Closing Bell - Closing Bell: Enough Good to Keep Going? 1/23/24

Episode Date: January 23, 2024

Is there enough going right for stocks to keep going up? Veritas’ Greg Branch and BMO’s Brian Belski debate their forecasts. Plus, Netflix is gearing up to release earnings in Overtime. Big Technology’s Alex Kantrowitz and shareholder Jason Snipe of Odyssey break down what they are expecting and what is at stake. And, Avery Sheffield from VantageRock is gaming out the Fed. She explains when she is expecting the first cut and what it could mean for your money.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the recent record high for stocks and whether the bull market is too stretched or if it is just right. We'll debate that in just a little bit with two well-known Wall Street watchers on two very different sides of that debate. In the meantime, your scorecard with 60 minutes to go and regulation looks like that right there. Dow is trying to get off its worst levels of the day. It's moving that way.

S&P, NASDAQ now positive. Well, 3M has been dragging the Dow all day long on the back of its earnings report. That stock has been weak. Look at that by 11%. Weakness as well today from Goldman, from Home Depot, and travelers out of the insurance space. They're all in the red at this hour. On the flip side, United Airlines, a big winner after beating expectations. We're also watching Microsoft here. It's been making a bit of a midday run, trying to hit $3 trillion

in market cap. You see it steadily creeping higher through the session. We are watching yields pretty closely, too, as the 10-year hits $4.15. The two-year moved above $4.40. We did have a pretty good bond auction earlier, and maybe that took the simmer off of rates today. It does take us to our talk of the tape. Is there enough going right for stocks to keep going up? Let's ask Greg Branch. He is the founder of the Veritas Financial Group. Our bull, Brian Belsky, chief investment strategist with BMO, is going to be along shortly. The stage, however, Mr. Branch, to begin, is all yours. Is there too much exuberance in this market or not? Surprise, surprise, Scott. I think so.

And look, this is coming from someone who readily admitted that I missed much of the performance in 2023, who readily admitted that on December 13th, when we had the Fed's posture pivot, that even I had to increase my exposure or let I miss more performance. But when we look back at what kicked this rally off, when we look back at all of the fire that was thrown, all the gasoline that was thrown upon the plane, much of that has reversed, yet the market hasn't reacted to that. And so let's talk about the jobs number that came in at 150.

We'll talk about CPI-4 that came in at 20 dips back in October. All those things leading us to believe, or at least leading some to extrapolate, that we had reached a new paradigm. Well, those numbers have reversed. We've jumped back into that 30 to 40 basis points of monthly growth for the last couple of months. We saw the jobs number rebound. We're seeing historic low claims again. And so even though we had a posture pivot from the Fed, even that has reversed to some degree, where you have even the most dovish members like Bostic, like Waller, coming out and trying to say as diplomatically as they can, wait a minute, we're not looking for six or seven cuts. We're very clearly saying there might be three cuts and we're very clearly saying that none

of that is going to happen on March 31st. And so we once again have a very bifurcated situation where the market expectations are very different than what the Fed has articulated, very different from what the Fed said that they would do. And even the things that I think caused the rally at 22 times, we're just not seeing those things continue and we're not getting the earnings to continue to propel this rally. But why are you trying to find bad news in the good? I mean, you can't have it.

You can't have it both ways. You can't say, well, we're going to have a recession. We're going to have a recession. We're going to have a recession, we're going to have a recession, we're going to have a recession, and then the economic data remains stronger than you think and then say, well, now the economy is just too strong. And that's going to force the Fed to keep rates higher for longer when the evidence would suggest and the trend would certainly suggest inflation coming down. Growth remains good. The Fed regime is changing. They've made a pivot.

They're going to cut. Who cares if it's March or not? Cuts are coming. No more hikes are coming, more than likely. Oh, the devil's in the details here, Scott. And I never use the R word. I challenge you to go back over 2023 because it doesn't matter what we call it. Well, you cited the long and lag effects of the policy. You intimated that that's where we were heading. Come on. Let's not get semantics here. You we both know what you're inferring. Of course. And I never back away from what I inferred, what I state explicitly. And we do need more slow. We need more slowing. We can't. As you just said, we can't have this both ways. We're not going to get to a sustainable 2% number at the rate that the economy is growing right now.

That's just not going to happen. It has never happened in all of history with these type of financial conditions. And so we do need more slowing. We are seeing some. We are not seeing enough, given that we are still fighting this battle with inflation. I don't think we can call it over. I think the Fed goes to great lengths to remind people that we can't say that it's over. And so I'm splitting hairs a little bit here, Scott, but it's not slowing fast enough for the Fed to have to cut. And it's growing too strongly to say that, yes,

inflation will get where we need it to get. Inflation will meet the Fed's mandate on its own. I'm glad you bring this up because it could not be more timely for commentary we got from James Bullard. Now, he's the former St. Louis Fed president, so he's retiring. However, he gives an interview a little while ago in which he says the Fed could begin lowering interest rates before he expects that they will, before inflation hits 2 percent and that it could come as soon as March. Quote, they don't want to get into the second half of 24 and inflation is already at 2 percent. You still haven't moved the policy, right? That would be too late.

Inflation on a 12 month core basis, you know, could get to two percent by the third quarter of this year. So, I mean, that's that was an influential member, maybe not voting on the Fed in this particular go around. But nonetheless, there's your Fed speaker who suggests inflation is going down at a fast enough cliff clip and they're going to cut rates before it gets to target they told you that themselves well like you said non-voting member we had three voting members come out and say that it's unlikely that it'll be march i guess we'll see the key to me scott is that hidden in that hidden in that december 13th notes and dot plots is that the fed expects that we're going to get to an unemployment rate

of 4.1%. Now, that in and of itself has been revised. They used to say mid-4s, but let's take 4.1%. I haven't done the math the way that they have. We're right now at 3.7%. We're still getting lower and lower claims. We're still getting lower continuing claims. I don't see how we get to 4.1%, and I think it's incumbent upon the Fed to explain to us how we get to 4.1. And I think it's incumbent upon the Fed to explain to us how we get to 4.1 percent unemployment in the current environment with financial conditions. They don't need it to. They don't need it to get higher. In fact, they don't care about that anymore. What they once thought. Well, what's what's what doesn't need to happen. They don't need to kill the economy anymore like they first thought.

They needed to crush demand and they needed to have unemployment skyrocket to kill inflation because they come to the realization that the inflation that was caused was not primarily caused by some excess demand within the economy because of the growth. It was caused by existential things that happened as a result of the pandemic, plus some stimulus that was piled on top of it. So when you say that they no longer believe that, I'm referencing notes that were from the December 13th meeting. I'm not referencing things that were six months ago or eight months ago. If they changed their mind in the last three weeks, I guess, or four weeks, so be it.

But I'm referencing the latest thinking that was intimated in the dot plots of the 4.1 percent, downgraded from the 4.4 percent. And yes, we can relitigate why the inflation was caused. I think I was early on that, calling for the correction in 2022, predicting the hyperflaciary environment. At this juncture, at this juncture, in order for us to get down to two, because we've seen a steady 30 basis points month after month, we haven't seen a new paradigm shift to that. Right. And we do need to get below 30 basis points. And so we haven't done anything. And I think something more will need to happen for us to have a new paradigm on that month over month growth. Energy has helped us out. And that's been great. It might not always be that way. Is your point that, I mean, you think the Fed's going to cut this year, but you think it's

for the wrong reasons or what's the story there? No, I think that we're more likely to see one last hike before they start cutting. Previous to this, again, I always own up to what I said previous to this. I did not think we were going to have cuts this year at all just because we weren't experiencing enough disinflation. That may change. We started to see the housing component move, right? It went in October from growing 60 basis points month over month, went down to 20. It's since come back. But this is what could make my entire bearish thesis wrong, is if the housing component moves in a significant way, that will be enough to solve all of the issues that I'm pointing out.

OK, stay with me a second. Let me bring in Steve Leisman, our senior economic supporter, because I want him to react to all this. Obviously, he knows the Fed better than anybody. So Bullard makes these comments, Steve, at the same time that that Wall Street's been pricing out March. Right. And yet now he suggests, well, we think that inflation could get down to target maybe faster than people think. And the Fed's not going to wait until it sees that right in its face. It's going to act before that. And that, in fact, could come as early as March. What do you make of all this? Well, the idea of the Federal Reserve cutting before 2 percent is sort of Fed policy. It's something Powell has mentioned. I believe it was policy before Bullard left the Fed back in the summer of last year. And so that has been something that's

expected. The question has been, Scott, when they might pull that trigger. And that's where the market's been going back and forth. What I think has been interesting is the Fed has been somewhat successful in talking the market out of March. And if you look at the probabilities of March, they're down below 50 percent now. Those were as high as 80 percent last year after Powell spoke at the December meeting. So we've come quite a ways down. It's pretty interesting to see that what's happened both to March. Now, what you do see is that those percentages go up as you get into May and again to June. And I think, Scott, as I've said before, my take on this has been I think May

is a better time for the Fed to hike because I think there Scott, as I've said before, my take on this has been I think May is a better time for the Fed to hike because I think there may go every other meeting. Powell has shown that he likes every other meeting. I'm a little bit, what's the right word? I guess in disagreement with my good friend Greg Branch when it comes to the outcomes from inflation this year. Inflation has surprised everybody, Wall Street forecasters and the Fed, to the downside. It has come down inarguably, I believe, faster than anyone predicted. Whether or not that continues is an open question. But I don't think you can debate the idea that everybody was on the upside or the wrong side of inflation this year in terms of where they thought in 2023,

we thought it was going to end the year. I mean, you also heard Greg make the case that he thinks there's going to be one more hike. Mr. Bullard also throws on the table the idea of waiting too long and the problems that would arise if the Fed actually waits too long to get back to normal, so to speak. Right. I mean, the Fed is incredibly cognizant of what they call the long and variable lags. Bullard talked a lot about that when he was in office. And now that he's out, he's still talking about it. So that's good news, I suppose. The idea, Scott, that the Fed cannot wait to 2 percent, that too long. It's well ingrained in the Fed. The idea being, though, that the Fed does not want to see 3% built into people's minds or expectations. So I do think we need to get below that.

Friday is a big day, Scott. We're probably going to hit on a three- or six-month basis. We're going to hit a 2% core PCE number on a three-month or six-month annualized basis. We'll be at trend. March, maybe they cut in March if you have two more good reports on that. But I believe May gives them the opportunity to have as much data in the hopper there to say, look, we've been at two, we can cut, we're not in danger of doing what Greg Branch says we might have to do, which is to hike again. Yeah, Steve, you stay with me.

I should let everybody know, too, S&P, NASDAQ are at session highs. So these record highs are extended on both of those sides. And the Dow is working its way well, well off of its worst levels of the session. I see it down by about 73 or so at this moment. BMO's Brian Belsky is with us. I'm happy, Scott, to keep talking. Scott, I'm happy to keep talking if the market is going up. Yeah, it is. It is. Brian Belsky, we had some trouble with your

shot. I'm glad we have you because you think this bull market is alive and well, that there is not too much exuberance about where stocks have gone and why. No, thank you, Scott. And thanks for your patience here on the shot today. You know, we've been on record since November of 2023 that the new bull market, in terms of the cyclical part of the bull market, began in October of 2022. Many people didn't realize that until, of course, the market was up over 20 percent last year. We think this, again, is part of a 25-year secular bull market that came into place in 2009. I'm going to show us the bearsome gray sky. You're probably going to be surprised by this. But if you think

about it, let's take two steps back. Since August of 2007, since August of 2007, investing has been all about the Fed. And that's when the Fed opened up the discount window and effectively started QE. And we continue to believe that there's been way too much focused on the Fed. You know, we've been doing this for a long time. You and I have been talking back and forth for a long time. I remember the Greenspan briefcase indicator. When we'd walk into the 90s, depending upon the thickness of his briefcase, whether or not what the Fed was going to do, then we'd move on. We meaning the Stock Market Society. And the Stock Market Society would move on to picking companies, industries, sectors, and stop worrying about that all of the cabal all the way with this and then you can ask me if you had been

a rhetorical sped funds futures sped funds futures have been wrong for two years for two years they've been wrong and we have this intense focus i actually don't have any clue or understanding what anyone in their right mind was thinking about the Fed was going to cut in the first quarter. I just don't understand that.

And that's because of this intense focus on the Fed and a lack of focus on looking at equity. So guess what? We're running up the wall of worry. We're not seeing the forest through the trees and we're missing great opportunities and great companies. right so forget the fed let's just yeah go ahead greg yes yes you can yes you can i think i think i think brian pointed out uh something that's really important even those of us who would like to get away from talking about the fed and predicting the fed we just can't so take the fourth quarter for example right remember that was one of my big concerns in 2023 is that I thought the consensus was just way too high at 8 percent for the fourth quarter. Well, that turned out to be right. And 8 percent came down to 1.6 percent by the end of the quarter. Usually downward revisions of that magnitude pose a stiff headwind

equity performance. And it just didn't matter because all that mattered was what is the Fed going to do? Yes, inflation is going to come down by itself. That became the conversation. So whether we want to focus on fundamentals or not, this just has to be a part of the calculus for now because it just has such an overbearing effect on performance. But you make the point, too, that the economy is just too strong to bring inflation down to where, you know, the Fed needs it to get to. Leesman, I'd love you to weigh in on that idea because, you know, I think it was pretty explicit in the last Fed meeting in the news conference from Chair Powell that he doesn't believe that the economy is too strong at this point to bring inflation down.

He thinks it's a godsend almost that the economy has remained stronger than even they thought it would. And inflation has come down at the clip it has, which means they actually might be able to pull this off. And you could feel the confidence exuding from Chair Powell in the last presser, I thought. Scott, I've been waiting for this moment on television for a very long time. I want to do my very best Bill Maher imitation. New rule. New rule. Here we go.

New rule. In the wake of a pandemic, that was a supply shock. You do not need growth to slow in order for inflation to come down. That's what we've learned. Inflation came down. Growth did not slow. And I will tell you this, Scott, I'm going to put up a graphic here that I believe to be wrong. I have never put up a graphic I thought to be wrong. This one I think is wrong. This is our CNBC rapid update. You're going to see two things, a piece of information in this chart. One, economists have had to upgrade their forecast again for the fourth quarter by 1.2 percentage points.

Again, for the first quarter this year, by nearly a full percentage point. But the thing that's wrong is, I think that's wrong, is they're still forecasting that slump. That slump right there has been something that's been moving ahead of us two quarters in the future. And it's been wrong, wrong, wrong, wrong, wrong and wrong. I don't know that that slump happens again. New rule. You do not have to have growth come down in order for inflation to come down in a post-pandemic period. Because, Greg Branch, this time is different. That's essentially that's essentially the argument. I was going to harken back because I've had this argument off camera

with both of you, both you and Steve. And so I continue to disagree, Scott. I think it is only different insofar as the cycle has been elongated. But yes, I won't use the R word, but we must see a cycle. I can tell you why the cycle has been elongated. It's the reason why I was largely wrong in 2023, because not only did we have the great wealth transfer from governments to companies and individuals who strengthened and fortified the balance sheet probably more strongly and more solidly than many of us anticipated, but we also had the great refinance, which did that as well. And so we haven't seen spending come down either from a corporate perspective or a consumer perspective in the way that in the ways that one might expect. After you have 500 basis points of rate hikes and we need that in order to get to 2 percent.

Well, we can move off the Fed, too, and get on to earnings because ultimately that that's what's going to matter probably, at least in the near term, more than anything else. Brian, Greg makes the case that earnings are already not good enough. They haven't started out great, and they're going to prove to be not strong enough to keep this market going higher. You would make the exact counter argument to that, wouldn't you? I would, just like I did a year ago. And we were right a year ago. And revisions are still pretty strong. And I think that comes from looking at the market as a total. You have to take a look at the bottoms up side of things and where you see the contribution of earnings coming in from especially technology and from communication services. And yes, there's parts of financials that have been very strong and don't discount the consumer.

So I think that this argument about earnings not being strong, they're just not looking at the right data, just like they were a year ago. And I think it's more building about the bearish narrative in terms of wanting growth to slow. And I just don't see that. We don't see that. We see no analytical or anecdotal events of that with any of the earnings work that we do.

But I mean, even Ed Yardeni, who's like a huge bull on the market, is talking about an exuberant melt up phase that we could be underway as we speak. Howard Marks was on the network today. Astute market watchers. He's a legend talking about, you know, whether whether people are too optimistic that so many things have to go right in order. And these positives, in his words, have been compounding as if they're all just going to fall into line, Brian. And that's going to justify where we are and why we can take another leg higher in this bull market. Well, let's look at my forecast, right?

$250 of earnings and $5,100. That's not exactly jump up and down, especially given the fact that the market is at highs. I don't doubt we've gotten a little bit too far ahead of our skis here. I wouldn't doubt that we soften up a little bit. But common sense says, especially the second half of the year, as we kind of settle into new valuations and what we'd like to call year two of normalization with respect to price performance for the market being high single digit, low double digit, and earnings growth being that, to price performance for the market being high single digit low double digit and earnings growth being that i just see that the market's probably i don't

disagree that a little bit ahead of itself but you still should be an investor if you would if you would have been bearish you would have missed the big apple rebound and you have to look at individual issues and buy when the when the opportunity comes yeah i'm looking at apples pushing back towards 200 i'm glad you mentioned that as the NASDAQ extends its gains. Microsoft pushes closer to $3 trillion in market cap. Gentlemen, I'm going to leave it there. Yeah, okay, go ahead real quick, Steve, real quick. I was just going to make one small point,

which is that I think it's possible for the economy to do well and it'd be a challenge time for margins this year. I think this is a year of consolidation where companies had high and rising prices last year. Hopefully this year they have at least stable, maybe even falling prices. So I could see this year being a year of consolidation before better profits in the year ahead. It's interesting you say that. I mean, Adam Parker has made the case multiple times on this very program that this is going to be the year that margins hold up and margins do well. And that's why he's turned probably a little more bullish than he was

in a handful of months ago. Gentlemen, thanks so much. I loved it. Thank you very much, everybody. Brian Belsky, appreciate it. Steve Leisman and Greg Branch, we'll see all of you soon. Let's send it to Christina Partsenevelis now for a look at the biggest names moving into the close. Christina. Well, let's start with D.R. Horton. Those shares are dropping after the homebuilder posted weak quarterly orders. Keep in mind that at the beginning names moving into the close. Christina? Well, let's start with D.R. Horton. Those shares are dropping after the home builder posted weak quarterly orders. Keep in mind that at the beginning of that particular quarter, 30-year mortgages in the United States were around 8%. That's a two-decade high.

So the company promised to reduce home prices and increase incentives to encourage sales, yet the stock is down 9%. From price cuts to price hikes, Procter & Gamble shares are rallying higher after the company reported mixed second quarter results. The consumer staples stock saw net sales rise 3% as revenue was boosted by price hikes. The company also narrowed its full year outlook for its adjusted EPS, and you can see shares are above 4% higher. All right, Christina, we'll be back to you shortly. We're just getting started.

Up next, your Netflix setup. The streaming giant reporting earnings in OT. Big Technologies' Alex Kantrowicz and Odyssey Capital's Jason Snipe. He owns that stock. They're both standing by to break down what they'll be watching from the report. We're live from the New York Stock its Q4 earnings tonight in overtime. Investors will be looking for an update on the company's progress and cracking down on password sharing and interest in its lower priced ad supported subscriptions. Netflix announcing this morning it's going to begin streaming WWE's flagship program Raw next year, its first major foray into live sports. Let's bring in big technologies, Alex Kantrowitz and Odyssey's Jason Snipe to discuss. Both are CNBC contributors. Jason is the Netflix shareholder. And I'll get to you in just a second, Jason, but to you first, Alex, this first foray, as we said, into live sports, is that what you expect it to be, the very first of a bigger one? Oh, yeah. I would say Netflix is already committed to live sports. They're doing WWE.

They're doing Formula One, which you could call a sport. They're doing tennis. They're doing the big tennis. So they have this cash advantage against their rivals. They have to exploit that. And when you think about where they could be overtaken, right, you have Peacock spending $110 million on one playoff game. It's sports. It's live events. So I don't really see this as a one-off. This is the beginning of a program, and they're just going to keep doubling down from here. Is it the right move? I love it, honestly. This is the thing that's going to attract large audiences.

It's not the hit business, by the way. You have sports. Let's say you do football, right? You can depend on that audience. They're going to be with you week in, week out, as opposed to a show that may or may not hit. So I love the idea. It's a moment where the competition is weak. Netflix has this lead. How do you exploit it?

This is the one area to go for. Jason, does the shareholder like this? Absolutely. I couldn't agree with Alex anymore. I think it's a low-stakes deal. I think sports is a holy grail, I think, for a lot of folks. It's the only reason they're still attached to linear TV. It's a $5 billion deal over 10 years with an opt-out in five. And I think they're able to attract a new audience.

Again, from a distribution perspective, there's 250 million users. So there's opportunity to cross out. And to Alex's point, I mean, Breakpoint, great. On the tennis side, Formula 1, they've already been in this space. So I think this is just the next continuum for them. The street, Jason, seems to be a bit lukewarm going into the number. Now, a lot of that probably has to do with the fact that the stock has rallied so much. The average price target on Netflix shares is barely above where the stock is trading now. So what does that do to where expectations are going into the print? Yeah, Scott, without a doubt, expectations are extremely high. If I look at the net sub-ad guidance for the last quarter,

it was a little over $5.5 million, and they produced $8.7 million. So now we're above $8 million in terms of guidance, and we're likely going to be slightly above that. I mean, they're guiding right around there. So expectations are much higher. Again, to your point, the stock is up 20 percent in the last three months and 37 percent since reported last quarter. So it's moved a lot. This is this is important news, I think, today. But, you know, the stock moves. I mean, it's been very volatile, obviously, as you know, through through earnings

when they report. Yeah, I mean, 700 bucks. Let's not forget about that. Right. You always have to keep that into perspective when we look at at these shares, Alex. So what do you make of what the stock has done, what that does to expectations going into overtime tonight? It's in a weird position because it's still more than 20 percent down from its pandemic highs. But that said, it's had this large run up and it's trading at an expensive multiple. Right. So if you think about whether whether investors will rotate out of tech, like what's the first one you're going to try to move money away from? It might be Netflix. So I think there's definite risk there. And there's definitely been this run up on the stock. It's very expensive. We know that the pickup of the ad tier,

the less expensive version for subscribers has been slow. Does it remain that way? Do we have a meaningful increase in subs or not, you think? Double-edged sword for Netflix on the ad tier. Now, there's a lot of hope, right? They've added many monthly active users on the ad front. That doesn't correlate one-to-one to subscribers because you have many active users in one family. That's one subscriber.

That being said, their ad load, according to reports I've read, according to personal experience that I've had on the ad tier, is low. They're not selling through the ads at a rate that you would expect them to. So you could say that's going to be one or two things. One, it means that Netflix is just bad at selling ads. Or two is that they're in the early days and they need to get a sales engine up and running so ad agencies are comfortable buying. And if they get to that point where ad agencies will buy, then you could see much more revenue come through the ad product.

And very interesting thing that I just read is that the ad user might even be worth more to Netflix after they've watched the ads than the subscriber user, maybe something like $20 per user versus $16. So if they can fill those ad spaces, that's really, really good news for them. Jason Snipe, live sports aside, do they have the new content to continue to add subs the way that you would like to see happen? I should also note this news, of course, that was in the last handful of days, the film chairman is leaving that company to start his own venture. How are you thinking about what content they have and the ability for that to bring in new people?

So I think the content library has been rich for some time. And I go back to they're the leader in streamers. Again, 250 million subscribers. And when I think about creators, you know, looking for distribution channels, I think this is the platform that's most attractive to them and I think they are better positioned than the other streamers and of course the the strike from last year is a headwind from all the streamers but Netflix did a lot of content spinning prior to and that's why their free cash flow continues to grow

because they haven't had to spend any as much money as of late so I continue to like the content library, and I think that's an opportunity for them. And with your comment about that as well, same question, content. Good enough? Oh, yeah, I think so. Everybody else has had to deal with the situation, and I've long thought that Netflix was in the best position to handle it because they have great reality television program, a bunch of great fun dating shows, Love is Blind, for instance, and then they also have you on the documentary front.

And people are watching those documentaries. One about Boeing is getting a lot of buzz. And so I think they're very well positioned in terms of programming. We'll leave it there, Alex. Thank you very much. Jason Snyper, thanks to you. We'll see what happens in overtime. So do not miss that earnings report.

Up next, gaming out the Fed. Vantage Rocks Avery Sheffield is back. She's mapping out when she's expecting the first cut. We'll give her take there, what she thinks about this record rally in the stock market as the S&P extends its gains now. 4861, NASDAQ higher too. We're back right after this break. Welcome back to the S&P 500 on track to hit another record close today with some modest gains. Investors digesting the latest batch of earnings, looking ahead to economic data later this week. Joining me now, right here at Post 9 with her outlook, Avery Sheffield, co-founder and CIO of Vantage Rock. Welcome back. Great to be here. It's good to see you.

So S&P, positive. Dow still negative, but it's working off the lows. Even the Russell just went positive a moment ago for a second. We all good with this rally? I don't know. What I do think is clear is that I think that they're given the levels of the market and where we're at, you know, S&P over 20 times earnings, Nasdaq 28 times. I think it's going to be like more of a show me story for especially those more expensive stocks in the market. But there's still a lot of stocks that are dramatically less expensive than that with very negative sentiment still built in that really could have the opportunity to really

surprise to the upside this earning season and throughout the year. We had a highly regarded wealth manager on. You may know her, Cheryl Young, yesterday. She said, look, she's positive on the market. But she said we're priced for perfection. Right. Right. Exactly. You agree? At a market level, it feels that way. I mean, certainly you can go back to the late 1990s. I mean, we can know S&P multiples, NASDAQ multiples. If we get into the stratospheric levels, it's certainly absolutely possible. But I think there are a fair number of stocks that are much closer to being priced for perfection. Actually, maybe even trading at more of those stratospheric valuations.

But I think the really interesting opportunity in this market is those companies that are less expensive, that have the opportunity for earnings growth to surprise to the upside over the year ahead. Out of the S&P 493 you're obviously referring to. Yes, but no, but actually, but those stocks, not all those stocks, those stocks actually, most of them are, I think, have the potential for nice earnings growth. Is it priced in? We don't know. But they are not, and I've said this before, like they are not the culprits of like the most of them are not the culprits of the, I think, excessive valuations that we see

elsewhere. So there are some of those names that you're probably fine with. Do they have the most asymmetry to the upside, though, to your point? I think those probably come in the other 493. Yeah. What do you especially like? Which part of the market? If we get even more granular, you know, let's pick some places to look. Right, right. Well, one place that we really like is telecommunications. With Verizon's report this morning really reinforced our thesis that these companies have become just much more stable cash cows than the market had appreciated in the past. dividend yield with churn down or churn stable with them taking price increases with having to

give fewer cell phones for upgrades really suggests the free cash flow will expand in the year ahead. So you have that stock compared to a Walmart, which has years where, I mean, some years they can grow earnings nicely. Other years, like, they grow earnings a bit, trades at 25 times earnings. Like, there's a lot of room for valuation expansion. What's going to happen to the Fed? What's going to happen to the economy? I don't think it's really going to have that material of a difference on Verizon's earnings. And you've got a really cheap stock. Ford and General Motors, you like those? Yes, we do also like auto. So in a portfolio, you have a spectrum. You have kind of your bond-like characteristics. Stocks with more bond-like characteristics, stocks that have some more cyclicality. But what we really like about them and the companies we like in general is that they

have the opportunity, and they're not just the opportunity, they are executing on their company specific business plans, taking out costs, improving product with an overlay of like, if things actually get weaker, rates go down. What happens when rates go down? Cars get cheaper for people to buy. So they kind of have a backstop if things do get a bit weaker. At the same time, they're both taking out meaningful costs. We expect that, you know, we will probably see more of that to come. And the push out of EV adoption really gives them more time to build that out in a more cost-effective manner, develop products that are very competitive in the market,

and at the same time have the benefit from their cash cows of, you know, really the larger SUV vehicles in the case of Ford, also commercial vehicles as well. General Motors with the buyback, and I mean, Pete, they cleaned up the balance sheet. Yes, 25% of their stock expected this year, maybe 20% next year. It's quite substantial, trading at like, you know, under five times earnings. Give me your idea, though. Kind of, let's go back to where we started, with mega caps. Yes.

Are the valuations crazy? No. Do you think the earnings are going to live up to it? Are we in danger of thinking that a more broad market is actually going to be narrow again? And if so, so be it? So I think you have to be very stock-specific on these, right? So you have in the communication services area, you have two of those companies are trading at multiples just over 20 times,

not that much more expensive than the market, like less expensive than the NASDAQ. You own any of these, by the way? With the moats. We do own some, So I wanted, yes. Yeah. I mean, in particular, we like Google and we like Meta because we think they have franchises. A lot of people are wondering about Google's franchise with search and AI, but we think that they are going to be a massive AI beneficiary as well. Meta, I mean, Meta, I think what people might miss about it, or maybe why it's not as expensive as some of the other stocks, is AI enables them to have more rapid adoption of free

content creation, right? Their whole business is based on free content creation. Well, now, if my nine-year-old can create content with AI that's sophisticated, she's going to be posting a lot more. Not that I love my nine-year-old But, Bullish taste on nine year olds posting, all right. No, no, no. But the people who post more, there's more content generated, they can advertise on that and they can use AI, or they are using AI to have very efficient advertising.

I think with cookies going away, you are gonna see the networks have more and more power because they have the ability, they have just more inherent information about people to make ads much more effective. It's been an incredible, you know, peak and valley, valley and peak. I should probably better say for Metashare's worst year ever in 22, best year ever in 23. And it brings us to now. Speaking of now, the whole debate around the Fed, how many cuts we get, when we get the

first, what do you think? Yes. So what I think is like there's just a lot of reflexivity, right? What we saw when I was actually last on this very beginning of November, I saw things are really getting bad. Gosh, I may have to be bearish, but actually things are getting bad. Rates came down and that was very stimulative. So now we have the benefit of the loosening of financial conditions we've seen since then. We've had interest rates come down, which is booing the economy, right?

The data points I'm seeing now are actually much better than they were in October. So the question is, if things start slowing again, do we start anticipating rates go down again? And it's just a little blip because then that buoys the economy up. So as we are now with the booing we've had, March, unless there's like some event that's unforeseen, it seems way too early. June is far enough out. It's certainly possible. I mean, real rates are near 2%. I mean, in the past, historically, that's been restrictive by itself,

but we're not living in a by itself world, right? The market is giving votes to loosen conditions to make things better, which then means, you know, I think the easy money and kind of assuming rates are going to go down quickly, like it's probably been made from here. Is there opportunity? Well, is that likely to happen maybe over time should the market not, you know, propel things higher? Certainly, certainly possible.

All right. Well, we will follow up. Thank you. Posting okay. Moderation is the key for posting. We're going to agree on that. Avery Sheffield, thank you. My up. Thank you. Posting OK. Moderation is the key for posting. We can agree on that. Avery Sheffield, thank you. My pleasure. All right. Up next, we are tracking the biggest movers as we head into the close. Pippa Stevens is standing by with that. Hey, Pipps.

Hey, Scott. One industrial giant is sinking as consumer spending flows. We've got the details coming up next. About 12 out from the closing bell. Let's send it over to Pippa Stevens now for the stock she's watching. Hi, Pippa. Hey, Scott. Well, 3M shares are sinking after the company issued disappointing guidance with full year earnings estimates below Wall Street forecasts. The company said China and consumer retail and markets continue to be soft and united in the green after the company reported higher than expected earnings and revenue for the fourth quarter. The company said bookings so far in 2024 have been solid, but did forecast a first quarter loss due to the grounding of Boeing 737 MAX 9 planes. CEO Scott Kirby telling CNBC earlier that the groundings are the, quote, straw that broke the camel's back and that United will

build a plan that does not have the max 10 in it. Those shares up 5 percent. Scott. All right, Pippa, thank you. Still to come, your earnings rundown. Texas Instruments among the big names reporting in overtime tonight. We'll give you a full breakdown. What to watch there. Closing bells coming right back. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Two big earnings reports we are waiting for in overtime. Christina Partsenevalos on Texas Instruments.

Julia Boorstin, of course, all over Netflix as well. Mike, I begin with you. So now you're a dove, Mr. Bullard. Yeah, exactly. Well, interestingly, he does swing back and forth depending on where the consensus is. But also he's really reiterating something Powell has said for over a year, which is just at least a hypothetical back then. Yeah, of course, we'll be cutting before we get to 2 percent. Sure. Right. So I think that still feeds into the general level of comfort the

market's displaying right now, not just with where the Fed is, but also it seems like you've had enough accumulated evidence that the economy is in an OK spot. Inflation is going in the right direction that even if they get some adverse surprises one way or the other with the PCE and GDP, you have a cushion against that, at least in the intermediate term, if not on the reflex reaction. Bond auction went OK. I mean, we're watching the two year auction for any trouble. You really didn't get any. No, it was absorbed pretty well. And I think we're in this mode right now, too, of looking at things like a big bond

auction and seeing can we check off that box or do we have to start worrying about yields getting untethered? Do we have to start worrying about, you know, short term investor trader sentiment getting overdone? Probably not quite yet. so therefore we sit. Apple goes up, brings a level of calmness to the environment as well, don't you think? Yeah, it always acts as that kind of counterweight to whatever we might be nervous about when it starts to work. All right, I think investors are maybe a little nervous about Texas Instruments, Christina Parts and Novelos,

especially after what happened in the last go-round. What do we think? Yeah, you're right. That's why the bar has been lowered because, well, first of all, Texas Instruments, for those who don't know, they make chips from everything, in everything from your fridge to your car. And management guided revenue lower for the past five quarters, to your point, Scott. And that's because of a prolonged industrial correction and weakness in the auto sector. Still a lot of questions about the auto sector.

But change may be upon us. Many analysts are betting that the bottom is near for Texas Instrument, although not everyone's jumping into the stock just yet. That's why you're seeing it underperform the SMH, the SOX ETF. There's several reasons for that hesitation beyond the end market weakness I just talked about. You also have possible cuts to fab utilization rates because of weak demand, which would hit gross margins. And lastly, pricing pressure from competition in China.

And that's why we can say that chips are not all equal. Exemplified by the discrepancy between compute chip names like AMD, NVIDIA, Marvell, which you're seeing up, what, 14 to 21 percent year-to-date. And then the analog names like ON and XPI, both negative on your screen year to date. Texas Instrument up two and a half percent this year. So not everything treated equal. How are you watching this, Mike Santoli? For sure.

You know, because Texas Instruments, the stock, has had a really nice comeback. And it's funny how many people have said it's the out of favor semi that we like for this year. You wonder how out of favor it is. Therefore, people, you know, it's always a high quality operator and things like that. Also, just watching how semis in general behave right here. You've seen the homebuilders kind of hesitate at the highs. Semis over the last two years have tracked homebuilders almost exactly. So you want to keep an eye on just how they react. This name was like 130 something after the last earnings report. Now it's had this big run back. Since October, it's had a near vertical. All right. So, Christina, thank you. We'll see an OT with the

results there. We'll see Julia Boorstin in OT with the results on Netflix. Big news today, obviously, around their foray into live sports. But from an earnings standpoint, what do we think? Well, looking at Q4, Netflix is projected to keep up its growth. What we saw in Q3, the company is expected to add nearly 9 million subscribers in the quarter, which would be in line with last quarter's massive subscriber beat. The company itself projected 11 percent revenue growth in the quarter, and that would be on a big leap in earnings per share. And this accelerating growth would reflect success continuing to crack down on password sharing, as well as the upside from advertising after Netflix announced that 23 million people view

its ad supported option monthly. Investors are also going to be looking for guidance on ad revenue going forward, as well as on video game strategy. Plus, of course, Netflix's plan for live events and sports after today's $5 billion deal with TKO for WWE rights. And the company is also sure to mention that it drew 18 Oscar nominations this morning, including seven for Maestro. Scott? All right, Julia, thank you. We'll see you in OT when those results hit. Mike, you know, this stock, speaking of ones in tech and growth, NASDAQ, that have had a rip into their earnings report. Now they've got to live up to the hype. Yeah, and I heard you talking about how the consensus price target is basically where the stock is right now.

There's a little bit of reluctance, I think, to say this should go back to 40, 50 times earnings the way it was in 2020 and 2021. It also spent a ton of time chopping around this high $400, $500 a share level in that period before it launched up towards 700. So I think people generally agree the company's doing almost everything right. It's a matter of the pacing of sub growth. Was this a quarter where they managed to under promise enough and all the rest of it? But it's, you know, it's actually now market capitalized bigger than Comcast as it becomes kind of the new cable bundle. Yeah. So we're watching the market here. We've extended our record highs on the S&P and the Nasdaq as well. Rates, you know, having a little bit of stability today after being on the hot burner, probably helping that trade. Dow's come way off its lows as well.

It has. I just think, you know, kind of boring, slow markets tend to be reassuring more than they are foreboding. And that's why you see a little bit of that reaction. Again, I think people have not been, you know, really max long believers in this market going in. When we see the narrowness of the leadership into the highs late last week, everyone kind of looks at it and doesn't know if they should really trust it. And so I almost feel like when the market goes up in that fashion, as it did much of last year, it almost rebuilds and sustains the wall of worry on its own without anybody having to do anything. Doesn't mean we can't back off. But, you know, more new highs and new lows today, 100 to 9 on the New York Stock Exchange. So things are still, you know, have some traction here, even if, you know, it looks like we went a long way in a short period of time.

Yeah, I do have some calls. Of course, we've highlighted them over the last few days that the market's priced for perfection or exuberance is getting a little bit rich. But we shall see because the S&P 500 putting in a new all-time closing high. So is the NASDAQ today. Dow Jones Industrial is off the load.