Closing Bell - Closing Bell: Moment of Truth for the Markets? 3/2/23

Episode Date: March 2, 2023

Is a moment of truth for the markets fast approaching? JPMorgan’s Jason Hunter says it could be. He explains the key level he is watching. Plus, Hightower’s Stephanie Link is betting big on China. Why she thinks there’s big opportunity overseas. And, market expert Mike Santoli breaks down the state of activism and what it might mean for the broader market. 

All right, Kelly, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 at the New York Stock Exchange. This make-or-break hour begins with stocks and bonds at critical levels. Here's a look at the scorecard with 60 minutes to go in regulation. We do have a little bit of a ramp here as we approach this final hour. Dow's good for just about 300 points. S&P's been around the 200-day moving average all session long until recently, ramping above that, too. 3940 is the number to watch, but we're 3970 now. The 10-year note yield closely watched, of course, above 4% all day long. We're going to watch those closely as we head into the end. And check out shares of AMD near the highs of the day on my scoop that Daniel Loeb's third point has taken a new passive position in that stock up

two and two thirds percent. We'll have, of course, more on that coming up as well. All leads us to our talk of the tape is a moment of truth for the markets fast approaching. J.P. Morgan's closely followed technician says it could be a level for stocks he argues is so important that if it breaks could lead to accelerated declines. Jason Hunter joins us now on the phone. He's head of technical strategy at JPM. Welcome. It's good to have you on our program. I mentioned off the top here, it's the 200-day moving average that everybody seems to be fixated on. You are watching a different level, though, on the S&P. Can you tell our viewers what it is and why? Thanks for having me. Yeah, really, it's a cluster of levels in the 3900s,

including the 200-day. But in the same area, you also have the 50-day, 100-day moving average. And more importantly, if you look at 3900 in that area, roughly, and go back to May of last year, as the S&P has traded in this very broad range, it's traded around that either as support or resistance. So obviously, today, you could see the market trying to bounce from that key area. But we think the pressure increases on the downside. And even if we bounce over the near term, we're expecting an eventual break through the downside and an acceleration to lower price levels. How would you describe where you think momentum is in the market right now? What started the year out with some newfound momentum has obviously come to a bit of a stop recently

as rates have continued to move higher. So how would you assess that? Yeah, so I would say if you look at the lower frequency momentum signals, which, you know, as a technician, if you just look at the charts in isolation, things like the Golden Cross, the 50-day average moving above the 200-day average, statistically actually have decent forecast value for a 3- to 12-month period, and that's to the upside where it does better than random trade entry. That said, we also incorporate a macro overlay to our work because these signals don't just operate in a vacuum. You know, and one of the things we highlighted, if you go back and look at the early 1990s, the golden cross triggered right in front

of that early 1990s recession. And when we think about things like the yield curve having been inverted for a year, you know, backward-looking S&P operating leverage declining for a year, the market now projecting Fed policy rates to more than 2x, you know, theoretical neutral, you know, the odds that you get a signal failure, we think those are pretty high here. So we're not, we didn't follow that momentum signal. In fact, we were saying sell 4,100, 4,200, and look for the eventual break to the downside. You also argue that the S&P looks overvalued by something you point to, the money market curve. I mean, I want you to explain that to me. Are you just simply talking about there are other alternatives outside of equities where you can get a better return than in the equity market, one of those being in pure cash and the interest rates that you get paid for now?

So while that theme aligns with what we're saying, what we're actually looking at in that model is the shape of the money market curve, which is to say how high is the Fed expected to raise rates over the near term and then how many eases are priced in on the back of that. And for that, we're looking at the forward OIS market to see what the market's expecting that Fed policy rate trajectory to be. We've used that for the better part of the last year, which has done a very good job explaining the S&P as it's been mostly multiple derating in line with Fed expectations that they're going to become more and more hawkish. If you look at the S&P over the past month, because we've had hot data both on the demand side

and the inflation side, you've seen the money market curve hawkishly reprice quite a bit. And the S&P has actually not sold off nearly as much as you would have thought given that. So even with the sell-off we've had, we've gone from two standard deviations overbought to about one and a half standard deviations overbought. On fair value, give or take, is about $3,800 on that model, by the way, how the Fed's priced right now. Yeah, interesting. Jason, I appreciate so very much your time this afternoon. We'll talk to you soon. That's Jason Hunter. He is, as we say, the head of technical strategy at J.P. Morgan. Now, let's welcome in to have more conversation about where this market could be heading,

Stephanie Link, a CNBC contributor, of course, also of Hightower and Dan Greenhouse of Solus Asset Management. It's good to have you both with us. So, Steph, I said, you know, coming in today, critical levels, 200-day moving average on the S&P. Got a little bit of a move higher here as we begin the final stretch, but also that 10-year above 4%. And then you have the overlay of the technicians and what they're watching and the real critical levels to suggest whether we really are going to have more downside or not. Yeah, I mean, I think today we have a little bit of Dan Loeb effect, right, because he is very bright and he has a great track record. And for him to get aggressive on a name that he sees, there's a lot of opportunity, especially in the second half, especially after NVIDIA.

And we're going to talk about semis later. But I think that's a vote of confidence that there are places in the market that you can invest in it's not overall the broader market right that you want to be invested in this year you want to you want to be a stock picker and you mentioned that the market is expensive at about 18 times forward but there's so many stocks out there scott that are not that expensive in the meantime the broader averages i think were in a trading range we've talked about this endlessly and i thought it was sort of interesting today that everyone now expects after the unit labor cost number came out and inflation continues to be persistent. Everyone's talking about, OK, more rate hikes this year and then all of a sudden more rate cuts next year. They're nowhere close to cutting. That's not even in the vicinity of their thinking at this point.

Yeah, that's for sure. We are all data dependent and the inflation numbers, no matter which numbers you're looking at, CPI, PPI, core PCE, services, ex-housing, it's still too high and too hot. And so that's why you're going to continue to have the Fed being very hawkish. And so I think it's very premature to start thinking about and starting to bet on a Fed reversing next year. Bostick today, still on the 25 basis point camp. He says there's a case to be made that we need to go higher. We're going to see. You're going to get Dan Greenhouse jobs report a week from tomorrow. You got CPI not that far away. You got the ultimate Fed meeting coming in play, too. So how do you see it right now? I mean, listen, it's as difficult today as

it was a week ago, as it was a month ago. There are so many different cross currents. And Steph makes a good point about about the market pricing and rate cuts. I don't know why anyone's even thinking about rate cuts when we're still not sure what the ultimate path for the rate hiking cycle is going to be. At this point, you're certain to see a rate hike later this year. You're certain to see a rate hike after that. At this point, you're probably talking about July as well, which is going to take the Fed funds rate up close to 575. Well, see, that's a little bit further down the road than the market is willing to accept at the current time. We figure, OK, you get 25 basis points in March, you get another May, you get another June, and then maybe you're done. You're even thinking about

going higher than the market thinks right now. Well, listen, if there's one thing we can say for sure, it's that just about everybody's been wrong about this entire conversation for the better part of a year or a year and a half. When you look back at the stuff that everybody has said and done, it's all basically fluff in retrospect. It has no weight at all because the reality on the ground proved everybody incorrect. And so I think at this point, with the stickiness of the broader levels of inflation that Steph alluded to, the confidence interval that we should have around where we think this is going to settle out, I think should be wider

than normal and even wider than it was a month ago. It's proving to be very, very difficult. So Steph, I want you to tell me what I'm supposed to do with the fact that earnings estimates continue to come down. Margins are coming down, the bread and butter of how you look at stocks, right? You always talk about margins. So if margins are declining down, the bread and butter of how you look at stocks, right? You always talk about margins. So if margins are declining and earnings estimates are coming down at the same time as a result, but interest rates are moving up and at the very minimum staying a little sticky where they are, how do you make a positive case for stocks in that environment? I think there are certain sectors and certain stocks, Scott,

that margins are actually holding up well because they have pricing power. We talk about this all the time. We're going to talk about a stock in the next block about that very fast, right? You saved that thought. I'm teasing. I know how to do this, I think, at this point. All right. But, no, my point being is in industrials, in materials, even in energy, there's so much pricing power.

And even within energy, these services businesses, they are absolutely minting money. Numbers are going much, much higher in that sector. And that's an out of favor sector at this point. But I could pick a bunch of stocks within that sector that I like very much. I'm overweight industrials. You know that. Materials, as I mentioned, they have pricing power. Look at Cleveland Cliffs, the fourth price increase today. Yeah. Jim Labenthal was talking about that very one. Of course, he owns it. And he mentioned that on halftime as well. And I will just say this. On retail, I actually feel better about retail.

If you look at the inventory numbers, they've been coming down year over year and sequentially across the group. That actually does bode well for margins in the second half of the year. I know, but you couch it within the second half of the year. Because right now, margins are getting hit in retail because there's so much discounting because of too much inventory. But the inventories have been coming down since the first quarter of last year substantially, right? So that's what's key going forward. And I think that if it's going to happen in the second half of the year, I want to own them now, right, ahead of that. All right. Greeny?

Yeah, so just about the broader market, you've brought up interest rates before. What I think is particularly interesting, and maybe it's gotten talked about and I haven't seen it, the last time that the 10-year hit 4% was call it early November. November. Yeah, give or take. The S&P 500 was lower then, was cheaper then, credit spreads were wider then, and optimism was higher then. And I just, I find it so interesting that as we've returned to 4% on the 10-year, which, by the way, isn't any sort of important level economically speaking, but obviously psychologically. Psychologically, it is, for sure. Round numbers matter.

I just find it interesting the degree to which we continue, we markets, continue to ignore the reality of higher interest costs. And I think the hire for longer component in this discussion becomes really important with respect to margins and the debt markets. It's one thing if you raise rates to 5%, 6% or whatever, and then they come right back down. You leave rates up there for a year, you're chumming a lot of water for refinancing risk, for inventory levels. It just becomes incredibly problematic relative to a lower interest rate environment for stocks. And I think the margin story is just, companies have never not defended margin. And when you start losing pricing power on the top line, for a given company, you're talking about 50 to 70 percent of your costs are labor.

And there's just, I struggle to figure out another outcome other than eventually certainly a cessation of hiring, if not outright layoffs. Talk about pricing power, what consumers are not so much what they're willing to pay, but what they have to pay. If you go to a place like Kroger, for example, Rodney McMullin, CEO on the network earlier today, what customers are telling us they're already behaving like they're in a recession. When you hear that, what do you think? I don't know. I mean, there are pockets, right? Certainly people are going to the grocery stores. We heard that from Walmart. Of course they're going, you got to eat, but you can trade down. Right. But they're buying more on goods in the grocery stores, right? And Walmart told us that and Target told us that. Kroger told us that you just mentioned. But at the same time,

the services part of the economy is humming. And that's a bigger piece of the overall economy. So then answer my question, because I asked, I think, Jim Labenthal the same thing, and I wanted your perspective, too. Which aisle do you believe in more or will more influence the way you want to play this market, the aisle of the airplane or the aisle of the grocery store? OK, I want to own the airplane for now, but it's not going to be forever. But I think that there's a lot of pent up demand, not only here, but overseas. We've had three years of pent up demand in China that they haven't even begun to see the strength at their retailers,

in their consumers and all of that. So I think that for now, we'll see when I change my mind. Okay. But I do still want to be involved in that segment within consumer. Part of my point, I think, here, too, is that you need the consumer to hold up, Dan, or the whole story becomes real specious. Because everything right now is, well, the consumer's held up better than people think. The consumer's the one that's going to lead this to a soft or no landing if that scenario even unfolds. It's not going to be, you know, corporates aren't going to take you there. Manufacturing's not going to take you there. It's the consumer holding up that's going to bring you to the promised land.

Yeah, that's exactly right. And I'm fond of saying to ex-clients and current investors, you don't need a Ph.D. in economics. Just watch the weekly jobless claims number. And, you know, I can't emphasize this point enough. It keeps coming in sub 200,000. Pre-GFC, if that number was under 300,000, it was an astronomically low number. So sub 200,000, especially when you consider how much larger the economy is, the labor forces, et cetera, et cetera, it's just incredibly, incredibly strong. And there's no doubt that that will turn at some

point. But until it does, trade down aside, you just have to continue to bet on the consumer. And the credit card data continues to bear that out. I want to just bring up, since I'm looking at it right now, and we have seen the market pick up some steam as we began this last hour, Dow's good for better than 300. NASDAQ is up a half of a percent. AMD, which we mentioned at the top of the program, if we can show you again, it's nearing a three percent gain. That would be its best levels of the session again on our report earlier today of third point taking a new passive and it's important to note passive position in that stock but nonetheless Steph as you pointed out at some point you look at growth names that may have been overvalued at one point but corrected to the point where they overcorrected, at least

in the minds of some smart investors. Absolutely. I mean, this stock used to trade 50 times forward estimates. At one time, it traded at 87 times. I remember because I was looking at it, I missed it and I thought, well, can I justify it, the valuation? And I just, I never could. And so now here's the thing. The E is so depressed at this company right at this very point. So it does look like at 26 times it's not a bargain. However, if you think data center is going to turn in the second half of the year and NVIDIA gave us that data point, we might hear that from Broadcom tonight, but second half of the year picks up in data center. They already guided down on PCs down 10 percent for the remaining of the year. So expectations are low. And oh, by the way,

gaming also probably is troughing. So if you think earnings are troughing and you have upside in the second half of the year, that's why it's kind of a compelling story, even at 26 times. You got Broadcom. I'm glad you mentioned it because we're going to walk you right up to the earnings as well that are in overtime. You'll be back with us to help us do that. But leave us, Mr. Greenhouse, with a thought before we move on about the kinds of things you're going to be watching as we head into the end of another week as we've just begun the month of March. Yeah, listen, I think you touched on it before and everyone's hit it ad nauseum over the last couple of months. Just the resilience in the U.S. consumer, the resilience in corporate earnings. I know obviously expectations

have come down and will probably continue to come down further. You just have to be impressed. And to tie this all together, the stock market's up however much percent off the October 12th low. Who's outperformed? Tech. I find it so interesting. If you had told me that we were going back from the low threes to 4% on the 10-year, obviously infinitely more on the two-year, would tech outperform? I would have said no way, and yet here we are.

Yeah, and we're also watching utilities, one of the worst sectors to start the year. The bond proxy has taken a pretty good hit as rates have risen as well. Dan Greenhouse, thank you very much. Steph, I mentioned you'll come back with us in just a little bit. Let's get to our Twitter question of the day. We want to know, are you worried about stocks retesting the October lows? You can head to at CNBC closing bell on Twitter. Vote yes or no. We got the results coming up a little bit later on in the hour. We're just getting started, though, right here on closing bell up next. Betting big on China.

Stephanie Link making a fresh trade. She teased it just a few moments ago. She reveals the name she is buying more of, why she is seeing serious upside overseas. And later, your rising rates playbook. Another top technician breaking down how to best trade the move higher in bond yields. We are live from the New York Stock Exchange. You're watching Closing Bell on CNBC. We're back on Closing Bell. About 40 minutes to go. We have a nice little rally as this last hour begins.

Dow's good for 300 right around the highs of the day. S&P 500 has bounced well above now. It's 200-day moving average. Maybe some positive comments from Atlanta Fed Chief Bostick leading to that. There's the Russell 2000 bottom of your screen, too, trying to stay in the green. Let's get a check on some top stocks to watch as we head into the close. Christina Partsinovelos is here with that. Christina? Well, that rally is not helping shares of memory chip maker Micron. They're lower this afternoon after company management spoke at a Susquehanna conference today and said they would speed up layoff plans and reduce head count by roughly 15 percent this year. That's why the stock is down 2 percent. It's also reacting to the CFO's comments, Mark Murphy. He said the customer inventory levels remain elevated

and there's still a significant supply-demand imbalance in the industry. Now let's talk about fuel cell names. They're under pressure today after a big miss on revenues from Plug Power last night, so it's weighing on the entire sector. Plug Power down about 7%. Solar Sox also in the red today, despite a fairly bullish note from Scotiabank. Sunrun, let's bring that up. Look at there, 3% lower.

Scott? All right, Christina, thank you. We'll see you in a bit. That's Christina Parts of Novelos. Caterpillar, top performing Dow stock over the last six months, gaining nearly 40% over that time. The lady to my left knows that better than most because she owns it. And she sees more upside ahead, which is why she bought more. Today?

I did, yes. It's now a very large position, probably my largest industrial, if not the one or two. Oh, is that right? Yeah. China play? It is. But let me tell you, they're just hitting on, they're executing on all cylinders, hitting on all cylinders.

Last quarter, they grew earnings adjusted up 43 percent year over year. Operating income up 78 percent year over year. Margins came in 130 basis points, better than expected. We talk about pricing power. They've got it in spades, double digits. And I think there's more to go. Infrastructure, infrastructure play. Infrastructure, for sure. And they're also streamlining their businesses. They're just doing a better job in execution. But yes, to your point on China, that's why I pulled the trigger today. That PMI number was extraordinary yesterday that we got from China, the highest since April of 2012. So there is a recovery happening in China. I know this one kind of gets caught up in the China talk.

It should. It's about 10% of their total revenues. But Asia-Pac in general is about 20%. So it's material for them. And I think it could go much higher. And I also think this is a hit in energy play. And you know I am positive on energy as well. 15.8 times earnings. So that's not extreme.

A 2% dividend yield. And their free cash flow is building. So I like this story a lot. And I like China a lot. Well, we're showing the other names that you own. Nike up today. Estee. Starbucks. You own all of those because of the China angle, at least in part. In part, for sure. I mean, Estee Lauder, 30 percent of their exposure is China and travel. Right. And that's all of a sudden getting better. That's number one. Nike, it's not only China, but I do think that's important.

It's about 10% of their total revenues, but DTC transition, right? And that's a higher margin business. And that grew 35% last quarter alone. So I think the inventory is the big story. And I'm very encouraged, as we talked about in the last segment, that inventories are getting better. They're not perfect by any means. There's still a lot we have to go through, but they are improving and that should help the margins. What about Apple? I mentioned that because obviously,

I don't know, 20% revenues come from China, don't they? It's a big deal. And the stock today, as we note what's happened in the market as we come on the air here for closing bell, we'll call it the highs of the day. And Apple kind of is, too. A stock that was negative earlier looks pretty decent now. It is. It's definitely a China recovery story as well. But it trades at 25 times earnings. And you get, like, upper single-digit earnings and revenue growth.

And so I just don't find that attractive. I mean, I just told you Caterpillar grew adjusted earnings at 43%. Now, it's a cyclical company. So it's not going to grow 43% forever. And I would argue Apple definitely is more sustainable on revenues and earnings, but it's still not compelling enough for me. And plus, I own a couple of semiconductor companies that actually have exposure to Apple. Give me a quick read just on, well, I know one of those two. The mega caps in general. Yeah. Questionable. Where are you? I know Met of those two. Yeah. The mega caps in general. Yeah. Questionable.

Where are you? I know meta is your big play there. Mega cap tech. I kind of feel like, well, there's issues, right? I mean, Alphabet, we've talked about, and I think that Microsoft is a real threat, right? With Bing and Search, and as they increase market share and what that's going to do to potentially do to Alphabet's operating income. A 5% move in Microsoft in terms of market

share is 9% to 10% in operating income hit to Alphabet. And I just don't think at 18 times, it's really pricing that in there. So I'm kind of, I'm lukewarm on the negative. I know we're supposed to see in the market zone, but stay here just for a second, all right? Because I got another story I know you're going to be interested in. It's from our own Alex Sherman, ESPN holding conversations with major sports leagues and media partners in a big push to become the hub of all live sports streaming. CNBC's, CNBC.com's Alex Sherman breaking that story, joining us now with the details. What do we have? Hey, Scott. Yeah. Reporting that ESPN has held conversations with both the leagues and other media companies so these are actually rival media

companies for espn to be kind of your your first stop shop for all live sports viewing in other words what they are gauging interest at this point for both media partners in the leagues is for users to be able to go on espn's free app or espPN.com and for there to be a feature on the app or in the site that would basically port a user to wherever a game is streaming. So this includes both regional sports networks, and I have reported and we have talked on this network about sort of the crumbling of the regional sports network model. Several of those companies in major financial trouble right now. This would allow a user to potentially directly sign up for a local sports network from the ESPN website or potentially the other solution would be at a national level. We're talking about Apple TV Plus or Amazon.

You could go directly to that streaming service from the ESPN site. So it would be sort of a strategic reconception of what ESPN is today. Interesting. Alex, I appreciate that very much. I'm glad that we have Stephanie Link sticking around just because you own Disney. I do. They're thinking a lot about the future of ESPN. It's big on Iger's plate moving forward. And everybody thought that they were going to sell this or spin this out. They can't. It's a free cash flow machine. And I like the fact that they're trying to monetize it even better.

He didn't completely shut the door on that, by the way. I don't think he will. No way. That's the cash cow. And that is something that he needs very desperately at this point. But I love that they're trying to find ways and be creative. And this is what we talked about. He comes back in and he's going to focus on content any way he can

in any division that he can. In the meantime, he's also cutting costs. I like that. All right. I'll see you in a bit for real this time. That's Stephanie Link. Up next, are activists really driving positive change or are they just getting in the way? We'll debate that coming up. Plus, getting another quick check on where things stand as we head towards the close got about 30 minutes to go highs of the day for stocks 32 997 for the dow we're going to watch that number closely 39 78 so we're above the 200 day on the s p as well closing bell back in two 30 to go let's show you the markets, which are at the highs of the day. There is the Dow 33K taking that back. It's good for 341. But an interesting session, to say the least.

Mike Santoli, our senior markets commentator, is here with me now. So Bostick says 25. Yeah. Loeb does a little bottom fishing, maybe an AMD. And here we are. Any excuse? I think the market's playing a little bit of small ball here in the sense of, look, we're in this range. It's been this slow grind lower. I think it kind of was wearing on people's tactical mood, basically feeling like, uh-oh, if this level doesn't hold, we're in a little bit of trouble.

We've got some daylight with the fact that we didn't break down below the 200-day average. It just kind of tempted you to sell it below that a little while. And yes, Bostick coming out saying he's in line for 25 basis points at this point maybe just took a slight bit of that hawkish edge away from what we've been trying to come to terms with, which was how high, how long. And it also shows, I think, that getting up above 5% on the short end of the curve

is not necessarily something that stocks can't deal with. It's really about the open-ended climb from there. Yeah, you're above 5% on the six-month and the one-year. You know, you're approaching that on the two. But the 10-year is sitting at 407. I mean, it shows at least some level of resiliency that the stock market didn't fall apart as you continue to move above four. Exactly. And, you know, I just went back to look at when we went above four in the fall, in October and November. It was like three or four week period. And the market had already

been going down for a month. Sounds familiar to what now that was going down much more quickly back then. And the market chopped around and actually made a little bit of progress until we shot up to 4.2 or so. Then it got a little bit nervous. And I don't think that's the only thing going on. We also had peak inflation at that moment where it was really finally coming to terms that maybe we had hit the peak. So I don't think the level is necessarily, you know, kryptonite for the market. It's not comfortable. And again, we're just basically with the S&P. We're above yesterday's high. So that's as much as you can say about the progress we've made on a week to day basis.

I mentioned Loeb with you in passing. It's a passive stake. But activism in general has been hot and heavy this year. Salesforce today. Thank you if you're in that stock for the Dow. We're having a great day to Salesforce right now is up better than 11 percent. Good guidance. They do a buyback. It raises the question, and I wanted your input on it, whether activists are actually driving some of the change that we're seeing where they're just getting in the way. Right. I mean, Iger did what he did. Peltz said, hey, we put the pressure that made them do that. Salesforce does what they do, as Benioff did. Elliot says, hey, we put the pressure on them to do that. I would say it's obviously case by case.

In my view, the Disney situation was there was only a certain set of things that Iger could do in the first month or two that he was in the job, set the priorities, talk about cost cutting, getting streaming to break even better, more quickly, all the things that are kind of obvious out there. Peltz coming in and saying, by the way, you overpaid for Fox four years ago, didn't exactly set the course from here on out. For Salesforce, I would say the activists were an accelerant, maybe a catalyst. Maybe let's focus in our attention on the things that we can handle right now

and try to maximize the margin benefit up front as opposed to taking a longer period of time. In general, I feel like the activist toolkit is a little bit unclear right now because it used to be lever up and buy back a ton of stock. This doesn't necessarily seem like the moment you want to lever up. Well, yes, exactly. The cost of capital is a lot more expensive than it was. You want to necessarily trade a stronger balance sheet for buyback. Or, you know, I think it's a lot of it on the cost side. Either it's CEO comp is too high, which is what Loeb is saying to Bath and Body Works, or just, you know, I think it's a lot of it on the cost side. Either it's CEO comp is too high, which is what Loeb is saying to Bath & Body Works, or just, you know, get margins in order.

You're under-managing the business and try to, you know, run a tighter ship as opposed to make broad strategic moves or put the company up for sale. When Salesforce did announce the buyback, I couldn't help but think about the debate that we've had over the last few weeks in particular about this newfound maybe war on buybacks. And, you know, you've made the point that not all buybacks. And David Einhorn made the point yesterday with me on the halftime that not all buybacks are created equal. For sure. They're obviously not.

It depends what price you pay, what the objectives are, whether you're kind of issuing a bunch of stock with the other hand at the same time. One thing I found interesting about Salesforce after the results were announced is, and this was in one of the analysts' reaction notes today, was that the stock-based compensation is going from like 10% of revenues annually down to 8% based on their new margin guidance. Well, the buyback's nice, but it's also good if you're not shoveling out as much equity on the other side. Yeah, a lot of pressure to do a lot less of that for certain. I'll see you in a little bit. All right, Mike Santoli is going to be back with us in the market zone as well.

Up next, we're tracking the biggest movers as we head closer to the close. Christina Partsenevel is back with that. Christina. Well, we're seeing some financial names under pressure with some more layoffs. I'll explain who's involved after this break. We're back at about 20 minutes to go before the close. If you're tired of the chop and the slow grind lower, today's your day. At least this moment is.

Dow is up more than 400 points now. Thank you, Salesforce, obviously accounting for a nice chunk of that. But we said Apple had turned around and went positive as well. Coca-Cola's having a pretty decent day. Microsoft up better than 2%. Boeing good for 2% plus as well as we continue to have a little bit of a ramp as we move closer to the end of this session.

Christina Partsenevelos is back with a look at the key stocks to watch as we approach there. Christina? Yeah, I'm having a good day too. But financial names, not so much. Under pressure. Just look at the sea of red

within the SPDR S&P Bank ETF. Bank of America, one of the lowest, down 1 percent right now. But Signature Bank is the biggest KBE lagger, presumably because of its linkages to crypto. Also, Bloomberg reports a city is cutting hundreds of jobs within the investment banking division. Citigroup shares down only twoenths of a percent right now. Shares of Okta, though, surging 12th, yes, 12th percent after beating earnings and guidance estimates. Analysts at Cowen upgrading the software firm, increasing their price target to $100. Right now it's trading at $80.17. They expect free cash flow to expand on the heels of disciplined cost management.

Our own John Fort caught up with Okta's CEO today and asked about the company's product portfolio. Here's a snippet. If you just look at a simple metric on how capable our sales team is about selling the customer identity cloud, we've seen an increase over the past four quarters in the percent of reps that actually done one of these deals. So they're learning the product, they're learning how to sell it, they're learning the value prop, and they're able to speak to every customer, every organization and say, listen, you should make a strategic choice for identity. And getting it from the leader that can address all of these use cases is the right choice and the right partner to work with. And, of course, we'll have much more from that interview on Closing Bell Overtime after 4 p.m. Good stuff, Christina. Thank you, Christina Partinello.

Last chance to weigh in on our Twitter question. We want to know, how worried are you? Are you worried about stocks retesting the October lows? Go to at CNBC closing bell vote yes or no. We got the results coming up after this break. We're back with the results of our Twitter question. We asked, are you worried about stocks retesting the October lows? The majority of you said yes, but it was pretty close.

But still, right? I mean, the positive market guilty before proven innocent. Yes. Fifty one and a half. Forty eight and a half. Thank you for voting. Up next, your earnings set up. Broadcom.

It's set to report results tonight in overtime, along with a slew of other companies. We've got a shareholder standing by to break down what she'll be watching when those numbers hit the tape. And do not miss the CEO of Snowflake on overtime tonight. His exclusive take after last night's lackluster results. Frank Slootman, 4 p.m. Eastern, Closing Bell is right back. We're 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, Strategas' Chris Verone on his rising rates playbook.

Stephanie Link makes the bull case for Broadcom ahead of the earnings in overtime. It's good to have everybody here. Mike, I begin with you. Got a pretty good day moving into the end here. Yes, Salesforce accounting for more than 100 points of the Dow's near 400 point gain. We'll take it given what's happened recently, though. For sure. And, you know, obviously the yield story

has been front and center for good reason. But I think it's a decent lesson that we were at these levels before in yields. It didn't necessarily knock everything off course. And I think also the context does matter. The little bounce we got today, at least for the moment, preserves the idea that this pullback seems kind of routine. It's not a lot of urgency behind it. You know, if you want to paint the whole picture, it's October low. That looked textbook in some ways.

You know, January, historically significant momentum signals. Typical February consolidation. Seasonals get a little bit better. Midterm election year. Credit in the VIX told you don't panic while the market was pulling back. So it's not all happy. We can obviously have some wrench thrown into that mix. But for now, I think it's still kind of willing to play this in the range, even as people are apprehensive about next week's jobs.

I was going to say you have, you know, a handful of days before the potential wrenches come flying. For sure. It's the jobs report today, you know, a week from tomorrow. You've got CPI, as we said, Fed meeting, even as Bostick says, 25. Yeah. Let's see what happens if the jobs report's hot. For sure. And the market is is to leave those possibilities open, pricing in a decent chance of a half percent. I really think it's all about, though, where does it end up? The market needs to have a line of sight to where we finish on rates. Hopefully in the markets view, it's not a six handle, but maybe it is ultimately. And that would probably require a little bit more work on equity valuations. But so far, it's happening in a slow enough way, in a more orderly way. And

the inflation prints, while not perfectly friendly, are not really wide of the mark that much versus what economists forecast have been. Chris Farone, to you. Nice bounce off the 200 day for the S&P. Let me start you there. Yeah, absolutely. This 3940 level last couple of days has certainly held its first test. But I largely agree with Mike here. These last three or four weeks, I mean, S&P came in six, seven percent, but there wasn't a lot of intensity under the surface on the downside. I think as attention kind of plays to these levels in this 3940, 3950 range, it doesn't tell the whole story, though. Scott, this is a very, very split tape.

And I think what divides this tape is rates. Anything rate sensitive is on the wrong side here. I mean, look at the weakness we've seen in utilities. Look at the weakness we've seen in pharma and staples and REITs and juxtapose that with just the absolute leadership we continue to get from things like machinery and steel and industrial. So I'm not sure the index actually tells the whole story here. There is a very, very divergent set of messages going on when you look at group by group and stock by stock. You sound exactly like what Stephanie Link was saying at the top of our program, right? She adds to Caterpillar Industrial. She talked about cliffs, steel.

So your point is very well taken. You've been more positive, I think, more recently. Are you still, as rates have crept higher since the last time we spoke? You know, Scott, it's not rates up that I think really would worry me. It's actually rates down. Rates up, I think, speak to this idea that there is some window here where risk can still work. I get worried when rates fall. That's the message I think we have to be on guard for as the year progresses here. But what I really want to emphasize, though, and this is important, I don't think we went through the last two years

just to go back to the same type of stocks. And when you look at the top of the market right now, you've had good moves in Apple. You've had good moves in Microsoft. But where's Google? Where's Amazon? Those have not been involved here. The top of the market is not monolithic. And I think what you see often is investors coming out of these periods spend too much time and too much capital trying to time their reentry back into the old leaders. And instead, they miss what the new leadership is. What we're seeing from these machinery names globally, what we're seeing from the industrials globally, that I think is the real story over the next couple of years. That's where we should spend our time and our capital.

Unless you need a good mix of both. And I look at an opportunistic Dan Loeb, for example, which we reported earlier about AMD. Yes, it's a growthy name, but it's also one that had a good pullback with the rest of that space. And at some point, you say enough is enough. Yeah, I think there's certainly some cyclical component to semis here. But, I mean, Scott, it's another group. When you go name by name by name, there is wide dispersion in terms of what the message there is. Now, compare that to something like industrials.

I counted yesterday. You've had 47 industrials on the breakout list over the last several days. I can't find another sector in two years that has been that broad. So that's where I am far more inclined to spend my time. I recognize they're overbought here. I recognize the fundamental group might say they're expensive. But the market's telling us something about these names as candidates for secular leadership going forward.

All right, good stuff, Chris. Thank you so much. That's Chris Verone joining us. I pivot now to Stephanie Ling, Broadcom, the stock you own as we look towards the earnings in overtime. Yeah. So if we take any cues from NVIDIA, we know that their quarter actually wasn't that good, but the guidance was good for data center and AI. And that is 30 percent of Broadcom's total revenues. So there's that. We also know that Cisco had a very good quarter and also, again,

another read through to Broadcom because they have networking, which is about 30% of their total revenue. So I feel pretty good about the out, the guidance for Broadcom. I think the quarter might be very sloppy. And a lot of that is because enterprise is still under pressure. Cloud is still under pressure. But at the end of the day, they have $31 billion in backlog. The stock has massively lagged, this SMH. It's up only 5%. The SMH is up 16% year-to-date. It trades at 14 times.

It has a 3% yield. And they're generating $16 billion in free cash flow a year. And so they increased their dividend last quarter, buying back stock. So I just like this company. It may be down at the print, but I think it would be an opportunity because I like the setup for 2023. There are pockets where your lips are moving and I can't hear a word you're saying because of all the chanting. I'm just being honest with you, Steph. I'm trying really hard.

Santoli's benefiting. He's sitting next to you. Well, now they're quiet. Exactly. All right, please. Chips, though. Do you feel like the worst is behind the space? Well, Micron didn't have great commentary today, right? But then again, it didn't kill the market,

right? It was Dan Loeb who is buying semis. So I think there are pockets within semis. I like the SemiCap equipment space. I think memory is still really iffy in the near term, but I like it longer term and I like their market share. And again, Broadcom, I think not only do I like their mix in terms of their semiconductor revenue at 80% of total revenue, but they also have a software component as well, which is 20%. And I think you're going to see better recurring revenue within software over time. I know you have thoughts on Costco, which is in overtime as well, right? So busy. I mean, I know we talk Broadcom, it's Costco, it's Marvell, it's HPE, it's Dell. So you've got a bunch to pay attention to. I think Costco is going to be great.

I mean, it always is. Usually, though, it sells off on the news. So maybe you get an opportunity. The stock, though, is still a little too rich for me valuation-wise. All right. Thank you for being here as well. Let's do your last word. I was just going to mention just on the semis, I mean, this is not granular.

This is not about which companies are working or not. But just on a market-wide basis, if you use them as a signal, it's still telling a relatively positive story. They're basically at a relative high to the S&P that goes back to something like April. So they've come back, if you like semis, leading in a limited way. They're not back to their highs. But I still think it's OK that they're firm in the face of a lot of else that's going on. You're looking at Costco in overtime, too. It's a, you know, it's an interesting one, you know, given on the consumer, you've got the recurring revenue of the membership fees for that company as well. Sure. You always do, you know, look at it for, first of all, they typically don't pad their margins, right? So

they're always kind of managing to a low margin and essentially trying to maximize value for customers. So it's really about top line. You often have the monthly sales. That's why I think the earnings reports themselves aren't always necessarily that dramatic. But, yes, always a high-value company, probably operating very well. You can kind of blend Walmart and Target, what they've told us in the last two weeks, and see if it's borne out by Costco's number. Also, you know, they do special dividends every couple of years.

I think they might be building up toward one of those as well, for those who like that sort of thing. We've had the two-minute warning, as you probably saw on your screen and heard the sound effect. And as we look into tomorrow, the final trading day of the week, as we kick off this new month of March, what should we be looking for after the kind of day we've had, especially as we approach the close?

I mean, I've been watching the way that small caps have been leaders, even through this slop that we've had here. So again, it's it's it. I agree again with what Verone said. It's very much a discerning market. It's rewarding certain parts of it and punishing others. So I think that that's still something you can sort of hang your hat on. I'm not that focused on $4,000 as a level, but you definitely want to be sort of focused on the idea that if you get any bid in treasuries and if you get any easing back on the yield side to see if the stock market is just kind of spring-loaded

to take advantage of that or if it shrugs it off. Because it feels like, you know, if you did get some relief on the yield front, then stocks could possibly rebuild some of this 5% or 6% loss we've had in the last month. Are you surprised that as yields moved up today, stocks didn't fall apart? I don't know that I'm surprised they didn't fall apart. Maybe slightly surprised that we got this extra day bounce without yields doing much of anything. Although, shorter-term yields did soften up a little bit if you look at the one year.

So that's all. We're just arguing about a handful of basis points over the next three months from the Fed. All right, so we were wondering whether we were going to hold that 200-day moving average on the S&P when we got just incrementally below it. We are. And we're going to go out with a pretty nice move on the Dow, too. Better than 300 points. Salesforce accounting for a lot of that.

We've got some big earnings coming up in moments with Morgan and John in overtime.