Closing Bell - Closing Bell: Mega-Cap Tech Magic 4/26/23

Episode Date: April 26, 2023

Meta preparing to report results after the bell after beats from Microsoft and Alphabet. But the big, looming question is: can Meta’s momentum continue after a strong run this year? Bryn Talkington of Requisite Capital and George Seay of Annandale give their expert takes. Plus, Disney is suing Florida Governor Ron Desantis over what the company is calling a “relentless campaign to weaponize government power.” NYT columnist Jim Stewart – who wrote the book on Disney – weighs in. And, we debate the state of the consumer with Victoria Fernandez from Crossmark Global.

Welcome to Closing Bell. I'm Sarah Eisen. And today for Scott Wapner, we are live from post nine of the New York Stock Exchange. This make or break hour begins with a mixed picture on Wall Street. NASDAQ a bright spot still as investors cheer the first crop of big tech results. Regionals, though, remain front and center as First Republic shares continue to get hammered, extending their steep losses. Disney fires back, suing Florida Governor Ron DeSantis, alleging political retaliation. Pulitzer Prize winning New York Times columnist Jim Stewart, who wrote the book on Disney, will join us shortly. But first, we begin the hour with the talk of the tape and the mega cap tech magic. Meta getting ready to report results in overtime after beats from Microsoft and Alphabet, shares of Facebook's parent company climbing already 80 percent so far this year. Execution of Zuckerberg's year of efficiency certainly resonating with

shareholders. But can they keep it up? With us now to discuss is Bryn Talkington, requisite capital managing partner, management managing partner. She's also a CNBC contributor, along with George C., Annandale chairman and co-founder. Good to have both of you on tech. George, you own shares of Meta. The bar has been set high by both Alphabet and the stock performance so far this year. What do you expect? It's been a nice ride so far this year, Sarah, and we're obviously hoping it continues. But also on Microsoft and Google, and I think we fail to appreciate the historically strong performance of these companies. It's just amazing how they keep delivering incredible numbers and incredible performance quarter after quarter after quarter, no matter how much sermon drained from the Fed,

global economy and geopolitics around them. It really was a sight to behold yesterday. So are you saying that the read-through from Google specifically? Because for Meta, it's all about advertising growth, right? And potentially more cost-cutting. Meta has been a really fun company to hold the last six to seven months because it's just been one elevator ride straight up. But now the hard part starts where they've basically done all the easy stuff and now they've got to go execute trying to grow their revenue stream again as well as

keep its costs down. So we're going to find out how good their management team is prospectively because they've got a lot of challenges still ahead on their drive forward. I feel like OpEx is going to be a very important measurement in this report. Bryn, you're the happy shareholder of Microsoft today. Yes. Any read through there to broader tech? I think what you're seeing is these companies are five discrete companies. When you look at the top three, Microsoft, let's say Google, and Meta. And so what we saw today is that Microsoft is operating on all cylinders. I mean, Satya came out so positive, mentioned AI and NVIDIA right at the top of the call. And when you look at their platform they're creating, where they are so unique relative to, I would say, an Amazon and a Google,

is where those two have cloud businesses. Google just turned a profit this quarter with cloud. Cloud at Google is about 9% of revenues, but 25% of workforce. So they had been losing money, so they've just become profitable. They are still an ad company. Microsoft, on the other hand, is a cloud company. They are an office. They are gaming. They are LinkedIn. They have GitHub. They have security. And their AI. And their AI. And they talked about embedding AI throughout their platform already. And so to me, this was a watershed moment for Microsoft. You know, going back, Sarah, to 2000,

there have been two companies that have remained in the S&P from 2000 to today, J&J and Microsoft. And I think with how quickly they've ramped up AI, five years from now, they will still be in the top 10. Here's the thing. We're hitting session lows right now. And even the great tech earnings could not propel this market. Without Microsoft, NASDAQ 100, Microsoft and NVIDIA, which you mentioned, are doing really well.

There's the NASDAQ. It's still up, but losing the gains, and the S&P is now down about half a percent. So what does that tell you about the overall market? It was supposed to be up to big tech now. Well, it tells me we're worried about First Republic. And so the irony there is the FDIC and the Treasury and Fed decided SDB was systemic. And so they saved all the shareholders. The reality, though... Not shareholders. I mean, depositors. Yeah, definitely. Sorry. Depositors. The reality is over the last 20 years, over 400 banks have gone under,

and those depositors only got 70 to 80 percent back. So I think that this is about sentiment within First Republic. I think they're collateral damage. I don't see that they actually did anything wrong. I think you're having the spillover, and those depositors left the building, that $100 billion. And so I just think the market is back to saying, what is the Fed, what is the FDIC going to do? First Republic is just going to be a weakness and an elephant on the stomach of the market until this gets resolved. I do think, Georgia, it's interesting that the entire market for the second day in a row is focused on this now sub-billion dollar regional bank, which clearly has similar problems to SVB. In other words, it was holding those

assets to maturity of low interest rates, underwater mortgages. First Republic, it was Treasuries. And they've got issues now about what they're going to do next. But, you know, is there a systemic risk here to the overall market, to the outlook as the market is treating it? Treasuries are rallying again today. Sarah, there's not. But you're going to see a Harvard Business School case study someday on First Republic and how you don't handle a banking crisis. Basically, they ran a conference call yesterday where they took no questions and shut it down after 15 minutes. And you want to talk about putting raw meat in front of short sellers. That's the way to do it. And secondly, they should have done a bear hug with some gigantic bank as soon as things got really sour for them because there clearly was no way out.

And the fact they weren't aggressive enough in doing that was malpractice on management teams part. They really have hurt their shareholders tremendously. The shareholders now will be lucky to come out with anything, but it's limited to them. They are in the wrong place at the wrong time and they're getting run over by the fears of the market right now. I agree. What a way to piss off shareholders by not doing questions on a conference call. And I should just clarify the two years rallying lower yields there. The 10 year actually yields are a little bit firmer today, but we saw a big rally yesterday. So what do you do? Do you add exposure in tech because you're enthusiastic about what you've heard so far? I think that you've seen Amazon still up 30% year to date.

You said at the beginning of the show, Facebook's up 80%. Microsoft's up now probably 25. Have the gains been made for the year? I have felt that the majority of the gains for tech have already been made. And this is what's so hard about investors is like no one liked tech last year. It's like you can't own it. And this is why it's so hard to try to time the market because the trade actually was just to sit still last year, sit through that pain because now you've enjoyed this really big reflation. And so I think, though, from an asset allocation standpoint, at the after Apple, I think there

will be some repositioning. I think if you don't own Microsoft as a portfolio manager with S&P exposure, I think you don't have that as an overweight. You will have that as an overweight next quarter. Is that the only one? What about Apple? We'll see Apple's next week. I think Apple could also be the cleanest earnings. You know, with iPhone 14 Pro, that's not an issue. China coming back online, I think they could have a really clean number. We'll see about Amazon. That's the one I most worry about because their numbers have been really disappointing, really the last five to six quarters. Amazon out with earnings tomorrow night. George and Bryn, stay with me

if you would, because we want to hit Activision Blizzard. Shares are down nearly 12% right now after the top UK regulator blocked Microsoft's deal to buy the video game maker. Let's bring into the conversation Andrew Urkowitz of Jefferies, who covers Activision Blizzard with a buy rating, $95 price target. You know, they also, Andrew, pre-announced today and the numbers looked okay. So the reaction to you signals what? No deal? Yeah, definitely no deal. Of the three regulators, the CMA was probably the most important one. It's the one that could have just outright canceled it with no way to kind of come back on it. So they can appeal it.

The appeals always are on technicalities, not on the actual core of the deal. We went back, looked at five-year history, couldn't find any one that got reversed after being appealed. So we think the deal is likely dead. It'll just take some time for Activision and Microsoft to admit it. So what is Activision worth as a standalone company? We think it's somewhere, in our note this morning, we said, look, if you give it just an EA multiple on our estimates, you're looking at like an $80 stock. There are some really big near-term catalysts.

They're sitting on $13 billion of cash post-deal. And, you know, they could easily do a buyback. So it's a capital allocation catalyst. They have probably the biggest game launching this year in Diablo 4 in June, which could push numbers higher. So, you know, in the near term, I think it's a very interesting stock here from probably 76 up into the mid 80s, low 90s. Do you agree, Brent? Well, I mean, I and Microsoft, I think the biggest losers today are, number one, Activision shareholders and the merger and acquisitions hedge funds that will go,

they would go short Microsoft and then long Activision. So you had Microsoft rally so hard after earnings and then this happened. So those guys got a double whammy. Wasn't Buffett in Activision because he thought that there was a merger arb opportunity? Well, if he was, that would have been the wrong trade because you levered those trades up on top of that. George, is there an opportunity? What about you? Do you take a look at Activision here as a standalone? Do you agree with Andrew? I own it, Sarah, and we shorted the calls on it at 90 bucks. And if it dips below 70, we'll be buying or shorting puts both aggressively. We really like the business. And there's a reason Microsoft was willing to pay 95 bucks for it. It's a great business. And Microsoft's management is arguably the best in

the world right now. So it's a great company. I do wonder, Andrew, about the missed opportunity here to get Activision into AI video gaming, right? If AI is going to permeate every technology, video gaming, they would have had a big leg up under Microsoft's roof, wouldn't they? Yeah. So AI has been part of gaming for a long time. They've been doing generative maps and generative world buildings for a long time. Yes, being a part of Microsoft, absolutely, you'd have a leg up versus everybody else. But this is a technology that's been permeating games for a long time. We just never talked about it until kind of chat GPT came along. But it'll benefit probably everybody and, you know, probably drive down costs,

but also the best creators will find the best use cases for it. And, you know, they would probably benefit. Guess what? Activision's got some of the best game developers on the planet at Blizzard and at the Call of Duty studios. Yeah, what did we learn about guidance today

and the pre-announcement and what they're expecting from the pipeline? Yeah, I mean, there's a bunch of noise on the numbers today. Yeah. Keep in mind, you have a management team that doesn't really need to give guidance. They don't need to disclose a lot because they were being acquired or are trying to be acquired. So they put out, we think, very conservative guidance. There was some noise around. You remember back in January, they exited China due to a lost deal with NetEase. And so, you know, at the end of the day, I thought the numbers were good enough. And, you know, if they have to go back being a public company and not being acquired, you'll probably get a lot more color around that pipeline. And

to the other guest's point, there's a lot to like here. I wonder, Bryn, final word to you as a Microsoft shareholder, if this deal does end now, what you would like to see Microsoft do with the $67 billion in cash? They've got $3 billion breakup fee, but there's some opportunities and possibilities, right? Huge opportunities. I mean, their game pass passed to almost a billion in subscription revenue this year. That is a very fast-growing market, and so I would like them to put some of that money into gaming because I think gaming is very under-discussed.

It's growing about 20% a year globally, and we as Americans and Europeans are the only ones that play consoles. Cloud gaming has a huge opportunity, so I hope they can go out and make some more acquisitions. And they start them young. My five-year-old is already into it. Thank you, Bryn, George, and Andrew. And a quick programming note on this story. Don't miss an interview with the CEO of Activision Blizzard, Bobby Kotick, tomorrow morning, Squawk Box, 8 a.m. Eastern time. I'm sure he has some harsh words for the UK regulators.

Let's get to our Twitter question of the day. We want to know, with strong earnings so far from Microsoft and Alphabet, will Meta beat estimates later today? Head over to CNBC, at CNBC Closing Bell on Twitter. Please vote because we'll share those results with you later this hour. We're just getting things started here on Closing Bell. Up next, Disney versus DeSantis. The media giant sues Florida over, quote, government retaliation. Jim Stewart, who wrote the book on Disney, joins us next with what's at stake for the company. We're live from the New York Stock Exchange with the Dow down 211 points. You're watching Closing Bell on CNBC. Welcome back. 44 minutes left in the trading day. Information technology is the only sector that is green right now. Let's get a check on some top stocks to watch as we head into the close.

Christina Partsenevelos with that. Hi, Christina. Hi, Sarah. So EV startup, let's start with that. Fisker just got the green light from EU regulators to start delivering its Ocean SUV to European customers. And that's why shares are soaring almost 20 percent right now. But if you look on the year, still down about 19.5%. Old Dominion Freight Line is tracking for its worst day since May 2022 after missing earnings and revenue estimates. The company cited continued softness in the domestic economy and a challenging operating environment. And what we're seeing from iShares U.SS. transportation ETF, IYT, is also lower, with smaller names in freight and logistics under pressure.

Ryder, another name that missed earnings, and you can see across the board, Ryder down 6%, DJ Transports 2.5%, Landstar 4%, almost 5% lower. Sarah? Christina, thank you. We'll see you in just a few minutes. Breaking news this afternoon. Disney is suing Florida Governor Ron DeSantis over what Disney is calling a relentless campaign to weaponize government power. Lawsuit comes the same day the governor's handpicked board nullified two agreements that had given Disney control over

expansion at its resort complex, Disney World. The standoff between the media giant and the Florida governor has been going on now since early 2022. Remember when Disney leaders criticized a controversial education bill, the so-called Don't Say Gay bill, which was advanced by DeSantis and other Florida Republicans. Joining us now is Pulitzer Prize winning New York Times columnist, CNBC contributor Jim Stewart. He has followed Disney for years, has followed the saga. Jim, this is quite an escalation. What does it signal about Disney's approach? Yeah, this is quite an escalation. What does it signal about Disney's approach? Yeah, this is a pretty stunning development. I mean, this, to me, really takes this whole thing out of the realm of political theater and into a realm where there are going to be some real

economic, not to mention political consequences. I think Disney is drawing the line here and saying, you know, we are serious, we have the resources, and we are going to wrap ourselves in the Constitution and the American flag and go to battle here. Who's got more to lose, do you think? Well, that's a good question. I mean, one of the incredible things about this feud to me is, and what makes it seem so crazy, is that both sides have such common interests. It's a virtuous relationship. I mean, the better Disney does in Florida, the more money it makes, the more people it hires, the more jobs it creates, and the more taxes it pays. It's all good for Florida. What's good for Disney is good for Florida and vice versa. So why are they at war? So who has more to lose here? I mean, Disney benefits from many state

policies there, including tax incentives that still have not been revoked. And DeSantis has certainly been threatening to impose very serious economic costs on their doing business there. But it's not going to wipe Disney out. It's not going to eliminate the profits from Orlando. I mean, it could be, of course, quite substantial. I think Disney is very worried about that and right to be worried about that. For DeSantis, this completely—I'm not a political expert, but he won his base when he, you know, to the extent there are people who don't like Disney and felt that they were, you know, woke or the wrong position on there. He got them. He delivered for them. That's over. So why is he doubling down on

this? I don't think he's going to be gaining any marginal voters by escalating this war. And I think on the national stage, if he's going to make a run for the presidency, I can't imagine he wants to be at war with Disney. And yet Disney, in the complaint, said they tried repeatedly to resolve this peacefully and in a reasonably friendly way and had absolutely no luck. And when you read his rhetoric and all put together, it's pretty extreme. Right. And actually, to your point about this, what's good for Disney is good for Florida. He clearly has bigger, more national ambitions, whether he announces or not.

And you do wonder how it's going to play. I remember asking Michael Eisner about this a while ago, and he was saying, you really want to be at war with Disney on a national campaign? Disney is like one of the most popular brands in the country. But a lot of people don't like woke companies, Jim. And that issue does resonate. They don't want companies weighing in on laws like don't say gay bills. Well, you know, that may be.

But I wouldn't call Disney a woke company just because it took a position. I mean, let's remember why they did this. They initially did not take a position on this, but they have a lot of employees who cared about the issue. They have a lot of gay employees. It was an internal employee morale issue where they needed to take this position. And by the way, it didn't have any effect on the legislation. It passed. DeSantis got his way with that. So why is Ian so enraged that Disney actually took a position on this? And retaliation has nothing to do with education. Disney is not an educator in Florida.

Many other, I mean, there were hundreds of companies that took the same position that Disney did on this bill. And they're not getting any kind of retaliation. So I do wonder, Jim, the fact that Disney and Iger continues to stand up for the company, as he should, right, as the CEO, but really to take it to these level, like they could be quiet and sort of let it die down and probably would still have the upper hand as we saw them make the move on the committee a few weeks ago. But the fact that they're doing a lawsuit, I do wonder if it's more impactful financially and economically to Disney than maybe initially thought or initial shareholders thought as well. Well, what they stress in the complaint is that this puts a cloud of uncertainty over

their future developments. I mean, where does this stop? If the state of Florida, at the whim of the governor who controls the legislature, can just step in there and nullify contracts, put taxes on them, transportation, you know, all kinds of taxes, and even maybe build a prison in the land next to Disney, that impairs their development plans. They say they were going to spend $17 billion in additional capital spending and hire 13,000 more people in the next 10 years. And they don't say it explicitly, but clearly they're implying that unless they get some certainty about this going forward, that's going to be in jeopardy. So I think they have very real and legitimate concerns that with a whimsical

government hovering over them, they cannot invest for the future. I'm sure a lot of businesses are curious about this lawsuit and CEOs who are wondering if Governor DeSantis does have a political future, what it would be worried about retaliation from government. One of the points Disney makes is that they have the resources, meaning the money, to actually fight back and to stand up in court. And they say they're partly doing this on behalf of the many smaller companies and businesses who could be threatened with that kind of intimidation who don't have the resources. So I think they want to strike.

They are striking a blow more generally for the business interests. They're striking a blow for the sanctity of contract. And they are especially striking a blow for the ability of companies to make statements on anything they want under the First Amendment without a specific retaliation from the government. And they do make a very, very persuasive case. I'm not sure just how he would even dispute it. But this is retaliation. All of this only happened because he was angry at a position they took on a bill. And it's like he singled out Disney because he knew he'd get publicity. The other 300 companies that took the same position, you're not going to get the national traction that he's getting on this issue. And by the way, I don't think it's Disney who didn't

bury the hatchet. I mean, he's the one who keeps raising this issue and threatening them with more, even more severe punishment. Well, let's see what he does next in reaction to this lawsuit. Jim, thank you. It's certainly getting interesting. Jim Stewart. Definitely. Up next, earnings season, shedding some light on the state of consumer spending. So how can investors best trade the health of the consumer? We're going to discuss. Plus, talk of slowing sales, slamming end phase energy. And it's weighing on the rest of the solar space. A rundown of those moves straight ahead.

Closing bell. Back in a moment. We are hitting session lows. We're down 26 light on the health of the u.s economy this week with a number of business leaders sounding off on the state of the consumer visa cfo on the company's earnings call saying quote the consumer is still in good shape and that spending across services travel and entertainment those categories in particular remain strong then there's chipotle ceo brian nickel noting customer activity continues to rebound during an interview on

closing bell overtime yesterday. We saw the lower income consumer, so households earning less than $70,000 slow down probably about a year ago now. And fortunately, we've seen a little bit of an uptick in that consumer with us, still below where we were about a year ago with that consumer. And fortunately, we've seen a little bit of an uptick in that consumer with us, still below where we were about a year ago with that consumer. And then we continue to see a lot of strength in the higher income groups. And within the past few hours, Hilton CEO Chris Massetta telling me he's seeing strength across all of Hilton's business segments. Leisure travel in the quarter continued to be very, very strong, both from a volume and a pricing point of view. Business travel made its way back finally from a volume point of view to above peak

levels of 2019. And pricing is quite strong. For more on the strength of the consumer and how investors can position to play it, let's bring in Victoria Fernandez of Crossmark Global, owns a number of these consumer stocks. Victoria, are you getting a clear message on the state of the U.S. consumer? And if so, what is it? I'm not sure it's particularly clear, Sarah, but I do think that overwhelmingly we're hearing that the consumer may not be as strong as they were six months ago or a year ago, but they're still decently strong and that's going to be supportive of this

economy. Even if we think a recession is coming later in the year, that's what's going to help it be a mild recession. And I think if you look at household balance sheets, they're still quite strong, even as some of the stimulus money has been brought down. But you take the financial strength of the consumer because look, wages are still up 6.5% year over year, the job market still looks good. And you add to that the sentiment component. We had consumer confidence numbers come out. The current conditions numbers stayed very strong. So you combine those two things together, and I think you have a consumer that, although they may not strong. Those are consumer defensive groups,

staples, which we know have high inflation and consumers are prioritizing. You own a number of retailers or firms, TJX, Lowe's, and some of the other more discretionary side of things too. Is that a riskier place to be right now? Well, I think it can be riskier depending on the names you're buying in those categories. You mentioned TJX. They are a leader in that off retail price segment. So if you have consumers that are looking to spend a little bit less on items, TJX is where they're going to go. And when you combine that with a balance sheet that has growing revenues, growing earnings,

good cash flow, then I think that's a name you can add in your portfolio. And you have the same thing with Lowe's. Before, we would have held Home Depot, right? We thought they had better management. They were doing better in their stores. Lowe's is doing well. And with the housing turning around, we've gotten really strong housing numbers over the last week. You've got the do-it-yourself people that are going in there and e-commerce at Lowe's, and they're building their pro business. So, again, I think it's a name that you can put in your portfolio and build on, and the consumer is still going to shop there.

And I'm looking at some of the other Crossmark holdings and your personal holdings, and it does tilt defensively. McDonald's is in there. Chipotle's in there. Kroger for the company. So it does seem like you're on that theme of the consumer spending in the places where it needs to, in the staples space, right? Well, we do think we're going to get a recession later this year. We think as the 500, because we do think there'll be another 25 basis point hike next week, as 500 basis points of hikes work their

way through the economy, even with the labor market strong and wages growing, the consumer is going to get crunched a little bit. And so they're going to go and do some of these more staple type purchases. So Kroger, yes, they've done great e-commerce throughout COVID and they're benefiting from that, especially if people start eating at home more as prices go up. Coke, Pepsi, we own both of those. And you mentioned them. People are buying there. So I think you can take a little bit of a defensive posture like we're doing, but still support the consumer because they will be the foundation that holds the economy through a recession. Yeah. And those consumer staples have done have done really well lately. Victoria,

thank you very much. Victoria Fernandez of Crossmark. And by the way, speaking of this consumer, don't miss Hasbro CEO Chris Cox tomorrow with me on Squawk on the Street, 11 a.m. Eastern, following its report before the bell. We'll also hear from Mattel after the bell as well tomorrow. So a lot more coming on the consumer. Up next, we're tracking the biggest movers as we head into the close. Christina Partsinevola standing by with that. Christina. I want to stick with the consumer. Bowls and burritos still loved by high-income Americans, and that's helping shares of Chipotle. I'll have the details and much, much more after this break. Markets deteriorated a bit here this afternoon. Let's send it over to Pippa Stevens, who's

looking specifically at solar stocks. Pippa? Hey, Sarah. Well, solar stocks are under pressure, dragged lower by end phase, those shares creating more than 26 percent and pacing for the worst day in more than eight years after the company warned of a slowdown ahead. With CEO Bajra Kathandaraman telling me, quote, we are not growing in the U.S. He pointed to rising rates as the primary reason. Bank of America cutting the stock to underperform today, saying, quote, we had thought the worst was behind us. We were wrong. Key Bank, Piper Sandler, J.P. Morgan, Deutsche Bank and Evercore,

among the firms cutting their price target on the stock. Now, that weakness is dragging down other solar names, including Maxion, SunPower, SolarEdge and SunRun, all of which are down double digits. Sarah. All right, Chris, thank you very much, Pippa Stevens. And now let's get back to Christina Partsenevelis with a look at some of the other key stocks to watch right now. Christina. Well, I got to talk about Chipotle because they beat estimates for the first quarter and that is driving shares 13 percent higher right now.

So what happened? The company was helped by more expensive menu prices, inflation, over 40 new restaurant openings, and lower income customers that are heading back into the stores. And that's why the shares have hit an all-time high. But Chipotle's base is higher income customers, and they continue to buy their bowls and their burritos. That, according to the CEO. PacWest moving higher today after the regional bank reported deposit inflows over the last month. That's giving investors some comfort after the big drop in deposits during Q1. And on that note, we may as well check First Republic right now because shares are down 30 and a half percent. That follows a number of volatility halts today

with the latest coming in the last hour. Bloomberg reporting the bank could see limits placed on its ability to borrow from the Fed. Bad news just keeps coming. Year-to-date down 95%, Sarah. But I do think it's a good sign that PacWest is up on the better news. Shows that First Republic is sort of in a league of its own here. Christina, thank you. Yeah, Christina Partsenevelos. Last chance to weigh in on our Twitter question. We're asking you, with strong earnings from Microsoft and Alphabet,

will Meta beat estimates today? Head over to CNBC at CNBC Closing Bell on Twitter. We're going to bring you the results right after the break. Let's get to the results of our Twitter question. So we asked you, with strong earnings from Microsoft and Alphabet, will Meta beat estimates today? And turns out, majority of you said yes, 54% to 46%. Kind of close. Bar set high, 75% run so far this year.

S&P is only up 6% in that time. When we come back, we're minutes away from that report in overtime. We'll tell you the key themes and metrics to watch when those numbers hit the tape. That and much more when we take you inside the market zone. How I missed the market zone. That is next. We are now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day.

Plus, Phil LeBeau is here on Boeing's latest quarter. Julia Boorstin looking ahead to Meta reporting results after the bell. And JPMorgan Private Banks. Elise Asseneba is here on why it's time to reset big tech expectations. We'll kick it off, though, Mike, with you on the markets. Couldn't hold the gains earlier in the session. Even big tech beats and AI could not come to the rescue of this market. Not extreme selling like yesterday afternoon, but it's softer and only tech is higher in this market.

Yeah, Sarah, there's a bit of a loss of nerve over the course of the day. Just maybe too many accumulating reasons to stand back away from the riskier parts of the market with what's going on with First Republic, even though it still seems relatively kind of hived off to the side of the rest of banking. Regional banks unable to get off the mat. And then small caps have just been too weak relative to the mega caps

to really encourage any idea that there's some risk capital that's going into looking for value. In fact, if anything, it's the expensive, perceived, reliable stocks that are working, whether it's Chipotle or Microsoft and anything that looks cheap. People are assuming it's cheap for a reason. At least that's today. And I would also point out, though, that things like health care are undergoing some profit taking today. So that's not really a macro message.

It's much more just people trimming back and seeing no real reason to get excited ahead of GDP, ahead of the Fed next week. I would also note that the carry is higher today. It's not dragged down as we saw yesterday. A bit, right. There's still weakness, obviously, in First Republic, but not the kind of effect we've seen. Investors are overlooking a mixed quarter from Boeing. Want to hit that? Cheering on plans by the company to boost production of its 737 MAX. Bill Abow with the story for us. Phil. Sarah, we say it every quarter. It's all about guidance when it comes to production. And for the 737 MAX, trio of good data points in terms of where the company is now and where it's headed over the next couple of years. For 2023, they reaffirmed guidance to deliver between 400 and 450 airplanes. They're going to move production up to 38 per month from 31 per month. That's going to happen later this year. And then the goal is to hit 50 per month by 2025, 2026. Here's CEO Dave Calhoun talking about

how robust demand is right now. The orders now are actually, in many cases, exceeding five years of demand. So it is a very robust moment. Our job is to make sure that we're transparent about the constraints that we face and that we don't get too far ahead of ourselves. One more good piece of news. If you are a Boeing investor, they reaffirmed their free cash flow guidance for this year between three and five billion dollars and the target of hitting 10 billion in annual free cash flow by 2025, 2026. Sarah, back to you.

And what specifically, Phil, did we learn about the latest production delays? Any new information there? Well, there's no new information in terms of what's happened aside from the fact that they said for some time there will be some 737 MAX deliveries that are delayed and deferred. And we've known that. The question was, would those delays and deferrals bring down the overall delivery guidance for the year, which has been 400 to 450? And what they said today is there will be some delays. There will be some deliveries that are deferred further out, but they still plan to hit 400 to 450 this

year. That's one main reason why the shares moved higher. Yeah. Saw the strong orders and the durable goods orders as well. That report this morning. Thank you, Phil. Phil LeBeau. Meta earnings are just moments away from crossing the tape. Let's get to Julia Borsten with what we should be watching, Julia. Well, Sarah, Mark Zuckerberg declared this the year of efficiency. So now we're watching to see whether a slimmed down meta after all those layoffs can accelerate its revenue growth. Revenue is expected to decline by nearly 1% in the quarter from the year ago period after showing declining growth in Q4 as well. Now, earnings per share are expected to fall by 25.5%. In addition to watching top-line growth, investors are focused on the impact of ad market weakness, Meta's progress monetizing Reels and

Messenger, as well as its investments into the AI space as well as the metaverse space. Now, year to date, the stock is up about 75 percent. And despite those gains, analysts are still quite bullish. 71 percent of analysts have a buy rating on the stock and 20 percent have a hold. Sarah. So as far as growth, Julia, where is this company, especially coming out of a potentially higher bar set by Google ads yesterday? Yeah, I mean, I think the question here is not only do we see a revenue quarter that is either down 1 percent, which is the expectation. Is it flat or can they actually show revenue growth? You know, last quarter, the company did show declining revenue growth, but also better than expected revenue numbers. So it was it was not not growing, accelerating growth, but it better than expected revenue numbers. So it was not growing,

accelerating growth, but it still was better than anticipated. So I think that's the question here. Will we see another beat? And what kind of outlook are we going to get for the rest of the year? Even if they don't give specific guidance numbers, can they give us a sense of whether there is momentum, whether there is a positive trend and how much the overall ad market they see strengthening going into the second half of the year. So I think that's going to be a real focus here. And also remember, Mark Zuckerberg has talked so much about layoffs and how they're going to be more efficient, more focused. What does that actually look like with with earnings expected to be down by 20 and 25 and a half percent? When do they start to see some of the benefits of those cutbacks? All right, Julia,

thank you. Mike, I wonder how how meta stock setup looks to you. Feels like positioning is a factor here just with the giant run year to date into earnings. All the sell side loves the stock right now. Feels like everybody owns it. Yeah, you've definitely had the crowd come back in behind it. I did see some some numbers from the street suggesting that positioning isn't as extended as it was just very recently. But yeah, there's no doubt that I think people have bought into the margin story, the cost cut idea, and really the return to something approaching 10 to 20 percent growth next year. So next year is a long way away, but it has to be rebuilding to that because you've already brought this stock back to about a 20 times forward earnings multiple. And so I do think that that's going to be the

equation right now. It's not just that, you know, people have over love it, but they have bought into the margin story and they want to see confirmation of that at this point. So what do you think, Mike? Tomorrow we're going to get GDP and jobless claims, which feel important. Going into a Fed meeting next week where the debate is around, is it going to be the last hike? What are they going to do from there? And how badly is this economy hurting right now from the bank failures and all the Fed tightening? Yeah, worth noting the Atlanta Fed GDP number has now settled back under 2% real growth. So we'll see. And that's where the estimates are for GDP tomorrow.

Today's durable goods number was an upside surprise. So it seems like that muddle through scenario for the economy right now is still pretty much in play. Also worth noting that today doesn't really seem about kind of a tantrum about bad earnings as much as it is. Really, it's it's about the stock market seems like it's got this deferred selling. We got to the high end of the range, couldn't do anything with it. On a technical basis, we're kind of seeing if we can hold that 4,000 level on the S&P, given how narrow the run-up was. So I do think the GDP matters. Maybe PCE matters more for the Fed outlook. And people have got to be

asking themselves, cyclicals have been weak for a while now. It's not news to the market that the economy is slowing down. But do you want to be too negative going into a potential Fed pause? And maybe even we get a bank rescue from First Republic at some point. And further inflation signs of prices moderating. Mike, thank you. Mike Santoli, see you in overtime. And also see you tonight. Mike is hosting a CNBC special, Taking Stock, at 6 p.m. Eastern time. We've got a few minutes to go in the session. NASDAQ's on track to snap a two-day losing streak. Elise is here. Elise, what do you do with all of the negativity and the risks that are piling up in the market? Mike discussed some of them. There's a debt ceiling out there, which it's hard to know where that's going to come down.

And at the same time, earnings, which are not bad, not a lot of guidance cuts. Right. So I think it's these macro overhangs like the debt ceiling, like what's still going on in the banking sector that's kind of keeping investors on edge. But the way that we're approaching markets right now is through the lens of being defensive but not fearful. So ballast your core fixed income allocation with some more opportunistic areas that we're starting to see pop up in equity markets as we kind of roll through these periods of pain sector by sector.

And I just want to say, it's Elise Asenbaugh. I'm sorry I messed up the pronunciation of your name from JPM Private Bank. Does that mean you're defensive in the stock market as well? Because groups like Staples already have worked really well and some say are getting expensive. Yeah. So look, we actually think Staples are defensive. When we talk about being defensive in the stock market, it doesn't necessarily mean gravitating towards the conventionally defensive sectors. We're talking about putting on market exposure via structured notes with downside protection, leaning into areas that we think already took their medicine last year, like semiconductors. So it's hard to paint our outlook with one broad brushstroke, but really it's that

core bond allocation that we're using as the defensive allis in portfolios. Interesting. But you'd be in a place like semiconductors, which are pretty cyclical. Absolutely, right? We saw them take their medicine and go through their pain in 2022. We think the valuation that investors were getting was offering a little bit of a buffer, even as the cycle kind of continues to deteriorate. And so that's an example of where we would be leaning into risk because we think you're getting the appropriate compensation. But a lot of people would say they took their medicine on higher rates. So the multiples got hurt last year but not necessarily on recession not necessarily on recession but we also want to make sure that we're not on our heels as this

cycle resets I don't think you can really understate the importance of the Fed pausing and interest rates starting to ease a little bit right now it's booing those higher growth kind of mega cap tech parts of the market which is helping the index as a whole but we really want to be on our front foot and starting thinking about starting to think about ways to position for the next cycle. What if Powell doesn't signal that he's ready to pause next week in his press conference? Is that going to be a big disappointment to the market? Potentially, right?

The market is expecting May to be the last Fed rate hike. That, too, is our base case. But I think at this point, people are understanding kind of the uncertainty premium that comes with the Fed right now. But all in all, when we look at the confluence of data, we do think that the Fed is getting closer and closer to that moment where they, too, will feel comfortable pausing. So overall equity exposure right now. I know you're leaning heavily on the fixed income side, but if you think the Fed is at an inflection point, wouldn't that bode well for stocks? Yeah. And we actually see upside over the course of the next 12 months from here. But we're cognizant of the fact that earnings expectations, for example, are still more

constructive than our base case. So we just want to make sure that we're approaching it not with, you know, the wool over our eyes and picking and choosing kind of our battles and the exposures that we want to be putting on. What about the debt ceiling? So we are expecting the debt ceiling to likely come down to the wire. We're still trying to figure out exactly when that X date is going to be. We're preparing our clients for volatility. And for folks who are particularly concerned about it, helping them find ways to potentially hedge or put on other defensive exposures.

Gold is one example, given the psychological safety net premium that it tends to carry. But you see it as a temporary issue. Temporary issue. Yes, we do think this is something that gets resolved. All right, Elise, thank you. It's good to talk to you. Elise Asenbach of J.P. Morgan Private Bank. Just going into the close here, S&P is down a third of a percent. Dow's down 210 points. We're off the session lows, but still couldn't hold on to early gains. And NASDAQ is, though. It's up half a percent.

And that's in large part thanks to Microsoft. Amazon also rallied today ahead of results tomorrow. NVIDIA and Meta is higher ahead of its earnings coming out in the next hour. That does it for Closing Bell. I'll see you tomorrow morning on Spock on the Street. Now into overtime with Morgan Brennan and John Ford.