Closing Bell - Closing Bell: Musk’s Moment of Truth 5/12/23

Episode Date: May 12, 2023

Elon Musk stepping aside as CEO of Twitter – presumably to spend more time on everything else he has going on… including Tesla. That stock is now looking for momentum. EMJ’s Eric Jackson gives his forecast.  Plus, Morgan Stanley’s Chris Toomey says one sector is “priced to perfection.” He explains which one and why. And, Jessica Inskip of Options Play highlights the key technical levels investors should be watching.

Welcome to Closing Bell. On this Friday, I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make-or-break hour begins with Musk's moment of truth, and whether naming a new Twitter CEO is just the thing to jumpstart Tesla shares. Short-circuited lately on pricing and demand concerns and the road ahead for tech overall, here is your scorecard with 60 minutes to go in regulation. The Dow down 8 of the past 9 days, pacing for its second negative week in a row. Energy, the worst sector this week. Banks, as you know, have been a big drag nearly every day. Take a look at the Nasdaq. It's been up four of the past five sessions as tech continues to catch a bit of a bid, especially Alphabet, up 10 percent this week alone after

holding that big event out in California, saying not so fast, Microsoft, and all that AI talk. It does bring us to our talk of the tape, Elon's exit. Well, sort of. As he names a new CEO for Twitter, presumably to spend more time on everything else he's got going on, including Tesla. Shares had ripped, then dipped, and now seem to be looking for some momentum. Can they find it? That's the big question. So let's ask EMJ's Eric Jackson. He owns Tesla shares. He joins us now. It's good to see you again. What was your reaction when you heard that he had finally named a CEO for Twitter? Well, I think it's unquestionably good news, Scott, for Tesla shareholders. This stock is off about 40 bucks since the beginning of April on all the concerns that you mentioned. And I just think it's

it's it gives the opportunity for people to reassess Tesla to say he's obviously going to have more time to focus, not as distracted from Twitter. And the great thing that Tesla has going for it is it's it's you know, we can we can talk about gross margins, what they will be for the year. But the number of deliveries this year are going to be significantly higher than last year. And if we've learned anything this week, especially with the Disney results and Disney Plus, growth is better than shrinkage. And so Tesla has major growth behind it. I think investors will look look at that again now and see that the shares do look attractive between now and the end of the year. Sure. But I mean, you obviously have to care about margins. You have to care

about the number of times they're willing to cut prices to spur demand, no? I think for Tesla, there's really two battles where it's waging war. One is in China and one is the rest of the world. In China, they're in a dogfight. There's no question. And so you can make the case that those pricing cuts are coming from having to keep up with the competition over there. On the other hand, though, look at Li Auto's results this week.

China is a growing market. It's a booming market for EVs. So they should make money in China. The rest of the world, though, Tesla's really in the catbird seat. And so I don't think that the price cuts are coming from weakness, but rather strength. And they still have a lot of profit margin to kind of work with when making those cuts. And it puts others like GMs and Fords of the world, you know, in a much more difficult place to compete with them. What do you make of the market reaction here? Obviously, when the news broke and we did it

yesterday in closing bell, the stock had popped and perhaps for obvious reasons. And then it was up slightly again this morning and then it's given it all back. What do you think's up with that? I mean, I just put it down to the, you know, the Nasdaq's down today. You know, Tesla by, you know, compared to a lot of names today is actually outperforming. I think it's still a good news is good news story. You know, let's see how it does, you know, next week into next week. But I do think that this is definitely positive news. Some people are saying, oh. You know, let's see how it does, you know, next week into next week. But I do think that this is definitely positive news. Some people are saying, oh, you know, he's not going to be

able to give up controls. He's going to be in the hair of the new CEO. But I would point to Gwen Shotwell at SpaceX, who really, you know, really runs SpaceX there as president and COO. Elon's involved in SpaceX, obviously, but he sort of lets Wen kind of run the show. So there's I don't I don't see any reason why that won't happen here at Twitter, too. Well, I mean, if if, you know, the new CEO, Linda, is going to be, you know, presumably really with the big focus on on ads and ad revenue. I mean, Musk is still going to be head of product. Right. I mean, so maybe still going to be head of product, right? I mean, so maybe some of the questions about what is his role truly going to be,

maybe they're valid because it's not like he is exit stage left completely. No, I mean, but he's a product guy first and foremost. And so he's obviously going to stay involved, tinkering with the Twitter product or the X product, whatever he's going to call it now, just as he does at Tesla and SpaceX. But just as we saw on the investor day for Tesla a few weeks back, I mean, he brought up this 30 or so people. There's a bigger team behind him. And I think it's going to be a good thing for Twitter that Elon is not the main kind of point of interface with, especially a bunch of advertisers. You know, I don't think that's worked out so well this year.

So, you know, he'll be involved, but he can sort of do what he does best. You know, I just learned, you know, a few moments ago, in fact, that you just sold Uber shares. I want to pivot there because I'm kind of surprised. Now, I know the stock has had a nice move, but we're not even back to the IPO price yet. Why are you getting out now? I thought the story was just kind of turning much more positive than it's been. It's I mean, if you compare it to kind of middle part of last year, you're talking about a stock that's moved up 50%. So it's had a great run from, you know, being unfairly kind of punished and sold off last year, you're talking about a stock that's moved up 50%. So it's had a great

run from being unfairly punished and sold off last year. I think DARS has done a good job. I do think there's a lot of upside still ahead in Uber shares, Scott. I still like it. I'd like to see them being even more aggressive against the likes of Lyft, who's kind of fading away into the distance. So you do that. I mean, how do you be more aggressive? How do you be more aggressive against Lyft? I mean, what what more do you want? Well, you know, obviously, AI is the buzzword right now. And most people talk about AI in relation to the big tech names. But and a bunch of smaller tech names like Chegg, for instance, have blown up in the last couple of weeks

because of AI's effects. But there are going to be some smaller companies that are AI winners. I think Uber could very well be one of those in terms of how they're investing in it, in terms of optimization

of the fleet management that's out there, getting cars in the right spots to pick up deliveries and so forth. I think there is a lot of upside still. I just think that just in the last couple of weeks, this is a stock that's moved up from, I think it was in the high 20s to now we're in the high 30s. Yeah. I mean, look, it's up 55% year to date. But when you talk about selling out of things like Uber, which you still like because they've gone up a lot, my first reaction is, man, do you think that you should do

that broadly in big tech as a lot of those stocks have had, you know, maybe not 55 percent gains year to date, but some of them, I don't know, they're like a double. Meta has almost doubled since its November low. And take a look at some of the gains that we've gotten in some of the like, you know, Alphabet, Microsoft. They're like we're talking 30 percent in just a very reasonably short period of time. Is it time to take profits elsewhere, too? It's I mean, the first half of this year has been the year of, you know, big tech for sure. And so all these names have done really well. Google's had a great week, as you pointed out at the beginning of the show. But really, it's just sort of catching up to the same level, year-to-date levels as a Microsoft. It was probably undeservedly kind of pushed aside as it was sort of seen as it was going to be hurt by AI.

And this week, now people are saying, oh, well, actually, it's going to be a beneficiary. So they've all had great runs. I think they all have bright futures. I do think it's smart to be thinking about taking some of the chips off the table with some of the big tech names. But my call for the rest of the year, Scott, is more I think that this rally can broaden out and kind of go into the Russell names, some of the smaller tech names who really are almost back to square one where they were at the end of 2022. And they really just, you know, haven't had the same good first half of the year that the big tech names have. Yeah, but how's that going to happen

if, you know, everybody's worried about a recession and an economic slowdown? Those types of stocks aren't going to work in that in that narrative and environment, right? Well, you know, we've climbed a wall of worry so far this year. And every week, it's something to worry about. I mean, a few weeks ago, we thought big tech's earnings were going to blow up and take the market down if it was anything but. And so that's another reason why I still think big tech continues to work over the next few weeks and months because there's just not a blow up in sight with their earnings. You know, then we got CPI worries. Now we have debt ceiling worries. And yet we continue to march higher. We got

inflation now under five percent. So I think there are you know, there are reasons to be optimistic that, you know, we can continue to grind higher for the rest of the year. And it does become a broader based rally. All right. Let's broaden the conversation. Speaking of broader based, bring in Kevin Gordon of Charles Schwab, Jordan Jackson of J.P. Morgan Asset Management. It's good to have everybody with us today. Jordan, you first. What about tech? Let's start there, because that's where we're really having the crux of this conversation is the Nasdaq has done better than everything else. Does that continue? I don't think so. I think there's some further downside to tech stocks from here. Obviously, they run out pretty significantly. But as you sort of highlighted at the outset, with the expectations for a recession, consumers coming under pressure,

I do think that there could be a little bit more pain being felt. You know, and also when you look at the broader market, big tech's been leading the rallies, been the big names that have allowed the markets really rattling. The breadth is quite narrow at this point so far. And so I'm not sure about the durability of the broad market rally. And I do think that tech is going to continue to come.

Well, we'll start to come under a bit of pressure given the outlook. What about you, Kevin? I mean, I agree. I think when you particularly would talk about the earnings backdrop, as you were just talking about, Eric, the fact that the earnings were less bad than expected, I think it's good, but it still doesn't change the fact that revisions have been more to the downside. So six months ago, the estimate for the tech sector was that you were going to see earnings

growth upwards of 10 percent for 2023. That has now gotten revised down to almost negative 2 percent. So you have that component and you have the fact of what Jordan was just saying, just a handful of names really leading the rally, which we've known for a while now. But why is that so bad? I hear everybody say that. And then I've had others come on and say, you know what, I'm going to bust that myth right now that this is somehow horrible for the market. I think it's the fact that so we're now seven months from the October 12th low for the S&P, at least at that moment. I mean, there were actually a lot of indicators that particularly we look at sentiment related if you want to broaden it out to sort of the larger stock universe that actually looked pretty good and kind of consistent with what you tend to

see at a major market low. But now that we're seven months off that point, the fact that you haven't had banks participate, the fact that small caps are really only up a few percentage points, you're not getting a lot of confirmation that you're entering a new durable bull cycle. So I think it's much more what the market's not confirming as opposed to trying to embrace some sort of rally and say, it's fine that the mega caps are leading. I don't think that's necessarily the story. I think it's much more what's not moving and what's not working. But what's not moving and what's not working hasn't been moving and hasn't been working. And somehow the market is still hanging in there with a level of resiliency that surprised a lot of people.

Oh, yeah. And it's concentration up the cap spectrum. The fact that you have, you know, the largest names really representing a huge chunk of the index. Even if you talk about a sector like tech, it's Apple, Microsoft making up more than 50% of that index. So if you're investing in a cap weighted index like that, you're putting a lot of your money towards just two names, which in times like this, it makes sense. And, you know, by the way, the mega cap names like those, like those names have become sort of the pandemic defensive. So I think the knee jerk reaction is still such that investors sort of flock back to those areas and they can look for stability there,

which, you know, it's not unwarranted because they're typically higher in quality. They do now have a little bit of a benefit from the dollar rolling over. You don't have as much of the FX headwind that you had last year. And with earnings relatively stronger, maybe not as much on the guidance run across the board.

But if that's the case for those names, then I think it makes sense why that's happening. We too top heavy. Jordan, do you have a problem with the fact that mega caps have made up an overwhelmingly large part of where this market has come to? I do. Part of the reason is the rate environment. You know, I certainly would argue that, sure, big names, long duration equuration equities can rally when rates were at 0%, but they're not. And I don't think we're heading back down to zero anytime soon. And so I worry that, you know, not only are they, the market rally has been very narrow, but these valuations, they're also the reason why valuations are relatively elevated relative to where rates are.

So you look at the outlook. Again, the Gafford guidance isn't great. And the expectations for a recession, as I mentioned, consumers coming under pressure. Sure, the dollar, given multinational exposure, the fall in the dollar has provided a bit of a bounce. But I just, again, for the durability of a broader rally, I just would like to see sort of the rest of the market play a bit of catch up.

Eric, I don't know. Do you agree with this premise or not? No, I'm going to argue against this. This is just a top heavy rally. I mean, obviously, these big tech names have done well. But the reason why it's top heavy is these names are so large as a percentage of whatever the industry that you want to point to. So if they do well, you know, like, you know, like they sort of dwarf the rest of the market. Now, you know, some of the names that we mentioned earlier, Shopify, Uber, you know, Coinbase, they've had even better years than the big tech names.

I think you got to pick and choose. You know, it's not just a, you know, buy the ETF for tech. I mean, you have to look for the winners. However, I'll be the first to admit, you know, the Russell is negative on the year. You know, so it hasn't been, you know, a huge broad-based rally. I would like to see that. But you've got to start somewhere. And, you know, we've got big tech leading the way.

I think it's going to lead to kind of others coming along for the ride as well. You know, Kevin, those who are negative on the market, it's one of the first things they point to. Oh, my God, it's so top heavy. Look how concentrated it is. Everything else is so weak. That's representative of a market that's about to have a role and about to roll hard. Yeah, I mean, it's not necessarily the top heaviness itself is not the catalyst to push you lower. I mean, it could be if you get a switch in momentum because those names have been doing so well, that just works against itself. But I think the cyclical tie-in and sort of the signal

you get from the lack of participation in the banking sector, I go back to that because every major market low since the 1930s, banks have always participated at this point when you've gotten off the low. Banks are down, as we all know. And so I think it's getting harder to divorce that from sort of the reality that we face

a little bit later this year, which is more contraction in credit, sort of a slowing in the economy, which is also a feature of what the Fed is trying to do in quash inflation. And, you know, for names that are in that big tech or tech-like moniker, because not all the names are in the tech sector themselves, but they're not impervious to drawdowns. And when we look back at history and you look at the ratios of, you know, the large caps versus the rest of the market, whatever indexes you want to use, it doesn't last in perpetuity where you get that kind of outperformance. So that's, it's not the reason that you go lower, but it is a risk, especially because, you know, a lot of people hold those names. They represent such a large part of the market. And when it reverses, it tends to happen pretty quick.

How negative are you on the market? I mean, do you think we're going back at everybody, you know, anything this week from we're going back to the October lows with thirty five hundred to, you know, thirty eight hundred. It wouldn't surprise me to go back there. But I also don't know because this is such a unique cycle. And even if you look back, I think what's tripped up investors a lot in this current cycle as it pertains to the market and the Fed and then also the economy. You go back to the three prior major hiking cycles we had for the Fed, so the 2000s leading into the financial crisis, into the tech bust, and then before that, stocks rallied as the Fed was raising rates.

As we all know, last year, stocks got crushed while the Fed was raising rates. So now you have the question of, is the pause good for stocks? Are the cuts good for stocks? I think that's what's tripped people up a bit and trying to figure out if October was the low. In my opinion, if you don't get, in a fundamental sense, confirmation from cyclical areas of the market, if they stay down and or move lower, then I think you get more of a weaker signal

for the market itself. And I think, you know, our view has always been that it would have been better to pull forward the start of the actual formal recession because that would sort of confirm that October maybe was the low. You would get more of a confirmation that stocks could see through it. The actual risk in the bear market for the bear case for the market is that you push the recession out because that would mean that you have this interim lift and then it sort of

has to work itself down from there in pricing in more recession. Unless, Jordan, you just never get a recession. That somehow, whether it's miraculous or not, we pull off this soft landing thing because the labor market has remained so overwhelmingly strong to the point that most are shocked by 500 basis points of hikes within 13 months and the unemployment rate has moved lower. Well, the labor market is the last shoe to fall. It's really once the labor market finally comes under pressure, that is when you're in the recession. But when you look at some of the forward indicators, part of the reason why the unemployment rate is so low is because of just a lack of available workers. And so this excess demand for labor, the roughly 9.5 million available jobs, that's going to take some time to work itself down.

And I'd argue that, you know, once we get to that sort of six and a half, six million job openings number closer in line to the aggregate number of unemployed persons in the economy, that's when we'll start to see a more material move higher in the unemployment rate. You know, you also add on top of this the banking stresses. You know, one of the things that I'm particularly concerned about is when you look at the makeup of the workforce, roughly slightly over a majority of the workforce, about 53 percent of private employees are employed at firms that have 500 or fewer employees. Now, these small businesses, they bank at local and regional community banks. And given the

stresses that we're seeing in the sector, you know, you argue a small business, maybe they have six to nine months' worth of operating cash flow, they're going to have to start tapping these community banks for extending some of their credit to keep their doors open. And if the availability of credit has become more restrictive and the cost of credit has gotten more restrictive as well, then that suggests they have to start laying people off. And that's where you get that broader reaching weakness in the labor force, the uptick in the unemployment rate. Maybe the job openings number comes down a lot more quicker than analysts anticipate over the next couple of months. So I'm particularly concerned. I think this leads the Fed into having to cut race before the end of the year. So I have a slightly more pessimistic outlook, just given everything we're seeing playing out.

You're being generous to yourself. I'm just saying. Eric Jackson, finish it up for us. I mean, I think there's certainly a good chance that the big tech names could tread water for the rest of the year. Heck, the whole economy could tread water for the next year or two. But I think we can muddle through. And I think even if the economy is, you know, chugging through this mud or there's an uptick in unemployment, there's no reason why there are a lot of stocks out there that have been, you know, penalized and marked down that can't do well over the next year or so.

So I think you've got to look for those names. You know, take it, take it, you know, case by case. But I think there are lots of bargains lying around for people to take a look at. All right. Good stuff, guys. Thank you very much, everybody. Have a good weekend, Eric. We'll see you soon, Jordan. You as well. Kevin, thank you again for being here. Post nine. Let's get to our Twitter question of the day. We want to know, are you more bullish on Tesla now that Twitter has a new CEO? Yes or no? Head to at CNBC closing bell on Twitter to vote. We'll share the results a little later on in the hour. We're just getting started, though. Still ahead, Morgan Stanley's Chris Toomey highlighting the one sector he thinks is priced to perfection.

He'll make the case coming up. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. We've got 35 minutes left to go in the trading week. Let's get a check on some top stocks to watch as we head into the close. Pippa Stevens is here with that. Pipps. Hey, Scott. Well, News Corp is outperforming today after the media giant beat estimates

on earnings and revenue, thanks in part to cost cuts, including layoffs. The company also saw gains in subscriptions to its publications like the Wall Street Journal and Sunday Times. Ad revenues, though,

did decrease 6% year over year, with the company noting pullbacks from the technology and finance industries. On the earnings call, CEO Robert Thompson saying generative AI may pose a challenge to the company's intellectual property while calling for the appropriate compensation. Elsewhere, Charles Schwab is a bright spot in financials after the brokerage firm reported that its total client assets rose to $7.63 trillion.

That's up 1% from the month prior and 5% from last year, though shares up about 2%. Scott? All right, Pippa. Thank you. That's Pippa Stevens. Investors gearing up for a big week of retail earnings. Melissa Repko is here with a rundown of what to watch. We got Target, Walmart, Home Depot, right? Yes. Hey, Scott, big week ahead. The big question is, how is the consumer holding up? Walmart is on tap first. It reports Wednesday, or it's one of the first, and it's expected to be in the strongest position.

Nearly 60% of its U.S. sales come from groceries, and that's a category people need even when the budget's tight. Target, on the other hand, is more vulnerable with discretionary categories like apparel, with only about 20 percent of its annual revenue coming from groceries. And even the grocery aisle is under pressure. Pandemic SNAP benefits expended and ended in March, according to Numerator. More shoppers are buying fewer groceries and trading down. And for Home Depot, the spring home improvement season

could boost sales, but falling home prices and higher interest rates remain a risk, Scott. All right. Melissa, thank you. It's going to be a big week. Take the temperature of the American consumer. See where we're at amid some reports that even at the high end, starting to cut back a little on spending. Melissa Repko up next. Priced for perfection. That is what Morgan Stanley's Chris Toomey is calling one very important sector in this market. He'll tell you exactly what he means, what it is. And throughout the month of May, CNBC is celebrating Asian American and Pacific Islander heritage, sharing

stories of influential AAPI business leaders. Here's the Notori Company president, Ken Notori. We're incredibly proud to be celebrating our 46th anniversary as an Asian founded and led independent family business. One of the reasons we've had so much staying power over the years is because we have celebrated and broadcast our Asian roots. It permeates everything we do from our East meets West design aesthetic to our core values, to even our supply chain. One of our differentiating

factors is that we have a family-owned factory in the Philippines where we manufacture the majority of our in-house collections. The fashion business has never been easy, but we're going to stay authentic to who we are, and we hope our message will continue to resonate with our customers. Welcome back. Solid earnings, a leap forward in AI the past month. Pretty good for tech, but the trade could be priced for perfection now, warns our next guest. He runs one of the highest rated private wealth advisory teams in the country at Morgan Stanley. He's Chris Toomey, and he's back here at Post 9. So it's price to perfection, price for perfection now? Yeah, I would say almost the whole market is right now.

I think everyone got excited about what was happening with earnings, but this was the whole Wall Street game going into the year. Expectations were earnings going down 4%. April 6th, earnings were expected to go down 16%, right? And so if we're down 8%, that looks like a beat, when in reality, the trend still is very negative. Sure. But if the trend isn't as negative as some were calling for, that's a whole different ballgame potentially. Right. But then you also have to look at what the market's priced for right now. Right. So if you look at the price of the market right now, it's over 18 times in a situation where we now officially are going into an earnings recession. And there is a 50-50 chance, depending on which way you look,

as to whether or not we're going into an actual economic recession. So in that environment, do you really want to put an 18 times multiple on the market? Probably not. Well, maybe you're willing to put a higher multiple on the most mega of mega cap tech names because you still want to go for quality. If you have to be invested, you still want to go for quality, still want to go where the money is, and you still want to play a little defense. And if you can do all three in that space, why not? Well, why not is because if we are going into an economic recession, you're going to have a problem, right? So, I mean, if we remember the story, the beginning of the year, economic data is looking better. Inflation is coming down. We have no landing or

soft landing. And so equally weighted, the S&P 500 looked really good. Then we had this whole situation where the data started turning and then the banks really had a problem. And you saw that two year crash. Right. And then it's all of a sudden when rates are crashing, you also get the sense that long duration assets are going to do well. So you've got people running into tech, which I could say is that sequential next domino with regards to the market falling out. The market doesn't fall out, though, unless big tech falls out. Big tech has to come down. It can't because it's such a huge component to the underlining economy. I'm just wondering what makes you think that it's going to with all of the. Now, granted, it may be overhyped in terms of AI. However, maybe that's the game changer that

some suggest that it is. And you're only going to you're just getting started with some of these stocks, even ones that have doubled like Meta, for example. There was a positive note from one firm out today suggesting this just beginning this turn. Right. But I think the thing is, is I don't think the technology industry is immune from the overall economy. Right. And I think if you talk about what's being priced into the market right now, what's being priced in the market are four rate hikes and 200 basis points of cuts. Right. And so I think you've got door number one and door number two, and both are not good options. Right. Door number one, we have those rate cuts. The reason for those rate cuts is that there is clear confirmation with regards to the fact that the economy is really in a recession and we need those rate cuts, right? That's door number one.

Door number two is we don't get those rate cuts. The market's pricing them, and the market's going to have to come down and reevaluate the fact that we didn't get that 200 basis points of cuts. And then taking a look at that scenario, you go back to your friend, Professor Siegel, who is now demanding that we get those rate cuts. Otherwise, we're going to see a really messy market. Let me ask you this question, because some people have suggested this, that rate cuts. Now, I know you say, well, they're only going to cut rates if we're falling apart. Rate cuts are always bullish. Tell me why they're not.

Tell me why they're not. I'm not talking about in the first five minutes or the first five days. Tell me why they're not. Well, typically, if the yield curve is inverted, the economy is going down. Typically, that means that we're cutting rates for a very specific reason. We're not in a situation where we're in this economy that's growing rapidly, which is a situation where we actually have to cut rates in order to keep the economy going. This is a situation where we are turning lower and we need these rate cuts to keep the economy from really

going much lower. So in my mind, I think the thing is, is we need something that's going to preempt those rate cuts and that preemption is going to be negative for earnings and pull down stock values. Sure. But I mean, ultimately, like, you know, 08, 09, when the Fed starts cutting rates, obviously the environment's still pretty bad. Ultimately, it ends up being one of the greatest bull markets in the history of bull markets, if not the best ever. But after after the shakeout. Right. So we haven't had that not the best ever. But after the shakeout, right? So we haven't had that shakeout. We had a pretty good shakeout last year. Well, so that's a good point.

So if we look at the performance over the last year, S&P 500 on a price percentage basis, three and a quarter, without dividends. The rolling U.S. three-month treasuries, $365. So you actually did better just rolling treasuries over that period with Ukraine, with China being closed, with nine rate hikes. And so if you include dividends, you made an extra one and a half percent for riding that roller coaster. In my mind, in this situation, you're collecting almost five or six percent sitting in cash waiting for this to roll over. I think that, to me, is a better trade than rolling the dice in a situation where market multiples are very high. So you always ask me, what would I need in order to change my view with regards to getting long in the market?

I always say price. That's not a fair comparison. You want the other answer, which is we need to see earnings then above $245 dollars which i don't think you're going to get in the next 12 months i just want to know you know those who have been negative and right sit here and the market's been much more resilient than they've expected i mean we have another day of it here where you start down you kind of do nothing and then as you head towards the close you you try and work your way back into positive territory. Is there some point where the train gets far enough away from the station that there's that fear of missing out factor that puts more cash on the sidelines into the market? Well, I mean, I think that's what we're seeing right now.

We're seeing that climbing the wall of worry. We see people dipping their toes. And I think where they're dipping their toes is typically that quality trade in technology. But I think that's also kind of weak hands. Right. So when the market starts to sell out, that's the money that's going to be coming out quickest. Right. And that's where I think you start to see the market getting closer to kind of that thirty six hundred level, which is where I think you can start looking to add exposure. Your clients real quick. Are they worried about the debt ceiling? They call you asking you what's what do you think is going to happen? Yeah,

of course, everything is. I mean, if you've about the debt ceiling? Are they calling you, asking you what do you think is going to happen? Yeah, of course. Everything is. I mean, if you've got a former president on national TV talking about, you know, not budging and defaulting on debt, I don't think that's very good. I think if you look at it in a situation, one thing people aren't talking about is looking at U.S. debt, CDS. If you look at CDS, credit default swaps on U.S. debt, it's worse than most emerging market countries. It's worse than it was in 2011. I think it's the widest since 08. Yeah, it's worse than 08.

And it's not affecting the equity market. In my mind, I think that's also another issue that you have to worry about. All right. Good stuff, as always. Thank you. Thank you. All right. Chris Toomey from Morgan Stanley Private Wealth. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens is back with that. Pippa. Hey, Scott. One solar stock is shining bright. We'll have all the details coming up next. We have less than 20 minutes to go before the closing bell. Let's get back to

Pippa Stevens, who's watching the key stocks at this very moment, Pippa. Yeah. Hey, Scott. Starting here with First Solar, which is surging more than 25% today, making it the S&P 500's top performer by a wide margin. The pop comes after the Treasury Department issued proposed guidelines around what qualifies for the Inflation Reduction Act's 10% domestic content tax credit. Now, investors have been waiting for clarification on how the bonus credit would be applied, and First Solar is the only sizable domestic panel manufacturer, and so is a clear beneficiary. The company is adding new capacity, although has said it is sold out through 2026. Meantime, Twilio shares taking a hit after Mizuho cut the stock to neutral from buy,

the firm citing near-term macro challenges, as well as lower growth. The stock is now down more than 10 percent on the week, following Twilio's earnings report on Tuesday, where the company issued weaker-than-expected revenue guidance, Twilio pointing to weakness from customers in social media, e-commerce and cryptocurrency businesses. Scott? All right, Pippa. Thank you, Pippa Stevens. Last chance to weigh in on our Twitter question. We asked, are you more bullish on Tesla now that Twitter has a new CEO? You can head to at CNBC closing bell on Twitter. Vote. The results are next. The results of our Twitter question, we asked you more bullish on Tesla now the twitter has a new ceo the majority of you saying no we're not it's kind of surprising up next the regional banks rocky week now investors are closely watching the balance sheet data out in overtime trust me they are

they can't wait for the balance sheet data the key figures to look out for in the balance sheet data what it might mean for the broader market that and much more when we take you inside the Market Zone. All right, we're now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Jessica Inskip of Options Play highlights the key technical levels we should be watching. Leslie Picker is setting the stage for some especially critical data on the health of the banking system. We'll get to everybody in just a moment. We start with Mike Santoli first. What have we learned, if anything, after yet another week where we stayed in this range?

In this range, I think familiarity breeds contempt, right? That's one of those sayings where I think this market at this level we've been able to chew through it multiple times and I think it's creating a little more skepticism or anxiety than it is comfort just because it seems precarious and I will grant that if you look at lots of parts of the market that usually are risk appetite indicators they're not really flashing a friendly signal if you look at the Russell 2000, it's kind of barely staying above these levels that might actually get people to think that we were kind of cracking below a multi-year range. The constant discussion about the top heaviness of this rally this year, I think, also has people feeling as if there's something illegitimate about where the market is, whereas I

think it's more reflective of the environment. Sure, of course it is. There's the Russell 2000. So that doesn't look great. That's over a three-year period. But then you have this. NASDAQ 100 against the equal-weighted S&P 500. On a year-to-date basis,

the NASDAQ 100 is destroying everything else. You go back three years, and it shows you that it's a catch-up move mostly. That does not look like a market that's badly out of balance. But it has to change soon if you're going to keep from getting dangerously lopsided. I do think that's the case. So what have we learned? Inflation is still on the downswing, but maybe not decisively so.

The Fed is not going to tell you it's done, but it's more likely than not done. And the leading indicators of recession remain in place, even if the absolute activity levels aren't going down. And earnings are kind of flattening out as opposed to really backsliding. Market also seems more willing to reward, so to speak, than punish, you know, AI players. I mentioned Alphabet, perfect example, was getting a lot of heat. Here it is up 10% this week. Absolutely. It's the one thing that really can create an open-ended upside story. And I think, you know, for better or worse, that's happening.

Although with Alphabet, again, it's a little more of a catch-up move. It doesn't look like Apple over the last year. It actually has been a bad underperformer. So it's been at these levels not that long ago. So I can kind of get why it's filtering in. But it doesn't seem like we're at a point where you can start to check off the boxes of things that would make you more confident that we're in some kind of enduring uptrend, even though I feel like the market has proven that you don't have aggressive sellers at this level yet market wide. And maybe it is because we might get a pause.

You might get some statement on policy that's going to help out the banks. Might need that, actually, because the banks, I totally agree, have not cooperated with this idea that there's not much to worry about. Yeah, we'll see what happens with them next week. It's kind of day-to-day to figure out where that sector is going. Jessica Inskip, are you one of those who looks at what's happened with mega cap tech and gives you a negative overall bias on where you think the market is? And not necessarily. I think mega cap tech is what's propping up the markets and supports that narrative of a range bound market. You know,

we came into this earnings season with the bar set really low with the most negative guidance since Q3 of 2019. But if we look at the commentary from earnings reports, the word AI was utilized up 64% year over year, and that's going back to 2005. And so that tells me, even though consumers are really loving AI and artificial intelligence, it's something that can be applied across every single vertical, helps with macro headwinds and that tight labor market, increasing productivity to bring equilibrium. So it's something that companies can utilize as well, even though we may not see an increase in CapEx spending, it's a necessity that helps support the larger narrative of a range-bound market. I know you're watching, too, this, what I guess you could call a disconnect between the debt ceiling duel and the price action of the market.

That's right. If there was really any large, broader concern, we would see that within the market. And we certainly, certainly do not. I think it's so interesting if we look at the broader S&P 500. And I think Jay Woods actually said this best. Sideways is a direction. We are not making higher highs. We are coming up against resistance and those support levels.

However, we are making higher lows, which is indicative of an upwards trend. And that support right now is 4,100, that 1128 lower high. The lower level of support is 3,900, which is the 26 weekly moving average. And then the lower high that's needed to sustain and not drop below before we have a really bad situation is actually 3,800. So we have some cushion until we run into that room where I would exercise a lot of caution. All right. Good stuff, Jessica. Thank you. Enjoy the weekend. We'll see you soon. Leslie Picker, there was that sluice report and now there's the balance sheet data and all of it is very important. It is very important, Scott, and I appreciate your enthusiasm.

In about 20 minutes or so, we get the Fed's H-8 data that gives us a snapshot of the deposit levels among U.S. banks. This data will be helpful in qualifying customer sentiment. After a mixed read from some regional banks yesterday, if you recall, PacWest said in a filing its deposits declined 9.5% last week, with most withdrawals occurring on May 4th and 5th, as customers grew spooked by the recent sell-off in its stock price, which is down about another 5% today. Western Alliance, though, on the other hand, said deposits actually grew $600 million since May 2nd.

Goldman put out its deposit rate monitor this morning, saying that rate increases have been slowing across banks even as outflows continue. Deposit levels are down 2% month-on-month, As outflows continue, deposit levels, deposit rate levels at big banks, or sorry, deposit levels are down 2% month on month, while at smaller banks, they're down 1%. A greater number of regionals and large cap banks are raising rates for CDs in an attempt to keep more deposits from leaving, although savings and checking rates still remain quite low by historical standards. So still some time to

catch up there, Scott. Yeah. And I feel like, Leslie, I mean, I guess you assume that you're going to be covering these regional banks for the foreseeable future until, I don't know, whether the government comes out and makes some explicit guarantee on deposits. We're going to have these stories almost every day. Yeah. I mean, I was a teller at a regional bank, so I will gladly cover this story, given that personal backdrop there. But no, you're right. And there are a multitude of factors here. We're looking ahead to next week. There are a couple of Senate hearings that involve both the Signature Bank and Silicon Valley bank leaders or former leaders at this point, and also the regulators to really home in on kind of what led to those

downfalls and whether they really ring fenced the issue moving forward. But until there is more clarity, especially on the regulatory front, you know, we're going to continue to cover this and every headline has the potential to move markets. Yeah. And as you have all week and well, I might add. Leslie, thank you. Leslie Picker, enjoy the weekend to you. Mike Santoli, two minute warning. And here we go again. Right. This resilient market as as almost every day, it feels like no matter what happens earlier in the day, this last hour of trade offers something pretty interesting towards the close. It has. Part of it, I do think, is that real money, people with long term time horizons don't have high conviction or at least don't see reasons to change their stance very radically based on what's incoming because we do seem trapped in a

range. And what that means is on a day-to-day basis, you're kind of in the hands of very short-term tactical players. And the main effect there when people are kind of having these waves of the single-day options go in and out of the market, is mean reversion. It's we sold them in the morning, we're buying them back later, or we sold them and the market makers have to hedge against it. So that's a small, I think, explanation for why we do have this intraday move. But also, you have the offsetting currents that are still at play, which is the mega caps are not falling apart, although they're underperforming today. And so now you have a little bit of relief on the average stock out there. And, you know, the banks down something like 35 percent on a three month basis. It almost never gets worse.

It's gotten worse at the bottom of covid really quick and it got worse in the global financial crisis on a three month basis. It's almost close your eyes and buy time, except before you get to the actual bottom bottom a lot bad can happen and you're not seeing the credit markets flare up in a nasty way the way you did those prior other times. It's very unique.

Everyone's concerned about the liability side of the banks the deposits as opposed to the assets at this point that's very different from other sort of perceived banking crisis. I want to wish everybody a good weekend as we work back

towards the flat line at least on the Dow. May get there too. Have a good one. I'll see everybody next week.