Closing Bell - Closing Bell Overtime: Stocks Sell Off In Final Hours Of Trading 4/4/24

Episode Date: April 4, 2024

Stocks tumbled in the final hours of trading. We have you covered from every angle. Wells Fargo’s Scott Wren and Vital Knowledge’s Adam Crisfulli on the market action while Apollo Chief Economist Torsten Slok breaks down the Fed’s part in this. Plus, Thomas Kennedy, Chief Investment Strategist for Global Wealth Management at J.P. Morgan on how he is telling clients to handle the recent volatility.

Well, geopolitics and fears of fewer rate cuts sparking a late-day sell-off as the Dow falls for a fourth straight session. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, stocks giving back early gains after Minneapolis Fed President Neil Kashkari said the central bank may not cut rates at all this year if inflation keeps moving sideways. Healthcare and tech leading the sell-off, but every sector in the red this afternoon. Let's get to today's action with our market panel. Scott Ren of Wells Fargo Investment Institute and Vital Knowledge founder, Adam Crisafulli. Adam, I'm going to start with you. Kashkari, we had a lot of sped speak the last couple of days. Kashkari floated. He basically

said he thinks two cuts, but floated the possibility that we could get no cuts this year. He's not a voting member. How important to the market in the South we saw this afternoon was that versus some of these headlines, some of these reports that are circulating about Iran considering retaliation or some sort of action against Israel, and we'll call it flaring tensions in the Middle East. Yeah, so I think, you know, I think it's important on days like this to kind of separate out fundamentals from technical conditions. So I think technically you had a complacent market, you had an expensive market, you had a crowded market.

All of that is the kindling for these types of real sudden, sharp moves lower on a day where there really, in my opinion, wasn't a ton of dramatically incremental news. Cash carry remarks were notable, but there were comments from other Fed officials that were kind of on the opposite end of the spectrum. So Goolsbee, you know, almost said the opposite, whereby he wasn't concerned about recent inflation and he still was kind of on track with three cuts for the year. Most Fed officials, even Powell yesterday,

are still kind of conveying a message that the Fed is likely to move three times this year at 75 basis points worth of cuts. So I don't think it was so much Kashkari. And you actually did see Fed expectations move in a dovish direction today modestly. But the lack of a big real material rally in Treasuries, I think, is insightful. And it suggests that, you know, this really wasn't a dramatic fundamental reaction in stocks. It was more kind of just a technical move of a market that, like I said, has been kind of a little complacent, a little rich, and pretty crowded.

Oil played a bigger role psychologically. It did have that big spike around 130. You know, there were a lot of headlines out of the Middle East. I wouldn't say there was a lot of real dramatic developments. But certainly geopolitical tensions, not just in the Middle East, but in also Russia, Ukraine, and the movement of oil, that's playing a role, not only on the inflation front, but on the consumer front as well. And, you know, probably one of the more notable developments came in the morning out of the Lamb Weston, where they talked about one of the reasons they had such a dreadful quarter was, you know, softening traffic from their restaurant customers. And that's consistent with what we've heard from a variety of different retail consumer linked companies over the last several weeks.

There does seem to have been a shift in the consumer on the downside. That's definitely going to be something to watch. Yeah, we heard that from Ulta earlier this week, PVH. You could argue that you saw some slightly softer commentary coming out of Lululemon as well. Scott, you're cautious on equities here. How do you position yourself, especially when we're just over a week out from the start of earnings with banks? You got jobs report tomorrow. You got all this Fed speak and now layer on geopolitics on top of it. Yeah, you know, Morgan, I mean, in my opinion anyway, I mean, I think the Fed speak that we've heard, which we've heard a lot, it's been from the same script.

I didn't really hear anything different, whether it was what Powell said yesterday or Neil Kashkari said today. I think today was largely about geopolitical tensions, you know, imminent Iranian, you know, repercussions, Israel putting their embassies on alert, oil going up. I mean, that's a big deal, and I think that's really what drove the market today. Of course, Fed speak always, you know, has at least some influence. Tomorrow, we obviously have a big number here. And if the number comes in the right way, which is not too strong for tomorrow, you could see this whole move today reverse. So I think in the meantime, you still have to think about valuations being high.

You still have to think about, what could I do now? Well, you know what the high flyers have been over the last 12 months. It's tech, it's comp services. In our opinion, you should be trimming those positions back to neutral because if you've been riding them, you're overweight right now. And you need to be looking at things like materials, industrials, healthcare, energy. Those are things, some of which have done very well in the last month or six weeks. Those are some things we think have some potential. So would we buy the S&P here as a whole? We would not.

But I think there's some things under the surface that you can be doing. But overall, we do think after this huge run we've had off the October lows, I mean, it'd be nothing to cough up, you know, 5%, 7%, something like that. I mean, today's reversal was nothing. I mean, you know, a percent in the quarter after the run we've had. So I think you have to be a little bit careful here. You have to look for opportunities. You have to operate a little bit under the hood. But overall, you know, let's face it, equities aren't cheap. Okay, Adam, so we can argue about who woke the baby and set the major

indices down. You know, was it geopolitics? Was it Kashkari, et cetera, et cetera. But bottom line, I wonder, is this perhaps a preview of what happens tomorrow if the jobs report is kind of hot? Yeah, definitely. Like I said, I think technically in the near term, markets are vulnerable. You know, I don't think there's been a dramatic change. I don't think there's going to be a, you know, a crisis going forward. But, you know, a very modest pullback, 3%, 4%, 5%, getting the S&P back to around 5,000, you know, it's really not that dramatic a move at all. And I think that would help resolve some of the excesses. But, you know, we've had mixed data over the last couple of days.

We had a very hot manufacturing ISM. We had a very hot manufacturing ISM. We had a somewhat cooler services ISM. There does seem to be an inflection point happening in the economy whereby manufacturing goods, which have driven a lot of the deflation and disinflation for the last several quarters, that process appears to be coming to an end, which makes it incumbent on services and shelter, housing, to really start to do more work on the disinflation front. And we saw a glimmer of hope in the services ISM. You had a big, sharp drop in the prices component. And we'll have to see if we see more of that in the data going forward.

The jobs report is important, but the CPI on Wednesday, that's really going to be crucial. I think for the jobs number, the last several months, it's kind of a Rorschach test. You can you can really spin the numbers if you look at the household or the establishment or the wages or the work we point. It's hard to get kind of a firm read, but inflation is really what you should be looking at closely here. All right. So, Scott, I know we can say that the overall index index moves aren't that big. But beneath the surface, AMD was down 8%. Square was down 6%. Supermicro down 5.5%. Affirm down 4.5%.

Salesforce down 3.5%. Both your more big momentum names and also some of the smaller risky names seem to take this on the chin particularly. What does that tell us? Well, I just think, John, you know, when you're a little bit nervous, when you've got some things going on that could, you know, go either way over the course of a couple-day period, I think you're going to take a little money away from your winners.

And I think that's what the market did today, and I think that's a common reaction here. So do I think that technology is not the place to be? Absolutely not. We're neutral at right now. But believe me, we're looking for opportunities to get back overweight technology. So I think it only makes sense that when you're a little bit nervous, whether it's Middle East tensions, whether it's, you know, the Fed's going to keep rates higher for longer, which is totally not new news. You know, you're going to take a little money off the table,

and it's going to be from the stocks that have worked for you. Makes sense. Scott Wren, Adam Christofouli, thank you both. Well, we've been talking about it. Tomorrow's highly anticipated March jobs report could be even more important following Minneapolis Fed President Neal Kashkari's suggestion that the Fed might not cut rates at all this year. Steve Leisman joins us for a look at what those results could mean for the Fed's rate cut strategy. It's not as if everybody on the Fed said this. Opinions are like all over the. What does this mean? But, John, you know, the part about saying the quiet part out loud that's implied by others. Let me talk about this. It was a week, John, full of Fed speak.

We asked Fed President Neil Koshkari, making one of the more hawkish comments just this afternoon, saying that if inflation continues to move sideways, he wonders if the Fed should cut it all. Now, 17 of 19 Fed officials are forecasting at least one cut this year, but two are not. Koshkari had said in early March that he saw a maximum of two cuts this year, so no cuts doesn't look to be his base case. At least it wasn't a month ago. Unclear if his view has changed. Still, there's been a torrent of Fed officials saying the Fed should cut,

but can take its sweet time about it. Barkin saying this afternoon, smart for us to take our time. Messner saying she anticipates cuts later this year. Harker saying inflation is still too high. Powell said at some point this year, the Federal Reserve will be cutting. Only Google's been making sort of out-and-out dovish comments saying employment could deteriorate if we stay restrictive for too long. Now, all of this is inexorably linked to the jobs report tomorrow, where the Fed is hoping for some slowing, but it's increasingly pointing to higher immigration as boosting the labor force. So think about it this way.

A number around 100,000 starts to raise questions about whether the job market is weakening faster than we thought. And that concern about Goolsbee is one worth thinking about. 200,000, that's the consensus. That's the sweet spot. Essentially, the market's ready for that. And then start thinking about a number north of 275, causing some concern the job market remains too hot and too tight and that wage inflation remains a threat. Remember, though, many Fed officials are less concerned about these big payroll gains than to see these as they see these gains coming from unexpected immigration. It is actually the

wage numbers that you want to look most closely at. I think that's the key to the jobs report tomorrow, suggesting labor market is still tight, still inflationary threat. All right. When we start talking about geopolitical tensions, which I realize is always sort of its own morass of possibilities, it seems to me that that just adds to the potential case that the Fed has has to sit on its hands and take more time to make any kind of rate cut decision. You know, this afternoon was a very complicated trade, Morgan. I think you saw it as well. If you look at the tail of the tape, the market was coming down. That might have been because of those geopolitical concerns. Then Kashkari speaks, takes another leg down right when Kashkari speaks. At the same time,

Scott Rand is 100 percent right. Probabilities of Fed rate cuts actually increased. Two year rallied. The yield rose. The 10 year rose. A lot of what looked like was happening this afternoon looked like a flight to safety. I was looking at and I don't know what happened to gold. That would be of interest to me. That would be another indicator of a flight to safety. It looked like geopolitics was more the proximate cause of the fear this afternoon than the Fed. But I do think it's important to think about what Kashkari is saying, because in answer to John's question, other Fed officials didn't say it, but it's implied, John, if you don't see the progress, you ain't going to see the cuts.

All right. Well, let's bring in Mike Santoli to the conversation. Mike, what piqued your interest in the way the trade played out? Well, just first of all, that we did close on the lows and that you didn't see the normal kind of mechanized dip buying that you have seen, you know, before we got to a 2 percent decline. So that at least raises the possibility that maybe the character of this market just slightly changing, widening out the bands of volatility, whatever the cause. And I think it was this whole subset of causes that fed into a market that was in search of an excuse to register some concern

about a variety of things. So that, to me, is the thing. Maybe the market, you know, is sort of, at minimum, seems a little bit capped right here until we get to earning season or even beyond that. And then I think, you know, I agree in general that there's this sort of two way swing possible in terms of interpreting the jobs number. But I think the bigger concern is always weakness

because you're already at five and three eighths on the Fed. That's a big change. You start to see if you start to see the the economy weaken further, it won't take long before people say Fed's already too late. I don't think we're at a critical moment and all that just yet. But for a market that's in search of reasons to worry after it hasn't worried about much at all for three months, I think that's in the mix. Steve, what if we get a strong jobs number and tame wages? I think that's OK. If you look at all this talk about immigration and the way that they are, look, it was about six months ago I started doing- Are we talking about legal immigration or illegal immigration? Yes. Okay. Yes. We don't know exactly where the bodies are from and there is some question as to whether or not we're counting it correctly. It's a complicated thing, Morgan, as follows. Companies may believe that it is better

or is less punishment from keeping an employee off the books than it is to hiring a person illegally. In other words, okay, I will pay you. I'll put you on the books. You may not have the right documents, but I'll hire you, but I'm going to report that you are hired. And so it may be that a lot of illegal immigrants, people who are here, not legally, I guess, or who snuck in, whatever, are on the books. It could be that's the case. In any event, the key is that, did a story six months ago, the ghost workers. We were hiring routinely 100,000 more people than we technically had bodies. In some cases, 200,000 more people. Where did they come from? The CBO and now other Fed officials are coming to the conclusion it has been the surge in immigration, some of it legal

and some of it not legal. But I just want to make one more point to what Mike said, which I think was critical. Mike, it is a very big change from a market that is more worried about weakness in jobs. Remember, we used to sit there and we would bite our nails. Maybe you didn't bite your nails because you're so calm, cool, and collected. But bite our nails over the possibility of strength in the job market and the job market being too strong. So things have really changed in the last, I don't know how many you want to say it, but maybe three or four months. I agree with that, Steve. And the reason I think it's changed

is that the Fed started to realize that inflation had come down enough that all they needed was the inflation to cooperate. They don't need to actively loosen up the labor market or really restrain the economy in a severe way. That's what they told us. That's the way they've seemed to behave. That seems to be what their guidance implies. And for that reason, you could kind of celebrate a

better economy as long as inflation was doing what it was doing. This is a change. And now we have the possibility of, you know, maybe having a little bit of static from both those messages, inflation and growth. This is a change for the Fed where they need to write the book, How I Learned to Live with Growth and Not Worry About It, or whatever the title of that of that old book. They need to read the book from 1995 because at a different unemployment rate level, that's what they did then, too. Exactly. All right. Well, we'll get the next chapter pretty soon. Much more on this late day at market sell off and how to protect your portfolio when overtime returns. Stocks closing lower today, losing their gains from earlier in

the session. And joining us now is Tom Kennedy of J.P. Morgan Private Bank. Tom, good to have you here on set. So you say embrace the rally. That's no matter what the number is tomorrow morning. No, I think we do need to see continued job growth tomorrow and wages continuing to moderate. That's what we're expecting to get. What kind of job growth, though? Like a lot of growth or just kind of good? Or does it matter? I think we're expecting to see around 200,000 jobs added, which is if we roll it back a year ago, we would have said we needed lower demand than that. But with the immigration surge we have seen in America, we're seeing continued job demand, payroll gains. And it helps explain why the household survey and the unemployment rate

and what we're seeing in the payroll survey can diverge for a period of time. We're getting a new surge of immigration into America, which is helping keep growth high, and inflation can still moderate at the same time. What about small and mid-caps, the stuff that's not the mega-caps? You say to expect a broadening, but it doesn't seem to stick around for too long. Yeah, I think the broadening, I hear that. We are seeing a broadening happen so far this year, particularly since the end of January. I think that broadening is going to continue. And in mid-caps, what can we really find in there? A little bit more cyclicality, an economy that can still rebound despite rates being high. Still think you want quality companies in there. Cheap valuations. And I think a nice tail

wind from government spending in the industrial sector. Okay. We had stocks on the day lower. We had bond yields move lower. We had the dollar strengthened against certain currencies, although not the yen. And we had gold. Yeah, gold finished the day lower as well, but down fractionally. Bitcoin actually moved higher for what that's worth. I mean, we were just having this conversation with Steve and Mike about the fact that perhaps it was geopolitics that contributed even more than Fed speak to the late day sell off we saw here. To me, I say this a lot on TV, but geopolitics is like supply chain. Investors don't care until they have to care. Is it time to care?

I don't know if it's time to care just yet. I read the price action the same way you did, though. Looking at what stocks coming down, bond yields across the curve coming down, it looks a little bit inconsistent with a reassessment of the Fed or a reassessment of payrolls tomorrow. So geopolitics is there. This has been that lingering worry in the in the background. I'm totally with you. And when we see the whites of the eyes of that, it might be quite a concern. When you look at the stocks under the hood, the ones that are selling off the most today have been your high momentum stocks. And is that the first place to pull back in a geopolitical shock? Maybe. Is it time to worry? I'm not convinced yet, but the price action today is

consistent with what you said. I agree with you. Okay. So buying opportunity here, or when you start looking at the technicals, we potentially see this pullback get a little bit steeper before it normalizes, assuming everything else kind of plays out the way investors would like it to play out. Yeah, I think on the geopolitical risk is something we worry about, but we are humble enough to say, I don't know that I have an edge there. If we do get a material pullback, history tells us that won't be particularly long lasting. So it could be a great buying opportunity. The broadening out that we are expecting is one that respects the AI trade and that has powered this world.

But if we can get that soft landing and the Fed can cut rates the way we think they will and we think they should, the broadening out makes the most sense. Cheap valuations and earnings upside. side. What does respect the AI trade mean when so many of the obvious AI plays like NVIDIA, Broadcom, Supermicro are already trading at very healthy valuations? Where do you look for true opportunity? I think you're seeing the AI trade go through four phases. The first is the hardware necessary to make AI real. Think of some of the names you just mentioned. The hyperscalers. These are the ones that are going to bring AI to our desktop. Then you're going to move into the energy needs. You're talking about a GPU versus a conventional CPU. What powers your computer? Five times more power necessary. And then we should see productivity broaden out. Those are my four phases.

The market is really respecting those first three. You're seeing no impact or the market price, almost no impact from productivity. There's a broadening out theme there as well. So what are you really looking for the next phase, which I think we're in the hyperscaler and the energy phase? What's the date we get to productivity? Not sure just yet, but I do think it's going to be quicker than maybe what we saw in the computer revolution. Okay. Tom Kennedy, thanks for joining us on set. We mentioned stocks lower today, but also on pace, the Dow on pace for its worst week in more than a year. Up next, Apollo Global Management Chief Economist Torsten Slocke reacts to the rate cut comments from Neil Kashkari and others today, what it could all mean for the market and for the economy.

Welcome back to Overtime. Geopolitics and fears of fewer rate cuts sparking a late day sell off. Joining us now, Apollo chief economist Torsten Slock. Torsten, it's always great to speak with you. It's like pick your poison. There's so much we could we could talk about here, whether it is geopolitical impact on markets and potentially on the economy and all the uncertainty that that brings with it, the interconnectedness of that with the Fed and some of the commentary we've gotten, including from Kashkari, who's a non-voting member earlier today. And then, of course, jobs report tomorrow. How are you assessing all of this data? What does it mean for the picture for the U.S. economy? Well, I think that the most important thing to keep in mind at

the moment is the significant easing that we have had in financial conditions since the December 13 FOMC meeting. Credit spreads are a lot tighter on IG, on high yield and loans. Issuance in IG and high yield was the highest in January, February, and March that has been on record. We have significant tailwind to, in particular, the consumer, but also cap expending from this easing in financial conditions. The easiest way to think about it is that the market cap of the S&P 500 is about $44 trillion. And we had a 25 percent increase in the S&P since November the 1st. That means that we have added $10 trillion to household balance sheets in the form of wealth.

It's really difficult to see how this cannot be positive for consumption. So, therefore, the broader backdrop for this Fed commentary, where we're seeing more and more backtracking, where more and more FOMC members are saying, well, maybe we do not need all these cuts. It does make complete sense, given the very significant tailwind from easy financial conditions. Yeah. I mean, we know the Fed has a dual mandate and markets market performance is not one of them. But to your point, the easing of financial conditions, is that something you think Fed officials are welcoming or you think is making their job harder right now as we do see inflation being a little bit stickier than everybody had expected? And given the fact that we are starting to hear some of these comments from folks who maybe are not voting members of the Fed,

but are tied to the Fed in either directly or indirectly, basically saying, hey, maybe it's not going to be three rate cuts and floating that out there in the market. You're absolutely right, Morgan. That's a really important question, because I don't think it was the Fed's intention to ease financial conditions. I don't think the Fed, when they began to say after two years of saying rates are going up, up, up, up, up to suddenly in December saying, well, now rates are going down. But think about it for the two years when the communication was saying rates are going higher or we were wrong rates are going higher or no rates are going higher. Then everyone was sitting on the fence. That was very little IPO activity, very little M&A activity. Credit spreads were wobbling around because there was not this strong message from the

Fed until the December FOMC meeting. So this is, I call it, an unintended consequence of the switch from a long time of being hawkish to now being dovish. And that unintended consequence has this tailwind in particular to consumer spending, but also to M&A activity, capital markets activity. And that is why it's not surprising that data on nonfarm payrolls for the last two months has been strong. It's really not surprising inflation has been strong. A lot of people say, oh, these are just statistical flukes. But is it really just a statistical fluke when you have both employment being strong, inflation being strong, jobless claims being low?

The data tomorrow, if we get 200,000, it will still be a very strong tailwind to the growth outlook. OK, so given all of those positive numbers that you cited and how overall good things look, what is most in danger of breaking if there are no cuts this year? Yeah, that's really important, John. And tomorrow we'll get a very important piece of evidence in that puzzle because this immigration story has created this idea that, oh, employment growth can be 200, maybe 250,000 and wages can still go down. So tomorrow we will find out if that's true. If tomorrow we get 200,000, which is what the consensus expects and wages do go down,

well, then maybe the immigration story is true. But if we tomorrow get 200,000 and wages actually begin to go up, that can, to your question, begin to cause a lot of trouble for the market because then the market will say, well, maybe inflation is not completely under control. So we will get a first step in the answers to that question tomorrow by figuring out what's going on with wage inflation will be by far the most important indicator in the report that's coming tomorrow. You know, we're going to be all over it here on CNBC. Torsten, thank you. Thank you. And now it's time for a CNBC News Update with Kate Rooney. Kate.

Hey there, John. A federal judge, Eileen Cannon, rejected former President Trump's argument today that his classified documents case can be dismissed on claims that he viewed them as personal records. Trump's legal team argued that the Presidential Records Act shielded him from prosecution. CBS Caremark, meanwhile, will cover the over-the-counter birth control pill, the O-pill, in the U.S. at no cost for many of the plan's sponsors, making it easier to access oral contraception as reproductive rights continue to be challenged in court.

That's according to Bloomberg, citing a pharmacy report. There have been concerns about the affordability of the O-pill when the FDA cleared it for non-prescription use last summer. And British billionaire Joe Lewis will avoid jail time for insider trading. A federal judge in Manhattan sentenced Lewis this afternoon to three years of probation and a $5 million fine. The billionaire pleaded guilty to fraud charges in January for sharing stock tips with friends and associates. Back to you guys. All right,

Kate Rooney, thank you. Up next, we'll discuss whether metals like gold and copper are a safe haven for our investors right now. And because you love the show and you want even more overtime, scan the QR code that's about to pop up on your screen and follow us on LinkedIn. Don't make me a liar now. Oh, there it is. Where we'll post exclusive content. And while you're there, you can check out a new Financial Literacy Month campaign that I'm a part of, brought to you by CNBC and The More You Know. Overtime, we'll be right back. Welcome back. There have been a lot of geopolitical reports and some rumors swirling this afternoon, some speculation.

Eamon Jabbers joins us from Washington, D.C., with what we do actually know and have confirmed right now. Amen. Hey, Morgan, that's right. Some concern now in Washington over the scale and scope of any potential Iranian response militarily to the Israeli attack that we saw earlier in the week. Remember, Israel had an attack earlier in the week hitting an Iranian target in Damascus in Syria. That attack killing a number of Iranian generals and military officers. Iran has said it will respond to that attack. And the question is, in what way? What does that mean for Israel? What does that mean for the conflict in the Middle East more generally? We saw a conversation between Israeli Prime Minister Benjamin Netanyahu and President Biden over the

phone this morning at the White House. John Kirby, the White House spokesperson, was asked if the president had shared any intelligence with Benjamin Netanyahu over the possibility of any Iranian strike coming toward Israel over the next 48 hours. Here's what he said. I'm not going to talk about intelligence matters, Peter. I think you can understand. But they did talk about a very public and very viable, real threat by Iran to Israel's security. And I think I need to leave it at that. So clearly not willing to go beyond just what's publicly known, which is that the Iranians have threatened to hit Israel. We don't know what form or shape that might take, but clearly some real tension now in the Middle East in the wake of that strike on the Iranian officials earlier in the week. Guys, back over to you. All right, Eamon. Thank you. You bet. Now, copper hitting its highest

level since January today and up more than 5 percent this week, while gold also hit a record. So should investors be looking to metals for a safety trade? Joining us now is B of A Securities metals strategist Michael Widmer. Michael, welcome. So you actually reduced your global copper demand forecast for this year and next, in part because of lower EV penetration, but then you've got data center demand still, and you've got transportation demand as well. So how does that balance out? I mean, the reduction was tiny.

I think we still can justify over the next four to five years around 4% annual copper demand. And if you put that into context, potential copper demand over the last 10 years was around 2%. So the real issue actually is that one way or another, we keep piling onto copper demand. Yes, EV penetration rates have come down a little bit, but we still have an expansion there. We put more renewables into the grid. And now the most recent focus is what's happening on the data center side. And one way way or another we just assume that the copper is there and ultimately just finding out right now on the supply side that that may not necessarily be the case unless i think by copper is speeding higher so i don't think it's a safe haven right

i just think it's genuinely a good investment and what about gold similarly i think it's generally a good investment i think you're looking at at the cocktail of macro backdrop that we are having at the moment. Granted, I think there is this argument out there right now that we are having a little bit of a stealth rally because assets under management at physically backed ETFs are falling. That's very unusual in a market where gold prices are rallying. But we see relentless interest on the options side. Call options over puts have traded very well to start with. We have seen very strong demand from Chinese investors, partly because on the left of good investment options, housing market not doing particularly well. The equity

market in China comes with a few hairs. So, and central banks, of course, are there as well. And then you have got all of the geopolitical issues there as well. There's a lot more to say about the geopolitical impact on gold. But you take all of that together, and I think that's why gold does relatively well. And lo and behold, I think a lot of the issues that we're facing are unlikely to go away anytime soon. In fact, you're going to get the first rate cap soon in the Fed. And that's going to give us another late higher potentially, right? Yeah. Of course, gold is not just a hedge against inflation, but a hedge against uncertainty, to your point. And we have

foreign governments that are increasingly buying gold as well right now, which brings me to silver, because you've always had this gold-silver ratio. We know gold is trading at record highs. That ratio has broken down in recent years, but we have seen silver starting to catch a bid again. And I wonder what you think about that metal. I think there's two reasons why silver is catching a bid right now. The first set of factors influencing silver is very similar to the gold side. It's kind of the macro picture rate cuts. But then you're also going into an environment now where you saw the PMIs coming out, right,

in the U.S. and in China, actually. You see a sentiment improving. Traditional industrial silver demand, which normally gives you a bit of a kicker relative to gold demand, is now potentially coming back. And on the solar panel side, we're moving to solar panels that are actually more silver-intensive, and we're leaning very heavily on the renewable side, on the solar, to facilitate the energy transition. So you take all of it together, you just need a little bit more of investor inflows. And silver is doing what it's doing right now.

It's going higher, basically. So you can then also look at individual regions. China, for instance, was a relatively steady net exporter of silver over the past 12 to 18 months. By December, China had actually stopped net exporting. It was a bit of silver still hitting the market in January and February, but we see also in some of the bigger countries that the dynamic is changing, changing for the better, more bullish side, actually.

All right. Michael, thank you. Pleasure. And, Morgan, we've got plenty of overtime left, but I'm going to have to say goodbye right now because I'm off to moderate a conversation with Intel CEO Pat Gelsinger, speaking of data centers and AI and chips at the Council on Foreign Relations. I'm going to bring you highlights tomorrow on overtime. Looking forward to that. You're going double overtime.

Yes. All right. Well, we'll see you tomorrow then. In the meantime, volatility picking up today, but it has been placid in recent months. So coming up, Mike Santoli is going to take a look at what history says and what that could mean for future market returns. Stay with us. Welcome back. Stocks closed red across the board with each of the major averages dipping more than 1 percent. It's the Dow's worst start to a month since June of 2011.

But joining me now is Ed Yardeni of Yardeni Research. Ed, it's great to have you on. You know, I think about you, I think about somebody who's been very bullish on the markets for a while now. But earlier this week, you did put a note out to investors basically saying, hey, there's going to be turbulence along the way here. And you did point to geopolitical tensions that could put pressure on oil prices. You pointed to the possibility of some big earnings mists and a still robust labor market that could keep the Fed from cutting rates as much as the market has been hoping. I mean, it feels like it's almost playing out in real time here on the eve

of the jobs report. And as we're talking about geopolitics and the impact that had as crude oil prices moved higher into the close here, your thoughts? I don't think everything else. Bull-bear ratios are historically quite high. Everybody's bullish, which means that we don't have too many bears or enough bears to convert to bulls. And meanwhile, the markets discounted

a lot of really, really good news. I mean, my outlook was for 5,400 on the S&P 500 by the end of the year, not by the end of the week. And so I'm not really that troubled by this pullback here. I don't think it's going to turn out to be a correction. But it could be a serious problem if, in fact, we find that a push comes to shove in the Middle East. You know, Israel bombed the Iranian embassy in Syria, and now everybody's kind of very nervous that Iran is going to retaliate in a similar fashion, that that could start continuing

conflagration in the Middle East that could affect the price of oil. And once you know it, the price of oil, the Brent crude jumped above $90 a barrel today. And I think that's one of the things that spooked the market. The others, I think we're going to have a strong employment number tomorrow, and that will continue to take away the notion that the Fed's going to clearly cut interest rates this year. They may not. So in light of that, is geopolitics your number one risk to your investment thesis and this bull market move that we've seen this year? I would say it is. Historically, over the years, I've learned that geopolitical crises offer opportunities to buy. You get the sell-offs and then the crises kind of abate for one reason or another.

This crisis in the Middle East isn't going away. It's getting worse. And the price of oil for a while there, when Hamas attacked Israel on October 7th of last year, the price of oil actually went down because global demand was quite weak. But it's really since the end of last year, I think we're starting to build a geopolitical risk premium into the price of oil. And here we are at $90 a barrel. I mean, it's possible that the global economy is also doing somewhat better, but the geopolitics is my number one concern. I will not be concerned if the Fed doesn't lower interest rates because that'll be

consistent with my view that the economy is resilient. So we saw every sector in the S&P finish today lower, but energy basically just below the flat line. We know it's the best performer this week. It's one of the best performers since the start of the year, to your point. Does that mean you go long energy equities or how do you position yourself in this market? Well, during this bull market, I've been recommending technology, industrials, financials, communications services and energy.

And the energy didn't do too well initially in the bull market. But I view energy as a shock absorber in a portfolio, just in case things really get much messier in the Middle East and the price of oil goes up. I mean, just looking at the charts, now that we've crossed 90, the markets are going to start thinking about $100 a barrel. And then we're looking at gasoline prices higher, and that starts to create some anxiety that it could once again cause a wage price spiral. That's not my base case, but it's not an unrealistic scenario. Okay. Eddie Ardeni, great to get your thoughts today. Thank you.

Two of the top performing software names so far this year teaming up in an unusual partnership. We're going to bring you those details next. Welcome back to Overtime. Palantir shares got a pop early in today's session, though, closing well off those highs and actually finishing the day slightly lower. The company announcing a deal to provide its software via Oracle's cloud. This is a new partnership for both of these tech companies. It came together quickly. It involves Palantir moving some workloads running Foundry,

which is its software platform from corporate data analytics applications to the Oracle cloud for the first time. Palantir also will make its Gotham software for government customers and its AI software deployable on the Oracle cloud. Now, it's a cultural fit in part because both companies are focused not just on commercial business, but also on investing in and building out their government businesses. Oracle has a big international government book of business, for example. So this tie up could actually garner more contracts of defense and intelligence from U.S. allies and international markets.

Palantir executive vice president Josh Harris telling me this morning, quote, this could be a game changer for the international government and defense landscape, just to start. And we are already seeing a positive reception on this combination three hours in. I spoke to him earlier today on the heels of that announcement. Shares of both companies, though, turning lower amid the broader market sell-off. Up next, Mike Santoli on today's spike in volatility and what that could mean for the market. And speaking of defense, as we do go to break, let's take a look at defense stocks, which closed higher today amid those geopolitical concerns. L3 Harris leading

the way up 2.5 percent. Stay with us. Welcome back to Overtime. Before we go, let's bring back Mike Santoli for his dashboard. Mike. Morgan, I swear I planned this one before we got a little jolt of volatility today down 1.2 percent on the S&P 500. This shows how calm the market has recently been. It shows you the average daily move in the S&P 500 over the prior 100 days. Now, this chart goes all the way back just about a century. And you see where we were before today? About a half percent as the 100-day average. And you see how rare it's been to spend a lot of time below that level.

So calm markets or bullish markets, when this is trending down and the market is basically in this very, very placid mode, usually a good thing that coincides with longer term uptrends what we do see though is usually get a little bit of a bump higher after it's kind of reached these levels we've trended lower than this a handful of times you can see so there's no saying that today's the start of something big one other thing I wanted to point out is there's so many comparisons between today's environment and the late 90s. You actually saw a lot of volatility here in the late 90s as the market was going up. It was upside volatility. It's a very erratic market, a lot of IPOs. It's not really what we've had recently. So that's one of the areas that the comparison breaks down between now and the late 90s. So for now, I would view today as a little bit of a shakeout. You had a pretty comfortable consensus in there in the markets. And one thing we've also seen is whenever we've had one of these little air pockets in the market on the way up, it doesn't take much to turn people cautious. It doesn't take much to kind of penetrate that bullish consensus, just because I think people have an awareness the market's come a long way, valuations are on the higher end,

and things like that, Morgan. Yeah. I feel like there was a time where, not that long ago, we were talking to you about the VIX every single day. It's been so long since we've had one of these conversations. So it's good to revisit it. And to the point, the last point you just made, I mean, you have Investors Intelligence Survey getting more extreme with the bull bear spread. We talked about it a couple of days ago, the Lefkowitz City Panic Euphoria, also in euphoria territory. In terms of what the VIX signals about how overweight we are in some of these readings towards bullishness, I mean, how quickly, when you talk about it changing quickly, how quickly can it change?

Well, what's interesting about the VIX, so now the VIX is the market's current best guess of how volatile the S&P 500 is going to be over the next 30 days. So it's essentially how much you're going to pay for insurance against that volatility. And it's actually sat above the realized volatility of the market. So even though it's low, even though people were basically very comfortable that different stocks are moving their own way and the overall index was actually staying relatively, you know, kind of undisturbed, you did see some premium in the VIX. So I think what I would say is it probably doesn't take a lot to get people just to have a reality check and say maybe this is just

a standard, you know, standard pullback. I do think that those sentiment measures you mentioned, it's very tricky because they are elevated. Forward returns, when they're that consensus bullish, tend to be weaker than the average. On the other hand, they can always get more extended and they can stay there for a long time in a bull market. So it's really tricky to use as a timing device. It's much more about, OK, here are the atmospheric conditions where the surprise might come from the negative side because people are already pretty fully invested in the bull market. OK, so in light of all of this and everything else we've been parsing through over this hour as we digest the late-day sell-off that we saw in equity markets here, what are you watching tomorrow?

I know we have jobs, but also that Liam Weston earnings report this morning kind of, I guess, started the undercurrents of concern, at least where the consumer is concerned in trading today, too. Right. And I think because it was also added to some other recent sort of soft warnings, whether it was Ulta yesterday, just this idea that the consumer is either taking a stutter step in its spending or is getting a little bit fatigued and is starting to wear on on some consumer population. So I do think that's worth keeping an eye on in light of the jobs number tomorrow. I think the first thing I'll watch is the bond market's reaction to that number. How does it treat it relative to which way inflation and the Fed are going. Okay. Mike Santoli. Great to start the hour with you and end the hour with you. With all the major averages finishing today lower the Dow actually posting its worst day since March of 2023. That's going to do it for us here at Overtime.