Closing Bell - Closing Bell: Bright Spot in a Tight Range 4/24/23

Episode Date: April 24, 2023

First Republic popped in today’s session, ahead of its crucial earnings report after the bell. Wedbush’s David Chiaverini breaks down what to expect and what it could mean for the broader regional bank space. Plus, Sofi’s Liz Young and Trivariate’s Adam Parker weigh in on the state of stocks as we kick off a fresh week of trading. And, EMJ’s Eric Jackson gives us a rundown of what to watch ahead of the parade of big tech earnings. 

And welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. We are live from Post 9 at the New York Stock Exchange. This make or break hour begins with the ongoing tense standoff between bulls and bears. The indexes continuing to coil ever more tightly ahead of crucial tech earnings and economic reports later this week. You see the S&P 500 almost exactly on the flatline for the day. One bright spot in this tight trading range, though, First Republic shares. They are up 8 percent on the day, which does lead us to our talk of the tape. A bellwether of regional bank stress. First Republic sets a report results after the close as investors see clues on deposit flight and a possible credit crunch to come across the industry. Joining us now is Wedbush analyst David Ciaverini to set up this report. David, great to have you here. What are we most going to be looking for here? First of all, the stock up perhaps just because nobody's anticipating any unexpected blowups.

Of course, we did have a lot of other regionals report. And so far, not a lot of signs of intensifying stress. Yeah, so we are cautious on the name, but I would say that bulls are expecting results to be less bad than feared. Now, we're expecting deposits could be down as much as 75 billion on a gap basis. Consensus is calling for about40 billion. And what I think is also driving the stock here today is we saw another bank that was kind of teetering after SVB went down. Western Alliance did rally hard after their results were better than feared. And the bulls on FRC are hoping for repeat here. So that's what I think is really propelling the stock up today. And bigger picture, I mean, we talk about the stock being up where it is.

This was one hundred and forty dollar stock a couple of months ago. Right. So it's not as if it really has changed the overall assessment by the market of what this actual business is going to be worth long term. But where does this leave the bank? Do they have enough liquidity for now? Do you feel as if they can sort of limp along without necessarily needing to raise more capital? The big unrealized losses clearly remain the overhang. Yeah, and you hit the nail on the head. They do have enough liquidity to get through. And as long as they don't realize the unrealized losses, then they have enough capital to maintain the regulatory capital ratio. So the company does have some runway here to survive. Now, the issue is at what earnings power will the company be

running at? Because when we look at their loan portfolio, it's yielding as of the fourth quarter, three and a half percent. On their website, they're offering CDs close to 5%. So that's going to lead to, based on their current portfolio, a negative spread, but at best, a very narrow spread for any new loans that they're making. And then to add on to that, the company has a junk rating from S&P and Moody's. So that's going to put additional funding pressure going forward. So they have a lot of wood to chop in the near term, but that's what investors who are looking at the stock here, they're looking at the tangible book value on a gap basis being $74. Even if they do run EPS losses for a number of years, as long as that TBV on a gap basis stays elevated relative to where the stock

is trading, that's what's giving the bull some strength here. Yeah, I mean, it's a tough bull case to say that tangible book value won't crash that quickly, but I guess that is the situation. What about across your coverage universe? Is the market in general correct in essentially believing that most of the impact has been recognized in the handful of institutions that have really suffered? Or do you really think there are other shoes to drop or a more broad credit and profit crunch to come? Yeah, the acute stress and the panic, I think, is behind us. Looking at all the banks that reported last week,

generally the theme was less bad than feared. Now, with that said, challenges remain for the group. Deposit competition is intensifying. Loan growth guidance was reduced. Net interest income, net interest margin guidance, that was lowered. Credit quality is a very big concern here. And in the most recent quarter, credit quality, just fine. But when we look out 12 to 18 months, and there's been a lot of discussion around commercial real estate and office properties, that's going to come home to roost over the next 12 to 18 months. And then on the capital front, people are worried about regulatory capital coming down and potentially banks needing to raise more capital as the regulators put more stringent standards in place for them. So a lot to be concerned about with the

banks, but I think the near-term acute panic is behind us. All right. I guess that's a bit of a silver lining. David, appreciate the time today. Thank you very much. Thank you. All right. Let's bring in Adam Parker, Trivariate Research founder and CEO. He's also a CNBC contributor, along with Liz Young, SoFi's head of investment strategy. Good to see you both here. I mean, I guess the banking crisis that didn't fully happen is one reason that the stock market has been able to hang in the way it has. But you hear a lot of folks maybe a little confused about why we're trading at these levels, Adam, in terms of it seems like we're all clenching up ahead of a recession. It seems like earnings haven't been great, even if they've been better than expected. And, yeah, the Fed's going to pause, but is it for the right reason?

So what's your take on whether the market is sort of whistling past the graveyard or has it right? I think there's three or four reasons the market's been better than people think. One, I think for sure, is the perception about the Fed getting more dovish. That's driven multiple expansion, particularly in the growth universe. I think the second is also maybe legitimate, which is the probability of a really bad scenario with really bad earnings is probably less likely now than it was at the beginning of the year. So if you think about the market as there's a possible group of outcomes, you assign a probability to each one, maybe that really bad case is less likely. Some of the economic data has been stable or it hasn't fallen off and even improved a few places.

I think the third reason, which we wrote about a little bit today, is maybe AI a little bit, and that actually impacting stocks more than people think. So I don't know if it's 10 years or 20 years. I don't know if it's 20% or 50%. But I know a lot of human behavior will be totally commoditized by AI, and there will be massive investment implications. So you can look at a stock like NVIDIA and say, oh, it's up too much, it's up 80%, 90% this year. But maybe it's just really cheap on a 5- or 10-year view as more and more things.

So we created an AI basket by, you know, doing language processing on every growth stock transcript. And we found these things outperform growth XAI. So there's something there, something real. It's not all speculative fraud. So I think there's some real reasons the market's up. But I still think the balance and the risk reward is at best 10% up, 10% down, just because you do have, I think, a higher probability of an eroding economy and earnings than you do improving. Yeah, Liz, I mean, it gets us right back to the what was priced in with last year's decline, what's still yet to be recognized. And are we benefiting from the fact that we have

been for some time anticipating, you know, the recession to kick in or anticipating some of the bad stuff? And it's at least not yet happened. Yeah, forever. It feels like we've been anticipating everybody's crying wolf, self-included, and no wolves have been spotted. Right. So I think we're in this again, we're in this waiting game. To Adam's point, though, if we look out five to 10 years, I mean, you're not going to find somebody who says that stocks are a bad buy over a long term period. They're always a good buy over a long-term period. I think what we're struggling with right now and what the market continues to struggle with is that in the near term, so let's say in the next three to six months,

we don't know what's going to happen. And it feels like, to me, we lose another bull every day because it's looking more and more likely that things are tightening up. I think the headlines, and this is what the guest talked about at the top of the show, the headlines about deposit flight and the things that we heard about in March probably are behind us from the depth of that crisis, so to speak. But now they become, what's the availability of credit? What's the availability for small businesses? And we've heard a lot about there being less available for small businesses. So if we're looking for something to fuel economic growth through the rest of this year, I would argue we're running out of spots to find it. Yeah, I agree. I think the run on the bank acute stuff might be over as

he alluded to, but the two clear negatives are one, loan growth slowing and will be lower, whether it's in real estate or CNI. So whatever your economic outlook was before SVB, it's got to be lower now, Apple for Apple, just because talk to people who are trying to get non-recourse construction loans in the real estate market, they'll tell you no regional bank will give them one. So clearly loan growth is going to slow the economy. And I think the second thing is we all know the duration now. We know the mismatch on the balance sheets.

We've been through that over the last month. But we don't know. There hasn't been enough discovery yet in the private credit on the bank balance sheets. And it sort of feels like that's asymmetrically skewed to negative. We were talking about that before we got on the air. So I think you're looking at it, you're saying, I don't know if these things are cheap or not. I mean, they could be expensive still once we kind of flow everything through. So I don't want to say, you know, I kind of painted you a picture for why I think the market's up and there's some nuggets of optimism in there.

But I think the balance is at best, you know, kind of risk reward flat, if not even negative, as we kind of look out in that three to six month view. And I agree with her. You're always going to say you're bullish on a three, five and ten because equities generally on most rolling three, five and tens have been a good investment. Well, especially when they've been flat for two years. And now, again, if October was the low, I think one of the reasons there's some hesitancy to say, yeah, that was clearly a bear market low is because even at that level, they didn't seem priced for stupendous returns going forward. Better, but not great. And so you can have it both ways and say, well, October was the low in that case. Maybe we're not in for

like the strongest bull market in the world, or we have to get back and refresh the valuation case by going lower. Well, I've long said and believed that purgatory is the worst place to be. And I think we're stuck in it right now. A sideways market is difficult for anybody to make money in, whether you're a bull or a bear. And it's been a tough spot to be both in stocks and bonds. So this is really frustrating, I think, for most investors. That October low, we got down to, what, 15.3 times forward earnings.

That's typically higher than what you see in a bear market or in a recessionary correction, right? I think that's part of the argument, that maybe that wasn't it. The other part of the argument is from peak to trough, it was down 25, 26 percent, also pretty mild in the realm of recessionary drawdown. So I think what we priced in last year was, OK, we're going to have a slowdown in growth. We're going to have some type of contraction, but maybe it's not a classic recession contraction. And now here we are this year where we've raised rates 500 basis points in 12 months. We've got every indicator screaming that something is coming and something like the near-term forward spread

saying that there's more than an 80% chance of a recession. So now I think people are getting on that side of, well, what if it does happen? Maybe 25% peak to trough wasn't enough. I don't know. Maybe it was, right? And the makeup of the index is different today than it has been in the past. So that could change it too. But I think those are the arguments for the latter.

Sure. And you also start to hear people citing those recessions in the past where the market seemed to kind of shrug it off, whether it was 1990 or even in the late 40s. So people are stretching for the analogs, I think. I think within the stock market, I mean, Liz does a lot of cross-asset, you know, bond. I mostly focus just on U.S. equities. I think within the U.S. equities. I think within the U.S. equities, I can see ways to outperform in a flattish tape. I can buy cheap cyclicals that don't have inventory problems where the balance sheet can be repaired. Energy's been

beaten up too much. I think metals, things that are not AI-able, certainly are going to trade at higher premiums over time. And then on the other side, I think what the market's been clear about is you can buy growth. And I think the attractive growth is either AI or biotech or small cap software where maybe they can get bought at premiums. I think there's some things you can own. And I think those are the barbell. I think the hard part is the 25 times earnings, steady grower, the things everyone wants to buy because the dream isn't sexy enough, right? Either I have to dream the earnings are going to pick up a lot and that seems unlikely in a rolling economy. Or I have to dream the mold is going to pick up a lot, and that seems unlikely in a rolling economy, or I have to dream the mold is going to expand a lot, and that seems a little bit unlikely.

So I've got to buy either stuff that can grow and the 24 P&L will be way better than 2022 in a declining backdrop, or the cyclicals with a balance sheet repair can just tons of free cash flow. So I think there's things to own, but I'm not, you know, I'm not bowled up that this is like a great entry point to buy equities, and we're up, up, and away. So I think we're pretty aligned on the overall macro. Yeah, and the cyclicals, to be clear, they have underperformed defensives a lot already. So you can't really look at the market and say you're ignoring the risk of a slowdown. Right. So it's kind of in there to some degree. Demand recession, certainly more in that part of the market than

other parts. Right. Yeah. Adam, Liz, great to talk to you. Thanks so much. Appreciate it. All right. Let's get to our Twitter question of the day. We want to know what catalysts will break the market out of its range. Big tech earnings, the PCE inflation data this week, the Fed meeting next week or something else. Head to at CNBC closing bell on Twitter to vote. We'll share the results later in the hour. Up next, your tech earnings rundown. Meta, Alphabet, Amazon and Microsoft all gearing up to report results. EMJ's Eric Jackson is back and breaking down the names he's betting on and where he's seeing risk in space right now. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC.

Let's go to check on some top stocks to watch as we head into the close. Christina Partsenevelos is here with those. Christina. Thank you, Mike. Well, Zoom, one of the biggest winners on the Nasdaq right now after the FT reports that Microsoft has agreed to stop bundling its Teams product with Office in order to avoid any antitrust investigation in the EU. So that means when you buy future Microsoft Office products, you can decide if you want to use Microsoft Teams or a competitor like Slack or Zoom. And so that potential market share growth is driving Zoom almost 2.6% higher right now. And then shares of memory maker Micron moving in the opposite direction today after the FT reports that the U.S. is asking South Korean chip makers Samsung and SK Hynix

not to step in and fill the gap should China ban Micron products. China hasn't done so just yet, but just the thought is driving the stock down almost 3%. Mike? Christina, thanks so much. Thanks. Well, one third of the S&P and almost half of the Dow stocks will report this week. Tech earnings kicking off tomorrow in a big way

with Alphabet and Microsoft. Meta, Amazon, and Intel are among the names later this week. Our next guest says earnings will surprise to the upside. Eric Jackson of EMJ Capital joins me now. Talk more about it, Eric. Good to see you. So you think that these these companies on net will surprise to the upside. Is the market not already leaning in that direction, do you think? I mean, pretty much all of them have been rediscovered and come up pretty well off their lows this year.

Well, yes, it's the third earning season in a row where in general you hear not just bears, but kind of neutral market participants saying that, you know, big tech really needs to take earnings expectations down on the rolling into the teeth of a recession. And that hasn't been the case for the last two big tech earnings season. We'll see how this one plays out. But I'm expecting overall for it to be another, you know, positive surprise at just how well some of these big names are holding in there. Yeah. And some of the themes that we can pretty much foresee are a continuation of this cost cutting story, which most of these companies, to one degree or another, have been undertaking. Do you feel as if that's going to actually allow estimates to go up or are we just going to be able to kind of make up the difference with some of that cost reduction? Yeah, most of the announcements

have already happened. We might get some more details from the likes of Google this week, for example, about just what they're planning on doing. Or from a meta, we might get some incremental news. For example, last week, Zuckerberg said at a town hall meeting that he planned to keep headcount at something like 1% to 2% growth going forward in future. If he says that on the earnings call and kind of validates that statement, that would be incrementally positive news for folks in the investor community. So a lot of this stuff has been baked in, but there might be some new announcements. I think people are going to want to see though um especially from the cloud players just what kind of deceleration are we seeing from an aws at amazon or from google or from uh you know from microsoft with azure as well uh you know the rate of decel you know makes a big difference in terms of the valuations of these stocks so is it is it

coming down two three percent um you know or is it four or five or more than that? You know, so that's going to be the kind of color that people are going to be looking into. And in terms of Microsoft in particular, there is, of course, the growth rate of the cloud business people be fixated on. But then also just the exposure to the broader PC and business software economy, where we have seen some concerns about people tightening belts on budgets. Do you think there's risk there or are they more or less a battleship that's going to be immune? Yeah, I'm most nervous this week in terms of the players that are reporting in Microsoft and Snap. So and with Microsoft, it's really that risk of enterprise spend,

you know, basically. You know, we got the announcement last week, Mike, from CDW, that they had seen sort of a big pullback in enterprise spend. Microsoft, in my view, is the most at risk, if that kind of carries over to them, in terms of what they announced this week. They're a bulletproof franchise, great brands. You know, it's not a tremendously expensive valuation here if you're looking ahead to 2024. But I think they're most at risk of kind of a near-term upset in terms of, you know, what they might announce for this particular quarter relating to enterprise spend that might surprise the market. We're going to hear a ton about AI, whether we want to or not, and whether it's kind of a real product that these companies or not. Is that going to be an investable theme for the here and now? Or is it just about, you know, one other thing to get people

excited about the overall franchise? I'm particularly interested in Alphabet versus Meta. They have exactly the same forward PE right now for the first time in some time. And I just wonder how that's gonna fall based on whatever growth themes emerge. Yeah, most of the AI stuff to me, Mike, I kind of don't pay attention to because it just seems to be kind of words more than anything else.

For example, Google could talk to what's happening with the BARD AI kind of answer to chat GPT. And you hear some people say that's going to be interesting, but it's not really going to make a material difference in terms of the financial results that they report. However, I do think AI matters in the sense that for some of these players, including Meta and Google, their prior investments in AI could turn up this quarter in terms of just increased engagement, you know, increased efficiency that they're showing across different platforms. For example, with Meta, we could hear of kind of better returns that they're driving in the kind of traditional Facebook feed or kind of some announcements about what they expect in the second

half of the year with Reels monetization, which we could end, directly tracing back to investments that they made in AI several quarters ago. So there's it can be very real, but not from kind of like a high level of buzzy kind of way. The one we haven't talked about, Amazon, is actually started to act better as a stock. It's been outperforming the Nasdaq 100 over the last few months anyway, kind of quietly, because I think a lot of folks had sort of soured on the near term story there. But what's your current read on that one with regard to its valuation? Well, they're coming off two really bad reports, their last two earnings calls that kind of surprised the market with kind of an overinvestment in distribution centers

and just sort of like struggling with the consumer transitioning in the face of the recession. I think it's unlikely that they're going to, you know, have three in a row because, you know, this is not a snap type company. So I think chances are better that they're going to surprise the upside. The expectations have been taken down. The valuations, you know, is pretty, you know, unheroic here at these levels for an Amazon. So I think they're one to watch. I mean, definitely the AWS story of cloud deceleration is important. And where are they exactly in terms of the rate of decel? Do they guide to a bottoming in deceleration for AWS later this year?

And with talk about, you know, a resumption of acceleration in cloud growth, if they speak to that on the call, that, you know, that would be a surprise and would definitely help the stock here. So I like it a lot going into earnings this week. All right, we'll be watching out for all of it, Eric. Appreciate you setting it up for us. Thanks. Thank you. All right. Up next,

forecasting the market's next move. Bank of America's Chris Heisey is drilling down on where he's seeing some serious risks and where he'd search for safety. And later, we're breaking down C3 AI's big move lower on the back of a key analyst call of all the details and what it might mean for the broader AI space. Closing bell. We'll be right back. Welcome back to Closing Bell. Stocks struggling for direction. The index is just barely above the flatline right now ahead of a blockbuster week of earnings. Let's break down what's next for the markets with Chris Heise, Merrill and Bank and Bank of America private bank CIO.

Chris, good to see you. Thanks, Mike. So you were just saying you kind of love one of these grinding sideways markets. What's the like about it? It seems to actually breed more frustration than anything else. Well, sometimes boredom is good. I think it buys investors a little bit of time, particularly when the front end of the curve is giving you a little bit more cash flow than what you're used to. The disconnect between the front end of the curve, the rest of the curve, and then the equity markets is really, really wide.

And you start to see these stories develop about either side of the equation. Like the bears will build the story here, the bulls will build the story there. And right in the middle is this narrow range that we've had, particularly this month, probably the thinnest range now going back quite a few years. Yeah. In fact, I've seen some work on that last week. There were three days when the S&P was up less than or moved less than one tenth of one percent, which has only happened like three times in the last five or so years. And actually after it was not disaster. It's not necessarily the calm before the storm. Which camp, though, do you find more persuasive now tactically in terms of the bullish case or the bear? It seems like the bear camp is more persuasive simply because we've got debt ceiling negotiations going on.

You have all of the different triggers lined up for a so-called recession. But then on the flip side, you have to ask yourself, did the pandemic distort a lot? Of course it did. Did it distort the numbers that you would normally see? Of course it did. Is it giving people time with a little bit more excess savings? Yes. So how do you balance that equation with the fact that you're still seeing that all the different triggers you normally look at are signaling a recession? And I just simply say that, okay, maybe it's different this time, but and but maybe collectively it's a rolling recession and you don't get this massive system wide one and it's more shallow than people think. And earnings can recover next year. So, you know, both sides of the fence are there.

Right. And if you get some belief that earnings could recover next year, June is, you know, right around the corner. And that's when people start theoretically pricing off of off of the following year's earnings. You did mention that you got some decent yields at the front end of the curve so you can stay in shorter term fixed income or cash and sort of get paid to wait and figure figure how figure out what's next. On the other hand, it seemed like in January when people first started to really take notice that, wow, we got four and five percent. It's actually safe yield. And people got really hopped up on it. What stocks did was went up eight percent in three months.

That's right. I think it was the anticipation that that was the peak. And then you would start to see the yields come down because in 22, everybody was focused on the fact that the discount rate was going up. Multiples should be coming down. And then ultimately would start to see the yields come down because in 22, everybody was focused on the fact that the discount rate was going up. Multiples should be coming down. And then ultimately cash flows, if they're a little bit less, less volume, less pricing power, ultimately lower cash flows and higher yields leads to lower valuation. That was 22. So now if you're starting to unwind some of that, that's the big move in growth. But if you look at multiples of growth, they're probably at a little bit of a premium right now relative to what we're about to see in earnings.

Yeah, absolutely. They've rebuilt that premium for sure. What about the rest of the world? I mean, is that one of the things the bulls will say is, look, other indexes, Japan, Europe, also acting well. It's not just a U.S. story. A little bit of individual stories there. I would point out this, which we just ran today. The actual 10-year yield in most developed markets, the big six, the big seven, is far and away, not far and away then a 1.7% dividend yield, you would say to yourself,

wow, okay, I understand. If people are looking for yield relative to the fixed income in their market, okay, that makes sense. Valuation better than the U.S. always is, but a little bit more of a discount. The real question is, is what's the flexibility of their economies as we go into this recession and then ultimately come out of it? Are they flexible enough? Do they have enough innovation to get them through into an earnings growth story? And I still think that question's out there. And so if you feel as if it's time to maybe wait and see where the opportunities present themselves, I know you've been at some point recently looking at small caps and saying they don't trade as expensively.

Is it time for that yet? Yeah, I think that's closer to year end. We don't really like to time like 12 months to 12 months. But if you're looking for the trend, it doesn't make sense at this point to begin to overweight small caps considerably. You might want to start legging in. It's on our upgrade watch list. So is international for two very important reasons. You get through the middle of the recession.

That's generally when bottoms begin to happen in the higher beta areas. And if you want to wait a little bit, no big deal. But at the same time, the index is heavy into regional banks, the small cap index. So it's got a lid on it from that alone. So we want to wait a little bit, but that would be an area for the next five, six, seven years where that valuation gap should close. Is the market correct in essentially viewing inflation as last year's problem and it's going to come down fast? You know, what's interesting about that is that the market is always correct, correct? So it appears so.

A good 50% of the CPI is in a downtrend. I would argue that it's about to be 80% if you take a look at wages and then ultimately real estate and food prices. All of those are showing the signs, at least forward looking, that that's coming down. So it's one of our big surprises over the next 12 months is that inflation actually drops a lot sharper than what consensus is expecting. All right. We could hope for sure. Chris, good to talk to you. Thanks so much. Bye. Appreciate it.

Up next, we're tracking the biggest movers as we head into the close. Christina Parts Nevelis is standing by with those. Hey, Christina. Thanks, Mike. Well, if the Inflation Reduction Act benefits are already priced into solar energy names, who still has room to grow? I'll have that list and obviously much, much more after this short break. 22 minutes until the closing bell. The index is right around the flat line. Let's get back to Christina Partsenevelis for a look at the key stocks to watch into the close, Christina. Hi, Mike. Well, let's start with U.S. air conditioner maker Carrier Global, seeing its shares plunge 7.5 percent on a Wall Street Journal report that it's in talks to acquire a German industrial manufacturer, Weissmann, for more than $10 billion, including debt. Weissmann also makes

air conditioners and heaters and could help Carrier Global diversify its supply chain. Shares of Albemarle rebounding today after last Friday's sell-off. There were reports on Friday that Chile would nationalize its lithium industry, the metal which is crucial for EV batteries. But Albemarle's CEO was on CNBC's last call on Friday and said existing Chilean mines and contracts would not be affected, and that's why the share price is rebounding 5.6%. Sunrun and Enphase Energy shares are higher today after Citi analysts added the solar names to its positive catalyst watch list, betting the names have further room to grow and that, more specifically with Enphase, it still has a strong

backlog of orders. But not the same kind of love for first solar after Citi downgraded the name, citing margin risks and concerns that the Inflation Reduction Act benefits are already priced into the share price. Or Mike, I should say. All right, Christina. Thank you. Thanks. All right. A string of high profile departures in the media industry today. Let's send it over to Julia Borsten for all the details. Julia. Busy news day indeed, Mike. Three major departures of men in top media roles. The latest Warner Brothers discovery is CNN announcing that it is parting ways with host Don Lemon, who tweeted his frustration about the way he was informed, saying he didn't hear directly from management. CNN responded that it did give Lemon the opportunity to meet with them. Now, Lemon

has been criticized for making offensive comments about women, and his firing does come after major layoffs and cutbacks at CNN. Meanwhile, CNN's rival Fox News Media announcing that it is parting ways with its longtime host, Tucker Carlson, and that his last day was this past Friday. Shares dropping on news of the loss of what was one of Fox's top-rated anchors. He was also one of its most controversial. His departure notably comes after a discrimination lawsuit filed by a producer on Carlson's show and Fox's settlement with Dominion Voting Systems.

After that lawsuit showed how Carlson's show spread misinformation. We also have an update on the firing of Jeff Schell, the CEO of CNBC's parent company, NBCUniversal. He was fired just yesterday. CNBC International anchor Hadley Gamble filed a complaint of sexual harassment and discrimination against Shell, according to her attorney. And then in an 8K filing today, NBC's parent company Comcast saying it retained an outside counsel to investigate and that evidence was uncovered that corroborated the allegations. Comcast said this led to Shell being terminated with cause. We've reached out to Shell and his representatives, but have not heard back. Back over to you. Julia, thank you very much. Well, it is the last chance now to weigh in on

our Twitter question. We asked what catalysts will break the market out of its range? Big tech earnings, PCE inflation data this week, the Fed meeting next week, or other? Head to at CNBC Closing Bell on Twitter. We'll bring you the results after this break. Let's get the results of our Twitter question. We asked what catalyst will break the market out of its range? Big tech earnings is the clear winner, about 43% of the vote. They start in earnest tomorrow and some also writing in that the debt ceiling could be a wild card as well among the 10 percent that said it would be something else. Still ahead, we are just minutes

away from First Republic reporting results. The key themes and metrics every investor needs to watch before those numbers hit the tape in overtime ahead. That and much more when we take you inside the market zone. We are now in the closing bell market zone Mark Newton of Fundstrat highlights one corner of the market that's breaking out and what it could mean for the S. and P. and

Steve Kovac on the big move in C three AI, plus Dom Chiu on First Republic ahead of its earnings report after the bell today. Welcome to you all. Mark, love for you to set the scene for us a little bit here with the broader market. You know, been talking about how either this is kind of an unimpressive bull market since October or it's a really non-scary bear market for the last few months. Do we have to make a definition? And what's your general take here on the tactical positioning?

Well, markets have been up the last four out of five weeks, but it doesn't feel that way to a lot of people. And that's what's important. Technology has started to wane a little bit. And so that makes the market seem a little choppier. We have had really good movement in sectors like health care, utilities, but really the rotation has gotten a lot more defensive in the last month at a time when sentiment has gotten more optimistic. So April tends to be one of the best months of the year. And I still think trends are positive in the near term. But as we go into May, I think there is a heightened chance that we could finally

see, you know, the much awaited correction that I think a lot of people are waiting on. And it should prove short lived. But there are some warning signs that are creeping up on the horizon. If that's the case, Mark, I mean, you mentioned the outperformance that has been showing up in some of the more traditional defensive sectors. Is it time to follow on and participate in those moves at this point in any of those that you saw? I mean, we have some pretty good earnings in the last several trading days from some of the big consumer staple stocks, for instance. Yeah, I like health care is really the best of any of the defensive sectors because there are parts of health care, of course, that are a little more risk on like biotechnology and really medical devices. But you see, equal-weighted healthcare right now is on the verge of breaking out of a pattern versus the equal-weighted S&P going back over

the last couple of years. Now, this is not immediately evident when you look at charts of XLV, but it does really highlight the movement in some of these subsectors when you look at a non-market-weighted type ETF, when you look at eco-weighted. So a lot of pharma stocks, a lot of the medical devices. We've seen recent really good movement, you know, stocks like, you know, Medtronic, of course, and Boston Scientific. And that's really an excellent area to position. And really the pharmaceutical area also, I think, is phenomenal. So it makes a lot of sense to me. Tech has had this big run-up. You know, there's no saying that tech can't work for the year, but certainly it makes sense to consider maybe some diversification at this stage of the

rally, just given what we've seen. And I wonder about Coca-Cola after reporting decent earnings, there was an initial positive response and then the stock is now backed off during the day today. And it's kind of bumping up against what's been the upper end of a of a trading range. How would you assess that one? Well, Coke, if you look at it over the last few years, it has actually broken out of a pretty lengthy downtrend. You know, it is one of my favorite consumer staple stocks right now. I do like the stock.

I think it likely moves back to an all-time high. So it is right to favor Coke technically. I've heard a lot of the fundamental reports have also been quite positive. So technicals are starting to mirror the fundamental names and really acts very, very well, technically speaking. You mentioned that, yeah, well, the banks sector has obviously been a bit of an albatross on this market, and it kind of creates ammo for both bulls and bears, right? You could say, if you're bearish, you said no real sustainable rally has tended to continue if the banks are outright weak,

as they have been over the last couple of months. On the other hand, the overall tape has managed to hold together even with that drag from the bank. So is there opportunity in bottom fishing there or would you sort of say this is a broken sector for now? Well, in an intermediate term basis, I would say it is broken. I say there are some excellent large cap banks that have rebounded quite sharply that do still look attractive. And a lot of those like the J.P. Morgans, the Citigroups, the Bank of Americas of the world, they've shown some really excellent signs of rebounding off those lows. It's really the regional bank area that is trying to stabilize a little bit, but it hasn't been that convincing to me yet that this is really a go-to area for intermediate term long investors. And in terms of a possible further pullback into May, as you say,

maybe we're setting up for, what would be a kind of acceptable level of pullback from here? Because, you know, since October, there have been a couple of retreats in the S&P 500 that did not really wipe out all the previous rallies. So I'm wondering how we would kind of frame out what a pullback might look like. Yeah, trends are still intact. We would really need to get down under 3940 in the S&P Cash Index. And that would be a big concern that we could see further weakness. 3800, of course, is the larger level for an immediate term investors that cannot be broken without thinking trends are turning a lot more bearish. I don't expect that needs to happen. But I think that a move down to 3940 to 4000 is certainly a possibility in the month of May. And as of yet, we don't really have

sufficient science to say that it's underway just yet. So we could get to forty two hundred, if not above that, you know, before we see even a minimal pullback. Yeah. So that would only be like a four to five percent drop from here, even if we did get it. And then finally, Mark, a lot of folks a bit alarmed at how calm the market has been and the fact that the volatility index is around in the 16s. Seeing that as a warning sign as opposed to a reflection, I guess, of just a steadier market. How do you read it? Well, implied volatility never works like people expect. You know, the VIX is going to slowly trend lower and markets are stable or sideways like they have been in recent weeks or going higher. So, you know, the VIX truly reacts when you have unexpected news such as the bank crisis, and that can cause, you know, a big spike. You know, I still view volatility and really the VIX is likely, you know, pulling back even further,

probably 15 and a half to 16 and a half. And that will set up opportunity, I think, for those to buy and buy volatility, you know, after this big move. It has been cut almost in half, right, over the last month and a half. So there could be opportunities for those. But we're sort of grinding sideways and really waiting for some catalysts. As you mentioned, tech earnings could be that or the Fed's endgame for rate hikes and how that materializes. I still see there's a lot of larger negativity, but it's really in the short term where sentiment has gotten a little bit more optimistic. When you look at things like fear and greed, AI and some of these investors intelligence polls that, you know,

make me a little bit concerned that really may might revert to its seasonal tendencies, which is usually down about, you know, two tenths of a percent on average. Yeah, has been a little bit of a chase in the last few weeks, I guess. Mark, great to talk to you. Thanks so much. Thanks, Mike. Let's get to Steve Kovach on a move down in C3 AI shares, down about 11 percent. Steve, on a downgrade from Wolf Research, I guess just questioning exactly how lucrative this supposed pure play in AI is going to be in the near term. Yeah, Mike. And look, this downgrade is largely on because they've been talking to CIOs, the folks at Wolf Research,

and they're saying they see IT spend kind of falling off later in the year. And that's going to be a big theme coming up throughout tech earnings this week is how resilient is this AI spend? I know earlier in the show, you were talking about the slowdown in cloud growth among the tech giants.

We're going to see the same thing on the software side for companies like C3 AI as well. Now, Wolf is even more specific. They're saying revenue growth this year is only going to be about 10 or 11 percent. Most of the street thinks it's going to be about 20 percent. The company itself used to think it was going to be 30 percent growth. But they had this other deal that they kind of renegotiated that kind of changed the revenue outlook for the rest of the rest of the year. That's that's what's dragging shares down now. And it's like this was this stock was up 70 percent before today.

All in that AI hype. It's still up almost 60 percent year to date. It is just basically a ticker symbol. It got people excited. AI at the end. Therefore, people buy it. Yeah. We'll see how much more of a reckoning there might be in that one. Steve, thanks so much. Let's get to

Dom Chu on First Republic. Dom, so what are we going to be combing through this one to really look for in terms of not just about this institution but regional banks in general? It's the same ones, Mike, to your point, that we've looked at for every one of these big regional banks. And by the way, this is probably the most important, right? Regional bank earnings report, the one that everybody, the main event, so to speak. First Republic, the one that's lost 90 percent of its value over the last year, tied to the failure of Silicon Valley Bank. It's a real epicenter of the fallout. Earnings per share expected to come in at 85 cents. Revenue is just a hair under one point

one five billion dollars. But the metric everyone's going to want to pay attention to, of course, is the deposit number. We are expecting deposits to go lower. There's no real dispute about that. How much lower is what we want to kind of see and what we want to kind of feel out at the end of last year, December of last year, the deposit base was one hundred and seventy six billion dollars at First Republic. The average analyst estimate right now has it falling to around $145 billion at the end of March, the end of the first quarter. But much like Western Alliance, which we could view as maybe a blueprint for this particular one, right? Western Alliance came out and said that in the first couple of weeks of this new quarter and month, they actually saw deposit inflows to the tune of about a couple billion dollars.

If something like that were to happen at First Republic, that could go a long way to stabilize a stock that has been very hard hit in this whole process. And Mike, to your point, I mean, this is by far and away the best performing stock in the S&P today. You get a sense that traders are positioning a little bit by trying to close out some shorts heading into a print that could be very volatile, Mike. Absolutely. We did see Western Alliance actually pop on its not-so-bad results last week. We will be watching that, Dom. Thank you very much.

As we get ready to close, another very steady performance by the S&P 500. We're just about holding in that 41-37 range. We've been about flat for the month to date. More stocks up and down on the New York Stock Exchange. And that's been a little bit of a change. And the NASDAQ is slightly underperforming, down about one quarter of one percent. That's going to do it for Closing Bell. Let's get into overtime with Morgan Brennan and John Ford.