Closing Bell - Closing Bell: Late-day stock slump, National Economic Council Director on inflation, and cash is king. 4/12/22

Episode Date: April 12, 2022

Stocks giving back big early gains extending the losing streaks for the S&P and Nasdaq to 3-days after the highest increase in consumer prices since 1981. National Economic Council Director Brian Deese says inflation is running uncomfortably high and explains why the White House’s plan to allow more ethanol in gasoline will help lower prices at the pump. And Satori Fund Founder Dan Niles explains why retail investors should be in cash right now and why he thinks some traditional technology stocks are attractive.

Tyler, thank you. Yep, we gave up the whole rally and then some, and we are trading near session lows as we approach the close. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Here's where we stand right now. The Nasdaq growth was the leader today. It was up 273 points or so. It's given that all back. It's down a third of 1% right now. S&P 500 down a quarter of 1%. And the Dow is down about a tenth of one percent. Energy is leading the way today in terms of sectors. You've got some strength in utilities, consumer discretionary materials, financials getting hit hard as we see interest rates go the other way. Yields are lower today. That hurts ahead of earnings tomorrow. Communication services also

weaker. What I'm watching into the close oil prices getting a big lift today at more than 6 percent. And WTI and Brent are both now back above $100 per barrel. Why? China relaxing some of the restrictions in Shanghai, a sign that more demand could be coming. And OPEC warning it would be impossible to replace all of the oil from Russia. Coming up on the show, National Economic Council Director Brian Deese will join us with his first comments on today's four-decade high inflation print and how the administration plans to battle those higher prices. Let's get straight to the market in this big intraday turn lower. The S&P 500 giving up a 1.3% gain. The Nasdaq erasing a pop of more than 2%.

Joining us now, Dan Niles, founder of the Satori Fund. Dan, welcome. I guess you're not too surprised to see the market mood shift. You've been pretty bearish. What is your take on the inflation report? I mean, there's no way to look at it other than it's negative. I mean, CPI is up 8.5 percent. Core is up 6.5 percent.

You're at 40-year highs, and the Fed has raised rates once. So the Fed is incredibly far behind. It's the farthest the Federal Reserve has been behind since the 1970s. And so you're going to see multiple 50 basis point rate hikes. You're going to see the balance sheet work down. And I think the key is when you're thinking about this market, you want to stay big picture. If it was don't fight the Fed on the way up, which was they put in so much stimulus that the stock market rallied over the two years we had a global pandemic, then the same applies on the way down, which is don't fight the Fed. The second part of it is you don't want to fight the fundamentals, which is that earnings estimates are going down for the first time since seven quarters ago during the depths of the pandemic, because you do have things like inflation and energy costs and wage

increases. And the biggest thing, which is demand slowing down. So those are the two big things. Don't fight the Fed and don't fight the fundamentals. So there is another way of looking at it today, though, when it comes to the inflation report, Dan, which is how the market saw it earlier, which is that it may be peaking. We saw core CPI, for instance, only rise 0.3 percent in March. And I say only because that is a deceleration from what we've seen in prior months. And there is a thinking that if inflation comes down sooner rather than later, the Fed won't have to be as aggressive. And those beaten down tech stocks might not look so bad.

Yeah, I think that's a very optimistic way to view things. Because, yes, I mean, mathematically, the compares get a lot tougher for inflation as you move out in over the next few months. The problem is, is that two thirds of all costs for corporations are related to wages. And you've got three million more job openings than you have people unemployed. The Fed can't fix that with rate hikes unless they magically make 5 million people show up on this planet to work in the United States. So that's not going to fix anything. And supply chain and energy costs are only 20 percent of corporations expenses because we're a services based economy. This isn't like 200 years ago. So those things are going to continue. And then you're going to have

food inflation, which is going to be really high towards the end of this year because the Ukrainians are involved in something else rather than planting, which means they won't be able to harvest. So it's going to be pretty bad. And it's going to obviously inflation should come down from eight and a half percent. But it's still going to be way higher than what people think by the end of the year. I think it's still going to be above four percent by the end of the year, which is still too. Fair. So what is your strategy then? Is it to raise cash during rallies? I know cash was one of your big calls of the year, which has been a good one.

Is that still the strategy here? Yeah. For us, I mean, I do this every day. So the strategy is pretty simple. We tweet about it, which is when the market really sells off and gets super oversold, then we cover and we try to get long. When you get a rally that gets back 70 percent plus of the prior leg lower, we go ahead and we start to reshort again. And we'll change that if we think, you know, inflation comes in way lower than what we're thinking or demand hangs in a lot better. But right now, that's not the case. And valuations are still high. you know, inflation comes in way lower than what we're thinking or demand hangs in a lot better.

But right now, that's not the case. And valuations are still high. So I think if you're a retail viewer and you can't watch a portfolio every day, cash is still the best. Otherwise, that's kind of the strategy that we're employing. What about energy? Because you liked energy coming into this year. Obviously, that's been the right bet. It's still going up. But I think you've gotten out of that ETF, the energy ETF. Is that right? Yeah, correct. I mean, we tweeted about this a few weeks ago when Russia first invaded the Ukraine and people were talking about $200 oil. And there's a great saying in the energy market, you know, the cure for high prices is high prices because high prices just kill demand. And so we got out of our position. We still are very bullish on energy long term because those things haven't changed.

In fact, they've gotten even more constructive for oil prices, which is supply is extra spare capacity is really low at OPEC plus. Environmental concerns is keeping additional supply under control. And I think by the end of this year, we're all going to be out. We're all going to be traveling. We're going to be consuming services and not goods. And that's really good for energy demand. So from a longer term perspective, we're very constructive on oil. You know, we'd look to get back long in the low 90s again, which is where it was prior to Russia invading the Ukraine. And we do think the Ukrainian situation will get resolved in Q2. Hopefully that's not wishful thinking. But, you know, May 9th is when, you know, Russia celebrates their victory over the Nazis in

World War II, something that might be an interesting date to watch. Because initially, just like you saw today, the reaction was, oh, the market goes up, it's all wonderful. And then people, cooler, take control and they sell it down. The day Russia resolves with Ukraine, all commodity prices are going to drop a lot. That's when we're going to be buying hand over fist, because those structural things just haven't changed. That is a tough one to predict. Dan, stay with us if you would.

We're going to get into some specific names that you like and don't like right now. Take a quick break. On the other side, we're going to drill down, particularly on the tech sector with Dan Niles. You're watching Closing Bell on CNBC. Dow's down about 108 points. We'll be right back. Welcome back. We aren't in your session lows here. The Nasdaq, the underperformer, down 0.7 percent almost after being up 2 percent earlier in the session. Let's bring back in Dan Niles again. Dan, weakness today in Microsoft, NVIDIA, Apple, Facebook, after it looked like they were going to have a good day earlier in the session.

Do you continue to avoid the NASDAQ, which is now down about 18% or so off the highs on these fears of rising rates and your call to not fight the Fed? Absolutely. And I think there's sort of a nuance to that, which is you want to particularly avoid companies that sell goods and you want to be more focused on companies that sell services. Because during the pandemic, we all bought a Peloton bike or buying things off of Amazon, off of our new iPhone

while putting a Zoom call in through our iPad, et cetera. You know, as economies open up and we learn to live with COVID, you're going to be going to restaurants, traveling, staying at your favorite hotel, eating at your favorite restaurant, going to a sporting event. And I think that's something that we're all starting to do again. So I think within the NASDAQ, you want to avoid PC and smartphone makers in particular and be very careful because I think you're going to see revenues go negative year over year before the year is out. And then but you can look at things like online travel or dating or things

like that that are more leisure focused. I think that's where demand will pick up as you go through the rest of this year. So that's kind of how we have a portfolio. You've also liked some of the old school tech names like Cisco, I think, Dan, which hasn't performed particularly well. It's down 19 percent or so this year and underperforming other big caps like Apple. Well, you have to remember when we put Cisco on, that wasn't one of our top five picks entering the year. So we got involved with Cisco fairly recently as we got more convinced that you're going to have a spending cycle in 5G because, you know, all the phones being or more than half the phones being sold this year will be running on a 5G network. You're going to have spending in hyperscale because we're all on the Internet. So those companies, the Facebooks, Googles, Amazons, et cetera, will be spending

more on that infrastructure. And as we all go back to work, corporations, which haven't had to spend in a couple of years because nobody's in at the office, they're going to be spending again. But remember, our overall big picture is S&P down at least 20% for the year. It's going to be hard for any stock to be up. If it outperforms and our shorts do better, which is what's been going on this year, then we can make money. And so that's the better, which is what's been going on this year, then we can make money. And so that's the strategy, which is why I don't want people to be confused. We wrote a lot of this up on DanNiles.com. We put it out last week.

So read that for more details, because this is complicated, obviously, stuff. Down 20 percent for the year would be another 12 percent decline from here for the S&P. You're also known, Dan, you've had some good calls in the past on semiconductors in particular. That's been a group that's also been tossed out lately, one of the best performing groups of last year. Has anything really fundamentally changed, though, with the semis in terms of the secular growth cycles that they're in, the shortages that we're still seeing that would warrant this kind of selling? Absolutely. Because if you think about it, what did people do over the last couple of years? Well, we upgraded our smartphones. We upgraded our PCs. Those are

the two biggest end markets for semiconductors. So you're going to see all those upgrades means you don't have to upgrade again. So you're going to see demand fall off. Remember, semi-supplying the goods. And so you combine that with the fact that inventory levels are up a ton. Dell's inventories are up 73% year over year. Asian ODM inventory is up 49% year over year. Distribution up 31%. So while you hear that supposedly there's a lot of shortages, companies have built a lot of inventory. You have demand rolling over. That is the worst possible environment for semiconductors, especially when people still are clinging on to the belief that everything's going to be fine. But the inventories tell you a very different story as to what's going on. So that was actually one of the first

sectors we shorted this morning off that rally, which was great. You're shorting it now, even though it's already down so much, the sector's already down so much this year? Yeah, but think about how much the sector's up over the last three years. So that's what you want to be looking at. And think about how much demand was overinflated, because you had the Fed expand their balance sheet by $4.8 trillion over the last two years. You had the federal government hand out $5.5 trillion of free money. That's $10 trillion against a U.S. economy that's only $20 trillion in size. You handed out 50% of GDP. So people spent money on a lot of stuff because you couldn't go and do services. You couldn't go to a hotel. You couldn't travel. That's all going to reverse this year. And semis are at the epicenter of that. And you've already seen DRM pricing,

which is kind of like the oil for the semiconductor industry. You've seen prices in that sector start to roll over from mid-March. So you're already seeing signs that supply and demand are starting to cross in the negative direction, which is why you want to be extremely careful in that space. I guess that what could go wrong with this whole worldview, Dan, is that the Fed could succeed at executing a soft landing, that they can. They've telegraphed what they're going to do with rates, so there's no big rate shock here, and that they can successfully fight inflation that way. And the economy is strong enough, if you look at some of these numbers with jobs and consumer balance sheets to absorb it. The Fed can't engineer it because how's the Fed going to create more people?

They can't. Right. So the Fed is raising rates, which is the only thing it can do. But remember where inflation is coming from. Inflation is coming from three million more job openings than we have people unemployed. Fed can't fix that with rate hikes. The supply chain issues, the Fed can't fix that. War in Russia between them and Ukraine, the Fed can't fix that. It can fix housing, some of the demand issues there that have driven prices up. When you fix that, it's by killing demand, which means estimates go lower and valuations are still high. So that all points to stock prices having to go lower. It's the exact opposite scenario of last year, where if demand was bad, the Fed could stimulate more, driving stocks up. And if things got better, stocks went up because things got better.

This is the exact opposite where you're in a box that you can't get out of because of high inflation. If you didn't have high inflation, not a problem. Keep stimulating forever and you'll be good. Modern monetary theory at its best. But that's not the situation you're in. That is not the situation we're in. Dan Niles, thank you for joining me. Good to get all your picks of the Satori Fund.

Let's give you a check on where we are in the market. The Dow losses are picking up steam here. We're down half a percent now, down 160 or so. S&P 500 down a little more than half a percent. Again, it might look mild, but we were surging this morning. The S&P was as high as almost 60 points up. You've got energy and utilities still in the green. Everybody else is lower.

And the NASDAQ down about six-tenths or so of a percent. After the break, UBS out with a big call today, upgrading the entire tech sector, saying it's a quality play. We'll take a look at what that really counts for when it comes to quality in this market. And later, don't miss our interview with National Economic Council Director Brian Deese, his first reaction to today's inflation print. And as we head to break, check out some of today's top search tickers on CNBC.com. Tenure yield getting the most attention as usual and is moving a little lower today for a change. Prices up, yields lower. Also on the list, Tesla, which is higher after a big sell-off yesterday by two-tenths of a percent. AT&T giving back a tiny bit of its big gains yesterday. NVIDIA and Apple holding up just a bit amid this broader tech sell-off.

We'll be right back. UBS upgrading tech today, saying the sector is supported by improving relative momentum, higher quality, and lower cost exposures. Mike Santoli taking a closer look at the group for the dashboard today, which looked like a good call this morning. Not so much right now. It really did. It responded at least in part to calls like this. And it gets to a key debate right now in the markets, which is, you know, we're talking about a later cycle backdrop and a lot of indicators of that. Tech is part of the quality trade that should be performing relatively well there, right, where you have good earnings

reliability and things like that. However, tech was up so much in the prior two years, the NASDAQ 100 was the leader, and now it's giving up some of that valuation premium. So this shows any quality screen, this is the iShares S&P Quality Index, but any one of these filters you run is going to really get you loaded up with tech. That one in particular, 35 or 40 percent tech and internet, and you see that the lines have really in the last year moved right together along with the NASDAQ 100. The other components of quality, however, the overweight sort of health care and staples. And you see those have been net contributors. So it seems as if you have to kind of make a choice that tech is not behaving the way other defensive groups are. And maybe it won't. But it is worth keeping in mind that if we are going to get back at some valuation to that reliability trade where you have good profit margins and good balance

sheets as being the leadership qualities, then that's going to take you to a lot of tech. But doesn't it depend how you slice and dice tech, too? Like, if you had just pulled out Fang plus Microsoft, it would probably be performing a lot better than the triple K. You know, yes and no. NASDAQ 100 basically is Fang, Apple, Microsoft, plus the semis to some degree. In the last two years, that all would be right up here. So, in other words, there was this massive 2020 to 2021 run higher, massive outperformance. It's been given back since then. They're not so defensive right now is the bottom line.

That's right. All right, Mike, thank you. We'll see you in Market Zone. Here's where we stand right now in the markets, continuing to lose steam throughout this final hour of trade. S&P down half a percent. You've got energy higher because crude oil is jumping more than 6%. But most everything else is lower right now.

The Nasdaq down four tenths of 1%. Coming off a lows a little bit, but we are still down. Utilities and consumer discretionary, both green. We'll be right back with the National Economic Council Director Brian Deese on whether President Biden's plan to allow more ethanol and gasoline will really help lower prices at the pump. We'll be right back. The news today, inflation in the U.S. rising 8.5% in March year over year. That is the highest pace in 40 years. Meantime, national gasoline prices, while down from their peak last month,

are still over $4 a gallon, according to AAA. Joining us now from the White House, National Economic Council Director Brian Deese. Director Deese, good to have you back on the show. Welcome. Happy to be here. Well, it was another scary inflation print this morning, eight and a half percent from last year. How problematic is this for the economy? Look, this report shows the impact of the war in Ukraine. We saw in very clear view the impact of the war and Putin's choices on the cost of energy in particular. 70% of that 1.2% monthly increase was a result

of energy. And as you mentioned, that was an increase directly in the price of the pump. Now, the good news is that the president's taken decisive action on that front. And since the middle of March, we've seen oil prices and gas prices start to come down. We also did see some moderation in March in what is referred to as core inflation, taking out food and energy. But make no mistake, inflation is running uncomfortably high. And that's why the president is about to talk in Iowa about actions that he is taking and has made front and center that lowering costs, lowering the deficit. That's got to be our focus. You can't really put it all on the war and Putin.

I get that we've seen sharp spike in energy and food prices since then, but we're seeing rising prices everywhere, and particularly in housing with rents and shelter, in places like apparel that have been rising for the last few months. That's much broader than just what we've seen as a result of the war. Well, the very large increase in March was driven by a very large increase in energy prices and gas prices. And that is a direct result of Putin's invasion and Russian oil coming off the market. Again, 70 percent of that increase in March was driven exclusively by

energy. At the same time, core inflation that includes a lot of the categories that you just described did moderate modestly from prior months. But to be very clear, inflation is too high and we need to bring prices down. That's absolutely the case. And that's why you see this administration doing everything that it can to encourage Congress to move in ways that could lower costs and make things more affordable for American families and provide additional moderating impact on inflation, and also to work internationally to try to do things like bring down the cost of oil. A lot of people do. Americans do, though, if we're playing the blame game, do look at President Biden. In fact, there's a new NBC News survey just out in March. Biden gets

more credit or blame for inflation than any other factor. The pandemic, Russia, corporations, Americans say 30, 38 percent of Americans say it's Biden. Only 6 percent say it's Russia, Ukraine. So, I mean, clearly there's a political issue here. Brian, I guess the economic question is, where would these inflation numbers be if the administration did not add two trillion dollars a year ago to this economy, which was already looking very strong and starting to open up on the heels of COVID? Well, a couple of points. First, there's been careful studies that have been done about the fiscal support last year. And the predominance of the evidence is that we generated very significant economic growth. We have very strong top-line economic growth and we

have very strong labor market outcomes and that the principal driver of elevated inflation is what we're seeing around the world. We're seeing record inflation in Europe, we're seeing record inflation around the world because we are dealing with a unique global supply shock and the war is compounding that as well. There's no question right now that what's going on in energy prices is a function of Russia and the war. That's economically speaking. Politically this president is focused on actually delivering results and that's what you see. He galvanized an international coalition over just the last couple of

weeks to release reserves collectively from the collective stocks around the world. We've seen that have some moderating impact on the price of oil. Today he's going to announce additional actions on what's known as E15 to allow additional ethanol into gas as well. Each of these steps is him taking action to do what he can to try to moderate prices and encouraging Congress to do the same. What does it all mean for the consumer? What do you expect in terms of consumer spending, dealing with this energy shock, the food shock, rates going higher? What's going to happen to spending? Well, I would say if you look at the U.S. economy right now, one of the striking

elements is the resilience of the American economy and the American consumer. Because of the strong growth that I just mentioned, we have now navigated through multiple waves of unexpected shocks. The Delta wave, the Omicron wave, the war in Ukraine. And we still continue to see the United States economy and the United States consumer operating more strongly than almost anywhere else in the world. And so that puts us in a relative position of strength. Obviously, we are facing very uncertain and challenging times right now, but we are uniquely well positioned in terms of our overall growth, the position of the American consumer and the American labor market to navigate through these times. How much worse do you think these inflation numbers are going to get?

Well, what I can tell you is that already the price of oil has come down from its highs in March and the price of gas at the pump is coming down. It's come down about 20 cents from its high and it should come down more and hopefully will come down quickly given where oil prices are. And so if we can sustain those lower prices over the course of April, then you would expect that to have a significant moderating impact on the month-by-month numbers. But we're focused over the medium term on how it is that we can bring prices down, encourage that normalization in the economy while continuing the strong economic growth and the record labor market outcomes. That's the outcome that we're all hoping toward. It's certainly what we're focused on. And I think our policies are oriented well to try to

increase the chance that we can get to that outcome. But wages are not rising as fast as inflation. And in fact, if you look at them on an adjusted inflation basis, they are declining. So that's part of why there's so much worry right now about the consumer and where this economy is going, with Wall Street increasingly talking about recession, Brian. No question these are uncertain times, and it's been a tough couple of years overall for American households. I would make a couple of points on wages. First of all, you've seen wage increases, the highest wage increases in the lower brackets of the income spectrum. So that means that the people that have the hardest time making ends meet and where higher prices have the biggest impact, they're actually seeing the strongest real wage gains, inflation adjusted wage gains.

And we're also seeing if you look at earnings or you look at disposable income, American households are in a better position now than they were for many periods during the pandemic. But there is no question that these high prices are hitting people in their pocketbooks. They're creating uncertainty, which is why we need to do everything we can to bring those prices down. And I would just underscore, we are taking every action that we responsibly can. And we're encouraging Congress to take actions that right now, today, could lower people's costs, lower their energy costs, lower their prescription drug costs, and do it while lowering the deficit as well. That would make a lot of sense. It would help to reduce inflationary pressure. And our hope is to keep working with Congress to try to get to

that outcome. National Economic Council Director Brian Deese, thank you for joining me from the White House today on that big inflation number. We're going to have much more on the outlook for inflation and the economy and policy, this time monetary policy, when we speak exclusively to Fed Governor Chris Waller. That's tomorrow, 3 p.m. Eastern time, right here on Closing Bell. Coming up on the show today, much more on this big market reversal. As stocks sit near session lows, down almost three-quarters of a percent on the S&P 500. There's the Dow losing 193 points, getting worse. We'll ask Deutsche Bank's chief global strategist what he makes of the intraday action and whether he sees an end to

the volatility at any point soon. You've got energy and utilities higher, everything else lower. Financials getting hit hard down 1.4 percent%. We'll be right back. Robinhood hiking the number of cryptocurrency offerings on its trading platform. The stock is up and Boeing announcing a rebound in plane deliveries. Those stories and much more when we take you inside the market zone next. And coming up next hour on Overtime, Guggenheim Global Chief Investment Officer Scott Minard and ARK Invest Kathy Wood live from the ETF conference in Miami. We're back on Closing Bell with the Market Zone. 20 minutes left of trading in just a minute with the Dow down 122. Dow is down 126 points. We are now in the Closing Bell

Market Zone. CNBC Senior Markets Commentator Mike Santoli here as always to break down these crucial moments of the trading day. Plus, CFRA's Colin Scarola on Boeing's deliveries and Deutsche Bank's Finkie Chata on today's big market reversal. Let's kick it off with the broader market. Stocks started the session pretty firmly in the green, now selling off here into the close. The Nasdaq was up more than 2 percent, Mike, at session highs. What a turnaround we saw. Is it just trying to figure out how to digest those those inflation numbers? Plus a surging price of crude oil, I guess, doesn't help all those things, Sarah. I also think it was a reflex sigh of relief that it was a better than feared number on the CPI, on the core CPI, at least. And it was unclear just how far that was going to get you.

The growth stocks have been very suspect in terms of a source of leadership in any rally. So whenever you do have these bounces, it's paid to sell them. I don't know how long that continues. I think there's a little bit of, you know, perhaps selling pressure ahead of the tax deadline coming this weekend because you had massive gains built up in 2021. I don't think all those things are necessarily the most most of the story today. It's much more about even though we got a light core inflation print, it doesn't really change the Fed equation that much because they want to get back up to a neutral rate very quickly, no matter what the month to month data look like. One mover I wanted to spotlight,

grocery chain Albertsons. It is plunging today, despite what was a pretty strong quarter, beat on both the top and bottom lines, better than expected same-store sales. The company indicated that its full-year profits may come in lower than the street's expectations, though, saying it expects inflation to hit lower-income consumers. Listen to this from the call. The one thing that we have put in our plan is that as SNAP funds reduce, which we suspect will go down over as we go through the year, that that lower end consumer or the consumers that were more dependent on SNAP, let me put it that way, will reduce some spend. So a warning there, Mike, on SNAP consumers, those that use food stamps. But importantly, the fact the CEO said that they're not seeing that behavior yet in terms of a slowdown. In fact, they've been able to

pass along higher prices. And I don't know. I mean, maybe maybe the street was looking for more updates on the strategic review that this company announced back in February. It's working with Goldman Sachs, maybe M&A plans. But you've got 10 percent food at home inflation. That's what the numbers showed today. That's a proxy for grocery. And so far, that's actually been pretty good for the grocers, the Kroger's and the Albertsons, because they can pass it on and people are staying closer to home because of it. What's your take? Yeah, it's been very good. Obviously, seven percent plus comp store sales from Albertsons, well ahead of expectations, shows you there's acceptance of these prices. I guess at some level you there's acceptance of these prices.

I guess at some level, there's a limit to that. People are going to worry about consumers generally being a little more squeezed if energy prices stay up here and things like that. There's other Albertsons-specific factors here. You know, it's a reverse LBO. It's been private hands for a very long time. It trades at a discount somewhat to Kroger, which is its only real big direct comp. And there's, you know, it's a low float. It's not in the S&P 500. There's a convertible preferred issue that might get converted into a common share. So there's a lot of moving parts to this story that are a little bit separate from, you know, consumer behavior and whether people are going to be trading down. Right. And Kroger is lower today, I should mention, down 3 percent. But as you said, it's been way outperforming Albertsons. I just want to mention some of the food stocks, Mike, because we're seeing all time highs in places like Coca

Cola, Hershey, Hormel, which is the maker of spam, which is always a problem when you see that stock break out because it means there are some serious concerns about the economic spending environment. Yeah. Traditional defense has been working and, you know, utilities in the face of higher yields, they've been working. The food stocks, it really is all about a little bit of, you know, top line lift, which is unfamiliar to this group in recent years. That's obviously that along with just being economically defensive. Seems like it's the full story right now. Arguably, they were an under-owned group coming into this year, too, because you really couldn't find many people excited about owning them, you know, for any real fundamental catalyst. Hormel up about two-tenths of one percent, highest level ever, going back to, I think, the IPO in the, I don't know, 60s or 70s. Let's turn to fintech now. Robinhood trying

to hold on to gains after announcing it is listing four new cryptocurrencies on its trading platform, including Shiba Inu and Solana. Robinhood had previously allowed trading in only seven cryptos. Meanwhile, Mizuho slashing its price target on Coinbase to 150 from 190 on concerns the crypto exchange may be losing market share due to increasing competition. Kate Rooney joins us now. Kate, why has Robinhood been so slow to add these new cryptocurrencies in the past? Why can't they just offer all of them? Yeah, so regulation has been the big reason. And a lot of people have wondered that. It's been four years since Robinhood added another token or another

cryptocurrency. That's a long time in this industry. Things move pretty fast. They, like you said, only had seven before this. It does speak to the competition here and the idea that there's a lot of other places at this point to go and trade crypto. I think they are feeling the competitive pressure. And back to that regulation point, you know, nothing has really changed to give them more clarity or more certainty when it comes to regulation. But it does seem that Robinhood has found a way to navigate this and get comfortable with the idea of adding new cryptocurrencies. I'm told they actually have an outside committee that decides whether something is really worthy of being listed. And they went through that process and decided that these four passed the test and they were going to add those. But a lot going on in competition here. And it speaks to what

you mentioned with Coinbase, too. There's a lot of options out there at this point. Right. Well, I remember when Coinbase, one of them had to add Dogecoin because they missed out in the quarterly numbers because we had seen such a surge. So what is happening, Kate, with market share among some of these major players that cater to retail traders and offer crypto? Well, it's interesting. So you've got Coinbase, which really is the big one we talk about, biggest exchange in the U.S. A lot of the global players are looking to expand in the U.S. Binance, FTX, Crypto.com, the ones that we saw spend big on those Super Bowl ads. The reason they're spending so much is to try to get market share here in the U.S. It is now a fee discussion as well. You had Jim Chanos talking about the idea

that Coinbase is over-earning. They're now competing on fees, and that's one thing that Robinhood focuses on in any interview. I talked to their chief product officer last week, but they really talk about the idea that they expect the same thing to happen in crypto that they saw kick off with the brokerage industry in terms of a fee war and a race to the bottom. Robinhood does offer free trading. Coinbase doesn't. But the other part of the Coinbase picture, people think of that, and they've described themselves as sort of more of the future of crypto and what you think of as a bank. They wouldn't call it a bank, but more of a financial services company than just a trading platform. MLB superfan Mike Santoli has noticed the crypto

ads, right, Mike, already? Absolutely. Well, FTX is a massive sponsorship with Major League Baseball. It just seems like a very aggressive market share grab. And I think the question for Coinbase and the rest of the industry is, you know, if you're taking in fewer eager new participants than we were because Bitcoin first got to today's price 14 months ago. It's just been a little bit less fun and easy than it had been a while back. You know, he's in a little more of a zero sum game in terms of picking up share of trading volume as opposed to what it was, you know, just a year ago. Coinbase down 2 percent. Kate Rooney. Kate, thank you. Let's hit Boeing, one of the few Dow stocks actually hanging on to gains today after

it reported it delivered nearly twice as many jets in March as it did in February. The company did remove 141 jets from its backlog, though, due to sanctions on Russia. Let's bring in Colin Scarola, equity analyst at CFRA. Colin's got a strong buy rating on Boeing. So what do you make of the delivery numbers? Hi, Sarah. Thank you for having me. I think it's a pretty pleasant surprise for Boeing. 37 single-aisle jets came in in March or were delivered in March. And the sort of common conventional wisdom has been that Boeing would need till kind of mid-2024 to get back to the mid-40s number on single aisle deliveries. If you think about delivering 37 in March with a war in Europe, China shutdowns, inflation,

shortages, all these major problems, and they're already at 37 in a month like March 2022, I think they're going to be well ahead of what people expect in getting back to that kind of mid-40s range. So it's a really good number. Because of the increased travel demand here coming out of COVID, is that the why? Yeah, I think what airlines are starting to see is demand is coming back way quicker than they expected. So I think right now on domestic leisure travel, in the U.S. at least, we're already above 2019 levels. I think we're going to hear the airlines start talking about that on these earnings calls in the next couple weeks.

So they're needing planes now so that they can start to get well above 2019 levels into this summer. And that's creating a lot of demand for Boeing and Airbus. And I think part of the crux of our strong buy is if you think about just the first year or two of a free cash flow timeline, it only represents about 10% of a company's value. And Boeing shares are down about 60% from where they were before the MAX crashes. So that implies that the 2025 to 2030 period is going to be still severely impaired earnings for Boeing. What we're seeing with the way travel is recovering, we just don't think that's going to be the case, and we think it's undervalued.

Hence the $274 price target. Colin, thank you. Colin Scarola, CFRA. Stocks are selling off here into the close. S&P is down a little less than half a percent. So we're off the lows, but we are well off the highs. We started the day firmly in the green. Let's bring in Benkei Chadha, Deutsche Bank chief global strategist. So, Benkei, what do you do? I know you've been looking at past hiking cycles. There's been 11 of them. And usually stocks can go up

in that environment. But you guys were also the bank that predicted recession. So what's the strategy? Hi, Sara. Thanks for having me. Yes, we are predicting a recession. But I think, you know, the fine print is important. The recession is predicted for late 2023. So Q4 of next year and, you know, Q1 of 2024. So, you know, if you look at that sort of relative to a typical, you know, Fed hiking cycle, that's a little bit earlier than what I would say is the average, which is about two years out. So I would argue that, you know, it's still quite a ways off. And if you think about how equities did, you know, prior to a recession, I mean, they sort of peaked, you know, three, four or five months before. So I would argue, you know, we are definitely late cycle. The end of the cycle, which is the

recession, you know, will definitely happen one day, but it's still a ways off. I would put, you know, where we are in the markets and the sudden reversal, basically, you know, as you know, this is we are in the fourth month now of basically the pullback from the first trading day of the year. And, you know, so there's plenty of negativity. There's plenty to, you know, sort of worry about. But I would argue that, you know, that we will recover from this pullback. This is a pullback.

Sort of, you know, we sort of had this, you know, three drivers of this big pullback. First, it was tech and mega cap growth and their earnings. We are approaching earnings season starting tomorrow. So that's a cause for concern. You know, then we had Russia, Ukraine, which sort of played out, I would say, you know, very much in line with the historical playbook, down three weeks, seven and a half percent, you know, and recovered pretty quickly. And so now it's, you know, primarily basically about the cycle, about the Fed. And I would argue it's too early to worry about the recession.

Too early to sell. So what part of the market, Binky, in particular, if you think that we are going to come back on firmer footing here, you've got a lot to pick from when it comes to the damage that's been done. Absolutely. So I would argue, you know, today's concern, I mean, you know, is really the Fed and the recession. I would say, you know, it's only worth basically since the recent peak, you know, worth about 5 percent, despite, you know, how much we talk about the Fed and inflation. And I would argue if, you know, if our baseline is right, that a recession is still some ways off, then, you know, you're going to basically, you know, see a lift basically in the cyclical parts. And I would argue, especially the financials, we're still long energy. You know,

if you look at what the financials are pricing in, it's a 10 year of about one and a half percent. I mean, in some sense, you know, they're sort of pricing in the three years down the road cut in interest rates that the bond market is pricing, you know, which is a recession, basically. So I remain long energy, financials, cyclical exposure, yes. Why not tech? Because we've already seen, I mean, if you're focused on things like being too negative and stocks overdoing it on the downside, there's no bigger damage done than technology where the Nasdaq is down about 18 percent off the highs. Absolutely. But what I would say is that, you know, the mega cap growth in tech stocks got bid up by the time of the pandemic way back in March, April, May of 2020. And they never gave up that premium. I mean, it was as high as sort of 70 percent versus the rest of the S&P.

Today, it's a little bit less than 50 percent. I would say, you know, fair value, we think, is closer to sort of 40 percent. So, you know, we've basically been a neutral mega cap growth in tech. And I'd say that it's it's it's really it's worked. And I would argue, you know, to go long, you would want to see that valuation premium go a little bit the other side. I mean, mostly what mega cap growth in tech has done is gone sideways relative to the rest of the S&P. Well, the financials have some work to prove it tomorrow. Down with J.P. Morgan reporting earnings.

They're off about 10 percent from the highs. Binky Chata, Binky, thank you. From Deutsche Bank, you heard the two minutes mark here in the trading day. Mike, what do you see in the internals? You know, they're weak, Sarah, but again, not as bad as maybe the reversal lower in the indexes might imply. So really a mixed picture. You've got about a 4 to 3 downside to upside volume. It was much more even earlier.

So, again, a lot of divergences within this market. It has been, again, the mega caps weighing on things. You mentioned financials, Sarah. Look at utilities versus the banks index on a year-to-date basis. The banks are going into this J.P. Morgan report in the morning at the lows for the year. That's a massive divergence. It shows you defensiveness. It also shows you some counterintuitive moves given what's happening with yields. You see that about a 15 percentage point, 16 percent divergence.

Volatility index above 24. Still got this little uptrend going. No panic, but definitely a little bit of apprehension building, Sarah. You could put any defensive group over any cyclical group in the last few weeks and show that chart. Mike, thank you. As we head into the bell, energy is the best performing sector right now. And we've come off the lows. Actually, the Dow has recovered nicely here, down only 55, but well off the highs of the session. As you can see, we were positive most of the day. Took a spill a little bit later in the day on concerns that maybe improvement in the month to month

core CPI just isn't enough to move the needle. Plus, you got a six percent spike in oil. Financials are the hardest hit group in the market, down one percent ahead of bank earnings, which kick off tomorrow. The Nasdaq 100 down a third of one percent. The Dow down 82 points and the S&P down a third of one percent as well. That's going to do it for me here on Closing Bell. Have a good evening, everyone. I will send it into overtime now.