Closing Bell - Closing Bell Overtime: Stocks Sell Off Following Powell Presser 3/18/26

Episode Date: March 18, 2026

Stocks sell off following Jay Powell’s presser. Former Federal Reserve Vice Chairman Alan Blinder explains what the Fed’s latest messaging signals for policy and the path ahead. Micron earnings with instant reaction from CFRA’s Angelo Zino. Venu Krishna, Head of U.S. Equity Strategy at Barclays, talks the broader market outlook following the Fed’s rates decision and the ongoing war with Iran. Craig Siegenthaler of Bank of America makes the case for private credit as a buying opportunity and explains where he sees value in the current environment. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The bell's bringing an end to the trading day at the NYSC. Hayward Holdings ringing the bell at the NASDAQ. SUMA acquisition doing the honors. Welcome to closing bell overtime. We're live from Studio B at the NASDAQ market site. I'm Melissa Lee, along with Mike Santoli. Sox closing lower costs aboard following the Fed decision to leave rates unchanged. The Dowdown nearly 800 points, the SEP 500, NASAC, both lower by more than a percent closing at session lows.

Consumer discretionary and consumer staples, the worst performing sectors. Energy was the best performer, but even it turned red late in. in the session. Melissa, you mentioned we closed at the lows. We also basically closed at the lows for this pullback. That was from last Friday in the S&P 500. Right back there, right back at the 200-day moving average. Last couple days, you and I have been a little properly skeptical of, like, you know, the staying power of these low volume bounces. Now, what does it mean for the moment? Banks still continue not to give you the green light to say that there's nothing to worry about here with this move. We are just, you know, five plus percent off-record highs. It's six months into

this period of no net progress on the upside. And the Fed, I think, was just one more potential savior that didn't come through. It feels almost, though, like a death by 1,000 paper cuts here, because we were sitting here, we're just 2% away from all-time highs. We're just 3% away, and now we're 5.5% away from all-time highs. I thought, I don't know what your opinion was of the Fed News Conference, I thought it was hawkish. I thought there was a moment in time where it really turned hawkish when there was a question about how do you view the reth, the rethru in the economy in terms of inflation of higher oil prices? And he said, well, you have to take a look at the context of it five years above trend, above our target inflation, plus the oil prices.

He then went on to say, you know, the last time we saw inflation, we thought it was transitory, it lasted a whole lot longer than we thought. Yes. And so then you get to wonder, you know, what the thinking is and maybe we are higher for longer at this point. And on the other side, Powell was really unconcerned about very weak job numbers. So he essentially said, look, you know, kind of the break-even maintenance level of job creation is somewhere near zero for private payrolls. That's what we've had recently. And he's not alarmed enough to actually feel as if there needs to be near-term rate cuts for that. So you put it all together.

Bomb market definitely responded to your yields, went back to a new multi-month high. And I think bigger picture, it kind of took away the possibility of what you would call good news rate cuts. right? That was the premise in October, November. We're going to run the economy hot and the Fed's going to have room to cut and you're not going to have to sacrifice on either side. Now it feels as if you might need more weakness or somehow a very sudden decline in inflation to get a little more easing from the Fed. Yeah, let's get deeper into the Fed decision and the press conference where Fed Chair J Powell made comments about his potential future at the central bank as well. Steve Leasman's got all the details. Hey, Steve. Yeah, hey, Melissa, the Fed chair giving a partial answer to a question that we've repeatedly asked him over the months. Does he intend to stay on as a Fed governor after his term as chair ends the answer? Not if he's still being criminally investigated. I have no intention of leaving the board until the investigation is well and truly over with transparency and finality. On the question of whether I will then continue to serve as a governor after my term ends and after the investigation is over, I have not made that decision yet.

So this could be the chair's thinking if he were to leave it would suggest that a criminal investigation, all but called bogus by a federal judge, could hound a Fed governor out of office. And then there's this question. If the criminal investigation drags on and Senator Tillis still refused to hold hearings on Fed Chair nominee Kevin Warsh because of his objections to the investigation, what happens then? Here's what Powell said. If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. So there is some question if that's definitively the right answer. One legal expert I talked to was an expert in the Federal Reserve Act. He believes the vice chair would take over,

but twice before it was worth saying the existing chair has been temporary elected chair by the board. So quite a bit of mystery and other issues unresolved. And that's not even to talk about, guys, what you were just talking about, which is what happens to interest rates amid an historic oil price surge. Well, how did you read the Fed chair's tone today, Steve? Melissa, the way you did. And I thought his answer to my question was an important one where he talked about this issue of how the idea of looking through the tariffs, having inflation above target for five years now, weighs on that decision. And I think it's Mike who said, well, we kind of lost the idea of no easy Fed rate cuts. That's not coming down the pike. The rate cuts are

going to have to be earned and earned by seeing. that inflation expectations are under control, that what's happening and going to happen to the headline inflation numbers are not going into core inflation. That'll be key as well. And you still have this tariff stuff to pass through. And today's PPI numbers suggest there's still tariff inflation coming through, at least at the wholesale level. We'll see what happens to the consumer level. But really the story is this. It's really hard for the Fed chair to say, yeah, we can cut rates because we're making progress to 2%. That's just not in the data. Yep. Steve, thanks. Steve Leesman in Washington. Micron earnings are out. McKenzie Segalis is the numbers there. Mac.

Hey, Mel. Micron shares only have about 1.4% despite a significant beat across the board for the memory chipmaker. Let's start with adjusted EPS in Q2. That came in at $12 and 20 versus the $9.31 expectation, which was already a 500% jump expected going into this. That's on revenues of $23.86 billion versus $20.1 billion expected. That's a 3x jump year over year. Jumping down to Q2 non-gap gross margin, this is a really closely watched metric across the chip sector that's coming in at 74.9% beating expectations of 68.9%. And then looking ahead in terms of Q3 guidance for EPS, $19.15 and $15 plus or minus 40 cents versus $12. and $0.5. Expected. Revenue, guidance for Q3, also a beat.

Coming in at $32.5 billion plus or minus $740 million versus $24.3 billion expected. So a really significant beat across the board. But Micron coming down 1% right now. I'm digging into this report. Mellon, I'll come back to you with more. All right, Mac, thank you. Mackenzie Segalos on Micron. Again, those shares are trending lower right now by about 1.5%.

Maybe just not quite good enough here after this torrid run. 60% run near to date, even. Right. So absolutely, a lot of it priced in. All right. Meantime, let's dig deeper into Chair Powell's future at the Fed and the path of interest rates this year. Joining us now is Alan Blinder. He is a former vice chairman at the Federal Reserve, Professor of Economics and Public Affairs at Princeton.

Professor, thank you so much for joining us. We do appreciate your time. What did you make of the tone of the Fed today? Did you think they were hawkish? That's how the markets are reading this all. Yeah, I think the markets are reading it a little bit. more strongly hawkish than it was. If you asked me which side of 50-50 was it on, I guess I would say hawkish, but not very hawkish. I mean, he made a few obvious points, one of which Steve made

in the previous segment, which is inflation has been too high above 2% for quite a while, and it's not really coming down, and that weighs on the Fed. And we knew that. There's no, there was no news in that. For sure. You know, Alan, the committee's outlook, the dot plot, actually read in the abstract is a pretty positive story, right? I mean, a little bit of a bump higher and expected growth. Yeah, maybe a little more on PCE inflation by the end of the year as well. But we kind of knew that it's going to have to be marked to market. And at the same time, Chair Powell, more than usual even, wanted to just set aside the dot plot.

It said if there was ever one we should have skipped. It was this one, I guess, accentuating how little we have to work on. based on these expectations for how oil and everything else is going to move from here. Yeah, well, I think that was a central point, that we're in the midst of an oil shock, probably not the end of the oil. If we were at the end of the oil shock, that would be something different. But we're in the midst of it, we don't know if it's going to dissipate from here on out or get bigger. You know, people are looking at $100 a barrel as as as high as it could possibly go.

It's not as high as it could possibly go. I'm not going to forecast it, but it could go up, could go down. And Jay Powell doesn't know the answer to that anymore than I do or than the administration does. So there's a huge cloud of uncertainty centered on the oil shock and what else it will bring. In the last segment, somebody wrote up the fact that oil prices won't be just gasoline. It'll seep into other things. And that's right. Food prices, as well as a fertilizer, not getting to farmers by spring planting season,

will reduce yields. I mean, there are numerous ways in which inflation can actually feed through, Alan. And so I'm wondering as... Yeah, anything that moves by truck. Exactly. Anything that moves by truck and particularly groceries. And so how do you read how an oil shock will, you know, translate and how long we'll actually see the full effects of this? It seems like it's a much longer road than what the markets are assuming. The markets are kind of assuming that it's an oil shock. Oil prices will come down themselves, and that'll be the end of it. But it's it feels like it's going to take longer to work itself through the economy. I think it'll probably take a little longer than that.

You'll remember, I remember very much team transitory. Remember that? Yes. It's all going to be transitory. This will be transitory too. But as Jay Powell pointed out in this press conference, that last episode of transitory inflation after the pandemic, in the recovery from the pandemic lasted quite a long time.

It did go away, as was expected. forecasted, but it lasted a long time. I'm no better at forecasting the state of the world war, sorry, in the Middle East than Jay Powell was. But this doesn't look to me like it's going to be over in the next few days. And, Alan, the longer term GDP growth trend was also lifted by, you know, 0.2 percentage points to 2%. That sort of suggests that, that people are building in expectations of a longer-lasting productivity boom. And Powell did kind of weigh in on that a little bit. We've talked about it all the time.

You were there in the 90s when the Fed did not raise rates when it otherwise might have been expected to, given what was considered to be full employment at the time. So how does that play into the overall picture in terms of the Fed stance? Yeah, I thought on the straight economics, there were these other things about him staying on the Fed as president, as chairman pro tem, et cetera. Leave that aside.

On the straight economics, the news was the upgrading of the productivity forecast. They don't give a productivity forecast. They give a potential GDP forecast, basically. But it's driven by productivity. And a lot of people have been wondering when was the Fed staff and the Fed itself, the FOMC, going to write up their productivity growth trend to recognize that it's been doing better than that old number for some time now. And they finally did it. I didn't know when they were going to do it. And they finally did it. And I thought that was the one notable thing. And it, on the pure economics,

and it does have the effect that you said, that it says that the economy can safely grow a little bit faster than was implied by the previous forecast indefinitely. That's the key thing. Indefinitely, not just for a quarter or two. He was reluctant to say or attribute that productivity bump to any one particular factor, but did say that AI could certainly play a role in this bump higher. Since you sort of lived through, that sort of productivity move higher thanks to technology, Alan. I'm wondering how you think about the longer lasting impacts of AI, as you mentioned. It's not a one-time boost.

It's forever. And also, we're just at the tip of things. So it could even be more impactful than we are seeing right now. Yeah, he's the chairman of the Fed. He's careful about walking out on limbs. You don't have to be. He does. I can be a little less careful.

My guess is that this is due to AI, the beginnings of AI. We're talking about two-tenths of a percent per year. That's not exactly a productivity revolution. But neither is it a trivial nothing. And the best guess, it's a guess, is that it's due to AI. If you listen to some of the real boosters of AI, you would think this is going to raise the productivity growth rate from 1.5% to 5% per annum. This is nothing like that. We're talking about 20 basis points on the productivity trend.

Still significant. Alan, thanks to your time. We do appreciate it. Very welcome. Alan Blinder. Micron earnings, as we told you, Jess out. The stock is basically flat after ours, despite big beats on earnings and revenue also to the guidance. But remember, the stock has been a huge winner over the last year.

We'll get instant reaction to the numbers. You're watching Closing Bell overtime live from the NASAC market site. Shares of Lumentum with another big gain today. Morgan Stanley saying the company will benefit its demand for optical components accelerates. And although the firm says Lumentum's valuation is relatively full, it says a market tightness could send the stock higher to 9. 900 in its bulk case scenario, but it's keeping its equal weight rating. It's also raising its base case price target to $595 a share. That's more than $100 below its closing price.

Lamentum is up, get this, a thousand percent over the last year. Another optical component makers, including coherent Sienna and applied opto electronics, have also seen huge gains. The entire kind of AI data center building block trade is just ripping. Well, speaking of which, let's get another little. look at Micron. Those shares moving higher after reporting second quarter results moments ago. The company beat on the top and bottom line and guided for the current quarter way higher than expected both on revenue and earnings. Joining us now to break down the report is Angela Zeno from

CFRA. Angela, I mean, we're talking about on earnings guidance for the third quarter, 150% above prior guidance, revenue, like call it, you know, 35% above prior guidance. So We got a stock reaction, but how much of that was expected and what else are you reading into the numbers here? Yeah, so Mike, thanks for having me. I'd say, you know, the expectation was for a notable beat, which is exactly to your point what we got here for the quarter and especially for the guidance. I think really where we saw the most notable beat was probably on the gross margin side of things. When you look at the guidance for gross margins is that north of 80%. You know, that's absolutely unbelievable.

But, you know, I think what the street is kind of extracting here is saying, listen, that's not sustainable and that's probably right. It's not going to be sustainable long-term. But that being said, what you're seeing here in the quarter is really, you know, the potential earnings, you know, power that you're going to get from this company. I think even from a free cash flow potential, I think more importantly, you know, it really demonstrates what the potential here for this company is going to be here in the next couple of quarters in years. You know, Angelo, recently in, you know, recent weeks, months, we've heard, you know, this time it's going to be different for these guys.

And whenever I hear that, it makes me a little skeptical about, well, why would it be different this time? Because everybody, all these players are building out demand. I mean, Micron itself is in the news just a couple days ago. It's acquiring new clean room capacity from a Taiwanese power chip company. And it's also going to build another clean room on the existing site as well as increasing productivity and capacity here in the United States. I mean, it's adding to its global capacity by the second half of 20. Is that still not enough? I mean, are we at a point where we should be taking a look at how much capacity is being added by not just Micron, but also other players in the industry?

Yeah, I think that's a fair question and concern. I think when you kind of look at Micron here, or you look at you look at why this time might be different, it is the fact that, hey, listen, the epicenter of, you know, the crux of the concern here is really on the data center side. And when you look at high bandwidth memory, which is what the industry is transitioning to, you know, is it by far the most complex product that the memory industry has ever made. And it has significant yield issues. It is a very complex product to make. So when you actually look at the bit output from high bandwidth memory relative to, you know, what you're actually getting out of it, I mean, listen, I think you need a lot more

capacity out there, which is why Micron is investing the way they are. You look at the the cap-x spend. They did up the cap-x number, I think, to north of $25 billion, and they did point to meaningfully increases in the following year. But that being said, listen, I think that's needed in this type of environment. What exactly, you know, when we get to some peak, you know, run rate or what have you, I think remains to be seen. But as we kind of look out here over the next two to three years, when you look at what Nvidia just highlighted in terms of the next-gen servers and the amount of high bandwidth memory you're going to need not only for Ruben, but Ruben Ultra and eventually Feynman, you're going to need to continue to increase that high

bin with memory capacity. And are we in the Invinia zone in terms of it's all about the duration of this demand boom? Because this is a super cheap stock. The problem is, historically, you know, historically you weren't supposed to buy the deep cyclical memory makers when they were super cheap because we thought the cycle was peaking. But now that's a question. I think this time is different in the sense that, hey, listen, the whole street is trying to price in and see when that peak is going to take place. You look at kind of the guidance here for this quarter. I mean, $19, I think, in earnings. I mean, that essentially extrapolates to our run rate of close to $80 in earnings. Well, let's call it a P.E. of a VAB six times on a

forward basis. Clearly, again, the street doesn't anticipate that being sustained, at least in terms of some of the stuff you're looking at in terms of, you know, margins and what have you. But to us, it's all about what the financials are going to look like going forward. I think the street is underestimating the free cash flow potential of this company. The fact that this is a company that looking ahead in prior or next-gen cycles isn't going to have anything near what it's had to experience in the past. They're not going to be looking at negative margins we think in future cycles. We think a mid-cycle run rate might be closer to something, let's call. in the $30 to $40 range and you put a PE multiple closer to 15 times in a mid-cycle PE.

That means that there's probably still upside potential here in this year. The company did increase the dividend by 30%, which, again, is conviction on their end. I think that they expect the good times to continue going here, I think, over the next couple years. Angela, great to get your perspective. Thank you, Angela Zeno. Coming up, we'll turn our attention back to the market reaction from today's Fed meeting. We'll focus on a couple interest rate-sensitive sectors when overtime

continues. Welcome back, Gold, today settling just under $4,900 in ounce heading its lowest level in about a month. It also closed below its 50-day moving average for the first time since August. Materials, one of the weakest sectors with metals names Newmont and Freeport-McMarin, the worst performers. And of course, on Fed Day, Mike, we're taking a look at interest rate-sensitive sectors. Exactly, and ones that are also levered to the consumer real estate. So here's ITB, that's the homebuilder ETF, as well as the regional banks, ETF. Very, very similar shape to these charts. This is a one year. You had a couple of false dons in home builders, but rates have just not cooperated, longer term rates, not a lot of relief on the 30-year fixed mortgage. And then

regional banks, you know, they had really been a leadership sector here for a while, even coming into February, and they've kind of given that up. So again, this is one of those things where the burden of proof starts to build on the overall market, unless these can maybe act a little bit better, particularly the regional banks. Now take a look here at homebuilders relative to a couple of very big apartment real estate investment trust. Now, they've diverged a fair bit. Obviously, there's that homebuilders coming in a little bit. But the weakness in residential real estate, that kind of shows you the softness in rents. In theory, all else equal. That should be helped to the Fed. Shelter's going to be a source of disinflation or it already is. Just unclear if that's

going to be enough, given what's happening with oil. Yeah. This homebuilder chart, though, in just the past month has been, I mean, if we could pull up that chart, has been just a wreck. I mean, it's like down 17 percent or so with yields. Diana was a lot. Diana was a lot. just saying 6.3 percent. Yes. Yields up at these levels. And then you have the combination of concerns about growth decelerating, but also rates staying higher. In fact, Treasury yields going up. And so that's the squeeze that home builders get caught. Time now for a CNBC News update with Angelica Peebles. Hi, Angelica. Hey, Melissa. Luigi Manjoni and his lawyers asked a judge today to postpone his federal trial from

September until January of next year, arguing he couldn't properly prepare for the federal trial because his trial in state court starts in June. Manjone is charged with Gunning Down United Healthcare CEO Brian Thompson in Midtown Manhattan back in December of 2024. Civil rights leader Dolores Swerta, who co-founded the United Farm Workers Union with Cesar Chavez, worked with him for decades on labor rights, accused Chavez of sexually assaulting her in the 1960s. The 95-year-old says she was coming forward now after New York Times investigation detailed a decades-long pattern of sexual misconduct allegations against Chavez, and he died in 1993.

And META is teaming up with attempts to bring creators back to Facebook, launching a program today that it says will guarantee payments and increase reach for creators who join. For the first three months, the creator Fast Track will pay $1,000 a month to people with at least 100,000 followers on Instagram, TikTok, or YouTube, and $3,000 a month to those with more than 3 million followers. That's quite a lot of followers and quite a big paycheck, guys. Back to you. Angelica, thanks, Angelica peoples. Coming up, much more reaction to today's Fed decision and its expectation for one war cut this year and as we had to break. Check out shares of five below. The retail reporting earnings of 431 a share. The estimate was $4 even. Revenue also beat.

First quarter guidance, also seen above analyst's current forecasts. That stock is up 6 plus percent at this point. Overtime. Be right back. Welcome back to overtime. Stocks down big today. The Dow losing 768 points. The S&P 500 fell 1.3%. The NASDAQ down 1.5%. Let's bring in Sima Modi for more on today's move. Sima. Well, Mike, much of the action, as you know, centered around oil, which resumed its upward move as U.S. and Israeli forces struck Iran's energy infrastructure seen by many foreign policy analysts as a significant escalation in the war. Oil prices shooting up, energy stocks, turning negative in the war. the last hour of trade while airlines and crew stocks traded down given their sensitivity to the fluctuation in the price of crude. Consumer Staples also a source of weakness led by General Mills. That company's turnaround efforts still in the early innings in the company's latest earnings report failing to impress investors. That stock closing down 3%. Tech also underperformed.

It was really a combination of semiconductor and software stocks. SalePoint, the latest cybersecurity software name to issue a cautious guide. sending shares down double digits, CEO Mark McLean, telling CBC that its conservatism has to do with the deployment of agents by the enterprise customer and that demand remains strong. Lulu Lemon was a bright spot following a strong earnings beat, really driven by international as its CEO's search and proxy battle continues shares ending up by around 4% on the day, guys. Sima, thanks, Sima Modi. Now to the bond markets, as yields did move higher in the back of the Fed decision. Rick Centellies in Chicago. Hey, Rick.

Yeah, it's a wild day, especially after the statement was read at 2 o'clock Eastern. Let's start at the beginning though. 8.30 Eastern, we had our read on PPI. Look at the year-over-year X food and energy. It was 3.9. That chart starts in November of 23. Why? Because Dees of 23 was the low mark post-COVID on that series.

The high-water mark to get higher than 3.9 was February at 23. That is moving in the wrong direction and set the tone for inflation underpinning most market moves. If you look at twos, tens, and dollar index on one chart, you can clearly see they all move together. As a matter of fact, as we sit at 378 in a two year, it took out its 13th read, which was right around 74. Right now, it's still comping to August of 25. Tenure can't even take out the 13th, 428, much less the high-year close of the year in January at 429, as it hovers of 426. And therein lies the story.

Massive curve flattening again. Why? Because two-year no yields are really firm because of less potential easing. Dollar index. It's flirting with its 13th. Close it. Power 100.36, getting very close.

Dollar has a lot of strength these days. Hasn't been at these levels in nine months. Mike, Melissa, back to you. Rick, any particular kind of trigger levels you're keeping an eye on on either the two or the 10 in terms of what might be a trend changer? Oh, absolutely. And I think you've alluded to it. I don't like these closes above 375 in a two year. On the 10 year, to me, once we start to trade on a closing basis, if we close above 4.30, I would look for an aggressive move right back up to 4.5%. Yep. Rick, thank you. Rick Santelli.

Thank you. WTI crude oil prices creeping back closer to $100 a barrel today. Pippa Stevens, got the details there. Pippa. Hey, Melissa, WTI settling around 96 with Brent ending the day at 107.38, its highest settle since July 2022, before rising here to 111 in extended trading. A big move, but not on par with the wild intraday swings we saw at the start of the war, as we get more clarity around which ships are getting through and how many barrels are offline. But the trend does remain higher.

We are keeping an eye on gas oil. which is European diesel. With today's move, prices have now doubled on the year. But Nat gas is in focus after Qatar Energy said just a bit ago that its Rassafan plant was targeted by missiles and suffered, quote, extensive damage. The Middle East supplies about 20% of global LNG, and virtually all of it comes from this one specific plant. Now, we're still waiting on clarity from Qatar Energy on which portions of the plant were struck, since there is more than just LNG within the complex. But Susan Sackmar, director at Flex, LNG, said this is a potential game changer and could eliminate what was going to be an oversupplied LNG market.

Qatar Energy was also in the process of a major expansion of the Northfield, which does supply the gas for Rass LaFan. Nearly 90% of that LNG does head to Asia, where prices are now rising. JKM at $19 per MMBTU with Europe right around 1850. That means that some cargoes initially heading to Europe are now U-turning and heading to Asia instead. Today in Egypt, they announced that it is their cutting energy use as the country contends with soaring fuel costs. Guys? I would imagine what happened to Raslafan also is impacting the helium market. I mean, if you're really taking off LNG, you're really cutting off helium supply as well.

That's right. And the third of helium supply does come from the Middle East. Much of it from that plan, of course, produced alongside the LNG there. And it's not just LNG, it's, you know, and helium. It's also petcams. It's all of these other product markets, things like polyethylene, all of this plastic production, all of these things are going to be impacted. And then you combine that, I should say, with the rising cost of diesel.

I mean, gas oil doubling now on the year. It's going to be inflationary really across the board for consumers here. For sure. Pippa, thanks for running through it all for us. Well, Fed Chair Powell today addressing oil prices at his press conference saying the impact is uncertain. Markets selling off today in part because the Fed signaled only one cut this year. But could the oil-driven inflation risk even threaten that single cut? Joining us now is Vinner Krishna. He is Markley's head of U.S. equity strategy.

It's great to see you. What have we accomplished in the equity markets with this period of unsettled action, repositioning? Obviously, sentiment has had a little bit of a turn for the more negative. And obviously, we're also trying to see if we have some support here on the S&P. Sure.

I think the market has grown cautious and rightfully so. You see that in the cash market, you see in the derivatives market, and you see it in the rotation in the equity market, right? So initially, the year started with a rotation away from tech into pro-cyclical areas, and now the rotation is more into energy-sensitive areas.

So in other words, where energy and materials are input costs, those areas are taking a hit, like in construction material, airlines, and things like that, and even some parts of staples, because that's more of inflationary pressure and whether or not these companies can pass through costs in such an environment, right? It sounds like a pretty small base on which to have the index rely if we're talking about that relatively, you know, skimpy sectors like energy and materials.

Right. But I think the bigger issue, what you've seen more recently is that tech again is getting some stability. Software has rallied. Samuance again picked up pace. And that's partly, I think, if you again take a step back and look at the earnings and what we learned from there. This market is being kept afloat by the strength of earnings of mega-cap tech, and more importantly, more recently in this quarter, the rest of tech. And where earnings grew more than 22%, tech itself more than 28%. So those are incredibly strong numbers, which are being balanced, on the other hand, by the incredible amount of capital spending, which is putting some sort of a concern in terms of the capital intensity of the business going forward and the magnitude of returns. you would need to see more earnings acceleration to justify that kind of sustained spending. Right. And you need presumably a good economy for that earnings acceleration in technology specifically.

I mean, as you are getting more cautious, as your counterparts are getting more cautious, is this because you're now factoring in the price spike or are you now factoring in a longer period of inflation because of these price spikes? I mean, Chair Powell, I think what was underscored in the conference, press conference, was that inflation can be much longer, even if it is a price shock. And that's what he said. And he seemed to just acknowledge that maybe he was too late. I mean, I don't want to put words in his mouth. But that transitory was not the right call, and transitory was much longer than what he thought.

Right. And to some extent, that is a risk given this time. So if you look at markets in aggregate, we are down only about 2%. There's a lot of underlying movements which are happening, which we just discussed. What the market is telling you the expectation is still is that there will be a resolution on this war. in the near future. So call it three weeks to six weeks. If that is the case, then I think we are fine, which is still our base case. Because if we take a step back again and look at the earnings momentum, the revisions, the tech earnings power, the capex cycle, and the capex cycle expanding

beyond AI into defense, energy, right? All those are very strong in the backdrop of a relatively resilient consumer spending. So I think the earnings outlook and the U.S. outlook, which, by the way, is more energy independent compared to Europe or Asia is really strong. The biggest uncertain or unknown is how long is this crisis going to last? Should it linger for much longer, then the related impact on inflation and potentially on growth is what will break the market, but we're not there yet. That's not a base case. You just have to keep your fingers crossed.

It's such a small window that you're talking about. The cloud is ticking. Exactly. So whether or not we're going to tip into something worse that will impact earnings. But if you look at all the geopolitical risks over the last five to ten years, they've all been contained, and they've all normalized relatively fast. So we have become, let's say, immune to geopolitical risk to some extent. So market will tell us or time will tell us whether we are pampered or the world is different today. And are you looking for anything in the way of the near-term action?

Because markets can lose patience waiting for the resolution. The near-term action just getting either more disorderly or being so bad it's good, looking for that kind of climactic moment when it seems as if a worst-case scenario has been discounted. Unfortunately, the climactic moment is going to come with the kind of actions taken in this war. So yesterday, the escalation by hitting infrastructure and, you know, points in Iran is an escalation. And they are obviously reacting, and this has already spread beyond typical narrowness of geographical. geopolitical issues. We are into Oman, Bahrain, Saudi Arabia, UAE, Qatar, right? The list is pretty extensive. And so the implications for global growth is quite dramatic. And I think that's why, and the biggest trick over here is that nobody, absolutely nobody knows what the end to this is.

And until you get a decisive look into that direction, it's tough to make a call other than saying be cautious. So what we are saying is stick in large caps, more towards value, right? So do the kind of things. Stay away from momentum in the short term. And that's the way you protect yourself. And stay in big tech, because it's also big quality. Sure.

You know, great to talk to you. Thank you. Mr. Krister. Up next, the top analyst reveals the one name in the private credit industry he thinks is a fire sale buying opportunity after funding nearly 40% over the last two months. Plus, we'll discuss whether the industry's problems are really as

bad as they're being portrayed in the media. Welcome back to overtime. Private Credit stocks have been hit hard this year amid rising concerns around redemptions and AI disruption. But our next guest believes some of that pressure may be driven by overblown media coverage. He joins us with the one name in the industry he thinks is now a fire sale buying opportunity. Let's bring in B of A Security Senior North America Asset Managers analysts, Craig Seagenthaler. Craig, great to have you with us. Thanks for having me on.

It's our fault. It is our fault. We're stirring up the hype around. private credit and it's all wrong. What is the media getting wrong? Why do you think it's hype? Why do you think we're obsessed with it? That's what I think. Number one, I'm not blaming the TV media. But number two, it's generating a lot of clicks. It's getting a lot of interest. So these are companies that have grown a lot. And these are companies that are making a lot of money. And so I think there's a lot of interest around them. And because it's private and it's new, I think that brings the

question mark that drives the interest. Why does areas stand above the rest? All of them have been decimated in recent weeks. Aries great management team, very fast growth over the last decade. It was actually a pretty expensive stock a year and a half ago. It is a very attractive valuation today. It's trading at a two standard deviation discount to the five-year average. It's a 6% dividend yield. And this is a company that's grown earnings like 30% plus per year over the last five years. It's the number on private credit business in the world. Their major fund is a public BDC called ARCC. It's had a 14% net return per year for 21 years through the GF set. So the very thing that creates a lot of the attention and the scare headlines, which is that

not everybody who seeks to redeem their money is able to do it all at once, is the thing that kind of protects these funds, because obviously, you know, they don't have to sell things overnight and don't have to take bad marks necessarily. What does that mean? though, for the longer-term growth trajectory of the asset class for the wealth management channel and things like, I wonder if that's part of what's happening here is you mentioned this category grew a ton. Well, it grew a ton by them seeming like everybody had to have a piece of it. Is that slow down in the future? So there's three channels, institutional, insurance, and individual. And the insurance and institutional channels are still growing like clockwork.

So there's demand there. The retail channel will be very pro-cyclical. And This looks a lot like what happened with real estate three years ago. The only difference now is private credit hasn't underperformed. It's actually done 12% a year per year for the last three years, 8% last year. Now, you're going to see returns get a little lighter this year, maybe 7-ish percent. It's not actually bad. So the entire fear is two things. What will happen in the future and rising redemptions?

The good news is the rising redemptions already happen. the limits are already pulled. So if you were a hedge fund and that was your negative, that was your negative kind of short thesis, it's over. It already happened. These funds will be limiting for the next couple quarters. Apollo is talking about increasing transparency of its funds, providing NAVs, I think, on a monthly basis

and eventually moving even more often. Is that going to be an advantage or is that just a real disadvantage for the space? Because for so long you didn't want to do that, right? Yeah. transparency is good. You know, if you think over the last year, the Trump administration had an executive order to bring ALTS into the 4NK channel. That includes private credit.

So private credit was, you know, on a path of getting much bigger. Yeah. To do that, you need pricing. You need daily pricing mechanisms. So I think are you talking about investment grade private credit where for Apollo that makes sense? Or are you talking about non-investment grade private credit where the returns are much higher? That's where the redemptions are up right now. I see. Are you completely willing to set aside the more cyclical concerns about whether we're at the front edge of a down credit cycle with regard to software or any other of these holdings?

Yeah. So here's why I'm not worried. Over the last 30 years, the only time you've had losses go up or defaults go up, two things happen. One is a recession. So GFC and COVID. And the other thing you'll see is a rise in negative marks. Now, we haven't seen either one of those yet, so I feel pretty good at this moment. I don't know what it's going to look like in a year. We could be in a recession. But, you know, because of that, I feel pretty good. Now, on the software side, just remember, these loans are only two-year durations. The LTVs are down at 30 percent, and there's a good private equity firm in front of them, Silver Lake, Vista, TPG.

So, and even if the private equity investment's bad, there's still a nice big cushion to get down to the software loan. And many of these software contracts, they're two or three years. And these investors aren't dummies. They're smart investors. They have to have a zero before there's a penny of loss for the private credit manager. Right, yeah. They're smart, but they haven't foreseen, I think, maybe the potential damage that AI can take. And I feel like the comparisons to the Great Financial Crisis, they're interesting, but it's not the same.

The Great Financial Crisis didn't attack the business model itself. It was a period of financial duress, which would pass, and their business models would remain intact. here you have something, a threat that's actually threatening the whole business model of a software company potentially. So AI disruption has been coming up in our conversations on the private side for like five years. But it's like the public markets did not pay attention to the clawed launch. Like everything blew up year to date. But like we've been kind of talking about this in the background. It's been in podcasts.

It's not a surprise. So five years ago, these private equity firms, like they were aware of this. They know what companies are defensive. They know which ones are targets. and they've been investing around this for many years, they didn't wake up on March 1st and say, oh, no, AI disruption's happening. Right, or with the Satrini Report or whatever it is.

Yeah. Craig, good to speak with you. Thank you very much. Thank you, guys. See you, Gantala. All right, well, Micron shares are volatile in after-hours trading, despite a big earnings beat, strong guidance, find out what management's telling analysts on the call straight ahead.

And as we head to a break, check out some notable names hitting 52-week lows, including Brown Foreman, Conagra, General Mills, McCormick, and Campbell's, if you can eat it or drink it, at 52-week lows, which the latter hit its lowest level in nearly 23 years. That's Campbell's. Closing Bell Overtime, live from the NASDAQ market site. We'll be right back. Welcome back to Overtime. Let's get another check on Micron. Shares down about 1% at the moment, and the call with analysts is happening right now. Mackenzie Segalos has the highlights, Matt. Hey, Mike. So shares have been pairing losses over the course of that earnings call with CEO Sanjay Marotra,

saying that AI demand is pushing data center memory to account for more than half of the total addressable market for data centers for the first time, and that memory has been, in his words, fundamentally recast as a defining strategic asset. He added that demand is outpacing supply for memory trips across the board, and he expects that squeeze to last through 2026, which is good for Micron, because it means they can keep charging more. Now, part of what's driving that, memory companies have been shifting production toward high bandwidth memory, the chips embedded on Nvidia's GPUs, among others, carry higher margins. But the Micron CEO also warning there is now a lack of adequate supply

for traditional memory products as conventional server demand picks up for magentic AI workloads and a broad-based server refresh cycle. Mike? All right. Mack, thank you very much. Yeah, I mean, obviously a huge secular story. We'll see if the street can take hold of that. Market caps of $525 billion at this point, which is just out of nowhere almost. It got huge in a hurry. That's going to do it for overtime tonight. Fast when it begins right after this quick break.