Closing Bell - Closing Bell: Can Amazon Keep the Party Going? 4/27/23

Episode Date: April 27, 2023

Will Amazon’s earnings keep the momentum going for the mega-caps? Evercore’s Mark Mahaney gives his take ahead of those key numbers. Plus, stocks got a big pop in today’s session with the Dow jumping more than 500 points. Ed Yardeni of Yardeni Research breaks down the crucial, final moments of trade. And, T. Rowe Price’s Sebastien Page weighs the odds of a “market zombie apocalypse.”

Welcome to the Closing Bell. I'm Scott Wapner, live from Post 9 right here at the New York Stock Exchange. This make-or-break hour begins with a big market day and the countdown now to the final FANG earnings report of the week. Amazon dropping its numbers in just about an hour. So many questions swirling about the company's future, from its efforts to cut costs to how it can stem a slowdown in its critical cloud business. We'll talk you right up to that report with some key guests, including a shareholder and top analyst. In the meantime, here is your scorecard with 60 minutes to go in regulation. It's a winning scorecard today. It is a big day for stocks after that meta moment. NASDAQ leading, but a good day for the Dow, too. You can see we're at the highs of the day. Five hundred and fifty points. Honeywell's beat, giving the industrials a much needed lift

today. Interest rates are higher despite that lighter than expected read on GDP. And the market is brushing all of it off. There's your picture. S&P is good for almost two percent. That's better than 80 points. It brings us to our talk of the tape, whether Amazon's earnings can keep this momentum going for the market and, of course, the mega caps. Let's bring in our dear Jabosa, who's covering earnings tonight with our setup. Dee? Scott, it's a big report out, and we're going to get a little bit of the consumer with its core e-commerce business, and we're going to get a lot on the enterprise as well with AWS. That's its cloud business, which is still by far the number one player.

But you mentioned it, Scott. A lot is at stake here. We know that that business has been decelerating. The margins have becoming are becoming a little narrower. So they have a lot to prove here. But I really think as much attention is going to be paid to that core online store sales. It has actually dropped. It has missed expectations seven out of seven of the last quarters. So investors want to know that all of these investments, all of this extra capacity that Amazon added during the pandemic is going to pay off. So that's going to be really important. A bright spot potentially could be advertising because so far from the other mega caps, from

Meta, from Alphabet, hasn't been as bad as feared. And that's really the theme going into Amazon. The other mega caps haven't been as bad as feared. Can Amazon pull that off as well? Yeah. What a ramp to today, D, right into the number of five percent. A stock that's done really well. We'll be back to you, I'm sure. And we look forward to those earnings coming out and you breaking it all down. In the meantime, analyst Mark Mahaney is with us now as an outperform on the stock. One hundred fifty five bucks is the target. Mark, it's good to see you. What are your own expectations? And maybe they're higher now street wide because of this ramp up into the number. Well, the expectations are higher. I'm not sure they should be. I think we had some very specific to meta developments last night,

to Facebook last night that I don't think you can really extrapolate. I mean, you know, meta had nice revenue growth acceleration. Google didn't print that. And across cloud computing, the enterprise category, okay, didn't decelerate dramatically, but it decelerated for Azure. It decelerated for Google Cloud. And my fear would be, I'm a bull on Amazon, but my fear is that Amazon and AWS, because they've got greater exposure to SMBs, greater exposure to the startup community, that they could see sort of worse trends, at least near term than the other cloud vendors. So I want to be a little cautious on Amazon going into the print. I like it. And if you're a long if you're a long term investor,

I think this is a trough margin, you know, trough earnings year. But I think things will still get a little worse before they get better. Wow. Outperformed, but certainly not overly excited. AWS revenue growth expected around 15 percent mark, as you point out. That would be the slowest year over year pace since 2015. And that's when the company started breaking it out. The question is, how much lower are we going to go? I think that's actually the number one issue on the stock.

And there's two issues here. That's one. And then, well, we're going to get this recovery in the retail business because almost all the cost inputs in the retail business have dramatically improved from that last year, which was horrible in terms of all the cost shocks they had. And then I'm sorry, the third thing is, is this company going to be aggressive, more aggressive in terms of cutting costs? I don't think they will. Google wasn't. I don't think Amazon will be. And so then we're back to the issue number one, AWS. I think AWS growth is growing lower. I think it's going to be sub that 15%.

And the real debate on the stock is how low will it go in the June quarter? Are we doing high single-digit percentage growth? Because I'll probably give a little bit of color commentary. I think the market's braced for that, so I'm not sure it's a negative surprise. I'm just not sure why it's a positive surprise if Amazon, Prince, AWS, sort of people think about it being a high single-digit percentage grower. That growth rate will reaccelerate. But all of the trends, I think, unfortunately for AWS, are negative now.

And I don't think they turn until the second half of this year. Wow. No more cost-cutting. You really think the street is prepared for that? I mean, I've heard people criticize Alphabet for not being more aggressive in the way that Meta and some of the others have. You really think the street's prepared for no more? I'm not sure it is. That's why I want to be near-term cautious on the stock. You know, I think Meta, again, you know, I know we're trading up on Meta, but Meta's a sui generis case or, you know, so kind of a one-off here. This is a management team that

clearly got we're cutting costs and we need to bring down expenses. They got that memo. They've had it for the last six to nine months, and they've embraced it aggressively. I don't think Google has, and I don't think Amazon has. I think Amazon probably needs to do more. So, you know, if the market really wants, you know, much greater cost efficiency, I think Amazon, like Google, they plan to grow into it. They're very long-term focused companies. It's been a great, wonderful success story for them and a good recipe for them for a long time.

But if you're looking for near term cost cuts, those aren't the companies to give it to you. Well, how much pressure is on Jassy, do you think? I think most I think the long the people who are really in the stock for the long term, I think they're fully behind him. I think the board and the rest of the management team are fully behind him. He came in at a very unusual time for the company, an extremely challenging time. I'd argue it's the most challenging time that Amazon as a company has faced in, I don't know, 10 years or something like that. So I think he'll get, I think he's got a lot of opportunity. I don't think there's going to be any pushing for him to leave. And I think actually he'll execute really well out of this. I just think it's going to take longer than people would like, at least near

term. But look, again, if you're willing to look 12 to 18 months out, this is classic DHQ, dislocated high quality company. You want to be long Amazon for the 24, the rally. And I think that begins later on this year. I just don't think it begins off of this print tonight. All right. We'll see. Mark, I appreciate it very much. So that's Mark Mahaney joining us now. Let's bring in CNBC contributors. Alex Kantrowitz, a big technology. Malcolm Etheridge of CIC Wealth. Malcolm owns Amazon. All right. Malcolm, the analyst, one of the best known ones on the street, just set it up for you. What do you want to hear and what are you going to be disappointed if you don't? Yeah, Scott, I think Mark actually was looking at my notes a little bit as I was as I

was listening to him speak, because I told you he was good on. I didn't realize he was that good. I bought into Amazon following their Q3 earnings last year in October. And my expectation was all the bad news related to the overhiring and overbuilding of fulfillment centers and everything else. I figured all that bad news was completely out there. And so with the stock being down about 50 percent off its highs at that point, I said it really doesn't have any way to anywhere to go from up anywhere to go but up from here. And I think it even notched its new 52 week low. I know it's come in somewhere in the 80s at this point and And up until today's move to 110 or so, we'd actually been seeing them hover around that point. But my expectation was that Andy Jassy was going to need

something like 12 months for full quarters to be able to identify where the cuts needed to be made and then make them and then see what other moves needed to be made and which ones were accretive to the bottom line. And so I think we're still in that window. I don't think all of the cuts have been made just yet. And I also don't think that we're going to hear that cloud computing demand has come back in any meaningful way. It's still going to be soft here. So I don't see them issuing any meaningful guidance

that tells people that this stock should be on a run today. Wow, Alex, I mean, I got one of the top analysts who's got an outperform in 155 on the stock. Not all that excited about the near term. I've got the shareholder now, Not all that excited about the near term. I've got the shareholder now. Not all that excited about the near term. Mahaney saying it's the most challenging time in an awfully long time for this company. How do you see it?

I'm with Malcolm and Mahaney on this front. You have challenges for Amazon on two fronts. You have the consumer not spending as much as they were in the heyday of the pandemic. And that's going to hit on the retail side. And you have small and medium businesses that are really pulling back, even large businesses pulling back. Anywhere they can find cost to cut, they're finding those costs. And where do you look?

You look at something like cloud services, where you might have been putting budget there and not really thinking, okay, is this being optimized exactly the way we need it to? Now that's being pulled back. So I think like Mahaney said, like Malcolm said, 18 months is going to be bumpy for Amazon. They have to still get out of this infrastructure spending they did during the pandemic. On the other side, the Fed moderates a little bit. Maybe even rates go down. You have predictability in the economy. Some of this evens out. Great

times for Amazon in the meantime, rough. What about the pressure, if any, and I'm presuming there's got to be some, on Jassy? Now, whether he was left a shiny automobile that was ready to just keep humming, or he was left what looked on the surface to be a beautiful automobile but had a nail in the tire, and it was only a matter of time before the air rushed out and he's going to have a flat that he was going to have to deal with. What's the issue? I think it's going to be fashionable to be anti-Jassie for the next bit, for the year. And you do see Bezos hanging out, having fun. There's going to be clamoring. Bring Jeff Bezos back in the fold. I don't think that's happening. Josh Brown was talking about that today on Halftime, that it's just a matter of time

before Bezos gets off the beach, so to speak, and comes back. I don't see that. And the reason why you bring a Jassie in is because he's the guy that's going to be in there for the future. Jeff Bezos is smart. He knew that when Jassy came in, he was going to be taking over a company that needed the most help in retail in the short term. But long term, the future was cloud. We're going through the tumultuous era right now

where they're trying to even it out in retail. But they just had an announcement on AI, large language models. That's why you have a guy like Jassy running a company like this. Get through the tough part in retail. Set it up for the future in cloud. It's the leader there. That's the future. It needs to fend off Microsoft.

I don't think you're going to see anybody in a better position to do the job than Jassy right now. And I don't see Bezos coming back. Well, because, Malcolm, I mean, when you talk about the competitors that, let's just say, AWS has to deal with, yes, they have the most market share in terms of cloud, but Microsoft is the one that seems to be stealing a lot of the mega cap thunder these days. There's AI or whatever else. They continue to knock the cover off the ball and leave a lot of people, you know, in the dust. They also have the largest accelerate.

They have the highest accelerated growth in the cloud space, meaning they're taking away the most market share from AWS among all of the other competitors, Google Cloud and everybody else. And so I agree with you that there are challenges out there to that moat. I think they have like a 34, 35 percent market share. So it's not everything. It's not 93% of search, for example. And so I do think that it's important that Amazon figure out ways to divest itself from its neediness from AWS's revenue. And I think that's the thing that I'm most interested in hearing from Andy Jassy, hopefully tonight. What is the timeline for when I can expect those cuts to be accretive to the bottom line? When can I actually expect as a shareholder that that is going to be what turns the ship,

so to speak? And can I just say really quickly to the point you guys were making about Jeff Bezos? I think that the most important and impactful thing Jeff Bezos could do for Andy Jassy and also for Amazon shareholders, the like, is drop the executive title from his chairman, executive part from the executive chairman title. And that will signal to everyone who is speculating that Jeff Bezos is somehow going to come back here and pull a Schultz that he has no interest in ever coming back. He's moved on to other things. Yeah, I don't know. Schultz, Iger, some say Bezos might be following in their footsteps. And forgive me, I didn't mean to step on your toes before you finished there.

If only JASIC could drop AI 57 times or whatever it was like Zuckerberg and Meta did on their call. I mean, is that part of the issue here, too? They're just sort of the, you know, the hype machine is elsewhere. Yeah. By the way, I think so so their biggest competitor in cloud is Microsoft. And you can't argue that Microsoft hasn't seen any benefit in cloud with all this AI talk. In fact, the reason that they're on the cutting edge, that Microsoft is on the cutting edge, makes people think, hey, should I be thinking about Azure the same way that consumers are thinking? You know, I've been doing this Google thing. What's the deal with Bing? And so maybe Jassy should say AI 57 times on the call. He might. I mean, that might be the best strategy. Zuckerberg knows how to talk to the market.

Maybe Jassy will figure that out as well. Yeah. So. So, Malcolm, overall, right. We say this is the last fang of the week to report. How are we thinking now about this group? Did we confirm all of the reasons why money has been flowing into that space? Or can we make that statement now? I don't think so. I've been telling you for months that I thought that if there was a meaningful rally and there was a bull market bubbling up under our feet, that tech was going to have to participate in a meaningful way to lead it, to lead that bull market. And I think that could be what we're seeing. A lot of people probably share that thesis

that they want to get positioned properly so that once the bull does start to rage, they don't miss out on things like Microsoft and Amazon and whatever else. But I also think that it's a little bit too soon because all of the data that we've been getting from earnings from big tech hasn't been all that impressive. It's basically earnings expectations that were right on the floor or just above it. And they marginally beat earnings expectations that had been guided as low as they could go. And so there's nothing impressive here in this moment that would tell me that we should be piling into tech and expecting the train to leave the station. I think that over the next couple of weeks, we're going to see some

of the air let out of this balloon. Wow, man, he's hard to please. I mean, Microsoft and Meta would tell you otherwise, would they not? They would. And look, I think the cool thing about big tech right now is there's stuff to believe in. You think about the AI narrative, you think about them making these moves or going to efficiency after spending a lot of time. They had work to do to please the market and they've started to do it. Now, the question is, can this momentum continue? That's that's the big question. A lot of it's going to actually depend on where the Fed goes in the next few months. Yeah, no doubt. Well, next week, by the way, before I let you go, I don't want to forget that Snap, I'm looking for

the paper, Snap reports, too. And maybe they have the benefit of not being the first mover, right? They have been the first ones before Meta and before Alphabet to report, generally speaking, you know, at least of late, which wasn't the greatest position to be in because they're the ones who got crushed the last couple of times talking about the softness in their business, what they were seeing from an advertising standpoint, too. What do you see here? Well, look, I mean, if they're looking to be in better position because they're after Meta now, whoops. Yeah, now I know. I don't even know why I brought that up.

Because now it's going to work against them. They have high expectations. They're not the same business as Meta. They're an also-ran. Right now, advertisers need an advertising package that they can bring to their executive teams and show ROI. Meta can do that. Can Snap do that? I don't think so. It hasn't proven it in the previous quarters.

And now they're going to come up to this mountain and try to say, well, actually, there's some faith that we're going to get budgets after what Meta just turned in. Good luck. Yeah. Well, they got a nice move into the number, if nothing else. We'll see. I appreciate it, as always. That's Alex Kantrowitz joining us there.

Malcolm Etheridge, too. Both CNBC contributors. Let's get to our Twitter question of the day. We're asking, will Amazon surprise or disappoint in its earnings report this evening? You can head to at CNBC closing bell on Twitter. Please vote. We'll share the results a little later on in the hour. We do have a big day with about 45 minutes left to go. Let's get a check on some top stocks to watch as we head into the close. Dow still up by better than 535 points, Christina. Yep. But I'm going to focus on

some down stocks right now. Shares of Mobileye plummeting right now, roughly 20, well, 19% at the moment after the company lowered its revenue outlook for the year. The self-driving technology company pointed to negative trends for three reasons. In the China EV market, a reduction in government subsidies, and then Tesla's recent drop in pricing. And keep in mind, though, this may be more specific to Mobileye versus the entire auto chip market. Scott, this is something we talk about quite often, but it could weigh on Intel's earnings, since Intel still owns over 90% of Mobileye. Sticking with semiconductors, Wolfspeed is also lower today. Let's bring that stock up down 22%. It's heading for its worst day in almost 10 years.

They specialize in silicon carbide chips that are used in electric vehicles, and their full-year forecast fell short of expectations. The stock was also downgraded by Oppenheimer. So adding to the sell-off, big sell-off we're seeing today. Scott. Yeah, all right. We'll see you in a bit. Christina, thank you.

That's Christina Partsenevelos. We're just getting started here on Closing Bell, and we are in rally mode as we head towards the close. You take a look at what we're doing here. We're just off the here on Closing Bell. And we are in rally mode as we head towards the close. You take a look at what we're doing here. We're just off the highs of the day. Dow is still good for nearly 550 points. S&P 500, a near 2% gain. That's better than 80 points.

NASDAQ's been still on the show all day, feeling pretty good about that meta print. See it there, the NASDAQ up almost 300, near 2.5%. And we have an all-star panel standing by to break it all down. We're live from the New York Stock Exchange. Closing bell on CNBC is back right after this. All right, Nasdaq outperforming today on the back of Meta's big beat. A pretty good week overall for big tech and earnings in general. So is it a sign that earnings season will be better than feared?

Let's ask CNBC contributor Joe Terranova of Virtus Investment Partners and Kristen Bitterly of Citi Global Wealth. It's good to have you both with us. What's your takeaway, Kristen, thus far? Well, I think it's interesting because the earnings that we've heard so far, a lot of it has been, yes, there's been some surprises, better than feared. But I think it's also about this expense control and really strong management and not just about top line revenue growth. So we go back to this story when we're looking at technology in particular. If you chart the Nasdaq and then you look at the advanced decline index as well, there's not a lot of breadth there. It really is a story of a few select companies.

I mean, so you go where the money's going. Is the breadth too narrow? What's riding on Amazon as the last fang of the week to report? Yeah, I don't know if so much is riding on Amazon as it relates to the market. Maybe it's specific to Amazon itself. I thought the market was going to challenge 4,200. It fell back on oil, closing that OPEC gap. It fell back on the First Republic news. So what has the NasdaQ really done here? What has Meta done? What has Microsoft done? It's steady to wobbly market. I think that's, in fact, what it's done. I don't think you can make this universal declaration that the earnings season is

a strong one. This is idiosyncratic. It's specific to a couple of names within technology. But the relevance of these names is overwhelmingly important in terms of lifting the indexes. I mean, that's exactly what's happening today. It has been overall better than feared. Wouldn't you wouldn't you admit that the earnings season? Yeah. OK. Yeah. Better than feared. I'll give you that. I think it has saying it was like knock the cover off the ball. No, it's not. But it was far better, far better to this point with about 50%. But it doesn't take us out of an earnings recession.

We're still in an earnings recession. And this calendar quarter, which we are in right now, we are going to see the most intense economic contraction and potentially the deepest earnings contraction of what will be a sequential three quarter decline for earnings. Yes. But it may not take us out, Kristen, of this earnings recession. But if it marks the trough, if it marks the worst in terms of where earnings are, because expectations are that in the mid to back half of the year, it's going to be better. Yeah. And I think we have to take a look at, OK, we have seven

out of 11 sectors that are currently in an earnings recession. To your point, this is about Q4 earnings. What are we seeing right now? I think we're seeing very binary stories. I don't think it's a universal better than feared. I think it's about these quality companies that came into this being very, very well prepared. And I think we have to go back to the economy and we have to go back to the economy and we have to go back to these leading indicators. The leading indicators are telling us, even look at GDP from this morning, they're telling us that the economy is slowing down. We know that credit is tighter. We know that the Fed is most likely going to raise another 25 basis points. This makes

it harder to be profitable. And we're in the camp that we're going to see an earnings contraction this year of upwards of about 10 percent. So, yes, you can be invested, but you've got to play a little defense. What happens? I mean, do you think anything of today, 500-plus points on the Dow, has to do with GDP weak, Fed done? I don't think the market's pricing that, right? When you look at the probability of an interest rate hike, I mean, still very, very high. I'm saying after next week.

But isn't that strange? One more and done. I mean, isn't that strange, this concept of the equity market telling us one thing and the fixed income market telling and really the rates market? How is it possible that we could think that everything is fine, but six months out, the market is pricing that we would have cuts? If we're having cuts, that's because we're in a contraction. That's because we see a recession. And I go back to this concept of low volatility in the market and the levels that we're seeing. It's because everyone is invested in treasuries. They are looking at that 5% handle.

They are taking money out of equities, sitting on the sidelines. So there's not a lot of breadth here. And there is a lot of short positioning out there still, which is why we tend to see this range bound market. Two-year Treasury up 14 basis points today. We would be speaking about stagflation if it was not for meta, because stagflation is certainly represented in what we heard this morning in that GDP report. Consumption slowing in the back half of the quarter, but yet we're seeing prices paid a little bit higher. So there's a little bit of an uncomfortable nature within that. And I think it just kind of falls back upon the fact that what was perceived to be

the optimal strategy going into 2023 has not been the optimal strategy. What's been the optimal strategy is what at the end of Q4, everyone was basically liquidating. And because of the overwhelming predominance in market cap share, that is, in fact, what's lifting markets right now. In an environment where you're talking about stagflation, you want the reliability of free cash flow that's in the present. Of course. Right? Well, that's why I wonder if it's a, you know, if you can't beat them, join them kind of market, right? Positioning was way off sides, okay?

It was like, okay, energy is going to continue to work. It may not go up 50%, but it's going to continue to work. Technology is not the place to be. Now we're four months into the year, okay? And technology has led, and things like energy have lagged in a rather dramatic way. So four months in, maybe I'm just thinking that's the way that this trade is going to go until it doesn't. And it could go for a while. Well, I think the interesting thing there is because the leadership has narrowed, this isn't about tech or a particular sector. I think it is about free cash flow generation. It is about liquidity and companies that are able to withstand this. Another really interesting statistic is we have about 10 companies are responsible for 25

percent of the free cash flow generation in the U.S. market. So I don't think it's as easy as saying, are you in tech or out of tech? It is about the companies that have strong balance sheets, strong free cash flow generation and diversification across both sectors as well as globally. I think that's the area where you can hide out from an equity perspective right now. Can I buy cyclicals or not? Right. Because they're having a good day today, obviously. But GDP was weak and some of the projections now are for negative growth in the quarter.

I think the current quarter. There are select cyclicals that, yes, in fact, you can. Like what kind? I think what you could do right now is what you could do. I'm avoiding answering your question. I think you know why. Tomorrow now is what you could do. I'm avoiding answering your question. I think you know why. Tomorrow, rebalancing the ETF. Well, let me ask you it this way then.

Yes. So you used to own Honeywell, for example, and I can't remember if it's still in the JOTI ETF or not. However, when you look at a stock like that, come off of earnings, stock has a good day today. Can you buy industrial-type stocks like that now? Yes, you can. I believe that you can. You could find, to Kristen's point, you could find that idiosyncratic story where the quality nature is represented in those companies. So you want to say it's a stock picking environment. OK, we'll say it's a stock picking environment. I think what you can't do is what most money

managers did at the end of 2022, Scott. They concentrated specifically in the direction of what? Cyclicals universally. I don't think you could do that here in 2023. I think you have to acknowledge what's unfolded, both in terms of the economic climate, the earnings climate, and from a strategic and positioning standpoint. Okay. I got to leave it there. Kristen Bitterly, thank you very much. Joe T., thank you as well. All right, up next, we are setting you up for Intel's results in overtime. Top chip analyst Stacey Raskin is back. We'll find out what he will be watching when those numbers hit the tape.

And later, some scary stock statistics. Is a market zombie apocalypse coming? T. Rowe Price's Sebastian Page will give us his forecast. And by the way, Ed Yardeni is joining us momentarily as well as I am just learning now. 30 minutes until Amazon earnings. Dow's good for 523. We got 30 minutes left. We'll be back in two or three.

We're back. It's not just Amazon, of course, Intel gearing up to report after the bell as well. The company expected to post its largest ever quarterly loss thanks to rising competition and a sharp drop in PC sales. Let's bring in top chip analyst Stacey Raskin of Bernstein Research. It's good to see you. Every time I talk to you and look, you just upgraded the stock like I know you're even laughing. You know exactly where this is going. You upgraded it about a month ago, about as half hearted and upgrade as you will ever find an analyst do. You still don't like it. But what's going to happen? We hate this call, right? You hate this call. You hate the stock.

What makes you like it again? Are we going to find anything today that tells you that it's now time to get back on board? Yeah, look, hate is a strong word. I used it, but it makes it personal. It's not personal. Thank God you said you used it. I didn't use it. True, true. No, what we're looking for, the big question is, is it finally as bad as it can get? I mean, that really is. And I guess we'll find out in big question is, is it finally as bad as it can get? I mean, that really is. And I guess we'll find out in a little bit, but it's pretty bad.

As you mentioned, it's one of their biggest quarterly losses in history, if not the biggest. Gross margins are going into the toilet. You know, the revenues, it's just incredibly bad. That's kind of what investors are looking for, right? You want to get the feeling that it is as bad as it can get. It can't get any worse, and that hopefully as things get into the back half and beyond, things can start to get better. I mean, that is the call. And the reason we upgraded it a month ago, it wasn't that we thought that their

strategy was on the right track or anything. It's just for the first time in forever, I go at least into the back half of the year and I'm actually finally above. And the reason is, you know, just given some of the current dynamics, the market's weak. They're even weaker. They're undershipping. They were overshipping. They're undershipping now at some point that has to normalize. And you start to look at where the numbers are versus some of those likely dynamics. And I was forced to admit to myself that maybe into the back half, the numbers are too low. And so that gives you something, some kind of grounding that a bottom that could be in. Do you think, let me interrupt you and I apologize. Do you think PCs, let's start with PCs. Do you think PCs have bottomed

or are close? I think if you look at Q4 and Q1 PC shipments, they were very bad, but they were almost dead in line with pre-COVID, typical pre-COVID levels for Q4s and Q1s. So we're kind of back to that, you know, 250 to 260 million kind of PC shipment run rate versus, you know, we had 350 million in 2021 or whatever it was. So we're kind of back to a normalized level. The CPUs are the things that Intel and guys like AMD ship, they were well below that. So in Q4, CPUs probably undership those weak PC numbers by 20 or 25%. To fit Intel's horrendous guidance for Q1, you kind of have to assume that the CPUs are undershipping by even more. And they're making up for the overshipment that we had

in prior quarters. But at some point, that has to normalize. So even if PCs stay weak, at some point, you're no longer undershipping that weak market and you get a lift as things normalize. I think that has the prospect to happen as we get into the back half of the year. Yes. So let me let me ask you this then for the other big issue, which is data center. And whenever and look, I'll be frank, I don't know the answer to this question, and I'm presuming that you know much more about this than I do. AI, does Intel's data center have anything to do with that business? And why don't we hear about AI at all related to this company like we do almost everybody else, it seems, these days? And will it be a big player there?

Yeah, well, they're going to try, right? And so they do have a roadmap of things like AI accelerators, similar to what NVIDIA sells. I would say it's not going very well. They've gutted some of their forward roadmaps in those things. And it's a tough road to hoe. Like NVIDIA also has a massive software mo mode that's hard for others to break into um on the cpu side though there are some ai applications that actually do run on cpus and their new server product it's called sapphire rapids does have some sort of specific accelerators on it for some of those workloads and some of the ai servers that are

shipping now that have a lot of these say nvidia gVIDIA GPUs. They do have some CPUs in them. It's much more GPU versus CPU, but it is dragging some of those, in particular these Intel Sapphire Rapids CPUs along with it. So at least in the near term, they're probably getting some of that, but I would say over the long term, as more and more workloads become accelerated and are taken up by some of these other pieces of silicon that are not CPUs, that is a headwind that Intel is going to have to deal with one way or the other. They're trying. I got to go, but what's the over-under on how many times Gelsinger says AI on the call?

He better say it a lot. We'll see. Stacey, I appreciate it as always. That's Stacey Raskin joining us ahead of those Intel results. Don't miss Mr. Gelsinger, by the way, on Closing Bell Overtime tomorrow. We look forward to that interview. We're still rallying into the close. As I said, Edgar Denny is going to join us.

He'll break down the final moments of trade. Dow still good for better than 500 points. We're still tracking the biggest movers, too, as we head into the close. Christina Partsenevelo standing by once again with that. Christina? Hey, dude. Not you, Scott.

The shoe brand just not cutting it for Crocs, and it's weighing on the stock. We'll be right back. for a look at the key stocks we are watching. Christina? Well, Tollmaker Hasbro is one of the top S&P 500 performers today. Shares are up almost 14%. Magic, the Gathering Games sets are popular and helped counter weak demand for toys and action figures. Hasbro still expects the toys and games market to remain flat this year, and that's why Hasbro and its competitor Mattel are focusing on intellectual property. The rival companies entered a multi-year licensing agreement this week

to launch co-branded games and toys like Barbie branded Monopoly. Meanwhile, Crocs on pace for its worst day since March 2020 despite the earnings beat. The strong performance for its shoes overshadowed by its guidance or lower guidance I should say for Q2 in the full year. You can see shares are down 16 percent. Crocs though recently acquired a shoe brand called Hey Dude last February, and those shoes aren't selling as well as they hoped. Scott. Yeah, down 16%.

Thank you. Last chance to weigh in on our Twitter question. Will Amazon surprise or disappoint? Head to CNBC Closing Bell on Twitter. We'll bring you the results after the break. Let's get the results now of our Twitter question. We asked, will Amazon surprise or disappoint? Surprise, the winner.

Maybe a surprising 40, almost 43% of the vote. 40, or 27% in line. So that's interesting too, 30% disappoint. Let's bring in Ed Yardeni now, the president of Yardeni Research. He joins us on the phone. Ed, market's been a little wobbly lately. Did we resolve anything? Are we on the road to resolving anything this week? Well, it's been wobbly for a while, but it's been holding its own. I mean, it's still holding

around that level of February 2nd. So I think all in all, the market's reacting pretty well. The earnings season makes it hard to conclude there was a recession in the first quarter. And by now, the pessimists are saying we're going to see a big dive in the market and this going the other way. And then today's GDP report was actually pretty good. It looked weak on the face of it. But a lot of that was an inventory swing from the fourth quarter to the first quarter related to excess inventories. I think they've been taken down and take that out. And real GDP excluding inventories is up 3.4 percent, led by a consumer at 3.7 percent. All looks pretty good. I mean, Morgan Stanley is looking for negative 0.4 for the second quarter. I mean, the economy is undeniably slowing. I think we can admit that.

But maybe that's why money continues to go into places like Meta and Microsoft and perhaps Amazon today and Apple and Nvidia and some of these other mega caps. Well, you know, Scott, I've been saying that we've been in a recession since the beginning of last year. It's just been a rolling recession. So while lots of folks are still waiting for that recession shoe to drop, I'm pointing out that housing's been in a recession, the goods sector has been in a recession, and yet overall GDP continues to grow. And it looks to me as though the goods sector may be bottoming because the inventories have been cleared, and consumers are actually buying goods again after mostly buying services.

And housing, I think, may also be bottoming here. So I think when you look at it from that perspective, things make a lot more sense in explaining what's actually been happening. Are we capped, though, to the upside? There are targets of 4,200, right? I mean, you've heard those. By virtue of what the Fed's going to do next week, what they're likely going to say, and if the economy isn't quite as bad as as you know like you suggest maybe

they'll do more well my year-end target still 4600 as we've discussed before and I think the markets should be struggling here a little bit on the way to the debt ceiling crisis which may or may not kind of go to the last hour. But when it comes to the Fed, I think the Fed's going to do a quarter, and I think they're also going to be announcing a pause, not so much obviously because of the economy or inflation, but simply because the banking crisis still isn't over. I mean, just the other day we had the market down on concerns about the banks again.

We'll talk to you soon, Ed. Thank you. Always good to hear from you, especially as we have a really interesting market to chat about as we head closer to the end here, 10 minutes to go or so. We're in the closing bell market zone now. CBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Sebastian Page of T. Rowe Price and whether a market zombie apocalypse is on the horizon. Brenda Vangelo on the big questions she needs, she has for Amazon into its earnings. Mike, I'll go to you first.

Nice little ramp, to say the least. For sure. What do you make of that? A combination of, on the fundamental side, things not getting bad quickly enough to push the aggressive selling beyond what we've already seen. It starts to look like a little bit of a shakeout last couple of days. Everyone's been fixated, and correctly so, on the very poor breadth of this market. So a handful of very large stocks may be making the indexes look like the market's in better shape than it was. I don't see that as a fake move. I see that as the way the market, when all else is going OK,

the way the market kind of lets certain sectors pull back and rest and get oversold and recognize fundamental weakness while the overall index can do OK. And then if, in fact, Amazon proves to be over its skis going into the report or something like that, or Apple doesn't deliver, mega caps can calm down and the rest of the market maybe has already taken its pain. So I think we're in that phase. We've seen it plenty of times. When you let the other parts of the market take that rest, and maybe that rest lasts a little longer

than people are comfortable with, but nonetheless, we've been here before. That's the benign read on it, and I'm not saying that everything's gonna be fine because the market always fixes itself. It doesn't always fix itself. When we get a liquidity problem, if we get a credit crunch, if the numbers on the economy continue not to be great, if the Fed says no pause in sight, we're going to have to deal with all those things. But I do think that it was very telling that over two days, people got a little bit bared up because the market had its

first 1 percent drop in a month. Yeah, it's been a minute for certain. Sebastian Page, T. Rowe Price. Now, correct me if I'm wrong. I think when you were sitting right to my left where Mike Santoli is now, you called yourself a reluctant bear. I think that's the words you used. Are you still in that camp?

Scott, I'm still reluctant. And I promise if I change my mind, you're going to be the first one to hear it. Look, you just heard Edgar Denny said the economy is slowing down, leading indicators flashing red, yield curve massively inverted, PMIs have dropped by 17 points. You had a weak GDP print today and on and on. And the market is trading at 18.5 price earnings ratio. There's a lot to like about tech, Scott. I mean, very good businesses in cloud and digitization, digital spending. They're cutting costs. There's excitement about AI.

Today's a good day in the market. But if you step back, overall, we remain underweight stocks, not massively, but underweight stocks. What makes you a cautious bull? Look, there are opportunities to add back risk in the portfolio under the hood. I think high yield, you can have a modest overweight there with nine percent yields i think small caps are interesting if you look at quality small caps and you're willing to engage in skilled active management select the right companies there are real worries in small cap space scott you mentioned the zombie apocalypse right 24 of companies in the russell 3000 don't generate enough net revenues to cover their interest

rate costs. That's a really scary, really scary statistic. But I'll put a caveat there. If you actually weighted by market cap and look at actual probability of default and you look at balance sheet and sales growth and so on, then that percentage goes all the way down to eight point eight. So there's nuance in this whole bearish narrative. I think the big picture, Scott, is that really we're still unwinding these covid distortions. And that's what makes a lot of those indicators flash red. So you've got to be careful not go all the way out to cash, for example. I hear you. But I mean, it sounds like you've got to be really highly tactical if you're going to employ your small cap strategy. You all but alluded to that. And if you have to be invested,

why not just set it and forget it in mega caps for the time being? Look, just the spread in valuation between large and small caps, especially quality small caps. I like to talk about the S&P 600 as opposed to the Russell 2. That's a nuance, but quality small caps, especially quality small caps. I like to talk about the S&P 600 as opposed to the Russell 2. That's a nuance, but quality small caps. That spread is so wide by historical standards. Small caps, quality small caps are trading. They're basically pricing in 2008, a 2008 kind of crisis. The price earnings ratio is kind of back to those levels. So no one wants to be in small caps right now the banking stress is probably not helping but i i would i would actually counter the idea that you have to

be super tactical i think you take like a one year horizon 18 months and at some point uh you know you'll be happy that when the recovery kicks in you'll have this beta in your portfolio this risk on position and you're not paying 18.5 like you are for the price earnings ratio like you are for the S&P 500. I hear you, but they're cheaper for a reason. I mean, if you, on one hand, are worried about the economy going into a deeper slowdown, if not recession, it's a hard thing to convince people to buy small caps right now and maybe say you've got to wait a year.

I mean, put it this way. If I put it all together, I end up neutral on my portfolio, total portfolio risk. But the way I get to neutral is playing offense and defense, defense on the stock market overall, and then offense where risk assets are cheaper, small cap, high yield. I don't want to be completely uninvested, completely in cash right now. Again, because despite the bearish narrative, the consumer is strong. China is reopening. Europe is doing OK. Natural gas prices down 70 percent. And so you have nuance that, you know, you just I think neutral is a great place to be. All right. I appreciate it very much, Sebastian. Thank you, Sebastian Page.

T. Rowe Price. Brenda Vangelo is an Amazon shareholder as she awaits those earnings with the rest of us. And we are not that far away, about five minutes or so. Dow still up more than 500 points. What do you want to hear tonight, Brenda? Well, I think all ears are going to be on what's happening with AWS, especially given the cloud strength that we saw from Microsoft and Google. And as we know, you know, cloud AWS has been slowing over the last several quarters. So even though the backlog was up a decent amount of 37 percent last quarter, I think, you know, we're going to be looking to see is that business stabilizing? Is it gross stabilizing? Is it starting to re accelerate a little bit. I think bigger question for all the cloud players is. How does a I

factor into this is certainly going to be important part of growth. And perhaps allow them to move away from kind of a commoditized offering. Into more of a specialized offering they can charge more for personal cause. More capex to

have to be spent to support that. But I think that's at that's really what we're looking to get clarity on and then also. As always with Amazon it's always about the margins- that tend to surprise one way or the other. As we know they overspent on the

quarter retail business and infrastructure. And so looking to see you know have they been able to realize some cost savings there. Yet or not as I think those are really the bigger questions that we're looking to have answers tonight

you want more cost cutting or not. Yes I think Amazon is one where we can definitively say you know since the company has been a public company. They reinvested. A ton of money back into the business and at that many times that has been

disappointing to shareholders. And contributed to a lot of market volatility in the stock and at that many times that has been disappointing to shareholders. And contributed to a lot of market volatility in the stock. But I think now is the time that they've admitted that they over invested. To potentially you know work on cutting costs and really. Focusing on

profitability which we know could be significant. If they weren't investing as much in the business. So I think that would be an important at turning point for the company, certainly. All right, we'll see if we get it. Mark Mahaney with us at the very top of our program.

Some near 57 minutes ago suggested we might not. We got two minutes or so until Amazon reports. We're about to hit our two-minute warning as well. Dow Jones Industrial Average up better than 500 points. NASDAQ stole on the show today on the back of those meta numbers. It's been the outperformer by more than 2 percent. S&P having a good day of about 2 percent as well. We've got snap after the bell, too, along with some other companies. There's your two minute warning. Mike Santoli, we've done this today in the face of yields rising across the

curve. Yields perked up. I do think people were seizing on the stronger than expected actual spending, domestic spending numbers in the GDP. But again, yields in a still manageable range, not really kind of challenging those levels we saw back in March. I do think that the fact that you had better breath on the New York Stock Exchange today, 80 percent upside volume, that can answer some of those questions. When it comes to an Amazon, it is traded. That stock is not only badly underperformed since the pandemic, over a five-year span, it's trailed the S&P 500 by a noticeable amount. And it's traded essentially step-for-step with the cloud stocks. So investors do view the e-commerce business almost just as a source of friction and cost and complexity on the story.

So I think that we do want to hear about a little more margin discipline on the consumer side of Amazon. Got a minute to go. What do you make of Yardeni versus Page? Bull versus even a reluctant bear? It's telling very understandable stories about why they hold the positions they do. I feel as if it's in a period where if you have high conviction, you have to be ignoring something, meaning it is an ambiguous set of circumstances. 4,600, where Ed is- Aggressive. Well, see, here's the thing.

It sounds aggressive, but we traded at 4,815 months ago, right? So that's how a trading range market and a 20% decline can work on psychology. So I feel as if the market's acting as if it's in a neutral state. It's been sideways. I don't think valuation is the problem for the average stock, but for the mega caps, it is a headwind. So I'm going to essentially say the low is in, but I'm not sure what the upside is. Well, we're going to find out if the final FANG report of the week carries this market higher like Meta has and Microsoft has.