Closing Bell - Closing Bell: More Earnings Pain Ahead? 4/10/23

Episode Date: April 10, 2023

Have we seen the worst of the earnings recession or is there even more downside ahead? Trivariate’s Adam Parker and JP Morgan’s Asset Management’s Meera Pandit give their expert takes. Plus, star venture capitalist Rick Heitzmann weighs in on the state of the private market – and where he sees the world of IPOs headed from here. And, Pioneer shareholder Jenny Harrington weighs in on the reports that Exxon Mobil held early-stage talks to acquire the company.

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9, right here at the New York Stock Exchange. This make or break hour begins with major questions about earnings, the Fed, and your money, and how this week could very well hold the answers to everything. Here is your scorecard with 60 minutes to go now. In regulation, energy and industrial stocks like Caterpillar leading today, while technology and communication services dragging the market just a bit. Apple lower today on report of falling PC shipments globally. Microsoft also falling a bit there. You see both stocks are in the red.

Brings us to our talk of the tape. Have we seen the worst of the earnings recession or is there more downside ahead? It is a key issue as you decide whether or not to buy stocks right here, right now. So let's ask Adam Parker, the founder and CEO of Trivariate Research and a CNBC contributor. All right. It's good to see you. It's obviously a big week. Price Action says the market's not really sure post jobs report what exactly to do. Now, volume's obviously going to be light because Europe's closed. It's, you know, people are off on spring break, et cetera.

But nonetheless, it's a big week. light because Europe's closed. It's, you know, people are off on spring break, et cetera. But nonetheless, it's a big week. Yeah. I'm a little surprised there weren't any negative pre-releases last week. So maybe, you know, the really egregious, you know, things that sometimes happen as the economy slows, you get one or two big blowups. Maybe we dodge that. Maybe that's bullish. But, you know, that's one. Two, I'd say the 2023 earnings numbers have come down a lot. They were down 3.6 percent in Q1 from where they were on January 1st. So the bar has been set lower. All 11 gig sectors, the numbers came down the most in energy and materials, but everywhere. So maybe the bar just got low enough, you know, low enough where it can be

generally clear. I mean, it's possible. I guess it matters as to whether you think earnings have troughed or are in the process of. For Q1, earnings are expected down 5.2%. That's after a 3.2% drop in Q4 of last year. Q2 expectations are for down four. Yeah. So what am I supposed to do with that? Numbers, I think, for the full year 2023 are about flattish now, a little bit up less than 1% from 2022. They're probably going to be down a little bit, would be my guess. So I think the good news is more of the downward revisions are behind us than in front of us. The bad news is there's probably some more downward. I think the problem I have, and it's too early to worry about it yet, is just the 2024 numbers that are out are for 12.5% year-over-year growth.

So I think too many people have been programmed to think there's a V-shaped recovery. We've seen that in a lot of the prior downturns. But those are all accompanied by accommodative policy, fiscal stimulus, et cetera, which doesn't seem to me like the base case. So what I think is wrong right now or mispriced right now, the market's telling you, and today's an exception with growth, but the market's telling you the Fed pivoted already, but the Fed isn't telling you that. So I'm worried the market's a little bit in front of the Fed in terms of, you know, the big rally we've seen in the NASDAQ and growth stocks. There's like a 74% chance as of today of a hike in May, as Leisman has been saying

today. Yeah, the jobs report was a little weaker, but not weak enough, not weak enough to keep the Fed from hiking. And those expectations were maybe, you know, first it was like 25 percent. Then they went up to 50 percent. And now, as I said, they're just shy of 75 percent. Yeah, I'm with I'm with Leisman on that. I think just keep it really simple. The Fed's mandate is twofold, right? Full employment, stable pricing. Which one of those is dovish? So the market's pivoted and dovish and growth stocks have had massive multiple expansion speculation, whether you look at profitless companies or however you look at it, hyper growth stocks are up a lot. I just think the skew now is toward them being a little bit more hawkish than what's in the price. So I'm kind of negative on the market right now because I feel like the earnings are going to

come down. Maybe we dodge some of the big pre-releases. Okay, that's a data point that I've observed. But estimates have to come down. Valuation's not that compelling. There's been a lot of speculation. And the Fed's going to be more hawkish than what's in the price. What's more compelling? What gets you to a point where you say, you know what, they've hiked, here we go, like eight or nine times and they may go another time. But what makes the market more compelling to you? I think you have to believe that, like you said, the earnings are troughing and start accelerating again. And the earliest that seems possible is at least six months from now. So I think it's a little bit. Yes, the market gets ahead of that. Yes, it's a disport. We know the same thing. Right. But I think it's a little bit too

early. A little bit. Yeah. All right. You think it's too early, though, to get super bullish? Yeah, I think it's I think that's right. Are we reminded this week that it's too early, though, to get super bullish? Yeah, I think that's right. Are we reminded this week that it's better to own health care over the banks? I raised that question because this is the week, right? You get the bank earnings kicking off later, but you also have UnitedHealth on Friday. Yeah, I really like, you know, at the beginning of the year, we downgraded those health care services just because they were so good last year. But we've talked on the air a lot. UnitedHealth is one of the true companies that has incredible pricing power. Some companies, you think they do.

When I think about mistakes I've made in my career, it's confusing cyclical with structural at the wrong time. And sure, there's some cyclical elements to UNH, Medicare, Medicaid costs. But at the end of the day, they have massive pricing power over me, over every small business that there is. And so the only way they really fail is if we get a deep recession where small and medium businesses go out of business. Short of that, they can take pricing up 9% on me. And I want to say, thank you, sir. Can I have some more? So I think those businesses have better estimate of achievability in an eroding economy than others. I think banks are tough. As you know, I don't think they're that cheap. And I think you're starting every meeting I do now, people were asking about commercial real estate loans, you know,

growth being impaired. Those are going to be the questions that remain no matter what happens this week. For sure. For sure. And so I think your view of the economy and growth has to be lower now than it was three, four weeks ago. Because you're just not seeing construction loans happening. It's just a slowdown. I mean, okay, so you don't want to buy the banks into what is a further slowdown. But at some point, you make a decision that, OK, I want to buy the banks because, as you said, the market's anticipatory. So it's going to look to the other side. But if I'm bullish and I get more excited, I don't think there's as much upside for them as other parts of the market. So I think for me, I continue to think energy and metals and chemicals are the

best way to outperform in any long-term timeframe. Estimates are low. There's risk they come up, I think. Inventory isn't a problem and they're cheap. So I continue to pound on that as a theme on any one, three, five, seven, 10 year view. I think for more economically sensitive stuff, I guess- Like cyclicals, would you want to own cyclicals or not? Because last week, right, industrials were the weakest part of the market. I think our view is overweight energy and materials underweight industrials, because industrials have more inventory than, say, metals and energy. They have higher earnings expectations, and they're not as cheap. So I think you've got a pair trade there, and I'd rather take the risk with energy and metals. I think the question, like, to get bullish, like truly bullish, I think I need earnings to be accelerating and I need some more evidence that

earnings can be higher in 24 than they are in 23 without massive accommodation, which I think is currently in the price. Okay. Let's bring in Mira Pandit now of J.P. Morgan Asset Management as we extend the conversation. Welcome. It's nice to have you here as well. You said in terms of sectors that tech is in for a quote unquote reality check. What does that mean? Tech has been a big driver of the rally so far this year because people think, okay, well, the expectation for rates is moving lower. If we see a recession, tech was very defensive during the last recession. I think those things can be true. And there are some macro underpinnings for a bit of a tech rally, but probably not as much as we've seen, especially because as we start to see earnings from a tech perspective, that's where you get

the reality check that they are still undergoing some of these challenges from a pricing standpoint, from a wage standpoint. There's still a lot of tough decisions to be made. And when you pair that micro story in with the macro story, all of a sudden, you start to see a little bit of weakness in areas that perhaps wasn't justified in some of the run-up we've seen. Unless we're reminded, like, you know, for example, Dan Ives would talk today from Wedbush that, yeah, you know, they're going to be cautious, but they're going to be more stable and maybe more stable than other parts of the market and more stable than people even expect that they would be in this space, which is the reason why money is going to continue to go there.

Then people have to understand that stability is not necessarily growth. You can't have both. If it's going to be stable and more defensive in the next recession, then perhaps, yes, these are good blue chip quality companies. But if we're thinking about the growth rates that we had seen over the last decade or so, not likely to be replicated. So we have to be a little bit more balanced there and again I I do worry a little bit about valuations. And I worry about concentration risk people already have a whole lot of exposure. To some of these very large

companies if you just own the index you have almost 30% exposure to some of the largest tech companies. And yet the profitability is not commensurate to that same weighting. You maybe have 20 percent of the profits in the S&P 500 coming from those largest tech companies. So that used to be a bit more balanced a few years ago when they had gangbusters profits. We're not seeing that today. So we have to manage that concentration risk. You want to stay defensive overall? It sounds like you're defensive. Sounds like you're cautious on the market. Within the scope of the U.S. equity market, somewhat more defensive. If you want a little bit of cyclical exposure, I think that energy can still hold up when we think about profits because oil prices are still high. They

have stabilized at a higher level. So those are some of the areas that we would find more interesting from a cyclical perspective. But I think defensives is going to be a good place to be. Health care, where you still have some access to those longer-term growth themes. And then looking outside of the U.S. to international stocks, where we're starting to see maybe perhaps more earnings upgrades than downgrades versus the U.S. Okay, so you guys largely agree, it sounds. But what about that? Here's some tech I'll own.

I mean, you've got to own some. I think you can own small-cap software. Okay. Why? Well, EV to gross profit, which is how most of them are valued, enterprise value to gross profit. The multiples have come down massively. There's a number of public companies, $5 billion or larger market cap, that are forecast to have gross profit growth of 30%, 40% this year. If they don't outperform, if the EV stays flat, they're going to look very cheap versus history.

And you've got big private companies that already have the money on the sidelines. They did Momentum, Qualtrics, Coupa. You're starting to see some deal flow in that range. And so maybe this sort of slower market and tech venture means it's harder to fund newer businesses. And some of these guys can actually do OK. So I think you can own some of those. I mean, you can't own nothing. I'm saying. No, I know that. But if there's a let's say if there's a broader economic slowdown, aren't the smaller enterprise companies going to get hit harder than the large ones? Yeah, I think. So the question, yes, is how much is in the price, right?

There's been a massive reset. I think the point that you made was a good one. Microsoft's a great company. It trades at 31 times forward earnings, where the estimates are probably too high. So it's about what's in the price. I'm saying some of these things have been reset massively. And you know, the names of the companies that are coming in, buying them at 30, 40% premiums. So I don't know if I can dream there's a 30, 40% premium coming in the next six, 12 months for one of the mega cap techs. I think you own it for risk management purposes. And I get it. You don't want to be way underweight, you know, Apple and Microsoft,

Google meta in the index. But if you're really looking for alpha, not risk management, I think you take a shot with some of these guys where, you know, you buy a basket of them and some get taken out. How, Mira, would you assess what you think the Fed is going to do? I mentioned we're at 74 percent now, and I characterize what Leisman said, or at least how he characterized it. Job report, OK, you know, weak, but not weak enough. Does that make sense? I would agree with that. When we look at the jobs report, okay, you know, weak but not weak enough. Does that make sense? I would agree with that. When we look at the jobs report, still had decent amount of gains. We're still seeing a very low unemployment rate.

We have started to see wage growth continue to roll over, and CPI has continued to outpace wage growth. But it is still pretty strong. So I think when we pair that with what we're likely to see later this week in CPI, we're probably going to have a headline CPI number that does come down pretty significantly as a result of base effects. We're probably going to see a core year-over-year CPI number that's still pretty strong, maybe even moves a little bit higher, and a strong monthly print. So I think the Fed will want to raise rates another quarter point in May, given some of that strong economic data. Where I would push back on that is that unemployment and inflation are deeply lagging indicators. If we look at the past and

we think about the unemployment rate, typically over the last 70 odd years, we've seen that when the unemployment rate bottoms, we go into recession about eight months later. So we can't just be waiting for the unemployment rate to pick up massively in order to push the breaks here, because what we typically see is that things have already gotten to a pretty rough place by the time you see unemployment rate peak. And typically even CPI continues to rise in the earlier parts of recession. So I think the Fed is really focusing on data that's deeply lagging. You know, I'm looking, speaking of Adam, at the New York Fed inflation expectations. I mean, not great. One year inflation expectations

up 0.5 to 4.7. That's up for the first time since October of 22. Three year expectations up 0.1 to 2.8. I mean, that only re-enhances to the Fed what it has to do, right? Reaffirms to them the job that still they probably think lies ahead. Yeah, I think a lot, you know, I don't disagree with your eye level view. I just think we're all stuck trying to interpret what they're going to do with data that everyone knows is lagging. But it was only 14 months ago, they were still buying, you know, billions and billions of dollars of MBS while housing was on fire in every MSA in America. So I think we would have said, well, wait a minute, that seems late also, right? So I think the question is, do we think they now are going to react and not look at lagging statistics for the first time ever, or we just shift and lag everything the way they've

been, they were lagged on the way in, they're going to be lagged on the way out? That raises the probability of a mistake, of pushing it too far, like a bigger mistake. They're going to be hawkish. They've never said they won't be. The data don't support they're going to be. And the stocks are discounting they're going to be. So if my job is, where are things not equally discounted in the market? And I should arbitrage that. You're telling me semiconductors, no recession, stocks are awesome and energy stocks are terrible. And there's a recession doesn't make any sense. Okay. And so that's what I'm trying, you know, so we, when we have people who are trying to beat the market, we're saying buy energy and don't buy semis. So does, does your view of the Fed being

more hawkish, Mira, lead you in part to international over the U.S.? Do you think that central banks are not going to keep the foot, the pedal to the floor as hard or as long? You might see some of the international central banks, particularly in the developed market, where we look at the ECB or the Bank of England dealing with perhaps a bit more stubborn inflation, some different characterization of wage issues as well. You might see them want to continue to be a little bit more hawkish than the Fed. But nonetheless, the Fed is talking tough, and they've said what they want to do. So while I don't necessarily think that additional hiking is warranted, it's likely the path of least resistance going further. Beyond that, though, I think they can pause for a period of time and take stock of what has

happened. But we're going to see slowing credit growth. We're already at rates of almost 5%. We're in a pretty restrictive territory here. I don't think they can really realistically hold the line for all that long. Well, that's why people would say we don't believe what they say. And frankly, what they say is not nearly as important as what they do. And that remains to be seen. Wouldn't you agree with that? I mean, the market doesn't believe that they're going to get to a level in which some have suggested they will.

And by some, I mean some of the Fed members themselves. I think at this point, we're kind of splitting hairs about where the Fed goes, where the Fed doesn't go, because the difference here on the table is maybe 25 or 50 basis points in the scheme of almost 5 percent of rate hikes. So we are at the end stages of this very long journey. I think when we think about international, it's less about a Fed or central bank story, and it's more about let's think about the fundamentals within the stock market. Where are we finding decent valuations, prospect for potential earnings upgrades, or at least catalyst further in terms of growth coming out of a very bad situation? Where are we finding a bit of that cyclical exposure that can do well while we're here in an environment of higher rates and higher inflation? So some of these different elements are why we think more

international rather than the U.S., where valuations at the end of the day just feel a little bit high, regardless of what the Fed is about to do. We're going to make that the last word. Thank you guys very much. Adam Parker right here at Post 9. Let's get to our Twitter question of the day. We want to know which stock should you buy right now? Bank of America, JP Morgan or United Health? An interesting question as earnings kick off this week. We want your answer. Head to at CNBC closing bell on Twitter. Please vote. We got the results coming up a little bit later on in the hour. We are just getting started, though. Up next, our venture capitalist Rick Heitzman is back with us right here at Post 9. He's flagging a serious snapback in a key part of the market as well. He'll tell us

why it could spell major upside for tech ahead. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. We're back. 40 minutes to go in the trading day. Shares of Taiwan Semi slipping today on some lackluster sales numbers. Christina Partsenevalos is here with the details and what it means for other chip makers. Christina. Well, the largest chip contractor in the world, Taiwan Semiconductors, posted its first monthly revenue drop

in almost four years. So the March drop shows it's pretty much not immune anymore to weaker electronics demand. And those results are also weighing on Intel at the moment. Shares are down a little bit, almost 1%. And if CapEx plans for Taiwan Semi begin to soften in the chip industry, it could impact Semi equipment vendors like ASML, LAM, Applied Materials. And it's not all rosy for the sector as well, because you've got memory chip contractor Samsung that just posted its

worst quarterly profit since 2009 on weaker global demand post COVID. Samsung, though, surprised investors by cutting short-term production plans, something it pretty much had resisted to do compared to competitors like Micron just over the last year. But there is a silver lining. If Samsung cuts production, that could help level out supply and demand and allow firms like Micron and Western Digital to step in and fill the gaps. That notion is driving memory chip makers Micron and Western Digital roughly 8% higher today, I should say. All right, Christina, we'll see you in a little bit. Christina Pax Novelis, the private markets saw a snapback in the first quarter. That's according to my next

guest after a softer end to 2022. What's next for venture capital as the space grapples with the aftermath of the SVB collapse? Let's ask Rick Heitzman now of Firstmark Capital. He's here with us at Post 9. So a snapback. Somebody said to me literally earlier today, man, the private markets are a mess. They're a mess, but they're starting to bottom out. We saw we're actually seeing the beginning of really good results in Q1. And after a 2022, which were a complete mess, especially firms that

had budgeted at the end of 21 for a strong 22 and massively disappointed, we could say, over the course, things have started to turn. How would you describe the overall state of venture in the wake of all that? In the wake of all that? In the wake of all that, there's less capital being deployed. So capital deployments down over 50 percent. Less institutional investors are giving money to folks like me to invest. And that's creating basically a slowdown throughout the ecosystem. What we're seeing is the beginning of green shoots. We're starting to see some of the best companies beat their numbers substantially. We're starting to see new catalysts with things like AI driving new innovation. And we're excited.

When does it start to come back further? I mean, if it's down 50% in terms of funding, when do you start to see a legit turnaround? Or is it severely impaired for a good while? I think there's been, we were overfunded in 2020, 2021. Interesting way of putting it. Yes, yes. Severely overfunded. So that was an unrealistic time in many ways. So that might not be the right benchmark. It might be renormalizing to a new normal of where we are today. And from that new normal, we're starting to see a functional market where expectations on the buyer and seller side are coming together and people are excited about the projects they're working on. Who picks up the slack for SVB in terms of venture lending?

I mean, I would imagine that's got to be impaired dramatically and may stay that way for a while. It's still early and SVB was a great partner for a lot of private companies and might have even been a little aggressive at times in providing debt to firms that were still emerging in terms of their operations. So, so far, there's been other people in the space who have stepped in and funded a lot of our companies. In the medium term, it's yet to see if either money center banks or emerging regionals are going to fill a lot of that ecosystem. You think they will in the kind of

uncertain environment that we find ourselves in when you're, you know, every conversation we have these days, not just with people like you and other VCs, credits can dry up for a while, right? Banks are going to be pulling back, not, you know, handing out the hand. No, banks are pulling back. Obviously, their cost of capital is increasing also. And so you're going to see less venture lending than you did before. But again, here's the new normal. That was not a realistic period in that time frame. The new normal is companies that are growing, hitting their milestones, are going to have access to capital on either the debt or equity side.

And you're starting to see that machinery starting to work again. What does the IPO market look like? It's still a mess. That's one thing that, you know, one thing that helps fund startups is folks like us who have been investors in companies for a decade.

You're looking for the exit, right? Finally started to get an exit and that enables us to send that money back to our investors and begin that cycle again. So without a healthy IPO market, people are still sitting on their hands a little bit. So far from what we could see, we're not seeing anything prior to Labor Day. The hope is that rates normalize, the economy's stable, and that you're seeing a fourth quarter of some of the best companies who've been waiting to go out for now almost two years are going to start to have access to the public markets and the markets

will start functioning. How optimistic are you of that time frame? I mean, even that sounds a little aggressive. It's a little given where we are now. I mean, it appears like we're maybe just at the beginning of weakening somewhat substantially. I think we're past the weakening point. We're at a bottom, but we haven't seen the catalyst. In the economy? Oh, in terms of the markets. Yeah, I'm talking about the economy, because it all feeds off one another.

The market might anticipate the economy a little bit more. So you hope that the markets anticipated the economy, and that's why last year was such a mess. And now going forward, we think that the markets will anticipate a little bit of a bounce, and actually the best companies are going to overperform even in a soft economy, and that's how you're going to separate out the great companies which should be able to go public in even what might be a volatile IPO market. From a more mature, if you want to use that word, stage of tech, We keep hearing about layoffs, right? Among the biggest companies out in Silicon Valley. Is there more to go? Do you think are we right-sized enough or not?

I think we are. I mean, assuming that you're able to hold your expenses, you're able to hold your revenue estimates for this year, I think people have gotten the memo. They've gotten lean. We've talked about it for the last year. I think a lot of the startups started doing layoffs even as early as 15, 16 months ago, looking at 2022 of, hey, our revenue is not going to be there. We have to right size our expenses in order to not have to fill that funding gap with equity because equity was not going to be there. What is the job market? How would you describe what that looks like right now out in the Valley? You have this huge upset. SVB blows up. Startup A is now wondering what it's going to do. They have to cut costs. They're laying off people. How hard is it to find another job in startup world in Silicon Valley? It's not that hard. I think there's still a healthy ecosystem. There's still

a lot of people hiring. You're still seeing, you know, the people that are getting laid off from a snap or getting laid off from a meta able to find a job. We were so far behind the hiring curve two years ago. It's now being reabsorbed. But, you know, people are being more thoughtful about, you know, not quitting their job without another job to go to. But, you know, that's starting to work again. And you're also seeing wage compression for the first time in probably 10 years in Silicon Valley and the startup ecosystem. All right. Appreciate it, as always. Good seeing you.

Yeah, we'll talk to you soon. That's Rick Heitzman joining us for Smart Capital. Up next, Pioneer pushing higher. The shale producer popping on talks of a potential merger. We have a shareholder standing by for her take and what it might mean for the broader space. Closing bell right back. Welcome back. Shares of Pioneer Natural Resources pushing higher after reports that Exxon held informal early stage talks to acquire the Shell producer.

This comes after Exxon posted a record profit, more than $55 billion last year. Joining me now, CNBC contributor and Pioneer shareholder, Jenny Harrington. It's good to see you. Interesting report, to say the least, from the Wall Street Journal. What do you make of it? Well, I thought Stiefel actually captured it perfectly in the piece that they put out this morning where they say the Pioneer deal isn't imminent last Friday's M&A headlines likely place a bid under pure play Permian assets and I think that's really it so what what's happened as far as I see it is the Exxon went out they've got like 30 billion dollars of cash on their balance sheet burning a hole in their pocket and

they've made a very big statement to the world that probably the single best oil assets out there because they can buy anything they want, are in the Permian Basin. That's kind of how Joe Terranova put it today on Halftime as well. It's such a trophy asset at this point, which will be viewed as such. And thus, you've essentially put a floor under the stock. Do you agree with that? Not just under that stock, but under anything with Permian assets. So you've got Devin that's got, sorry, I have it right here, about 70 percent of their assets in the Permian. And you've got Oxy that has about 55 percent of their assets in the Permian. So you have a lot of players down there. And I think this just puts a floor under it. And,

you know, Scott, we've been going back and forth on this, you and I, for almost a year, right, as we've seen oil prices trade up and the stocks are acting quite a bit more volatile even than the oil prices. And when they come down to these prices, I'm kind of pulling my hair out saying, well, they're still minting cash. There's so much money to be made here. These are really valuable assets. I think when the stocks come down to these trough kind of levels, they're really compelling to buy. And you should look at them based on their cash flow. And I think that's exactly what Exxon's doing. So yeah, I think it puts a floor

under this whole space. And it highlights another thing too, which is whether we like it or not, we are totally dependent on fossil fuels. And those are here and we need them. So like you see things like U.S. gasoline demand decreasing. And it's easy to latch onto that and say, oh, well, everyone's running for EVs and who's going to need gasoline anymore? But then if you take a step back and look at the broader global scale, you actually see expectations for global demand of oil increasing over the next five years. So this really is just a great reminder of how much money there is still to be made in this space. You sold Chevron and got into this name only within the

last year, right? Right, right. And I was probably slow on that. I probably should have sold Chevron earlier. But I read this really interesting book last year. It's called The New Map by Dan Yergin. And what he does is just paint the whole history of the map of energy kind of starting in the 1930s through today. And as I was reading that, I thought to myself, you know, really the single best assets globally are in the Permian right now. And that's where the best reserves are. It's where all the future growth where the best future growth should come from. So I had Chevron, which I've had forever and ever and ever. And I couldn't see enormous upside on that still. And, you know, I run this dividend

strategy, so I have to have a big dividend yield. So I had Chevron that was down to a less than 4% dividend yield because it did so well. And they're very, very global, very broad, very broad asset. And I said, you know what? I think it's time to be done with that. Sold Chevron, bought Pioneer. I'd already bought Devin last year at about this time and just really concentrated my focus in the Permian because I thought that's where the best free cash flow would come from. What about the idea that last week restarted the energy trade

after underperforming since the beginning of the year? You buy that? Yeah, I think I do. And I don't think it's going to be, you know, we were up, what, 60 percent in 2022, 50 percent in 2021, or I might have those reversed. It's not going to be like that. And a lot of the money's already been made. So we've had this high growth, crazy, frothy return period for the past couple of years. I think where we are now is going to be a much more steady state period. So even if you look at the company's earnings, they jacked up in those couple of years and now they're still strong, but they start to plateau a little bit compared to what they were. So I think it's restarted it, but not in the way that it was before. So please don't get in now and think that you're going to

put 60 percent in your pocket. You might not. You might put 11 percent dividend yield in your pocket. Yeah. Thank you, Jenny Harrington. We'll talk to you soon. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is standing by once again for us. With that, Christina. Someone's got a green jacket to add to his closet, and that's got shares of one name swinging higher. Terrific, ain't it? I got 20 minutes or so to go before the close.

Let's get back to Christina Partsenevelos for a look at the key stocks we are watching. Christina. Well, Block is actually lower today as KBW analysts downgraded the stock to market perform. The firm says multiple rifts are starting to add up for the company, including scrutiny of its cash app. That follows short seller Hindenburg's accusations just last month that the app enables illicit activity. While Block, of course, denies these accusations, KBW analysts say regulators could still take a look, and that's not good for the stock, down 2%. Shares of Topgolf Callaway are getting a boost thanks to Jon Rahm's win at the Masters.

Rahm is a Callaway team member for the PGA Tour and played the Masters with the company's gear. That's putting the stock on track for its best day since January. I didn't have any puns in that one, Scott. it's okay you'll make up for it maybe tomorrow you're just you're you're above par or under par what's better no it's under par oh i ruined it okay bye that's all right bye bye that's christina parts and nevelos last chance to weigh in on our Twitter question. We asked which stock would you buy right now? Bank of America, J.P. Morgan or United Health? Head to at CNBC closing bell on Twitter. We have the results right after this break. I got 20 minutes or so to go before the close. Let's get back to Christina Parts and Nevelos for a look at the key stocks we are watching. Christina. Well, Block is actually lower today as KBW analysts downgraded the stock to market perform.

The firm says multiple risks are starting to add up for the company, including scrutiny of its cash app. That follows short seller Hindenburg's accusations just last month that the app enables illicit activity. While Block, of course, denies these accusations, KBW analysts say regulators could still take a look and that's not good for the stock, down 2%. Shares of Topgolf Callaway are getting a boost thanks to John Rahm's win at the Masters. Rahm is a Callaway team member for the PGA Tour and played the Masters with the company's gear. That's putting the stock on track for its best day since January. I didn't have any puns in that one scott no it's okay

you'll make up for it maybe tomorrow you're just you're you're above par or under par what's better no it's under par oh i ruined it okay bye that's all right bye-bye that's christina parts and nevelos last chance to weigh in on our twitter question we asked which stock would you buy right now bank of america jp.P. Morgan or United Health? Head to at CNBC closing bell on Twitter. We have the results right after this break. Let's get the results now of our Twitter question. We asked, which stock would you buy right now?

Bank of America, J.P. Morgan or UNH? J.P.M. is the winner in what was a very tight race. JPM edging out United Health Group, followed by Bank of America. Up next, a major Mac meltdown. We will break down the report that is sending Apple stock lower today. That and much more when we take you inside the market zone. All right, we're now in the closing bell market zone. Greg Branch, Veritas Financial Group, here to share his playbook heading into earnings season. Steve Kovac on Apple's tumbling PC shipments, plus Papazani breaking down the crucial moments of the trading day as we head into the close in about 10 minutes time. Greg Branch, I begin with

you. It is a big week. Earnings kick off. We have more inflation data. How do you size it all up for us? So at the end of the day, the market is still discounting the future incorrectly, in my opinion. We are looking at consensus in the back half of this year, forecasting for mid-single-digit growth in earnings for third quarter, 10% earnings growth in the fourth quarter. And it is still unclear to me how we get from here to there, with right now consensus being at about negative 7% earnings growth or earnings decline, I should say, for the first quarter. And so somewhere along the way, the market is either going to have to discount appropriately what

the future looks like, or the future looks very different than what many of us think. Right now, the market is discounting interest rate cuts probably in the middle to the back end of the year. That's something that I don't see. And the market is discounting that we will not see a slowdown recession, whatever you want to call it. Also something that I don't see in the cards for this year. I mean, we are in an earnings recession. It's undeniable, obviously. But like every recession, you come out of it after you go into it. And maybe earnings are in the process of troughing. No, although it sounds like you think they're going to get much, much worse from here. Well, look, it's funny that you say that you say we are in a recession. How long has the masses rejected that notion?

No, we're in an earnings recession. We're in an earnings recession for certain. If you look at the numbers of last quarter, plus the expectations of this quarter, plus those for next, we're going to have three quarters in a row of negative earnings growth. That's what I'm saying is is undeniable. The numbers are the numbers. Right. It is undeniable when it is not deniable anymore, but it has largely been denied up until that very point. I guess what I'm saying is, is that think about December 31st, the projection for this quarter was flat. And here we are a short three months later and it's negative 7 percent. That's a pretty big change, Scott. And I think that consensus is off by

similar magnitudes for virtually every quarter this year. What that means is that we're going to have continued aggressive downward revisions. It means our multiples are wrong. And you still think the Fed is going to be more aggressive than people want to believe? I'm not sure it matters anymore, to be honest with you, Scott. I think it's the first time we can say that. We spent two years Fed-watching the market's ups and downs predicated on everything we thought the Fed was going to do. I think we're actually starting to transition out of that. I'm not sure it matters anymore if they're going to be another 25 bips in May or not, because what we do know is that the credit crunch is real, and that's going to do some of the Fed's lifting for it.

The Fed just hasn't figured out how much it's going to do. So they will certainly pause soon. I think the difference of opinion is that summer forecasting rate cuts this year. And I think that that is wishful thinking. Is a pause not good enough, though, to at least signal that we're done? We're done hiking. And the market may have to wait longer than it wants to for actual cuts, but at least it would know that the hiking cycle is over. Yeah, and I think that that's a good thing, except I think the market's attention will now be turning to what used to drive it,

which is the macro and the multiples and the earnings growth. And I think that when people start to focus on that again, they're going to find precious little earnings growth this year. And they're going to find that the market isn't trading at 18 times forward. It's actually trading at 22 times forward right now. And I think that that'll concern people. All right. So where do I want to position right now, then? The few places that are going to get earnings growth this year, Scott, that's energy, that's consumer discretionary, and that's industrials.

That's the only place you're going to find any earnings growth this year. Hold that's energy that's consumer discretionary nuts industrials that's the only place you can find any any scope issue hold on a second i mean i don't understand the industrials thing i mean i got you with energy why do i want to be industrial in industrials if you think and your projection for the economy frankly and the market is far worse than most people who who who come the network. But yet you still want me to buy industrial stocks. Now, that doesn't make sense to me. Help us understand that. I want you

to buy companies that are going to deliver reliable earnings growth. And while it might not be the whole sector, even in a recession, that there's there's going to be certain segments that slow down and certain segments that may hold steady, but that may have efficiency gains that aren't experiencing as significant wage pressures as others. And so that's the challenge is find the earnings growth. You got a name or two for me that I can find that earnings growth in? Scott, you know, I can't recommend specific names on TV. Well, I'm going to ask you anyway. It will make you squirm a little bit. Greg, I appreciate it. That's Greg Branch, Veritas Financial. Steve Kovac now joins us.

Mac shipments fell 40 and a half percent in the first quarter of 2023. OK, big shock. We know PCs and computers, Macs, whatever you want to call them and whoever's selling them are weak. Yeah, Scott, but there's a little caveat to this. So when Apple reports their Mac sales, they actually do it on a sales dollar basis. They don't actually say how many units are shipping. So let's just say this IDC report that we've been talking about all day, that's sending Apple shares lower. Let's just say it's completely right. They're talking about the number of Macs shipped,

not necessarily the sales growth or the dollar sales that are done here. And keep in mind, they just launched a couple new MacBook Pros, the more expensive ones, early in January. So that might help a little bit on the sales side. But again, it does not look good. In the December quarter, their Mac sales, again, on a dollar basis, was down 29%.

And this is just a continuation, a dollar basis was down 29 percent. And this is just a continuation, a sequel of that story, Scott. What do you think the recent gains in the mega cap space have done to earnings expectations? Even if I'm not asking about the numbers, generally speaking, but just in terms of where the narrative has gone as these stocks have had a huge jump back, do you think expectations thus have risen as well? Well, I don't think expectations have risen. I think what we've been seeing from big tech companies, with the exception of Apple, is them handing investors exactly what they want to see,

which is layoffs and more cost cuts. We've seen that from Google. We've seen it twice from Meta. We've seen it twice from Amazon. Maybe Google will do it again. And then in this more smaller caps, we've seen it from Salesforce and so many others. So they're handing investors what they want to see, that as we go into a recessionary environment, we're not going to be spending like crazy and hiring like crazy like we did during the pandemic. Just back to Apple for a second. Sales will likely be down again year on year when they report earnings in May 4, Scott. So it's not all gravy right now. Things are slowing down in a real way. Yeah it's not all gravy right now. Things are slowing down in a real way. Yeah. People are going to want to see also, though, as you know,

what's going on with the app store, the services business. Right. That was the question going into the last quarter. And I remember us having that conversation on earnings day. That's going to rule the day yet again. No. Yeah. And it's always services. And look, when we see services growth slowing down, which we saw last year, a lot of that was blamed on things like advertising slowing down or people not spending much on gaming in the app store in particular, Scott. That's where most of the money is made through video games. People are just playing fewer games as they get back out into the real world. So again, we're just in this for Apple in particular, we're in this really funky time of the comps just look so bad. It's not going to be till

the end of the year that they will kind of lap themselves from peak pandemic sales for Max, for services and all those things. So it's going to look a little bit better on a year-over-year basis, not until the end of this year, Scott. All right, Steve. Thank you, Steve Kovac, joining us there. I turn now to Bob Pizzani, who's sitting here at Post 9 with me. Does it feel like tech's teetering a little bit? No. I'll tell you what I love. I'm waiting for the S&P to go positive right now. Yeah, it may, in fact, do that. Dow's good for about 59.5. The low print was right at the open for the S&P 500. We moved up, and we did it on cyclicals. The lead sector today,

transports. The worst last week cyclicals. Exactly. Everything's flipped around and everything is up in the transports except the railroads. They're down a little bit today. But if you see what's going on here, look how the cyclicals have led here. Industrials, energy and materials. Caterpillar's been strong. A disaster last week. 3M, Honeywell, Dow Inc., all moving up. Energy is strong, even though oil ended a little bit below $80. That's still a good print for oil. Materials have been doing well again today. There's your three classic cyclicals. Real estate also bouncing back. So I see gold down three days in a row as well. I see yields moving back up. This tells me that the recession concerns that

were so prevalent last week seem to be easing a little bit. Now, what are we back to soft landing again? Well, that's what the market seems to be telling us. We're going back and forth. Obviously, they can't quite decide on that that Goldilocks scenario that they want to get going here. But the important thing is, even in tech today, S&P positive, by the way, we're slugging that flat. There we go. So we might get there. So the important thing here is even today tech today. S&P positive, by the way. There we go. We're just hugging that flat line. There we go. So we might get there. So the important thing here is even today, the weakness was in Apple primarily, but look at the semis.

NVIDIA came back positive. Most of the other big names, Teradyne, the other big names in the semiconductor space, they all went positive as well. And then remember, we were talking about the defensive stocks all last week. Coca-Cola, Johnson & Johnson, Procter & Gamble, Merck, Amgen,

all were really, really strong. A little bit down today, but overall, I'd say they were flattish, not necessarily really detracting. Look how they've rallied here late in the day for most of these stocks. There's Merck now positive on the day. This is good. It's 3 to 2 advancing to decline. It tells you that there is less concerns about recession today than there was in the middle of last week. It tells you there's less flight to safety. In stocks, flight to safety is what you're looking at here. Merck, health care, and consumer staples names.

That's another indication of less fear in the market. The VIX is still at $19. So overall, I think this is a really constructive day for people who want to make an argument about the soft landing. I mean, you look at the jobs report, you could take a couple of things from it this past Friday. You can say, see, it's evidence that the labor market is still holding up. The other side of that is, as Leisman has been saying, and I've mentioned it multiple times throughout the day today, it was weaker, but not weak enough to keep the Fed away. Yeah.

So, I mean, one's a positive story. See the economy's still strong. The other one is, see the economy's strong enough it's going to engage the Fed still. It was just weaker, just slightly below expectations enough to make an argument at this point that it's a toss-up whether the Federal Reserve is going to continue to address the raise rate based on that number. That's Pisani's last word. Santoli said I could give you that for a few days. Thank you. toss-up whether the Federal Reserve is going to continue to address the raise rate based on that number. That's Pazani's last word. Santoli said I could give you that for a few days.

That's Bob Pazani here. He does it for us with a closing bell.