Closing Bell - Closing Bell Overtime: BlackRock Co-Founder On Market Volatility; Former Bridgewater Chief Investment Strategist On Gold, Dollar 4/10/25

Episode Date: April 10, 2025

Lori Calvasina of RBC Capital Markets and Adam Crisafulli of Vital Knowledge discussing the ongoing equity pullback and Calvasina digs into why her S&P 500 bear case is now the base case. Our Megan Cassella reports on the White House’s tariff plans targeting China, while Pippa Stevens breaks down the sharp decline in oil prices. Ralph Schlosstein, Evercore Chairman Emeritus and BlackRock Co-Founder, shares his market outlook during the ongoing market volatility. Rebecca Patterson, former Bridgewater Chief Investment Strategist, joins to offer her view on the macro, as well as gold and the dollar. FIS CEO Stephanie Ferris, in her first broadcast interview, on how the pipes of the financial system are handling the current trading volume surge.

So much for a comeback. Stocks tanking after Wednesday's historic rally as investors game out high China tariffs and high uncertainty from Washington. Though the major averages closing well off the lows of the session. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Fort is off today.

We will be all over this precarious market and how to navigate it Throughout the next hour. We will have BlackRock co-founder and Evercore chairman emeritus Ralph Schloss Stein and former Bridgewater chief investment strategist Rebecca Patterson, but let's get straight to this sell-off joining me now as RBC head of US equity strategy Lori calvicina and vital knowledge founder Adam Chris a fully along with CNBC's Megan Kasella in Washington with the latest on tariffs we've got Pippa Stevens on the plunge for energy stocks and Christina parts and evils on the sharp drop for tech yet again but let's start this conversation with Lori and Adam Lori I'm gonna go to you first are we bouncing along a bottom here? Are we trying to find a bottom?

It's a great question, Morgan, and I think the same way prior to the Rose Garden tariffs that the market was trying to kind of testing that 10% down from peak level and really trying to hang on. I think that's what the market is trying to do in here.

20% is an important threshold and we came very close to that earlier in the week at our maximum point of pain we were eighteen point point nine percent below the the February high and that's important because if you go back and you look at that drawdown in twenty eighteen.

Which is very similar conditions to what we have in the market today you had a trade war you had concern about fed policy error. Today not so concerned about the fed. Up but other policy errors are under discussion- and there was also

extreme positioning and valuation for us to start the year so that's a really good concerned about the fed. But other policy errors are under discussion. And there was also extreme positioning and valuation for us to start the year. So that's a really good template for looking at today. And we're getting very close to that maximum point of pain on some of the worst days that

we've had recently. Adam, want to get your thoughts on this, especially as you have different pieces to the puzzle. You have the technical piece, you have the fundamental piece, especially as earnings really start to ramp up with the banks

beginning some of the big banks beginning tomorrow. And then, of course, you've got the macro piece, which still carries a lot of uncertainty. How do you see this market here with the S&P settling? It looks like $52.68, so down about 3.5%. Yeah, I think the Wednesday pause took some of the more extreme talerous scenarios off the table, which is obviously positive. It also revealed kind of where the White House's pain thresholds lie. So the pain threshold has been much higher than I think most people anticipated, but

we did get a good sense that around $5,000 on the S&P, and we also saw them respond to bond yields that they will be sensitive to market price action despite some of their indifferent tone. So removing some of the extreme tail scenarios from the table is positive. It helps put a floor under the S&P. So 5,100, 5,000, that seems like it's going to be a relatively stable base. Now the question is just working through

this extreme uncertainty that still is present with tariffs. We still have a very heavy tariff burden in place. There's a lot of uncertainties what comes next on tariff. And like you said, we're about to hear from the entire S&P 500, and it's very likely companies are gonna be more cautious on these calls than they were in January, February.

And so you have a lot of risk to earnings estimates for the full year, and you just don't have a ton of valuation support in the marketplace. So it's kind of, you know, definitely put a base in, but the upside case is still very hard to see. Well, speaking of tariffs, Lori, Adam, stay with us because we're going to bring Megan Casella in Washington into this conversation now with the latest on what the White House

is saying about tariffs. Megan. Morgan, the president has been talking about his tariffs today, but not bringing us a ton of clarity on the exact next step. So a few top lines from what he's been saying. He said that the administration is very close to being able to announce its first deal, but the president would not say with which country. He also didn't rule out extending the 90 day pause if needed.

But he also said that if the White House isn't able to strike a deal, that countries will see their tariff rate rise back to the level where it was yesterday. So it all just adds to this uncertainty right now. And it comes just a few hours after the White House clarified that the new tariff rate against China this term is actually 145%, not 125, like they had said yesterday. That didn't become clear until the executive order was published this morning. It lifted the reciprocal rate against China by 20 points more than I had expected. And when I clarified that with the White House, an official confirmed that once the 20 percent

fentanyl tariff is factored in, the new rate is indeed 145 percent. You also can't forget the tariffs in place already and still on metals and cars and the 10 percent universal baseline tariff. So Morgan, on balance, when it comes to the average tariff rate that we're charging on U.S. imports, we are almost exactly where we were 24 hours ago before this pause was Baseline tariffs so Morgan on balance when it comes to the average tariff rate that we're charging on US imports We are almost exactly where we were 24 hours ago before this pause was announced Yeah, it does seem like we're now in a full-fledged potentially full-fledged trade war with China here 145 percent is a staggering number. You were the first person to actually break that number

Today in reporting the fact that it was higher than had been previously suggested by the White House. I am curious, Megan, and maybe I'm putting you on the spot here because it does seem to change day to day. But when you look at the administration, there has been some slightly conflicting commentary coming out of different officials here in the last call it week around trade policy, what stays, what goes, negotiations. It almost seems like at least from a market perspective in the last 24 to 36 hours, Treasury

Secretary Besant has really taken on more meaning in terms of anything he puts out and how the market reacts. Is that where we need to be focused in terms of administration officials and who says what and what it means? He definitely has taken on a bigger role especially just in the last few days you know it was a tweet from Commerce Secretary Lutnick that told us who was in the room with the president yesterday when he made this decision on the pause and it was Lutnick and it was Secretary Besant so only the two of them that we know of were in that room the trade trade representative, for example, was on Capitol Hill testifying to Congress as

the news was announced. Clearly didn't appear to be involved in that decision. We don't know where Peter Navarro was, for example, but we know his viewpoint had been a little bit different. Besant also said he flew down to Mar-a-Lago on Sunday to launch this conversation with the president about shifting the conversation to focus more on negotiations to show some forward progress being made. So clearly taking on a leadership role. We also heard him talk in the cabinet meeting at the White House today too.

So someone who is trying at least and so far has been sort of speaking directly to the markets and trying to calm things down this week as much as he can. When you talk about a trade war with China, they're trying not to use that word at this point, but when you get into 104% rates versus 125% versus 145%, at a certain point you do almost wonder, well, yes, the technicalities matter. At a certain point, aren't we just likely to cut off all trade? And where do we go from here? It all speaks to the difficulty that companies right now are really dealing with.

Yeah. I, politicians, it doesn't matter what your political affiliation, I've seen this for a number of years now, very rarely, if ever, use the words war and China in the same sentence to your point. Lori, I wanna get your thoughts on this and what we're seeing on the tariff side and specifically, given the fact that we did come into

this year with high valuations for stocks and we do have the beginning of earnings in earnest here. What it means for price to earnings and specifically the earnings piece of this and how investors need to think about profitability in this year in this age of uncertainty. It's a fantastic question, Morgan. And you know, when we look at different PE multiples that we track on my team, some of them, NASDAQ 100, Russell 2000 have set certain thresholds that make us understand why the market

was trying to bounce yesterday and why it's been trying to put in a bottom. Russell 2000 PE is down around 12.6 times. That's in line with where it bottomed out in 2023 and 2022 after major declines in the market. But the problem is that nobody has faith in the E right now. And if you look at the rate of upward revisions in the different indices, we've only seen about 60% downward revisions recently. So 40% of revisions in recent weeks have been to the upside. And when we go through company transcripts, what we realize is that

companies really have not been making much in the way of tariffs into their guidance. And in their conversations about tariffs, a lot of them have not provided a lot of specificity to the sell side analyst community that would allow them to go in and get ahead of some of these issues. So we're going to need a lot of disclosure from companies in the upcoming reporting season about the tariffs themselves. And frankly, Morgan, we're also going to need a lot of disclosure about what was happening with business activity during the calendar first quarter. From all the uncertainty, we have heard discussions of a pause of, you know, kind of more sporadic behavior, you know, of conditions not being great for retailers in particular in February. But what we really need to understand is kind of

what is that cadence of demand after some of these pressures like weather and fire have dissipated or things getting better? How much is the deterioration and sentiment and the noise out of Washington and these policy changes? How much is that actually weighing on demand and what do companies expect on that going forward? That's a lot that they've got to disclose. A lot of uncomfortable conversation or questions rather that need to be answered.

Adam, want to get your thoughts on the fact that the market here just shrugged off the CPI report which came in better than expected including the core piece of that report. I realize there's a lot of investors out there saying, oh that was March.

Things have changed since then. We get PPI tomorrow though. That's seen as a leading indicator of where inflation pushed out to consumers potentially goes at least a little bit. Is that going to matter more?

No, I think, like you said, investors are kind of dismissing a lot of the Q1 March data just because they feel that the world has changed so dramatically in just the last few weeks. So remember, we had a pretty healthy job before last Friday. We had the good CPI today, and it really didn't make a dent much. I'm more interested tomorrow, actually. I think the latest Michigan Standard Report could be interesting.

That one's shown a very notable deterioration in confidence alongside a very sharp move higher inflation expectations. So we'll get the latest April reading on that tomorrow. And I suspect you're gonna see more of the same further erosion of confidence and then higher inflation expectations. But investors very much are kind of forward looking right now. All the Q1 data, you know, unfortunately, given that it

does look like March was a relatively healthy month, but you know, investors are very much looking at Q2 and the second half of the year. It does seem like a future friction point and how data progresses from here is going to be that dynamic between softer demand and potentially higher costs. Lori, want to get your thoughts on what you'd be buying in this market right now given the downdraft we've seen here if anything. It's a great question Morgan I'm and I was

talking to some young girl investors- this earlier this week could only been in the business for a couple years and- you know the advice I gave them was this is a period in time where there's so much uncertainty- you know you can sort of choose

to play short term defense you can choose to play longer term offense. In the shorter term on the defensive side we've been overweight utilities were sticking with that it's a little bit expensive- but frankly we don't really love

other defenses like health care and consumer staples they've been working very well but longer term. I am concerned about policy disruption there so I'd rather concentrate my defensive bets in that utility space. Longer term you know for rebound plays I'm rather concentrate my defensive bets in that utility space. Longer

term you know for rebound plays I'm looking at things like financials that's been a sector I've been overweight we've been sticking with that we know there's under performance pressure in the short term while economic expectations are

deteriorating but we think the valuations have improved we like a lot of the rhetoric we're hearing out of DC in terms of deregulation and supporting smaller community banks so we think that's an important longer term tailwind and this We like a lot of the rhetoric we're hearing out of DC in terms of deregulation and supporting smaller community banks. So we think that's an important longer term tailwind.

And this is the sector of the market that tends to outperform when consumer sentiment recovers. We're not at that point yet, but we do think that's a thing that investors are going to have to turn their attention to at some point. So that's really more of our offensive longer term play. Yeah, we did just get a house past that budget framework as well. We're going to talk a little bit more about that later in the hour. Lori, Adam and our own Megan Casella, thank you for kicking off the hour with all the

major averages lower. The Nasdaq down 4 percent, the S&P three and a half, the Dow down two and a half percent. But get this, we're still dramatically higher on the week simply because of the rally, the record-breaking rally we saw yesterday in the market. Now, let's drill down on energy. This is the hardest hit sector today as WTI crude dips back below $60 a barrel. Pippa Stevens joins us with more. Hi, Pippa.

Hey, Morgan. Well, U.S. oil did spend much of the day under $60, hammered by concerns on both the supply and demand side, as well as trade war fears, given that China is the world's largest crude importer with energy aspects. And Rita Sen telling me the worst is still not priced in and there is more downside. Now on the heels of oil's decline, energy, once again, the worst sector today, but performance between the subsectors has diverged.

Drillers and oilfield services names have been hit the hardest. Drillers like APA, Permian Resources, Devon and EOG, they're most correlated with commodity prices, which is why they're down double digits. Services names like Neighbors, Patterson, Noble and SLB are also deeply in the red on fears that drillers will slow their spending. But the refiners and pipeline companies

are holding up a bit better. On the refining side, we're heading toward the summer driving season when people hit the road. And so far, we haven't seen a big pullback in product demand. And for the pipeline companies, including Kinder Morgan and Williams, they're relatively insulated from tariffs since their domestic focus, and they have fee-based revenue streams so they aren't as exposed to the price of oil itself.

Morgan? Pippa Stevens, thank you. Let's now get to Christina Parts-Nevelis at the Nasdaq market site for a look at the pain in tech. Christina. Yeah, it was quite the reverse. We talked about it from yesterday's rally, but the Nasdaq still managed to climb off today's lows, closing about 4 percent lower. Despite today's pullback, though, the index actually remains in the green for

the week. And you said it, Morgan, it has a lot to do with just yesterday's rally. So Nvidia Apple are the primary anchors driving down the NASDAQ 100, showcasing really the massive influence these two giants have on the index. The usual test suck suspects aren't faring any better. You got Tesla, Amazon, Meta Broadcom, all dropping. Look at that on your screen, more than 5% today. and take your pick of reasons for this sell-off those looming 145% tariffs on Chinese goods putting pressure on Apple supply chain rising treasury yields increasing borrowing costs especially for tech economic weakness threatening ad spending at Google and Metta Plus chip tariffs and export controls on the horizon negative for Nvidia Potentially with neither China nor the President Trump showing of backing down markets really remain caught in this continued uncertainty

One bright spot. We just talked about it amid all of this turbulence all Magnificent seven names remain on pace to close positive for the week, but looking ahead There's really just mounting concern about upcoming earnings reports and whether companies are gonna need to temper back their forecasts as really these headwinds Continue to intensify, Morgan. All right. Christina Pards-Navalis, thank you. Now let's bring in senior markets commentator Mike Santoli for a look at stress indicators in this market.

And Mike, there are a number of them. Yes, several are firing, Morgan. Take a look first of all, familiar one. Here's the volatility index. Now this is sort of measured based on the cost of pricing in forward moves in the S&P 500 over the next 30 days. It rarely can sustain itself for multiple days above let's say 40.

We did get back up into the mid 50s a little while here. It's been very grudging and coming down because of just the wide perceived potential swings in the market. This year back from early August is a much more classic kind of seizing up and then relaxing type move. A spike peak in the VIX often means that the fever has broken and we can move on from here.

One thing to keep in mind, the actual experienced volatility, the S&P, the realized volatility in the last 21 days is in the mid 40s. So it's not as if VIX is really trading at a huge premium, so to speak, to how crazy and jumpy the market has been.

Moving on. Take a look at the Swiss franc. Not every day. You have this one in focus, but it's an extreme move. And it shows that there is a huge global bid for a safe place to stash cash, but it's not the US dollar. Today, the US dollar index is down about a percent and a half and you see this massive spike higher in the Swiss franc which is sort of one of the ultimate flight to safety type type of trades take a look at corporate debt This is the high yield bond ETF corporate ETF relative to an equivalent Treasury

maturity ETF and I mean the gyrations are wild and you see it's sort of like Bit about performance yesterday and they gave about half of it back. So again not at the worst levels But definitely credit is also feeling the pinch just from mostly what might happen to the economy and various sectors Under a very aggressive tariff regime Morgan Bank of England warned that hedge funds are facing substantial margin calls from prime brokers due to extreme market volatility You had Torsten Slock a friend of the show from Apollo Publishing a paper about the forced unwind going on and basically saying the basis trade is back and breaking that down and how large that Is in the market as well focus here on the 30 year so for swap spread as well as potentially ground

zero for that unwinding your thoughts. Right it's all part of the same dynamic essentially which is leverage accounts deleveraging fast going out from longer term debt back toward cash and then also concurrent with all that is just the global

flow seemingly reduction in emphasis on US-based dollar-based assets. So at this point, what we see is, look, Treasury Secretary Besant said he sees it as a routine deleveraging. That's what we hope it is, and we hope it stays that way and does not necessarily accelerate into something that causes a little more damage.

Okay, Mike Santoli, thank you. We'll see you a little later in the show. Joining me now, Ralph Schlossstein, chairman emeritus at Evercore. Excuse me, he has also co-founded BlackRock and spent nearly two decades as its president. Ralph, it's great to have you on the show, welcome. Great to be here, Morgan.

So I'm gonna start right there because we just talked about some of the unwinding we're seeing in this market and some of the big moves across different asset classes. Just incredible volatility here. You've seen a number of market cycles and I would imagine a number of market disturbances. How would you factor this in versus what we've seen historically? Well, if you look back historically, obviously, the financial crisis in 2008, 2009, we had enormous volatility. In the COVID pandemic, we had enormous volatility. The difference here is that in both of those cases, it was exogenous factors that were causing volatility and policy was effectively being used

causing volatility, and policy was effectively being used to reduce or offset that volatility. In this particular case, the volatility and the downdraft in the markets is actually precipitated by the policy of the government. And that's a little bit more alarming. And then I think the point that was just raised by your other commentator, what's very different here is normally when stocks go down as much as they have, there's a flight to quality quality and quality becomes defined as US treasuries and the US dollar. In this particular downdraft in the market, we're seeing treasury yields go up and the dollar weaken. Those that's kind of an alarming trend to me that's

flashing yellow, that something is going on here more than just fee leveraging. So what do you think is going on? And I look at the treasury market specifically and there have been some there's been some speculation in recent days that part of what we've seen and I haven't seen data to back it up at least not yet that part of what we've seen in the treasury market and perhaps even in the FX market has to do with foreign investors maybe selling U.S. assets. Yeah, we don't have any data on that at all other than anecdotal commentary, which I've heard some amount of in the last handful of days. That is concerning.

I do think the markets generally are reacting to two things. One, extreme uncertainty as to what policy will be. I think there is some empathy among all market participants that, you know, that the U.S. hasn't always been treated fairly, both in tariff and non-tariff barriers to trade, and so there's some sympathy for the effort by President Trump to correct that. On the other hand, the dramatic shifts in policy make it very, very difficult for businesses, individuals, particularly small businesses to make decisions, to make investments, to hire people. So what we're seeing in the real economy,

and we don't have data on this yet, it's only anecdotal, but things are pulling back a little, people are pulling back a little bit, companies are pulling back a little bit, companies are pulling back a little bit. And it's, part of it is they don't really like some of the policy, it's too dramatic. But some of, but a big part of it is that just the uncertainty and the volatility

of the policy itself. It's interesting, we went into this year with CEOs in corporate America, excited about Animal Sp hopeful talk about the possibility of more deal-making more investment more more deregulation triggering stronger economic activity in this country flash forward to this week Jamie Diamond Larry Fink at the company you co-created, BlackRock, Ed Bastion from Delta here on CNBC yesterday, and a number of others now warning

about the possibility of recession and the self-inflicted nature of this wound. What has it done to CEO confidence? Well, it's- You know what, Ralph, hold on one second. I'm just hearing we have breaking news. I'm gonna go to Steve Leesman. Stay right there.

Thanks very much, Morgan. Boston Fed President Susan Collins talking about the things you guys are talking about. She said it could be appropriate to reduce rates this year, but renewed pressures could delay policy changes. That's renewed pressures on inflation. She says that confidence is needed that the tariffs are not destabilizing inflation

expectations before the Fed could act and here's a direct quote She says quote the signal would have to be compelling to take preemptive action and do what the Fed normally does Which is that in the face of recession declining growth the Fed could come in and cut rates Can't do that now without a clear signal fed policy could face challenging trade-offs Requiring a balancing act between competing objectives on both sides of the employment and the inflation mandate. The response is going to depend, as Fed Chair Powell has said, on the distance of employment and inflation from the Fed's goals. And she talks about just what Ralph was saying.

There is a wait-and-see attitude she hears in her district that is now commonplace among households and firms that could have a negative effect. Morgan, we've heard now, I think, four Fed speakers today. It's interesting to me they're all basically singing from the same hymn book about not being able to really react here, about the way their policy choices are frozen because of what's happening with the inflation side. They can't address the growth side, at least not now. There don't seem to be any doves or hawks on the Fed. There's just everybody right in the middle here.

Okay, Steve Leesman, thank you. Ralph, in many ways that gets back to what we're just talking about from a CEO standpoint and what we've seen in terms of CEO confidence and this idea of activity freezing. Steve Leesman's talking about it from a Fed perspective, policy perspective as well. Yeah, I think the, first of all, we don't really have any data yet on the effect of everything that's happened over the last month or so on the real economy. We don't know, tomorrow we'll get information

on consumer confidence, PPI, I don't think will be that dispositive at all. Consumer confidence is a little bit more forward-looking. I do think that both the Fed and industry, the private sector, which is the vast majority of our economy, are seized up a little bit because of primarily uncertainty. And secondarily, they don't love the policy that they have seen and see it as somewhat disruptive of the historical world order.

And that's something that CEOs find discombobulating and it causes them to slow down whatever they're planning to do. I do wonder whether, I mean the Fed is talking about inflation being sticky and not ready to make any kind of rate cuts in this uncertain environment, but you have a discount window, you have repost central bank swap lines, asset financing facilities. We've already talked about the fact that the Fed is slowing down its runoff of quantitative tightening could you see some

of those levers quietly pulled in the background if we continue to see this type of volatility in the markets. I happen to be and I may be of minority opinion I happen to be of the opinion that even if the Fed were to cut the Fed funds

rate once or twice or three times in the next few months, in the absence of resolving the policy uncertainty and the highly aggressive trade policy, I'm not sure it would really have that much effect. And I think, quite honestly, if I were sitting on the Fed today, I would not only be taking the view that we should have a wait and see because we don't really know how to trade off between a weaker economy and what could potentially be a re-ign recognition of some inflation. We don't know what the right thing is to do, but on top of that, what would be also very bad for the Fed would be to cut interest rates two or three times and not to have the normal effect that it's stabilizing effect it has on the markets. effect that it's stabilizing effect it has on the markets. In my view, if we do get further disruption, it's more likely that the Fed would be intervening in various ways to support particularly

the credit markets, treasury market, you know, and it effectively slowing quantitative tightening or resuming quantitative easing. Ralph Schlastein. They have different vehicles for doing that, obviously. Okay. Appreciate it very much today. Thank you for your insights. Sure.

Pleasure to be with you. Ralph Schlastein. Well, Bank Stock's getting crushed today, along with the broader market ahead of earnings from JP Morgan and several other big names tomorrow. Leslie Picker is here on set to TS up for what we should anticipate, especially given the fact that we did see such strong selling in some of these names today. Yeah, I can't stop thinking about what a long quarter this has been. It feels like a decade, a total 180 from the last time banks reported in January.

All the gains this sector saw after President Trump was elected have been erased, and then some. Oregon Stanley, Goldman Sachs City, and Bank of America have lost a quarter of their value from their 52-week highs. The headwinds are numerous here. Trade war uncertainty, and as a result, the markets are pricing in a higher recession likelihood,

and all of that is creating outsized volatility in equities and rates. Credit default swaps, the security that allows professional investors to hedge or offset some of their credit risk, have also been widening among the big banks. I spoke with Ben Emmons of FedWatch Advisors about what's going on here,

and he said, this does not indicate a financial crisis. I will repeat, this does not indicate a financial crisis, but it is tied to the recent market volatility. Emin says because banks hold treasuries on their balance sheets, there's a feedback loop. Bank CDS widens as VIX jumps on rising yields,

which puts pressure on bank stocks and widen CDS is further CDS further. I guess we should say. Emmons told me quote the loop is starting to intensify, which is becoming alarming to him, but much of the recent volatility has taken place in the 10 days since the quarter ended,

making guidance and executive caller on tomorrow's conference calls paramount here. Loan growth expected to still be muted. The capital markets revival has most certainly been pushed out and credit normalization is supposed to continue. Luckily we hear from a diverse mix of firms tomorrow with JP Morgan, Wells Fargo,

and Morgan Stanley each reporting. Morgan, Morgan Stanley, Morgan. I know lots of Morgans. Yes. Okay, I'm getting tired, and honestly, I'm tired for you, and we haven't even gotten through all those conference calls. Where are you gonna see the pain more first?

Is it gonna be the regional banks that are sort of on the front lines with small businesses and with consumers and with lending into their communities. I just wonder, yes, these are the big banks. These are, you know, we pay close attention to them. They start, they sort of set the tone for earnings season. But I have to think that regionals potentially are more exposed here and thus could matter more in terms of their commentary in coming days and coming weeks.

I would say it's a double-edged sword because on one hand, you have regionals that are exposed to the U.S. economy. So if that starts to slow, which a lot of people are expecting to be something maybe in the second half of the year if it happens at all, that's something to keep an eye out there. But multinational clients are kind of the bread and butter of these big bulge bracket banks. So if there's weakening, if there's the you know, the geopolitical tensions get in the way

of cross border deals, for example, or cross border listings, or if it just kind of makes these international clients of theirs pull back and use banks in their own country, all of that could be a big concern for them as well. Now that said, they do benefit from the offset of had a lot of them have pretty sizable trading divisions. And so when you see the volatility like we've seen in FX, like we've seen in

equities, like we've seen in rates that could benefit them. You know, when everything else is is looking a little dicey. So many factors to piece together. Leslie Picker, thanks for doing it for us. And that context around CDS, very important on a day like today. Definitely. Thank you. Well, coming up, a look at four stocks with big exposure to China that have been crushed in the selloff, which could see relief

if a trade deal does get done. And former Bridgewater chief investment strategist Rebecca Patterson says the Cherriff disruption is like a category five hurricane. She'll tell us how she's navigating that storm. Stay with us. Welcome back. Some China exposed names bounced yesterday despite China getting no relief from the tariff pause. Quite the opposite actually. Many of those names fell again today after the White House said

tariffs on China are now going to total one hundred and forty five percent. Let's bring back Mike Santoli. Mike. Yeah, Morgan, it was a pretty good example of just how indiscriminate yesterday's burst of buying was

that basically everything went up pretty much without regard to where the stocks were positioned. It was mostly just if it was down the most going into the low, it bounced the hardest, but we did see big reversals today. So here's just a smattering of these China exposed names, Apple, Nike, Starbucks, the least of them,

and then Mattel as well. They gave back most, if not in some cases, all of yesterday's bounce, and they're gonna remain, no doubt, very twitchy in relation to every turn in potential negotiations. They're already very much tightly wound around these levels, having gone down pretty straight for a while, though maybe less so when it comes to Apple. Take a look here at Taiwan Semi against the U.S. semiconductor sector.

This is over three years. It kind of spans the deep seek era, so to speak. And they were moving very much in tandem until we did get to about the middle part of last year, then the peak in Nvidia and all the rest of it. You know, Taiwan semis held its value a good deal better. But what's interesting here is they both are on kind of a similar shelf, although for semis in the U.S. it goes back a little bit farther. So again, we keep retracing back to these moments in the U.S. it goes back a little bit farther. So again, we keep retracing back to these moments in the past.

We have this kind of testing phase to see if in fact we're still in the on the right side of what might be a new range. So that's what seems to be happening here. Taiwan Semi, by the way, is the largest holding in almost every emerging markets index. So that's got another effect in terms of fund flows. It's also the test case with $165 billion announced investment in the Phoenix area over the coming years to build fabs here in the US as well. So it's going to be one to watch from a reshoring standpoint or I guess a new shoring standpoint as well. Mike Santoli, thank you. Up next, former Bridgewater Chief Investment Strategist,

Rebecca Patterson, on whether she sees an opportunity to put cash to work after another big sell-off on Wall Street. And later, could passing an extension of President Trump's tax cuts help turn this market around? Well, that's later on Overtime. on overtime. Welcome back stocks giving back a chunk of Western of Wednesday's historic rally as investors come to terms with a reframing of the global trade landscape. My next guest wrote about the volatility of the last week and a new piece in the New York Times equating it to a category five hurricane. So how is she navigating the storm?

Well, joining me now is Rebecca Patterson, former Bridgewater Chief Investment Strategist. Rebecca, it's great to have you on. Let's start right there. How are you navigating this storm? Well, I've had a preference for large caps for some time because I felt that small cap equities need more of a cyclical

uplift that's sustained and ideally falling interest rates. So definitely stay there. These are going to be bigger, safer companies. I've had a preference for the United States, obviously, so far this year that hasn't been working. And I think my preference was largely because I felt the trade war would do even greater economic harm to some of these countries overseas that are being targeted. And I think really it's a matter of how much you're

losing in those countries, unfortunately. I guess the main place that I've been pounding the table on is not an equity market at all, but commodities and particularly gold. I've been bullish on gold for about a year and a half, and I continue to be. And the main reason driving that view is central banks. We've seen central banks for the last three years buying over a thousand tons a year, and that purchase continues, and it's mainly diversification that these central banks are doing

to slowly reduce their reliance on U.S. dollar assets. And we have gold trading at a record high, to your point. It also raises the question, I guess, the inverse of that is, given the dramatic weakening we've seen recently in the U.S. dollar, do you think we are

entering this period that everybody's warned about for years as a possibility of de-dollarization? Well, I do think the gold reflects, again, very marginal incremental move in that direction. And I think that part of the weakness we've seen recently in the dollar, which is pretty

extraordinary. Remember, normally when you're in a risk off period, a trade war, you would have a stronger dollar. So the fact that it's weakened so much just this month against the euro, the yen, the Swiss franc, a number of other currencies, suggest both fears of US growth slowing that could lead to Fed rate cuts making the dollar less attractive, but also to your point, Morgan, repatriation of capital, foreign investors who had put a lot of money into US markets in recent years taking that home. I think it remains a question whether that's tactical, they're rebalancing and they want less reliance on the U.S. or if it

could be a structural shift. And I think we need to entertain that as a possibility today that this, not that it would continue at this pace, but that what we're seeing in the world order could change how different countries think about the U.S. Given the fact that we have now entered what I will call a trade war with China, 145 percent tariffs on Chinese goods coming out of China, and they've got their own retaliatory measures on us as well, what does that mean for the relationship between the two countries? Not just from a trading perspective, but also from a financial one given the fact that we are intertwined to look no further, for example, than the Treasury market.

Yeah. Well, I'm lucky as a senior fellow at the Council on Foreign Relations to have colleagues who do nothing but think about supply chains, global trade, and U.S.-China all day. And speaking with them earlier today, one thing that struck me about one of our China specialists is that China's president Xi Jinping Has really been planning for this moment since he took power in 2013. They've been focusing on self-reliance They also have a longer time frame than the United States does he doesn't have to worry about midterm elections So, you know from that perspective I can see why they might not want to make a deal that quickly.

At the same time, cyclically, obviously, China's economy is very soft. Youth unemployment rates are high, confidence is low, and they can't just keep doubling down on exports. At the same time, the US also has its challenges, even though we've gone into this trade war with a very strong economy and the data still shows strength on a backward looking basis. You know, we do have an economy that's very sensitive to market conditions. So many U.S. households have their retirements, their savings, their money in the market. So these swings affect confidence very quickly.

And we do have our electoral calendar. So it's interesting. I think both countries have things they could lose, have reasons they don't want to capitulate too quickly, but I have to think similar to 2018 and 19, if the market pain becomes too big and the economic pain becomes too big for both countries, they'll figure out a way to come to a deal. I don't know when that's going to be what it looks like, but I have to think that's going to be where we land. But I do think that this does some longer-term structural damage to the relationship. We are moving in the direction of decoupling.

So Americans need to find a new place to get their shoes, because right now 80% of them come from China. Yeah, I do wonder. We were talking about this. I was talking about this with Ralph Schlaustein earlier, and we don't have data. I haven't seen data supporting this notion but the speculation's been out there in the market and traders have been circulating it this week that maybe what we've

seen in the U.S. Treasury market with the dramatic spike in yields yesterday for example was foreign investors selling and whether that's the case or not I do wonder whether it highlights the geopolitical risk that is inherent in the way the US economy is currently structured from a fundamental standpoint. Yeah, I mean, the United States has by far the deepest treasury market in the world. It's over $27 trillion. So for us to have a moment like the UK had in 2022

where bonds, the currency, equities all sold off at once, it's a lot harder for us to have that kind of distress. If we were to, I am confident the Federal Reserve at certain point would step in just for stabilization, not necessarily to cut rates, but to stabilize things. To your point, Morgan, foreign investors do own a lot of US treasuries. China alone has about 800 billion of them. And so if central banks around the world are wanting to slowly reduce their reliance on US dollar assets, just buying less. They don't have to sell. They just have to buy less because the demand we need keeps going up with supply. And the

budget going through Congress right now is going to increase the deficit further, despite the math that I think is being discussed. We are going to be having to issue more bonds, most likely quite a few, and that's going to require more bond supply, which means demand. If demand's not coming from foreign governments, foreign central banks, we have to find other sources of that demand. And so the risk is that treasury yields could settle at slightly higher levels.

And that's borrowing costs for you and me whether we're getting a mortgage or getting an auto loan. It's borrowing costs for companies that are trying to grow. It's borrowing costs for governments overseas, particularly emerging markets. And so a higher yield is gonna be a factor all else equal that slows global growth, including US growth. And brings us full circle on this conversation back to the bullish case for gold.

Rebecca Patterson, thank you. Up next, a look at whether lawmakers could be a step closer to extending President Trump's tax cuts and the message House Speaker Johnson shared for investors. Stay with us. Welcome back. We have breaking news on a helicopter crash in New York. Contessa Brewer has the details. Morgan, in the last hour, multiple people have been killed in a helicopter that has crashed in the Hudson River between Manhattan and New Jersey.

This is north of Wall Street in the financial district. WNBC is reporting at least five people have been pulled out of the water. This is some of the brand-new video that is just coming in. Five of those people pulled from the water include three children, two of whom are reportedly in critical condition. They have been taken to hospitals. The pictures that we're seeing is of this chopper upside down with just the skids above the water line. And importantly, for our Wall Street audience, there's a big emergency personnel presence on the West Side Highway.

That's a major thoroughfare in Manhattan, and police are asking people to avoid the area near the West Village. That could certainly complicate the evening commute for people. But again, those details just coming out about this chopper crash in the Hudson River, Morgan. Contessa Brewer, thank you. Our prayers go out to those affected. Meantime, President Trump's budget bill, including an extension of his tax cuts, has stepped closer to reality

after the House narrowly approved a framework for a deal. Emily Wilkins has the details. And Emily, what a difference 12 hours made. What a difference it made Morgan but look now they were able to pass the bill but now really does come the hard part actually filling that framework that they've passed with some of those policies that we've been discussing here policies on taxes on raising the salt cap on Medicaid what kind of cuts they're going to have all the while preventing this overall package from adding too much to the deficit. Now the fiscal hawks in the

House who blocked the framework last night, they relented today after being promised that the Senate would make serious cuts beyond the four billion that's in the framework. The House Freedom Caucus said in a statement after the vote that quote, Speaker Mike Johnson, the speaker committed to ensuring the final bill will provide enough spending reduction so that tax cuts will be fully offset. As important, the Senate leadership has committed to follow the House's lead on spending cuts. Now, to be clear, Senate Majority Leader John Thune did say today that he was committed to finding some more serious cuts, but he stopped short of

saying that the Senate would match the 1.5 trillion in cuts that the House backs. Johnson said that he hopes the stock market sees today's vote as a good sign, and he had some trading advice right after the vote earlier this morning. I do hope and believe that the vote today is a very strong signal to the markets, to investors, to investors, job creators, entrepreneurs, the people that make the economy run, that the congress is going to get us on sound footing. And you can count on that and you can bet on it and you ought to, I think today be a great day to buy stuff.

Not sure how many folks took that advice today but lawmakers are hoping that they can get this final bill to the president's desk by Memorial Day, and that that will also create some confidence in the markets. Morgan, you just laid some of it out, but how ambitious the policy pieces of this now are with this framework

greenlit here is the clock ticking in terms of this reconciliation process and how long they have to get it all done. In some ways Morgan it absolutely is ticking. Lawmakers see this as of the essence. They want to kind of still capitalize on the momentum that Trump had coming out of the election last November to deliver wins for the American people as quickly as possible. From a more realistic timeline remember this package also includes that debt

limit increase that's going to stop us from going over the fiscal cliff. And we don't have a deadline for that yet. It could be as late as July or August, but it could be as soon as next month. And lawmakers are going to have to be very cognizant of that as they continue to work on this package. Emily Wilkins, thank you. Well, another volatile day on Wall Street after yesterday's historic rally. How is the plumbing of the market holding up during all of this volatility? Well, joining us now is Stephanie Farris.

She is the CEO of FIS. It's a fintech company that powers the infrastructure behind banks and financial services companies. She's also featured in CNBC's Changemakers list this year. And Stephanie joins me here on set for her first broadcast interview. My very first broadcast. Welcome. I want to start right there because we've been so we've been talking so much about the volatility and the volumes that we've been seeing traded in recent

days but we haven't talked about how well the infrastructure is operating and you sit at that intersection between financial activity and technology. What are you seeing? I do. And thank you for having me. Very excited to be here. It has been a rough couple of days and couple of weeks. But what I would say is for those of us who are in the financial services industry, and let me take a step back and describe what FIS does so

that people can have an appreciation, we really are a global leader in financial technology. So the financial technology that moves money globally around the world, whether it's money at rest in your bank accounts or you're paying money in movement or money at work and investing. So we provide the technology that does that. But what I would say is we should all be really proud

of the industry because regardless of what's happening and there's a lot of volatility, we may not like the outcomes, the financial services industry is operating as it's expected, as the technology says that it should be working. And we haven't had any major blips. So I would say from my chair and from your chair,

we should all be really proud of that. So in light of that, what does that mean in terms of the fact that the infrastructure is functioning the way it was intended to, how does that help to keep this situation that we're seeing right now from become what I would call essentially a bank run and feed upon itself? Yeah, so it no matter what kind of crisis we're in, whether it was the great financial crisis or when we had some issues with bank liquidity or even now,

the thing that people get most concerned about is can they get to their money? Whatever they want to do with their money? Whatever they wanna do with their money, if they wanna pull their money out, if they wanna trade money, if they wanna loan money. And so when you think about that, it's about the safety and security and the trust that you have in the system. So when we talk to clients about our technology

that runs these, it's about resiliency, safety, security. Can you see your money? Can you get to your money? And so that is the trust we all have in the system. That is what the technology and infrastructure provides. And when people feel like that's safe, then the system works as it's intended. That's interesting.

You just put out research today that you did with Oxford around this too. So where do you see friction points within the financial services system? Yeah, so we sit in this very interesting, unique vantage point across the money life cycle. And generally we see a lot of things growing, but we also see lots of places of friction where you want to get your money faster, real-time payments, etc. We also saw a lot of

operational inefficiencies around fraud and cyber. And so we're very excited about this piece of research we just put out, which talks about those operational efficiencies and for the first time, quantifies on an annual basis, how much they cost companies because of all those inefficiencies. It's $100 million a year for every company as they look and deal with all of those inefficiencies and frictions.

Now your company oversees trillions of dollars in transactions across banking, capital markets, corporate as well. What are you seeing right now in terms of deal activity? We've been talking a lot about uncertainty and how does it affect FIS? Yes, so you're exactly right. 10% of the world's economy goes through our technology

and across our systems annually. So we have an amazing vantage point. And honestly, it's an honor and a privilege to serve the financial services industry in that way. We see lots of different things. It depends where you are in the market. You can see that if you're in the trading side of the market, we're seeing volumes at an all time high.

And we're here to make sure and focus for our clients that they can trade and make all, settle all of those activities. In the M&A and IPO market, there isn't much activity. So it really depends where you are on the spectrum. But our goal as we talk to clients is making sure that no matter where they are, they can take care of their customers.

We've got about 45 seconds. So we've got to keep this one kind of quick. But when you see this uncertainty more broadly in the market, there's concerns about business activity, consumer activity. What does it mean for your company specifically? Because as one analyst put it, sees you as maybe a little more recession proof because of where you sit. Yeah, we don't have a direct tie. Tariffs don't impact us directly. We're obviously keeping an eye on them and we're not based on consumer spend. We're primarily B2B. So

we are a little bit protected from the volatility, But we continue to focus on our clients and we're very happy with what we've been doing thus far and appreciate you having me. Stephanie Ferris of FIS, thank you so much. It's great to have you here on set. Thank you. Well, it's another down day for markets. We get bank earnings tomorrow. We get University of Michigan consumer sentiment and we get PPI. That does it for us here at Overtime though. Fast money begins right now.