Closing Bell - Closing Bell: Can the Fed Keep the Rally Going? 4/6/23

Episode Date: April 6, 2023

Is a weakening economy going to drag stocks lower or is a potential change in Fed policy good enough to keep the rally going? Tony Pasqueriello of Goldman Sachs gives his expert take. Plus, Former Federal Reserve Governor Frederic Mishkin breaks down what he expects from the jobs report. And, market expert Mike Santoli explains what he is watching as we wrap up the this shortened trading week.  

Tyler thanks so much welcome to Closing Bell I'm Scott Wapner live from post nine right here at the New York Stock Exchange this make or break hour begins with a final countdown to tomorrow's jobs report and all that is riding on the outcome is the labor market finally cracking is the economy too and does that mean the Fed will soon stop and what all of that would mean for your money we'll tackle those critical questions this last hour of trade. Here is your scorecard with 60 minutes to go in regulation. Some early weakness reversing a bit as the day goes on. Do have some dip buying today in tech. The Nasdaq tries to keep its weekly winning streak going. Communication services leading the way today. Seems clear, though, investors not really willing to make any big bets ahead of tomorrow morning. Yields a big story this week.

Also in wait and see mode. It brings us to our talk of the tape. Is a weakening economy going to drag stocks lower or is a potential change in Fed policy good enough to keep the rally going? Let's ask Tony Pasquarello. He's the global head of hedge fund client coverage at Goldman Sachs. Back with me at Post 9. Welcome back. Thanks, Scott. Are you a buyer or a seller of this market? I've been in the range trade camp for a while. I'm still in that camp. For a choice, I'd probably be a buyer of dips and a seller of rips. I think the first quarter was instructive for all that's changed in the past month or three months or six months in the first quarter. S&P was in the box. Thirty eight hundred forty two hundred. So I don't see

for all the big dynamics of the games changing. My guess is we're made stuck in the mud for a while longer. You keep talking about in the notes of yours, which have been must read for me, asymmetry toward bad outcomes. What does that imply? So even though I do think we're kind of stuck in the range, if I were to observe the tails, I have a hard time seeing the upside tail on the market. And part of that is here we are still, do I want to pay 18 times for virtually no expected earnings growth? And yet, as we've seen this week, it looks like the economy has lost a little bit of momentum. I still think we have a regional banking situation which remains unresolved.

And so my guess is if there is gap risk, it's probably more to the downside than to the upside. So when someone like Jamie Dimon says, you know, this banking crisis isn't over, I'm paraphrasing obviously from his shareholder letter this year, you think there are more shoes to drop in that whole story, whether it's on the regionals themselves or the fallout for, let's say, commercial real estate and frankly, wherever else. So our banking team was in D.C. last week meeting with regulators and clients. They've published on this. We did a bunch of client calls on the back of that. What I find interesting with big professional money managers is how wide the distribution of views is. Sometimes in this industry, we kind of cluster

towards consensus. I think the bid ask is very wide on this. You do. Still early days. I think the bulls would say, look, the policy firewall is in place. I think Secretary Yellen suggested they could run that play a few more times. Deposit flight has slowed down. I think the bears would say deposit flight still continues. We don't have a system wide guarantee just yet. And the regional kind of the forward earnings power of the space is in question. So I think that's still very much an open question. What about the Fed and what role it's going to play going forward? If the Fed says, first of all, if the Fed doesn't do anything in May, I know it's like 60-40 at this point on a 25 basis point

hike. What happens if the Fed doesn't do anything and implies that we're done? So as the great Paul Tudor Jones says, the Fed's trying to land a capsule on the moon. I think that mission's gotten harder over the past month. They're on one hand trying to fight what is still a legitimate inflation concern. We'll find out next week with CPI. Of course, it's expected to be 5.6%,

which is still a long way from target. And on their hand, they're attending to this regional bank situation. You know, I thought Bullard was interesting today. He essentially said we have traditional tools to manage inflation. That is the funds rate. That is forward guidance. That is the balance sheet.

And then we have a separate set of tools for kind of macroprudential reasons, financial stability. So they're trying to basically run both plays at once. Our view is the Fed will go 25 in in May. OK. They will go twenty five in June and that's done five and a quarter. Let's a turkey roast a little bit where we disagree with the market is the implied cuts. Well I mean yes they say five and a quarter. I mean the market right now is calling you know what on that Fed funds futures are at but four point one percent by January of twenty fourth. So the market doesn't really believe what frankly anybody from the Fed is saying. And that, with all due respect, is to the chair himself. And so part of me thinks that's a probabilistic thing, kind of a distribution of probabilities. I think the market may be saying, look, there's a 75% probability things are fine. And the Fed's not doing anything in the second half of this year. And there's a 25% probability they are fine and the Fed's not doing anything the second half of this year.

And there's a 25 percent probability they could cut three or four hundred basis points. You run that through the math, you kind of come out with 85 basis points of implied cuts. Do you, you alluded to it, of course, when it's whether it's the Fed chair himself, ECB, Prez Lagarde herself, Bullard, with the idea of these tools to deal with everything. You know, we can fight inflation. We've got enough tools in the box that if there are flare-ups on the credit side, not necessarily, you know, systemic risk in the broader sense, but we could just deal with all of it. Do you believe that or not?

I think they need to project confidence. The market is assigning. Is that overconfident? Well, no, I think actually in a way, if you look at the back end of the bond market, if you look at the tips market, break even inflation rates, I actually think the market's given the Fed a fair amount of credibility that ultimately they're going to get inflation under control with a little bit of a risk premium that they need to avail themselves of the lower end of the rate distribution and cut. But you don't believe that cuts are coming in calendar year 2023? The house view, the Goldman Sachs view would be there are no cuts in the second half of

this year. And what I think is a little bit interesting about this sequence is how the market has reacted. I mean, I think tech has obviously been the very big beneficiary. I think the best companies in the world, the best balance sheets in the world, flight to quality, flight to cash flow, as I think you said, but just almost programmatically when you have that big move lower in rates, 10-year real rates are 1% if you look at the tips market. I think NASDAQ, the multiple of NASDAQ, very gladly accepts that. Does it make sense to you where tech is for the reasons that you just laid out, or is that one of the areas that you would lean into the sell-on strength positions?

I think based on what we know today, I do think it makes sense. One thing that's very clear in our franchise flows is they're kind of the winners from a process of elimination. In other words, there's lots of other parts of the market, and this is a global statement. One might be reticent to own,

but tech just has so much going for it right now. Well, I mean, when you compare it to, you know, more alleged risky plays in some of the more cyclical areas of the market, if like this week you say, OK, well, PMI, ISM services were weak. There's clear evidence that the economy is continuing to slow. And now if you get actual cracks in the labor market, which have always been a lag, and now may be taking hold by evidence of some of the stuff we got this week, and that leads me into tomorrow. What's riding on tomorrow morning?

So we're at 260, which is about 20K above consensus. As you rightly pointed out, the data this week on the margin, a disappointing both barrels of ISM services and manufacturing, and then the string of labor market data jolts ADP claims. If we're right, and we print a 260 payroll number, I do think that will take the temperature down on a lot of these concerns around kind of the momentum of economic growth. And then another big card comes down next week in CPI. I mean, what happens if the labor market is in fact cracking, and the economy is in fact slowing, and that the projections, you know, respectfully, your house view or whatever, just don't come to pass, that the Fed can actually be done sooner there for whatever.

Mr. Bullard and whoever else say they're not going to where they keep talking like they are. I don't think the market, including tech, is immune from a downturn in the cycle. And again, the starting point is one of at 18 times you're in the 85th or 90th percentile evaluation, which is pretty demanding. And in a way, perhaps the market's already taking credit for some of the rate relief that's priced into the strip. And so I think that would be an inconvenient truth to confront. Whatever you said, you heard the reaction. So they liked whatever you said. They're still yelling about it on the floor. Do you think, just in case you could hear it through the mics,

are defensive plays still too expensive in your mind or no? Staples, utilities, or are they okay after the pullback that they had seen? As a house, we're favorable on defensive staples and utilities, healthcare as well, which I think also picks up the market's desire for growth. That's been a very strong factor this year. We run a screen of what we call strong balance sheet companies. We like the ratio of strong balance sheets to weak balance sheets, irrespective of the kind of the near-term economic path. This is the week where sort of crude oil roared back. Yeah. I'm looking at it here.

It may be flat now, but it's, you know, 80 bucks is the line we're at. Does this give new juice to the energy trade, which obviously had surprised a lot of people as much as technology did on the other side? We think it does. I think it does. The OPEC puts alive and well. We've seen that.

We think crude oil is 95 bucks at the end of this year, $100 next spring. Those stocks are cheap. The energy, if you look at basically the headline sectors of the market, energy is the single cheapest of the 10 or 11 to choose from. It trades on a 9 PE. I think you know our house view on the commodity cycle is a full-throated bullish call. The core issue of not enough supply just gets worse and worse. I think positioning has cleaned up a bit in that space because it was a very tough Q1 photographic negative of last year. And so for a trade, I don't have a problem with the energy

stocks. Okay. It's good to talk to you. Thanks, guys. I appreciate it very much. I'll be watching my inbox for that weekly note of yours. That certainly has a lot of people talking. Tony Pasquarello, Goldman Sachs. With me now, Joe Terranova of Virtus Investment Partners and Stephanie Link of Hightower. Both are CNBC contributors. It's great to have you both with us. You know, Steph, I look at the notes from you today. Thanks, Scott.

And you sound like a person who is certainly getting a bit more defensive. You sold out of Deere this week and you added Procter & Gamble. So if that doesn't say it, I don't know what does. Oh, it definitely says it. And I'm also, I also have my eyes on J&J as well. I haven't pulled the trigger on that one, but I am definitely more defensive at this point, but I am still, I'm more defensive than I ever have been,

right, in the last couple of years, but I'm still balanced. I still think that there's value in some of the cyclicals in some of the financials and some of the industrials I actually added to Chevron today but I do think given the backdrop of all the data that we've gotten this week alone you have to actually concede that we are in fact slowing, right? We're starting to see the higher interest rates impact into the economy. And it really shouldn't be too big much of a surprise because it usually does take about eight to 12 months for any kind of policy to get into the economy. And they just started raising last year, late in March into April. And so we're starting

to see the impact. I'm a little disappointed in the jobs numbers throughout this week. We don't have to panic yet, Scott, on jobs. I mean, the four-week moving average for initial claims is $238,000. The average over the last 50 years or so is about $370,000 in terms of initial claims. But the point of it is we're starting to go in the wrong direction. And so you add it all up. And I think you want to have more of a balance in a portfolio. I don't want to gloss over this. More defensive than I've ever been in the last couple of years. That sounds like the Stephanie Link, who was glass half full, is now glass half empty. And I feel like that's kind of undeniable.

I don't know if it's glass half empty. I mean, I'm trying to look at some of the bright spots in the economy. And the services part of the economy is still very, very strong. And again, the jobs numbers are still, it's still tight. And wages are still strong at about 7% growth year over year. And if you switch to another job, it's 14%. So there are pockets of the economy that are still doing quite well. There's a lot of momentum, but I'm not going to look at this data, Scott, and ignore it because it is higher

rates are going to have the impact to the economy. We're going to slow down. And I've said this for a long, long time. Okay. So we're here. We're into the slowdown. And let's see how it all plays out. But I don't want to go all in on defense. They're not they're not all that cheap, quite frankly. Profit and Gamble is trading at 20, 25 times earnings. Right. So it's hard to buy a lot of those. But that's why I mentioned J&J, too, because that's at 15 times earnings. So I'm looking for places on the defensive side, but I still have a more balanced portfolio so that when, in fact, we stop seeing higher interest rates and the Fed does eventually pivot, those sectors, these cyclicals will rebound pretty quickly. All right. So, I mean, there's a crack in the glass that Stephanie's been looking at. Right, Joe? There is. And Tony, as you heard, still suggests that there's asymmetry to the downside. Excellent. And I think

Steph has done a good job as well talking about the range that the market has been in between $3,800 and $4,200. And that's what Tony talked about today. But there has been a paradigm shift in the first quarter. And now as we move into April, and that's the economic conditions. The economic conditions you can't ignore. They are deteriorating. And that's why there is credibility in now rebuilding positions in what you call today on halftime safe havens. I'll call them strong balance sheets, technology, mega cap companies, having a second look at healthcare, Merck, which I've talked about over the last 14 months, coming back into favor once again. The IBB, the biotech all cap ETF, which I recently purchased, taking a look at that once

again. So you can't ignore the economic deterioration. This afternoon, the NFIB, which is the small business survey it came out hiring intentions right now for small businesses 15 that's the lowest number let me let me stop since may of 2020 tomorrow morning if the jobs report is light okay do market goes higher it does so so see i can't figure out and that's why I'm asking people all week, I thought, yes, this week it seemed like bad news had become bad news again. Now we're suggesting bad news is good news? But the market, and again, Mike Santoli's done a great job talking,

the market's just rotated. That's all it's doing. It's rotating away from an overweight to cyclicals. I'll raise my hand. That's where I was. Back towards being more balanced, more diversified, and recapturing ownership of what you want to call safe havens. You find those in mega cap technology. You wouldn't buy staples like Steph doing P&G? I own staples. I own staples, but I don't own enough staples. And certainly one of the staples

that I own hurt me today. We'll talk about that later. But I own staples and staples are rich in value. I believe it's the right place to be given the overall environment. But Staples in and of themselves, that that's not going to provide me enough positive contribution and performance. Steph, does a disappointing or, you know, I don't use whatever word you want. Does a light jobs figure tomorrow morning? Does the market, as Joe thinks, go up or down? I don't think it goes up because inflation is still too strong. Tomorrow morning, does the market, as Joe thinks, go up or down? I don't think it goes up because inflation is still too strong. The core PCE is still much too high at 4.6 percent year over year versus the 2 percent of what the Fed wants.

So I think the Fed will not stop tightening. Is it maybe just two more tightenings? OK, fine. We're at the end of the cycle for sure, but we're just starting to see the impacts. And so I just think the inflation numbers are not going to come down fast enough. I know we have a CPI number next week. I know that's really a big number, but I pay more attention to what the Fed is telling us that they watch, and that's the core PCE, and that's just too high. By the way, back on to like staples versus discretionary within the consumer sectors, the staples sector is down 2% on the year, discretionary is up 12%. And I can see that

easily reversing. And so you know, I've been overweight some of the discretionary names. And we'll talk about some of the things that I'm in the process of doing next week on halftime, or closing bell. But yeah, I think that that switch makes sense right now. What I don't quite get, and I want you to explain, is why, if you're growing more negative overall, you're slightly overweight financials and industrials. And whether you are at the early stages, Deere and the P&G moves, of making that transition away from some of your positioning as it sits today? Well, you know, I'm just trying to get more in balance because I would like Joe. I was more on the cyclical side and it worked for them for the first month and a half this year.

And then it hasn't worked since. But within industrials, you know, I like the aerospace cycle. I view GE as a special situation. I like Boeing very much. They're just getting going on better production levels. Ingersoll Rand has just kind of been beaten up, and it's actually quite cheap. So those are the only three I own. But I'm down from owning seven names to now three in industrials. Financials, I just, I think the big ones, the ones that I own, the Bank of America, the Wells Fargo, even Schwab, I think that the valuations are just too compelling for me. And I know that they have excess capital. They're gaining market share. And so while maybe when they report next week, the numbers might probably be like in line-ish, in my opinion,

but the guide might be more conservative. If they fall, then I'll buy more. I mean, that's because I want to look through all of this and find some opportunities where I think they're big blue chip companies will not only survive, but thrive as some of the weaker players actually fall off. Joe, you want to buy the dip in the banks or stay away from the banks? JP Morgan, I bought on March 24th. I want to stay high up in quality. I certainly don't want to play with some of the regionals right now because I do believe that you're going to see significant credit tightening and the fact that all this money is parked at the Federal Reserve capturing the reverse repo rate of 4.8 percent. That's not going to benefit bank earnings.

So there's a lot of volatility still ahead. I'm most fearful, as I've told you, of the third quarter. I think the third quarter is when you could see the most intensity for poor earnings and then the conversation regarding the debt ceiling. We've got to get through the second quarter. We just started with that. Well, hopefully in a second, we can build up enough cushion in the second quarter. So in the third quarter, we don't have that precipitous fall through the October lows. All right. Good stuff. Steph, thank you. Jyoti, we'll see you again in the market zone as well. We're just getting started here on Closing Bell. Up next, we're counting down to tomorrow's all-important jobs report. What's really at stake for stocks and

what could all of it mean for the Fed? We will discuss that with a former Federal Reserve Governor. Frederick Mishkin is with us. And as we head out, it's our Twitter question of the day. We want to know, what do you expect from the jobs report? A beat, a miss, or a match? Head to at CNBC Closing Bell on Twitter. Oh, we got the results later on in the hour. You're watching Closing Bell on CNBC. We're back. Tomorrow's jobs report looming large for future Fed rate hikes after a number of weaker than expected economic data points and more hawkish Fed commentary this week. Joining us now, former Federal Reserve governor and CNBC contributor Frederick Mishkin. Mr. Mishkin, welcome. It's nice to talk to you today. Good to be here. Mentioned at the outset, I'm curious, was this a turning point this week, do you think, for Fed policy,

given the string of weaker economic reports, including from the labor market? I actually don't think so. I think that people can put too much weight on current data coming in. And the big problem right now is inflation is still too high. And even if there's some weakening that we see in the data, that doesn't mean that inflation is going to come down nearly fast enough to get down to the 2 percent target level in a reasonable period of time. And so we have to really wait and see. And there are some big issues of uncertainty right now, particularly what's going on in

the banking sector. So, I mean, if you're's going on in the banking sector. So, I mean, if you're worried about uncertainty in the banking sector and we know that the economy is deteriorating, at least to some degree, we can certainly debate how fast that is all taking place, then you talk as though the Fed's just going to keep the pedal to the floor. No, I don't think so. That's not the way to interpret what i'm saying what i'm saying is that in the absence of a of the stacking crisis by the way

that's what the fed would have needed to do uh... so that you know i've recently does research which was pre-election stevie i added that research we actually thought that uh... that there were very strong reasons for the fed to keep raising weights basically above the five and a half percent level and furthermore not to think about all that coming down are very quickly that that that that high rates would be there for fairly

long period time there's been a major change however which is that these uh... instability in the banking sector is something that could seriously weaken the economy uh... we see big outflows of deposits from banks uh... this means that banks have less resources to lend. And that could be something that could actually impact very

seriously on the economy. What I should say, however, is it's not clear that that's going to happen. The Fed has taken steps and the government's taken steps to basically prevent these banking troubles from spilling over largely into on the the uh... uh... it into the he what happens to the economy but we don't know and i think that's what the real problem facing the fed if the the whole this bank instability up basically resolves itself fairly quickly then in fact i think that there will be back to raise your rates on raising

substantially but that may not happen quickly, or in fact, there is a possibility that things could get worse. And then in fact, the Fed would have to reverse course. But I don't want that to happen. I think that's a bad way for the Fed to be lowering interest rates. I think it's just something they have to watch and watch very carefully. What about this notion that we've heard from the chair himself, Bullard reiterating it again today, this idea that the Fed has a big enough toolbox with enough tools in it that they can fight inflation on one hand and put out any credit

fires on the other. If you were in the room, would you be making that same argument or you disagree with that notion out of hand? No, I actually think that's right, that you have these measures to deal with the banking crisis. Now, you have to know that whenever you get into these kind of situations, all of a sudden big shoes can drop. And if big shoes drop, it sort of spins out of control. It sort of goes over the cliff. I actually described this to my students by the Wile E. Coyote cartoons and the Roadrunner, where Wile E. Coyote goes over the cliff. That's a very different environment. I don't think this is nearly as serious, as big a problem as what happened during the global

financial crisis. It's a much more straightforward shock, something that actually we can get information on in terms of how much interest rate risk actually of these institutions bearing uh... that we can uh... we we know exactly where to put the money to basically on shore up the banks this is much more complicated uh... when we have the kind of financial shocks we've had by in two thousand seven two thousand two thousand eight so it's a very

different world but at the other hand it's still a possible that uh... that uh... this bad things are still is in the closet that uh... can create real problems uh... that was part of what happened actually in the global financial crisis when uh... you know what's been going on for a year and then the the shoe drop with

lehman uh... so i think the fed has to really keep very very close watch on that but but i i do think they have the tools are they going to implement a lot of the tools. Actually, they provide liquidity facilities that in effect have guaranteed deposits to make sure that deposit outflows didn't go way down and deposit outflows actually become much more massive. So I think that they do have the tools, but sometimes you got the tools and bad stuff happens and you get overwhelmed. I don't think that's going to happen, but boy, you really got to watch out for that. I mean, it seems like you can almost make the argument the Fed got lucky, quote unquote,

with SVB, that it was fairly idiosyncratic and it really didn't have a roll on effect anywhere else in response. And, you know, obviously, credit where credit is due. Well, well, in response to, you know, how quickly they they dealt with it. But I mean, come on, where where was the San Francisco Fed during this this whole thing? We knew we knew that there were issues with SVB and they were not dealt with. And it seems as though and some have made the argument that the Fed was asleep at the wheel the entire time. So do we really have confidence in their ability to, God forbid, deal with anything more substantial and serious than SVB, even if it doesn't rise to the level of a GFC sort of thing?

So, you know, look, my view of this is that that justice as ricky ricardo would say to to lucy and i love lucy uh... the fed's got a lot of explaining to do i mean that they really clearly did not do the job a properly i'd i i i actually felt that the that michael bars testimony saying you know it's supposed to fall for the bank and the test to be in the back management sure that's true uh... but the bank and SBB and the bank management. Sure, that's true. But the Fed did drop the ball here. And in fact, we need to look at that and make sure that we understand how to make that not happen. However, one of the things that I will say positively about

the Fed, having been inside, it's a learning organization. They make mistakes. As you might know, I've been very critical of Fed policy starting in 2022. And then they finally got it. Now, it may have taken them a long time to do so. But actually, when I say 2020, I meant 2021. But they finally got it and turned around very quickly. I think that they do have the capability of dealing with this. They do know this interest rate risk, by the way, is one of the easiest risks to actually evaluate.

It's a little shocking that the Fed allowed the SVB to not have the kind of risk management that they're supposed to. That's a key thing that supervisors are supposed to look at. Do you have the right kind of risk management? Clearly, the SVB was not serious about measuring interest rate risk they had a period of time that a cheap risk officer this is you know really bad bad news something should have been done about it

but i can tell you the federal is very quickly these are very smart people are they really a serious about doing the job well by and out when they make when they blow it they basically wake up that's not true of every organization but they but they do. And that's why I'm much more confident that they can keep this under control, having been inside the organization to see that it works. However, we still want to know what went wrong, because we don't want to let that happen again. And also we want to know whether, in fact, the weakening of Dodd-Frank in 2018 had any effect. Maybe it didn't, and it was just

the Fed didn't do its job properly. Well, they woke up all right. Oh, they sure did. They woke up all right. Some would suggest they need a sleeping pill because they become too awake. Yeah, maybe not. Way too awake. The issue is that this is a serious issue.

You've got to get in there. You've got to get the information. You've got to make sure that people know what's going on and do your job properly. And I think the Fed can. Look, one of the things about success is that we all make a lot of mistakes. It's learning from your errors. And actually, I was impressed that the Fed got that after basically being asleep at the switch in terms of inflation for close to a year are they finally been

dot that indeed very dramatic in seventy five basis points was shocking and was exactly the right thing to do you know i i i i i have more confidence in this organization i've seen it uh... turnaround get it right after they made mistakes but they're human and uh... and yet And yeah, they made a big one.

But we need to look at that and fix the problem to make sure it doesn't happen again. That's really critical. It's not enough for the Fed to do its own internal investigation. We really need outsiders to look at this and really determine what went on. Fred, I appreciate your time so very much. We'll see you soon. That's Frederick Mishkin, former Fed governor, joining us here on Closing Bell. Let's get a check on some top stocks to watch as we head now into the close. Christina Partsenevel is joining us now with that. Christina.

Shares of AMC are surging right now, almost 23 percent. But keep in mind, that's pretty much just five bucks, not even five bucks a share, 481. So it actually fell down to 18.5 percent. But a Delaware judge today denied the movie theater chain the ability to convert its preferred equity units, also known as APE, into AMC common shares. So in other words, the judge blocked a deal for a 1 to 10 reverse stock split and AMC's ability to sell more shares. This order, though, is temporary. But AMC has promised not to do anything to its shares in the interim. And you can see Ape shares also on your screen down 12%. Remember all those technical outages from Robinhood back in 2020?

Well, today the trading platform has agreed to pay as much as $10 million in penalties to several states like California, New Jersey, and Texas after the outages on the app stopped customers from trading. Robinhood neither admitted nor denied the state's finding shares are still up 2.7%. Scott? All right, Christina, thank you very much. Up next, a Thursday triple play. Three key stock stories you need to be watching before the market closes today in less than 30 minutes. Why the likes of Airbnb and Levi are sinking in the session today. Plus all the latest on the Disney drama. Do not go anywhere. Closing bell back right after this.

We are tracking three key stories as we head into the close today. Seema Modi is here with what's sending Airbnb stock lower. Julia Boorstin standing by on the latest drama at Disney. And Melissa Repko is breaking down Levi's big earnings miss and a big stock slide that has ensued today. Seema, you first. Well, let's start with Airbnb, Scott. Concerns started in February when AirDNA, which tracks home rental industry trends, showed that the average daily rate was rising at a slower pace than the same month last year.

Then you fast forward to this week and Deutsche Bank analyst Lee Horowitz forecasting Airbnb to post a Q1 nights miss and potentially guide down for the second quarter with new data suggesting April nights may grow in the low to mid teens. It comes as hotels have done, you could say, a better job at holding on to pricing power. In fact, weekly hotel occupancy numbers out today show more people checking into hotels versus the prior week. Let's take a look at Airbnb stock. It's on pace for its fifth negative day, down about 11% this week, which would put it on track for its worst week since early November, Scott. All right, Seema, thank you very much. Julia Borsten now on plenty of drama this week at Disney.

Well, Disney shares are pretty much flat right now, but in a rare interview, former chairman of Marvel Entertainment, which is the comic book publishing and merchandise licensing division ofeltz, in his proxy battle against Disney. Now, after Perlmutter sold Marvel to Disney in 2009 for $4 billion, his power was dramatically diminished in 2015, when then-CEO Bob Iyer replaced him as head of Marvel Studios with Kevin Feige. All of this comes as today Disney named its first-ever chief brand officer, Asad Ayaz, who will continue as president of marketing for Walt Disney Studios, as well as for Disney Plus, in addition to this new role.

Now, a key part of this new role is promoting Disney's 100 year anniversary. And to tie all of this back to Perlmutter, Marvel has only been part of Disney for 14 years, but it is a powerful brand engine for the media giant. Scott. All right, Julia Boorstin, thank you very much for that. Now to Melissa Repko on Levi's. Take a look at that stock today. Not a pretty picture. Hey, Scott, shares of Levi are on pace for their worst day since going public in 2019 after the company reported high inventory and said promotions have significantly jumped from a year ago. Levi beat earnings expectations on the top and bottom line, but gross margins came in lower than expected as the company marked down clothing to sell excess goods. The company pointed to

progress on inventory. It was up 33% year over year at the end of the first quarter, compared with 58% at the end of the previous quarter. Yet it also spoke about weakening wholesale business, which it wants to offset with direct sales. Retailers that carry its brand, like Walmart and Target, have been cutting orders or placing smaller orders with suppliers, such as Levi, especially as apparel sales soften. Scott?

All right, Melissa, thank you. And ladies, thank you very much. Up next, Christina Partsenevelos is standing by with some key movers. 20 minutes or so before we close, Christina. What do French fries and Europe have in common? Before you say absolutely nothing, hang tight until after this break, I'll explain the connection that is driving one name higher. Let's get back to Christina Partsenevelos now for a look at the key stocks to watch with 15 minutes to go. Christina.

Well, regional banks right now leading the way ahead of earnings that are starting next week. First Republic, Western, or Alliance, you can see on your screen, both over 4% higher. Just yesterday, Western and Alliance said that their deposit outflows are starting to stabilize. Speaking of deposits, the street is pretty mixed on regional bank Comerica. J.P. Morgan downgraded to neutral with a price target of $44 when originally it had a price target of $75. Concerns of weak loan and deposit growth, while Raymond James says it's a strong buy after the recent sell-off. Shares are about 3.3% higher. And give me those frozen waffle fries. The maker of frozen potato products, Lamb Weston, increased its earnings and sales

guidance for the full year after recently acquiring operations in Europe. There's that connection. Shares are 2.3% higher. All right, Christina, thank you. Christina Partsenevelos. Last chance to weigh in on our Twitter question. We asked, what do you expect from the jobs report tomorrow? A beat, a miss, or a match? Head to at CNBC Closing Bell on Twitter. We have the results after this break. The results now of our Twitter question. What do you expect from the jobs reporter? Majority of you saying a miss. We'll see in the morning. Up next, a big box drop. Costco shares under pressure today. Joe Terranova, he owns it. We get his take next. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of the trading day.

Plus, Keith Lerner gives his market outlook ahead of tomorrow's crucial jobs report. Joe Terranova back with us to talk about Costco's drop as well. Michael, looking forward to tomorrow morning. Interesting market this week. What's at stake, do you think? You know, it's not really showing a lot of anxiety building up into it. Maybe because for most of the week, we've been absorbing the weaker than expected economic numbers. The macro is starting to get repriced. I look at that through individual stocks more than the overall

indexes. So if you said, oh, we had some pretty rough macro data this week, I'm like, OK, well, I guess that's why GM and Ford trade the way they do, why Capital One is bumping along the bottom, why Whirlpool looks really ugly. So in other words, the market wasn't expecting great things. Now, obviously, if it's truly bad, if there's a negative number in front of it, we're not going to be able to handle that very well. But I don't think the overall tape has been underreacting. It's been, you know, reaching for stability in the same big growth stocks. And, of course, you've got to bounce in the regional banks, which does drain away some of the volatility.

Keith Lerner, how do you see it set the table for us ahead of tomorrow morning? Sure. Great to be with you on this Thursday. You know, the consensus is looking for around, you know, two hundred forty thousand wage growth above four percent. So I think if really what you want to see as far as a sweet spot is somewhere around two hundred thousand and a little bit light on the wage side. But I will say, you know, after we get through this number, we have a long holiday and then we have CPI. People will forget about this employment report by the time next week rolls in. And I the bigger picture is um you know the risk reward in our view at 4100 is just not that favorable when you're

looking at a market that's trading at an 18 multiple uh in our view you have a lot of good news baked in with a little margin of error i know but i feel like you didn't i feel like you didn't think the risk-reward was that great either at 38 or 39, and here we are at 41. Actually, when we were on with you in the beginning of March, we actually said after the pullback that the risk-reward had become slightly more improved. You actually gave me a hard time about that. And now that we're back to the 41, the 4,200 level, we think it's less favorable. And by the way, last time we actually made an asset allocation change in our portfolios was around these levels. We didn't think it was time to press things at 38 or 3900. But we are back up here. And like I said, I mean, even I

think a lot of the debate is, is the Fed going to pivot? Is this going to allow them? And our point of view is the Fed has raised rates 475 basis points where they do another quarter or not is less meaningful. In our view, as we move into the second half, we will see a more meaningful move down in the economy. And then, Scott, just one more point. When we look at the second half, there's a disconnect. And I think something's going to have to give in that in the second half, industry analysts are expecting earnings for the S&P to rebound to a new high, while the consensus economists are expecting numbers to come down. So we think that actually those earning numbers will have to come down, which makes the market even more expensive than it looks today.

Real quick, before I let you run, did things change this week in terms of what the data seemed to be showing, not only the economy but the labor market itself i think it shows that it's slowing down from a very strong level so i do show that you're starting to see that the question that the market's debating is how quickly does it go to more of a negative side we think that happens more into the second half but at least it's starting to trend that way keith i appreciate it very much good weekend to you and we'll see you on the other side of that joe t costco some asking whether this is the canary in the coal mine. That's what UBS wanted to know today. What do you think? I think it's important for sure. I think it's indicative of a cost-conscious consumer. I think big ticket items clearly will be given second

thought now by the consumer. You see it in the price performance, not only of Costco today, but Best Buy over the last four months. So you can't dismiss the meaning that's being messaged from Costco today. Make you want to rethink the discretionary trade? I mean, this is some can be put as a staple in some people's minds, but it's a good mashup. Yeah, well, Costco gives you that nice blend between what is discretionary and what is a staple. What's interesting, just specific to Costco, is right now you're on the fence in terms of momentum. You're losing a little bit of the momentum. Fundamentally, the story is still there, though, for this company.

This is a company that has strong revenue growth, and in fact now if we're going to see a consumer that has strong revenue growth. And in fact, now, if we're going to see a consumer that's going to move away from discretionary and go to staples and go to the consumable, they're actually going to go to Costco because that's where the value opportunity is going to be. So I think the fundamentals are still in place. The analyst community came out today in the wake of this report and really supported it very strongly. Yeah. Mike, I mean, how do you look at something like this in that prism of both of those areas, discretionary, stable, defensive or not?

If it's just a give back of coming out of the gate very strong in January and February, you got the Social Security bump in income and things like that, then I think it's OK. Costco is an expensive stock, always is. Maybe it has to kind of grow into it a little bit more. More broadly, again, I was saying before, a lot of the areas of traditional consumer discretionary have already struggled, the exception being homebuilders. That's one that I keep looking at as a potential outlier. It's obviously rate sensitive. Every time you get yields coming back down a little bit people think it automatically is going to convert into you know housing demand that's been true so far but you know is the market a little bit too optimistic

about that if in fact the employment picture softens up so that's why we have a lot of ifs and maybes and in the outlook a lot of ifs and maybes and still a lot of skepticism Scott you've got seven consecutive days where the 10-year Treasury yield has moved lower but yet there still is this prevailing skepticism in the market. Yeah no doubt about that. Thanks for sticking around Joe Terranova. Last word to Mike Santoli. Some nice dip buying in tech. You mentioned specifically all week even though the Nasdaq was weak and tech was selling off it was orderly. Yeah not much. And then here you get some dip buying today. We do. And the other strand of it is just getting a little frisky in the AI trade again. You don't know if that's a good or a bad thing. You want people to have something big picture that they're excited about to look for. But you're seeing some of the smaller AI related stocks move. And even the Alphabet move today, which is leading the Nasdaq, is happening under the cover story of AI.

I think that's OK. Again, you don't want a market where it's all one thing or all another. But yes, there has been more balance to this market. It was really almost a push this week in terms of overall index moves within it, health care doing fine for a little while, all the rest of it. So I think there's low conviction. I wasn't pleased on the sentiment side to see the retail investor bull bear survey kind of tick higher. You had a jump up in bulls in the latest week. And I think the reason for that is last week and the week before, the most popular widely owned obvious stocks in the world did great. So if you owned Apple and Microsoft, which is retail, I think that there was a little bit more bleeding in. So I'd rather see more skepticism than that going into a big number like this. We have had times when the market was closed on Good Friday and the jobs number. The Monday has been slightly more volatile than usual, but not necessarily negative. It's going to be an interesting report in the morning.

Hot number you have to believe is undeniably bad. Is a weak number good or bad? We're going to find out. We're going to go out while the Dow's fighting for positive territory. Right now showing a little bit of a gain. NASDAQ is the big winner today. Morgan Brennan picks up the story right now in OT.