Closing Bell - Closing Bell: Bank Stock Breakdown, Hot Jobs Report & Fed's Rate Decision 2/2/24

Episode Date: February 2, 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 Bell on this Friday. I'm Scott Wapner live from Post 9 at the New York Stock Exchange. This make or break hour begins with the week that was and the rally that still is. So what now? With most of the mega caps in the Fed meeting in the rearview mirror, is it still safe to buy into this burst? We're going to ask our experts over the final stretch, including Fundstrat's Tom Lee in just a moment. By the way, we also have Fed Chair, Fed Vice Chair Rich Clarida, the former Fed Vice Chair Rich Clarida, coming up in just a bit. First, though, your scorecard with 60 minutes to go and regulation looks like that. There is the Dow. It is higher. But look at the S&P and the Nasdaq.

So as we ended halftime today, I was wondering out loud, hey, are we going to close above 49.50 on the S&P 500? I undershot that, I think. Are we going to close above 49.70 on the S&P 500? We'll see over the next 55 or so minutes. NASDAQ, obviously, the big winner. Amazon, Meta. And those other stocks that are rallying, surprising not at all that it is the NASDAQ's moment to shine today as those stocks. Look at Meta, best day in a year. Amazon helping, too, following its own impressive earnings report.

Apple, well, it's been a little volatile in the session following its own quarterly numbers. Even it, though, has moved green, and that says a lot about where this market is. Let's take a look at yields. They've been mostly higher after that much stronger than expected jobs report earlier this morning. All of it takes us to our talk of the tape, what it will take to keep stocks moving even higher from here. Let's ask Fundstrat's managing partner and head of research, Tom Lee. He is with us live today. Tom, welcome back. Thank you, Scott. Good to see you.

Yeah, you too. This is a remarkable market. What is driving this and what is driving this continued acceleration as we hit this final stretch today? Scott, I think 2024 is revealing the stock market is getting stronger because it is proving to be extremely resilient. Last week, Tesla missed, fell 11%. The S&P was up for the week. This week, we had two big fangs, miss and disappoint. And the market's, of course, roaring as we end the week. It's the 14th consecutive week.

I think it has a lot to do with, one, the economy's incredibly resilient. The Fed, I think, has turned dovish. We don't know the timing of the first cut. Inflation, I think, is falling basically like a rock. And we know there's a lot of cash on the sidelines because there's over $6 trillion sitting in money markets. And yet the S&P, you know, is just in the last six weeks generated more return than an entire year of owning money market cash. Yeah, it's been unbelievable. So March doesn't matter?

I mean, is that the lesson of this week? Yes. I think, well, I think the bond market really cares whether it's May or March. I think that the stock market really should just care that the Fed has gone from fighting inflation and almost giving the economy a heart attack to one where they're trying to manage the business cycle. So if they don't feel comfortable doing this cut in March and instead of May, I don't think it should have any effect on equities and how they do today. The interesting part, I guess, is what you allude to.

It's sort of this change in focus of the Fed. And I think Chair Powell alluded to this as much in the news conference when he cited, I think, on multiple occasions, the strength of the labor market is not necessarily a bad thing anymore, so to speak. They don't feel perhaps as though they need to really lean on that to get inflation to come down because they've been surprised to the degree that it's already been coming down. Yeah, that's right. I mean, I think the biggest evidence this week was the ECI, the Employment Cost Index. You know, that number came in very tame. And Fed Chair Powell barely mentioned the labor market in the last press conference. I think it's because

the job market is still adding jobs. I mean, today was a big surprise, but the unemployment rate's not really falling precipitously and it's not creating a lot of wage pressure. So it's so far, I think the labor market isn't going to be the source of the concern for the Fed. Yeah. What about the broadening of the market? It's been slower than I think than many probably you as well have expected. Why so? I think that the broadening of the stock market requires equity inflows. I mean, we already know that for the entire month of January, retail investors were pulling money out of the stock market. Maybe they'll start to allocate in February. But the month that they did, which was December, we saw a spectacular move in the Russell 2000. Do I think retail investors are going to be taking money out of the stock market?

And in fact, someone had showed me that margin debt now is down 20 percent from its highs. I mean, you know, if that's any signal to me, I think broadening is going to come really sharply. But it comes when retail begins to buy stocks. I mean, I'm thinking to myself, though, why get inflows now? Will you really get inflows? I mean, I don't know. The next stop on the S&P 500 feels like it's 5,000. Tom, the time for inflows seems like it's past.

And now maybe people are going to be reticent to move money out of money markets and whatever else into equities at these levels, no? Yes, Scott. I mean, of course, the risk reward was better in October, but nobody wanted to own stocks October 2022 or October 2023. But there's also a lot of research showing that buying stocks at new highs isn't a bad thing. I mean, look at NVIDIA, right? If someone would have sniffed at buying it at the new highs, then, of course, it's up

another 40%. I do think you are correct that 5,000 as an important round number is a level we have to watch. I mean, if this is a strong market, 5,000 won't mean anything. But in February, 5,000 could be a short-term top before there's a big air pocket. I mean, that's a level to watch. Yeah. Remind us of what your targets are. Our year end for S&P is 5,200. But given how strong January was and what it implies historically, because usually the full year plays out in the first month, you know, I think 5,200 is probably a little low. You know, it could be much higher. So you don't think the market's too expensive here, as some are suggesting? You know, expensive is in the eye of the beholder,

excluding FANG. It's your investors are paying 15 times 2025 earnings. I don't think that's very demanding. So I feel comfortable buying the S&P and even small caps here. Small caps, as you know, haven't really participated, but they're hugely levered to Fed cuts and very, very sensitive to investor inflows. And so I think there's still a lot of juice in a lot of areas. You stick into your 50 plus percent return on small caps for this year? Yes, I think that's I think that's a reasonable target. What we have to keep in mind is small caps on a price-to-book basis are trading at 44 percent of the S&P's price-to-book. That's the only time you ever saw that was 1999. That was the low, a 40-year low, and it started a 12-year launch point for outperformance. So I think the risk-reward is very good for small caps.

At what point do you get concerned about the mega caps, which you've suggested from the outset are the place to be? You've obviously been a thousand percent correct, but at what point do you say, okay, well, maybe this is a little much? Well, it's going to be a judgment call because, you know, if someone asks me, you know, do you want to own these for five years because they have structural moats? I mean, absolutely. So I think how much of that five years gets priced in this year? I just don't know. You know, it's possible that the Fangs could have a great year in 2024 and then, you know, consolidate for two years. I mean, that happened with Amazon, right? It consolidated for a few years and now it's really starting to break out. I think investors just need to buy those and

really hold on to them. But I think there's still a lot of areas that haven't participated that could really start to outperform. Like what? Give me something. Well, for instance, I think when the Fed starts cutting, you know, investors are going to change their calculus around financials and real estate because one of the biggest risks for commercial real estate is the risk of refinancing. Well, if the Fed's turning dovish, it's going to be easier to get investors willing to refinance these properties. That's really good for the banks and the regional banks. And of course, that's going to flow into small caps. So I think that the moment the Fed actually starts cutting, even though it's going to be widely anticipated, could be a really important point for some sectors.

Wow. All right. Let's bring in Cameron Dawson now of New Edge Wealth and Alex Kantrowitz of Big Technology. Alex, of course, a CNBC contributor. It's great to have you both with us. Cameron, I'll turn to you first. To say Tom is bullish is an understatement, but he's been right. Will he still be? Well, I think that Tom's point about there still being room for people to get drawn into this market is a really good one. What we find in history is that valuations don't matter in the short term. They matter two, five years out. And what can lift valuations even higher, even on the S&P 500 index level, now at 20.4 times forward. That is expensive from a market cap weighting.

But because there's still room for for allocations to move from about 67 percent to stocks back up to 71 percent, which was the peak we got in 2019 and 2021, that would suggest that there's still room for people to get drawn in. 5200, he suggested, could be even conservative. When somebody says that, what's your reaction? I think that you have to make the assumption if over 5,200 that not only the Fed is your very much friend, which would support valuation staying at this elevated level, and that you have an economy that remains resilient through 2025 because you have to see that earnings growth deliver for 424 at 10 percent, 25 at 11 percent. If there is doubt about that, then that's where that 5200 plus will be become more of a challenge. That's a good point, Tom. So what about that? It's not so much, you know, what have you done for me lately and what will you continue to do for me market?

It's a what will you continue to do over a much longer stretch than I think some are thinking. That's right. Well, I think one point that we have to be aware of is it's actually not going to be what earnings get delivered in 2025. It's what the market believes can be delivered in 2025 by the end of this year. Because, you know, we still have 12 months after that.

There's, I think, a significant improvement in earnings visibility underway. 43% of the companies that reported earnings so far in the S&P are having 10% earnings growth. It was 36% a year ago. The ISM hit 49 manufacturing, which is the highest since October 2022. That looks like it's breaking to the upside. That is highly correlated to S&P earnings growth and, of course, to the cyclical piece. And, of course, we haven't had massive guidance cuts. In fact, so far, 79% of companies are beating results by an average of 6%. So it's been a good earning season. Maybe the stocks haven't reacted yet. But if you ask me, can me can the s p do 11 earnings growth next year

i think it could do better because we know that technology spend actually could accelerate pretty dramatically over the next couple years as companies start to find applications for ai so i you know i think 11 doesn't seem very demanding for next year. Speaking of earnings, speaking of huge movers, Alex, this meta move is extraordinary, to say the least. What's your reaction to it? First of all, it must feel sweet for Mark Zuckerberg on Vision Pro Day. The story is meta going up 20 percent, having the device before Apple, beating the Apple ads embargo while Apple tries to get its device out and has disappointing guidance. So I think you have to be thrilled if you're meta. Obviously, it shows that Apple is no longer a problem for them.

And very importantly, they've figured out reels, right? And that's where I think when we talk about room to grow, that's where they have the room to grow. If they get their hold on monetizing these short-form videos and figuring out how to apply their data on that, that's an area for massive growth for Facebook. Not only Facebook, it may be an Instagram at some point. And that's something that you have to watch

in terms of Facebook's runway. It might not be the end here. What do you make of what this company's been able to do, let's just call it over the last 18 months, from that day about 18 months ago in October where Brad Gerstner sends the letter to Zuckerberg and says, look, it's time to get fit and it's time to focus on what really matters from then to now is hard to put into words.

What would your words be? I mean, Brad Gerstner is totally entitled to his victory lap. I saw he was on Halftime Report and power to him, right? His letter that potentially sparked this within meta. I mean, you look at the result, what was going on then and the results now. 22% less costs, $10 billion in incremental profit in this quarter alone. That's just unheard of. Yeah, it's crazy right there. 267.5% the gain in Meta stock since that letter. What's the takeaway from you, Cameron, this week now that the mega caps but NVIDIA are in the rearview mirror? Earnings revisions are the most important thing in this

market because what we've seen is that earnings revisions have been narrow. That defines why we've seen a narrow leadership in the market. But something like Meta has seen its earnings go from a $9 estimate for 24 to a $19 estimate for 2024. So what we can see is that the only two sectors that have had positive earnings revisions are tech and comm services. No wonder that's the market leadership. You can say the same thing about the equal weighted index. Equal weighted earnings have been revised down about 7%, but the S&P is flat. Earnings revisions are absolutely imperative. I wonder too, Tom, as to whether the fact that Apple has these issues in China, the stock was lower, and yet even it has turned around today. That has to be viewed in some

corners as a real positive in terms of price action. Does that just continue to tell you that these stocks are going to trade as a group you continue to call them fangs others call them the mag 7 at some point you thought well maybe we'll get some divergence between the group now you could certainly say that well tesla has sort of eliminated itself in the for the time being from the mag 7 by virtue of what's happened to that stock but how would you view that scott you know i think the f or the MAG7 are a very specific ecosystem. They're really widely held by hedge funds. There's enormous research and analytical support around them.

They trade like water. I think any of these stocks, take Apple or Meta, they trade more in a day than the entire European, all the European equity markets combined. So I think when money flows into equities or people want to put on trades, they are just buying the fangs as a group. But of course, you know, the Russell 2000 is 8% of the entire stock market cap. It's tiny. When investors start allocating to the Russell 2000, we could see explosive moves. So yes, I think the market does move thematically.

The FAANGs is one thematic trade. You think we're going to get, Cameron, this broadening that Tom expects? I think it all comes down to earnings revisions. You look at the Russell 2000. Its earnings have been cut by 20% over the last year. And on the positioning side of things, what's interesting is that Russell move that we saw over the course of the fourth quarter, what you saw is inflows into the Russell 2000 that were nearly equivalent to what we saw in the mean stock boost of late 2020, 2021. So people chase the rally a lot. So what we say is that the market has to broaden and earnings revisions have to broaden this year. It's not

a like to have, it's a need to have. And you don't think March matters? As long as you can see the path forward, right? Before, it was too muddy. We couldn't really see anything. Now we can actually see a path towards cuts. Is that all that matters? Well, I think it actually still does matter. Look, the Russell 2000 is down today, despite what's happening in the S&P 500 and the Nasdaq. Small caps are effectively a leveraged bet on the 10-year interest rate. So if interest rates are biased higher because the Fed is slightly biased, a little bit more hawkish than what very dovish bond markets had priced in, then Russell will continue to struggle. These higher rates have had an impact at times on tech, but not so much today. Alex,

I turn back to you. Amazon's being overshadowed by meta, obviously, but its own gains today are extraordinary, too. You can take a look at what Amazon's done here. Highest profit level in two years. The guidance was strong. They've got these initiatives in AI in their own right with Anthropic and now Rufus. What's your take here? I love Rufus. Amazon is really difficult to navigate as a consumer. You try to find a product. You really struggle to find it. Imagine just being able to ask a conversational bot what you're going to buy and it will tell you. Like, that's great. I think it's awesome. And it's also Amazon being willing to sacrifice some ad revenue in service of a better user experience. You saw in Alphabet's call, Sundar talked about how Google responded. Here's Amazon being proactive and saying even if it's going to cost us revenue in some ways, maybe hurts advertising a little bit, we're going to make our experience better. And their profits, $13.2 billion on the quarter, which is super high

for Amazon, which we're not used to seeing big profits. It just shows that the company is changing. By the way, at the right time, when we're going to be outside of this world of zero interest rates and in a world where interest rates might be lower, but they're still going to be higher than they were. We need these companies to turn profit. And Amazon is looking at places like advertising, places like cloud services, and they're saying we're not going to be the no profit company of the Jeff Bezos era. We're going to be the AWS company. We're going to be the entertainment company, the advertising company, introduce advertising into prime video. They're playing the game that the market wants them to play right now. And that's why we're seeing such a run up. It's pretty interesting, too, that the

way that the market is running up, especially in the Nasdaq and the other by virtue of how big Apple is in its place in the in the other indices, too, that it's this ability to go up even if Apple doesn't. You know, Apple's a modest loser. What's your big assessment from the earnings report? I mean, there's an undoubted problem in China, right? And I don't know when that's going to get better. Nobody truly does. What's our great takeaway from this report?

Well, you talk about the market being able to rise when Apple doesn't. We have to say it's no longer the most the highest valuation company. That's Microsoft talking like, do you want to have AI as your story or the Vision Pro as your story? AI. And by the way, that's what's leading the market right now. So I found Apple's results kind of concerning. And that's why they're so flat today, maybe up a little bit. When they guide towards another quarter of revenue contraction, what's that going to make? Five out of six.

And by the way, this one I kind of think was a gift in terms of being able to ramp because they had a lot of iPhone that moved into the second quarter last year. So their comp was actually easier to make. So they could be flat, but still, they're no longer the, I mean, they've always been such an important component in this index.

That influence is starting to be diffused a little bit. And Microsoft is picking up some of that slack. Is that a potential weakness, Tom, or a sign of strength for this market that it can withstand any period of weakness from an Apple? I think it's a lot of strength, Scott. You know, Apple's number two, Tesla's number eight, number two and eight, you know, didn't have great reactions to earnings and yet the s p is pushing on to all-time highs i i would consider that not only strength but it's an example of a broadening market right because it didn't take the rest of the things down either

eyes of the day you're looking at the s p tom we are right next to uh to you we were anyway and we're the highs of the day uh we're at forty nine seventy two and a half. I appreciate you being with us very much, Tom. We'll talk to you soon. Cameron, thanks. And Alex, of course, thanks to you as well. Quite a day. Quite a week. We're just getting started up next. If not March, then when? Former Federal Reserve Vice Chairman Richard Clarida is with us next. He'll tell us what today's blowout jobs report signals to the Fed when cuts might be coming in his mind and how to invest around it. We're live from the New York Stock Exchange.

Closing Bell's coming right back. Welcome back. We are rallying big time today on the heels of those strong results out of big tech, even with a stronger than expected jobs report, which maybe cements the fact that March is not going to happen, as Fed Chair Jay Powell suggested during his news conference. So maybe we really do need to move on from that. For better clarity, let's ask former Fed Vice Chair Rich Clarida.

He is PIMCO Global Economic Advisor, joins us now. Good to see you. Welcome back. Glad to be on the show. You told our producer on this segment that today's jobs report would be, quote, unwelcome news for the Fed. Why wouldn't it be exactly the opposite? Well, you know, the Fed is trying to engineer that soft landing. And I think in their mind, 350,000 jobs looks looks a little robust, in particular, the tick up in average hourly earnings. I also think, however, that there are typically some seasonal factors in January. So

I don't think this will carry a huge amount of weight. But they were certainly thinking of a little bit softer landing than you would get from this report. But did you have the idea that, you know, what was once a we need to really hurt the job market from the Fed has clearly seemed to morph into a look, we don't want to ruin a good thing. So it's a really delicate balance. It is. And, you know, and I thought the chair was very effective the other day when he indicated that, you know, the Fed welcomes a strong labor market, you know, evidence that we're going to be able to achieve the disinflation that they want. So, you know, the Fed actually likes a strong labor market, but they also want inflation to return to 2 percent.

Were you surprised by what he said about no March, that he was as explicit or answered that question he was asked as explicitly as he did? I was a bit surprised in the press conference because a straight reading of the FOMC statement at two conveyed to me that he and the committee wanted that optionality. I'll give Jay Powell credit. He did say, I think, first person, I think it's too soon. So maybe the other 18 folks have a different view. But yeah, he certainly did convey his own thinking there. And for what it's worth, I agree with that. I just don't think we'll have all that much more

data between now and March. And so if it made sense not to move in January, I think probably in March as well. Do you think it opens the door in any way to dissent, some more fractured Fed, if you will, the debate becomes more rigorous in the room? That could well happen. I think it's been remarkable how unified the committee has been through what has been a challenging period in terms of aggressive rate hikes. But I haven't really picked up on that too much in the speeches by the different officials. So I think it's probably too soon to worry about that. What makes sense to you then in terms of what's your own gaming this out? When does the first cut happen?

I think especially after today, June is looking like a pretty sensible meeting to pencil in. At the June meeting, there'll be a set of projections. They'll have a lot more data by then. I think the committee has decided that they're done. The chair more or less confirmed that and that there are discussing cuts. And so if I don't think it's March, it would either be May or June and I would lead into June. How many do you think we get in total this year? I'm still in the three camp. I know that makes me boring because that's what they wrote down in September. But but I think three cuts beginning in June would be my baseline right now. What do you think their take is on what the stock market is doing? This rally is

nothing short of incredible. New highs, obviously new record highs. And we're close. We're not just not that far away from S&P 5000. Does that make them uneasy, nervous? What? It's a good question, Scott, because, you know, as recently as November, they were citing financial conditions directly in the statement. You may have noticed they took out any reference to financial conditions in the in the statement two days ago. Now, no first they're looking at financial conditions but they are also looking at credit spreads and other indicators and so i think they're thinking that it's consistent with a soft landing the chair won't use that term yet but i think right now that is that's what they're that's how they're interpreting it

you have any worry whatsoever that they wait too long to cut that they're that's how they're interpreting it. You have any worry whatsoever that they wait too long to cut, that they're looking at either backward looking stuff or they're just too afraid to come to a consensus to move and it becomes too late and they do undue harm to an economy that they never had to do that to in the first place? I've heard those arguments. I respect that to some extent. But I think given the data flow that we're seeing, that would not be a front and center worry for me. I mean, I think we'll have enough indication of the economy slowing. And of course, you know, if the economy slows and inflation falls faster, as you'd expect, you know, they can move more more rapidly. So, no, I'm I know I've heard that argument, but I'm not very persuaded by it. But I could say, you know, I could look

at offsetting things, if you will. I say, OK, well, today's jobs report is blowout. Why would they go in March? But then if you look at, you know, employment cost index, for example, or PCE, all of those are trending overwhelmingly in the place that makes the Fed most comfortable because they look at those metrics perhaps closer than anything else. So I could say, well, those would suggest why not March? And I think the answer is that although the progress on inflation in the last six months has been welcome and remarkable, it's been driven largely by goods inflation. Services inflation is still running a little bit hotter than would be consistent with the target. No, but again, I think they are going

to cut. They think they're going to cut. And they'll certainly, given the data they're looking at, you know, May will be a live meeting. I think that's that would be the way I'd sum it up. Any doubts in your own mind that they pull this off, that we have a soft or so-called no landing? Scott, I would distinguish between the no landing and the soft landing. I think with no landing, you know, you don't really get inflation returning to two percent. So I think I think, look, there's always this has been a cycle where we've been surprised when I was there in twenty twenty one. We were surprised. And so you have to be a little bit humble about about forecasting. But but things are looking things are looking very, very favorable right right now.

And I think that should be the focus. Well, you allude to something, and I want to end on this. The idea that if growth remains too strong, you can't bring inflation down to 2 percent, or that's the principal worry of the Fed. Is that necessarily true? And isn't the inflation data proving that it might not be? I think what I'd look at, Scott, is is is it coming from improvements in supply? Now, we've had some really good news on productivity. Productivity is very noisy, but the last four to six quarters has been strong.

We were getting good news on labor force participation, but that's been sort of flatlining recently. And so I think that you can get strong growth in disinflation if it's coming from the productivity side. If it's coming from the demand side, then then that's that's really what rate hikes are meant to address. And so I think they are looking at the supply side pretty closely. That's why we have these words, immaculate disinflation, right, which we're kicking around. Because, you know, conventional wisdom would suggest to you, well, maybe inflation can't come down if you still have the growth. But in fact, perhaps it can. Mr. Clarida, I appreciate your time so very much.

We'll see you soon. Thank you. All right. That's Rich Clarida joining us there. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens standing by with that. Hey, Pippa. Hey, Scott.

Well, a pop for one retail name, but a drop for another. We've got the moves coming up next. With 25 minutes to go before the closing bell, let's get back to Pippa Stevens now for the stock she's watching. Pippa. Hey, Scott. Well, Clorox shares are cleaning up today in the wake of a strong earnings report. The company said it's recovering well from a massive August cyber attack

and is returning to regular inventory levels. Ugg and Hoka maker Deckers Outdoor is also surging today after a strong quarter. The company handily beat the street's estimates and as a result, several Wall Street analysts, including Wells Fargo, are raising their price targets on the stock. But on the other side of the footwear industry is Skechers, which is seeing shares slide today after a mixed quarter. The biggest drag on the stock is light full year guidance for both profit and revenue. Those shares down 10 percent. Scott? All right, Pippa, appreciate it very much. Pippa Stevens up next. Rough ride for financials down 7 percent on the week. Now, top technician BTIG's Jonathan Krinsky breaks down the charts, what risks he is seeing for that sector. It's coming up next, rough ride for financials down 7% on the week. Now, top technician, BTIG's Jonathan Krinsky breaks down the charts,

what risks he is seeing for that sector. Coming up next. All right, we're back. The major average is set to lock in yet another week of gains, thanks in no part to the banks. The regionals are on pace now for the worst week since June. And our next guest, well, sees more downside risk from the financials from here. Joining us now, Jonathan Krinsky, chief market technician, BTIG.

Good to see you again. Welcome back. Good to be here, Scott. Well, we're going to talk financials in a minute, but we got some stuff to clear up here. Now, there were multiple days, I think, in the last 10, for example, where you put out notes suggesting that the NASDAQ and the mega caps were especially vulnerable and that they were big risk of going lower. Here we are. We've done the mega cap earnings that prove not to be the case. I'm curious as to how I should take that if I'm an investor today.

Yeah, well, I think, you know, one of the indices we were talking about was the Goldman VIP index, which is the 50 names that they deem to be the most important to hedge fund clients. And that recently got one of the most extreme overbought readings we've seen in the last decade. And previously when that happens, sometimes it's imminent, but sometimes it can take a couple of weeks. But in almost every instance, with the exception of mid-December 2019, which led to about a three-week rally before some turbulence, with every instance, within the next few weeks, it gave back all of those gains and then some and saw decent correction. So, you know, I think today's action, some idiosyncratic, certainly there are some very

positive earnings news and some of those most important names. But I think ultimately, when you look across the landscape, you're starting to see even within the MAG-7, you're starting to see some signs of breaking that correlation, right? We know that relative strength for Tesla and Apple peaked last summer, for Alphabet that peaked last fall. And so three of the MAG-7 names are actually acting or underperforming the S&P. And so while it seems, you know, that the four remaining names are, you know, almost invincible, I think as we get into the middle later part of February, you're going to see some some turbulence in some of those V.A.P. names. But I mean, the ones you mentioned, though, under have underperformed for fundamental reasons and nothing else. If anything, these stocks are proving to the market that they deserve to be rated where they are and have the price action that they've

had, don't they? Yeah, look, I mean, those four remaining certainly have the momentum and the relative strength. So, you know, Meta, Nvidia Microsoft, and Amazon certainly, you know, those are the clear leaders right now. And, you know, even a pullback from this point certainly would not get them even back to where they were a few weeks ago. So I think the issue here really is, you know, what else can we see rotation under the surface to, you know, to kind of make up for the falling of those other three? You could argue there's a few other names out there that are trying to do that, and maybe it's Broadcom, something like that. But I think when you look at the index holistically

and some of the exhaustion signals we're seeing, we just think as you get into the middle part of February, from that perspective, you have to be a little careful. Why are we picking on the financials today? What have you seen there that makes you a little nervous there? Well, look, there's an old saying from false moves come fast moves. And if you go back just four or five days ago, it looked like the regional banks were actually poised to break out to the upside. Obviously, that didn't happen.

You had a name that maybe triggered it. And then here you have regional banks down 10%, 11% quite quickly. And typically with the financials, like a lot of sectors, when you see weakness in the smaller cap names, which regional banks are, that tends to precede weakness in the larger caps. And we saw that almost exactly a year ago. So if you go back to a year ago, the regional banks started to show weakness in February. The large cap financials continued to show some relative strength, actually didn't peak out until late February. And then obviously everything fell together. So I don't think it's going to be as extreme by any means. But I just think when you have the large cap financials into overhead supply from their 2021 peak. They were up, you know,

nine days in a row coming into this week. I think, you know, just there's some risk for the downside for large-cap financials to kind of follow the regionals. I mean, we need to be, I think, careful, though, whereas, you know, where you cite almost, you know, a year ago, SVB was out there, right? And that was the mechanism, if you will. Maybe this week it's New York Community Bank. But idiosyncratic stories don't necessarily mean the imminent demise of a group of stocks, especially if the market is thinking that the Fed's going to cut interest rates. I mean, the bond market has been voting for that regardless of what Chair Powell suggests.

Yeah, look, we're not saying anything like March of 23 is in the cards by any means. I think it's a function of risk reward, some decent, you saw regional banks down 10%, 11%. Could the large caps have 4%, 5%, 6% downside? I think that's probably reasonable. And then I think the other thing is what is tactical? What is timely right now? We would say financials are not a timely buy here. Other areas that are much more timely, I think if you look at industrials or even healthcare, which is our highest conviction idea for this year, healthcare is actually the third best sector year to date. And it was the only sector in the first sector to hit a 52-week high yesterday. So I think there's some subtle signs of leadership change. I just think financials probably are due

for a pullback. But either look to other areas like healthcare in the meantime. Good to see you back. Jonathan, thank you. Jonathan Krinsky, BTIG. Coming up next, a highly anticipated IPO might have found its home. We got all the details after this break. Closing bell, coming right back. Welcome back to Closing Bell. Reddit, one of this year's most highly anticipated IPOs, has found a home right here at the New York Stock Exchange, according to the Wall Street Journal. Interesting story. We'll follow there. The social media company confidentially filing offering paperwork back in 2021, expected to unveil the filing as soon as the end of this month. CNBC has reached out to the Stock Exchange. They have no comment at this time. I mean, they

can come sit right next to me on Post 9, me and Mike Santoli, and confirm it. Right, Mike? They could, if it were official and they were ready. Up next, an activist is setting his sights on, or setting their sights on Mattel. We have those details and much more when we take you inside the Market Zone. We're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Courtney Reagan on the activist push to reshape Mattel. And Pippa Stevens on the earnings results moving energy stocks today.

Mike, I'll begin with you. We had a nice little move here to end this week, 49-67. Meta? Well, yes. Meta. Tech? Amazon, Nvidia. Of course, that's where the heft of the move is coming from.

It's obviously not comprehensive. It's not all inclusive. But, you know, you have 175 stocks making new 52-week highs in New York Stock Exchange today. It's more than three or four times as many new lows. So it shows you there's participation. I think the market is able to take some comfort in a strong jobs number, even if we're not taking it purely on face value in terms of that magnitude of run rate of job creation. What I do think is you've had this ripsaw effect where the bond market didn't know if it was supposed to be starting to discount a potential Fed mistake

by not cutting in March. Doesn't seem like it's a Fed mistake now. The question is, are we just going to be in this suspended animation period where it's like either not hoping for the economy to weaken, but making sure that inflation isn't restarting. So, so far, earnings have clicked positive on the quarter in terms of year over year growth weight. That's the second straight quarter. Everything else seems pretty tame. It's tough to find something specific and imminent to worry about, except, you know, and I was saying this for a couple of weeks, 5000 on the S&P is where a lot of the trend lines lead us to,

and it should be kind of a stop and reassess moment. We'll see if we get there. Let's get this news. I want your reaction to it, because this is just breaking. We do have some news on a face familiar to CNBC viewers. Morgan Stanley's Mike Wilson, a source confirms to me, an internal memo went out today announcing Wilson will be leaving the investment committee.

He'll be staying with the firm, I'm told, but it will be to work now with institutional clients. Mike, of course, on many of our programs on this network over the last several years, trying to navigate these markets with everybody else. Yeah, he's obviously been, you know, pretty conspicuous as somewhat fighting the overall trend at the S&P 500 index level. He's been very wedded to the earnings path. Last year, we actually had a struggle in terms of broad earnings growth. What I think was a surprise to a lot of people was the way the index itself found a way higher in an appreciable way. So I don't know what to make of this in terms of whether it really is going to be a change of tone

in terms of strategic focus for the strategy piece of Morgan Stanley or not. You know, it creates this natural, like, are bears capitulating? Or are the firms where the bears were capitulating? Very, very much too soon to say that. And that's always a longer-term process. You have seen some other strategists raise their S&P targets and essentially just try to mark their opinion to market. I don't know that we have a moment here where you're really punishing people who've been cautious. You know, it's he, like many, as I suggested, tried to navigate and game out this new world

of this Fed regime and thinking that, you know, I'm thinking of past notes. It was the fire and ice note. It was the price is wrong. These suggestions that the market shouldn't be trading where it is relative to what was still to come from these, you know, massive rate hikes that we had and in the short period of time and that ultimately it would take a toll. And in fact, it hasn't happened. There's also probably the underestimation of what mega cap would mean for the overall market and the ability at the index level to carry stocks to these levels we are today. It enabled the market at the aggregate level, at the index level to hold a premium valuation through an entire aggressive Fed tightening cycle and an earnings recession. Now the multiple came down a little bit. But anybody who was thinking about the older relationships and the fact that you know we're trading at a premium and we should probably have a little more of a reset lower. You know you kind of got left behind by the by the market. So I don't think there's any particular

shame in it. No frameworks have worked perfectly during this cycle. It's been very odd. You know, normally you actually rally into the beginning of a Fed tightening cycle. We didn't even do that. The market just anticipated it, got it done with a 25 percent decline, and then it was up and away from that. I'm also told, again, according to a source, that Lisa Shallott, another name who's very familiar and a face who's familiar to this network, that Lisa Shallott, another name who's very familiar and a face who's familiar to this network, I think was on as recently as last week on one of our programs, is going to assume that. Who has been cautious as well. So very similar, I think, framework. So maybe it's not really a change necessarily in actual direction of advice.

So we'll continue to follow that story. Wish Mike well, of course, in this new endeavor at Morgan Stanley. Courtney Reagan's following Mattel activism. What's going on? Yeah, so shares up around 5% today after activist investor Barrington Capital sent a letter to Mattel urging numerous changes. Barrington pushing them to explore options for its American Girl and Fisher Price brands, separate the roles of CEO and chairman, pause stock-based compensation that it calls excessive, also asking for a $2 billion stock buyback. Now, Mattel tells CNBC, in part, look, it looks forward to engaging with Barrington

as we do with all of our shareholders. We welcome this initial outreach, and we're reviewing the letter. The Toymaker does report its fourth quarter and full year next week, so we'll get a little bit better idea of the direction of some of those brands and see if they say anything more. Back over to you. All right, we appreciate that. Court, thanks. Caught me looking at the market here. I see the Dow up 150. S&P 500 still looking for that close above 49.50. We'll probably get that at this point with less than a minute to go here, 49.60. There are some bears still who are hanging on to this story that cuts aren't coming as fast as you think. Higher for longer is ultimately going to take a toll. Market's too rich for where earnings truly are outside of the very select few stocks. Absolutely. If you think there's a good chance that the hot jobs number today was a real head

fake, and I mentioned earlier, one year ago, we got a half a million job print for the January number, and it was nowhere near that thereafter, then, yeah, you should worry about the Fed potentially waiting too long, not listening to the decline in hours' worth, maybe some of the layoff news. But for now, I think we're a long distance from really getting to that point where it seems critical. All right. Bells ringing, marking a new record high for the S&P 500, 49, let's call it 49.58, 49.60.

That's where we're settling out today, this final day of a very busy week. I'll see you next. Into OT.