Closing Bell - Closing Bell Overtime: Virgin Orbit Falls; Averages End Quarter Higher With Strong Finish 3/31/23

Episode Date: March 31, 2023

Stocks surged in the final hour of trading, sending all averages higher for the quarter. Jefferies’ David Zervos and Richard Bernstein Advisors’ Rich Bernstein talk how to position heading into Q2. Plus, Evercore Head of Technical Analysis Rich Ross lays out the technical case for more upside ahead in tech stocks. We also get top picks in industrials from RBC Capital Market’s Deane Dray and in space stocks from BofA Securities’ Ron Epstein while Apollo Global’s Torsten Slok on weigh investors shouldn’t think the banking crisis is completely behind us. Our Kristina Partsinevelos digs into Micron’s wild week. 

GAINS FOR THE DAY, FOR THE WEEK, THE MONTH AND, YES, THE QUARTER. ACROSS THE MAJOR AVERAGES AS Q1 COMES TO A CLOSE. THAT IS THE SCORE CARD ON WALL STREET AS WE WRAP UP THIS FIRST QUARTER. BUT THE ACTION IS JUST GETTING STARTED. WELCOME TO CLOSING BELL OVERTIME. I'M MORGAN BRENNAN. JOHN FORD IS OFF TODAY. COMING UP THIS HOUR, THE LATEST REPORT ON BANK BALANCE SHEETS FROM THE FED. SOMETHING WE'VE BEEN WATCHING CLOSELY SINCE THE TURMOIL BROKE OUT THIS MONTH. WE'LL BRING OUT THOSE HEADLINES AS SOON AS THEY CROSS. bank balance sheets from the Fed, something we've been watching closely since the turmoil broke out

this month. We'll bring out those headlines as soon as they cross. Plus, Apollo chief economist Torsten Slocke joins us with his first read on today's inflation data and his view on the broader economy as we do head into Q2. Let's get straight to the market and the final scorecard for the quarter, though. The Nasdaq was the big winner up more than 16 it is the best quarterly gain since 2020 the s&p 500 finishing up seven percent the dow even managing to squeak out a gain joining us now is david zervos from jeffries and richard bernstein from richard bernstein advisors good afternoon to you both richard i'll start with you what banking crisis Just looking at the major averages and the fact that we dipped a little bit and then came right back to start

the year so strong. Your thoughts? So, Morgan, good afternoon. I think, you know, you kind of actually answered what I was going to say in the question in that people are saying what banking crisis, that they're assuming. That we're going to go back and enter a period of cheap and abundant liquidity. Because of the financial crisis are partly because of the financial

crisis. That's giving rise to this very speculative run that you're seeing in the stock market. So I think you know the way you said like what banking crisis exactly. That's what people are thinking. But they are thinking that the fed and the F. D. I, what banking crisis? Exactly. That's what people are thinking. But they are thinking that the Fed and the FDIC and the Treasury are going to provide tons of liquidity and they're going to speculate on all that liquidity.

David, do you see it the same way? I mean, we have seen hundreds of billions of dollars added to the balance sheet. And, yes, we can debate the reasons for it and how temporary it's going to be. But it does inject liquidity into a market that's been starved for it. Yeah, Morgan, it's there. It's good news, though, that yesterday when the H4 one report came out that the balance sheet was contracting again. So we had the big the big run up. We had the introduction of the new funding facility, the changes in the discount window operation to make it much more attractive for banks to bring assets there. And then obviously all the assets

of the two bank failures went onto the Fed's balance sheet, or at least one of them did. So we had a $300 to $400 billion expansion. And then that's come down on Thursday. I think we had a $30 billion contraction last week. So it does look short lived. It looks like these are two very specific, very unusual cases of mismanagement and bad regulation combining to give us something of a scare. But the broader financial markets and the broader financial system still look pretty robust. I mean, I don't see why we extrapolate this bad behavior to the entire marketplace. And that's been our position since the Sunday night when the Fed first came out with these programs after the original SIPB failure. So, David, then, do you see this rally having legs?

Is this potentially the start of a new bull market, as some folks have suggested, at least where the Nasdaq is concerned, given the big rally we've seen in tech stocks? I don't. And the reason I don't is that I think that the more the market rallies up, and I've said this this year, and it was even part of our thesis last year, the more the market rallies up, the more the market has confidence, the more that Jay Powell and his friends around the board table at 20th and Constitution are going to feel emboldened to be able to get inflation back to 2% faster. And I think the more we see this 424300 S&P, the more it's going to feel like Jackson Hole last year, when Jay sort of changed the speech all around at the last minute and said, hey, guys, if you're that optimistic, that means I

can just go a little harder and a little faster. Now, he's further down the road, and I don't think he needs to go that much further. But I think it just gives the Fed that much more reason to stay on the more aggressive side of the monetary tightening equation. Rich, the fact that we have seen tech stocks, communication services, consumer discretionary, really the big outperformers to start these first three months of the year. The dynamic has changed to this idea that the mega caps are now defensive, but the actual more traditionally defensive sectors have been the underperformers. Is that where you find opportunities to buy here, or do you continue to work off of the momentum trade?

Absolutely, Morgan. I think that, you know, I love Mike Santelli. I've known him for a million years. But I think you made a comment in the last segment that was that was really wrong he said there's no macro call to be made here. It's all company specific. I would argue it's the exact opposite. This is a giant macro call. Based on a speculative fervor. Of returning to cheap and abundant liquidity members not only check its crypto currencies. And there is nothing fundamental about the cryptocurrency market. So if you think that this could end in disappointment, which is kind of my feeling, then it says that you want to revert back towards the more defensive sectors, things

like consumer staples, things like health care, things like utilities, that ultimately earnings and fundamentals do matter. And that's what's probably going to drive the market more than a hope of a return to cheap and abundant liquidity. You know, I'm glad you brought up Mike, because I know he's on standby. So I do want to bring in Mike Santoli, CNBC's senior markets commentator. I want to get your response to that, Mike. No, and honestly, it's really just a clarification, Rich, which when I made that comment, it was with regard to three stocks, Meta, GE, and Boeing and why they've performed. And so there's a sense out there that investors have grabbed on to some company-specific situations because they are so perhaps challenged in trying to make the macro call, which is what has mattered for the overall market. So just want to get that one out there. Mike, you know I love you. Hey, you said it twice. How could I doubt it?

So to wrap up this conversation, Rich, what's the next shoe to drop? What is it out there that you see as a big concern and something that's going to catapult the market lower here if this is indeed an echo bubble or a bear market rally? Right. I think, Morgan, that it's probably that inflation is very stubborn and doesn't die a quick death, which forces the Fed to withdraw more liquidity than people are currently expecting. That would be my guess, right? Because if you think that right now we're in this speculative bubble, what could make that wrong? Well, you know, liquidity is the lifeblood of speculation.

So you have to say, well, what would cause that liquidity to dry up? My guess would be that inflation's more stubborn than people think, and the Fed has to go farther than people might think. David, I want to give you the last word here. What are you watching as we start a new quarter? I'm watching the Fed balance sheet. I'm watching the inflation data. I think rich is right on target there in thinking about how sticky it's going to be coming down. And even

if it comes down pretty quick, Morgan, I think this Fed is not going to declare victory early. And the more we rise up, the more they're going to be emboldened to stay tighter for longer. So there's really a headwind for the equity market. And it puts me back toward thinking that the senior secured debt markets, which are still a risk on trade, are just a safer way to play risk on in an environment where the Fed is really not going to be your friend anytime soon. All right. David Zervos and Rich Bernstein, thanks for kicking off the hour with us. Thank you, Morgan. Mike, I want to get back over to you. You've got a broader look at the market and the balance we have seen in tech. Break it down for me.

Yeah, Morgan, trying to broaden it out a little bit because it has really been so stark how the NASDAQ 100 and those types of stocks have outperformed on a year to date basis and really have made the entire quarter for the major indexes. But on a two year basis, what's fascinating to me is it's just a catch up move by the NASDAQ 100 in the last month and really the last couple of weeks to get back up to where the average stock has been over two months. So it's really a lot of symmetry in this chart because you had huge outperformance by the big growth stocks going right into the market peak into November of 2021. And then they led you on the downside. Look at the big gap that opened up between the average stock and the huge growth stocks. Now we've just essentially come right back together. We've round tripped.

Part of what that means is that the those growth stocks are more expensive again and they basically have rebuilt their premium valuation to the overall market. So we can definitely debate whether that makes sense or not, depending on what's going to happen with rates and growth and all the rest of it. But to me, it's not so much that the market has been consistently privileging that group. Just more recently, they grabbed back for those laggards. Now, on the economic front, what has been interesting, and probably one of the reasons the market's been able to hold together, is that the economic surprise index has made a relative high. So this is basically whether is data coming in better or worse than forecast.

And outside of when we restarted the economy after the covid shutdown, it's basically at the top end of its range. economic surprise index. So numbers coming in firmer than expected and is not yet directly translated into expectations building for a super hawkish Fed, as David and Rich were just talking about there. That could very well now be where the argument goes, because if the markets have held together and inflation hasn't been too cooperative and the economy looks like it's resilient, maybe we're now priced for being surprised at the downside based on what the Fed has done. But it is good news on a Main Street level that things have held together pretty well on the economy. Yeah, and we did get that PCE number that was softer than expected, Mike. But just looking at that chart with, you know, the economic surprise index,

when you see that, when you see all the major averages finishing the day up anywhere from 1.5% to, in the case of the transports, up 2% today. Big moves. Is this a situation where good news is finally, perhaps potentially, at least right now, becoming good news for stocks? I think for the moment it probably is, although we may very well be pretty close to that time when it's not going to be as good. If inflation keeps coming down, that's going to overtake everything else. And that's going to be good news, right? Because that's going to allow the Fed to go easier. But if it's really about, you know, labor markets

being strong, like next week's jobs number, which is going to come when the market's closed, I think it's legitimate to question whether, in fact, markets will take it well if the economy seems to be reaccelerating. All right. Mike mentioned the jump in tech, but is that rally just getting started? Well, our next guest says there's still a case to buy any dips, and we're going to check those charts. That's coming up next. And as we head to break, take a look at the biggest winners in the NASDAQ 100 this quarter. NVIDIA, Meta, Tesla, Warner Brothers Discovery and C-Gen are all up 50% or more. Look at that. NVIDIA, 90% in three months. We'll be back after this. Welcome back to Overtime. The NASDAQ 100 closing out the quarter up a whopping 20%.

Our next guest says there could be more upside ahead. Let's bring in Rich Ross, Head of Technical Analysis at Evercore ISI. Rich, great to have you on. Walk me through this call. Thank you. So look, I work on the macro team here at Evercore ISI. What we do best is connecting the top down with the bottom up. And I think what we're seeing is that the breakout in technology is being driven by a reversal in those same macro forces, which drove the bear market last year. And we continue to believe that peaks in the dollar, interest rates,

crude oil, credit spreads, inflation, and the pace of policy itself will continue to drive the ongoing breakout in technology, both absolutely and relatively. And just to wrap that up, what we've seen in the first quarter is just a preview of what we're going to see in the subsequent three quarters this year, Morgan. We keep hearing about the fact that earnings estimates need to come down. Does it matter when you're looking at the technical analysis or is that factored into it? Well, look, I'm a big believer that technical things happen for fundamental reasons and the people that make the charts that I analyze are driven by the fundamentals and the macro. So I

don't want to say it doesn't matter. But insofar as my work, I do the market through the lens of prices. I don't speak Fed. I speak prices. And what I see speaks volumes about what's going on out there, not just today, but what's going to continue to happen more across asset classes, both top down and bottom up, as we see in the stock market each day. Yeah. So the QQQs, I guess talk to me about the SPX as well, because it looks like here you have a first half target of 43.25. Yeah. So look, the tailwax, the dog. As you know, with technology, all roads lead back to tech and growth. And when you see this dramatic breakout from a 12-month base of support in the triple Qs after a 37% decline,

it's consistent with further upside in technology. And given its heft, its weight in the S&P 500, I believe technology, 28%, 29% of the S&P. You add on comm services, another 9%. We're talking about 38, almost 40% of the S and P is being driven by technology and communication services. And what a coincidence, those are the two best performing sectors on a year-to-date basis. So almost by math alone, if you are bullish on technology and growth as a style, you are bullish on the S and P. And that's how I get to that 43.25 first half target. Yeah, we talked about NVIDIA and just the fact that it's leading the S&P, it's leading the NDX higher to start the year, 90% gain,

up almost 130% over the past six months. It speaks to the strength and the resilience we've been seeing in semiconductors specifically. What are you seeing in those charts? Yeah, I mean, that's a great point. Obviously, NVIDIA is sort of the lead horse at this point. But semiconductors as a sector, really quite compelling. And when you think about semiconductors, Morgan, from a 30,000 foot view, this is the underlying commodity of technology. Compare and contrast with the underlying commodity of inflation, of value, which is crude oil,

which is down 50 percent off the highs. And you can see that the bullish breakout in the stocks above 31.50, which projects upside to 41.00 to a new all-time high, it's not just bullish for technology. It's not just endorsement of the technology sector, but really of markets and, quite frankly, the global economy more broadly, given the increasingly technology-driven nature of that economy. Rich Ross, great to get your insights. Thanks for joining me today. Thank you. Thank you for having me. My pleasure. Well, we have a news alert related to the civil suit against J.P. Morgan and its relationship with Jeffrey Epstein. Eamon Jabbers has the details. Eamon.

Morgan, The Wall Street Journal has just posted a significant story here about new developments in this case. The Wall Street Journal is reporting within the past couple of moments here that the U.S. Virgin Islands has issued subpoenas this week to Sergey Brin, Thomas Pritzker, Mortimer Zuckerman, and Michael Ovitz to gather information for its civil lawsuit against JPMorgan Chase and company over the bank's relationship with Jeffrey Epstein. The Wall Street Journal here is citing people familiar with the matter. I can tell you, Morgan, I just hung up the phone a couple of minutes ago with a source familiar with the situation who confirmed to me that those four individuals will be receiving subpoenas. One of the questions in all this is whether those subpoenas

have been delivered already or whether they're still pending. Not exactly clear where we are in that process, but that those four individuals will be receiving subpoenas in this case. The Wall Street Journal reports it's not entirely clear why those four are receiving these subpoenas for information about the bank's relationship with Jeffrey Epstein, the convicted sex offender who died some years ago.

Again, these are some of the most powerful and wealthy, well-known figures in American business. Sergey Brin, Thomas Pritzker, Mortimer Zuckerman, and Michael Ovitz all now being pulled into this case, which so far has been more tightly focused on J.P. Morgan's relationship with Jeffrey Epstein, its banking relationship, and a social relationship with one of the executives at JP Morgan. This has caused trouble for Jamie Dimon of JP Morgan, who is now going to be in conversations under oath in this case, describing what he knows about JP Morgan's relationship with Jeffrey Epstein going back as far as 2008. So a significant new

development here, Morgan, involving some of the most powerful people in the United States. Back over to you. Raises so many questions, and we know you will be continuing to dig into this evolving story for us. Eamon Javers, thank you. Up next. Apollo chief economist Torsten Slock weighs in on today's cooler than expected inflation data and the one risk factor that could take a big chunk out of GDP going forward. Breaking news on the Fed. Steve Leisman has the details. Hi, Steve. Hey, Morgan. We have data on what's happening to deposits at banks in the United States, which we've been watching to see if this issue of whether or not money is flowing out of large

banks or out of small banks. What we found is that deposit domestic banks actually declined $97 billion to $16.09 trillion on a not seasonally adjusted basis. You did have an outflow from the large banks as well, 96 billion down on the large banks, and that was to 10.7 trillion. And the outflow from the small banks, the large banks are the ones, the top 25 of the small banks are just down by a billion, a 5.39. Now, they did take a big hit the week before, down 184 billion, but at least for the week, that seems to have stopped. At the same time, you still have this exodus from the banks in general, and maybe that money is flowing to money market funds for higher interest rates, maybe into treasuries. Hard to know right now, Morgan, but you do have this exodus from domestic banks in general, with the bulk of it coming out of large banks and the flow from small banks down to just a billion dollars

after $184 billion flowed out the prior week. Morgan? Okay. I was going to ask you that, if there's any sort of sense or intel in terms of where some of that money is going, for example, money market funds or treasuries, as you just mentioned. You take this data, which we're now following on a weekly basis. You take the Fed speak we've been getting all week, including with John Williams just this afternoon talking about the state of credit and the fact that that seems poised to continue tightening and help the Fed do its work for it in terms of this fight against inflation. Where are we at in terms of the banking picture, especially as we do start to think about earnings in a couple weeks?

So I'm sorry if it's a bit of a cop-out, Morgan, but it's early days. And I think that was best exemplified by what John Williams said today. He said he has concern about this, as other Fed officials have as well. But they don't know the extent of what's going to happen here. There is an issue of credit tightening and whether or not credit tightening takes the place of interest rate hikes. I'm not sure, though, Morgan.

I think this is something to ask our esteemed analysts, whether or not that's the kind of trade-off that's a positive trade-off. It's like, hey, they're not raising as much. But hey, they're not raising as much because banks aren't lending. Inflation is falling because overall economic activity and investment is falling. So I'm not sure that's the rosiest environment. Certainly not for all stocks. Maybe for some select stocks.

While you were asking the question, I did pull up the money market data, which we got the other day, Morgan. $65 billion flowed into money markets to a record $5.19 trillion. And that's after, I'll tell you the total, over the last three weeks of data, $304 billion has flowed into money markets. So that's people saying, you know what? I'm not earning nothing on my bank account. I can go over here to money markets. So that's people saying, you know what? I'm not earning nothing on my bank account. I can go over here to money markets. Now, of course, those are not insured deposits. At the same time, the liability side on that deposit, the asset side of that deposit are short-term money markets, short-term government T-bills, usually all short-term papers. So

people have a sense of security in those money markets. But again, they're not FDIC insured. That's a key point to make, Steve Leisman. Thank you. Of course, when I meant earnings, I meant bank earnings and what this is going to mean for net interest margin and whether we're going to see a lot of noise in some of these reports from the banks in the next couple of weeks. Let's stay on this topic because Senator Elizabeth Warren said on CNBC this morning that, quote, the recent fallout from the banking crisis can put our economy at risk. Take a listen. Banking is about steady profits. Banks should absolutely be able to make profits.

But when banks load up on risk, they put depositors at risk. They put small businesses at risk. And ultimately, as we have learned with these multibillion-dollar banks, they put our whole economy at risk. So we've as we have learned with these multibillion dollar banks, they put our whole economy at risk. So we got to make a change there. All right. Our next guest echoes those concerns. If the banking crisis continues, there is a higher chance of a harder landing. Joining us now is Torsten Slock, chief economist at Apollo Global Management. Torsten, great to have you on. Politics aside, the words, the message itself

from what we just heard, do you agree? Well, I would say what really is, as Steve also was mentioning, the issue going forward is that we just don't know what the behavioral change is going to be in the overall banking sector, and particularly in the regional banks, in terms of tightening lending standards. If we are going into a period where the banks need to reorganize their balance sheets and they need to now deal with issues, everything from higher funding costs to more regulation to also assets having declined in terms of treasuries being down because rates are going up, the risks, of course, are looking ahead that we may have some more headwinds in terms of lending. And remember that the regional banks

account for 30% of all assets in the banking sector and 40% of all lending. And as you covered so well, of course, this is on certain products, commercial real estate and elsewhere, then raising the risk that lending across a wide range of areas for consumers, corporates, real estate, commercial real estate, residential real estate might therefore face quite some headwinds going forward. So the downside risks are definitely intensifying as we look ahead. Yeah, it's sort of this argument of if the Fed is done tightening, let alone cutting, which I know is something that's been priced into the market for later this year, then either one of those scenarios means maybe things aren't going so well with the economy. So what are you watching in terms of high frequency data or other key points or factors to to inform you about this dynamic actually materializing? Yeah. First, of course, the data we just spoke about, namely what's happening with the deposits.

And of course, the good news and the data that just came out a few minutes ago is that deposits, it looks like the outflows are stabilizing. As Steve was mentioning, that might be something now we're looking at what's going on with the larger banks in terms of outflows. But broadly speaking, it looks at least like it's a little bit better than what we had last week. But now what we should be spending time on, now the attention should be turning to the economic indicators. What's happening with small bank lending to consumers?

What's happening with small bank lending to corporates? What's happening with small bank lending to consumers what's happening with small bank lending to corporates what's happening with small bank lending to even also commercial real estate and more broadly of course what's happening to jobless claims and we have daily data meaning there's public daily data about how many people go to restaurants how many fly on airplanes all that is still okay but if you begin to look at some of the weekly data for credit cards that has actually begun to slow down a bit. So the question is, what will the high frequency, the weekly data do over the coming weeks ahead? And it does take a little bit of time before credit crunch kicks in. But it is very important because all this comes on the back of the lagged effects of Fed hikes.

As you also just were mentioning, Morgan, that we already have the Fed has hiked rates and we have some Fed hikes in the pipeline that still will be kicking in. And on top of that, adding both higher funding costs for our ES has been widening out, meaning the cost of borrowing in markets secured relative to unsecured has been widening out. And on top of that, if you get tighter lending standards, it does raise the risk that we could have a harder lending relative to a few weeks ago. So therefore, yes, it's true that things look a little bit better, but I'm meaning on the on the screens in terms of the data and where markets are trading. But the key issue going forward is what is going to be the behavioral change, because this is not just like LTCM or Orange County or even the UK LDI issue a few months ago,

because all those things were not in the banking sector. Banking sector is critical because it provides credit to the economy. So how do you balance all of this against the inflation piece of the puzzle? We did get that PCE number this morning. I'm going to call you Mr. Supercore, since you are the man that came up with that term. And it is now the term that Wall Street and arguably the Fed itself is now using, officially or unofficially, to gauge the stickiness of inflation. You've done a lot of work on the labor market as well, and looking at the fact that there's some structural changes to it. So how do these two things balance against each other, and how do we avoid a situation like stagflation?

Yeah, that is really a challenge. I mean, the Fed keeps on saying they're data-dependent. And obviously, if you look at the rearview mirror, the data is actually okay because the economy has just not quite slowed down a lot yet so that's why it becomes very difficult when you look backwards to try to quantify this situation we have in front of us where we now need to assess what will happen in the banking sector so i think to your question that absolutely inflation is still way too elevated that's what all the fmc members keep on saying basically inflation in round numbers including the pce numbers that came

out today is around five percent and the fed's target is that inflation should be 2. So it is difficult to put apples and oranges up on the scale. What do you put most weight on? Do you think that inflation at 5 percent is a big issue? Or do you think that the financial instability risks that we have in front of us are still enough so that you should not be hiking rates more? The good news for the Fed is that they still have now more than a month for the next meeting. But it really is very, very critical to monitor the incoming data, in particular for the economy, on spending for the consumer, on capex spending and on hiring. To what degree are we beginning to see some signs of a slowdown? Because, again, it was already slowing down the economy because of the Fed having high

rates now for the last 12 months. All right. Torsten Slocke, appreciate you joining us on a day like today with so much information and data to digest. Thanks for having me, Morgan. It is time for a CNBC News Update with Contessa Brewer. Hi, Contessa. Hi there, Morgan. And here's what we have for you this hour. Former President Donald Trump is planning to fly to New York Monday night and surrender to authorities Tuesday morning, according to NBC News sources. Then he will appear in court Tuesday afternoon to enter his plea in the case. Right now, the plan is that he would leave the city Tuesday night. The Justice Department is appealing a judge's decision to block a key provision of the Affordable Care Act that provides preventive health care access to 150 million Americans. LGBTQ youths have planned demonstrations across the country today to honor the Transgender Day

of Visibility that's meant to celebrate accomplishments of trans people and bring awareness to the violence and discrimination they face. Attention, Swifties, get ready for long lines at the Sold Outout Eros Tour. The concert kicks off tonight in Arlington, Texas. Hundreds of fans have lined up. They're buying merch from the trucks outside the venue there. Looks like a good time, Morgan. We're missing out. Yeah, we're taking one for the team here in the studio, aren't we? Contessa Brewer. We're going to live vicariously. Thank you.

Coming up, Virgin Orbit in free fall. Sir Richard Branson Satellite Company is ceasing operations. It's laying off nearly all of its staff after failing to secure funding. We're going to talk about what went wrong and the impact on future investment in space, next. Welcome back to Overtime. Virgin Orbit ceasing operations, laying off 85% of its workforce, about 675 people, after the space company failed to find an investing lifeline. The small launch provider, majority owned by Sir Richard Branson and spun out of sister company Virgin Galactic in 2017,

had been facing a cash crunch exacerbated by a mission failure in January. The company had been seeking investment in recent months after Branson was unwilling to fund it any further. Quote, we have no choice but to implement immediate, dramatic and extremely painful changes. That's what CEO Dan Hart told employees in an all hands meeting yesterday. The events marking a dramatic U-turn for a rocket maker that had, before this year, conducted a series of successful orbital launches and had been widely viewed as one of the front runners in a very crowded launch market. But when Virgin Orbit went public via SPAC, I asked Branson in January of 2022 whether the company had enough

cash after the deal raised roughly half, a little less than half, the capital originally forecast. Do you feel you have enough cash to execute on the strategy for this rocket company now moving forward? Yes, we do. I mean, we've got some wonderful partners. We've got Mubadala from Abu Dhabi. We've got Boeing. We've got the Virgin Group. We've now got some outside shareholders as well. We've got our next launch next week or the week after. And it's an extraordinarily exciting company. There's no other company that is able to do this. Every other company that puts rockets up has to have a base somewhere.

You have to have you have to wait a long time to get a slot on it. You know, we can we can be much more nimble and much, much quicker than than than our principal rivals. Virgin Orbit's value proposition had been that launch flexibility using a modified Boeing 747 to air launch its rocket to orbit, meaning takeoff and landing from conventional airports, essentially, or runways. And it was a model that could scale internationally and do so potentially pretty quickly. But Orbit was unable to reach the rate of launches necessary to generate enough revenue. So what happens next? Well, bankruptcy seems inevitable. Branson has first priority of the assets in such an event. And investors in the sector are reminded of a very overused but very true saying, and that is space is hard.

So will the drama at Virgin Orbit turn investors off to future investments in space? Well, let's bring in Bank of America analyst Ron Epstein. Ron, it's great to speak with you today. You don't cover Virgin Orbit, but you do cover quite a few of the publicly traded space names, including some of these so-called new space pure play stocks that have gone public via SPAC in the last couple of years. Your thought on what this says about the sector more broadly and whether it adds a chill that was already taking root? Yeah, I mean, it's you said it. Space is tough. It's been said many times. Does it add a chill? I don't think so. You know, it's a sector that has, you know, if you look at kind of post the SPAC boom,

a lot of the space names underperformed relative to that. This year, some were starting to come back. But, you know, it's a difficult space. It requires a lot of capital. And I think your question early on was, you know, do you have enough cash to get there? So no, I don't think it causes a jolt across the sector. So what are the names that you would be buying into right now and why? Yeah, so two names jump out at me. One is Rocket Lab. Rocket Lab is a launch provider. They do a more traditional launch than Virgin Orbit did. They're not

launching off the wing of an aircraft. They launch from Wallops Island and also in New Zealand. They're the most successful commercially traded, market traded commercial launch company outside of SpaceX. They've put in the mid-30s rockets into orbit. They have a broad customer base. And they've also diversified their business away from just launch. They do satellite components, everything from solar panels, reaction wheels, so on and so forth. So that's one we like a lot. They've been very successful. It's a good business model. And then the other one is Terran Orbital.

Terran Orbital does satellites, they're a satellite manufacturer. They do synthetic aperture radar satellites right now, but they are a contract manufacturer essentially for satellites. They've got a big backlog right now with the US government. And I think that's an important thing. When you look at space markets, space markets tend to be driven by a government customer. And what we look for in space companies are space companies that have a good government backlog that can supplement any commercial activity they have on the side. And for both companies, as you go into this this year, into next year, you should see an increasing cadence of launches and satellite builds that will be boosting both their businesses.

All right. Two stocks for our viewers to check out. Ron Epstein, thanks for joining me today. Happy to do it. Thank you. Well, you can find much more about the future of the space industry on my podcast, Manifest Space, which is available wherever you download your podcasts. Cash is truly king right now as money market fund assets hit a record high. Up next, Mike Sandoli looks at what this huge and growing cash cushion could mean for the market. And let's get a check on the biggest S&P 500 decliners for the quarter, shall we? First Republic, it saw by far the biggest drop, 89% almost, followed by Zions Bank Corp, Charles Schwab, Comerica, and actually a non-financial name in that top five list as well. Dish, stay with us.

Welcome back to Overtime. Let's get over to Mike Santoli with a look at the buildup of cash among households. Mike. Yeah, Morgan, it's been pretty dramatic. I mean, a lot of people are trying to put cash out of harm's way, which has meant either the stock market or in smaller bank deposit accounts. And it's finding its way to money market funds. Now, obviously, you can capture higher yields in short-term money markets than you can in most bank accounts. And it has a lot of folks pointing to this and saying we're at record high in money market fund assets in total

in the U.S., and therefore, money piling up, quote, on the sidelines. Maybe that's bullish because it could eventually get back into stocks. I think it's a little more complicated than that. First of all, proportionally, $4 trillion back here at the stock market low in early 2009, that represented 60% of the S&P 500 total market value in money market funds. Right now, $5.1 trillion in money markets today is more like 15% of total S&P assets. So it's not exactly proportional to how big a buying power that would represent. The other thing is cash can't really go anywhere. If you buy a stock from somebody that creates cash in that person's account. So the cash on the sidelines conception is a little bit flawed. But look at this. Bank of America, private wealth clients are now building up their cash allocations

within their portfolios, but really just back up to longer term average levels. So people were underweight cash when rates were zero. They're getting it back higher. Clearly, it creates a cushion in portfolios. That's a good thing. But I just don't know that it's a matter of this money is about to spill into the stock market, Morgan. I mean, just looking at this chart, it's kind of incredible to see where we're standing in terms of the cash dynamic here versus what is that? I can't see because I need my glasses on. This is the percentage of cash in the portfolios. Yeah. So you were down here when rates were zero and people loved stocks and they saw no reason to have cash and also underweighted in bonds on averages, too. But again, how about that 2008?

That's when people were truly panicking. 20, that's the one I'm looking at. 20% cash allocations. Yeah. All right. That puts it into some context there. Mike Santoli, thank you. All right. Mike Rahn, finishing at the bottom of the S&P 500 today after China launched a cybersecurity review of its chips. Up next, how this new crackdown could impact other U.S. semiconductor companies. Stay with us. It has been a crazy week for Micron. Shares are actually getting hit today after Chinese regulators announced a cybersecurity review of the chipmaker's products, ending down 4%. Christina Parts-Nevels has the details on the potential fallout from that crackdown.

Hi, Christina. Hi. Well, details from Chinese regulators are scarce. We don't know the type of memory chips scrutinized and if a ban would be put in place during that security review. But like you said, it's enough to drive the stock at least 4 percent lower today. Micron tells us they are in communication with the Cyberspace Administration of China, which stands for CAC on your screen, and are committed to conducting all business with, quote, uncompromising integrity. But should China follow through with the ban, there would be a near-term impact to Micron, since as of fiscal 2022, China and Hong Kong

contributed 16 percent of total revenue. The timing, though, of this announcement is somewhat suspect, since Taiwan's president is visiting the U.S. this week. But if China were to block Micron products, it would signal a broader shift in Chinese policy, leaving other U.S. vendors with large Chinese exposure at risk like AMD, Qualcomm, Broadcom. The list continues. And that would dramatically hurt the sector. It's still definitely too early to figure out the ramifications of such a review. But has investors wondering if we are left with a tit for tat trade fight between China and the U.S.? We talk so much about the growing tensions between the U.S. and China.

And we tend to talk about it from this tech Cold War perspective in terms of our policy. But it's such a key story, Christina, to look at it as a risk on that side of the equation with that country specifically as well. It is a double edged sword for them, because if they were to cut off large firms, Micron is a smaller one. But, you know, more specifically, they get 10 percent of their revenue from China. But the bigger players, Broadcom, Qualcomm has over 60% of its revenue from China, which means that China needs a company like Qualcomm. Can they just cut them off completely? No. Christina Parts-Navalas from the NASDAQ, thanks for bringing us the story. Thank you. Industrials underperforming the broader market in the first quarter, but could an urge to merge

lead to a big sector rally? In Q2, a top analyst weighs in. Welcome back. The Justice Department suing Norfolk Southern for the train derailment in East Palestine that resulted in the release of toxic chemicals, seeking damages for alleged Clean Water Act violations. The 28-page complaint saying, quote, the plaintiff, United States of America, asks this court to hold defendants accountable for unlawfully polluting the nation's waterways and to ensure it pays the full cost of the environmental cleanup. Note, this is a civil suit. It is not a criminal suit. But based on conversations I've had with industry experts today, it's still a rare move by the federal government in the wake of a derailment, even a high-profile one.

Norfolk Southern responding, quote, our job right now is to make progress every day cleaning up the site, assisting residents whose lives were impacted by the derailment, and investing in the future of East Palestine and surrounding areas. We are working with urgency at the direction of the U.S. EPA and making daily progress, stressing that there's a commitment there to, quote, make it right. That make it right conversation or concept is something that CEO Alan Shaw has said repeatedly in my interview with him on site last month, as well as during testimony in two recent congressional hearings. So far, more than 9.4 million gallons of impacted water and nearly 13,000 tons of waste soil have been removed.

And financial commitment by the railroad to the community and region has totaled about 28 million dollars. Norfolk is also facing a lawsuit from the state of Ohio and a flurry of class action lawsuits. Shares of Norfolk Southern rallied today up about one and a half percent. They're down 14 percent this quarter, one of the worst performing industrial stocks in the S&P to start the year and the worst performing Dow Transport component as well for the quarter. The broader industrial sector, meantime, finishing in the green for the quarter, though lagging other big winners like communication services and tech. Joining us now with his top picks and predictions is RBC Capital's Dean Dre. Dean, it's great to have you on the show.

Top pick. If you could buy something right now, given the fact that we've seen this underperformance in the sector to start the year, what would it be? Great to be with you, Morgan. So we have actually three top picks, and it really depends on investor appetite. If you are nervous about the banking developments, you should be gravitating to higher quality names. Our topic there is Amatek. And if you still have a risk on appetite, we really like Wesco, the electrical products distributor. We think that has room to run here. And then following up on your last story on the train derailment,

our top pick among the water sector names is Xylem. We think they're well positioned as a water technology company and that we think water quality stays in the headlines. I want to get your thoughts on GE, which has had such a strong start to the year, rallying 45 percent. It's in the middle of this deconsolidation process, if you will, as it spun out health care and becomes a pure play aerospace company, but still has power attached for the time being. Is there still room to run? Yeah, there is. We still like GE here. And I love the urge. We call it the urge to demerge. The whole sector for the last five years has been running towards this portfolio

simplification, addition by subtraction, whatever. But you've had this epic breakup of GE, all engineered by Larry Culp. It's coming now down to the final run, two companies. And GE has been the best stock performer in the industrials in our sector. And we still think there's room to run there. So whether it's the urge to demerge or whether it's M&A activity across the sector in general right now, or I guess reshuffling of portfolios, where would you expect to see more activity? So for the last five years, we've absolutely had this portfolio breakup simplification theme. But that pendulum really, we think, is starting to swing back. And it's the right time in the cycle. Companies have great balance sheets, record backlogs,

and really attractive secular drivers like electrification and grid hardening. We think they start going on the offense now and are shifting back into the familiar urge to merge. And we put a report out outlining where we think some of that activity could be. OK, very, very quickly, 3M, it's got a lot of liabilities on its balance sheet. It's been an underperformer. Buy or steer clear? Oh, not only do we have a sell rating, we have said, sadly, 3M is uninvestable at this point. We think the market is not fully calibrated. It's liabilities, especially on DeFi. And sadly, that's where they are.

All right, Dean Dre, great to get your picks here. That's going to do it for us on this Friday afternoon with all the major averages finishing the day higher. Next time I see you, it'll be April. Historically, seasonally, a very strong month for stocks. That's going to do it for overtime. Fast money begins right now.