Closing Bell - Closing Bell: Bulls Back in Control 5/9/24

Episode Date: May 9, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business. 

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the best playbook for your money right now, and we will get it exclusively today. In just a bit, from PIMCO's Erin Brown, she's going to reveal her latest asset allocation strategy first. She's going to do it right here. In the meantime, your scorecard with 60 minutes to go and regulation looks pretty good. There's 52.12 on the S&P. Why is that significant? Because if we can hold this, it would be the first close above 5,200 in a month. Exactly a month. And we're looking pretty good in this final stretch because it's a pretty broad rally. The major averages are all higher. Energy, utilities leading the way, but we're almost green

across the board. Well, not necessarily growth. It is a tough one today for Roblox. Those shares are plunging following the company's guidance today. There it is. Stocks down 21.5%. It does take us to our talk of the tape, the resilient rally, how long this can last. Let's welcome in Kristen Bitterly of Citi Global Wealth. She's here with me at Post9. It's good to see you. Good to see you too. Is this what the next leg of this rally looks like? one that is carried by a lot of things other than tech? Absolutely. I think that we've entering into this year, we thought that there would be a broadening out of earnings. And I actually think it's good to see

this is a healthy rally in terms of seeing it across the board without that type of concentration. But I think we have to point back to the fundamentals that are driving it as well. This earnings season has actually been better than expected. And there is a lot of delineation under the surface in terms of idiosyncratic events. And so companies that are not delivering are getting punished. And companies that are and are raising guidance are seeing the rewards in the market. So I think we could continue to grind higher. Are you surprised at the bounce back?

How quickly the market recovered from what felt like it could be something a bit worse than what we got? I think April was a really unique month in the sense that we were coming off the back of two quarters where we had double-digit gains in the S&P 500. And so some of that was more normalization. We had to give back. And when you look at the pullback that we saw, you can make an argument that that was a garden variety pullback, that we tend to see those types of pullbacks in any given year. I think right now the question still, Fed is front and center in terms of whether we're going to see rate cuts, the story about the trajectory of inflation and what that's going to do to corporate earnings.

But for those companies that have strong balance sheets, I think we still see some continued strength in earnings, which will drive the market. Is it fair to say we're not as obsessed over the Fed as we were two weeks ago? Right. Powell sort of came out. He calmed us down because he wasn't as hawkish as we feared he might be. So now we're not hanging on every Fed speaker's word. We're kind of taking him almost at his word. It's like, we know you want to cut. OK, we can accept the fact that it's not today and it's not tomorrow, but we know you're going to. And if the economy is good enough and the earnings remain as good as you suggest they might, then we're OK. Yeah. So I think we should always take Chair Powell at his word. I actually think he's a very clear communicator and is very direct in terms of what they're watching and what they're

watching is the data. So I think what we have to see in order for the Fed to be in a position to cut is clearly continued disinflationary forces. We don't have that yet. So we have a pause in terms of some of their progress. We need to continue to see that. We're starting to see a softening in terms of some of the employment data, which is something we're going to be watching

very closely as well. I will caution, though, that when you look at the market reaction function, I mean, we started this year with like six rate, six to seven rate cuts priced in. Then we came back to next to none. Now we're at two. So we started this year thinking we would have three rate cuts and that they wouldn't start until the summer months because of we needed to see that disinflation work its way into the data. And we're still sitting there. we think that's going to be the case. Well, you guys are on the, I think it's fair to say, outlier island in some respects and that you still think there's going to be three. We still think there's going to be three, but no, we haven't changed that the

entirety of this year. So while we saw these wild swings, we didn't go up to six. We didn't go down to zero. And I think the reason is, is like we have to, when we go into the summer months, there are certain seasonal factors in terms of the data that we could see in employment. We obviously got the jobless claims this morning, which was something I wouldn't read too much into it. But you start to add up some of these data points and you're seeing a slowing in the employment backdrop. And that coupled with some disinflationary pressure could

actually be something that could put them in a position to cut this summer. Is this what we're looking at on the screen right now? The Treasury curve? Is that the most important thing that we will be keeping our eyes on? The fact that, you know, we were pushing 5% on the two year and we're like 470 ish on the 10. And obviously, we've settled and we've come down. And that has enabled stocks to go up. I think there's fundamentals that are driving it, rates clearly being one of them. But I think the most important thing in terms of stocks going up is earnings right now. So when we look at earnings and the ability to deliver, rates matter, of course. And rates certainly matter for companies that are highly levered, that where there's a dependency upon refinancing your debt. So those are things that it's really

a tale of two markets in terms of the companies that have strong free cash flow generation, that have strong balance sheets, that took advantage of historically low rates to get their balance sheet in order. And so those companies are almost immune to some of these pressures. So I think earnings matter and rates certainly matter for certain parts of the market like small caps. I still feel like the rub on that is as it relates to earnings specifically, almost all of the earnings growth is coming from that very select group of stocks for the most part, right? Mega cap tech. But yet you're a believer in the broadening out. Does that mean that you think their earnings growth pie is going

to be more inclusive to some of those other companies? I think so. And when we say that it's broadening out, you almost have to go back to the fact that last year you had seven out of 11 sectors in certain quarters that were in profits recession. So when I'm talking about the broadening out, it is no longer kind of one sector driving that. Maybe you have outsized gains in one sector versus another, but we are starting to see that broadening out across the board. And we're starting to see flows coming into areas that were really unloved last year. And so if we were going to pick a position, for example, within the S&P 500, instead of playing the market capitalization weighted, where really you're trying to look at stretch valuation, some

of those mega cap companies, just doing an equal weighted expression of that is a clean way to kind of go into the second half of this year. Look at the year to date gains to your point about the broadening beyond tech. And I think people would know about this at this point, but financials year to date as a sector up 10 percent, tech's up 11. But industrials up 12, energy up 12 and a half, comm services, which plays certainly into the mega cap tech story, is up 19. You know, industrials up 10, utilities up 12. So it is pretty broad. And lately it's been, you know, staples and utilities having another good day. So we believe we should believe in that. I think so. If we look at utilities, that's a great example of people

really trying to broaden it out in terms of what are going to be the beneficiaries of AI, right? So not the pure plays, but almost looking at the energy consumption and really trying to find ways of other expression in terms of supply demand. I think when it comes to, let's talk about the health of the consumer and some of those earnings that we're anticipating next week in terms of the big retailers, I think if we're going to pick another theme within earnings season that was very important is looking into the health of the consumer and some of those areas that were slight misses, especially when it comes to the lower income consumer and middle income consumer. And so I think going into the next couple of weeks,

that's certainly something that we're going to watch. I mean, online retail was a big blow up over the last few days. So, you know, there are there's a big divergence between the winners and the losers within the retail. Maybe we get more clarity on that next week. Let's bring in Chris Heisey now of Maryland Bank of America, Private Bank and Joe Terranova of Virtus Investment Partners. Joe, a CNBC contributor. Welcome to you both. So, Chris Heisey, I'm reading your notes. You seem pretty bullish to me.

Yeah, Scott, we're, you know, we try to parse through all the data. We've got the best consumer data out there in terms of our penetration to the consumer. And we still see very good signs with the consumers. Is it slowing down? Absolutely. Is it worrisome? No. Most of it in the job market is driving that right now for certain income cohorts. The wealthy have created a lot of wealth since 2020, the shortest span ever, the largest amount of wealth created ever in that shortest span. But what's important in all of this context is are we in the early stages of a long-term bull market or not? It feels comfortable saying it on a day like this, but we are in our opinion. And it's because the wall of worry is still high. Profits are growing above their long run rate.

Sentiment, as I mentioned before, is still like what is coming around the pike that I need to be worried about. And finally, you're starting to see this basing out of small caps. And Kristen just talked about it before, and Joe's been talking about this for a while. You've got much more industry group participation across the board. It's not just the Mag 7 or the Fantastic Four. In fact, there's well over 150 companies in the S&P 500 that are driving the performance. Joe, maybe the most controversial take that Chris has is this idea that we are in the, what he says, early portion of a decade-long bull market. I say that

because I think the prevailing view among most is we're late cycle. He would have you believe otherwise. What say you? He would. To look out over the next decade and to gain a clear understanding of what direction we're going to go in is very difficult for me. I'm sorry. I'm just being candid. I can't go out that far. I think where we are now in 2024 through 2025, we have a bull market in place. I think when you hit 2026, you have a little bit of a hiccup surrounding the midterm election and some of the expiring tax cuts. But to go, over the next decade, I just can't. That's fine. I can't look at it that far. That's fine. But, you know, when people say we're late cycle, that doesn't necessarily imply that we're going to be okay through 2025. That means that this bull market is, you know, going to be sucking wind fairly soon. So here's why, and that's an excellent point, and here's why I disagree with that, because I think you have to look at how far we've come.

Yeah, there's a great song by Matchbox 20, by the way, how far we've come. But I just want to go back and remind everyone where we were when you were sitting here with me on a Thursday in early April. And you remember the day the Dow went down 500 points at the end of the day. The S&P went down from 52.50 to 51.50. Neil Kashkari warned all of us about his concerns about inflation. Oil prices hit $88 that day. And there were all these overwhelming concerns. We're 1% away from a new all-time high right now. We have washed away the entirety of that decline. This week, we have navigated through significant 10- and 30-year debt auctions. That was the big bugaboo for the market. Scott, the 10-year Treasury has declined 30 basis points since April 25th. And

yes, the mega caps have supported earnings growth for the S&P and for the Nasdaq itself. So I think very quietly this market, the resiliency of it is absolutely remarkable. And I think it's reminding all of us you will get punished at your own risk if you bet against it. Do you agree with this notion that we're more early stages of a bull market rather than late stage? I think we're certainly not in a late stage. I think when you look at the leadership and what we just talked about, about this rally having the potential to broaden out, that we're seeing earnings broaden out, that wouldn't happen in a late stage of a bull market. You'd actually see the opposite in terms of the leadership narrowing. And I think you do have to take a step back.

And I've said this a number of different times, but what do we know to be true? We know that there's significant amount of cash on the sidelines, just $6 trillion plus in money market funds alone, even more than that when you look at deposits. And so you have a lot of cash on the sidelines. We saw that recently in terms of buying the dip action. And then you have earnings growth. So we went from a profits recession to now where we anticipate we anticipate about eight percent for the totality of this year. Fed funds most likely has peaked and inflation, while it's not exactly a linear trajectory down, it can be a little volatile. That's actually a pretty conducive setup for risk assets. I think your late cycle

when behavior, speculative behavior, gets so complacent, and the areas of the market that right now are rightfully correcting, the emerging growth stocks, they are correcting. Generally, what you see is those stocks go parabolic at the end of the cycle. What we're seeing right now is indicative of a healthy marketplace, a marketplace that wants to pay the premium for the profitability and the margin expansion, a market that is dismissing the premise that those emerging growth stocks that don't have that degree of profitability can extend the significant

appreciation that they've witnessed in the last several months. Chris, I mean, it's, you know, one argument is kind of hard to think we're late cycle if we know we're at the we're not even at the start of the cycle of rate cuts. Right. If you if you get rate cuts when the economy is doing OK, you get them for the right reason, because you know that the Fed wants to cut. They feel confident that they can cut because inflation is coming down. You get the earning story that Kristen is talking about. I guess those are good reasons to stay bullish. Certainly in the in the in the shorter term. So let me let me put a few things in the context. What's that mean? What's that mean in the shorter term? Well, we've got OK, the next one to two years, because you've got a business cycle, you've got an economic cycle, and you've got market cycles that pierce through both of those.

We're going to go through, as Joe said, we're going to go through late, early, mid, late, early, mid cycles in the market to assess the incoming data. What I meant about the long-run bull market is it's driven by more demographic factors. It's driven by the sheer wealth, the size of the millennials, the Gen Z. They will have no choice but to invest. So you have higher demand for investing. You have lower supply for equity overall, given what's going on. At the same time, you have this incredible commercialization of, yes, initially overhyped generative AI, but eventually it's going to hit at the cost inefficiencies out there and perhaps maybe even the cost inefficiencies

at the national debt level. So for me, I could see very clear, transparent themes over the long run. Now, in the here and now, what do you do? You use the yields to your advantage. We haven't seen yields like this. And cash on cash is an extraordinary, powerful movement to take that cash that you earn on your cash or fixed income and reinvest back into equity hedges, even if inflation doesn't come all the way down to 2%. So I think this is a time, turn the page back to 1990s. We had an incredible decade. Yes, there were early, mid, late cycle movements. But through the decade, we had a pretty good run. Kristen, what about the small caps that Chris was talking about? Year to date, it's such a dramatic underperformer. Is the Russell for the obvious reasons of higher rates loaded with regional banks? All the things we've discussed for, you know, forever at this point. Is now the moment, finally?

I actually think, like, within small and mid-cap, if you look at the profitable growth pockets of that market, that's a much more attractive place to be in terms of playing this catch-up and playing a broadening out versus going into something like the Russell 2000 that, to your point, you're going to be exposed to some leverage, you're going to be exposed to financials, you're going to be exposed to things that maybe if we do have rates higher for longer would be highly exposed. So I would say mid cap, small cap growth. And if you look at with the profitability filters,

those are the ones that can actually play from some of these long term unstoppable trends that have been dominating the market but haven't really caught a bit? I don't know if I'm ready to go towards small caps just yet. I need to see the profitability be witnessed. 22% for earnings growth to the NASDAQ. Why move away from that? Why move away from the earnings growth of 5.5% that you're getting for the S&P? So if you want to move away from the MAG-7, if you want to move away from the engine of this year's appreciation, which to me is the semiconductor industry, I could still stay high up in the equity size class with large caps. I could look at Chipotle. I could look at Costco. I could look at Intuitive Surgical or Merck. I could look at Goldman Sachs, which is making a new all-time high as we speak today. I've got other

areas, other sectors in the large cap universe where I could find opportunity. I don't need to go to small caps just yet. Chris, I don't think it's going to surprise anybody if we have a day like today where we say, wow, look at this. We're going to close probably above 5200 on the S&P 500 for the first time in a month. And it's not being taken there by mega cap. It wouldn't surprise me one bit if tomorrow there was a lot of buying in mega cap. And I only say that because that's the rhythm of how the market has been. Just when you've been there to write off these stocks, the buyers come in at any any viable dip. Yeah, this is clearly still not a walk away from the momentum type of market yet. It's an ease away from that momentum. We can't be in the one corner

all the time when we're still growing above trend. And I like the way Joe was putting it. It depends on what your mandate is. If your mandate is a particular mandate, there's enormous opportunities outside of the so-called MAG-7 or, again, the Fantastic Four. If your mandate is a fully diversified portfolio where you actually have a strategic benchmark that has small and mid-cap in it, you're going to need to be patient with that. They're just now basing out, and this rotation is going to take time. We'll be talking about this rotation for the next 18 months, but every step of the way, it continues to gather a little bit more movement. I'll give you one interesting insight from this morning.

Do it quick, if you could, please. I've got to get you some news. Year to date, 186 companies are outperforming the S&P 500. Last 12 months, it was 160. 90% of the industry groups are now participating. That's a powerful statement. Yeah, yeah, for sure. And thank you for that. Chris, thank you. Joe, thank you as well. Crystal, we'll see you soon. I do have news to get to, some breaking news out of the DOJ. Eamon Javers with that for us. Eamon. Scott, that's right. The Department of Justice's antitrust division is now announcing a new task force on what they're calling health care monopolies and collusion.

This sounds like it is going to be a very wide ranging effort in the health care industry by the antitrust division. Just take a listen to what they're talking about in this press release in terms of what this new task force is going to do. They say it's going to consider widespread competition concerns shared by patients, healthcare professionals, business and entrepreneurs, including payer-provider consolidation, serial acquisitions, labor and quality of care, medical billing, healthcare IT services, access to and misuse of healthcare data, and more. So a very wide-ranging new Department of Justice task force here on what they're calling healthcare monopolies and collusion from the Department of Justice. I interviewed Jonathan Cantor, the head of the antitrust division on CNBC a couple of weeks ago, Scott, and he was signaling then that health care was a big area of interest for them. So I think this should be on the radars of all the people in that industry, certainly this afternoon, Scott. Yeah, no doubt. Eamon, thank you for that very

important news. Eamon Jarvis in Washington. Let's send it over to Christina Partsinovelis now for the biggest names moving into the close. Christina. Well, let's start with T-Mobile reportedly closing in on a deal to buy parts of regional carrier U.S. Cellular for more than $2 billion, while Verizon is also considering buying certain parts of U.S. Cellular. But there's no transaction details for that company just yet.

This all according to The Wall Street Journal. The reason that they're having this split sales structure is to convince the antitrust department that the deal won't hurt competition. You can see those shares up barely 1%, but Telephone Data Systems owns the majority of U.S. Cellular, and that's why that stock you could see on your screen, both of these names almost 30% higher. They were even halted for volatility. Another disappointing quarter for SolarEdge as demand remains weak because of high interest rates and customer inventory levels that also are high. The company cut shipments to get through excess inventory, and that contributed to weak revenues of $204 million in the quarter, much lower than the $1 billion in revenue the

company pulled in a year ago. Weak margins and a weak Q2 revenue guidance also added to the company's 7.5% drop. Scott? All right, back to you in just a bit. Christina, thanks so much. We're just getting started. Up next, PIMCO's playbook, the firm just dropping its brand new market outlook, and we have the exclusive first look with portfolio manager Erin Brown. We'll find out how she's navigating the backdrop for stocks, where the opportunities are. We'll do it next. Stocks are green across the board. Dow on track for its longest winning streak of the year now. PIMCO's Erin Brown is out today with her new asset allocation outlook.

Joins me now for an exclusive interview. Welcome back. It's nice to see you. Nice to be here. One thing that jumps out to me, I guess, is you told this what you told our producers. You're modestly overweight equities. That sounds like a, dare I say, modest drop down from where you were before. Am I right or wrong? No. So we're still I would say our positioning really hasn't changed within equities in terms of the aggregate length. I would say on a scale of of negative 10 to positive 10, we're a five out of 10. So that's still pretty bullish equities relative to where we've been. That,

I think, remains consistent. But we are broadening the lens in terms of our exposures outside of just AI tech into a much broader diversified set of assets that we now like within equities. OK, so you're a believer in a big one in the broadening story. So if you're moving to diversify away from tech, where are you diversifying into? Yeah, so a couple of things. First, you're really starting to see a change and a turn in the global PMIs. So you're starting to see manufacturing growth

bounce back up. Not only are you seeing that, but you're starting to see export orders from our largest trading partners also start to pivot more positively. And even incrementally, some of the data out of China is coming out a little bit better. export orders from our largest trading partners also start to pivot more positively and even incrementally some of the data out of China is coming out a little bit better. So I think you now can start to look at much more aggressively at cyclicals that have been in an earnings recession

over the last six quarters and starting to look at manufacturing cyclicals industrials and even some emerging markets that are going to take advantage of global growth bottoming out and starting to rebound you know into more positive territory now that's interesting to hear it it sounds like your strategy may be more bullish than your to the degree to i mean if you if you want to be modestly overweight equities, and let's say you're five out of 10, you just painted a pretty bullish picture to me. What's missing? Yeah, I think, so I think that you still want to stay underweight, the small caps. I think that that sector is going to continue to be hampered by very high rates, which are going to come down slower than probably even the market's expecting. We're expecting, you know, probably one hike, one cut rather at this this year and fairly modest shallow

hiking cycle, a cutting cycle rather next year as well. So I think our estimate is that at least within the U.S. that small caps are going to continue to be hampered by, you know, very restrictive rates. I also think that, you know, as you start to see this broadening out of leadership within the market, certain sectors that are still leveraged to high rates, I think are going to continue to underperform. being long AI and AI winners on one hand, and then on the other hand, getting longer cyclical risk in the portfolios and starting to incrementally add back some emerging market risk as well. Oh, interesting. What do you make of what we've witnessed this week with some of those more growthy names getting hit pretty hard on any slight either miss or just perception that maybe things aren't going to be as great as they were. Yeah, so that's been, I think, one of the big themes of earnings, which is that misses are getting hit hard, much harder than what we've seen in the past. But you're also seeing the winners get rewarded as well. So you saw some of the data center names and some of the power

IPP names that had really high earnings expectations built in. They were able to beat, and their stock soared on the back of that. So you are seeing this bifurcation emerge. I think that I would be looking at my shopping list right now, some of the names that got hit hard on the growth sector that you still believe fundamentally in the secular themes, and looking to buy them at lower levels. I'm not giving up on the growth sectors of the economy. I think that's still going to be an area that over the both the medium term as well as the longer term will continue to shine because that's ultimately where we're seeing growth being driven in this economy. What's this move in utilities about? I've heard all of the, you know, hypotheses of why this sector

is going up and now we're even assigning AI power play to it. What's your best guess? And how long does it last? So we are in very, very early innings of this. The amount of electricity capacity that right now the AI industry is using is about 2 percent. It's expected to grow by 2030 to about 8%. And then over the next 10 years beyond that, it's going to be closer to 20%. So there's going to be a significant amount of electrification and power that's needed in order to be able to fuel the development of AI. And that's not just in running the servers and the computers and the data centers, but it's also cooling. So you're going to have multiple needs for power in order for AI to really become an impactful sort of secular theme.

As a result of that, we really like those utility companies that are independent power producers, that are not heavily regulated, that have more ability to be able to scale more rapidly and be able to expand their grid more rapidly. And that's in the independent power producers. So I would be underweight the broad utility index, but overweight those IPPs, particularly ones that are being able to sign long-term contracts with data centers and are able to take advantage of this AI theme and have those long-term contracts in place in order to do so. Wow. So you're a big believer in that story that some are now talking about on an almost everyday basis. And by the way, utilities as a sector, more broadly, are up near

8% over the last month, far outperforming everything else. but when you look at these ipps and these ai power names they're up double that so you are seeing a pretty big divergence yes the theme is pulling up the entire sector and utilities also have been an underperformer over the last year but if you really want to juice that trade i would be looking at the ipps specifically aaron i appreciate it as always thanks for sharing this with us first and exclusively thank you aaron brown himco coming up I would be looking at the IPPs specifically. Erin, I appreciate it as always. Thanks for sharing this with us first and exclusively. Thank you, Erin Brown, IMCO. Coming up, greater than the sum of the charts.

BTIG's top technician, Jonathan Krinsky, is back. He'll tell us how he's charting the recent rebound and the rally's road ahead. The S&P now trying for its first close above 5,200 in exactly a month. On track to do that. We'll track it over the final 30 minutes. We're back after this. All right, welcome back. The S&P 500 moving higher, putting the index just 1% now from record highs set last March, or late March, excuse me.

Our next guest says a retest of previous highs is in fact coming and sees one overlooked group that could outperform BTIG's chief market technician. Jonathan Krinsky joins me now. It's good to see you. So we're going for fifty two hundred. A close above that for the first time in a month today. And we may very well get that. What does that mean? Well, if you go back to April 20th or so, we got some tactical oversold conditions. We thought a bounce was likely, got us back up to $5,200. And then we said earlier this week this is kind of bear's last stand to kind of turn things down. We're looking at the analog back to the summer, last summer, when you had about a 6% drawdown in July.

You rebounded back into September, and then you failed and moved lower. And so we should, you know, if that analog was going to play out, we should have really turned lower yesterday. Looks like Bulls kind of, you know, regained leadership here. And so, yeah, I mean, I don't think it's a stretch to say new highs are coming only about 60 points or so above that. But I think more so it's, you know, you have the VIX back under 13, trends still positive. So that's probably the path of least resistance is still higher here. I mean, this market's confounded you at times, hadn't it? And other technicians, too, whereas things look like they're about to roll harder

and they rebound faster than many people expected. Is that a fair assessment? Yeah, and I think it speaks to the internal rotation that's going on. I mean, you know, I think if you think, I think most people would say that tech technology has been leadership and certainly has over the last six, you know, 12, 18 months. But, you know, let's take the last three months, for instance, the S&P 500 technology sector is basically flat while something like utilities are up 18 percent. So there's just continued leadership. And when one sector takes a

pause, another steps up. And that's really kind of what's been the story of late. What caught my ear of what you said a few moments ago is this might be the bears last stand. Can you expand on that? Because, you know, the bears have felt emboldened at times when it looked like they may be regaining something and then they've been steamrolled again. Yeah, I mean, like we said, we had that 6% drawdown in April, rallied back to a level where, again, if we were not going to make new highs, it was likely to turn lower this week, and it appears that didn't materialize. So, you know, it doesn't mean we can't have pullbacks or shallow dips, but I think that, you know, if we're looking for that playbook with like a 10 to 12 percent drawdown

like we saw this last summer, we're probably going to have to wait a bit longer for that and probably from higher levels at this point. You look at some charts, you say the gold miners look especially strong. Tell us more. Yeah, I mean, gold miners continue to act well. They're actually, again, outperforming the market year to date. Probably not a lot of people realize that. But they had a massive move over the last two months, basically consolidated for the last couple weeks. And now they're kind of reasserting themselves and breaking out higher today. Silver is outperforming gold.

So those are things you want to see, real yields coming down. Those are all constructive aspects to the gold trade. But, yeah, it's a good-looking trend, and we'd all constructive aspects to the gold trade. But yeah, it's a good looking trend and we'd expect higher prices for the miners here. I don't know if you heard my conversation prior to this one with you, with Aaron Brown of PIMCO, who's more bullish on China by virtue of what Chinese equities have done. Jeff DeGraff has been looking for a breakout there. And I think you are as well. Yeah, so at the end of last year, we said China is kind of the ultimate contrarian trade, just absolute worst of the worst trend.

Sentiment was bottom of the barrel. And so that was really a time you really had to be kind of uber contrarian and buy a falling knife. We now have, I would argue, sentiment is still just as bad as it was then. If you look at the latest Barron's big money poll, only 4% of respondents said China was the best, most attractive country to invest in this year. And yet the trend is actually starting to turn. So, you know, the Hang Seng is actually in line, almost beating the S&P year to date. So we now have positive trend, positive momentum for China. And yet sentiment is still extremely bearish. So, you know, we think from a risk reward perspective, there's much more.

It's much more compelling to us than than U.S. equities broadly here. What's the message, if any, today that we may get above that 5200 level and close there without tech being the leading contributor to it? You know, again, when volatility and volume is so low, we tend not to put as much weight on price levels because, you know, it doesn't take much to move above or below it. But I think it's psychological. And again, you know, if you look at the retracement off of the correction we just had, getting about 5,200 has some significance. So again, it's not a big call to say we're going to get to 5260, which is the all time highs that could happen in a day or two. But I think it's just emblematic that, you know, volatility is continuing to compact.

And about 5200 is a nice psychological level for the bulls to hang. You didn't address my question specifically about the fact that we may very well get there today, but it's not technology that's dominating the conversation. In fact, it's everything but. Yeah, no, that's valid as well. And like we said, technology is basically flat over the last three months. And so it's really been, you know, financials and other parts of the market materials still act pretty well. So, yeah, that's an encouraging aspect as well. It's a good point. Jonathan, we'll talk to you soon. Thank you. BTIG's Jonathan Korinsky. Up next, tracking the biggest movers into the close. Back to Christina with that. What do you see? Well, something isn't translating for Duolingo shares, even though the company's earnings and

guidance surpassed expectations. I'll tell you what that something is after this short break. We're 15 from the closing bell. Back to Christina now for the stock she is watching. Tell us. App loving. That's what I'm watching because it's almost, what, 15% higher, hitting a new 52-week high after the app monetization firm posted strong earnings and a strong sales outlook signaling maybe, just a maybe,

a rebound in app advertising markets. That's how you can see shares up 14%. First quarter earnings for Duolingo, though, were double estimates with management raising its revenue outlook for the year. And yet the stock is getting crushed down 18% because user growth is starting to slow down after rapidly adding users over just the last two years. So starting to see that slowdown down 18%. Scott? All right. Christina Partsenevelos, thank you very much. Still ahead, the Roblox record shares cratering after the company's first quarter earnings report. We're going to run through the numbers that have investors heading for the exits today. We're back on the bell just after this. A CNBC interview, an exclusive one you cannot afford to miss.

Ahead of next week's critical inflation data, Minneapolis Fed President Neil Kashkari, Chicago Fed President Austin Goolsbee are both sitting down with our own Steve Leisman tomorrow. Power lunch at 2 o'clock Eastern time. Up next, results from Dropbox. After the bell in OT, stock down more than 30% in the past three months. But can today's report jumpstart that turnaround?

That story and more we take inside the Market Zone next. Now in the closing bell Market Zone, CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day, plus Steve Kovac on Roblox heading for its second worst day ever. Pippa Stevens looking ahead to Dropbox earnings out in overtime today. Mike, begin with you. Looks like we are going to close above 5,200 for the first time in a month. The significance of that to you is what?

Obviously, the resilience of the market got us here. I think we're higher at the close versus the midday or midpoint of the day, 11 out of 14 days. So the old our cash in line that it's a procrastinator's rally. People expected and hoped for more of a dip than we got. 5,200 we first got there. Day of the March Fed meeting, March 20th. Since then, we've actually gone down half a P.E. point in the S&P 500 from 21 to 20.5 at the same index level because forward earnings have come through. That's how it's supposed to work.

To me, banks and breadth are still some of the biggest assets of this rebound rally. Banks up 7% in a week. Breadth, advanced decline is some of the strongest multi-day readings you're going to get. All of that being said, how much of this favorable rotation can get you farther? Because, you know, industrials and materials, they're more expensive on a forward PE than they've been almost any time in the last 15 years, except for the pandemic when earnings were depressed. So, you know, you have to wonder whether you have a lot of blue sky above. But for now, market is really not doing anything. No macro news is good news when the bond market is calm.

Able to get here, too, without tech participating. I think it's the only down sector in the entire S&P today. Yes. So it is about, again, you know, the fact that people haven't just pulled back entirely and reduced equity exposure. They want to rotate and find something. You know, I know you've been talking about the utility move. It was all about what hasn't participated yet.

Okay. talking about the utility move, it was all about what hasn't participated yet. OK, utilities versus Equal Weight S&P were lagging by 40 percentage points over the prior couple of years, and they've regained 10 of it. I mean, so you're talking about just deep laggards. Let's see if they can participate. And then we get the storyline built around it. I think you're starting to hear that storyline a lot by a lot of smart people. Go down to go look at the independent power stocks in the late 90s, early 2000s. They ripped.

A lot of them went bankrupt. One of them was called Enron. Hey, it's Josh Brown said on Halftime today, that's going to end in tears. In his words, not mine. All right, Steve Kovach looking at the record. Actually, you know what? I have a news alert I want to read first. It's Boeing.

Those shares are taking a bit of a dip on a recent news that the SEC is probing statements the company made about its safety practices following that near tragic January incident where a panel blew off the plane. We have reached out to the SEC and to Boeing and we'll bring you any comments as we get them. Now to Steve Kovac looking at Roblox. Tell us what's I mean, the stock has been a mess today. Yeah, a mess. Not as much of a mess as it was earlier. It's down as much as 29 percent pre market, Scott. But look, this is really about the guidance and the guidance is missing expectations in a significant way for both Q2, the current quarter and the full year. I caught up with CEO Dave Bazzucchi about what's going on here. You know, in this report, they talked a lot about decreased engagement, being behind a lot of this, being behind this week guidance. And he told me it's more of a technical problem with the game than it is something about people not wanting to play or spend money in it.

The last year, they basically shipped a bunch of new features for Roblox that don't really perform well on Android phones, which is like the biggest part of the user base there. They say they fixed it now. He told me they fixed it just a few weeks ago. It's performing better. And so there's a little bit of optimism that they're being maybe a little too conservative in their guidance on the call. Bazzucchi also said they wanted to provide some cushion in that guidance just to see if the new trend they're seeing in user engagement actually pans out for the rest of the quarter. But for now, it's really taking a hit down 22%, Scott. All right. Good perspective, Steve Kovach. Thanks to you. Needs some perspective now from you, Pippa, on what to expect from Dropbox in overtime. Well, Scott, the stock is down more than 20% since its last quarterly update when Dropbox said it lost roughly 50,000 paying users

while also issuing light guidance. And so for the first quarter, Wall Street is expecting the cloud company to earn an adjusted 50 cents per share on about 629 million in revenue. Now, customer count and free cash flow guide will be top of mind for analysts. JP Morgan said the stock has sold off more than it expected and that the valuation is cheap relative to peers. But the firm still holds a neutral rating on Dropbox, saying they continue to see signs of deceleration in the underlying business with a tough setup for growth over the next few quarters. Now, earlier this month, Dropbox disclosed a cyber attack.

The company said it doesn't believe it will have a material impact on overall operations, but investors will be looking for more clarity on that. Scott. All right, Pippa. Appreciate that. See you in overtime when those results hit. Two minutes exactly, Mike, to go. Rates are a big story. Let's look at the yield curve because we've come down so much. The pressure has been taken off so much. And that has a direct correlation to this 5200 getting back here in the speed in which we have. Yes. So you're off like a quarter of a percent across the curve pretty much. So essentially, a quasi rate cut has been initiated in the Treasury. That's the only time you like to talk percents when we're

talking about yields. No, no. A quarter of a percentage point. Oh, OK. I should have made clear on that. But you're absolutely right. You don't do percentage moves in yields. And, you know, obviously, on some level, the inflation numbers next week kind of have veto power over the rally in the short term. So you have to be sensitive to that idea that, you know, yields were also calm at the end of March when, in fact, we got this little surprise and this little jolt. But really, that's all that matters. You look at the charts of the yields and they look like they've rolled pretty nicely. If we're going to defend those highs. And again, you know, we never have to unwind the entire jump in yields to keep stocks steady. It's just about them not blowing out in a disorderly way.

It's the volatility of the Treasury moves that seems to matter more for the near term equity action. Goolsbee and Kashkari tomorrow with Leisman. You know, any risk? I mean, you know, Goolsbee, you could say, is no doubt a dove. Kashkari's gotten a little bit more hawky over the last couple of years. Arguably, Friday's jobs report and even today's jobless claim showing some softening of the labor market may be a drain, a little bit of risk out of that commentary, because they're going to be able to say, look, we're going to be open to the data. We're data dependent. And so far, it's looking like it might be moving in the Fed's direction in the short term. So maybe not necessarily

a ton of shock value. There's the bell. Thank you, Mike. 5,200. We're above it for the first time in a month on the S&P. We're going to close there. See what tomorrow brings. Don't forget about those earnings coming in OT. There's Morgan.