Closing Bell - Closing Bell Overtime: What DoJ’s Lawsuit Of Apple Means; FedEx, Lululemon, Nike Earnings Give Macro Clues

Episode Date: March 21, 2024

The major averages powered higher to another record close as investors digested the latest Fed tealeaves. Earnings from FedEx, Lululemon and Nike. Vital Knowledge’s Adam Crisfulli breaks down the market action while BMO’s Simeon Siegel dives in Nike’s quarter and Evercore’s Jonathan Chappell talks FedEx. CFPB Director Rohit Chopra on advancing new proposals to regulate the biggest banks. Plus, former FTC Commissioner Mozelle Thompson on the DoJ’s Apple lawsuit.

Stock soaring for a second straight day as the major averages close at new highs. Strong day for the Russell, too. That's the scorecard on Wall Street. But winners stay late. Welcome to Closing Bell Overtime. I'm John Ford with Morgan Brennan. Yeah, industrials and financials leading the charge today in a broad-based rally. Record highs for the industrials. Communication services, really the only sector, one of two sectors, in the red. But Apple, one of two sectors in the red.

But Apple, one of the few stocks sitting out the rally today. After the Justice Department sued the company, alleging it has a smartphone monopoly, we have a top former regulator weighing in on the fallout for Apple. Can't wait to talk about that. Plus, we are set for a trio of big earnings coming up. Instant analysis of results from FedEx, Nike, and Lululemon. As we await those earnings, though, let's bring in our first guest, Vital Knowledge founder, Adam Crisafulli. Adam, in a way, these records, strong day for major averages. If you had told me a couple of years ago this would happen with a bad day for Apple down 4%, I'd have been surprised.

New market leadership here? You know, it's been impressive. You've seen the market absorb underperformance in Apple and other kind of major tech stocks. And you've seen the kind of rally baton get handed to other groups. So certainly encouraging the Equal Weight S&P and the Russell, both were big outperformers with the NASDAQ and the capitalization S&P. So, yeah, very encouraging that you could absorb that type of a pullback in Apple. And Google also was pretty soft today. And you saw, you know, a lot of the big cyclical groups, financials, semiconductors, capital goods, all traded very well. You know, you had dovish monetary policy. You had another big AI data

point with Micron. And you had some pretty encouraging economic data out of the U.S. this morning as well. So all those factors help propel equities higher today. You chalk this up to a post Fed afterglow? Yeah, I think that's definitely a big part. You know, the Fed's decision was more dovish than anticipated. You know, I think on an absolute basis, it wasn't extremely dovish, but there was a lot of concern that they would dial back their rate cut guidance from 75 to 50 basis points. They did not do that. Powell was somewhat dismissive of the hot inflation figures we got in January and February. We talked about how we were on the cusp of slowing the pace of balance sheet shrinkage. So

certainly dovish for the Fed. But you also had today a surprise S&B rate cut, Swiss National Bank cut rates unexpectedly. And then the BOE decision also, they left rates unchanged, but their forward guidance, the vote of the BOE members was dovish also. So it wasn't just the Fed. You also had momentum out of Europe, too, for the dovish monetary pivot that is happening globally. Yeah, it's like you took the question right out of my mouth. And that was the fact that it's not just the Fed that is starting to pivot and starting to get easier in terms of that monetary policy picture when you look around the world. And certainly we saw that play out in the FX markets as well. The fact that you are seeing industrials at a record high, materials trading at a record high, some of these more cyclical parts of the market. How does it speak to where we are in the economic cycle and thus how that's translating to the

market as we did have another day with, let's face it, strong economic growth data? Yeah, the data was encouraging this morning. And you are seeing, you know, some green shoots on the manufacturing and the industrial front. On the flip side, I think you're seeing a number of red flags when it comes to the consumer and retail. Micron was terrific, but you also had Darden Restaurants today. You had Academy Sports with ASO, which is a relatively small-cap sports retailer. Retail sales, recent February retail sales report was soft. So you're seeing consumer red flags and in some industrial green shoots. So there's kind of a bifurcation in the data and news flow that we've been seeing over

the last couple of weeks. So how much to FedEx, to Lululemon, to Nike, these names that we get after the bell that are also reads not just on their own companies, but the global economy going to matter here in terms of this market narrative continuing? Yeah, I mean, these are huge global multinational companies, especially FedEx and Nike. So they're going to give us great insight into, you know, a variety of different corners of the economy. You know, we're just a couple of weeks out from the start of the Q1 season. So these are kind of some of the last big insights into how corporate America is performing. You know, for FedEx, cost cutting is going to be a big part of the story. They've been very aggressive on the cost front. That's helped to offset some revenue headwinds.

On their last call, they did suggest that they were starting to see some stabilization in demand. In large part because just base effects were getting easier. The year-on-year comparisons were getting easier. So it'll be interesting to kind of hear their latest commentary on that. And then for Nike, you know, part of it is, it's the global macro environment with the consumer, but part of it also is company specific. Now they're certainly losing share in certain categories. You know, China's been an area of softness for them too.

So it's certainly gonna get some interesting insight from all these companies. Let's bring in senior markets commentator, Mike Santoli. Mike, I wonder if China will factor in significantly in this afternoon's earnings because things overall have been so good. And for some of these companies, Nike, certainly Lululemon, expectations are high. There's a question mark on China impact here. There is.

I think the big question is whether investors have implicitly kind of written off China as a real growth driver in the short term for these companies and even for the world economy as a whole. A case can be made that we've done fine without China. Maybe there's even been a little bit of a muting of inflationary forces because of what's been going on there. But yeah, it will be a good glimpse. And actually, arguably, FedEx and Nike have tried to make the case kind of liberating their own investment stories from the China piece of it, but it's been unsuccessful so far in general.

All right, we've got Lululemon earnings out. As you can see right there on your screen, the stock is falling. We're going through those results. We'll bring them to you in just... Okay, we're ready to go to Courtney Reagan with those Lululemon results. Court. Hi there. Yes, Morgan. So Lululemon for the fourth quarter, they are out with their results beating street expectations for earnings per share, turning in five twenty nine compared to five dollars even for that that expectation. Revenue is also stronger than expected at three point two one billion. The street was

looking for $3.19 billion. Comparable sales up 12 percent. America's of that portion was up 7 percent, but international up 43 percent. Gross margin up to 59.4 percent. That's an increase of 430 basis points year over year. When it comes to the guidance, however, Q1 guidance for both revenues and earnings per share is in a range that is below streets expectations. And then when you look at the full year, I would say weak full year revenue guidance, but in line guidance for the earnings per share. You can see the stock is falling here down about six and a half percent after hours. But to be fair, the stock has been a winner for quite some time, although year to date has underperformed the S&P 500. Morgan and John? All right. As you mentioned, Courtney, shares are down about 6% right now. Mike Santoli,

I'm going to go to you on this one because the quarter itself, incredibly strong. I mean, the gross margin increases. America's international at 43%. The fact that you do have this weaker guidance in place, what does that signal about the rest of the year for Lululemon, especially as the stock has been pretty richly valued up until now? Yeah, I mean, it could certainly just be conservatism at the start, relatively close to the start of a calendar year. So the full year guidance in terms of net income, it's within the range of the current estimate of $14.13 a share.

But there was a $0.09 beat in the quarter, you know, that was just reported. So it seems as if maybe there's going to be some deceleration along the way. Premium multiple, kind of widely loved stock. We'll see if it settles out here as people just sort of digest whether it is just a little bit of a conservative guide or if they're just seeing some signs, maybe in the latter part of the last quarter, that there's been a little bit of fatigue among the consumers. All right. Adam Crisafulli, thanks for joining us. Mike, we'll see you again shortly. We've got FedEx results out as well, and we're just going through those numbers. We'll

bring them to you in just a moment here. In the meantime, another big mover today, a Wall Street debut for Reddit. The social media company stock soared following its IPO. Julie Boorstin has all the details. She's been on the New York Stock Exchange for all day reporting moment by moment here. Well, Morgan, Reddit closing the day at $50.44. It did briefly dip below its opening price of $47, but it closed up over 48% from where it priced at $37. So Reddit's designated market maker, Glenn Carell, told me this was a picture-perfect opening for an IPO with a ton of investor interest. He pointed out how massive the volume was with about double double about double the shares trading of the float of 22 million. The New Street research just issued the first price target on on Reddit shares at fifty four dollars, saying that includes a five percent discount due to overhang from the FTC inquiry into its data licensing practices.

New Street saying it believes Reddit should trade at a premium to small and mid cap social media stocks due to its higher user growth rate and emerging opportunity to license data. Now, Reddit CEO Steve Huffman telling me he feels immense gratitude and quote, while we celebrate today, it's just a day and tomorrow we get back to work. The chatter on Wall Street bets, that's the Reddit forum, it has been mixed. Right before the stock started trading, someone in the crowd around the Reddit post called out to Huffman diamond hands and he laughed. And you know what? I misspoke there. It did get priced at thirty four dollars a share. So up 48 percent from that, Morgan. All right. Two days with two strong IPO debuts. Julia Borson, thanks for bringing us the latest. Let's bring in Mike Santoli for his dashboard.

In the meantime, Mike. Yeah, Morgan. So another record high for the S&P 500. Here's how it looks on a six-month basis. It's been, as I keep pointing out, really steady trend line. 52.50 is one of those target areas. We hit another one about 50.50. Didn't spend much time there.

Kind of kept going. And, you know, it's sort of the strongest markets will sort of hug the upper end of one of these lines. And the lower end has just been like a 20-day low. I mean, it's really been without substantial dips. We'll see how long it can last. We're working on about a 10%-plus year-to-date gain before the first quarter is entirely over. Now, the character, too, more aggressive stocks, especially in the last couple of days, have started to work. Take a look at the high beta portion of the S&P 500. These are the more volatile stocks that tend to move the fastest. That's here in blue. And they've kind of jumped ahead of this cash cows ETF, which is

high free cash flow companies. So, look, they rhyme in terms of their cadence, in terms of going up over the last couple of years. But you do see these times when high beta kind of spurts ahead. That's when the market's getting aggressive, got some thrust behind it, often means going to need to rest before too long. All right. Thanks, Mike. Meanwhile, FedEx shares in overtime are spiking up about 8% on this report. Frank Holland, how do the numbers look? Hey there, John. Looking at the FedEx numbers right now, you can see shares are moving higher after this earnings report, up over 8%.

So the company reported a slight miss on revenue, but a beat on EPS. EPS of 386 a share, compared to the estimate of 345 a share. One thing that was being closely watched was the Express segment. That's where FedEx gets about 50% of revenue. The key thing to watch there

was its margin right there. So the estimate for margin was 1.1%. Spoke to Bank of America earlier today. They said that would have been the lowest margin in the history of their coverage of FedEx. Instead, they had a big beat when it came to margin in Express. Still not a great number, but 2.5%. Also seeing the margin on ground coming in line. The company said cost savings helped improve their Express results overall. Again, Express is really the core of this business. Air delivery, what FedEx made its name on. Overall margin also beat expectations at 6.2% compared to an estimate of 5.6%. Still looking through the numbers.

However, the company says it's also on pace for this fiscal year for its cost-cutting effort called Drive at $1.8 billion. Back over to you. All right, Frank, thanks. That stock up now better than 10% in overtime, but more news on that to come, of course. And more news to come just in general. We're moments away from Nike's earnings. That stock has been the worst Dow performer over the past year. Up next, we're going to get instant reaction from an analyst who has a buy rating,

plus a top former regulator on what's at stake for Apple and its stock following this antitrust lawsuit by the Justice Department. Overtime's back in two. Nike results are out. We are going through them meanwhile shares of lulu lemon under pressure after week guidance and joining us now is simeon siegel from bmo capital markets simeon uh the the guide here from lulu on paper doesn't look that bad but how much does it speak to how high the expectations are for this brand? Hey, good to see you.

Yeah, listen, I think that Lulu has been a hyper-growth business. It's been one of the best growth stories in retail. And I do think people have been starting to ask about Americas versus China. And so I think that we're looking at a consolidated number, clearly a B. But any time you're going to guide down, the question is going to be, is it conservative or is it the beginning of an inflection? And which do you think it probably is? I mean, I know we're going to hear some more on the call, so maybe you don't want to get ahead of that. I was going to say, you're catching me three minutes after the release. Okay, hold on, Simeon. Hold on, Simeon.

We can ask you about Nike too soon in just a minute because those numbers are out. Sarah Eisen has them. Sarah? Hi, John. So it's a beat on the bottom line for Nike. Seventy seven cents. Expectation was around seventy four cents and a slight beat on revenue to twelve point four billion. The expectation was around twelve point two eight billion in revenue. So kind of in line on the revenue side. I'm just going through the release right now. It looks like North America was a little bit of a bright spot. They saw three percent growth in North America, which is a reversal. They've had negative growth there in the past two quarters. And then the other place you jump to immediately is China, where it's about 5% revenue growth.

And that is pretty much in line with expectations. Seeing what else jumps out, gross margins were 44.8. That is a nice jump. So clearly the bottom line is looking up, and that is driven by decreased freight costs, driven by cost savings that they are able to get. It's a company that is in a bit of a turnaround mode after they warned last quarter that revenue growth was going to be soft. They come in in line. Remember, this is also a company, guys, that announces guidance on their earnings call. So in the next hour, we'll want to hear what they're seeing for this current quarter and then see if they give us any hints about 2025, because this is their

third quarter of the fiscal year. But overall, it's kind of an inline quarter and potentially a little bit of a beat on the revenue side and on the bottom line. I'll continue to dig through it. But overall, remember, Nike's on a weird schedule, Morgan and John. This incorporates the second half of the holiday season, which clearly was strong and potentially helped out North America here, and then into the start of the year. All right, Sarah, I know you'll continue going through it. And as you've been talking, of course, the stock in overtime has gone up,

gone from flat to up 2% to 3%. Simeon Siegel, going back to you now on Nike, it seems like China's at least in line. That was a big question mark for me. And I guess the after hours initial reaction here, we don't have guidance yet, but the difference between Nike and Lulu, the difference between maybe moderate expectations and high ones. Well, and so also, and Sarah just did my job really nicely for me. I think a big distinction. We're talking about China, but the fear factor for Nike was the other side. It was North America. Remember, this is the second

quarter where we're lapping a big Adidas miss last year. So this was that big when Kanye gave an opportunity for Nike to take the chance. Last quarter and this quarter, there was a high bar. They just cleared it. So that North America beat, I think, is a very important factor for Nike, because what you want to believe, what you want to make sure of is that they're not ceding all of this share in the core market. And so there was a lot of worry walking into this for Nike. I think right now that North America number is going to be an important number. OK, so let's look at some of the similarities then between these two names, Lululemon and Nike. And the key one for me is the fact that gross margins expanded for both of these companies. You got freight costs continuing to come down.

To your point, yes, North America returning to growth with 3% growth, that being a reversal for Nike. But you saw strong growth in the quarter for Lululemon as well. And China was positive, or I should say international was positive for both of them, too. So how does it speak to, in general, the retailing environment right now for companies that do have these sticky brands? I think we're seeing the consumer spend. I think we're seeing the gross margins there. I think that's exactly the point. I think, Morgan, you and I have talked about historically where there's a lot of fear because the macro is what it is. And we can see all that. And yet, on average, I mean, this is the tail end of this

earnings cycle. On average, these companies that we're looking at have seen revenues grow around 4%. They've seen gross margin actually grow around 200 basis points. There is a healthy level of spending being seen in these companies, whether it's through a healthy level of consumerism, we don't really know, but the results are there. And so if you have a product that people want to buy, you are selling it. And so I think that what we are, what is encouraging here, again, that regional discrepancy, I think, is something we're going to be talking about a little bit more than we normally do. But watching people buy in North America, seeing a company of Nike size grow North American business is a very big deal. Lulu is still growing. The question is, at what speed? Lulu's Americas, I think,

was still up high single digits. So you are seeing people shop. OK. Simeon Siegel, thanks for breaking it down for us as we have both of these stocks moving in opposite directions. We're going to go back to Sarah who has more detail on the Nike release. Hi, Sarah. Hi, Morgan. I just wanted to share with you a comment from John Donahoe in the release, the CEO, because I think it speaks to what the priorities are and where Nike is right now on their journey. They say we're making the necessary adjustments to drive the next chapter of growth, according to Donahoe.

We're encouraged by the progress we've seen as we build a multi-year cycle of new innovation, sharpen our brand storytelling, and work with our wholesale partners to elevate and grow the marketplace. The reason I bring this up, and by the way, wholesale was up 3%, the business that they sell

through Dick's Sporting Goods or department stores. The reason I bring it up, Morgan and John, is because they have gotten some negative reports on Wall Street lately with downgrades and analysts questioning where they are in the innovation cycle, losing share, for instance, in key running category for Nike to upstarts like Hoka and On Running and in the apparel side as well to the Biores and the Lululemon. So I think that Donahoe and one thing to be listening for on the call is really trying to tell investors that they are at the beginning here of this innovation cycle. He's made all sorts of executive changes in the last nine months. And investors, I think, will be listening for more details about what to

expect going into the Olympics and then out of it. Yeah, we know you'll be listening as well. Looking forward to it. Sarah, thank you. Shares up about one and a half, two percent right now. Well, FedEx delivering for investors following a profit beat and issuing another five billion dollar stock buyback. Up next, a top analyst tells us what he wants to hear from executives when that call begins in just about an hour. Plus, Consumer Financial Protection Bureau Director and FDIC board member Rohit Chopra on why he voted in favor of a new proposal that could make it harder for big banks to win merger approval. We still have a lot left in overtime. Stay with us. Welcome back to overtime. FedEx shares jumping right now after beating on earnings. So there

was a miss on the top line. Let's bring in Evercore ISI's Jonathan Chappelle. He is an outperforming $327 price target on FedEx. It's good to have you on right now. I'm wondering what's sending shares so much higher right now. Is it the fact that the FedEx Express operating results improved, maybe signaling an inflection for that business, which means so much to FedEx? Or is this really about the full year guidance in which they've narrowed the EPS range? Capital expenditures are going to be a little bit lower than prior guidance. And they've reaffirmed revenue decline in the low single digit percentages year on year. So not any worse than feared. What's driving the move? Yeah, it's almost expressly all the former, no pun intended. But

Express was the big focus of this earnings release. It disappointed back in December. There was a lot of hand wringing. Could Express margins go negative in this fiscal third quarter? You know, how low could it get? There were some weather events in January and December, which was really spoofing the stock back in February. To have this margin come in at 2.5%, which is not only a full 150 basis points better than street expectations, but is actually up sequentially about 80 basis points, which is counter-seasonal, I think that's the main focus here. And really what's important about it is it's not even so much a read on the macro, which I'm sure we'll talk about at some point, but it's really more FedEx specific.

They continue to execute on their drive initiatives to take structural costs out and to have a beat of this magnitude on the express margin. I think that's driving the entire upside in the stock today. Yeah. And I realize FedEx has had a lot of company specific stuff that it's working through over these last however many quarters. And yet, we're seeing shares of UPS trade up in sympathy right now. And I wonder how it speaks to the macro environment that both of these companies are navigating at a time where, yes, the margins are looking better in Express, cost cuts continue, and you're seeing those in the results here, but you're still seeing top line declines. Yeah, you're exactly right, Morgan. I mean, the revenue did miss in every single segment.

The macro doesn't look great at this time of the cycle. You know, we've done a lot of pre-quiet period discussions with all of our companies across all the different segments of freight, and it doesn't sound great out there right now. So I'm a little bit surprised by the sympathy move by UPS today. Of course, it's only 2 percent But UPS has their investor day next week, so we'll see what they have to say about the demand side. And of course, the FedEx call doesn't start for another hour, so I think there'll be about the sustainability of this margin improvement and the success, this near-term success in Express, which so many were worried about? Well, it really is both, but I think the latter for FedEx is most important. We still have to see the execution of this drive initiative. It's supposed to be $1.8 billion in cost this fiscal year, $2.2 billion next fiscal year. So as Morgan said at the start, narrowing the

guidance range with the midpoint being exactly the same point, I think helps, but really proof that they can execute on that $2.2 billion, which admittedly is probably harder to attain than the lower hanging fruit of the $1.8 billion. That's going to be most important to the FedEx story specifically. But if they do give a positive on the macro, which I'd be a little bit surprised if they did, then I could understand, you know, in sympathy moves by UPS and other freight surface transportation stocks as well. OK, Jonathan Chappell, thanks for joining us ahead of the FedEx call as we do see those shares ricochet higher. And by the way, on a day where the Dow transports are up another one percent, up more than three percent for the week on pace

for the best weekly performance for that average all year. Well, it's time now for a CNBC News update with Bertha Coombs. Bertha. Hey, Morgan. Prosecutors in New York say that Donald Trump's hush money trail should begin without delay on April 15th, arguing that any calls for a delay from Trump's team are, quote, a red herring. The defense had called for additional time to review new evidence that it had received in recent weeks. Medicare will now cover Wagovi for heart patients, but only if it's prescribed to reduce the risk of heart attacks and stroke rather than simply for weight loss. Before today, Medicare had been prohibited for paying for weight loss drugs, but new guidance from the agency that oversees Medicare said today that the drugs could be covered if they are approved for a secondary use that is covered.

And multiple state DMV offices fell victim to a national outage that halted license-related transactions. The non-governmental group that provides the software to DMV offices said that the outage was due to a loss in cloud connectivity. Most states said the outages had been resolved by this afternoon. Back to you. I'll take it, Bertha. Thank you. Apple, meanwhile, having its worst day since August after being hit by an antitrust lawsuit from the Justice Department.

Up next, a former top regulator on what's at stake for Apple. And check out shares of Micron, the big winner in the S&P 500 today at 14 percent after a big earnings beat and better than expected guidance. Overtime will be right back. Welcome back to Overtime. The Department of Justice going after Apple today, alleging the tech giant maintains an iPhone monopoly. Shares falling more than 4% in the session. It's biggest drop since August. And joining us now, former FTC Commissioner Moselle Thompson. Moselle, itlle's been a while good to see you again so i've been reading through you this complaint

and i know you might be hesitant to be critical of of of this kind of thing but there's some stuff in here that kind of blows my mind early in the complaint the government sort of takes credit for the success of the ipod by saying that you know by suing microsoft it cleared the way for iTunes to be installed on Windows, which I think is ridiculous because really it was Carly Fiorina cutting a deal

with Steve Jobs that got that Windows iTunes going. And then let me quote you part of this complaint where the DOJ says, to protect its smartphone monopoly and the extraordinary profits that monopoly generates, Apple repeatedly chooses to make its products worse for consumers to prevent competition from emerging. Now, Apple's competing with Google's Android, with Samsung. We're to believe that Apple's been making its products worse and we keep buying them. Does that sound like a strong case to you? Well, it's going to be an interesting challenge because this is a case where they're not only

going to have to show that there's harm to competition, but they're going to have to show that consumers are not benefiting. I mean, Apple makes a product that people like and it bundles it with services that people like. Now, there's a lot of competition out there, as you know, John, is that Google and others are pretty big boys, so they know how to compete. So it's going to be an interesting challenge here because it's going to be bigger than just mere showing that competition is hurt because there's a lot of competition here. Now, it's also important because this case, there's a pretty broad based attack on the iPhone and everything that attaches to it. And Apple

says, and it's a legitimate concern, is that does that mean that we can't innovate for our own products and interoperability? Is that a chilling effect? So it's going to be an interesting challenge to talk about what consumers actually feel and where they benefit from this. It's hard to challenge a product that's extremely popular. Okay, to paraphrase Mark Antony here, I'm not here to defend Apple. I'm not saying they do everything right certainly in their ecosystem.

But I wonder, is the DOJ in a way trying to redefine monopoly and monopoly power here? Globally, Android has 70 percent plus market share. In the U.S., maybe the iPhone has between 50 and 60 percent market share, but not all of that is premium smartphones. So how do you define a market where you can argue that Apple itself has monopoly power? And that 64 percent there, I have issue with that number. That's based on the sell-in in Q4 of 2023. It's not the overall install base. How do you have to define monopoly in order to argue here that the iPhone has monopoly power in this market? Well, look, this is part of a longer term shift in how the Biden administration has changed its view about big tech generally. And it's much more aggressive in what its guidelines are talking about in terms of what harm to the market and competition is. It's yet to be seen whether courts have fully adopted that or not.

So that's going to be part of this challenge. You're right, too. Market definition is going to be a very important part of this. Although the iPhone is a very significant player in the U.S., it's not a significant player in the overall global market for phones. The other thing you'll have to think about is what is it that we're really trying to do here? Are we really trying to create an ecosystem that fosters innovation? And what is the impact on innovation? I'm sure these are questions that are going to have to be dealt with by any court.

And a lot of those issues are really poor issues that courts have not fully considered yet, especially in the new approach that this particular administration is taking. Yeah. And I realize we're talking about this is, you know, given the fact that this is a U.S. probe, a U.S. case that's now been brought forth today. But the stage has been set. I'm looking at two different Reuters articles dated back to last year, outlining probes into Apple for anti-competitive behavior by antitrust watchdogs in Italy and in France. And it raises the question, yes, we're focused on the U.S. here today and how this goes through the court process, the legal process here in this country. But how much is the scrutiny on a global basis actually going to put enough pressure on Apple to change some of its behaviors, if at all? Well, one of the things that's interesting here is the moving target.

You know that Apple is not operating in isolation. At the same time, the EU is talking about its new Digital Markets Act, and it's asking companies like Apple to change some of their practices and how they allow people to participate on their platform. So while the DOJ is suing about how this is happening in the United States and what Apple is doing, Apple is iterating at the same time. So some of the challenges that they're going to have about the DOJ is complaining about may actually not be there or may look at very different by the time this case goes to trial. Wow. We're going to continue to watch this as it develops in Moselle Thompson. We appreciate

your insights and look forward to having you back as it does develop. Good to see you again. All right. Shares of Apple down at 4 percent, even as the broader markets rallied again today. An unusual decoupling that we saw there today with stocks. Up next, much more on this big hour of earnings, including Mike Santoli's look at how Lululemon keeps outperforming the consumer discretionary sector. And Reddit may be stealing the headlines today, but Astero Labs is rallying again following the more than 70 percent gain it saw after going public yesterday. You can see there it's moving higher even in after hours, up 3 percent right now. Stay with us. Welcome back to Overtime. Let's get another check on Lululemon.

Those shares still falling down about 10.5% in overtime after its Q1 outlook came in lower than expected. Mike Santoli is back with a look at Lululemon and another major consumer stock. Mike. Yeah, John. And over time, this goes back seven years. Lulu and Chipotle have moved not so much exactly in lockstep, but by similar magnitudes. And I think that it shows you the tendency of the market to bestow upon individual consumer subsectors this this winner take most area. Now, what other what else unifies these companies is they were very profitable on a store basis. Premium pricing latched on to a generational cohort that stayed with them. And they still have a lot of room for expanding their store footprint. Even after all the growth they've had, both have premium stock multiples.

So, you know, Lulu probably dropped below CMG on this measure, but still has plenty of room and vastly by hundreds of percent outperforming the overall consumer sector. Now, another pair of stocks I sometimes like to track for their kind of waxing and waning of advantage is Berkshire Hathaway and Apple. Now, of course, Apple is the largest public stock holding of Berkshire Hathaway. It accounts for about 40 percent of its portfolio and maybe 17 percent of the market cap of Berkshire. But you see a really diverge here. And this is the you know, you guys are talking about how Apple has managed to go down with the market staying higher. I've

been making the case for a long time that Apple is really a bellwether in a timely way. And this sort of shows that there are there is an ability for stocks to kind of break free of whatever Apple's doing at a given moment. Can't diverge forever. But for now, it's doing it. All right. Mike Santoli, thanks. With a hot take, as always, we have a news alert on Dutch Bros. Kate Rogers has the details. Hi, Kate. Hey there, Morgan. Yeah. Take a look at shares of Dutch Bros. They're down by around four and a half percent. Now, the company announcing a secondary public offering of its stock, eight million shares to be offered. And once again, the stock is falling by more than four percent on that news. Back over to you. All right. Kate Rogers, thank you. Up next,

FDIC board member and CFPB director Rohit Chopra on why he voted in favor of a new proposal that would increase scrutiny of big bank mergers. Stay with us. Welcome back to Overtime. Lululemon's CEO making headlines on the analyst call. Let's get back to Courtney Reagan for some of those. Court? Yeah, hi, John.

So Calvin McDonald, Lululemon's CEO really towards the top of the tall call, says, as you've heard from others in our industry, there's been a shift in U.S. consumer behavior and we're navigating what's been a slower start to the year in the market. But he says they take it as an opportunity and they're seeing other strength internationally. Also want to call out that mainland China saw sales grow 78 percent in this most recent quarter. America's was up 7 percent. Back want to call out that mainland China saw sales grow 78 percent in this most recent quarter. America's was up 7 percent. Back over to you. All right. Courtney Reagan, thank you. Shares of Lulu down double digits right now. Today, the FDIC voted to issue a proposal that would put additional limits on bank mergers with more than 100 billion dollars in assets.

Joining us now is someone who voted in favor of that proposal. Rohit Chopra is a member of the FDIC's Board of Directors. He's the director of the Consumer Financial Protection Bureau. Joins us now. Director Chopra, it's great to have you back on the show. Good to see you, Morgan. Why did you vote in favor of this? And in terms of next steps, how could this potentially change the regulatory landscape for the biggest banks? Well, we have seen how some of these very large mergers over the past few decades haven't always turned out to be beneficial for our entire economy. In many ways,

the U.S. has been lurching to a banking system that's more like we see in Europe and China. So what we have done is vote on a clear policy that spells out how regulators are going to review these mergers. I really think this is going to make merger review faster, more predictable, but also stop anti-competitive transactions. And certainly this has been an area of focus even just in recent weeks with the New York Community Bank Corp., which had acquired Flagstar Bank and then had acquired some of those signature bank assets, in the process becoming one of those banks with more than $100 billion

in assets and, of course, we know has now been facing issues in recent weeks and had to receive an investor capital injection, et cetera. I'm wondering how much that factored into some of these proposed changes. And just as importantly, as we know, regulations can sometimes come with unintended consequences. How do you ensure that the largest banks now don't become that much stronger with these proposed regulations? The key here is to make sure that the whole system is dynamic, it's competitive, and there's no question that some of the largest bank mergers have been really bumpy and have created chaos for consumers

and the markets they serve. So we wanna make sure, even in the merger process, that things are smooth, that it's not gonna create risks to financial stability, but Morgan, you've raised another point. We also have to make sure that we look at the harms from some of these mergers of the past and make sure that those biggest banks don't continue to exploit their too-big-to-fail subsidies. So we're working hard across the board that we can preserve a dynamic banking system.

Rohit, good to have you. I want to shift gears and ask about mobile payments, specifically top to pay. Back in September, the CFPB put out a release. I want to quote from it. You say, as of the second quarter of 2023, Apple's iOS operating system was on 55 percent of smartphones shipped in the U.S. and Google's Android operating system was on 45% of smartphones. And then later you say the dominant market share of these two operating systems, coupled with the increasing shift toward mobile device payments, underscores the important role that their policies and practices play in retail payments. Are iOS and Android roughly equally influential, as you quote that 55-45% there?

Well, when you look at where developers and where the banking and fintech world, they often really look hard at iOS and how they will develop apps and be able to get to market. The CFPB shares a lot of the concerns with regulators around the world and banks about how Apple has imposed regulations that really stop banks and fintechs from getting to market on payments. I know that there has been obviously today's lawsuit against Apple, which talks about tap to pay and Apple's policies, how it can lead to junk fees on small banks and credit unions. So we'll be watching that very closely about ultimately how will app developers, fintechs, banks be able to serve people through smartphones and other devices. It just caught my eye that 55 and 45 are pretty

close together. And you said dominant market share of these two operating systems. But the DOJ is calling iOS a smartphone monopoly. Those two things don't seem to jive with each other. Well, I think those look at when you look at the law monopolists, sometimes there can be a number of super big players. Many people look at big payment networks and others. But here's the deal. We want to make sure that smartphones, just because they control all of the operating system, it doesn't let them dictate everything when it comes to developers of apps and other services. We have seen the problems that can occur from all sectors of the economy when big tech firms are foreclosing competition. So we'll be watching this Justice Department lawsuit pretty carefully

in the banking world. Speaking of potential suits, the credit card late fee caps that are set to take effect May 14th, industry moved to sue to block the implementation of those. A judge rejected that in the last 24 hours or so. What happens next and expectations around what this does to the credit card ecosystem when we know that it's a key part of those business models, for better or worse? Well, credit card companies have been exploiting a loophole that was in the law. And we have worked to close that to save the entire system about $10 billion. I'm not surprised that the junk fee lobby is pushing back to hold on to those billions. They have been fighting in court. We have seen some favorable opinions.

But Morgan, we're just going to keep on pushing to defend it so that consumers can see the results. At the end of the day, credit card companies have lots of ways to deter late payments, jacking up your interest rate, hurting your credit score, increasing your minimum payment. Adding insult to injury by exploiting this loophole doesn't really do anyone any good except for those dominant card issuers. All right. Rohit Chopra, Director of the Consumer Financial Protection Bureau, thanks for being with us on Overtime. Up next, Overtime movers that need to be on your radar as we count down to the analyst calls from Nike and FedEx.

We'll be right back. It has been a big hour of earnings here on overtime. FedEx sharply higher right now. You can see it up 12.5%. Strong earnings beat and healthy margins being cheered by investors. UPS moving higher as well. Nike also getting a bid. Total revenue coming in above estimates and North America in particular standing out. And that's despite what we just heard from Lululemon's CEO on the U.S.

consumer, Morgan. Yeah, continue to watch this, parse through the results and all these earnings calls. But just to go back to the regular trading session for a moment, bespoke saying that the last time Apple was down 4% or more in the S&P 500, the Nasdaq were both up on the day. It was more than 10 years ago. Speaks to potentially this decoupling between Apple and the broader market. Maybe it's being replaced by NVIDIA as everybody's so focused on AI. Apple certainly got its own unique government inspired issues in the market today. Yeah. Record closes for all the major averages. That's going to do it for us here at Overtime. John, hurry home.

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