Closing Bell - Closing Bell: Fed Leaves Rates Unchanged, Stocks Rise on Powell News Conference 3/20/24

Episode Date: March 20, 2024

The Closing Bell all-star panel – Josh Brown, Liz Young and Steve Liesman – give their instant reaction to Chair Powell’s News Conference. They break down what is next for the Fed and what it could mean for your money. Plus, we set you up for the big earnings in Overtime. 

You're listening to Closing Bell in Progress. Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. You have just been listening to Federal Reserve Chair Jay Powell, the Fed, keeping both interest rates and its outlook for potential cuts this year unchanged. The markets embracing that status quo. The S&P 500 lifting to a new intraday record high above 5,200. The prior intraday high around 5,189. Of course, any rise today is a new closing high.

You see the NASDAQ up 1%. Russell 2000 small caps outperforming up 1.6%. Now, Treasury yields relaxing a bit lower, but mostly on the short end as we sort of get a little more confidence that the Fed anticipates three quarter point rate cuts perhaps by the end of this year. The 10-year moving less. So you see a little bit of re-steepening of the curve. Maybe that suggests that the more tolerance for some warmer inflation.

But I would say in general, Chair Powell talks about the balance of risks between employment and inflation roughly equal. But he's not particularly concerned about any of them. So let's get to Josh Brown. He is CEO of Ritholtz Wealth Management. Liz Young, SoFi head of investment strategy. Just to break this down a little bit, Josh, markets seem to take the absence of any hawkish surprise as as a positive. It's like we were in a strong market before. The chair is unconcerned seemingly about the little bit of an uptick in inflation. And so therefore kind of game on. Yeah, my big takeaway that is really that they're going

to slow the pace of balance sheet runoff, which I found, I guess, to be something unique. I also think they're talking about it, but they haven't decided anything. But it's definitely an indication slowing the pace of balance sheet runoff reminds me of when Henry Blodgett was posting all this stuff from Hussman. So somebody said, well, are you going to sell your stocks then if you're so bearish? He said, I'm going to stop reinvesting my dividends. OK. All right. We got it. All right. So that's that's one thing. Here was the other one. This is a quote. The risk is two sided. If we ease too much, we could see higher inflation. If we ease too little, we could risk damage in the economy. OK, thanks for those people who have not been paying attention to what the balancing act is. There it is. And quite frankly, nothing really seems to have changed

to the point on either side of that balancing act to push the Fed. And really, I think we're enduring higher tenure rates fairly well in the broader market, which is certainly not the purview of the Fed, what the 10-year does. You know they're paying attention. Consider this, Mike. You've got seven basis points in the last week. You've got 41 basis points year to date. It's a fairly substantial move in the 10-year.

Stocks are weathering that really well. So today didn't really give you anything new on that front and i think the balancing act has to continue that is true although again you know first of all we always list it uh throw out the the little bit of a disclaimer that a lot of times post-fed moves are kind of like whipsaw one way then the other way right now it doesn't seem like there's a lot of room for interpretation here but you know if you look at the um the summary of economic projections which came out along with it, they keep the median of three anticipated quarter point cuts.

By the end of this year, some of the highs and lows changed in there. So there's fewer deep dubs and not as much, you know, in the middle. But I guess I would say is it also comes with a higher than anticipated GDP for the year and a slightly higher core PCE inflation. Now, Powell seemed to say, well, that's just kind of marking the market what we know for the first two months here. It's not projecting ahead. But I guess that's understandable the market would take that as a net positive.

I think it is understandable that the market takes it as a positive. And we should, frankly, if you're looking at just the math of it, which had concerned me earlier in the year, the math of them projecting 1.4% GDP growth, and we were still supposed to somehow generate double-digit earnings growth, it just didn't make sense. So I think their projection to bring GDP growth up is a positive. Obviously, inflation a little higher, not as much of a positive, but not quite as concerning. If everybody still thinks the labor market is going to be strong. People can spend and absorb that inflation if they're employed and they're confident in their wages staying steady.

The thing that I think is interesting, they did lower the expected number of cuts in 2025. Now, we're just kind of pushing out the worry into the future even further. So we came into the year thinking we were going to get six cuts. The market has completely weathered that storm, brought it down to three, and been quite resilient throughout, but lowered what we think might happen in 25. Rate-sensitive stocks, though, are moving. And I found this really interesting.

The ARK names, the ARK ETF itself is up 3%. Metals and mining up 2%. The regional banks are up 2%. These jumped out at me. And then I think if you look at the Russell 2000 on the whole, so you're up 2%. If you finish the day where we are right now, it's the second best day of the year for that index. So those things were interesting. Also should not be glossed over.

While Chair Powell was speaking, we printed a new all-time record high in the S&P 500 above 5,200. Yeah, the Russell doing that with its biggest holding, Supermicrocomputer, down 3.4%. There was also in those projections a slight rise in the long-term projected neutral interest rate. This is a theoretical thing. It's 2.5%. Now it's 2.6%. But what it suggests is that maybe the economic potential growth rate is better than we thought, or maybe we have a little more of a tendency toward inflation than we thought. And there's slightly less room between where rates are right now and the neutral rate to say that, oh, they have a lot to cut before they get, you know, less restrictive.

Now, again, this is all on paper. This is happening in the lab, so to speak. And previously Powell had said, well, we only know the neutral rate by its works. You know, it's this concept we don't have to worry about. Nonetheless, it fits in with this idea that we have to at least acknowledge the economy's been performing better than a lot of the models would have suggested by now. I think one of the points that he made, I don't know the exact quote, but something along the lines of, yeah, the neutral rate is higher than maybe we originally expected, but what we were used to pre-pandemic was abnormally low, almost an admission that that was maybe a mistake,

keeping it that low for that long. So get used to what would be more normal or what would suggest a healthier economy, actually, which is a higher neutral rate. And frankly, this whole higher for longer argument is not new. We've all been talking about that for a long time. So now their data, their projections is just showing us that they too expect it to be higher for longer. It's just a matter of, is it too high for the economy to be able to refinance the corporate maturity wall that will start heating up in 25 and 26? Is it too high for the cost of funds? When will the yield curve get back to normal? Those are still the unanswered questions.

But today's statement, as much as I want it to be dramatic so that we have more to say, wasn't that dramatic. No, I mean, it's sort of dialing ahead by three months, more or less what they said in December. It gives them less time to get to those three cuts if they're going to get them in this year. Again, you can't always take that as gospel. CNBC senior economics reporter Steve Leisman, just stepping out of Chair Powell's news conference, joins us now. Steve, I know you asked him about, you know, the interplay between the expectation for potential easier policy and the projections for inflation and growth as well. Yeah, let me tell you behind the question I asked, which is that they raised the inflation forecast, they raised the growth forecast,

they lowered the unemployment forecast, and yet they didn't do much change this year to the outlook for the funds rate. So you could come to a bunch of conclusions of that. One conclusion I asked him about was, hey, does that mean you're more tolerant with higher to the outlook for the funds rate. So you could come to a bunch of conclusions of that. One conclusion I asked him about was, hey, does that mean you're more tolerant with higher inflation, less willing to really clamp down on the economy? Do you not feel it's worth it to really slow the economy more that you're going to get the inflation results that you want? Now, he kind of slammed the door on that and said, no, that is not the case. So here's what he said. We're strongly committed to bringing inflation down to 2% over time.

That is our goal, and we will achieve that goal. Markets believe we will achieve that goal, and they should believe that, because that's what will happen over time. So, Mike, this whole debate may not matter, because if we do resume the downward trajectory of inflation, then the Fed's going to be in a good place. The question becomes in a couple months, if these sort of lousy inflation or not improving inflation numbers continue, then what does the Fed do? Does it decide, you know what, we can't tolerate higher growth the way we've been tolerating it. We need

to make faster progress on inflation. So it's not a question for now. It's one possible, what would you say, inference you could take from the data, but it's not definitive. Right. And I do want to mention we continue to make further new highs in the S&P 500, as well as as the Dow rising about one percent now as well. And Steve, you know, it's sort of interesting because Powell sort of declined a couple of opportunities to declare a little bit of a harder line on inflation. It conveyed a fair amount of tolerance of what the January and February inflation numbers have indicated and maybe, you know, some confidence that will go lower and emphasizing the progress made over the course of the past year. Mike, I think you're hearing exactly what I heard. There were several opportunities for him to come in.

And those would have been, by the way, opportunities for him to sort of bolster his inflation fighting credibility or his concern with it. He did say, hey, if it keeps up, we may stay higher for longer. I think that this also, by the way, this discussion tells you that the Fed and the Fed Chair Powell believe there's quite a bit of restraint in the current rate. And you look at the fact that they did raise the neutral rate by 2.6. Well, what does that mean? It means there's still quite a bit above at 540 or so where they are right now relative to the neutral rate. So they believe there's plenty of restraint in the system, which I guess suggests they feel there's some upward or bound that they could go or some tolerance they could have for higher inflation and still feel like they're addressing it with a restrictive funds rate. Right. Steve, stay here. I do want to bring in Josh and Liz back into the conversation. So, you know, in some respects, and I've been saying this

for a while, this hasn't really been a Fed driven market. It's kind of a market that wants the Fed to kind of be in this predictable spot somewhat out of the way, Josh. Well, here's what's different. The first half of 2024 versus the first half of 2023. The first half of 23, we had serious acute issues with the banks right around now and we also had a scenario where inflation was outpacing wage gains and that was a very ugly place for a lot of people to feel comfortable this is the opposite yes it's true inflation is somewhat sticky what's also true the cause of the inflation is the fact that people are doing really well right now. And actually, wage gains have started to outpace the growth in price gains throughout the economy.

So people don't feel it yet. You don't hear a lot of optimism, but it is the reality on the ground and the Fed understands this. And so as a result, they're not in a situation where they have an emergency on either side of what they're doing. Last year, again, remember, inflation way too high, plus the risk of if you kept hiking rates, you might blow up the banking system. Both of those threats seem to have been neutralized. And so to your point, Mike, we are in this place. We're in a little bit of a box, but no emergency on the left, no emergency on the right. And so I think as a result, everybody has the benefit to move more slowly and make decisions at a lesser pace. Yeah. And of course, history does say that if there is going to be an easing cycle, a slow and measured one is usually better for stocks because obviously it means there is no emergency.

Liz, you know, for all of this, we do have a market that's been rolling for a while right now. It doesn't seem like it's been in need of help from the Fed or anything else. And it's one of these situations where it seems like the market kind of keeps discounting the same pretty good news every day or some version of it. Now, it's hard for valuations to really start to bite, even if they're high, if the Fed is going to be, you know, accommodative and if earnings are going higher. But I guess how would you think about the overall market field position at this point? I think the market is queuing off of some good things and then some momentum and a lot of risk appetite that people just really want things to continue moving upwards. So that's where you've seen this big rotation, maybe out of the stuff that was very obviously overvalued, very obviously crowded trades, and into some of the things that are still risk assets, but more cyclical, more attractive.

We can sleep at night paying that much for that particular part of the market. And I think that's healthy risk appetite in this part of the cycle. I still think there's a pretty strong debate between whether or not we're late cycle or mid cycle. And if the Fed doesn't land this plane or doesn't stick the landing, we could accelerate into late cycle pretty quickly, overheat again.

And that's the big question. But so far, it's working. And the broadening out today, especially the broadening out is alive and well. Might be better if we never get the first rate cut. It remains this thing that's on the fishing line out in front of us. And asymptotically, we just continue to move along and wait for it, wait for it, wait for it. And it really never even has to come. I would say indefinite, if not never.

But yeah, I mean, Steve, what are we now, do you think, going to start to look toward? Right. Well, we'll get some more Fed speak. I guess we're going to have the February PCE report. Is it the end of this month or so? Well, you know, Mike, if you don't mind, I want to expand on what Josh said, which I think was really interesting. Guys, if you listen to the press conference, there wasn't something that folks were able to hammer Powell over the head with to say, how could you possibly not be cutting rates given that this thing is happening? Josh was right. We've moved out away from the banking crisis of last year, which was an obvious thing. I can't point to something to say, you idiot, why aren't you cutting rates? That question, that pretense does not exist.

Now, maybe missing something right here. It could be the CRE thing. It could be something going on in the banking system. But right now, I'm looking, obviously, to see, Mike, to answer your question, does consumer spending hold up? Does the delinquencies that we saw look like they stabilized at the end of last year. Do they remain stable? Are there systemic risk issues we'd have to worry about? Are they going too far with the balance sheet in terms of reducing it by too much? And does the sort of cumulative effect of higher rates have some impact that was just delayed and it's coming? But I think what Josh said should be expanded. There is not the thing out there

that you say to Powell, how could you be missing this, and why aren't you cutting right now? Well, that's very clear, Steve. I think that's well said. On the other hand, you would almost imagine a scenario where you could pound him and say, how could you not be taking a projected rate cut out, right? We had these higher than expected inflation numbers, and the economy needs nothing. Yeah, exactly. I mean, it's sort of like when he was asked, oh, you still are anticipating shelter

inflation to kind of revert lower, and he's like, I think there's a lot of expectation it's going to happen. He wouldn't say when. I think his answer's okay there, Mike, in the sense that, hey, we're very restricted. We've got a lot of restraint in there, and we haven't taken it away yet, And we haven't promised you we're taking it away, which kind of leads to the thing I think Josh was just getting at when I kind of interrupted him.

I'm sorry about that, which is if it doesn't go, if the rate cuts don't happen, Josh, are you cool with that? Is that a sell signal for stocks? I don't want one because I don't sell solar roof panels. I'm not a mortgage banker. I might feel differently if I owned a hotel chain. I might, seriously. But I'm not, and by the way, for the people screaming, they need to cut rates to support the economy because millennials, younger millennials need to buy a house.

What do you think is going to happen to the home price when mortgage rates come down 100 basis points? You think that's going to work in your favor? Are you crazy? Well, I also think nobody actually has a real firm idea of what happens to the 10-year yield, which mortgage rates are more based on, if, in fact, we're starting to cut right here. Liz, you focus on the yield curve. 10s aren't moving much at all.

30s aren't moving much at all. I'm not saying that's going to be the way it is, but it's not an automatic. I think, Mike, that's a debate we haven't had, which is this whole scenario sets up higher for longer on the 10-year, which sets up for higher rates or more competition for stocks down the road. That's really an interesting debate to have, I think. That's right. Well, and I think the other thing about that is the 10-year is also going to follow what inflation expectations do. Right.

And those have not moved much. So that's been working in the Fed's favor. Expectations have been reasonably anchored, except for at the two-year portion. But they've been anchored over the long run, which gives them the flexibility to still say, we can wait. We've got the strength in the economy. We've got the time. If inflation expectations start to look more threatening, you're going to see the 10-year move pretty quickly. Yeah, that is one of the many things we now have to turn to and watch in the next few weeks. Liz, Steve, thank you very much. Josh, see you in a little bit in the market zone. The S&P 500, as we mentioned, crossing above 5,200 for the first time, holding above that level. Joining us now is Sarah Malik, Chief Investment Officer at Nuveen. Sarah, it's great to see you. So we do have Fed basically

more of the same in terms of its message, same three anticipated rate cuts. Market seems fine with the Fed sort of stepping aside. What were the key things you would pull out to observe? Yeah, it's great to see you. I think that there's three outcomes that the markets like about the Fed meeting. That's the economic growth upgrade to projections. Also the dot plot that didn't change. And Powell did not sound incrementally hawkish on inflation. But under the hood, let's first look at the dot plot. That is teetering on the brink of moving

to just two rate cuts this year. I think that's where we likely could end up. And also with inflation, Powell sticking to his 2% target. The question is, when will we reach that? I think it could be years rather than months before we get to that 2 percent target. So second is, where does the market go from here? Well, first of all, there's a lot of FOMO cash, trillions of dollars of cash on the sidelines that's been looking for how to get back into this market. I think secondarily for the S&P to continue to move higher than 5,200,

we need this rally to continue to broaden. That's where I'm more of a skeptic. Just looking at earnings growth for 2024, tech by itself, earnings growth is expected to be about 20%. The rest of the S&P, about 5% earnings growth. This strong economy needs to translate to the rest of the non-tech S&P 500 to boost that earnings growth. I think that's how the to the rest of the non-tech S&P 500 to boost that

earnings growth. I think that's how the market will sustainably broaden from here. Well, you said you're somewhat skeptical that that's going to kick in right away. Does that suggest the risk reward at this level for the market in general is not that great? I mean, I think it's going to be tough to find that catalyst to have the markets move higher. If you look at the non-tech portion of the S&P 500, they are dealing with this sticky inflation, wage inflation is impacting their margins. Also, on the revenue growth side, they just don't have the structural tailwinds such as AI and the demand to increase productivity that's benefiting tech companies. The rest of the S&P doesn't have that. And you can see that in the material sector, energy sector and health care sectors, which are under pressure

in terms of earnings growth. And those are large drivers of the rest of the S&P. You mentioned that certainly there are trillions of dollars in cash. A fair portion of that is retail investors. But if you're an investor and you're involved at all in the equity markets, hasn't the market itself kind of kept you involved and raised your exposure and kind of allowed you to have both at once, to have the cash cushion, a little bit of income, and then be able to support whatever equity risk you want to take? I think we are hearing from our clients that many of them are rebalancing somewhat out of equities because of the huge run that it's had. And they're just trying to

be disciplined in terms of diversification. I think a lot of that cash, when it comes back into the market, what it should be looking at is fixed income. High yield fixed income from taxable to munis. You can lock in yields in the high single digits, even sometimes in the double digits that you haven't seen in years. It should be a little bit more resilient because we still do expect two to three rate cuts this year. I think that's an area where you can get out of cash and out earn the five percent that you can earn in cash and get more returns and fix income. And I guess, you know, raises the question about the rest of the world. You know, there has been global confirmation of this bull market. You see some strong markets elsewhere, but there's a lot of catch up to be done. If you think that that we need,

so to speak, the market to broaden away from big cap U.S. tech here, that would also suggest the rest of the market, the world would be less disadvantaged. Well, first looking at Europe, I think Europe is in the disadvantaged camp. They have a similar inflation problem, but they just don't have the economic growth that the U.S. has because the U.S. is exceptional when it comes to technology and its leadership. China, of course, may be some green shoots there, but still property issues and other issues in terms of China getting back to its historical growth rate. Japan looks promising. Japan GDP growth, the consumer in Japan. I think Japan is an area that investors can look at. And just thinking about the world on a global basis this year,

something else to consider since it's already March is that we're going to have 77 elections this year, 60% of GDP. Normally, that does cause more volatility for the markets. I think it's going to be a little bit more than noise this year because the less predictable the election outcomes are, the more volatile the markets are. So that'll end with the misinformation, with artificial intelligence. I think that could add volatility to the markets

as we sit at 5,200 on the S&P. Yeah, I mean, I know the historical patterns in election years absolutely say that's the case after the, or during or after the summer, you should expect a little bit of turbulence. But for now, market seems pretty undisturbed by any of that. Within the U.S. market then,

are there spots you'd be able to pick outside of tech where you feel as if they're underappreciated or is this market pretty well picked over? Yeah, I think within tech, first of all, you need to be selective, but there are promising technology companies that are continuing to thrive in this kind of market. Amazon, which is invested heavily in its logistics, I think will continue to do well. Outside of technology, looking at laggard sectors like REITs, that's an underperforming sector this year as we unwound from seven rate cuts expected to two. REITs have lagged for a couple of years. They've kind of been the baby thrown out with the bathwater of all the real estate issues. If you look at REITs historically, they tend to outperform in periods of rate pauses

or rate cuts, which is the period that we're in. That's an area that I'd be looking at. Health care tends to be an underperformer in an election year. So I don't think we're there yet. And the consumer I'm worried about after seeing two months of not great retail sales, I think consumer discretionary. We've already seen it with earnings that have been mixed. We get Nike tomorrow where I'm concerned, will they be able to keep their high single-digit revenue growth target going forward? And they have issues in China. So consumer discretionary is an area that I think you need to be much more selective on. Yeah, most of it's flying today, but we'll see how it settles out.

Sarah, good to talk to you. Thanks so much. Thanks for having me. All right, let's get a quick check on the S&P 500. Still tracking for a record close. Any higher market today means a record. And it's now 52-16. How is this possible? No rate cut.

The anticipation is enough for now. Up next, we're counting you down to Reddit's IPO pricing. Plus, a rundown of the key earnings you need to be watching in overtime. And don't miss a first on CBC Sit Down with Intel CEO Pat Gelsinger. You can catch that interview at 4 p.m. Eastern time in overtime and don't miss a first on cbc sit down with intel ceo pat gelsinger you can catch that interview at 4 p.m eastern time in overtime the market zone is next we are now in the closing bell market zone rithitholtz's Josh Brown is back with us. He actually never went anywhere. He's going to break down these crucial moments of the trading day.

Plus, two earnings we're watching in overtime today. Christina Partsinevelos on Micron and Diana Olick on KB Home. And Leslie Picker on the highly anticipated Reddit IPO. That's pricing after the bell. So, Josh, coming into the week, it was three big events. NVIDIA's revival meeting. So far, so good. Bank of Japan.

Dovish hike. Market absorbs it. And then the Fed. No change on the Fed, which basically means we're cool with we think inflation is going the right way. We're going to allow the economy to be as strong as it can be with that all. What's I mean, what's next? What can we feed on from here? Well, I think what's interesting right now

is you don't have that catalyst ahead of you. You've got earnings in the past. I guess we could start worrying about next quarter. But I think you are going to get more economic data. And one of the things that people have been nervous about is the job market being too good. One of the answers that Powell gave, I think in response to the New York Times just now,

is that strong jobs in and of themselves do not forestall the need for rate cuts. And I think the markets liked hearing that because it's likely we're not going to see any kind of about face with the labor data. It's just it's nowhere. So I think that that was helpful. Yeah, he actually highlighted kind of a virtuous cycle with added labor supplied from domestic and also from new immigrants,

you know, getting jobs, spending money, and this sort of self-sustaining, you know, strong job market. We'll see. That's the best case scenario. You do wonder if we're getting to a we-did-it moment here,

you know, with the S&P at a record above 5,200. But I'm still waiting for people to really get giddy about things. It doesn't seem we are. It's not a giddiness, but it is also not waking up every day with our guard up about the next thing worth falling apart. You and I have been around for a long time, and we remember long stretches of time where it wasn't, uh-oh, the next Fed meeting is make or break.

And I think we're in one of those stretches. And I give you permission, America, to just appreciate that. It doesn't mean things can't go wrong. It doesn't mean we're going to have a 12 VIX forever. Of course, there will be bouts of volatility. But we shouldn't be too hard on ourselves. We've been through a lot over the last four or five years. It's okay to just have a growing economy and no emergency that needs to be addressed. Two bear markets in four years. That's not the norm. Boring is bullish, as I like to say. And by the way, I've been around longer than you, just for the record.

Not much, Mike. All right. Christina, Micron, what should we expect? Well, AI demand we know is driving memory chip prices higher. NVIDIA is boosting Micron's profile with shoutouts on stage at its recent developers conference. But questions arise about Micron's ability to balance AI growth with its cyclical business. Micron shares have risen in lockstep with NVIDIA over the last year since it's considered an AI play with its high bandwidth memory with the 3E, if you're going to get technical. And that ramp is

expected soon and that particular memory is used in ai systems but the revenue though is still expected to be modest in the first half of this year with much of the real contribution in q4 or later micron is still exposed to cyclical businesses like pc smartphones enterprise cloud server markets all of these markets are still trying to improve. Marvell and Broadcom earnings posted underwhelming outlooks just two weeks ago and saw their shares sell off when investors decided they weren't near-term AI plays because they were hit by that cyclical business. For all that AI confidence to remain, Micron investors will have to see that AI memory is a growing percentage

of total revenue and a boost to gross margins. Yeah, I mean, Christina, this is sort of reminiscent of even in past cycles before the AI obsession where Micron kept trying to liberate itself from sort of the commodity memory chip, I guess, profile that they've had forever. If I could say, almost every single chipmaker out there in management loves to deny the cyclical nature of their business. And with AI right now, that's changing the narrative a little bit, but not really because we're still seeing what the analog makers,

we're still seeing it within the auto sector, we're still seeing the enterprise market being hit, cloud less so. So it's just a matter of just admitting that there is a cyclical nature to this business, even with AI at play. Right. Well, thanks very much, Christina. We'll see what the numbers give us. Diana, certainly homebuilders among the groups rallying on this sort of perceived dovish

Fed. What about KB Home after the close? Well, this is a tricky quarter because mortgage rates came down and then went back up again. And KB is focused on the entry-level buyer. They do this build-to-order product that tries to stay budget-friendly.

So, you know, when you look at mortgage rates and the movements there, they're particularly sensitive. That said, all the builders have been buying down rates to get buyers in. The question is, how much is that hitting builder margins and how aggressive do they have to get? Now, we saw Lennar fairly aggressive in their earnings report last week in the buy downs. They're more of a move up builder. Toll being luxury does much less of

that. So KB will be on the other side of that. So that said, we also saw housing starts bump up significantly in February. So likely slower home deliveries in this past quarter, but improved new orders looking ahead. And then, of course, we'll be watching for any commentary on current demand because we are going into this actually in it already, the very important spring market. Absolutely. Here we are. Thank you, Diana. So, Josh, you know, this group has been riding on the demographic and supply constraint story for a while. Unclear if anything is going to kind of disturb that in the short term, although you have to believe existing home inventory is going to start to pick up at some point. Yes. My friend Logan Motoshami had been

telling me since 2021, the thing about housing is that borrowing costs will not overcome the fact that there just aren't enough houses. And it's one of the few things in the financial world the Fed can't influence even if it tries. They cannot get home builders to come rush into the breach when there aren't enough homes. They can't print houses. And that phenomenon remains with us. I don't see it changing anytime soon. The housing market doesn't move on a dime. It

doesn't change course very often. And so if that's the situation that we're in, I think we're just going to continue to see the stickiness of inflation be in this shelter component. And it won't necessarily be up all the time or every month, but it's also not going away anytime soon. It's just the conditions in which we all exist in, and we have to get accustomed to it. Yeah. I guess from a macro perspective, you have seen housing activity in general curl up off the low. It's now a net contributor again. We had that recession. You know, Powell got a question in the press conference about, hey, you know, you're still waiting for home prices to come down because that's not you know you can't really use that lever that doesn't exist yeah if you if you talk to financial advisors you talk to people in wealth management

which is where i live what our clients are doing right now is they are helping the next generation bear the burden of these higher shelter costs. They are literally making the down payments for their adult children. It's not that they want to do that. It's that this is the environment we're in. In some of these cities in the Case-Shiller composite, some of these 20 major metropolitan areas, you just literally can't live if you're not getting some kind of help to buy that first home. Starter homes don't exist. They're unavailable. So, again, it comes back to, is there money available?

Yes, there is. That's what's supporting the housing market. The housing market is not reliant, fortunately, on current mortgage rates coming down. Tons of cash buyers. All over the place. So it's just the reality of the situation that we're in. Let's get to Leslie. Just looking ahead to the Reddit pricing, of course, a totally different company, Astero Labs. Leslie, huge debut up 69 percent after pricing last night. Yeah. So hopefully I mean, that doesn't hurt. Right. Because if you have some of the buy side

that feels good about, you know, what happened with this technology IPO today, then, you know, does that bode well for Reddit? It doesn't hurt. I am hearing, though, that Reddit is aiming to price at the higher end of the range it had been marketing, although nothing is official until the final pricing call after the bell. If so, that implies a fully diluted valuation of $6.4 billion, an offering size of $748 million. Pricing an IPO is always more of an art than a science, but this one may have a few competing interests that the company and its advisors need to balance. On the sales side, shares are held by employees and executives. That comprises about 30% of the amount sold in the offering,

so that group would like to see the deal price higher, of course. But then 8 percent of the offering is reserved for eligible users and moderators on the platform and certain directors and friends and family of employees. So you wouldn't want to price too high and risk a day one flop that could upset that group. So definitely an interesting balance that they have to strike today. Yeah. As you mentioned, always tricky. On the other hand, you also have the uphill battle of, of course, this is not a young company, hasn't been profitable, as you've been pointing out. And also just anything that's in social media ad supported that is not basically meta, Google, or maybe Amazon has been a tough sell for the stock market.

Yeah, and their top line growth on the ad side for revenue is similar to that of the big tech giants. However, they're operating in this space, social media in general. It comes with regulatory concerns. There's also just the overall monetization backlash that we saw last year. That has some investors kind of wondering, you know, how they strike that balance with regard to keeping users while making sure that they also generate money as a public company. So it'll be interesting to see kind of what happens. Of course, this is the first social media IPO that we've seen since 2019.

So pre-pandemic, it's been a big change since then. Yeah, plenty has happened. Leslie, thanks a lot. So, Josh, kind of an oddball deal in some ways. Yeah, this is going to be a fun one. This is going to be one of those where we're all going to put the ticker on our screens because you just know there's going to be drama. What sticks out to me here is just the fact that the IPO calendar is back to the point where we can do a Reddit. Whether you like it or not, 25 IPOs year to date, 14% ahead of where we were a year ago. This is a company that's lost money for 20 years, a cumulative $771 million or so. Got a CEO who paid himself $193 million last year.

Of course, most of that is stock. So if the stock is a flop on the IPO, won't exactly be that number. But it's going to be controversial in their risk factors. They actually state Wall Street Bets, which is probably their most visible community, is one of their biggest risk factors. Normally, you wouldn't expect to see a company say their own users or customers are a big

risk to them. But that's the nature of this thing. And I can't wait to see when it comes out, how it's received. Yeah. I mean, you know, do advertisers want to interact with every all that flow on Reddit? I mean, that's a bigger picture kind of business question. Yeah. It reminds me more of Twitter than Meta because they don't know their customers the way Twitter didn't really know their customers.

Right. Is that a great ad product? Can we compare it to Instagram? I would say no. It would be an interesting test of, you know, this market's willingness to believe, which right now seems pretty well intact. You know, it didn't seem like we were really tensed up going into the Fed, but we've still had a little bit of tension released. Yeah. But you know what? This is one of those things that we had to get through to your earlier point. And we did. And quite frankly, nothing has really changed. But that's a good thing, because, again, we're in a trending

market. It's broadening. You're seeing a lot of positivity away from the traditional leadership, new leaders emerging. And if that's the situation that you're in, you probably don't want any new news, quite frankly, that would upset that. Yeah. All right, Wes, we get it to the last minute. Thanks a lot, Josh. We'll talk to you again soon. We are going to be on pace for a new record high for the S&P 500, 52.22, anything higher, basically 85 basis points higher. Dow up a full 1%, NASDAQ Composite up 1.2. And the Russell up almost 2%, been underperforming just a little bit.

They also have about 80% of all volume to the upside on the New York Stock Exchange. So, yep, it is a broad rally. Market taking the relative dovishness versus expectations of the Fed as a plus. You see bond yields coming in somewhat after they topped the last few weeks. Two-year note yield off.08 to.462. That's basically right where the Fed is projecting the Fed funds rate is going to end 2024. Ten-year yield down to about.427. That does it for Closing Bell.

Let's bring it into overtime. It's Morgan and John.