Closing Bell - Closing Bell Overtime: S&P 500 Closes At Record high; Breaking Down The Luxury Consumer 3/7/24

Episode Date: March 7, 2024

The S&P 500 closes at a record high after hitting an intraday all-time high. The Nasdaq also notching an intraday record. RBC’s Lori Calvasina and Bespoke’s Paul Hickey break down the market action, plus earnings from Broadcom, Marvell, Costco, Gap, Docusign, MongoDB and Samsara. Bernstein analyst Stacy Rasgon dives deep into the Broadcom numbers and its AI exposure. CFRA’s Arun Sundaram on Costco’s quarterly results. Neiman Marcus CEO talks the luxury consumer and bringing tech to high-end shopping.  

A second day of gains with the S&P closing up about 1%, a new closing high for the S&P 500 too, I might add, as those major averages do close in the green for a second straight day. That is the scorecard on Wall Street. The action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, NVIDIA are rallying today, helping the tech sector outperform the broader market.

We've got real estate and financials, the only sectors in the red. So now get ready for a barrage of earnings from some chip names, Broadcom, also some software names, some retail names, Costco, Gap, DocuSign, MongoDB, several others. We're going to break down all the results as soon as they're released. Plus, we will take the pulse of luxury consumers. And we're joined by the CEO of Neiman Marcus. But as we await all of those earnings, let's bring in our market panel. Joining us now is Paul Hickey of Bespoke Investment Group and Lori Calacina of RBC Capital Markets.

Lori, it is great to have you here on set. I'm going to start with you because we have the S&P finishing, as I mentioned, at a record high. It looks like 51.57 as we settle here. Are we stretched? Is there room to go higher? Do you expect a pullback or a consolidation digestion period before this continues? So, look, I've been looking for a pullback since January and we haven't gotten it. And sometimes markets just want to go up and you have to take a step back and say what's going on.

And so I do think sentiment is a bit stretched. It's not terrible. One of our models is one standard deviation above the long term average. It often gets to two. So there's room for it to get even more stretched. But I will say from a valuation perspective, I think it's a pretty fairly valued market at this point in time. And we don't just look at PEs and are they above below average. We look at them in the context of macro variables and in the context of inflation moderating, GDP starting to come in hotter than expected again, and sort of those expectations picking up, and the anticipation of a little bit of interest rate relief from the Fed. Things look pretty fair if you look at our model, which is based on data back to the 60s. So, you know, we're at my target. That never feels good when you're a strategist,

but my valuation model has been pointing to upside to around 5400 or so. OK, Paul, I want to get your thoughts on the action that we're seeing here, especially as on a day like today, we're seeing tech really continue to lead the charge and AI, of course, that big secular bull story. Yeah, so, I mean, I think we focus so much on the Fed and we focus so much on Powell's testimony the last two days. But I think people are missing the main point. This is not a Fed driven rally. The rally has coincided with the Fed pivoting and going on the sidelines and no longer standing there with the crowbar ready to take out any economic strength. And so what the real theme here is the AI trade.

You take stocks that have any sort of relationship to AI. They've trounced the broader market. That's the theme of this bull market. And what we're seeing, as Laurie said, we see valuations that are reasonable here. And we are, it's typical bull market behavior that we're seeing. Just running through the list, four-month winning streaks, 5% gain to start the year, 20% gain in four months. All of these things are very big moves for the market. You think, OK, market needs a breather here. And you could get a breather here.

But longer term, these are things that occur during bull markets. And bull markets, by definition, are periods of above average returns. Paul, I get the feeling you're very excited about Costco earnings coming out. I don't know. You might even sell me a hot dog here. But, Lori, I'm going to go back to you because we've got the jobs report tomorrow. And as we mentioned, the S&P has already had quite a run. We're at your target for the year, I believe.

So is this a good news is good news situation or a no news is good news situation in the sense that as long as things are just about as hot as expected, but not too much hotter than things in the equity market can continue as they have? So I think either will work. And to be honest, as I've been talking to investors the last couple of weeks, the tone has actually been pretty negative. I mean, it's been, oh, my God, the economy is so hot. We're never going to be honest, as I've been talking to investors the last couple of weeks, the tone has actually been pretty negative. I mean, it's been, oh, my God, the economy is so hot. We're never going to be able to cut rates. And guess what? The market's been trudging higher. So I think the market is queuing off of more of the economy is hot than the worries about the Fed.

And we did see Powell, you know, really kind of calm people down, I think, a bit today in terms of the idea that the Fed is never going to cut. He said, you know, we are going to cut, you know, if things keep going the way they're going. So I think the market is really starting to cue off the good news and accepting, like, it's OK for us to be OK. You know, we don't have to look for bad news to justify gains from here. OK, so, Paul, when we have when we have NVIDIA running like it was up four and a half percent today. That, along with some other things, though, is too much good news an issue for us at these highs. Well, I mean, some of these stocks, expectations are high. You have Broadcom earnings today. It's up 50 percent since its last earnings report. You have Marvel up 40 percent year to date. So expectations are high. But getting to that good news is good news again. That is a very important trend to remember. And the reverse is bad news is going to be bad news

again. And we saw that Tuesday. We saw weaker than expected data across the board. And what did the market do? It sold off intraday the entire time. So coming into tomorrow's employment report, if you see a necessarily significantly weaker than expected number, that could pose a problem for the short term in the market here, because I think investors really have to focus on the point here that good news is good news again, like you said. OK, we're starting to get some of these earnings releases, MongoDB, Marvell, a few others that our team is going through. So we're going to continue to monitor that. We're bringing those earnings just a moment. In the meantime, Lori, looking across sectors, I mean, we were

just talking about the AI story. But I mean, are there areas of this market that do feel compelling right now, given the economic backdrop? So look, I'm certainly not anti-Mag7 or anything like that. And we're neutral tech. We used to like it. We think the valuations aren't where they were sort of six, nine months ago. But I will say it does feel like this is a market that does want to broaden out. And I know we're still talking about all the AI names, you know, and certain stocks in particular, but that mag seven trade has narrowed. And there's been sort of this Darwinistic attack. If the earnings aren't holding up, you get kicked out of the bucket. So it's shrinking. And that tells me the market is

very sensitive to where the earnings growth is and is being very rational about what it's willing to pay. I think as economic expectations continue to improve, you're going to see the rest of the market's earnings expectations move up. And we're already seeing on current consensus projections that in 2025, the MAG7 bucket isn't really expected to be that dominant in terms of earnings growth going forward, at least the way it was back in 2023. So I think it's really, you know, a stock picker's market. I think it is time to look at some of the laggards. And I've been pointing out to people, you know, small caps actually outperformed in February. Nobody really noticed that. But I think there's just a lot of interesting stuff out there and sector discussions almost get a little bit silly because there's so

much that's interesting right now. So is it a matter of Lori, dry powder, but don't try to time the market? I think so. I mean, even on this pullback question, and I'm surprised we haven't gotten it, but you know, we're not going to get every call. People have said, you know, if we get it, how far is it going to go? I'm like, it's not going to be more than 10% because that's a growth scare. This is not a growth scare kind of market right now. People are sympathetic to the idea that we've maybe gone a little too far too fast. And when that happens, dips get bought quickly. So I would say maybe a 5%, not kind of, you know, not frankly, really the kind of market where you want to load up hugely on defensives, to be honest. Yeah, Paul, I mean, we've had yields basically in a range here. But in addition to what we've

seen in terms of records for stocks, we're seeing records in gold. We had Bitcoin touch a record earlier this week. Dollars still hanging in there, too, I might add. I mean, how does this how does this, I guess, speak to the environment that we're in and how investors should be thinking about the money they're putting across different asset classes, especially when you do have and I think this headline just crossed, you do have money market funds at a record high now. Yes. So, I mean, I think what you're talking about is broad based strength across various asset classes, as you mentioned, Morgan. And what that's a sign of is the loosening of credit conditions that we've seen over the last four months. It's been one of the most extreme loosenings of financial conditions that we've seen going back to the early 80s.

And that what that tends to do is it drives up asset prices. And when you've seen these types of loosening of... Hold tight for a moment. We got MongoDB results out, and that stock is down precipitously, at least initially. Pippa Stevens has the numbers. Pippa? That's right, John. The stock is tumbling here on weak guidance.

But let's start here with Q4 results, because it was a top and bottom line beat with the company earning 86 cents adjusted. That was almost double the 47 cents analysts were looking for. Revenue coming in at 458 million, also ahead of the 433 million expected. But once again, it is that week Q1 and full year guidance that's pressuring shares. For the full year, they see revs between $1.9 and $1.93 billion, while Wall Street was looking for $2.03 billion. On EPS, they see a range of $2.27 to $2.49, well short of the $3.34 that analysts were looking for. Stock is down almost 8%. Morgan? All right. Pippa Stevens, thank you. Marvell technology earnings are out as well.

Christina Parts Nevelis has those for us. Yeah, it's good to keep in mind that Marvell is exposed to legacy chips as well as the AI section. So what we're seeing for EPS, it was in line at 46 cents on revenues of $1.427 billion. Q1 guidance, though, was weak with the company warning, we are forecasting soft demand impacting consumer carrier infrastructure and enterprise networking in the near term. But we expect revenue declines in these end markets to be behind us after the first quarter, which was that guidance. You can see the stock is down 9 percent. They did also announce in a separate release a $3 billion buyback. But I'm sure they're going to talk up the impact of AI because they said that AI drove strong growth in our data center and market revenue,

which increased 38 percent sequentially, 54 percent year over year. But nonetheless, it's the Q1 guidance and the soft, weak consumer that is concerning, causing the stock to plunge 10 percent. OK, Christina Parts-Mavlis, thank you. I see you and I got the same wardrobe memo here today, too. All right, Paul Hickey, since we interrupted you before, want to get your response, your real-time response to some of these results we just got. So, I mean, I think what we were talking about earlier, some of these semis have run so fast going into these earnings report. Marvel was up 40 percent year-to-date,

so expectations are going to be high. The stock has a history of reacting negatively to its earnings reports in the short term. So that's something to keep in mind. MongoDB, that's a weak report. The guidance is disappointing, especially after they raised their guidance for three quarters straight coming into this report. But again, if you look at the stock, it's down over 20 percent heading into this report over the last month. Part of that due to Snowflake's weak earnings about a week ago. So I think some of that could be priced in here. You know, expectations were

lower there than they were for Marvel. Okay. We're going to go back to Pippa Stevens, who has DocuSign earnings as well. Pippa. Hey, Morgan. Well, the stock is jumping after the company beat top and bottom line estimates during the fourth quarter, earning 76 cents adjusted. That was ahead of the 64 cents analysts were looking for. Revenue coming in at 712 million. That was also a beat. Q1 revenue guidance also ahead of forecast with full year revenue guidance also topping analysts. Estimates that stock now surging 12 percent.

John? Okay, I'll actually take it. Oh, John, I think we'll take it. He's doing double duty right now. Are we ready to do Samsara now? Because I can... All right, let's go for it. What's the stock doing after hours?

Can we put that up, Samsara? Ticker IOT. It is a beat both on the top and bottom lines. Yeah, that would explain it. It's moving higher. Revenue came in at $276.3 million versus $258.3 expected. Non-gap EPS at $0.04 versus $0.03 expected. The guide for Q1, they're guiding to revenue of $272 million at the midpoint with $266.8 expected. Also on EPS, guiding to a range of zero to negative penny per share versus a penny loss expected.

Also, the full year guide is ahead of expectations, guiding to 1.186 to 1.19 six billion dollars versus one point one eight little hair shy of that expected. And earnings per share of 10 cents at the midpoint versus eight cents expected. That explains why the stock, Morgan, is up better than 10 percent in overtime. All right. Oh, I should mention. Yes. Exclusive tomorrow. So I'm sorry, CEO Sanjay Biswas. That's tomorrow on overtime. All right. Oh, I should mention, yes, exclusive tomorrow. Samsara's CEO, Sanjay Biswas, that's tomorrow on overtime. All right. So tune in tomorrow. In the meantime, Lori, I'm not going to ask you to respond to each individual stock, but I am curious to get your thoughts on what I would call bifurcation within semiconductor stocks. You've got the legacy businesses and then you've got the AI bucket.

AI seems to be doing really well. The other stuff, maybe not so much. I raise it because, at least in recent years, semis have sort of been seen as an indicator of global economic strength. What to make of it? So, look, what I would say about economic strength, right, is it does feel pretty lopsided around the globe, right? I mean, it feels like the U.S. is really kind of the oasis, the area of strength. You know, there has been some talk, right, about whether or not China has bottomed. You know, we were sort of hearing that, you know, a couple weeks back in some of our meetings. But I think in general, there's still a lot of confusion about where we are globally in the economic cycle. And I can even see this if I compare consumer confidence in, say, the U.S. and Europe to, say, Australia and Canada, with Australia being a pretty decent proxy for Asia. And you've got some markets that are down around recession, even crisis-type lows,

and others that hit them a couple years ago and are in the middle of a rebound. So we've just got a very, very asynchronous cycle right now that I think is confusing a lot of people. Yeah. Maybe some more clarity, at least domestically, with that jobs report in the morning. Lori, thanks. Paul, thank you as well. Thanks. Now, tech stocks, not the only major outperformers right now. Here to tell us what else is doing quite well, senior markets commentator Mike Santoli.

Mike? Yeah, John, it's almost sector by sector. There seems to be one or a couple of these anointed momentum leaders that really are racing ahead of the rest of the group. So you can see it here, Costco relative to the XRT. The XRT's had a really nice run. This goes back to the middle of last year, up 19 percent, 50 percent for Costco. It's just sort of momentum upon momentum. We talked in the last hour about how this happens to be in the Nasdaq 100 ETF could explain part of it. Then you have Eli Lilly relative to the rest of pharmaceuticals. Again, we know the story. There's a secular growth theme. Investors can't get enough of it. They just

sort of buy it every day to get exposure to it. And so here's Lilly. And again, you've actually seen a little bit of a rebound in pharma relative to last year's weakness, but still pales in comparison to Lilly. How about materials? Not a lot of fast moving stocks in this area, unless maybe some of the gold miners are working. But here you have Martin Marietta materials, construction materials. Actually, Vulcan is similar in the same industry. And of course, it's gone vertical relative to the rest of the group. So part of this is momentum as a factor, as an actual theme, a characteristic of stocks is something that is traded. And so it kind of feeds upon itself for a while. There have been some extremes recently in high momentum performance relative to low

momentum. Some people have kind of flagged that as a potential source of instability in the scene setting for a pullback. But of course, it lasts until it doesn't. So we'll see how it goes, John. Interesting, Mike. I want to mention, first of all, Broadcom, Costco, Gap results all out. They're all moving higher at the moment, especially Gap. We'll get you those results, folks, in a moment. But, Mike, when you talk about what's outperforming, I'm reminded of the criticism of this market often that people are too much in ETFs and they're not buying individual stocks. Hold on. Let's get to Broadcom.

Let's get right back to you, Mike. Let's get to those Broadcom results with Christina Parts in Nevelis. Christina. Well, so far, we're just going to look at the Q1 results. EPS beat 70 cent beat ten dollars and ninety nine cents adjusted on revenues of eleven point nine six billion. The company said they're pleased with their two strong drivers of revenue growth. new growth, and that would be the VMware acquisition that's helping drive software. And then, of course, AI demand for their AI data centers and custom AI accelerators. But you can see the shares are dropping about almost 8%. So I'll go through the guidance and get back to you. All right, Christina, we'll be back to you for more on that. Mike, I don't know if you have an initial reaction to that. Broadcom is one of those names, kind of like MongoDB, I guess, in a way, which had been running quite hot in AI excitement. And maybe the expectations are quite high.

Yeah, and the initial reflex was a move of the magnitude that the options market was previewing in the range of 7 to 8 percent on that move. Now, yeah, to me, it's part of the same dynamic that's been animating a lot of semis, a lot of tech, a lot of other areas, too, which is the next player in the game of whatever the hot theme is. And arguably, you know, Dell took flight last year, even though it's not purely an AI, last week, even though not purely an AI company. And Broadcom has been given credit, and its valuation is way above where it's ever been before because of that AI piece. And, of course, there's a lot more to the company than that. Okay. We've got more earnings.

Mike Santelli, we'll see you in a little bit. But right now, Gap and Costco, those results are out. Courtney Reagan has the numbers for both. Court. Yeah. Hi, Morgan. So shares moving here big on Gap. It's a big beat here.

The company putting up earnings of 49 cents versus 23 cents expected. Revenue is also stronger at 4.3 billion. The street was looking for 4.22. Same store sales, those comparable sales, overall flat. The street was looking for those to fall 1.1 percent. And all three of the major brands saw better than expected comps. Actually, Old Navy up 2 percent, Gap Global up 4 percent. Banana Republic down 4 percent, but better than expected. Athleta down 10 percent. We don't have an estimate for that, but again, overall better than expected. Pretty strong gross margins here, 38.9 percent. That's five percentage points higher year over year. Also above street estimates, margins, operating margins also stronger than expected. When it comes to the

first quarter revenues about in line with expectations for flat revenues, full year revenues also expected to be flat. I spoke very briefly with Gap CEO Richard Dixon when he said on the quarter, quote, we devolved from a pop culture brand to clothing retailer. Today, we are getting our vibe back. And then on the guidance for the full year, he said, we're expecting roughly similar consumer and macroeconomic environment to 2023. Apparel expected to decline in 2024, but there are always winners. We are on the right track for reinvigoration.

And then lastly, Richard Dixon, Gap Inc. CEO, says to CNBC about margins and promotions. We do plan to maintain the discipline we've talked about. We sell higher average unit retail prices across all of our brands in the fourth quarter. We're managing inventory really tightly, down 16 percent going into the year. So that's Gap. And then very quickly, Costco turning in earnings of three ninety two a share unclear if that is comparable revenues, though, missing estimates at fifty eight point four four billion compared to fifty nine point one six billion. Again, on that earnings, it includes a twenty one cent benefit from a special dividend. That's why we're not quite sure if it's comparable.

We did know about those same store sales because they report monthly up more than five and a half percent in e-commerce sales up more than 18 percent. Costco shares down about three percent here. Back over to you. All right. Our Courtney Reagan, thanks for filling us in on Gap and Costco. Now let's get back to Christina Partsenevelis with the guide from Broadcom. Christina. Well, the guide is in line. And Mike just brought it up, too, that you had the run-up in this name and the expectations were high. $50 billion for the fiscal year. That was what the street was anticipating.

We're seeing a little bit of a regain in the share price that initially dropped about over 7%, so now down a little bit over 2%. But really, when you consider the stock that's run up over 50% just in the last three months or so, the expectations were high. $50 billion is going to be split, $30 billion for semi-revenue, and $20 billion for software revenue. So again, the company believes the two main drivers, AI and software, that'll help this name. But it's coming back up, down 2% now. Yeah, it's quite a balance. Like Mark Santelli was saying, the options market was expecting a big move and got that just initially. We'll see where it goes from here as we await the

call. Christina, thanks. Thank you. We're going to have much more on this wild hour of overtime earnings still to come when we get analysts' reaction to Broadcom and Costco earnings. Every hour on overtime is a wild hour. Plus, President Biden will propose new taxes on billionaires and corporations during the State of the Union address tonight. Coming up, we're going to discuss the potential impact on your investments, on the economy and more. Overtime's back in two. welcome back to overtime broadcom first quarter earnings out just moments ago the stock is off its lows still down more than three and a half percent right now in overtime joining us now is bernstein senior research analyst stacy rasgan stacy uh a beat on the quarter that they just reported. What's the concern about the guide?

Look, so the stock has risen up a lot, you know, in the recent weeks and months, as we know. So expectations are all high. They didn't raise the full year guide. Broadcom's not guiding quarterly for now. They're only guiding full year. Beat on Q1, they're holding the full year. So you could maybe interpret that a little bit as the full year, a little lower versus where the streak currently is, maybe. Some of it might be Marvell's print. I don't cover Marvell, but they reported tonight and they had a fairly sizable miss going forward. So some of it may be in sympathy with that. I'll be honest.

I look at this. I don't see anything really structurally wrong. I think this is fine. The numbers in the quarter were good. They've got room, I think, as we go through the year to take things up, especially if the AI piece that they have drives more. It looks like they've got the majority of the OPEX cuts out from VMware. They bought that, so the OPEX came in really, really well.

I think it's fine. Well, I guess that's the question for me, though. Fine, if you've been kind of positioned as one of these semiconductor AI plays, and you've got the likes of NVIDIA just sort of blowing the doors off with already high expectations, and then you come out with, you know, some pretty good results, a beat on the top and bottom, but then you hold your full year guide steady. I mean, it's fine, fine. Well, we'll have to hear what they say on the call, right? So there's two pieces to the semiconductor business. There's the sort of the core business and the AI piece.

And the AI piece, what they've been saying is it'll be, quote unquote, more than 25% of the semi business this year. So if they're guiding $30 billion, that would be, you know, $7.5 billion, $8 billion maybe in AI revenues. It's more than doubling year over year. The core business, they've already guided fairly conservatively. That's actually guided down already fairly substantially. I think that's the question. Is the core business getting worse? And that is possible.

They're not immune to any of this. If that is the case, though, it would suggest that the AI piece is stronger. So I do think people are going to be listening for the interplay between what the core business is doing in a cyclical downturn, potentially, and that AI piece. The company does have an AI analyst day coming up in a few weeks. So presumably they'll have good things to say about AI. But that interplay between those two things will be something that certainly I think investors will be listening for in an hour or so when the call starts. OK. I mean, the stock has run up 50 percent in the past three months. It's dipping right now in overtime. You got an outperform rating, but your price target, I believe, is

1250. We're trading above that. Do you buy on this pullback or do you wait for something deeper? Yeah. So, again, I always I've said this before. Don't read too much into the price targets at any given moment. They don't get updated every single day and the stocks had a strong run. I really do like Broadcom. Look, so I think that they have done their best to try to de-risk the core business. It does have the second best AI story in the space in terms of magnitude outside of NVIDIA. You've got very significant synergies coming, both in terms of operating synergies and growth coming from VMware.

I think this is a company that you get into 2025 when those synergies are going to be doing ballpark $60 in earnings and $30 billion in free cash flow. I don't think those are peak numbers either. I think it continues to compound from there. I still really like the stock. I think it's still got legs from here. It's bobbling right now. We'll see what they say. We'll see what it does tomorrow. It's been a very strong performer. I don't think there's any reason that that story has to stop them. All right. Stacey Raskin, thank you. And speaking of AI and chips, don't miss my exclusive interview with AMD CEO Lisa Su. That's going to be Monday, 4 p.m. I'll be live from the company's campus in Austin, Texas. Now, we mentioned Costco shares. They are lower in overtime, but just over 4% at the moment after missing revenue estimates when they reported just

moments ago. Joining us now to discuss is Arun Sundaram, Senior Equity Research Analyst at CFRA Research. Arun, this is a name that's been running quite strong. Expectations are high. Is there a problem here? Yeah. Hey, John. No, I didn't see any problem with this report. I actually thought it was a pretty good earnings. Comp sales are up 5.8%. That's excluded fuel. That's actually a step up from their fiscal first quarter of 3.9%. Membership fee income was up 8%. I think it's a solid number. You saw strong digital or e-commerce sales growth as well. The stock is run up a lot recently, so I think expectations were really high. So you just really needed really strong earnings to support this rich valuation. And while the results were good,

if I was going to be nitpicky, we did see operating margins were about 3.6%. We were expecting about 3.7 percent operating margins. It looks like gross margins didn't expand as much as we thought it would. So there might be some questions on whether Costco is investing in price to drive more traffic, things like that. But we'll hear more about that on the call today. Yeah, that's exactly where I was going with you, Arun, is pricing power and whether we've hit a ceiling at a place like Costco, as we've heard so many others across the industry basically comment on, and how you balance that versus costs coming down internally at the company, too. Yeah, so, I mean, Costco is one of those retailers that typically last to raise prices and first to lower prices.

So now that inflation is moderating, and we're actually seeing deflation in a lot of discretionary goods, we sense Costco is lowering prices, especially on those discretionary goods like furniture, TVs, things like that. And that's going to drive more store traffic. And most importantly, it's going to drive membership income and their renewal rates. You have to remember Costco's model only works when they continue to gain new members and keep those members. And right now, the renewal rates in the U.S. and Canada are around 93%, which is really strong. So, you know, nothing to worry about at this point. Yeah. Still no sign of a hike in those fees for membership, though.

But the renewal rate's definitely in focus. Arun Sundaram, thanks for joining us. Thank you. We have a news alert out of Washington, and Megan Casella has those details for us. Megan. Hey, Morgan. We are just learning that the American Bankers Association, the Chamber of Commerce, and other banking groups are suing the Consumer Financial Protection Bureau over a credit card late fee rule that was just finalized this week

and is set to take effect within 60 days. They say that the rule is exceeding the agency's authority, that it would result in more late payments. And as a reminder, this is a rule that was set to cap the amount of late fee that a credit card company could charge to cap that level at $8. They're seeking a preliminary injunction to keep this rule from going into effect. We're just learning about it. We're not sure whether they'll get that, but we'll stay on this and bring you the updates. All right, Megan, we appreciate that. And for now, time for a CNBC News update with Kate Rogers. Kate. Hey there, John. Moments ago, a U.S. House committee unanimously approved a bill that

would require China's ByteDance to divest TikTok. The bill gives TikTok's parent company six months to divest from the short-form video app or be banned from the U.S., the full House of Representatives could vote on the bill in coming weeks. United Airlines will pause hiring pilots this spring, citing Boeing delivery delays. The airline carrier now expects only a fraction of its original order from Boeing this year as the planemaker struggles after issues with its 737 MAX planes, Boeing has yet to comment. And a CDC study found that an antibody treatment from AstraZeneca and Sanofi was 90 percent effective in protecting infants from RSV. The early data reinforced the CDC's recommendation that infants in the first season of potential exposure be given the treatment.

Back over to you. All right. Okay, Kate Rogers, thank you. Well, up next, Mike Santoli looks at what the recent decline in the Economic Surprise Index could mean for the economy and the market. And check out shares of GE flying to a six-year high as GE Aerospace prepares to become a standalone company. On April 2nd, you can see they finished up 4 percent at today's investor meeting, forecasting operating profit of $10 billion in 2028, announcing a $15 billion share buyback, a dividend at 30 percent of net income. CEO Larry Culp discussing robust demand for GE's jet engines and services, also voicing support for Boeing's Dave Calhoun as GE's engine production

for the Max line continues on a possible Boeing Spirit Aerosystems merger. Culp telling me, quote, it might help if it was all under one common ownership, but I don't think that's necessarily a panacea to those supply and those exchange issues between Wichita and Renton. Shares of GE finishing high. We'll be right back. Welcome back to Overtime. The City Economic Surprise Index has rolled over in recent weeks, possibly suggesting some peace of mind for investors. Let's bring back Mike Santoli for his take. Mike. Yeah, Morgan. So this is what the path looks like. It has eased back over the last few weeks, but it was coming from a position of strength well above the zero line. Remember, this is how economic data are arriving relative to forecast. So still solidly above zero. And I've

put it out in the past. The last couple of years, you spent almost no time in negative territory, which means consistently economists have underestimated how strong the economy was. But this backing off recently seems to fit with this idea of we want Goldilocks numbers. You want to have some deceleration in inflationary pressures. Bond yields managed to seize on some of these data and essentially bring bring yields lower in the last few days. So everything is is pretty benign. Obviously, you don't want to see things weaken up too much more than that. And of course, we have the big monthly jobs report tomorrow that will feed into this picture. Yeah. You know, we got the FDIC releasing a report today, and they're talking about late

credit card payments at the highest since 2011. We saw FICO scores dip down earlier this week. I just wonder, I mean, I know we're talking about economic surprise index, but I just wonder when so much of the U.S. economy hinges on the consumer, if we are, in fact, starting to see those early cracks in terms of that turnover in consumer spending? Yes, I would say the answer is absolutely. We're seeing things like, I mean, even continuing jobless claims, they're not at an alarming level, but they're well up off their lows. So things like, you know, delinquencies, credit losses, even the aggregate amount of non-mortgage debt seems like it's pretty high. Those obligations. The good news is it's coming off a position of being so, so low relative to incomes that it seems like you have a little bit of leeway before you have to worry about it. But I do think the Fed's paying attention to those things and doesn't want to dismiss the idea that you could start to see some headwinds be felt by this economy.

All right. Mike, thanks. Meantime, we've got breaking news in the IPO space. Pippa Stevens has details. Pippa? Hey, John. Well, Razormaker Harry's has reportedly filed for an IPO. That's according to Reuters, citing sources. The report says that the company Harry's has filed confidentially with U.S. regulators. Bankers involved in the deal are reportedly Goldman Sachs, JPMorgan, Barclays and Wells Fargo. Now, in a private fundraising round in 2021, the company was valued at $1.7 billion. Once again,

Harry's reportedly filing to go public. John. All right, Pippa, thanks. And this is the one that Edgewell tried to buy back in 2019, 2020, but the owner of Schick got sued by the FTC to block that, which probably lucky for them because the pandemic hit right after that. People stopped shaving in the pandemic for a little bit. Well, they did. They stopped grooming. Now they're grooming again. Nothing got shaved, very little. My head got shaved, though. Up next, the CEO of Neiman Marcus on whether he sees any slowdown in spending by luxury consumers when overtime returns. Welcome back to overtime. Cracks in luxury spending popped up this week.

Shares of Hugo Boss are down 13 percent after warning it may not meet its sales target for 2025. Nordstrom continues to fall after a warning of a potential sales decline this year when it reported earnings earlier this week as well. But Neiman Marcus reporting its second quarter results today, which shows total sales down a low single digits compared to last year, but it did see stronger full price selling. Joining us now is Neiman Marcus CEO Jeff Hua, Yvonne Remdonk. It's great to have you back on the show. Thanks for being here. Thank you, Morgan. So it seems to me retail writ large, kind of the big broad based theme that we have gotten here in the last couple of months coming out of the holiday sales quarter,

is that it's inventory correction finally being realized, its margins expanding, and its profit growing, even if sales continue to decline. I look at your results here, and it seems like that is what's playing out in Neiman Marcus as well. So walk me through what this means for the rest of 2024, especially when we are talking about a deeper pocket, more luxury consumer. So what we're saying is really a sequential improvement of our performance in the last quarter compared to the prior one. And to your point, an increase compared to 2022 in full price selling, which tells me that the luxury customer is buying. And the categories that are outperforming for us are true luxury categories such as jewelry, designer handbags, and women's shoes. Now, I think what we're also seeing is a normalization from all-time high in 2022 with a more aspirational customer and a certain slowdown online through

that normalization. I don't have a crystal ball for the rest of the year, but we're cautiously optimistic because of the signs that we just mentioned where the true luxury customer is actively involved in purchasing luxury. When we talk about softer forecasts at some of the other department stores, like a Nordstrom, for example, are you taking market share? Well, we are a relationship business, and we believe that we have a customer who's clearly with us. An illustration of our relationship is that 2% of our customers drive 40% of our revenue.

And while we're interested in all customers, we zoom on those who are in a relationship we have 1100 sales associates who do more than a million dollar book of business and transact 20 of our sales when the customer is not in the store so we believe that we have a customer who's deeply loyal to us but that there's another customer who's coming to us because we have the right offering and we're doing a lot of activation in our store. So the understanding is we keep our loyalists and we attract more high CLV potential customers. Jeff, correct me if I'm wrong here, but it seems like a big part of the story is the sort of dilution withering away of the aspirational luxury customer, the core luxury customer

remains strong. If that's the case, what do you do, continue to do to get a bigger share of wallet from that core luxury customer? So what we really do is we focus on the relationship we have with them. And as I mentioned, leverage our sales associate who know them to anticipate their needs. But we also double down on the notion of experience. You can buy the product in different places and you own the product. But what we really focus on is providing you an experience specifically in-store, including services, and then what we call retailtainment. We bring brands with exclusive offering that are presented in our store and online in a multisensory way. And we believe that activating brands with offering that is not available anywhere else

is what gets the customer excited. And that's where we cross between buying the purchase to actually enjoying the experience of purchasing the product. So where does technology come into play then? It seems like if you're going to be high touch, then it's not clear whether it's the human salespeople using the technology to show that they know the customer better or where the investment goes. our reach and we are engaging with customers through our app or through our sales associate engaging digitally with our customer 27 and so that is 24 7 that is really how we scale the reach but then we use data and algorithm that predicts who we should go after what style we should recommend and at the end of the, we can scale the reach because the associates get all of those lists of recommendation. But in our world, it's very much a human interaction. It's powered by technology, but it remains a human interaction.

Okay, Jeff Hua, thanks for joining us. Thank you for having me. Up next, we will round up the other earnings movers that need to be on your radar as we count down to the calls from Broadcom, Costco and Gap. Plus, the tax man cometh for Wall Street as President Biden gets set to call for higher taxes on the wealthy and corporations. We're going to discuss what that means for your money later on Overtime. welcome back let's take a look at two stocks moving in opposite directions here in overtime mongo db shares are lower by about 12 and a half percent at the moment after guidance came in a little lighter than expected and samsara shares are higher by about 14 percent after reporting a

beat on the top and bottom lines we're going to talk talk to Samsara CEO Sanjit Biswas tomorrow right here on Overtime. Both Samsara and MongoDB's conference calls are going to start at the top of the hour. Meantime, President Biden expected to call for tax break curbs for the wealthy and corporations during the State of the Union tonight. Up next, what that could mean for the state of your money. And if you love the show, of course you do. And you want even more overtime, well, there's a QR code just for you. It's on your screen. You can scan it. Follow us on LinkedIn where we're going to post exclusive content. There's a lot there already. Overtime will be right back. Welcome back to Overtime.

President Biden set to deliver his State of the Union speech tonight. It's going to include proposals that would raise taxes on both corporations and the wealthiest Americans. Megan Casella has details. Megan. Hey, John, that's right. So President Biden is going to come out swinging tonight and aiming specifically at big business with a few different proposals. White House officials tell us he's going to be calling to raise the corporate minimum tax up to 21 percent. That's up from the 15 percent level that he signed into law less than two years ago. He'll also call for eliminating corporate tax breaks for all employee salaries over one million dollars. And now this one's an expansion of current law, which already says that companies cannot deduct CEO and executive salaries. Now,

some of these other ideas might sound a little bit more familiar. He wants to quadruple the stock buyback tax. He'll close a loophole for a tax loophole for corporate jets. And he wants to impose a 25 percent minimum tax on billionaires. The White House, of course, says all of this will be aimed at leveling the playing field and reducing the deficit moving forward. And just one important caveat to note here is that these are simply proposals. He's going to need Congress's help to move on any of this, and Republicans are not likely to get on board. But it does still show us what the starting point is going to be as President Biden tries to draw a contrast this year between himself and Donald

Trump. Morgan? All right, Megan Casella, thank you for more. Let's bring in SGH Macro CEO Sasan Garamani. Sas, it's great to have you on the show. I'm going to start right there because we talk so much about how tight monetary policy has become here in these last two years. We don't talk as much about fiscal policy where we do have these record deficits and where we do see some of these, for example, broad based industrial policies actually starting to have money sent out and push out into the economy. It's been a very big part of what's keeping this economy resilient now. Yeah. Hi, Morgan. Thank you very much for having me on again, first of all. Yeah, I think this is, as you mentioned, the fiscal impetus and the economy

is something that has been underestimated year after year, and I think will continue to be underestimated going forward. We started off this segment with a discussion of some proposals that President Biden is going to roll out in the State of the Union speech. The problem with these kinds of things is that, you know, it's much easier to lower taxes than to hike taxes. And, you know, we saw that in, you know, even in the current term of President Biden, where, you know, they had some proposals to raise, you know, broader proposals than these really kind of very micro ones with millionaires and, you know, planes and so on, to raise the tax on, you know, and so on to raise the tax on you

know higher earners and the minute that you know Kyrsten Sinema sort of put a kibosh on raising corporate tax hikes and kept tax hikes in general everybody kind of conveniently folded so to your point you know monetary policy has to offset what is, you know, this fiscal spending that's not going down either under a Biden administration or under a Trump administration. And frankly, I think the odds of having tax cuts are significantly higher, you know, even if you put 50, 50 percent odds on, you know, either candidate than actually getting tax hikes in, you know, in the near future that impact the economy of any size. So then what's the read through not only to inflation, but also to Fed policy at a time where we just had Powell testify on the Hill for two days and continue to signal that he doesn't know when they're coming, but they are coming.

Rate cuts. Yeah. Yeah. And here I'm going to distinguish between, you know, my views on what they should do and, you know, what they're probably going to do. You know, I think from the Fed's perspective, you know, one of the things that we saw in real time was around the turn of the year when they talked about normalizing rates and we looked at sort of the

distance that they could really drop rates between five and three, you know, three, seven, five, all the way down to two and a half percent. In theory, you know, that it rallied bonds to trading well below 4%. And it was, you know, off to the races for the economy. And Powell is making that same mistake now. Six months later, they kind of reverted a little bit. They toughened up their message. They sort of changed the normalization story to say that, you know, that these are kind of like adjustments that we're going to make. Refer to the 1995 green span and all of that.

Markets push out, you know, rate cuts to June and, you know, they don't give a date on it. But then Powell apparently gets nervous today and says, well, you know, we don't know when, but it's going to be pretty soon. And we still have a lot of room. And, you know, it's making the same mistakes. And I think the message is that the economy is wound tighter than what people and economists have been thinking. And the reason is fiscal spending. Well, Saskia Armani, it's great to get your thoughts on this, especially on the eve of another jobs report. Thank you for joining us. Thank you. Nice to be here. And that is going to be one of the key things we do watch tomorrow.

And of course, we've got some overtime movers, too. Yeah, I mean, the market's just been on a tear. And so you look at this job report, you wonder how do investors react to that, given that context? Yeah. And then, of course, weighing that against the AI secular growth story, which, of course, we're seeing play out with Broadcom and Marvell in those stocks right now. That's going to do it for us here at Overtime. Fast Money starts now.