Closing Bell - Closing Bell Overtime: Surprise OPEC+ Cut Sends Oil Surging; Former Hulu Exec On Disney’s Future 4/3/23

Episode Date: April 3, 2023

The Dow and S&P 500 notched their fourth straight day of gains to kick of Q2 trading while the Nasdaq lagged. Edward Jones’ Mona Mahajan discussed the market action while 3Fourteen Research’s Warren Pies broke down the move higher in crude. SPG Global’s Simon Gallagher, a former Hulu executive, talks the news out of Disney’s shareholder meeting and the latest salvos in the DeSantis versus Disney battle. Natural gas posted its worst quarter on record. Skylar Capital CEO Bill Perkins on what’s next for the commodity. Ronald Reagan Institute Director Roger Zakheim on the investment implications of Speaker McCarthy’s visit with the President of Taiwan. Our Phil LeBeau broke down the latest quarterly auto sales while Contessa Brewer talks what it means for the gambling stocks that this year’s men’s Final Four is composed of smaller schools and underdogs. 

And I'll take it. It's a mixed picture for the major averages to start the month as tech takes a breather, energy stocks surged. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off today. Coming up on today's show, Disney hosting its annual shareholder meeting this afternoon, the first since Bob Iger's return to the top job. We'll discuss the highlights and the company's future with former Hulu and Netflix executive Simon Gallagher. Joining us to talk about the market action, though, is Mona Mahajan from Edward Jones. Mona, great to have you on.

Want to get your thoughts on stocks at these levels right now. What do you think is priced in? What isn't? Yeah, thanks, Morgan. And look, it's a great question. We've had a great Q1 thus far. The S&P was up about 7 percent, the Nasdaq up an impressive 15 percent. But keep in mind, most of that was valuation driven. So we had an expansion of P multiples. Meanwhile, earnings growth actually contracted during that period. When we started the year, S&P earnings growth looked closer to 5 percent. We're now hovering at about 1 percent positive on earnings growth. We

do think that perhaps after this nice move, we're headed towards, again, a period of consolidation, maybe some volatility. There are some incremental headwinds, and I'll point quickly to three of them. One, of course, is earnings. We do think earnings can still continue to be revised lower, especially when we think about Q3 and Q4. Number two is the Fed and really the market expectations of the Fed. Keep in mind, markets are still pricing in Fed rate cuts. We think they've been pretty clear. They'll pause and then go from there. And then finally, on the bank crisis that we just went through, we do think there is an incremental tightening of bank lending, credit tightening coming ahead of us

that perhaps has yet to be priced in as well. So some headwinds that we are facing, but we don't expect markets to price in a recession twice. So we already went through a pretty severe bear market last year. We do think if we do see some volatility, it'll look more like a correction, 5, 10, maybe 15 percent. But those are normal. Two to three corrections per year are normal. And then you set up better or at least for a better second half. I just want to pick up on what you just said. Are you telling that even if we were actually to go into a recession, stocks have already gone through

their process of pricing that in and it will just shrug that off at this point? So markets will likely not just shrug off a recessionary environment, particularly if it's deeper than expected, although our base case is for still not a deep or prolonged, somewhat of a mild recession. But we do think some, if not much, of that has been discounted over the past 15 months or so as we've gone through a bear market in the S&P and, of course, early on in the NASDAQ. We do think, as we noted, there will be some volatility as we try to get through that and try to assess how deep or prolonged this downturn can be. But, you know, we do think, again, another bear market is is for us at least not a base case and more

credible scenario that we see this volatility emerge as a correction. So if you do expect more volatility, but you don't expect that or you expect that the worst of this bear market is over, are you buying stocks right now? And if so, when and what? Yeah, you know, I think for now what we've seen recently is a more defensive tilt in markets and rightfully so. We've seen that inequities play out with, you know, health care and staples have still outperformed more recently. We've certainly seen this move into higher quality parts of growth and technology, but really free cash flow has been valued in the bond market. We've, of course, seen a move towards shorter duration. You know,

these some of these CDs and one or two year treasuries that are really yielding attractive, I guess, yields compared to recent history. We do think, though, as we go through an economic bottoming, markets will start to look towards, and they usually start to look three to six months ahead of when the economy bottoms, that recovery ahead of it. And that recovery playbook does look a little bit more balanced. So, you know, not only your defensives, but your cyclical parts of the market, not only your short duration in bonds, but some of your longer duration

assets as well. And, you know, think about areas like small caps and international that tend to be higher beta. So we do think as we are getting through this period, there will be opportunities that form for investors ahead. And for long-term investors, heading out of a bear market historically has yielded higher than average returns in the years ahead. So there could be a very interesting opportunity, we think, forming really in the months ahead. So how are you thinking about this week and next then? Because we do have this holiday-shortened week. We get a jobs report on Friday, but stock markets aren't open for that. And then you get the beginning of earnings, bank earnings next week,

and you have a whole bunch of macro data sprinkled in on top of it. So what do you see as the next big catalyst? Yeah, we'd point to the earnings season coming up. You know, of course, the bank earnings next Friday will be critical, not only because they have a great view into the consumer, but of course, people want to hear what happened over the last month or so, what they are seeing in terms of bank lending, tightening standards, any implications from the smaller regional banks. And so that will be critical, we think, in the weeks ahead. And of course, how they're thinking about the outlook going forward.

We do think, you know, earnings for Q1 have already come in quite a bit. We're now at negative 6 percent for Q1, about negative 4 percent for Q2. So even if we haven't, you know, declared a GDP recession, certainly earnings are going through two back-to-back negative quarters in the quarters ahead. Now, of course, Q3 and Q4 still look like they are positive. But again, those could be revised lower if we start to see that economic slowdown emerge. So we'd say near term, the earning season is critical. You pointed to jobs report on Friday as well. That wage growth component in the labor market still remains sticky. And we'd like to see that start to moderate more as well. So we'll be keeping an eye on that, too. OK, Mona Mahajan, thanks for joining me and kicking off the hour.

Let's turn to oil. The other big story of the day jumping after that surprise OPEC plus production cut that news sending energy stocks sharply higher. The sector closing up around five percent today, having its best day since October of 2022. Joining us now on the news line is 314 Research co-founder and strategist Warren Pies. Warren, great to speak with you here. I want to get your thoughts, A, as somebody who's covered energy for a long time. A, were you surprised to see this move by members of OPEC over the weekend? And B, where do we go from here? Yeah, thanks for having me. I think everybody was surprised by the move, to be honest.

I wish I could sit here and say I was clairvoyant and knew that this was coming from OPEC. But it was a true surprise move from the cartel. Now, I think that if you go back, you can kind of see the clues and understand potentially the reasoning behind the cut. So a thing we've been highlighting for our clients is the positioning within the futures market. So we saw managed money, futures position, so that's hedge funds and CTAs, just the fast money in the crude oil market, get extraordinarily short just leading up to last week. It actually triggered a buy signal in our main crude oil model at 314. So you have short sellers offside. And then the other side, you have the banking crisis. That was really the impetus for them getting short. And the Biden administration that's been selling

SPR barrels out for the last year, more or less. And so they've had their opportunity to buy these barrels back, as they said they would. And then they kind of balk at the deal. And I think that OPEC was sending a signal to the market here, to the Western SPR dumpers and to the speculators, that they're still alive and they're still a wild card in the market. And so I think that from our view, in our model view and everything we look at, this is absolutely a buying opportunity for oil and anything with oil beta here. I think this is going to be a catalyst for higher prices going forward. Okay. I want to get into the specifics of that.

But first, it sounds like, I mean, is it fair to say, and I've heard some folks come on our air today and use this term, is it fair to say that there's an OPEC put out there in the market now? Yeah, absolutely. I think that they've more or less revealed their hand. They probably want prices up closer to $90 a barrel. I think that's what they're targeting, and they're not going to be, I don't think they're going to lose sleep if we get back to triple digits, you know. And so, yes, I think that the OPEC put is back. When you spin

this forward to the second half of the year, I mean, the China reopening is kind of a slow burn on the demand side. And we've already seen, I think there was a lot of misreading the oil situation earlier this year. We had inventories building in the U.S. And really, this is a function of how profitable it was to be a refiner in the U.S. last year. So refineries in the U.S. ran full out last year, and so they had to undergo a maintenance period. That was early this year. Otherwise, you know, you can't run a facility like that flat out indefinitely. So we saw refinery utilization drop like we were in a recession in the first quarter of this year, and that caused crude oil inventory to build.

But we're not in a recession. The economy is actually strong, and you have the tailwind of this year, but that caused crude oil inventory to build. But we're not in a recession. The economy is actually strong, and you have the tailwind of the China reopening. So I think that the folks and the speculators that got short, based on these inventories and this idea of a macro play, they're really getting burned, and that's going to continue. Now, I know you've been very cautious. I'd even call you bearish in terms of the broader market and how you're positioning yourself. How does this energy piece of the puzzle fit into that larger thesis for you?

And if you were going to, or our viewers at home were going to invest in the move higher in crude, what would you suggest? Well, that's the easier answer is we're recommending large cap quality energy stocks. And specifically, we like Canadian producers, CNQ, Canadian Natural, and Suncor, two large caps everybody knows up in Canada. It's honestly a maintenance capex story. There is very little maintenance capex in those Canadian producers. And so I think in this environment where everyone's trying to distribute as much cash flow as possible, those are going to continue to be winners in this environment. So that's what we've been recommending and we continue to recommend for clients here. As far as the broad market, we came into the year seeing this $3,600 to $4,000 range.

I've talked to you, I've talked to Mike Santoli about it over the first quarter of this year, and we keep bumping up towards the top of this range. I haven't seen anything that's really changed my opinion here. I think that this range persists. I do not think we're in a new bull market, and I do think we're going to see new lows later this year. We haven't seen – we're three to six months off the – we're six months off the bottom now, supposedly, if October are the lows, and the yield curve is still inverted. Bottom line, that's never happened before. If October was the lows, you wouldn't expect to

see the yield curve remain inverted six months later. You would see earnings beginning to hook higher. They continue to grind lower, forward earnings, that is. So for me, I don't see the forensic evidence to suggest that this is the start of a new bull market. So I'm still back to fading that top of the $4,000 bull market so I'm still back to fading that top of the 4000 range which were obviously above right now and this just oil coming back in it reignites the debate around the Fed inflation everything else so to me uh this is net net bad news for equities I think there's still some Goldilocks period between like 80 to 90 where the the stock market can behave behave okay while oil is hanging out

there. But ultimately, if oil gets to 100 bucks, it's going to be a big negative for the equity market. All right. Warren Pies, great to get your take today. Thank you for joining me. Thanks for having me. Shares of Disney handily outperforming the Dow this year in what's been an eventful few months of cost cuts, political challenges, oh, a proxy fight. Up next, we're going to discuss the takeaways from today's shareholder meeting with former Netflix and Hulu executive Simon Gallagher. Overtime is back in two. Welcome back to Overtime.

Fed governor and FOMC voting member Lisa Cook is about to speak in a conversation at the University of Michigan. We're going to monitor her remarks, bring you any headlines as we get them. Meantime, Disney holding its first annual shareholder meeting with Bob Iger after his return as CEO. The meeting also comes after the company began laying off 7,000 employees last week. CNBC's Cine senior markets commentator Mike Santoli joins us now. He's taking a deep dive on the company's performance, the stock performance under Iger. Hi, Mike. Hey, Morgan. Yes, relative performance of Disney shares versus the S&P 500 since Bob Iger first became CEO the initial time back in October of 2005. That's the start point

here. You see massive outperformance over this period that was surrendered largely in the past couple of years, still ahead of the S&P over that span by 20, 25 percentage points. I guess you'd have to include an asterisk here because, of course, after Iger left the CEO job, Bob Chapek came in. That was roughly right about there, February of 2020, and Iger came back there.

So there definitely was some net downside during that period. Who knows how we're going to keep score of that. But it is interesting also to note that Disney has outperformed other major media stocks over this period, too. But, you know, now he's in the job. It's a two-year clock. in that now to sort of try to see if the next phase of Disney's evolution is one that can satisfy shareholders who are kind of wondering about the valuation, the context of the changing business models, Morgan. It's a key point that you are seeing this name outperform some of its media peers. I do wonder how it's performing versus, say, some of the other Dow components

or other maybe even some of the big tech names that we've seen have such a strong start to the year as well that have also had their foray into media? Sure. I mean, if you do a shorter time period, you know, obviously since 2012 or whatever, Netflix would just obviously be blasting it away. But no, I do think in terms of comparable companies established in media, you know, Disney has had the better assets. They've made the smart acquisitions. A tough part probably comes right now. And I think that what investors are wondering about is there's a playbook out there that Iger has been talking about since the mid 2000s, which is make fewer movies, make them Disney branded, make them franchises. He was kind of at the start of all that stuff. That's why we talk about franchises right now. And also shrink linear TV as you have to to keep costs in line.

All that stuff was underway for 15 years before you left the first time. So it's sort of what has to get done again. I'm going to call it out. You have making Burr Bank. It's very clever, Mike Santoli. You're going to have to bring a very strong dad joke game later in the show when we see you again. This was mine. That one was I owe it to somebody else.

Oh, okay. Well, they're both great. We'll see you later in the show. For more on Disney, let's bring in Simon Gallagher, SPG Global Principal and former Netflix and Hulu executive. Simon, great to speak with you today. Want to get your thoughts not only on this meeting from Disney today, but also just on the moves in general we're seeing as Iger does seem to be accelerating his efforts, given the fact that the clock is ticking on that two-year window that he set out for himself. Sure. He also seems to be, in my opinion,

backing away a little bit from what his original strategy was and moving more towards the Warner Brothers Discovery type model in terms of licensing content, being willing to license content, not holding all of the content back for Disney Plus. I think that's best evidenced in Avatar 2, which we're seeing. And this may be part of an original agreement with James Cameron, the director of the film, but it would appear that they are going through traditional licensing windows for Avatar 2. There's no rush to get that to Disney Plus in the same way there was with Black Widow a couple of years ago. What does that mean in terms of how Iger is thinking about at Disney the push toward profitability for the streaming service

and how that speaks to the broader landscape where everybody is trying to tighten belts and trying to find a way to make money on these platforms. Look, I think the biggest opportunity for Bob and for Disney is to sell their stake in Hulu. I know that there's been a lot of debate and disagreement over what is the right strategy, but I think that would deliver a significant return on investment to the shareholders. I think they've already got an asset that is equal of Hulu, if not significantly better in Disney Plus, keeping in mind that Disney Plus is essentially a worldwide service, whereas Hulu is only in the U.S. and Japan. So I think there's tremendous opportunity to back out of that service for the service still to remain successful and for them to look at other assets, such as the transaction that happened today with Endeavor and WWE. WWE I think would have been a tremendous asset for Disney. Yeah I want to get into that deal too but first just another question on

Disney specifically Comcast is the other stakeholder in Hulu our parent company CNBC's parent company. Do you think Comcast actually wants to buy Hulu? Is that a deal that you think actually gets done? I'm not sure if it'll get done. Obviously, there's an agreed price that the transaction could take place at. There is a schedule that is on. So I think that it's going to be something that heats up over the course of this year. It has to take place by the early stages of 2024. So I think there is going to be a deal done one way or the other and as i say i think that that's a a better way for disney to go and i think it gives comcast a tremendous asset that would to align with peacock and i think that

service could continue to be very successful but i think at the moment disney is has already has an asset very similar to hulu in disney plus and I think they should focus on that asset. So I do want to talk about the deal of the day, and that is Endeavor buying WWE to then merge it with UFC as a standalone business. We have some sound from Vince McMahon of WWE and Ari Emanuel of Endeavor, who sat down with CNBC over the weekend. I just want to play that for you.

The number one show in cable is Raw. 1.8 million viewers, up 9% from the same period of time, 2022 to 2023. Even though everybody says cable's dying, Raw is up. Smackdown, I think it's 2.3 million viewers, up 7 percent, same period, same period. The idea here is there's nothing like the two combined. It's live. That's really a key, is our events are live. People want to watch live. What's amazing is that both of these stocks actually ended the day lower, but we keep having this conversation about how crucial sports is in terms of a profit and money making machine, especially when it comes to live events. Look, I think the market's misreading this. I think this is an amazing deal.

I think it was very cleverly structured. I worked for IMG, which is an endeavor parent, which is a division of Endeavor. I worked for IMG selling meteorites, sports meteorites, for six years. And I think people don't really appreciate how much more valuable WWE is when it's being managed by Endeavor. Certainly Endeavor represented the brand for 20 years as an external client, but I think now that it's in-house, Endeavor has a number of clients around the world. They can draw on all of the intelligence, all of the learnings that they have from clients such as Wimbledon, such as the Olympic Archives, to drive significant additional value in WWE.

So I think for shareholders of both companies, I think this is a very important day. And it also structures the new company as a big global media company rather than an agency business. They've gone from just owning UFC and professional bull riding to now owning these two assets alongside each other. So I think it's very exciting. And I think there's a very strong path forward for the combined companies. Always great to get your thoughts, Simon Gallagher, especially on a day like today. Appreciate it. Thanks, Morgan. Wall Street focusing on the big pop in oil prices today, but check out natural gas. That's sinking again after turning its worst

quarter ever. We're going to discuss that move with NatGas expert and Skyler Capital Management CEO Bill Perkins. That's next. And as we head to break, check out some of the names hitting 52-week highs today. Marathon Petroleum, McDonald's. Speaking of cost-cutting, Ulta, Hershey and GE at the top of the list. Stay with us. Welcome back to Overtime. Time now for a CNBC News update. And for that, we turn to Pippa Stevens. Hi, Pippa. Hey, Morgan. Well, here's your CNBC News Update at this hour. Former President Donald Trump touching down in New York ahead of his expected arraignment tomorrow afternoon.

The indictment remains sealed, so the exact charges are still unknown, but they are expected to be related to hush money payments made ahead of the 2016 election to two women who claim to have had affairs with Trump. The former president has denied the affairs and any wrongdoing. Meanwhile, President Biden landing in Minneapolis says he plans to push his clean energy and manufacturing efforts across the country. Biden is planning to tour clean energy tech manufacturer as part of his effort to highlight his agenda before an expected re-election campaign. According to the White House, Biden's economic plan has led to $2.7 billion in federal funding across Minnesota. And NASA and the Canadian Space Agency unveiling the four

astronauts who will take part in the next Artemis mission and fly around the moon. The Artemis 2 team will be made up of three Americans and one Canadian. It includes the first woman and first person of color on a moon mission. Morgan, that sounds like a reporting trip for you. It does, doesn't it? It's supposed to happen next year, and it is a key mission, and it is the mission before the mission where we see American boots, if all goes according to plan, back on the lunar surface. So it's going to be one to watch. Pippa Stevens, thank you. Oil is a top story, but not the only energy market seeing big moves today. Natural gas is starting off the second quarter lower, and it's coming off its worst quarterly performance ever, down more than 50 percent so far this year. Joining us now,

Bill Perkins from Schuyler Capital Management. Bill, great to have you back on the show. Thanks. Thanks for having me again, Morgan. We keep going lower here. I know you've been bearish for some time and you've seen some pretty incredible returns at your hedge funds. In light of that, do you continue to think that we go that we see more weakness? I do. The market is working. We're seeing increased gas burns. We're seeing spreads inducing people to put it in storage. We're seeing flows across the continent to areas where there's more demand or more storage space. But unfortunately, it's not enough. Not yet. Unless we get some severe weather or some producer action to curtail production, I expect to see prices even lower than where they are now. There isn't that much more to go,

so that's the good news for the producers, the people who are along. But as a percentage, it's still quite a bit. So when you say there isn't much more to go, meaning you think that we're probably going to bottom somewhere near here? I think we're going to bottom somewhere in the $1.40 to $1.75 range. I think you'll start to see action by producers to shut in production

in order to stave off declining prices. Basically, it's not economical. They'll make economic decisions to delay production into future years. But we haven't seen that behavior yet, and we're not yet quite at that pricing. I wonder what you think the announcement we've got from OPEC and what that's doing to oil prices does to this conversation. And I ask that because you've got big gas producers like Chesapeake and Comstock starting to reduce some of their drilling. But we also know that a lot of gas comes up with crude oil as well in some of the biggest shale fields. And it doesn't seem like with oil prices moving higher that producers are going to feel so incentivized to shut in some of that

supply. Well, definitely not the producers who have liquid rich or producing oil primarily. The natural gas is basically a byproduct. So they'll actually sell the gas negative. It's the crude and the liquids are where the money is. Luckily, that's generally in the Permian, some places in the northeast, lots of liquids, rich gas and a couple other places. And so in order to keep the market balance, we still do need some dry gas production and we're not at those prices. But if crude oil production grows, so does associated gas. And if we can transport that out of those regions into the market, it's going to be a tough hill to climb for natural gas producers. You got Freeport coming back online finally. How much LNG can we export to make up the difference and I guess at least buoy the prices here? We're running at record exports right now, I think 14.3.

These LNG facilities, aside from Freeport blowing up, have been running all out for a year, really avoiding doing any maintenance. And that's obvious because European gases are very, gas prices are very high, and they want to take advantage of that right now. And so there's a massive incentive to delay maintenance and run these facilities. The question is, is how long can that go on? How long before things start breaking? And that's another bearish risk factor for the summer. Any type of LNG maintenance will just be another weight on this market. So we're definitely paying attention to that. Okay. Bill Perkins, we appreciate the update. Thank you for coming on, given the big moves we've seen in this market.

Thanks for having me. Coming up next, a chart trifecta. Stocks, treasuries, oil, all bumping against their long-term ranges as we kick off the new quarter. Mike Santoli looks at which asset class could be poised for a breakout. And tomorrow, don't miss CNBC's Equity and Opportunity Forum on bridging the wealth gap and securing a strong economic future. You can register right now by scanning that QR code on your screen. Stay with us. We have a news alert. Comments from Treasury Secretary Yellen.

Kayla Tausche has the details. Hi, Kayla. Hi, Morgan. Treasury Secretary Janet Yellen commenting on the production cut by OPEC+, calling it an unconstructive act and a regrettable action that will not be positive for global growth or bringing down inflation for consumers. She was speaking to reporters after an event that she held at the Yale School of Management with Yale's president. And she also said that it was too soon to assess the price impact of the OPEC production cut,

as well as whether it could potentially impact the threshold that the Treasury and other allied nations have set in capping the price that Russia is allowed to sell its oil that it produces at. Currently, that's set at $60 a barrel. And she said perhaps in the future they could reassess that. But for now, there's not going to be an impact there. She also commented on the strength of the banking system. She said it's stabilizing and that the Federal Reserve remains well capitalized. And she said the U.S. government will not allow contagious runs on the banking system to continue. Morgan?

Have we heard from, I mean, certainly key to hear from Treasury Secretary Yellen, given what we saw from OPEC over the weekend, but have we heard from either President Biden or the Energy Secretary on the heels of that surprise announcement as well yet? Well, we heard from the National Security Council. Spokesman John Kirby spoke at length to reporters this morning about it and said that they were given a heads up. He said that it was not a positive move, that they did not appreciate that they were going in that direction and that they did not support what they were doing. He said that Saudi Arabia remains a strategic partner.

They will look for cooperation and collaboration where they can. But certainly the administration is not pleased with this move and feels like it is a fly in the ointment of the rest of the economic work it's doing. Morgan. All right, Kayla Tausche, thank you. Let's get back to Mike Santoli with a look at three major asset classes that are all bumping against long-term technical ranges. Hi, Mike. Hey, Morgan. Yeah, we're testing some boundaries here, stocks, bonds, and oil. Here's the one-year chart of the S&P 500. You see, we're about where we were in early to mid-February. Forty two hundred is basically that number.

And it goes all the way back to last spring. We did overshoot it in the summer in August. What it's generally meant when we're at the upper end of this range is, you know, the collective wisdom of the market is saying maybe a soft economic landing is more positive. Maybe earnings flatten out, but they don't decline. Maybe the Fed is closer to being done without causing too much damage. Of course, the lower end of the range, whether you want to call it $3,600 or $3,800, depending on what range we're talking about, is much more about potential hard landing and some worse scenario out there.

And the Fed's going to have to put us into a recession. Now, bonds kind of sitting right on this shelf. The 10-year treasury yield has not really gone below this level. It's around three-fours. We got below to the three-threes a few times, but it shows you it's gotten a little bit heavy on this level. Now, that could say that, in fact, inflation is not going to be a big problem. The other thing to keep an eye out for, Morgan, is people who still think we're in a bear market, who still think that we have a recession waiting for us,

are going to say that the correlation between stocks and bonds might flip. In other words, lower bond yields at some point will perhaps not be good for stocks, but be negative to stocks. That is what has happened in past cycles that were like this. So we can keep an eye on that relationship. It is not yet discernibly flipped. And then oil, we were just talking about that $80 a barrel right here. It's not as much of a longer-term top of the range, but it has really been sitting here for a little while now, several months. $80 was the number. I would say the market overall, the stock market is relatively

comfortable here in the $80. But when you're below $100, keep in mind we were above $100 from about 2010 to 2014 in a much smaller economy. So you can absorb it even if it's not going to be helpful on the inflation and growth front. It does feel like there's this major push-pull happening when you look at all these markets and you break it down the way you just did with those charts between the bulls and the bears and sort of where we go next. Any sense on what that key catalyst is going to be for any kind of breakout technically in any of these markets on any of these charts you just laid out? I mean, I think that whether we get an indication of a Fed pause that's a little more clear than the market just trying to anticipate it, that might be the thing if, in fact,

it's happening at a time before the economy is discernibly really falling away. So maybe that's the question. And then obviously the converse of that would be if it seems like the Fed is already overshot and we don't have an escape from some kind of a recessionary scenario. So I would say those two things in the interim, mechanical, tactical stuff, sentiment is gonna matter a lot.

And we do still have very cautious sentiment in equities at least, if not in the other markets. All right. Mike Santoli, thank you. Tesla just turned in its worst day since January, despite reporting record Q1 deliveries. Find out why Wall Street is slamming the brakes on the stock when overtime returns. Look at that, down 6 percent today. Welcome back. Auto sales revving up in the first quarter, even as Tesla disappoints with its quarterly deliveries.

Phil LeBeau has the details. Hi, Phil. Hi, Morgan. Let's start with Tesla. You showed the intraday move, and it was down, what's it down, 6% for the day. Part of the reason why are some factors outside of deliveries, but it did deliver 422,875 vehicles. Tesla had put out basically a consensus to analysts saying, this is what we heard from

our analysts. It's in line. FactSet said, no, we expected 432,000 regardless. These are the three factors that are weighing on shares of Tesla away from deliveries. First of all, you've got the new IRA tax credit impact. We already know Tesla has said the standard version of the Model 3, it may not qualify for the full 7,500. We'll get all the rules on April 18th. More price cuts could be coming in China where the EV competition is heating up. And then you've got the Q1 automotive gross margins. We get those on April 19th.

That's what people are focused on. And there's concern that any one of those three could weigh on Tesla's results in the second quarter. That's the reason that the shares are under pressure. As you mentioned, we get almost all of the automakers today reporting their Q1 results. Ford will give us their numbers tomorrow. And across the board, generally impressive numbers. GM up more than 17%. Hyundai up 16%. Toyota, the outlier, down 8.8 percent.

Finally, I want to show you shares of Rivian. Under pressure today, the company reported its Q1 production and delivery numbers. Both were down 7 percent compared to the fourth quarter of last year. That is a sequential decline that got the attention of the people at CFRA. They issued a rare strong sell rating on the stock today. Morgan? Interesting. I want to go back to the fact that you are seeing this pop in numbers. Supply chains easing, inventory starting to hit lots as well. What is this going to do to prices?

Because we know new vehicle prices have been stubbornly high. They've been staying stubbornly high. Right. Well, because there has been such limited supply, automakers, to a certain extent, have been able to say, you know what, what we have on the lot is what you have to choose from if you haven't already pre-ordered. And, oh, by the way, most of the time, it's the top trim level. Increasingly, what we're hearing back from dealers is that people on the lots are now saying,

I like it, I might buy it, but I'm not paying the top trim level. You gotta give me something a little bit lower. I think we're gonna see these prices ease back a little bit more over the next couple of months, Morgan. Great. I know we get the Mannheim used vehicle value index later this week as well. So another data point to watch.

Phil LeBeau, thank you. Up next, the director of the Ronald Reagan Institute on the potential investing fallout from increasing tensions between the U.S. and China. As leaders from Washington and Taiwan prepare to meet this week and tonight at 7 p.m. Eastern, the fired Starbucks worker who ignited a union movement at the coffee giant speaks out for the first time. Plus, fresh off Bob Iger's blistering attack on Governor DeSantis, Central Florida Tourism Oversight Board member Bridget Ziegler fires back in an exclusive interview. That and more on tonight's Last Call.

Welcome back to Overtime. House Speaker Kevin McCarthy planning to meet with the president of Taiwan, Tsai Ing-wen, Wednesday at the Reagan Library in California. The meeting will likely rattle an already tense relationship between the U.S. and China. And joining us now is Roger Zachheim, director of the Ronald Reagan Institute. Roger, it's great to have you on. We've already seen the tensions between the U.S. and China ratcheting up here. Expectations for, A, what is going to come from this meeting, and B, how China's going to react. I'll start with a second, Morgan. Great to be with you. China's going to react in the same way they reacted probably the way Nancy Pelosi visited Taiwan last year, by increasing aggression and provocations in the Taiwan

Strait. For this meeting, it's critically important for the US-Taiwan relationship, having President Tsai come and meet with Speaker McCarthy, the opportunity for those leaders to speak to the American people about the importance of relationship and for the United States to demonstrate its support for Taiwan's security and freedom. Yeah. Strategic ambiguity, that is the term that is used in terms of the U.S. position around Taiwan where China is concerned. But you mentioned Pelosi, now McCarthy.

You have other lawmakers that look poised to travel to California and have meetings this week as well. Can we still call it strategic ambiguity? Absolutely. Strategic ambiguity is about the question whether the United States would come and support in the form of military participation in defense of Taiwan in the event of conflict. What we're talking about here is what we've been doing for decades since the Reagan administration where the United States has supported Taiwan security in the form of assistance. Arm sales, that is something that the United States has

consistently ratcheted up when the threat to Taiwan has increased. We all want a peaceful solution to this problem. When there's peaceful solution pursued, we'll decrease our security support. Of course, in this environment, we need to increase it. And I think that's what you're going to hear from congressional leaders at the Reagan Library. OK. I mean, we do have this $19 billion backlog of weapons sales to Taiwan. You have supply chains here and production lines for the U.S. defense companies that are trying to ramp and ramp as quickly as possible, but also having to replenish stockpiles and supply directly or indirectly into Ukraine, too. How does that

get balanced out? And I guess, does a meeting like this shift the policy around that manufacturing? Well, China, of course, is the pacing threat. The United States has to be willing to deal with China. And part of that is increasing our arsenal of democracy and making those investments to increase industrial capacity. You're right to mention Ukraine, but Ukraine has made clear to all of us that just-in-time manufacturing won't work when it comes to our national defense. And so we need to have the ability in the United States, as we talk about walking and chewing gum at the same time, to provide for Ukraine, to go ahead and invest and provide the support to Taiwan, and at the same time increase our stockpiles.

And it shouldn't be a choice between one out of the three or two out of the three. We should be able to do all of it as a great power. Yeah. China is forging closer ties with Saudi Arabia as well right now. We obviously saw the surprise OPEC announcement with the barrel, with the oil cuts over the weekend, too. What does this do to our alliances in the Middle East and to things like weapons sales there for the future? Well, we need to increase our cooperation with Saudi Arabia on the security front. I think one of the challenges of the Biden administration is they took that for granted and has come back to haunt them in energy policy. As you've just pointed out, we thought last October when Saudi did the same thing that was resolved,

we saw the announcement of the Boeing deal between Saudi and Boeing. But clearly, Saudi does not feel confident that it could rely exclusively on the United States and the West when it comes to their security needs. And so they're willing to play ball with China. It's a problem. I think the Biden administration absolutely needs to address it. Ignoring it or saying there's not a problem is not helping matters. Roger Zachheim, great to have you on. Thanks for joining me today. Great to be here. Breaking news on the Fed. Steve Leisman has the details. Steve.

Thanks, Morgan. Fed Governor Lisa Cook, speaking in Michigan, says the Fed has to pay more attention these days to credit channels. This picks up on a speech she gave last Friday. She says she expects additional credit tightening in the economy. And she points to the most recent senior loan officer survey that said there's already been credit tightening in the economy. And that's before the issues of the Silicon Valley Bank have hit either the economy or that survey, which comes out in May. The credit crunch in the tech sector, interesting, she says, could have implications for innovation if there's less capital available for innovation in that economy.

She says this is still a pandemic-related economy and there are still shortages and inflation and excess job openings that are a matter of concern for her on the inflation front. Though this is some good news here. She says she's seen some wage gains moderating quite a bit. One other factor, more academic in nature here, but she does say there is some research showing that switching from lower to higher paying jobs, of which we have seen a lot of in the wake of the pandemic, could be ultimately disinflationary because it's good for productivity. Morgan? Lisa Cook, one of the newer members, we haven't heard very much from her. I guess, how would you categorize her in terms of the dove to hawk, or I guess hawk and less hawkish?

So, she's an academic economist. Actually, we share in common that she was in Russia for a period of time that I was there. She was studying academically. I was writing for a newspaper. But some of the same macro themes came up. I think that Lisa Cook, and I'm taking a guess here, is one of those Fed folks that in a normal time, if it was a close call between hiking or not hiking, would probably be a little bit more dovish. But the thing is, Morgan, and this is what's been so interesting about covering the Fed these days, it really hasn't been much of a close call, except for maybe the thing is, Morgan, and this is what's been so interesting about covering the Fed these days, it really hasn't been much of a close call except for maybe the last meeting because of the credit crunch.

And she is telegraphing here that she will be taking the credit tightening very seriously. So perhaps it's getting to be a closer call for her. Ultimately, she might want to be more concerned with the impact of credit tightening and Fed rate hikes on ordinary people. But right now, it's not necessarily a close call when it comes to inflation. So she has sided with the majority, which has been hawkish, as you know, for quite a while. Steve Leisman, thank you. Up next, we will discuss whether tonight's college basketball finals will be a slam dunk for sports betting companies and why it could be your last chance for risk-free bets.

Stay with us. Welcome back to Overtime. This year's college basketball tournament has seen an unusual amount of madness leading to tonight's unlikely finals matchup. Contessa Brewer looks at what that means for the sports betting industry. What does it mean? You're so witty. I love that. Well, the number four seed, UConn, the Huskies are going to face off against the fifth seed, San Diego State, tonight in Houston. Aztecs are looking to win their first ever title. UConn looks to secure its first in nine years. I always wanted to do sports. The odds have the Huskies as the seven and a half point favorites. Now, FanDuel tells me that 65% of their bettors have placed a money line bet, who's going to win, on San Diego State to win.

PointsBet, a partner with NBC Sports, says 82% of its money line bets are on UConn, calling it the most lopsided pregame action they've taken on a team in the national championship in the past three years. The over under for the game has been set at 132.5 points for the final total score. DraftKings says 78 percent of the bets coming in are on the over. And one interesting tidbit here. BetMGM tells CNBC they saw a 30% uptick in handle on the women's NCAA tournament this year. The action comparable to an NFL game, go women.

And for the sports book, tonight's game might spell the end of a very brief era. The American Gaming Association has issued updated code of ethics where marketing goes. It includes banning the term risk-free in all advertising and promotions, severely restricts college partnerships with sports books, and it bans all name, image, and likeness deals with college athletes. And just to be clear, that's not retroactive. It's not retroactive, and it only applies to those that are members of the AGA, which does not include, say, PointsBet or Caesars, for that matter, and others.

All right. I think it's going to be an exciting night. We're going to see how all that shakes out. Contessa Brewer. Let's do it. Thank you. All right. Well, we had a mixed picture for the major averages, the Dow finishing higher, the S&P

eking out a gain in the Nasdaq under pressure. That's going to do it for us here at Overtime. Fast money begins right now.