Closing Bell - Closing Bell Overtime: Former Cisco CEO John Chambers On AI And China; WPP CEO Mark Read On Partnership With NVIDIA 6/1/23

Episode Date: June 1, 2023

The major averages closed higher today, though off session highs. Wedbush Securities Head of Equity Trading Sahak Manuelian breaks down the market action and reacts to quarterly results from Broadcom, Lululemon and MongoDB. Former Cisco CEO John Chambers on tech, China and AI. WPP CEO Mark Read discusses the company’s partnership with NVIDIA to use generative AI learning to produce advertising at scale. CFRA’s Angelo Zino breaks down Broadcom’s earnings. BofA’s Ethan Harris previews tomorrow’s jobs report.

Well, major averages ending high are led by the Nasdaq, which is now on pace for its longest weekly win streak since 2020. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Port is off today. Buckle up for another busy hour of earnings. We've got reports from the likes of Broadcom, Lululemon, MongoDB, Zscaler, and ChargePoint. Plus, AI gets creative. We're going to talk to the CEO of advertising agency, the largest one in the world, WPP, about the firm's new partnership with NVIDIA to bring artificial intelligence to the ad industry. Stocks rising

through the session today, but closing off the highs. So let's bring in Wedbush Securities Head of Equity Trading, Sahak Manuelian. Sahak, great to have you on the highs. So let's bring in Wedbush Securities head of equity trading, Sahak Manuelian. Sahak, great to have you on the show. It's like a smorgasbord, this market. There's something for everyone here. I mean, look no further than the data this morning, right? You had ISM manufacturing with an inflation read in there. Big drop in prices paid. That was positive. But then the jobs data, ADP today, much stronger than expected. Your take. Yeah. Hey, Morgan, thanks for having me back. For sure. Something for everybody. We saw the Joltz jobs report earlier in the week, 80 earlier in the week. And when we saw the ADP

employment change this morning, which was solid. And then to your point, the prices paid component this morning showing inflation kind of coming, you know, under control, if you will, or certainly starting to wane some. And then we also saw CPIs overseas in Europe. Eurozone CPI came in lower. And earlier in the week, we saw Spain, France, Germany all report lower CPIs. And again, it's a lot of, you know, a lot of the bullish narrative around earnings and earnings releases. And we see the markets creeping higher. Folks aren't necessarily positioned for what we're seeing. But there's been a lot of, you know, bullish tailwinds behind companies and companies' reports. And we've been talking about some of these like cost cutting, productivity, efficiency, some of the FX headwinds abating, supply chains normalizing.

And so report after report after report, one really loud or glaring theme has been margin improvement. Margins are getting better. And we think that continues. And we think that continues. And we think that stocks are in a pretty decent place. And coupled with the technical backdrop here and overly negative sentiment, although maybe some of that's starting to bait too now, we like equities into the second half of the year. Things will continue to be choppy, we think. It's still going to be very difficult to make money in this environment. You can't buy everything like many investors were

used to over the last three, four, five years. But there's still some deals out there, we think anyways. Yeah. I mean, and to your point, we're seeing it with Dell earnings, which came out in the last hour, came out early as well, right? I mean, cost cutting is part of what helped fuel the results there that ended up ending the day higher. But on the flip side of that, I mean, you have Macy's and Dollar General this morning and some weakness in those reports and cuts to the outlook as well. So it does seem to be murky going into the second half of the year. So when you talk about where you can make money in this market, where is it? Yeah, things are, you know, very choppy, to say the least. And so when you talk about retail and soft lines, it's tough. It's still

a very tough place. I think, you know, individuals are just spending money in different places. And you can take a look at what Visa and MasterCard have been saying, that the consumer is still pretty decent, pretty strong, still spending. They're just spending on different things. They're not spending on some of the soft lines that maybe they were previously, but certainly travel leisure. Some of these things are doing OK. We've seen the airlines recently reporting some pretty decent figures where travel has been strong. But, you know, going forward and looking, maybe trying to look into the second been strong. But, you know, going forward and looking, maybe trying to look into the second half of the year, we think, you know, certain areas of health care look pretty decent. And I think there's a catch up trade there to be made,

especially within biotech and some of these smit cap biotech names that have been completely trailing what a lot of the broader averages have been doing. And then within technology, I think, you know, software certainly got some punches over the last couple nights here. We saw some of these software names, which got, you know, arguably ahead of themselves just in the month of May, starting to come back to a little bit of reality. But we still like some of these software names. We still like some of these AI plays. We just upgraded C3 AI this morning after this huge move that it's had. So there's still a lot of names out there and some names that aren't that expensive. But, you know, it's just going to continue to be a stock picker's market. And we think that certainly health care is somewhere to

look at for the second half of the year. And still certain spots of technology we think should continue to perform well. Yeah. I just want to note that Lululemon results have just crossed the tape. Our team is going through the results. We're going to bring those to viewers in just a moment here. In the meantime, we are, Sahak, also awaiting those Broadcom results. This has been one of those names alongside NVIDIA, alongside Marvell, alongside C3 AI has been seen as a play, a near-term play on, or I guess a play that's going to realize results quicker than others where this AI phenomenon is concerned. What are you looking for when we do get those numbers here literally any minute. Yeah, Broadcom certainly top of mind for investors. Here's this. The semis have just been going crazy to the upside. We like the semis. One that we've been highlighting here is Micron. We've liked that name. It's been working out. But nonetheless,

for Broadcom, look, very solid management team over there. Reasonable valuation, 18 or 19. This is not a crazy expensive stock. And you can take a look at the chart and it's gone parabolic to the upside. The recent Apple deal only gets investors, I think, more and more interested in the name. We think, you know, these guys have some pretty bulled up expectations. They got to come out and deliver. So if they deliver, I think the stock is fine. If not, there might be a better place to come in and buy this.

But valuation wise, this is, you know, this stock makes a lot of sense where it's trading to us right now. And pardon me to your point about AI. Here's another one that certainly got caught up with uh some of the ai moves uh as of late over the last couple weeks um we we like some different we like i said we upgraded c3 ai we still like that as an ai play also i would just highlight microsoft we've loved that stock we think that's one of the um ones that will uh certainly work well in uh in ai and then certainly nvidia with what it's done recently yeah i want to get your thoughts on financials, too, and specifically the banks. We saw a big bounce in a lot of the regional names today. And I realize that there's been some commentary, cautious commentary.

You had commentary from the truest CEO, I believe, yesterday at a conference. Folks very focused on Moynihan. Oh, never mind. We got those Lululemon results. So we'll come back to that thought. Seema Modi has the numbers for us. Seema, what's Lulu looking like? Morgan, it's a strong report on the top and bottom line.

Earnings of $2.28 adjusted, which is well ahead Wall Street's estimate of $1.98. Sales at $2 billion, which also is above what Wall Street had been forecasting, $1.92 billion. I would point out that net revenue did increase 24%. Same-store sales were strong, but digital sales slightly disappointing, but that's not reflected in shares, which are up about 11% here in after hours or overtime. Excuse me. CFO Megan Frank saying our Q1 results were strong as guests responded well to our product offering in all of our markets across the globe. She mentions the acceleration that they are seeing in China, coupled with lower air freight, contributed to our better than planned financial performance.

So once again, you have a retailer here, Morgan, mentioning the acceleration they are seeing in China and the stock again up about 11% here. The conference call does begin at 4.30 p.m. Eastern. There will be some questions, Morgan, around that acquisition of Mirror for $500 million in 2020. That hasn't gone as planned. So Wall Street will want an update on the company's digital fitness strategy going forward because that has been a key focus for the company. But right now, stock trading at $3.63 a share. More when we get on the call. Back to you. Yeah. And of course, those digital app offering possibilities and then the reports that maybe Mirror gets sold. We'll have to see. Sima Modi, thank you. Do not miss an exclusive interview with Lululemon's CEO tomorrow at 10 a.m. on Squawk

on the Street. Let's bring in Mike Santoli for his take on Lululemon's results. Mike, you know, it's been a real mixed bag for retailers, but this one certainly seems to be knocking it out of the park here with the stock up 10% right now. Yeah, clear excuse for relief in Lulu. And, you know, the fact that it's been a little bit of an ugly reporting season, at least in terms of the reactions and some of the big names so far, means that the stock was going straight down into this report. So this bounce we're seeing so far after the report in Lulu is just getting it back to where it was trading early last week. And it's sort of rescuing it from revisiting, you know, where it was before the last earnings report three months ago. I do think them calling out the acceleration of their business in China is definitely something that's welcome at this point. People very alert to that. I don't know how the inventory levels, they're up a bit, are going to be interpreted. But given the fact that they have a very strong full year revenue and earnings guide relative to expectations, probably keeping people from being too concerned about the inventory issue. Yeah. So, Huck, I want to bring you back in this conversation as well and get your reaction,

especially because there's been a lot of debate about just how choppy this reopening in China has been. But we do know that some of the higher end retailers or those that I guess you'd call the Lululemon or even maybe even into the luxury category have so far seemed to fare well. Yeah, what I would say is it's good to see this Lululemon print here after the close and with the stock trading up some 10 percent, I think is what I just heard. But look, this stock has gotten crushed going into this earnings print. And I think this is a little bit of a relief here to see the numbers come in better. I just heard that the freight costs were down again, pointing to, I think, what is somewhat of a normalization and disinflationary forces playing throughout the economy and starting to show up within companies earnings releases. And to your point, Morgan, about China and the growth prospects from China, that's certainly been top of mind. We've seen what energy has been doing because of that. And we've seen what other stocks and we've seen what the Chinese markets have been doing because the growth hasn't been maybe quite as robust as many originally thought.

However, having said that, we think Lulu is certainly one that will be able to outperform. And given the top notch management team there, one that we like here, especially after giving this release after the close. All right. Sahak Manuelian, thanks for joining us. And shares of Lululemon are now up 11%. MongoDB's CEO will break those down. Mike, we're going to go to you actually first for your dashboard, because I know you have some more insights on this entire topic. Yeah, looking to broaden out the lens a little bit, Morgan, on Lulu and how it compares over the last 15 years against another name that's in the consumer area, kind of defining its own real sub-industry within it, and also just taking a massive amounts of market share and fast comp

growth, Chipotle. This goes back, as I say, 15 years. You see both of the stocks, Lulu and Chipotle, have been about 10 times as strong as the overall S&P 500 over this period. And they have actually moved roughly in cadence to one another, diverging occasionally, but still kind of working together simply because they are both those types of companies that are much smaller relative to their nearest competitors, whether it is the other fast food chains for Chipotle or Nike and other big retailers for Lulu. So lots of room for expansion. Also ability to keep premium pricing and have a younger than average consumer as their most loyal customer. So all this has been working together and you see Chipotle's outperformed a little bit more recently. Now, on the valuation side, very similar story, both with premium valuations relative to the S&P 500 in recognition of the fact that they have had those durable growth stories. Now, you see Lulu has actually fallen behind here a bit. Seems as if, obviously, a little bit less recession resistant, perhaps, and maybe just not as entrenched as Chipotle is right now. Also, I would point out both companies have been

given credit for having figured out the digital side of things, the e-commerce solutions, and it's all a huge percentage of both their businesses. So right now, you see, it doesn't reflect the after hours pop in Lulu, but they both occupy similar space in investors' mind and in how the market treats them. Yeah, it's pretty incredible to see how similar these two names have traced in terms of a chart. It almost makes me feel like we need to do like a millennial index. Mike, we'll see you later in the show. MongoDB earnings are out. Deirdre Bosa has those numbers. Hi, Dee. Morgan, those shares are surging. It's a beat on the top and bottom line. And really, it's the outlook that is driving those gains in the after hours.

EPS, the street was expecting 19 cents adjusted. It came in at 56 cents adjusted. So that's a big beat there. And on the revenue side, the street was expecting $347 million, coming in at $368 million. Like I said as well, that revenue outlook for the full year and EPS outlook for the full year coming in better than expected. So that is pushing shares up 15 percent in the after hours.

We'll continue to dig through this, Morgan. Awesome. Deirdre Bosa, thank you. MongoDB CEO will break down those results in an exclusive interview tomorrow on Overtime. In the meantime, we've got a lot more earnings action coming your way, including Chipmaker Broadcom. We're going to bring you those numbers as soon as they cross. And after the break, former Cisco CEO John Chambers, who now runs a venture capital firm, will join us to talk about the rapid acceleration of AI and if he sees echoes to the dot-com boom. Overtime's back in two. Welcome back to Overtime. ChargePoint earnings are out.

Phil LeBeau has the numbers. Hi, Phil. Morgan, take a look at shares of ChargePoint showing a little bit of pressure after hours. The company reporting in the first quarter a loss of 23 cents a share. The consensus estimate was for a loss of 17 cents a share, so wider than expected loss, with revenue coming in slightly better than expected at $130 million. But it's the numbers within the numbers we want to focus on. Q1 gross margins of 23%. That's gap, non-gap, 25% for the first quarter. Ends the quarter with cash on hand of $313.3

million. But what really may be putting the pressure on the stock, the revenue guidance for the second quarter. This is below consensus of $148 to $158 million. The consensus is for Q2 revenue of $165 million. That's one factor behind why you see charge point moving lower as it misses in terms of a wider than expected loss for the first quarter. Morgan, back to you. All right, Philip. Oh, thank you. Broadcom earnings are out as well.

Christina Parts Nevelis has the numbers. Hi, Christina to you. All right, Philip Boe, thank you. Broadcom earnings are out as well. Christina Parts Nevelis has the numbers. Hi, Christina. Hi. So what we're seeing is a top and bottom line beat, $10.32 adjusted. The street was anticipating $10.08, so slightly higher there. Revenues, let's call it a little beat, slightly in line, $8.73 billion. The street was anticipating $8.7 billion. For Q3 revenue guidance, in the release, you had Hoxhaan,

the president and CEO of Broadcom, saying that their third quarter outlook projects year-over-year growth, reflecting continued leadership and networking as we support a measured ramp into large-scale AI networks. So that was the only mention of AI in the report. We're sure to hear more about it. But for Q3 revenue guidance, it's only slightly higher than what the street was anticipating at $8.85 billion. The street was anticipating $8.7 billion. So that could be part of the reason we're seeing some of this drop right now. And then last but not least, they only break down two revenue categories. That would be semiconductor solutions and infrastructure software.

Both of those sectors did come in in line. Infrastructure software revenues are a little bit higher. So not a major beat here. A lot of what's going to be relying on this stock to move higher is going to be on the earnings call and how Hoctan talks to their Apple relationship, the chip backlog, and any type of ramp up in AI for their full-year revenue guidance,

which we have not received in this report thus far. All right, Christina Parts-Mavlis, thank you. Shares are down 1% right now. Let's bring in former Cisco CEO and JC2 Ventures CEO, John Chambers. John, great to have you on the show. Morgan, it's a pleasure to be back with you again. So we do have to start with AI, especially after we did just get those results from Broadcom. You have that company basically talking about, at least here in the release, a measured ramp into large-scale AI networks. But then you think about NVIDIA and the fact that it just trounced current quarter expectations, largely because of the demand it's seeing for its AI-related and enabled chips last week.

I just want to get your thoughts on what we're seeing in terms of this wave of new technological capabilities and whether it's going to be as big as everybody and the investors really believe and hope and pray that it is? Well, I actually think, Morgan, it will be bigger than people anticipate. This isn't something that I've come to the conclusion in the last six months. I started betting on AI six years ago, invested in a big way in AI companies doing call centers, et cetera, like Unifor and ASAP, et cetera, on it. I think it will be bigger than the cloud and bigger than the internet. So combined, I think it will, however, remove it three to four times the pace on it. Well, people get overexcited a little bit and then a little bit pessimistic. That always occurs

with any major new technology area. But I think it is the best place to bet long-term. And I think you'll see the next major companies come out of AI startups or major traditional companies reinventing themselves. NVIDIA, I think it was just a start there. Jensen has done an amazing job. You never bet against Hawk at Broadcom. He runs one of the most tight financial operations

I've seen. He executes extremely well. I think he's got a very good strategy in front of him on the direction. And when he says he's going to play in AI and machine learning, you can almost take that to the bank in terms of what they'll be able to do there long term. I'd be remiss if I didn't put AMD into that category. Lisa Su, who's probably been the biggest turnaround that's been done in high tech in the last two decades. She just continues to execute better and better and better in terms of direction. She acquired one of my companies, Pensando, about a year ago that focused on the cloud at the edge.

She reinvents herself. And I think when she said at WEF and no, electronic show in January, that AI was going to be the next major focus, the next big thing. She remanded it. So I'd expect her to execute as well. So semiconductor company, they're kind of back in vogue. And you've seen that increase with Broadcom with 38% year over year growth in terms of the stock so far this year. And I think it's, if I remember the numbers right, 20 out of 28 analysts having a buy to a strong buy on it. So they're executing well, but they're riding the big wave. So so when I think about Cisco back in the 90s, you just mentioned the Internet and you look at

a look at a stock chart of Cisco. I mean, it went parabolic from like 98 until 01 through the tech bubble and then the bus. And you can make the argument looking at an individual for example that at least the parabolic part we don't know the rest of it plays out but the parabolic part is is is very similar so when you talk about the possibility this could be bigger than the internet what do you mean by that we are not as you guys set the question morgan uh... you're you're absolutely rightVIDIA, it's approaching a trillion

dollars in terms of valuation. There are only four other companies at that level. So it's clearly priced for good execution to strong execution. However, in terms of when you move into these new waves, the revenues that you get, the growth that you get early in the wave is a small percentage of what occurs longer term. So do I think you'll see major movement in terms of stocks that are focused in this area? Yes, I do. And when you look at the top six stocks in the NASDAQ, say as an example, I think they've accounted for 80% of the growth of $3.5 trillion in the NASDAQ move so far. So early innings, I do see a very similarity to what Cisco did. We had to explain to people what the internet was in the early 90s. Then once people got it,

the major investors said, if you don't have an internet strategy, we're not even going to invest in the company. I think we're going to see the same thing in AI. There will be a shakeout. There will be some tremendous hot startups that don't make it, but some of them will emerge to be the next big players in the industry. And I think you will see semiconductor players as well as some of the traditional larger players ride this wave as well. Perhaps the Microsofts, the Googles of the world, the Apples of the world. And, of course, we're seeing all of this begin to take root and play out amid a tense geopolitical backdrop, especially when you look at the part of the world where all these so-called picks and shovels and semiconductors are mass manufactured.

And that's Asia. The decoupling of China and the U.S., even as we do see some American CEOs traveling to China, some of them like Elon Musk for the first time since the pandemic this week. How does all of this factor into this broader tech discussion? Well, just to give your viewers a quick snapshot, I ran Asia Pacific for Dr. Anne Wang, and China was that area that I learned very well, and I've known the market for 40 years. It's been a very good market to Cisco over the years that I was there. However, in the last seven to 10 years, it's moved into a win-lose type mentality versus the U.S., especially the U.S. technology companies. So I think when you look at that, you are going to see deglobalization actually occur at a faster and faster pace. I think that China and the U.S.

will eventually get back together. That's inevitable, in my opinion, because it's in the best interest of both countries and both peoples and key groups. But if I were betting on one major market in Asia, I'd bet on India right now. I think Prime Minister Modi, with his digital India, has it right, targeted appropriately. He's coming over here in a couple of weeks for a head of state dinner and meetings in Washington. And so if I were betting as an investor, I'd probably double down on India because I think India, in terms of investment, the companies there are exactly where China was in 1995 when I bet big time on China. John Chambers, always great to get your thoughts. Thanks for joining me today. Morgan, it's a pleasure as always.

Well, PagerDuty earnings are out. Seema Modi has those numbers. Hi, Seema. Morgan, take a look at PagerDuty stock skyrocketing here in the overtime after earnings more than doubled. Wall Street estimates 20 cents adjusted versus the estimate of nine cents. Revenue came in line, but guidance also strong. I want to bring you the comments from CEO Jennifer Tejada, who really underscores or highlights rather the resilience and highly engaged mid-market and enterprise customer base. She goes on to add that generative AI is an intuitive interface to automation that accelerates access to the operations cloud for new users across the enterprise. Speaking of users, I would point out that total paid customers of 15,089 as of April 30th was higher than a year than the same period a year ago.

Shares, excuse me, are down 17 percent in overtime. Back to you, Morgan. Yeah, big move to the downside. Sima Modi, thank you. After the break, the AI ad vantage. We're going to talk to the CEO of advertising giant wpp about his company's just announced partnership with nvidia on generative ai plus we're waiting the latest data on the fed balance sheet in the next few minutes we're going to bring you that when it crosses overtime we'll

be right back welcome back to overtime ad giant wPP and chipmaker NVIDIA stocks both higher today. The company is announcing a partnership this week to use generative AI to produce advertising at scale. I sat down with WPP CEO Mark Reed today to ask about the collaboration. I started by asking how long this has been in the works. Take a listen. We started this process in COVID. Because in COVID, we couldn't go and shoot cars in the desert. So we started to figure out, well, actually, how could we do this virtually? So

actually, this is a solution we've been working on with them for the last two years. So it's being deployed already. I think on a mass scale, it's a question of rolling it out over the next three to six months across our organization. But we have got work that's been, that's come out of the partnership already. And we've already seen in advertising, AI being used in things like data analytics and targeting. But when we talk about the creative side of it, what does that mean in terms of not only impact to cost

of putting a marketing or advertising campaign together, but also the time it takes to do it? Yeah, I mean, that's really at the heart of this, isn't it? I mean, we use AI, as you say, to target media campaigns and think about how you produce work more quickly. But this is really the first application of technology to the creative process and enables our creatives to produce work in much different ways. They can produce many, many different variants of work. They can target and make work that's much more relevant to particular audiences. I just think about this Hollywood writer strike that continues and the fact that one of the sticking points in negotiations is AI. So when we're talking about the reaction of the workforce and of creatives and of talent

to this new technology, how is it going to impact their jobs? How is it going to impact headcount? How do you ensure it doesn't do away with some of those professions in general? Well, look, I think it's obviously much easier to think about the jobs that will impact and the jobs that it will kind of reduce the work of, and it is to think about all of the opportunities it creates. I mean, that's the thing is we don't know all the new jobs that will be created by AI. I mean, take writing a press release. I mean, it's pretty clear that I think the first draft of press releases are going to be written by computers in the not too distant future, probably in many places they already are. But the tone of voice, the messaging, all of that's going to need to have human supervision.

One of the challenges our clients face is the volume of assets they need to create. Today, they're not just producing 30- or 60-second TV commercials. They're trying to market on Instagram, LinkedIn, Facebook, TikTok, Amazon, Uber, Netflix. All of these new channels require creative work in different formats and different sizes with different messages. And so, technology is a massive solve for that problem. So I think it's really hard to see net-net what the impact on employment will be. Just to expand this conversation out a little bit more, I mean, it's an uncertain macroeconomic environment right now. Your outlook for advertising through the rest

of the year? Look, I think, you know, we guided to three to 5% for WPP for the year overall. I think that's still how we see things. Group M expected about 6% ad growth. I think as we look at it today, it's probably going to be a little bit more challenged in the U.S., maybe a little bit faster than we expected at the beginning of the year in China, where the Chinese recovery is perhaps a little bit slower than we all expected. But I think the ad market has remained remarkably resilient over the last two to three years in the face of macro challenges, largely driven by, I guess, by – or largely driven by strong consumer spending and strong confidence among companies whilst consumer spending remains strong. And I think we're going to see challenges, though,

as interest rates continue to go up in many parts of the world and consumer spending gets challenged towards the end of the year. So I think it's uncertain, but I'd say it's been more resilient than people may have expected before, certainly before COVID. Just one final question. I mean, we're talking about AI, but in general, where are some of the key areas or bright spots in terms of where that spending and where that investment is going in the industry? Into advertising, look, I think there's a lot of interest in influencer marketing. There's still tremendous influence in retail media and e-commerce. Amazon have now built a global advertising business that's bigger than the global newspaper industry. You've got businesses like Uber building big advertising businesses and Netflix taking advertising for the first time.

And it's really interesting. Netflix are now saying that they're making more money from their ad-supported tier than they are from their premium tier. And so advertising has been turned from something that was maybe seen by some people as a negative into a positive. And I think the way we look at it is the best media businesses are those that are funded by advertising and subscription. And I think we've got an important point to play. I do think that the advertising industry in general needs to make the case for what we do. And much of the free internet from Gmail to social media

to Google Maps is funded by advertising. I think that's a good thing and it drives innovation. And I think this explosion of AI is only going to lead to, you know, more innovation and more creative work, which is a good thing. So Reid also telling me that they have already been running AI training programs at the company. About 6,000 of the 115,000 employees that comprise WPP have completed them. It's one to keep an eye on as we look to jobs report tomorrow with the challenge report today actually including an interesting tidbit, basically suggesting that you could see something like

somewhere between 3,000 and 4,000 jobs planned to be cut, and yet other analysts trying to wrap their arms around the possibility that maybe, by and large, this new type of AI technology is going to be a job adder and a job creator. It's just that the jobs are going to look very different. So we continue to have that discussion. Meantime, breaking news from the Fed. Steve Leisman has the details. Hi, Steve. Hey, good afternoon, Morgan. The Fed balance sheet declining by $50 billion. That's the most in several weeks down to 8.35 trillion dollars it is down for the 10th straight week but still i'm just going to give you a calculation it's still

above where it was before silicon valley bank failed but it's getting down there it's about 43 billion above where it was let me give you the rest of the numbers here borrowing at the fed's discount window uh totaling just 4 billion billion. That's down $240 million to the lowest level in several weeks as well. But the bank lending facility created in the wake of the Silicon Valley bank to finance the paper that was on the books of the banks where the trading below par value, it was up $1.7 billion to $93.7 billion. So put them together, we want to know how much banks are borrowing from the Fed, up slightly to $97.6 billion. So that same level, about $96, $97 billion, we've been there for about a couple weeks as the measure

of stress that's out there. Finally, the loan to the Bridge Bank, that's what has been loaned by the Fed to the Federal Deposit Insurance Corporation to finance those bank failures at $188 billion. That's down $4.5 billion. That comes down as the FDIC sells assets of those banks and pays off that loan to the Fed. But it is coming down slowly, Morgan. So there you go. Still about the same level of stress, but the Fed's balance sheet continues to come down, remaining a bit above where it was before Silicon Valley Bank failed. Morgan. Got it. So basically we can say stabilization continues, but recovery, maybe not yet, or at least very slow going. Maybe, maybe not yet, but still the same level of stress. I don't know where that 97 or 98 billion dollars, who's borrowing that, but it's really not a bad deal for the banks to do it. I don't know that it $97 or $98 billion, who's borrowing that. But it's really not a bad deal for the banks to do it.

I don't know that it's a stigma. And at some point, you're like, is this a measure of stress? Or is this a measure of just banks taking advantage of something the Fed has put out there for them that allows them to finance their paper at par? And Morgan, I have to say, I think it's probably some guy somewhere who puts out this H4 one every week and has for probably decades, probably smiling someplace now that we do this as breaking news on CNBC. I think you're probably right, Steve, but I do appreciate that nuance. It's a key point that you make. And of course, we did see the banks, the financials, the regionals all pop today in trading. Steve Leisman, thank you. Time for a CNBC News

update with Bertha Coombs. Bertha. Hey, Morgan. Thanks very much. The Senate voted mostly along party lines today to block President Joe Biden's student debt relief program. The measure would also end the Biden administration's pause on federal student loan programs. Biden said last month he would veto that legislation. The vote required just a simple majority. It passed 52 to 46, with a few moderate Democrats voting with Republicans to advance the measure to President Biden's desk. Vice President Kamala Harris announced a new Biden administration rule today that aims to tackle racial bias in home appraisals. Harris said the rule will require financial institutions to look at their appraisal algorithms to ensure they do not produce lower valuations for people of color. It will also make it easier for consumers to appeal valuations. Elon Musk's SpaceX Starlink

now has a Department of Defense contract to help Ukrainians on the front lines of the war with Russia. The Pentagon signed an agreement with the company to provide Ukraine with the satellite communications service, but did not disclose the terms. Ukraine is using Starlink in part to help with battlefield communications. Morgan, back over to you. Yeah, this was getting a lot of attention today, a little late on the details, including how much this contract award actually is, but certainly one to watch as Starlink has been so important in Ukraine and is seen as having so many different types of connectivity capabilities in general. And continues to spread in this country as well, in rural areas,

and a lot of people who are really signing up because it's just better service. Yeah. Bertha Coombs, thank you. After the break, the macro signals from corporate results. Mike Santoli looks at the potential green shoots emerging as we head towards the end of the earnings season. Stay with us. Welcome back to Overtime. The ISM manufacturing survey for May coming in at 46.9 this morning. It is the seventh month in a row

showing a contraction. Mike Santoli joins us again. He's going to break it down. Hi, Mike. Yeah, Morgan. And actually taking a look at a bit of an alternative version of something like the ISM, the Goldman Sachs Analyst Index. So what Goldman does is they survey their own analysts, which cover individual companies and industries, and ask for the same types of things the ISM survey does of manufacturing and non-manufacturing employers, which is essentially current level of sales, new orders, employment, all those factors, weight them similarly to try and get maybe a leading indicator of what both the manufacturing and non-manufacturing ISM might be saying. And you see here, it's

bounced above that, solidly above that 50 mark, which represents the difference between an expansion and a contraction versus the prior month. So a little bit of a bright sign right here of a pickup in activity. We'll see if it follows. As you can see, the scales are different right and left. So it's not exactly the same statistically, but they have tended to track one another over time. That's really interesting. So so it looks like it looks like the Goldman line there on the chart is signaling that maybe we see a little more strength emerging from ISM. Like, is it a leading indicator for ISM or no? They really like real time track each other. It's very difficult to say if it's fully leading, but it has in the past at times led moves in the ISM. So I think the bigger issue is which direction might the next

move be or what's the central tendency of this chart? And I think even if you're looking within the ISM, especially non-manufacturing, there are signs of strength. A lot of the headline numbers don't look as good as, for example, the employment indexes and current level of sales. All right. Mike Santoli, thank you. Up next, a top analyst reacts to broadcom's earnings and what he wants to hear on the company's call which kicks off in just a short while stay with us welcome back to overtime we're moments away from broadcom's earnings call the company beating on both lines with third quarter revenue guidance a bit ahead of expectations. So basically, solid report. Joining us now, CFRA research analyst Angelo Zeno. Stock's lower right now. What do you expect to hear on the call? What are you going to ask?

Yeah, listen, I mean, as far as the quarter is concerned, it's, you know, hock being hock in the sense that kind of it was solid execution. And as far as kind of the what we're looking for here for the quarter or what we hope to hear on the call, I think it's all about AI, right? I mean, that's really what everybody wants to know. It's why the stock really kind of ran up into the numbers. And if you kind of think about Broadcom here, they really operate into two aspects of AI within the semiconductor market. One, it's on the networking side of things, kind of those Ethernet switchers out there. And if you kind of look at where the run rate was a year ago, it was about $200 million.

Gut Company last quarter got it to about $800 million. This year we're looking for hopefully some upside potential, whether it be for the current year or maybe further lookout ahead. And then, of course, they've got this custom ASIC solutions business where they essentially help co-develop ASIC chips or custom chips for the likes of Alphabet, among others. And that was a $2 billion business last year, expected to be $3 billion this year. And we're hoping, again, for some upside or updated numbers on that side of things. And I think you kind of need to hear that in order for the stock to move higher. Gotcha. Very quickly, you got a buy rating on the stock. You sticking to it? Sticking to it. You know, it's definitely seen some multiple expansion here from 13 to 14 times to 18 times.

But, you know, that said, I mean, given the opportunities ahead, we think, you know, the valuation makes sense here. OK. Angelo Zeno, thanks for breaking down the results. We're looking forward to that call. Up next, we will round up all the other after hours earners, earnings movers that need to be on your radar. So stick with us. Welcome back. Let's get a check on some of the biggest after hours movers. Lululemon surging after beating on the top and bottom lines. Same-store sales were also well above estimates for physical stores, though digital sales didn't rise as much as expected. Look at those shares, up 12.5% right now. MongoDB beating on both lines as well and giving very strong second quarter and full-year guidance. Those shares are up almost 21%.

And PagerD duty moving in the opposite direction, falling hard after revenue guidance came in light, down 11, almost 12 percent in the after hour session right now. Up next, what to expect from tomorrow's May jobs report and how it could impact the Fed and your money. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We will be right back. Well, tomorrow's May jobs report will be closely watched by investors to determine the Fed's next move and whether or not the economy is headed towards a recession. Joining us now is Ethan Harris, head of global economics at Bank of America Securities. Ethan, I want to get your thoughts on this, because we've had some

pretty robust labor market data so far this week, whether it was jolts yesterday or ADP today, or even claims which rose but did undershoot expectations. What are you expecting tomorrow? I think it's going to be another strong number. Remember, the consensus has tended to be a little low in its estimates for payrolls. We're forecasting 200,000 with an upside risk to that number. And we also think the unemployment rate will stay at 3.4 percent. For some reason, the consensus keeps thinking that even with these very strong job numbers, the unemployment rate's going to rise. We think it's stuck at these very low levels.

It's another signal to the Fed that they have more work to do to get the labor market back into balance. So how does the Fed do that? And I ask that because we have had some Fed speak in the last 24, 36 hours that suggests that maybe June will not be a live meeting. We may actually see a pause or maybe I should call it now a skip. Yes, we have to come up with new language every day here. So I think that they probably will skip in June. I think they're going to rest on their laurels a bit because they did just do two 25 basis point hikes in the face of some pretty concerning news around banks and around the debt ceiling.

So they probably feel like they've made an investment there. But if the data is strong enough, if we get another big jobs number, say 250 or something, and if we get a strong CPI report the day of their meeting, it could tip the balance. So they're by far, by no means they're done. I think they'd like to pause in June, but they're still data dependent. What matters more now? Is it the unemployment rate or is it going to be the wage growth? Well, I think it's both. I think that if you look at the economy right now, a lot of the inflation problem has been resolved. We've seen supply chains reopen. We've seen commodity prices come down. What's left is an out-of-balance job market. And so they're looking at both measures of how much disequilibrium there is. Are there many more jobs under demand than

workers available? That's certainly still the case. And are they seeing labor cost pressure? And it's not just wages going up. Workers also haven't been very productive in the last year. We've had some very soft productivity statistics. So if you get solid wages combined with mediocre productivity, it continues to create labor cost inflation. So what are you forecasting then for the back half of the year? I mean, is a mild recession still, you know, the, I guess, base case from a Bank of America standpoint, especially if you do have this out of whack, out of balance labor market? Yeah, you know, I mean, we've been, like other economists, we've been surprised at the resilience of the economy, not just in terms of growth, but in terms of core inflation as well. And so, you know, what you've been doing, we, along with a lot of other forecasters, we keep on bumping forward the recession.

We're not going to give up on the idea because fundamentally the Fed needs to fix the labor market imbalance. If the labor market doesn't rebalance, then the Fed just has to hike some more. So I think it's getting to be a close call on when they go. When the recession starts, we think probably Q3. But if we get more strong data like we're likely to get tomorrow, we may have to bump that out. But I don't think it's the right time to be giving up on the idea that we're going to have a very weak economy going forward. The Fed has to finish the job of getting inflation under control. Very, very quickly, how does debt ceiling contribute to all of this, assuming we get this deal? Oh, this is good news.

They avoided doing something that would have been quite awful here. Yeah. And I also think it's good news for the budget in the fall because the right wing of the Republican Party has accepted, in effect, accepted a compromise, which is what you have to get in Washington if you can get anything done. Yeah. Ethan Harris, thanks. Appreciate it. Thanks. Appreciate it. OK. Thank you. We've got exclusive interviews tied to earnings that we just talked about in this hour coming up tomorrow. Jobs report obviously in focus. Stocks finish the day higher. Overtime is over and we're going to toss it over to Fast Money now.