Closing Bell - Closing Bell 4/11/24

Episode Date: April 11, 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.

Welcome to Closing Bail. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with a big sigh of relief for the bulls. Stocks rebounding after yet another read of inflation. This one, though, softer than expected. We'll ask our experts over this final stretch what all of that means, including former Dallas Fed President Robert Kaplan. He's coming up in a little bit. In the meantime, take a look at your scorecard.

With 60 minutes to go in regulation. Got a very interesting final stretch underway because a cooler than expected PPI has stabilized interest rates, and that's been good enough to give stocks a bit of a lift today. NASDAQ outperforming, as you see there. Several mega caps are catching a bid this hour. Amazon among them. That stock's going for a new record closing high, and you bet we're going to track that throughout this final stretch. A nice move as well for Nvidia. It's recovering from its correction territory move.

Apple, it's also rallying back above $170 a share. There it is, pushing towards $174. That's a nice gain of 3.5%. We've got some news coming up on Apple, too, and you don't want to miss that. It does take us to our talk of the tape. Great expectations and whether they need to be reset for the Fed and for the markets. Let's ask Cameron Dawson, chief investment officer for New Edge Wealth and Joe Terranova of Virtus Investment Partners. He's also a CNBC contributor. And they are, as you see here at Post 9.

Cameron, I begin with you. Did we unravel anything big yesterday? And if we did, did we fix it today? I suppose it's insofar as the inflation and yield story doesn't question the growth story underlying this market, then the risk on rally can continue. As long as we continue to see earnings estimates drift somewhat higher, have an optimism about the underlying growth of the economy, then risk on continues. The bigger issue would be is that if you start questioning risk because yields are so high or because the Fed stays hawkish. I said, Joe, we stabilize yields today.

That helps the story that S&P, as I look over Cameron's shoulder here, has retaken 5,200. So we've taken back that level. It sure looked a little dicey yesterday. Nerves were definitely tested. I'm not saying we're out of the woods today, but it's a whole different story because of the inflation read was a different story. Well, it looked dicey at 915 in the morning. But once the market opened, it stabilized because NVIDIA and the Max seven showed up once again. That's that's an intriguing dynamic over the last

24 hours. I'll touch on that one second. But just as it relates to yesterday in the Federal Reserve, look, I've said this all along. Number one, we know the Fed's not adversarial, full stop. But secondarily, they want a reason. They want the reason to cut rates. They didn't get the reason to cut rates. What dropped late in the day yesterday in the business media? The news surrounding the balance sheet, the possibility that they'd be paring back the balance sheet runoff. That's dovish in its nature. The ECB follows it this morning and says you get potentially a June rate cut. And now in the last 24 hours, Scott, you've got the MAG-7 coming back once again. That's intriguing to me, a little bit concerning to me because of the strategy I run, but it's certainly relevant and it speaks towards the market is focused and prioritized on earnings because that's where the spectacular earnings

come from. All right. So we start tomorrow with earnings, but we're still fixated, Cameron, on when we're going to get these rate cuts. Some people would say if ever this year, but even the Fed speakers out today, you know, voting members like the New York Fed President John Williams, no need to do anything, quote, in the very near term. But he does expect the PCE to get to a level that is good. Right. I'm paraphrasing that it's two and a quarter, two and a half percent this year before moving closer to two percent next year. Barkin today, not where we want to be, but we are heading in the right direction. Collins, expect it will be appropriate to begin cutting later this year. More time is needed now. Similar story, right?

The bottom line is they're still talking about cuts, just not yet. Yeah, they really want to cut, which is why they ignored the inflation data from January. They did it in February. And now it sounds like they're going to do it for the March data as well to look through it, see it as a bump and not a reverse trend in direction. So it means that as we get closer to the May meeting, we get April data. If that continues to move in the opposite direction of what they want, it really will challenge them to keep this narrative. We think that the three cuts that they have put down in the dot plot is far too high, given the amount of inflation, given the resilience of growth, and given the fact that financial conditions are so easy. There's no

urgency for them to move. So we think at the end of the day, it's going to be less than three cuts, and it likely is back and loaded to the back half of the year. Is the market going to be cool with that? Patient enough to wait? They're cool with it, again, back to growth estimates. As long as growth is holding up, as long as we're seeing GDP estimates hold in OK, that means that the market can forgive a lot. We also have to remember there is a liquidity dynamic happening here. And it's a little nebulous. But we know that liquidity has supported this market. So you add growth, liquidity, you can shake off a Fed. And apparently, as of today, you can shake off higher yields. OK, yeah, no, you can. But Joe, at some point, you know, it's I go back to the Pasquarello, Tony Pasquarello of Goldman. Now, when do higher yields begin to bite?

It all roads lead all roads lead to that question. Yesterday, we were unnerved because we felt like they were going to start biting sooner than we thought. Maybe we reset our expectations there as well. I think it will begin to be problematic for the market when earnings do not deliver. And I solely focus on what happened in Q3 of 23. You really didn't have the significant growth in earnings that we're witnessing just yet. It was kind of isolated at that point. Here we are now moving into an earnings season. And if we can get three and a half growth on revenue, if we can get the five percent growth on earnings, that's going to be OK. If it doesn't deliver in earnings, then to

your point, it's going to be troubling to look at Treasury yields at those elevated levels. Well, because then you question the multiple, right? Cameron, you've had multiple expansion, right? That's how we've gotten here. You've got to have it supported by something like earnings. And you could probably make the argument that at the end of March at 21.2 times forward, maybe that was the peak multiple given this yield backdrop. The thing about earnings to watch really closely is that they become more back-end loaded. If you look at it, you kept the earnings estimate for 2024 the same, but it's all put into the third and fourth quarter. Fourth quarter growth

is expected to be 11%. So we're listening closely for guidance from the companies as we go into earnings season to see if that kind of growth in the back half of the year is possible. Worst sector this week, Joe? Financials. Why is that concerning? Well, because they kick off earning season in the morning. Are they going to deliver something uplifting, or are we going to be writing off a group that's done reasonably well of late? Year-to-date, it's up near 9%. But that reflects the pullback more recently that this space has had. No, I don't believe that we're going to be writing off the sector

because the sector, as you point out, the performance has been strong year to date. I do think elevated yields reintroduces a little bit of a problematic scenario for the regional banks. I also think money center banks and look, full disclosure, I'm personally long JP Morgan, their best in breed. And I'll stay long even on a decline and probably buy more because I think that stock moves significantly higher. But there's enough within the financials when you're looking at consumer finance, capital markets, asset managers, private equity and then insurance companies and insurance companies, whether it's auto or property and casualty, you're going to see significant revenue growth there. So, Cameron, I mean, investors in some respects can't have it both ways, right? You can't say, well, lower yields and expectations of cuts are good for all of these broadening sectors that are sensitive to the economy. And then now, if we're talking

about higher rates for longer than we thought, say, yeah, well, those sectors can still do good because growth is just fine and everything's just perfect. Do I need to rethink where the broadening trade has gone and where it may go from here? We just showed a board of where bond yields are. What did I see? 457 on the 10-year? Okay. We were worried that it was going to get over four and a half. Well, here we are. There it is, 457. Yeah. I think that there's two camps of the broadening trade, one that's hurt by higher yields and one that can do okay if yields are higher. The one that does okay is your cyclical sensitive sectors, the industrials, the materials, the energy benefiting from higher commodity prices and a recovery in manufacturing.

The stuff that gets hurt from those higher yields is your small caps, your lower quality parts of the market. Those with bad balance sheets that have to refinance their debt, that higher for longer means that they're going to get pinched as they go through this refi cycle. Yeah, I mean, the Russell got crushed yesterday. It was down, I think, if I recall correctly, like two and a half percent on the spike in yields after the hotter than expected CEI. But what about what do I do with the broadening trade? Yeah. So so let's let's tackle that for a second. Let's put small caps off to the side for a second. Let's touch upon first of all, in Q4, if you look at revenue growth for the max seven, it was 15 percent for the other four. Ninety three was three percent. Six hundred basis point margin

expansion versus only 60 for the other four. Nin Elevated yields, what do investors see? They're looking towards earnings and they're saying, okay, where do I get the sustainable, reliable earnings? I get them from the MAG-7. So I'm going to tell you, sitting here, running an equal-weighted strategy, I am looking at the price action in the last 24 hours. I'm saying to myself, uh-oh.

Here we go again. Oh, come on. Don't do this to me again. Come on. Because we had it going in the right direction. We had the broadening out trade. S&P Equal Weighted was doing well last two days. S&P Equal Weighted is trading awful. We're seeing some areas of the market like industrials and financials where you had strong momentum. They're falling down. And let's not forget,

in technology, you're going to have this divergence. Semiconductors, semiconductor equipment, software, those earnings are going to be OK. But when you're going to have this divergence. Semiconductors, semiconductor equipment, software, those earnings are going to be okay. But when you're looking at hardware, communications equipment, electronics equipment, that is not going to look so good. You know, because if you're going to have a little more of a defensive tilt within your bigger picture offensive stance, you're going to go right back to the mega caps. And you're going to go to NVIDIA, which is up three and a half percent at nine hundred bucks. Now you're going to go to Microsoft, which is up near one and a half percent or Amazon, which is trying to hit that new record high,

as we suggested today, or Alphabet, which is up two percent. And then there is Apple, which is one of the best performers on the day today as well. It's not a today event, by the way. This started yesterday on the open cable right out of the gates when yields rallied. We are keeping an eye on shares because they are trading near the highs of the session today. On reports, the company's gearing up for its first big AI product push. Steve Kovach following that story for us, and he joins us now. Steve. Hey there, Scott. Yeah, this is based on a Bloomberg report earlier this afternoon saying Apple's getting ready to put out its new crop of Mac chips. They call it the M line of chips. We're currently on the M3 line of chips. These will be the M4 and start launching reportedly at the end of this year, probably for the holiday buying cycle and then

into next year. But most importantly, this report says Apple is going to be marketing these or pitching these as AI chips for AI capabilities and Macs. I will also note, though, the M3 chip, the current chip that came out last October and is also in the new MacBook Airs that were announced just last month, it is already being targeted or marketed as an AI thing. So the MacBook Air came out. Apple called it the best AI consumer PC you can buy. So we're already seeing Apple at least start to label some of its machines and technology as artificial intelligence. But of course, Scott, nothing I just said is going to matter until June 10th at WWDC, when we see Apple finally unveil the user-facing artificial intelligence

features that they've been teasing for the last couple of months now. Is this, do you think, Steve, based on your own coverage experience, the most pressure packed moment that you're going to have witnessed for Apple? Yeah. In that second week of June? A hundred percent. Only because I've been covering this company for over a decade, Scott. I've never seen Apple tease a product like this. Never say, hey, we're going to announce something related to AI. Or they would even admit they have a new iPhone coming in September if you were to ask Tim Cook today. The fact that they're teasing it right now and saying it's going to be an artificial intelligence announcement says a lot about the

pressure they're under. We see the stock underperforming its peers in big tech because of AI. And so, again, I'll go back to what Tim Cook's words have been, that they're going to break new ground in artificial intelligence. That means something new we haven't seen before. And that puts enormous pressure on themselves to actually deliver a really killer announcement related to artificial intelligence that will run on these chips. But again, it's the user-facing stuff that really gets people excited. All right. High of the day for shares of Apple. Steve, thank you. That's Steve Kovacs. So, Joe, I mean, it feels like a good minute since Apple was at $175 a share.

It's been stuck at $168, $169. Looked like it was about to have a more significant move lower. And here we are. And here these shares off at your own peril, I suppose. Oh, exactly. And I'm just hoping that Apple rallies another seven to eight percent before April 30th when we do the quarterly rebalance, because the momentum on Apple looks looks awful. It looks negative right now. But the fundamental story is intact. I think this is evidence that they are going to deliver in incorporating AI into their products for their consumers. They benefited clearly from COVID with computer sales and the work from home environment. They needed a catalyst

coming off of that after experiencing weak sales in 22 and the early part of 23. And I think here it is, refreshing the entire line of Macs and iMacs, inclusive of AI. I know that's going to incentivize me to go buy a few. But do you think that this AI announcement that we expect at WWDC in the beginning part of the summer, Joe, is going to be enough to get their mojo back? I do. I really do. I think they're going to deliver on it. I think they are, and I think it's going to be the iPhone 16 could potentially be as relevant and as impactful to them as iPhone 6 was. You're watching shares of Apple, right?

I mean, for the overall market picture, it hasn't of late had the impact, I suppose, that it once did in terms of, you know, as goes Apple, so goes the market. We haven't talked like that in a long time. Well, certainly. I think that the challenge for Apple going into this year is that it was part of the MAG7, but it didn't have MAG7 quality earnings growth. Its earnings are expected to grow just 7% this year versus triple digits for a name like NVIDIA. So the question will be, is this enough to move the needle for earnings growth

for Apple at 7% this year, 8% next year? It's trading at 25 times. Do we see that needle move? We're watching 184 really closely. That's important resistance for Apple. It's 100-day and 200-day moving average. Overhead resistance could rally into that. That's where you judge. If it rolls over, then there's still trouble. If if it can break on through then maybe this is a new day I mean Joe, I mean the Bulls would be extraordinarily happy if you were talking about 184 sure would because the last time it had a significant move lower it recovered reasonably quickly It did now we have the AI announcement to look forward to we're gonna get earnings obviously well before that I think around the first week of May ish

They're gonna have to deliver something decent there as well. Give us something on the revenue growth side, right? Because we're begging for that again. I think they're going to have to give us something there. I also think we're going to have to see an improvement in China. I think we're forgetting about that. I think that's important. Are we beginning to see a little bit of a lift in the business there? Mega caps in general. Cameron, how do you view this space? We wanted to write them off and figuring that it was time to go broader. Are we back, as we've discussed with Joe already, are we back focusing on those areas? If the market's going to get a little choppy, if volatility is going to pick up a bit

as we sort of debate when the Fed's going to move and by how much, we're going to go right back to these stocks. I think that they remain incredibly important, right, is that we can't have the MAG7 break down and have the overall market do well simply because there's such a large weight in the index. So we have to root for the MAG7. As to whether or not they will be leadership, we do know that they still have powerful earnings growth this year, which means that they can still outperform and lead those with the best earnings growth. The question is, that starts to decelerate a lot in the fourth quarter and into 2025, and that's when we probably start talking about these fading in some of their glory

simply because the earnings growth will not compare to other parts of the market. What if earnings get off to a rocky start tomorrow? Does it matter? Do we care? Does anything matter really until the mega caps report anyway? Well, I think that is the moment of confirmation of whatever the general trend is going to be in the early part of the earnings season. I think the jury is going to remain out until we hear from the technology companies for sure, even if the early part of the earning season is not as strong as we'd like it to be with financials. The problem is, though, you know, you took J.P. Morgan out earlier. J.P. Morgan is one of a number of stocks in a number of sectors, large cap stocks that have done really well, that have hit either new highs or still, even with recent pullbacks, are trading at near new high

levels. That, to me, raises the bar on almost every sector because of the broadening. If you didn't have the broadening story, you'll say, oh, well, it just matters when the mega caps report. Well, now a lot of sectors and stocks have done quite well since, you know, let's say March 1st. Doesn't that raise the bar on everything? I think it does, because if you look, there's quite a few sectors that are trading your 20 year high valuations, industrials, materials, health care, financials, which means that the bar is high for upside surprise. You have to deliver on the earnings. And if you don't, it's likely that you see some choppiness. And we have notably seen some momentum start to fade and wane in this market over the last couple of weeks,

which just says that we shouldn't be all too surprised if some choppiness ensues, unless we get a little bit of weaker data. I'll get you the last point, Joe. Big takeaway from this week thus far. My big takeaway from this week so far is that 2024 has been a year in which the market, the bull market continues to get stress test. And I think we have another example of that this week.

And with this latest stress test, we're not all rooting for the MAG-7 to outperform. OK, let's be clear on that. But with the stress test of this week, it was the mag seven, the definition of quality, like you said, that has returned once again to lead the market off of what appeared to be a deeper correction. It's been a resilient market because in many respects and at many times this year, it seems as though just when the bears thought they were going to get the upper hand, it didn't materialize. This market's proven to be a lot more resilient than people have thought, mostly, I think, because economy good, expected rate cuts. Who cares if they're further down the road than we thought? And the earning story and the economy are going to just remain good enough. I appreciate your time. I like the conversation. Cameron Dawson, thank you. Joe Terranova to you as well. Seema Modi has a look at the biggest stocks moving into the close today. Seema.

Hey, Scott, 40 minutes left in trade. Take a look at shares of Nike moving higher after a positive analyst called Bank of America upgrading the footwear and apparel company to buy from neutral, basically on valuation. The bank said investors should look to buy the dip as estimates and valuation look more compelling. Tune in to hear from Nike CEO John Donahue on CBC tomorrow in the 10 a.m. hour. Let's switch focus to CarMax, though. Shares are tumbling today after a weaker than expected earnings report. The used car retailer also warned of a slower recovery for the used car market and that it may fall short of sales targets as high monthly payments continue to hurt customers. Scott. All right, Siba, we'll see in a little bit.

We're just getting started up next. Not for the faint of chart. Get it. Top technician Chris Verone. He breaks down the health of this rally, including the key levels for stocks investors need to watch. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. The S&P 500 and Nasdaq making a bit of a comeback today with some of this year's top performers once again leading the charge. Our next guest sees reasons to be cautious, at least in the near term. Chris Verone, head of technical and macro research at Strategas, is here at Post 9.

It's good to see you. Great to be here. Let's be clear on what you think. You're not talking about a change in your overall view, which has been positive. It's just we could be a little bit volatile in the next day's weeks. Yeah, that's right. I think everything we do at least is incremental. And you think about the last couple of weeks, you have this move in yields, you have gold unbothered by it, you have hot oil, you have dollar up. Tactically,

does it make sense to maybe watch your back here after a 20 plus percent move in five months? Absolutely. But as we were saying earlier, I don't want to lose the plot of the movie here. And the plot of the movie here is this is an ongoing bull market. Bull markets pause or consolidate from time to time. What I think we just want to be a little bit mindful of are maybe some flashes of some leadership change under the surface. I've been finding it curious that stuff like utilities have quietly perked up here a little bit. An unusual mix given the move in rates. So I think it's more about rotational impulse than it is some outright distribution or selling.

Hasn't there been, though, a twist in the plot? Right? The plot of the bull market was economy good, Fed cuts coming, and Fed cuts coming soon, and rates are going to move lower. Well, we've had a plot twist because we think now rates are coming later, with some suggesting they may not come at all. And we're hoping that the economy can withstand the Fed staying higher for longer. So how do I square that? So I think the key to macro is distinguishing between what should happen and what could happen.

What should happen, the Fed probably shouldn't cut rates here, given the persistency we've seen in the economy, what the inflation data has looked like. But that doesn't mean that they won't cut rates. And if you look at the message of gold here, gold, I think, is behaving as if the Fed is going to do exactly as they have said and cut. So I'm hesitant to get too negative or too cautious in that environment. Do you think that that backdrop is what's been driving this incredible record run for gold? I think gold is becoming the release valve of what ultimately could be viewed as a policy error cutting into a very strong economy. Now, I think you make a good point. The narrative or the consensus out there is the economy is strong, and that's the camp I'm in.

But we also have to poke holes in that and see the economy is strong. And that's the camp I'm in. But we also have to poke holes in that and see if anything is changing. And what I would be mindful of, if this status quo of strong economy is going to persist, we need stuff like discretionary to keep outperforming. We need, I think, financials to stay part of this game. And there's maybe some modest pause or correction in those groups. How they respond out of this, I think, is going to be essential as to whether or not the status quo can persist. Are you worried about this breakdown in the financials? I mean, the XLF, I think I said earlier, was below its 50-day for the first time since November. After maybe its best three or four-month move. No question about that. But you

use the words needs to continue. Sure. And, you know, if you look at the soft landing episodes historically, 94-95 and 84-85, so non-recessionary rate cuts, what do they have in common? Financials were absolutely above and beyond the best sector. So I think if we're going to maintain this, you want them to participate. Now, the good news is we're a week removed from 52-week highs in a lot of these banks. I think JP Morgan actually making a 52-week high today. So I don't want to get too carried away with, oh, they're breaking down, they're not working. But do we have to kind of put it on our list of things to watch? Absolutely.

Talk to me about 5,200. So we've retaken it on the S&P in the final stretch here. How important is it that we hold it? I don't think it's that crucial. I mean, there is really good long-term strategic support in the $49,000 to $5,000 range. So I think if you've got a deeper pullback or a correction over coming weeks, there's a lot of support underneath this. The 50-day moving average is roughly $5,100. That might not be enough to contain near-term weakness. But look at how a lot of stocks today hit some big levels and came right back off of it, particularly when you look at some of the tech names. So you have to kind of tip your hat

to the market and say it's another sign of a bull market acting as bull markets tend to. You want to weigh in on Bitcoin, what's been driving the breakout, whether you think it's legit, it can continue, there's durability for it. Whether you're there or whether you're not, I think you must be aware of its diagnostic value. And we look at Bitcoin as probably the purest form of a liquidity barometer we have. And juxtapose it versus gold. Gold historically has been both a risk on and a risk off indicator. Bitcoin in its shorter life has only been a risk on indicator. So if this liquidity impulse that has driven equities higher for the last four

or five months, I think if that is to persist, you need Bitcoin to be a part of that. 64,000 is a really key level. I think under 64, you begin to question, well, wait a second, is maybe the liquidity condition is starting to evaporate or deteriorate here. Are you watching technical levels of any of the key mega caps in particular? You know, Apple is obviously the charts, which you watch, has looked terrible. Today, notwithstanding, I mean, today is stocks up more than 4%. But how do you view that? Because we just talked about it on some new news and on the anticipation of what they're going to do. So I think when you look at this Magnificent 7, if we're

still going to use that name, what the Mag 7 is not, it's not monolithic. It's not the monolithic 7. And I know Apple's bouncing here, but let's focus on the leaders. The leaders in the MAG7 are Google. I mean, breaking out out of a huge base to a new high. Amazon. Amazon breaking out of a huge base to a new high. I want to own the best stocks in the leading groups. That's Google. That's Amazon. It's not Apple here. I think Apple's a bounce in the downtrend. Interesting. I appreciate your time. Thank you. Always. Thank you. All right. Chris Verone joining us from Stegus. All right. Coming up, former Dallas Fed President Robert Kaplan. He is back with us. How he is now sizing up this week's conflicting inflation

reports and whether he thinks the Fed should push back its rate cut timeline. That is after this quick break. Welcome back. This week's inflation reports only adding to the debate over when the Federal Reserve might begin cutting interest rates this year. Former Dallas Fed President Robert Kaplan, he joins us now with his own view. He's also the former vice chairman of Goldman Sachs. Mr. Kaplan, welcome back. It's nice to see you. Good to see you, Scott. How complicated did things get this week for the Fed? I think that the narrative continues that goods are disinflating, not perfect, but disinflating. Services are sticky. And the CPI and the PPI, I think, were somewhat conflicting, but confirm that. And I think the other narrative here is you've got very restrictive monetary

policy offset by an underestimated impact of very stimulative fiscal policy, unspent ARPA money, Inflation Reduction Act projects, Infrastructure Act projects. So I think the net of it all is you're seeing some confusion. And I think it'll likely cause the Fed to be very careful about moving in June. But I think they should keep their options open and let the situation continue to clarify. So you don't think the door is fully closed on June, it sounds like. It's it's I think from a risk management point of view, I'd say the waiting is such if I were there, I think the bar has gone up for me to want to cut in June. But I keep I keep an open mind. I'd be careful about making prognostications. And I would rate right up to the June meeting to make a decision. But I think the markets should be prepared that they won't

cut in June. But I'd keep my options open if I were at the Fed. How how lively do you think the debate is now going to be in the room itself? And what do you think is the impact from that kind of a debate? Remember, we move from what has been unanimity in terms of there haven't been any dissents on any part of this regime since the Fed started hiking. Are we at the precipice of a change? Yeah, you may have heard me say before, I think the Fed is at its best when there's debate and disagreement. I like that there's disagreement. And here's why there ought to be disagreement. Again, what's the impact of fiscal policy?

We have this issue of labor supply looks like it's going up due to immigration. Is that sustainable? We don't know. Is productivity growth improving? Is that sustainable? We don't know. Is productivity growth improving? Is that sustainable? We don't know. You also have this perverse effect that higher rates may actually be making rents higher because multifamily owners have to charge higher rent to cover the debt service. I think all those things mean that this is kind of homework time for me if I'm at the Fed, in that keep an open mind,

do your analysis, talk to contacts, and listen to counterarguments. And I think debate is healthy right here, and disagreement, and I'd be learning from my colleagues, but I probably myself would be risk-averse about acting in June, that's for sure. And I'll take it meeting by meeting. So Williams of New York, who is a voting member, of course, says today, there's no need to adjust policy, quote, in the very near term. Can you decode that for me? Yeah, he's saying we'd like to cut rates at some point. It will help the banks.

It may help small business lending. There are other positive effects. But we're at full employment. And because we're at full employment, we have the luxury of patience. Let's take advantage of the fact we're at full employment and take advantage of the fact we can afford to be patient. Of course, they can afford to be patient for all the reasons that you said. The economy is strong. But at some point, the longer you wait, the more perhaps the risks of a mistake go up. How much do you think that's being discussed?

It's being discussed. But I got to tell you, again, we ran 15 percent of GDP deficit in 2020. But we know why, COVID. We ran another 15 percent of gdp deficit in 2020 but we know why covid we ran another 15 percent in 21 and a lot of that money was arpa still being spent we ran seven in a fraction last year we're on our way to seven in a fraction i'm afraid this year uh unless tax revenues bump you've got very strong fiscal policy and uh we've got programs going on that you would normally do after a recession. We're doing them pre-recession. And so it would give me some confidence. We've got a bit of a tailwind, and I want to make sure to wrestle this inflation to the ground.

And I don't want to declare victory prematurely. Now, I'm looking at the meeting schedule. So let's just, for argument's sake, take June off the table. We've got July. We've got September. We have a decision that will come down two days after the presidential election, and then we have December, of course. So let's assume they first go in July. Would they go in September, or is that too close to the election? I mean, my own view is

I would do everything in my power to screen out political considerations. And so I'd want to do what I felt appropriate. I think the one decision they will make in May, by the way, is on the balance sheet. I think they will telegraph in May a plan to slow the runoff of the balance sheet. And that's a very significant development. Well, that's a significant development for where yields may go and how the stock market might take all of that, which leads me, I suppose, to a question about the stock market itself. And if this record-setting rally in stocks has played a role as well, or at least given an additional insurance policy to the Fed of feeling comfortable enough that they don't have to do anything now. Yes, the increase in wealth and I'd also say still relatively tight credit spreads. I'd keep

my eye on credit spreads. As long as credit spreads stay tight, that's almost more important to me than the stock market. But both give a tailwind to the economy. The fact of the matter is, though, the Fed has the luxury of patience. Let me let you ask the next question. I'm going to make one other comment then. No, that was my that was my final question. Okay, so let me also say there is so much focus on monetary policy because it's easy to understand and we can understand two to three rate increases and everybody can play. I think the Fed will do its job this year.

I'm not sure what they will do, but I'm confident they'll do their job. Two years ago, I thought they were out of position. They're in position. I think more attention should be spent on the fiscal situation, which worries me much more. Debt to GDP well over 100 percent. Interest expense moving toward a trillion dollars next year, squeezing out other items. This money will eventually run out. And I think some of this strength of the economy is inorganic. It's artificial, being based on

government spending. And I think more time needs to be spent on that. Yeah, but I mean, and I guess I am going to ask you another question, given your answer there, because you are insinuating, I suppose, that somehow the government's going to come together and do something the political parties are about the deficit. And when people say that, eyes roll and say, yeah, right. And you know exactly what I mean. I'm not insinuating what they're going to do, but I am. Listen, the order of what they should do, you'reuating what they're going to do, but I am. Listen, the order of events is— What they should do. You're suggesting what they should do, where people would say there's no way in heck that that's going to happen.

So if you're a business person, which is my background, you first diagnose the situation. Then you figure out what to do and how to do it. I'm still at diagnosis. I'm saying in our diagnosis of what's going on, we would be well served to highlight part of what we're seeing is very strong government spending. I don't think that's being properly recognized right now. OK, fair enough. We'll talk to you soon. I appreciate your time very much, Mr. Kaplan. Thank you. Thanks, Scott. All right. Up next, we're tracking the biggest movers into the close.

Seema Modi standing by once again with that. Seema. And Scott, weak industrial production is really starting to catch up with key stocks in the sector. Is this a warning sign ahead of earnings? We're going to discuss from the bell. Let's get back to Seema Modi now for a look at the stocks to watch. Seema. Scott, let's start with shares of Fastenal on pace for its worst day since February of 2022. Here's why. First quarter earnings coming in weaker than expected due to sluggish demand for industrial parts. Now, Fastenal specializes in key components used in machinery and construction. It's a potential warning sign for some of the bigger industrials that get set to report earnings

in the next two weeks. Stock is down about 6.5%. But take a look at Global Life. Shares are tanking on an unverified short-seller report that alleges fraudulent practices. Wells Fargo analysts defending the stock, reiterating its overweight rating, but that's not stopping shares from underperforming. Currently the worst performer, the insurance company on the S&P 500. And remember, Global Life has seen scrutiny in the past as a subject of a Business Insider investigative series in February of 2023. It's got down about 53% right now. All right, Seema, appreciate that update. Thank you. Seema Modi, still ahead. We are on record

close watch for Amazon after those shares hit a new intraday high for the first time in nearly three years. We're going to track the move in the final minutes of trade. We are back on the bell right after this. Coming up next, Morgan Stanley shares under pressure late day here that after a new report that the bank's wealth management division is being probed by regulators. We're going to bring you the latest inside the market zone next. 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. Kate Rooney is with us today on Amazon's record breaking run and Leslie Picker on why

Morgan Stanley shares are selling off late day into the close today. And Joe Terranova, he owns that name. That's why he's still here, too. Mike Santoli, we do begin with you. What a difference a day makes. And sentiment certainly is not what it was a day ago. It has firmed up. I mean, a lot of things have to go wrong to really buckle the market that behaves this way. I mentioned yesterday the lows we gapped down in the market on that CPI number, and the lows were just holding at last Thursday's low. So we held in the range, and it's very tough when the problems or the stress points on the market are yields going up, and we have to question about Fed policy, and maybe we're going to have to wonder

if the economy can handle it, that the biggest stocks in the market are the ones that get bought in those scenarios. They're not yield sensitive. They're not cyclical. Let's play defense. We have to. And everybody also recognizes that we're getting into earnings season. The other characteristic of this market for a long time is once the known catalysts are passed, even if they didn't go right, you know, CPI, PPI, and then the treasury auctions, it's like, okay, we got through it. There's no more volatility storms ahead that we can be aware of. And so we hold in here. I'm not saying that means this little choppy episode is over. What it means is we've been going sideways for four or five

weeks now. That's a good thing. You had the momentum trade cool off. Still don't have great breath today, but that's where the higher yields tend to bite. Yep, the higher prices are in those mega caps, as Mike was talking about. Kate Rooney, I'm looking right at Amazon. This would be a new closing high. Yeah, Scott, we're headed there. Amazon hitting close to an all-time high in terms of the close going back to its IPO in 1997. It's one of the Dow leaders today.

That record coming on the same day as CEO Andy Jassy's annual shareholder letter. Jassy talking about balancing some of the cost discipline with spending and artificial intelligence. A lot of focus on Amazon's profit margins and so-called cost to serve. On its prime video business, Jassy says, quote, we have increasing conviction that it can be a large and profitable business on its own. That was new, but does not plan to spin it off. According to his interview with Andrew this morning, Evercore's Mark Mahaney, meanwhile, reaffirming Amazon as its top pick today, mentions AI, says a lot of the AI workloads

could drive some more demand for AWS, but also expects North American retail segments to hit record margins and seize record free cash flow in the quarter. Also says the valuation is reasonably dislocated versus Amazon's historic average valuation, sees it as one of the very few large caps with material multiple re-rating potential this year. Scott. OK, Rooney, they like your report apparently down here on the floor of the New York Stock Exchange as they get ready to ring in a new record closing high for Amazon. Thank you for that. Let's go to Leslie Picker now. She's following the financials, most specifically Morgan Stanley. Those shares are down and pretty significantly late day. Yeah, you're not used to seeing a move like this in Morgan Stanley, down more than 5% right now after the Wall Street Journal published a story about a wider regulatory probe into the firm's wealth management division and how it's vetting clients at risk of money laundering. At issue, according to the journal's sources who were unnamed in the piece, is whether Morgan Stanley has been, quote, sufficiently investigating the identities of prospective clients and where their

wealth comes from, as well as how it monitors its clients' financial activity. Some of the probes are focused on the bank's international clients. The Journal reported in November that the Fed had been looking into similar issues, but today's story says there is also involvement by other regulators as well, including the Securities and Exchange Commission, the SEC, and the Office of the Comptroller of the Currency, among other Treasury Department offices, the Journal sources saying in today's piece. Morgan Stanley declining to comment, as did the OCC. Morgan Stanley reports earnings next Tuesday. Scott. All right, Leslie Picker, thank you very much. We said Joe Ternova was

hanging around because he owns shares of Morgan Stanley. So we wanted you to weigh in. What do you make of this? I think I think on Tuesday we're going to learn how Ted Pick handles the adversity, how he's able to speak to the analyst community and to the shareholder community. They've got to clean this up. This is something that's lingering from 2023. The Federal Reserve in November obviously was unhappy with some of the measures that Morgan Stanley has taken. There's a lot of scrutiny right now in Washington, D.C. on these firms. And we'll find out on Tuesday if, in fact, he's able to handle it. Not necessarily going to call this a crisis, so to speak. No, but the wealth management division, it's the engine. That's their engine. It's the engine. And this is his first test of sorts? First dealing with significant adversity that's affecting the shareholder base. That's significant. You have to address that.

Mike? Yeah, I mean, first of all, it has to have been one of these ongoing things that every single institution gets scrutinized over their AML practices. It's such a core thing for the compliance that you know that it was an ongoing back and forth, and now maybe it's been elevated or maybe that they feel as if they need to push for more substantive change. So I don't know. We don't know the details. We don't know if this really is material to earnings as much as it is about the franchise and brand. Significant enough, again, that you at least are reporting. Because it's such an outlier move, especially ahead of some of these financial stocks reporting earnings. All right. Pretty good recovery today for stocks. Joe, thanks for sticking around.

There you go. OK, we're trying to get there. I have a party here down here. That's the way it goes, though, because they're fired up. Fired up. You know overtime is fine. So is that.