Closing Bell - Closing Bell Overtime: AI, IPOs and Retail Earnings Drive the Market Conversation 5/21/26

Episode Date: May 21, 2026

Michael Kantrowitz of Piper Sandler assesses the broader market backdrop and where leadership may emerge next. Retail earnings stay in focus: Chris Horvers of JPMorgan explains what recent reports reveal about the consumer and spending trends across the economy. Workday, Zoom, Deckers, Ross Stores and Take-Two Interactive all add fresh signals across software, retail and gaming. Our Kate Rooney reports on the next big private market story involving OpenAI while Alex Kantrowitz discusses AI policy, IPO dynamics and the latest developments across the sector. Ashok Bhatia of Neuberger Berman examines whether the debt fueling the AI boom could become a problem for bond markets. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The bell's bringing in to the trading day at the NYMC, BNY, ringing the ballot at the NASDAQ and for technology doing the honors. Welcome to closing bell overtime. We're live from studio at the NASDAQ market site. I'm Melissa Lee along with Mike Santoli. Sox higher across the board today. The Dow up nearly 300 points. And that is a new record closed, by the way, small gains for the S&P 500 in NASAC. Once again, the Russell 2000 leading the way, more in the markets straight ahead, including the momentum pushing the Russell. And as the markets move on from yesterday's big earnings, we've still got several notable companies. companies reporting today, including workday, Zoom, raw stores, and deckers. And we're still watching the fallout from SpaceX's S-1, as Open AI could be next in the pipeline, but we will start with the markets, and it did seem once again that oil sort of set the tone for the markets.

The markets followed along. It did. You know, we get a little bit of a hint of a headline that says maybe things clear up in the Gulf, and oil softens up, yields come down. You know, there's a little bit of a bid in stocks after that, but it did fade, right? We need confirmation for that to last. I think it doesn't really change the broader complexion. So a week ago today, S&P 7500, that's the high still.

We've been just kind of going sideways below that, churning around, trying to figure out if we just have to digest it. What's fascinating is, Invidia, another great quarter, another great guide, down almost 2%. And what happens in reaction, the DRAM memory ETF goes up 5%. Everything else in the chip world will go higher, but not Nvidia, despite the valuation there. And we're grabbing for the stuff that just can move the fastest, and it's the most volatile. It's kind of the higher torque play on all of these themes as we go along. Also, the VIX

below 17 kind of shows you all this push and pull below the surface of the index and, of course, building toward a three-day weekend as well. But it's a calm market, but not one that has a lot of push behind it, at least, at the moment. You can see sort of the fractures in the consumer complex. And we had the headlines from Walmart talking about the consumer that is increasingly under stress. We have mortgage rates at nine-month highs. We've got gas prices, four and a half bucks, a gallon going into the Memorial Day weekend. So these are all concerns. And so the relief in oil prices that really sort of lets the market breathe a little bit for as long as that lasts. Right, exactly. And, you know, they've been massive underperformers, that whole group, you know, in the last three months or so.

Let's get more on today's market movers. Christina Parks Neville is here with those. Well, equity is edge higher, like you guys said, midday while oil prices did decline. And as traders really continue to track developments around the Iran conflict, that pressure on crude really weighed on the S&P energy sector for a second straight day. Valero, Marathon, Vlaro down almost four and a half percent today, APA among the biggest laggards. In tech, NVIDIA slipped despite topping first quarter estimates, as investors really focus on what's next.

The company did highlight $20 billion within a CPU opportunity, and that's why competitors AMD and Intel move lower, while Arm, a key Nvidia beneficiary, surged about 12%, 16%. Into it was the worst performer in the S&P 500 plunging today about 20, concern centered around the slowing turbo tax amount among lower income filers. And the company also confirmed a 17% workforce reduction. They said it wasn't because of AI. On the consumer side, results mixed again. You had Walmart dipping after maintaining full year guidance while Kroger fell in reports it plans to cut prices. But Ralph Lauren moved higher on a beach showing strength at the high end. Then switching to some big movers, Spotify jumping 13% after outlining long-term targets.

an AI deal with universal music while Birkenstock surged on a $250 million shared buyback. And for our audience members, Mike and Melissa, do not wear Birkenstocks. Not today, at least. I thought you said you didn't own a pair. No, you don't know. That would just show me. Thank you, Christina, Christina Park-Nevelace.

Yield's backing off earlier highs. Let's get to Rick St. Telly in Chicago. I'm sure he's not wearing Birkenstock today, at least, Rick. No, it's always Tony Lama's on this end. You know, if you look at the yield curve twos to tens, it flattened all four basis points today, as you see on this two-day chart. And the reason I think that's

something to point out is because if you look at a two-day chart of tenure and oil, oil is having a bigger impact on the long end of the yield curve. And that makes sense. It's sensing that as we get closer to the end of the conflict, the inflationary pressures will fall along with crude oil. And that is something to pay attention to. Because if you're looking at the long end, look at oil. And if you're looking at the short end, maybe you want to be looking at the nervousness regarding Fed Fund futures. Everyone seems to be talking about December's now over 50% probability of a tightening, but that's five meetings away. Look at a two-month chart. The upper line is July. The bottom chart is D's. Well, it's a log jam. Every month, whether it's

July, August, September, October, November, December adds to the pressure building in the D's. contract. But July has nothing in there for the Fed doing any tightening. But all of these issues are making the two-year a bit stubborn. We want to pay attention to that dynamic. When the conflict ends, I think you're going to have a big yield curve flattening session. And then after that, we'll watch how it steepens as oil prices affect the inflationary prospects. Mike, Melissa, back to you. I, Rick, thanks so much. Well, Workday earnings are out. Sima Modi has the number. Sima. Mike, a sizable B for Workday in the first quarter. quarter, $2.66 adjusted versus the estimate of $2.51. Revenue coming ahead of consensus at $2.54 billion

and subscription revenue for the first quarter and even looking ahead to the second quarter in line with what the street was anticipating. I would also point out operating margins, non-gap for the first quarter ahead of estimates at 31.8%. Stock is moving here in overtime by as much as 7%. Some comments here from founder and now CEO and Neil Booster, who rejoined as CEO back in. February. He said we had a great Q1. It makes one thing clear workday is ready for the AI moment. Our core business is strong. Our AI strategy is working and we're moving with the speed and focus that requires us to lead. It comes as the company now has 20 organic agents and they have about over 80 million users under the contract and 1.4 trillion transactions annually. So that just shows how customer

adoption is increasing. We'll wait for more comments from him on the earnings call guys. Stock going into this was down about 40% year-to-date, bringing back some of that here with it up 7%. Yeah, down 50 plus percent from its highs, down 4% today. It's like 10 times earning, so obviously room for upside surprise in the stocks reacting. Cima, thank you so much. While markets may be facing some pressure from the rise in yields, they still remain firmly in an uptrend with the Dow at new highs and the rest of the market, not too far from it. So can the trend hold if rates don't reverse course in a meaningful way? Joining us now is Michael Cantorwitz from Piper Sandler.

Michael, good to see. We were just chatting here about how the, you know, the markets kind of cadence seems dictated by the oil and yield story. And whether it's going to be play defense with mega caps or look to the broader list of stocks seems to be dictated by that. So how does this play out in your eyes? Yeah, no, it's a good point. The broadening trade began in October and ended abruptly on February 27th when this conflict began. And, yeah, I do think where you see the most volatility from interest rates and oil is really under the surface of the market. You know, while the markets are still, you know, in an up trend and close to their highs with the Dow Adahe, under the surface, it's not quite as rosy of a story. And that's largely due to the PE compression we've seen from higher rates.

We're at a point now where we think we've seen the bond market basically start to, I think, become a bigger negotiator. perhaps in this Middle East conflict. You know, if you think about last year with tariffs, I think the bond market played a big role in causing a pause from President Trump. So the pressure continues to rise. And I also think we're going to potentially see some reflexivity from three months of higher rates in oil prices and potentially some softer economic data in the next few months that could also lead to some drop in rates, all else equal.

So I think it's time for investors to go shopping for some of the decisions. discretionary names, some of the biotech names, some of the housing-related names that have gotten just beaten up. Their valuations have come down with the view that potentially we start seeing the end of this rather than higher rates for much longer. So you have to believe that rates are coming down. You have to believe that inflation will also come down, Michael, in order to be in for that trade. It's simply a trade. It'll be a reflexive moment in time when the war's over and all these things reverse? Well, yeah, I think for the short term, it's more of a three-month trade. To your point about inflation, you know, inflation is lagging in nature. So I think what matters really is

the front month curve of oil prices and ultimately interest rates. If we do see a real resolution, a lasting resolution, then I think investors will largely look through a lot of the bad news that's still to come from the reverberations of what's already taken place. If not, then the risk to the markets probably gets heavier as more problems compound on the issues that we already have. There's been a lot of commentary about the fact that real rates have been rising. So in other words, nominal yields are up, not just because of embedded inflation expectations. What is your interpretation of that?

I know it's kind of notoriously hard to get to the why of why real rates are higher, whether it's growth expectations or fiscal concerns or whatever. But what does that mean in itself and then for equity valuations? Yeah, well, I try to answer that in a really simple way as opposed to someone who, you know, a Fed policy watcher who tries to break down the term premium, the inflation expectations, you know, a lot of these assumptions and models. I look at inflation surprises. I look at labor surprises and I look at cyclical data surprises. They're all up. The labor surprise index is at a two-year high in the U.S. It's been rising for five months. The inflation surprise index has been rising all year and more sharply in the last two to three months. And the cyclical surprise

index, this captures a lot of the manufacturing PMIs that we've seen improve all year is also at a multi-year high. So it really is all of those factors that are contributing. I would say oil and inflation are the heaviest, but it is broad. And you see that certainly the earnings and a lot of the macro data that's tied to manufacturing and certainly anything related to AI. It helps you also think about what needs to change to get rates down. Now, we could see some softer labor data and expectations in labor have certainly improved of the last couple of quarters as the data have. We potentially could see some soft PMIs, but again, ideally the best way would it be to obviously get oil prices to stop moving higher. Yeah, that's the more painless way of having it happen.

Michael, good to talk to you. Thank you. Michael Cantuance. We've got a news alert now. The government making a deal with a mining company. Let's get to Pippa Stevens. Pippa. Hey, Micropeture Resources. Surging here, 15% after announcing its finalized a $2.9 billion deal from the U.S. export import bank as the government looks to secure critical mineral supply chains. The company will use the loan to develop its gold mine in Idaho, but the site will also produce antimony, and that is what the government is interested in.

Antimony is key for a number of industries, including defense, semiconductor manufacturing, solar panels, wind turbines, and more. The U.S. has no antimony mines in production, and more than half of our supply comes from China. China has previously curbed exports of critical minerals, including rare earths. And so the U.S. is trying to rapidly develop domestic resources. And this is just the latest in a string of mining deals from the U.S. government. The Export Import Bank earlier this year announced Project Volt a $12 billion critical mineral stockpile.

The government also backing miners like MP Materials, USA, Rare Earth and Lithium Americas. Seed Perpetua now up here more than 17%. Melissa? Pippa thanks. Pippa Stevens. Well, Walmart leading retail lower today as it falls about 7% here. It's worst day since 2023. The company's weaker than expected outlook, raising new questions about the health of the consumer. Walmart CFO, John David Rainey, spoke with CNBC earlier and laid out how higher fuel costs could keep pressure on prices. If fuel prices stay where they are, it could certainly put some pressure on average unit retail.

If you think about food as just an example, food requires fertilizer and a disproportionate amount of the world's fertilizer. or phosphate and nitrogen come through the straightforward moves. And so that's with that closure right now, that's having an impact. And so I think it's reasonable to assume that if prices stay where they are and the state of the closure remains where it is, that you could see some upper pressure on prices. So what does this all mean for retail margins, pricing power and the consumer joining us now with his take, Chris Horvers, JPMorgan, Senior Retail analyst, Chris, great to have you with us. You know, even looking through this quarter, this seems like the exact kind of environment

where Walmart gains share and actually comes out on the other end stronger. And I think that's exactly right. John David's correct. The other cost is shipping that product all over the country. And Walmart was caught here in the first quarter. They absorbed the energy prices and they didn't pass it through. Given the fact that now as they look ahead, they see those energy costs as persistent,

they're going to start to raise price. And you're also lapping some serious egg deflation last year. So as a result, their volumes should benefit because they'll get trade down because they win in those environments. And then on the other side of it, you have a very healthy mid-to-high-end consumer. There's a lot of reports out there saying that this tax stimulus that washed through the economy in the first part of this year is still in people's bank accounts. So as they draw people into the top of the funnel, they gain share in general merchandise,

see very healthy spending. and then they'll also gain share and maintain that low-income consumer. So what do you attribute then the stock reaction? Obviously, a big premium has been built into Walmart. It came in in a high. Yeah, so when Doug McMillan took over in 2015, Walmart trade at 15 times PE. Walmart trades at 40 times PE. You know, gross staples typically trades one and a half two times the market.

It's been mostly re-rating. We're at this point where we need upward revisions. and you had last year where, you know, a tariff cost and insurance cost pressure their upward revisions came into this moment. You were blindsided. Frankly, we're buyers here. The long-term story's intact.

You're going to roughly raise your earnings power 50% over the next three to four years, and you'll hold that valuation. So over the long-term, this is a stock that looks like $168. Target's quarter really showed progress in this turnaround story, but in this environment where Walmart is ready to compete,

Does that put Target at any disadvantage in this progression? You know, Target's an interesting story because they've made a lot of progress, but there's still a lot more to do. And if you look back historically, Target does really well when you have a very healthy consumer. We had a very healthy consumer in the first part this year. It's not as healthy as it was. So we expect much more modest outcomes.

And given that the majority of their sales comes on the discretionary side, whereas Walmart's mostly on the consumable side. we're just concerned that whatever moderation's coming for the consumer and the retail, targets just in a tougher position. And then Walmart wins on trade down and this growing marketplace, this business model like Amazon. On the consumables, was there any broader rethink based on Kroger's talk today of actually getting aggressive on price? It's an interesting dynamic because Walmart's, the Kroger CEO is the former head of Walmart U.S. So he knows how the sausage is made in Bentonville, so to speak. But if you look at where price gaps are for Kroger versus Walmart, there are double digits, they're low teens kind of price gaps. They historically were high single digits. So there's a lot of room for Kroger to invest in price. And it won't necessarily affect Walmart's market share. It's also a little bit of a higher income consumer.

What happens to the Walmart consumer when, like PepsiCo, for instance, raises price on. Dorida's wheat. Just had a story today saying that they're going to raise price on the small snack size, even though three months ago during their earnings release, they said, we feel the pain of consumers, we're going to roll back those increases. Well, they're going to actually increase price on the small packages. So for the Walmart consumer, when that happens, how does that sort of feed through? Because that's not, they don't have control over that, obviously. Yeah. And that's the top of funnel, bottom of funnel issue. The way we think about that, that that low end could get squeezed a little bit, but that's also going to force small those mid to high income. Consumers,

to trade down and seek the best prices. And net net, given the health of the consumer, we think that's a net positive between the top and bottom. Chris, great to you. Thank you. Chris Horbers, J.P. Morgan. Well, staying with retail, shares of raw stores jumping after hours after a strong beat on both EPS and revenue.

Same store sales jumping 17% versus expectations of 9.4%. Its second quarter outlook for sales and EPS coming in above estimates as well, and it's raising its full year. comp sales forecast. The company sees second quarter EPS at 185 to a 193 a share versus a consensus of 179. Well, SpaceX finally filing to go public and we learned a lot by digging into that S-1. Has Elon Musk created a new standard for IPOs? One or the next wave of companies going public could follow. And check out shares of S.A. Lod are a big jump after hours. The company says it's ending discussions with a Spanish beauty company regarding a potential merger.

Yale's stock fell sharply in March when rumors of a deal hit the market. You're watching Closing Bell overtime, live from the NASAC market site. SpaceX's long-awaited entry to the public market is nearly here with its S-1 filing last night, revealing some key financial details, some highlights. The company had $18.7 billion in revenue last year. That was of 33% from 2024, but had a net loss of nearly $5 billion in 2025. CapEx doubled in Q1 year over year, and the company has, has about $29 billion of debt, a bright spot Starlink, which is bringing in the bulk of the

revenue as subscribers cross 10 million. And finally, there is Elon Musk's control. He will control about 85% of the voting power through a dual-class structure, making him virtually impossible to fire. Investors are essentially betting that Musk, Mars, and an AI business can justify its potential $2 trillion valuation. I mean, the total address will market, Mike, is $28.5 trillion. So obviously it's worth every penny. Exactly. I say sarcastically. It's galactic total indressable market.

Right. Mars and beyond was the market there. But I mean, you know, it's funny because we'll go through these financials. We'll pour through them every single line item. But ultimately, it does not matter whatsoever. But within the S1, there were some other interesting tidbits, such as the tariffab, which Intel investors want to take as written in stone, but actually it's not. Right. Either party can walk away from that contract. So that's not set in stone. And another interesting thing that I thought was that SpaceX is the ninth largest holder of Bitcoin. Oh, yeah.

Which is odd, but it's quite fascinating. It's really is. I mean, it's a kind of a pile up of a lot of fast emerging trends that they've wanted to harness. Clearly, the rhetoric is all in the direction of AI and just this flurry of dealmaking that preceded the S-1. Right. Right. It's the anthropic deal where they're kind of sort of. renting out their computing capacity. They have this pending merger that's going to kick in, the cursor deal, and even bundling X-A-I into it all just to make it an AI play. And then you have the kind of, you know, good, but not $2 trillion starlink business, which is kind of underpinning. Every buzzing trend in the financial markets all bundled up into SBCS. And, yeah, obviously, the big thing is the aggressiveness of this anticipated market cap.

I mean, if it was a fifth that size, we'd be saying, oh, it looks interesting. Right. On a financial base. Exactly. Well, OpenAI is expected to be the next big company to file to go public. It's S1. Could come very soon. Kate Rooney's looking into that, Kate.

Hey, Melissa. So Open AI now preparing to file for an IPO confidentially as soon as Friday, based on what we're hearing. Also looking to go public as soon as September, this is according to a source familiar with the matter. It would follow SpaceX. And that listing, as you guys have been talking about, with its AI business, XAI, I'm also told by sources, rival Anthropic, has been getting. getting IPO ready behind the scenes. No timing yet on that one. But Open AI is really planting

the flag here, trying to get out ahead of its biggest competitor to frame the story and the financials as well to Wall Street. So guys, we won't see the numbers until the S1 flips. That would be closer to listing date, so likely closer to September. But we are seeing some breadcrumbs of what might come out. So new revenue reports today around both AI companies for Walness Source telling me Open AI's first quarter revenue was around $6 billion. That was driven by Codex above Anthropic for that quarter by about a billion dollars. Information was first to report this one. But then you look at the second quarter.

It looks like Anthropic maybe point ahead that company on track to generate $10.9 billion in revenue for the quarter, which would top sales for all of last year speaks to the growth in both of these companies. Marks its first profitable quarter. That is, according to a source familiar with Anthropics Financial's OpenAI has taken overall a much more aggressive approach when you look at data center spending and compute does argue that is a strategic advantage, sort of a moat there amid this compute crunch, could also mean larger losses in the near term, but we will see you guys. Back to you.

We will, hopefully, very soon. Kate, thank you. While those two names are considered the headlines, there are a number of other massive IPOs in the pipeline this year, like, of course, Anthropic, data bricks, Strava, and Stripe. So how could Open AI and SpaceX set the narrative for the rest of these companies? Let's bring in big technology founder and CBC contributor Alex Cantoritz. Alex, good to see you. Good to see you. Obviously, this environment's starting to crackle here a little bit, and there's a hurry by these companies, SpaceX, Open AI, to get out there, whether it's because you'd want to kind of make your claim on the capital before Anthropic shows up or whatever. But how do you see this developing, even in terms of the horse race in AI? Well, I think the horse race that we're looking at specifically is going to be this Open AI Anthropic horse race. Open AI is obviously racing to get out first. A year ago, you'd speak to, to Open AI about IPO and they would be like, how we don't want to do that. Sam Altman said would be very annoying to be a public company CEO, but now they're racing, obviously, to go public.

And this is probably because this is about as bad as it's going to look for Open AI. Now, obviously, we just saw some revenue numbers. They're doing well. But Anthropic has been gaining fast. The thing is, Anthropic is going to hit some sort of threshold where they're not going to be able to deliver their services the way they want to because they haven't been spending as much on infrastructure as Open AI has, and therefore we see that they're going to be profitable. I don't think that was by intent. They would rather continue to lose money. So Open AI is going to have a faster growth rate with Anthropic, and it's going to be pressed to get out first right now, tell its story, and then over time, because it's invested in compute, then lap Anthropic.

But you don't want Anthropic to come out first, set the narrative, look like you're behind, and say, we'll try to figure out eventually you want to come out first and say, here's what we are, where the first pure AI IPO invest in us, give us the money. So not seeing the finance, not seeing the S1 at all from either of these. So you're basically saying look through an Anthropic looks to be the better. I mean, excuse me, Open AI looks to be the better business, even though initially it will not. Well, look, this is because this is so early and we're moving at such speed. We've never seen an industry move at the speed.

These companies are moving at. I mean, Anthropic was founded 2021. We're at 2026. We're seeing astounding numbers, 10 billion in a quarter. So a lot of this is based on projections. But the projections are that this continues to go exponential. And if it does, then deliberate smart investments in data centers, the type that Anthropic has been doing, may be something that backfires in the future.

So what Open AI has is the bigger risk, right? It has made these bigger investments in data centers. So you could see much bigger revenue in the future because it will be able to deliver to customers and potentially win people over from Anthropic. The other side of that is, if we don't continue to see the exponential progress, then you could be left with a pretty big bill for Open AI and its suppliers that it won't be able to make good on. There's a fascinating big picture question about where ultimately the economics are going to accrue in this whole trend, right? So let's say Open AI in Anthropic, they're public in the next eight months or something like that.

They have a couple trillion dollars of market cap. That enables a lot of investors to say that's the way I'm going to be playing long-term AI growth. right now we mostly have the infrastructure food chain to invest it. And I just really do wonder if it's going to be about, okay, compute constraint that helps the hardware makers. But ultimately, is the value going to migrate toward, you know, the platforms and then applications on top of it? Yeah. So I think, first of all, I think the hardware is going to do fine. I think Nvidia and that crew is going to be okay. But a very interesting thing has happened in recent months, which is that previously businesses like Anthropic in particular, they were AP. business. So let's say a consultant would go with a bank and build a better dashboard with AI that synthesizes information and delivers it to bankers. But now what we're seeing is the actual applications that these companies are building, the Claude Codes, the codexes of the world, are consolidating values, value within the foundational labs. I mean, when you think about where is the AI money going, we don't really see a lot of secondary or tertiary AI companies. Where are they?

they don't exist because a lot of it is being captured by the foundational labs themselves, which is kind of a curveball, which we hadn't seen before. So it might end up being that you could play the infrastructure, right, the chips that are enabling the stuff, and you play these big apps, the super apps from the open AIs and the anthropics. Where does the money come from? I mean, if we're thinking about the ATM effect, where is the money being withdrawn in order to go into an open AI or anthropic? Well, it's going to have to show, there's going to be progress that's going to

need to be shown within enterprise. Right? A lot of this is not a consumer boom. This is an enterprise boom. It's companies saying I can take AI, put it into action, and get 2x, 3x my investment because my employees will be more productive because I can serve my customers in ways that I couldn't. And right now we're kind of at this moment where everybody's just running towards that

with this expectation that it's going to pay off. Like the ROI calculations are just being made and people are feeling good about it, but we're not in definitive territory yet. If the technology proves the ROI, then we're going to see continued investment within these companies. And clearly the pilots have gone well up until this point. But that's not a settled story yet. Yeah. Alex, good to see you. Thank you. You too. Thank you. Kentowitz. Well, the Russell 2000 outperforming the major averages for the second straight day. What does that tell us about investor appetites right now? We'll break it down.

Next on closing bill overtime. A marriage made in two of the hottest parts of the market. AI cloud provider Nebius jumping today as it signs a $2.6 billion deal. with Bloom Energy. Bloom's fuel cell systems will provide electricity for Nebius. Over the past year, Nebius is up 400 percent. Nothing compared to its 1,500 gain for Bloom. Those names helping to drive the momentum rally. And Mike is watching this chase from momentum here. For sure. So this is the Russell 2000 relative to the Small Cap 600, right? The difference being Russell 2000 is more stocks, but also the small cap 600, you have to be profitable. It's a higher quality fundamental index.

And so here you see the outpacing of the Russell relative to the 600. It's just kind of widened out this cut. This is a two-year chart. They were together down here. And now you see how far apart they are. Bloom Energy, largest holding in the Russell 2000, almost 2% of a 2000 stock index, $87 billion mark cap. It's not a small cap.

It'll get out of there soon. But the point is that's the kind of stocks driving at IonQ. The quantum company is also in the top 10 of the Russell 2000. Now, take a look more broadly at larger cap, momentum over quality. has been the trend there as well. So that's the momentum ETF. Again, a two-year chart, and it's just lift-off relative to quality.

So clearly it's offense above everything else right now. In a small cap 600, what is the industry that dominates there versus the Russell? It's a little more skewed. Actually, industrial is one of the bigger. It's industrial consumer. It's a little more balanced out.

And, of course, financials are always in there in small-ca. Very interesting. Time for our CNBC News Update with Pippa-Steevins. Pippa. Hey, Melissa. Lawmakers are urging major HALOCOM companies to do more to protect Americans as part of an investigation into the surge in cyber scams. The Joint Economic Committee is seeking information from AT&T, Verizon, and T-Mobile

about their efforts to collect data, monitor for scams, and take action against bad actors. The U.S. estimates the cyber scams cost Americans an estimated $200 billion in 2024. Blue Sky says that the Kremlin is hacking its social media platform. The company told the New York Times it is fighting Russian efforts to hijack users' accounts to post fake content. Blue Sky says it has been removing the posts and called Russian influence operations an industry-wide problem. And the National Oceanic and Atmospheric Administration said it expects this year's Atlantic hurricane season to be one of the quietest in several years. Forecasters expect 8 to 14 named storms in the period, which runs from June 1 through the end of November. But scientists warn that warmer water temperatures from the El Nino pattern,

could lead to an unusually stormy season in the Pacific. Mike? All right, Pippa. Thanks very much. Well, I had a quantum leap for IBM and others today as the government makes a $2 billion bet. Plus, bond yields backing off today. Stocks gaining will take a closer look at that relationship

and what it can tell us going forward. We'll be right back. Welcome back to closing bell overtime live from the NASDAQ market site. The Dow closing at an all-time high, its first record close in more than three months, Three stocks moving higher after reporting results. Let's start with Zoom. Beating on earnings and revenue, fill your guidance on both counts also better than expected.

The stock got more than 6%. Deckers beating on earnings, 96 cents a share, 13 cents better than expected. It's Hoka and UG brands, which account for most of its revenue, both beat as well. Take 2 posting a net loss. We are not comparing that to analyst estimates. Revenue was a small beat, but the big news for the company, the release of Grant Deft Auto 6, company confirming it's on track for a November launch, just in time.

For the holidays, that stock up 7%. Main time, we are continuing to watch the move in yields this week. J.P. Morgan pointing out in a note, its model says the S&P 500 equity risk premium is at the lowest level since the financial crisis. So is it time to add more fixed income into your portfolio. Joining us now, Ashok Batia. He is Newberger, CIO, excuse me, and Global Head of Fix Income. Excuse me, Ashok, great to have you with us. No, thanks for having me. I guess it's important to understand why rates are rising.

And you think actually it's for a good reason, a positive reason, at least for equities. Yeah, I think, you know, there's two reasons. One is inflation and inflation expectations are going up. That's certainly been the biggest driver of the move until recently. But the other component has been, you know, real yields rising as well. And this one is not necessarily that bad for equities. We think it's reflecting AI and potential growth in just a stronger intermediate or even long-term economy. And, you know, in addition to that, you've also got a lot of sovereign government bond supply that is raising that real yield as well.

So overall, it's at minimum a mixed message for equities. And I think you can look at this as some positives for risk assets as well. Is it as simple as saying that higher real yields mean that a bond investor is getting better compensated here? or is it telling you that we might have more supply to deal with down the road and those real yields are going to be sticky up here? Well, if you look at sort of the real yield available, and let's just look at the Fed's policy rate and subtract off 10 years of inflation expectations, that's a real yield of about 1%, a little bit above 1%.

So it's certainly higher than what we've been used to, but in the grand scheme of things historically, that's still a pretty low level. You know, our view is the 1% real. yield, that's fair compensation for a bond investor. It's certainly not like egregiously cheap, but it's at a level that, you know, we think supports bond investments, and it's not so high that it's scary for equity or credit investors. So where in the curve would you be invested? We've been really focused on sort of the two to five-year maturity. You know, with the Fed being priced, or excuse me, priced right now to hike about one and a half times, you've got a fair amount of protection now in some of these

and intermediate maturities, and you can lock in yields of around 4 to 5.5% for a short to intermediate fixed income portfolio. And we think that's pretty interesting and compelling. The long end of the market's a lot trickier. That's going to be driven by the 6% budget deficit that the U.S. is running. We'll see how growth develops. But we think that one, even despite the rise in yields in the long end, we're still being, you know, shying away from taking too much exposure there. You mentioned the AI investment as potentially raising growth expectations and perhaps going to lead to better productivity. But I wonder about in the near term, just the demands on capital to finance it right now. So you have governments running these big deficits, as you mentioned, and then the private sector is trying to get every dollar it can to invest in this way.

Is that straining the market at all? I mean, spreads look fine, but I wonder if you're concerned about that. Yeah, it's definitely causing pressure. And, you know, it is remarkable. You know, five or six years ago, we were talking about, you know, excess savings gluts and all the capital that would come into bond markets. But what we're seeing now is really remarkable. And it's coming into investment grade debt for the hypers. It's coming into the high yield market now.

It's coming into the asset back and private markets. And these are really big numbers. And I do think one of the reasons rates are rising is just reflecting you've now got two big drivers of issue. You've got the governments, and now you have all of this AI-related debt. And it's just leading to a bit more competition for capital globally for both of these entities. And that's why you're seeing, you know, one of the drivers of these rising yields. Yeah, I guess price has to, you know, get us to a new equilibrium there. A show, great to talk to you.

Thank you. No, thank you. I show, Batia from Newberger. The Commerce Department, making a big move to back quantum computing stocks, which are soaring as a result, details are straight ahead. Plus, the CEO of one big tech company revealing how he chooses which employees to replace with AI. Details from Closyville overtime return. Welcome back, the U.S. Commerce Department, making a bet on quantum, providing $2 billion in funding across nine companies, including IBM, global foundries, inflection, D-Wave, and more.

As part of investments, the government will receive equity stakes in each company. Inflection CEO, Matt Kinsella, was on CNBC today and gave viewers a demonstration on Quantum. This is a quantum chip. It's a quantum core, and it sits at the heart of all of our products, and inside live millions of atoms, and we use lasers to interrogate those atoms, take advantage of their quantum mechanical properties, and then turn them into cubits. And those cubits are the fundamental building blocks of quantum computers, and it all resides right in here. IBM posting, it's best day since January 2025, Raghetti, inflection, D-WA better than 30% gains. Honeywell, also higher today, Honeywell owns a majority, taken continuum, continuum filed to go public earlier this month. For IBM, they're going to use this money, they're going to make a foundry, a chip foundry, and it's going to be a separate company. Yeah.

And you wonder if that company is going to go public eventually. You wonder, too, yes, because there are no economics associated with this yet. It really is, like, deep research in a lab at this point. And there's a lot of physical impediments, right? You've got to chill this stuff down so much. But it's really interesting. I guess the government feels like they're playing with house money with intel. and some of the other things.

And I don't know. I mean, it's really fascinating considering that that's also considered to be perhaps the thing that cracks cryptocurrencies, ultimately down the road. It's a weird hedge. But you don't see the impact. You don't see more investment into quantum as being a debt to the detriment of it. No, it's not showing it right now. It's just too far off.

I mean, a lot of those companies are kind of shell penny stocks at some point not that long ago. Yeah, exactly. Well, shares of Cloudflare are down nearly 15% since the company in now that's cutting more than 1,000 jobs because AI has, quote, fundamentally changed the company's work. In a new op-ed titled How I Chose which Cloudflare employees to replace with AI, Cloudflare CEO Matthew Prince, writing that what the company did is likely going to become the norm over the next year. He argues that AI isn't coming for builders or sellers, as many have discussed, but is coming for measurers such as middle managers and operations jobs.

Prince argues the layoffs weren't about reducing headcount. In fact, they have a record number of open positions right now. A lot of those positions are being filled with internships, with Prince saying they're the next generation that will invent ways to drive our business and that AI isn't the harbinger of bleak youth unemployment. It is the opposite. it somewhat mirrors what meta has done, right, reallocating people from kind of maybe general management roles into, uh, into somewhere else. It always feels like companies want to strip down the, you know, those middle layers. But, um, you know, fascinating to see if that, if it's truly effective or if it's an excuse, we can't really dismiss the possibility that a lot of companies are leaning on this explanation because they just want to get lean no matter what. Yeah, AI washing. Yeah, exactly. I mean, Jamie Diamond also talked about, um, where the company would be hiring, they would be hiring a bunch of AI guys. So, I mean, it's, it's sort of like

making its way through. We'll see what this actually yields in terms of productivity, for one. And if total compensation for its workforce will actually go up or down, I think that'll be really interesting. Yeah, that's right. No, exactly. And by the way, measures, I mean, Jamie Diamond runs a huge bank, and a lot of that is just like, who gets credit for what transactions and how are we paying people and let's do the compliance. You know, in theory, there's a lot there. But we'll see if it really works. Well, there could be a game changer in the weight loss drug wars after a next generation treatment passed a key late stage trial. We got the details straight ahead. Welcome back to overtime. Eli Lilly, one of the big winners in the S&B 500 after encouraging

data on its next generation weight loss drug, Annika Kim Konstantino has got the details there. That's right, Melissa. So after this data analysts are calling this drug best in class with obesity, and so at the highest dose, patients lost around 28% of their week, over 80 weeks, and that compares around 2% weight loss with placebo, and nearly half of the people in this trial lost 30% or more of their weight, and that's a big deal. You know, it's higher than what we've seen with Wacobe, it's higher than what we've seen with Zepbound, and it really reaches the level of weight loss that we typically see with bariatric surgery. And in terms of side effects, they were slightly higher here, especially as it relates to gastrointestinal side effects, you know, in terms of nausea,

diarrhea, and vomiting, and around 11% of people on the highest dose actually discontinued the drug due to side effects, and around 4% of people on the low dose also disresed. continued for that same reason. But at the end of the day, you know, JP Morgan analysts do tell me that, you know, this is just a modest tradeoff, these side effects, to the higher efficacy that we see with this drug relative to other drugs on the market. And so it's still a big win for Lilly today. A lot of this, though, was already priced into the stock, correct? I mean, the results were anticipated, Reda Trutide was always seen to eventually be the best in class. Definitely, Melissa. I mean, we already saw results from this drug, face three results in diabetes,

as well as in another obesity trial, which already validated this idea that it is showing high levels of weight loss that we really haven't seen across the GLP1 class here. So this is not really surprising here. And that's why Lilly's stock was pretty much flat today on this data. And, Anika, just given the side effects and the dramatic results, does it change the kind of category of patient that might be a better candidate or not for this relative to some of the existing treatments? Yeah, that's right, Mike. So when I talk to doctors, they do tell me that, you know, this may not be the best fit for everyone, unlike something like the bigovie pill, may be a more mainstream consumery sort of pill that really flies off the shelves here with this

drug and maybe more fit for people who are morbidly obese or have a BMI over 30 and really need to see that high level of weight loss. And some of that's maybe a little bit overweight or, you know, the average person in America that is obese may not need to have 30% weight loss. They may benefit from just having 10%, 15% or even just 20%. And just quickly, Annaica, give us a couple of names you're watching from the ASCO data dump, which we're expecting momentarily. That's right. So we're going to get some abstracts dropping at 5 p.m. today, but we also, you know, investors are really watching the data readouts that are coming out next week. And some of the names that we're watching is Revolution Medicines.

We're going to get, you know, detailed phase three data on their pancreatic cancer drug, which had really positive initial data back in April. And we're also watching Summit Therapeutics, which is going to release some bi-specific antibody data in lung cancer. And that's going to be looking at overall survival data. So those are the two names that we're watching right now. Anika, thanks. Thank you. All right.

Tomorrow could be Open AI Friday, I guess, if we get this filing. So we look forward to that for sure. It's going to do it for overtime today. Fast money begins right after this quick break.