderella story in their latest note on the cosmetics manufacturer the firm upgraded the company to a buy citing various efforts like cost-cutting and a shift away from the weaker Chinese market that's helping the recovery shares Shares are up about 6%. Christina, we will be back to you in a little bit. Meantime, FTX founder Sam Bankman-Fried getting hit with a 25-year prison sentence today. Kate Rooney live outside the New York City courthouse just a few blocks from here with the very latest. Kate.

Hey, Scott. Sam Bankman-Fried was sentenced to 25 years in prison today for what U.S. prosecutors argue was one of the biggest financial frauds in U.S. history. It caps off the fall of one of the one-time crypto billionaire less than two years ago. He was living in a $30 million penthouse in the Bahamas. He was really the face of the crypto industry at the time. And today he took the stand in a beige prison jumpsuit, pleading for the judge's leniency with a much more contrite, more apologetic tone than some of the defiance and evasion we heard from him when he was on the stand and was cross-examined

back in the fall during his criminal trial. He said on the stand today that his actions, quote, haunt him every day. He also said, I'm sorry. The judge, though, today asking Bankman-Fried to forfeit $11 billion. He admonished the 32-year-old and pointed to the, quote, enormous harm he did, the brazenness of his actions, his exceptional flexibility with the truth, and his apparent lack of any real remorse. And he said he obstructed justice, committed perjury at least three times on that witness stand

throughout the trial said bankman freed was at risk of committing crimes in the future he said it's not a trivial risk at all that he comes back and commits another crime that did play in the sentencing judge caplan also talked about sam bankman freed's risk appetite said his fraud was another example of this and his penchant for gambling he was was found guilty in November on seven counts of fraud and conspiracy. His family saying today we are heartbroken and will continue to fight for our son. His defense team does plan to appeal, Scott. Appreciate that update. Thank you very much. That's Kate Rooney outside the courthouse.

We're just getting started here on Closing Bell. Up next, the S&P heading for its best start to a year since 2019. But Morgan Stanley's Chris Toomey, who runs one of the nation's highest rated private wealth advisory teams, is still is still, he said, raising the is still raising the red flags as he stands off the set, ready to come on and make his case. He'll do it just after this break. All right, welcome back. The S&P hitting a fresh record high as it heads for its best first quarter in some five years. But our next guest predicting pain ahead for the market that he says has, quote, gotten ahead of itself. Morgan Stanley's Chris Toomey runs one of the highest rated private wealth advisory teams in the country. He joins me here at Post 9. Well, you're consistent.

I'll give you that. But why are you still negative? I'm trying to think. You know what? When I knew you were coming out, I'm like, how am I going to handle this interview? I feel like I ask you the same questions every time. Yeah. Because I have no choice.

Right. But I mean, at some point, as this market, as we just said, is off to its best start in five years, you would think that your position would change. Right. Why hasn't it? I think it hasn't because while we have seen tremendous economic growth that we weren't expecting, we've seen inflation come down, we've seen a very strong labor market. The things that we're concerned about continue to be things that we're concerned about. And I think why we're particularly concerned right now and why we think this rally is so remarkable is I think if you look at the pace over this period from October to now, you know, we actually have not even seen a 2% correction.

And over that time period, we haven't seen something like that in over six years. If you look at all of these sectors that are doing well on a technical basis, they're all either overbought or extremely overbought. So in our mind, I think even on the short term, we would all agree that the market could probably take a breather. So I think from a technical standpoint, from where we have been, I think it wouldn't surprise us to see a pause or more importantly, probably see a pullback given how far we've moved and how aggressively we've moved. Okay. That's all fair. And I think you're right in suggesting that nobody would be surprised if there was a pullback, some kind of a

correction. I mean, that's what happens in bull markets. However, you were negative. You've been negative since before the market got into the conditions you suggest now make it ripe for a pullback. And let's talk about the underlining thesis behind that, right? So the underlining thesis was the Fed was not going to be as aggressive in cutting rates as the market was pricing. And we saw 2023, instead of rate cuts, we saw rate hikes. We started the year, you talked about this before, instead of getting seven rate cuts, we're now potentially getting two, right? And then let's talk about earnings. Earnings last year were flat. Earnings this year, even with the

dovish tone and economic growth that we're talking about, are not really going all that much higher. So if you look at the performance, 90% of this performance is PE multiple expansion. And so at that point, are you looking at a situation where the equity market from an equity risk premium standpoint is really not giving you that bang for the buck. In our mind, yes, maybe you're right. This is a bull market. But, you know, as Roy Newport said. It's a bull market, my friend. I mean, the market is telling the story, not me. Right. Right. Of course. But what is driving that market, right? So even if you go deeper into earnings last year, right, you take out

the market cap weighted, you look at equally weighted, those earnings are negative. If you strip out the MAG-7, earnings are actually down 10%. And you're talking about breadth in the market for this quarter, which you're starting to see particularly in February. But if you look at the performance, the 10% performance, 30% of that is one name, right? So you are starting to see particularly in February. But if you look at the performance, the 10 percent performance, 30 percent of that is one name. Right. So you are starting to get some breath, particularly with some of the larger names and different in different parts of the sectors. But the median returns are still around two to three percent in each of those sectors. OK, let me let me take a couple points off of what you said, and we'll debate this. Earnings. So we went from an earnings recession, right? We were negative earnings for multiple quarters. And then, as you said, we got

flat. But now we're going to grow again. So the trajectory from earnings looks like this, right? We went from negative to flat to now we're expected, as I said, for the first quarter, some 5%. Now, it may be down from what was 10%, but it's nonetheless 5% versus negative. That's one thing. And then do you really want to be negative on the market into a global cutting cycle, which is what we're going to have. We're going to have that. At some point, right? But let's talk about what are the things that might affect that, right? So growth has done well, right? We saw January, February CPI and PPI numbers that ran hotter. And you can talk about owner equivalent rent and so forth. But I think some of the other things that are a concern are the fact that if you look at gasoline prices, right, which was a tailwind last year, it's

up 16 percent this year. Food prices are up 9 percent. Consumer sentiment's going down. Concerns with regards to the quit rate is going down, right? Wasn't consumer sentiment good today? Yes. Yes. But, you know, look, there's a variety of different consumer sentiment numbers.

Look, Colin, the consumer's been good. The consumer's good. And the consumer's been strong strong and optimism still remains. It does, but what's going on underneath the scenes, right? You're in a situation where the consumer has got over $1 trillion worth of debt that's paying 20%. Right now, non-mortgage debt is actually equivalent to mortgage debt. So you're basically paying exactly what you were paying before and savings have come down. So the issue is, for me, is not just the fact that the rates have to come down.

If rates stay higher for longer, that's going to be a really problem for a variety of different areas of the economy. And it's not being priced in right now. No, but don't you think that rates are going to continue to come down, as I suggest, not just here, but globally. When you have, you know, an official from the ECB saying, well, we have the option to cut at every meeting. We're not obliged, but we could cut at every meeting. You'd probably start with a moderate rate cut, could start in the spring. I mean, the inflation target within sight. If I told you that that was Powell, our Fed chairman, suggesting that the inflation target was within sight, you'd believe it because he was dovish at the recent meeting. I mean, they're all but telling you that cuts are coming. They may not be on the market's original schedule,

but does that really matter if it's a trend, a major trend change? Yeah, I mean, it does matter if it's not priced into the market that there's a potential that it might not happen, right? And if markets are priced for perfection, you don't need something dramatic to happen in order to send them down fairly dramatically, right? So if you're in a situation where multiples expanded so much, earnings do not, to your point, are coming in gangbusters. And if no one's paying attention to the fact that we were in a situation where we were pricing in seven rate cuts and we're only getting two now and the market continues to grind higher, then earnings better be good, right? And so if earnings aren't great, right, I don't necessarily mean they have to be okay. I think they have to be good based upon where we're priced right now. You could see that pullback having a real dramatic impact on the underlining equity

market. And then if you get hot inflation numbers, PCE tomorrow, we're not necessarily expecting a hot number. But to my point, it's not priced into the market. The potential for a hot PCE number is not being priced into the market at all. And so what happens if we get one? Well, we'll see. I mean, certainly you can't have a string, a continued string of hotter inflation numbers and expect the market's just going to be cozy with that. But let me ask you one more question about valuation, because how can you make a comment that the multiple of the market's too high, but then in the same light say, well, it's just a small number of big stocks that have carried the load and those valuations have gotten out of whack.

Now, you may take issue with the valuations of an NVIDIA and of Microsoft and whoever else you want to lump into that from the megacast. But doesn't that also imply that these other parts of the market, the lagging sectors of the market, have multiples that are more attractive, if not cheap, relative to what the mega caps have done? I mean, there are all these other sectors that have not performed as well in the quarter as technology has done. They picked up lately, but those multiples are not the same as the Microsoft's and the NVIDIA's, are they? No. So, look, I think that's the bullish question, right, which is the idea that the market is going to spread out. We're going to continue to get breadth and that diversion. It's happening in February. But my concern is the earnings within those estimates are not necessarily rising to your earlier point in the show. And what I think the better question is, is if quality

is the place to be, right? And these mega-cap companies are the ones that have impenetrable balance sheets and continue to grow, right? Like NVIDIA's earnings that they have that are driving the market, and they're a huge part of the S&P 500. How do you not want to own those names and see the market going higher? Sure, but you're also insinuating that when you use the word quality, that it only applies to those names. When you look at the number and names of stocks that have been at or near new highs over the last couple of months, I mean, is Caterpillar, is that quality? Are some of these other industrial names, is that quality?

Is JP Morgan quality? Right. Because all these stocks that I'm naming have been at or near new highs. Right. The quality spectrum has widened tremendously over the last couple of months. I would say, look, those have always been great companies. They'll always continue to be great companies. The question is, is what are you going to pay for those types of earnings? And in my mind, if you look across the spectrum and look at those sectors in an

environment like this, you're going to get really excited. That's what happens around a long weekend. They're getting really excited. But the point is, I think markets have gotten ahead of themselves. I think prices are too high. Stay cautious. Don't get out of the equity market. But if you have cash, let the market come to you. Stay calm. Stay calm. Be patient. Stay calm, guys. I love the debate. I really do. I appreciate you coming back and your willingness to engage in this kind of conversation. This is what I do. All right. Chris Toomey of Morgan Stanley joining us once again.

Up next, going beyond the MAG7, tech having a volatile month. So where should investors look for opportunity outside the mega caps? The managing director of Advent Global Opportunities will join us after this break on where he is seeing pockets of value right now. Closing bell is coming right back. Welcome back to Magnificent Seven. Losing steam this week amid the rally broadening. My next guest, finding opportunities outside mega cap tech, both domestically and abroad. Let's bring in Mohamed Andrewala. He is managing director at Advent Global Opportunities, which has $91 billion of assets under management. Mohamed, welcome. It's nice to see you.

Thank you for having me, Scott. So how would you articulate your market view here as we close a quarter, best start to a year in five, and now we're wondering what happens next? Well, it's certainly been a great start to the year for the market, but it's not just this year. I mean, the last six months, the market's been a great start to the year for the market. But it's not just this year. I mean, the last six months, the market's been really moving up. And I think, as some of your prior guests talked about, a lot of that has been multiple. So, multiples have expanded quite a bit.

And in particular, around these so-called magnificent seven, the seven mega-cap tech names, our view is, and we are long-term investors, our view is that if you look for sustained earnings growth beneath the surface, beneath the largest tech names, there are actually some pockets of value that you can find. Give me some ideas where, because that's ultimately what investors want to do. If they're tired of either looking at the MAG7 or wondering whether there's going to be a continued rotation into other areas. Where should we look?

One of the areas we're spending a lot of time in is aerospace, and in particular, the aerospace supply chain. So not just the big names that folks are familiar with, Boeing and Airbus, but even deeper in the supply chain. And as that supply chain is ramping up production, there's some challenges in getting new planes out. What that means is that the existing fleet of planes is getting older and working harder. And the implication is that the need for repairs, parts, maintenance is continuing to increase at a sustained rate. And so companies that service that aftermarket within the aerospace world are actually really well positioned in our view for sustained earnings growth for the next several years.

Before I let you go, and I'm going to see you next week, by the way, at the Iris Zone Conference, which I'll get to in a moment, you really are the epitome of the American dream. When I read through your notes, and I did not want that part of your story to be overlooked and simply just sitting here talking about X's and O's and stocks and the market at large, you came to this country at 17 years old. You had two suitcases and $200 in your pocket. You had a full scholarship to Franklin and Marshall. It's remarkable. How did you get from there to where you are today? I'm in the land of opportunity.

I've been very, very lucky. And, you know, life takes you in different directions. And one of the critical sort of points in my life was coming to the U.S. And just the opportunities I've had here, the mentors I've had here, and the learnings I've had here has allowed, you know, for me to get to where I did. So I am, as you say, living the American dream. Did you always know that this is what you wanted to do? You just needed to come here, get the education you did, and then you'd figure out a way to get to Wall Street, so to speak, and in finance? No, I can't say that.

You know, when you're 17, you really don't know much. But I think that's the beauty of it, right? I mean, in America, I've had the chance to just see a lot more things and realize that there are a lot more career opportunities that were possible than might have been back home in Pakistan. Yeah. As I said, we'll see you next week. We'll make sure we shake hands over the Iris Zone Conference. I'll look forward to that. I'm going to be there, by the way, live.

We'll have an interview you won't want to miss. Greenlight Capital's David Einhorn, he's going to join me live from the Iris Zone Conference, and that's on April 3rd. Looking very much forward to that rare opportunity to sit down with David Einhorn. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is standing by once again with that. Christina. Well, we have some insiders dumping shares of Reddit and Palantir getting some shade from an analyst. Enough to move the stock. Details next. 15 minutes from the closing bell.

Let's get back to Christina Partsanovalos now for the stock she's watching. Christina. Shares of software firm Palantir are lower after a Maness analyst told investors to steer clear of this name because of its excessive valuation, spotty execution, and inconsistent government-related contracts. And it actually gets worse. The analyst Brian White says Palantir's, quote, darkest days of the economic downturn are ahead of them. Shares down 6%. And a change, of course, for Reddit shares, down about 12, a little bit over almost 13% now after surging almost 50% on the first day of its IPO last week. We learn now that Reddit's CEO, CFO, chief operating officer all sold hundreds of thousands of shares with that public offering. Insider selling, spooking some investors. That's why the stock is down 13%. Scott?

All right, Christina, thank you. Give it a little bit back. It's been up seemingly almost every day. Christina, thank you. Christina Parts of Nevel is still ahead. Drilling down on energy. That sector on pace now for three straight months of gains. We're going to break down that big move coming up.

Closing bell is coming right back. Top technician Jonathan Krinsky lays out where he is forecasting the most strength in the market in the new quarter we'll take you in the market zone next all right we're now in the closing bell market zone CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day plus BTIG's Jonathan Krinsky with his technical take on the names that could be winners and losers in April. Pippa Stevens on the energy sector's winning month. It's been on a run.

Mike, I will begin with you. See if we can extend this record high for the S&P. And it sure looks like we just might do that. Yep. You know, this year to date has really resembled, I mentioned this before, some of those years like 95, 2013, 2017, where the market gets off to this great start. There's no downside volatility at all. You get this persistent strength and the market gets overbought. It's embraced. It's widely loved. The bull case is very clear and yet it doesn't quit. So I'm very mindful of not saying, OK,

you've got to step off here because those years did not quit after the first three months. I do think it makes sense to be aware of how much has had to go right in order for us to get here. Obviously, you know, the potential Fed easing being offset by a much stronger economy and the sort of AI investment and earnings push that wasn't going to be there otherwise and therefore has animated and emboldened people to essentially pay up for these long-term stories. Well, okay, to your point about how many things have had to go right, I mean, I think one of the most remarkable things is what could actually go wrong, and we've still managed to be where we are.

Tech could stumble. It could go wrong, yeah. And we to be where we are. Tech could stumble. Could go wrong. And we were able to withstand that. The Fed, right, we were able to withstand going from seven to three. Yes. And here we are. We're going to have another record close. That's right. No, that's because the confidence in the macro picture underwrites the whole story. And if you are confident about that, and if you do believe that the stocks that have been left behind last year were unduly cheap, or at least not priced for a good earnings path over a couple of years, I do think that's important to keep in mind. It's not just like, oh, we'll have a couple of quarters of mean

reversion higher earnings. It's probably got to continue for a while. But yeah, it's been impressive. I think it's natural to sort of get a while. But, yeah, it's been impressive. You know, I think it's natural to sort of get a little bit itchy and say we're due for some kind of adverse surprise. How can you not think that, right? Yeah, it's hard to help yourself. I mean, sentiment is definitely getting a little bit stretched, all the rest of it, but there's no smoking. We'll see where the technicals are going.

Jonathan Krinsky, BTIG, joining us now. How are we looking as we head into a new quarter? Scott, good to see you. You know, look, I think the biggest risk as we head into April for us is the momentum factor unwind. And that doesn't necessarily mean market negative, but I think when you look at that momentum factor, depending on what you look at, we're coming up the best quarter in at least the last 20 years, meaning the stocks that have been going up have been going up extremely strongly meaning the stocks that have been going up have been going up extremely strongly and the stocks that have not been doing well have not done well. And so, you know, if you want to kind of break that down to potential areas we think could

have opportunity into April on the high momentum side would be the semiconductors, which, you know, the semis are coming off their best five month return since the year 2000. And interestingly enough, April is actually a pretty weak month for semis. It's been down eight of the last 10 years in April. So I think you have stretched positioning in semis into a seasonally weak period. So that's, I think, the biggest downside risk. And then the opportunity, we think, is an area like utilities, which are just now starting to break out of an 18-month downtrend,

breaking some horizontal resistance to the upside. And interestingly enough, April is actually very strong for utilities. They've been up pretty strongly, on average about 2% over the last 10 years, up 80% of the time. So it's one of the best sectors in April. So we think those are two ways you can kind of play both sides of the market, and we'll see how that shakes out for the overall team. That was Cameron Dawson's pick, too, for a contrarian play with utilities. Jonathan, thanks. We'll see you soon. BTIG's Jonathan Krinsky. Energy up 10 percent this month.

Is it going to continue? Pippa Stevens has more on that for us. Pippa. That's right, Scott. It is the best sector this month. But the stocks have actually lagged oil itself year to date, meaning the catch up trade could continue. Morgan Stanley upgraded energy to overweight this week, noting the sector trades at two times the historical discount to the broader market. Plus, companies have paid down debt and free cash flow margins are well above the historical averages. Across the sector, 40% of components are at their highest level in at least a year,

with the refiners leading the way. Marathon Petroleum, Valero and Phillips 66 all hitting records this week as crack spreads remain supportive. The busy spring driving season is just kicking off and gasoline futures are already up 20 percent in the last month. Now looking forward, the midstream could be a place to watch. It's hard to build new pipelines, meaning there's a premium for existing infrastructure. Key players there include enterprise products, energy transfer, and Western midstream. Scott? All right, Pippa Stevens, thank you very much. Mike, we're going to turn to you. So yesterday we had a new record close for the S&P. We're going to get one for the Dow. We'll get one for the S&P too, it looks like. Yeah, well, certainly for the S&P,

we're extending that. But now the Dow's joining the party, and we're a little more than 100 points away now from Dow 40K. Yeah. I mean, the S&P, this would be the 22nd new record high in the first quarter. If you annualize that, I think that's the best year ever in terms of number of record highs. So that, again, shows you that this market has run ahead and taken credit for a lot of good stuff. But it is based on like we were saying, many of the things we were so worried about back in September and October, really not coming true and reversing that huge risk aversion that we that we did see there. The stuff to watch that I'm watching that you can't really tell when it's going to run out is

a lot of the retail investor speculative action that has started to flow again. And whether that destabilizes parts of the market, I don't think it's make or break. But you also, at the same time, have this very, very active and growing area of just selling options to harvest the income. In other words, to bet on continued low volatility. So everyone says, well, when the market's this broad, it never just tops. No, it doesn't top for good. But we had a really broad rally into the beginning of 2018. And that's when you got volmageddon.

So I don't think we have the makings of it right now in the same way. But those are the things that ride along with a bull market and are part and parcel of it. But when they get to an extreme, they could be destabilizing. And what Krinsky was saying about the momentum reversal, it's not necessarily market negative unless it knocks something loose in terms of, you know, the cross asset pricing. And, you know, we're selling everything because our leading stocks went down and we have to raise cash. That's not happening right now. Dow's 60 or so points ahead of a new closing high. So it looks like we're going to notch that on this final day of an amazing quarter.

S&P is going to extend its own record close. You've got names like Disney, which have done incredibly well. Bell's going to mark all of that as we put in a new record. Don't forget, 8.15 tomorrow morning on CNBC.com for the PCE report. We'll trade it on the other side of the weekend. Have a great one. I'll see you then in the OC.