Closing Bell - Closing Bell: Can Earnings Momentum Hold? 4/17/23

Episode Date: April 17, 2023

It’s the best start to earnings in 20 years. But can the big week ahead hold the momentum? Trivariate’s Adam Parker and Hightower’s Stephanie Link give their takes. Plus, CIC Wealth’s Malcolm Etheridge is getting out of Alphabet amid reports that Samsung may be looking elsewhere for its search needs. And, Ed Yardeni is back … and he says “the sky is not falling” despite what some Wall Street heavy hitters are saying. He explains why. 

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 great debate over stocks and earnings. Why Mike Wilson says things are still too optimistic on both fronts, while Ed Yardeni suggests in a new note the near opposite, that the sky actually isn't falling. And guess what? You're going to hear from Mr. Yardeni in just a little bit. In the meantime, your scorecard with 60 minutes to go now in regulation. The Dow looking to extend its four-week winning streak, seeing modest losses for most of the day today. There it is, virtually flat. Right now, industrials and financials among the better sectors in a bit of a sideways tape, as we said. Tech, a touch weaker. NASDAQ, there

you go. It's a bit lower as well. Yields are rising across the board. It does bring us to our talk of the tape. The best start to earnings in some 20 years and whether a huge week ahead can hold the momentum. Let's ask Adam Parker. He is the founder and CEO of Trivariate Research, a CNBC contributor. I mean, we have been off to a good start so far. Banks, you know, gave a little love rather than the opposite. You feel any better than you have? Well, you know, it's one of those, you know, if I told you you were going to make a bunch of money and then I told you a couple months ago it'd be a lot less than I beat that lot less by a little, I guess you're okay. I mean, earnings revisions during the first quarter were down in every single sector of the market, down 6%, 7% from Jan 1 to March 31st. So they're clearing the lower bar. But I wouldn't say, you know, all clear signal earnings are great.

I think they'll be mixed. And I think the big investment debate is how much of the Fed action is already in or has it even started in all of that. What I think is more the case is we had a big sort of reopening and unwind of the reopening. And I think now you're about to see the lagged effect of the Fed action. So I'm in the camp that earnings are going to come lower, probably much lower for 2024 numbers than we have. So you're in that Mike Wilson, Morgan Stanley.

I mean, he's in my camp, I'd say. Let's phrase it that way. OK, I figured you were going to go there. But the bottom line, though, is that you still think and those who are more cautious still think that earnings expectations are too optimistic. Yeah, I do. But I don't know if that always matters, as you know, for whether the stock market goes up. Right. So what do you make of that then? I mean, because the market, I think you can also admit, has been pretty darn resilient, extremely resilient. And I think there's three reasons for it. If you take sort of the growth part that's leading one is you know this perception the fed got dovish and and inflected you see that in the bond market you see it in growth equities right you see it in semiconductors etc two is something that i think is probably real which is ai the parts of ai that are real they're

going to drive you know very rapidly some changes. And so there's real fundamental reasons why NVIDIA is up. It's not all the Fed. I think the third is sort of the relative defense people perceive about the big, you know, FANG M stocks, you know, that basically if the overall estimates are way too high, maybe there's some defensive in there. So some logic why that part's led and outperformed. But I don't think it's an all-clear signal that this guy, you know, whatever, I think the earnings will decline. And right now the estimates are 219 or so for 2023, $219, 246 for next year. I think the better number for next year is probably more like 220 or 225. So you still have some real revisions for 2024 numbers. So let me ask you this. Do you think, because I've had this debate with others about whether a recession is priced into the market, okay? Marco Kalanovic of JP Morgan,

whom we follow and he publishes a lot in the mid to late afternoon, literally just dropped a note, okay? Right. With some pretty provocative thoughts in here, and I want your reaction to them. Even in an optimistic scenario of soft landing, equity upside is likely less than 5%, and that is the return that is delivered by short-term fixed income. That's number one thought. Number two, on the downside, even a mild recession would warrant retesting the previous lows and result in 15 plus percent downside. 15 percent downside, even if it's a mild recession. You agree with that? I'm kind of halfway in between here and that. I'd say, I mean, the market really has been kind of range bound. You know, 3,500 was the low

plus or minus 4,200 at the top. Whenever we get to the top of the range, I get a little bit more worried. I have some sympathy for the fact that maybe we just haven't seen some of the lag, the fact of the slowdown in earnings yet, and that there could be things, whether it's in commercial real estate, the slowdown there, the loan growth that we know is slowing in the regional banks, private equity, which could roll over and slow private credit where things haven't been marked. There's a lot of places we just don't know yet where the collateral damage is. So I have a bias to thinking things could get risk-reward worse. And if I walk in today and say, all right, I need, what, 10% upside in the S&P, so $4,500 plus,

I really have to believe I'm going to be willing to pay, I don't know, 19, 20 times next year's earnings. So I have a bias to be, you know, kind of 10% down, 5%, 10% up, and therefore I'm not super positive on equity. I mean, is your base case a recession at this point? I think, you know, whether it were the GDP's negative two quarters or whatever the economists say, I don't really care. I think the base case is earnings are declining. Corporate earnings for the S&P 500. They have declined. We're in an earnings recession. Yeah, and I think they'll continue to decline. And I think I worry about is a bit of a V-shape in the second half of the year and into next year in the numbers that I don't think is plausible. I don't think it's a base case anyway.

So I have sort of a slight negative skew on earnings. And so all I can dream about is flows and, you know, multiple expansion on the Fed dovishness and, you know, maybe just that everyone else is kind of negative. Once you get all these big guys negative, then by definition, send them it's negative. And I think maybe you want to be contrarian. You want to romanticize your contrarian. That's your that's your. What if we get through another week as you look at our wall here that we have back at our headquarters of all of these companies that are reporting,

including the banks and there's some staples and companies across all sorts of swath of the of the economy. And we come through another week and we say, you know what? Not as bad as feared. Yeah. When do you sort of try and embrace the soft landing idea? I think you need tech, consumer, and industrials more than you need banks to tell you that. I think there's no question that loan growth is going to slow, that when you have what we talked about many times,

I think everybody knows the sort of health and maturity part for the banks. That's just capital that's not productive on their balance sheet. There's no question their growth is going to be lower. So I don't know if they're the barometer for economic health they used to be in other cycles. I think it's going to be more some of the consumer. And the consumer usually is the second half of earnings season. So let's bring in CNBC contributor Stephanie Link of Hightower Advisors who joins the conversation. So, Steph, you can pick up on what Adam was talking about.

I'd love your opinion of this Kalanovic volume because it's like, I don't know, it feels like 50 pages or so. But the bottom line is mild recession, not priced in, could result in 15 plus percent downside. And even in an optimistic scenario of soft landing, upside is likely less than 5 percent. And that comes through short short term fixed income. Yeah, well, there is an alternative right in fixed income. And this is why we have the problems with the banks and deposits. Right. Because everyone's shifting out into higher yielding assets, right, in CDs and money markets. So you've been seeing that all year, that there is an alternative now.

And I think that's one of the reasons why actually we've seen a trading range in the market. But at the end of the day, you're right, it comes down to earnings. And not all earnings are going to be horrible. I look at energy, for example. Numbers have been going higher, actually. And that sector is well below the 20 multiple that Marco is talking about for the overall S&P 500. Financials, under one time's book. Historically, that's been a great time to buy them.

Yes, they have their struggles. But by the way, up at the quarters from JP and Wells Fargo, even Citigroup, who can't execute consistently. All three of them were really good. And so to me, there are pockets. I think the consumer is hanging in there. We talked about retail sales last week. And I'm looking at the three-month moving average at 1.8 percent growth. Consumer is still hanging in.

Are they going to hang in if we have a recession? Probably not. But as of now, look at the Atlanta Fed GDP number at 2.2%. That actually is not a recession. We're not there yet. So I think that there are pockets in the market. And as you know, I've gotten more balanced in my portfolio, owning some defensives, but certainly seeing some opportunities in the cyclicals as well. How do you respond? Yeah, Steph and I are super aligned on the energy sector. Expectations are really low. 2024 earnings are 20% below 2022. I don't think it's a huge inventory problem. And I think demand growth will exceed supply growth. So I agree there. It's like 5% of the S&P. Yeah,

5%. It's not going to be the determining factor. No, but it was 11% of the earnings. So, you know, I think it's a little chunkier than people think on the earnings front. On the banks, we probably differ a little bit just because I think some of them, I agree with you, you're buying below one times tangible, it's a good deal, but the question is, you know, is that really intellectually honest, tangible, or is the growth gonna be lower? So I think it's more mixed there,

and I just, I think there's more, I can dream more in other places. Probably most negative on industrials, you know. Uh-oh, now you're picking a fight with Steph. Well, our work shows industrials are now the biggest percentage of the growth universe they've ever been. And I think about mistakes I've made in my career, the dozens

and dozens of mistakes I made. Most of them or a lot of them are when I confuse structural for cyclical. And you have an upward slope, you have a cycle over it. I just think maybe some of these things are over-earning. We haven't seen this load on shore. There's exceptions. If you've got great exposure to agricultural oil and gas and you can grow above GDP. But there's a lot of sort of widget makers trading at 19 times with high earnings expectations.

So I think it's always, you know, Steph's a stock picker, so I think it's always in the details which ones you're talking about. But I think in aggregate, I'm looking, if I compare to energy, I'm looking at high estimates, high inventory, high valuation. So I like that pair trade. They both benefit if everything's, you know, reopening and both get hurt if it's not. But I kind of think energy is a lot cheaper. Steph, I mean, you are one of those who try and tell a more positive story around the industrials, albeit on a bit of a selective nature, but nonetheless, far from a sky is falling scenario in that group. Yeah, well, as you know, in the last couple of weeks,

I sold Cat and I sold Deere. And so I only own Boeing GE and I own Ingersoll Rand. And I've been adding to Ingersoll Rand over the last couple of weeks because I think it's a great play on on-shoring. Boeing, you know why I like it. I think longer term, they are going to get their act together with the 737 MAX. For the most part, they have. They have a little bit of a stumble on Friday, but I think they'll be fine. Free cash flow is going in the right direction, higher. And GE is a play on that, given their engine. So it's very specific within industrials. But as you know, I sold some industrials and put it into a more balanced area like Staples, like P&G and Keurig Dr. Pepper. Back to earnings for a second, Scott. I actually am in the camp that earnings are going to be better than expected. And that means is that better than feared? OK,

I'll take that. I'll give you that, whatever. But to me, I think margins are going to hang in better than expected. Everybody is gloom and doom on margins. We know companies cost cut all the time. We know that they have a lot of them have pricing power. I think international growth is going to be stronger than expected and much more of a tailwind. And the dollar being weak will also help multinationals. So I think at the end of the day, earnings will come in a little bit better than expected. They're not going to be up double digits. I don't want to suggest that, but I just don't think they're going to be down nine, 10 percent like some people are expecting. And that's why I look for opportunities. You know, I guess, Adam, part of the point is that, you know, earnings are going to be good

until they're not. Right. And it still is, as you said, I think at the outset of our conversation, it's unclear to what degree of what the Fed has already done is starting to work its way through the system. How long can you push off the inevitable? There's not great academic history and a large sample size in this, but the conventional wisdom is there's about a year lag before you really start feeling it. They started raising in March of 2022. We're in April of 2022, so we're one month into feeling it. And I think a lot of the strength was all of our fiscal policy

and the helicopter policy that people really had a lot of money in. So they're kind of burning through that now, and we'll see the impact, I think, over of the strength was, you know, all of our fiscal policy and the helicopter policy that people really had a lot of money. And so they're kind of burning through that now. And we'll see the impact, I think, over the next six, 12 months. So I'm not doom and gloom either. And I think Steph's explanation makes a lot of sense to me. You know, where you're finding a few individual names you think can have better 2024 earnings than 2022, even in an eroding backdrop. Part, though, of the point here, too, Steph, is that you have to be extraordinarily selective in what you're buying, even in sectors that you think are going to be better than others. And that makes it all the more difficult as to why the market in some respects is sideways. There's a lack of conviction, I feel, in the way that the market's trading through the

price action of placing your bets too much on either side, which is why you go sideways. Yeah. Yeah, I mean, we've gone sideways because there's a lot of uncertainty, right? And you're 100% right, Scott, in terms of it being a stock picker's market. That's why Adam and I are in this business, because we like to actually pick some stocks and sectors and that sort of thing. But it's not been easy by any means. Here's the thing.

You always ask, if tech can't rally, can the market rally? And I have forever said, well, there are other sectors that can kind of take up that slack. I don't think that's the case. I really don't. I've changed my mind on that. I think tech is such a big, and comm services, such a big piece of the overall market, 35%. I mean, you saw March, the market did a very nice job on the upside because you had tech rallying, growth rallying. That's growth, by the way, is 75% of the S&P 500. So if you don't have growth

in tech rallying, I think you are going to continue to go sideways. But that doesn't mean you can't make money in what the industries that we just talked about, energy, financials, I think discretionary, I think some staples with pricing power. And I do think some select health care as well. So there are places where you want to take a look and then you've got to dig deep into the fundamentals. The precarious part about that whole thing, though, Adam, is that, you know, there are those who say, well, tech is already too stretched. So there's a lack of breadth in the market.

And if you lose tech, to Steph's point, what do you got? What's going to pick up the slack? And what Steph said and what others are suggesting. There's nothing quite that big, right. There's nothing. What we've been working on, we wrote for the geeks in your viewer base, we did a big note on free cash flow and free cash flow conversion last week because normally those things start to erode at this point in the cycle.

The problem is the starting point is already really low. Almost half of small cap stocks don't even generate positive free cash flow conversion last week because normally those things start to erode at this point in the cycle. The problem is the starting point is already really low. Almost half of small cap stocks don't even generate positive free cash flow and a chunk of the growth universe doesn't either. So I think as we get tighter financial conditions, slower loan growth and an eroding economy, lending conditions, I'm a little worried about the free cash flow stuff from the market, which looks very, very low, only about 75% conversion versus earnings. So the price to free cash flow is even more expensive than the price to earnings, and I think that could become a bigger issue. So you've got to really focus on that over the next two to three quarters as things slow. Steph, last question and quick to you.

Do you expect tech to fade from where it is? Earnings are either going to confirm or throw water all over this move that we've seen. Yeah, I think tech can go sideways for a bit. I do think there are pockets of tech that are interesting in the out couple of quarters, especially like the semiconductors, because we're getting through the inventory problems. We're not there yet. We're definitely not there yet. But we will be through the inventory problems in the next, say, two, three, four quarters. And of course, we will discount that well ahead of time. I think some of the software names are ahead of themselves,

and I don't understand the valuations. It's really challenging because they are going to have challenges as well. I get the reason why they've rallied because of free cash flow and all that stuff. But I don't think they're as defensive as people think. I think you've got to be selective overall. And you know I'm underweight tech and I'm underweight comm services, and I only own a select few. But to answer your question, I think it goes sideways. I think the expectations, risk-reward into the prints are not great. Guys, we'll leave it there.

Steph, thank you. We'll see you again in the Market Zone. Adam Parker, as always, thanks for being here as well. Let's get to our Twitter question of the day. We want to know which of these companies reporting this week. Looks like a buy right now. Is it Netflix or Tesla or Steph's IBM? You can head to at CNBC closing bell on Twitter. Please vote. We got the results coming up a little bit later on in the hour. We're just getting started here on closing bell up next. The big search switch up. Shares of Alphabet falling on a new report. Samsung could be looking elsewhere

for its search needs. We'll hear from an Alphabet shareholder after this break, making a big call, too. You're watching Closing Bell on CNBC. All right, 40 minutes to go here in the trade today. Let's get a check on some top stocks to watch as we head towards the close. Christina Partsenevelos is here with that. Christina. Thank you, Scott. Well, shares of Prometheus Bioscience is spiking today after a pharma giant, the pharma giant Merck, said over the weekend it would purchase the company for nearly $11 billion. Prometheus is developing a treatment for various autoimmune conditions. On the other side of things, though, Moderna, which Prometheus, by the way, is up 69%.

The other thing, though, Moderna shares are actually down about 8 percent, despite positive results from a trial of its experimental cancer vaccine used for melanoma. Some analysts are worried about the treatment's successful approval, and so that's why the stock is down. And then lastly, shares of Roblox tumbling after the gaming company released March data showing a potential drop in average bookings per daily active user compared to last year. Despite this, daily active users, hours engaged and parent approved, and as well as estimated bookings were all up from a year ago. You can see shares down 12% right now. Scott? Yeah, all right. Christina, thank you. We'll see in just a bit. Speaking of shares down alphabet, those shares having their worst day in nearly two months after a New York Times report says there was, quote, panic at Google as Samsung considered adopting Microsoft's Bing as its search engine. Our next guest says investors should now consider replacing Alphabet in their portfolios.

Let's bring in Alphabet shareholder and CNBC contributor Malcolm Etheridge of CIC Wealth. It's good to see you again. That's rather dramatic. You would actually sell Alphabet now? Good to see you, Scott. I am actually already decided that I am going to sell Google. I mean, Alphabet, I guess. I am only waiting for earnings next week because I imagine next week Microsoft and Alphabet are going to be artificially bought up into earnings being sort of mediocre to decent. But I was very, very surprised to hear Sundar Pichai sound so cautious and maybe even negative on the potential of AI.

A large part of the job of the CEO is messaging and storytelling. And so I just don't get it, especially since internally you even have folks who are so heavily invested in AI that you need to be keeping in those seats so that you keep that talent where it is. Sure. And instead, Sunder Pichai is out on this media campaign telling folks to beware in the doom and gloom aspects of AI. I mean, I think there are many people who are out there talking, of course, about the promise, but also about the potential societal pitfalls of it. Though we know that Alphabet's just not going to see the tremendous lead in market share and search that they have to Microsoft or anything else. So in some respects, follow what they do, not necessarily what they say.

And as I said, he is certainly not the only person of stature who is out there talking about some of the risks around AI. So to be clear, I do think the potential for things to go wrong here is a real concern, right? I completely agree with Sundar's comments about the dangers of things like disinformation and fake news and stolen art, violating copyrights and everything else. But to me, as the lead dog in the space, right, since Google has been doing AI research for years and their DeepMind lab is widely considered to be one of the best in AI research globally, they need to be in the driver's seat on this and set the tone. And I just feel like if harming society is truly Pichai's concern and that's the thing keeping him up at night, it would make more sense to be trying to position Google as the arbiter and the rules maker in this thing,

generative AI, given its ubiquity and its first mover advantage, rather than trying to cast a cloud over the whole thing because the ship has already sailed. That six-month pause that Elon Musk and everyone else was calling for is never going to happen. You know, since you're referencing it, let's listen to what he actually said on 60 Minutes regarding this issue, and we can continue the conversation on the other side. Do you think society is prepared for what's coming? On one hand, I feel no, because, you know, the pace at which we can think and adapt as societal institutions compared to the pace at which the technology is evolving, there seems to be a mismatch. On the other hand, compared to any other technology, I've seen more people worried about it earlier in its lifecycle.

So I feel optimistic. I mean, that doesn't sound like somebody who's willing to cede anything. It's just making sure our eyes are wide open. Can I draw a comparison though to his chief competitor over at Microsoft, Satya Nadella, who anytime someone asks him a question about anything really in public, his answer somehow finds a way to track back to chat GPT and just how giddy he is to talk about the opportunity that's in front of Microsoft when they think

about things like generative AI. And so I just feel like Microsoft doesn't even have to win this arms race in AI. They just have to continue to be a thorn in the side of Alphabet, who is, again, the first mover in the space. And I feel like Google slash Alphabet is going to be continuously distracted and continuously trying to catch up in this AI arms race, which is really what Microsoft wants. Because for every one percentage point of market share that Microsoft can take away from Google in the search wars, that's like $2 billion, I believe, using Microsoft's math of opportunity of revenue gain for Microsoft that they take away from Google. And so while they're busy trying to protect their flank and busy trying to keep up, at least in the conversation with Microsoft, all Microsoft has to do is hang around being an annoyance. And that keeps Google from overtaking them in this particular race that they're in. I mean, Morgan Stanley doesn't share your

concerns in any way. They have a note out today how AI can drive upside. That's the title. They reiterate their overweight rating. One thirty five is the price target. A good twenty five percent higher from here. They talk about paid search, online advertising using its reach data sets and AI tools base case, they take revenue growth numbers up. They're extraordinarily optimistic, you know, despite some of the concerns that you have expressed during this interview. I read that too, Scott, and I think they're wrong. I think if Google were to lean too far into the generative AI search trend,

it would cannibalize too much of their core business, right? Search is their only real business. Even the products they've developed are all built around getting you and I to the search bar quicker than on their competitors' devices. And that's worrisome for me because if they were to make a real pivot toward incorporating a chatbot feature with one singular answer to your search query, it would be the equivalent of Facebook going fully mobile back in 2014 when all of us were throwing slings and arrows at Mark Zuckerberg and saying, this guy's crazy. And I don't think that Google slash Alphabet has the time to pull that off and be able to say, see, we told you so.

We told you we had something in the works. Because the way that AI and the technology and the companies that are being created now on top of the chat GPT-4 technology and whatever will come later. The way that that is moving doesn't give Alphabet enough time to be trying to figure out how to play both sides at the same time. All right. To be continued. Malcolm Etheridge, thanks. We'll talk to you soon. Up next, the sky isn't falling. That is the message from our next guest today, Ed Yardeni, calling out two of the biggest names on Wall Street for what he is calling alarmist commentary. He'll make that case after the break. By the way, on a programming note, joining us tomorrow on Closing Bell in a CNBC exclusive, retailing legend Mickey Drexler, the former J.Crew and Gap CEO, talking about his latest role as CEO of Alex Mill, a company started by his son.

The current state of retail, the consumer fashion, of course, much more. Closing bell. Be right back. Take a look at the market here. Nice little move trying to get anyway as we head closer to the end of this trading session on this Monday. Dow is now good for some 63.5 points. S&P a fifth of a percent. And there's the Nasdaq, which has been negative, which is moving just a touch higher as well. The Russell and small

caps are outperforming in a big way today at better than 1%. The sky isn't falling. Those are the words from my next guest addressing a warning from J.P. Morgan CEO Jamie Dimon that higher rates for longer will mean big problems in the economy and banking system. Joining me now, Ed Yardeni. He is the president, of course, of Yardeni Research. You take issue, Ed, with some of these warnings that have been out there. You think they're a little too hyperbolic? I think they're a little bit too pessimistic. Look, there's been a lot of pessimism about the economic outlook, about the financial outlook since the beginning of last year.

I have said that I think we're in a recession. We've been in a recession since last year, but it's a rolling recession, and it keeps rolling in different industries. And all in all, it isn't adding up to an economy-wide recession. I think when it comes to Jamie Dimon, he started last summer warning us about a hurricane and how his bank was becoming more conservative, more careful, and advised investors to do the same. Well, June of last year, we made a low. And then October of last year, we tested that low. And it basically held. We were only down 2% below that low. And the

market's been doing fine then. So I just quibble with the fact that somebody as influential as Jamie Dimon has been promoting pessimism when what he really should do is just focus on his bank results. And they were spectacular at the end of last week, just totally at odds with his pessimism. I mean, maybe we should have listened to him, though, more closely when he said months ago that a hurricane was coming. And, you know, maybe he was wrong on Mother Nature. I mean, maybe it was an earthquake and that was in Silicon Valley Bank and it could have been much worse. And as I just pointed out, he has talked about a hurricane. I think it was on June 1st of last year. And I think it was something around the middle of June that the market made a low.

Then it had a rally. Then it took a dive on Powell's hawkish stance at Jackson Hole. But the October low wasn't really much lower than the June low. So I think if anybody listened to a diamond and got out, they've missed a pretty good recovery in the market. Do you think earnings, by and large, are going to be better than most had expected coming into the season? Well, like everybody else, I was very surprised by the strength of the bank earnings. But it turns out that they're able to raise their deposit rates and still come out with increasing net interest margins. So I think that's really quite an achievement.

And meanwhile, loans are an all-time record high. So that's weekly data. So we have yet to really see the credit crunch that has been much feared. And yes, the bottom line is I think instead instead of maybe earnings being down five to seven percent, they might be down more like four to five percent in the first quarter. You know, I mentioned at the very top of our program about 30 minutes or so ago, this new note that came out from J.P. Morgan's Marko Kalanovic, because you're talking about making that low last October, which you think will hold. I want to read you and reiterate for our viewers who may not have caught that exactly what he said in terms of whether a soft landing is going to happen or not. And even if it does, what that means on the downside, even a mild recession would warrant retesting the previous

lows and result in 15 percent plus downside. You just take issue with that out of hand? Well, that's his opinion and I've got my opinion. It's not something where we're battling each other. There clearly has been a tug of war between the bulls and the bears. I've been among the bulls, especially in late October. I thought October 12th was the low. I thought there was way too much pessimism, as much pessimism in some of these surveys of confidence about the market, about as much pessimism as we saw back in March of 2009. And surely things aren't anywhere near as bad as that. And so it's my opinion that we're not in a recession. We've been in what I call a rolling recession. I'm I'm somewhat encouraged that the Fed staff is calling for a mild recession in the middle of at the second half of this year because I don't think it's going to happen.

So from a contrary perspective, I feel relatively safe with that. But, you know, I respect the fact that it's your opinion, but is it are we talking about facts versus facts? I mean, do you think that a recession, A, is priced in? And if we, in fact, do have and you use the words economy wide recession, do you think that the stock market is vulnerable to maybe the magnitude that Marco does if, in fact, that comes to fruition? Well, I think since October 12th, the market's been discounting something other than a recession. It seems to be looking beyond any recession. So if Marco is right and we get a mild recession or if the Fed staff is right and we get a mild recession in the second

half, I would argue that that's not exactly news, especially, I mean, look, the market didn't blink when the Fed minutes came out announcing that the staff thought there might be a recession in the second half of the year. Well, because that's because they hope that there are going to be cuts. Well, I think that the market has come to the conclusion that with the banking crisis, it would make no sense for the Fed to continue to raise interest rates. I'll become more concerned about the potential for a bearish situation if the Fed just keeps going raising interest rates here.

I just don't think it's necessary anymore. They want it to get too restrictive. They're at restrictive. 5% has already caused a banking crisis. That's enough. And so I think they're going restrictive. Five percent has already caused a banking crisis. That's enough. And so I think they're going to pause. And I think that pause is going to turn out to be a permanent pause. I don't think they're going to go much higher than five percent. And I think the economy

is going to bear it quite well. And meanwhile, I think inflation is going to continue to come down. The bears versus bulls isn't just about a recession. It's also about inflation. The bears think that inflation is not going to come down and the Fed's going to have to keep raising interest rates until we get a recession. I don't agree. Which is why we'll leave it there. And I know we'll have many more conversations about this very topic. Ed, thank you as always. Thank you.

All right. That's Ed Yardeni joining us. Up next, we're tracking the biggest movers as we head into the close. Christina Partinevalos is back with that. Christina. Scott, one analyst is seeing 40% top line growth for this particular name, and it's dragging down an entire, or I should say dragging up an entire sector. Can you guess which one?

We'll tell you right after this quick break. Got about 17 minutes before the closing bell. Let's get back to Christina Partsenevelos now for a look at the key stocks we are watching. Christina. The stock we were talking about, solar company Enphase, leading the way for the sector after an upgrade from Piper Sandler. The firm said it could see as much of a 40 percent top line growth for Enphase. Other solar stocks riding the momentum today, and that's why Enphase is up 8 percent. And for example, First Solar up 5 percent. Netflix shares slumping not because of the technical issues with its failed live broadcast last night of the Love is Blind reunion, but because of earnings out tomorrow after the

bell. Credit Suisse said it remains neutral on the streaming company and is cautious ahead of the earnings report. Netflix missed earnings estimate last quarter, but posted pretty impressive subscriber numbers. The street will be watching if that trend continues. Shares 2% lower. All right. Big week. Big week. Earnings and everything else. Christina, thank you very much. All right. Christina Parts and Nevelos. Last chance to weigh in on our Twitter question. And we asked, which

of these companies reporting this week looks like a big buy right now, including the aforementioned Netflix? Is it Tesla or IBM? You can head to at CNBC closing bell on Twitter. We'll bring you those results after this break. Get the results now of our Twitter question. We wanted to know which of these companies reporting this week looks like the best buy right now. It's Tesla with 43 percent. Reasonably close vote. Interestingly enough, IBM in second place with more than 31 percent rounded out by Netflix at 25. Going to be a big week. And up next, trimming tech. Stephanie Link is back. She's pulling back her position on one key bang name. She's going to tell us exactly which and exactly why when we take you inside the Market Zone.

And by the way, tomorrow, do not miss another exclusive. This one with Bank of America CEO Brian Moynihan. That's right here on Closing Bell. We're right back. All right, we're now in the Closing Bell Market Zone. Victoria Green of G Square Private Wealth is here with her market outlook as we enter this very busy earnings week.

Stephanie Link is back with her market outlook as we enter this very busy earnings week. Stephanie Link is back with us to share why she is trimming a position in one bank stock that she loves. Plus, Bopazani breaking down the crucial moments of the trading day. Into the close, Victoria Green. It's going to be a big week. It really is on tomorrow. More banks and we have all sorts of different companies, Netflix and Tesla and on and on and on. Are we going to live up to the momentum that we've set thus far? I'm a little concerned. We are. I am a little bit bullish, but we are about to hit that 4,200, and this is make or break for all the regionals. We're going to look under the hood. PNC reported last week pretty decent numbers. Even today, you know, State Street stumbled bringing down Bank of New York a little bit

as custodians, but you have to know how those regionals did. Those deposits the big banks got came from somewhere. So I am a little bit nervous we might start selling out around this 4,200. We've got some huge reports. Tesla, I'm a little nervous about because their sales numbers, even with all of those discounts, yes, it was slightly above, but really not what we're looking for. They're just a lot. We're on edge right now. I think it could go either way, and that makes us nervous. Would you be a seller yourself at 4,200, as optimistic more than most as you've been? Yes. I mean, it's worked well, but I think we are at the point we might be peaking out a little bit.

I feel like if we could get a definitive break above 4,200, that's great for the bulls. I just don't think we're maybe going to see that. This is where we stalled out in the past. And, yes, earnings have come in more positive, 90% beats. I know it's only 10% of the S&P that reported last week, but I'll take that, that 90% beats. The bad news, the worst of it hasn't hit, but I'm still a little bit nervous that the second half of the year is going to be ugly. So I am switching a little bit more into the sell the rips mode until we get a little bit more clarity about what's coming down the pipeline on rates, because that's such a wild card. Are they going to cut rates this year? I don't think so,

but the market's pricing it in. What do you make of that call by Marco Kalanovic a little bit ago? Even a mild recession means we could go down more than 15 percent right back to those lows. I think we've got a lot of good supports between us and the lows. I don't think a mild recession would take us there. I think you would need some really solid misses, and you'd need people saying, hey, this profit, this earnings recession, this profit contraction is going to continue, and we're going to get stuck in a rock-and-a-hard place of a recession and sticky inflation. You would need both of those data points to come in on the bad side for us to really see us retesting the lows. Absolutely, there is some downside risk at this point in the market as we're approaching this very, very strong resistant level at 4,200. There is downside risk at this point, but I think we've got a lot of supports between us and the

retest of the October lows. Victoria Green, thank you very much. We'll talk to you soon. Stephanie Link, we bring you in now. Taking profits in meta? Is that what you're doing on this note? At least maybe in part from new street today that says the re-rating is likely over well no i mean i was taking profits last week actually um and it really is just taking profits the stock ran so much scott that it became an 800 basis point overweight position relative to my benchmark that is just not smart risk management. So I sold some. It's still a very big position.

But I feel like 144 move off the November low justifies taking some money and putting it elsewhere. But, you know, say, so it's up 150 percent, right, since the November low. But what about this idea, OK, that all of the upside at this point has got to be in the stock. They downgraded to neutral. Their price target's unchanged at 220. So we're right there on that line. But in terms of potential upside,

do you feel like it's capped at this point? Like what else could possibly get you a higher stock price? Yeah, so the story, Scott, has been since November, by the way, is cost cutting, right? They've laid off about 25 percent in headcount. They've reduced their expenses by 12 percent. And actually, CapEx has come down 14 percent. That we know that's in the numbers. What we don't know is can they actually see a reacceleration in revenues? That's the difference. That is why a couple of weeks ago, Morgan Stanley upgraded it, and I actually agreed with it at the time. The stock has run since then. But because it's entirely possible to see double-digit revenue growth return in the second half of the year. How is that? AI

and product-driven improvements to the ad stack, Reels, which now has a revenue run rate of $6 billion, Click to Message has a revenue run rate of $10 billion, and just getting going. And of course, they're lapsing the Apple privacy changes. So all of these things can lead to an improvement in revenue, and I don't think the stock is getting credit for it. The stock is not cheap as it was. It's now at 18 times versus when I was pounding the table at 10, 11, 13 times most recently. But I think maybe the

earnings are actually depressed because if they do receive a return to revenue growth, those earnings are going much higher. The stock's not as expensive. So that's why I'm still sticking with it. I like the revenue potential and the cost-cutting discipline. Quick on another one before we go. IBM, all right, also reports this week, using your words, it isn't as cheap as it was. I could say it about this one, too. Yes, but it's lagged. It's down 7% on the year, and you know what tech has done.

So I still think the restructuring story is exciting. I still think Red Hat has a lot of momentum. I expect double-digit growth there. Cost-cutting discipline as well. It's all going to come down to enterprise, Scott, but it's not expensive. It's got a good yield, so I still like it. All right, Steph, thank you very much. That's Stephanie Link. Now to Bob Pizzani. We got a nice little move of sorts as we head to the finish line. No, in fact, we, uneventful until the last half hour, we moved 150 points on the Dow, and we are 30 points from a new high for the year on the S&P.

41.79 would be the beginning of February high that we had. We're only 30 points away from that. Three things today, Scott. Number one, this relentless march of yields. Look at this three-month T-bill. It's 5.09%. I read that Marko Kolonovic note there. Risk-reward heavily favors cash. I think that's

an interesting point. And yet, market keeps advancing. For now, right? I mean, it's like that word that Kramer used at the very beginning of this day, resilient. The market's been resilient. Absolutely. And I'll tell you something that really surprises me. The regional banks have finally caught a bid. Biggest mover on the S&P today, MTB, a regional bank with the earnings out. Zion's going to report Wednesday morning it's up 3%. U.S. Bancorp's going to report Wednesday afternoon it's up 1% or 2%. Finally, a little bit of life in the regional banks. That's number two.

And number three, are you looking at the VIX? What was the last time? Was it at 17? Below. It hit 16.9 today. Do you know that's like a 15-month low right there? It is very rare to see the VIX below 18. That just does not happen very often.

Make you nervous? It does. Of course, it's the classic sign of complacency right now. But the point is the earnings on the regional banks, the market action today is saying they're not as worried about the regional banks as they were. I mean, you're off to the best start of earnings season in some 20 years. Yeah. In terms of 90 percent of the beats, 30 companies reporting 90 percent early, right. 30 companies doesn't a season make. And this week it's on big time. And of course, now we're waiting for the big disappointment. Who's going to disappoint? Somebody is going to come out, you know, and say something that

people are not happy with. But for the moment, the earnings season is passing the critical test about net interest income with the banks, worries about loan growth dropping. All of that is not as bad as feared at this point. Now, the big question still is, can you cold the earnings up for the second half of the year? Because all the earnings are back, and you know that, right? They're all down 5% Q1, down 5 percent Q2, up 10 percent for Q4. That's there's the soft landing for you. Nobody's anticipating a big, hard landing right now. And the question is, are we going to get the kind of guidance that will support that market, the primary market thesis that we've got?

Let us get through big tech. By the way, Dow's good now for a quarter of a percent. That's better than 85 points. S&P 500, as we approach the close here with some 30 seconds or so left, is up about 13. You're going to be watching tech really closely in the next couple of weeks, Bob. It's been a sideways move up for the last week. It's been the consumer staples name and the cyclicals like industrial materials. That's good. It helps broaden the overall rally out. We don't want to depend on tech too much. 41-50 on the S&P. 29 points from a new high for the year.

All right, and a high of the day for the Dow as we go out, trying to push the triple digits. I'll see you tomorrow. Into overtime now with Morgan and John.