Closing Bell - Closing Bell: Broadening Rally Benefiting Bulls? 2/28/24

Episode Date: February 28, 2024

Could underperforming tech actually be a good thing for this bull market? Ritholtz Wealth Management’s Josh Brown and Hightower’s Stephanie Link give their expert takes. Plus, Alger’s Ankur Crawford says that the Mag 7 is looking more like the Mag 4 right now. She explains why and how she’s navigating that trade. And, Chris Toomey from Morgan Stanley is doubling down on his bear case. He tells us why he’s sticking by his stance despite the major rally. 

All right, welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange, and this make or break hour begins with a broadening rally. Just the sign the bulls have been waiting for. The big question, can it last? We will ask our experts over this final stretch. In the meantime, take a look at your scorecard with 60 minutes to go in regulation. A tight day for the major averages, which seem to be looking towards tomorrow morning's PCE inflation report, what the Fed considers its most important reading. So we're read across the board, modestly so, NASDAQ down a little bit more than others. We are watching on that note shares of Apple, the company holding its annual shareholder meeting. CEO Tim Cook pledging the company will, quote, break new ground this year when it comes to generative AI. OK, those shares have been in a bit of a slump lately, really for the past six months. Elsewhere, Dow Component Salesforce reporting in less than an hour.

We're going to set you up for that as well as we look ahead to overtime. It does take us to our talk of the tape, underperforming tech and why it might just be a great thing for this bull market. Work with me here. Let's welcome in Josh Brown. He's the CEO of Ritholtz Wealth Management, a CNBC contributor. It's great to have you back. So it's Piper Sandler today, which says, topping out or broadening out? I would say it's, I don't know, feels like no contest, like broadening out. Over the last month, discretionary is up seven, industrials up six. These are percents.

Materials up five. Financials and health care each up four and a half percent. Tech's only up three. And I'm going to go through some names, too, in a minute. But what do you think of this story? I'll tell you your problem. You're putting people on the air that are looking at the Russell 2000. They're missing the they're missing the boat on what's really happening here. There

is a bifurcation taking place between large and small mid caps caught somewhere in the middle. That part is true. The question is, which one do we focus more on? We focus on Russell 2000, which is smaller than the meal Apple just ate for lunch? Or do we focus on how many huge, important companies are, as we speak, making 52-week highs or all-time record highs? From my perspective, don't worry about the small caps. Focus on the big story. Okay. I'm so glad you went there.

Perfect segue. I always go there. Yes, you do. Stocks in the last week outside of tech that have made all-time highs. Ulta Beauty, United Rentals, Hilton, Marriott, Booking Holdings, NBR, TGX, Ross, Tractor Supply, AutoZone, O'Reilly, Colgate, Costco, Marathon, Diamondback, Phillips, American Express, MasterCard, Visa. I could keep going. That's like half the list. Maybe not even so.

But the small caps. But that gives you— The regional banks, can you imagine? But that gives you an idea. How about today? AutoZone, TJX, Otis, MasterCard, Home Depot, Costco, General Electric, Disney at a 52-week high. Don't tell anyone. Like, if these are the stocks that are leading the market, and they are, by the way, Apple is making lower lows, is not leading the market. RSI is 37, not even in the game. Alphabet actually somehow looks worse.

Tesla, negative 19%. Like, those are not the leaders. These new companies that we're talking about, not really new, new to the conversation. They're not part of like Mag7, whatever. They're just, they're going up. And from my perspective, that's the more important message. And by the way, look at Equ weight NASDAQ technology, writ large. It looks amazing.

Look at even equal weight S&P. It's making higher highs. It might not be NVIDIA strength, but that's what you want to see. So, yes, there are a few thousand stocks that aren't really that important that don't look great right now. There's no real cause for alarm. And I want to leave you with something. J.C. Peretz's new note out this morning. This is the bottom line for me.

There are no new lows. So right now, 13 percent of the S&P 500 making new highs. That's great. It's not higher than normal. It's fairly normal. The fact that there are no new lows is the point. So if you're seeing 52-week lows spiking, that's when you want to get concerned about the health of the rally. It doesn't exist. There is no list. So when are you going to see

that spike? Well, let's start with 10-day lows. Then let's look at one-month lows. Let's look at three-month lows. We'll build up to that 52 week lows. There's nothing on any of those lists. And until there is, I think the bulls have it. And I think that's a very that's a very logical way to think about the overall market. Right. So the Russell's up three and a half almost percent in the last month. But what like I don't know, 25 percent, 30 percent of the companies don't make any money. It's loaded with regional banks. We for a while we were using it as a litmus test for the broadening of the market. But I like where you're going, because over the last month, let's say the biggest winners in the market over the last month in areas that should get more respect.

Discretionary Ralph Lauren's up 26 percent. Tapestry's up 22. GM up 15. I mentioned Chipotle. You see Abercrombie. It looks like they're curing cancer with khakis. Industrials, Uber, we know about that. GE up 18. You mentioned that. Ford up 17. A lot of materials. Health care has woken up. Yeah. Chipotle, like this is a very broad cross-section of companies that they're in the consumer economy, they're in the industrial economy. They're discretionary, they're staples. It's like a church in Dwight.

There are staples that are making highs. So, look, it's not that this is a silver bullet and as long as you have new highs from large companies, you have nothing else to worry about. But if you have new highs from that broad across section of different sectors, industry groups, some cyclical, some non-cyclical, some counter-cyclical, when you have all of that happening, what are you looking at $7 billion market cap companies for? What signal do you think is there? The only thing that that part of the market is telling us is that higher borrowing costs are going to be disruptive to those companies. We all understand that. We all get that. This also means, according to Barclays, that further upside in the market hinges on this story continuing to play out,

that if tech is going to take a breather, that you need these other spaces. I agree. Need these other faces and names to continue to do well. I 100 percent agree. And one of the things that we're starting to hear from companies that are not tech companies is the ways in which they're going to use AI technology to grow their earnings. So these are not companies doing GPUs. But this is McDonald's telling us, for example, a stock I just bought recently, about what AI is going to mean for their own efforts to become more efficient and serve customers faster and more profitably. Wendy's telling a ridiculous story, but whatever.

Surge pricing for double cheeseburgers. It's always a surge when I'm in town. Look, there are a lot of companies that in the second half of this year will have growing earnings that have nothing to do with tech. But the story they'll be telling is we are becoming more efficient because of all this stuff that we just bought from Microsoft and from NVIDIA. So that is part of this AI story. It's just not AI stocks. What happens if the Russell actually wakes up? Oh, my God.

And can that happen, though, with the you know, there are going to be these lingering concerns. First rate cut regionals. First rate cut June. You don't want to be if the first rate cut is June. You don't want to be materially underweight, smaller cap companies. Let's just put it that way, because these stocks could be coiling like a spring. That's the catalyst when they might wake up. What do I do with Apple? We'll circle back to the mega caps. And the one we said is really not done anything for six months. And you can even go if you want to and say for two years, it's been a sideways trade. We've had momentum from the sales side reversed. That's been an issue. Now

we have the announcement about the car, whatever. They're going to put more attention towards generative AI. Tim Cook saying as much today at the shareholder meeting. What gets the stock going again? Okay. So I'm long Apple. So please take what I'm about to say in context. I've been an Apple bull since 03 when we were wearing Von Dutch hats, okay? That being said, there are times when Apple has a positive halo around it because so many things are going right at the same time. They hit an iPhone cycle, a new product launch, etc. This is not one of those times. The halo is pitch black right now. All of the negatives about Apple that have been boiling beneath the surface are starting to bubble up at the same time.

And it doesn't mean you need to panic out of the name because it's fairly close to record highs. It's just not at a record high. But people are concerned about Apple because the momentum is not there in the share price. And the headlines are not going their way. So one really great example is how many people are trying to return the first wave of the Vision Pros. We kind of knew that that's like when Apple launches a new product, that's like one of the risks is the journalists will seize upon this story where, hey, maybe this thing is a flop. It's way too early to say one way or the other whether or not it's a flop. But those headlines can get worse.

That's number one. Number two, Berkshire, which was buying every share that wasn't nailed down going back to, I think, 2012. Last quarter, for the first time, they started to trim their position. So they should trim it. It's half the stock portfolio. It's a quarter of Berkshire's market cap. But still, they are not active buyers of Apple, and it's hard to see why that might change unless it has a material drop. So those are two things that are going against the company right now. The third thing is, they really haven't given you something to be excited about on generative AI, and as a result, they're not in that category of the mega caps that are still making new highs. Now, here's what's good.

They're telling reporters that that's coming later this year. Tim Cook is now actually saying generative AI for the first time. He hasn't really been talking about it. They have a worldwide developer conference in June. I wouldn't be surprised if that's the moment that they choose to unveil something specific. They claim that they're already using AI. All the devices are AI ready. He said today at the shareholder meeting that they're already using AI. All the devices are AI ready.

He said today at the shareholder meeting that they're going to, quote, break new ground this year. Now, we talked about active buyers. I'm glad we have Stephanie Link with us today of Hightower, the chief investment strategist and a CNBC contributor, because right there, you're looking at her,

an active buyer recently of Apple. Go off, Quinn. Look, I think Apple is not going to go back up anytime soon because you mentioned it. There's not really a short-term catalyst. That being said, I think there is a smaller catalyst in the near term, say like in the April quarter, in that timeframe. And that is because I do think the quarter

is going to be better than expected. They'll have made progress with China. Services will stay double digit growth. And I think they're going to announce another 90 billion dollar buyback program. Who knows? They can actually increase the dividend, too. And I think that'll get Apple back on the radar for folks. And then we wait until June, as Josh just mentioned, WWDC, and we'll get more information. And the news today about them abandoning the car, I think that's really good news, right? Because they knew they couldn't win. You have 200 global companies that are focusing on EV and autonomous cars. You have 20 OEMs that are actually out there that are delivering over 10,000 cars each a year plus, right? So there's tons of competition. Meanwhile, these guys are

still in their infancy and doing testing. So they made the news, they made the announcement, they're going to use that $1 billion a year that they actually spend on the car to focus on AI. And that's what's going to be the story in the next couple of years. It may not be the story this year, Scott, but the next couple of years, it's going to be huge for the next upgrade cycle. The list that I read, Josh, at the beginning of the program about stocks making an all-time high within the past week outside of tech seem to me to be the exact kinds of stocks that get you excited to do what you do every day in these markets, because these are your kinds of stocks, correct? I went down the list. GE Healthcare, you've got industrial stocks within there.

Fastenal, Masco, Parker Hannafin, the Cost the Costcos of the world, tractor supplies, Marriott. You're a believer in this broadening story that probably hasn't gotten enough respect. I would agree with you. And one of the things that we talk about a lot is the economic data. And why do we talk about the economic data? Because it does have a direct impact to earnings. And we just got a GDP report today at 3.2%, led by a 3% growth from the consumer. That is huge. That's 70% of our economy. And at the same time, we didn't even talk about this last week, Scott. I think I mentioned it briefly, but we were all wrapped up in NVIDIA.

But we had an S&P Global PMI number, manufacturing, that went into expansion, and new orders were 53.1%. That's also very much expansionary, and it's a leading indicator. And so why do we care about it all? Because it does have implications to earnings. And so tech earnings this past quarter were up 7%. Com services up 9%. However, as you mentioned, healthcare up 8%, financials up 7%, and then industrials up 6%. And so people are paying attention because those are the stocks that nobody really owned, and they were really, really cheap. And so I think there's a lot of momentum in those sectors, and that's really where I want to be. I don't not want to be in tech, because you know I've been buying some tech, but I've been trimming some tech too. I think you're just broadening out. You want to have diversification.

So there's no there's no question then in your mind to what Piper Sandler is asking about, you know, or suggesting even that we're at a significant inflection point. The words they use that the market's either poised to top out or broaden out. You think it's the latter? I do. I do think it's the latter because, again, I think the earnings are coming through. And oh, by the way, the guidance was really good in many different sectors. And so what I do during earnings season, you know this, I always have a little bit of cash on hand. And we talked about this last week that, you know, GE Healthcare fell 4% random. No reason.

So I bought some of that. Quanta Services is still lagging the industrials. I love the grid. I bought some more of that. Home Depot, which, by the way, since they reported that horrible quarter two weeks ago, the stock has done nothing but go up. So to me, I'm just trying to pay attention to the direction of where earnings are going. And eventually, stocks will follow those earnings.

May not happen right away, but I do think you get your opportunities. That's why I have a little cash so I can buy. Hey, Steph, so glad to be on with you today. We run a screen where we're looking at companies that are within 95% of all-time highs. And then we're looking for RSIs that are not overbought. And obviously, we want profitable companies. And then ranking them by size.

And then ripping out all the tech stocks. And here's the top four that are not techs, that are not NVIDIA. It's Lilly. It's Visa. You have Walmart. Sorry, Walmart and Visa. Let's just stick with those two. If those are within 3% of all-time highs, Walmart, by the way, looks incredible.

Broke above 57, which is the previous high. RSI is 76. Stock is absolutely on fire. Visa within 2% of a 52-week high. Above the 50-day, above the 200-day. If those two stocks are doing that, people are like in search of indicators. Like they're reading surveys from people who work at light bulb factories. Here's your leading indicator. This is Visa and

Walmart, I would argue, that covers 98% of the consumers in America, right? So if those stocks are doing that, what other indicators do you honestly need if you're trying to figure out, is this thing about to broaden out and take the whole market higher? For me, those are my indicators. Where am I wrong? I think that, no, I think you're 100 percent right. And it is all about the consumer. We talk about jobs. We talk, we always look at initial claims. And those numbers are ridiculously low. Wages are just fine. Inflation is coming down. Savings rates are still elevated. OK, they're down from their peak levels, but they're still elevated and consumers are spending. And

you know, this country, we are a nation of spenders, Josh, and you and I are both guilty of that. And so to me, I look at all these indicators, the macro, and then you're looking at the micro. And I'm also looking at things like American Express. And then I'm looking at like a laggard. Let's look at let's look at something like it's not going to look good on the chart. I know this. But Target, they report next week. And let's see what they have to say. But if Walmart was any indication, if Costco is any indication, and oh, by the way, TJX had a great quarter. I think Target is poised to move higher. Whether it does or not on the report, that's one thing. But it is all about the consumer. And it's such a big part of our economy. And so I'm right up. I'm right there with you in terms of looking at watching consumer stocks.

Sorry, Steph. Let's set people up for a couple of earnings since we're talking about that that are coming in OT that matter a lot. Salesforce, Josh, number one. I mean, this is this is a get lean story. Like so many of the big tech winners over the last year. Operating margins have been absolutely killer. Between January of 2021, when they were accused of bloat, through January of 2022, operating margins were 3%, 6%, 5%, and 0%. And this was problematic. That is not the story now. The last four quarters of operating margin for Salesforce, 14, 14, 18, 18. Why? They fired all the people and closed down their expense accounts that weren't really there to work, but were there to schmooze.

What you have left when you do that is people that are working so they don't get caught up in the next wave of layoffs. It's unfortunate, but this is how human nature works. This stock, where it's trading right now, close to making a record high, not quite terribly overbought. But those late 21 highs are in sight. If tonight's a great report, should punch right through there. No problem. I don't see a lot of resistance. And by the way, this is a Dow component, too. OK, you crushed that one. Now, Steph, to you on Snowflake, which you've been buying. Yeah, it's a fairly new position for me.

I bought it when it was already up 10% on the year. This stock is now up 17% on the year. And it's going to be volatile one way or the other. I didn't buy it for the quarter, Scott. I bought it because AI is only as good as the data you put into AI. And they have the data analytics in size and scale. They got a new product cycle story. The number you have to watch is product revenue

should grow 30%. Guide has got to be 30%. But whether or not they do or not, I think they are going to see an enormous CAGR over the next 10 years plus. And I also think it's kind of off the radar screen for some people and it was for me for a while, but I do think it's a powerful story

and it's a way to play AI, which I think is a huge total addressable market, as you know. OK, guys, that was awesome. I think we mentioned the names of 40 stocks or so in 19 minutes and few of them, if any, had anything to do with the Mag7 or AI. Steph, thank you. Josh Brown, thanks as well. Great conversation with you guys. Let's send it over to Christina Partsenevelis now for a look at the biggest names moving into the close. Christina. Well, let's start with China's largest Internet search engine. That would be Baidu, seeing its shares drop almost 8% right now,

despite a 6% year-over-year increase in Q4 revenue. And that was driven by AI applications and advertising dollars, which is still its main source of revenue. But expectations were pretty high going into this earnings report, and the earnings report failed to impress. Investors wanted a bigger revenue beat. It's also a tough day for Urban Outfitters. Those shares are down, what, 14% after an earnings miss, driven by weaker sales not at Urban Outfitters,

but at Anthropologie and its Free People brands. The stock ran up about 30% this year ahead of earnings, so expectations like Baidu were high. The CEO warning that shoppers are not as exuberant as when they first came out of the pandemic. Shares down 13 and a half. Scott. All right, Christina, thank you. We will be back to you shortly. We're just getting started. Up next, the fall of the Mag 7. That's how Aldridge's Ankur Crawford is categorizing what's happening in the tech space right now. She'll join me at Post 9 next with how she's playing that sector and why she's betting on a big shift into the MAG-4.

We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. Apple, not the only mega cap stock lower today. Alphabet also trailing the group and adding to its losses for the year. Our next guest says bifurcation in the mega cap trade is set to continue. Let's bring in Ankur Crawford, executive vice president and portfolio manager at Alger, with me here at Post9.

It's nice to see you again. This bifurcation you're talking about is bye-bye Mag7, hello Mag4. Yes, hello Mag4. And, you know, there's some that occasionally become unmagnificent, and that's what we're kind of seeing right now with Apple, Google, and Tesla. I mean, you're sending, wow, sending Apple, Amazon, well, Amazon's in. Apple, Google, and Tesla, they go to the curb? Well, just for now. Apple? Yeah, you know, so here's the thing with Apple. Apple has great prospects, but they just have to deliver.

And oftentimes, Apple is a late bloomer. So they weren't necessarily the first ones to a large screen phone. They weren't the first ones to think about a phone without a keyboard. So it's okay for Apple to be a kind of a fast follower. And I think that's what they will be for the consumer. It's just not now. I would say Vision Pro is okay. It's not fantastic.

But in the past, because of everything you said they're not first mover they're usually best mover we give them the benefit of the doubt that's why the stock usually runs up ahead of earnings and things like that what's wrong with this time why aren't why isn't the stock getting the benefit of the doubt when it comes to ai well i think given the multiple it has been given the benefit of the doubt to some extent, right? Because the multiple has been, is not reflective of the growth. So the multiple is too high, the growth is too low. That's right. And I would argue meta is more compelling than Apple today in terms of the growth and the valuation relative to Apple. So I think it's

more about the opportunity cost. If you have to put a dollar into something today, do you want the lower growth, higher multiple or the higher growth, lower multiple? And you'd always choose the higher growth, lower multiple. Okay. So for somebody who owns many of these large tech stocks, are you concerned about the underperformance, let's just say over the last month, as other sectors have done much better? The underperformance of Apple? Of tech.

Oh. Right, as a group. I mean, tech is the sixth best sector over the past month behind discretionary, industrials, materials, financials, and healthcare. Is that something that's just getting started? Maybe. However, I think even inside of tech, there's a big bifurcation. So security and software is doing really well. Semis are on fire. And then there's other parts

of tech like the IT services companies that are doing poorly. So even inside of tech, you're getting a bifurcation of winners and losers. So I think it's hard to put a broad swath and say all of tech is doing poorly. You know, NVIDIA is doing fantastic. Well, it's obviously not. Yes, of course. Well put. I mean, it's not all obviously doing poorly, but there is some thought in the market that it is primed for a breather. Maybe NVIDIA included.

I mean, it just can't keep going up to the moon every day, theoretically. Well, it has been. Come on, don't be greedy. But that it's going to take a breather and that some of these other stocks are actually going to have even more legs than they've shown recently. Yeah. And you know what? I think in all fairness, that probably has to happen. And in part, because if you look at the valuation discrepancies in other sectors today, they are widening. And usually when we see that, we either have a catch-up trade of things that lagged or we get a normalization of everything that worked. And at this point, given where the economy is and the strength in the economy,

where interest rates are, I think we more have a catch-up trade of the rest. Do you believe in this biotech trade? in the economy where interest rates are. I think we more have a catch-up trade of the rest. You believe in this biotech trade? I mean, if you want to say there's maybe pockets of speculative activity in the market, I hear people say, well, look at what biotech's going bananas every day. And then Bitcoin is matched with that sort of sign of animal spirits in the market as well. But biotech, are you a believer? I am a believer. Big picture, long duration assets are getting a bid, whether it's biotech or other long duration assets. They're getting a bid because we're in a more stable economy. Interest rates are, if they're not going down, at least they're not going up. You know, but we also have, like last year was the lowest M&A cycle that we've seen in 10 years.

And so there could be an M&A bid coming up just across the market. But biotech has a really interesting nuance. So in between 2025 and 2030, there's going to be $200 billion of revenue that goes off patent for big pharma. That is really interesting because the pharma companies are going to have to fill in the hole of these drugs going generic with something. And that is going to spark an M&A cycle on some of the biotech assets. Sarepta, Vaxxite, and Nuvalent. Those are the three you like best and have positions in? Yes.

All right. Welcome back. It's good to see you again. Good to see you too. Ankur Crawford joining us once again at Alger. Up next, the case for caution. Morgan Stanley's Chris Toomey is back. He's doubling down on his bear stance, I'm told. Is he doubling down or is he quadrupling down at this point? I mean, because he's been bears for a while. We'll mix it up after the break.

We're back. The major average is under a little bit of pressure today after rallying more than 10 percent over the last three months. My next guest says we could see some more profit taking from here. Morgan Stanley's Chris Toomey runs one of the highest rated private wealth advisory teams in the country. He joins me here at Post 9. Nice to see you again. I was like, this has to be the day. This has to be the day that Chris Toomey is going to sit across from me or next to me and say, you know what? I'm finally turned. Yeah, I'm bullish this market because there's no other place to be and no other way to see it. And you're shaking your head no. No. Why? I'm sorry.

Why? Well, look, I mean, just because you want something or think something should be something isn't what is actually going to happen. And I think if you look at, despite, you know, your previous guests' conversations, S&P is up about 7% year to date. Equal weight is up about 2.5%. That's what the median return is about. We've gone up 25% since the October lows. Right now, I think people are saying, what we've gotten here, maybe I need to take something off the table a little bit. If you look at what's worked really well on the hedge fund side, you go long momentum, which is 75%, the mag seven, and you go short, the small caps, the unprofitables. You look at what's performing

in the last week or so. You see China's up about 10%. As you said, Bitcoin's going through the roof. Some of these biotech names are doing well. Unprofitable growth is doing really well. So what you might see is some of these trades unwinding, people starting to take some profits. And I think what's really interesting is we got a really difficult January number, right? We had a difficult retail sales. We had a difficult CPI, which we can talk about. And the market sold off a little bit. What was interesting was the names that actually did the best

were the names that had been doing the best. So you didn't necessarily see people taking profits there. And in reality, those quality names continue to outperform. Okay. Almost everything's been going up, right? Over the last month, I'll read it again because I think it's a story that's not getting enough credit. And people who are bearish or cautious don't seem to want to mention it.

Discretionary stocks are up 7 percent in the last month. Industrials charts looked unbelievable, up 6 percent. Materials up 5 percent. Financials and health care up 4.5% respectively. Tech's only up 3%. Ralph Lauren, up 26%. I got probably 60 stocks in front of me right here. Tried and true names in this economy that are hitting 52-week highs or all-time highs over the past week.

Not one of them is a mega cap tech stock on my list. Right. What more evidence do you need? Well, look, you've got the MAG7, which is MAG5, MAG4. They're up over 35% year to date, right? So yeah, there was time for them to come down a little bit and for some of these other names to catch up. But I think what's important is looking at the fundamentals, right? So go all the way back to 2022. Market was pricing 150 basis points worth of cuts. Fed was talking about 75 basis points of cuts. We saw 50 basis points in hikes, right? Started this year, we had six cuts priced in starting in March. Now we're at three, right? So over that time period we actually had flat earnings in the S&P 500. Everyone talks about the fourth quarter, how we

outperform. No one talks about it. We did, but no one talks about the fact that three months before earnings started they cut estimates by 8%, right? So this is your son saying I'm gonna get a D in math and then coming back and saying I got a C- right? This isn't what really going to drive performance of the S&P 500. But when your expectations were that he might get kicked out of the class, and here we are because the economy is super strong, strong enough. We have no recession. Multiples, you could make an argument, are justified at these levels because of the economy and the fact that earnings came in better than expected. Most of the naysayer predictions

just have not happened. They haven't. They haven't happened with regards to price, but they have happened with regards to fundamentals, right? If you look at the S&P 500, up 25% on flat earnings, right? So why is the multiple expanding? We're not cutting rates. And here's the bigger problem, right? If you think about the fact that we aren't going to be cutting rates the way the market's pricing it, what happens, right? You don't need it. Well, no, that's what we don't need now. But you've got $800 billion worth of corporate debt that is rolling over this year, right? You've got over $1.2 trillion worth of corporate debt rolling over next year, $4 trillion until 2030, right? And we're going to get rate cuts. We're going to get

rate cuts, but when are we going to get them, right? These companies are running out of cash. You look at the consumer, the consumer's got $1.2 trillion worth of debt that they're paying 25% on. So everyone's talking about how great the consumer is. He's just extending. He's extending, waiting for these rate cuts. And these rate cuts are getting pushed back further and further. And as much as Powell would want to cut, he's not because he's concerned about inflation, because he's seeing it, right? And because there's precedent. If you look back at the 70s, it's very hard to get this perfectly right with regards to inflation.

So would I want to be paying a premium for the market in this environment? Would I want to be bidding up these stocks right now? Not necessarily. What do you want to be paying a premium for the market in this environment? Would I want to be bidding up these stocks right now? Not necessarily. What do you want to be doing then? What do you want to be doing while the stock market continues to go higher? I would stay in quality. The benefit right now, again, is you've got alternatives, right? You've got a 10-year that's in the 4% to 5% range.

You've got private credit paying you 10%. You've got triple net lease paying you 7% or 8%. So you've got alternatives to equities. I know, but is J.P. Morgan Morgan quality is Berkshire Hathaway. This is this is this is Costco quality. This isn't a mass Marriott quality. Those are the quality names are going to continue to do well. So this isn't about eliminating all your equity exposure. What this is doing, you look at Warren Buffett's letter this weekend. He's got one point. He's got one hundred and sixty seven billion in cash. Right. He's got one point. He's got 167 billion in cash, right? He's waiting around for things to get cheaper to put money to work. My only advice is saying, don't be afraid to take

some profits here, sit on some cash and wait for the market to come to you. He's not saying I'm not buying anything because the landscape sucks. He's like, I can't find anything that's worthy of buying for me, I think, because prices are high everywhere. Well, so, I mean, half dozen, six, half dozen of the other. I mean, like, in our mind, the fact of the matter is, there's a lot of things that are not being priced in the market. The market's priced for perfection. In our minds, if you're going to focus in on return of capital before return on capital, it makes sense to be prudent here and not necessarily add too much risk to your portfolio. We'll leave it there. Always like the debate with you, Chris Toomey.

Thanks for being back. Thank you. Morgan Stanley, managing director of Private Wealth Management, the founding partner of Morgan Stanley Team Global with the whole title. Up next, we're tracking the biggest movers as we head into the close. Christina Partsanovelos is standing by with that. Christina. A big title there.

But let's talk about the Department of Justice launching an antitrust probe into UnitedHealth and the Bitcoin rally causing an outage for one firm. Those movers next. We're about 15 out from the closing bell. Let's get back to Christina Partsenevelos now for a look at the key stocks moving into the close. Christina. Well, let's start with the cryptocurrency because Bitcoin did cross $63,000 earlier today for the first time since late 2021. You can see Bitcoin, we'll bring it up in a second, is down around $60,000.

But investors are hoping to reach that all-time high of $69,000, especially before this year's halving or halving or halving in Q2 when the reward for mining Bitcoin is split to reduce the amount for miners and maintain scarcity. Tongue twister today. Bitcoin tends to be a barometer of risk appetite and the rally even caused an outage on crypto platform Coinbase today.

Speaking of not UnitedHealth, let's talk about UnitedHealth. It's a big drag on the Dow after the Department of Justice launches an antitrust investigation into the company. The Wall Street Journal reports that investigators are looking into the relationship between its insurance unit and its health services arm, which owns physician groups. The move is part of the Biden's administration push to lower drug prices. Shares are down about 3 percent. Got through it, Scott.

Yes, you did, Christina, as always. Thank you so much, Christina Parts and Avalos. Still ahead, we get you set up for Salesforce. The software giant reporting results in overtime. We'll tell you what to watch for coming up. First, though, a quick message as CNBC celebrates Black Heritage. It's truly an homage to reflect on the stories of those that have broken barriers and inspired the next generation. It was representation like Ursula Burns that allowed me to see the possibilities of becoming a president and CEO of FedEx Custom Critical. I humbly understand my assignment and responsibility to have a positive impact through my contributions

and paving the way for our community. Welcome back. Today we announced CNBC's first ever Changemakers List. 50 women transforming business and philanthropy. You can find all 50 Changemakers at cnbc.com slash changemakers and learn more about the event we're hosting to celebrate these women on April the 18th. Coming up, Salesforce Paramount reporting at the top of the hour. We'll tell you what to watch for when those numbers hit in overtime. That and much more

when we take you inside the Market Zone. We are now in the closing belt market zone CBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus two earnings releases out in overtime that we are watching closely Kate Rooney on Salesforce Julia Boorstin on

Paramount Mike Santoli I'll turn to you because we're going to turn to PCE. Yeah maybe that's one of the key determining factors as to whether the broadening of this market which is legit continues. Yeah that's one of the key determining factors as to whether the broadening of this market, which is legit, continues. Yeah, it's a matter of whether the market has been hesitating ahead of that, maybe as the bulk of earnings came through and then that's the next big

macro touchpoint. I mean, I think we're at an interesting moment where the S&P has really been tethered to levels it first got to two weeks ago, right in the 50-50 area. And as you've been mentioning, the tape action's healthy underneath. There is a lot of participation. I don't think, though, even though it's a bull market, it's acting like a bull market, that means the overshoots happen to the upside. The persistence of this rally has been getting at the benefit of the doubt. All that said, it doesn't give me a lot of conviction to say that the next 3% to 5% is definitely up versus down, just because of the seasonal stuff the positioning stuff the fact that you're starting to see a little bit of the you know aggressive fast money action on the on the fringes of the market like biotechs

and yeah and bitcoin even right i mean bitcoin was i don't know the range in bitcoin alone today was unbelievable it was like a 10 range or something and so yes all that stuff shows you there's this sort of high-energy flow in the market. It's okay. This is what happens at the latter phases. But you had this thing where we got to find the next Nvidia. We're going to decide it's SMCI or it's Arm. We got to find the next Chipotle. It's going to be Wingstop or Kava.

And they're all ripping. And so I think that that can be fine. It's still part of the rotational story, but it does leave me a little bit cautious about whether that tone can just continue without getting a little bit of a check on it. Well, tech earnings have been good, and we're going to get another check from Salesforce. Kate Rooney in overtime. What should we expect here? Hey, Scott. Yeah, so Salesforce is really seen as a barometer for enterprise spending and front office budget. So it's a key software report to watch. Watch 2025 guidance. Will they indicate an acceleration in booking, for example?

And then for the prior quarter, watch CRPO. That's a booking metrics for Salesforce. Margins are key as well. Wall Street's looking for 31.5 percent non-gap operating margins. And then revenue growth rates as well. CEO Mark Benioff's commentary about what he's seen in the market, that's going to be closely watched. And any comments about AI, what's in the pipeline for Salesforce when it comes to generative AI, and then how that's going to affect spending and CapEx.

It is among the tech names that has been cost-cutting and reducing headcount. It's also been a top pick at Morgan Stanley. At least analysts there point out Salesforce has been trading at a roughly 57% discount to large cap peers like Microsoft and Adobe. Back to you. Yeah. Kate, thank you. I mean, it's up 14 percent or so year to date.

It is important for all the reasons that Kate said. And it's a nice time that this report comes. And, you know, it's an interesting spot. If you look multi-year, it's gone back to its price highs, just about. But on a free cash flow yield basis, you know, which is kind of how you have to look at a big software company, it's still less expensive than it was at the highs. They've done a ton of the cost and the margin work is in there. And so I don't think that necessarily it's sort of priced, you know, all that aggressively relative to the fundamentals

if they can keep on this pace of, you know, of delivering as they have been. And then there's Paramount. Julia Boorstin, what are you looking for? Well, when Paramount reports after the bell, all eyes will be on its streaming division, along with what the company could say about potential M&A. Now, Paramount is expected to report declining revenue and a loss of one cent per share. But the most important area to watch is its direct to consumer division, which is expected to report a loss of one cent per share. But the most important area to watch is its direct-to-consumer division, which is expected to report a loss of nearly $550 million. That would be more than double the loss in the third quarter, but a slight improvement from the year-ago period.

Now, the division is expected to add about 4 million subscribers. That's more than a million more than it added in Q3. So the question is whether the streaming division's growth can compensate for losses or declines in Paramount's traditional businesses and also how those pressures on the traditional media business impact its outlook on potentially selling the company. Scott? Okay, Julia Boorstin, thanks so much. We'll see you in overtime with that. All right. Any insulation of sorts around the PCE because of hot CPI, hot PPI? We sort of expect that it's maybe a worse than expected number or at least hotter.

And we'll just sort of explain it away. But, yeah, we knew it was coming. I've been toying with that idea, but also it could end up being, you know, the third one. All of a sudden makes a trend and so you know it obviously could break either way and i'm very interested to see how the market digests because what the market has managed to digest pretty well is yields going up you know to two three month highs depending on what you're looking at the two or the ten year treasury that's been okay we've obviously repriced the fed curve pretty aggressively doesn't look like we're getting five plus cuts we maybe only get three if we get that. Who knows when they're going to start? And the stock market has

been OK with it because of the reasons, because of how the economies behave. So, you know, I think we should be able to generally look through a quirky hot number. But you're going to have plenty of people who are anticipating this idea that the disinflationary trend has been interrupted in a bigger way. And then you're going to have people say, well, maybe we do have to slow the economy more to get there. So I don't know is the short answer to that. But the bond market seems to at least been registering a little apprehension about this. If you look at the inflation break evens based on market action, they've been trending higher. They got from like 2 percent on the five-year anticipated inflation

to like 2.4%. Still benign, but it's changed. Yields have kind of made their move already and then sort of been kind of hanging out and holding steady to the degree that when we're talking about stocks, I haven't really been mentioning tick by tick of what the 10-year has been doing. It's just been hanging out. You haven't had to. They've been range bound is the big picture way of viewing it. The other part of it is credit spreads just keep getting tighter. So yields are not going up on corporate debt. They're going up on treasuries more. And that's just keeping the corporate financial conditions very easy. And it's, you know, even to the point where massive issuance of corporate debt in February, really near record.

And yet the market just didn't even have a hiccup about it. Well, the bell's going to ring in a moment. S&P and Dow are going to go out. It's not quite flat, but not that far from it either. As we look ahead to that PCE report in the morning, we'll digest it all. I'll run you through it tomorrow when I see you on Closing Bell. Now to OT with Morgan and John.