Closing Bell - Closing Bell: Fleeting Pause or Proper Pullback? 4/3/24

Episode Date: April 3, 2024

Is the stock market’s indecisive start to the second quarter another pause on the way higher… or the stirrings of the first proper pullback in five months? RBC’s Lori Calvasina gives her take. Plus, Disney won its proxy fight against Trian’s Nelson Peltz. Top analyst Laura Martin from Needham breaks down what this might mean for the stock in the long run. And, Ford shares popped on some strong sales numbers. Phil Lebeau explains what this report means for the rest of the autos space and Ford’s EV competitors. 

This make or break hour begins with stocks finding some traction after a two-day skid as the rise in bond yields stalls, at least for now. Another round of steady economic numbers on the services sector today feed the debate over interest rates, with Fed Chair Powell reiterating his patient stance when it comes to potential rate cuts, seeking greater confidence that inflation is in retreat. Let's get to our scorecard with 60 minutes left in regulation. The S&P 500 up modestly, actually less than about a quarter of a percent. That follows a two-day dip. The index is now sitting right at the spot where it closed the day of the last Fed decision, March 20th. That's exactly two weeks ago. Just above 52.20 was the close. Their tech bouncing back a bit today.

The Nasdaq, you see there, is up by about a third of a percent with Apple and Tesla among those recently weak stocks bouncing. Cyclicals in materials, industrials, energy continue to outperform the broader market as, you know, the verdict of the market on the economy still seems to be pretty solid. The XLE on pace for its eighth straight week of gains. 314 researchers at Warren Pies, he will weigh in on whether this run in crude can continue later this hour. Treasury yields are easing back from an earlier jump, though still harboring at the very top of their four-month range. You see the 10-year at 435. That takes us to our talk of the tape. So is the stock market's indecisive start to the second quarter yet another fleeting pause on the way higher or the stirrings of the first proper pullback in five months? Let's ask Laurie Calvacina, RBC Capital Markets Head of U.S. Equity Strategy.

Laurie, good to see you. Thanks for having me. You have said, among other things, that some of the sentiment stuff that looks a little elevated has been screaming for a pullback. Is the market listening? Or I guess are some of the other inputs still keeping it afloat? Well, look, it feels like it's screaming a little bit louder this week, but it's been whimpering or kind of fussing a bit for the last few months. So I think time will tell. I do want to see how markets react after the next inflation print.

So I'm wondering if we're just seeing a bit of angst in the run-up to that report. But I think, by and large, what I think is interesting is it's not sort of a defensive underbelly to the market. Right. I mean, you talk about how materials are doing well, energy, industrials. That's happening even in context of tech bouncing back a little bit. The small caps, I mean, bottomed relative to large back in early February. Nobody really seemed to notice that. Yeah, sure. So I think this is a market that's still trying to rotate, trying to get a little bit more cyclical, has some angst over inflation in the Fed. But at the end of the day, it's a different setup from August.

Back in August, we were all worried that we're going to be in economic purgatory forever. Now we're all bemoaning the hot economy and what that means for Fed policy. So, you know, we'll see. There's good and bad out there. Yeah, for sure. And to your point about this really active debate about what the Fed should do, what it will do, what it's going to mean. Actually, we have some comments on that, both from David Einhorn from interviews today, from him from Greenlight Capital, as well as Steve Cohen of SAC.

How many times are they going to cut this year? I think fewer than they're priced in right now. So fewer than three? Sure. Do you think there's a chance they don't do anything? There's a chance. I think inflation is re-accelerating. I think there's a lot of indication of that. I think the market expects three cuts.

I think that's the number. I don't disagree with that. I think inflation's the number. I don't disagree with that. I think inflation's been somewhat contained. And I think, I mean, ultimately what it'll come down to is that a true statement or not. We think, the Fed thinks eventually it's going to come down to 2% inflation rate. What do you think? I think that's going to be hard. Yeah, so that pretty much sums up where you know, where the the front lines of this debate are. So I guess that we go in sequence. You know, what is the Fed inclined to do?

Is it doing it for good or bad reasons? And how much does it matter for the market? Look, I think that the reasons matter. I do think the Fed is being patient here. I think that's what I keep hearing in all these speeches. And I think we want them to be patient. I mean, they were sort of, you know, given a lot of grief for moving too late with the hikes right so don't we want them to be patient with the cuts? Doesn't the market actually want inflation to be contained? I think if they weren't being patient I think they would be getting beaten up for that. So I think at the end of the day they're being data dependent, they're watching the data come in just like everybody else, they're being pretty transparent and honest right now and I think those are are all good things. And I think if inflation is getting out of hand, you

know, you know, holding back is probably the right decision. They seem to believe in, you know, Powell's comments today. You know, he reiterated more or less that they think that the disinflationary trend is probably still in effect. But what do you actually think? Because you do have that difference of opinion that we've seen this sort of floor and a flare-up in inflation. At the same time, you're seeing things like ISM services today still positive but weaker than expected. Prices pay coming in. Are we just seeing another shift from services back into goods? And is it muddying the picture?

I think the picture is getting a little bit muddier. I mean, our economists and rate strategy team, they were looking for five cuts at the beginning of the year. And they've now dialed that down to three. And I think part of what really pushed them to do that was you were starting to see some pressure on the good side, right? So I think that was a little bit different from what we'd expected in the beginning of the year. I'm going to be really curious to see what companies are saying in this next reporting season. And somehow we're right on the cusp of another reporting season. It felt like the last one took forever. But I guess I wasn't totally

shocked by some of these inflation prints just on the basis that I was hearing companies still complaining a lot about costs in real time and really kind of begrudgingly loosening their grip on the pricing power element. So I felt like you could sort of look back at that last reporting season and see sort of seeds of, you know, kind of ongoing inflationary pressures in some of the corporate comments. So it'll be interesting to see, get that boots on the ground read in a few weeks. And at this point, I mean, we have the economy again surprising to the upside, at least relative to the start of the year forecast. It seems like it's holding together. I mean, I'm definitely alert for the idea that we are also maybe looking at some head fake stuff in

here because six months ago, as you said, we thought we were an economic purgatory. We weren't. But is the economic picture right now supportive of where the consensus thinks earnings can get to? I think so. I mean, the consensus numbers are a little bit ahead of my numbers. I'm at 237. Consensus is 243. That's really more about margin expansion than demand. I've got flattish margins in part because of these cost pressures. So I think it's really about the revenue expectations. And it seemed again, like this last reporting season, the revenue backdrop was fine. It was really just these cost complaints that at least were spooking me a little bit. I do think if you look back

historically, two to four percent GDP, very strong environment for the stock market, up about 12 percent on average. I think the best year in that environment was up 34 percent, which tells you how out of how out of hand things could potentially get. But a hot economy is good for stocks. Purgatory is not. Yeah. And that's, you know, hey, you'd have to actually dial back the rate of appreciation from the first quarter to only have a 34 percent increase. So who knows where it can go from here? Let's bring in Peter Cicchini of Exxon Capital. Peter, good to see you. Where do you come down here? I mean, we've been on this vigil. I know you have, too, for when the economy might be starting to show a little bit more fatigue. The data don't really cooperate, but I guess you can slice it different ways, especially on the consumer side.

So how are you viewing it? Yeah, there's there's something for everybody in the data of late, right? You know, there certainly are when you look at the high-frequency data through the ISM and PMI surveys. There have been signs of weakness in employment. The employment trend for both services and manufacturing has been lower, really, over the last six months. That has not led through to the hard data. It hasn't led through to initial claims or continuing claims or certainly to payrolls, which tend to be a bit of a lag to the high frequency data. You know, in terms of really the go forward for risk assets, it is about the Fed at this point. And I think a scenario that's interesting to contemplate is one in which the Fed has to stay on hold because there's just enough evidence that inflation is percolating once again and the economy starts to really slow in the second half

of the year, which I think is something that history would suggest has to happen given the length of the yield curve inversion and, you know, a number of other financial condition factors, which is equity markets have been a self-fulfilling prophecy in that they are one of the things that are keeping financial conditions so loose. So there's a little bit of a circular argument here that, frankly, the economy depends more on the market than the market does the economy here. But my concern is Fed is on hold, does very little for the first half, but is forced to cut aggressively in the second half of the year. We talked about reasons mattering. The reason being is that the economy actually is slow. Yeah, I mean, clearly, I mean, if we get past, let's say, June or July, it's going to be maybe the longest pause or one of the longest pauses the Fed has ever had at a peak rate. So it would seem like the pressure internally and externally will grow to do something.

And, you know, I've been working on this potential analogy that what we are seeing right now is the exact inverse of the post-global financial crisis, when couldn't get inflation up, everyone thought rates were going to normalize, couldn't get them off zero. In 2015, we waited that entire year for Yellen to get one cut in in December as growth slowed and inflation was zero. And yet they wanted to get the hike in there because they wanted to say, look, we're in a different regime. We're off of zero. So I wonder if you have something right now where there's just an institutional impetus to get a cut in there one way or another this year, Peter. Yeah, that's an interesting, that's interesting,

this sort of mirror image to the GFC, disinflation versus inflation. You know, look, I think at the end of the day what happened and what's been reframing that sort of purgatory we felt in August was this pivot that happened in November. I've been calling it the Bernzian pivot that Powell undertook sort of in that December meeting. And what that did was it really loosened financial conditions quite a bit. And the price we're paying for those looser financial conditions is higher inflation because it wasn't all supply side. One of the things we

have to recognize here is we are still running six plus percent deficit to GDP. And that is unprecedented in a full employment environment with, you know, ISMs for the most part still above 50. And in history, in that sort of environment, the Fed has actually done nothing. It has not cut. So again, I think it's going to be very hard to cut. But the impetus for markets to go higher just isn't there. Valuations are no longer favorable for ownership of equities. Spreads in the high yield market at 340 got as tight as 320 for CDX high yield. Just don't make for very good risk reward. Laurie, on the valuation point, I know you kind of try to come at this from different angles in terms of a fair value for the market.

Where does that leave you? Because you're even looking at, even if you take away the Magnificent Seven type stocks, the rest of the market isn't exactly cheap based on history. Well, you know, if we parse out the top 10 names in the S&P versus the rest of the market, you just look at a median forward PE, which is the preferred measure for a lot of people. You're around kind of 27, 28 times on that top 10 bucket, and you're around like 16 times on the rest of the market. And that's a bit above average, but it's still well below peak. And when you talk to a lot of people,

they kind of think the market deserves to trade at a 15, 16 times multiple. So, you know, to me, that tells me there's not a pervasive valuation problem. We've just got a problem in a couple of names, and even those are really justified based on the earnings growth we've already seen. I think, you know, thinking more broadly about the S&P itself, we try to guess where the multiple should be on a trailing basis, given where inflation and interest rates are

expected to be. I will tell you, I worked through the math last week before the holidays. I really, you know, I try to be fair about the numbers, but I come to the conclusion we're pretty much where we need to be. And if the Fed isn't going to cut, we'll see some downside risk. Yeah. So we're selling 5,300 thereabouts. It's obviously, you know, a couple percent up from here. And I guess within it, there's a chance to have somewhat better returns and maybe there's some risk in there. I think so. If you take the consensus numbers instead of my earnings number and, you know, that number consensus is usually right by midyear. So we can stop fighting about this in a couple of months. But that can get you to well north of fifty four hundred.

So, you know, I think and look, it's a compass, right? It's not a GPS. It's pointing you in the right direction. But it does tell me we should look for things sort of in the low 20s type multiples. All right. Yeah. It seems like history would would say that that's where it can go, if not will go. Laurie, Peter, great to talk to you today. Appreciate the time. We are also keeping an eye on Disney shares. They are moving lower after the company won its proxy fight against Tryon's Nelson Peltz. Tryon releasing a statement following the vote saying, quote, while we are disappointed with the outcome of this proxy contest, Tryon greatly appreciates all of the support and dialogue we have had with Disney stakeholders. We're proud of the impact we've

had in refocusing this company on value creation and good governance. Joining us now is Laura Martin, senior internet and media analyst at Needham. Laura, good to catch up with you on this. Now, it's interesting how Disney shares did trade a little bit lower and underperform the group in responses. I suppose it's because someone's always disappointed with the outcome of a vote. And if you were voting for the company's slate, you already own the stock. But what's your read on what's next in terms of the company priorities? If they're just if it is a kind of more of the same or is there something else to expect? Yeah, I think there was hope. You know, he got he got 31 percent of the vote. Like, you know, I'm surprised Nelson Peltz did that well.

So I think what that means is they thought Nelson Peltz would be more short term oriented. And the people that were sort of buying the stock because they thought he would drive better succession planning and more short term, is now not going to be on the board for at least another year. And I think what they have to do next is they have to fix the streaming losses. They've got to start up this ESPN joint venture with Warner Brothers and Fox. They've got to drive growth, figure out a way to drive growth at ESPN. And they've got to fix the theme parks, because we've got this whole sort of political, we're in a political year. And as you know, Disney falls on the wrong side of the woke quotient. And that is hurting their attendance, in my opinion, in Orlando.

I was going to say, what has to be fixed at the theme parks? Considering it doesn't seem as if they've raised some prices again. It doesn't seem as if visitation is necessarily struggling at this point. So I think visitation is fine in California and it's really strong offshore in Shanghai and Hong Kong and Paris. I think in Orlando they are raising price. You're exactly right. But I also think there's sort of a backlash not only from sort of the political spectrum, but also because prices have got sort of egregious in Orlando. Yeah. Yeah. I'm not surprised to hear that. I guess, you know, the company has already said what they have. The cost cuts are in train. In fact, they pulled some of them forward that they're going to have free cash flow this fiscal year. I guess they're saying comparable

to the pre-COVID peak. All the things you mentioned they have to do, it seems like that's central to their plan right now. And I guess the stock has maybe reflected a lot of that, given the fact it's vastly outperformed other legacy media at this point. It trades above, by the way, where Nelson Peltz sold it over a year ago. Well, not only that, like he spent, and Nelson Peltz spent $25 million waging a proxy contest that he lost because all 12 seats are going to Disney. But he made a billion dollars on his $3.5 billion investment by driving decision making so that Bob Iger could keep the board the way he wanted it. So he made a billion dollars by spending $25 million fighting with Disney. To me,

that's exactly the kinds of things a billionaire does. Yeah. Oh, yeah. There's certainly, you know, you can't really argue if that was really the backup plan, was to make a lot of money by making a lot of noise. I guess that makes sense. But from here on out, in terms of the risk-reward in Disney shares, do you see that the ESPN joint streaming venture

is going to be a mover of the needle at this point? What else is there to kind of expect in terms of, you know, giving a signal as to whether the stock can get another leg higher? Right. So catalyst for the stock, definitely the ESPN joint venture. I think there's 10 million court cutters that are not getting sports right now. So I really like this ESPN joint venture with Warner and Fox as a catalyst for the stock. They've got to get better content in the theaters and on streaming. They have a bunch of sort of every month they now have sort of a tentpole film coming out. That will help the numbers a lot because, as you know, that Disney engine is driven by box office successes, both in the parks and consumer products. So they need some more box office successes because Disney has been

sort of doing poorly at the box office. So they have to fix that. And they need to still cut costs on the streaming side to get to profitability. Yeah. I wonder if the industry in general is making that easier, essentially, to rethink the entire kind of expense base when it comes to producing new content. We obviously we know that Paramount is to some degree in play. It's hard to know if they want to keep up the same level of streaming investment. It would seem if you're looking at everybody's hand at this point at the table, after Netflix, you would think Disney has the best. Yep, agree 100 percent. And they have a lot more outlets to put it over, right? They have the ABC broadcast. They have all their cable channels. They also have streaming.

They have a lot of outlets to distribute their content, which means they're getting paid a lot of different slices, whereas Netflix has one outlet. It puts it on streaming globally. That's it. It doesn't have any other ways to make money. Disney has a lot of ways to make money. I would argue theme parks are another way it makes money with its content. The point is it has a lot of different silos that it can earn 10 cents, 20 cents, $50, which I think is a better business model than the Netflix single distribution point business model. Yeah, well, we'll see. Netflix trying to create

some kind of physical experiences somewhere. We'll see if it all converges way down the line. Laura, thanks very much. Appreciate it. Have a great day. All right, and don't miss Disney CEO Bob Iger on CNBC tomorrow morning. That's at 9 a.m. Eastern on Squawk on the Street. All right. Check out shares of Intel now falling in today's session after reporting some steep losses in its foundry business.

Christina Parks-Nevelos is here with more on that move. Hi, Christina. Hi, Mike. Well, investors knew it was going to be bad, but maybe not this bad, after Intel announced a new reporting structure for its foundry business, which is really just called or known as the manufacturing arm. Restated financials in their 8K yesterday showed that the foundry business had an operating loss of over roughly $7 billion last year, and when you compare it with a profit of over $11 billion for its products business in the same year. Management warning that losses will hit a its products business in the same year. Management warning that losses will hit a peak this year in the foundry business because of high startup costs

to build these manufacturing hubs in America, as well as advance their chip technologies. Management also doesn't expect to reach break-even until 2027 or hit 40% gross margins and 30% operating margins until the end of 2030, six years out. The company warning of lower core growth because their accelerators, in other words, AI chips, didn't do as well as they thought. So you got the slower ramp of products, the lack of AI participation, the lack of big foundry customers, and these high costs that have investors selling out today.

You can see shares down 8%. But when you zoom out on a year-to-date basis and compare Intel with TSMC, AMD, or Nvidia, Intel is the only stock in the red on the year and currently trades at 33 times forward-looking earnings. Nvidia's at 37 times, but Nvidia expects sales growth of almost 250%, which isn't the case for Intel, so you decide if it's too expensive or not.

Although Intel does have a lot to prove in its path to foundry profitability, they hope that this segment breakout of their foundry business will provide better transparency, better comparisons with TSMC and other chip makers, and then hopefully a better valuation. Mike?

That is the hope. Certainly rebasing expectations from here on out. We'll see if they can put that to good use. Christina, thank you very much. Thanks. We are just getting started here. By the way, the indexes have lost some ground. The S&P 500 barely flat.

It had been up about a quarter of a percent. Up next, drilling down on energy. Crude seeing serious strength to start the year. 314 Research's Warren Pies is back with how long he thinks this oil rally can really last. He joins us after this break. We are live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Getting some news out of Apple, Pippa Stevens has that for us. Hi, Pippa. Hey, Michael. Apple is reportedly exploring a push into personal robotics, according to a report from Bloomberg.

So that would include a mobile robot that can follow users around their home, as well as a tabletop home device that uses robotics to move displays around. Now, this, of course, comes as Apple looks for the next big thing after it scrapped its electric vehicle project back in February. Now, according to the report, Apple hasn't committed to either of these personal device projects, and any work is still in the research phase. Now, we did reach out to Apple, but have yet to hear back. The stock is slightly higher on the session. Mike. All right. iRobot's already

taken. Maybe iBot is going to be how they go. Thank you, Pippa. The energy sector outperforming with the XLE on pace for its eighth straight week of gains for the first time since 2007. Let's bring in Warren Pies of 314 Research to talk about this market. Warren, good to see you. I know you've been you've been treating energy, energy stocks, that that is as a as a pretty good hedge for an otherwise diversified portfolio, maybe in place of bonds. That's worked really well here. What about, though, the move in crude now that it gets up toward ninety dollars a barrel? Yeah, thanks for having me. I'm of two minds when it comes to energy. As you said, I think we've advocated for years you need to have an overweight in your portfolio. That is in a balanced equity portfolio. Energy should be

an overweight because it's doing things that nothing else in this market is doing. So that's one issue. We like it for its diversification. It's working in recent weeks. But when you approach it on a standalone basis, or you're talking about crude oil on a standalone basis, I really do think we were bullish on the commodity coming into the year. I think $90, or I said $90 is going to be a soft ceiling. We're about there. And I can see the signs that this rally is getting very long in the tooth. So I would say call it eighth or ninth inning if you want to use a baseball analogy. And so that I'm of two minds. You know, energy is a diversifier.

We like it. But oil, you know, it's not going to turn around tomorrow. But I think we're close to the end of this rally. What are the signs you do see in the crude market? I wonder at this point, because it's we're at the stage where as it goes up, people say, well, geopolitical concerns, Saudis, you know, trying to be a little stricter on supply. It's a it's a familiar set of factors that don't always work. But right now, that's where you're getting the attribution. Yeah, it's kind of a story. Everyone just tells themselves at this point in the cycle. Right. And it's this that as long as human history, this is just a sentiment story. There are geopolitical concerns. You know, we've had Ukraine hitting out at Russian refineries

and we have Israel striking out at Iran. And both of those are concerns. But if you go back to the history of geopolitical events and uprisings, unless there's a meaningful disruption of supply, these events get sold in the weeks following. And so I've never seen anybody who can trade oil based on geopolitics. So I think it's largely narrative. What really matters to me, what's mattered over the last two years in the oil market is futures positioning. This has been like, if you give me one indicator to call the market, this would be the indicator.

We came into the year, hedge funds, CTAs were at like the highest short position. So peak pessimism that you want to fade that we've seen post-COVID and they've wound those down. We don't get the report until Fridays and it goes back to Tuesday. But given everything has happened and the sentiment, I would guess that when we get those numbers, you're going to see a very optimistic and you want to fade that futures report coming out this Friday. So that's been my the key tell. If you're going to give me one thing to look at the oil market to tell you when these cycles are going to turn. And I think we're getting close to the end. All right. I do want to get you on another

portfolio diversifier on gold. But first, listen to what David Einhorn, a big gold fan, had to say just a little while ago. We own a lot more gold than just the GLD. We own physical bars as well. So gold is a very largeD. We own physical bars as well. Why so? So gold is a very large position for us. Why have you made it so large? Well, because I think that there's a problem with the overall monetary and fiscal policies of the country. And that both policies are systemically too loose.

I think the deficits are ultimately a real problem. And I think that this is a way to hedge the risk of something, you know, not so good happening. So Warren, gold is another one where we tell ourselves stories as to why it does what it does. That's one of them that Einholm was articulating there. But what is your stance right now? I know you're favorable toward gold and I guess sort of why and how would you play it? Yeah, so we came into the year, we thought that gold would break out to a sustainable new all-time high and hit $2,500 an ounce. And I really do agree with the narrative that Einhorn's pushing here. And so we like gold.

I think you can use to call price. And real rates gets a lot of attention. We've seen gold rallying while rates have increased, and that's caused confusion. What I'd say is when you go back and study the gold market, it's really this more ephemeral thing. It's trust. It's something you can't necessarily measure. And I think that Einhorn's on to something, you know, at risk of telling myself a story. I think he's onto something.

We've never seen this large of pro-cyclical fiscal deficits in this country's history. And I think that it makes a lot of sense to add gold as an allocation of portfolio, given the uncertain experiment that we're running. Yeah, certainly been some attention on things like buying out of China and other central banks, but whatever, it all does seem to push in a similar direction. Warren, got to leave it there. Appreciate the time today. Thank you. Thank you for having me. All right. The S&P trying to shake off yesterday's sell off right now, just below the flat line. Up next, we'll hear from one strategist who's betting the rally might still have room to run and how he's playing the market right now. That's after this break. Closing bell. We'll be right back. Getting some news now on Sherry Redstone. Pippa Stevens is back with the latest. Hey, Pippa.

Hey, Michael. Sherry Redstone has reportedly reached a tentative agreement to sell her stake in Paramount to David Ellison's Skydance Media, according to a report from Bloomberg, citing people with knowledge of the matter. This follows the Wall Street Journal reporting earlier today that the two were in exclusive talks. Now, this provisional accord is to buy Redstone's family holding company National Amusements,

which does control a nearly 80% of voting stake in Paramount. Mike? All right, yes. So that's still sort of handicapped. We'll see what it might mean for the entirety of Paramount down the road, Pippa. Thank you. The S&P 500 struggling for direction after a rough few days as the 10-year Treasury yield rises to its highest level since last November. Joining me now to share where he sees markets headed from here

is HSBC Global Research's Chief Multi-Asset Strategist, Max Kettner. Max, it's good to see you. You know, some familiar challenges to a market that had really been feeding off of a perfect backdrop for a few months here, where, you know, inflation was on the downside, people anticipating the Fed cutting rates into a strong economy and a record high stock market, maybe some complications. How do you see it playing out? Yeah, I think actually, I think the next couple of months, we're still probably in for some further gains because when we look at some of the macro data, particularly in the U.S., also globally, but I think it applies particularly to the U.S., look at things like CEO confidence. That's been picking up for a couple of months now, right? When we look at things like, for example, consumer sentiment around future finances, which is one of the

determining forces of future consumption, that's been really on a tear in the last two, three months as well. Or, you know, when we look at other indicators as well, global central banks now moving from hikes to cuts. So perhaps us talking more about the lagged impact of easing monetary policy. Look at what we're going to see in the next couple of months around the earnings season, the reporting season and Q1, when we look at the S&P. Actually, consensus expectations are again for an earnings decline quarter over quarter, right? Only tiny, only around 1%. But particularly the cyclical sectors where, again, consensus is very, very, you know, very, very downbeat.

So I do think particularly with the reporting season coming now, there is a bit more upside still for risk assets in general. And I mean, I suppose that, you know, all of those inputs, right, you see the earnings going in the correct direction. The fact that we've at least hit peak rates and bond yields maybe are not yet threatening is working perhaps against things like the slower moving drivers, such as sentiment, such as valuation, which are very hard to time, but and can always get more extreme. And yet they seem as if they could sort of have some bearing on returns down the road. Yeah, they could. But let's be honest, right? So those people who kind of give us this pushback, oh, you can't really buy an S&P at 21 times earnings. To be fair, I usually push back and like, well, you could have told me that a month or two ago and said you can't buy an S&P at 20

times earnings or at 19 times earnings, right? It's been similarly as expensive. So just because we're trading at 21 time zoning doesn't mean that the next leg higher can bring us up to 22, at least temporarily. And then the earnings catch up to that. And in terms of sentiment, in fact, actually, I would argue sentiment and positioning is pretty neutral. So in fact, when we look at our short term sentiment and positioning indicators, what we're seeing right now, we've had a bit of at least a very mild sell signal in the last couple of weeks. Even that has vanished over the last week and a half. So it's no longer there.

And in fact, when we look at aggregate real money investor sentiment, what we track is basically the sort of published sentiment from the largest 60 real money asset managers worldwide, that's pretty much neutral across basically all the big asset classes, whether that's duration, whether that's investment grade or high yield credit, or even in equities. We only ever see a really tiny, tiny whiff of an overweight. So from a sentiment and positioning perspective, I do think actually this rally, again, still has a few more legs. Yeah, I suppose that would be true maybe again, still has a few more legs. Yeah, I suppose that would be true maybe on a global basis even more so than here in the U.S. among tactical investors, I imagine. When it comes to the bond market, do you actually think,

for example, treasuries are hitting a ceiling here in yield? Or is there the chance that we can, you know, maybe get closer to last year's highs? Yeah, I don't think we're going to go, you know, we're going to surpass 5% substantially, for example, again, right? I don't think, and I think that's the important thing for risk assets overall. The important thing is not necessarily where bond yields are going to go, right? I think they could go a little bit higher, but then, you know, it's probably time at least from a multi-asset perspective to start buying a bit duration once we hit sort of 450, 460 and the 10s, right? That's probably the time where you want to be a bit more long duration in an asset allocation. But the important thing from a risk asset perspective, whether that's for spreads, whether that's for equities, the really important thing is, as long as that move is really happening

gradually, it's not really a problem, right? So if we're seeing, if we're really continuing to see yields going to go up pretty gradually, right, a gradual repricing, you've just mentioned it at the beginning of the year, right? We had this optimism around Fed rate cuts. But let's be honest, the last three months, we've priced out pretty much four, almost five rate cuts. And that still didn't stop the equity market and spreads to rally. Why? Because actually the rates move was pretty benign, pretty gradual. As long as that's continuing, that's pretty good. And that actually still means there's a bit of risk premium in equities and in credit that can be freed up.

All right. In fact, the 10-year Treasury yield I noted today and yesterday traded briefly above 4.4, and Treasuries were immediately bought. Who knows if we can make much more of that, but we'll see how fast they move or slowly from here. Max, thank you very much. Max Kettner. Up next, we're tracking the biggest movers as we head into the close. Christina standing by with those.

Hi, Christina. Hi, Mike. Well, more price hikes coming for Spotify users and beauty sales hitting a slump. We discuss next. We have more developments on Paramount. Pippa Stevens back with those. Hey, Mike. Well, Apollo reportedly offered twenty six billion for Paramount, according to a new report in the journal. And, of course, Paramount deciding to enter into those exclusive talks with Skydance instead. Now, according to the journal, those conversations now pause any other conversations with bidders for 30 days. Now, this comes after Apollo had originally offered $11 billion for Paramount's movie studio

before increasing that bid for $26 billion, including debt over the weekend, according to the Journal. Now, in that report, the Journal notes that some Paramount directors opted to move forward with Skydance over Apollo since it wasn't clear how Apollo would finance its bid. Now, quick reminder that right now Paramount's market cap is $7.5 billion. I should note we did reach out to the company and have yet to hear back. Mike? Yeah, and $15 billion or so in debt on top of that. So I guess the $26 billion would be a premium, but not a huge one if that were taken. Thank you, Pippa. Let's get back to Christina for a look at the key stocks to watch.

Well, the slowdown is coming for the beauty space, warns the CEO of Ulta Beauty. At a conference, CEO Dave Kimball said Ulta demand should moderate with the slowdown starting, quote, a bit earlier and a bit bigger than we thought. The trend cutting across all price points and categories, but it's more significant in the high-end makeup and haircare lines. Shares are down almost 15% right now.

And we know that because beauty has really stood out as one of the hottest categories in retail, But Ulta's demand warning is bringing down other cosmetic stocks like Elf, Coty and Estee Lauder, since their products are also sold at Ulta locations. Shares of audio streaming service Spotify moving in the opposite direction after a Bloomberg report said the company plans to increase prices for its premium subscription services in several markets to help with future expansion. And yes, that means hikes in the United States for a second time in just a year. Shares are up seven and a half percent. All right, Christina, thank you. Still ahead, driving big gains. Ford sales numbers sending that stock higher today. We'll tell you what's behind that strength and how it could impact the rest of the auto and EV space.

Closing bell. We'll be right back. In case you missed it, you can watch Scott Wapner's full exclusive interview with Greenlight Capital's David Einhorn from the Sohn Conference. Just head to CNBC.com slash pro. Plus, for CNBC's full sit down with hedge fund manager and New York Mets owner Steve Cohen, go to CNBC dot com slash pro pick or scan the QR code on your screen. Up next, Levi's reporting at the top of the hour. That stock seeing some substantial gains over the last few months. We'll break down the key themes and metrics to watch in that report. That and much more when we take you inside the Market Zone.

We are now in the closing bell Market Zone. Phil LeBeau is here with the sales numbers that are lifting Ford stock. Plus, KBW analyst Kyle Voigt just initiated coverage of Robinhood. He joins me to explain that call. And Courtney Reagan looks ahead to Levi's earnings out in overtime today. Phil, Ford, clearly the market wasn't ready for numbers this good, I guess. Yeah. And I think, Mike, the interesting thing is that this is a testament to the decisions that Jim Farley and his team have made when it comes to hybrids in terms of production and EVs in terms of pricing. Take a look at the Q1 sales from Ford. The ICE, we know about the F-150, the traditional vehicles, up 2.6%. But look at hybrids, up 42% as they've been pushing production there, and EVs up 86%.

This speaks to the decision about pricing on EVs. Ford has now jumped into third place behind Tesla and Hyundai in terms of EV sales in the United States. And yes, it's still Tesla that dominates the market. But Ford made the decision, we're going to dramatically slash the price on the Mustang Mach-E. And what happened once they did that in late February? Sales took off. Speaks to what the market is looking at right now in terms of pricing and EVs. And look at this chart. This is Ford versus Tesla. No comparison here, especially over the last couple of months in terms of the performance. I know there will be Tesla bulls out there who say, yeah, we'll look at it over the last five years.

We're only looking at this quarter because that's what the Q1 sales sales numbers reflect. Mike, EVs, by the way, overall for the market, 7.1 percent market share has not changed in the last year. Yeah, I was going gonna say it seems to have kind of stalled out there one out of every 14 cars all right ford shares up three percent on all that phil thank you very much kyle uh robin hood on on quite a run uh so far this year stock up 50 doubled in about a year obviously a lot of retail trader activity has come back options market volumes are huge you initiated coverage of the stock today, acknowledging a lot of that progress, some of the strategies, but maybe feeling like

the stock is just a hold. Talk about it. Yeah, I think we have a really favorable view of the fundamentals of the company here. As you noted, retail has reaccelerated into this year. March is one of the best months for retail trading and retail engagement since the first half of 2021, which was obviously the meme stock frenzy of the first half of that year. And so we have a really favorable view of what's happening from a cyclical standpoint. But more so than that, they're positioned well from a secular perspective. We do expect them to continue to take share of the U.S. self-directed industry as we look out over the next few years, have strong net new asset growth, as well as deliver new products into the market that are going to generate additional revenues for the company, especially

as we look out to the second half of this year with futures trading, cash settled index options trading, as well as the credit card launch that they just announced last week. So favorable view of that. But I would say that the stock is just at a more demanding valuation at these levels. It's moved from $8 to close to $20 in just under four months and now trading at 24 times EBITDA. We just feel like a lot of that initial value has been captured in the stock price. And I was going to say, all of those initiatives you mentioned are obviously rounding out their product array to kind of become a little more of a full service investment and banking type of app. On the other hand, everything that they're going into, whether it's the cashback credit card or various types of other investing products, you know, the companies that dominate those areas, they trade at, you know, 10 to 20 times earnings, not 50, as Robinhood does. So I just wonder what ultimately the opportunity set is for this company.

Yeah, and I think it's important to highlight that these are incremental to the core business. I don't think that any of these initiatives are going to be dominating the revenues or dominating the EBITDA profile of this company, even as you're looking out over the next three years. So we don't think that there's going to be a significant deterioration in the EBITDA multiple. As we look out, we think these initiatives are generally incremental.

And a lot of these initiatives are incremental in areas that are very capital light, futures trading, cash settled index options trading, expanding internationally with the product as well. And so we just we just see that dynamic really not necessarily playing out of the next few years. Gotcha. Kyle, appreciate it. You got $20 price targets just about where Robinhood shares are. Thank you very much. Courtney, what should we expect out of Levi's? Yeah, Mike, so it's the first quarter for Levi's Grouse under CEO Michelle Goss. Investors are going to want to know if the outlook

for the year has changed at all since it last reported and forecast at the time weaker full year sales forecasts than the street had expected. Beyonce's new country album and song Levi's Jeans, though, bringing some positive cachet to the brand and pop culture, even just here in recent days. Shares have well outperformed the retail ETF, the XRT, and the broader S&P 500 over the last three months. But bigger picture, shareholders really want to know more about Goss's plan for the legacy brand's future, particularly as it seems that concern about consumers' ability continues to grow, retail executives wondering if discretionary spend can continue under all these macroeconomic pressures. We will ask her about all of that and more when we speak to Levi Strauss & Company CEO Michelle Goss on Last Call this evening. It is her first interview as CEO and a CNBC exclusive. Mike?

All right. Beyonce didn't expect that was going to be a factor here for the quarter. I guess maybe, you know, helping Levi's counter the Wranglers and Lee franchise among country fans. Corey, thanks very much. We'll see what the numbers give us. Let's take a look into the close here. The S&P 500 is back in positive territory, up about one eighth of one percent. It has been kind of oscillating in this area, just about 5,200 after two days of declines. Market breadth actually is positive. You have the small cap, Russell 2000, outperforming with a half percent gain. You do have about 60 percent of all New York Stock Exchange volume to the upside as well. Bonds have been a big part of the story all week.

Yields have been on the rise. ISM services data had prices paid come in lower than expected. That's calmed down the sell-off in Treasuries. You have the 10-year right around 435. It went above 4.4 today, as it did yesterday. But those sell-offs in bonds were bought pretty handily. That's going to do it for closing. Validation will finish in the green. Let's take it into overtime with Morgan Brennan and John Ford.