Closing Bell - Closing Bell Overtime: Qualcomm CEO Makes His Case For Why It Can Win At PC Chips; Dutch Bros CEO On Secret Sauce Behind Explosive Growth 6/3/24

Episode Date: June 3, 2024

Stocks staged a late-day comeback to close well off session lows to kick off trading in June. Schwab Asset Management CEO Omar Aguilar and Hennion & Walsh’s Kevin Mahn break down client positioning ahead of the summer. Qualcomm CEO Cristiano Amon talks his company’s push into PC chips and why its product can win. Dutch Bros CEO Christine Barone on the consumer and the company’s explosive growth. Plus, T. Rowe Price’s Dominic Rizzo on top picks in the tech sector. 

Well, a mixed bag to start the week as investors weigh soft manufacturing data against enthusiasm about NVIDIA's new chips. The Dow closing well off lows after dropping more than 400 points earlier in the day, and the S&P closing a little better than flat feels like a victory. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford with Morgan Brennan. Yeah, some late-day buying. Well, coming up this hour, T. Rose Tech Playbook. We're going to talk to the portfolio manager of the firm's Global Technology Fund about the new headlines from NVIDIA sending that stock higher

and the other names he likes right now. Plus, we're going to hear from Qualcomm's CEO about the chipmaker's partnership with Microsoft and its move into PCs. And another read on the consumer. The CEO of coffee chain Dutch Bros will join us right here on set to give her read on the consumer following downbeat results from Starbucks and McDonald's, what they're seeing. But first, let's get to the market action. The Dow leading the declines today, but staging, as we said, a comeback late in the session. Most S&P sectors closing lower with energy getting hit the hardest after oil pulled back.

Joining us now are Omar Aguilar of Schwab Asset Management and Kevin Mann. Mann, right? Yeah, right. Of Hennion and Walsh Asset Management. Guys, good afternoon. Kevin, thanks for joining us here on set. I mean, you say that the long-awaited economic slowdown might be here in a weird way that kind of sounds like the food might have cooled off enough that you can really dig in and eat it. Is that where we are? We can eat without getting burned or is there the risk that it's getting too cold? There's absolutely the risk and we have to remember that the 525 basis points in rate hikes from the Federal Reserve were intended to slow

down consumer demand and slow the economy. We saw that happen in the first quarter with a revised GDP growth rate of 1.3%. Where does that go from here? So my concern right now is that the Fed keeps rates too high for too long and pushes that economic slowdown potentially into a recessionary period. But the Federal Reserve realizes that risk. That's why I believe there are at least two rate cuts still on the table in 2024. At least. OK, well, Omar, the labor market is cooling, working class spending, especially cooling, too. We're in a jobs report week. So

what's the most important unanswered question that you're going to maybe get some data on in that report this week? Well, I think, you know, the expectation continues to be that we see that cooling down on jobs. I think the bigger question mark will be what happens with wages, as we already seen that, you know, significant changes in wage growth could have an impact in consumption. And at the end, you know, it is really that part of the consumer and consumption that affects the part of the GDP. And we already know that 60 percent of the low end of the consumers are already being squeezed. So wage growth will have a significant impact on what may be the next reach for the U.S. economic growth. Kevin, I want to go back to this idea of two cuts at least this year. I mean,

obviously, we're getting jobs data later this week. You got an FOM decision next week. We know they're not going to cut. It's really about the dot plot next week. In the meantime, the fact that we are starting to see softer data, signs of slowing economy, I mean, we could talk about a soft landing for the economy, but what does that mean in terms of a possible soft landing for stocks? Because if you see that disinflation narrative begin to pick up in a more meaningful way right now, how do stocks continue to trade at these levels, realize this earnings growth, even if they're starting to see less pricing, a hike ability, and they're seeing softer sales? It's a phenomenal question. And let's go back to the beginning of the year, the beginning of the year where some suggest that we might have six,

seven interest rate cuts. Then I saw just last week, some suggesting we might get an interest rate hike or perhaps, as we saw in Barron's this past weekend, no rate cuts this year. You know who hasn't changed? The Federal Reserve. Their December dot plot chart, three rate cuts forecasted 25 basis points each. Their March dot plot chart, three rate cuts of 25 basis points each. We'll get an update next week on that dot plot chart. But what if they stick with those median three rate cuts? That could potentially provide a tailwind for stocks, get some more money off the sidelines and prevent this economic slowdown from moving into a recessionary period.

However, each meeting that goes by where they don't cut rates, I think there's the risk for more volatility, volatility that we haven't seen in the stock market thus far in 2024. Omar, I realize we had a choppy trading session here today. We started higher, we went lower, we ended higher, at least well off the lows with the major averages,

but it does cast into focus the same dynamic that we saw last week, which was this AI secular growth story was not enough last week to lift the broader markets. And you saw that tug of war here today, too, with all the news coming out of NVIDIA and AMD and the like. How much fuel is still in the tank around that trade? Well, you know, the big part of this continues to be that the earnings results that we have seen so far continues to suggest that there is a multiple expansion as well as an increased cycle on capital expenditures. And any companies that can continue to generate free cash flow and has attractive yields from free cash flow that also can demonstrate that their capex has a future earnings growth potential will

continue to dominate the market. And I think what we're seeing a little bit today is more of this total war of what the economic news be on manufacturing. And I think what was described before of this idea of like, are we going to go back to what we discussed about a potential recession? We discussed that for two years. Or is it really just that the inflation is finally resuming into the place where the Fed wanted to be? And we're going to see the path towards that 2 percent inflation that they have. So that macro component seems to be overlying these tradeoffs, whereas I think the micro component continues to point to stronger

balance sheets, higher quality companies with good capex. Kevin, finally, what if the Fed does stop suggesting three rate cuts this year? In a way, that shouldn't be a surprise because a lot of people are saying, well, you know, one or two. But if the Fed says it, does that mean that people are thinking, oh, well, maybe none or one? I think that adds another level of concern for investors right now. And I think it's fun to play the Fed guessing game each time that we're on the show together. But at the end of the day, there are investment opportunities to consider regardless of whether the Fed cuts interest rates or not. You mentioned NVIDIA before. NVIDIA, boy, did they knock the cover off the ball last week.

As it stands right now, those MAG7 stocks, which accounted for 62% of the total return of the market last year, only account for about 53% this year. But if you back out NVIDIA, it's only 21%. NVIDIA has now become the magnificent one. But there are so many other opportunities that surround NVIDIA. How about Vertiv, which we heard about before? They provide the energy, the infrastructure, and the cooling solution to data centers. NVIDIA just grew their data center business by over 400 percent. There are investment opportunities out there for investors to consider and not just go back and forth about this guessing game on when that first interest rate cut is coming, John. All right. All right. Of course, we did see some profit-taking in names like Vertiv and Eaton today,

but we know that they're also trading at record highs given the infrastructure build-out that we're seeing around AI. Okay, Kevin and Omar, thanks for joining us. My pleasure. Let's bring in senior markets commentator Mike Santoli. He's got a look at the latest signals on the inflation picture, which we kind of teed you up for, Mike. 100 percent, Morgan. Appreciate it. Yeah, flows right from what you guys were saying. Take a look first at the Goldman Sachs Commodities Index. Very heavily skewed toward energy. The composition of this index is actually based on how much the world consumes.

So pretty relevant to the overall goods inflation picture. Anyway, this is a three year chart, which I think is necessary to see where kind of normal or or worrisome levels are. Obviously, Ukraine invasion right there. And now you're really slouching toward levels that were unremarkable before 2022. So really not much of a net contributor to inflation. Obviously, we know it is services inflation, shelter inflation that matter more. Take a look here at the path of Fed rhetoric in terms of how hawkish Fed speak has been against the three month annualized PCE, core PCE inflation data.

Basically, a data dependent Fed is speaking based on what the data come through as. So this is from Renaissance Macro from Neil Dutta here. The blue line is basically natural language processing, calculating from Bloomberg exactly how hawkish or dovish Fed speak is. And so it's it's trailing right around. You see this little curl lower that we got right there. Also, though, ISM prices paid today was on the softer side. Most of what we've gotten since the last Fed meeting, I would argue, pushes in the direction of, OK, disinflation seems to be resuming, whether it happens quickly enough or the economy weakens more along the way. We don't know just yet. But it does help to explain why Treasury yields have come pretty far off the highs in the

last several days. I mean, it's another great chart, Mike. It raises the question in a week where you have the ECB expected to start cutting rates. You have a BOE decision. Cuts are not expected there, but expected maybe later this summer. The fact that you have a Fed that is holding steady and sitting on its hands, how does this now play out globally? You know, it seems as if the Fed doesn't necessarily prefer to be too far out of sync with what's going on in the rest of the world. Obviously, the dollar is the kind of, you know, pressure valve for any of those imbalances that might build up. I don't think the first cut along the way is necessarily

or second one is going to be the thing that really throws things into, you know, into some kind of stressful place. But you do have to be mindful of it. I really do think the Fed, for good reason, is leaning toward wanting to find that window where it can start the easing process, if only just to punctuate this long tightening phase that we've been in. All right, Mike, thanks. Meantime, GitLab results are out. Stocks higher. Julia Boorstin has the numbers. Julia. Stocks higher because GitLab beating expectations on the top and bottom line, also guiding to second quarter earnings ahead of expectations, ahead of that Wall Street expectations. Now, adjusted earnings of three0.03 per share were better than the $0.04 per share loss that analysts had anticipated. The company's revenues of $169 million, also slightly

ahead of estimates for $166 million. Q2 revenue guidance, pretty much in line with expectations. The company guiding to between $176 and $177 million in revenue. $177 million is the estimate. And the company is guiding to between $0.09 and $0.10 in adjusted earnings per share for the second quarter versus the $0.05 per share estimate expectation for Q2. Shares were in the green. Now they've tipped. They're going back and forth, John, between red and green. Now they're up about 1%. We got the flashing green and red happening right

next to you as that stock bounces around. That's how we roll in overtime. Yes. And meantime, a number of pharma and biotech stocks, thanks, Julia, seeing big swings today, including GSK. That's pulling back sharply after a Delaware court said it would allow scientific evidence to be presented in tens of thousands of lawsuits related to its discontinued heartburn drug, Zantac. Investors, meantime, also watching the cancer-focused ASCO conference in Chicago. Our Angelica Peebles is there and joins us with more. Angelica. Hey, John.

Yeah, this year we are hearing a lot about progress in lung cancer. AstraZeneca's stealing the show this year with new results from its drug for certain types of lung cancer. The audience yesterday cheered when they heard AstraZeneca's drug, Tegresso, slashed the risk of the disease progressing by 84%. Pfizer also presenting an eye-popping number. Their drug for a rare type of lung cancer cut the risk of disease progression or death by 81%. This is how we can make or not revenues when we make a difference in patients' lives. With such profound data on this drug, clearly we expect that the sales of this medicine will go very high.

We're also seeing more headway in breast cancer, a targeted chemotherapy drug from AstraZeneca and Daiichi Sankyo continuing to impress. That drug and HER2 working in even more patients than are currently eligible for that drug. Guys? I mean, there's been such headlines and you've brought such great interviews to CNBC today, Angelica. The question I keep coming back to is, I realize sadly that cancer is a big and booming market. What do these new innovations, what do these new breakthroughs mean in terms of the existing treatments that are already on the market? Is there a risk of cannibalization here or is this a situation where you see more collaboration?

There's definitely opportunity. And, you know, yesterday when I was at that AstraZeneca presentation, you have to take a step back for a second because people were so excited to see these results. I mean, patients had three years without progression of disease. And on one hand, it can be a little depressing to think, oh, my God, only three years. But at the same time, if you think about what that means for a patient, that's a really big deal. And there's so much opportunity still to improve the lives for patients here. And that's something that we're hearing so much about, whether it's from Johnson & Johnson or for Pfizer. And it's something that we're going to keep an eye on in the years to come.

A very big deal. Angelica, thank you. Today, NVIDIA closing up nearly 5% after CEO Jensen Huang talked about the company's next-gen chip platform at the Computex conference in Taiwan. After the break, we're going to hear from Qualcomm CEO Cristiano Amon about his company's partnership with Microsoft and the factor he says is going to propel Qualcomm's position in the PC space. And we will break down the big headline-driven moves today for GameStop and for MicroStrategy. Overtime. News out of Computex in Taiwan this weekend and today with semiconductor giants announcing new AI products and faster development cycles. AMD closing lower today despite unveiling fresh AI chips for desktop and laptop, both due in July. Data Center 2, NVIDIA revealing the Rubin platform to succeed Blackwell, which it just announced a quarter ago, pushing that stock to a record close. Taiwan Semi and Arm also hired today after announcements from two large customers, NVIDIA and AMD, while Intel closed lower. I sat down with Qualcomm's CEO, Cristiano Amon, ahead of his keynote this morning in Taiwan

to talk about his disruptive move into PCs. He told me Qualcomm's push into EVs, autonomous, and car entertainment systems laid the groundwork. This technology got validated before actually in automotive. When we start winning in autonomy, if you think about autonomy in ADAS, it's an AI problem where you have all those images from the cameras of the car, the sensors you're making decisions. Clearly the car companies realize you cannot put a server in the trunk of a car, especially an EV. You have something that sips battery, and that was the Qualcomm NPU, and we just took that to the PC with an incredible amount of

processing power and low battery life. We feel that's highly differentiated, and I think it's going to continue to propel our position in the PC space. We expect as we get to summer and back to school, those products are going to start to ramp in volumes. Starts in Q4 is primarily a fiscal 25 event for us, especially as we get the last calendar quarter of the year. And while AMD and NVIDIA are promising chips for gaming PCs that will also work with Microsoft's new CoPilot Plus software, Amon is arguing that Qualcomm can uniquely bring this combination of performance and battery life he says will dethrone Apple's MacBook performance. Microsoft needed a partner that can actually deliver the leadership position. I think they

needed a new partner into the Windows ecosystem and I think that's what Qualcomm brought to the table. Second, I think we have the ability to restore the leadership position on silicon to X-Elite with the Windows ecosystem. I think we demonstrated our new Orion CPU developed by Qualcomm is the fastest, I think, processing. And then on top of this, you have something which is new. It's not just about having the performance and the battery life, but this AI engine. And I think it's new, it's unique, it's part of this incredible transformation of the Windows ecosystem. Morgan, here is the bet, potentially, for investors. It's clear at this point to me, AI is like the web and like mobile in the sense that it's a disruption that seems to be opening the door for one set of giants to challenge the market share of another set of giants.

We saw that with Microsoft trying to challenge Google in search. Initially, that did not work, right? That was Nadella's announcement back in February of last year. Now we see it in the chip space where Qualcomm is trying to get into PCs, AMD is trying to get into data center AI, where NVIDIA is already established. Expect to see NVIDIA also try to get more into the edge. We'll see who, if anybody is able to break through, but investors, if they guess correctly, might be able to guess who gets a lot more profit down the road. I mean, it is really fascinating. We keep talking about AI PCs and, you know, you're getting more meat on the bone in conversations like this one with Qualcomm CEO.

I am curious, though, because Intel is the name we have right there on the screen. It's the one that that closed down two percent. So where does Intel fit into all of this? Intel is being challenged from multiple points of view because it won the initial PC and data center wars. Like X86, the CPU was the most important technology from a chip perspective. Now that's being challenged on ARM by Qualcomm from the PC side. It's already clearly been challenged by NVIDIA, by the GPU on the data center side as well. And Intel, the strength of Intel's response is still in doubt. So that continues to unfold.

All right. And of course, Arm, as you mentioned, the biggest beneficiary in some ways with the stock up five and a half percent today on all of these headlines. Jensen tried to buy it, didn't get it. All right. When we come back, T. Rose, technology portfolio manager whose fund is up nearly 20 percent this year, is going to break down the big divergence happening between semiconductors and software and the names he likes heading into the summer. And later, an exclusive interview with the CEO of Dutch Bros. We will get her read on the consumer and if she's seeing any red flags following

downbeat earnings from other players like Starbucks and McDonald's. Welcome back to Overtime. Tech outperforming today with the Nasdaq up half a percent, helped along by NVIDIA, which rose nearly 5% after announcing a new suite of AI chips over the weekend and closing at its own record high. Joining us now is T. Rowe Price, Global Technology Fund Portfolio Manager, Dom Rizzo. NVIDIA is the fund's largest holding. So naturally, Dom, we're going to start the conversation there, especially as we have seen this bifurcation between semiconductors and software in this new AI era and investor skepticism about where the money's flowing

right now, at least in the near term. First off, great to see you, Morgan. Yeah, I think Computex laid out a lot of really interesting innovations that's happening all across AI this weekend, whether it's AI in the data center and the one-year refresh cycles that we're going to see out of NVIDIA and AMD, or it's AI at the edge and the AI PCs that we're going to see. But look, if we look at this earnings season, as you know, we've been bullish digital semis

and bullish on NVIDIA throughout the entire year. And I think we've seen a few thesis-confirming data points. First off, and probably most importantly, hyperscale CapEx is probably going to be up close to 50% this year. A lot of that is flowing into NVIDIA. And if we look at the NVIDIA earnings numbers, you know, the streets start at the year estimating that in fiscal 26, NVIDIA would earn roughly $23 in earnings per share. Now that number is $33. So we've seen the earnings beats come through to prove it. And so the stock's trading at roughly 33 times earnings, which I think is a pretty reasonable multiple.

So we were just having this conversation earlier in the show, and that is this idea of NVIDIA being the magnificent one. Forget magnificent seven. NVIDIA is sort magnificent one. Forget Magnificent 7, NVIDIA is sort of in a class of its own right now. Do you see it the same way, or is it time to, especially as we do see the headlines coming out of Computex, for example, is it time to start to diversify away and make bets in other places as well? Well, there's two kind of different pieces to this. One is the entire digital semi-ecosystem, and that continues to benefit from NVIDIA doing so well. These are names like TSM, Samsung, Integris, and even AMD. I think the market's big enough for both of them. You know, we're talking

about a $400 billion AI chip market. NVIDIA will be the leader, but I think AMD has a real opportunity to be a credible second source. But when we look at software and we see some of the things that happened this earnings season, we saw really small revenue misses in guidance result in meaningful stock price reactions. So we saw Salesforce.com, less than a 1% move in their guidance resulted in a 20% move in the stock. And I think that tells you a few things. It tells you something about positioning. It tells you something about valuations. But it also tells you something about what people are worried about,

which is terminal value risk and what AI means for the software ecosystem. Well, I wanted to ask you more about that because you like ServiceNow. ServiceNow right now, after last week, its earnings were pretty strong. It didn't report last week, but ServiceNow is at six-month lows right now. It's in the middle of the 12-month range as people got freaked out about Salesforce and others. You also like SAP. That hasn't run as much, but it's also off the highs. So is that a rational reaction based on how high some of these software stocks have gotten?

Or is there something else going on? Because you look at the WCLD, it's down around 30 right now. And so many of the smaller software stocks that supposedly have multi-cloud or AI promise are not performing well at all. Yeah, I think the question that's happening in soft right now is really at that high-end application layer, right? What does AI mean for a Salesforce or an Adobe? The difference with ServiceNow, it really is a platform company, right? The platform of platforms, as Bill likes to say. And many of those AI apps are going to be built on top of the ServiceNow platform. And ServiceNow offers companies a really clear ROI

out the gate, unlike many other softwares that you can see. And so that's why we haven't seen the crowding out effect from GPU spend. It's ServiceNow like we've seen at other application software companies. But yeah, no, the IGV, the software index has struggled a bit, and we've seen it de-rate from nine times sales three years ago to seven times today. Yeah, we'll see where it goes from here. And I know you'll be tracking it as well. Dom Rizzo, thanks for being with us.

Thanks for having me, guys. Now let's get a CNBC News update with Seema Modi. Seema. John, the Israeli military announcing today that four more hostages kidnapped by Hamas on October 7th have died. The announcement comes as a ceasefire proposal backed by the White House is being challenged by right-wing members of Benjamin Netanyahu's government. And Puchpol News just reported that Netanyahu has accepted an invitation to address Congress

and will do so on June 13th. The Georgia Court of Appeals today scheduled a hearing for October 4th to hear an appeal of a lower court's ruling allowing Fulton County DA Fannie Willis to remain on the election interference case brought against former President Trump and others. But the three-judge panel is unlikely to issue a decision before voters head to the polls in November. And huge news in the world of soccer today. After years of speculation, Kylian Mbappe is finally going to play for Real Madrid. The team said today it reached a five-year agreement with a player many argue is now the best in the game. The 25-year-old World Cup winner from France will join the team which just two days ago won its 15th European title.

John. Wow, he was playing with Madrid's feelings for a long time. Seema, thank you. He is, hands down, the best soccer player in the world. Okay, well, some controversy there, perhaps, down in Miami. When we come back, the CEO of fast-growing coffee chain Dutch Bros joins us here on set with her read on the American consumer and how the company plans to more than quadruple

its locations. And as we head to break, check out shares of MicroStrategy. The company and its founder, Michael Saylor, agreed to pay $40 million to settle a tax fraud lawsuit in Washington, D.C., while denying any wrongdoing. MicroStrategy also getting a boost after being added to the MSCI World Index. Today is the first day of trading after that addition into the index. You can see right there, shares ending today up almost 7%. Stay with us. Welcome back to Overtime. Shares of Dutch Bros getting a caffeine kick up more than 25 percent since posting earnings in May. Joining us here on set, Dutch Bros CEO Christine Barone. Christine, it's great to have you here. Thanks so much for having me, Morgan.

You know, I'm going to just right out of the gate draw the juxtaposition between Starbucks and Dutch Bros with the last earnings call, because we are seeing consumer pushback among some brands in terms of higher prices and in terms of belt tightening. That has not been the case with Dutch Bros. I guess walk me through it. Who is buying your coffees? Are you taking market share? So as we look at it, I think it's a lot of really knowing who our customer is

and focused on that customer who just loves the innovation we have. So if you look at what we're doing, we're really driving innovation. We launched Protein Coffee this quarter. We launched Boba this quarter. We also have an awesome rewards program. So 66% of our transactions go through that rewards program. Okay. I want to stick with the Protein Coffee here for a minute.

Who's your demographic, especially a time where, and I think about Nestle a couple of weeks ago, launching a protein focused offering for GLP-1 users. Is that part of the upswing or tailwind you're seeing with that product? So I think what we're seeing with that is there is a lot of protein usage also in that younger demographics. So they're drinking the kind of those protein fortified milks. And so we are starting to see that trend and just thought it would taste really great with coffee. And so we flavored it with different things. It's something I have every morning. What's the right way to think about what the store is supposed to mean in 2024 and the rest

of the 2020s? Because you've got to plan these for the long term. When Starbucks first got Wi-Fi, it became this sort of gathering place idea. But now there seems to be this congestion that's happening in the store. How are you planning your stores? How are you thinking about them philosophically to be relevant for the next decade? Yeah. So as we look at it, a lot of people really love convenience and they want service at the same time. And so that's really what our model is. It's focused on having our broistas come out and greet you in the line. love convenience and they want service at the same time. And so that's really what our model is.

It's focused on having our broistas come out and greet you in the line. We're a drive-through concept, so you get to drive through, but you miss none of the service by coming through the drive-through because we'll greet you with a smile. We don't speak to you through a box. We actually come out and say hi to you. We gather your drink. We might help you figure out what drink you want, and then we serve it to you at the window with a smile. What are you doing about unions and healthcare?

So what we try to do is really ensure that our employees love working at Dutch Bros, and that it's not just about kind of all of, it's about a lot of different things to make sure that they're happy, that they have an awesome work environment, and that they love coming to work every day. I mean, you're expanding aggressively, quadrupling stores, I think, over the coming years. How are you deciding what markets to go into? How is labor factoring into that? And I guess to that point, when we talk about things like drive-thrus, for example, which we know have had a comeback post-pandemic, what factors into making those decisions and making sure you also don comeback post-pandemic, what factors into making those decisions and making sure you also don't overexpand into certain markets? Yeah, so all of our growth

is predicated on having people ready to go open new markets. So we have an operator pipeline. All of our shops are open with operators who've been with the company an average of seven years, and they move to a new market. They opened that shop. And so as we move, as we expand across the country, a couple of different things. So one, we want to make sure that our supply chain is successful. We want to make sure that our people are successful, that there are places that they want to move to. And we're kind of continuing to expand in adjacent states as we go across the country. If you need people with seven years of experience, how do you grow that pipeline as you try to expand faster and faster, or do you eventually run out of operators to open places? Yeah, so what we do is we really do spend a lot of time training folks. So it starts as you come in as a broista. You pass what's called a flow check,

and you really learn how to make every single beverage. So it's a lot of training. It's ensuring people want to stay with us too and grow with the company. So sharing all of those opportunities with them. So if we take a step back, what is your sense of the consumer right now? Yeah, so I think that where the consumer is right now is they're being very thoughtful about where they're spending their money, and they want brands and experiences that really resonate with them. And so I think they're coming to us because of that. It's not just about the coffee. It's also that connection that they have with our broistas. Is there still room to raise prices, or do you think, given what we're seeing with the consumer more broadly,

we've hit a wall? I think that, like others, we'll be very cautious as we look at price. We haven't decided anything for the rest of the year, but I do think we should be very cautious looking at the rest of the year. What's the modern philosophy for you on loyalty programs and in the smartphone era, how those should really work? Yeah, I think it's about taking our lead from our customers and understanding how often do they want to be communicated, what types of things do they love to hear. What we're finding is it's a mix of new products, it's a mix of news that's coming out from Dutch Bros, and then it's also rewards, and so incentives to come in and have that extra drink.

All right, Christine Barone of Dutch Bros, thanks for joining us here on set. It's great to have you. Thank you so much. Yeah, everybody likes rewards. Up next, Mike Santoli is back and is going to look at whether the widening gap between the S&P 500 and the S&P Equal Weight Index could be a red flag for this market. And late-breaking headlines on GameStop. The Wall Street Journal says E-Trade is considering booting Keith Gill, a.k.a. Roaring Kitty, from its trading platform

and discussing if Gill's trades amount to market manipulation. We're going to talk to the reporter who broke that story when we come back. Welcome back to Overtime. Mike Santoli is back with a look at whether the widening gap between the S&P 500 and the Equal Weight Index is a red flag for the market. Mike, are we too top heavy? Is this Jenga? You know, John, we go through bouts of this concern every once in a while. It's a persistent trend.

It persisted even today. The S&P 500 was up slightly. The equal weight was down half a percent. And you can see that it has accumulated to a pretty decent spread over the course of one year. So what is that? Eight percentage points or something like that? Nine percentage points. A lot of it, an enormous amount of it is NVIDIA alone. Now, it's not just that. The mega cap growth stocks are definitely getting more than their proportional share of net new money. And that has obviously caused people to think that there's sort of a rickety foundation for this

market. I wouldn't say that's quite the case. Look at the absolute trend in the equal way. That's not negative outright. It's just sort of lagging to some degree. There's more offsets within it, a little more churn than burn. Now, take a look at the path of earnings revisions. In other words, how much earnings forecasts are going up or down? Well, here you see it, the market cap weight, thanks to those mega cap growth stocks holding up really nicely for twenty twenty four estimates. You see the equal weight obviously weighed down by some more areas that are getting reduced earnings forecasts. So it doesn't mean necessarily a super unstable, but it's very fundamentally based that it's something where the money is following the profit outlook. Mike, in a way, is it heartening that the magnificent seven are no more, that it's really

just Nvidia or have a different cohort of big stocks just continued to dominate? And it's still just as as concerning. I would say it's heartening in the sense that it shows the market is being discerning and it's not just buying size for size's sake. There were times when it did seem like that. But now you have this real bifurcation. Of course, Tesla has kind of been ejected. You know, even Microsoft hasn't done anything since March. So you have seen Apple lag over the two year period. I think that's a

good thing in the sense of not being traded as one big block. And, you know, ultimately, if Nvidia just gets really fevered and it becomes, you know, just a momentum story and it's nothing but call option buying and basically people chasing momentum, that ultimately isn't great. But it doesn't mean the rest of the market has to suffer if that does have a nasty pullback, Morgan. All right. Mike Santoli, thank you. Up next, we will talk to The Wall Street Journal reporter who just broke headlines that E-Trade is considering kicking Keith Gill off of its platform after raising internal concerns about his trades in GameStop. And the SEC is reviewing GameStop trades as well. And Paramount was a big winner in the S&P 500 today

after CNBC's David Faber reported the media giant has agreed to merger terms with Skydance. That deal, which could be announced in the next few days, is still awaiting approval from Sherry Redstone, Paramount's controlling shareholder. We'll be right back. Welcome back to Overtime. The Wall Street Journal just reporting that Morgan Stanley's E-Trade is considering kicking Keith Gill, also known as Roaring Kitty, off its trading platform. The Journal says Morgan Stanley is discussing if Gill's GameStop trades amount to market manipulation, adding the SEC is also reviewing trading in GameStop options. GameStop surged earlier after a post on Reddit supposedly by Gill showing a position worth more than $100 million,

along with significant call options. Joining us is the reporter who broke that story, Anna Maria Andriotis from The Wall Street Journal. Thanks for being with us. So some great detail in this story that you wrote with The Journal. Morgan Stanley looked after that initial pop a few weeks ago and saw that he was positioned to profit enormously if the stock popped, which he seemed to know it would, right? That's right. Great to be speaking with both of you.

So this all started a few weeks ago at Morgan Stanley, pretty much very soon after the Sunday, May 12th tweet from the account associated with Gil, where it posted a picture of a man leaning forward in his seat. So the following day on Monday, May 13th, people working at Morgan Stanley looked into his account, which is the norm, I'm told, in terms of monitoring clients' accounts being pretty routine there. They looked into his account and learned that he had purchased options, a large volume of options on GameStop. So, immediately, concerns were discussed internally, and that is an ongoing discussion internally, with regards to, is he manipulating the stock?

Is he manipulating the market, the borderline stock market? And should we cancel his account? So, Annemarie, it seems like maybe the existing regulations, law even, aren't prepared for this modern moment. He never told anybody technically to buy GameStop. He's posting pictures. He's posting memes. But there was a movie about this. Everybody knows what it is that he's really trying to say, right?

So is that part of what makes this cloudy? That's definitely part of what makes this cloudy? That's definitely part of what makes this cloudy. In addition, part of the cloudiness for Morgan Stanley is what happens if they do kick him off the E-Trade platform and he goes public with this. This is something that has been discussed internally for some time now, the last few weeks on and off. What type of risk does Morgan Stanley face with regards to, given how popular he is, the following that he has, should he go public with them throwing him off the platform? Will other E-Trade account users cancel their accounts? What would the impact essentially be on E-Trade? So there's the cloudy area around regulations.

There is also, like, what does it, like, almost kind of like not being entirely sure what to do internally at Morgan Stanley and trying to determine that, and also realizing that they face this risk of his large number of followers and what this could mean for accounts there. It's such a fascinating debate that's taking place. I mean, the flip side of this is that he's being transparent, right? That he is being transparent in terms of positions he's putting on. I just wonder, because you talk about it in the article, the fact that, you know, there's been review of whether any laws were broken here and sort of the

legal and regulatory aspects of this. Has any of that actually been determined? Or to your point, is it sort of this gray area where it could be interpreted any which way? So it seems like it's a gray area. And you're right. What we report is that the SEC has been reviewing trading in GameStop call options around the time of Gil's social media posts, and that they have sparked, the options trades have sparked internal discussions at the SEC over whether they could be considered manipulation. So you have this internal discussion going on at the SEC on a broad level with regards to option trades during this time period, and one that's more specific on Gil over at E-Trade slash Morgan Stanley. All right. Anna Maria for The Wall Street Journal, thank you. Seems like what Morgan

Stanley really needs here is cover, and maybe this helps them with that. Up next... Got to wonder if other exchanges might weigh in on this, or even potentially court that business, right? They'll certainly probably do that. Well, up next, all the must-watch earnings reports you should be ready for tomorrow on Overtime. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We will be right back. Welcome back. GitLab shares pulling back despite topping estimates earlier this hour.

Second quarter revenue guidance was in line, though EPS guidance was strong. Nonetheless, those shares are down 4% right now. Meantime, tech and retail take center stage on tomorrow's overtime earnings calendar. Hewlett Packard Enterprise, CrowdStrike, Bath & Body Works, PVH, and designer brands, which owns footwear retailer DSW, are all set to report right here. And on the economic front, investors will digest the April job openings and labor turnover survey jolts and the May factory orders report as well. Speaking of jobs, Friday brings the May employment report and Intuit QuickBooks just released its latest small business index, which measures employment in U.S. businesses with fewer than 10 people. Employment in that category shrank nearly 25,000 jobs from April to May, nearly 300,000

year over year. The contraction came in all 12 sectors and every region. The steepest losses were in the information and manufacturing sectors and in the far west and southwest regions. So as we look ahead to tomorrow, CrowdStrike, Morgan, strikes me as particularly important given the action we saw in Zscaler and the questions about software. Cyber is a hot area within that sector. Yeah, it's one of those other secular growth stories. But as we've seen, there's been a real landscape of winners and losers even in this earnings season where cyber is concerned. Going to be watching all the labor data we get this week, especially, and we've had this conversation in recent months,

but especially as you're seeing a growing body of research coming off of Wall Street about the role that immigration is playing in the jobs growth we've seen in recent months and what that means in terms of tempering wage inflation, even as you see those numbers increase. It's sort of a key debate, especially since some of the data that's available for that research is a little bit limited. Well, the political conversation around immigration and the economic conversation, very different. You need a younger workforce still, even with AI, right? And where are you going to get it? We're just a CEO recently commented to me.

It takes 18 years to make an 18 year old still. We know that. So if you need the labor force sooner, you got to get it from somewhere. And so far, the economy seems to have benefited from that. Yeah. Overall, it's a big week for macro data. We know what we just got with ISM manufacturing that put pressure on Treasury yields. It's sort of we're still in that bad news is good news debate for the markets. Nonetheless, we had a mixed finish for the S&P

as we did see some buying here into the close. Brings us full circle to the beginning of the show. We were talking about that impact of moderating economic, you know, macro data on the economy. We're still at the high end of that range where the S&P has been over the last several weeks. And, you know, Mike Santelli said we'd be chopping around sideways for a while, and indeed we are. Yeah, sure seems like it. And I said mixed picture for S&P. The S&P finished slightly higher.

Mixed picture for indices overall with the Dow lower and the Nasdaq also higher. That's going to do it for us here at Overtime. Fast money starts now.