Closing Bell - Closing Bell Overtime: Stocks Slide As Geopolitical Worries Intensify; Richard Haass On Middle East Tension 4/15/24

Episode Date: April 15, 2024

Stocks gave up early gains and the major averages closed lower with the Dow posting its largest intraday swing since March 2023. 3Fourteen Research founder Warren Pies and The Bahnsen Group’s David Bahnsen break down the market action while Hamilton Lane co-CEO Erik Hirsch on how private markets are reacting to the geopolitical turmoil. T. Rowe Price’s Dom Rizzo on top tech picks while Richard Haass talks Israel’s potential next moves. 

A 600-point swing for the Dow as rising geopolitical risks send the blue-chip index lower for a sixth straight day. That's the scorecard on Wall Street. But winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Treasury yields spiking again as the 10-year hits the highest level since November amid escalating tensions between Israel and Iran. Also, some stronger economic data with retail sales here today. But coming up, Council on Foreign Relations President Emeritus Richard Haass on

whether the conflict in the Middle East will be resolved, will be de-escalated, and what that could mean for the market. Plus, a top tech portfolio manager and where he sees buying opportunities in the sector, which is one of the worst performing today. And let's break down today's action with our first guest. Joining us now is Warren Pies from 314 Research and David Bonson from the Bonson Group. Guys, welcome, Warren. So first time we've had a Monday down 1% plus on the S&P 500 in more than a year. What kind of action do you see, particularly in the relationship between stocks and fixed income? Yeah, thank you for having me. This has been really we go back to the second half of last year.

There was a tight relationship between stocks and yields. And essentially when stocks and bonds were tied at the hip until we entered 2024 and we've had this kind of divergence between the two, everyone's been watching and wondering how high can yields get before it impacts the stock market. And I think we're starting to find out that you get above 4.5 percent and it becomes a headwind for the markets from a valuation perspective, relative and absolute. And from a business fundamental standpoint, we're getting to that area where it starts to impact stocks. And we're seeing that indigestion in the stock market. And David, you got your eye on dividend payers and energy stocks, giving these geopolitical tensions we're seeing? Yeah, I mean, very much so. And I think that the I think that the reality today was that the market was up 300 points with bond yields up big,

and then it went down over 200 points with yields still up, which really indicates an intraday volatility that is far more likely related to the geopolitical tensions. We very much believe dividend growth, because of its embedded focus on quality, value, different types of balance sheets, different types of debt ratios that kind of speak to higher quality companies. And then, as you mentioned, the energy side, we have some great dividend growth names that happen to be in the energy sector, therefore perhaps correlated to some of the geopolitical tensions in a positive way. Yeah. Warren, I do want to go back to treasury yields here for a moment because the fact that we have seen the treasury complex continue to sell off despite the fact that you have seen this investor shift

to safe haven as volatility has moved higher, risk assets have taken a breather here. What does that tell us and what is that signal about what is driving the narrative right now, given the fact that there are so many macro and micro dynamics to factor in. What is actually moving the bond market right now and why? Well, I think you have two big things. Number one, you have, this is the obvious one, is the Fed is probably not going to cut as soon as everyone expected even a few weeks ago. So that's number one. But I think the big picture reason, the big picture mover for the bond market

is the creeping realization across the market that the terminal rate for the Fed, which means where are they going to end when everything is said and done with their cut cycle? Where will those rates bottom out? For years, the Fed has said two and a half percent. And with the last SEP, they just nudged that number up to two point six percent. I think that the number is actually significantly higher than that. And the economy has changed in a significant way coming out of COVID with the excessive amount of debt and fiscal spending, pro-cycle deficits. So to me, that's the big thing. And then when you say, OK, where are rates going to end this cycle? There's a certain appropriate spread for where

the 10-year should be. And I just don't think we're really there yet. And that's what the bond market is starting to kind of digest in real time. David, I wonder how you see it, especially where the Fed is concerned, because the way I see it, it's essentially like a Venn diagram. You have geopolitics, you have inflation, you have the Fed sort of sitting in the middle because we know geopolitics, A, breeds uncertainty, and B, historically, can be very inflationary. Look no further than industrial metals, aluminum and nickel today, also tied to geopolitical dynamics,

specifically more sanctions on Russia and trading of those metals as they come out of Russia. How does this now potentially factor in when we do see these rising risks in the Middle East and elsewhere? How does this factor into the Fed's calculus and thus impact to the market? Can we even possibly begin to game that out yet? No, you cannot. And the reason why is that there are so many moving parts. It's incalculable. And we're also talking about the difference between the optics of what the Fed does and the underlying decision making. those things involving commodity prices that are not related to monetary policy, that are extrinsic in some of their supply demand factors, as well as just, as you said, geopolitical heat. The Fed funds rate doesn't affect Middle East geopolitical

weekend tensions. These things are somewhat permanent circumstances. And so I think the Fed is primarily focused deep down in places they can't talk about at parties on the fact that there's a maturity wall of debt coming in commercial real estate, corporate debt. They've gotten a huge free ride for a couple of years, high rates that nobody's really actually paying. And I think that ultimately the inflation data will show what it's going to show. But the Fed cannot let those moments happen. Where I would somewhat disagree with my colleague here on air is I think that the terminal rate of Fed funds is never going to go back to the zero bound, which he's agreeing

with, but I don't think they can let it go higher because the Fed ultimately is in an accord with the Treasury Department, that the federal government cannot afford the debt that's been put on. And this new level of debt and growing deficits was not new after COVID. It had been going on for 15 years before COVID with declining rate environment. Ultimately, the Fed is trying to manage a bunch of things at once that it really can't do, other than praying it gets lucky. OK, David and Warren, thanks for kicking off the hour with us as we did see this late day sell off in stocks and the Dow having a 600 plus point swing to end the day down. It is the biggest reversal we've seen in the Dow in 13 months. Well, let's turn now to senior markets commentator

Mike Santoli for a look at what's keeping the dollar strong, because it is staying strong. Mike. It is, Morgan. And it's basically all these things we've been talking about. The U.S. economy growing faster than others. Obviously, our yields going higher as well. So financial conditions in general snugging up. It's hard to really tease out whether there is a little bit of a safety bid in the dollar. So this is a two year chart. You see 106 basically aside from this immediate period here around late, you know, into early 2023 was not been higher for many years. So you're kind of testing those levels. It's not something that necessarily is automatically going to change the overall equation, but it definitely shows you where the relative growth and yield are. So here is the U.S. 10-year Treasury yield minus the German

10-year Treasury yield. This spread is kind of widely watched. This goes back 10 years. So you see it's rarely over the course of 10 years been higher where U.S. yields are well above those of Germany. Why? Well, it seems like the ECB is going to cut sooner than the Fed. It seems like the European economy is growing much more slowly. And so what you also caught here is in 2018 when we also had a Fed that was much tighter than the ECB was. So you have these differentials that are also kind of drawing capital. And that also helps to prop the dollar because we do have that relative yield advantage at least for now. Now, is that bad for stocks? Take a look at this chart. Bank of America published this one today. S&P 500 relative to the U.S. dollar index. And the dollar index is inverted here. So when this is going down, it's the dollar getting stronger and stocks getting weaker.

That was the play this entire time the Fed was tightening. This entire time we had to deal with yields going higher. But you see there was a decoupling here. So you had a slight downward move in the dollar, and stocks have managed to remain strong. So a lot of that is tech. A lot of that is AI, Morgan. But it shows you that there's no single relationship that lasts consistently through time between these things. Interesting. I'd be very curious to see what, if you threw treasury yields in there, what that looks like, too, because I'd imagine that that decoupling. Moving like the dollar.

Exactly, exactly. I mean, what's so notable about this is even as we've seen yields move higher, we've seen the dollar steady and even strengthen here in recent weeks. You have seen commodities still manage to move higher. Gold, obviously, all-time high. We've seen what's happening with crude, although that took a little bit of a breather today, given Mideast and all the geopolitical tensions, stuff that's going on in Ukraine and Russia with infrastructure impacts there, too. I just wonder how sustainable it is to see these decouplings and how much it speaks to all of these different dynamics, or if they're historically, when we've seen stuff like this, if there's a point where it all begins to merge again? It's totally hard to know if there's a moment or a trigger where it says, OK,

we're going to have this stuff converge and the form of relationship reasserts itself. What you do have is a higher nominal growth environment than we got used to for a long period of time. It means higher inflation. It means higher U.S. growth. It's a reflationary impulse in terms of commodities. So a lot of things happening all at once. And of course, you have that exceptionalism within the S&P 500 of earnings are growing and they're largely being driven by sort of secular themes to a fair degree. So it's tough to necessarily draw it one to one. Hey, we got four point six percent Treasury yields. Last time we were this high was last October, and the S&P was almost 1,000 points lower at its low. So it shows you

that value builds within the equity market. It doesn't just sort of trade against other asset classes, John. All right, Mike. We'll see you again in just a little bit. Now, Goldman Sachs, the big winner in the Dow today after reporting much better than expected first quarter earnings. Leslie Picker looks at what those results might mean for Morgan Stanley and Bank of America, which report tomorrow. Leslie. Hey, John. Yeah, shares of Morgan Stanley in the green today as well. After those Goldman results, net revenue at Goldman jumping 16 percent in the quarter,

more than two-thirds of which were from its global banking and markets division. Within that division, investment banking fees jumped 32% thanks to higher revenue from debt underwriting and an increase in completed mergers as well as IPOs. So far, expectations for Morgan Stanley are a bit more muted, with the street expecting gains of 12% for investment banking year-over-year and essentially flat revenue from sales and trading. But that group known as institutional securities within Morgan Stanley comprises less than half of the firm's revenue. Now, wealth and investment management

is the other half and analysts expect those groups to be slightly higher. At Goldman, asset and wealth management was essentially in line with expectations. We also get results from Bank of America tomorrow, where its investment banking division is expected to generate $1.4 billion in revenue, and markets are estimated to have added another $5 billion to the top line there. Also in focus for B of A will be net interest income, profitability from loanmaking. Guidance on that metric was modest from the money center banks that reported last week, leading to investor disappointment. So we'll see if B of A is any different, guys. Leslie, a possibility we see some kind of reversal of fortune here for a long time because of the lack of IPOs, the M&A environment. Goldman was struggling. Morgan

Stanley's wealth management business was the envy of the market and got a valuation from that. Might that be causing some tough comps at this point, even as Goldman gets stronger? You're asking the right questions, John, because that global banking and markets division returned a pretty remarkable, I believe it was 18% return on equity just for that division, 14.8% for the firm as a whole. So analysts on the call were asking, hey, is this just a massive cyclical tailwind or is this something that you believe is sustainable? Executives said, you know, obviously we would like it to be sustainable. We have seen higher numbers in the past, but sure, this is above probably where the

average would be in terms of that ROE number. That said, capital markets activity, you have different pockets that are kind of on the upswing and others that still have yet to really factor into the market, namely something that was on Goldman's call today was the private equity community and M&A activity there. And David Solomon said that they've had more discussions with this community about activity in the first quarter than they saw in all of 2023. So that's kind of one piece of the puzzle that could still create more of a tailwind moving forward for deal activity. All right. Leslie Picker, thanks for breaking it all down for us. As Goldman Sachs was one of the top performers in the Dow and also one of the top performers

in the S&P just behind M&T Bank as we do get more of these bank results here this week, particularly the regionals. Well, tech, a real drag on the market today. Worst performing sector, a top tech portfolio manager tells us if he sees any buying opportunities in this pullback. And later, Hamilton Lane CEO, co-CEO Eric Hirsch on how the turmoil in the Middle East could impact the Fed's rate cut strategy and your money. Overtime's, the worst performing sector today in the S&P as the yield on the 10-year hits a five and a half month high. The Nasdaq now down nearly 3% in April, below its 50-day moving average for the first time since early November. And joining us now is T. Rowe Price, Global Tech Fund Portfolio Manager, Dom Rizzo. Dom, it's good to have you

back on. I mean, it's an ugly day for stocks, but particularly for some of these tech names that I know we usually talk to you about. So I'm going to start right there. The fact that we've seen the sell-off, how much of this is tied to rates? How much of this is tied to geopolitics? How much of this is just profit-taking on tax day, by the way, after big runs in many of these names to start the year? Well, first off, thanks for having me back, Morgan. I think it's kind of a combination of all three of the things that you laid out. You know, we had many of these stocks up a lot year to date, and sometimes you have a little pullback on some of these names after that happens. We have some profit-taking on price momentum reversals. But if I look at the fundamentals in the digital

semiconductor supply chain and the semi-capital equipment supply chain right now, they look really strong heading into earning season. So I'm not particularly concerned about this near-term pullback that we've seen. OK. So in terms of the semis themselves, I know top 10 holdings, you have quite a few semiconductor stocks in this list, including names that report this week, Taiwan Semi, ASML. And then, of course, we know there was the multi-billion dollar Chips Act funding announcement to Samsung as well. So walk me through. Sounds like you think this is a buying opportunity, this pullback for some of the chip makers. Yeah, I do, because I think that the AI bull market is still really in place. We're

going from a forty five billion dollar AI chip market in twenty twenty three to a four hundred billion dollar plus chip market for AI in 2027. And there's three data points I'd point everyone to that we've seen so far this past couple of weeks that have been very positive for the space. So number one, TSMC's March numbers up 34% year over year. Looks like that's 2% higher than the streets estimates. So that's a good place to start. Second, Disco in Japan, 6146 is the ticker. And what we've seen there is really strong momentum

in their high bandwidth memory business. They saw 35% year-over-year growth for their group consolidated sales, and that's a great sign for AI. And then finally, VAT in Europe, VACN is the ticker. They saw orders for their vacuum business, which goes into the semi-capital equipment ecosystem, up 73% year over year.

So I think fundamentals remain very strong in this space. Don, what do you do with Apple? There's a lot of pessimism around it. The shipment numbers for the last quarter didn't help. And yeah, you got WWDC, their developer conference coming up, and people are excited about AI. But very seldom does the market appreciate Apple announcements around technology. Only the actual shipments and profits seem to get people excited, especially when people have been down on the stock. Well, absolutely. Look, if you look at Apple's fundamentals, I think the market share data that came out today kind of tells us something that we know already. You know, Q1, fairly weak. Q2,

probably going to be weak too. And what's driving that? There's really two things. Number one is the replacement cycle elongating, right? Something that we've talked about in the past. And then the second thing is increasing China competition. But market share data is really backward looking in nature, right? And if you could look forward, we have the WWDC announcement coming in June. And I think that's where Apple is really going to lay out their AI strategy, right? Which will probably be twofold, on the phone, on device, lightweight, large language models, effectively a super serious system. And then, as well as a partnership,

probably with Google Gemini, that will take the heavy, large language models, right? And if you look at how Apple is really well positioned for AI, it really comes down to their hardware, software, their super high memory ability to put that into the phone, and then their chip ecosystem. But the most important thing with Apple, John, is if we see them have both a hardware and a software refresh because of AI, right? AI can drive the hardware upgrade cycle and take us away much higher from this

$100 billion free cash flow number that we've been stuck out for the past few years. All right. All right. We'll see about that. I also want to ask you finally about this rumored deal Salesforce might buy Informatica. First of all, I'm kind of surprised that Benioff and Salesforce are out of the penalty box so soon on big acquisitions. I wonder if you think that's going to stick. And then after Alteryx got taken private to close 2023, where is the play in data? Because there seems to be, whether it's a take private or potential other types of M&A, a lot of interest here. Yeah, absolutely. So what's happening with Salesforce Informatica?

On the surface, it's actually, I think, fairly logical, right? Data is becoming increasingly imperative in an AI-focused world. Salesforce has really been pushing their data cloud strategy. I would say Salesforce has a lot of work that they have to do in terms of the integration of the product portfolios. They've made a lot of acquisitions over the years, and that's just another acquisition that they would have to integrate. I actually think a stock that's underappreciated on the data side and on the AI side is SAP. So with SAP, you have an ERP refresh cycle with their S4 HANA upgrade coming. AI is going to drive more users to the cloud.

That should result in revenue that's accelerating, operating margins that are expanding, and free cash flow conversion that's improving. And as well, the valuation is actually pretty reasonable. Mid to high 20s earnings multiple for what I think is faster growth than Salesforce. I also think Databricks on the private side is very interesting as well. Okay. Dom Rizzo, thanks for joining us. Thanks for having me back, guys. Up next, a look at whether defense stocks, which have underperformed the broader market over the last year, are set to take off following Iran's attack on Israel.

Plus, Council on Foreign Relations President Emeritus Richard Haass on the risks rising geopolitical tensions posed to the market. We'll be right back. Welcome back to Overtime. As stocks reversed course and sold off today, defense names including RTX, L3Harris, and Lockheed Martin outperformed as geopolitics remain in focus. Among the capabilities responsible for a largely successful deterrence by Israel and allies over the weekend, missile defense systems and interceptors built by RTX, Boeing, Israel's Rafael, Lockheed, rocket motors by Northrop Grumman and L3Harris, Aerojet Rocketdyne, fighter jets including Lockheed made F-35. The key question for investors, though,

does this mark a sentiment shift as U.S. defense stocks have underperformed over the past year? J.P. Morgan, which upgraded Lockheed to outperform today, noted it prepared that call prior to Iran's attack and would not venture a prediction on that situation, but did write, quote, what we can say is that it's a dangerous world. And while this is not a sufficient condition for defense stocks to outperform, it is a potential source of support, especially when they're under-owned. Jeffrey's saying supplementals could now accelerate. The Senate had passed a $95 billion security funding package that included money for Ukraine and $14 billion for Israel specifically. It's all been stalled in the House.

Do lawmakers resuscitate that or, perhaps, maybe more likely, revisit a standalone Israel package? The recently appropriated 2024 U.S. defense budget is about 3 to 4 percent higher than 2023. Twenty twenty five is poised to grow just one percent, thanks to budget caps. So additional funding would be impactful. Lastly, demand has already been outpacing supply. The world has been dangerous thanks to Ukraine, Israel, U.S. stockpile replenishments, plus

big spending increases by U.S. allies. Contractors have been ramping production. Sales and backlogs have been growing. But the stocks have been largely stuck as margins have not kept pace, thanks in part to lingering supply chain issues. So what defense companies have to say about that when earnings start next week will be critical for investors specifically as well. But for more on the

situation that is developing, let's bring in Richard Haass, Council on Foreign Relations President Emeritus. Richard, it's good to have you on. You know, we had these late day reports, these headlines that Israel has basically conveyed to the U.S. that it has no choice but to respond to Iran. That did send stocks lower in late-day trading. I mean, it's my understanding from all of my reporting over the weekend, I'll call it the last 48 hours or so, we know that this attack by Iran on Israel was unprecedented. It's the first time Iran has launched attacks from inside Iran rather than just by proxy. 300-plus missiles and drones is much more than I think anyone had anticipated. And yet we know the U.S. really would like to see the situation de-escalate or at least not become a bigger, broader conflict.

How does this play out now? How much of this hinges on Israel and that response that it decides to move forward or not move forward with? Morgan, I think the future now hinges about 99 hinges on Israel and that response that it decides to move forward or not move forward with? MICHAEL PASSMORE, The Washington Post, Morgan, I think the future now hinges about 99 percent on Israel. Iran has announced that it believes things are concluded. They put out a statement very quickly. The Biden administration obviously wants things to calm down. The last thing they want is a wider war that, among other things, would send oil

prices sky high. But Israel has to decide. They're going to respond. But more important than whether they respond is how they respond. And there's at least several options. One is to resume, if you will, their indirect in-the-shadows war with Iran. That would be the low end of the spectrum. They could attack military sites in Iran, particularly those that are associated with what Iran did the other day. For example, Israel might be tempted to attack drone factories or storage sites or where missiles are to be found. And then lastly, there will be those voices in Israel, and we're already hearing them,

and we're also hearing them in this country, which we're saying this is the opportunity we've been waiting for. And they're going to argue for Israel going in big, possibly even taking on Iran's pre-building blocks of its nuclear program. And I think that debate's yet to be settled. And exactly how Israel responds will be critical here. Yeah. And, of course, we want to to avoid speculation because this could play out a number of ways, particularly here in the next hours, days, potentially. But just in terms of gaming out that situation, that possibility that is on the table of Israel perhaps going big, as you just put it, how does that then play out in terms of the dominoes, the allyships,

the coalitions that now form on the global stage when we know so many different countries are involved either directly or indirectly? Well, let me just add that I think it's not the most likely course that Israel would do that. I actually think it's quite unlikely. It's very hard to do. Iran's nuclear program is widely distributed, and that's the parts we know about. And they would be able to rebuild significant parts of it, say, in months or at most a year or two, and they'd rebuild it in a way that's harder to reach. So I don't think Israel is going to do that. They're going to come under a lot of pressure not to do it.

Again, I think the real choice will be, you know, something more modest or to resume the indirect war. But if Israel were to do something directly, if you will, their version of a homeland-to-homeland attack, then it's unlikely it stops there. And that's what people are worried about, the so-called cycle of escalation. If Iran found it unacceptable to simply absorb what Israel did against its Quds forces in Syria, it's unlikely to stand down if Israel were to attack Iran proper. And that's why these two countries have avoided this for all these years,

but we may be edging awfully close to it. Richard, how does the U.S. election season factor into how the U.S. responds to this situation? Because there's the desire to not get involved in a broader war, certainly with U.S. troops involved, but also the desire to stick by a longtime ally. Well, in olden days, the consideration of standing by Israel I think would be larger than it is now, simply because the demographics in this country and the politics in this country have changed when it comes to Middle East issues.

And we've seen that over the last six months, as October 7 shifted into October 8, and the mood here. But I think the administration is more worried about higher oil prices. If there were a large attack on Iran, my guess is the Straits of Hormuz would close to shipping. And also, this administration's already stretched. Our defense industrial base is already stretched. We're having trouble keeping up with the need to supply Ukraine. We're trying to strengthen Taiwan against possible contingencies there. We've been trying to help Israel. We simply don't have enough defense to go around, plus we also have to worry about our

own forces. So that's a real consideration as well, one that would be true even if there were no upcoming American election. One would have to assume that China and Russia and other adversaries have been watching this entire situation very, very closely. Richard Haass, thank you for joining us and sharing your insights. Thank you. Now it's time for a CNBC News update with Bertha Coombs. Bertha. John, more than half of the first group of nearly 100 potential New York jurors called for the Trump hush money trial have been excluded by or excused rather by the judge this afternoon after he asked whether they could be impartial or could serve for another reason. According to pool reporters from the courtroom of those excluded, more than two dozen were white women. Jury selection is expected to take up to two weeks. A new report today from U.S. Central Command says the 2021 suicide bombing that killed 13 American service members at the Abbey Gate in Kabul during that chaotic withdrawal was, quote, not preventable. CENTCOM also identified the bomber for the first time

as an ISIS militant who'd been recently released by the Taliban from an Afghan prison. And MGM Resorts is suing the Federal Trade Commission to block an investigation into last year's hack of the casino company. The company argues that it should not have to turn over information because it is not a financial institution and therefore not subject to the FTC's rules on consumer financial data. That's going to be a highly watched case. Back over to you. All right, Bertha, thank you.

Now, Costco keeps outperforming the rest of the retail industry. Up next, Mike Santoli looks at what that could mean for the state of consumer spending. And later, the co-CEO of Hamilton Lane on the impact tensions in the Middle East could have on the Fed and Wall Street. And what investors need to be watching. Stay with us. Welcome back to Overtime. Mike Santoli's back with a look at the higher-end consumer. Mike? Yeah, John. So strong retail sales for March reported this morning, but the market's not

really braced for across the board strength necessarily. Take a look here at relative performance of Costco and Walmart and Dollar Tree. So Costco does have a somewhat more affluent customer demographic. It's not the only thing going on. I've mentioned before, Costco is in the NASDAQ 100. It's in the QQQ ETF, one of the bigger positions. So it got that momentum left. But clearly, it has stronger organic growth trends, in part because of the demographic base. Now, also, on the lending side, American Express has vastly outperformed other lenders that cater more to low-moderate income borrowers, including Ally, the big auto lender, as well as OneMain Financial. That's kind of a non-prime personal loan company.

So American Express, earnings late this week. We'll see if those trends continue. Also an investor day in two weeks, John. Mike, going back to the first chart with the equities on it, it's interesting to me almost exactly four quarters ago is when the difference in the performance there gets really dramatic. I mean, Walmart hasn't done poorly, but Costco over the past 12 months has done particularly well. It absolutely has. I do think that was part of the no recession trade.

So essentially, you had all this money chasing this idea that, in fact, the consumers were in better shape. Unemployment's coming down. Wages are growing. Walmart, of course, more grocery exposure. You had pricing power for a while in grocery, and then that has backed off. So probably part of it, again, along with the whole momentum factor that has lifted Costco shares. All right. We'll have to see what LVMH brings us with earnings from Europe as well this week. Mike Santoli, thank you. Investors punishing shares of Salesforce, meantime, on reports that it could be on the verge of making one of its largest ever acquisitions. We've got those details straight ahead as the stock fell 7% today. And check out prices of aluminum, nickel and copper. Those popped after the U.S. and U.K. announced new sanctions against Russia over the war in Ukraine. The moves prohibit the trading of these industrial metals on the CME

and the LME if they were produced in Russia from April 13th onward. Stay with us. Welcome back. Salesforce, the biggest drag on the Dow today, having its worst day since 2022 on reports it's in advance talks to acquire data management firm Informatica. That's according to The Wall Street Journal. The deal would come in below Friday's closing price, around $38, according to reports. That's where it was when the talks were first reported. Now, a deal would be one of the largest in Salesforce's history, and a return to form for CEO Mark Benioff after sitting on the M&A sidelines

just for a bit after activists were really ticked off about how those acquisitions, many acquisitions, had affected profitability and efficiency. Analyst notes today it pointed to potential synergies with MuleSoft, which Salesforce acquired in 2018 for about $6.5 billion. You might recall I spoke with Informatica CEO Amit Walia when the company reported earnings back on Valentine's Day. Stock was at $30 then. Cloud annualized recurring revenue up 39% in the last report.

Competitor Alteryx, as I mentioned earlier, agreed to be taken private by ClearLake Capital Group and Insight Partners for $4.4 billion four months ago, Morgan. And so my question is, does this put some of the data-driven and even multi-cloud names more in play, whether it's for take privates or for acquisitions? Though once you get to a certain size, you would need to be taken out by one of these names that hyperscalers and the really big tech names might not be allowed to buy much. I realize we had a down day for the markets more broadly,

so maybe you didn't see stocks trading in sympathy, but what are some of the names that now potentially could be in play if that's the case, and we're seeing the beginning of a trend here? Well, I'm not an analyst, but I did stay at a Holiday Inn Express last night. No, it makes me think of names. You talked to all these CEOs, though. Nutanix has been doing well, and it's kind of a multi-cloud player. We've talked often to HashiCorp, which is more on the DevOps side, but also for managing multiple clouds.

So where do these fit with companies that are big enough to have the money to spend, but small enough that the regulators won't get on their case? I don't know. It is interesting, too. To your point, after all the activist investor pressure in Salesforce, the focus on growing margins, now it's potentially back in the market to buy something. We'll see. IPO's heating up too. Up next, the co-CEO of Hamilton Lane on why so much money is being taken out of the public markets and being invested in private markets right now. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back.

Welcome back. A tough start to the trading week with S&P, Nasdaq, Russell all closing more than a percent lower as an escalation in the Middle East conflict hit investor sentiment. Here to discuss what this could mean for both the public and private markets is Eric Hirsch. He's co-CEO of Hamilton Lane, one of the largest private market investment firms globally. Eric, welcome. So this geopolitics-driven confidence hit, how does it affect some of the sectors you like, infrastructure, private credit, manufacturing? Well, John, nice to be back. I think it's to be determined. I think we have to

see whether this becomes a real shooting war. Obviously, what happened over the last 48 hours is incredibly tragic and very scary. But I think the question really is what's next and whether that begins a real spillover. So I think that's what you're seeing the markets react to. And I think now we're all just waiting to see whether there's another shoe to drop. OK, so focusing in a bit on the IPO market, we've got Rubrik coming up. To me, it's unique, both because of the size of it, because it's a highly anticipated high growth cyber name. How does its performance, if it does, differ from some of the other kind of tiptoe into the water IPO entrance we've had? Well, I think you're exactly right. The public markets are trying to just figure out where the investors are. There's a tremendous amount of capital still sitting on the sideline. And as you

know, the public markets just aren't really growing, not in terms of market cap, but in terms of just the number of investable companies out there. And so I think there's desire from the public market investors to have more choice. And so good names, strong performance that are actually cash flow positive, I think are going to resonate. But again, the markets have been erratic and things that are happening geopolitically are not helping that. Okay. Is there more resiliency when you start to talk about some of these macro dynamics and uncertainties, this wall of worry that is building

in the public markets? Are the private markets a little more buffered from that, if you will? The private markets are just less emotional. So I think it's more of a long-term focus, long-term orientation, and not having to sort of deal with what's happening from day to day to day. And as you noted earlier, we're beginning to see a lot of capital moving out of the public markets because of that. Again, investors are looking for more choice. They're looking for more stability. They're looking for an environment where they can be thinking long term, not sort of day to day or month to month. In the private markets, there does seem to be some chatter, though, that if you have a Fed that's higher for longer or, as I'm starting to hear increasingly, slower to lower, that perhaps the longer that that plays out, that that could actually spell some trouble for certain asset classes within the private markets and private credit, commercial real estate, etc. How real

is that risk here as Fed Funds Futures pushes out the possibility of rate cuts? Yeah, Morgan, I think it's actually pretty low risk. I think, one, there's a huge dislocation going on in the lending space. And so the regional banks have largely been disintermediated by what's happening on the private credit space. There in the private credit space, you have a tremendous volume of capital. And so you've got a lot of capital looking for a lot of homes. If rates go down, better for the borrowers. If rates stay flat, fine. And if rates go back up again, which I think is unlikely, the market will also recalibrate. I think the market is recognizing today that we need to sort of recognize that an incredibly low, basically zero rate environment is really the thing of the past. We're not going to sort of come back there tomorrow.

And so I think both borrowers and lenders recognize sort of what that new reality is. And they're all adjusting. Eric, we were talking earlier with Mike Santoli about the consumer and we know how important consumer spending is to the overall economy. Are there a couple scenarios that you're gaming out about how this ends up for the consumer that's been taken on more and more debt and at the middle to low end, just under a lot of pressure from lingering inflation? What do you think happens next? Well, I think this is really sort of the sad part of our economy is that you've got such bifurcation on the wealth spectrum. So as you noted, kind of the low and middle end of the market is being incredibly hurt by inflationary pressure, whether that's gas or groceries,

all of that is difficult for them. The high end of the market, which again is a lot of where our spending is actually coming from, and we just saw that report coming out a few days ago, they've been benefiting from a high rate environment. They're not borrowers, so fixed rate on their mortgages, a lot of capital sitting either in the public markets or sitting in cash, all of that benefiting from a higher rate environment. They're seeing their real estate values go up. They're seeing their stock portfolios go up. And so their willingness to spend is actually increasing. And the data really bears that out. So I think what we're seeing is a real bifurcation in the consumer. Small and low end of the market hurt under enormous pressure.

That's a problem. But the high end of the market, which represents more total capital going to work, is actually doing quite well. Some very key context there. Eric Hirsch, thanks for joining us. Thank you, Morgan. Well, earnings season picking up steam tomorrow. We're going to run through the calendar and tell you what to expect from United's results when overtime returns. Welcome back. Tomorrow will be another huge day of earnings. We've got results from Bank of America, Morgan Stanley, PNC Financial and United Health, also J&J in the morning. After the bell, we will break down reports from United Airlines and Interactive Brokers, also J.B. Hunt on the freight side.

We're going to speak exclusively with Interactive Brokers Chairman Thomas Petterfie after those numbers cross. But before he dials into the call with analysts, it's going to be one to watch, especially after Schwab results today, John. Indeed. Now let's get to fill a bow with what investors should expect when United Airlines reports earnings tomorrow in overtime. Phil. You know, John, separate from the numbers, and by the way, United is expected to report a loss. Separate from those numbers, three things are going to be jumping out in terms of what the company may announce during the results that are posted after the bell tomorrow. One, what's the impact of maintenance issues that have cropped up over the last couple of months? How will that curb summer growth?

And is there an order for Airbus A321s? Remember, they've already said they're taking the MAX 10 off of their books. United also has offered its pilots unpaid leave in May and June. That's because they're going to have fewer planes this summer. And they're also pausing plans to hire pilots over the next several months because they don't have the aircraft. All of this sets up what we're going to expect from United's fleet and what the company outlines. Remember, originally they were expecting to have between the MAX 8 and the MAX 9 from Boeing, they were expecting far more than the 56 planes that are now on the book. In fact,

31 fewer planes are now on the book. No max 10 deliveries. Remember last time we interviewed Scott Kirby after the Q4 results, he said, we're done waiting. We're taking it off of our plans for the future. All of which, as you take a look at shares of United, sets up the question, do they announce some type of an A321 order when they announce their results tomorrow? And we'll be talking with Scott Kirby on Wednesday morning. So lots of news focused on where the fleet is and what their capacity will be this summer. All right, Bill LeBeau, thank you. We're going to look forward to that in overtime tomorrow. And Morgan, lots of earnings this week in the getting your hands dirty sector.

Of course, there's CSX and freight on Wednesday, along with Kinder Morgan and energy infrastructure. And then on Thursday, yes, there's Netflix. We'll be very excited about that. But have one eye on the paints and coatings out of PPG. Of course you do. And you should, because that is always an early indicator of where the industrial part of the economy is heading. And certainly like you see with some of the freight players, can be a read more broadly on the state of the economy, not just here in the U.S., but also internationally. And of course, geopolitics fits into all of it. So we continue to keep an eye on situation as it develops out of the Middle East and also on oil, which I would imagine is going to be part of the story when United and some of these other names

report as well, as we do see crude. Took a bit of a breather today, but it has been moving higher in general pretty quickly. Yeah, and tomorrow, though, we are going to start looking ahead to Netflix as well. One of those big names that's been performing better than its peers in the media industry as others are trying to pull back from over-investing, perhaps, in streaming. Netflix is making money there. Yeah, free cash flow tends to be the focus in the meantime. Big late-day sell-off for stocks. Everything finished the day lower. That's going to do it, though, for us here at Overtime. Good to be back with you. You too. Fast money. Yes, starts now.