Closing Bell - Closing Bell Overtime: Jerome Powell Hikes Rates For The 10th Time In A Year; Stocks Slide Into The Close 5/3/23

Episode Date: May 3, 2023

Stocks slid into the close today after Fed Chair Jay Powell’s press conference. Jefferies Chief Market Strategist David Zervos and Unlimited CEO Bob Elliott break down the market’s reaction to the Fed’s 10th hike in a little over 12 months. Former Fed Vice Chair Alan Blinder and former CEA Chair Jason Furman read the tea leaves from Powell and the Fed. Qualcomm shares slid in Overtime after issuing weak guidance; Susquehanna analyst Chris Rolland discussed what investors should do with the stock. Host Hotels CEO Jim Risoleo joins the show after the company posted strong earnings and raised its full-year forecast; he talks the state of his customers and where they are spending money. Plus, Bernstein’s Toni Sacconaghi previews tomorrow’s big tech behemoth reporting: Apple.

Getting close or maybe even there, quote unquote, stocks closing at session lows after the Fed hike and Powell said maybe. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Coming up this hour, we will get the first reaction to the Fed decision from former Council of Economic Advisors Chair Jason Furman and former Fed Vice Chairman Alan Blinder. Plus, we've got more earnings coming your way from the likes of Qualcomm, Etsy, TripAdvisor, and Zillow. Let's begin, though, with a Fed decision and the market reaction. Joining us now, David Zervos, Jeffries' chief market strategist, and Bob Elliott, CEO at Unlimited. Bob, you're here on set with us. I'll kick it off with you.

What did you make of this, what we might call a dovish hike today? It seems like there's something for everyone. Yeah, I think, you know, Powell delivered what he was intending to do was to give that dovish hike, give some indication that they may be near an end to their tightening, but also leave the door open for possibly more tightening if the data comes in and forces his hand to keep going. And I think that's the key thing that probably disappointed the market. I think many people in the market were hoping that this was one and done, and they didn't quite get that, and we see it in the stock response in the 3 o'clock hour.

All right. David, I want to get your thoughts on this, too. Conditional pause, data dependency, where we're seeing the Fed actually be data dependent. How do you see it? Yeah, I think all of those, Morgan. I think it was very much as expected. I don't think the market is surprised by this one bit. We were up whatever, 20 or 30 points in the S&P. We ended up down 20 or 30 points in the S&P. I think it's a pretty low volatility day for a Fed day and a few ticks here or there on the two-year note and 10-year note. And he delivered what he wanted to deliver, which is, hey, we've done 500 bps. It's a lot.

We're going to watch for a little while. And honestly, we're pretty happy. We've still got a 3.5% unemployment rate after those 500 bps. Inflation is coming down. Inflation expectations, five-year, five-year, and the break-evens and the one-year break-evens are all kind of where we want them and we just gotta we gotta take our tough medicine and and slow things down and lose a few jobs and get this inflation lower and we can be back to normal but you know he's not he's not declaring victory anytime soon and i think his message was the same it was we're we're here to be vigilant against inflation and we're actually pretty happy with how the job

market has performed through all of this tightening. All right. I do want to mention Qualcomm earnings are out. We are going through them now. The stock is down initially about 4 percent on those, but we'll continue to go through those numbers and bring them to you in just a moment. Bob, so this was a unanimous hike from the Fed. Assuming the labor market stays somewhat strong with tomorrow's report, even if slowing, how much tightening of credit conditions is going to be necessary for the Fed to be able to say, OK, we're ready to pause now? I think the big problem that the Fed is running into is that this isn't a credit driven expansion or strengthen the economy. It's an income-driven expansion and demand. And the result of that is even though the banks may continue to tighten credit to some extent,

actually they tightened credit a little bit in the first quarter, a fair amount in the first quarter, and the economy continued to be relatively strong when you think about nominal final sales. And so I think what they're betting on is that credit can bring this economy down, and they're probably missing just how strong that income driver is of this economy to keep things going. And so that's why as long as that unemployment rate stays at 3.5 percent, as long as we see those wages continue to grow at relatively elevated pace, 5 to 7 percent, you're going to continue to see more demand, more strength in the economy than the Fed wants to achieve its inflation mandate. But David, isn't this kind of what Chair Powell was saying about it being different this time?

And I know he wasn't talking about exactly this dynamic. He was more talking about employment being stubbornly high, unemployment being stubbornly low. But there seems to be a knowledge of that. I don't see what gets them to a pause if that trend continues. What does? I think what does look, I think the hurdle to hike is actually pretty high in the next few meetings. I think they want to pause. They want to feel out how this credit condition tightening issue with the regional banks plays out. And as long as we get things pretty close to expectations, we don't need to get inflation collapsing. We just need to kind of keep that CPI in the 0.2, 0.3. I think 0.4s on a month would get them a little nervous.

But if we get 0.2s and 0.3s and maybe headlines maybe headlines.4 or cores.4, but the headlines.1 or 2, I think they're going to stick around for a little while. And job growth is sort of the sideshow. It's really that inflation expectations and inflation itself are coming down. And I do think, you know, Jay really did want to pause. He thinks he's done a lot. He doesn't want to overcook it and get blamed for blowing things up. And so far, I think he's really winning this battle on soft landing or or limited down, you know, limited risks on the employment side from from all the tightening that he's done.

So I don't know that he's going to I don't know that he's got a sort of a real predilection to go in this June meeting or even throughout the summer. I think there really is a desire to pause. OK, Bob, what's an investor to do? I want to play some sound from Jeff Gundlach, who was on our air on CNBC with Scott Wapner in the last hour. Take a listen. I'm really turning more bearish at this point in time. I think the markets for risk assets are too complacent given this cocktail of higher interest rates, quantitative tightening, and credit contraction. Certainly, we should expect higher default rates and lower quality fixed income securities as we move into the end

of this year. And I'm strongly of the opinion that investors should be going up in quality in bond portfolios. And we haven't even talked to our regional banks. It was just a couple of days before we saw everything go down with FRC that you were talking about that being a zombie bank. That's right. I mean, I think the main risk for holding risk assets right now is that either the economy continues to be strong enough and gets through the regional bank issue and the credit tightening, and the Fed has to tighten more in order to bring PCE down,

which, you know, core PCE is still 5%, as Chairman Powell mentioned today. That's a long way from their target. There's a lot more work to do. So either they've got to continue to tighten or there's enough tightening that's happened so far that it's going to bring the economy down. And those expectations that are in the equity market right now aren't going to be realized. One way or the other, it's not a good look for stocks on a forward-looking basis. David, you agree. And what do we need to see, first of all, in the jobs number tomorrow? And then what's the next most important data signal we'll get? You know, I think the wage data and the inflation data are going to be a lot more

important than the job data. Obviously, we had a great ADP. The job data continue to be, you know, on another planet relative to where we've seen the tightening. So I don't I don't think there's a lot of risk on the job side. I mean, that said, you know, these numbers are very volatile month to month. I think that the story that Jeff was spinning is an important one. And it really does, I think, guide you away from the riskiest parts of the capital structure in the U.S. economy. What we've been guiding our clients away from at Jefferies, which is the equity markets. We see them very range bound, this $3,700 or $3,600 up to $4,300 area. That's kind of the range. And I don't really see a lot of reason to break that. It's a carry trade for us. And we think there's

really good fixed income stories out there in the double B, single B area that are offering near double digit yields or still double digit yields. And that's a great story and a great place to hide out. Your senior secured lender, the equity guy needs to get wiped out before you lose and you're getting a big fat coupon in a still high inflation environment. So I think that's where we're sticking with our guns. And it sounded like in your interview with Jeff, he's in a pretty similar place, although I think a little darker than we are on the economy. But I'm kind of a little more in the Jay world. But, you know, who knows? Nobody knows.

But I think there's some pretty good signs that this economy, as Jay said, can do a little bit differently than it's done in the past when you've had such a big hit from rates. OK. And kind of, you know, survive it with a few nicks and bruises as opposed to really deep scars. All right. Sounds good. Here I was trying to make tomorrow Jobs Friday. This is Wednesday.

Tomorrow's Thursday. We've got another day to wait. It's a busy day. No, a busy week, I should say. It is. Got Apple tomorrow. There's some important stuff happening. David, Bob, thank you.

Thank you. Always a pleasure. And now Qualcomm earnings, as I mentioned, are out. Christina Parts and Evelis, why is it down? Ah, that's because of its outlook. But let's go through EPS right now. Two dollars and 15 cents adjusted, which falls in line with expectations on revenue of nine point two seven billion a beat. But that's a more than 17 percent drop year over year, given how exposed Qualcomm is to the weak smartphone market. And I say that because Qualcomm actually pointed out in their report right now that handsets fell 14% year-over-year,

while the Internet of Things, another category, continues to be impacted by high customer inventory levels and lower demand. So since customers need to continue to work through this inventory, Qualcomm's Q3 EPS guide fell into a range of $1.70 and $1.90. That is well below the $2.16 expected by Wall Street analysts. They also, this is according to Qualcomm, expect the Android and the auto market to be flat with IoT growing mid-single digits. And so that's part of the reason why you're seeing shares down about 2.6%. Overall, though, it's a cautious tone set by the company. They say the environment is still challenging and they still have not seen

evidence of a meaningful recovery in China. So the big, I guess we could say bet right now is the bottom in for handsets, just like we've talked about whether the bottom was in for for PCs with Intel. It's just this ongoing guessing game for timing. Not quite as optimistic in a way as the PC commentary, especially that part about China not being back. Also, a little interesting note here, Qualcomm saying a larger than normal sequential decline in QCT revenues, primarily due to the timing of purchases by a modem-only handset customer. That makes you think of Apple.

It does. It does for our audience just so they know. Qualcomm separates the revenue streams into two. So QCT is pretty much the sales of chipsets and any 5G wireless chips. And then the other category is licensing. So what you're pointing to, John, shows that they are trying to diversify away. And I'm sure on the call, they'll talk about that diversification, especially towards auto,

which did grow, but still contributes a very small portion of total revenue. All right. Christina Parts and Evelis, thank you. Shares are down about two and a half percent right now. TripAdvisor earnings are out as well. And Seema Modi has the numbers. Hi, Seema. Hey, Morgan, we know the travel story has been strong, but TripAdvisor numbers for the first quarter coming in below expectations at $0.05 adjusted versus the estimate of $0.07. It was still able to grow revenue by 42% year over year. There's been much discussion around Viator, which is TripAdvisor's tours and experiences category, where it saw growth of 105% versus the same period last year. In fact, CFO Mike Noonan talking about how they continue to invest in the large experiences opportunity utilizing both our TripAdvisor and Viator brands as we seek to deliver great value

to both our customers and suppliers. There's been some speculation that this part of the business could potentially be spun off or taken public, although no comment officially from the company on that yet. But we are watching shares of TripAdvisor. It was down about 6% in the regular session, and it is also lower in extended trade. Remember, guys, not only are the online travel operators competing with TripAdvisor, but Google is as well, John and Morgan. It has been heavily investing in its own travel booking platform. Back to you. I know you've been all over that story. Sima Modi, thank you. Shares are down about six and a half percent right now as well. Zillow earnings are out. Diana Olick has the numbers. Hi, Diana.

Hey, Morgan. Yeah, nice beat for Zillow in Q1. Revenues came in at $469 million versus estimates of $425 million. Adjusted EBITDA was $104 million versus estimates of 62 million. Residential revenue did decrease 14 percent year over year. That's primarily because of lower premium agent revenue as a result of the overall weakness in the housing market. Rentals, that's their game. Revenue increased 21 percent year over year thanks to strong traffic and growth in multifamily. We just can't say enough about red hot rental market. Mortgage revenue, of course, dropped 43 percent due to higher interest rates, resulting in less demand. Now, traffic to Zillow Group's mobile apps and websites was flat year over year. Zillow, though, is now heavily focused on AI and actually adding a new chat GPT function.

CEO Rich Barton said in the release, our powerful brand and strong balance sheet put us on solid footing as we build the housing super app and help get more and more people home. Zillow just announced this new feature to go up to game in home searches. And at the same time, of course, Redfin also came out with the same feature. So we're all in chat. GPT, back to you guys. Yeah, where have we heard that before? Diana, thank you.

Meantime, Etsy earnings are out. That stock popping after hours. Pippa Stevens has the numbers. Hey, John, Etsy shares are up 7% right now in extended trading. The company earning 53 cents per share in the latest quarter. That was in line with analyst estimates. Revenue coming in at $641 million. That was ahead of expectations for $622 million, and that number was up 10.6% year over year. The company is saying that Q2 revenue should come in between $590 and $640 million, while analysts were looking for $625 million. Now, the company did say that it has maintained the vast majority of their pandemic

gains in the face of what they called stiff macroeconomic headwinds. And they pointed to an exciting pipeline of product developments coming up. John. All right, Pippa, thank you. Let's now get a take from CNBC senior markets commentator Mike Santoli. Markets reaction to the Fed, Mike. Yeah, John, you know, in advance of one of the Fed decisions, it's always, oh, is the market going to rally or sell off in response to what the Fed does? And it says the correct answer is always both, because we did get the 7.7 percent rally intraday, then a 0.7 percent decline on a

closing basis. David Zervos talking about the range for the S&P 500. It is very well enforced. He talked about, you know, 3,700 to 4,300 on the S&P. I would even say it's narrower than that. It's more the central tendency is kind of forty two down to thirty eight with some overshoots along the way. There is still some encouraging signs here that we're holding this little uptrend right now. And why do we have this push pull? Well, consider what Jay Powell said. He characterized the labor market as still very tight, but he also characterized monetary policy as tight based on real rates. So therefore, he's saying that the economy is still strong and we've done most of what we're going to do to kind of slow it down.

And that just leaves us in those sort of swirling waters, figuring out how it breaks from there. Take a look at gold. It has been on a pretty good run. You have this time when people think that the central bank might not have ideal control over the situation. The dollar has been weakening. Gold has kind of been bumping up against, well, our all-time highs. Keep in mind, Jeff Gundlach said it kind of looks like a triple top. I sort of agree. There was another range bound period several years before this chart starts that did have another one of them that looked like this. On the other hand, it's been strong relative to other assets recently. Take a look at gold compared to oil, crude oil, WTI crude, another weekday right there. It's a disinflationary type story, but also one that says that maybe financial stability risks have been more in tune.

So on a one year basis, you see that turnabout that happened around the middle of last year as the Fed tightened. On a two year basis, they're basically that turnabout that happened around the middle of last year as the Fed tightened. On a two-year basis, they're basically even, but with gold on the upswing and oil declining. John? All right. Good to know. Mike Santoli, thank you. And that's a good lead-in to talk with our next guests, Federal Reserve raising rates this afternoon, quarter-point increase as expected.

Joining us now, Jason Furman, former Council of Economic Advisers chairman, and Alan Blinder, former vice chair at the Fed. Guys, welcome. Alan, to what degree are we in that squishy place where people are trying to figure out what this Fed language means? Are hikes done? Are they not? Does this put more of a magnifying glass on Friday's numbers for jobs and wages if the Fed's looking to the data for permission to pause? Yes, I'd say. I'd say it's getting about as squishy as it ever gets right now. I mean, J-PAL more or less said that, you know, groping for the top. They think they're right either at the top or very close to the top. The other thing I put on your list, although it's three weeks off,

is the minutes. I'll be looking at that to get some further information on how many members of the FOMC thought this was enough. Nobody dissented. We know that. But in the last minutes, we saw that several members thought what they had done at that point was already enough. And I don't know what was said at this one. Jason, was it enough? Look, I think they did exactly the right thing by raising rates today. I think Jay Powell doesn't know where rates are going to be later on, so he shouldn't pretend that he does. Getting rid of forward guidance, moving to pure data dependence. I think that's the right move too.

If you ask me my forecast, I think inflation is really embedded. I think it's not coming down very easily. And so I think they're going to be a little bit unpleasantly surprised about where inflation is. And they're going to need to raise rates. Maybe they take a meeting off, go back to it the meeting after that. Maybe they raise it the next one. But that's really my forecast of the economy, not my forecast of the FOMC. Jason, I know you are watching this credit crunch process. NerdWallet was down 22% today. And I actually asked CEO Tim Chen how much of their weak guide is because banks aren't as eager to lend money. Listen. Absolutely. I think we're seeing that on the

margins. And I also think that you're seeing anticipation from even the large banks that are less affected that regional banks are going to slow down lending and that might slow down the economy as well. So I think the rate hikes are having their intended effect for us. We really just want to be here to help people navigate through that no matter what happens. Jason, how much of that do you see? Where are you looking to really get a sense of how much of an effective rate hike the credit tightening is giving? Yeah, look, Jay Powell got that question in the press conference and he wasn't able to answer it either. So I'm certainly not going to be able to. I divide it into two types of things.

There's market-based financial conditions. Those have actually eased. Mortgage rates down, dollar weaker, corporate bonds yields lower, and they're issuing a lot of those bonds. So that's actually all an easing in the last month and a half. But then there's all the non-market stuff. That's probably more important. That definitely is all tightening. We have these subjective surveys, NFIB we already got, the senior loan officer survey we're going to be getting. You can look at some of the bank flows and what's happening to loans, especially in the multifamily

sector. So on balance, the market easier, the non-market stuff tighter. It's probably a tightening. That's why I don't think they'll need to go to the 6% rate I had previously expected. I'm still not sure it's going to be enough to do the job they want, though. Yeah. Alan, I mean, the other piece of this puzzle, and Powell said the banks are sound and resilient. He even used the word resolved, saying that the three large banks that were at the heart of the early March stress are now all quote unquote resolved. But do we yet know how sound, how stable the financial system actually is here with rates now at the highest that they've been since 2007? And of course, the wild,

wild swings and sell-offs we've been seeing in those regional bank stocks in recent days? I think broadly the financial system is very sound and very stable. But the key word in there is broadly. That doesn't mean there isn't fraying around the edges. Who predicted Silicon Valley Bank? Who predicted Signature Bank? Who predicted First Republic? By the way, I didn't, so don't think I'm claiming credit for knowing things that other people didn't know. Why are we to believe that that's it, only those three? We know it's been a generic problem that banks have been inappropriately or ineffectively prepared for these Fed hikes,

for the extent that they would go and how high they would go. So I think there's still lingering worry about that. Like Jason, I can't give you a number of how much this is going to do for economic growth or even for bank lending, but it's not good. And I think it's a real hazard. OK. And the one thing I'd like to add, by the way, is Powell didn't mention at all, basically, except to slough it off the national debt ceiling. That's another storm. If you talk about financial instability, if you want to get financial instability, that's the way to do it. Well, it seems like some people might want to get some financial instability. we talking a few months ago about the consumer being tapped out around mid-year when it comes to savings rate and ability to draw on credit? How do those two things complicate what happens

in the second half of the year? Yeah, look, I mean, the debt ceiling could be hugely disastrous if you go through it, or it could be like every other time we've come up against it and it's settled in some way that's less than ideal, but it takes away all those risks. I think probably it'll be settled, but I'm more nervous than I've been in the past. The consumer is a little bit easier to understand because you're not talking about a freakish tail risk. Consumers continue to spend a lot. Consumer spending in the first quarter was strong, but incomes are still relatively low relative to that spending. As a result, we have this quite low saving rate.

We have credit card balances rising. We've seen some stresses we're seeing in delinquencies and the like. And so, yeah, I think around middle of this year, you'll need an adjustment. Now, that adjustment's a little bit less than I might have thought because real incomes have been rising with the strong job market and the falling of headline inflation. So that'll help the consumers be able to continue to spend, but nowhere near the pace they've spent over the last year. Okay. Jason, Alan, thank you. Sure. Thank you.

Up next, we're going to get an analyst's first take on Qualcomm's results and weak guidance and the read-through for other chip stocks and for Apple. And speaking of Apple, we're just 24 hours away from that company's highly anticipated report. We're going to preview what to look out for when Bernstein analyst Tony Saganaki joins us. Stay with us. Welcome back to Overtime. It is time now for a CNBC News Update with Bertha Coombs. Hi, Bertha. Hi, Morgan. Here's the CNBC News Update for this hour. Police are searching for gunmen who opened fire at an Atlanta medical facility today. Authorities say at least one person was killed and four injured during the

shooting. Donald Trump's lawyers say they will not present a defense case in writer E. Jean Carroll's civil trial. Trump initially had an expert witness lined up who is now unable to testify due to health issues. Carroll alleges the former president raped her in a Manhattan department store nearly three decades ago. Trump has denied the allegations, calling them a hoax. And the Food and Drug Administration approved the world's first RSV vaccine today. The vaccine, produced by pharmaceutical giant GSK, lowered the risk of severe illness by 94 percent in late stage clinical trials. Researchers first attempted to develop a vaccine for the virus about 60 years ago. And it's indicated for people who are 60 and over.

Back over to you. Six decades. Bertha, I just got to say, you have great taste in your clothes today. I know. It's like a barbecued kind of day. A lot of folks wearing this color today. Bertha Coombs, thank you. I missed the memo.

Next time. It's okay. We made up for it. Yeah. Qualcomm reporting numbers just moments ago. The stock moving lower on guidance that came in below consensus forecast. Joining us now, Chris Rowland, senior analyst at Susquehanna. Chris, wondering your take.

The midpoint on Qualcomm's guide, about a half a billion short of consensus, and they call out the timing of a modem purchasing customer that makes us think of Apple. What might all this mean? Apple, indeed, and Apple is weak. There is no doubt about it. Android is also weak and doesn't seem to be bouncing. There's a ton of inventory over there in China right now. So it's going to be another quarter and perhaps two before Qualcomm and, you know, everything handset related, including Apple, probably on this side, hit bottom and start hitting some better than seasonal results afterwards.

So, Chris, back in mid-March, you called a bottom for the semiconductor cycle. You still feeling confident in that? Pretty confident, yeah. You're starting to see that bounce. We thought it was going to happen with PCs first. We saw that. Not AMD today, but AMD has a very strong back half that we believe in. And Intel was better on the PC side.

So that bottom first handsets will probably batter that will hit second. We're still a quarter or two away. The China commentary a bit concerning to me because Apple needs a stronger consumer in China. Do they not? And they're not the only ones. It seems strange. Some others had reported consumer strength in China. Maybe that's more on the services side. Maybe we're starting to see that the products, not so much. Yeah, I mean, on the handset side of things in China right now, it's kind of a bloodbath. You have demand, you know, way down from COVID levels. And then in addition, you have a massive overhang of handset inventory just in every little booth all throughout China that you can find. They have more handsets than they need.

All right. Chris, thanks for joining us. Shares of Qualcomm are down about two and a half percent right now. And of course, we're awaiting that conference call. SolarEdge earnings are out meantime, and that stock is jumping. Pippa Stevens has the numbers. Hey, Morgan. Yeah, those shares are up more than 8% after SolarEdge handily beat estimates for the first quarter. EPS coming in at $2.90 on an adjusted basis.

That was almost a dollar ahead of what the street was looking for. Revenue coming in at $944 million, once again above street expectations. Now, in terms of guidance for Q2, the company sees revenue between $970 million to $1.01 billion, with the street looking for $986 million. Now, this is a very different report than what we heard from competitor Enphase. Enphase pointed to a slowdown in the U.S. market, and that has sent shares tumbling. So SolarEdge in its report did take a minute to emphasize that they have a diverse geographic footprint

and that they're not overly reliant on any one region. Again, those shares up 8%. Guys? All right, Pippa, thank you. And after the break, Mike Santoli is going to look at the funds that are benefiting from a recent flight to quality. And later, we're going to speak with the CEO of Host Hotels as those earnings cross the tape about the outlook for travel and how higher rates are impacting that business. Stay with us.

Welcome back to Overtime. Mike Santoli is back from the New York Stock Exchange, and he's taking a look into the shift into quality names. Hi, Mike. Yeah, Morgan, it really has been a mantra among a lot of investment advisors, fund managers saying, like, this uncertain point in the economic cycle, quality attributes in companies seem like they're worth paying up for. And that's actually worked, at least by the sites of this quality ETF. There's many of these

that essentially screen the S&P and say we're going to take the companies with the better balance sheets and the stronger profit margins. Usually they're also lower volatility. And it's clearly worked against the equal weighted S&P starting in February. It hasn't necessarily been a long term winner in all environments, but it has been working right now and it has drawn a lot of money in that direction. So Goldman Sachs is tracking the flows of investor cash into this group of funds, this group of ETFs that track quality and also low volatility type S&P stocks. And on a cumulative basis, this year really has been quite a rush, especially since Silicon Valley Bank went into crisis right there in early March. So people are, yes, maybe they're going to be willing to own some equities, but it's going to be stuff that promises to give a smoother ride, be safer, be less vulnerable. I do take a little bit of a, maybe a bright, sort of a bright side view of this,

which is that investors clearly are cautious. Investors clearly have a lot of hesitation about taking on equity risks. And sometimes in that environment, when nobody thinks the overall market can perform and they're much more cognizant of risk than reward, it means that the surprises can happen to the upside. And it usually is a decent sentiment cushion underneath the market to say that people at least are not kind of being driven by greed as much as fear. Am I correct to read that the stoic Mike Santoli is sounding a little bit cautiously optimistic right now? You know, I feel like I've been in that mode for a while, at least when it comes to just what the downside looks like. So I really do feel as if the prevailing view has been for some time that the market's not going to run away from me. I've been mentioning, for example, that people fell in love with money market funds at 4% to 5% in January, thinking that it was this magic solution to their problems.

And then the S&P went along and gave you 8% in four months. So I do think sometimes, you know, the public doesn't always get it wrong. But sometimes when things get too popular, the market sort of gives you some reason to doubt that view. OK, so this has been your cautiously optimistic face all along is what you're telling us. That's right. Exactly. There you have it, John. OK, got it. You got a smile out of him. Yeah. Up next, the CEO of Host Hotels and Resorts discusses the outlook for travel spending and the health of the REITs when we come back. Welcome back to Overtime.

Host hotels and resorts just out with earnings revenue topping estimates and earnings per share nearly doubling the consensus on forecast, coming in at 40 cents per share versus 24 cents expected. The company also raising its full year forecast and joining us now exclusively is CEO Jim Rizzolio. Shares are up 2 percent, I'd note, as well. Jim, welcome to the show. Thanks for being with us today. Thanks for having me on today, Morgan.

So comparable hotel revenue per available room, it was up 31 percent. We've been hearing it from other travel and leisure related companies that demand is strong. Where are you seeing that demand come from? And key question, looking to the second half of the year, how resilient do you expect it to be? Well, for those who are maybe not as aware of host hotels and resorts, we are one of the largest owners of iconic and luxury hotels in the united states we're the only real estate investment trust in the s p 500 and the only real lodging real estate investment trust with an investment grade balance sheet so the company is really set up to continue to outperform we couldn't be happier with our performance in Q1. Our guidance was 24% to 27% rep part growth.

And as you said, we came in at 31%. We are really enthusiastic for the way this year is playing out. The confidence we have and what we're seeing occur in the balance of the year gave us the confidence to raise our guidance from 5% at the midpoint to 9% at the midpoint for four-year 2023 Red Park. And it's really across all business segments. The leisure customer continues to remain strong and resilient. I would say that there was a bit of a plateauing effect from the fourth quarter to the first quarter. But rates are meaningfully above where they were in 2019. And we don't see a moderation back to 2019 by any stretch of the imagination. Business travel continues to evolve. We're seeing small, medium sized businesses really leading the way.

And it's going to evolve over time. I think the really bright picture is the group piece of the business. OK. Posted. Well, go ahead, Morgan. So so in terms of the group piece of the business, I guess I guess break that down. And just as importantly, because we did have the Fed raise rates again today, we did have that press conference from Powell. What are your expectations in terms of where the economy goes from here? As we see all of these rates begin to settle in, as you have a bank, a banking situation, a crisis, that means that we're going to see capital and lending standards begin to tighten. How are you preparing for that? Are you already seeing signs of any of that? Well, Host is uniquely well positioned because we have no

debt maturities coming due until March of 2024. And at that point in time, it's only a $400 million bond deal. We're well positioned regardless of what happens in the economy. You know, the group business, there's pent up demand. There clearly is. And there's continued optimism about the state of travel. And we're just not seeing any signs. And this is post SVB and post signature going down as well. I think the 25 basis point increase was well forecasted and expected. And we're just not seeing the slowdown. Now, of course, that can change. But as we sit here today, we have very high level of confidence on all three segments of our business. Okay, Jim, you mentioned business travel. Tell us more about that, because last quarter, you talked about how Amex Global Business Travel said that the business,

the transient had moved to about 80 percent of pre-pandemic levels. But you sort of want that high rated business events at your luxury properties to come back as well. How is that looking and how is that trending as we face these economic headwinds? We are seeing a pickup in business travel on a month over month basis, John. And as I mentioned, it is really being led not by the big multinational companies who I think perhaps are being a little more cautious given the overall economic macroeconomic environment. But we are seeing it being led by small, medium sized businesses, the businesses that have to travel. They have to have to get out there. They have to knock on doors.

And, you know, ancillary to that is is the corporate group meeting business. We continue to see a lot of pent up demand, a lot of companies wanting to meet, associations wanting to meet. So, you know, we're just not seeing any softness at this point in time. And so what are you doing investment wise in the properties themselves? Have you slowed that down? Are you able to kind of control costs that way? Or do you need to continue doing renovations, even technology renovations, to keep up with the pace of demand? Yeah, we are very fortunate given the fact that we have a Fortress balance sheet. We finished Q1 at 2.2 times leverage. And that's after having the ability over the course of 2021 and 2022 acquiring eight really terrific assets that have performed well in excess of our underwriting expectations. Additionally, we have invested a billion and a half dollars in our portfolio over the time frame 2021-22.

And the investments that we made, some of them very transformational, most of them very transformational, are allowing us already to pick up significant market share because we were in the unique position given our balance sheet to put money in our assets, whereas other owners were just living day to day and they did not invest in their property. So we're very optimistic that we're going to continue to outperform. OK, a rare a rare look then from a public company with the size and and kind of level of your portfolio. Jim, we appreciate you joining us. Thank you. Up next, a top analyst on whether investors should buy shares of Apple before the company reports earnings after the bell tomorrow.

We'll be right back. Welcome back to Overtime. Shares of PacWest down almost 27 percent right now after hours. The stock plunging on a report that the bank is weighing strategic options, including a potential sale. Other regional banks are falling in sympathy. We're going to bring you more as we have it. But, John, PacWest is now down something like 78 percent, including this move since the start of the year. The KRE is down. Western Alliance is down. It's just it's right across the board. And of course, you can't help but juxtapose it against the commentary from Powell at the press conference earlier today, where he was essentially saying that First Republic, quote unquote, draws a line under the banking stress and that it was an important step towards ending the period of banking turmoil. Maybe a dotted line,

line in pencil. I mean, so much for the sigh of relief here. There's only so much. I mean, Jamie Dimon's got to be pushing away from the table now. So who's going to do the buying now? Maybe that regional bank consolidation we were talking about, but I don't know. I don't know. Yeah. Definitely, we'll continue to monitor the situation. We'll bring more headlines as we have them.

In the meantime, let's run through some of today's other after-hours movers. Qualcomm shares, those are lower after third quarter guidance came in light. Etsy, higher after beating on revenues and reporting earnings that were in line with estimates. TripAdvisor, falling hard after EPS missed. And Zillow is higher on a beat on both the top and bottom lines, up about 5%. Let's talk about tomorrow. The big report is Apple following better than expected reports from Amazon, Microsoft, and some other tech companies. The stock's already up about 30% this year.

Joining us now with a preview, Bernstein's Tony Sakonagi. Tony, in this Qualcomm report, we see China not entirely back on handsets, which might say something about Apple. And then just overall demand doesn't look that strong. But, you know, Apple kind of has its own inventory situation to work through. How much can you read through? Good afternoon, John. So, yes, the handset market is very weak.

The good news is we believe that Apple has been doing better than the broader market. And it is benefiting a little bit from the fact that last quarter they were supply constrained on pros, iPhone pros, and this quarter they're not. So we expect some Apple to have actually rebuilt some channel inventory to have had a pretty good pro quarter on the iPhone. You know, all that said, we're still expecting Apple's revenues to be down, iPhone revenues to be down. But we do think the quarter will come in line or slightly above expectations. I think it's all about the go forward and the commentary that's going to shape investor sentiment. Right. How much does this quarter really matter, given that we know Apple

has big product announcements in the back half of the year? They probably want to draw down inventory, especially ahead of those. And it has a good amount of control and visibility into its supply chain because those Apple retail stores. Yeah. So historically, this is a great time of year to own Apple. I think one of the most striking patterns of almost any stock that I've observed, especially really mega cap stock like Apple, is in 14 out of the last 15 years, it's outperformed in the three and six month period prior to iPhone announcement. So we're right in the middle of that. We're about four, four plus months until the next iPhone cycle. And historically, the relative outperformance, not how much Apple's gone up, how much it's beat the market, has been almost 1,500 points on average in the three months before iPhone launches. And I think to a certain degree, it's what you alluded to, John, which is

they have a product cycle coming. People are looking forward. They're not really looking back around, you know, what happened this year. And the stock tends to do very well. And the converse is true, ironically. After a new iPhone announcement, the stock typically doesn't outperform for three to six months. So seasonally, this is the best time to earn Apple. You know, could we have a pullback or a jump after earnings? Certainly we could, largely dependent on guidance. But typically, you know, and the numbers are very striking, this is a good time of year to own Apple. Okay. Buy the rumor, sell the news, it sounds like. Tony Saganaki, thank you. Let's get another check on PacWest as we had to break down sharply on a report saying the bank is weighing strategic options, including a possible sale. It's dragging down other regional banks. Look at that chart. It's down about 40 percent right now after hours. Deposit insurance, more calls for greater assurances. I would imagine

we're going to hear more of that as this happens and this unfolds in real time. More over time after the break. Airbnb today unveiled a low-cost option for house rentals, allowing consumers to rent a single room instead of an entire home. CEO Brian Chesky telling our Andrew Ross Sorkin that this will improve affordability at a time when consumers are looking for value. As the economy slows down, we still see people want to travel. And I think the reason why is the more the office is Zoom, the mall is Amazon, the theater is Netflix, travel is a way that people leave their homes. And so I think that it's becoming a more important

part of discretionary spending. But at the same time, it's going to obviously get balanced with the fact that like people have less money to spend. You can catch the rest of that interview, including what he said about artificial intelligence and the travel business tomorrow morning, eight 15 AM on squat box. Speaking of squat box, one of the show's signature brands is getting its own newsletter. It launches tomorrow.

On the other hand, you probably already know which segment we're talking about. On the other hand, you might need a refresher. Guest was here to weigh in on both sides. The one and only John Ford. On the other hand, here on Squawk Box, John Ford. John Ford is weighing in. John, what are you thinking?

Well, on the other hand. On the other hand. On the other hand. On the other hand. On the other hand. On the other hand. On the other hand. It is on the other hand. So, I mean, come on other hand. On the other hand. It is on the other hand.

So, come on. I'm never going to really run out of material for this thing. It's like a multiverse of on the other hand. Hey, Joe. You better tell us. If I don't know after this. I always do. OK.

I always tell you. You know what I noticed for the first time ever? You start on the one hand with the pin in your left hand, and then you swap over on the other hand, the pins in your right hand for the second thing. Caught you. You can sign up for the On the Other Hand newsletter at cnbc.com slash O-T-O-H or by pointing your phone at the QR code that's right there on your screen. John, give us a little sneak peek of this first newsletter.

Absolutely. Thank you. I'm excited. Believe it or not, it's been three years almost. In August, it'll be three years since I started doing this segment just about every week, trying to keep it fresh. Debt ceiling. Should Congress bargain with the debt ceiling? There are two sides to these things. And what I love about writing this segment is sometimes I start out thinking one side is stronger. And then by the time I gather the facts and construct the argument for the other side, I flipped. So it helps make me smarter. I hope that the viewers are enjoying it as well. I know I am enjoying it. Congratulations.

Really excited to check out the newsletter. The newsletter is going to be the script to the thing that I write every week. And there's going to be a poll on LinkedIn where you can weigh in every single week. And I'll tell you what everybody else thinks. All right. Sounds good. In the meantime, we're keeping an eye on Kenview, the J&J consumer spinoff, which is pricing here after the bell, going to be the biggest IPO of the year. Keeping an eye on regional banks, given the headlines that have crossed for PacWest.

And then, of course, continuing to digest the Fed. It's been a busy day. And Apple tomorrow, right here on Overtime. That's got big implications for tech and everything else. It is the biggest. That does it for Overtime. Fast Money starts now.