Closing Bell - Closing Bell: Do the Bulls have the Upper Hand? 5/1/23

Episode Date: May 1, 2023

… or is the old cliché “sell in May and go away” your best strategy? Josh Brown of Ritholtz Wealth Management and Marci McGregor of Bank of America Merrill Lynch give their expert market takes. Plus, Fundstrat’s Mark Newton is breaking down the key S&P level to watch ahead of this week’s Fed meeting. Plus, a rundown of what to watch when MGM reports results. 

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with stocks, well, they're trying to rally to kick off the big week for your money. We'll see if they can keep that up. The Fed decision now just 48 hours away, excuse me, more earnings too, including the biggest stock in the market, Apple. Here is your scorecard with 60 minutes to go in regulation. Well, I mean, the Dow was beginning May with a late day turnaround, was up triple digits earlier, gave it all back. And now it's sitting virtually flat. Similar story today for the S&P and the Nasdaq. S&P did get, well, ever closer to 4200, gave it back. Technology not getting much going today as well.

It all leads us to our talk of the tape. Do the bulls have the upper hand in this market again, as some are saying? Or is that old cliche, sell in May and go away your best strategy? Let's ask Josh Brown, Ritholtz Wealth Management co-founder, CEO, and a CNBC contributor. Welcome. It's good to see you. Hello, Judge. New month, new hairdo. Oh. It's new and fresh.

How about that? So what about this idea? I mean, there was some saying, you know, the bulls have the upper hand. I agree with the premise. And it's an interesting conversation, because if you thought about how we went into the year, what was the big risk? The bond market. Like, how much further is the Fed going to go? That was it. Every day, all day. The bond market right now is a basket case. Consider this. Right now, the highest yield on the curve is the four-month. It's 5.2%

yield right now. The one-month, for contrast, is at 4.3%. This is a huge spread between maturities that are like three months apart. It's crazy. The three-month is yielding 67 basis points more than the one-month. So it's all upside down that's that's the freak show that's going on behind the gym where they smoke and flick cigarettes. The the the the captain of the football team is Fang. Like these stocks do not look anything like the bond market. The volatility hasn't been there. The confusion isn't there. When they have strong reports or product releases, the stocks go up. When they have negative guidance or weak reports, the stocks go up. When they have negative guidance or weak reports,

the stocks go down. It actually makes a lot more sense what's going on with large cap growth, specifically tech, than anything that you're seeing that has to do with central banking or interest rates or anything like that. So I think investors look at that and they say, oh, that's why the Nasdaq's up 21% year to date. And that's why we're looking at all-time highs of 52-week highs at least in some of the largest companies in the space. So Brad Gerstner was on, you know, with us on halftime. And we asked him specifically about mega cap technology, right? He's having the, just had the best quarter he's ever had after a rough prior year because of the exposure to tech. And the idea, can this this continue let's listen to

what Gerstner said about this we'll kick it on the other side I thought we had a regime change at the start of last year this is no longer about inflation higher and rates higher this is now about inflation lower and rates will peak in May or June of this year. And then they'll likely follow as well. We think that setup, coupled with the rationalized multiples of tech stocks, made it a great time to start investing in companies like Meta, like NVIDIA, like Microsoft that we expected to beat earnings. And they delivered. They did deliver, obviously.

And the implication from Brad was like, this is the place to be. They got the cash flow. They got the balance sheets. It's where the action is. And it can continue. The multiples are not overstretched in many of the cases by any means. What do you think? So you have the Russell 2000 is flat on the year.

So it's got to be very frustrating if you've got a broadly diversified portfolio and you decided this was the year to tilt away from large cap growth. Like many people did. The torture chamber has started up again. Now you have really good earnings support for the S&P 500, at least for large caps. Consider for Q1 so far, 53 percent of companies have reported. It's like an 80 percent beat rate. I know. What else do you want out of the S&P to at least justify the start to the year?

Now look at Apple, Microsoft. These two stocks combined are 39% of the year-to-date gains for the NASDAQ. So it's really wild, of the S&P 500 rather, it's really wild that we're right back in that place where the rich get richer, the big get bigger. But you're going to have to accept that there are going to be periods of time like this. And now the big question, are we going to do Apple here? Yeah, that's why I was going to bring it up now that you did. Does it last, right? Is Apple the last one to underscore the reason why these stocks have not only gone up,

but are going to continue to be the place to be? So here's the way I would frame it. And I'm long the stock, and I think they're going to have good earnings. And I think the stock will react positively. I could be wrong. That's what I think is going to happen. Here's why this is important, though. The bears will tell you Apple's already up 30 percent year to date. You got you got the benefit of good earnings. That's what I've been saying the whole way, though. You've gotten a year's worth of gains in the mega caps. Yeah. In the first couple months of the year. So there's no way it's going to continue. Yeah, but let me holler at you because if you want to frame it year to date, be my guest.

But understand Apple is flat year over year. There are very few annual periods of time where Apple is flat, especially in periods where Apple is executing and hitting on all cylinders. So yes, you could say year to date it's up a lot. I wouldn't disagree. Of on all cylinders. So, yes, you could say year-to-date it's up a lot. I wouldn't disagree. Of course it is. However, in a year, it really hasn't made any progress. So I'm not sure how much of this year's, quote-unquote, good news priced in. The second thing I would point out, there is a way to make the valuation maybe not make perfect sense.

And let me rattle off a little bit. 28 times enterprise value to EV to EVTA. That's extremely expensive. But the way that you can understand Apple better, and the thing that has worked historically, is not to try to apply a consumer electronics multiple or even a tech services multiple. You have got to start thinking about this company like a luxury goods company. Because that's really what it is, and the user of Apple products does not trade away or trade down or have any more

options at that level. They're Apple users. They're locked in. That's what they want to do. Look at LVMH. I don't know if we could do a P.E. ratio. Apple's P.E. ratio and Louis Vuitton, Moet, Hennessy, they're growing literally in tandem with each other. This is the way these kind of global luxury mega brands are being valued right now. Stop putting Apple up against Seagate, for the love of God. Start thinking about it like you would Hermes or Louis Vuitton. Some people talk about it as if it's a staple.

Maybe it's a luxury staple item. It's a staple for the top 1%, let's say, arguably. Maybe the top 10%. Might be a little bit of a stretch to go further than that. But now they've got new growth markets, too, that are not 1%-er stuff. India, they're never going to buy $1,500 phones there in large quantities. Let me ask you this, then. If you think that Apple is going to deliver and that, in your words, the stock is going to react positively, does that mean that this rally has legs?

Well, statistically, the S&P will be up if Apple reacts the way Microsoft did. But again, the bigger question is, so now we know this year's it trade was back to the it trade of three, four or five years ago. The question is, can the rest of the market now come up from behind? Can the Russell 2000 names get going? Can the mid cap 400 names get going? That's the part that I think is still left out of this. And I don't think Apple is going to change that one way or the other. Is the dispersion between those two groups and the lack of breadth in the market, is that concerning to you? It will be the longer this goes on for and the fewer large caps there are making new highs,

but not yet. It's not where we are. And actually, we don't have a lot of overbought charts. I was looking at the percentage of names in the S&P 500 that were selling at a 70 RSI or greater. It's not a big list. You really have a lot more more 52 week highs than all-time highs most of these stocks peaked in 21 i think we're still okay for now what about the argument that all of the bad news is still on the come that what the fed has done is is taking a toll under the surface and it's going to bubble up yeah it's just a matter of when not if that's kind of the mike wilson view who reiterates that you know today by saying well I don't think this rally is going to last much longer for all of those reasons. And the economy is going to deteriorate to some greater degree than where it is now.

I have been sympathetic to that argument for, I don't know, the last 18 months. I have felt that way. But let me ask you a question. How under the surface do you consider First Republic Bank? Like that's not under the surface. That is an actual calamity driven by the Fed's actions and some of their own, you know, hubris and bad management. But three out of the four largest banks ever to be resolved by the FDIC all had been resolved in the last month. So this is not a case where there has been no damage or where it's all under the surface. It's right there in plain view. It's just not happening to Citigroup.

Is it going to get worse? Diamond, Jamie Diamond, of course, CEO of J.P. Morgan, said this morning on the news that they, of course, were buying the assets of First Republic, that this is ostensibly it. You've had the three banks now, as you said, since March. And that would that would listen. That would constitute. Listen, this did not have to go the way that it went. The fact that we just decided FDI insurance is not a two hundred fifty thousand dollar upside limit. Now it's unlimited. That's a new innovation right alongside AI. This is a new thing we invented this year. Had we not done that, we would be in the midst of a 2008 because it would be 100 banks in trouble and not three that we knew about all on the same day. And we'll throw in Credit Suisse just for fun.

So I think that there was intervention. I think that you can consider what happened with these three banks. Crisis-like. They're pretty big banks. hundreds of billions in assets. We're not talking about a local thrift with 10 branches. So it's not all under the surface. It's on above the surface. We're seeing it.

So it's not as though there isn't damage. It's just that systemically, we haven't had a credit event. We might. We might. But you could always say that. And you could have said that credibly two years ago, one year't had a credit event. We might. We might. But you could always say that. And you could have said that credibly two years ago, one year ago, six months ago. Still hasn't happened. We have blowups.

We don't have a systemic problem. Now, of course, if you're out of the market, short of the market, you're responsible yet. And I get that. I agree. Okay. Let's bring in Marcy McGregor now. Bank of America, Merrill Lynch. So, Marcy, I mean, do you feel like we're still on on shaky ground or as we enter a new month that we have a little bit better footing? You know, when I push back a little bit, I see a market that's kind of treading water right near its year to date highs. We have inflation, which I think is coming gonna come

down pretty quickly over the next twelve months but it's still more than twice. The feds target when you look at core PCE- I think you have market breath as you were discussing is pretty narrow seventy percent. Of S. and P. returns

so far this year come from five names. And earnings are declining year over year so yes I think in the near term sentiment can kind of keep the market treading water. But the big question I have to ask myself is what will cause the

market to break out of this. Really wide stubborn trading range we've been in for months now. And I don't have a great answer to that so I still see choppiness ahead. I do think the economy is slowing. And with market breath as narrow as it is,

much more narrow than it was back in February at the market highs, I'm still a little bit cautious on this market. But I mean, if earnings better than feared aren't a catalyst to take things higher, if a Fed pause this week isn't enough of a catalyst to take things higher, what is? Exactly. You know, and exactly what the bulls are saying right now is, yeah, earnings aren't so bad. The companies are pretty resilient. The Fed is going to pause, but financial conditions are going to continue to tighten. I think we're going to get one more hike out of the Fed and then they get into pause mode. They may leave the door open

for June in their comments on Wednesday. But I think financial conditions continue to tighten. We haven't heard much about their balance sheet. And I think that roll off is going to keep keep things tight. So I think, you know, I'm struggling to see, especially with kind of momentum kind of slowing a bit in earnings, what this looks like as we get to a debt ceiling argument in Washington, as we get to a fall where I think the economy really will be slowing. And a consumer that's been so resilient, but I think the purse strings are starting to tighten. So I'm a lot more positive if I think 12 months out than I am three or six months out right now. Gotcha. Josh Brown has a

question for you. Hey, Marcy, thank you so much for coming on. What changes to asset allocations are you making in light of that outlook? Or is this really more of a behavioral thing where you're just kind of telling people, don't have too much enthusiasm or maybe use too much leverage in the short term, make it to the long term because a year out things look better. Like what's the right response to take if someone agrees with what you just said? Great question. So our positioning all year has actually been neutral stocks, bonds, cash,

because we do see that sentiment and light positioning can have a near-term impact. So we said we're staying cautious, but staying invested. Now we've been tilted towards defensives a lot this year. That's really only kind of perking up in the last two weeks. But I think it's going to look very different in terms of recovery. I think small caps will finally get their moment. International stocks will look a lot more attractive. I think it's a little early for those right now,

but I keep saying have the shopping list ready and know where you want to position when this cycle starts to pivot. Game out, speaking of pivots, game out Wednesday for me. Is a pause maybe not so explicit, but implicit by the Fed. Is that a sell the news event or is that going to be viewed as a positive? Listen, the view that the Fed pauses on Wednesday is is widely consensus right now.

The market is very much expecting a Fed to pause. So I think it's not really going to be a newsworthy event. Now, like I said, I think the Fed does leave the door open for June. They're going to have a couple more unemployment reports between meetings, another big inflation report. So they're going to say and tell us they're data dependent. But where I think the market is really off sides is when we're going to get our first cuts. The market's expecting cuts, I think, a lot sooner than reality. Our view is you don't get the first cuts until likely even early next year. And with that, you know, we have to remember markets actually react pretty negatively to the first Fed cut.

Because why is the Fed cutting? The economy is really slowing. So that's where I think the market expectations need to be reset, is not on the pause that's coming after this meeting, not on the 25 basis points, but it's going to be on what the timeline is for a Fed cut. And I still think that's a ways away. Fed wants to be absolutely sure that they've battled inflation and won. But if I think, Marcy, that like like many do, I think that inflation's peaked, right, that rates have probably peaked and that, OK, I'll give you the fact that the economy is slowing, but it's not going into the total tank. And that's why I want to be in places like technology. Can you make the argument against that? Yeah so- like I said you know even if you look under the

hood of the tech sector market breath isn't great there right it's really being led by the mega caps. Where I would push back on a tech kind of leading the recovery view and we are neutral tech right so- you know certainly not a sector that I'm negative on. But where I would push back a little bit is two areas. One, in industries like financial services, which are, you know, kind of in cost-cutting mode, that's about 20% of IT spending. So I think that can pressure tech going forward. I think you also saw a tremendous amount of tech demand pulled forward with COVID. So I think that can pressure sales. And that's a story for many quarters to come. Again, I think it's going to be mild, but I think it could pressure earnings. That's the thing. It's not really happening.

And by being neutral, so to speak, on that area, I mean, I can nitpick 10,000 things in this market if I want to. And yet the ship just keeps sailing forward in terms of mega cap tech. There's always a yeah, but. But at some point, that story tries to starts to sound a little tired. And what we've been saying to clients is tilt towards higher quality tech, tilt towards mega cap tech, especially companies pulling their weight in earnings. And that is what you've seen perform so far year to date. My gut tells me, though, that we see some market volatility. And this market has been so subdued with a VIX under 20 for some time now. I think if we see volatility perk up again around the debt ceiling, again around some tough economic data. That's where I think

these defensives that are just starting to perk up are going to be the way to be positioned. Yeah, I appreciate it, Marcy, very much. That's Marcy McGregor. Lastly, with you, you're going to be around for a bit. We're going to see a couple of times before the hour's up. I mean, those reasons alone, right? Inflation peaking, rates peaking, economy a little bit dicey. You're going to go with quality And arguably what is viewed in this market as the highest quality. I don't care if it's six stocks or 600 stocks. I think those are the stocks that got rewarded by and large this year. Investors have been looking for a combination of quality.

And by quality, it's not a subjective like, oh, I think this company is a really nice company. Oh, no, I'm speaking, you know speaking facts. Yeah, we're talking like fortress balance sheets. Even look within sectors. Look at large banks, JP Morgan leading the large banks. It's not like an accident. Investors are prioritizing the companies that are perceived as being quality in every one of the 11 S&P sectors. And that's something that you're seeing internationally as well when you take a look at it.

So that's important. I think companies that have secular growth stories are doing better than companies that are highly reliant on the cyclical story because of how in doubt that cyclical story seems to be all of a sudden. And so that combination, you ask yourself, where do I find quality companies that can basically manufacture their own growth? Smart cap tech. It's not this is not rocket science. Yeah. All right. Let's do this. Let's let's squeeze a break. Josh is hanging around.

Let's get to our Twitter question as well. We're asking, should you sell in May and go away? Get ahead at CNBC closing bell on Twitter. Please vote. We have the results coming up a little later on the hour. We're just getting started, though, here on Closing Bell. Up next, Altimeter's Brad Gerstner also making a big move out of one stock. Josh Brown owns it. We debate it. We'll do it next. And later, top technician Mark Newton, a fun strat. He's watching a key S&P level now ahead of this week's Fed meeting. He'll explain exactly what it is.

We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. About 35 minutes to go in the trading day. Been a strong day for travel stocks. Seema Modi here with a look at those names. Seema. We'll start with Norwegian, the top performer on the S&P 500. Strong demand, higher ticket prices. The company also reiterating, Scott, that the banking stress in March did not result in unusual booking activity or travel cancellations. In fact, it saw onboard revenue rise 30 percent from 2019 levels. That stock on track for its best day since October 12th. And those comments from CEO Frank Del Rio really fueling shares of Royal Caribbean and Carnival.

Those two stocks higher right now. And take a look at booking holdings ahead of its report on Thursday on track to close at yet another record high. It follows four consecutive months of gains just as we count down to Marriott's report tomorrow morning to see if it can match Hilton's very bullish outlook that it received last week. Scott. All right, Seema. Thank you, Seema Modi. Top tech investor Brad Gerstner taking sides in the AI arms race today. Listen. If I'm the CEO of Google, I have one job. I have one job. Do not let chat GPT secure a leadership position in search and discovery when it comes to AI.

And that's exactly what's happened. The bottom line is today I don't see a level of urgency around efficiency and product release and getting leaner and faster that's required to compete with ChatGPT. I mean, I thought that was a big deal. Brad Gerson used to be in the stock. He's like, basically, they fumbled the ball in AI, and they're not picking it up anytime soon because the game's already being played without them. Or at least way ahead of them yeah what do you say i have well so i agree with most of what he's saying i have a slightly different perspective but with the same idea the fumble the fumble is probably

not that important like you kind of dribbled out bard then he went on uh kevin ruse's podcast and he basically said like this this large language model that we put out as BARD is actually not our best stuff. It's more like a Honda Civic. That's his words. That's not mine. So you don't do all that stuff if you're serious about making the splash. But I think the real fumble is that Google, and for good reason, became very pressured internally by both employees and all of these chief ethicists and all kinds of people that had working at the company whose role is not to make money to be more retrospect about AI in general and more cautious about rolling out chat products

in particular. And I think they listened to too many people who told them to go slow. And then Microsoft just like comes around the like, we really don't care. This thing is out there. We'll improve it as it goes. I do think that it's impossible to have a conversation about the near-term future of AI without Alphabet. You may not think that they are in the lead right now. It doesn't really matter what the public thinks. What really matters is who is going to make the best products and have the highest rates of usage.

I think it's way too early to say that open AI has any kind of superiority over everything that's going on under the hooded alphabet. I would be hesitant to call the match at this point. But does it give you any kind of pause as a shareholder to say, OK, well, Microsoft, NVIDIA, now in some respects, Meta, they're the ones who have sucked all the oxygen out of the room. Today, today, today. But I mean, it's been more than just today. Google was like the hundredth search engine. So this is really important. Google didn't come public until 2004.

We had already had a wave of 20 search engines, IPO, become hugely valuable, and go to zero. It's not that important to be first. It never has been. Google didn't enter the office products market until 15 years after Microsoft had dominated it. You can take a huge chunk of a business if you come in with the best product. Apple is living proof of that. They're never first. They didn't have the first smartphone, the first MP3. It's just not that. It's important to us today. It's talking heads and media. Of course, if we're investors in a stock, we want to feel like they're first. But in the end, what matters is who makes money and who gets a dominant market share. It's so early that I think that that's a misguided way of trying to handicap what's going on between MSFT and Goog. Yeah.

And you've made the case, too. You think, generally speaking, there's a bubble in AI that some of the stocks you own and love have gotten a little bit caught up with. The second half is going to be wild and woolly. If we don't have a credit event, if we don't have some like crazy economic meltdown and we just have like an atmosphere where the Fed is cutting rates and people are discovering chat GPT, we are going to have a wild and woolly second half with all things AI. It's almost unavoidable at this point. All right. Good stuff from Josh Brown yet again. Up next, top technician Mark Newton getting bullish on two key parts of the market where he sees opportunity and risks. Next.

Stocks ticking slightly higher today to start off the new month of trading. My next guest says the markets could be bracing for a big rally in the next few weeks, could be led by tech. Let's bring in Fundstrat's Mark Newton. It's good to see you again. I got two numbers on my mind, all right? 4,200 S&P. Got closer there today before backing off.

I just looked at the VIX. I mean, we might go 15 while we're having this conversation. What do we make of both? The VIX should be heading lower. There's nothing that has really spooked the market in the last month since it peaked in mid-March. So the VIX is down about 50%. Stocks have slowly grinded higher. Those are conditions where the VIX typically falls.

Lower than this? I actually see an upcoming bottom in the VIX likely this week. It could start right near the Fed meeting. Even though I still expect the market to be higher this month, at least into mid-month, the VIX very well might bottom and then make a secondary low. even though I still expect the market to be higher this month, at least into mid-month, the VIX very well might bottom and then make a secondary low. Why does the VIX go lower into the Fed meeting? It's on a severe downward spiral right now, and the VIX has been going down for a month and a half.

It's dropped sharply. There's no reason to try to time the bottom unless you look at things like spot VIX compared to back month. And there's a huge contango right now. You look at the VIX, is it under 16? And August VIX, I believe, is at 22. So there are a few things I look at that suggest we're close to a bottom in implied volatility. That doesn't mean the market has to sell off violently, but I think you probably will get some sort of a reaction near the Fed. The real key is going to be technology.

Look, I think the risks are rising in May. I call it, you know, the three S's. The first is, of course, seasonality. We have exited sort of the golden period of pre-election seasonality, which starts in October, ends in April. We're out of that period officially. Sentiment has recognized this rally over the last four out of five weeks. And we've seen things like fear and greed, investors' intelligence have all risen. We saw levels near 25 in March. Now they're up near 65. That is worth paying attention to.

Sector rotation, probably the most important. So we've seen a huge uptick in defensive trading in the last month. If you look at an equal-weighted basis, the top five sectors are real estate, discretionary, utilities, staples, and healthcare. So those are all extremely defensive. Technology, on an equal-weighted basis, actually is down over the last month.

But you think technology is vulnerable if we're going to have some May choppiness? I think tech is close to stalling out, and that should happen this month. And we should actually retreat in technology. Now, I'm not saying sell tech and go away. I'm thinking that tech has had a big run. You've seen equal-weighted tech break down versus the equal-weighted S&P thanks to semiconductor weakness, software. It's really been FANG that's really helped to disguise technology, and that's going to be something to pay attention to. So you think we can get to 4,300, 4,325, but that technology is not going to be the thing to take us there?

Near term, it's likely going to be 4,200 where we hit a wall this week and we pull back. Short term, maybe 1% or 2%, and then we likely move up above 4,200. That causes the final stage of capitulation where everybody's eyeing that as being an important level. They have to cover shorts, breakout buyers emerge. I don't think we get above last August peaks at 43.25. So for me, there's 2% to 3% upside, whereas, you know, the risks of a pullback, given the defensive trading, seasonal concerns, uptick in sentiment, those are important.

But you don't have any traditional sell signal right now. I mean, in terms of trend following, things are still very much intact with regards to the market. I'm wondering, and, you know, some have raised the issue of whether the Fed decision, if it's a pause, is a sell the news event. How do you see that? I think after a 500 basis point, you know, 500 basis points and hikes over the last year, I think 25, whether they do 25 or not, is irrelevant. Only, except for this one major thing, You know, in the March Fed minutes, they came out and said there's going to be

heightened risk of recession later this year. So why in the world would they continue hiking if even the Fed itself says there's going to be a recession later on? Well, let's just say it's a pause. I think the market is out of touch with what the Fed is saying right now. And those two things have to really reconnect.

I mean, I don't necessarily think there's going to be a drop in rates. I don't think they're going to have to cut later this year. But I think we could easily have a meandering period where we go nowhere where the Fed is done and we have to wait and see. I think personally, that's a smart move. What's the best part of the market right now? Well, I love health care. I think that's coming into a very seasonally bullish time.

We've seen short-term breakouts in medical devices and some parts of biotech. Pharmaceuticals are a great defensive area to be. So tech is starting to wane a little bit. And if anything, you're still seeing good strength in discretionary. Casinos, home builders, those have been very, very good areas. We've got NGM coming in overtime tonight. We're going to have a preview coming up. You have to respect the defensive sectors as well.

What about energy? What about energy? What about energy? Energy is still seasonally in a good time, but it certainly has disappointed. I'm waiting for crude to stabilize a little bit and go higher. I'm a longer term energy bull, but, you know, it certainly has stalled out a little bit. You have to be a little bit more selective until crude really starts to get back up above probably the low to mid 80s. But, I mean, that's been a debate whether you need crude prices to really go up for energy stocks to work. And some make the case that you don't. I mean, it's a 75.

I wouldn't disagree with that. Look, you saw a period where energy held up fine, even though crude was declining. And then finally, the mean reversion kicked in for energy. And now, if anything, things like XLE are still OK by my book. So I don't mind energy, but I really want to be in health care. I like industrials. There are lots of parts of industrials that are really in good shape. So you have to be diversified. And if anything, the correlation indexes have dropped substantially that you can be a stock picker again. You know, the CBOE three-month correlation is down to a 30%.

Stock picking is working in this environment. You don't need to own broader technology anymore. You can diversify your assets, and I think it's a golden time for stock picking. Yeah, but you have to believe, as you do, that you're not going to have a recession. You can't tell people to buy cyclical stocks if you think that we're going to have a recession, which you just said you don't. You don't think we're going to. You said, I don't think the Fed's going to need to cut, implying that you don't think we're going to have a recession. Tom Lee doesn't think so. The great Jesse Livermore once said, the market is not wrong.

Opinions are wrong. The market, since last October, has shown its very good performance. And until I see that changing, I think, in general, the market's going to respect inflation starting to fall off a little more quicker than an earnings recession or the threat of a recession where everybody in the world thinks we're having a recession. I think it's going to be postponed. I don't see it necessarily needing to happen this year. Okay. We'll leave it there. Appreciate it. Mark Newton, thank you very much. All right. Up next, we're tracking the biggest

movers as we head into the close. Pippa Stevens standing by with that. Hi, Pippa. Hey, Scott, it's all about the chips. We got one key report this morning with more names on deck. Coming up next. A lot less than 20 to go before the closing bell. Let's send it to Pippa Stevens for a look at the key stocks we are watching. Pippa. Hey, Scott, we are tracking the chips. On Semiconductor is the top S&P stock today. After the company posted first quarter IRV results this morning, that topped expectations. Despite what the company called macroeconomic uncertainties, On Semi's silicon carbide revenue nearly doubled quarter over quarter. Automotive revenue grew 38 percent year over year, with revenue from the energy infrastructure and

advanced driver assistance systems of 50 percent compared to last year. Other chip stocks on the move include NVIDIA, hitting the highest level since March 2022. And after the bell, we will hear from NXP and Lattice. Scott? All right, Pippa. Thank you. Last chance to weigh in on our Twitter question. We asked, should you sell in May and go away? You can 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, should you sell in May and go away? The majority of you said no. Shouldn't. Near 58%. That's with the S. and P. China hit forty two hundred. Had a nice little rally going earlier today all but evaporated now. But up next

your earnings rundown MGM is set to report in overtime. We'll tell you the key numbers every investor needs to watch just ahead. That and much more when we take you inside the market zone. Are we now the closing bell market zone CNBC senior

markets commentator Mike Santoli here to break down the crucial moments of the trading day plus Philip Bo on the autos General Motors announcing job cuts Ford getting ready to report its earnings tomorrow contest a brewer with a look at

all that's at stake tonight with MGM reporting in overtime in just a few moments Mike Santel Mike Santelli first. I feel like it's kind of like we try to get ahead of ourselves a little bit going into the Fed. Then we're like, wait a minute, what are we doing here? There is some of that. We'll be like, chill out for a second.

And this market lately has defaulted to churning in place, lots of rotation. I also think the fact that the regional banks continue to decline all day, couldn't get out of their own way. I did think there was a chance coming into today that the FRC takeover would be viewed as a little bit of a clear the slate moment. That's not the way the markets take. Diamond tried to say as much, too. It's kind of like, look, this feels like it's the end of this. End of the acute phase. And I'm sure that kind of is. I don't think people are selling regional bank stocks right now because they feel as if all of a sudden we're still going to be in this chaotic moment where who's going to rescue somebody.

Who's next? I don't know. You do just have the continued pressure from all the places we know. So that being on one side of it and then on the other, slightly warmer than expected. Both growth and inflation numbers coming out this morning has yields higher. And so it's a little bit of let's, you know, kind of tense up a little bit in advance of the Fed. We're going to get most likely what we expect, but we don't know how it's going to react. It's never a clear equation when we get that. And I would say also heavy corporate debt issuance today, which is a good thing.

The market's receptive to it. The spreads are tight. But that does also have Treasury yields leaking a little bit higher. Yeah. Technology not really doing much today. You know, so that's, you know, another bit of bit of a breather. That's not exactly how it's just Nvidia kind of accounting for the upside. Yeah. Apple's virtually flat. All right. Altimeter's Brad Gerstner weighing in on the road ahead for the automakers earlier today on halftime, warning they might not be able to pass on more price increases to consumers listen in 2022 they were able to pass on massive price

increases because we had supply chain disruption now supply chains are being normalized i think it's going to be difficult for companies like autos to pass on price increases in a world that is starting to deflate around key prices. All right, let's bring in Phil LeBeau. So, Phil, General Motors got an upgrade today from none other than Adam Jonas. Yep. But what about the point that Gerstner makes? He makes a valid point. It depends on how much we see the supply increase and brings down the prices of new vehicles.

By the way, Scott, the average transaction price, it's only come down maybe one, one and a half percent from its all time high at the end of last year. Now, many expected to come down further this year. We'll have to wait and see. But that's the idea that is out there, that as you see more supply, prices will come down. I want to show you shares of General Motors. You mentioned the upgrade from Adam Jonas. That's why the stock got a pop right at the opening. But it's given back some of that, especially as news came out this afternoon that the company is cutting several hundred contract

worker jobs. These are job cuts in the product development area of the company. Not a huge number of job cuts, but it shows that they continue to want to be as cost conscious as possible. That's one reason why Adam Jonas at Morgan Stanley, he upgraded the stock to overweight. He says, look, this is a slow-melting ice story. In other words, the internal combustion engine vehicle is not dying anytime soon, raises the price target at 38 from 35, also cites their improved capital discipline.

Speaking of capital discipline, as you take a look at shares of Ford, we'll learn what type of discipline they have exacted on their operations over the last quarter. In the first quarter, they report after the bell tomorrow. Scott, back to you. Yeah. And Mike, I mean, you know, the best of times of the auto industry in terms of you've got all this pricing power, you know, you're charging way above MSRP and the stock still can't get out of their own way. Yeah, exactly. And I think that's really part of the takeaway, too, which is it's not as if everybody was collectively expecting these companies to be able to pass along further big price increases. If anything, we're kind of bumping up against the limits of affordability on some measures. And they traded five to seven times forward earnings. So clearly the market doesn't think you had this great kind of price times volume growth story behind us.

I'm looking at things like Ally Financial. Stock's kind of hanging in there, but way off the lows. And so it shows you we've built in this anticipation that it's like a weird part of the cycle to try to get excited about these names. But if you do slow the transition, if there's this perception that their kind of legacy business is not going to be obsolete as fast as we thought before, then, you know, you can have an extended life to the trade. I'm also looking, by the way, at Uber, which is up 6 percent, which reports tomorrow morning, which Brad Gerstner obviously is a shareholder in, is urging them to get a little more efficient as well. Phil LeBeau, thank you.

We will obviously hear from you regarding Ford and what they deliver. But it's a big day for Uber. Look at that stock. Contestant Brewer, MGM in overtime. What do we expect? Well, we're expecting a lot from the earnings and the call here, Scott. First, Macau Mayday brought April gaming revenue numbers for the entire destination, top to expectations, even

though we'd seen analysts revising upward several times ahead of that number. We should also get some current color about visitation. This is a holiday period right now. Secondly, U.S. generally and Vegas specifically here, the strip just keeps setting new records. Will we see any indication of a consumer pullback in leisure spending or companies pulling back on conference spending? And, of course, in the sports world, we've learned from BetMGM that there were first quarter net gaming revenues up 94 percent. What that means for MGM moving forward. It's a partner, of course, with Entain. You can see the shares up almost 3 percent today, up about 38% year to date. Let me ask you this, Contessa.

What happens if you do, in fact, see a pullback in corporate spending for conventions and the like, but you don't see a pullback from the consumer, which has been very strong, and Vegas is on fire? What's the fallout then for the bottom line? You know what was unbelievable? Even before the conference calendar had truly resumed, we were seeing some real midweek strength and what they were able to charge on the weekends, raising the room rates and what restaurants were charging and cabanas at the pool, that it was almost an afterthought when conventions and the midweek business travel started to come back. And it's come back with a bang. It's a packed calendar. And of course, when we talk about sports coming up later this year, you've got F1 that is all

the rage and they have significantly raised their rates and their packages for that. So we'll see what they say on the on the call about this looming threat of recession and whether they're seeing any impact in Las Vegas at all. Yeah, Mike Santoli, the cabana indicator, that's a new one, right? Mike Santoli, the cabana indicator, that's a new one, right? Forget everything else, the cabana indicator. It fits right in line with booking holdings being basically at an all-time high. I mean, it's a whisper below where it was in 2022. And so I think there's a mixed message here, which is, yes, there's no quit to the travel economy.

People are willing to pay up for it. But on an economy-wide basis, we want to see services-based inflation calm down. And we're not seeing it just yet. Or at least we're not seeing it quickly enough. We know housing is something that should roll into the numbers. So I think that's why we're caught in this pinch between the consumer still has resources, there's still enough sturdiness to the consumer and household income story. And companies, they're kind of making their way through. They've made some efficiency measures, and they're not feeling like they have to face really declining demand.

On the other side, is the Fed going to be friendly or not? So that's why I do think the language of whether we get a pause explicitly or just hinted at is going to be key. And if the Fed comes out and says, we don't see another way out we have to put a million and a half more people out of work that's the only way this works. Then you know that's not necessarily going to be acceptable. To the market but. I keep pointing out yes if he was where it is right now a year ago it was here two years ago. A year ago fed funds rate was half a percent wow okay wow

don't fight the fed makes a Wow. Okay. So don't fight the Fed. Makes a lot of sense. Don't fight earnings forecast declines. Makes a lot of sense. Both of them have been hostile. The market's found its way through. You can answer, well, that's because 10 stocks are working right now and flattering the index. That's true lately. It's not true on a one-year basis.

On a one-year basis, the average stock in the market is basically like plus or minus 5%. Contessa, by the way, will be covering MGM after the bell. Thank you for that. I'm going to give her full props on the cabana indicator. That's interesting. As we approach the close, we've got less than a minute, about 45 seconds. In fact, yields, you mentioned them, higher across the board. The real question, is this going to be it for the Fed? And we're going to find out 48 hours from literally now.

Yeah. And even if it's not it, are they going to lean in the direction of saying, we feel like the policy is restrictive enough, the economy is growing below potential. If inflation continues to come down, they'll be able to say nominal short-term rates above 5% are restrictive enough, even incrementally more so. So I think that's the fix we're in for now. Okay, we're not going to make it into positive territory for the Dow. Not too bad of a day, though. That's a fractional loser. That does it for us.