Closing Bell - Closing Bell: Can the Breakout in Apple Continue? 3/6/23

Episode Date: March 6, 2023

Can Apple’s breakout continue and is it a sign that the rally can too? BTIG’s Jonathan Krinsky gives his take. Plus, shares of Snap surged in today’s session as lawmakers are preparing legislation to ban TikTok here in the U.S. Akex Kantrowitz of Big Technology and Casey Newton of Platformer weigh in on what could be at stake. And money manager Emily Roland of John Hancock is raising the red flag on what she is calling the biggest mistake being made on Wall Street.

Welcome to Closing Bell. I'm Scott Wapner from Post 9 here at the New York Stock Exchange. This make or break hour begins with stocks trying hard to eke out another gain. Here's your scorecard of where things stand with 60 minutes to go in regulation. The Dow's been up all day, weakening though throughout the session. Interest rates turned around, perhaps getting ahead of the Fed chair's testimony on Capitol Hill tomorrow. You can see the S&P still hanging on to positive territory as well. But two Dow stocks primarily the story today. Merck on some positive new drug data, as you just heard.

And Apple, which has been on a tear lately, up some 6% or so in just the past three trading days. And that leads us to our talk of the tape. Can Apple's breakout continue? And is it a sign that the rally can too? Let's ask star technician Jonathan Krinsky of BTIG had a new note out today. It's good to see you. Welcome back. The question of the moment is Apple's run sustainable? It's good to be here. You know, we don't think so. A couple of key points we start with first, you know, in absolute terms,

this one fifty six level for Apple has just been so critical at turning points over the last 18 months, all the way back really to the fall of 2021, where it initially topped out. It then acted as support several times in early 22. And then, you know, lately it's been acting as pretty key resistance, topped out last fall in October, again in February. So, you know, it just seems to be this crucial pivot point. You know, today's move felt a little exhaustive to us, kind of gapping up after two big up days, I think on a new analyst note, but it puts it right at that downtrend from the August highs. And, you know, these type of gaps in this market tend to get filled. It's not a breakaway market

where, you know, you get these upside gaps and they just continue to the upside. It's a market where really gaps in both directions tend to get filled pretty, pretty quickly. So we'd expect this to be kind of, you know, a tactical high here for Apple. You draw the line or the relationship between Apple and the small caps. And I wonder if you can explain why and what the relevance could possibly be between the biggest stock in the market and a couple thousand of the smallest ones. Yeah, this really stood out to us this morning. And I think the divergence was a bit wider. Apple was beating the Russell 2000 by over 5 percent this morning, which was the biggest. I'm sorry, that was on a two day on a two day basis is beating small caps a two-day basis. Biggest such move really in the last year. The only two other dates that were even close were September 20th of last year and

February 3rd of this year, both of which did see some fairly decent downside on the indices following that. Of course, the sample size of two is pretty small, but I think the takeaway here is that we're not seeing the broad-based breadth that you would expect. In fact, you're seeing the opposite today where the smaller 2,000 stocks and by many accounts, the majority of stocks are actually down today. So I think to us, it feels like you had a decent two-day rally last week. Today didn't get the follow-through necessarily. It really just felt like back to kind of those 2020 days where a handful of the FANG names were doing a lot of the heavy lifting. And to us, that suggests it's kind of,

you know, this rally is feeling a bit on its last legs. Okay. We'll leave it there. Jonathan, thank you very much. That's Jonathan Krinsky, BTIG. Now let's bring in CNBC contributor Adam Parker of Trivariate Research to see what he makes of what Mr. Krinsky just said. It's good to have you back. Thanks for having me. You're not really a believer in the move higher that we've had in stocks anyway, right? Well, I mean, I think the data points that we're looking at,

from rates to speculation to valuation to earnings expectations, all look worse than they did three months ago. I mean, with Apple, I don't know enough about two-day technicals to dispute what he said, so I'll go with it. But, I mean, the biggest stock in the market having what looked to be some kind of breakout is not insignificant to you, though. No, I just think it's, you know, the market ripped in the Q4 up 5%, 6%, and this thing was down, right? And now it's up a ton, and now it caught an upgrade from a big firm.

So, sure, it's up today, but I don't think that means it's in a better position. I mean, I've looked at Apple a lot lately, actually, and one thing that really surprised me is in the last 10 years, their net income has only grown 9% a year, right? If you told me 10 years ago it was going to grow 9% a year, I'm not even sure you and I would have sat here and said it was a growth stock. Now, they bought back 40% of their shares, and so it's been a monster. But, you know, I don't know.

Looking out forward to me in a longer-term view, I don't know how I could like that versus, like, the energy sector, which is the same size. So, you know, it depends on your horizon and what you're really trying to accomplish when you invest, but it doesn't make sense to me. How do you size up what's at stake over the next, as we say, 13 trading days?

You've got Powell tomorrow on the Hill, and all eyes are on that. And maybe the fact that yields turned around today to move higher, maybe trying to get ahead of what could be more hawkish testimony from Chair Powell tomorrow. But then you got the jobs report. You got CPI, you got ECB, you got Fed decision.

13 critical days. Yeah, I just think the risk reward, I mean, look, we wrote in our note you saw this week was, what is the bull case? If I show up today and I think we're going to end the year 10% higher in the S&P and I want to really deploy some fresh capital at sort of 40, 50 round numbers, I got to believe in something close to 4,500, say, at year end. What do I need to believe? Like, what is that bull case? I need sort of slowly declining inflation. I need the Fed to get less hawkish but pause and not ever, you know, data get worse where they're going to cut.

I need, you know, sort of input costs to come down so the companies can expand. I mean, there's a lot of if I need, I need sentiment and positioning to then therefore think things are going to be a lot better in 2024. It just feels like the risk-reward skewed to the negative to walk in today and get very, very excited, just given how much worse the data looked than three months ago. I mean, Fed done soon, inflation down faster than people think, earnings not as bad as feared. That's that hard to put that story together, you think? I think it is. If the Fed's going to get dovish, I think that's going to happen because the economy and earnings are really going down. What if they don't get dovish, they just get dunnish?

Yeah, I mean, so that's what people want. We had 20-something meetings, a couple of dinners with investors last week. Every meeting I said, what do you think the bulk case is? It was tough. The Fed getting out of the way. So I said, well, what does that mean? What does them getting out of the way mean? I think that means you think they're pausing for a long time because we're in this Goldilocks zone of data on inflation and jobs. I mean, anything's possible, but that certainly isn't the highest probability outcome. I think the highest probability outcome is they stay hawkish until they can handle the services and wages part of the economy and get inflation much lower. You still think the macro gets worse as we progress, like Marko Kalanovic at J.P. Morgan is talking about, right? He's one of those who has tried to

be pretty bullish last year in the face of a lot of negativity. Then, as I've been saying, kind of saw the writing on the wall. And now he expects the macro to deteriorate. Wrote today, one strong day or a week in risk does not change our negative outlook that is predicated on weakening macro fundamentals. I think we've got the same view on the macro part for nine months. Erode, not implode, but not sure 24 earnings will be above 2023. So one of the reasons I got more worried a couple weeks ago is I think the 24 numbers are out

and they're 11.5% earnings growth expectations. So now I know I'm going to have meaningful down revisions in the second half of the year because I don't see a big fiscal stimulus incremental or big accommodative monetary policy. So I need earnings to really do well. I think things are okay. I still think I can find things that are going to outperform

in an eroding backdrop, but I don't see how somebody could sit here today and say the probability economy improves is better than the, you know, higher than the probability it deteriorates. No, but does it, I mean, no one's going to come out and necessarily say it's going to improve, but I feel like the base case has become, okay, well, we can get a soft recession. I mean, you don't have to have the whole thing fall apart, do you? What if it just doesn't get any worse? I think the part that's the least compelling, yeah, I hear you, right? I mean, I think the part that's least compelling is simply I can buy, you know, after tax on a, you know, whatever duration I want, six months to two years, something that yields close to four and a half after tax, maybe. So that's guaranteed.

Equities don't look that compelling unless I really believe either the multiples are going to expand a ton or earnings are going to surprise the upside. So I'm not in the camp that earnings surprise the upside. So now we're talking about the multiple. That's a bit of a gamble, and that comes down to perceptions about the Fed. So you need to believe that. Yeah, it's that simple. It's got to be earnings or the multiple.

But that's still the biggest problem for equities and for stock investors, that the bond market is just too much an attractive alternative. I think so. And I think for a lot of people, it's the first time in their investing lifetime. And I know for me. Money markets, too. Yeah. We talked about it on the air last May.

I mean, that's when, you know, chuckleheads like me started laddering, you know, treasuries for the first time in our investment careers. I used to have CDs. Now I have a whole treasury schedule. I know, but it's compelling. It doesn't give you pause that sort of everybody is on the same side of the boat at this point. As you said at the very top, you go talk to people. That's the biggest bull case is that every top-down guy's got a maximum of 4,200.

That's definitely the biggest bull case. But, you know, just because everyone knows I'm ugly doesn't make me handsome. I mean, you know, sometimes it is what it is. Like the earnings expectations are high. The rates are up a ton. Perception about rates are up a ton. The valuation went from below 15 times in October to 18 and change times now. You know, speculation is rampant.

We got a lot of stuff up a ton from lows. So the only thing that really could be offside still is a little bit of positioning. And that's tough to play for that, you know, dream that I guess I, you know, I buy my little dream today. I sell it to a sucker with a bigger dream later. And that's getting harder. But when do you know that it's time to play for the other side of what we're in? At some point you do. I think that's right. I think you've got to believe that earnings or margins can surprise to the upside or that the balance sheet repair can be massive. One of the reasons I really like energy, we've been hammering on metals,

is because inventory is low, expectations are low, and they're pretty cheap. So I think that's a pretty good risk-reward. I'm just more worried about areas that everyone loves the stocks, there's a big inventory problem, and or, you know, I need to believe the economy accelerates. What do you mean, like retail, like discretionary, which has led year to date? It has because it got, you know, crushed last year, and Q4 was probably. And the consumer's been holding in. And the consumer's holding in at the low end. But I think a lot of those stocks that miss,

one of the things that's interesting about retailers in particular, even the ones that traded seven times earnings, when they miss, the stocks go down a lot. So I don't have that. You know what you want? You want stocks to miss and not go down. Then you say, OK, now the bad news is in the price. And somehow they show some better progress. So I haven't seen stocks that are cheap miss and hold in. In consumer. I'm not. OK, in consumer. I'm glad you make the distinction because we have had some stocks

that initially went down on earnings and then turned around. Like Apple. But that's a positive sign that you want to look for. You know, I think it's, yes, I'd say that's right, particularly with cyclicals or businesses where you're trying to gauge the inventory. But some of these large ones like Apple, which I'd say 80% of its returns are explained by macro factors and flows. It's not really people's view of the fundamentals are way better. I mean, I don't know how somebody could argue that, you know, it's worth whatever the analyst said, 30% more. So they're saying $750

billion, that thing's worth more. I don't know, man. There's a lot of other things that, you know, that's a lot of wood to chop. So you don't think that the fundamentals of an apple are better than the fundamentals of an industrial, for example, in what is likely to be a slower economy? I think it really depends on... You have to bet on one versus the other? If you're bearish, I guess you're making a relative call on their estimate of achievability in a six-month view. It depends.

If you're an oil and gas exposed, you're an agricultural exposed, some industrials are going to be pretty good. I mean, I think it just depends on the end market. I just struggle with what's the long-term story there. I'm not saying the jig is up, but obviously obviously if I can look at the cash flows and look at the businesses, I can own the energy sector 5% of the S&P. I can own Apple at 5%. I'm taking the energy sector every day of the week and twice on Sunday.

So you take a cat or a deer over an apple? Those have other businesses besides just oil and gas, but I'll take— You said ag. That's what made me think of deer. Well, I think the end market's good. I'm saying some of the industrials have end market. Yeah, yeah, I could be right. What about, why isn't energy working?

You know, I think the last three Wednesday prints from the government data look a little high on inventory, so people were worried about that. You know, I would have thought a possible catalyst could be China's GDP guidance over the weekend. It didn't really come up to be an upside surprise. So that was one of the things that maybe could have gotten us a little bit more positive. If you're looking for bull cases, it could have been evidence that they're going to manage the economy to a higher recovery than people thought. They kind of put a little bit of water on that fire over the weekend. So I thought that was another incremental negative. I think ultimately the call on energy

is a simple one. Capital spending of the biggest 120 companies is just structurally way lower. Demand is going to hold in it. So eventually, you're going to have higher prices. So if you want to make a high probability bet, it's that globally, consumers will be spending more money on energy-related items over the next 2, 3, 5, and 10 years. It will steal share of their discretionary and non-discretionary spend. And that's almost a certainty. It's good having you here.

Always good. Good to see you. Thanks for coming back. All right, that's Adam Parker joining us on Trivari having you here. Always good. Good to see you. Thanks for coming back. All right, that's Adam Parker joining us on Trivariant right here post-9. Let's get to our Twitter question of the day. We want to know, should you fade Apple's rally? You can head to at CNBC Closing Bell on Twitter to vote. We'll share those results a little bit later on in the hour.

In the meantime, let's get a check on some top stocks to watch as we head into the close. Christina Partsenevelos is back with that. Dexcom, biggest slagger right now on the NASDAq 100. Dexcon makes glucose monitoring systems for diabetes patients, and the FDA cleared competitor Abbott Labs for a rival glucose monitor. So that's why you're seeing Dexcon shares down almost 7.5 percent. And if you look at Abbott Labs, you expect to be up, but it's also down over 1 percent. And secondly, the entire semiconductor sector is lower today with the exception of Micron, which is up almost, what, half a percent at the moment. Not even. It's falling now. The stock was beaten down last week, so you could see possibly some people buying in.

Marvell technology you're seeing on your screen down 4.5%. There were quite a few analyst price cuts on Marvell after its earnings came out last week. The chip maker warned they are still dealing with an inventory correction. Scott. All right, Christina, thank you. We'll see you in just a bit. Christina Parts and Novelist. We're just getting started here on Closing Bell. Up next, trading snapsurge. Have you seen the social media stock today? It is jumping big time. Check that out. Better than 11 percent. Lawmakers, well, they reportedly have a plan to ban TikTok in the U.S. We'll debate what that could mean next for that space and later what one money manager is calling one of the biggest mistakes being made on Wall Street right now.

We explain until you have best position your money. You're watching Closing Bell on CNBC. We're back on Closing Bell. Shares of Snap, there There they are surging today. Better than 11 percent lawmakers said to be preparing legislation to ban TikTok here in the United States. Senate Intelligence Committee Chair Mark Warner says he's planning to introduce a bill as early as this week. And now a new report just moments ago that the White House itself is considering pushing Congress to give it more legal power to deal with TikTok and other tech companies that could expose sensitive data to China. Let's bring in Alex Kantrowitz of Big Technology and Casey Newton, a platformer. Both are CNBC contributors. Guys,

it's great to have you back. It's been a minute. So good to see you, Alex. You first. So you got these two stories now. You got Mark Warner, the senator, ready to introduce a bill as early as this week, and now the White House leaning in, too. What do you make of it? Well, it is a big deal that we now have Democrats starting to step in and say this is something that they're going to want, especially if Warner introduces the bill. That could signal there's some bipartisan support here. But I think something that we need to talk about is that the federal government has been in negotiations with TikTok on some assurances that it can get in order to allow it to keep operating in the U.S. And so what we might be seeing here with the White House

getting involved is just a little bit of posturing on behalf of the White House and the federal government saying we are going to have these negotiations. There are some concessions they want to extract. And I think that's what's happening here. It's a pressure game. Casey, posturing concessions are outright banned. What do you think is the most likely scenario here? Well, I have to say that as the weeks go on, I think a ban is looking more likely, certainly more likely than I think most people are giving it credit for. This is something that has bipartisan support. It's the rare issue in tech that does. And so I think if the Biden administration really wants to ban TikTok, they're about to have legislation that could actually come to the president's desk that would accomplish that. Alex, do you think that's the most likely outcome as well?

I do not. I think we're heading into a big election cycle. We're heading towards 2024. And Senator Mark Warner said this today in his comments, right? You have TikTok that's used by 100 million Americans for 90 minutes a day. That means that TikTok is more popular than Congress, more popular than the president in some ways. And if you ban it, that could cost votes in some very important battleground states from people who are angry at you taking away their entertainment, right? This is entertainment for people above all else. So, you know, for me personally, I would say that it doesn't seem likely

this is going to happen. And if it does, it's going to be a very costly move politically and would be shocking to me. So it's funny, Casey. I mean, here we are looking at Snap, right? It's having a huge day. We haven't even mentioned that company

as related to the TikTok stories, which we just discussed for a few minutes. I mean, what do you think the ultimate impact here is for a snap? Is this, you know, a gain in stock that just is unsustainable? It's a moment of euphoria thinking that one piece of their major competition is going to be banned? Because I can still think of, you know, YouTube and I can still think of of of Facebook reels, et cetera. Yeah, well, look, we know what happened in India when Indian banned TikTok, and that was that the other short form video platforms did see a huge spike in use, in particular YouTube shorts and Facebook Reels. So I don't think it's irrational for investors to look at what's happening in Congress right now and think,

you know, if a ban were to take place, Snap will be one of the beneficiaries. At the same time, I think that Shorts and Reels are much further along in growing an audience of creators who are creating videos for their platforms than Snap is. And so if TikTok is banned, I suspect it's those two platforms that are going to see the most immediate short-term benefit. Alex, what is the state of Snap? How would you describe it, right? They come out, they say, OK, we've got 700 million monthly active users, 750 million monthly active users. We can get to a billion in a couple

of years. We're cutting costs. We're downsizing the business in terms of layoffs. What is the state of that company today? The good thing that I would say about Snap is that it's focusing on the core business now, right? We're not hearing so much about drones or other science project. We're hearing about the company focusing on what Snap is and making things available like Snapchat Plus that's going to appeal to creators and already has 2 million people subscribing to it. However, I think that most of Snap's growth in the U.S. and North America in particular has started to tail off and you're starting to see a lot of international growth. And they're starting to really corner the market on people 25 and under and haven't really been able to break through past that and haven't been able to build the ad platform that's going to allow them

to reach the mass population. So I think Snap is kind of in a holding pattern. All that being said, it's not going to be in the same league with Facebook and Instagram or even TikTok. And, you know, we're going to have to see some major changes if it's going to start to play in that game. And that's why when I see these gains off of the TikTok ban, they're surprising to me. Those ad dollars are going to go to YouTube and Instagram if things continue as they stand today. Casey, speaking of playing in bigger games, what do you make of this new chatbot that Snap's talking about? Legit? Is it just jumping on the bandwagon of AI? How do you see it? Yeah, so I've been playing around with it a little bit this weekend, and it's fine. It's not really any better than the version of ChatGPT you can already get for free on the ChatGPT website.

So, look, I do think that there are probably a bunch of bored teenagers who are going to enjoy having a virtual friend in their pocket. I think there's probably a lot that Snap can do with that. But man, over time, I don't know that that sort of thing is going to be able to sustain a $4 a month subscription. I think these things are just going to be available in a lot of places and for free. Guys, we'll see how it develops. Appreciate it. As always, Casey and Alex, we'll talk to you again soon.

Coming up, our next guest highlighting one part of the market she says has gone from uninvestable to unavoidable. J.P. Morgan's Gabriela Santos makes her case just after the break. And throughout the month of March, we are celebrating women's heritage, sharing the stories of women leaders in business and our CNBC teammates and contributors. Here is the CEO of Ventas. From a very young age, I've really been interested in achievement and getting things accomplished. And my parents instilled that in me along with a really good work ethic. I think it's really important to be fearless and to be confident.

And one framework I've used in decision making for my own personal career, as well as for Ventas, is the upside downside, where if you really can see an upside that substantially outweighs the downside, that's the green light to go ahead and make that decision and go forward. We're back from uninvestable to unavoidable. That is how my next guest is describing the opportunity in China, saying it's time to lean into the growth upturn. Joining me here, Post 9 to Explain, Gabriela Santos of JPMorgan Asset Management. Nice to see you back. Nice to see you, Scott. So that's a big statement, uninvestable to unavoidable.

Have we really gotten there? So I think for the past two years, uninvestable had become a bit. Have we really gotten there? So I think for the past two years, uninvestable had become a bit of a buzzword. We're talking about China. We had a 60 percent correction in the equity market. Interest rate differentials started to turn in the U.S. favor. So really, the rewards weren't worth the risk of thinking about a China strategy. And if anything, there was a bit of a liability in having a China line item in a statement. I think this year, with the 60 percent rally we've seen off the October lows and with this massive growth upswing that we're expecting in China's economy and earnings, it's unavoidable to at least have a strategy about China, whether ultimately that is investing directly in China,

as we would argue, we would be overweight Chinese equities, or whether it's playing that story indirectly through Southeast Asia or certain European companies, you've got to have a strategy. A better market performance, a reopening, doesn't change the lack of trust issue, which some investors still have no matter what happens. How do you deal with that? Yeah. And we recently released our new guide to China. And there we make the argument that there is a very powerful story to invest in China.

It's the reopening. It's also the broader pro-growth turn that China has taken, which usually tends to last a couple of years. It's also the expectation that there's a lot of alpha to be added beneath the surface post-initial first wave of COVID reopening. But ultimately, we do still make the case that this is the same China. You still have to have a limit to exactly how much China you can add directly because it will continue to come with double the volatility. And for some clients, ultimately, the decision is not to invest in China directly, to play it more indirectly through other emerging markets or even developed companies like Europe. OK, so let me ask you that. Some of the neighbors, if you will? Do I feel like I can get similar upsized returns with lower volatility and lower risk by playing the region, just playing it elsewhere? And I don't have to

worry about some of the regulatory and other issues that are out there. And I just bring up what JP Morgan CEO Jamie Dimon said last week. The thing I worry most about is Ukraine and our relationship with China. That is much more serious than the economic vibrations that we all have to deal with on a day-to-day basis. And I think we'll continue having this underlying vibration over the next century, which is a mix of competition, at times diplomatic tension between the U.S. and China, which ultimately means there is a certain level of volatility or premium that should be associated with investing in China directly. When it comes to public markets, something that's liquid you can get in and out, that's less of a concern where we've seen some

changes from our clients is more in terms of private markets where there is illiquidity and longer term horizon. When it comes to playing China indirectly, I think the reopening theme, yes, you can access with other EM countries, which by no means don't have issues of their own. But certainly you can play the reopening theme, the return of Chinese tourists through Singapore, Thailand, Vietnam, Korea, and developed countries like Japan and Europe. So I had a guest, I don't know, within the last couple of weeks who has a similar thesis, and you alluded to it earlier by just playing the European luxury brands, that that's the easiest and, if you want to say, safest way to do it.

I know you don't pick stocks per se, but that's the basket that you would be looking at? So the indirect way to play China is through the return of Chinese consumption. And European luxury companies derive 40 percent of their revenues from Chinese consumers alone. And there's a big benefit of Chinese consumers being able to go back to Paris, Rome, Milan. They don't need to pay taxes like they do when they buy those luxury items domestically. So that's that's an interesting opportunity. And we don't feel like that's fully priced in quite yet. Let me turn your attention to here at home. U.S. markets, 13 days that are especially critical.

That's how we've been kind of thinking about things today. Beginning tomorrow, Fed chair on the Hill, jobs report, CPI, Fed decision. We've had a couple of days move here in the market that's made people feel a little bit better. How do you see it? So I mentioned and we started off talking about China because there we do have a conviction on the turn in the macro direction, something that can carry us over the next couple of years. And it was reiterated at the National People's Congress of focus on growth. In the U.S., there is much less visibility on the cyclical macro picture. Every client we speak to has very low conviction on the macro picture. Every guest we speak to, by the way, is very similar. Exactly. And there's just a certain

lack of humility we need to have when thinking about all of the different possibilities and elevated probabilities we have in the U.S., soft landing, hard landing. So within U.S. equities, we don't feel like it's the time to be taking a big stance, and that's underweight or overweight, by the way. Where we do feel like there is conviction in the U.S. macro picture is that a no landing is not a steady state. The Fed will not tolerate higher inflation for longer. And so what that means to us is one way or the other, inflation should normalize.

And ultimately, that's why we do feel have conviction on bonds. It's a matter of how we get there. It is a matter of how we get there, which the kind of the journey does matter for stocks. Yeah, for sure. What we're learning, it's not linear for certain, right? The way that some people might have thought it's going to be a little more bumpy and volatile, more bumpy, more confusing. You add to that the post pandemic world, the seasonals, and it just makes, as you said, the next 13 days really, really key. All right. It's good to see you again. Good to see you, Scott. Gabriella Santos back with us

post nine. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos, of course, standing by with that. Christina? Well, we've got one bank that's arguing recent corporate job cuts have yet to be felt across the luxury market, and that's sending shares of one retailer down 5%. I'll have the name and much more after this short break. Got 20 minutes to go until the closing bell rings, and we're still trying to eke out that gain we talked about, but we've got some work to do. S&P is flat, and the Dow, which has been up all day, is only up by 21.

Christina Partsenevelos back with a look at the stocks to watch, the key ones as we head into the close. Christina? Well, let's start with shares of RH, previously Restoration Hardware. You know they're an expensive retailer for furnishings. While the shares are down almost 5% right now after a downgrade from Jefferies, they lowered the price target to $298 on concerns the luxury housing market is struggling to stabilize and that recent job and compensation cuts really haven't been felt across the luxury furnishing sector. For example, they cite March 2023 investment banking bonuses that fell 30 to 50 percent, which is why

they are moving to the sidelines for this particular name. Natural gas stocks are in the red today after NatGas posted its worst session since last June. You've got Comstock, Chenier and Antero. They're all firmly in negative territory. And speaking of energy, we'll hear from the Baker Hughes CEO next hour on Closing Bell Overtime. Be sure to tune in, Scott. And we will. Christina, thank you very much. Christina Partsinello. Last chance to weigh in on our Twitter question. We asked, should you fade Apple's rally? Head to at CNBC Closing Bell on Twitter. We'll bring you the results just after this break.

Let's get the results now of our Twitter question. We asked, should you fade Apple's rally? Result, pretty split. Yes, is the winner, near 51% of that vote. Up next, signs of life in the IPO market. Looks like one company might be making a big push to go public this year. And what that might mean for the world of IPOs in the broader market. That's just ahead when we take you inside the Market Zone.

All right, we're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, Emily Rowland on what she says is one of the biggest mistakes being made on Wall Street right now. Papazani on some signs of life in the IPO market. But, Michael, we kick it off with you. Bond yields turned around at some point midday. We've really been carried all day, too, by Merck and Apple. You take those out and it's a nothing burger. Yes. The rest of the market, a little bit heavy, backing off a little bit. And it does make sense. I mean, I wouldn't blame

anybody for being slightly apprehensive ahead of Powell's testimony tomorrow, not because he's going to come out kind of throwing grenades, but more just the direction of surprise is probably toward more hawkishness versus less reacting to January data. At the same time, by the way, the second half of February seemed like maybe you got a little bit of deceleration in certain things like consumer spending. So, you know, the yields hesitating, but nudging higher, putting a little bit of a two day rally on standstill. I wouldn't say we've really changed anything, but you won some benefit of the doubt just the way the market gathered itself at the end of last week. See if they can do anything.

So Merck moved on news. Apple's just been moving, right? And the stock was up 6%. Well, with an upgrade. Yeah, or a new buy rating. But, I mean, it's up 6% in a few trading days. It was already on the move before today. It was just sort of that last push higher.

But you heard, you know, Jonathan Krinsky said, not sustainable. Well, Apple has always been the kind of stock that seems to have a sprint toward the end of a broad market rally. I'm not saying that's necessarily the pattern right now, but that is the case that sometimes people just grab at the obvious. I don't know that that invalidates what else is going on, because what you're also seeing today is, I think, just normal pullbacks in some of the more hot areas of the market, materials, industrials backing off just a little bit and consumer cyclical. So those have been the leadership areas. A little bit of, you know, maybe a splash of cold water from the China growth expectations took down global mining related stocks. That's been right at the center of that strong cyclical upside trade. Emily Rowland, John Hancock Investments, one of the biggest mistakes being

made right now on Wall Street, you say, is what? Hey, Scott, I think that there is an element of complacency setting in. And Mike just hit on this a little bit. When you look at some of the cross asset leadership as of late, we're back to the high beta cyclical, almost speculative corners of the market. We look at areas like European equities outperforming small cap stocks, industrials, materials, even high yield bonds and bank loans on the credit side. And to us, this is markets telling us that there's basically zero probability of a recession. And to us, I can't give you the exact number. I'd love to. But it's definitely way higher than zero here. We do still think that the

lagged impact of Fed tightening is going to do some damage to corporate earnings. It's going to crimp margins. It's going to cause challenges to the labor market and ultimately the consumer here. Markets are acting like everything's awesome. I just think that they're maybe not appreciating the fact that Fed policy does work with long and variable acts. So what does that suggest? And where do you think we're going on the S&P 500? I mean, we would be trimming into strength in these riskier pockets of the market and redeploying cash into more defensive areas, higher quality parts of the market. There's been a lot of talk in the tech sector today. You're going to find a lot of that in areas like large cap growth.

These are companies with great balance sheets, lots of cash on their balance sheets, good return on equity and a more limited need to tap the capital markets in order to grow. So we like that. And then we're also just doing the math on stocks versus bonds right now. And you look at the equity market, it's just tough to see a big sort of bounce higher from here, given the fact that we're trading at 18 times forward earnings, given the fact that there's a pretty generous, you know, that's a generous multiple earnings estimates. One of your guests earlier talked about 11.5% earnings estimates for next year. We think that's going to be pretty tough. So we want to be selective there. But bonds, we are loving the income on bonds today. You're looking at 5%, 6% on investment-grade corporate bonds, locking that in for a long period of time.

We think that's a really competitive and compelling option, given some of the challenges to the macroeconomic backdrop. I'm confused, though. You don't believe the move that we've seen in certain sectors of the market. You're obviously cautious, but you want me to hang out in large cap growth? Large cap growth is really where you're going to find quality. Now, by the way, I'm not loving mid and small cap growth. That's where you're going to find a lot of unprofitable companies.

There's not a lot of quality there. These are companies that are really sort of growth at any price, companies that need to engage in the capital markets. We're not loving that. But frankly, the boring old S&P 500 tech sector, that's where you're going to find that quality. Again, lots of cash, good return on equity, more durable profitability. Listen, when we're going into a global economic slowdown, we've got to figure out where the best relative opportunities. And on the equity side, we'd be thinking about that.

We also like mid-cap value on the other side of the house. Well, interesting call. Emily, I appreciate your time very much. That's Emily Rowland. Bob Pisani, we're getting some life, a much-needed life back in the IPO market. Boy, do we need it, Scotty. The chipmaker arms providing a little excitement

in the more of an IPO market. The chipmaker's reportedly eye little excitement in the more of an IPO market. The chipmaker is reportedly eyeing an $8 billion IPO with a valuation of anywhere from $20 billion to $70 billion. Let's call it $50 billion. Split the difference. Reportedly passing on the chance for a dual listing with the U.S. and London. Now just opting for a listing here in the U.S. An $8 billion IPO would be the fourth biggest one in 10 years, believe it or not, after Alibaba's record $21.9 billion in 2014. Rivian was $11.9 billion, Uber at $8.1 billion. This is all before the green shoe. So we had a disastrous 2022. The IPO market is still dormant in 2023. Look at these

numbers. We've only raised $1.8 billion so far in newer offerings. Give you an idea how big Arm's $8 billion offering would be. 2022, look at that. Only $7.7 billion in newer offerings. Give you an idea how big arms eight billion dollar offering would be 2022. Look at that. Only seven point seven billion dollars in new offerings. Arms IPO alone at eight billion would be bigger than the entire IPO market in 2022. That's how pathetic it was last year. So look at the Renaissance IPO ETF, the basket. This is the one we look at. Sixty IPOs have gone public in the last two years. Disastrous 2022. It was down more than 50 percent. That's an intraday you're looking at right there. So, Scott, it's hard to read through what this means, this announcement or this proposal for the overall IPO market. What the IPO market needs right now, stable stock market and lower rates.

Higher rates are just a killer for the IPO market. Remember, so many of these IPOs, they're growth stocks, biotech and tech, like ARM, that would be negatively impacted by higher rates. So they're obviously eager to go. The rest of the market, kind of hard to read through whether or not this is going to be a turnaround. Scott? No doubt. Mike Santoli is sitting here with me, Bob. I mean, this is almost a special situation, IPO.

And that's the reason we're even talking about it now in what is a still very uncertain market with high rates, which Bob says is bad. Yes. Often the way it goes, though, when you've got to break one of these logjams in the IPO market, you know, if you have a frozen market, a bear market, and you have a motivated seller that really needs to get liquid. I mean, I remember in 2009, Visa went public. Why? Because the consortium of banks that own them needed capital. And it was a great IPO and you got a reasonable price for it because it was kind of a hostile market. So it's not a surprise. What's fascinating, by the way, about

that IPO ETF, it's been so long since there were enough IPOs to go into it that a lot of those IPOs are way older than two years because they haven't been able to refresh the list. So it's really almost like the vintage of 2020 and 2021. Part of this, Bob, too, is this doesn't necessarily open the big door to other IPOs. As we said, this just what this one just seems to, you know, the timing needs to happen for this now. Yes, I think Mike's right. They're being motivated by particular need to raise cash and do something in particular. Everybody else is still sitting out there. I keep asking. Every other week I call my IPO friends.

Tell me something exciting. Give me a name. Tell me something. I have heard nothing. This is the first major one that I've heard in a long, long time. But until you get some stabilization in the interest rate scenario, it's tough to say. We're going to see big tech IPOs coming that don't have some kind of pressing need for cash. Yeah. Bob, thanks. And Mike, just back to you.

I mean, the they, by the way, SoftBank. Yes, of course. And they couldn't do the deal with NVIDIA. So the next best option is go to the markets. They want to monetize the asset whatever way they can. And it's probably going to happen in that mode. Now, you probably do have some very seasoned private companies. I mean, there's reports out there that Stripe is trying to raise money privately to raise cash essentially to make their employees good on

some of their own equity. Right. So because the market didn't open up enough for them to get out there and do an IPO. So all their employees essentially, you know, feel as if they need to be paid for all the equity they want to get out of. So that's employees essentially, you know, feel as if they need to be paid for all the equity they want to get out of. So that's a really inefficient way to do it when you could just do an IPO, but they're just not going to be happy with what the fintech valuations are right now. Yeah. I mean, look, and you see companies like Goldman, which thrive in those environments where, you know, deals are ripe and public offerings, et cetera. They need it as much as anybody else. What is happening, though, is one of the biggest starts to a year

in terms of corporate bond offerings, even though yields are higher and theoretically the sellers are going to have to pay more, there's a real meeting of supply and demand at these levels. So the capital markets are still pretty flush. Corporate spreads are still pretty tight. So in other words, it's not as if the entire system is kind of being starved for capital. It's just not coming through equities because you just don't have that kind of risk-seeking growth capital that normally would be a real eager buyer for IPOs.

So we're going to get the two-minute warning in about 30 seconds time. I want you to size up for our viewers really what you feel is at stake starting tomorrow when the Fed chair goes to the Hill because it's the first of many events over the next 13 trading days that could quite literally decide what happens in this market for a matter of months. Sure. Powell will absolutely have to say that the December outlook of the Fed in terms of where rates would go to just doesn't really apply right now. It just looks a little bit stale because they didn't expect a strong growth in January. Their own projections were for a much weaker economy than we've seen so far, probably also lower inflation.

So he'll have to reset expectations above the 5.1 percent terminal rate that they had out there. But the market's already beyond that, right? The market's already pricing in closer to five and a half at this point. Does he feel the need to drag the market sites up towards six percent? I kind of doubt that he's going to front run his own meeting in two weeks and say that there's anything definitive about this. But you have to acknowledge both sides, while also probably saying that he doesn't necessarily feel as if you have to torpedo the whole economy yet. You know, they've been lucky. They've been able to say, well, we can't rule out a soft landing. We can't say that you have to bring unemployment much higher to get inflation down.

Maybe at some point they'll have to say that if inflation is really sticky. But for now, he can thread the needle, I think, a little bit longer. We're going to be surfing from one inflation report to the next. So that brings up the CPI next week. Yeah, a jobs report next Friday, CP CPI and then ultimately the Fed decision. I wonder, I mean, it's, you know, look, these things are political, too, in nature when the Fed sure goes to the hill. He's probably going to get some incoming fire. It's going to be noisy. It always is. There's always these non sequiturs and these kind of wild

things he's supposed to opine upon. But I think at the core, it's going to be about, you know, are they progressing toward their goal? What are the lagged effects? What do they expect the economy is going to do in terms of response? Because, you know, we keep dialing forward the date at which, you know, the economy is really going to have a slowdown or maybe dip in a recession. And that's just because the non-rate sensitive parts of the economy have held up much better than anticipated. Speaking of rates, I'm looking at the 10-year-sensitive parts of the economy have held up much better than anticipated. Speaking of rates, I'm looking at the 10-year, 397. Again, it was a midday move in interest rates today that unsettled the stock market, if you want to call it that,

which was primarily in the green for most of the day. Did almost give it all up, but a nice little move here as we head to the close. Dow's going to go out with a gain. That does it for us. I'll see you tomorrow.