Closing Bell - Closing Bell: Mega Cap Melt- Up 5/22/23

Episode Date: May 22, 2023

Can anything stop the mega cap melt-up? Morgan Stanley’s Erik Woodring gives his expert opinion. Plus, Gabriela Santos of JP Morgan Asset Management weighs in on the hawkish commentary from two Fed presidents today. And, Wells Fargo’s Mike Mayo breaks down all of Jamie Dimon’s comments at the JP Morgan Investor Day.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This make or break hour begins with the debt ceiling duel and a key moment for mega cap tech as Apple gets a rare downgrade. Those shares lower, not really having a dramatic impact on the markets, though. Here is your scorecard with 60 minutes to go in regulation S&P 500 once again trying to close above 4,200. It's a few points higher than that in this, the final hour of trade, helped by a really nice day from the communications services sector. Media names rallying. Another new high from Meta.

That's the story there. A new high from Microsoft and Alphabet, too, lifting the Nasdaq again, but up for four straight weeks. Nice gains across the board. That takes us to our talk of the tape. The mega cap melt up, and what, if anything, can stop it? Let's ask Eric Woodring. He covers tech hardware, including Apple. From Morgan Stanley. It's good to see you. Welcome back. Good to see you, Scott. Thanks for having me on. So we're having this conversation in the midst of what's been really a remarkable

run by mega cap tech, including Apple. There was a downgrade of that stock today by Loop Capital. They see the company missing the quarter in revenue. What about you? You share any of those same concerns? I think it's just too early to call the quarter. It's May 22nd. There's still a month and eight days until the end of the quarter. So we judiciously track supply chain data points on a weekly basis. I would say from my perspective, we haven't heard similar concerns when it comes to builds or reduction in build forecasts. And so steady as she goes, again, we're in an environment where demand is challenged by the macro. But for Apple, it has been much steadier, much more stable than for a number of other companies in my universe. I mean,

they were talking about both iPhone and overall. And if you look at iPhone, I mean, maybe one of the surprises in the most recent quarter was just how robust that business remains, returning to growth in the quarter from a decline of the prior quarter. How would you assess where the iPhone is today and maybe some of the concerns that you might have on smartphones overall? Sure. So just remember, if we go back to the December quarter for Apple, today and maybe some of the concerns that you might have on smartphones overall? Sure. So just remember, if we go back to the December quarter for Apple, there were supply challenges. And so the March quarter did reflect some of that demand that was deferred from the December quarter and captured in the March quarter. But overall, bills have remained steady, as I said. I think what really I would want to point out for Apple is emerging

markets. We wrote about it last week. It's something that Apple has continued to hit home on maybe the last three or four earnings calls. And that is if you isolate maybe seven emerging markets, those that Apple called out as hitting new record revenues, India, Indonesia, Mexico, Vietnam, collectively, they saw iPhone units grow about 55% year over year in the March quarter. If you take everywhere else in the world, iPhone units declined about 5% year over year. And so I just don't think we can ignore the emerging market story anymore. Those companies are still just call it 10% of iPhone shipments.

And so it is not the majority, but it is growing very quickly. And so there is some stability in emerging markets, clearly. And then when you look at home again, we just need to parse through some of the challenges that different regions are going through. The U.S. with the debt ceiling, Europe with what's going on in Europe, obviously, from from a geopolitical perspective. But that's kind of the lay of the land as I think about the iPhone today. Yeah, I mean, iPhones obviously accounts for the lion's share, but services are so super important as well. And I'm curious as how you would read through what's been happening there after a period of remarkable growth where you're growing double digit percentage points and then you cut that in half a bit and then it's you know it's

re-accelerated it's had a little step back so where are we today sure well you know we're in the period that i'd call the troughing period um if you look on a constant currency basis services is still growing let's call it let's call it low double digits we think of services in constant currency as a mid-teens type of grower. So it is undergrowing what we think the potential of the business is. But that's partially what I would call cyclical, certain factors like digital advertising that is challenged in the current environment. And then the other factor is the app store. The app store is the biggest part of Apple's services business. And if we look back over the last two to three years, that was a business that

grew tremendously over kind of the run rate that we would think of. We're seeing a bit of that digestion in spending today. That doesn't mean that it's structurally challenged. It just means it went through a very strong period of demand. We're seeing some of that being digested today. But ultimately, we do think that in the June quarter, services accelerates by about a point versus the March quarter. And then you see a more significant acceleration into September and December, with the dollar actually becoming a fairly favorable tailwind relative to something that has been a significant, call it five plus point headwind over the last few quarters.

Yeah. Speaking of services, AI obviously comes to mind. The App Store, as you mentioned, chat GPT for iOS is like number one in the App Store the moment it's available. Well, what's the real the real world opportunity for Apple in AI or is that as well just too early to assess? I don't think it's too early to assess because we know where Apple's strengths lie, right? A two billion install base, 1.2 billion users, a ton of data. We think about this as being the technology platform that frankly controls our lives. And so we have not just the applications on our phone, but we have our contact information, our transaction information, our payment information, our location information in some

cases. That's where Apple's strengths lie. And so you can imagine that Apple using generative AI is going to take advantage of that. Now, do we know exactly what Apple is doing today? No, they have not necessarily been as vocal as some of their mega cap technology peers. There was an article last week alluding to the fact that Apple is working on something internally. I think that should be the base case for any investor, even if Apple's not saying anything publicly, to think that they are working on technology. But just remember, they haven't always been the first to technology introductions in the past. What I think Apple is doing is trying to understand how this market is developing, how regulation is developing, and how best to monetize AI,

and then make sure that when they do come out with a product, that that's something that actually becomes a P&L contributor. So is it fair to say, do you think that, you know, of all the stocks that you would put in the so-called AI basket, that Apple really has yet to see the same kind of stock bump that some of the others have. I mean, this stock was already on the run. The more pure players in AI have had a significant bump. Apple just feels like it's just getting started in terms of the stock reacting to the potential of what AI could be. I think that's true. I don't think that the stock has moved on AI headlines whatsoever. I think it's been more, you know, Apple is a relative safe haven.

It's a it's a best house in a bad neighborhood when there's a lot of macro uncertainty out in the world. You know what you're going to get. Apple does have a competitive moat that has not been diminished whatsoever. The iPhone, again, is the most important technology product in a consumer's pocket today. And my view would just be there are three key factors that the market is coming to realize more so. Gross margin tailwinds. We talked about services reaccelerating. And then the third is just iPhone returning to growth next year. Those are powerful forces when it comes to the potential for profitability. I'm about 10 percent above consensus for EPS in fiscal 24. This could be the market, you know, looking towards that direction and saying numbers potentially move higher if we move away from this kind of more challenged macro environment into a more normalized environment. Speaking of numbers

moving higher, lastly, before I let you go, 185 is your price target. We're awfully close, as you know. You watch it as closely as everybody else does. Are you tempted to bump those numbers up? I'm tempted to follow the data that I look at. And right now, the data is very stable. There's going to be future catalysts such as WWDC, the developer conference, June 5th, where Apple launches, in our view, their first AR VR headset. Could that be a potential catalyst? We'll have to wait and find out. But I do think I would point to our $255 bull case. Again, Scott, last time I was on, we talked about Apple's shift to subscription and the market viewing Apple from a subscription-like

lens. I wouldn't put that out uh out of the potential as we sit in and look at apple at 180 today well which means we have plenty to talk about uh in the months ahead no doubt eric i appreciate your time so very much we'll see you soon thanks scott eric woodring over morgan stanley joining us here adam parker is with us today as well ceo of trivariate research and a cnbc. It's good to see you again. This mega cab mania is pretty remarkable. Not much seems to want to stop it. Are you concerned about it at this point? I mean, there's three reasons these things are up. One is people are more dovish than they were at the beginning of the year, and that drives the multiples. Two is the relative perception

of safety that they have in terms of their earnings estimates. If everything's way too high, maybe they're only a little too high. And the third is AI, and all those things are real, and I think they explain the returns. I mean, you know, in order, you mentioned up top of the hour, you know, what's the catalyst to potentially get them lower? It's probably in order. People getting the wind that maybe the Fed's a little bit more hawkish than what's in the price, that maybe they're not going to cut 50 bips, but maybe they're going to pause longer.

Or, you know, that could probably bring the multiples in a little bit. Or if you somehow get a slowdown in earnings in July. You know, I don't think any analyst can call, you know, builds on a one month out for a big company like that. There's just the problem with Apple and others is it's, A, its returns are 80% explained by macro factors, and B, it's like a 28 variable problem you're trying to isolate to one, right? So it's gonna be hard to call Apple's quarter on any kind of consistent basis.

You gave the reasons, the few reasons why you think the stocks have continued to run, to you use the word to explain why they're up. Do those same reasons, quote unquote, explain the valuation? Or is that an area that you would take issue with? Listen, I think every stock, and we've been talking about this for a while, is going to be in one of three buckets. It's either going to be benefiting from AI, impregnable to AI, or destroyed by AI. That's it.

And so I think the wrong thing going to be doing within the market is going to say, I want to buy the cheaper stuff and short the expensive stuff. Because in essence, what you're going to be doing is longing companies that are vulnerable to destruction and shorting stuff that's either impregnable or a beneficiary. So I think maybe within each of the buckets, you can try to find longs and shorts. But I don't think you want to say, oh, I don't like these stocks because they're expensive when they're benefiting or impregnable to a major trend that's going to last for many years. Yeah, I do want to ask you about the debt ceiling and the impact on how the market may react either way. Sure. Before I do that, there were some new headlines coming out of Washington, D.C., our nation's capital.

Kayla Tausche is down there ahead of that 530 meeting today between the president and the speaker. Kayla. Well, Scott, House Speaker Kevin McCarthy spoke to reporters just last hour following a meeting between his deputies and White House negotiators that wrapped earlier today ahead of the meeting between the two principals that will happen here at the White House. McCarthy told reporters that he thinks it's possible to get a deal as soon as tonight or later on this week, but said that a deal would have to happen this week to pass the House and then be taken up by the Senate after Memorial Day next week before that June 1st deadline. Asked to reiterate that he believes it's possible to get a deal by the June 1st deadline, he said it's possible. Now, he also said that in order for a deal to be made, decisions have to be made. Now, certainly there have been high level decisions that have not been made thus far in the talks, notably how much to cut federal spending by and

for how long. In order to get any deal on the details of federal spending, the two sides will need to agree on some sort of top line spending level and then get down into the details of federal spending. The two sides will need to agree on some sort of top line spending level and then get down into the details after that. We're not there yet, Scott. And that is something that we're watching for later today. Any progress in the right direction from the two principals will certainly be a move in the right direction. Scott certainly will. Kayla, thank you. A little more than two hours away now at the White House with that big meeting. Kayla Tauji, as you see right there at the White House. All right. So let's game this out. How are you thinking about this? As some suggest that it's not so cut and dry that it could be a sell on the news.

I've heard that. Do you think there's a risk of that in any way? Oh, in any way. Sure. But I mean, the last 10 times, the right thing to do was not worry about it. Because if you really think about it, there's only two possibilities. One, massive, immediate austerity, or two, raise it. So which one do you think is higher likelihood, right? So the pattern is... The deal's going to happen. Right. Obviously. So historically, what's happening... But it's going to get potentially messy in the interim. Every time. Historically, what's happened is that this market goes up on the resolution more than it went down being fearful about it. So I think that's still the base case. But your question is possible, you know, depending on the messiness unfold. But I would say, like, not on my radar screen is a top five issue I'm worried about right now,

because I think there's just a one way answer to the question. Ultimately, it doesn't matter. They have to raise it. So what about the Fed? Now, you mentioned at the outset, as we're talking about certain things that could derail the mega cap trade being a more hawkish Fed. What about this idea being put forth of a so-called hawkish pause, where they pause in June, but they lead you to believe that they could easily go in July or thereafter. Exclusive interview today on this network. Neil Kashkari seemed to put forth with that. Jamie Dimon today at the J.P. Morgan Investor Day said everybody should be prepared for rates to go higher from here, which they have of late, as you know from watching Yield.

So how do you assess all of that? I guess, you know, my bias is to agree with that. You know, I think probably what's in the price, if you look at what's in the price, it's probably more dovish than what's going to unfold. The simple logic is simply looking at unemployment and looking at CPI. And those two indicators still in absolute terms look very high. And I think the unemployment cycle is not going to unfold this cycle the way it did in the past. Right. We have a shortage of low-end workers across the board in a number of industries. So I don't think the unemployment rate would normally be this low

in prior cycles. So I wouldn't be surprised if you say, look, risk-reward skewed to one or the other. I think risk-reward is skewed to they're more hawkish. And that's why probably you should be a little bit more cautious. Look, we came into the year saying we're bullish and everyone else is bearish. But maybe the second half, I think we're getting now to the point where you get a little bit more worried about the market because I think the risk reward on the Fed is negative. And it's happening at the same time where everyone else is starting to get a little bit more bullish because they can't stand that they missed the magnitude of the rally. So, I mean, Diamond's also saying that, you know, it's not only, you know,

we have to maybe get our arms around the idea that rates are going to go higher. Markets have to get their arms around it, too, which is essentially what you're saying. I mean, it feels like rates have been going up now almost every day. You have four different parts of the curve are above 5%. Yeah. Right. One month, three months, six months, one year. Yeah. And look, it's hard to make a bullish equity risk premium argument. The idea that equities are worth the risk versus risk-free bonds. I think that's been a hard argument. I think the bull case is simply you think the trough in earnings is being put in right now. You think that earnings are going to start growing in 24 versus 23, that they'll probably grow after that. And so as you know, you always,

always sound dumber when you're bullish. So I think that's the counter argument is we're at the trough now and you don't see it. More hawkishness is behind us than in front of us. Maybe they pause and raise one more, whatever. It's still near the end. And so that's the case for people being bullish. And that's why growth assets are up. If I'm being tactical, I'd say I think people, I think they're going to end up more hawkish than what's in the price. And so I'm getting a little bit more worried about the market. I don't really think it's easy to say the next 10% is up and down. And, you know, we get to 46 and change before we get below 4,000 again. I don't know. As a former semiconductor analyst, I want your take on that news today out of China related to Micron.

How does that make you think about not only that stock but that space right now? Yeah, I mean, look, it's a little bit bifurcated depending on your end market. And, you know, I don't have the exact numbers on Micron. What is it, 10% China plus or minus in revenue. Probably not all of that's the exact space that's being targeted. You could create an argument. I think the stocks rallied off the lows a little bit during the day from the pre-market. So I think people- Talking about whether the chips are banned in one area, like infrastructure, but not in mobile or in PCs. Right. Just to make sure we're all the same page. Right, right. Sorry. Yeah.

No, it's okay. I should have been more clear. But I think ultimately there's just nine or ten semiconductor companies that just benefit from AI and have big technology moats on top of that. So when I look at that framework I had of beneficiary impregnable or destroyed by AI, there's just a list of these things, basically all SemiCap equipment, plus NVIDIA, AMD, and a number of others that they just are going to benefit. And I'm seeing people take their numbers up from, well, I thought maybe it was 100 million, but maybe it's 500 to a billion next year. In a market where I'm trying to find relative estimates that could be too high or too low to make my positioning,

AI numbers are coming up. So I don't know if I want to get too negative on semis or at least the ones that benefit. Micron's a little bit of an idiosyncratic relative to that. It's a memory company. They've built tremendous access capacity. Everyone knows it. So you still have to burn through that over the next couple of quarters. So let me ask you this, and then I'll let you go.

I'll stay all day, man. If you were still that analyst, okay? NVIDIA reports on Wednesday in overtime here. Given the run that it's had, given how bullish most are on AI, and I'm sure you would have a strong buy or an outperform, and rightly so, but how would you be thinking about that

going into the number relative to the big number, and that's the stock price and where the valuation now is. I mean, CEO, I don't want to speak out of pocket. It's been a long time since I interacted. But you've seen it. I think he's done a pretty good job of comforting investors on the call. So unless the numbers really decline, he has the ability to position the company well when he speaks. So I wouldn't bet against it, but who knows? I look at it, whatever,

$775 billion market cap, and yeah, it's super expensive on today's earnings and next year's, but are you sure it's not worth $2 trillion in 10 years? I'm not. If they're selling 25,000 GPUs to chat GPT-5, it's real and it's happening now. I don't want to short that into the print personally. So if you want to short it into the print, good luck. All right. We'll make that the last word. It's good talking to you as always. Good to see you. All right. That's Trivari. It's Adam Parker. Let's get to our Twitter question of the day. We want to know, is the market too reliant on mega cap tech performance? You can head to at CNBC closing bell on Twitter. We'll have those results coming up a little bit later on in the hour.

Let's get a check on some top stocks to watch right now as we head towards the close. Christina Partsenevelos is here with that. Christina. Well, Foot Locker right now is really just deep in negative territory again today. That follows Friday's 27 percent drop. Right now, there's at least 13 analysts that cut their price targets after the company's weak results just from last week. Citi downgraded the stock to neutral, saying they expect full-year results to be even worse than Foot Locker's lowered guidance. Shares are down 30% in a week and down almost 8% right now. And DraftKings is getting upgraded to buy at UBS, sending it to its highest

level since January 2022. Analysts also hiking their price target to 30 bucks a share from $19, citing higher revenue growth. DraftKings has been on a tear in 2023, up almost 130% year to date. Scott. Wow. All right, Christina, thank you. We'll see you in just a bit. We're just getting started right here on Closing Bell. Up next, as we mentioned, J.P. Morgan holding its investor day today. The company CEO Jamie Dimon taking the stage. We're going to bring you more of the highlights. We are live from the New York Stock Exchange and you're watching Closing Bell on CNBC. We're back. J.P. Morgan holding its investor day. CEO Jamie Dimon's taking the stage, commenting on where rates could be heading from here.

Our Leslie Picker is there and joins us with more. Hi, Leslie. Hey, Scott. Yeah, Dimon going straight to Q&A today, urging the audience to be prepared for higher rates and tighter credit. You're already seeing credit tightening up because, you know, the easiest way for a bank to retain capital is not to make the next loan. So I think you are going to see that. And I think everyone should be prepared for rates going higher from here. You know, if that five percent is not enough in Fed funds, if I and I've been advising this to clients and banks, you should be prepared for six, seven. Diamond says there will be a credit cycle predicting it to be, quote, normal and, quote, will probably be real estate. He also spoke

a bit about the impact of more stringent capital rules and monetary policy. We haven't been through quantitative tightening. So we really don't know what's going to happen to deposits at all. And that's why I've been quite concerned about that. I'm probably more concerned about quantitative tightening than almost anybody in this room. We've never had QE before. We've never had QT before. It just started. Succession was a key topic at the end of Q&A. When asked how much longer he plans to be CEO, he chuckled 3.5 more years, probably a nod to that stock option bonus he got in 2021. He added when he lacks intensity that he brings to the CEO position, he should leave, Scott. All right, Leslie, thank you. That's Leslie Picker. Up next, the Fed front and center

today. Kashkari and Bullard both weighing in on potential rate hikes this year. We'll break down their predictions, what it might mean for the market with JP Morgan's Gabriela Santos. We'll ask her to react as well to what you just heard Jamie Dimon say. And throughout the month of May CNBC celebrating Asian American and Pacific Islander heritage sharing stories of influential AAPI business leaders. Here is the Vizio founder and CEO, William Wang. This is a place where everything is possible. After college, I started my first career as a technical support engineer.

And today I run a multi-billion dollar corporation. And 21 years later, we sell millions of TVs. And two years ago, I took the company Visio Public. And now we're a popular list on New York Stock Exchange. So I'm here living the American dream. I'm grateful to be here. And it's been an awesome journey. Treasury yields moving higher after more hawkish commentary from two Fed presidents today,

signaling the possibility of more interest rate hikes ahead. This is stocks try to hold on to their earlier gains with investors bracing for the latest meeting in D.C. on the debt ceiling duel that at 530 this afternoon. Joining us now, Gabriela Santos of J.P. Morgan Asset Management. It's good to see you again. Good to see you. We'll get to the debt ceiling in just a second, but just react in real time if you could to what Jamie Dimon saying at the investor day. I know it's difficult for you, same company. However, Fed funds going higher. The message is be prepared for interest rates going higher. So we were thinking there was a chance of that happening before March happened. So I do think Fed officials had also said that there was some upside to their

5.1 percent midpoint forecast before then. But we've now added the second way of breaking economic growth and inflation through credit tightening. So now we do feel fairly confident that May was the last rate hike and that the next move will be a rate cut. I think as a risk manager, bank CEOs, other CEOs need to deal with multiple scenarios and multiple possibilities to stress test their portfolios. But thinking about economic fundamentals, we do think the direction of travel here is really for lower yields. And this recent move higher, the 30 basis points we've gotten over the last couple of weeks in the two year, the 10 year, it's a gift. It's a gift to add duration again and to be able to benefit from locking in these higher rates and capital

appreciation rather than sitting around in too much cash, which has seen $800 billion of inflows this year and is a dangerous place to be going. So one gift in one part of the market can be a potential problem in another. Is it a problem for equities if rates continue to go up? And if those kinds of comments that we heard here are a reminder that the Fed might be far from finished. So I do think if yields continue to move higher, you might see some continue to see some pressure in some parts of the market. You started to see that last week with defensives. We think that's one of the reasons utilities, for example, had a negative return last week of 4% was the fact that you had a 30 basis point move higher across the yield curve.

But ultimately, our view is that's kind of capped. Everything we hear from investors is how bonds are back and everyone is waiting for these move higher in yields to add duration. So there's a cap. There's a limit to how much higher yields go. And we do feel comfortable adding duration, but also having exposure, especially to defensives within the equity side. But see, even if rates are done, let's say going up from here because of the 30 basis point move, if they sit here, the competition that that presents to equities remains. It just doesn't become even more dramatic, right? Absolutely. And we do think the excitement for us, especially on the U.S. side,

is really in bonds. It's in fixed income this year. There's just so much to be gained from locking in these yields and from the potential price appreciation as yields continue to fall. You could be talking about over the next 12 months, high single digit returns from boring things like treasuries and investment grade if you're extending duration at this point. Within equities, that's why that leads us to a lot more enthusiasm, I would say, overseas, especially we wouldn't snooze on the positive developments in Europe, in Japan, and our expectation that emerging markets as well starts to turn around. And flows are really reflecting that, right? You're seeing outflows from U.S. equities this year, inflows into international equities, fixed income as well. So what gets you more excited, though, about U.S.

equities? I think for the U.S., the excitement, number one, is really just the reset in valuations that we had. It's just such a better starting point versus late 2021 when we had multiples at 22 times and our message was expect 4% annualized return from here, it is a better starting point at 18 times. We now expect basically double annualized returns from U.S. equities. So that's an exciting improvement. And then the second two is just really some more structural changes, some long-term themes. The first is already receiving a lot of attention around AI and how

that benefits semiconductor developers and also semiconductor manufacturers, how that helps the hardware and software space and also consumer-facing applications. But there's a second one that we're also really interested in within U.S. equities that's more on the value side. And that's this idea of a rise of industrial policy, a rise of big action items from the government. If you think about the IRA, the chips, build back better. And that's really a big benefit, all this CapEx for industrials, utilities and energy. Is it difficult in your role not to want to chase the move in mega cap and all the hype around AI? Clients, customers are like, this is where the action is. The stocks continue to go up in the face of rates going up. So maybe we should be more geared towards that area of the market. To that conversation, you say what?

Yes. And we do always, when there's a big move in the market, in a specific sector, specific companies, we sit back and we take a look. Well, is that actually justified by fundamentals, by valuations? Meaning, is that sustainable? Do you think it is? When it comes to artificial intelligence, we do think it is a massive development akin to really the rise of the personal computer in the late 90s and the huge implication that had disrupted businesses, created a productivity boom, and created these huge mega cap winners. So in that sense, we would be excited. Where would we be concerned if this started to turn into a pets.com type of situation? And by that, we mean every single company that mentions

AI gets a boost. That's a reason for concern. Maybe we're not that far off from that. And we're not that far off from that. So differentiating what's real from what's just sugar high. All right. Good stuff. Thank you, as always. Gabriela Santos, J.P. Morgan, Asset Management. Up next, we're tracking the biggest movers as we head into the close. Christina Partsinell-Velos is standing by again with that. Christina? As my colleague Melissa Lee said earlier today, weight loss is the A.I. of pharma companies right now.

And today, there could be another weight loss drug to hit the market, and it's sending shares of one pharma name higher. I'll explain after the break. We're working on 20 to go before the closing bell. Christina Partsenevelos is watching the stocks. You need to pay attention to Christina. Pfizer. Pfizer is higher today on optimism around a drug candidate. Data from a stage two trial shows that an oral drug from Pfizer could be as effective for weight loss as Novo Nordisk's blockbuster injection drug Ozempic. Pfizer shares are above 5 percent, while Novo Nordisk covers near the flat line last I checked. And yes, it is. Progeny is higher as BTIG initiates coverage with a buy rating and a price target of 50 bucks a share.

Analysts say the company will be a big beneficiary as more Americans turn to fertility treatments for growing their families. The company partners with employers to provide related benefits to workers, and that stock is up over 4% right now. Scott? Okay, Christina, thank you as always. It's the last chance to weigh in on our Twitter question.

We asked, is the market too reliant on mega cap tech performance? You can head to at CNBC closing bill on Twitter. The results are right after this break. Let's get the results now of our Twitter question. We asked, is the market too reliant on mega cap tech performance? The majority of you saying yes. In fact, the market is 79 percent.

Up next, Zoom reporting results in just a few minutes and overtime. The key metrics to watch when those numbers hit the tape. Plus, top banking analyst Mike Mayo joins us to break down the highlights from J.P. Morgan's Investor Day. We'll do that and more when we take you inside the Market Zone. All right, we're now in the closing bell Market Zone. CBC senior markets Commentator Mike Santoli is with us to break down the crucial moments of the trading day. Plus, Mike Mayo of Wells Fargo Securities joins me now from J.P. Morgan's Investor Day as well. And Pippa Stevens sharing what to watch for in Zoom earnings out in overtime today. Mike, though, I begin with you. We can react to what Jamie Dimon said about interest rates or Fed funds rate, six, seven percent. I mean, he clearly is trying to warn people,

as he has in the past, rates go up almost every day. It is his orientation to think that normalizing rates, so to speak, is high. He's thought that when rates were peaking at three percent, he thought they were going well above that and other times. So I'm not sure that that's something that really is making its way in an immediate sense into the market. What I do think is clear is yields are picking up a little bit. Some of that is, you know, Fed saying maybe we skip a meeting. It's not a pause. It's not the end. Some of that is the economy holding up a little bit better. Some of that is probably a debt ceiling deal means they're going to issue more treasuries because they have to.

So I don't think it's at this point an alarming level of yields in terms of challenging stocks. Although we are sitting here right at the top of the range. All the reasons you might give coming into this week for why it makes a lot of sense to perhaps stall off. What I do like, though, continue to actually take some comfort in, is that Twitter poll. 80% of people think it's all about a few big tech stocks, and they think it undermines the legitimacy of this rally. I've been saying this for a couple of months.

I prefer that than if people were like, this is great, happy times are here again, and we love this. They don't love it. It makes people uncomfortable. It's adding to the wall of worry in a very similar way that all the meme stock action did in 2020. All right. We're getting some news regarding TikTok. And for that, I want to go to Steve Kovac, who has the very latest for us. Steve. Yes, Scott. So TikTok is suing Montana. We're just getting this lawsuit in. They are suing over that law that was signed into by the governor, Jan Forte, that bans it statewide.

And they are suing over it. Here's what this TikTok spokesperson says. We are challenging Montana's unconstitutional TikTok ban to protect our business and the hundreds of thousands of TikTok users in Montana. They go on to say they believe they'll prevail in this case. Now, last week, we just about a day or two after this law was passed, a group of TikTok users sued over the same law. And also, I'd note, Scott, the way this law is written, it doesn't really work the way Montana probably wants it to. The app stores can't block apps on a state by state level, but the law does put the onus on app stores run by Apple and Google to do so. So we're expecting more legal challenges. Actually,

ACLU might even be next, Scott. All right, Steve Kovach, thank you very much for that regarding TikTok. All right, Mike May, I want to talk to you about your own TikTok of sorts, the timing of some of your notes today as we got news out of this meeting from JP Morgan, because you had one sort of pre-event, which was, you know, very bullish, obviously. But then midday, you put out a new note which talked about J.P. Morgan guiding the markets a touch lower. Can you sort of assess where you came into this meeting and where you are today and the level of bullishness you have around JPM shares? Well, look, this was J.'s annual investor day. And I think they showed

that they are the LeBron James of banking because they're good at both offense and defense. On offense, they have record investment spend. But you know what, Scott? We still forecast record revenues and for those revenues to grow more than twice as fast as expenses. So that's the whole medium term story here. And there's a lot of business coming to J.P. Morgan. I mean, in the consumer business, they've gotten deposits in Silicon Valley, their record spend on marketing for credit cards and the wholesale business. A lot of that business that's done at regional banks might not be done there as much anymore that's flowing to JP Morgan so I feel great about the offense when it comes to defense they have excess capital excess liquidity and excess reserves for problem loans right

they've already reserved for almost 6% unemployment the credit card loss guidance is the same, no change there. CRE, office, it's a fraction of what is for other banks. So the offense is good, the defense is good. The main short-term negative would be they guided lower for capital market revenues in the second quarter. So we're talking nickels and dimes here

when they should earn between 14 and 15 dollars this year. So that's a that's a tweak. At our conference last week in Chicago, we had over 70 financial firms and many banks. And Goldman Sachs at our conference said they see green shoots. Today, JP Morgan guides a little bit lower for capital markets. We'll see, you know, as goes the economy, as goes the geopolitical environment, as goes the debt ceiling, as goes capital markets. So it's kind of like predicting the weather. So I'm still as bullish as I was going into this meeting. There are certainly some extra positives,

but that tweak for the second quarter in the immediate term wasn't expected. I'm just also wondering about Diamond's own comments about, you know, be prepared for interest rates to go even higher, throws out six to seven percent for Fed funds. That is not a great scenario in any way, either for markets or for the economy, is it? Well, JP Morgan is structurally positioned about as well as they've ever been structured. But cyclically, you have all sorts of headwinds from interest rates to inflation to expenses to normalizing credit costs and changes in regulation. And Jamie Dimon is the worrier in chief. He sets a tone for risk management. And by setting that tone, he's alerting the few hundred thousand employees to also look out. So he said he is more worried about quantitative tightening than anybody in this room, pretty much more than anybody else. So

that's his job is to set a tone for being prepared for what people might not be prepared for. So I think culturally that's really good. But you're right. Cyclically, it's a reminder that there's still some tail risks and it's still a flammable situation depending on the course of the economy. You also think that they were a bit conservative. Is that correct with their assessment of what First Republic is going to mean for them in the near term as well? Yeah, you know, First Republic really accelerated their expansion strategy with the affluent consumer sector in the United States. They said a couple of times we were conservative. So it's not me saying it. They said they were conservative. So I think that might add a little bit more to earnings. So net net, maybe a little more from First Republic, maybe a little bit less on trading.

You're still, you know, we're at $14.50 for EPS this year. They're trading at nine and a half times earnings. J.P. Morgan, best-in-class global bulge bracket bank, is trading at one half the price-to-earnings multiple of the general stock market. All right. I appreciate you joining me, Mike Mayo. Thank you very much, JP Morgan's Investor Day. Pippa Stevens, what should we be looking for when Zoom reports in just a little bit in overtime? Yeah, Scott, well, it does feel like expectations are pretty muted here with rising fears that a deteriorating macro environment will impact

IT spending, especially given that Zoom has broad exposure to the tech and financials industries. So enterprise growth is top of mind, as is read through on how the price hike back in March is trickling through, as well as cost savings from the 15 percent workforce reduction earlier this year. The company has faced a stiff competition in the video conferencing market, so it also needs to show growth in other products. Management will also, no doubt, talk about the AI opportunity. Finally, acquisitions is something to watch. Zoom did not reauthorize its $1 billion buyback from last year, with the CFO saying the company wants to maintain flexibility as valuations become more attractive. So perhaps some clarity there, Scott. OK, Pippa, we'll watch out for that.

Thank you very much, Pippa Stevens. All right, let's bring Mr. Santoli back. I think rates are going to be a significant story moving forward. If you think that that diamond is going to be anywhere close to what he says. And with the kind of Fed speak that we've gotten now in a sort of steady March, the Bullards, the Logans, the Kashkari's. What is it going to mean? It absolutely could be if, in fact, first of all, I think the signaling is very clear right now for June that they are leaning heavily toward not making a move. The Fed is not making a move. Now Fed is not making a move.

Now, if we're talking about inflation expectations or the market's estimation of where inflation goes starts to look a little stickier and that's why yields go up, that's not a friendly formula for for stocks. I just think it's too soon to start anticipating something exactly like that. You do have the short end of the Treasury curve. The bills are still all twisted up based on debt ceiling stuff. So interested to see how it shakes out. The credit market is not alarmed at this point. What I do note today is regardless of what's happening on the yield side, the real riskier corners of the market are ripping. So it seems short covering. It seems like people grabbing for some fast moving stuff. You got the ARK Innovation Fund, regional banks all up. The heavily shorted stocks are up. So there's a little bit of surrender of the bears in there because this market has just been a little bit too resilient.

That's something you have to throw into your mix tactically to say, you know, are we, you know, using up a little bit of the buying power here at the top end of the range, at least for the very short term. I suspect tomorrow we'll be talking about what happens in 90 minutes or so, this latest debt duel meeting at the White House between the president and the speaker and how people want to try and game that out, what it means for the market once a deal, in fact, is reached. Logic would say that one side or the other would want to kind of throw a scare in there before we get an actual agreement. That's usually the way it's gone. They don't usually kind of leave a lot of time on the clock before a deal happens. So I think it would still be received pretty warmly if there was a firm deal that's going to actually get through Congress.

At this point, I think the market is sort of deciding not to worry too much about the other possibility. So we'll see if that gets challenged. Well, we're not going to get 4,200 on the S&P today in terms of a close. But we're not that far away as we turn our attention to D.C. and their latest installment of the debt ceiling talk.