Closing Bell - Closing Bell Overtime: Nasdaq, S&P 500 Kick Off March With Record Closes; No Fed Cuts In 2024? 3/1/24

Episode Date: March 1, 2024

The Nasdaq and S&P 500 set new intraday highs and closed at record levels to kick off March trading. Apollo’s Torsten Slok gives his case for why the Fed won’t cut rates this year. Zscaler CEO Jay Chaudhry joins to discuss the latest quarter – and the stock drop that came with it. Boeing is in talks to acquire Spirit Aerosystems; Gabelli portfolio manager Tony Bancroft breaks down what to do with both stocks. Wedbush’s David Chiaverini on turmoil at NYCB and what it means for other regional banks. Plus, Elon Musk sues OpenAI, Elastic tumbles on earnings and what’s going on with Intuitive Machines and its spacecraft that tipped over on the Moon.

The record rally rolls on as we start March. 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 Fort. Yeah, the S&P 500 and NASDAQ closing at new highs for the second straight day as tech and energy lead the market higher. And NVIDIA, a big part of that tech rally with the chipmaker closing above $2 trillion in market cap for the very first time. It's amazing. It only took eight months. One stock missing out of today's rally, though, Zscaler, which is under pressure despite an earnings beat. Coming up, the company's CEO joins us for an exclusive interview.

But let's get to today's market action with our first guest, as we do see record closes for both the S&P and the Nasdaq composite. Joining us now is Apollo Global Management Chief Economist Torsten Slock. Torsten, it's great to have you back on the show. What's amazing is how much Fed speak we got today. And in the midst of it all, you put out a note this week that's been getting a lot of circulation, where you're basically saying, guess what? It's going to be higher for longer.

Looking at the inflation data, don't expect the Fed to cut rates at all this year. Why is that the thesis? It's exactly because what you and John just spoke about, namely, we're at all-time highs in the stock market. Credit spreads on IG are very tight. Credit spreads on high yield are very tight. Loan spreads are very tight. IG issuance in January was the best January on record. You also saw high yield issuance was strong. You've seen loan issuance in January was the best January on record. You also saw high yield issuance was strong. You've seen loan issuance being strong. And you're also beginning to see IPO activity begin to pick up and M&A activity begin to pick up. So it is not surprising that this easing in

financial conditions created a very strong employment report in January of more than 300,000 jobs traded. And now also, likewise, we're seeing also a beginning of an uptick in inflation in January. So all that we are pointing out is that this tailwind from easing financial conditions that all began with a Fed meeting on December the 13th when they pivoted from hawkish to dovish, all this is going to lift growth, lift economic activity. And the wealth effect from stocks going up is also going to lift consumer spending. So that's why we expect now that the Fed will probably stay on hold until the end of this year, because the tailwind to growth over the next several quarters continues to be so strong. OK, what about the counterargument that January in particular, the data, there's a

lot of noise. You had a lot of bad weather. It distorted things. Today, as I mentioned, we had a lot of Fed speak. We had Goolsbee. We had Bostick. We had Waller. It distorted things. Today, as I mentioned, we had a lot of Fed speak. We had Goolsbee. We had Bostick. We had Waller. We had Logan. We had Daly. We had Kugler. And we also had Barkin, who, when our own Steve Leisman asked him on CNBC today if he still believes there will be rate cuts this year, had this to say. I'm still hopeful inflation is going to come down and inflation normalizes. Then it makes the case for why you'd want to start normalizing rates. So what is normalizing rates actually? I guess what what is it going to take for you to feel like inflation is coming down meaningfully enough that you see that normalizing rate process actually start to happen?

Because we also know officials have said we don't need to hit 2% for that to start. Well, you're right, Morgan, but the 10 charts that I sent you and the reasons why we are now saying that they will not cut this year, there were a number of indicators, including indicators from the small business community that are pointing to small businesses beginning to raise prices over the next three months, beginning to raise wages over the next three months. You're seeing ISM prices paid on the manufacturing side beginning to go up, ISM services prices paid also going up. These are all very important leading indicators. And combined with the underlying trend in inflation also picking up. And as you highlighted, there's been a lot of discussion about, oh, this is just because of some statistical issues in the data. But you're beginning to wonder,

is it just statistical noise that inflation is picking up? Well, what about is it also just statistical noise that nonfarm payrolls is more than 300,000 in January? It cannot just all be statistical noise. It's beginning to paint the picture that there is just a lot stronger tailwind to growth coming along from, in particular, the easing of financial conditions that we have seen since the Fed began to pivot on the December 3rd FOMC meeting. So, Torsten, let's go back to this issue of super core, which sounds like, I don't know, a workout. But the inflation reading, X-ing out food, gasoline, energy, housing, that actually ticked higher. I guess, you know, you cite that as part of your concern here. But at the same time, we are seeing pressure on the consumer, maybe not the high-end consumer,

but the mainstream and lower-end consumer. Numerous retailers, even those that are strong overall, expressing caution in their guide on demand at the lower end. Might that not be reason for a cut before December? But that's absolutely right, John. There is a split in who is it that's being impacted by the Fed having high rates. And those who are impacted by the Fed having high rates, those are the households with the highest debt levels, the households with generally lower incomes and generally lower FICO scores. They are the ones seeing delinquency rates going up on credit cards, delinquency rates going up on auto loans.

Same thing in credit. It is firms with a lot of debt, with low coverage ratios, with weak cash flows. They are the ones who are being impacted by the cost of capital having increased so much. But the reality is when you look at it at the macro level, those entities and those balance sheets, they are simply not big enough to drag down the macro data. That's why non-farm payrolls still continue to be so strong. Jobless claims, like again yesterday or Thursday, was just really strong also. So you're beginning to see the picture that, yes, it is impacting certain entities among consumers and households that have a lot of debt because they are therefore more vulnerable to interest rates having gone up. But at the macro level, you're simply not seeing the economy slow

down. Consensus since the Fed meeting in December has been doubling their forecast for what they think GDP growth will be in 2024. So 1% to 2%. And the Atlanta Fed GDP now estimate is also still above 2%. So you have still a lot of tailwinds that are just not fitting with the story that there is a slowdown coming along. And note also the final point is we went into this year expecting six cuts, many markets. Last year, expecting a recession. That turned out to all be wrong. So why is it that the economy shouldn't slow down if it didn't have that slowdown for the last 14 months? Even if you're right, and if all of that doesn't happen, what about the read through for stocks? Because as we're talking about this, it's the bigger stocks

that got us to these record levels. NVIDIA, poster child for AI, hits two trillion today. Even if all of the rest of that is happening, if the big stocks got us here, might the big stocks not continue to carry us higher, even without the rate cuts? I totally agree. And that's exactly why I remember also that the tech stocks and the Magnificent Seven, including Tesla and Nvidia, those are among the most traded stocks for households, for retail traders. So they are the ones who are seeing significant wealth gains at the moment. So the tailwind to consumers, in particular those active in those stocks that have done especially well, will continue to be really strong if we still see this bull rally continue. So in some sense, the easing in financial conditions

is exactly trying to really make it a lot harder for the Fed, because it's actually undoing some of the Fed hikes that the Fed has been putting in place in an attempt to try to get inflation under control. That's why all these charts that are sent also to you and Morgan early this morning are exactly suggesting that this reacceleration we're seeing in the last two or three months is exactly what we should be looking at and wondering, well, OK, but maybe that reacceleration does mean that the Fed will have to stay higher for longer. It raises so many questions, especially as everybody's focused on New York Community Bank Corp, something we'll be talking about later this hour and what this means for the banking sector more broadly.

If you've got higher for longer, you've got Powell on the hill next week. And then, of course, the questions around quantitative tightening may be starting to slow. Torsten Slock, thanks for kicking off the hour with us. Come back so we can dive into all of that a little bit more at a future date. Have a good weekend. The S&P 500, by the way, John, not only closing at a record, but closing above 5,100, 5,137 for the first time today. Yeah, NVIDIA helps too. I mean, you can't go too long without saying NVIDIA, it seems these days. Well, it wasn't just a record day for the major averages. We just talked about it. NVIDIA closing above $2 trillion in market cap for the first time. Christina Parts-Navalis has more on the details around this move for this name.

Yeah, so this is now the $2 trillion club. 12 zeros means NVIDIA's market cap is more on the details around this move for this name. Yeah, so this is now the $2 trillion club. 12 zeros means NVIDIA's market cap is more than the individual DGPs of Russia, Mexico, Australia. That's all based on 2023 IMF data. Shares closed 4% higher. There were a few drivers. There was a big price target increase from Daiwa Capital Markets. They went from $535 to $900, pointing to NVIDIA's entire ecosystem, strength including software, and the recent increase in inferencing demand. So no longer just trading, inferencing.

Other drivers, though, came from earnings last night. Dell seeing five quarters of backlogs for its AI servers, which means more orders for GPUs from NVIDIA and AMD as well. HP was a little bit of a different story with a top line miss, and they warned of NVIDIA and AMD as well. HP was a little bit of a different story with a top-line miss, and they warned of NVIDIA GPU supply constraints. In other words, they're struggling to get their hands on NVIDIA chips because they're in such hot demand. Another positive for NVIDIA shares. $2 trillion club. Haves and have-nots when it comes to NVIDIA.

Christina, thanks. Thanks. And meanwhile, elsewhere in AI world, Elon Musk is going back to court, this time on the offensive. He's suing OpenAI and Sam Altman, alleging that they abandoned the company's founding mission. It potentially pits Musk against the interests of Microsoft, where CEO Satya Nadella told me non-profit OpenAI is part of Microsoft's for-profit AI strategy. OpenAI was actually started, and it was meant to be open source. is part of Microsoft's for-profit AI strategy. OpenAI was actually started, and it was meant to be open source.

I named it OpenAI after open source. It is, in fact, closed source. It should be renamed super closed source for maximum profit AI. Because this is what it actually is. It's gone from an open source foundation of 5123 to suddenly it's like a $90 billion full profit corporation with closed source. So I don't know how you go from here to there, but that seems like a, I don't know how you get, I don't know, how you get, I don't know, is this legal? It seems like there is a segment of people who were concerned about the development of AI being driven by profit. And that's the reason why OpenAI and its board were structured the way they were to begin with.

If the governance changes and Microsoft continues to have this relationship, what assurance can you give people who are concerned about this that the development of AI won't purely be driven by profit? Yeah, I mean, look, I think about this. This is an interesting question, John. I've always sort of subscribed to, you know, that, you know, the idea that the social contract of a corporation is to drive profitable solutions to the challenges of people and planet. And so to what I think about the license to operate for Microsoft, yes, of course we have to generate profit,

but at the end of the day, we have to create solutions that are useful and are real solutions to challenges of people and planet. So this is not about profit for profit's sake, but it's about driving profit by doing work that the society needs. That's how I think we have a license to operate in every community and country that we operate in. And so that's what

we will continue to pursue. And then, of course, the OpenAI, it's a different structure. It's a nonprofit, and we respect that. Morgan, one interesting detail here. Maybe Elon Musk is just being petty here. Who knows? The chairman, new chairman of OpenAI, who came in after Satya and I had that conversation, Brett Taylor, was the Twitter chairman who bested Elon in court over making him buy Twitter. So maybe he wants to, you know, round two, wants to win. But then at the same time, one part of Musk's argument, legal argument here that's pretty compelling, is the tax issue of investors contributing to a non-profit, getting a write-off on the front end, and then getting profits from OpenAI's for-profit arm

on the other. Up to this point, it doesn't seem like that's how legally it's supposed to work. Yeah, which is why it would not necessarily be surprising to see this actually make its way to court. I do think it's a little bit ironic. So many of the times you see Elon Musk end up in court or some sort of courtroom battle, it's usually because somebody, maybe a regulator, is suing him or calling attention to something that's going on in one of his businesses. Tables are turned here in terms of that. It's also why, again, there's so much focus on OpenAI's board and what that composition looks like, especially as they potentially continue to expand that out.

But I think there's, I mean, we keep talking about these two buckets. It's like the buckets of folks that are really focused on the progress and AGI and technology for technology's sake. And then you have the folks that are very focused on this idea of guardrails and ethical AI and how all of this gets implemented. But then there's also all this gray matter. Microsoft is kind of a key example of that to me because they have had the outreach with the White House and with the government and with regulators in terms of being like, hey, we're going to sign on and, you know, we're going to work with you as we implement all of this. Yeah. Yeah. I don't know. I'm not a lawyer, but it seems to me like a big part of the issue here is tax write offs. Like, are the are the investors who contributed to a nonprofit going to have to pay a little extra if this ends up being a for-profit entity? I don't know that this entirely

derails. You're taking a sexy topic and you're turning it into taxes, John. Well, some people think taxes are very sexy. I mean, I'm just saying. Well, let's bring in senior markets commentator now, Mike Santoli, speaking of sexy, for his first dashboard. You're not going to tag me with somebody who has a thing for taxes. But anyway, let me get to what has been working in the market. And arguably, the most sexy stocks in the market have been doing the best. This is the Momentum ETF, MTUM. It basically takes the sort of fastest moving components of the S&P 500, the ones that are exhibiting the greatest momentum, and it owns that basket. Now, you've seen this almost vertical move we've had since

October. And I think it's important to have these multi-year charts now because we're getting back to these levels that ended up being pretty consequential back in late 2021. And momentum is a real phenomenon in markets, which is to say it's something that persists for a while. It's something you can capture. It doesn't necessarily adhere to the fundamentals or the news flow. And, you know, one of the laws of markets is FOMO drives MOMO. So you could say things are running a little bit hot right here. But, you know, it's it's been higher. And even on a relative basis, it has done better in the past. So we wait for that moment when it gets to be too much.

So a lot of focus on small cap stocks and whether they're going to confirm the records in large caps. Now, the Russell 2000 is still well below its record high. It's pushing a two year high. But I think it's important to recognize within small caps what's driving the upside, and that is growth. So you see, for most of the last couple of years, you know, they were roughly in the same spot back in the fall. And growth stocks, especially in the last couple of months, have been the whole story. The biggest holding, I keep pointing out in the Russell 2000, is super micro by far. It's like almost a percent and a half of the index. So when people look to the Russell for some kind of a signal about the real U.S. economy or something like that and talk about how it's heavily in financials, it's really the

growthier, lower quality, frankly, names in there that are working. Because small cap growth over long periods of time is a generally disappointing asset class relative to value or large cap growth. You mentioned that, Mike. Super Micro is now a $50 billion stock. It's like got a beard in junior high. Maybe it gets kicked out. It's not small enough, but it's also being led forward by NVIDIA. So where does a stock that big, two trillion, fit into the momentum story? It's incredible. Well, that's the lead source of the momentum, really, because it is in this, not only in this ETF, but in the high beta ETF and all of those baskets, the factors in the market that are, let me just grab onto

what's working. And frankly, also you have earnings momentum behind it. So there's all these strategies based on are earnings revisions going up fast? Yep, that's the case for NVIDIA as well. And what we see with Supermicro and then even arguably with things like ARM and then you keep going down the scale is NVIDIA had up until today,

it had done nothing since the morning after its earnings and everything else in the whole ecosystem started to ramp because people want the next play that's unexploited so far. And you can make the case that $50 billion is a drop in the bucket when you're looking at it against $2 trillion. It's a strong case. Mike Santoli, thanks. I mean, look, no further than 30% move in Dell today post-earnings, right? Or NetApp, double-digit gains there today, too. Yeah. And we've seen

big moves as well in Pure, in C3, which we had here on overtime. And speaking of big moves, Zscaler, overall, over the year, it's been strong, but a big loser on Wall Street today, despite beating earnings expectations. Up next, CEO Jay Chaudhry is going to break down the quarter and address concerns about billings growth. And later, a top aerospace analyst weighs in on a report that Boeing is in talks to reacquire its troubled fuselage supplier Spirit Aerosystems. We've got all the details when Overtime's back in two. Welcome back to Overtime. We've got some breaking news to share with you. Earlier today, there have been reports that Boeing was in talks to reacquire one of its key suppliers, Spirit Aerosystems.

And we have just gotten a release from Boeing basically confirming that they are, in fact, in talks right now. Boeing saying, we believe the reintegration of Boeing and Spirit Aerosystems manufacturing operations would further strengthen aviation safety, improve quality, and serve the interests of our customers, employees, and shareholders. Noting that there could be no assurance that they will be able to reach an agreement, they are, quote, committed to finding ways to continue to improve the safety and quality of the airplanes on which millions of people depend each and every day. So again, we've got a statement from Boeing confirming that it is in early talks with its supplier Spirit Aerosystems about the possibility of a combination. Spirit Aerosystems ended the trading day up about 14 percent. As you can see right there on your screen, it's up another one and a half percent right now in overtime amid this

press statement. Yeah, be interesting to see if they come back together. Meantime, Zscaler continue to slide today despite beating Wall Street's expectations for second quarter results and the guide. For more on those earnings, let's bring in Zscaler CEO and founder Jay Chowdhury. Jay, good to see you again here on Overtime. I want to go straight to the momentum that you have in deals here. You mentioned on the call a tech company purchasing 20,000 seats of your suite, phasing out firewall-based security. And you talked about now a double-digit number of customers spending more than $10 million with you annually. What's driving that high-end, high-dollar growth? Our customers are very worried about cyber protection.

So in addition to that, they also want to reduce costs. eScaler is one of the very few companies that can do the best cyber protection with zero-trust architecture to phase out expensive, old school firewalls and VPN and cost savings and user experience. You get everything. So it's a very compelling proposition. That's why customers are going from $100,000 to a million dollars per year, a million to five or five to $10 million. We deliver real value and real cybersecurity. Okay, now I want to go to the guide here. Palo Alto Networks, when it reported 10 days ago,

security stocks fell because it lowered its full-year billings forecast. You just raised your fiscal 24 billings, but I'm wondering, are you seeing any of what Palo Alto is seeing that caused them to lower theirs? We are not seeing any cybersecurity spending fatigue that got mentioned. What we are seeing is fatigue for ELA bundles, where companies take a bunch of products, put them together, and sell it as a bundle. A CIO talked to me. He said, I'm tired of shelfware. I get sold so many things. They are not good, and they sit on the shelf. Our customers basically want to be able to use the product. The market is still tight. But if you can show cost reduction, user productivity,

and better security, deals happen. And that's what we're doing. That's what's driving growth. So our revenue went up 35% year over year. Our free cash flow, 19%. Our gross margin, over 80%. We are hitting in all cylinders, and we are very comfortable about the long-term future of the company. So a couple of different analysts, Jay, have pointed to government business. And as this being a big growth opportunity for cybersecurity writ large and for your company specifically, what are you seeing and what does that trajectory continue to look like as you do have the director of the FBI and other intelligence agencies pointing to the ever increasing cybersecurity risks from China and the like? Yes, it's no doubt that cybersecurity threats are growing.

I'm happy that Biden administration has been pushing for zero trust architecture strongly and a number of federal agencies are making good progress. That's why 12 of the 15 cabinet-level agencies use Zscaler. I mentioned one of the agencies in my earnings report, in my prepared remarks, that they doubled our ARR. We doubled our ARR with them, and it's about $5 million ARR, and they're only 15% penetrated in number of users. So good opportunity, and it's not even just business. To me personally, it is making sure our nation is secure, and we're making good progress in civilian and defense agencies both.

So whether it's on the government side, whether it's on the commercial side, in this new era of generative AI, what does that mean for data protection and how is cybersecurity demands, the types of products and services that you offer, how is that going to continue to evolve? So AI is vaporizing the cybersecurity landscape. It's making it easier and easier to launch those attacks.

You have been reading about some of those deep fake video calls, deep fake audio calls. But I think we can fight AI with AI. That's what we are focused on. Every company talks about building AI solutions. So to answer your question, AI is requiring more and more cyber security better solutions, but AI solutions aren't created equal. AI solutions depend upon the quality of data that's powering it, and the quality of data is important. Zscaler has 375 billion transactions per day that comes from communication our customers do, accessing information. And data is large, it's relevant. As a result, the platform we have is

smarter and it can provide better cyber protection. We already launched a couple of products that are leveraging AIML. We are doing RISC-360 to give you an overall view of the risk. SCC is requiring reporting to be done, disclosures to be done. GenAI can allow us to create those reports automatically. So it is actually very helpful as well. So we believe that it's going to increase demand for our products, and we're very focused on delivering tangible results. All right. A lot of growth, certainly in the for our products, and we're very focused on delivering tangible results. All right. A lot of growth, certainly in the rearview mirror, and you seem to be predicting it ahead. Jay Chaudhry, thanks for joining us on Overtime.

Always. Enjoyed it. Thank you. Well, another name that tanked today after posting beats and a strong guide, Elastic, whose software drives enterprise search and analytics. CEO Ash Kulkarni told me this morning that in the quarter, he won more business from one of the largest U.S. banks, taking share from a more traditional software provider. They were not seeing the scalability as their data needs continue to grow. Attacks, as you know, are becoming more and more sophisticated. So you really need to be able to use AI and ML to help your developers, your analysts get ahead of the problem. And they saw in us the ability to do all

of that and do it at a price point that was very compelling. And although they were using us for a completely different use case in the past, they now moved to adopt us as their SIM. They displace that incumbent. And that is really, really exciting for us because it's establishing us as a really strong part of their infrastructure. Elastic sales up 19%. That exceeded expectations. The question is what kind of valuation Elastic deserves. Ash told me that as AI-driven consumption

from these newer customers spins up, that's going to change the math. Elastic has not yet given guidance for the fiscal year that starts May 1st, but that, Morgan, is coming soon. All right, we know we'll be watching for it. Up next, Boeing just confirming merger talks with Spirit Aerosystems. Spirit Aerosystems also doing that. We've got a portfolio manager who owns both stocks joining us next to break that down. And in the meantime, check out shares of NetApp, the best performer in the S&P 500 today. You can see right there it finished up 18 percent. That's on Wall Street's earnings that beat estimates, raising its full year guidance. AI, we keep talking about it and it keeps powering the market higher.

Stay with us. Well, breaking just moments ago, Boeing and Spirit Aerosystems both just confirming an earlier report that they are, in fact, in merger talks. Joining us here on set, Tony Bancroft, Gabelli's aerospace and defense ETF portfolio manager. Tony, it's great to have you back. Are you surprised by this? Great to be back. Thanks, Morgan. I think strategically it makes a lot of sense. We've talked about it in our shop quite a bit. And I think in the near term, there's no silver bullet. In the near term, there's probably going to be some bumps integrating the two companies. You know, Spirits is a large manufacturer. But I think in the long term, you're going to see some opportunities for, you know,

some consolidation with synergies and some opportunities with manufacturing and, you know, operational efficiency. I think it just makes sense in the long term. You know, who knows what happened in 2004, the invisible hand of Adam Smith did his due. But I think it's probably the right thing long term. Yeah. And, of course, your ETF, GCAD, it's Boeing's number two holding. Spirit Air Systems is number three holding. Both of these I would call turnaround stories right now.

Pat Shanahan is running things. He's the new CEO over at Spirit Air Systems. Before he was at DOD as the acting defense secretary, he was, quote-unquote, Mr. Fix-It at Boeing. So I wonder what those types of synergies could look like if this merger actually were to be fulfilled, and also what it means for the broader Boeing portfolio. I mean, are they going to have to spin off defense or no? That can just live on its own. Yeah, I don't think that's the case. I think, you know, pre-pandemic, 80 percent of Spirit's sales were to Boeing. So there's a lot of vertical integration that is going on here. And I think they both realize that. And, you know, people are talking about the issues with Airbus.

You know, Airbus, I think, will easily be able to, you know, if they were to buy back the two plants that they produce, you know, parts and fuselages for them, I think that won't be an issue. And I don't think there really should be a lot of regulatory issues. This is not an antitrust. You know, they used to own Spirit. They pretty much make everything for Boeing. And it's just sort of a logical conclusion, I think. Tony, what's the lesson here from the investor perspective about Spin-offs and the effectiveness of those because there are a number of defense contractors having various kinds of problems I think a lot of investors are gonna say oh well clearly you should spin that off

Yeah, I you know I think I go back to the example of imagine if GM were to you know have an entirely Entity separate entity make all their chassis for every car that they make. And for all intents and purposes, that's sort of what's going on with Boeing in spirit. I mean, I think there's a lot of IP. There's a lot of integration. You know, you've heard about the travel work issue with what's going on with Boeing and, you know, having to rework. And, you know, it could have essentially the probably the genesis of the most recent incident was the fact that there was probably some miscommunication, you know, some rework that had to go on.

Obviously, as we know from the initial NTSB report. And I think if you could integrate those two companies in the long run, you're going to have a better culture. You're going to have a better operational efficiency. There's a lot of there's a lot of goodness coming out of this, I think, over over time. All right. Tony Bancroft, thanks for being here with us. Thanks for having me. Well, it's time for a CNBC News update now with Pippa Stevens. Pippa. Hey, John, over 100 rioters from the January 6th storming of the Capitol may have to be resentenced after an appeals judge overturned the sentencing enhancement used against those charged with felony obstruction. The decision could affect one of former President Trump's trials,

where he faces similar charges. The Pentagon will lift the ban on the V-22 Osprey next week. That's according to the Associated Press, quoting officials who said Defense Secretary Lloyd Austin approved the plan to slowly bring the aircraft back into operation. The Osprey had been grounded since a November crash killed eight service members. And a Cuban political dissident who never left the island despite being accused of being a spy for the U.S. will be given an award by the State Department. Martha Beatriz Roque Cabello will receive this year's International Women of Courage Award that recognizes the effort of women around the world advocating

for human rights and peace. John and Morgan, back to you. Pippa, thanks. Coming up, a top analyst is going to discuss whether the fallout from New York Community Bancorp is unfairly hitting the rest of the regionals. And forget TV sponsorships. What if you could sponsor a moon mission? We've got those details when Overtime returns. Forget TV sponsorships. Welcome back. Intuitive Machines made history. It was the first company to successfully land a private spacecraft on the moon.

The M1 mission, carried out as part of a NASA program, was not without drama, though. After a successful launch on February 15th and a stock surge, Odysseus made a nail-biting landing a week later. Then, the disclosure. It had tipped on its side, as you can see here in this photo. Shares plunged. And on Monday, there was the warning that the mission would be cut short. That did not happen, though. On Wednesday, the lander still was active. NASA hailed it a success.

And then, as you can see right there, last night, Odysseus went to sleep as the harsh lunar night set in. The stock, it's now higher over the past month, but it is down big after tripling about halfway through this mission. CEO and co-founder Steve Altomus says the next month will be dedicated to assessing data and adapting for the next mission, which is expected later this year. And he's fielding calls from prospective new customers, including Japan, Australia, and some European and Middle Eastern countries. Also, some prospective sponsorships. We've had this wonderful sponsorship and relationship with Columbia from Columbia Sportswear. And, you know, they put a material on the lander, an insulator. And, you know, it started as a sponsorship and turned into an engineering demonstration that actually proved out their technology for warm or cold weather gear.

And it actually turned out to be a great thermal insulator. So we're going to move that thermal insulator materials and coatings from Columbia onto the lander to replace some of the materials that we currently use. What's more, after the surprise reawakening of Japan's lunar lander this week, Intuitive Machines now also hopes to have Odysseus quote-unquote phone home when the sun rises in the next few weeks. That was not part of the original plan. But future spacecraft may not have to worry about that, as Intuitive Machines works with a startup, Xenopower, which is contracted with NASA to develop nuclear-powered batteries, essentially. For more on my extensive interview with Intuitive Machines' Ultimis, check out Manifest Space, as well as the Overtime LinkedIn page. And for more on Xenopower, you can also check out my interview with that company's CEO,

Tyler Bernstein, on Manifest Space as well. It was a busy week, John, for Lunar Things. Yeah, yeah. Seems like it was quite busy. You know, and then eventually Odysseus wakes up, right? Well, the bulls keep running wild on Wall Street. And up next, Mike Santoli is going to look at whether investors and strategists are all in on this record rally when overtime returns. Welcome back to Overtime.

Mike Santoli returns with a look at whether investors are really all in on this rally. Are they not? Well, Morgan, they're getting in. They're certainly more in than they've been in quite a long time. But I would say maybe not completely all in. So this is the consensus equity recommendation among sell side strategists out there. Bank of America has kept track of this for a long time, and you'll see it's up to about 55 percent or thereabouts. Now, that is above the 15 year average. You'll notice that after the great financial crisis, this seemed to just go into

a lower range. No longer is the street going to recommend 65, 70 percent equity allocation. But mid 50s is not as high as we were just a couple of years ago. So it suggests, you know, affirming sentiment, but not necessarily particularly frothy just yet. Now, similarly, private clients, that would be, you know, the wealthy individuals that are with Bank of America. They have a separate gauge showing their own equity allocations within their accounts. And this is something that also is higher than it had been. It's above average for the 15 years. It's around 61 percent. This is a weekly reported number, but it's still below where we were a couple of years ago. So in theory, there's room for these equity exposures and the general kind of forecast of what the equity market is going to deliver to rise a little bit more before you have to say, you know, that

we're really challenging excessive highs. OK, headroom is good. Headroom is good. Mike Santoli, thank you. Up next, why investors should pay special attention to companies with consumption based models as the AI revolution plays out. And do not 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. Welcome back. This week's earnings reports reflected the artificial intelligence effect

with companies like Pure Storage and C3AI getting a boost from data-driven consumption and others getting left out. Today, John takes time out with a founder whose company is providing storage technology to support it. Yeah, Morgan. Garima Kapoor is co-founder of MinIO. It's a company that specializes in software for storing massive amounts of unstructured

data. The Series B startup scored a billion dollar valuation when it announced that round two years ago. Garima, whose background is in finance, grew up in India and didn't start thinking like an entrepreneur until she moved to the Bay Area and got immersed in Silicon Valley culture. The priority growing up was never inculcated in me as compared to, you know, my brother who was growing up that, no, you need to go earn. So that was never inculcated in me as compared to, you know, my brother who was growing up that, no, you need to go earn. So that was never the topic for me. For me, always the discussions around the dinner table was always about you need to study, do well in school. And that was

the end of it. There was never what do you do after school. So that was always the case, even though I was a really good student. And I think what changed for me, quite honestly, was coming to Bay Area. I think that was kind of a switch that happened within me. And once you are in Bay Area, I think you're surrounded by so much of talent, so much of thinking and, you know, thinking big. Kapoor's co-founders include Harsh A Avartana and Kapoor's husband, Anand Babu Pariyasamy. And now, with the data rush that's being driven by corporate migration to the cloud, her priority this year is scaling the company globally. You know, Minayo, when we founded, we just started with one simple hypothesis

that we wanted to be AWS S3 for rest of the world. And that has been our focus since day one and that's what we exceed in. And if you see other competitors in this space, they're trying to be file system, they're trying to be legacy protocols as well as object storage.

So I think there is a difference when you build systems from scratch to address the modern workloads rather than retrofitting it to address the newer workloads. So I think that is where the real differentiation lies. So the timeout takeaway, Morgan, consumption pays. We've seen a number of companies shift their revenue models in recent quarters because of the cloud and AI transition. Their customers want to pay as they go go as they try this new technology. And that's giving investors an interesting direct insight into the adoption curve and how it's inflecting as we see revenues move in closer step than usual with usage. It takes me back to your candy bar

metaphor from last year. Exactly. On Snowflake, because they have a consumption model. Exactly. All right. Great stuff, John. Up next, we will discuss whether the sell-off in regional bank stocks following the turmoil at New York Community Bancorp is creating buying opportunities in the industry. A lot to break down there. Stay with us. Welcome back to Overtime. Shares of New York Community Bancorp fell nearly 26% today after announcing leadership changes and identifying material weakness in their internal controls. Year to date, the stock is down 65%.

Joining us now to discuss is David Ciaverini of Wedbush Securities, who covers mid-cap and regional banks, including NYCB. David, is this a canary in the coal mine for other regionals, or is this an anomaly? So the base case is that it is an anomaly because of the specific exposures New York Community Bank has, specifically the rent-regulated multifamily asset class, loan asset class for them is really outsized. They've got 22% of their portfolio in it. The next highest is 5%. So a big step down. Now, commercial real estate will be an issue for the industry, but I think the stress is really acute for New York community and it is outsized for them. But the rest of the industry should be able to manage through it over the next

several quarters. But it is the number one reason why we are cautious on the overall bank group. So then, OK, it sounds like you're saying it's not a canary, but then you said it's a reason why you're cautious on the overall bank group. Is any weakness that's credited to specifically New York Community Bank Corp a buying opportunity or not? Yeah, no, it's a fair question. So I think commercial real estate overall will see some stress this year, but it won't be as severe as the stress that New York community is facing. So with that said, some banks that we like in this environment, First Horizon, First Citizens are two banks that are trading at reasonable valuations. And then a company like Fifth Third has the highest loan loss reserves in our regional bank coverage. So we think they are

too well positioned, especially since they have low commercial real estate exposure. So we do think that there's going to be stress, but there are some companies that we think are worth taking a look at, given the stress that the, stress that the banking system is, you know, under over the past few days. OK, so how about New York Community Bank Corp specifically? I ask that because it closed down 26 percent today. Even now in after hours, it's up slightly, but it's three dollars and sixty two cents. And as one strategist, one trader pointed out today, it's trading below that critical

five dollars a share share threshold, which is where other banks like SVB, like Signature, were at risk of FDIC seizure. So what matters here for the future of this bank specifically? I mean, does it all hinge on deposits? And also, does it raise questions about what M&A is going to look like among the regionals moving forward. Yeah, I think you hit the nail on the head with your deposit comment. Really, it's the core of whether or not the bank survives or not. And it's really a matter of core deposits. So the low-cost core deposits, we don't know how those have been trending. So in the first week of February, they gave an update saying that overall deposits were up $1 billion. But the issue there is that they also acknowledge that they're using brokered

deposits to support their deposit levels. So those are much more expensive. They're just as expensive as borrowing. So that's why it's important to know what's going to happen with core deposits. Now, with that said, our base case is that they probably have seen a few billion at a minimum of outflows of these core deposits. And that's going to put pressure on their net interest margin, which is why we took our estimates down this morning. OK, David Chavarini, thanks for joining us. Our share is perking up a little bit after hours. But boy, John, I mean, this is one of those names that just has continued to be hit hard. As we look to next week, though, it's really going to be a week about policy.

You got Powell on the Hill. You got Super Tuesday for U.S. primaries. Beige book, State of the Union from President Biden. And oh, by the way, you've got some rate decisions across the world, including the ECB and China's parliament meeting, too. And in the meantime, at the sector level, we've covered so much on overtime this week. We've talked about retail and the pressure that the consumer is facing. But that's in the context of the PCE of inflation readings that show, boy, that's sticking around. And we've had people comment on industrials still being strong. That has nothing to do, for the moment, with AI.

Yeah, well, well, well, well, you are starting to see more and more implementation of certain types of technologies. That's it for the moment with AI. Yeah, well, well, well, well, you are starting to see more and more implementation of certain types of technologies. For the moment. Yeah, but in the meantime, this all kind of takes us back to Torsten Slok and his argument for no landing and maybe no Fed cuts this year.

We'll have to see. That's going to do it for us here at Overtime, though. Have a good weekend and fast money. Stick around. Begins right now.