Closing Bell - Closing Bell Overtime: Markets Digest Nvidia News; Getting Set For Fed Decision 3/19/24

Episode Date: March 19, 2024

Investors turning their attention from Nvidia to the Fed as its next policy rate decision comes Wednesday. Citi’s Scott Chronert and Evercore’s Krishna Guha break down what to expect. Wedbush analyst Matt Bryson and T. Rowe Price tech portfolio manager Tony Wang react to Nvidia’s new products. Plus, Hamilton Lane Co-CEO Erik Hirsh on investing in private markets ahead of IPOs from Reddit and Astera Labs. And our Emily Wilkins reports on how the Senate result in Ohio could impact crypto prices. 

Well, stocks settle here. It does look like we're getting another record close for the S&P 500, 51.78. If it stays this way ahead of tomorrow's Fed interest rate decision, that is the scorecard on Wall Street. But the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, you got to kind of shake it for a little bit and see where it settles. Energy and utilities driving the gains today. NVIDIA having a volatile session after announcing new AI chips and more data center technology. But it's new software partnerships with Synopsys, Cadence Design, and Ansys

making those three stocks the best performing tech stocks in the S&P 500. And later, Hamilton Lane co-CEO Eric Hirsch gives us his outlook for the IPO market as Reddit gets set to go public this week. And it's not even the only IPO we're going to be getting. But let's get straight to today's action, shall we, with our first guest, City Head of U.S. Equity Strategy, Scott Cronert. Scott, it's great to have you on. We did finish the day higher for all of the major averages.

It looks like we did get another record close for the S&P 500. How does this set us up, not only for the rest of the week where we know we're going to have some market moving catalysts here, particularly with the Fed tomorrow, but looking at your forecast for the year 5100, we're above that now. Morgan, you're spot on. 5100 three months ago seemed pretty optimistic. Now we're looking through the rearview mirror at it. You know, we've been in print with a bull market or a bull case scenario of $5,700. The question's coming up, how do we get there? We think we need to see a clear line to even stronger earnings for this year than we're projecting, which is $2.45 for the S&P. We don't think we're quite

there yet. So we're mostly short term of the view that we have to digest this move, but completely recognizing that there's a FOMO thing going on here that given this move, I think we're attracting a lot of money off the sidelines into U.S. equities. Interesting. How much do Treasury yields matter here? And I asked that on a day where, yes, we're coming off of the Bank of Japan decision. It seems like it was a little bit of a sell the news event. We see some pressure on Treasury yields here ahead of the Fed decision here. But up until at least recently, we've had some disentangling of those two markets in terms of the trading patterns.

I think interest rates are facing off with a new growth driver. The way we're thinking about interest rates, I think this is relevant ahead of the Fed meeting this week, is in terms of 10-year treasury yields, we think they're very important to substantiating the valuation around that growth part of the market. So this move up to a 4-3 handle, probably not what we'd like to see. We prefer to see it under 4. However, the broadening effect in the market is being led by more economic sensitive parts of the market. Energy has now come up into the fray, along with financials, industrials not too far behind. We'd argue that that shorter cycle, shorter duration part of equities, probably more sensitive to shorter term interest rates,

Fed funds and the SOFR analogies to that. So, yeah, I think the market at some point here is expecting that we're getting closer and closer to a Fed pivot, even though consensus is now pushed out to midyear. Yeah, I just want to correct myself real quick because I called the BOJ decision a sell the news event. What I really meant was a buy the news event when you look at bond prices. All right. Well, and Scott, you expect that we need a 10-year that gets lower, right, in order to get 5,700 on the S&P. But if the 10-year moves lower, isn't that maybe even better for the Russell 2000 than the S&P? Yeah, well, the Russell 2000 is going to be more economic sensitive. It's just the nature of that index construction. So much like the cyclical part of large cap, you want to see pressure coming off of short term

rates to get to a more normalized curve environment that should benefit a lot of the financing that goes with the activities related to that economic sensitive part of the market. Got that. The 10 year component is a little bit different. And there, yeah, what we'd like to see is pressure coming off of inflation expectations that in turn support a gradual valuation. So on the one hand, I want longer term rates for valuation. On the other hand, I want shorter term rates coming down to get a little bit more comfort that we're looking at a more constructive earnings trajectory for the cyclical parts of the market, including U.S. small cap. So what I mean there is if you think the S&P can go up 10 more percent from here to end the year,

then I imagine you're thinking that the Russell can go even higher than that percentage wise. The S&P is led by still a component of the MAG7. You got five stocks that are over half of the index return this year. Small cap's not going to have that. But the broadening effect, as we mentioned to earlier with energy kicking in along with financials, even industrials, that does play to small cap. So again, small cap is higher beta from a performance perspective for a reason. It's higher beta fundamentally as well. We need to get to a little bit more conviction that you're on the other side of this Fed hawkish rate regime to really kick small cap into gear. We've been suggesting leg in, but don't go all in just yet.

All right. Well, we'll see if we get near your bull case. Scott Kroener, thank you. Now, AI Assignment could be ready to shift into a higher gear as we await the pricing of Astera Labs' IPO. It just increased the range and number of shares that it's offering. Leslie Picker can explain all that. Leslie? It's hard to imagine an even higher gear, but you're right.

We've got IPOs now, and Astera Labs garnering higher than expected demand in its IPO roadshow amid fervor over AI. The Intel-backed company now plans to offer shares between 32 and 34 apiece. Both Astera and its selling shareholders will generate $673 million in proceeds if priced at the high end of that new range. That would imply a valuation above $5 billion. Astera Labs is a six-and-a-half-year-old semiconductor connectivity company. In its prospectus, it says its connectivity solutions are, quote, at the heart of major AI platforms deployed worldwide,

featuring both commercially available GPUs and proprietary AI accelerators. About 89% of its 2023 revenues stem from its top three customers. That figure amounted to $116 million last year, up 45% year over year. The company is unprofitable, but cut its losses in half in 2023 to $26 million. The founders say they are fans of all things astronomical and named the company Astera, which means star-like. So we'll see tomorrow if its stock behaves more like a shooting star or a supernova. Guys, that's a Morgan's alley. This is like the perfect combination of your interests. You got my attention with that one. And a super, well, maybe a supernova wouldn't be so good. But either way, we're talking about sensational potential

IPO. And by the way, 24 hours ahead of Reddit with a very similar valuation, it sounds like now. Similar valuation, but very different on a price to sales basis, because Reddit has over $800 million in sales compared to this one at about $100 million in sales. So when you compare those two, that's just the difference, I guess, between the comparables in the social media space right now and AI. But definitely an interesting juxtaposition to be on the road at the same time, because here you have Astera, which boosted its range. Usually when that happens, they tend to price at the high end of the range or above. You wouldn't boost it if you were going to then price below your newly

boosted range. So usually the psychology there is you've got higher than expected demand and should price well. Reddit so far has not boosted its price range. I'm told that, you know, according to people familiar with the matter, they don't want to be too aggressive on pricing with this one. So we'll see what happens tomorrow with that pricing. But obviously, it's an interesting test of the IPO market with these two businesses that are very different, but obviously both in that tech space. Sounds like Astera is growing a lot faster, a whole different. Yes.

Leslie, thanks. Let's bring in now senior markets commentator Mike Santoli for his first dashboard. Mike. Yeah, John, so much focus on the market here, its efforts to broaden out beyond that handful of large cap growth. Well, it's been a global phenomenon, too. I think it's worth accentuating that the all country world index, that is everything, all equities, has actually also made a new high. Not as aggressive as the S&P 500, but somewhat similar to the equal-weighted version of the S&P 500. So, therefore, the ones that don't have that recent benefit of the Magnificent Seven.

You see, this goes back three years. So, essentially, kind of taking in most of the bear market and then what we've come back from there. So that usually is something that suggests you have global confirmation of a bull market in play. It doesn't mean we don't have pullbacks, but it suggests there's a little more happening than just a narrow slice of the U.S. market. Now, we obviously have the Fed meeting tomorrow. Take a look at the five-year Treasury yield. This is one that sort of captures a pretty good blend of near term Fed policy outlook, as well as longer term inflation, more so than, let's say, the 10 year does. And you see, again,

this has been the story going up to around four or three. And that's that box that we've been in since the fall of last year, where we really declined was the December Fed meeting where we indicated a Fed pivot. So you have a little bit of suspense here as to whether the bond market is going to, you know, treat whatever Powell says tomorrow as an excuse to maybe test higher yields or not. But one thing I want to make sure we keep in mind here was in the late summer of last year, the end of July, we did see this pop higher in yields to around current levels. That really destabilized the equity market. It kind of prompted part of a correction that we got into the fall.

And the level is not scary right now. The level that was scary then, because we were getting there so fast and we didn't really know why, maybe it was Treasury supply, was a problem. Right now, the market can make its peace with 4.2%, 4.3% on the 5-year, the 10-year if it's happening for the right reasons and it's under control. Mike, U.S. equities have been outperforming their geographical peers for so long. I wonder at this point, are U.S. equities kind of like a version of the MAG-7 compared to the rest of the international markets? In a sense, they are, John. Yeah. This idea that, oh, you just can't fight it.

You know, I mean, it's just what are you going to do, even though the math says that they should pull back and converge with the rest of equities? It just never seems to happen. So to the degree that you think people are getting too comfortable with the mag seven trade, because, again, it's very similar. It's a several it's like several trillion dollars worth of market cap that we have here kind of valued in a certain way here that the rest of the world does not have. You know, you basically make that trade for mean reversion either way. So it doesn't mean it's right or wrong. It just means as if it's all being driven by a very similar effect. All right. We'll see a little bit later this hour. Mike Santoli,

thank you. Well, NVIDIA shares, speaking of Mag7, keep heading higher after announcing its next-gen AI chips and new software partnerships. Up next, we will discuss how much more upside there could be to this red hot stock. And later, why Evercore ISI Vice Chairman Krishna Guha isn't ruling out more than three rate cuts by the Fed this year. Overtime is back in two. Welcome back to Overtime. NVIDIA managing to shake off early morning selling and end the day higher. Shares turned around midday after some bullish comments

from CEO Jensen Huang to investors, including in part what makes us unique, he said, is that we're the only chick company, I believe, that will create its own market. And that echoes what he told our Jim Cramer earlier this morning. NVIDIA is a data center scale company. We're a full stack software company, and we design the entire computing system. We sell it in parts so that everybody can enjoy NVIDIA. Joining us now live from the conference is Wedbush Enterprise Hardware Analyst Matt Bryson

and T. Rowe Price Portfolio Manager Tony Wong. Welcome, guys. Matt, first, I mean, in a way, Lisa Su was just telling us a week ago that she thinks that AMD is uniquely positioned because it's got, you know, chips in CPUs, in client machines, as well as what it has in data center. I mean, can all of this be true at the same time about the advantages these companies have? Yeah, I mean, I think it can all be true. So I think that when you think about NVIDIA, the fact that they built out this software ecosystem, that they're unique in being able to give you the entire, or most of the system, so the networking as well as

the accelerators, and able to get better performance out of that, that's unique. At the same time, I think when you look at the cloud vendors, they've been designing their own systems for forever. They want to have diversity of choice and so it makes sense to have AMD as a partner and then from an AMD perspective, if they get 10%, 20% of the market, I mean that's almost a home run for them. So yeah, I think both companies can be winners.

Tony, NVIDIA seemed to position itself, Jensen seemed to be positioning it as, hey, we do the whole data center, not just the chips, in a way that should seem to be a gauntlet throw for AWS, for Microsoft Azure, even as Jensen opens his arms and embraces these guys as partners, and they all talk about how great Blackwell's going to be. Yeah, absolutely.

Well, it's really exciting to be here, and one of the themes that we've seen is really big chips with really big performance. And so we've seen the training improve on Blackwell from ranging from two to five X, inference up to 20x, and the overall cost of ownership has gone down tremendously. And so I think that's what's exciting here, that we are seeing this really big shift in generative AI where if you just feed the machine more data and compute, you get better answers.

And so the software is writing itself. And so I do think this is a new compute TAM and like a lot of players can do well. And so that's really exciting for me when I look at the space. Matt, do you see it the same way, this idea of new compute TAM, especially when you do have this algorithm company first, quote unquote, as Jensen put it? I guess, what does that mean in terms of market share within data center? What does that mean in terms of thinking about the future of NVIDIA as more, and I know we have been talking about it here, but continuing to talk about it, as more than just a semiconductor name?

Yeah, so I think... Matt. Yeah, so I think certainly the TAM has started to take over from, or there is a new compute TAM that we're going to see the next generation of applications built on AI. I think the debate is rather when do those applications show up? So like Jensen said, we're basically building the software, so building the applications. That pace of growth is the difficult piece to figure out.

In terms of where market share is, I think there's always going to be competition from hyperscale in terms of we can do infrastructure better than, say, an NVIDIA can. We can get a cheaper price, but I think as far as you can see right now, which is through the new products Nvidia announced, that like Tony said, they're simply offering you a better value at this point. And so they will continue to get share and they will continue to sell more because no one wants to miss this new AI opportunity. Yeah. Tony, where are we seeing the rubber hit the road already in terms

of proof points around Gen AI and what is next, especially when you think about the really extensive lists of partnerships and name dropping that happened in the last 24 hours at this developer conference with all the companies? And by the way, stock responses, we saw two attached to it. Yeah, that's a great question. Well, I think that the thing to learn about, to know about AI is that it's a whole ecosystem approach and NVIDIA can't do it all. So it needs a lot of partners to unlock these new TAMs. And so I think last year we saw ChatGPT be the craze, but now this year we're seeing a lot of real proof points here. And with Microsoft and Copilot, you got Meta with digital advertising,

ServiceNow has a lot of great AI offerings. And I think that we're going to see a lot of new innovations, a new frontier where AI is pushing. One of them, which is going to be digital simulation with digital twins. And so that's going to impact pharma in a big way with drug discovery and being able to simulate the real world digitally, like in a computer before you do it in real life.

It's going to save us a ton of money, going to bring us better products, and that can be extended to a lot of different parts of manufacturing, such as cars. And so I think that's going to be the new frontier, digital simulation, digital twins. And I think that's going to be another leg of growth, another leg of a new TAM for NVIDIA and the ecosystem to be able to get to. All right, Tony and Matt, thanks for joining us. And there's more on chips. Don't miss Jim Cramer's exclusive interview with NVIDIA CEO Jensen Huang. That's tonight at 6 p.m. on Mad Money, but a lot more on the outlook for chips tomorrow. I'm going to sit down in person with Intel CEO Pat Gelsinger.

It's going to be a first on CNBC interview, 9.30 a.m. on Squawk on the Street, and then you can see more from Pat Gelsinger right here over time, 4 p.m. Looking forward to that. We have a news alert on the NASDAQ meantime. Bertha Coombs has the details. Hi, Bertha. Hey, how are you? We've got NASdaq shares under pressure this afternoon, Morgan, as Boris Dubai, one of its biggest shareholders, is selling 27 million shares to boost liquidity, according to the CEO, Esa Kazim. He says we still believe in the Nasdaq vision. He says

Nasdaq is a key technology and brand partner for our exchange group, and still believe in the NASDAQ vision. He says, NASDAQ is a key technology and brand partner for our exchange group, and we believe in the strategic vision for the company. We look forward to a continued relationship as a partner. Nonetheless, that secondary offering is putting some pressure. They will still hold on to 62 million shares, which would be about 11 percent of NASDAQ, making them the second largest owner of NASdaq stock, even with this sales. But as you can see, a bit of pressure on Nasdaq. Back to you. OK, Bertha Coombs, thank you.

Well, Reddit is making a pitch to get its users and moderators to buy into its highly anticipated Wall Street debut this week. But there are concerns that could lead to a big post IPO sell off. We've got those details straight ahead. Plus, we're going to discuss the outlook for the IPO market with the co-CEO of Hamilton Lake. We'll be right back. Welcome back to Overtime. Reddit is set to price its IPO after the bell tomorrow, and the social media company is hoping many of its users and moderators will opt into the offering.

Our Julia Boorstin looks at what some are worried could end up hurting the stock. How, Julia? Well, so, John, Reddit wants to tap into the power of its 73 million daily active users. So it set aside 8% of shares for its users and moderators, inviting the most active moderators and users to purchase up to 1,000 shares at the IPO price without a lockup period. Now that could drive volatility and the conversation on Reddit could turn out to be a headwind. In fact, thousands of members of Reddit's Wall Street Bets community, which has about 15 million users, upvoted a post about shorting Reddit stock.

Some warning that going public could be the beginning of the end for Reddit. Others saying that the business, which is yet to turn a profit, is a bad bet. recognition of Reddit, including as a result of the popularity of Wall Street bets among retail investors, the market price and trading volume of our Class A common stock could experience extreme volatility. Now, there was one other warning out today, Reddit disclosing a patent infringement complaint by Nokia. Reddit says as it becomes increasingly high profile, there's more risk of IP claims against it. Morgan. All right. Something to watch. Julia Boorstin, thanks for bringing that to us. Reddit is set to begin trading later this week, in addition to Astera Labs, which is scheduled to debut on the Nasdaq tomorrow.

My next guest believes we will see increased IPO activity in a number of sectors this year. Joining us now to discuss Eric Hirsch, co-CEO of Hamilton Lane, one of the largest private market investment firms globally. Eric, welcome to the show.O of Hamilton Lane, one of the largest private market investment firms globally. Eric, welcome to the show. It's so great to have you here today. Pleasure to be here. Thank you so much. So let's start right there. You got two high profile IPOs this week. And as we're talking about private companies going public, we've also had a flurry just in the past two days of public companies potentially looking to go private. We talk a lot about what this means

for the equity market, but what does it mean for the private market? Well, I think there's a lot of opportunity here and it'd be hard to have less IPO activity. So I think more is a pretty safe bet than what we've been having. And I think what you see today is a lot of companies have been held now for four or five years by the private markets that are now looking for an exit. And I think part of this is just understanding where is the new normal. People have been kind of waiting to get into the water, wondering if it's OK. And I think you're starting to see signs that we're adjusting and that people are going to start getting in that water and we're going to start seeing more liquidity events. OK. How much does the Fed matter here? I mean, we've seen higher for longer,

a lot of focus, not even necessarily. Yes, there'll be focus on what Powell has to say at the presser tomorrow, but a lot of focus on the dot plots and whether we see a change to the outlook there. What how much does that matter, especially when we are talking about liquidity events? We are talking about, for example, private equity that's sitting on a lot of dry powder right now. But also we've seen this uncertain environment. Well, the Fed matters enormously. But I think the market is now adjusting to the reality that we're not going to take rates back to zero. And so inflation continues to be very, very resilient.

And I think the Fed is clearly signaling that if there's going to be rate movement, it's going to be very, very modest. And so I think at this point, fund managers understand that that is the reality that they're dealing with. And I think what the private markets need, and frankly, the public markets also benefit from, is just a notion of stability, that this is where we are, this is the environment you need to operate in, and then you go about your business and actually get going. Eric, I'm inclined to think Astera Labs might matter a lot more as a signal for the IPO market than Reddit, in part because it's not relying on any kind of name recognition. It actually grew 45 percent in 2023 and maybe represents the type of company that's waiting in the wings here. Am I wrong? I completely agree. I mean, if you look at the stock market today, we've talked about it, you know, ad nauseum, the S&P essentially driven by seven companies, all now completely household

names, all trading at incredibly high multiples. And I think investors recognize that their very passive approach to the public equity market has left them with very concentrated portfolios. It's one of the reasons why we're seeing a tremendous move of retail capital into the private markets, because they want to get exposure to a broader opportunity set. And a lot of these companies that are never going to go private or never going to go public. And so to access them, they need to get into the private markets. So then what does success look like, not for Estera, but for the IPO market overall in how Estera might perform once it starts trading? I mean, not lower, of course, but is rocketing higher necessarily a bad thing? I think you just need stability.

I think you're right, that we need to start seeing some non-retail driven, non-name brand, just good fundamental businesses get through that IPO window and be stable. And stable to me means they come out, they hold price, and then they slowly begin to move up. I think this notion that everything should rocket or move or be incredibly fast, I think that's been one of the detriments of the public markets today for the retail investor. And so they struggle with that sort of volatility and trying to kind of chase that next winner. So how much and I'm going to stick with that thread here because you did talk about the retail capital that is flowing into the private markets increasingly. We're seeing that build out of private wealth management among quite a number of firms right now that focus in and play in the private markets.

I wonder if you expect that that's going to continue and what that does to the dynamics in the public market when you do see something like an IPO in the future. I think it's going to be we are at the very, very beginning of what is going to be a very long game of a lot of capital moving from the private wealth sector out of publics into privates. If you look at kind of long-term performance of institutional investor and retail investor, the institutional investor has generally done significantly better. Why? Because they've actually had access to the private markets. The retail investor kind of up this point, has largely been kept out of it. Unless you were an ultra high net worth individual or a family office, the private markets have not been accessible to

kind of the average retail investor. That, as you know, is changing. Better products, better pricing, better accessibility, better access to platforms. And I think those long-term performance trends that those of us in the private markets have seen for decades of the private markets significantly out from the public markets. Are now becoming better understood by the retail investor and we're beginning to see that that flow of capital start. It's early but it's already very significant and I think where it's going to go is going to be incredibly significant. Well you know we'll be following it here on Overtime. Eric Hirsch, co-CEO of Hamilton Lane. Thank you. Thank you. Let's get a CNBC News update and go back to Leslie Picker. Leslie.

Hey, John. The White House responded this afternoon to the Supreme Court decision allowing a Texas law that lets local police arrest migrants, saying it, quote, fundamentally disagreed with the ruling, calling the law, quote, harmful and unconstitutional. However, the high court ruling allows litigation to continue in lower courts where it could be blocked again. Saudi Arabia is working to create a 40 billion dollar AI investment fund. according to The New York Times, whose sources say Saudi reps discussed a potential partnership with several financiers, including Andreessen Horowitz, one of Silicon Valley's top venture capital firms. It would make Saudi Arabia the world's largest investor in AI. And billionaire philanthropist Mackenzie Scott will donate $640 million to almost 400 small nonprofits that responded to an open call.

That's more than double what Scott originally planned to donate. Her charity, Yield Giving, received more than 6,000 applications, prompting the program to expand both the award amounts and the pool of recipients. Very nice. I was just thinking that. More money to go around, it sounds like. More opportunities. All right, Leslie Picker, thank you. Just how bullish are investors right now?

Up next, Mike Santoli takes a closer look and Bitcoin keeps getting crushed. It's been taking a breather now down more than 8 percent since hitting a new high just last week. And that is putting some pressure on crypto stocks like Coinbase and MicroStrategy, which both finished lower today. Stay with us. Welcome back to Overtime. Mike Santoli is back with a look at the current level of risk in the market. Mike. Yeah, Morgan, specifically, what are investor risk appetites telling us? Is the market getting a little frothy? I've been focused on some shorter term sort of tactical stuff that made the case. Maybe, you know, things like speculative call options, things like that, even some retail investor surveys. But the monthly Merrill Lynch or Bank

of America Global Fund Manager Survey has a composite for sentiment that includes those investors cash position their equity exposure and their growth expectations for the economy and you see it's kind of just risen up to neutral levels kind of surprised me a little bit it mostly owes to the fact that these fund managers are holding a little more cash than average and while equity allocations are up they're only up to like one or one and a half year highs. And so in the grand scheme of things, it does seem as if there's more room for long only investors. These are more

traditional institutional investors to allow themselves to to get deeper into the long side of this bull market, Morgan. All right. So when I look at this and I and I see the fact that it's ticked up a little bit right there. How does it speak to where we're coming from? Yeah, because it certainly feels frothy right now. But to your point, when you look at this, the context matters here. Absolutely. In fact, you notice that this is basically was a, you know, 25 year low in sentiment, which is what we had in the 2022 period when you had stocks and bonds going down together. It seemed like we weren't going to get inflation under control. So it is really just kind of, you know, a return

to somewhat more normal levels of risk tolerance at this point, at least by this measure. Again, other things suggest that there might be a little more short term risk of people getting a little over their skis, but not based on the real money here. All right. Mike Santoli, thank you. Now, up next, Evercore ISI Vice Chairman Krishna Guha, why he thinks the Fed will begin lowering rates in June, and why investors shouldn't rule out more than three cuts this year. And check out shares of international paper. By far the biggest winner in the S&P 500 today after announcing its longtime CEO

will be replaced in May by one of investment firm KKR's executive advisors. You can see those shares shot up 11%. That's a big move for IP. The March Fed meeting kicking off today with a policy announcement tomorrow. Joining us now with his expectations, Evercore ISI Vice Chairman Krishna Guha. Krishna, good to see you. So you expect that Chair Powell is going to flat out say that the inflation prints, I guess the services inflation we've been seeing, makes it tough to build confidence that disinflation is setting in.

Is the market going to take that OK? So what I think is that Powell will have to harden up his tone some after the second now bad inflation print in a row. It'll have to sound a little bit more hockey. It'll have to sound a little bit more hockey. It'll have to sound a little less Goldilocks-y. But, and this is the really key thing, that tougher tone will be applied to an unchanged strategy and an unchanged baseline. We still think the base case is three cuts this year. We still think the Fed intends and expects to go in June after having checked the data from March, April and May. So tougher tone, same base case. My hunch is that the market will be OK with that. As healthy as the economy looks, as as sturdy as

services inflation looks and as active as the rest of the year is going to be politically, what would it take for the Fed to actually be able to cut three times this year from here? So I actually think that June and three cuts is pretty sticky. So why? Fundamentally, I think Fed officials want to cut rates. They don't want to cut before it's responsible to cut rates, but they think they want to cut as soon as it's responsible to cut rates. Why? Because while there's a lot of uncertainty as to exactly where this neutral rate might be, I don't think anyone on the committee thinks that a rate of 5.5% is sustainable indefinitely in the US.

At some point, they fear something's going to go wrong with the economy. And so I think they will look to bring that rate back down to the mid fours at least as soon as they have reasonable justification for doing so. That's an economic judgment. But by the way, it also works well with the political calendar. June, every other meeting, so June, September, December, that would mean the Fed can be on an autopilot glide path through what's surely going to be a toxic election season. They would like that if possible. Yeah. And it's interesting to hear you talk about that, especially given the pre-Fed article we got from The Wall Street Journal from Nick Timoros today,

where he basically said, hey, Fed's less worried, less focused on on a strong economy and sticky inflation, maybe more worried on holding here too long and recession setting in. It raises the question and Tim Dewey over at SGH raised this as well. It raises the question that perhaps the risk here is that you see more cuts added through the dot plot because it wouldn't take that many officials changing that with that view, then fewer cuts in the dot plot. Your thoughts? With great respect to Tim Dewey, who I think is a super smart guy, I think that's an overstatement of the case. I do think that we will see net dot drift upwards. I just don't. In other words, some Fed officials are taking out a cut either in 24 or 25. My own base case is that the 24 dots are pretty sticky. That three-cut baseline is pretty solid. I think there's a higher risk that you could see the median take out a cut in 2025. My base case, though, is no change to the

dots in 24 and 25. I think there is an awareness that if they stick around for too long, they might invite trouble. But I think, nonetheless, the biggest thing that's happened over the last few months is this setback on inflation. They won't overreact to it, but I can't see them throwing the steering wheel in the opposite direction. How much does the balance sheet matter here? Because we know that at some point the Fed is going to start to talk about slowing down QT. We also know that the market loves liquidity. So when does that begin to enter their picture? And how much does that factor into the investment case for the markets here? So I'm really glad you raised that because we know the Fed is going to have a deep dive

discussion about QT at the meeting this week. The Fed typically doesn't make decisions at the same meeting where it has a deep dive analysis. So my best guess is we get a 50,000 foot update from Powell at the press conference, a bit more information in the Fed minutes. And then we get a decision in May to slow down QT, reducing the pace of QT in treasuries from 60 to 30 a month, leaving the MBS piece unchanged, taking effect from mid-year. Of course, we'll have to watch what Powell says to check that that timeline isn't too ambitious. But you're right, for sure, they are looking to slow down. They hope if they slow down, they can carry on a bit longer. So what they have in mind here is slower for longer QT.

All right. Krishna Guha, great to get your thoughts ahead of the thoughts we get from Powell tomorrow. We have a news alert on J.P. Morgan. Leslie Picker, she's doing triple duty for us today. She has the details. I'm back, and this time with an announcement from J.P. Morgan, which declared that it increased its common stock dividend to a dollar fifteen per share. That is up from a dollar oh five per share. So about a nine and a half percent gain for that dividend at J.P. Morgan Chase that announced a short while ago. Stock not really moving on this announcement today, guys. Okay, we'll keep an eye on it, though. Leslie Picker, thank you. Nordstrom shares surging today, giving investors a major sense of deja vu. We're going to explain why next. And because you love the show and you want even more overtime, well, we got a QR code for you. We like those. It's going to show up on your screen any moment now. There it is. Yes. So, you know, turn

your phone, point the camera at that, and that'll take you to the LinkedIn page where we post exclusive content, get even more over time. But for now, we'll be right back. Welcome back. Let's get a check on some luxury movers from today's session. Nordstrom closing up 9% on reports the retailer is trying to go private. As you may recall, Nordstrom family members attempted to take the company private back in 2018, but those plans fizzled out after the initial offer of $50 a share was deemed too low. The stock closing today, just to give you some perspective, at just under $19. And shares of Caring, the parent company of Gucci and Balenciaga, falling in the U.S. market after the French company warned that revenue for the first quarter could drop 10% because of weak sales at Gucci,

especially in the Asia-Pacific region. Gucci could see its revenue fall 20% in the first quarter. Those shares finished down at 9 percent as well, John. All right. And up next, why control of the Senate in November could come down to a battle in one key state between a pro crypto candidate and an anti crypto candidate. And check out shares of Supermicro under pressure again after announcing plans to sell two million shares of stock. Shares of the AI darling are now down more than 20 percent over the last week, but also up 13 percent for the month. That's kind of right. We'll be right back.

Control of the Senate and the future of crypto regulation could all come down to a closely watched race in Ohio. Emily Wilkins is in the Buckeye State. She's got the details for us. Hi, Emily. Hey, Morgan. Well, yeah, crypto companies are poised to bet candidates in several major elections, like the Ohio Senate race. Now, voters today are casting the ballot for the primary to see which candidate is going to be taking on Democratic Senator Chair Brown. Brown's the chair of the banking committee, and he's gotten an F rating from Coinbase's advocacy group Stand With Crypto.

Meanwhile, one of the Republican primary challengers, former tech executive Bernie Moreno, has gotten an A rating fromers, former tech executive Bernie Moreno, has gotten an A rating from the group. Now, if Moreno wins, he says that he will make crypto a key issue. So that's going to be an issue because the broader issue is one of freedom. Does Sherrod Brown get to decide whether somebody in Ohio gets to own cryptocurrency or does that person get to use their money to buy cryptocurrency. That's the issue. That's why I'm going to win that freedom

argument. Coinbase, Ripple, Gemini and other crypto groups have given to Fairshake Pack as well as two related crypto packs, which have raised $85 million by the end of January. Fairshake spokesman Josh Valsto says the groups have the resources to affect the races and the makeup of institutions at every level. And they'll leverage those assets in order to build a sustainable, bipartisan crypto and blockchain coalition. Now, Ohio's not the only state where crypto could play a role. Stand with Crypto has also given F ratings to the Democrats in Montana and Michigan, two other very key states in the battle for Senate control and the future of crypto regulation.

John? I wonder, Emily, is this going to work because it's money and elections run on money, or could it backfire if it seems like the crypto industry is trying to, you know, buy candidates favorable to them? I think to a certain extent, you do see a lot of different groups come out during elections, try and give donations to the candidates that they think are going to wind up supporting them should they be able to win and get into Congress next year. And one thing that Moreno sort of called out to me is that he said, look, you know, banks play in some of these elections.

You've seen other sort of called out to me is they said, look, you know, banks play in some of these elections. You've seen other sort of industry standards. And he said what he wants to do is really make that connection between cryptocurrency and freedom and really be able to kind of pitch that as a way to voters. He also noted that there are one point two million people who own crypto here in Ohio and, of course, more throughout the U.S. And they're really hoping that this message will resound with some of those voters. One more reason to keep an eye on Ohio in a key election year. Just to shift gears a little bit here, Emily, because I know you've been following this as closely, if not closer, than I have. And that is the fact that we finally got a budget deal for the remainder of the budget that hadn't had a deal appropriated yet. Today, what does it mean here

for fiscal 2024 for the government and what's next for lawmakers? So the good news for the government is that, yes, there is now a agreement on getting the rest of that government funding done. Remember, they passed part of it two weeks ago. The next part is due on Friday or we're facing a partial government shutdown. However, just because there's an agreement, it doesn't mean we have the text, doesn't mean we have the details of the text, and it doesn't mean that there's going to be enough time for this legislation to pass both the House and the Senate before the end of the day on Friday. At this point, folks who I've talked to have said, look, there could be a short shutdown. It could go into the weekend. I think for a lot

of lawmakers, they're thinking as long as they can get something passed before Monday, they can avoid any sort of major impacts from this. But yeah, the clock is absolutely taking on this. And the agreement is a good step forward, but it is certainly not crossing the finish line. All right. We'll keep an eye on that. We're keeping you busy in the meantime. Emily, thanks for joining us. It's really all about the Fed tomorrow. I mean, that's the big thing. Nonetheless, we've got Micron, we've got Chewy, we've got Five Below and a couple other names reporting after the bell in overtime. Yeah, it's not all. I mean, don't forget Intel. The chips are still in play this week. And Estera Labs. Yes, Estera Labs, too, which Intel has an investment in. So the question

of how much this innovation actually turns into productivity, that matters to the broader economy and matters to investors in the market. We were just talking about Supermicro. Yeah. Meantime, we did have all the major averages finished the day higher. The S&P closing at a new record high, 51 at 78. We'll continue to monitor that as well. That does it for us here at Overtime. Fast money starts now.