Closing Bell - Closing Bell Overtime: Wall Street’s Biggest Bull: Evercore’s Julian Emanuel On Street High S&P 500 Call; Boeing CEO On The Hill 6/18/24

Episode Date: June 18, 2024

Evercore’s Julian Emanuel breaks down why he is raising his year-end price target for the S&P 500 to 6,000. Nvidia closed above Microsoft in market valuation for the first time; Bespoke’s Paul Hickey and Stifel’s Barry Bannister break down where tech goes from here. Two Boeing analysts break down CEO Dave Calhoun’s hearing before the Senate. 

Stocks just keep marching higher with the S&P 500 and NASDAQ closing at record highs and the Dow in the green for a second straight day. And we also have a new most valuable company on Wall Street with NVIDIA passing Microsoft in market cap. And that's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Tech and industrials, the big winners today. Communication services, consumer discretionary, underperforming, but coming up, the biggest bull on Wall Street, Evercore ISI's Julian Emanuel on why he just hiked his year-end S&P price target to $6,000. That's a new street high and what he thinks will drive the market to that level.

Plus, we will get another read on the health of housing when KB Home releases earnings in just a few minutes. Instant analysis of those results is coming up. But first, let's get to today's action with our market panel, bespoke co-founder Paul Hickey and Stiefel chief equity strategist Barry Bannister. Guys, welcome. Barry, the 10-year Treasury yield eased up again today, back to levels down where they were late March. The S&P closed around 54.88.

Now, all that said, I believe you still see what would be a violent correction for the S&P by end of summer, a 13% drop taking us to 47.50. What's going to do that? Well, we're looking for a mild case of stagflation. We're thinking the core PCE is actually going to arc back up a little bit and the economy, the headline GDP at least, is going to slow down. You know, on this market, though, it takes about one generation to forget the danger in a bubble. The last bubble was 25 years ago. I was there. You have extreme optimism on a new technology.

You have very narrow breadth, excessive valuation, day traders with strange names, political theater with zealous prosecutors. I mean, I almost miss nostalgia for Monica Lewinsky. And what do you have now? And then you had 78% decline, 78% in two and a half years for the NASDAQ. That was a disaster. So I would be very cautious here. And the summer looks like when we're going to get some of the news flow that we're expecting that's negative. All right.

Well, Monica Lewinsky is still around. You know, she's tweeting and whatnot. Paul, it's hard for me to see the major indices falling apart without NVIDIA falling apart, too, as long as it continues to impress. How does that happen? Especially because there are so many stocks, small caps in particular, that haven't been participating in what might look like a bubble. So do you think NVIDIA continues? How key is it to this market now? So, I mean, just the it's such a large stock at this point that it's got to continue doing well for the overall market. You know, the analogy to the late 1990s, you know, it's a very easy analogy to make given the new technologies and the run-ups that we've seen. But I would say if you want to make that analogy, you would probably have to say we're in early 98 at this point rather than in 2000.

In early 98, that's when breadth was just starting to diverge. And in this period, breadth has really only started faltering in the last month or so. And then what we saw before that is things were continuing to do well. Take this for, you know, 70% of industry groups are within 5% of a 52-week high. At the peak in March of 2000, the median level was 18%, even though we were at a record high. So back then, it was tech and everybody else just falling apart. Right now, it's tech and everybody else just treading water, so to speak, and trading sideways. NVIDIA is the big behemoth now. As you said, it's the biggest company in the world. And that growth rate, I mean, it's growing like crazy, but now you get 160 billion in revenues per year. Can you

maintain that growth rate going forward? Is the world big enough to maintain, you know, to keep that growth rate going? And that's going to be a big question going forward. But for the rest of the market, besides NVIDIA and a handful of others, you know, things can continue. They're hanging in there and they're not falling apart like we've seen. Yeah. Like we saw in 2000. OK. Along those lines, Barry, you can have if we are in a bubble as you are positing, then you can have a bubble inflate for a while, to be fair, before you actually see it see it burst. Regardless, you have a lot of cash sitting on the sidelines right now and money market funds and whatnot. We know the AI story is a secular growth story and there is many billions of dollars going towards that infrastructure build out right now.

We also know that analysts are bringing their earnings estimates up for the back half of the year, in part because of all that money that's going into that build out. So what would actually need to happen for that to change and for your thesis of perhaps being invested in more defensive sectors of the S&P 500 is below its 50 day moving average and over 60 percent of the Russell 3000, which has small and large, is below its 50 DMA. So we are not in a broad market, as was said earlier. Second, hold on there. So hold on there. Russell 2000 is less than any of the three largest stocks. So, I mean, that wasn't what I said there. So hold on there. Russell 2000 is less than any of the three largest stocks. So I mean, that wasn't what I said there, that it's a broad market rally. I said the rest of the market

is trading sideways here and it isn't down 18 percent. The average stock isn't the average group isn't down 18 percent like it was at the peak in March of 2000. So I just want to be clear on what I was saying there. Yeah, in the summer of 98, we actually fell 20% on Russia and other defaults. So I wouldn't want to make the early 98 analogy either. But leaving that aside, there is a wall of money. Remember, we spent an egregious amount of money on COVID, 25% of GDP, miles ahead of any other country. And money flows uphill. So now the wealthy have that money. People who own businesses received the sales from people who had the money. And all that money that's uphill now in the wealthy hands is going to be looking to invest. The reason being is rich people don't spend a lot of money, they invest money. So there is a valid case of a bubble and the bubble continuing. Remember,

at some point, it transitions from being investing to a greater fool game of timing the top. And so that is a riskier, so I would be cautious. And as for NVIDIA, you know, selling the picks and the shovels and the pans to a gold rush seems like a strategy, but they're, pardon the pun, a flash in the pan. They don't last very long. And then eventually they burn out and you have to go and decide what's going to work next. So I'd be a little cautious of putting a high multiple in a semiconductor stock, even if it is part of the AI revolution. Paul, what is it going to take to see a broadening out of this market? And I asked that on a day where we have seven Fed speakers. We know that officials have been leaning more hawkish right

now. They're sitting on their hands awaiting several months worth of encouraging disinflation data. Is that is that what it's going to take for our next catalyst in either direction for the market? So, I mean, what you're going to need to see is, I think the market wants to see easier Fed policy going forward, some clarity on what we're going to be, what the Fed's going to be doing. The retail sales number was weak today. Sure, a big part of that was gas prices. So underneath the surface there, it wasn't quite as weak. But again, the economy isn't firing on all cylinders here. It's humming along.

And we will need to see a pickup in growth for the broadening out to occur. But we have seen the rubber bands stretch a little bit extreme here, where you've seen the mega caps outperforming the smaller caps by degrees that you don't tend to see very often. And when you have seen those typical levels, you tend to see the smaller caps outperform. And as Barry was saying, OK, say we are in March of 2000, the equal weight S&P 500 from March of 2000 over the next year was actually up when the S&P 500 was down because it was those mega caps driving the declines in the market while the rest of the market was actually holding in well. Okay. Paul Hickey and Barry Bannister, great to kick off the hour with you. Thanks for joining us. And of course, to this

point, Russell 2000 is down on the quarter, but the NASDAQ is up 9% now on the quarter, another closing record high for the NASDAQ and the 31st record close for the S&P since the year started. Let's bring in senior Markets Commentator Mike Santoli for a look at the NASDAQ 100. Mike, we always talk to you about these historical analyses. I wonder what your thoughts are. Yeah, well, look, we've seen this huge acceleration in the NASDAQ 100, which really is the center of the big cap strength that's been driving the upside.

Look, I see analogies. I don't think it gets to the point of just exactly how tremendous the gains were leading into the top in 2000. The entire Nasdaq composite, it sort of like it like tripled in a year and a half back then. However, it has become very much a momentum vehicle. This is a Nasdaq 100 against the momentum ETF of the S&P 500. So the highest momentum stocks. And you can see they don't always go straight up. It actually is sort of backward looking.

But what we've seen now is a self-fulfilling thing where the strongest stocks attracting the more buying. There's a big fundamental tailwind to these stocks as well. And that reinforces the conviction in them. So it can only go so far. Right now, we're running a little bit hot. Here's the NASDAQ 100 and its relative strength index. So it's just a quantitative gauge of momentum relative to its own trend.

It's got above 80. That was at the open today. So probably, you know, about there right now. And it hasn't happened all that often. One that actually reminds me of this is in the late summer of 2020, you did have that acceleration of that pandemic surge and you put in a very short term kind of top chopped around, corrected a little bit. That was when Tesla and Apple were really driving things. It wasn't the end of a trend. And if you go back and look, when we've run this hot, you do need to calm down. You have to slow down at some point. It can happen, though, just by going sideways or having the market rotate around, or

it could be a quick cleansing drop. Now, I would also point out we were sort of there near the peak of the market in late 2021, too. So it doesn't mean you're safe just because you've been this strong, but it does show you that it's not something that, by definition, means we have to go down a lot from here. I mean, it's pretty incredible talking about it in the last hour with NVIDIA up 45% in a month, that what is now the world's largest or most valuable company by market cap is trading as a momentum stock here. I saw this stat to start out the week,

and that is that the ratio of growth stocks to value stocks in the U.S. is at the highest level since July of 2000. It's 2.7 standard deviations above the mean. What to make of that? Yeah, exactly. I mean, everything that looks like an extreme right now, so that would be growth over value, large cap over small cap, high quality over low quality, momentum over laggards, all of that stuff is really bringing you to the same spot, which is this handful of stocks, like maybe five of them that seem to represent all those things at once. So it's somewhat unique.

And the more concentrated the market becomes, the more that those stocks obviously can kind of move on their own and not in relation to the rest of the market. So for a while, it seems like it kind of doesn't matter what everything else does, but it does show you where the market's laid its bets. It's really about the scarcity of conviction about the earnings path for the rest of the market. If that changes, if you start to get encouraged about the rest of the market, then I think money would flow behind that. All right. Mike Santoli, thank you. And I see KB Holmes results are just crossing. We will get you those as soon as they are ready. The stock is at least initially higher. But Barry Bannister

said S&P 4750 by the end of summer. If you don't like that, how about 6000? That's where Evercore ISI's Julian Emanuel thinks the S&P is going to end the year. It is the highest S&P target on Wall Street. And up next, he's going to explain why he thinks the market has so much more upside. Plus, are Boeing shares too cheap to pass up? Even as CEO Dave Calhoun faces intense scrutiny on Capitol Hill over the company's 737 MAX debacle. We've got a pair of analysts weighing in. Overtime is back in two. Welcome back to Overtime. The S&P 500 notching its 31st record close of the year today.

Our next guest sees more fuel left in the tank, raising his year-end price target to $6,000 for the index. That's the highest number on the street now. We finished today at $54.87, as you can see right there on your screen. Joining us now, Evercore ISI Senior Managing Director Julian Emanuel. Julian, it's great to have you back on the show. You didn't just raise your target to a street high of $6,000. You raised it from $47.50. What is going into this new target? Why are you doing it now and why are you feeling so bullish for the end of the year?

So thank you, Morgan. We're going to rewind a little bit of stuff here, going back to your last guest and some of the commentary. The first thing is when you think about the risk of the market now, there's two things you want to look for. Is there a bubble forming? And is there the potential for a recession? And frankly, when we look around, A, the fact that there's all this talk around a potential bubble and a lot of controversy around that gives us comfort that we're actually nowhere near a bubble. And when we think of all the traditional signs of a bubble, IPOs, M&A frenzy, huge public bullishness, potential policy errors, we're very comforted by the fact that there's more to go. And in terms of the recession part, the economy is slowing. Absolutely. Everyone knows knows it it's not at all uh from what

we see in danger of the imminent downturn and in fact the fed is likely going to be behind us if we need it so we put that all together and we come to this idea that, our skepticism about valuation over the long course of history is pretty well founded, which is why we sort of were resistant to get more positive. But then we dug in and we thought about the AI stocks, which we've been proponents of for well over a year. And we came to the conclusion that expensive markets happen every now and then. And when they do, they last longer and go further than anyone thinks. This expensive market is six months old and 12 percent higher. The averages go significantly higher from there. That's how we get to 6,000.

All right. So that's interesting. Now, we do have economic data that's softening. Look no further than retail sales as the latest example of that this morning. To your point, you do have a market that is looking expensive from a valuation standpoint. You also have a market where breadth has been very narrow. We know it's really the small handful of mega cap tech stocks that are leading the charge right now. So what does it take to see that broaden out? Does it need to broaden out to keep trading at higher levels? So we would certainly be more comfortable if it did, in fact, broaden out. If you look at the past, it doesn't necessarily have to be the case that it broadens out. We actually think that it does broaden out. Actually,

that 2020 to 2021 example that Mike Santoli talked about a few moments ago is a perfect example. You had a pullback in technology, and then you had leadership assumed in small caps. We actually think that coming into the Russell 2000 rebalance at the end of June, that you could have a reassertion of that leadership. Frankly, from a valuation standpoint, you're at extremes. So we would not be surprised at all to see a bit more leadership rotation. And as I said, that would be a good thing. Julian, here's the part of all of this that makes me most uncomfortable from an investor standpoint. What about the fact that the mega caps are so out of step with stocks in general, just doing so much better? And then stocks in general are so out of step with how Main Street consumers are feeling, given what's happening with inflation,

particularly the folks who are mostly living paycheck to paycheck. Something has to come into step at some point. And is it more likely that the Main Street consumer starts feeling like NVIDIA or that the broader market starts feeling like the Main Street consumer? John, I don't think anyone's going to feel like NVIDIA. It is it is a thing unto itself for the most part. And actually, our fundamental analyst thinks you could get to a sort of 10 to 15 percent weighting the S&P 500 over the next, call it five years or so. But what I would say there is, remember, part of the reason that the consumer has felt so depressed, I guess, is probably the way to call it, is this sort of anchoring on inflation as a

function of what prices were in 2019, forgetting about how their income has moved. And obviously, this is feeding into, you know, sort of uncertainty coming to the election. We think that over the course of the rest of the year, it will become clearer that inflation is continuing to moderate. OK. And the economy is not likely to hard land until, you know, call it late this year, early next year. And we think any hard landing will actually be mitigated by the Fed to a very large extent. So, Julian, let me ask you a quick one then. Which sector,

which S&P sector is most mispriced now ahead of that 6,000 end of year target? So we actually think that the defensive sectors are the most mispriced, which sort of, if you think about it, feeds into our overall enthusiasm. Look, we're overweight, both communication services and infotech. Those are the obvious trades. But frankly, when you think about the GLP-1 phenomenon a year in, consumer staples and health care away from the GLP-1 names really have been under-owned and under-loved. And we do think there's a catch-up trade to be had there between now and the end of the year. Okay. Julian Emanuel, we got a bull to go with that bear from earlier. I appreciate it. Well, KB Home earnings, as you mentioned,

are out. And Diana Olick has the numbers. Diana. Hey, John. Yeah, nice beat for KB Home. Q2 EPS of $2.50 a share versus estimates of $1.80. Revenue of $1.71 billion versus estimates of $1.65. Average selling price actually increased to $483,000 from $479. Yesterday, Lenar reported a decrease in the average sales price, but there was nothing in this report about incentives. CEO Jeff Metzger in the release said buyers remain resilient in their desire for homeownership despite the volatility in mortgage interest rates. Our pace of monthly net orders per community was one of our highest second quarter levels in many years, which we believe reflected the compelling personalized choice that our built-to-order model offers to

meet each buyer's lifestyle and budget. And I'm going to put an emphasis on budget because that's how KB gets buyers in the door by designing their own homes to their budget. And I'm going to put an emphasis on budget because that's how KB gets buyers in the door by designing their own homes to their budget. Now, deliveries were down nearly four percent year over year. Net orders, though, up two percent. They did not give guidance. We'll get that on the conference call later. Back to you guys. That's going to be important, Diana. Thank you. Meantime, a new whistleblower and a CEO grilling, making Boeing a big drag on the Dow today. Up next, a pair of analysts on how investors should be trading that troubled stock. Plus, are skyrocketing insurance premiums showing any signs of slowing down?

The CEO of life insurance giant John Hancock weighs in later on Overtime. Welcome back. Boeing CEO Dave Calhoun faced questions today from the Senate over quality control issues and whistleblower allegations associated with the aircraft maker. Boeing has been enveloped in controversy over two deadly crashes in 2018 and 2019, which were then followed by an incident this past January where a door plug blew out of a 737 MAX 9 aircraft mid-flight. During today's testimony, Calhoun had a tense exchange with Senator Josh Hawley in which he defended Boeing's safety record. But meanwhile, you're getting paid a heck of a lot of money. It's unbelievable. If anybody's coming out of this deal good, it's you. Why haven't you resigned? Senator, I'm sticking this through. I'm proud of having taken the job. I'm proud of our safety record. And I am very proud of our Boeing people. You're proud of this

safety record. I am proud of every action we have taken. Every action you've taken. Yes, sir. Wow. Wow. There's some news for you. Joining us now to discuss is Citi's Jason Gursky and Bank of America's Ron Epstein. Great to have you both on. Jason, I'm going to start with you. You got a buy rating on Boeing. I mean, we're talking about a company that is obviously under intense scrutiny still because of safety and production and cultural issues, which, by the way, extend beyond just the commercial side of the business. Look no further than Starliner and what's happening there at the International Space Station with a press conference around that just

today. You got CEO succession and now you have a dozen whistleblowers. Why is this a name to own right now at this time of crisis? Yeah, look, I think there's a lot of noise going on right now. That's for sure. I think this is one of those situations where going on here, which is this really young labor force that is going to need some time to mature, figure out how to do its job better. And look, with hindsight as 2020 probably should have had more inspectors around over the last few years checking their work. But we've got a maturing workforce here that is going to come down the learning curve. We're going to get better on the productivity of these employees. And we should see, I think, higher production rates, better margins and better cash flows here over

the next several years. Ron, I think you're a little more skeptical. You've got a neutral rating on Boeing here. What is it going to take to, I guess, overhaul the company if that is indeed what needs to happen? How quickly can that happen? We know this is a process that has already been underway for a number of years. We've got cash flow, free cash flow under pressure again. And of course, from a public safety standpoint, perhaps distrust that's going to take a long time to go away or subside. Yeah, it's a really heavy lift, right? So as you said, we're neutral here. There's definitely a tension between all the good things going on in commercial aerospace, demand for airplanes and so on and so forth, and the issues at Boeing. Boeing won't get fixed overnight. It's going to take a number of years.

One of the things we'd like to see is who the next leadership team is going to be. And think about it. This next leadership team has a lot of hearts and minds to win. They have to win over multiple government regulators and agencies. They have a lot of airline customers who are upset with them. They have a flying public that in some cases

doesn't trust them. They have a labor force that they have to negotiate with. So there's a lot that this next management team has to do. And oh, by the way, in the narrow body market, they've been steadily losing market share to Airbus. So this next management team is gonna have to launch a new airplane. And if they launch the wrong airplane, then that's a problem they have to live with for another couple of decades. So one of the things we really want to see is who is this next leadership team and kind of what

direction are they going to take them? And I think investors have to understand it's going to take more than a year, two years. This is a five to seven year turnaround. It's a very complicated company with very complicated processes with very complicated problems. OK, so, Jason, along those lines, who do you put in charge at Boeing now? Calhoun's a short timer. I'm specifically curious about Stephanie Pope, now chief operating officer. This could be a golden opportunity for her or a glass cliff. A lot of people feel like you got to

get somebody from the outside, but she really didn't have to do with the hardware here. She was global services, should know the customer base, maybe can communicate and get this thing sorted out sooner. I don't know. Who do you put in charge? What do you think? Well, it's less about naming a person right now, I think, at this point. And we're talking about the skill set that's probably needed here. I think ultimately what you would want to see is, you know, somebody with a lot of manufacturing and engineering experience, willing to live in Seattle and is willing to sleep on the factory floor. I think that's what you're looking for. And, you know, whether it is Stephanie here in the near term or whether they bring in somebody to, you know, mine the shop

and get us through this period here over the next couple of years and then hand the reins over to Stephanie some number of years down the road, I'm not exactly sure how this plays out. But what they really need is somebody that is going to be deep in the weeds in Seattle, walk on the floor every day. And if Stephanie has the ability to do that and the board has the confidence in her to do that, then, you know, perhaps she gets the baton sooner rather than later. All right. We'll see what kind of call they make. Jason, Ron, thank you both. Now let's get a CNBC News update with Bertha Coombs. Bertha. Hey, John. Russian President Vladimir Putin has arrived in North Korea, according to state news agencies. North Korea's leader Kim Jong-un greeted the Russian leader at the airport in Pyongyang.

Putin's arrival comes shortly after North Korean state media published his comments vowing to support the reclusive nation against U.S. sanctions. 911 services across Massachusetts suffered an outage earlier this afternoon, making it impossible for anyone to reach emergency services. The state's public safety office said it was unclear how many communities were affected or what caused the failure, but service has now been restored. And the surviving son of disgraced South Carolina lawyer Alex Murdoch is suing Netflix for defamation. Buster Murdoch accuses the streaming service and other media companies of falsely accusing him of being involved in the death of his classmate Stephen Smith in 2015. That case was reopened in 2021 after authorities reported finding new information while investigating the deadly shooting of Buster's brother Paul

and his mother Maggie. Alex Murdoch was later convicted in their double murder. Back over to you. All right, Bertha, thank you. Up next, Mike Santoli is back taking a look at whether very strong demand for high-yield bonds could be a warning sign for the credit market. Plus, the CEO of life insurance giant John Hancock on a new partnership to give customers discounted access to a controversial full body MRI scan for early detection of cancer and other illnesses. Stay with us. Welcome back. Let's get to Mike Santoli with a look at the risky business happening in the credit market right now. Mike. Yeah, John. Well, there's always risk out there if you invest in high yield credit, but it's a matter of whether you get compensated for it and if it's priced correctly. This is from KKR. It shows you their estimate of the implied default rate among high-yield issuers based on where those bonds are trading right now. So the lower the implied

default rate, the more optimistic investors are being, and maybe the more that they're kind of overlooking the potential for risk developing in credit. So you see where we are right here, down around a 2% or 3% default rate. Previous times we've been here, this is like 1997, 2005, 2006. You've got 2018 in there. Late cycle, but not at the end of the cycle. So it's basically when there's a lot of demand for credit, not a lot of stress and a lot of high liquidity in this system. That would make you think, okay, the clock's ticking. Now take a look at this at this other chart totally different but it's about the supply and demand of risky securities and how it's really been low as a percentage of GDP so this basically says how much in the way of IPOs high yield bonds and leverage loans are being dumped out into the market relative to the size of the economy very very low in fact to the point where these are major market lows or business cycle lows like 2009 and so it suggests that it's just a matter of there hasn't been a lot of companies trying to soak up a lot of the liquidity out there and it shows you that demand for stocks from buybacks and everything else is really outstripping what is being issued so maybe maybe that changes right now. Maybe companies are going to be opportunistic here, and that might enliven the capital markets, even if eventually it goes too far, John. So, Mike, does this suggest that in a high-yield debt market, it's not trading on fundamentals because the supply of risky assets is relatively low? I would say it's trading certainly always partially on fundamentals. I mean, when you have really high corporate profits and the stable economy and all the rest of it,

and the Fed is maybe going to ease, it suggests that there's reasons people are optimistic about high yield. Really, it's about whether you're getting compensated in a world where investment grade debt can be had, you know, at six percent. Do you want to go out the extra couple hundred basis points and pick that up even when you're taking on that much more risk? So it's always a combination of fundamentals and then sentiment and liquidity. All right. Mike Santoli, thank you. We have a news alert on Trump media and technology. Pippa Stevens has the details. Pippa. Hey, Morgan, that stock is down 18% here in extended trading on a dilution issue. So essentially, Trump media released this updated S-1, which does allow the trigger to exchange warrants for shares. The company

previously said that they would offer nearly 21.5 million shares of common stock when those warrants were exercised, according to a filing back in April. So in other words, this is a dilution issue, which is why we are seeing the stock now down 18 percent. Morgan. Pippa Stevens, thank you. Citi investors liking what they heard today about the company's crown jewel, its services business. We've got those details straight ahead. And shares of Silk Road soaring after the company, which makes a medical device to help prevent strokes in some patients,

inked a deal to be acquired by Boston Scientific for nearly $1.2 billion in cash. We'll be right back. Welcome back to Overtime. Citigroup shares getting a pop during the investor day as Wall Street focuses on Citi's business helping companies move money. Leslie Picker has the highlights. Leslie. Hey, John, that's the perfect definition right there. And this is Citi's first investor day in two years. Today's event focuses focused on that services business. And this is something that CEO Jane Frazier has repeatedly called the firm's crown jewel. Citi's services group essentially allows its corporate clients to move money around the world, engage in cross-border transactions.

Despite being one of Citi's five businesses, services comprised more than half of the firm's net income in 2023. And in today's remarks, Frazier said she thinks there's an opportunity to grow market share even if rates go down. Last year was a record year for services. Whilst this business has undoubtedly benefited from higher rates, we also experienced growth across all key drivers, including cross-border transactions, U.S. dollar clearing volumes, commercial card volumes, trade loans, the list goes on. I am confident that we will continue to see more growth in these areas, even in a lower rate environment. Now, Citi said it expects services return on tangible common equity to be in the mid 20 percent through 2026

and that is nearly three times the current rotce of the overall firm so you can see why they consider this the crown jewel of citigroup guys yes indeed leslie picker thank you well super micro might get a ton of headlines and it was was up better than 3.5% today along with NVIDIA. But it's not the only company trying to solve AI's energy problem. Up next, the CEO of NTT Data on how he's tackling liquid cooling. And check out shares of Six Flags and Cedar Fair rallying after announcing their merger will close on July 1st. Six Flags also declaring a special dividend of a buck fifty three per share, which will be paid out once that deal is finalized. Amusing.

Welcome back to Overtime. NTT Data announced today that Abhijit Dube has officially become CEO of the company's $30 billion business outside Japan, which includes a global network of data centers and an IT services organization. NTT has a commitment to sustainability that poses a unique challenge as AI demand continues to ramp because AI hardware runs hot. That's why Dubay is pushing into a couple of different liquid cooling methods. The one stands out. One is the director chip and the other is a liquid immersion. And what we are finding in our AI deployments that the director chip actually works better from a cooling as well as economic standpoint over the life cycle. So that is sort of more what we have started seeing.

We advise our clients on what we see our clients moving towards as well. But then there are also modifications that you need to make to your data center infrastructure. For instance, to deploy liquid to the chip, you actually need to have the ability to pump liquid in the middle of the data center. And so the data center has to be engineered to be able to do that. And that requires foresight. So the new data centers and even the

ones that we designed a year ago and are in the middle of construction have always been designed that way. So in some ways, they are future proof to the AI-ready infrastructure that's required. You recall, we heard last week on Overtime from Supermicro CEO Charles Liang, who told us he believes his company's approach makes liquid cooling faster to deploy, especially to existing data centers. And we see here from NTT that there are multiple ways the ecosystem is trying to solve this AI energy problem, Morgan. I mean, I realize it's a new and emerging market, but boy, is it growing and getting very competitive very quickly. And we're eager to see who ends up making the money here. Hardware, real estate, data center, we'll see.

Well, up next, the CEO of life insurance giant John Hancock on how potential interest rate cuts could impact his business and the premiums that customers are paying, which hit new highs last year. Welcome back to Overtime. Shares of Manulife are up 35 percent year over year. One of its units, life insurer John Hancock, today announcing it's going to offer discounted access to prenuvo's whole body MRI scans. These scans are meant to help with early detection of cancer and other health conditions. But they've been met with some skepticism in the medical community. And joining us now in exclusive interview is John Hancock, CEO of Brooks Tingle. Brooks, good to see you again. So you guys have

this vitality program that incentivizes people to get healthy, stay healthy, and this discount is part of that. I believe the usual price of the prenuvo scan is $2,500. Explain to me how it works and how this isn't a hypochondriac's dream or nightmare, depending on how you look at it. Well, great to be with you, John and Morgan. And you're correct. We sort of redefined life insurance almost a decade ago now and said life insurance should be as much about living as dying. And we do indeed offer our customers a whole range of services and incentives and rewards for things that correlate with a longer, healthier, better life. And Prenuvo is the latest addition to that set of sort of features and benefits that

we make available to our clients. It is, as you said, an MRI solution that does a full body scan. I did it recently myself. I'm not sure if either of you have. It's quite, to put it technically, cool. And the report you get back is just fascinating. Every square inch of your body, inside out, all the different major systems and so forth. But for us as a life insurer, the name of the game for us is to help our clients live a longer, healthier, better life. It's obviously overtly good for the customer if

they live longer and are more healthy. And it's great for us, to be honest with you. I think it's pretty obvious how we make money. Customers pay us premiums. We invest those premiums. The longer that happens before we pay a claim, the better off everyone is. So Prenuvo is just the latest in a series of services and tools that we make available to our customers to aid primarily with early detection. And the theme, I would say, with Prenuvo is early detection. I think all of us know that a chronic condition or a disease like cancer caught early is much more treatable than one caught late. So for those of us that have some hypochondrial tendencies, sure, it's fun, but it's also really meaningful science for us. Here's my concern as a potential customer.

Maybe I want to know about my risks, but maybe I don't want my insurance company to get a new set of data about me to concoct their own concerns about risks that might not actually pan out. What do you say to people who are concerned about handing over too much data from a scan like this? Sure. Very, very fair, John. And I want to make it absolutely clear that we make this discount on the Prenuvo service available to our customers. We literally do not know which of our customers even avail themselves of the discount and take the test, let alone what the results are. We receive no information back from Prenuvo about the results of the scan.

So our concern, and that's quite intentional, by the way, for a customer potentially like yourself, who, you know, fear of having their insurance company know about those results might prevent them from doing it. And we want them to do it. We want our customers to know if they have an emerging condition that they should be being treated for. So we do not have any line of sight whatsoever, no access to the data that results from this type of screening test. Brooks, it's good to have you on. I want to take a step back and just get a sense of what you're seeing from your customer or prospective customer base, because we know in the pandemic and coming out of the

pandemic, there was a huge surge of Americans who said, OK, and folks in general said, OK, I'm going to sign up for life insurance now. Have you seen that normalize? And at a time where consumers are tightening their belts, they are adjusting to a higher inflationary environment than it was a couple of years ago. Has there been more, I guess, more belt tightening where these types of products are concerned? It's a great question, Morgan, and you're exactly right. There are sort of cross currents there. COVID has had a lasting effect on consumer sentiment about life insurance. Generally more favorable, generally, you know, greater perception of value there and greater demand. The cross current is inflation for many households, particularly in sort of middle America,

has created competing financial priorities and dampened demand in certain segments of the market. So I would say demand for larger policies, more complicated estate and other financial planning remains strong. A little bit of dampening sort of in those segments of the economy that are more affected by the higher inflation. The one thing that's universal, though, from all of our research, I saw a really interesting study that asked U.S. consumers, what's one thing you're going to do differently as a result of COVID-19? And something like seven out of 10 people said exercise more and lose weight.

We've all realized the importance of being more healthy, whether it's COVID hanging around for a while or the next virus. The more healthy you are going into a bout with a virus like that, the greater the chance of successful recovery. So we think it's the perfect time to be offering the protection of life insurance with a program like Vitality that helps people be more healthy. I can see the argument for sure. Brooks Tingle, CEO of John Hancock. Thanks for joining us, Morgan. This is a day when it looks like share count to come, but NVIDIA, past Microsoft, is the most valuable company in the markets. You've got a chips leader, a software leader, and an Apple systems leader all vying for the crown there. Yeah.

And it's really those and the rest here. We did have another record close for the S&P 500, 31st one of the year, as well as the NASDAQ, another record. That's going to do it for us here at Overtime. Yeah.