Closing Bell - Closing Bell: Meta's AI Venture & Fed's Next Move 4/25/24

Episode Date: April 25, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

And welcome to Closing Bell. I am Brian Sullivan in for Scott today and we are live here from Post 9 at the New York Stock Exchange. This make or break hour begins with the GDP induced sell off. Maybe tax is a little part of that too. Investors grappling with the mix of slowing growth, inflation, what it might all mean for possible rate cuts or maybe rate hikes in the weeks and months and quarters ahead. Here's your scorecard with 60 minutes to go. It's a lot of red on the screen, but I'm going to say this. Markets are well off their lows. The Dow recovering a bit. Yeah, it's down a lot, about 1.1%, but the Dow was down 707 points earlier in the session.

So we are well off our lows. Bond yields, though, by the way, they're up. Ten-year hitting a five-month high, kind of ticking its way back toward maybe 5%. Of course, as we talked about last night, Meta's lackluster revenue outlook leading to declines across the sector. You got Microsoft and Alphabet down as well. That's all ahead of their earnings.

Their earnings are due out after the bell. Tune in to Last Call, guys. By the way, 7 p.m. Eastern, we'll have more on those reaction to the breaking news, too. One bright spot today, semiconductors. What else? NVIDIA moving up. Evercore reiterates it. Now performs, saying, by the dip.

Intel also getting ready to report in overtime as well. So we've got a lot still to do, and anything can happen. And by the way, all-star analyst Stacey Rasgon will join us shortly. I think it's his first time here at the NYC, I'm told. So look forward to having him on set, talk about those numbers. All of this bringing us to our talk of the tape. We'll hire for longer and maybe a slowing economy and a pretty high capital gains tax proposal that's not getting as much attention as it should derail the rally we've had in stocks.

Let us dive right in. We've got Fundstraps Managing Partner and Head of Research, Tom Lee. Here on set, Virtus Investment Partners, Joe Terranova, of course, both CNBC contributors, and our senior economics reporter, Steve Leisman. And that is where we have to start, Steve, because GDP is really the three letters that seem to have defined the day. Yeah, I think that's right. But there's different aspects to it, Brian, and I don't know the extent to which the market is reacting to each one.

I think the miss on the growth side is not the most worrisome part of it. In fact, I kind of like what I saw there in the sense that there was a big subtraction from inventory and from trade. And it's very normal, by the way, to look at GDP in this respect to see how businesses and consumers are spending. And that was pretty decent. If you look at real final domestic purchase, it was 2.8 percent. It was down. By the way, that is more or less the soft landing we're kind of looking for. What was not the soft landing we're looking for. But there are those numbers there, by the way, Brian, you can add up those two on the bottom left

and add that back to GDP if you want an idea of where it might have been, if not for those big subtractions. So the real story is the inflation story. And those numbers came in hotter than expected. But there's an asterisk we can put next to it. And we cannot answer or write that asterisk out till tomorrow morning and the story is this we know that inflation in the quarter was higher but where and when was it higher so what we're going to look for tomorrow is was january and february hotter than we expected whether it be upward revisions or was march hotter and if it ends up being march well then the sell-off makes sense and maybe there's more to go because it means that the inflation problem we knew we had at the beginning of the month continued and is actually worse than we expected at the end of the quarter.

So that's what we're looking for. If March is subdued, if it comes in 0-3, I think we're okay. 0-4, that's another story. And now we've got a continuing inflation problem, and that idea of the Fed cutting rates gets extended further into the year. So when's our next meaningful data point, Steve? Like what? PCE obviously is massive. But like after that, what what are we looking most what are you looking most closely at? Well, you know, like a good father, I love all my children.

Oh, you've got so many, CPI, PPI. And it's gotten, there have been more children that we've had to watch lately, of course. We didn't make such a big deal of the inflation component of the GDP report, so it changes, which makes it interesting, of course. But the Friday employment number, I think, is the one we're looking for. Looking again for that gradual weakening on the activity side of the economy and then looking at the wage side to see if there's still danger there that higher wages are pushing up and moving inflation. All your children, some newly adopted, I think,

because we're looking at things that we never even looked at recently before. It's like that weird kid Oliver they brought in the last season of Brady Bunch. Steve Leisman, thank you for the cousin because everybody was too old. Steve, thank you. So there's the perfect setup. Let's get now reaction and maybe what to do. Tom Lee and Joe. Tom, I'll start with you. Honestly, I don't think enough is attentions to this capital gains proposal we got last night. I think that might be sprinkled in here. But anyway, GDP is getting all the attention. Steve laid it out nicely. What is your take? Well, I agree with Steve's point. You know, the GDP number did catch people off guard, the core price index being basically a hot number, 2.9 year over year. But it is going to come down to the revisions, which everyone expects.

I think there's also now a disconnect between the CPI numbers we're seeing and what we hear from companies or even consumer surveys. I mean, for instance, in just this first quarter earnings season, the mentions of inflation as a problem is now at the lowest level since the first quarter of 2021. So it makes me wonder, how is inflation accelerating when fewer companies are even mentioning it as a problem in the first quarter? And I think that there are catalysts in the next couple of weeks. I mean, the first one, of course, is tomorrow to see really what March inflation looks like.

But I think the earnings backdrop has actually been very supportive. 80% of companies are beating. So as painful as the last couple of days have been and really the last couple of weeks, I actually think it's the risk-rewards positive here. So the firm landing is here, in my opinion. We did hear from Whirlpool. We did hear from Harley-Davidson that they are having difficulty passing through rising input costs to the consumer. And that's not a bad thing. In fact, if you look at the price action today, right now, where we are in the market,

we have recovered everything that we lost after the GDP print and after the inflation figures were released. So we've recovered it all. This is really where we sit in the marketplace right now, off of meta and the spending that's attributed to meta. I think that the rest of the world is experiencing a disinflationary trend that ultimately is going to get exported here to the United States. Brian, you look at Europe. You're talking about inflation readings that are in the twos, whether it's France or Germany.

Italy's at 1.2. Asia is in outright deflation. That's coming here. And I just don't think it's France or Germany. Italy's at 1.2. Asia is in outright deflation. That's coming here. And I just don't think that's a bad thing. And the premise for buying equities in 2024 never was about the Fed has to cut rates, because if it was at the beginning of the year when there was seven rate cuts priced in, now we're pricing in one rate cut maybe in December. Well, the equity market would be lower from the starting point. We're actually higher. Joe and John jump in on this. Can we just like remember the Super Bowl with the Falcons and the Patriots and the Falcons

dropped like 100 to nothing at halftime. And then Brady comes back and wins. Can we all just acknowledge that the stock market is up this week? Even with today, we're still higher for the week. We're only like a percent or two off all time highs. Market has one big down day. Profit margins are strong. You know, everyone wants to focus on the economic recession that never happened. The real recession that happened that matters most is the earnings recession. And we've come out of the earnings recession in the second half of 2023 for the S&P and the Nasdaq. We're waiting on the Russell, and that's a catalyst. Yeah, Tom, though, we've got a couple of big names tonight, and we'll get Dan's take on that in just a second, Dan Ives. But I mean, what if Microsoft and Alphabet soil the sheets? I think

is that the family-friendly term with the numbers tonight? I mean, then what? Because Meta kind of did. Yeah, I mean, Meta was up 40% into the earnings report. So I think expectations were high. I think there has been sort of a reset. So I think there's a, hey, if it's a beat, we could see stocks rewarded. And overall, it has been a good earnings season. 80% of companies are beating. And if you really exclude energy, you're really pushing up against double digit earnings growth year over year. So it's exactly what Joe was saying. It's been a pretty nice earnings recovery. And I think as you get into the second half of this year, health care no longer has negative year over year comp. So, you know, you could be back into mid-teens earnings growth.

So I think the earnings backdrop is really supportive and there there's still $6 trillion of cash on the sidelines. So we get some good numbers tonight. Well, more importantly, Tom, I think good guidance, right? Forget about the backwards. We want the forwards looking. That's good. This sort of mini-market panic probably could come to an end right quick. That's right i i think part of this is is that the as steve was saying you know the inflation

so markets perception inflation is not clear right now because i think there's a camp of folks who think it's re-accelerating and i think the march cpi kind of fueled that narrative so maybe april is really the tiebreaker and that's you know that's not for a couple weeks but it's also doesn't mean you have to wait forever to get some idea what's going on. All right. It's Tom Lee. Very different backdrop, though, than a month ago. Tom, we really appreciate your views. Thank you very much. All right. Still got Joe here. Let's bring in the aforementioned Mr. Dan Ives, because maybe a lot is riding on Microsoft and Alphabet tonight. What are your expectations? Probably the most important earnings, I think, of all earnings when you look at Microsoft and Alphabet, because the AI revolution is here. And this is really what I view

as more the drop the mic moment for tech to show where the spending is going. I think Nadella, in terms of what's happened in Redmond, we expect a beat there from Microsoft. And I think when you look at Alphabet, digital advertising strong and the cloud story still not being factored in. And I view this for tech. This is going to be a flex the muscles moment for tech. Well, if it's a drop the mic moment, we can say this. If we're talking comedy or music shows, we can say that the opening act meta got hit by tomatoes. Right. They did not perform. The audience booed. So what you're saying is now this could change the narrative. Tonight could change the narrative. Is anyone more important

than the other one? And Joe, chime in here. Do we care on a macro level? Just one point to the meta. I mean, look, they're spending like a 1980s rock star. But where are they spending on AI? Who's benefiting from that? It's Redmond, Google and, of course, Amazon, Jassy and others. So I view that as that's spending and the stock obviously come back a bit, but this all speaks to the batons being handed from the godfather of AI, Jensen, NVIDIA, which continues to be in just a massive position of strength, to software. Now you see the use cases, monetization. NVIDIA is the most important stock in the S&P 500.

It's been that way all year. In the world. It was that way last year, okay? I've often called NVIDIA the Patrick Mahomes of the stock market. He's selling insurance. And when you hear what you heard last night from Meta and what Dan is suggesting we're going to hear tonight in terms of spending on AI,

what you're really gaining insight towards is that the hate the AI halo is still present. Look at the AI halo today and the price performance. Look at Nvidia. Look at the other names when you drop down from that AI halo. You look at Broadcom. You look at a net. Those stocks are all higher today. I think that's what's incredibly important. And look, I want to say something. You know, I am not wildly bullish. I actually think where the market is right now is we're going to be running to a lot of different places. And ultimately, maybe ending up in the same spot before, at some point, we resume the prevailing bull trend.

I wonder if NVIDIA popped today and some of the other semis, but mostly NVIDIA, not because people were optimistic again on semis, but it was a haven, right? And it's things sold off. No, I think it's. No, it's. Oh, my God. Let's go back to our tried and true. That is spending $40 billion on R&D for AI. Whose chips do you think they're buying?

But they can't make enough of them. No. Raymour's talked about this. They're years out. They seem. They're years out. They're sold out. And that's been the story every quarter that they're not going to be able to meet demand, but they do.

They've been meeting demand. And until they tell us that they're stumbling and the supply challenges are present, you have to believe that NVIDIA is going to continue to earn what they've earned. He makes a phenomenal point because also if you follow the breadcrumbs, okay, Godfather of AI, Jensen, and NVIDIA,

what we're going to see from Redmond in terms of Microsoft and those cloud and AI earnings, look at Alphabet. Now, the second third. What is the Della, the consigliere? You have an Italian sitting on the desk. But ultimately, the two most important in terms of Jensen and theadella, but now it's the second, third, fourth derivative. Look what's happened to Dell. Look at Oracle. Look at the rest of the software. Look at what eventually is going to be cybersecurity and infrastructure. That's why tonight's the night. It shows where the spending is.

And if you can see the forest through the trees, in my opinion, it's still the early stages of this next heck bull market that we believe is going to go. Because when you said tonight's the night, I went in two different ways musically. I thought Rod Stewart's a beautiful song. It's uplifting. Then I can go Neil Young tonight's tonight, which was like his darkest album. Things are dire. You're the Rod Stewart version tonight. I'll go more Rod Stewart.

You're bullish tonight. I'm making a real point. Microsoft, Alphabet, going to be good. Tonight, Knicks are going to win. Tech earnings is going to be strong. Islanders? Islanders possibly, too. But I think eventually what you are going to see, this is the pound-the-table moment where tech shows demonization here.

It's not hype. And that's why when Nadella talks, everyone listens. Is there something that Nadella has to say? Is it just strong demand for chat GPT? What does Nadella have to say about the future to make you even happier? It's all about what adoption looks like from their customer base. On Azure, a 30% type growth number. What co-pilot, what that adoption curve looks like. Because,

Brian, if you start to see Nadella, and I believe he will, talk about this adoption, it's even, I think, much more significant than they even expected. That shows this tidal wave of a trillion dollars of spending. It's coming to the rest of tech. But it's interesting, though. It's like, to your point, when you let off, you talked about Whirlpool and Harley-Davidson. And, you know, looking at these sort of mid-level consumer stocks, the middle class is struggling. There's a big gap and it's a market haves and have-nots, right? I mean, AI is a have and anything related to middle class. Ulta Beauty is down 22 percent since April 1st.

Yeah, without question. I mean, the only place that seems to have the positive momentum in the consumer sector is Chipotle. And that's really because and I say this with all sincerity, they have won over the hearts, the minds and the bellies of Gen Z. Gen Z is is all about Chipotle. But I think we are in a place where right now where we're seeing the economic effect. And that's why I think the read-through over the coming months is not going to be as strong as it's been in prior months. And that doesn't extrapolate. That means the market goes down. Quickly, we've got to let you go. Quickly.

Joe, can the consumer economy falter? Waiver, right? But parts of the market like AI, just they're completely disconnected. Without question. Yes. I think the market continues to move higher. And I think in that recipe, the Federal Reserve ultimately is able is able to adjust monetary policy to be more accommodative. And let's remember, I think they believe they're they're restrictive and they've got two tools to use. It's lowering the Fed funds rate and it's also pausing or moderating the pace of quantitative tightening. Don't be surprised if that's what comes first. That's an excellent point.

No one ever talks about that with the Fed. It's always like, where's rates going to go? Well, they got a lot of, as they would say, tools in the toolbox. Joe, Dan, great stuff as always. Thank you. All right. Speaking of semiconductors, now let's send it over to Christina Partsenevel for a look at some of the biggest names moving into the close.

And, Christina, it's your people. It's your group. Yeah, but unfortunately I'm not going to talk about my group right now because you guys just did it. So I'm going to talk about Caterpillar instead because those shares are tumbling. After the construction equipment maker posted first quarter revenues that trailed Wall Street estimates,

the numbers also showing a slight revenue and sales decrease from the year before, which the company attributes to lower sales volume. The six percent right now and then newmont corporation having a better day the gold company notching its highest share price since july after topping the street's first quarter expectations this comes against the backdrop of a budding gold rally shares of newmont up oh almost 14 percent tonight's the night i'll have intel for you later brian how about that and we're going to find out if you're giving us the rod stewart tonight's the night or the Neil Young tonight's the night, because they're very different things. Rod Stewart. Everybody's on to Rod Stewart today.

I don't get it. They're optimistic. All right. We are just getting started here on Closing Bell. And up next, here's a meta. You might have heard about them having their worst day in over a year. But one top believer is pulling a monkey's. He's still a believer.

He's going to make his case after the break. We are live for the New York Stock Exchange on this Thursday. We're back after this. All right. You know it. Metashare is having their worst day in nearly a year and a half. You had disappointing revenue guidance, higher than expected costs that we just talked about. They're spending a fortune on AI.

But your next guest is a believer in the stock, advising investors to buy the pullback. Joining us now is Raymond James, senior Internet analyst, Josh Beck. Josh, I guess the thesis just simply being what we talked about, which is, yeah, they're spending a ton of money because they expect it to pay off someday. And I think so do you. Yeah, well, thanks for having me on, Brian. So, yeah, it's an interesting history with with Meta. They've made some of these really large investments. If you think back to mobile, if you think back to short-form video, and at first, there's a lot of costs.

It's a little bit painful to the stock, but over time, they've proven out a really strong return on investment. And so what I see happening today is we're in a similar cycle. It's very early, but they're really doubling down on their AI investment. So CapEx is up pretty immediately, as is some of the OpEx lines to support it. But when you look down the road, it could open up a whole new door for Meta. Meta's always been a consumer ad platform. And I think if they're successful with these AI initiatives, they could be in the discussion around enterprise software, around selling compute

infrastructure. Obviously, this has been massively successful for AWS. And I think it's worth the investment. So a little bit of pain today, but I think for the long term oriented investor, I think this is potentially a great entry point. Yeah. And by the way, speaking of that, I want to just do a quick aside with the macro markets. It's not impossible that the Nasdaq could in the day higher. I mean, it's only down a half a percent. We got 40 minutes to go. Meta is well off. It's lows as well. And you wonder if there's going to drag it up, kicking and screaming. That's an aside, Josh.

You don't need to comment. I just want to know the markets we're on, while still down, are well off their lows. At one point, the Dow was down 707. It's down 311. All right, so let's go back to Meta. When you look at this AI build-out, Josh, how do they make money? Facebook, it's a free product. Instagram, a free product. Instagram, a free product.

A lot of advertising dollars. I get it. But is there some other strategy that Zuckerberg may be thinking about here? Yeah, you know, he really spent a lot of time on the call. He's obviously very thoughtful. You know, founder-led company can be very aggressive if they see opportunities. And he went through a number of ways they can potentially monetize AI. So, so far, it's just helped the advertising business.

It's driven more consumers to spend more time. It's driven better returns for advertisers. That's playing out today. In the future, he outlined a few initiatives. Business messaging is one of them. The one that I think is the most interesting, which is kind of buried in the call, was they could use AI to enable customers to pay for bigger AI models and compute. So when you think about meta, you don't necessarily think open AI type of model. But if you look at some of the benchmarks, all of a sudden, they're at the very top of the list. They're in the top five by some comparisons.

And what you can do is you can start to charge for developers to use the model. You can potentially bundle compute. And if you look right from some of the early proof points that we've seen from the likes of Azure, it's already spooled up to a multi-billion dollar business for them. So I think this opens up a whole new door. It's outside of the consumer realm. It's going to take time. It's not going to be an overnight success story. But I think if you're at the board level and you want meta to remain relevant in the future of this AI revolution, you have to invest. And that's what they're doing.

Josh, really appreciate it. Rough day there, but, you know, stock goes up, you buy the dip, you make a lot of money. Josh Beck, thank you very much. All right. Staying with tech and up next, we're going to talk about Intel. It's having a rough year. Investors have been struggling. We're going to find out exactly what tonight means for Intel. Star analyst Stacey Raskin is here at Post 9 next. All right, let's call your attention to the market, because if you kind of skipped out for a couple hours because you woke up, 9.30 comes Eastern time. The market opens, just goes down. Dow's down 707. You get it.

You tune out. Guess what? Things have really come around. I'm not going to say today's a good day, but Dow's down 314, which at that price point is only eight tenths of one percent, halfway off its lows. In fact, 11 Dow stocks are higher. Boeing is higher. Even Intel. That goes to our next guest here in a second sitting next to me. Even Intel is higher today. About half the Nasdaq 100 is also higher, by the way, led by AstraZeneca, Marvell, the not the superhero thing, the semiconductor company. Tesla's higher. Keurig, Dr. Pepper. So was a pretty ugly day late morning. The buyers have come in. Not going to say a good day, but

still, we are well, well off our lows. So let's talk about the aforementioned Intel. We know it's been a rough year. Stocks down about 30 percent. You got earnings out tonight. Stocks higher into the print. Stacey Rasgon of Bernstein Research lives out on the West Coast. He's in the Pacific time zone. Never been here for TV at the NYC. That's right. So I love being the first. So, Stacey, good to see you. Thank you for having me. No, I had nothing to do with it, actually. It's the entire production team. But it's good to see you here. Okay.

Intel. Yes. Rough year. But what's the one or two things you're going to look at the most tonight? Yeah. So, Intel has had a rough year, and we kind of understand why. Well, Intel investors have had a rough year. They have.

It kind of goes hand in hand. I mean, look. So, I will be honest. I don't exactly know what to do with the stock. We've mellowed a little bit on it. We upgraded it last I don't really know what to do with it. PCs right now are still fairly anemic. We'll see what that looks like into Q2. Servers, maybe at the end of the day, maybe not getting worse. Maybe that's a positive, but their Altair business is going to be pretty bad. They don't really have an AI accelerator story that's driving a lot of these other names. Not getting worse is not what I want to hear. Brian, how's that rash? What's not getting worse?

Yeah, exactly. And to be fair, they had this Foundry Day a couple of weeks ago, and my biggest takeaway from that day was come back in 2030. It's kind of in no man's land right now. It's six years from now, according to my math. Exactly, yeah. They said they'll be break-even on in 27 or 28, and

they'll have some better model in 2030, but that's a long ways away. At this point, at $35, is it an absolute short? I don't know, although it's back in funding short territory for sure, but it doesn't feel like a long either. I don't exactly know what to do with it anymore. Well, here's what's weird. I mean, Intel, and I'm not trying to bring politics into it,

because then you've got to take a shower. But let's be clear, they're getting billions from the government, from taxpayers. Well, there's no government in my own. It's the taxpayer money. You're getting billions from taxpayers. Everybody from taxpayers. Well, there's no government in my island. It's the taxpayer money. You're getting billions from taxpayers. Everybody's talking about the CHIPS Act. They should be, in my view, they should be winning. Like, that's, this is the home team.

This is the home team. See, they are getting money. Lots of folks are getting money. Everybody. It's not just them. You get a car and you get a car. But remember, the problems that they're having, they're not solvable by money. You don't throw money at these things and they're magically fixed.

But we are throwing money at them. Well, exactly. So that's a whole other conversation we can have. But these are the most complicated things that humanity has ever devised, that they've ever built. And you don't just throw money at the problem and it magically gets fixed. They had money, plenty of money, right? They could have gotten it. They didn't. This stuff is hard, right? Okay. And I know Pat Gelsinger is talking to John Ford. Seems like a perfectly nice guy. Never met him. But if you had to go back and Intel is one of the most storied. And by the way, only only the paranoid survived by Andy Groves, one of the best business books. Anybody. Sully's Book of the Month Club. Read that. And it's about from one of the founders of Intel.

And they owned it. Intel inside. If you had to go back and say, where did they botch it? Yeah, I mean, so the issues that they're having, by the way, didn't just develop. It's been 10 years in the making. I mean, they started having process technology delays, like, way back, over 10 years ago, 14 nanometers. Their big initiative, when Bob Swan, the former CEO, was the CFO, his whole thing was, we're going to take OPEX down to 25% of revenue. We're not going to spend. And numbers were excellent back then, and they were generating tons of cash, and margins were great, and they had a true monopoly kind of position. They were comfortable, weren't they? Oh, they were the Ford LTD of stocks.

Yeah, they kind of got lazy. Comfortable, didn't do anything very well. And then they fell on their face, and it gave AMD and others a chance to close the gap. And there's a lot of changes that they missed. They missed mobile. They missed AI and accelerated compute. And they're paying for it now. And when Pat says it's going to take until 2030, it shouldn't be a surprise. It took 10 years to break it. It's going to take 10 years to fix it. I think it always was. It was a $67 stock a couple years ago. It was a $67 stock in the year 2000. Yes. Yes, it was. Well, stock in the year 2000. Yes, yes it was.

Well, we're watching tonight. Either way, good stuff. Tracy Raskin, don't be a stranger. Safe travels back. Anytime, anytime. Right? I think Morrison said the West is the best. Thank you.

All right, I'm next. Shares of Southwest Airlines, they're down. The airline announcing it is stopping service at some airports. Maybe we'll name the airports, talk more about love and why investors aren't loving that news. Next. All right. There is a lot of news on Southwest Airlines today. And investors, they're not loving it.

Let's turn it over now to the hardest working man in TV and definitely the hardest working person, CNBC, Phil LeBeau, who's been covering everything the last few days. Phil, thank you. What's going on with Southwest? They need a reset, Brian. That's the most simple way to put it. They reported a wider-than-expected loss for the first quarter. And Bob Jordan, when we talked to him, said, you know what? We've got to shut down those markets that are underperforming.

That's why they're pulling out of Syracuse, Bellingham, Washington, Cozumel, as well as Houston, George Bush. And that's just the beginning of what they're doing. When you look at where they are, they are being hit hard because they are a 737 only fleet. They had ordered a whole bunch of Max's beginning of this year. Think about this. The beginning of this year, they expected to take delivery of 80 737 Max's this year. You know how many they're expecting to get right now? 20.

You can't grow your airline. You cannot increase your revenue if that is what is happening. And for Bob Jordan, he's in a tough spot. He is stuck. He's got a 737 only fleet. He had hired pilots. He had made investments expecting to grow. That's not happening. Here's what he had to say this morning when we talked to him about being stuck in this

situation with regards to the MAX. We support Boeing taking the time to fix their issues, become a better company because that is good for Southwest Airlines and the country long term. But there's no doubt this is a significant issue. Re-planning, adjusting schedules for our customers, and yeah, we're significantly down from our originally planned delivery. By the way, not all of the issues at Southwest are related to the problems with getting more MAX planes. They also need to generate more revenue, Brian. And to that end, Bob Jordan told us this morning on Squawk on the Street, they are studying and will likely implement changes in terms

of how they interact with their customers and what customers can expect on a Southwest flight. Most notably, don't be surprised if you see a change in the one seat for the entire plane approach that they have used from the beginning. Does that mean that we'll see a business class? Does that mean that they will now allow people to pay extra to pick specific seats? All possibilities there. Bob Jordan will likely announce something later this year as they look at new ways to generate greater revenue.

And we all know what happens with the airlines that have business class or differentiated sections where people can pay up for a little extra leg room or a little extra service. Yeah, they're doing it. And that is revenue that Southwest wants to capture. Nothing announced today, but don't be surprised if you hear something later this year. You know, I know Frontier is not Southwest, but kind of a similar type model. And now Frontier, I see, is rolling out a business class type product of its own where people want that convenience. Southwest, I mean, since Herb Kelleher built this thing years ago, chain smoking in his office, has been a unique thing in air travel. Is it possible, Phil, from what I'm hearing, that Southwest is starting to realize we might have to unsouthwest ourself a little bit. The business model has to change to a certain extent. It does.

Look, they still have incredible brand loyalty. There are people when I fly around this country, they swear I fly Southwest, nothing else. They love that they don't pay for bringing their bags. There's no bag fee when you go on Southwest. And there is a lot of conveniences with Southwest that they love. What they don't love in terms of the last few years is it's underperforming. And if you are Southwest, if you look at the rest of the industry and you realize the revenue that is being generated with some changes in business models, you're saying to yourself, maybe it's time we change as well. Fascinating times for Southwest and its investors. Not a great day today. We'll see. Phil LeBeau, looks like you've got a flight to catch. We'll let you go. Phil, thank you.

All right. Coming up tonight in about, I don't know, 20 minutes, Microsoft's going to roll out their numbers, going to roll out their guidance. We're going to talk about the key themes, the metric that all of you need to be watching as the market claws its way back. Let's get a check on the market averages before we go to break. Again, at one point, the Dow down 707. Now you've got a bunch of stocks up. We are still lower, but the S&P is probably going to only in the day down a half a percent. Who'd have thunk it? We're back right after this. All right. Do not forget to tune in to Last Call tonight, 7 p.m. Eastern.

The host, better than average, Peter Diamandis. He's a billionaire, big tech investor. He's going to talk to us about tech, his positions, and why he is optimistic. Very bullish on the future. That's Last Call, assuming the host survives New York City traffic. All right. We are all over today's big market swings. Up next, UBS's Julie Fox, here to break down all the action on the trading day,

how she is navigating it, and today's drop and comeback. And, of course, the big earnings after the bell. That is Microsoft. That is Alphabet as well. You've got Intel, too. There's a lot more to do. And guess what's coming up? The market zone. You've been waiting all do. And guess what's coming up? The market zone.

You've been waiting all day. And it's next. Now you've been waiting. And now we are in the closing bell market zone. UBS Global Wealth Manager Julie Fox is here to kind of break down what happened today. Big reversal. Down day, but a big reversal. Plus, it's from a tech earnings trifecta. And over time, you've got Dee Bosa on what to expect from Alphabet,

Steve Kobach on Microsoft, and Christina Hartzenevelos on Intel. But before we get to all them, we're going to get into some news on Paramount, breaking news on Paramount. Alex Sherman, all over the story since the beginning. Alex, what are you learning? Hey, Brian. So, look, there seems to be some momentum in terms of getting a deal done from Skydance Media and Paramount Global. This has been an ongoing saga for about six months now. I'm told that the sides are moving a little bit closer toward coming up with final valuations for Skydance, around $5 billion for new equity

that would dilute current common shareholders in Paramount Global, which is why you see the stock down. After my report, investors that are common shareholders, not a huge fan of this deal because of the dilution. But the Skydance pitch is that this company will remain a publicly traded company only with 45 or 50 percent of the company owned by Skydance and its private equity backers. So common shareholders can participate in the upside after there is a change in leadership here. The CEO of this new company would be David Ellison, who runs Skydance Media. The president, I'm told, would be our former CEO, NBCUniversal former CEO, Jeff Schell. So we're moving closer toward a deal. Maybe the month of May could be finalized, I'm told, if things go right.

But there is one major hurdle still, and that's that Charter Communications, the second largest U.S. cable company, still has to come up with a renewed carriage deal with Paramount Global. And media watchers can remember that Charter struck a hard bargain with Disney. In fact, blacked out Disney networks. They lost Disney networks for about 10 days before ESPN, before a deal was reached. Okay, a lot of questions. No time now, but Alex, I have a feeling we will see you on last call. Alex, thank you.

Great stuff. Let's get out of UBS with Julie Fox, not just on today. Julie, a little scary at the beginning of the day, that GDP number coming in weak. We've had some hot inflation data. I mean, are we ready to use the S-word, stagflation, or not yet? Well, I think the mood of the market right now is very anxious. Today's GDP report, like you said, did not help. Investors want to know what comes next when it comes to inflation and the Fed. But we're still positive on stocks for 2024. Nothing over the past few weeks. The market declines, worries about inflation, geopolitical concerns has changed

our market outlook for 2024. And we're sticking with our year end target on the S&P 500 of 5,200. That's another 4% gain from current levels, so not huge upside. But again, when you factor in the move we've had so far this year, we could be looking at a full year gain of 10% in the S&P 500 for 2024. And that's a very respectable gain, especially coming off the 24% gain that we saw in 2023. You still in yield to rate cut camp? Yes. So we are still in the two rate cut camp. We believe that the Fed will cut rates two times starting in September. Earlier in the year, we were in the three rate cut camp. And we've softened that and our Fed expectations somewhat. We think the odds of a sustainable reacceleration of inflation are low. We think consumer spending won a sustainable reacceleration of inflation are low.

We think consumer spending won't be as strong going forward as it was the past few months. And also that shelter costs will continue to be reflected in a more favorable way to the inflation print. So that's why we still think the two rate cuts are on the table for this year. Yeah, I mean, and I tried to impart this earlier. I know today was scary at the beginning. GDP not good, Julie, but we were we're actually still higher on the week. I mean, markets well off their lows. It's like we're acting like it's doom and gloom. But stocks are still higher for the week. I mean, there is an underlying bid, I think, to the market.

Yeah, I mean, I think that there is still more upside ahead in stocks, although more muted. Earnings will be the key to turning around the mood of the market, which has been negative in recent weeks. I think it's important to stay invested. And we still think there's opportunities out there, primarily within tech, and believe that there are pullbacks in tech and other sectors that are opportunities. Yeah, crazy. What's the next most important thing to you? Is it corporate earnings?

Is it that PCE tomorrow? Is it something else, Julie? Yeah, I think we need to keep an eye on just some of the key things in the market. We still have the other risks that could be out there with the inflation as we continue to keep an eye on what's going on with interest rates in the Fed. Julie Fox, thank you very much. Appreciate your views as always. All right. Speaking of corporate earnings, we're just a couple of minutes away from the company formerly known as Google. Let's get a Deirdre Bosa with a preview of Alphabet's earnings. A to Z.

Throwback. So, Brian, Meta raised questions that are relevant for Google as well. When do we see more AI monetization, a peak in spending? Now, Google plans to spend more on CapEx this year than last year. And as for revenue realization, that will largely show up in the cloud. Its core search ads also largely in focus because that gets at this innovators dilemma that Wall Street has been worrying about. Last quarter, that unit was soft, raising questions about competitive pressure from chatbots. And on that note as well, it'll be important to hear from Sundar Pichai and others about how they plan

on ruling out Gemini to a broader audience, something that has been kind of slow to do. Google also needs a new CFO. Ruth Porat moved into that new position of CIO and president nearly a year since that announcement. So we'll see if they've made any progress or have anything to announce tonight. And finally, there may be a small chance of this, but some have been looking for a dividend, especially after Meta surprised markets by issuing one earlier this year. That could offset some concerns around AI spending. Back to you. Well, we go from AL to AP in the alphabet as we work our way up.

Steve Kovac here with what we can expect from Apple. No, we're going to do Microsoft instead. Microsoft. Yes. So Microsoft is reporting up to about, I'll do Apple free next week. How about that? Oh, that's next week. That's the bad ink.

I'm just a fill-in substitute. We didn't watch a movie. It's okay. So with Microsoft though, Brian, we're looking to the cloud, not necessarily co-pilot, to get an idea of how AI is actually making money over there. Azure growth is going to be the best hint we have for that whole theme that we're looking at. We saw last quarter that 6% of Azure cloud growth was due to artificial intelligence.

We're going to be looking for that number to grow. As for Copilot, Microsoft does not really do a good job telling us how well that is performing. That's, of course, the AI assistant. It sells to businesses for $30 per user per month. Any color they give on that, though, is going to drive investors wild. And then we've got CapEx,

like Deirdre was talking about for Alphabet. And like we learned last night, if there's an increase in CapEx that's unexpected, that could rattle some folks as well. So we'll be paying attention to that too, Brian. And I'll have Apple for you one week from today, I promise. We're still working our way. M is still after AL in the Alphabet, so I was directionally correct. But now we're going to go backwards down the number line to quote Fish. Christina Hartzenevelis, Intel. Did I get that right? Is it Intel? You got your ABCs correct. Yes, it's Intel. Even though Intel's chip foundry

business lost $7 billion last year and even more expensive this year, the CEO, Pat Gelsinger, is promising this year is a trough, aka the bottom. Investors are hoping that's going to be the case as well for Intel's other business segments, especially PCs and servers, because they contribute so much to revenue. There's been some conflicting messages about this PC recovery. Recall that Intel guided Q1 below estimates, and that's what we're reporting, and PCs are a major contributor to that revenue line. That's why both HSBC, Raymond James recently both cut their price targets for Intel and Bank of America worries about elevated PC inventory levels. But they think the Microsoft 12 launch later this year

will help the refresh cycle for PCs. Another area of focus is the server market and any momentum from upcoming Intel products like Granite Rapids, Sierra Rapids. But there's always that fear, that big fear that AMD is stealing even more market share in this category. And then you've got some upswing shares, though, still down compared to the SMH on the yearly due year to date basis. Brian? Christina Partsenevelis with Intel after the bell as well. And we appreciate it, Christina. Thank you very much. I can't hear anything we got a lot of people here from all over the place cheering that is