Closing Bell - Closing Bell: Big Bull Rally Risks? 5/13/24

Episode Date: May 13, 2024

Is the bull market at serious risk or not? Solus’ Dan Greenhaus, Invesco’s Kristina Hooper and Merrill and Bank of America Private Bank’s Marci McGregor debate their forecasts. Plus, Alphabet shareholder King Lip weighs in on what’s at stake for that name ahead of its developer’s conference. And, the EV stocks charged higher today. Phil Lebeau explains what is behind that move and what it could mean for the sector more broadly. 

All right, Kelly, thanks so much. Welcome to Closing Bell. I'm Scott Wabner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the markets on edge as critical inflation data looms large. The recent rally back from the April lows potentially hanging in the balance. We will ask our experts over this final stretch what is really at stake this week with the release of both PPI and CPI reports. Our guests today, including Sarah Nason Tarahano of Goldman Sachs Private Wealth, is going to be here at Post 9 in just a little bit. In the meantime, take a look at the scorecard with 60 minutes to go in regulation. We're still less than 1% away from those new all-time highs. May not get there today. We're led by Apple, though, in some of those higher beta growth names.

And we're watching Alphabet shares closely today as OpenAI refreshes its chat. GPT chat bot will have a deeper look at the latest salvo in the AR arms race coming up, what it means for investors as well. In the broader markets, well, most S&P sectors seeing modest losses today. Small caps are outperforming, yields are down. So what else is new? The Russell is up. We'll watch that over this final stretch. It does take us to our talk of the tape, whether the bull market is at serious risk or not.

Let's ask Dan Greenhouse, chief strategist for Solus Alternative Asset Management, with me here at Post 9. Welcome back. Thank you, sir. See the Barron's over the weekend. Dow 40,000 so close you can feel it. Why you should fear it. And they make a direct line to the CPI because that's coming up on Wednesday. PPI is tomorrow. They say recent history points to reasons for pessimism. At this rate, investors could be betting on rate hikes instead of cuts before the fall. What do you think of that?

I mean, that's first of all, I until this moment, I had no idea where the Dow is. So thank you to Barron's. Thirty nine thousand four hundred. I see it. I see it's on the wall now. Glad you're paying attention. But listen, I think there's a lot to worry about in the short term here. The market, the S&P 500 is basically at a high,

and call it only a third of the index is within a couple percent of its 52-week high. So it's a little bit of a narrow breath here. Obviously, the Russell hasn't rallied. So there are some things that you would like to see happening that aren't happening. But on balance, I think you have to be pleased with how the market's holding up here, especially with yields coming back in. Well, I mean, you know, the market's rallied back pretty sharply. Over the last month, the Russell's up 3.2 percent. That's not insignificant.

I mean, the broadening trade has obviously worked, right? The Russell and the Dow are the best over the last month by a fair amount. Twice as good as the other. I mean, just to reiterate a point that we've talked about on there repeatedly, I don't think that you need to look, in terms of the broadening out, I don't think you need to look at the Russell 2000 as evidence for it. First of all, lost in the conversation about the Russell lagging in a longer-term trend is that mid-caps are basically at a high as well. And those are companies that people are much more

familiar with as compared to the S&P 500. And then within the S&P 500, first of all, within the MAG7, you have a bit of a rotation here. But within the S&P 500, you see, like, I don't think people realize, and it's just starting to get some attention now, the second best performing sector year to date is utilities. Now, obviously, that's part of the AI derivative trade that I think I've been harping on on air. It's by far the best performing sector over the last month. That's right. I mean, it's not even close. Yes. It's a double digitdigit percentage gainer. If we throw up a chart, I see we have a chart of the XLU up. If you zoom in on that, I mean, that's a parabolic move, so to speak. Well, people now are, like, making it the next AI trade.

Well, first of all, and again, just to reiterate my point on AI, whenever we talk about NVIDIA, for instance, my point has been that there are AI derivative trades that you can play that aren't particularly the semiconductors. And I'm not saying that I secretly meant you should buy the utilities the entire time, although I'm not not gonna say that I wasn't saying that it's utilities. There's no evidence to suggest one way or the other. That's right. So you'll live in the gray area. That's my kind of evidence. But yeah, I mean there are other plays at work here to play the AI trade. Right now utilities are getting some attention. There are others and some of these names are up 80, 90, 100 percent year to date, rivaling some of the

MAG-7 and more traditional AI plays. Let's talk about this. If you look at the activity in the market, let's just call it what the Wall Street Journal sort of characterizes it as today. Investors have been piling into the soft landing trade because that's what it is. That's why all of these other sectors, you could take utilities out of that. It's not necessarily a soft landing trade unless the derivative of rates coming down, the boil coming off rates plays a role in that particular trade. But you know what I mean? Sure. Financials, industrials, materials, people talking positively about China again. And it's all sort of plays into that story. Is it misguided? No, I don't think so, because all the evidence has been and remains that,

for lack of a better word, a soft landing. And again, we have to have a conversation about what we mean by that. But at least for now, the hard landing, the recession that everybody thought would occur is not. I think the problem that we have right now is for someone like myself who thought there was going to be a recession called a year and change ago, but gave that up a year and change ago, there's still people holding out this idea that, well, it's going to happen, it's going to happen, just give it time. And maybe that will be the case. But in the meantime, the stock market keeps racing, not quite to new highs, but on its way to new highs while you're still out there clamoring for a recession that no data point right now, at least, seems to suggest.

So then we should stay with the broadening trade. I think so. I think so. I mean, listen, you see this again, not just from large to small or whatever. You see it within the market. You mentioned financials, traditional cyclicals. Energy is one of the best performing sectors year to date, something that we've talked about for quite some time. There are plenty of ways to make money in this market that are not just seven stocks. And that's been the case for, I don't know, 18 months.

Does it feel to you, as Jonathan Krinsky suggests today, that the, quote, bulls remain firmly in control? Because we're basically back at prior highs. Yeah. Of course, he thinks that we're going to get there. But he said as much on this program last week. Yes, listen, I think that's right. The bias feels like it's to the upside still. I did mention before, and I'll repeat, only about a third of the index is within a couple of percentage points of 52-week highs. So it is a little more narrow than I would like.

But I think John is generally right and appears to be right in this case. I think the bulls are in charge. But, again, why is the bias to the upside? It's because profitability is doing well. It's because the economy is doing fine. I know there's some worry that data is not meeting expectations, as evidenced by the City Economic Surprise Index, which has turned into negative territory.

There are concerns, but there's always concerns. You've got the commentary from a couple of companies like McDonald's, like Starbucks, although I could counter that with any number of other companies. But despite that, and when you take the totality of the data and the evidence, I don't know why the bias doesn't remain to the upside. All right, let's bring in Christina Hooper now of Invesco and Marcy McGregor of Merrill and Bank of America Private Bank. Ladies, nice to have you here. Christina, welcome to Post 9. You've heard Mr. Greenhouse. What do you think? So I agree with a lot of what he's saying. I do think that we're likely to see a continued broadening of the market for two reasons. We've gotten some hints from this earnings season that we're going to see improvement in a lot of the cyclical names.

That seems to be the case if the current trend continues. Number two, and perhaps far more important, is the anticipation that there will be the start of rate cuts soon. I don't think this is a softening, soft landing trade. I think this is a reacceleration trade. And that's why we're seeing the broadening. Is that expectation? The reacceleration of the economy trade? Yes, exactly. But the issue is that weacceleration of the economy trade. Yes, exactly. But the issue is

that we can't count on the Fed. What's a far surer bet, in my opinion, is the ECB cutting rates in June. And that's why I think there's more opportunity, for example, in European equities. But having said that, I do agree that I think we're more likely to see that broadening to continue in the U.S. If you think the U.S. economy is re-accelerating, doesn't that introduce then further risk of it not cooling enough to keep inflation coming down to where, as Barron points out, at this rate, quote, investors could be betting on rate hikes instead of cuts before the fall if the inflation data doesn't start falling into place? Let's not forget that the last few reads have been disappointing, to say the least.

Well, I think we're seeing a slowdown right now. But stocks are discounting out and typically discount out six to nine months in advance. So I think that trade, that broadening trade, is about anticipating a reacceleration. I do think we'll see sufficient slowing to see continued moderation in inflation. I don't think we're getting to 2% this year. I don't think we're getting to 2% this year. I don't think we're going to satisfy the Fed, but I don't think the Fed expects to get to its target by the end of this year. And if I could add real quick before we get Marcy involved,

the Fed has told us from Chair Powell on down that they're more likely to keep rates where they are rather than hike them. And I think we can have a separate conversation about it, but if they were going to hike, they should have hiked or at least not gotten more dovish at the end of last year. That was the mistake. I mean, some people don't even think that they're restrictive enough, like Leon Cooperman, by the way, from the Omega Family Office, a legend in the investing world, who said on Power Lunch today, quote, there's a lot of talk about the Fed being restrictive. I don't think they're being restrictive. Where's the evidence the Fed is being restrictive? We have a stock market at or near highs. We have tremendous

speculation in individual stocks. Now, mind you, he says this on a day where GameStop's up like 70 percent, has been halted like 6,000 times down here because of a photo that was put on social media that got the stock going again. So, you know, Marcy, how in the context of what, you know, the two folks have just said, you've got the Cooperman commentary on this network a little while ago as well. What's your own view? Well, we have a market right now that's holding its breath a little until Wednesday when we get CPI and we'll hear from Powell right after. But Powell's really pushed back on the idea of a hike being the next move. I think I agree that it's far more likely. Our base case is the first cut comes in December. But I think if inflation continues to plateau, it's far more

likely that the Fed would hold policy tight and just not move from where they are right now and stay in pause mode, which, by the way, extended pauses in markets actually are pretty good times to be an investor in the S&P 500. We looked back at markets where the Fed's paused over 100 days, you know, which clearly we're well past that. And those tend to be pretty strong periods performance-wise. At the end of the day, I think this tug of war between inflation concerns, maybe stagflation fears and earnings is going to continue. Ultimately, I think it's earnings that went out and support this uptrend in the market,

because I don't think the rally we saw, call it from November to the end of March, was just Fed enthusiasm. It was about earnings growth. It was about easier financial conditions. And it was about liquidity. In the very near term. I think you have seasonality behind you. You have, you know, corporate buybacks perking up. That's going to be a support in the market. But ultimately, I think it's earnings that went out here. Nine days from now, Dan Greenhouse, NVIDIA reports its earnings. Is that with all due respect to inflation data? I don't want to upset the CPI and the PPI and other reads that are coming down the pike. Is that the most critical event in this market to determine whether we actually have a sizable summer rally?

Unequivocally, yes. Now, again, the CPI data matters. The PPI data matters a little less. But I think unquestionably NVIDIA is at the heart of the entire trade right now. Because I mentioned earlier the relative thinness, if you will, of the rally up to new highs. I'd like to see something closer to 50% of stocks be close to 52-week highs when the market's doing what it's doing. But NVIDIA is at the heart of this. And, again, there's no evidence that they're going to.

I saw one sell-side shop raise their price from $750 to $1,200. You don't do that, right? Let's hope you don't do that right in front of a company that's... Well, $750 looked good a month ago. No, it did. And the markets rallied all the way back to $902. You know, listen, there's a cardinal rule. When the stock's above your price target,

you've got to raise your price target. But there's a binary event for the summer rally? Yeah, probably. I mean, but listen, again, what is NVIDIA telling us? That there's demand for these products. And that filters through to everybody else throughout the ecosystem and the market in general. And again, I'm not an NVIDIA analyst.

Solus, I've mentioned a hundred times, not particularly a large tech investor. But it does seem like this is at the heart of everything. And there is very little evidence, if any right now, that there's a slowdown in demand. It just speaks, I guess, Marcy, in part to this all roads leading back to the broadening conversation, because that seems to be where we always end up when we start thinking that, OK, going to have a soft landing. You start to get more cyclical trade activity. So we think it's going to continue. Is that legit? Do you think it will? Or is NVIDIA going to remind us all the reasons why we were investing in those kinds of stocks in the first place? Well, I think it can be both. I agree with Dan. You know, when I think

about it, it's about that next circle out from the AI enthusiasm. If you look at CapEx, right, I think we are in the first year of a multi-year CapEx cycle around artificial intelligence. If you just look year todate, $57 billion in incremental additional capex has been announced, right? This is all about the AI boom. That said, the second half of the year is going to be about the other 493 catching up. The fact that industrials, financials are joining the earnings growth party gives me some positive feelings about, you know, maybe the MAG7 will moderate a little. I wouldn't avoid it because of this innovation cycle that we're in. But I

would think about the broadening and, you know, what's next. I think it's industrials. I think it's defense stocks. We like energy here as well as consumer discretionary. What do you think, Christina, about this whole NVIDIA idea that, yeah, we may, I know we're going to trade on CPI and PPI, that's unavoidable, but that's really the event that you need to pay close attention to more than anything else? I don't think so. Certainly, NVIDIA could power the S&P 500 to new highs, but it would be a very, in my opinion, narrow market. It is not going to contribute to any very significant broadening. I think that comes from CPI, from PPI, from Fed speak, from the view that markets have about how close we are to our first rate cut, in my opinion. So it seems to me with you, all roads come back to the rate cut. The fact that, you know, you've got a changed Fed, we believe, ever since we had that pivot and, you know, Powell wasn't as hawkish as we feared.

And now it's just don't fight the Fed. Is that fair? I think earnings are very important. That's part of the calculus. But earnings have been relatively good. And so now we have to shift our focus back to the Fed. And that's really the ingredient we're looking for now, in my opinion, to get to where we need to be. And I do think we are going to get a rate cut sooner rather than later. I don't think we're going to have to wait till December because I think the Fed's going to be satisfied. You had asked before, what's the evidence that we're in restrictive territory? We don't need to look for evidence. Jay Powell has said we're in very restrictive monetary policy territory.

I know there are some that was such a loaded, a loaded comment just because there are some who would say, well, I mean, he said that that inflation at the outset was transitory. Also, they haven't nailed everything. You know, they haven't got everything exactly perfectly. Now they've they've managed it. Well, I think most would think once they had that out of the way, they haven't got everything exactly perfectly. Now, they've managed it well, I think most would think, once they had that out of the way. They have. And I do think that they just need more confidence, which means more data. So hopefully CPI and PPI this week will do that.

But we do have to worry. We saw a spike up in Michigan, and that was confirmed today by the New York Fed. I was skeptical. Inflation expectations. Yes, exactly. I was wary of the Michigan reading because of that transition in the survey from phone-based to web-based. But it was confirmed today by New York Fed. Now, it's the short-term consumer inflation expectations, but it does make me a little more uneasy. So let me just add one word.

The question shouldn't be whether the Fed is restrictive. I think most people would agree the Fed is restrictive. The question is whether they're restrictive enough. And this is a separate conversation for a separate panel. I don't think they're restrictive enough for what they're trying to accomplish. And I think that's plain as day. But that's another story. What I did want to push back on. Why? Because the stock market's near a high? Where's the evidence? With all due respect, where's the evidence they're restrictive? Where's the evidence that what do you I mean, what needs to happen to prove to you that they are? The original, listen, they told me credit spreads to blow out and you need like,

you don't need things to blow up. But how about go up instead of being at the tightest ever? How about stocks not trading at 20 plus times forward earnings sitting at record highs? How about the economy doing, relatively speaking, just fine? The whole point of raising rates to choke inflation out of the system is to slow things down. Where are things slowing down? I know people wanted to point to Starbucks. Oh, you know, people don't want to buy $9 for an iced tea matcha or whatever anymore. But I listen to the credit card companies. No signs of slowdown. DoorDash, no sign of slowdown. Uber, no sign of slowdown. There's like a million things you could point to. Now, again, I'm not saying they're not restrictive. The question is whether they're restrictive enough.

They told us they're not. It's a two-speed economy. Where we're seeing the impact now is lower-income households, and that's come through in a lot of the earnings reports, most recently Tyson talking about the pressure on lower-income consumers. That's where it typically starts, and then it starts to spread. I'm going to disagree because for every company, I keep coming back to the credit card companies. And when MasterCard reports and when Visa reports and tells me they see no change in behavior across income cohorts, that to me trumps

McDonald's or Starbucks or Tyson telling me some of our products are getting a mix issue. We also heard from Capital One. So I do think we're getting that in different industries, that there's pressure on lower income consumers. And it matters. Now, do I think it's enough to cause a recession? Absolutely not. But I think when you see rates hiked 500 basis points, compare that to 94, 95, we only saw 300 basis points hiked.

And the Fed only sat at that high level for five months before starting to cut. We're now more than double that. But you know it's a different economy today than then. It is different in some respects, but we are playing with fire. The longer we have rates, as high as they are. All right. We'll leave it there. Thank you all.

I appreciate it very much. Let's send it to Christina Partsenevelos for a look at the biggest names moving into the close. Christina. I've got a meme feature. Shares of GameStop are up, what, 76% right now after meme stock investor and the focus of the Seth Rogen movie, Dumb Money, which I watched on a plane. Roaring Kitty posted his first tweet on X.

Keith Gill is the man behind Roaring Kitty. He was one of the first key promoters of GameStop back in 2021 and hasn't actually tweeted in about three years. The tweet makes no mention of GameStop nor arguments for buying the stock. It doesn't even contain any words. You can see it on your screen. Just a drawing of a man leaning forward was enough for investors to add over $4 billion in market cap in this name since last Friday's close. Speaking of memes, Reddit shares, let's see that, that's up, what, about 9%? No news catalyst, almost 10% now, aside from, yes, the return of Roaring Kitty. I want to just recall

that just last week the social media posted losses in its first earnings report, but did see strong user growth. There's all this talk about AI being utilized as well, but maybe memes are back. Are they never left. Why the qualifier that you watch it on a plane? You didn't want to admit that you ordered it up? Very good catch, Scott. Very, very good catch. I listen to everything.

I don't have an answer. Yeah, I watched it on a plane. That's all. I will come back to you in a little bit. You think about the answer. Okay. That's Christina Partsinevolos. We're just getting started.

Up next, navigating the AI arms race. OpenAI holding its big event today. Google kicking off its developer conference tomorrow. So what is at stake for both of those names? We will discuss and hear from an Alphabet shareholder. We'll do it after this break. Live from the New York Stock Exchange, Colton Bell coming right back.

All right, welcome back to Closing Bell. The AI arms race front and center yet again. OpenAI kicking off its big event today. Front running the likes of Alphabet and its own developers conference tomorrow. Here to discuss, Steve Kovac and Deirdre Bosa both obviously follow this space very closely. Steve, you monitored this event. Tell us what stood out. Yeah, one big announcement coming out this, Scott. This is the newest model, the flagship model from OpenAI. It's called ChatGPT 4.0. That stands for Omnimodal. And basically what this

means is it can have a conversation with you, sort of like you and I and Deirdre are having a conversation now. You don't have to ask one question, then wait for the answer, then ask the next question. You can just sort of just talk and even interrupt it if it's not necessarily giving you the answer you want or you change your mind. You can kind of ask it again and it has what's called memory, which means it can remember the previous questions you've asked and add on to the conversation that way. It's also what's called multimodal, which is a term you're going to be hearing a lot as we hear these AI announcements coming from Google and Microsoft and Apple in the coming weeks.

That means it can also interpret not just text, but it can interpret voice, of course, and images and kind of collate all that stuff and give you the answers you need. So really interesting with a demo we're watching here that was done. It appeared to be a live demo, and it kind of reminded me back when Google really messed up its Gemini demo, which was supposed to do a lot of what we just saw from OpenAI today. And they kind of cheated it, you might remember, to make it look more capable than it actually was. But this appears faster and better. It's also going to be free, and it's also going to be available for paid users and developers to tie into their own third-party app, Scott. Maybe, Dee, there was a little bit of trepidation among investors of, you know, this looks like even more of a foray into search and it's going to eat into more of the wheelhouse of Alphabet.

So the stock was down about 2 percent. You could see from the intraday that we showed the stock has definitely recovered. I'm wondering how we should perceive that, if at all, and what this means really to Alphabet's own ambitions here. Yeah. So one of Alphabet or Google's most biggest competitive advantages is its distribution, right? And ChatGPT making more of their technology, more of their advanced technology as well, free. That could be seen as more of a threat.

However, Google will have its chance tomorrow. I think you're right in saying that OpenAI front-ran the I.O. event. It was shorter than I think I was expecting. And they showed off some really cool technology, which Steve was just talking about. But also, it flew a little bit under the radar today. Google tweeted out its own technology ahead of I.O., and maybe it was just a teaser, but it looked similar to what ChatGPT showed us and OpenAI showed us earlier today, and that is a phone looking at an empty I.O. stage, again, responding very conversationally,

looking at the images and understanding that, responding to a voice more in a conversational sense. And, Scott, I think this tells us that we're moving from the era of chatbots to the era of AI assistants or agents, which a lot of folks have been talking about for a long time. So it's pretty amazing to see the first glimpses of that today, both from OpenAI and from Google. And so this race is just getting underway. It'll be exciting to see what Google has tomorrow. Steve mentioned the botched demos in the past. It has been sort of a turbulent ride for Google.

It was leading the race, and then it was perceived to be catching up in the race. Tomorrow, they're going to have the chance to set the record straight. It's also, Steve, a bit of a relay race, too. And we're going to get Apple down the road, WWDC, Microsoft coming up with its own developers conference, too. What should we expect? Yeah, I want to talk about the Apple one, Scott, because that's really interesting and plays into what we heard from OpenAI today. New York Times on Friday reported, you know, part of that announcement at WWDC is likely going to be an update to Siri and also a lot of what we heard about today from OpenAI. Again, this idea of an agent, this more conversational, I don't have to

tell you the problem Siri has today. We all experience it and just making it a lot more capable than it is now. So I think that is going to be a big announcement to watch. And then, of course, because of Microsoft a week from tomorrow, we know the relationship with OpenAI and Microsoft already. Microsoft likely going to lean on a lot of the tech that we saw today in order to inform its own products like Copilot and the like. I do want to point out one more thing, though, that even though Sam Altman was not part of this event today, he put out a blog post shortly after it ended, and he called OpenAI. He said,

we are a business and we're looking for ways to make money. I thought that was really interesting given all the board issues last year and this whole Elon Musk suing over the fact that they kind of abandoned this nonprofit vision. And here you have Sam Altman saying, yeah, we're a business. Yeah. Interesting for sure. Guys, I appreciate it very much. Appreciate you. Thank you. Stephen Derringer joining me now with more on how to play it is King Lip of Baker Avenue Wealth Management. He's an Alphabet shareholder, among other holdings that he has in his books. Good to see you. So as you see what OpenAI did today and you think about what Alphabet may do tomorrow, how are you thinking about it as a shareholder? Hi, Scott. Yeah, I think it's really an exciting time for the AI industry. Admittedly the OpenAI exhibition was very very impressive. That

being said as an Alphabet shareholder I think there's plenty of room for the AI industry to have multiple players. I think where Alphabet has an edge though however is really the ecosystem which Deidre referred to. The search business, the Android platform, the cloud business. There's really a lot of levers that Alphabet can pursue by entrenching the Gemini product into all of these businesses. So from that perspective, impressive open AI exhibition, but I think there's going to be a lot of great updates for us to hear tomorrow. Do you feel like, though, this is yet another example of, you know, setting a fire, so to speak,

underneath Alphabet in terms of innovation? This is a reminder that they need to keep innovating, to keep up with the likes of OpenAI and others, for that matter. That's exactly right. I mean, a couple of months ago, we talked about how Google was a show-me stock. Alphabet was a show-me stock at this point. And most recently, in their quarter, they showed a lot. They issued their first dividend, their $70 billion buyback, which honestly shows how confident they are about their future. But it does, as you mentioned, sort of light the fire under their engineers and for constant innovation. But I think that the company is really well positioned to do that. What about Apple? What do you make of the nice comeback that this stock has had, 187? We'll call it that. It's up more than 2 percent today.

Personally, I think it's a big deal for Apple. I mean, if we think about the rumored, if you would, open AI and chat GPT entrenchment into the iPhone, what it's going to do essentially is make the older iPhones probably become more obsolete faster, if that's the case. Because a lot of these applications that are driven by AI are more processor intensive, which means that newer iPhones are only going to be able to take advantage of that. So if that's the case, we would expect the refresh cycle to be accelerated. So I think it's great for Apple, and I think that's the reason why the stock is doing so well today. Yeah, nice day for sure. King, thanks. Talk to you soon. King Lip. Baker Ave. All right. Up next, critical inflation data on the docket for this week. Goldman Sachs, private wealth, Sarah Nace, Tara Hondo's back with

us post nine. Get her playbook for stocks, the Fed, where she thinks inflation might be heading from here. Best way to play all of that. We'll do it next. All right. welcome back. Stocks hitting a pause after an early May surge. The Nasdaq and small caps holding on to gains while the Dow is falling. Investors grappling with rising inflation ahead of two key reports this week. Joining me back now, Post 9, to share her outlook is Sarah Nason Tarahana, who runs the global family office business at Goldman Sachs Private Wealth. Welcome back.

Thanks for having me. So you deal with the longest of long term money. That's right. Probably the least tactical in a sense of any kind of private wealth related investors. What does that mean in how the outlook is generally speaking on a perspective of where the markets are going? Yeah, look, I think it's a great question. And as you mentioned, you know, family offices are managing money for generations. They're not answering to a board of directors. They're not necessarily thinking as much about how markets move day to day.

I think they think in terms of long-term themes. Where's the money going to be made over years, over decades? And also they tend to really run to the markets when others are running away. So on dislocations, they're in a position to really add exposure. And we saw that even with the April pullback. Right. So we had, you know, five percent pullback and the majority of our clients were looking to add exposures to names and sectors they liked there. So there I mean So there are tactical occasions, I suppose. Of course, yes.

Like I use an example of Stan Druckenmiller coming on our network. He runs the Duquesne family office. But he still looks at something like an NVIDIA. Without you discussing NVIDIA per se as an individual name, just the idea of being tactical at a moment where you look at the landscape and say, OK, I'm sensing a bit of froth, even in a long term theme that I believe so heavily in. Yeah, it's a good question. And like, maybe I'll just take a step back and talk a little bit about

the mag seven, because we've been actually spending a lot of time on this. Obviously, a tremendous amount of growth in the market has come from this. And, you know, they're not cheap stocks. But but if you look at the earnings growth year over year, Q1 know, they're not cheap stocks. But if you look at the earnings growth year over year, Q1 earnings, earnings are up 48 percent. And they're the same price that they were. They traded at 30 times a year ago. They still trade at 30 times. Right. So they've delivered on their valuations. And I think they represent really important parts of innovation in the market. They have very strong balance sheets, lots of cash. They're spending money on CapEx, which wasn't necessarily happening a year ago,

where there was so much focus on expense discipline. And, you know, there are stocks that our clients typically want to own. Now, do I think people should buy them at the highs? No. That's where these are stocks that move around. We are very disciplined. We look for pullbacks, pullbacks on earnings, pullbacks on any dislocations that may have nothing to do with the individual stocks. Right. And pullbacks like our clients are creative. So if vol increases, selling puts to get exposure. So I think that's really what the conversation has been. And obviously, earnings next week are going to be important. Yes. You're alluding to NVIDIA, which is coming up on May 22nd for all of you who forgot. So does that mean that the conversation around where to put new money still reverberates and finds its way to the mega cap? So those are the first types of questions you get.

It's a great question. There's a little bit of that for those that don't feel like they have enough exposure. But there's also a lot of talk around, like, what's the next derivative? What's the next beneficiary of this, you know, AI boom, so to speak? And people are thinking about what's going to power this, right? So the utility thing. Utilities. So you really think there's legitimacy to that conversation, which now everybody's talking about the fact that utilities are one of the best performing sectors of late and largely because it's like the derivative play of AI. I think it's legitimate. It's a derivative play of AI, but there are other things too,

whether it's a move to more electronic vehicles. Right. And so there are other things that will fuel this that that I think also are a contributing factor. So we're definitely paying attention and and we'll see. Tell me about on the list of things that are the key themes, sports investing. Yes. That's interesting to me. Tell me more. Sure. So sports investing and my colleague, Note Cole Pullen-Ross, who runs sports investing

for wealth. We collaborate a lot because as you can imagine, it's a very important space. She was just on the network last week. It's a very important space for our family office clients. I think one, I mean, sports are just an area where historically low correlation to the market. Our clients are always looking

for themes and areas that have a low correlation to the broader market. In addition, I mean, the valuations in sports, if you look at where the NBA teams were trading in the mid-90s, like average $72 million today,

that's over $3 billion for an NBA franchise team. And the media rights have a lot to do with that. And I think what our clients are starting to look for is what is the next big thing in sports where there's money to be made? I'm a former athlete myself. I'm a mom of three daughters. Women's sports is an area. I don't know if you got into the Caitlin Clark phase.

I mean, hello, who did it? Whatever. But I think women's sports scenario, people are really excited to watch women's sports that and emerging sports. And so for all of these reasons and the last thing I'll say about sports, which I think is really important to our family offices and families in general, is that most of our families own sports in communities where they live and work. And they love the idea of putting infrastructure and investments into where they live and work.

And so for that reason, it's also super interesting. So we had a lot on sports at our conference. And finally, real estate. Yeah. So in what context? Sure. So I would say for family offices, and again, I'm speaking about family offices,

not broad private clients in general. For family offices, they tend to own real estate outright. We did a global family office survey in 2023. Our family is actually at 10% of their portfolios in real estate. I think one, similar reasons, they're hard assets. They can buy them in their communities. They can have an impact. They can own the buildings, pass them on to the next generation. And also historically has been a good hedge against inflation. One of the things that I think was interesting at our family office conference is how popular the real estate segment was among our client base. Last year, it was a breakout that not many people picked. But I think the last 18 months, we've seen some dislocation

in prices that has been interesting to families. I said, you know, they run to the market when others run away. And with higher interest rates, financing has been more difficult. These families often have high cash balances and can come into markets when maybe less financing is needed from a traditional institutional community. Enjoyed our conversation as always. Thanks so much for having me, Scott. Thanks for being here. Serenace Tarahano of Goldman Sachs. Up next, we're tracking the biggest movers into the close. Back to Christina,

who's now had time to think about my earlier question. Christina. I watched on a plane because it was free and easy to watch and I could focus versus, you know, getting distracted at home and trying to find it. That's why. I'll buy that. And you also have to tell me what you ate for dinner on Friday, right? Because you said you would follow up if it was a meat and potatoes. But let's talk about a pharmacy chain looking to say bye-bye to the UK. And another tech firm going private because they couldn't cut it out in public markets. That and obviously so much more right after this break. Hour 15 from the bell. Back to Christina now for a look at the key stocks that she is watching. What do you see? Walgreens, Boots Alliance. Those shares are rising, what, about 5% right now

in a report that the company is looking to sell. It's a $8.8 billion drugstore chain in the UK. The company is holding early stage discussions with potential bidders, but the formal sale process has not yet begun. This according to Bloomberg. Squarespace shares, though, surging after announcing a $6.9 billion deal

to go private. An all-cash deal to private equity firm Premier. Premier, I should say. Squarespace is the latest in a string of tech firms going private after continued struggles with underperformance since its IPO back in May 2021. Shares up 13 percent. All right. We'll see in the zone. Christina Partsanova, still ahead, charging higher. Rivian, Lucid and ChargePoint are surging in today's session. This thanks to some key developments out of the White House. We'll break in the zone. Christina Partsanova still ahead, charging higher. Rivian Lucid and ChargePoint are surging in today's session. This thanks to some key developments out of the White House. We'll break down those details, what it can mean for the EV makers, bottom lines in the long run.

Closing bells coming right back. All right, welcome back. We have some news out regarding Roku. Seema Modi has that for us. Seema. And Scott, the stock is moving on this. Roku has secured the exclusive multi-year rights for Major League Baseball Sunday leadoff live games. It starts this weekend where Roku will offer Sunday MLB games for free on the company's channel, plus an all-new MLB zone worth noting. NBC's streamer Peacock previously had been the platform of choice as the battle for sports heats up. Scott, Stock up 3%. All right, Seema. Yep. Appreciate that very much. Thank you. Up next, a double dose of chip stocks popping. Arm and Intel hired in today's session to tell you what's behind those moves, how it could impact the broader semi-space when we take you inside the market zone. We'll do it next. All right, we're in the closing bell market zone. CBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Let's fill

a bow on what potential tariffs could mean for the EV makers. And ARM and Intel shares taken off today. Christina Partsanovalos on what is behind. That move, Mike, this thing, I guess, feels like a let's see what the inflation report in the morning is. Yeah, we sort of pulled into neutral in a way. I think the rebound rally has been broad enough, both domestically and globally. Earnings have been good enough. Treasury yields are down enough.

So, you know, the prerequisites are there, I think, for the market to make a little more of it on a benign surprise from inflation. That said, I still don't feel as if we really have a coherent leadership story going on, either cyclical or fully defensive. And I think that, you know, there's some doubts as to whether we flushed out enough to have, you know, a really exuberant jump beyond the old highs. But we'll see. All right, Philip, what's going on with these EV makers and potential new tariffs? Well, look, the White House has telegraphed this over the course of the last week that there will be some type of tariffs likely announced this week. And that's moved shares of Tesla, Rivian, Lucid all higher because they know that they're not going to have to worry likely about Chinese competition because when these tariffs are put in effect, right now there's a 25% tariff on anything imported from China, the electric vehicles.

And by the way, there's only two models right now that are imported. The likely proposal, 100% tariff. And again, we expect this announcement sometime this week, if not within the next couple of days. This has also given a boost of sorts to what's happening with Chinese EV players. Why? Don't be surprised if we see some kind of response from China that could further insulate or help the EV players in that country, which is why you see the shares of those EV players, those EV stocks from China moving higher. Scott? Just had that Zika IPO why you see the shares of those EV players, those EV stocks from China moving higher. Scott? Just had that Zeker IPO down here on the floor of the stock exchange a week or so ago. Phil, thank you. Phil LeBeau, Intel and Arm on the move today. Christina Partsenevalos

filling us in there. Christina. Yeah, it's because the Nikkei reporting that Arm is setting up an AI division with plans to launch a chip prototype by 2025. So that could lead maybe to an eventual spinoff of the AI chip business, which would be a positive for SoftBank given its large stake in Arm. But Arm wouldn't comment to me on this deal, but there's two issues.

Firstly, it changes Arm's business model of license and royalty revenues. And then secondly, this means that Arm could be in competition with its very own customer base. So there are some skeptics on this deal. Speaking of Arm, let's talk about competitor Intel. Also hired today on a report from the Wall Street Journal that Apollo Global is in talks to finance an $11 billion Intel plant in Ireland. Intel wouldn't confirm, but recall that only just two years ago, Intel struck a $30 billion deal with Brookfield for a minority stake in Intel's FAB in return for investment. Intel called

that Brookfield investment part of their smart capital strategy with more plans to use that smart capital strategy. So Apollo would fit that perfectly. Scott. All right. Perfection. Thank you, Christina Partsenevalos. All right, Mike, back to you. About two minutes. We're going to hear the sound effect in a second. This Apple comeback has been pretty powerful. Yeah, for sure. You know, it's very interesting in that you have this sort of serial anticipation of all these developers' conferences. And all you have to do is be a little bit of a left-behind stock and then say the words, you know, AI and have it be plausible. And it does work.

But it also feeds into this kind of leadership influx. So you see Tesla and Apple up there today in terms of MAG7 performance. You see Meta and Alphabet on the downside. So I think that's what's been going on in this market. It's been grabbing for left behind stuff because you had extreme outperformance by the highest momentum stocks into the highs in March in that five-month sprint. And to me, since then, it's been a real unwind of that. I put the utility move in that bucket. It's mostly about a left behind washed out group bouncing. Staples are up 5% in a month. It ain't because of powering AI.

So I do think that that's something that's been going on here that I think it's been hard for people to get their arms around because you do have this overlay of is inflation too sticky? Is the consumer suffering a little bit on the other side of it? So when earnings are rising the way they are, when credit spreads are this, it's hard for the market to get into too much trouble. I think it's a question of just the next step from here, whether we get something that feels a little more like a helpful storyline. Well, nine days from now, you're going to get an arguably binary event. You know what that is. Well, we are.

NVIDIA earnings. And there'll be a buildup in anticipation to it. And in February, it was genuinely kind of a spark for the entire market when we did get those results. There are some reports right now that supply is really coming on pretty strong. You see the secondary market in some of these GPUs. It'll be very interesting to see what the sentiment is there, because NVIDIA's a stock that point-to-point has done nothing for two and a half months. So we'll see if that's just been coiling up or if it's telling us something else.

All right, good stuff as always. That's Mike Santoli. We'll see you tomorrow, all of you. Bell rings. We got touch negative on the Dow and S&P. Now it's Russell going positive. Does it for us in the OC. It's on to us.