Closing Bell - Closing Bell Overtime: Tech Stocks Rebound; Apple Has Best Day Of The Year; Evercore’s Roger Altman On Economy, Inflation 4/11/24

Episode Date: April 11, 2024

Tech led a rebound in stocks after Wednesday’s selling while Apple notched its best day of the year. JPMorgan’s Phil Camporeale on the market action while Patrick Moorhead covers Apple’s bounce. Evercore founder Roger Altman on the Fed’s next steps, when a cut could happen and the resilient economy. Our Morgan Brennan on the explosive growth of the space economy in Colorado. TIAA CIO for Wealth Management Neel Mukherjee on how he is advising clients. 

And the breaking news is a record high for Amazon. That helping tech stocks recover from their recent funk. And there is your scorecard on Wall Street. Kind of looks like one of those cookies, right? It's green on one half, red on the other. The action, though, just getting started. Hi, everybody. Welcome to Closing Bell. I am Brian. And once again, John is off.

Morgan will join us shortly from Colorado. The market and you finally getting a little good news on inflation with the March producer price index rising, but rising less than expected. Coming up, Evercore founder Roger Altman on this week's mixed picture on inflation, what he thinks the Fed will, if at all, start cutting rates. Plus, TIAA Wealth Management's chief investment officer on where he sees some of the biggest market opportunities for you right now. Neil Mukherjee will join us in just a bit. Let's get right now to today's action, though, with our first guest.

And that is Phil Camporeale of J.P. Morgan Asset Management with us on set. Phil, good to have you. Good to be here. How do we read the inflation picture? Yesterday was doom and gloom. Today, a little bit better. Where do you, where does JPMorgan Chase stand? Yeah, so the inflation data that we got this week, Brian, CPI has to take precedent over the producer price index. So I think if you think about mixed messages, I think yesterday is more important for the narrative. The bottom line for us, though, Brian, is inflation may be bad for do you think the Fed should be imminently cutting rates? But it is not bad for economic growth. OK, what I mean by earnings is that because investors care

about earnings as much or more than they care about economic growth, I think. Yeah. So the nominal growth forecast that we have, OK, which is roughly that the real GDP is going to be about two ish percent inflation, about two and a half to three. That's five percent nominal growth, Brian. That's a pretty good number when it comes to earnings. And 100 percent agree. We kick off earnings starting tomorrow. And listen, all eyes are going to be on earnings with the valuations up this high, with the market moving by 26%. Do earnings, given that parts of the market may be considered stretched by some, parts by some, do we need earnings to be perfect? There is a high bar for earnings. So I think what you're going to see is if companies miss, they're going to get hurt. And if companies make, maybe not, they don't run as much.

But I think the earnings season this quarter is very, very important. I want to be really clear about something, though. This economy doesn't need the interest rate cut. I think we're getting a little bit kind of crazy about when the Fed is actually going to move. I think what we're saying is as long as directionally the next move is not a hike. So let's stop there. That's the line in the sand that we're making. I think stocks are going to be okay. And that's what's leading us to our nominal growth.

I love that you said that because I've been doing this longer than I care to imagine. Yeah. And I used to go months without talking about the Federal Reserve. Yeah. Now I can't go minutes. I know. Without talking about the Federal Reserve. And I don't I don't like it. We're too reliant, I feel, on the Fed. Right. And Brian, what have we seen all last year? The Fed stopped hiking rates in July of last year, OK, have been on pause since then. It's been a pretty nice run. I think this economy, people are so paralyzed by, you know, the last cycle and a zero interest rate policy. That's not normal. That's not the new normal. That's not normal. That's not the

new normal. That's not normal. Okay. And I think going forward, a 2% real rate that some would think would be so restrictive is exactly what was the normal before the financial crisis. I think that's what we're going back to. Guess what? You sound like an old man right now, Phil. The old man on the couch. 6% mortgages. How dare they? That used to be considered low. Right. Now it's considered high. It's the same 6%. Unfortunately, everybody's locked into all these 3% and 3.5% mortgages.

Okay. You said we don't need a rate cut. No. What if we, I don't think we'll get one, but what if we do? What if we get two rate cuts? Is that just literally just fuel on that fire? Yeah, I think what the rate cuts would do stocks rip. Yeah, I think stocks are kind of front running that a little bit, which is where

the earnings story comes in. So that valuation story is predicting the Fed to start easing rates. OK, so if they do cut rates, I think what would happen, Brian, I think you would get a rally in interest rates. I think that, you know, the 10 year note would start rallying and that's maybe not something that they would particularly want. If they if they cut rates, the 10-year yield goes up? The 10-year rallies goes down. Oh, the 10-year price. I didn't know if you're talking about price or yield. No, the yield goes down. I was thinking, what in the world are we talking about? But we don't need it. We don't need it. So I guess the 4.5% 10-year treasury rate where we're sitting at about now, that's fair if If again, you're thinking about 2% real growth

and 2.5% inflation. Can stocks, we got to wrap it, but can stocks move higher the rest of this year? Low probability of recession, labor supply meeting labor demand, labor supply getting more productive, 7% deficit and a $7 trillion Fed balance sheet. Brian, this is all liquidity

that's pointing us to be overweight stocks, but stocks that don't need the rate cut. Large cap over small cap. We don't have REITs in the portfolio. And the high-yield credit story also makes sense. Phil Camporelli of JPMorgan Chase. Phil, real pleasure to have you on. Thank you.

Great stuff. Laid it out, man. I feel like we can just end the show right now. But we won't. Phil, thank you. All right, shares of Apple ending the day up 4%. Big day for Apple. I think it's probably its best day of the year. I'm guessing. If not, it's got to be close. It's on the back of reports that Apple will overhaul its MacBook lineup, but with new AI-focused semiconductors. But what, if anything, can Apple investors figure out about

a bigger picture AI strategy from Tim Cook and Co? Joining us now is more insights and strategy CEO Patrick Moorhead. Patrick, we never talked about MacBooks that much, but now they apparently are important. How come? Well, we're about to go into a super cycle for what the industry is calling an AI PC. That essentially means you do a lot of the AI processing on the device itself versus, let's say, the cloud. And realistically, it will be a balance. and strategy that that is going to make double digit increases in the PC market over starting in the middle of 2024 and going all the way through the end of 26. So it's a super cycle.

What if anything can we read though? Is there a bigger crystal ball, tea leaf, whatever kind of a read on Apple's AI strategy from this, given that this is the one giant tech company for which we know about their augmented reality AR strategy with the Vision Pro? Can we take anything broader away from this, Patrick? Well, I think we can. Apple has always been relatively weak in cloud-based services. The most sophisticated cloud service that Apple has is backup and maybe the store. But what this portends to is their strategy for AI will be on device, and their pitch will likely be that it'll be higher performance, better security, better privacy, and just leave the trust with Apple. And I think it's a pretty good play.

And by the way, it's not necessarily unique because HP Dell, Lenovo, Microsoft Surface with Qualcomm Intel and AMD are replicating it. And I think consumers were wondering where, sorry, investors were wondering where's the bright spot for Apple, right? We've seen the hits that Apple's taking in China with smartphones. We saw them bail on cars to the future. A good product, but a muted response with its AR capabilities. And this looks to be a bright spot for them. Yeah, because it is a little bit vexing on this. The MacBook. How much does the MacBook, listen, MacBook is probably the best, in my opinion, laptop out there.

But how much does it matter to Apple as a whole? I mean, it's really the phone, its services. Where's the MacBook fall? Well, it is a smaller percentage of what they do and services are becoming an increasing part of that. But Apple's play is about selling you every device and every one of these devices working seamlessly with each other. I don't believe that the iPhone business would be as good as it is today, nor its services business without connectivity to watch and the MacBook. So it's a really systemic approach. And Brian, I believe 100% we're going to see the same on-chip AI capability show up in the iPhone. And we might get a little taste of it at WWDC conference coming up shortly.

Well, and that's going to be a big one, I guess. And I have a feeling CNBC will be there. You will probably be there as well. Patrick Moorhead, good seeing you. Big day for Apple. In fact, my instinct was correct, folks. It is Apple's best day of 2024. Thank you. Big day for Apple. In fact, my instinct was correct, folks. It is Apple's best day of 2024. Thank you. All right. Time now to bring in senior markets commentator Michael Santoli for the first

of his dashboards in overtime. Mike. Yeah, Brian. I mean, Apple was a big part of the story as to why the headline S&P 500 did do well today, kind of bouncing off the bottom end of this recent range over the last few weeks, and also why it's outperformed today and for the last little stretch, the equal weighted version of the S&P. So you see that they kind of went up in tandem. As a matter of fact, the equal weighted version was leading off the October low for some time. You had that broadening action as yields came down. That's been the rule here.

But now this gap has opened up again. In fact, today the S&P up about three quarters of a percent. The equal weight was around flat. So it's not so much that this is a worrisome thing. It's something that tells you about the tendencies of this market to get, when it gets defensive, when yields go up, it wants the mega caps. That's where the secular growth stories are. However, I would say that in both cases, you're doing just fine.

You're kind of just consolidating a pretty good rally at this point as opposed to reversing it. Did have a couple of pockets of weakness, though, in one of the favorite sectors, industrials today, which I think is at least worth taking a look at. So Fastenal had a missed top and bottom line. This is a kind of big, well-run, broad-scale industrial fasteners and other products company. And it brought down Grainger, another one of these industrial distributors. But you see how strong they've been over this period of time. You have this six-month run.

They both are up about 40 percent. Anything that vaguely touched infrastructure has been great. And they're still well outperforming. But it shows you a little bit of the air pocket risk as we get into earnings season, Brian. Yeah, these industrials, I mean, Fastenal, not a name certainly people talk about all that often. Why specifically are those stocks right on Michael Santoli's radar? Mostly because they often are the ones that are most correlated with the kind of ebb and flow of the industrial economy. They're just incredibly broad.

And in terms of the sets of products that they sell and they're kind of these roll ups and they they're basically kind of slow and steady in most times. But then they catch the tailwinds of growth. So I think what's also interesting is just how much the stocks had momentum going into this. Anything electrical component has also been running like this as well. So it might just give you a sense of parts of the market that got a little bit ahead of themselves because of the excitement about some of the industrial investment themes that are out there. All right. Well said. And I know we'll see a bit later on in the program. Michael Santoli, thank you very much. All right. Up next here on Overtime, Evercore founder Roger Altman on whether he thinks the increase in dealmaking and IPO activity will gain even more

momentum. Plus, J.P. Morgan, Citigroup, Wells Fargo kicking off earnings for the banks tomorrow. Coming up, a top analyst on what he is expecting and what those results could mean for the rest of your bank investments. We just talked about the Fed. Let's keep talking about the Fed. A trio of Fed officials weighing in today on the battle against inflation, and all three making it clear they do not favor any rate cuts in the near term. What does Roger Altman of Evercore think? Well, we're going to find out because he's joining us now. Iosing Bell Overtime. Roger, a real pleasure to have you on,

I think, at an important time. What is Roger Altman's view of what the Fed will do and what the Fed should do? Well, you can't ignore the data and the prints on inflation that are on the hot side. Looks like the PCE, which is the Fed's favorite metric, is going to come in around the mid-threes when we next see it. And if you want immediate rate cuts, and a lot of them for 2024, that's a negative result. But I think the bigger story is really the remarkable strength of the U.S. economy. It's just amazing. I looked this up before this afternoon's discussion with you. Six months ago, just six months ago, a majority of economists thought the growth rate for this year, 2024, would be about 1.3 percent. Now they're seeing it as almost double that.

The Fed itself thought the unemployment rate for 2024 and already, I think, now at this point in the year, would be a full percentage point higher than it actually is. And you know, since 2019, the US economy in real terms has grown 8% through the pandemic and so forth. We're the only economy in the world that's now bigger than it was before the pandemic. Europe over that period has grown 3%. So yes, I understand that the market, of course, is focused on the very short term and when the Fed will first cut, whether it'll be two cuts or three cuts in 2024 and so forth. If I were managing money, I'd be focused on that too. But I think the bigger story is the amazing resilience of the U.S. economy. That's why valuations are high

and stocks, putting aside this week, are doing well. Do you have a view on why the U.S. we went from hard landing to soft landing to no landing? And I was wrong. A lot of people were wrong. Now I'm kind of thinking we have this edge and energy costs or energy prices are far less than most nations. If you're a German manufacturer, you're not building anything ever again in Germany. You're going to build it here, be based in Germany, but you're going to build it here. We're already seeing that. I think that's one reason the U.S. economy has done well.

But is it still just leftover money from the pandemic savings? Is it just people don't care? They're jacking their credit cards up. Why? How? I think, Brian, I think it goes way beyond the excess pandemic savings, although there still is apparently three to four hundred billion of that in the pockets of or the bank accounts of upper income Americans. But look, our labor force has grown strongly, unlike the rest of the world. And you need that part of the supply side to grow if you as a whole are going to grow. That's a huge plus. Oil and gas production,

as you said, after all, we're a net exporter. That's a plus. Productivity growth, labor productivity is up 1.6%, i think over the last two years but that's impressive there's a long list uh but everything by and large is going right in the u.s economy and yes inflation is proving sticky on the downside parenthetically i think it usually does although we haven't had a period of high inflation for a long time. But that's not out of line historically. But I think the reason the market is, generally speaking, quite high, and multiples are quite high, three turns or so above long-term historical averages, it's because the U.S. economy is so strong. And we should feel fortunate in this country that it's the case. And it's out. The economy is outpacing every single forecast that one could have pulled up from six months ago

or nine months ago. Arguably, the soft landing already has happened. You know, but also you're right, Roger, not only has the economy outpaced almost all forecasts, but so is inflation, though. I mean, I think it was one out of 75 economists that were surveyed got the CPI number correct. I mean, one out of 75. And I mean, these are these are these are very smart women and men went to the best schools, best MBA programs, and they couldn't get it right. Yes, but I think what they've misjudged, and I was wrong too. Let me quickly add that. Me too. But I think what they've misjudged was how strong the U.S. economy would be.

You know, if you thought, as so many did six or nine months ago, that we were going to have a recession, then you would have been expecting a lower inflation rate. And what has been the big surprise, I think, is not so much that inflation has been so sticky coming down, but that the growth and the labor markets and fixed investment, corporate profits have all been above expectations. So it naturally follows that inflation would be slower to come down in a stronger environment like that than otherwise. Do we get to see a big pop in deals and IPOs because of it,

or is the cost of money just too high right now, Roger? No, I think the environment is improving. We're not seeing a dramatic recovery in the transaction cycle. We're seeing a medium one, at least in terms of M&A. But across the board, conditions are better than they were. IPO market is doing better. Leveraged finance markets are doing better. Other equity financing markets doing better besides IPOs. And M&A volume is up in dollars

compared to last year. It's down, actually, in number of transactions. But total dollars are up. So it's an improving environment, but not dramatically so. Most people think it'll continue to slowly improve. We'll see. Hard to say. Roger Altman, it's not hard to say we enjoy having you on the program. Thank you very much. Appreciate it. Thank you, Brian.

My pleasure. Talk about going with the flow. WeWork founder Adam Neumann launching another real estate startup today. People are giving him hundreds of millions of dollars. And he spoke exclusively to Deirdre Bosa and CNBC. And those highlights in our chat with Dee are coming up. WeWork founder Adam Newman. Remember him?

Launching his latest venture and speaking exclusively with Deirdre Bosa. And Deirdre's joining us now with the highlights. And I can't wait to hear this, Deirdre. You know. We talked about a lot of different things, Brian. But let me just say, the main takeaway, I would say, is that Adam Neumann still isn't really doing tech, despite his best efforts to brand it that way. I'm here in Flo, one of the first buildings to launch,

and this is essentially a rental apartment company that is competing in a crowded space where really large real estate companies already play, from Toll Brothers to related companies. Neumann, though, is still very good at selling a story. He's been able to raise $350 million from one of Silicon Valley's most well-known VC firms, that's Andreessen Horowitz, at a valuation of a billion dollars.

Now, I questioned him on the tech part of the business. What makes it innovative and disruptive? The potential equity stakes for renters still not figured out, and whether flow helps or exacerbates the housing crisis. While he says that he has learned lessons from WeWork's downfall, he was still light on specifics and vague on the mission. Have a listen. I think the ultimate aim is to actually feel proud of where you live. If you own it, if you're renting it, if you're sharing it, whatever it is, you really want to feel at home and you really want to feel connected, as we said before. And we're on a journey of exploring all those different things. Now, as for that first venture, who can forget WeWork? Remember that Newman is trying to buy

that company back. He says he's still in talks to do so. Didn't give us any more on the financing, but he says he wants to do it because he could integrate WeWork with Flow, and he is actually creating co-working spaces in the buildings like the one that I'm in. And two, he wants to buy it back because he noted that the international businesses is not in bankruptcy while the U.S. side is. Ryan. All right. So how does this differ? I have so many questions. We could go the whole rest of the show, Deirdre. You and I talked about it a little bit yesterday. How does this differ from just like buying a building and renting apartments? What is flow different? How is WeWork different from Regus, which was doing the same thing for 30 years before?

It's a great question. WeWork was different than Regus in that it kind of popularized the co-working space, right? It kind of brought it into the mainstream. The business model was not different. And you could say the same thing about Flow, that Adam Neumann is an apartment landlord. He talks about the company being vertically integrated, how they own, they operate, and they have this technology backbone. But again, the details on that technology side were, there weren't very many, first of all. They were vague as well. Like when he said something that they created all in

house and that differs from what a Toll Brothers or related companies does with One Hunts and Yards, for example, that's not actually true. They develop a lot of the stuff in house as well. So Adam Neumann, he's sort of doing what he's done before with WeWork, and he's actually having some success, right? I pointed to the $350 million that he raised. But in this instance, there's a really key difference in the business model, and that is that Adam Neumann actually owns these units. He owns the buildings. So it's not as likely to go bust as quickly in a downturn as a WeWork, where he was essentially holding on to leases and then turning them around in short-term leases. So that is a key distinction. And Brian,

he's not the only one, right, looking to residential real estate. You have some of the largest asset managers in the world doing so, like private equity firm Blackstone. Well said. Deirdre Boso, fascinating stuff. I can't wait to see more. Deirdre, thank you very much. All right, time now for a CNBC News update with Julia Borst. Brian, Secretary of State Antony Blinken spoke to foreign ministers from Turkey, China and Saudi Arabia over the past 24 hours to clarify that escalation in the Middle East was not in anyone's interest. It comes amid concerns that Iran would attack Israel in response to the recent strike on the Iranian embassy in Damascus.

Sam Bankman-Fried today filed an appeal of his conviction in a 25-year prison sentence. The FTX founder was sentenced last month for stealing $8 billion from the now bankrupt cryptocurrency exchange. Bankman-Fried is also asked to stay in New York during his appeal instead of being transferred to a California prison to serve out his sentence. And a CDC report found COVID vaccines are not linked to fatal heart problems in young adults, debunking misinformation that the vaccines were the cause of sudden cardiac deaths in young athletes. The report found none of the deaths within 100 days of receiving the vaccine were attributed to it and that most of the 30 people who died from COVID in that time frame were not vaccinated.

Back over to you. All right, Julia Boorstin. Julia, thank you. Up next, TIAA Wealth Management's chief investment officer on whether the recent market pullback is a buying opportunity in sectors he says are attractive now. Plus, one Morgan Brennan has an up-close look at how the aerospace industry has been transforming Colorado. And she's also been speaking

with some of the biggest names in space. I think going to the moon and touching down softly and completing that mission 100%, that's gonna sweep the entire world into what we're doing. When you look at the future potential of manufacturing in space, what I like to say to people is any manufacturing process that occurs on Earth that could be negatively impacted by the effect of gravity has huge potential for being manufactured in microgravity.

I think we live in a golden era of space exploration, and I think things are accelerating and taking off in a very, very rapid way. All right, welcome back to Overtime. Stocks rebounding after today's producer price index, basically the wholesale price is not what you pay, came in a little bit lower than expected. Of course, this on the heels of yesterday's elevated consumer price index. That is what you pay that caused markets to go down. So how do we square all the different noise and data points that we're getting there in the market? Well, joining us now is Neil Murkugi. He is the chief investment officer of TIAA's Wealth Management Division.

Neil, thanks for coming on. How do we square it? One up, one down, couple months hot, couple months not. What's your take? Well, Brian, the issue is if you take the totality of the data on inflation this year, it's looking firmer than expected. So one month higher than expected is a blip. Two months higher than expected is a blip. Two months higher

than expected is a bit of a seasonal aberration. Three months is a trend. And so if you go back as to why this is happening, it goes back to December when the Fed pivoted in a dovish fashion. Financial conditions have eased up substantially. Stocks up. Credit spreads are tight. Interest rates are lower. Firmer growth, firmer inflation. So that's what is now seeping through into the economy. And the Fed has to be really careful here. They have to push back and appear a little bit more hawkish than they have. You said something. You sat down. We're chatting. And you said your clients were starting to ask you about Fed rate hikes. And I said, not cuts, hikes. And you said, yes. So people are,

you've got some smart clients and they're talking about the possibility of a rate hike. It's interesting, right? The first thing that people are worried about is can equity prices, for example, keep progressing without any Fed rate cuts? I think the answer is yes. But you're right. There are certain clients who are now asking, does the Fed need to hike? Has the Fed done enough? I think what the Fed really needs to be aware of and what they should be aware of and are is what happened in the 1970s, like we talked about, Brian, because back then inflation came back in three waves,

all because either there was some geopolitical issue or the Fed wasn't doing enough. And the Fed knows that. This Fed needs to keep rates higher for longer, needs to make sure that inflation starts to glide lower towards their 2%. Now, I don't expect them to pivot. When it gets to 2%, that would be a little irresponsible. But if it gets to 3%, 2.5%, that's where the structural new rate of inflation could be.

They need to iterate the market, but they need to start by sounding a little bit more hawkish. So the mission is not accomplished. It definitely is not accomplished. The Fed is supposed to also look at jobs. The dual mandate. I would imagine they don't need to right now, that it is 100% inflation. They do.

I mean, they mention jobs, their notes and their minutes and everything, but I got to imagine that it's all inflationary talk. I agree with that. So when they did the pivot, I think that was because they were focusing on risk management on the growth and the labor market side of the equation. The Fed was staring down the barrel of a soft landing, and they just wanted to walk through it. And now, on the other hand, they need to pivot to focusing on risk management on the inflation side of the equation. That is the most important thing for the Fed right now. Jay Powell is a powerful guy. The Fed's a big organization. It's got a balance sheet, by the way, bigger than the budget of the United States of America. But I don't know, as powerful as the Fed is, what they can do about auto insurance rates.

What can Jay Powell do about the lack of housing availability? There's nothing they can do about the things that I think are truly inflationary. That's absolutely right, Brian. And that's one of the reasons we think that the Fed may not be able to get to that 2% inflation because we may be in a world which is about 2.5%, 3% like inflation levels. You look at how the global economy is these days. There's a scarcity of labor. The availability of cheap labor is not there anymore from China. There's a scarcity of commodities, especially as we transition to the new energy economy.

There's a scarcity of housing. Millennials are aging into their prime age of buying, consuming, household formation. They cannot get housing to buy. And the deglobalization trend, reshoring, friend-shoring, ally-shoring, that leads to higher prices for everyday products. I'm not saying inflation will be stuck at 4%, but perhaps 2.5% to 3% is the new norm. Yeah. And by the way, if you figure out how the Fed can bring down home and auto insurance rates,

Neil, you let us know, and we will lead a show with that. Neil Mukherjee of TIA. I used to say CREF. No, it's just TIN. I just dated myself. Neil, thank you very much. Appreciate it. All right, up next, Mike Santoli is back,

looking at whether rising oil and gas prices could drive new concerns about consumer spending and investors driving shares of CarMax down. One of the worst performers in the S&P 500 today. They didn't like the earnings. They blamed higher rates. They talked about customer affordability and KMX shares are losing ground right now. All right, welcome back.

Michael Santoli returning with a look at how rising oil and, more importantly, gasoline prices might mean for consumer spending. Mike. Yeah, Brian, so gasoline prices up, let's say, 15%, 16% in less than three months. Certainly has the attention of people wondering what it means for inflation. And then you have the spending side of things. Certainly a restraint on consumer spending, but this shows basically how much it takes to work to get an hour, to get a gallon of gasoline. So it's the average hourly wage divided by the cost of a gallon of gas, national average. And you see, it's basically

middle of the pack going back to the mid-70s right here. basically, you get about eight gallons for an average hour's work if you're a non-supervisory worker. You see what the 90s, boy, under-discussed is how cheap energy was in the 90s as part of that boom. And then, of course, you see in the 2010s here when wages were lagging and, of course, oil prices were high, you had a really low affordability of fuel. So it's one of those things that says it's not really time to worry about this too much. Plus, you could consider the higher average fuel efficiency of vehicles right now. And, you know, the amount of labor it takes to drive a mile is probably a good deal lower than it's been throughout history, Brian. Yeah, and you're starting to see some firms basically say, hey, maybe you want to sell NVIDIA and buy Exxon. I'm being a little bit, you know, overly specific.

But people are starting to they've already come back. The last couple of weeks have been a huge pop. People are starting to kind of come back to these these oil and gas stocks. Absolutely. And, you know, the fact that it's affordable at these prices is sort of part of the bull case. Right. So it's not as if you're going to destroy demand if oil prices and retail product prices stay at these levels. So they're pretty free cash flow heavy at this point, those companies. So yes, you are seeing a little bit of a performance shuffle in those sectors. Michael Santoli, thank you very much. Appreciate it. All right, up next, spent the last year Rocky Mountain Way couldn't get much higher. Joe Walsh was mostly right, unless you're talking about space travel.

That is what Morgan Brennan is doing out in Colorado and two booming cities. Morgan. That's right, Brian. I mean, it's no coincidence that this conference, one of the biggest for the space industries, is held here in the state of Colorado. We're going to break down why that is and why the space industry is lifting off in nearby Denver and Boulder. Stay with us. Morgan, I don't know if you can see me out there, but you're going to be talking about growth and construction. And so as I was wandering the hallways at our fair headquarters, I came across this hard hat with the name Morgan Brennan on it.

See that Morgan Brennan. And I just thought that, A, you know, you're not here, but your hat or your helmet is. And you're talking about construction. And I look pretty good in it, too. So I just wanted to just toss to you on the cities of success wearing a little tribute to Morgan Brennan. It's going to be like a who wore it better. Listen, they can see you from space with that thing on. That'll never be me. All right, well, we're here at the Space Symposium.

This space conference, it's one of the biggest of the year. It speaks to the fact that Colorado is a hub for aerospace and defense sector. And it's the region that's growing. The state now has more private aerospace employees per capita than any other state. You have a robust military presence here combined with access to top talent. It's creating this cluster of thriving startups alongside the big prime contractors. You can see just a couple of the names that have locations here in the general area. The dynamic is catapulting nearby Denver and Boulder into its high-tech future.

And here's a look at my reporting on the industry's dynamic growth. It's airing tonight in a CNBC primetime special, Cities of Success. In the shadow of the Rocky Mountains, with an elevation one mile closer to outer space, is an area that's home to a growing cluster of aerospace business. Driving around Denver and Boulder, you'd never know there's hundreds of companies here, front line of our nation's national defense, building highly innovative products that look like they're straight out of a sci-fi movie, manufactured here and then rocketed into Earth's orbit.

Also blasting off, the industry's growth. Aerospace grew 88% over the past two decades, more than any other emerging industry in Metro Denver and Boulder during that time period. And now, 191 aerospace businesses are supporting 29,000 jobs in the region. I think aerospace has become a fulcrum of our whole economy now. Among them, the biggest, oldest prime contractors. Publicly traded names like Lockheed Martin. The industry heavyweight is building up to 32 new satellites to modernize GPS for the U.S. Space Force. Boeing, Northrop Grumman, United Launch Alliance, BAE Systems, and RTX all have a presence here,

alongside private stalwarts like Dylan Taylor's Voyager Space and Jeff Bezos' Blue Origin. It's a community that works together in terms of aerospace. It's not dog-eat-dog. It's all dogs working together. It's hunting like wolves. The cluster of powerhouses in the industry, coupled with access to a pipeline of talent from local universities, like University of Colorado Boulder, have seeded a thriving startup community. So tonight we speak with one of those thriving startups about their decision to relocate from Silicon Valley to Denver, as well as state officials, leaders in aerospace, about the industry's rapid growth throughout the region. So be sure to check out our CNBC primetime special, Cities of Success, Denver and Boulder. This kicks off at 10 p.m. Eastern, right here on CNBC. And Brian, I expect that hat back on my desk before I get back to New York.

It wasn't on your desk. It was in the middle of the house. It was on some random file cabinet. Should I name it? Well, my desk is expanding, just like the space industry in Denver. On a serious note, I know you've been out there before. I mean, how gobsmacked are you by the growth? I mean, the state bird of Colorado is not the eagle. It's the crane.

I mean, listen, it's the mile high city, right? You're a mile closer to space. But in general, this has long been a hub for space and defense, but it's growing. It's growing rapidly as this new space economy that's driven in large part by commercial companies continues to grow as well. And you can see it around us. I mean, I'm standing right in front of Sierra Space. They're based here in the area. This is a company that, as I spoke to their CEO, Tom Weiss, just last week for Manifest Space, is potentially looking to go public via traditional IPO as soon as next year. Their space plane is expected to travel to space before the end of this year, potentially.

When are you and your trusty producer, Harriet, coming home? We will be back in time for the beginning of next week. I was going to say, because... This is the end of the conference today. Having been to Denver Airport recently, I would advise you to leave now if your flight is tomorrow night to get through security. Cause it's like the worst I've ever seen. Um, it's, it's a big airport and listen, I mean, eventually, and you have companies that are working on it, including space companies, point to point, supersonic, hypersonic travel,

you know, it's coming. Or you don't have, you're not necessarily going to, maybe 10 years out, 20 years out, but you're not necessarily going to have to spend all that time at all these airports taking hours and hours to travel. But that's still a little pie in the sky, but there are companies that are working on it. And you can see all of those types of dynamics playing out here on this floor. That lunar economy, space stations lunar economy space stations trying to trip

you up politics and you just bring it right back to business that's why you're the best you just i was trying and you were like no this company's trying to fix that problem too i'm just trying to hide my receding hairline morgan brennan thank you great stuff looks good on you not really years are a little all right up next the top analyst on what you should expect from the big banks when they start rolling out earnings tomorrow. All right, get ready. Bank earnings kicking off tomorrow. You've got Citigroup, Wells Fargo, JPMorgan Chase, State Street.

What to expect. Joining us now, Piper Sandler, Managing Director, Scott Seifers. Scott, what is tomorrow? Is there one of those that I just named to you that is kind of the biggest, the most important to watch? I've got to imagine it's JPMorgan, but I'm just guessing. Yeah. Hi, Brian. Thanks for having me. Yeah, I think J.P. Morgan is the one. Actually, we think for the most part, the large banks are actually going to start out the season pretty strongly for the for the banks. So, you know, we think basically the group is better geared toward a higher for longer rate backdrop. So that's good. In particular, I think J.P. Morgan and Wells Fargo, you might see them bump up their revenue guidance, which is a good thing, of course. And then second, you know, the capital markets are finally normalizing.

So we're hoping to hear some positive commentary there. Third, we expect pretty benign commentary regarding credit quality. And then, you know, finally, the only negative is that we'll probably see some pretty downbeat commentary regarding loan demand. But bottom line, the universal banks are the biggest banks in the country. They're better geared for this type of environment than the rest of the industry. And J.P. Morgan's our favorite within that group. Yeah. OK. And so is there anything inside? You mentioned a couple broader aspects of it. Anything really that the one thing inside of JPM that you and your team will be watching the most closely? Certainly. I think what we call net interest income is basically the spread between

what they make on loans and what they pay out in deposits. So they have an ultra conservative guide that I think it's very, very likely they'll have to bump that up. So all else equal, you know, our sense is that you could probably see estimates go up by about 5% if they just got to a more kind of a realistic guide. So that's the little carrot out there for tomorrow. And just given how conservative management has been, there could be even a little more upside as the year pans out, depending on how the macro and the rate backdrops all play out as well. Yeah. And do you think, I mean, there's obviously we always say banks, but we know that all banks are different. Some are similar, but they've all got different nuances. I certainly get that. Wells, probably more, I guess, related to the U.S. housing market, mortgages, things like that. What can we garner

from Wells Fargo? Yeah. So of the biggest ones that are report tomorrow, Wells is the most main street bank, whereas, you know, Citi and J.P. Morgan, they've got the capital markets, the trading businesses that make them a little idiosyncratic. But, you know, what you would see from Wells, I think probably is a better view into what's going on with overall lending dynamics. So I think for the most part, and we get a little bit of an insight into this from data that the Fed publishes weekly, but there's really, unfortunately, not a lot of demand just insofar as the cost to borrow is very high given the rate back drop. There's still a lot of macro and geopolitical uncertainty. So I think for the most part, it's going to be pretty dampened outlook for overall

loan growth. But thankfully, for Wells, they do have that emerging capital markets business that should go well. They seem to be making some progress on the regulatory issues. So, you know, it's a mixed bag, but they seem pretty well positioned as well. Scott, we're going to leave it there because we've got some breaking news. Scott Seifers, Piper Sandler, thank you very much. Got a news alert on Paramount with Julia Boorstin. That's right. Paramount filing its proxy, which reveals that four members of its board of directors are not up for reelection. Don Ostroff, Frederick Terrell, Nicole Seligman and Robert Klieger. Those are the four names that were

previously reported as come a stepping down from Paramount Global's board. Now, with this, the company's proposing bringing its total board of directors down to seven from 11. They are not introducing any new names. They also announced that they are scheduling the annual meeting for June 4th at 9 a.m. Eastern. This is going to be a fascinating one to watch, Brian. Yeah, it really is a big story. That saga around Paramount is something. Julia Boorstin, thank you very much.

All right, folks, do not forget to tune in to Last Call. That is tonight at 7 o'clock Eastern, 4 p.m. Pacific. We got Bruce Smith, Buffalo Bills legend, NFL Hall of Famer, talking about why he's throwing his weight behind a proposed casino in Virginia. Bruce, in a cast of thousands tonight on Last Call. We'll see you then. That does it for overtime. Fast Money begins right now.