Closing Bell - Closing Bell: Cornucopia of Concerns Hit the Market 5/2/23

Episode Date: May 2, 2023

It was an ugly day on Wall Street ahead of tomorrow’s crucial Fed decision. CNBC Senior Markets Commentator Mike Santoli, New Edge’s Cameron Dawson and Cantor’s Eric Johnston give their market takes. Plus, David Chiaverini from Wedbush breaks down the big move lower in regional banks. And, top chip analyst Stacy Rasgon weighs in on the semi space… and what is at stake as AMD reports in Overtime. 

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This make-or-break hour begins with this big day and the countdown to the Fed decision, now less than 24 hours away. So much riding on that outcome. Stocks already jittery, whether it's worries about regional banks weighing on sentiment or more data showing a weakening U.S. economy. Here's your scorecard with 60 minutes to go in regulation. Dow under some pretty heavy selling pressure for most of the day, as you know by now. So much for the S&P closing in on 4,200. It was just on the doorstep. It's back way off that round number. Now, NASDAQ giving back a good amount today, as well as technology slides small caps under pressure to rustle down by 2 percent. Brings us

to our talk of the tape, the cornucopia of concerns hitting the markets today and what it might mean for where we go from here. Let's bring in senior markets commentator Mike Santoli for more on that. It really is a laundry list of issues on your mind. Yeah, we didn't have to go far to find things to worry about today. I think, though, it starts with when the market, when the S&P 500 is at the upper end of its range, as it has been hanging around for a while. More things have to go right and fewer things have to go wrong to keep it there. The huge stocks did their job by insulating us from some macro concerns much better than expected earnings last week. I feel like kind of got burned up in the way of higher prices. And then you get mixed with

regional banks unable to rally on what could have been that clearing event with FRC resolved. I think that was yesterday. Their stock becomes a zero. If you owned it, you probably owned some other ones. And so I do think there was a little bit of a, you know, as I said before, who's next? It doesn't have to be somebody next, but you can always try to play the game. That being said, with the Fed coming, Australia hiking rates overnight. And the sense that we know there was always a risk that there was going to be one hike too many. We don't know if it's if it's enough or it's too much.

And I think that's just the natural jitters of where you get before before a Fed meeting. When you have the stakes high and the uncertainty there, it's the market's way of saying, let's make this the last one. Treasury Secretary Yellen sort of moves up perhaps the timeline of debt ceiling. SoFi gets downgrade, stocks down a lot. Sure. Chegg talks about the implications of AI on its business down almost 50 percent. IBM layoffs. You go down the list. There are it seems to me to be added risks by the hour almost today. Yes. Now, look, I think when the sellers show up, you can always look for catalysts in retrospect or at least coinciding with with all that. But I agree with you that, you know, we've wobbled around this range where, you know, we at the upper end of the range, it's maybe the benign outcome is the one we're going to get. And let me also, people hate when I do this. We're at 4,100 and change right now. We closed at 4,150 one year ago. We closed at like 4,172 years ago. We don't need extra

reasons to be sitting at this level because under a whole lot of different conditions, we've been here. I do think right now, though, it is really about a little bit of a batch of soft macro data. Is that going to be enough for the Fed? I've not thought that the 25 basis points that we're probably going to get tomorrow is going to be the straw that breaks any camel's back. But you just don't know that. And when the regional banks are saying, look, we have kind of few escapes from the profit trap we're in right now. And and our book values are not necessarily what they appear. You know, it maybe is just the market craving a little more clarity from the Fed. All right.

Let's bring in Cameron Dawson now of New Edge Wealth and Eric Johnston of Cantor Fitzgerald. It's good to have you both with us as we watch this market over the final stretch here. Cameron, you first. It's not necessarily that, to Mike's point, the 25 additional basis points is the straw that breaks the camel stretch here. Cameron, you first. It's not necessarily that, to Mike's point, the 25 additional basis points is the straw that breaks the camel's back. It's the idea that Bill Ackman tweeted about not that long ago. It's, well, you want to push rates higher, then watch the outflow of funds from regional banks and into money market accounts and the like. And that just makes people nervous, too. I think it does because it also exposes where there could be other risks on the balance sheet,

because the more that you have deposits outflow, the banks have to look at their balance sheets and say, where could we have loan troubles? And one of the things that came out of the earnings season this quarter is that banks talked about the need to shrink their balance sheets or reposition their balance sheets. All that points to is slower loan growth going forward, which would likely coincide with much slower economic and thus earnings growth. Eric, I mean, look, let's be honest. You've been calling more recently for the sort of the sky is going to fall. It's just a matter of when. Right. Your conviction has been extremely high that we were going to make a U-turn and go lower. And in fact, we really haven't. Now, maybe this is the start of something today. Maybe tomorrow will be it. But how do you see it

now? Yes, I think equities have been have been extremely resilient. And, you know, this is certainly taking longer than than we expected, but doesn't change the fact that as we look at things right now, we are seeing the economy starting to really slow very real time as we speak. The job openings, they still remain very high, but this is the second largest decline over three months in job openings in the last 20 years. The only bigger time was around COVID. We're seeing consumer credit, right? Balances are surging. Probably tells you the consumer is weakening. We're seeing consumer credit, right? Balances are surging. Probably tells you the consumer is weakening. We're seeing tightening standards, et cetera. Even Amazon, right? To think that, so it's not just a goods issue. You look at Amazon, AWS started off the quarter with

11% growth. That would have been unheard of one year ago and was a sharp deceleration. So this is not just a goods issue we're seeing this across the economy service is very strong right service remains remains strong but if you look at the totality of the data we are slowing and you know one of the things i would say around around earnings is that you know earnings have um you know they've been better than you thought i could finish the sentence to better than you thought. No, I'm not going to say that because, you know, they've they've estimates have fallen about 10 percent over the last nine months since we've been negative on earnings estimates. Growth this year, excuse me, this quarter was negative. So, yes, earnings estimates beat by 7 percent%, which is the headline. Earnings growth this quarter was

negative. Last quarter was negative. And that was with GDP positive and nominal GDP very positive. And we think that's going to decline and potentially go negative this year. So we think there's significant earnings headwinds also ahead of us. So, Cameron, how would you respond to that? Do you agree? Earnings, I think it's kind of hard to deny. I mean, they've been better than a lot of people feared. That's for certain. And like a deceleration is one thing, which we've witnessed on revenue growth for the kinds of companies that Eric was talking about. A cliff dive is another, and we haven't seen that.

Well, the first thing to point out is that even though there have been a lot of beats, the market reaction to those beats has been kind of just a shrug, which tells you mostly for cyclical companies. When cyclical companies beat and raise and the stocks go down, that's usually a reflection that a lot of the good news is already priced in. But then the other challenge we have is that if you go into the back half of the year,

you still have a big earnings ramp into the fourth quarter as well as into 2024. So there is optimism baked in, and that optimism shows both margin expansion and revenue staying strong, which means that there's no recession priced into any of that at these levels. We may, in fact, have expectations that are too high for the back half of the year for earnings and into 2024. The jury's still out on that. Without a doubt. Now, the 12-month forward has actually curled higher. I think it's mostly because the better-than-expected numbers from the first quarter are kind of

flowing through into current quarter estimates. So without a doubt, it's a prove-it situation for the later part of this year. I do think it has been frustrating for those on kind of both sides of the recession debate because, you know, everything Eric said is correct. Huge drop in job openings and a big surge in layoffs. Yes, outstanding consumer credit is surging. But then you look at it on a longer term scale and it's all kind of getting back to the normal range. Or it was just so overstated at one point of so much stronger than than the norm that it's coming back to the pack. So I do think the fact that we have relatively high nominal GDP growth because inflation is where it is, is sort of fouling the mechanism a little bit in terms of determining when earnings

themselves are falling off. Eric, what do you expect the Fed to do and say tomorrow, or at least imply? Let's add that word into it. You know so I think that inflation. You know our view right now is that inflation is going to prove much stickier than I think maybe the market is really anticipating and so I think ultimately tomorrow they're going to raise twenty five I think they're going to leave the door wide open to go in either direction for the for the June meeting. But I do think the take will be slightly more hawkish than people are thinking. And the reason why I say that is you look at where the

PCE, where CPI numbers they look at still are. And then you also look at our deficit spending. Our deficit this year is going to be somewhere in the neighborhood of $2 trillion. That is very stimulative. And that is a major tailwind for inflation. And so I think it's going to prove very, very sticky. And the Fed knows that and is going to have to give a tone that will probably be more hawkish than the market is currently currently expecting. I understand that. But maybe in the same respects, they'll be tone deaf to the issues that have been around the banks. You just had the third bank failure since March. You're unmoved by that. Rich Clarida, by the way, giving a former Fed vice chair, giving an interview at a Wall Street Journal event.

I would be in the camp of signaling a pause, he said a short time ago. You wonder how many others are in that camp. So I don't think they're going to want to they're going to want to put themselves in that box. Right. Because if they come out somewhat explain will come out explicitly, but somewhat explicitly indicating a pause and asset prices were to rally sharply, they're now going to be in the same predicament that they were before, where they led the market in a wrong direction and then they have to pivot back. And I don't think they're going to do that. If you look at rent prices, the real real world rent prices,

they're now taking up again. So a lot of the indicators beyond sort of the CPI are also suggesting that things are starting to be kind of move higher again from the inflation front. And I do think that's going to concern them. And so I think your best case scenario is where they just play two sides, leave it open, and they'll see where the market takes them over the course of the next month. It's going to be hard for the Fed to surprise us, right? I think it'll be hard to have a major surprise. It's going to be about the shadings of the message, probably.

But I would take the other side of this idea that they feel like they have to be hawkers. They're never going to declare victory when you have inflation twice at their target. But so much different than last August when Fed funds was at three, inflation was still pushing 10 and the markets were ripping. Here we have, you know, there's some elegance to getting the Fed funds rate to 5 percent and saying, let's wait and see. Five percent is above core PCE. That's restrictive. And the fact that the market, the economy has slowed down to a fair degree is also getting to their goal of below trend growth for some period of time. So there's a there's a rationale they can easily trot out to say enough for now. Maybe we back away. We're kind of in the zone of where we need to be.

Meanwhile, debt ceiling and regional bank stress. Another reason for a risk management mindset, at least to come through to some degree in the message. Do the tea leaves and the Clarida type comments tell you anything about what might happen tomorrow? Well, it means that it's likely going to be far more split and that we could actually see defectors and pushback. Now, we won't know until after this meeting because we don't get an update to the dot plot. But I think it's important to also remember that this hike gets us to the median dot that they raised to in March, which means that they're finally restoring credibility in their terms. So this kind of gets us to the success of saying and doing what they said that they would do.

And now from there, I think that they have a little bit more wiggle room to be able to stand back and see how things play out. But we'll see that really battle out between the hawks and the doves and the Fed speak following this meeting. Eric, I want you to respond to Mike, though, on the notion that he put forth of at least taking the other side on this need and, you know, necessary thing to be hawkish tomorrow by the Fed. Just I would say, OK, well, maybe you'd be right if we didn't have three banks implode since March, but maybe the playing field is littered with some landmines now that the Fed just doesn't want to take a risk on walking down. I mean, their commentary has kind of gone back and forth on banks, whether it's some of their responsibility or or not. I do think it bottom

line is it does scare them a little bit and they don't want to be held responsible for that type of, you know, action. But I think what their path has been to talk hawkishly, as we know, and I think what they would be concerned about is the going back and forth and changing the message before the quote unquote job is done. I mean, if you look at the data that we're seeing today, it's very difficult to find a reason for why they would pause. Because it's all lagging data. I mean, come on. You can't expect the whole story to fall apart. You know, as well as anybody, that we're just beginning to see the effect of what will be, what, 10 or so, 500 basis points worth of rate hikes? I absolutely agree there's a lag effect, for sure. We've been talking about that a lot, and I still think that exists.

But the Fed has been very focused on a lot of the data that, as we know, is lagged. So whether it's PCE, CPI, the current unemployment rate, all of this data that they talk about, and even job openings, which come down a lot, that they talk about and even job openings, which come down a lot, but they're still at an elevated level. Wage growth, the ECI just came out. It's annualizing over 4% wage growth. And so all these indicators that they look at, and don't forget, they're trying to get the 2% average inflation, average inflation. So getting a one touch on 2% is not getting their job done. So they're well above where they are trying to get to. And I'm not sure they're going to want to make a bet, right, if they're going to err on either side.

They're going to want to make a bet that the lag effect is going to ultimately work out. The other key event, which we haven't really discussed at all today, is Apple, right, and the earnings on Thursday. And what kind of an event that's going to be? Eric is negative on Apple or at least thinks it's going to be a negative event. What do you expect, Cameron? Well, the bar is really high after you saw the big rally, not just in the recent days, but from the beginning of the year. It's now trading at 27 times earnings. And what's interesting is that if you look at Apple, it's had flat profits for the past couple of years. Now, you have seen the earnings grow because you've seen them buy back a ton of stock. But the question is, should you be paying an increasingly high multiple for Apple, given the fact that earnings aren't growing rapidly? So what we see with Apple from a technical standpoint is that $180, that's the 2022 high.

That's very formidable resistance. You could move up to that. You're seeing better relative performance. But I know that momentum in Apple, even though the stock has been trading up, has been kind of flatlined for the past two months. So that would tell you all that this is a really important quarter with a very high bar. Right. The mega caps off at your peril. I mean, we're kind of learning that as we go through earnings season, as we did last week, where they all were pretty good. Yes, they mostly were. I wouldn't write them off, but you also have to keep them in perspective. So when they rally and the rest of the market doesn't, it doesn't mean that the S&P is at an illegitimate price or somehow it's a house of cards. It means it's an unbalanced market and

the rest of the market is resetting. And so I do think it's a house of cards, it means it's an unbalanced market and the rest of the market is resetting. And so I do think it's clearly mathematically important tomorrow. It's definitely always a test of the willingness of investors to pay up for the stability and the perceived predictability of a, you know, two and a half trillion dollar company that buys back a few percent of its stock every year. All right, guys, good stuff. Eric, thank you as always. Eric Johnson, Cameron, thank you as well. That's Cameron Dawson. Santoli's back in the market zone. We look forward to that as well. Let's get to our Twitter question of the day. We're asking what should the Fed do tomorrow, right? What should they do? Should they hike 25

basis points or should they pause? You can head to at CNBC closing bell on Twitter to vote. We'll share the results a little later on in the hour. We do have a big Fed day tomorrow. Please don't miss our all-star lineup as well. We're going to hear from Jeffrey Gundlach, the double-line CEO. Our Fed day tradition continues tomorrow. Getting his first take. And Charles Schwab's Lizanne Saunders is going to be with us to react to the news,

the stock move, and everything else tomorrow right here on Closing Bell. One of the biggest stories of the day. And now we have more news on it regarding Carl Icahn as well. The famed activist investor just putting out a statement in response to the short seller report from Hindenburg Research, which is targeting Icon Enterprise. That came out earlier today. Hindenburg saying IEP has significantly inflated the value of its assets, that it trades at an unreasonable premium to its holding company peers. It also went after the dividend yield, saying Mr. Icon has been using money taken in from new investors or Icon Enterprise has to pay out dividends to old investors. Icon now saying in a statement on behalf of Icahn Enterprises that the company believes the Hindenburg report was, quote,

intended solely to generate profits on Hindenburg's short position at the expense of IEP's long-term unit holders. We stand by our public disclosures, and we believe that IEP's performance will speak for itself over the long term, as it always has. A tough day for IEP shares, currently down by more than 20 percent. As we head out, another check on the Dow. It was down more than 600, nearly half those losses, still down 382.5.

We're all over the sell-off as we head into the final stretch. Got about 40 minutes or so to go. Up next, breaking down the banks. The regionals getting slammed today. We'll drill down on those major moves with an analyst after this break. And later, AMD on deck. Top chip analyst Stacey Raskin is back. He breaks down what he is watching in that report, what could be at stake for the overall sector. You're watching Closing Bell right here on CNBC. Let's get a check now on some top stocks to watch as we head into the close. Christina Parts and Novelos is here with that. Christina. Thank you, Scott. Well, we're watching weakness

in energy today as oil prices hit their lowest level since March. Diamondback is firmly in negative territory right now following its earnings miss. You had other names that include Marathon Oil, APA Corporation and Halliburton. Look at that down over 7 percent right now. And Chegg is trading at its lowest level in six years on weak revenue guidance. The company says AI tools like ChatGBT are having an impact on new customer growth rates. Those results, which is why Chegg is down, what, almost 50%, but those results are weighing on other educational players like Duolingo and John Wiley & Sons. And we'll hear more from Chegg CEO in the next hour on

closing bell overtime. Scott, look forward. Look forward. Christina, thank you. Look forward to hearing from Dan Rosenzweig in overtime. Thank you. Regional banks getting hit hard today. Leslie Picker is here with more, of course, following the money on this still developing story. And that's part of the issue, Leslie. Yeah, very much developing some steep drops in regional banks today, once again, as the market digests the fallout of First Republic failure and the sale to JP Morgan. The KRE regional bank ETF down more than 6 percent. PacWest, Western Alliance, Comerica, Zions and Key Corp leading the industry to the downside. The sell-off is the combination of each bank's commercial real estate exposure, its level of uninsured deposits. The bearish thesis

stems from the fact that First Republic's bondholders and stockholders were wiped out in yesterday's seize and sale to JP Morgan. And the market is essentially revaluing the downside risk in the event that another regional sees the same fate. The deal also highlighted the power of the big bank balance sheet preferred by the FDIC in this case to acquire the failed bank out of receivership. In a world of potential industry consolidation, this calls into question regionals' ability to compete, Scott. Leslie, thank you. We'll follow it. Some just stunning losses again today. For more now, let's bring in Wedbush's David Chivarini. He covers the regionals. David, I'm really glad to have you today because you're in the heart of this proverbial storm

in terms of your coverage list is all over this space. How are you thinking about it today? Yeah, it is surprising to see this level of a sell-off following the First Republic seizure yesterday, because this was front and center for the past month and a half. So you didn't have the same sort of shock and awe that occurred right after SVB went down, right after Signature Bank went down. People were prepared for First Republic to go down. So it is surprising that, you surprising that this sort of reaction today, if anything, should have happened yesterday. So the delay is a concern. But what I'm thinking is that people are looking ahead, looking to the funding issue for banks, because

rates are continuing to head higher. Deposit costs are continuing to help to head higher. And then credit quality. I think that what the market is telling us is that credit quality is going to be an issue and commercial real estate is really what's getting the headlines here with the banks. So that's what's concerning us. We've been cautious on the banks for the past year or so. We continue to be cautious looking forward and really curious to see how this plays out. See, one of one of the things you just said, you know, about deposit costs. It doesn't matter if deposits are leaving. Right. And it's the kind of thing that Bill Ackman was tweeting about today.

Fed's going to likely raise rates again tomorrow. You continue to push rates higher. You've got competition from money market funds like you haven't had in what feels like a generation at this point. And you're going to see more flight as a result. Right. So you've got the Fed's balance sheet is coming down. It's not even the banks competing with one another. As you noted, they're competing with money market funds. So this funding pressure is really going to squeeze net interest margins. So you've got revenue pressure, you've got the cost pressure on the deposit side. And then when the credit quality costs end up going up, you're going to be left

with far less earnings than what people were expecting earlier this year and certainly late last year. So multiples are coming down and I think investors are beginning to shift towards tangible book value as kind of a baseline to support valuations. Can you feel confident putting a buy rating on any of the stocks in your coverage list as we have this conversation today? I'm talking about PacWest and I don't have your ratings in front of me. I just have your coverage list. So forgive me for that. PacWest, Zion, Citizens, Western Alliance. I mean, some of these are in the heart of this today. Do you have a buy rating on any of those? And if you do, how? Yeah. So the only one out of those five you mentioned that we have a

outperform rating on is Western Alliance. And that one, we do kind of put in the category of. Higher risk higher return we just upgraded it. Right after they reported earnings when I was trading at. Thirty two dollars a share and they really what surprised me it was a good surprise is that of the six billion of deposits

that left in the first quarter. They got two billion of the back- quarter to date through through April. So we're seeing some stability there. We're expecting eight dollars of earnings per share from them. So it's trading at call it, you know, four times earnings, even even less than that. But we do put it in that higher risk, higher return category. And the other, you know, reason for having some like PacWest, for example, forgive me for interrupting you.

What do you have on that? Yeah, PacWest, we've got a neutral rating on that one. And they do screen poorly from a when you look at tangible book value on a fair value basis, they screen poorly in that regard. They've improved their insured deposit rate. They were. It's really poorly at forty five percent they've increased that to about seventy three percent so. That should add some stability to them but I think what investors are focusing on for them. Is also

capital. Capital has been an issue for pac west they're trying to increase. Their CET one ratio they attempted to do a capital raise. In the immediate aftermath of S. V. S. V. B. going down. They pulled to do a capital raise in the immediate aftermath of SVB going down. They pulled that off the table. They're now looking to sell their lender finance business, $2.7 billion portfolio, to lower the size of their balance sheet to indirectly improve their

capital ratio. So PacWest does have some wood to chop, and they do screen poorly on a number of metrics. And I think that's the reason why it's coming under such pressure. Yeah, it's getting chopped. All right. And today it's getting chopped by another 25 percent. David, I appreciate your time very much. That's David Chivarini. Thank you. Wedbush joining us today. Up next, forecasting the Fed. The countdown is on for tomorrow's crucial decision.

And our next guest is raising the red flag on what he says could be the biggest risk from Powell's commentary tomorrow. He'll explain after the break. We're back with Closing Bell right after this. Dow's down 350. Welcome back. Stocks wavering ahead of a critical Fed decision tomorrow. Our next guest says the big risk is more hawkish commentary than investors expect. Scott Rend is a senior global market strategist at Wells Fargo's Investment Institute. Joins us now. Welcome back. Why is he going to be more hawkish than we think? Well, Scott, I tell you, for one thing, in our opinion anyway, I think the bond market has just mispriced.

We think the Fed's going to hike tomorrow, of course, but probably another 25 basis points in June. And I think more importantly, a hold rate steady over the balance of the year. And clearly that's not what the bond market has priced in. So I think the risk is we've been up here toward this big resistance level at 4,200, as you mentioned. You know, there's a lot of reasons to be concerned here. And if the Fed talks hawkishly, just from a trading perspective alone,

you'd think there'd be some downside here in the market. Yeah, I mean, I'm just trying to think of what the probabilities are that that actually happens. I mean, if can mean a lot of things. Economy is slowing, inflation is coming down, banks are fragile, some are wobbly. Doesn't that factor into how you're thinking about all this? Well, it does. And I think that, you know, for us, did we think inflation was going to fall on a straight line? No. Has it come off a pretty decent amount? Yes. But if you look at whether it's core PCE, core CPI, you know, we're hung up here a little bit at levels that are well above what the Federal Reserve would like to see on average over the long term. It's going to take longer to get down there. And really, in our opinion, it's going to take a recession to push us down to the levels that the Fed would find acceptable, which we think is going to happen in the second half of this year. You know, we're looking for sub 3 percent CPI by the end of the year. And a lot of that has to do with with the

recession that we think is probably going to start, you know, negative GDP third, fourth, probably the first quarter of next year. So that's what it's going to take to get there. Unfortunately, we're going to have some market volatility that's going to come along with that. But I mean, they don't necessarily have to keep hiking to put us into a recession. We're starting to feel the effects and implications of what they've already done. So that's right. Maybe maybe they're content on just doing tomorrow and holding and seeing they could be. And, you know, I think, you know, they're going to they're content on just doing tomorrow and pausing, holding and seeing. They could be. And, you know, I think, you know, they're going to they're going to hike tomorrow for sure.

After that, you know, you're splitting hairs, whether it's another quarter or they pause or whatever. But I think the important thing is how long are they going to leave it at the terminal rate? The market's pricing in better than 50 percent chance of a cut in September. And then I think north of about 80 percent in every meeting through the end of the year. They're going to want to see this inflation come off because, of course, the last thing that the Federal Reserve wants to do is take a pause, have inflation hang up at levels that are too high and then have to start hiking again. How vulnerable then are stocks do you think? Well, you know, for us, we think that the top side, as I said, 4,200, you know, the bottom of the range,

as we see it, is around 3,700, so let's call it 10 to 12%. So really for us, when you see all the risks that are out there, M2s crashing, credits tightening, the Fed's going to leave rates high, unemployment's going to go up. We think we're going to have some downside here and very well could get toward the bottom end of that range, which at that point, we'd be pretty optimistic and we'd do some positioning, non-defensive positioning, looking out well into 2024 that we think is going to be a lot better. All right. We'll talk to you again soon, Scott. Appreciate it very much. All right. Thanks, guys.

Scott Wren joining us here. Closing bell up next. Getting slammed ahead of the Fed. You know that by now. We are weighing now the big risks at hand. Trying to navigate how investors can best position themselves amid this volatility. Do not go anywhere. Closing bell right back. We've got 20 to go before the closing bell. Let's get back to Christina Parts of Neveless now for a look at the key stocks to watch. Christina. Let's start with Molson Coors ticker TAP gaining almost 8 percent right now, its highest level in over four years after

its earnings easily beat Q1 estimates. Even though Molson has been hiking prices on its beers and seltzers, the company is benefiting from consumers that are shifting from higher-priced beers to cheaper ones like Coors. Materials giant DuPont is actually moving in the opposite direction of TAP, down about almost 7% right now, even though it beat estimates. Investors are concerned about the 16% plunge in electronics and industrial-related businesses, forcing the firm to trim its full-year earnings outlook. DuPont also says it's agreed to buy Spectrum Plastics Group from AEA investors for $1.75 billion. Shares are almost 7% lower. Scott?

All right. Christina, thank you very much. Christina Parton-Novellos. Last chance to weigh in on our Twitter question. We asked, what should the Fed do tomorrow? Hike by 25 basis points or do nothing and pause? Head to at CNBC closing bell on Twitter. The results are right after this break. Let's get the results now of our Twitter question. We asked you, what should the Fed do tomorrow? The majority of you said nothing. If they should pause 51 percent, it was close. We'll see. Hope you all join me. We're, I don't know, 24 hours away, less. There's the Dow

today, 358, 359 to the downside. It's been an ugly day. Our next guest is forecasting even more rough waters ahead. I'll explain why and how to navigate it in the Market Zone. 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, City's Scott Cronert on why he still sees nearly 10% downside for stocks by the middle of this year. Top chip analyst Stacey Raskin is back of Bernstein with the setup for AMD ahead of earnings after the bell.

Looking forward to talking with all of you. I begin with Santoli. I'm looking at PacWest. Yeah. Why? Because it's down 27.5%. And as long as you have issues around the banks or perceived issues or worries about potential issues, this is the kind of day you're going to have.

Yeah, you can't be comfortable. It doesn't mean that we know something specific is blown loose in the system. We know that there are enough people not wanting to stick around to see. So I do think there's a decent chance, it's very hazardous to say this, that you've got a really good flush in the overall regional banks today. They're a little bit off up off their lows. It seemed pretty indiscriminate and not really pinned to anything, except we have a Fed meeting tomorrow. And it comes with the obvious risk that it's one hike

too many if we get that hike. The bull case, if there was a premise out there, it was peak inflation, Fed pause and then a predictable Fed thereafter. Earnings dipping but flattening out, and therefore valuations are not too extreme. Sentiment and positioning remain relatively defensive. How much of that we've kind of used up just to get ourselves to the upper end of the range really is now where the debate lies. I do still think we get the pause. Everyone who says they're still way above the inflation target, they're correct, but they were always going to pause before we got back to 2%. And you've got to remember all the ways that Powell rationalized aggressive hikes last year. He was reaching for gasoline prices, for University of Michigan inflation expectations, for job openings, for everything he could.

I thought you were going to say University of Michigan tuition implications. He might as well have. The point being, when they get to the point where they think they need to be, they're going to find a rationale for it and it's going to be persuasive as long as they stick to it. The tough thing is if you get a sell on the news,

even if you get an implied pause. Because then what do you have? We certainly could. What do you have? Look, they're going to try both directions. We know the market always does that just to see where the conviction lies after a pause. I think it's going to be about whether financial conditions relax at all after we get a pause over the next couple of days or if they continue to seize up. Credit conditions are not really at the stress levels right now, but they're inching in the direction of, hey,

you want to pay attention. We still have to watch the Contessa Brewer Cabana indicator, but we'll get to that. We'll get to that later. Scott Kroener, Citi. You think that stocks have 10 percent downside from here? You know, we went into this year thinking the 3700 was a pretty good first half target that was predicated on ongoing Fed hawkishness, which has been on and off throughout this year. We also thought that earnings expectations would have a little bit of a downside bias, and that would continue some of the negativity. At this point, as we get closer to the mid-year point... I think we've lost the microphone. We'll try and get Scott back in a moment.

But, look, there are some who think we're going back to the October lows. There are some who would say, well, yes, we're going lower, but we're not going that far back lower because we're not in that, you know, dire of straits. That's right. I mean, you have to remember the inflation level at that point, how much more the Fed had to do, and the fact that it seemed as if it was a stagflationary panic at the lows. Now, $3,700 is not that much above $3,500, which is roughly where we bottomed last year. I do think that there's a plausible reason to be skeptical about the way the market has come

off that low. It has not behaved the way a traditional bull market would have in terms of how broad it is, the sort of aggressive sectors leading and all the rest of it. On the other hand, I've said from the beginning when we got to those October lows, if that was it, if that was all the pain that this market had to take, yes, we would have considered ourselves lucky. Now, what does it mean if you get a low at a relatively unpunishing level? It means forward returns are probably not as good as if we got a real devastating kind of a crash to a low that was much more extreme as we did in early 2020. Scott, we're back with you, thankfully.

What does take us lower if, in fact, you're right? So, look, I think from here it's going to be the perception that second half earnings begin to falter. It's going to be higher for longer Fed funds. And that's essentially our house economic view, which is that we're ultimately going to see a 550 to 575 Fed funds rate. If you look at end of the year expectations, the market's expecting that you get a pivot and you're down to four and a half. That 100 basis point spread is really the battleground in this market right now. And essentially, I think it underscores that there's a pretty big division between the valuation driver that's taken the market higher so far this

year and where fundamentals may ultimately lead us. Scott, I appreciate it. Sorry about the technical issues that we have. We'll have you back. That's Scott Cronert joining us. Stacey Raskin, AMD. And somehow all roads lead back to Intel with you because Intel's on your mind as we're thinking about AMD. Well, I mean, to be fair, you know, you could argue from a market standpoint, Intel's results may be somewhat supportive. So Intel's results were not good. They were objectively horrible, but they were actually better than expected on both PCN and data center. And Intel thought that the PC channel, which has been undergoing a pretty significant inventory flush, ought to be normalized exiting

Q2. So those things are somewhat supportive. I think Brandy, they're in the same markets. Now, that being said, I actually do think Intel's print made the setup for AMD just a little bit tougher, particularly on data center, because Intel's results within data center, while they were bad, again, were better than expected. They actually beat fairly handily in the quarter. And so if AMD does not show a similar kind of data center upside, because AMD also guided data center down pretty significantly in the Q1, if they don't show a similar kind of data center upside, because AMD also guided data center down pretty significantly in the Q1. If they don't show a similar amount of gain, you can start to poke holes a little bit into the share gain

thesis around data center for AMD. So I do think from that standpoint, the setup is slightly harder, but the market commentary may be at least somewhat supportive relative to what were very low expectations. Yeah, when are you ready to declare that PCs have bottomed? Well, they may have, right? Again, so it's not just for these guys, it's not necessarily just the PCs, it's also the, they sell the chips, the CPUs. And through much of last year and even much of the year before,

the industry was overshipping CPUs versus PCs. I think at its peak, CPUs were overshipping PCs by 30%. They are now undershipping by a very wide margin. Intel suspected that they were undershipped the market by 20% in Q1. It may have even been worse than that. And so because of that, eventually you can't undership forever, right? So even if PCs themselves are weak, you move from undershipping to shipping to demand, and that actually gives you a lift. And we upgraded Intel a little while ago. That was a big piece of the upgrade was just channel normalization.

It does seem like it's likely to happen. You cover NXPI? Sure. I mean, I guess I ask you that in the context of stocks up three and a half percent. And, you know, as we're ready to declare that, you know, those kinds of companies are going to falter, it has a heavy exposure to autos, what's really going on there, there do remain some upside surprises, yeah? Yeah, so NXP, they had a pretty strong quarter. And so they beat and raised. And what happened in the quarter, their core market, sort of auto and core industrial is still pretty resilient.

And they've had some fairly significant weakness, again, in some of these consumer areas and China. And they were sort of less bad than they expected. And they're seeing some recovery. They've got mobile recovering into the back half and some other things. And so those actually look pretty good. The margins were OK. I think the big question of them obviously is sustainability. I know investors are worried a lot about auto because it's been the last market that's holding in. Everything else has shown signs of rolling. Auto has still been very robust, but again, it can't last forever. You go back to those same kind of analysis, semis versus end market,

auto semis versus auto shipments, and they've massively diverged over the last couple of years. I think we're shipping, I don't know what it is, 50% or 60% above the historical trend line in terms of content. And people will point to lots of things, EVs and pricing and everything in terms of driving that content up. But it's a very big gap. And so people have been wondering about sustainability. For now, though, it still looks like it's going. All right. Good stuff, as always. Stacey, thank you. Stacey Raskin. Don't miss AMD's CEO, by the way. Squawk on the street tomorrow. Dr. Lisa Su, we look forward to that, as we always do. Kay Rogers on Starbucks, which is in overtime in just a few moments.

Kate? Scott, analysts are looking for EPS of 65 cents on revenues of $8.4 billion for Q2. Same-store sales projected to increase 7.1% overall and by 8.5% in the U.S. and 0.6% internationally per street account. China, which is Starbucks' second home market, saw its business take a hit last quarter due to ongoing COVID challenges, which is projected to continue into this quarter. Reminder, we're going to hear from the new CEO, Loxman Narasimhan, on the call for the first time.

Former CEO Howard Schultz, remember, stepped down on March 20th, but he was in charge for this quarter after coming back to lead the company just about a year ago. Looming over Starbucks, the continued union battle, which Schultz testified about before Congress last month. Investors, though, don't seem bothered. Scott, the stock is up 14 percent plus year to date. We'll see what happens in overtime. Kay Rogers, thank you. We'll see you, of course, in just a bit.

All right. Mike Santoli is back with us. We just had the two minute warning. What do we look for? It's a bit sloppy under the surface. I have to say we're up off the lows in the indexes, but you still have an 80 percent downside volume day in the New York Stock Exchange. You still have the Russell 2000 really struggling trading, you know, beat for beat with the financials for the most part down another two percent, really not that far off of where it was, you know, back before the pandemic. So I do think it's still a delicate situation.

We go into the Fed trying to stay somewhat neutral in the middle of the range right here. I do think it's worth remembering we get the ADP jobs report tomorrow. Never really a market mover, but it's a reminder that it is a jobs week. So we're going to get loaded with a lot of here's where the economy stands right now. And then tomorrow, obviously, it's going to be hashing through the message from the Fed where you've had the market in regional banks essentially, you know, proactively throw a tantrum suggesting that maybe the pain threshold isn't much higher than this right now. I'll give you one more reminder. Lizanne Saunders, Jeffrey Gundlach, of course,

joining us tomorrow on Fed Day. We're excited about both of those interviews. There's the VIX. I'm glad we showed it right on cue of 10 percent because I did want to mention that. That's what nervousness looks like for a day. And yet it ticked towards above 20 at one point. So it shows you that it has a hard time getting ahead of steam up. But it is on alert right now. We're a couple points off the lows from the latter part of last week. All right, so the Dow was down by more than 600. It's recovered a bit. It's still an ugly day.

Let's not kid ourselves. Down 357, but it all roads lead to the Fed and us here in overtime.