Closing Bell - Closing Bell: Churn, Baby, Churn 3/15/24

Episode Date: March 15, 2024

Is all this churn just an overheated market cooling off or is it the start of what would be the first notable broad pullback in five months? Malcolm Ethridge of CIC Wealth and NB Private Wealth’s Shannon Saccocia map out their market predictions. Plus, Fundstrat’s Tom Lee says there is a strong case for buying the dip. He explains why. And, Amazon is making a big push into the social shopping space. We break down the details and explain how a potential TikTok ban could impact that initiative. 

Hey, welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. This make or break hour begins with stocks struggling to keep their head above water for the week against the undertow of a bond sell-off and faltering big tech leadership. The S&P 500 on the way to a seventh down day in the last ten. You see it off about half a percent right now, though without much damage done in all. The index off only fractionally for the week at this point and less than two percent from its record high. The 10 year Treasury yield near its high for the year as the street absorbs higher than hoped inflation readings in recent days and suspense builds over the Federal Reserve's meeting and message next week. You see the 10 year there at 430.

Small cap Russell 2000 has been up slightly today, but off 2% for the week. We have some soft guidance from Adobe. That's weighing on the software sector, pulling down the NASDAQ by almost 1%. While energy shows some pep on a strong run for crude prices this week, all happening on a big quarterly expiration session featuring some heavy index rebalancing at the close in less than an hour as well. Which takes us to our talk of the tape. Is all this churn just about an overheated market cooling off a bit after a rapid sprint higher? Or is it the start of what would be the first notable broad pullback in some five months?

We pose this question to Malcolm Etheridge, CIC Wealth Executive Vice President and a CNBC contributor. Malcolm, good to see you. Welcome. Yeah, good to be here. So, you know, we're up 16 of 19 weeks in the S&P. Haven't had a 2 percent pullback on a closing basis in one of the longest stretches in history, which leads you to say, OK, we're due for some for some chop. On the other hand, you know, there's the argument to be made that a little more payback, maybe on a valuation front, maybe sentiment and even who knows about what's happening with rates. So how are you viewing the market action recently? Yeah, I'm wondering if investors aren't starting to realize that it's not a foregone conclusion that Powell is looking at

June and saying that's where the magic happens. Right. I think that maybe it's finally starting to sink in that when he says we're going to be patient here, we're going to stay higher for longer, we're maybe starting to see that filter through the markets just a little bit. Even if that were the case, I guess I could counter that by saying, well, in January, people thought it was going to be March. He kicked that out from March into the spring or summer. Market took it. It was fine. The economies look like it's holding up. Earnings turned higher. In other words, how make or break is a June rate cut or one soon thereafter for the market at this point? I would say it's at least make or break for the small and mid caps. If you just consider the

small cap index, the Russell 2000 is down this week. It was roaring pretty loudly, right? The last couple of weeks, we heard the broadening is happening. The broadening is here. IWM was getting bought up left and right. And now here we are. The stocks leading the way are five mega cap stocks. The Russell is nowhere to be found. Yeah, we had this just this little bout of outperformance by the average stock, whether it's the Equal Weight Index of the S&P or the Russell 2000. And then it sort of rolled again. That's been fitful.

It's been tough to have that take hold. We know that. And rates seem to matter for that. The other thing that seems to matter, and I keep pointing this out, but Supermicro, this kind of moonshot tech hardware company, this big AI play all of a sudden, was the largest holding in the Russell 2000 for a while now. Really big relative to MicroStrategy, CryptoPlay, another one.

Supermicro is going in the S&P at the close today. Now, it doesn't come out of the Russell 2000 right away. But the point is, is the Russell today what we thought it was in terms of its message? Well, I didn't really think it was anything to be excited about yet, simply because we don't know where we're going on rates. If you consider half the companies inside the Russell aren't profitable, that means they really are impacted by interest rates, right? Every quarter percent turn the Fed has made the last couple of years has really mattered to the small caps. And so to ignore that and say, you know, we can have a 50 percent run in small caps, for example, I think it's just putting the cart way out too far in front of the horse.

And what we're now seeing potentially is this reversion back to mega caps and also a reversion back to mega cap tech, because we really have five companies that are leading the S&P right now today. We've got five. And on a given day, it's not always the same five. So I think there's been a lot of difference. Yesterday, Microsoft up big. New high today, down a couple of percent. It just seems to be a lot of shuffling around of the deck. But the two that matter are what?

NVIDIA and Meta, right? 80% up, 40% up, respectively, right? So those two are half of the eight percent return we've seen in the S&P it's starting to be deja vu all over again right it sounds exactly like yes last year where we came into 2024 saying a broadening is coming yeah things will change yeah yeah we we saw it in uh in last summer up into the June market high and then of course in the fourth quarter until it gave way let's bring in CNBC contributor Shannon Sekosha of NB Private Wealth to join the conversation. Shannon, your thoughts on all this, because there's a case to be made that even though

those handful of stocks have contributed an enormous amount to the overall index gain, it's not happening at the complete expense of everything else. We keep pointing out, you know, consumer cyclical has done okay until recently. Industrial has done okay. How, as an investor, are you thinking about the risk reward outside the big ones? Well, one of the things that we look at, Mike, is that in this period over the course of the last several weeks, we've really been in pretty much a a vacuum in terms of micro data. Admittedly, we've had some earnings reports, Adobe notably reported today. But when we sort of shift from micro to macro, that's where people get a little bit anxious. And I think that when you're looking at it from the underlying earnings

perspective, when you're thinking about the broadening out, the broadening out is really going to be driven by two things. It's by improving gross margins, which are going to improve the potential for earnings growth. And it's also going to be the potential for multiple expansion. Unfortunately, you know, some of these stocks have the vulnerability, if you will, for multiple compression. We're not seeing that in this period because people are going back to mega cap tech over the course of the last couple of days because they're looking at the macro data and they're just not sure what it's telling them about the outlook. And so from my perspective, the way we look at it at Neuberger Berman is that looking back on the fundamentals, looking at the earnings potential, looking at the opportunity to potentially

see earnings growth out of the broader part of the market, it doesn't mean that these technology companies can't grow their earnings and that they're not going to continue to. But is the premium that's been attributed to them justified from a multiple perspective? Or are there ways that you can start to put some of that cash that you may have on the sidelines to work in the equity market and things that are modestly more attractive. I mean, I guess the question then, Shannon, is do we have an economy that's going to underwrite, so to speak, the earnings growth expectations that are now getting baked in, arguably, at least into forecasts, if not into valuations? It would appear that we still have the support for that,

at least if I look at sort of the underlying and the way we're looking at things like PMI data. Sure, we're not as strong as we could be. But I would say that if we were significantly stronger in terms of the go forward outlook for the next six to nine months, that really could potentially take the Fed off the table. And I do believe that the Fed needs to move here. I think that despite the fact that we look at financial conditions, maybe they're not as restrictive as they should be given the increase in rates that we've had, but they are restrictive in parts of the economy. And if that starts to spread, that restrictiveness in credit for small, medium-sized businesses, the restrictiveness that we're seeing in the lower-income consumer.

That could derail this economic growth. So I think that if we were too hot, we'd take the Fed off the table, and this really creates a scenario for them to stay in the game. So, Malcolm, if you think that maybe the broadening trade is not something you want to bet on in a big way, and we narrow this sort of leadership, maybe you don't have the valuation support, do you think that you would want to bet on in a big way. And, you know, we narrow this sort of leadership. Maybe you don't have the valuation support. Do you think that you would want to become broadly defensive? Do you feel like we have to get hedged out?

Is this rally on a shakier ground than the charts would make it seem? Yeah, so I'm concerned that this is similar again to last year where we didn't think the market was going to perform nearly as well as it did. Chat GPT shows up and changes things a little bit. NVIDIA is going in a similar direction this year. It's taken the market by storm in a way that's making me say, you don't necessarily want to be sitting out of this market waiting on it to start raining. And so I think maybe it's the time to be looking at sectors of the market that you feel are strong

and, dare I say, maybe even recession-proof, like potentially cybersecurity. That's one that I love, that I feel like cybersecurity spending for at least large enterprises and government agencies is non-discretionary at this point, right? So maybe we got a little bit of conflicting data out of Palo Alto and CrowdStrike. One's having the time of their lives and the other one is telling us prepare for a storm. But I think cybersecurity is a place that you could go that, irrespective of what direction the market decides to move,

by the end of this year, it's probably going to hold up pretty well. Not specifically cybersecurity, but software in general is actually under a lot of pressure today. That Adobe software guidance has been an issue. You're seeing things like ServiceNow and other software companies suffer as well. You own Adobe. Do you think it's a change in the story? They're now getting recast in a way as a company that might be not quite positioned well for the AI world. Yeah, so I wish that I had waited a little bit to buy it, frankly.

I thought I was buying the dip when I initially got into it. I would love to step in and buy it now, but I think it's probably going to fall a little bit more simply because the news is going to continue to shake out there. I think, to your point, the concerns over their text-to-image competitors from OpenAI, for example, I think are a little bit overblown, right? Adobe has a pretty decent moat. And if you consider the fact that their tools are proprietary, all of the images that they use, their cache of images are all proprietary to them. And they've also stepped out there and said, we're going to indemnify any of our large enterprise clients against lawsuits over copyright infringement and such. And so I think that it's probably a little bit overblown, but am I willing to be patient if I want to deploy new capital today and go into Adobe? Maybe not. Yeah. Well,

it's interesting how at some point down the road, we might be dealing with these companies that are saying, look, AI tools need not be a free for all. You don't want to necessarily kind of just throw open with whatever open source thing you have. Shannon, just give you a little bit of the last word here as to whether you think you would be looking to either build cash or just wait to do some buying in terms of waiting for some kind of a pullback broadly in the market, or is it kind of business as usual? From our perspective, we believe that investors are sitting on probably outsized positions in cash mike and you know i think there's this argument and we you and i have discussed this previously you know whether this goes into longer duration bonds or whether it

goes into the equity market i think you know you just need to look at longer term allocations and many um many investors are positioned less aggressively than they were say you know 12 or 18 months ago because cash is an say, you know, 12 or 18 months ago because cash is an option. So, you know, our belief is that cash rates are going to come down. We believe the Fed is going to hike. And, you know, if you wait until that second rate hike cut, excuse me, second rate cut, then you've likely missed some of the move there. And so I think, you know, being prescriptive and thinking about where to add exposure based on your long term view is really what you should be thinking about right now.

All right, Shannon, Malcolm, appreciate it. Have a great weekend. All right. As investors look ahead to next week's Fed decision, let's bring in Seth Carpenter, chief global economist at Morgan Stanley. Seth, it's good to see you. I'd love to hear your playbook going into the Fed meeting. Did the inflation numbers this week or this month change the picture? Powell has said things don't have to get much better on inflation, but they can't get much worse if we're going to get a rate cut. Absolutely. I think inflation numbers are clearly what everyone's talking about. I think it's worth remembering that, yeah, the last two prints probably above what most people were forecasting. Two before that, though, to the low side, and the Fed

famously tries to look through some of that noise to see where things are going. And I think it's also important to remember that the print for February was lower than the print for January. So it's not as though we got this signal that all of a sudden inflation has turned back up and it's going to start running up. It's that there's noise. We've been saying for a while that the inflation data would be bumpy. So what does Jay Powell try to do at the upcoming meeting? Boy, I really think if he had his brothers, he would try to leave basically everything exactly where it is now, retain that optionality that the market seems to have. Could be three, could be four cuts this year. He did say they're getting close, but he had said, you know, we're not quite there yet. And so I think he really does want to just stall a little while longer to make sure that

things are not, in fact, going back up. Is there a I assume there is a faction of the committee that still is not convinced that you don't have to suppress labor demand, you don't have to slow the economy more in order to be sure that inflation is heading to target. I know there's been a lot of talk about whether the dot plot might change as a result of some of that, thinking, I guess, how much might that matter, if at all? So it's funny. I completely agree with the premise that there's a wide range of views. In fact, during the 15 years that I was at the Fed, at one point I had a boss who was fond of saying that the FOMC are 19 people that don't agree on the color of an orange.

So it's a wide range, wide range of views. But how much does it really matter? I actually think right now it doesn't matter. One thing has become clear to me over the past couple of years. This is Jay Powell's Fed. I think he is very effectively leading the committee through time to get to the decisions that he thinks are right. And it is also an uncertain time.

And so things are being made on a meeting by meeting basis as the data come in. And so if next week we have one or two or three FOMC participants write down a dot plot that has four, five, six, seven rate cuts in it, and we've got another couple FOMC members that have a dot plot that has no rate cuts in it, I'm not really sure that any of that matters. I think the chair will be effective at corralling people to the outcome that he wants. Yeah, and he has been on the record, even just last week in Congress, saying that they now view the risks as balance. That's their way of saying they're as attentive to risk to the economic growth picture

as they are to a flare-up in inflation. Where are you on the underlying strength of the economy at this point? You have seen some labor market indicators roll over a little bit. And I guess the only reason you'd really worry if the Fed were going to continue to be patient is if you thought it was going to make them too late to get in front of economic weakness. I completely agree with that last part. That would be the real risk.

And I don't think that risk is especially big right now. I will say if we go back, you know, the past two years or whatever, the whole rate hiking cycle, it's funny to think about when the debate was hard landing versus soft landing. We were always at Morgan Stanley in the soft landing category and then got surprised somewhat to the upside when it comes to how last year turned out. I think as well, what's super remarkable, extra new data coming in, the Census Bureau, the CBO with their forecast about how big a deal immigration might be for the economy driving some of those labor market outcomes. And so the question is, is something

like 175, 200,000 the new normal in terms of what the economy can sustain relative to where they were before? So I think the economy is in pretty good shape. We do think things are slowing, but by no means crashing. And we saw some of that slowing in the retail sales report, for example. I think you can look around at different corners to see places where things are slowing. But as long as we've got a solid labor market, which all the indicators are we do, it's super hard for me to see things crashing. Is the Fed focused for any particular reason, do you think, on how long the Treasury yield curve has been inverted?

It's now a record for the 2 versus 10 year. It obviously hasn't been a timely recession signal. It probably just means, you know, next move is down on short rates. But is that something that would filter into their sense that they want to get going on rate cuts? Yeah. So I personally don't think so. I can imagine five years from now or whatever, when the transcripts of the meeting come out, maybe it's this one, maybe it's the previous one. You'll see one, maybe two voices that reference the yield curve and sort of what it means. But my experience while I was there, my experience knowing the current set of policymakers, the yield curve isn't for them sort of a super important indicator for where things are going. There's just so much about the current environment that is different than other cycles we've seen. I don't know why they would put

much weight on the yield curve right now. All right. Yeah, probably good news if that's the case. Seth, great to get your thoughts. I appreciate it. Thank you. All right. Yeah, probably good news if that's the case. Seth, great to get your thoughts. I appreciate it. Thank you. All right, Seth Carpenter. Let's send it over to Christina Partsenevelos for a look at the biggest names moving into the close. Hi, Christina. Hi, Mike. Well, Reckitt Ben Kieser shares are under pressure today after a jury ordered the consumer goods company to pay $60 million in damages to an Illinois mother. The verdict found that the company's ephemeral baby formula led to the death

of the woman's premature infant after failing to warn of the risk of inducing the intestinal disease NEC. It's not a good sign for Abbott Labs either, also sinking down over 4%. That's because there's more lawsuits claiming Abbott Labs formula also failed to warn customers of that exact same risk.

Wreck it down about 14 percent. And job is tumbling today after the manufacturing company's quarterly revenue came out below what Wall Street was expecting. The CEO sounded optimistic on the earnings call, saying that this year is, quote, transitional and that revenue headwinds will be short term. So, in other words, don't worry. But shares are down 18 percent. Yeah, pretty, pretty big bite out of that one, Christina. Thanks very much. We are just getting started up next, doubling down on the bull case. Fundstrat's Tom Lee is back. He'll tell us why he's still betting on the rally in one part of the market he is especially excited about. We're live in the New York Stock Exchange. You're watching Closing Balance CNBC. Welcome back. We are just days away from NVIDIA's highly anticipated GTC conference,

where CEO Jensen Wang will deliver a two-hour keynote on what to expect from the company in the year ahead. Joining me now to discuss is Stiefel's Ruben Roy. And Ruben, it's great to have you here. I don't know, I can't remember a more anticipated appearance by a CEO in recent times. What can can Wong say in this setting that will, I guess, maybe properly set expectations at a time when they've just been roaring ahead? And what specifically do you expect to hear about the durability of demand? Great question. Thanks for having me. Yes, we titled our note that we put out today, AIpalooza. And yeah, this is the first time, I think, in a 25-year career of covering the space that we're going to see a tech CEO give a keynote speech at a hockey stadium. So highly anticipated.

What can he say? I think there's going to be a lot of discussion around the product roadmap. NVIDIA has increased the cadence at which they're bringing new products to market. I think that's really interesting. I think there's going to be a discussion around the ecosystem that's building around their AI offering. So it's not just about hardware, right? We're not considering NVIDIA a chip company anymore. It's a systems company. It's a software company. It's a networking company. And so I think there's. It's a software company. It's a networking company. And so I think there's going to be a lot of discussion around, again, this concept of an AI ecosystem that Nvidia has been busy building. And we're looking forward to the roadmap ahead. And what's your sense of what, you know, the buy side, what professional investors are most attuned to in terms of feeling like the move in the stock has been justified. I mean, as many have said, it's become less expensive as it's roared ahead because the earnings estimates

are up so much. But it would seem as if you still need some reassurance here that that trajectory is going to continue. Yeah, I think it's going to be about that ecosystem because, you know, revenues have gone up, so have margins, right? There's a lot of software going into the system sales that NVIDIA has been doing. They're establishing cloud services. They're establishing concepts like AI factories, which include hardware and software. And so I think buy-side investors, professional investors, will be listening closely to kind of, you know, what's next for the ecosystem and how NVIDIA plans to participate in sort of a very rapidly growing TAM. The TAM, you know, as we think about it on compute, NVIDIA likes to, you know, sort of characterize

that as a trillion dollar TAM opportunity with general purpose compute, which historically has been serviced by standard general purpose processors now moving to their GPUs and other forms of accelerated compute. And then, you know, sort of moving beyond that to this AI software ecosystem that they've been building. I think those areas are going to be likely the most important for investors. Yeah, that kind of gets at something that I've got asked repeatedly here and there, which is if these potential revenue numbers and the total addressable market are what people who are enthusiastic about NVIDIA say they are, where is it coming from? So who is the net loser or cedar of market share in this environment?

Well, for right now, if you look at general purpose compute companies, you've got Intel, obviously, as the market share leader in x86 processors. And certainly, Intel has been working hard on revamping its own strategy to participate in AI. And I think they're having a lot of discussions internally on roadmaps and otherwise, not just for the server space, but for AI PCs and elsewhere. But if you think about that migration away from general-purpose computers, that's one that comes to mind. And then if you think about more classic networking companies, NVIDIA has taken some share today on their own clusters of GPUs,

but certainly you've got other companies that have been participating in networking hardware and otherwise. So I think it'll be really interesting to see how NVIDIA plans to expand in those areas, networking being a very important area as well with a large stand associated with it. And before we go, I know you have a $910 price target on NVIDIA with a buy. So I mean, that's only a 3% upside or something from here. Is that just a matter of how far the stock

has run or are you having trouble refreshing for higher price targets at this level. You know we'll look at the model and you know we raised the price target quite a bit you know sort of into and out of earnings which you know

we're just a couple weeks ago. Yeah. Stocks up around eighty percent this year so it's been moving quickly on us I think if you look at it from a longer term perspective like I said there just a couple of weeks ago. Stock's up around 80% this year. So it's been moving quickly on us. I think if you look at it from a longer-term perspective, like I said, there's a big TAM opportunity out there. And, you know, we'll let the model and the price targets play out as that TAM opportunity is realized.

All right. We'll see what we get next week. Ruben, appreciate the time. Thanks. All right. Up next, Fundstrat's Tom Lee is back. Why he says it is time to buy the dip. Plus, homebuilder stocks moving higher. We'll tell you why and what it might mean for the housing market in the months ahead. And don't forget, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back. Welcome back.

Tech selling off again today and dragging the S&P 500 and Nasdaq lower for a third straight day. Our next guest still sees a strong case to buy the dip. Let's bring in Fundstrat's Tom Lee. Tom, it's good to catch up with you here. Obviously, it's a bull market. Buying the dips generally tends to make sense. It's certainly been rewarded in the last several months. But it's almost like we haven't hardly had much of a dip to speak of. You know, you had these little wobbles lower, another one right now. Are you confident that they're going to stay so shallow? That's a great question, Michael. I think one of the reasons these dips have been shallow is that measures of investor leverage, whether it's margin debt,

which is still below July 2023 levels, or cash on the sidelines, which hit a record $6.1 trillion this past week, shows you that investors are still uncomfortably underinvested. And therefore, these dips are opportunities to add. I've been traveling Latin America for the past week, meeting with a lot of pension funds, and we're getting the sense that these investors are waiting for a dip. So as soon as you get some sort of wobble like today, I think these are quickly met by buying. Yeah, I mean, it's certainly been the case. Although, how do you, I guess, jive that with the fact that you've seen some of the other indicators of positioning and investor sentiment, whether it's investment advisors or retail investors or call option volumes, seeming like at least things have gotten a little bit

extended? You know, to an extent, those are extended because, you know, prime brokerage data really tends to capture the TMT hedge fund positioning, which does look extended. And AAII tends to reflect bullish sentiment, but it doesn't necessarily reflect actual positioning, which we can tell by margin debt is still quite low. And other measures don't necessarily capture what private bank and wealthy individuals and households are doing, which when we hear from our wealth managers, still have a very conservative bias for their clients. So I think that we're not in we're

not really as exhausted in terms of positioning or even sentiment as we were in October 2021. Now, I know, Tom, that you feel as if there's a potentially long lasting outperformance cycle possible in smaller stocks. Been a lot of false starts in this direction. Been some pressure on the Russell 2000 and other small cap measures with rates going higher. What sets the scene for you to say that small caps will start to work on a relative basis? Well, it is a constellation of factors, Michael, that are really coming together for the first time. We're emerging from a pretty terrible inflation cycle that was, you know, crushing for smaller companies, especially their ability to raise prices relative to larger companies. And it's coming at a time when the Fed is about to make a pretty abrupt move to being supportive of the business cycle instead of fighting inflation. And on a valuation side, small caps are trading at 44 percent of the price to book of large caps.

That's exactly where we were in 1999, and that was the launch point for 12 years of outperformance. So I think when investors start to allocate to stocks and the Fed starts to be visibly cutting, you know, I think the Fed is not clear when they start, but when they start, I think it's going to be a big tailwind for small caps. Now, you know, the relative valuation you mentioned going back to 1999 or thereabouts absolutely seems to be the case. The length of underperformance has been something similar. But if I look back at that period, you know, after 2000, the peak in the market, a lot of that outperformance by small caps came because large cap growth just imploded. I mean,

you just did see devastation in some of the largest stocks. Now, obviously, small caps came because large cap growth just imploded. I mean, you just did see devastation in some of the largest stocks. Now, obviously, small caps held up better and then went up after the market low in the early 2000s. But I assume you're not suggesting that that's what we're in for. That's right. I think one of the differences, principal difference, is that it's the starting point. You know, the S&P large cap is roughly 15 times X the mag seven the Russell 2000 if you look at the profitable companies there have multiples more like 12 times and the non profitable small caps in the Russell actually have leverage either to economic growth or to risk premium

declines so you have like sort of the double recipe within the small cap index of quality companies having multiple expansion, but also sort of risk appetite growing and allows, you know, whether it's the biotechs or some of the regional banks, which will have future growth, but actually don't really earn money right now. All right, yeah, we'll see if all that can coalesce.

Tom, appreciate the time today, thank you. Thank you. All right, and don't miss Tom, appreciate the time today. Thank you. Thank you. All right. And don't miss Tom Lee at the CNBC Financial Advisor Summit on May 22nd, where he and other market experts will share what they are seeing and what the rest of the year might have in store. Scan the QR code to register or visit CNBCEvents.com Financial Advisor. Up next, we're tracking the biggest movers as we head into the close. Christina, standing by with those. Hey, Christina. Hey, well, from a car to a NASDAQ booth,

we got you covered. Disappointing outlooks, pushing software and a beauty provider lower. I'll have all of those details after this very short break. Coming up on 20 Minutes, till the closing bell, the S&P down about two-thirds of 1%. Let's get back to Christina for a look at the key stocks to watch. Thanks, Mike. Well, we have a disappointing guide weighing on shares of software provider PagerDuty. Shares are down over 8%. Wall Street's pretty mixed on whether AI will actually boost demand.

PagerDuty CFO also warning that they're seeing headwinds from smaller businesses. And shares down about 24% just in the last year. Beauty giant Ulta also disappointing investors with its margin forecast, even though their Q4 revenue beat expectations on the earnings call management said they do see opportunities for international expansion into markets like Mexico, which they plan to open up a store next year. And shares are down over 4%. Mike. Christina, thanks. All right, we're keeping an eye on the housing sector after a key move from the National Association of Realtors. Diana Olick here with the details. Hi, Diana.

Hey, Mike. The National Association of Realtors has agreed to pay $418 million in damages to settle class action antitrust lawsuits over broker commissions. That money will go first to pay the plaintiff's lawyer fees and then go to the class. Now, the settlement, though, makes it clear that NAR is denying any wrongdoing. The lawsuits argued that NAR, with its more than one million brokerage members, violated antitrust laws by setting certain requirements that led to a standard commission. The settlement bans the NAR from making any set rules that would let a seller's agent set compensation for a buyer's agent. And that had led to this norm commission of about 5 to 6 percent. Although the NIR in a call today vehemently denied that there are any set commissions,

saying they're always negotiable. But what this means is that the agent market will now get much more competitive, which could lower commissions. And that's why we're seeing stocks like Zillow and Compass taking a massive hit today. This is likely going to have a big impact on the agent industry itself. And it comes during a time where there's a serious lack of homes for sale. So it's been pretty tough on agents already. Mike?

For sure, Diana. I mean, this is one of those things that for how many years have people wondered why there was such stickiness in the level of these commissions? So is there any way to handicap how competitive things will get? I mean, I suppose it's going to really vary quite a bit if things really do loosen up. Yeah, it's going to depend both on the market and the agent. And any agent will tell you that commissions had always been negotiable. It's just a question of where did they start from.

They generally kind of started at 6 percent and then the agent would say, well, I'd cut my fee. But then the question is, why were they ever starting at 6 percent to begin with? You look at Redfin, which has a much lower standard commission, and that's how they market themselves. Glenn Kellman, the CEO of Redfin earlier today, said he thought this was great because they had always been arguing for lower commissions. But again, it becomes the issue of the buyer's agent. If they're not being paid by the seller's agent, would a buyer then opt not to use a buyer's agent? And that could be hard for first-time buyers or veterans or, you know, people who don't have a lot of money to negotiate with. And, you know, they might need that buyer's agent, but they don't want to pay for it.

Now, that is interesting, all the permutations. It reminds me a little bit of the underwriting fees for going public. They were sticky forever at seven percent. And the bankers would say, look, you only take your company public once. You want to nickel and dime on this. So I don't know. We'll see if that applies to some degree with with houses as well. Diana, thanks so much. Still ahead, the energy sector wrapping up a strong week.

We'll drill down on that pop and a big move in crude oil coming up. As we head out, a quick message as CNBC celebrates Women's History Month. As someone who is a changemaker, it means someone who's pushing the boundaries of innovation, changing the way things work and having a new vision for how business should be done around the world. You know, I feel like I operate with grace, humility, with execution, with grit. And I'm not sure that's something that can be defined by gender. I think as a female leader, more than anything, is that I want people to look at me and say leadership can look different than maybe they expected.

Up next, a big shopping shakeup. Amazon making a major push to up its social shopping presence will break down the company's new strategy and how a TikTok ban might impact the future of that space. That and much more when we take you inside the Market Zone. We are now in the closing bell Market Zone with the S&P 500 down about two thirds of one percent, just barely down for the week as well. We have Leslie Picker sharing comments from Goldman Sachs CEO on the company's outlook, plus Kate Rooney on how TikTok's loss could be Amazon's gain. And Pippa Stevens wraps a big week for energy. Leslie, David Solomon addressing the troops as well as the shareholders. What did he have to say?

Yeah, so basically it's a turning point for the firm. According to Solomon, he calls 2023 a, quote, year of execution for Goldman Sachs, while saying he's optimistic about 2024. Remember, in 2023, Goldman was backing off from its consumer expansion and taking write downs from that, as well as exposure to commercial real estate, all while M&A activity dropped to a 10 year low. But it's a new year, one that the firm plans to spend focus on its two core businesses, global banking and markets, as well as asset and wealth management. In the letter, Solomon said that the firm, quote, stands to benefit as capital markets rebound.

He also said the firm increased its wallet share in banking and markets in 2023 by nearly 350 basis points since 2019. On the asset and wealth management side, Goldman touted that it surpassed its alternatives fundraising goal a year early. Since 2019, the firm raised $250 billion toward that goal. Mike. You know, Leslie, so $250 billion toward that goal. Mike. You know, Leslie, so the message, you know, seems to be it's a bit of a cleaner story here. There's a lot of the portfolio reshuffling that Goldman felt it had to do. A lot of that is done or

underway. And, you know, the stock has really outperformed Morgan Stanley over the last year or so. It seems as if Goldman's no you know penalized for not having as big a wealth management network and the rest yeah i mean even in a down year even in 2023 about 60 i believe it was like 66 65 percent of their revenue was tied to global banking in market so that's investment banking uh uh underwriting on the equity side and the debt side, as well as trading. So they're very tilted toward kind of the capital markets reopening. So I think if you're an investor and you look at what's going on with the economy, if we're able to avert a hard landing, if there is a soft landing scenario, if the Fed does cut interest rates at the end of the year.

So taking all of those macro considerations, it would suggest that the environment is better for things like IPOs and M&A. There was a Morgan Stanley report actually a week or two ago, which said they predict M&A to skyrocket 50% this year, just kind of based on all of those factors. And we get a key test with Reddit next week

of the IPO market. So, you know, we'll see how things go. But all of that put together is really important for Goldman's business. So I think investors are somewhat optimistic that we could see a rebound in that activity after years of not the best environment for M&A. A bit of a missing piece of the overall bull market environment. We will see if that kicks in. Leslie, thanks so much. Kate, Amazon wants us to shop by phone more.

Yeah, they do, Mike. It's really been beefing up its social media presence. Amazon really had a lot of this happen last year. It teamed up with Pinterest, Facebook, Instagram, Snapchat, all within a year to embed these products into social media feeds and then let users link their Amazon accounts to make purchases. The e-commerce giant has also been taking a page from Reels and TikTok, if you ever use those, on its own mobile app. It launched Inspire last year, which looks a lot like Reels,

but these are actually Amazon products being promoted by influencers. Part of this is defensive as social shopping becomes a bigger slice of e-commerce overall. Insider Intelligence estimates it's going to grow into a $100 billion market by next year. That would be up from $67 billion last year. There is possible gain for Amazon as well if TikTok does end up getting banned, as Mark Mahaney over at Evercore tells me could be an incremental positive and means more opportunity for Amazon around some of those shopping partnerships, Mike. Yeah, maybe it won't surprise you to know I really haven't done anything with Reels or TikTok, and means more opportunity for Amazon around some of those shopping partnerships, Mike. Yeah, maybe it won't surprise you to know I really haven't done anything with Reels or TikTok. You know, Mike, right? That's how you shop. I'm aware that they exist, and my daughters text some to me sometimes.

But I do wonder, is there any way that Amazon's much bigger presence in advertising can also be enhanced here by this effort? Yeah, that's a great point, Mike. So part of it is sales and just overall e-commerce, and then part of it is advertising. So they've got these sponsored products, which makes up a bulk of their advertising revenue. So one of the big opportunities on that does absolutely come down to sponsored products, which is part of advertising, which is really part of the what some say is an undervalued bull case for Amazon and potentially as much as five, six billion dollars and upside, depending on who you ask.

Yeah, without a doubt, become very important to the story. Thanks so much, Kate. For more on the TikTok ban, by the way, don't miss an exclusive interview with Coastal Ventures managing director Keith Raboy. That's coming up in overtime today. Let's get over to Pippa for a look at the energy markets. Pippa, firming up, $80 WTI. That's right, Mike.

Well, energy stocks were the best group not only today, but also on the week amid a 4% jump in oil prices with WTI above that $81 level. Now, the market is on edge as Ukraine carries out a series of drone attacks on Russian infrastructure. Eight facilities have been targeted, according to data from RBC, with three of them seeing a significant drop in output. So we are seeing gasoline futures outperforming oil this week, with PVM saying these latest attacks have, quote, sent shivers down spines of product bears. Now, on the back of oil's move, energy stocks are the best group, with the refiners yet again leading the way.

That's Valero, Marathon Petroleum, and Phillips 66, all at record highs. Although one notable underperformer is EQT as nat gas prices drop. We are now in shoulder season with elevated storage, and so some weakness there for EQT, Mike. Yeah, for sure. I mean, nothing seems to, nothing seems to get out of natural gases way lower. When it comes to WTI, though, I mean, every one of these rally attempts in the last year or so has been utterly swamped eventually by the kind of constant heavy supply. So is there a reason to think that's going to change? Well, I think one reason why we didn't see

all that much of a price response going back to October was that we never actually saw supply come offline and no infrastructure was targeted. So that's what's a little bit different this time around. The Ukraine drone attacks are focused on Russian refineries. And so that could lead to a drop in their product exports, which might actually lead to a drop in oil prices as well if they have more oil hitting the market. But there is a chance that what if Ukraine, as RBC drop in their product exports, which might actually lead to a drop in oil prices as well if they have more oil hitting the market. But there is a chance that what if Ukraine, as RBC noted, moves to actually targeting their export facilities? So I think that's the key difference this time around. Time will tell if we can support these levels. There's certainly a lot of spare

capacity that could come online. But I think the key thing here is that if we see more infrastructure attacks, that's what could really move the needle. Yeah, definitely worth being alert for that. Pippa, thank you very much and have a great weekend. As we do head into the close in about one minute, remember, we do have the big S&P 500 index resuffering. A lot of the sector ETFs, they're going to match up on the close. You have Supermicro going into the S&P 500. Meantime, S&P down about seven tenths of one percent and just barely below the flat line for the close. You have Supermicro going into the S&P 500. Meantime, S&P down about seven-tenths of one percent and just barely below the flat line for the week. We had 16 of 19 weeks higher

last week. We're just slightly lower, but still S&P only 1.4 percent off its record high despite this churn we have seen this week. Bonds have been a good part of the story. 431 on the 10-year Treasury yield in response to some of those inflation readings this week. We have the Fed coming up next week as well. And it does appear as if the S&P 500 will just barely miss being flat for the week under the weight of some of that tech stock selling that we did see in anticipation of the NVIDIA keynote on Monday. NVIDIA itself managed to finish in the green. That's going to do it for Closing Bell. Have a good weekend.