Closing Bell - Closing Bell Overtime: Why Spin Offs Are The Next Trendy Move For Industrials; Your Q2 Investor Playbook & Another Cloud IPO Filing 4/1/24

Episode Date: April 1, 2024

Stocks mostly lower to start trading in Q2. Goldman Sachs Senior Strategist Ben Snider and Envestnet co-CIO Dana D’Auria break down the market action while Interactive Brokers Chief Strategist Steve Sosnick gives his April playbook for investors. Microsoft-backed Rubrik files for an IPO. CFRA analyst Zach Warring on PVH’s weak revenue warning that sent the stock sliding. The latest winning strategy for industrials? Spin offs. Our Seema Mody on what’s behind the latest trend while Jefferies analyst Sheila Kahyaoglu on how to play the stocks. Plus, UPS wins a major contract away from FedEx and our Phil LeBeau previews Tesla delivery numbers.

Well, it looks like a mixed picture for stocks, but the S&P starting April in the red after it closed Q1 with the best quarterly returns since 2019. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Yeah, and treasury yields are jumping, putting major averages under pressure. Real estate and health care, the worst performing sectors, while comm services and energy were the bright spots. Coming up, Interactive Brokers Chief Strategist Steve Sosnick lays out his investing playbook for April and beyond. Plus, we are awaiting earnings from PVH. Instant analysis of those results and what they say about the state of consumer spending is coming up. But first, let's get more on this market pause. Mike Santoli joins us from here to expand

on those comments that he made just moments ago about about being overbought. Yeah. Yeah, there's no doubt about it. And I think a lot of the chatter over the three days we were closed in terms of the market is what does it mean that the market has been so strong for this long, whether it's five straight months up, whether it's two straight quarters up, you know, double digits, whether it's up 10 percent to start everything usually goes in the direction of we probably could use a breather. You should expect a little bit more, maybe downside chop before terribly long, but it's almost never the absolute peak of the market. So in this case, it means there's heavy demand for stocks.

And right now the market is sort of feeding off of the economic resilience and at least the chance that the bond yields have are near a peak and that the Fed is potentially going to become more friendly. All that stuff is working in the favor of the market. The question really is how much have we priced in? Have we taken credit for winning some games we haven't even played just yet? I mean, I do think it's notable that you have the NASDAQ actually eking out a gain here today, Mike. Even as you do see Treasury yields move higher, it is after, let's call it a month, of this rally broadening out in March. It really is back to big cap tech, at least today, to start Q2.

Yeah, I would say at least today is the key phrase there. I definitely want to see if this develops into a broader giveback of that broadening trend. It would suggest not. I think the S&P 500, it finished last week, finished March, with 80 percent of all of its components at a one-month high. So basically, things just really whistled higher into the end of the month. We'll have to see if this is nothing more than just a little bit of a shakeout to start a new quarter. It's really nothing to speak of on the charts. We'll see if it develops into one.

All right. Mike, we'll see you in just a few moments. Let's get today's action with our market panel. Joining us now is Ben Snyder of Goldman Sachs and Dana Dioria of InvestNet. It's good to have you both here. Ben, welcome to the show. I do want to talk to you a little bit about what we're seeing in the S&P 500 versus the equal weighted S&P 500, sort of following on what we just discussed with Mike right there. I mean, as we have seen treasury yields move higher, we have seen mega cap basically hold in there in trading today. But in general, if you look at what's happened since the start of the year, this rally has been broadening out. And we have something like stronger than expected

manufacturing data today. Can that continue, given signs that maybe the economy is holding in there more than people expected? I think you're exactly right. And I really want to focus on a word you just used in the last segment, which is broadening. I think that is the word to describe what's happened so far this year. We're seeing the S&P move higher. We're seeing the equal weight S&P move higher. We're even seeing some mid and small caps move higher. And I think the key reason is very simple. It's that growth is solid. You know, coming into this year, there were a lot of concerns about whether we'd have a hard landing or soft landing, whether inflation would continue to decline.

And I think it's become increasingly clear over the first quarter of this year, the economy is running at a healthy rate, that earnings growth is improving. And that's really helped this equity market rally broaden now. Yeah. Dan, I want to get your thoughts on this, especially, and I'm just going to take a step back and ask a really basic, really fundamental question. But I think one that has to be asked, given the fact that we had PCE that, yes, came in line with expectations, but does continue to point to inflation in this last mile being stickier. And then today, ISM manufacturing

showing a surprise expansion for the past month and maybe showing signs of stabilization in that sector of the economy, too. And that is what actually gives the Fed reason to begin cutting rates at some point this year? What's the case for it right now, especially with financial conditions rallying the way they have in Q1? Yeah, I think you're acting the right question here. Right. And it's been really interesting to watch the market, you know, both see this growth that we're all seeing and, you know, talking about. And then at the same time, you know, continuing to price in as many rate cuts as humanly possible, right? So we certainly have calmed down from where we started the year in terms of the expectation of rate cuts. But I definitely agree with sort of what I think the spirit of your question is, which is it's asymmetric.

It probably leans towards fewer growth or fewer cuts, excuse me, because of the growth, all else equal right now. And you pointed out inflation. We're increasingly seeing a view that looks at this super core inflation where we take out, you know, food, energy, housing, et cetera. And that's been even stickier. And that's, you know, food, energy, housing, et cetera. And that's been even stickier. And that's, you know, taking even longer to cool. So I agree. I don't think that there's a reason for the Fed to cut right now. I think the Fed has a lot more to lose by cutting early than they do

by by letting it go a little bit longer. You know, notwithstanding, there are bears certainly who come out and say, hey, the Fed's already too late for the cuts. So, Ben, what's the impact on stocks, particularly smaller caps? You're talking about broadening if we get fewer cuts than some expected. I think that's right. And I want to emphasize the idea that getting fewer cuts by itself is not necessarily a bad thing for stocks. In fact, if the Fed is cutting less because growth is stronger than expected, on net, that's probably a good thing for stocks. In fact, if the Fed is cutting less because growth is stronger than expected, on net, that's probably a good thing for stocks. But it does, to your question,

affect rotations and relative strength within the market. And one thing we've seen very clearly recently is that smaller and mid-cap stocks have held back a bit because of concerns of higher for longer interest rates and what that would mean for the cost of capital and for balance sheet leverage. And these smaller companies generally tend to have higher leverage. And so on days where the market has felt more comfortable with the Fed cutting outlook, we've seen this catch-up trade, as it were, with smaller and mid-cap stocks rallying. Going forward, if it turns out that growth is even stronger than we currently think and the Fed is going to cut even less than is currently priced, I still think on net that's a good thing for stocks, but it probably means a little bit less strength from the smaller,

more levered companies. Okay, so Dana, what do you do with small caps? Actually, I'm pro small cap. I agree with everything you just heard Ben say. Look, small caps tend to be more interest rate sensitive. They do have to, you know, typically go to capital markets more often. So, of course, you know, any kind of movement in rates does impact them. You also think in terms of just the corporate teams at small cap companies versus large cap, you know, it's not necessarily, obviously, self-funding. And, you know, you now have corporate teams across corporate America, but think in small caps in particular who are dealing with just rates that they haven't seen in a long, long time.

Right. So I do think there's more, you know, headwinds there. But but being in the market is about, you know, getting into something when it's at a low price. And so if you're in it for any kind of longer haul. Right. And by that, I mean, you know, something past, you know, a year, let's say I do think small caps are a place to be. I think most investors have a ton of mega cap, no matter what they I do think small caps are a place to be. I think most investors have a ton of mega cap, no matter what they're invested in, whether they're passive, active, you know, active managers can't afford a lot of tracking error to the big indexes, which have a ton of mega cap. So a little bit of a tilt into small, wait it out,

and you'll probably get a better return in the long haul. Take some courage, though. All right. Dana, Ben, thank you both. Now let's bring back Mike Santoli standing up this time for his dashboard. Mike. Yes, John. Well, good to see you right over there. Look, we were just talking about how overbought the market is. Here's a statistical way of viewing it. It's the S&P 500 over four years relative to its own 200 day average. We came into today with it about 12 and a halfish, 13% above that 200-day average. That's pretty stretched. And one place you can go back and look at right here, even though it looks far lower on the chart,

you were basically similarly overbought at that point. That was around Labor Day 2020. Had this huge surge in the summer there. And we did get a little bit of a pullback and correction. But you've seen these other times during 2021 where it was almost there. The folks over at Ned Davis said, what happens when you're this overbought? Well, near term, you should expect some consolidation, but actually it carries higher down the road on average.

In other words, unless you're super mega, way more stretched above the 200-day average than this, you're starting to look like it's parabolic. That's when you start to worry. That's not what we have right now. So, again, short term, don't be surprised if we get a little bit of a setback. Longer term, it usually means that it's demand for stocks is swamping supply on this trend. Take a look at Treasury yields. A little bit of a different story there where we've seen just yields leak back up to the recent high. So we've been pretty firmly in this zone for a while right now. And the market's been very comfortable with this, whether it's 4.4, 4.5, whatever it is. This

was the late summer, early fall panic where we were liquidating treasuries. We're worried about too much supply, worried about yields. We're going to put the economy into recession and still they'd be too high. Well, that's gone away. We're OK right now with yields at four three at the moment, especially if it does mean we have a stronger economy. But we will see what the sensitivity is of the overall market or, as you were saying, components of the market guys to those yields if they go higher. John. OK, Mike, going back to that first chart, that period of time after we're overbought for a while and then you know we're under the yellow uh over sold that's like all of 2022 right so it can that's a while yeah look that that's what happened

i mean one of the definitions of a bear market is the 200 day average is actually going down and you're trading below it in actions of ceiling so yeah there's no doubt about it but it would take a whole lot to reverse it at this point um So I wouldn't be worried so much about that. It's much more about do we have to kind of have a correction that checks back to the trend and moderates the upside. It raises the question that when you see a move like you saw today in Treasury yields, you have the 10-year back above 4.3 to your point, which we saw last month. But the move back above 4.3, this was the biggest daily yield move since mid-February. The volatility, you talk about this so much, that it's not necessarily where always yields go, but how quickly they get there. How much does that matter? It's interesting, Morgan, because yeah, this is a big one-day jump. We had another big five-day jump in yields just a couple of weeks ago, and yet the volatility as measured

in the Treasury market has been pretty suppressed. It's been near a two-year low. If you look at things like the VIX of Treasuries. And the reason for that is they haven't trended. It's been this kind of self-correcting range. And, you know, and basically people aren't betting that it's going to surge from here. So for now, it's OK. We can kind of handle it.

But again, you just wonder where the trigger is. All right. Mike, good to see you here in studio. Bridge and Tunnel. Mike Santoli. We're here for it. All right. We'll see you in a little bit as well. Up next with an analyst with a buy rating on PBH reacts to those earnings, which are due imminently. He tells us what he wants to hear from executives on the call just tomorrow morning. Plus, GE is set to spin off its renewable power generation business tomorrow. Coming up, we'll discuss what that could mean for GE's red-hot stock as it becomes a pure-plate aerospace company. Overtime's back in two. Welcome back to Overtime. We are awaiting numbers from retailer PVH, the company behind brands Tommy Hilfiger and Calvin Klein.

Joining us now is CFRA equity research analyst Zachary Waring. He has a buy rating on the stock. Welcome. So this exit from heritage brands, I guess that was like Izod and some other like middling Macy's polo brands is going to benefit their margins, we expect. But what else could affect PVH going forward? I wonder particularly about these Macy's store closures, because I'm used to seeing, you know, Tommy Hilfiger, Calvin Klein, those kinds of brands at department stores that aren't necessarily trending in a great direction. Yeah, so we're looking for continued momentum

in their direct-to-consumer business to kind of offset some of that, like you said, the Macy's store closures. We want to see digital momentum continue as well. They saw, I think, 8% and 13% respectively for those two in Q3. So we're really looking for that to continue in Q4. And then obviously, we're looking for guidance. So analyst expectations for 2024 are roughly $12 a share, which is pretty significant growth from this year's estimate. So that's kind of what we're looking for. We think they'll benefit like other retailers from lower freight costs and some of the lower supply chain costs that these other retailers have benefited from over the last nine months. I do see those numbers crossing. We are

going through them and we'll ask you some questions about them when we have them. But also, I'm wondering about, you talked about direct-to-consumer, what's going to distinguish PVH as a strong player in that area when you've got, I think, so many companies reconsidering how they're going to do D2C and how they're going to play in digital? Yeah, I mean, I think they're going to do some wholesale business. They're one of those brands that that's a big part of their business. And we don't think that that's going to go away. But we do think they have some room to the upside and direct to consumer. You know, we think the company is, you know, now that they've spun off or, you know, closed out its

heritage brands business, we think they've got some upside to gross margins here. Okay. So we are going through those numbers. We're going to bring them as soon as they cross. Meantime, shares are under pressure here right now. It doesn't look like it's potentially due to the top or bottom line in the corner, although we're waiting for confirmation on those numbers. I guess it does raise the question, though, when the stock's up more than 50 percent over the last 12 months, more than 80 percent over the last six months, is it overvalued here or is there still room to run depending on what we get in this report? we don't think it's overvalued unless they guide for lower eps this year so we think as long as they guide for some eps growth in 2024

you know we think there's plenty of upside shares historically before the pandemic they trade traded in the mid teens so 14 or 15 times next year's earnings. And right now they traded about 12, depending on what their guidance is for 2024. And we think that they can see some expansion in overall margins now that they've kind of gotten rid of that heritage brands business that they've been dealing with for over a year now. Well, I think Calvin Klein and I think Tommy Hilfiger, I think the 90s. And we know the 90s are back. So it raises the question, how cyclical is business for a company like PVH? Well, yeah, you've seen it with, you know, companies like Abercrombie have benefited significantly over the past 12 months because of that, you know, the trendy 90s style is coming back. You know, we think they're not quite

Abercrombie, but we do think that they can see some upside in terms of revenue growth. So, yeah, I mean, we're looking for it. You know, we're really curious to see what the company guides for. You know, they've hinted at maybe the bigger buybacks in the future now that they've kind of gone away from heritage brands. You know, they have a little bit of debt they need to deal with in 2024. But after that, we think there's going to be upside to share buybacks. OK, well, we do have the results. We're going to go to Courtney Reagan for those. Hey, Court. Yeah. So you can see here shares are down lower by about eight and a half percent here. If you look, it's really the guidance that's that's pulling things down here.

But let's look at the quarter. So for the earnings, we have 372 adjusted. That is better than expected at 353. And also the revenues here are also slightly stronger than expected for this quarter at $2.49 billion compared to $2.42 billion that the analysts were expecting. But if you look at the revenue guidance going forward for both the full year and the first quarter, it is much worse than expected. So for the full year, it's projected to decrease between 6% and 7%, and the street was looking for that revenue decrease to be just about 1%,

so much worse than expected there. And hopefully we'll get a little bit more details about why that is the case on the call. But as of right now, the shares are definitely reacting to what the future is expected to be from PVH. Back over to you. All right, Court, thank you. Zachary, back to you. You talked about the full year EPS guide. It looks like it's in a range of $10.75 to $11 compared to $10.76 on a gap basis, $10.68 on a non-gap basis in 2023.

So, yeah, maybe that's a little higher, but kind of flattish. Do you think that's the cause for some of this reaction? Yeah, I definitely do. I think the guidance is a little disappointing in terms of what I was expecting. We think shares are probably not overvalued here still. But I think after, like you said, a big run up over the past nine months, you're due for a breather here. And so without that higher guidance, I think that's what's happening. Yeah, it looks like we got a little more color here from the CEO in the release to where they talk about where he talks about generating high single digit direct to consumer

growth with growth in both Calvin Klein and Tommy Hilfiger and across all regions for this past quarter, also talking about significantly expanding gross margins. But looking to 2024, it certainly seems like growth in Asia and North America, but Europe, it's saying here that the macro has become more challenged. The focus is on quality of sales to further strengthen the market leading position. How much does that matter, especially at a time where in general, when you look at retail stocks more broadly, it really has been gross margins that have been driving whether stocks are gaining or slipping on their reports as of late? Yeah. And you saw that

this the deceleration in Europe from Nike as well. So, you know, Europe seems to be a little bit weaker. Some of these later reporters have said that Europe is a little bit weak. But yeah, I mean, we think this is kind of a Lululemon case here where, you know, people, maybe they're guiding a little conservative for the full year because they're just not sure of how the U.S. consumer is going to hold up. And maybe they can raise throughout the year. That's kind of how we're looking at things. As long as the U.S. consumer remains stable, we think, you know, there's plenty of upside for these shares. OK, looks like there might be a two billion dollar stock buyback

as well initiated here, too. We're going to continue to go through the release. Shares are under pressure. Zachary, thanks for joining us in real time to break them down. GE and 3M meantime are the latest conglomerates joining the spinoff party. Up next, we'll break down those two moves and why the strategy continues to become more and more popular on Wall Street. And Tesla stock has not been able to maintain a charge. It has been the biggest loser in the S&P 500 during Q1. Coming up, we will discuss whether tomorrow's deliveries data could mean more trouble for the EV maker. We'll be right back.

Welcome back to Overtime. We've got some breaking news on Warner Brothers Discovery. Steve Kovach has details. Steve? Hey there, John. Yeah, we have two directors resigning today from Warner Brothers Discovery. This is following what the company is saying was a Department of Justice investigation into whether or not these two directors violated the Clayton Antitrust Act, specifically Section 8. Let me name the two of them are Stephen A. Myron and Stephen O. Newhouse, both resigning from the board. And the Section 8 of the Clayton Act has to do with folks who are serving on two boards of competing companies. It's unclear exactly the nature of the investigation and what boards could have been a conflict here.

But here in this release, Warner Brothers Discovery saying they decided to step down instead of kind of fight this investigation. John, I'll send it back over to you. All right, Steve, thanks. Now, breaking up is hard to do, at least according to the old Neil Sadaka song. But on Wall Street, breaking up is proving to be extremely popular and profitable for conglomerates. Seema Modi joins us to explain why. Hi again, Seema. John and Morgan, well, it's interesting. If you look at the data, companies are getting bigger over time. In fact, 50% of companies on the S&P 500 have more than three segments

earning roughly $250 million in earnings or more. Goldman's M&A structuring team says that's fueling this spinoff trend with J&J divesting Kenview, GE with healthcare, and the industrial giant will be back at it again tomorrow, officially spinning off Vernova as a standalone energy company that spans power, renewables, electrification and transitioning GE to more pure play aerospace company. 3M, meantime, attempting a similar transformation, spinning off its health care business, Silventum, today, which will allow it to raise a significant amount of capital following a series of legal setbacks. Guys, we're looking at about 15 deals total in 2024 compared to eight during the same time last year. And with the IPO market a little bit less active, the experts we spoke to say expect many more deals in 2024. All right.

Well, first of all, I have to say, welcome back. Thank you, Morgan. It's great to have you here on set. And I just as a mom, it's awesome. And it's kind of incredible because I know you've been following this. I've been following this. I mean, GE, it's trading at $175 a share ahead of this spin tomorrow. It was only a couple of years ago that it was trading at $6 and change a share. I mean, it's just been a wild ride. But all of this in general kind of reminds me of what Dean Dre at RBC has been saying for years now, which is the urge to demerge when it comes to the industrial. So I guess just to talk, just to dig into and speak to why these companies are seeing so much more realization in the markets versus the sum of the parts when they're together

as a conglomerate. Right. Well, I think private equity, for one, is there's been less deals. So I think now companies have to be a bit more strategic about the company, the businesses that they have under their umbrella. If they can't sell it to a strategic company, let's divest it and and trade it on the exchange. I think that's one of the strategies behind all of this. And plus, there is this broader consensus that pure play stock stories are working a bit better for the retail investor than these larger conglomerates,

whereas an investor, you may not know exactly what you're getting. All right. Seema Modi. Thanks. Thanks. Well, for more on the General Electric spinoff, let's bring in Sheila Kailu from Jefferies. Sheila, it's great to have you on the show. And we're going to start right there with the fact that GE basically tomorrow breaks into two companies. You've got aerospace, which is really a growth powerhouse, and you have power, which is actually starting to see signs of recovery and a more meaningful path to greater profitability this year as well. Walk me through the aerospace piece of this and whether this is a stock that has been trading with momentum that can continue. Yeah, sure. So we're fans of

the aerospace business. We're putting $155 price target on GE Aerospace with the implied Brnova valuation, meaning GE Aerospace is currently trading at $140. Now, $155 means it's trading at 20 times EBITDA, which may seem steep, but given 70% of GE airspace is related to services, which is growing at double-digit pace and higher margins than OE, original aircraft revenue business, we think it warrants this premium, coupled by the fact that Boeing has seen delays. And we could get into what that means for GE services business. Okay, let's get into what that means, because we know Boeing was the worst performer in the S&P 500 in Q1. It continues to have these issues around safety,

around production with the MAX, etc. So how does this affect GE? So the way we come up with our 155 price target for GE is we look at its services portfolio in each of the engines. So we value the narrow body portfolio at about $50 this year. That's primarily driven by the LEAP and the CFM. And that means we're going to see the CFM 56 stay around longer as there's lower delivery. So think about Boeing, it's missed about 100 aircraft or so. It's on pace to miss about 100 aircraft deliveries in the first three to four months of the year. That means it adds about six points of aftermarket growth on our estimates if you include a five-point price assumption. So every 100 aircraft missed on deliveries from Boeing and Airbus is a win for GE and the other aircraft engine manufacturer, which tends to be

RTX, which is the GTF. But we have a hold on that stock as GE has a dominant position, not only on the narrowbodies, but on the widebodies as well. So the longer OE revenues are delayed, aircrafts are delayed, it means more momentum for the commercial aftermarket. Okay. Sheila, bear with me here. I got to ask, given what we've seen happen with Boeing and Spirit Aerosystems and the popularity of these spinoffs right now, could it be short-sighted? Do some of these things perhaps belong together? And are companies tempted in this environment to unlock shareholder value in the short term in a way that's actually going to destroy it in the medium to long?

There's so much there to take. What direction? You know, I think Boeing has had supply chain issues, which Larry Culp did a phenomenal job at GE cleaning up over the past few years. So it's about what Boeing's new management team is going to do to reshape this. It seems like vertical integration is key here with Dave Calhoun on the tape saying they're close to a deal with Spirit. So I don't think you're going to see, I think you're going to see a little bit more vertical integration when it comes to the airspace supply chain. Now, Boeing does operate three segments, commercial aircraft services, as well as a defense business. The defense business tends to lose money,

but can it operate as a standalone? That's been thrown out there as well. So we could see that. Everything is always on the table, given Boeing's current leverage. We could see potential optionality there in the portfolio there as well. It's not out of the question, but not imminent at the moment, given all the pieces that are going on in the commercial aircraft business. It's probably a lot for one new management team to take on. All right. Sheila, great to speak with you ahead of this spin tomorrow. Thanks for joining us. Well, don't miss an exclusive interview with the CEOs of GE Aerospace and GE Vrnova tomorrow at 9.30 a.m. Eastern on Squawk on the Street. Up next, Mike Santoli is back. He's looking at what's

driving the dollar higher today and what that could mean for the Fed's rate cut strategy. And check out shares of Micron, the big winner in the S&P today after Bank of America raised its price target on the chipmaker to $144 from $120 on expectations that it's going to be a big beneficiary of the AI boom. Overtime, we will be right back. Overtime's back and it's time for a CNBC News update with Leslie Picker. Leslie. Hey, John, the owner of the cargo ship Dolly that collided with the Key Bridge in Baltimore last week is looking to protect itself from potential lawsuits. In a federal court filing today, the ship's owners and operators said the collapse was not their fault, citing a federal maritime law that would grant them limited liability. Florida's Supreme Court this afternoon ruled voters will decide whether to amend the state's constitution to establish a right to abortion.

The Republican state attorney general had sued to keep the measure off the November ballot. In a separate ruling, the high court upheld the state's 15-week ban on most abortions. And the last survivor from the USS Arizona that was attacked at Pearl Harbor in 1941 died today, according to his family. Lou Conter was 18 when he enlisted in the Navy and was assigned to the doomed ship. His family said he'd hoped to make one final trip to Hawaii last December,

but decided he didn't have the strength for it. Lou Conter was 102 years old. Truly amazing story. I'll send it back to you. May he rest in peace. Leslie Picker, thank you. This morning, we got a stronger than expected ISM manufacturing reading. It showed activity expanded for the first time in 17 months. Mike Santoli is back with us with his take

on this hotter than expected data. Mike. Yeah, Morgan, and here's it translated right into the current snapshot of where first quarter GDP growth might have finished up. You see the Atlanta Fed tracker here, GDP now. It shot up to 2.8 percent. Part of that was the ISM numbers this morning. Part of it was personal consumption numbers coming in last week. The bottom line, though, well above trend growth. Remember, this is real inflation-adjusted growth.

This orange line is the blue chip. Economist consensus forecast is right around 2 percent. So we have this pattern still above trend growth, higher than expectations as well. And what does that mean, of course, for rates, the Fed, the whole thing? Obviously, the stock market's been able to feed off of this. Earnings should be well supported. However, one effect to the U.S. dollar has resumed its climb or maybe gone up to the upper end of this little range. Remember, Treasury yields I mentioned were at the top end of that range. We've been in for several months.

Same thing with the dollar index. Now, of course, the yen has been very weak for lots of reasons we know specific to Japan. We were above 107, close to 110 or so back in late 2022. So it's not as if we're near, you know, multi-year highs, but it's definitely showing you that it's part of the story of pricing out or the pace and the and the timing of Fed rate cuts. Yet another example of that. Yeah. And also speaks to the fact that you're starting to see some cooling inflation data in other parts of the world, too, like French CPI, I think also perhaps contributed to this move higher, the strengthening that we saw in the

dollar today, too. I'm curious, though, about gold, because typically what happens is when you see a strong dollar, you see higher interest rates, you see gold weakening. That has not been what has been happening. Ben Emmons over at New Edge made the argument in a note today that you're actually seeing gold being, you know, bought into as a better hedge against uncertainty from the elections, geopolitics, and as a hedge against inflation, but also as a hedge hedge against uncertainty from the elections geopolitics and as a hedge against inflation, but also as a hedge against Treasury bonds right now, too, and uncertainty within that market. Yeah, the idea that like Treasuries are not necessarily working as a hedge against all you might hope them to hedge against

because inflation has remained sticky. Maybe the Fed's not going to cut rates in terms of what gold typically does. I think it's really hard to get a fix on it in any moment in time. You know, real rates are still solidly positive right now. For a long time, it was like, well, when real rates go down or they're negative, that should be great for gold. Well, that really didn't work either. But I do agree that there's a big bid for real assets going on right now. Gold has held up much better. There's been a technical breakout. Bitcoin's doing what Bitcoin's doing. So there's certainly a demand for alternative stores of value in this environment, whether you're worried about, you know, the deficits, whether you're worried about the election or

whatever it is. And it seems like it's feeding on itself for now in the gold price. All right. Mike Santoli, thank you. Up next, Interactive Brokers chief strategist reveals his investing playbook for April, which is historically a strong month for stocks. And we are keeping an eye on PVH. Those shares are near session lows in overtime. As investors digest that weak revenue guidance, they're now down 18%. It's a big move for the company that houses Tommy Hilfiger and Calvin Klein. Stay with us.

The Dow and S&P closing lower today. The Nasdaq about flat, but it comes after Q1 brought in the largest share of record S&P 500 closes more than a decade, according to Bespoke Investment Group. Nearly 40% of trading days ended at new highs. So can the momentum possibly continue in Q2? Joining us now, Interactive Brokers Chief Strategist Steve Sosnick. Steve, great to have you. So investors have high hopes for earnings, high hopes for rate cuts. Is that a good or a bad thing for a month like April that's traditionally not too bad for stocks? Hi, John. Thanks for having me. Yeah, I mean, there's a lot worse things than to go in being optimistic.

You know, we had a great quarter, both in performance and last quarter's earnings were very solid for the most part. So there's reason to be optimistic. You know, the trend is your friend. And this trend has been extraordinarily powerful. It's very tough to bet against. And so going into earnings season, which starts again in two weeks, whether we like it or not, we, you know, we have we're pretty sanguine going in. But that sometimes can be a problem because if you go in too optimistically, then it's a higher bar to beat. So that'll be the thing to watch for as we build up into it in the next two and a half weeks or so. So that starts. What about fixed income? If not many people think that we're going any higher, much less, you know, much higher.

Just maybe that we'll stay here higher for longer, since it's not clear why the Fed would cut rates anytime soon. Yeah, that's been one of my theses is at this point, why does the Fed need to cut rates? You know, we've got a very solid economy. They you know, one of the things the market loved after the last FOMC meeting was the summary of economic projections being raised for GDP from one point four to two point one percent. Well, that's pretty solid. It's clear that there's plenty of money flowing into speculative investments as you know, as we talk about here, you know, on air all the time and I talk about with clients, there's no shortage of those. There doesn't appear to be credit worries right now with the possible exception of commercial real estate and some related products. So therefore, why does the Fed actually need to cut right now? And that is a question. Today, we did see after the ISM numbers, which were very strong on manufacturing and new orders, but also very strong on inflation. There was definitely a fear

that the Fed doesn't need to cut, and rate cut expectations briefly fell below 50 percent for June. We backed up to about 60-ish later in the day. But that question has to be in investors' minds. Are we too reliant on the idea of rate cuts right now? So how does all of this speak to what I will call an explosion, a re-explosion of options activity that we have seen in the market and which is arguably contributing to outsized moves in both directions for stocks, for example, on the heels of earnings? Yeah, well, Morgan, this is, you know, this is one of the things, you know, the longtime option traders like myself always dreamed of was this kind of volume. But what we've seen a lot of

it is in a very speculative character. I've actually been calling it FOMO insurance, where we see a lot of customers buying upside. They may not want to buy, let's say, an NVIDIA at $900. They may not want to put more money into the market in a big way at all-time highs, but they certainly don't want to miss the performance. I'm speaking more of institutions, but it applies to individuals as well. And so I call this FOMO insurance. The options market exists primarily as a risk hedging mechanism. In this case, the risk that is primarily being hedged is FOMO, is the upside insurance. And so it can exacerbate moves, though, because we're seeing so much activity in short term options. It's sort of like when you're on a sightseeing boat and everybody rushes to one side or the other. That definitely has an effect right now because of the option activity.

So is that a reflection more of euphoria in the market, or is it more of a reflection of uncertainty? And I guess just as importantly, then, as an investor watching this, as a trader watching this, how do you play this to the best of your ability? Well, I do think it shows a bit more euphoria because we're not really seeing much demand for downside hedges. That has always been, you know, they've always been much more expensive than upside hedges. But lately, that premium has really changed. That's why I looked at it this way. One of the things that you just had up on the on the Chiron was, you know, think about using insurance for options. There were stories that it's never been more expensive to insure your home. Well, it's rarely been this

cheap to insure your portfolio. And so this would be a time where if you're getting nervous, if you started to think about the sell and may go away idea, you have a month to start to build up some of your hedges and lighten up your risk tolerance as we go into earnings season and then sort of the end of the November to April historically seasonal great period. Steve Sosnick, always great to get your thoughts. Thanks for joining us here. Thanks, Morgan. The package delivery war is heating up with UPS winning a significant contract away from rival FedEx. Those details straight ahead.

And because you love the show and you want even more overtime, think of it as a double overtime. You can scan the QR code on your screen, follow us on LinkedIn, where we'll post exclusive content. Overtime, we'll be right back. Welcome back to Overtime. FedEx, one of the worst performers in the Dow transports today. The transports did end down more than 1% as well. That after announcing its two-decade air cargo contract with the U.S. Postal Service will not be renewed come September after both sides could not reach a deal on, quote, mutually beneficial terms. That's according to FedEx.

USPS has been the largest customer of FedEx's Express segment. Now FedEx's biggest rival, UPS, will become the Postal Service's primary heir partner. Financial terms of this new contract not disclosed, but UPS did call it a quote significant in its own release today. The wind coming on the heels of UPS's investor day last week when the delivery giant forecast better than expected financial targets through 2026. And UPS CEO Carol Tomei discussed the ways she is going to achieve it, especially given some of the lost market share last year amid labor negotiations. We did see volume leave us during the contract negotiation and more than we expected, candidly. But I'm happy to report that we have brought 60 percent of that volume that diverted back into our network.

And it's not just about winning back. It's also about winning new. We do believe that volume will be down in the first half of this year, but we expect it to return to growth in the back half of the year. I was in my interview with her last week, and perhaps this is an example of winning new. This is expected to add a steady revenue stream to UPS as it ramps up its health care and international businesses, among others. Nonetheless, John, shares of FedEx ended today lower, and actually UPS slipped in trading today too amid broader selling for the broader markets. Indeed. And speaking of deliveries, Tesla is set to report its first quarter deliveries tomorrow.

Up next, what to expect for those results and whether it might help turn around a stock, which is the worst S&P performer during Q1. We'll be right back. welcome back to overtime breaking news on the ipo front steve kovac has it steve hey there john yeah rubric has filed to go public uh filing their s1 just now this is a microsoft-backed cybersecurity and cloud company uh one of many of course. And it is going to be trading on the New York Stock Exchange. They're saying under the ticker RBRK. And just some underwriters here. That includes Goldman Sachs, Barclays Capital, Citigroup Global Markets, and Wells Fargo Security.

You see Microsoft here barely moving after hours, but another big cloud play for them. John. Steve, thanks. Yeah, and Morgan, this is an interesting one in particular. Rubrik is in the back backup and recovery space dealing with the ransomware problem. Bipol Sina is the CEO, co-founder. I've spoken with him many times. We talk sometimes to Cohesity, another startup run by Sanjay Poonen.

They sort of delayed their potential IPO until next year because they end up buying some assets of Veritas. But a name that's currently publicly traded, Commvault, is a competitor, right? More in the older backup business, but has transitioned into recovery as the market has moved in that direction with ransomware. Bipple has been really stacking the board and the advisors of Rubrik. So this is going to be an exciting one to watch, even beyond AI, and what kind of legs tech excitement might have. Yeah, and of course, we know it's been a strong year to start for cybersecurity stocks as well. Specifically, there have been expectations that Rubrik could go public. We saw reports circulating just earlier this year on that front as well.

And then, of course, we have the fact that, yeah, Reddit traded lower again today, a new 52-week low, but it's still well above its IPO price. Astera Labs, more than double from its IPO price. So at least so far, and I realize we don't have a very large sample size, there is a strong market out there for IPOs. Last private market valuation on Rubrik, somewhere around $4 billion. So this could be significant. All right. One to watch. And of course, Microsoft involved, as you mentioned. Tesla shares suffering a nearly 30 percent decline during the first quarter. Investors are on edge as they await the EV makers' latest delivery numbers. Those are going to be released tomorrow. Phil Abobo joins us with what Wall Street is expecting. Of course, Phil,

we did get some numbers from some of the Chinese EV makers today, too. I wonder how much that factors in here. Certainly factors in, Morgan. We don't know for sure if Tesla will release tomorrow. Our best guess is before the bell tomorrow. That's what history tells us. Let me quickly run through the numbers. 457 is the consensus out there, though we should point out that number keeps coming down. 422 is what they delivered in the first quarter of last year. There's a possibility they may have a year-over-year decline in deliveries. What does that mean for the full-year delivery estimates? Is it going to come under 2 million? The consensus right now, 2.06 million. You've got three headwinds out there

right now. China competition, overall the EV market, the demand is slowing down. And there's simply more EV models for people to choose from when they're out looking. All of that weighing on shares of Tesla. As you take a look at shares of Tesla, remember, this is a company that is looking at its worst, just came off its worst quarter since 2022. And again, we think, we think we'll get the delivery numbers for the first quarter before the bell tomorrow. Guys, back to you. All right. Well, if we get them, we know you'll bring them to us for the first quarter before the bell tomorrow. Guys, back to you. All right. Well, if we get them, we know you'll bring them to us.

Phil LeBeau, thank you. John, we get jolts tomorrow, February factory orders, and a flurry of Fed speak all week long. Yeah, that's right. And the jobs report at the end of the week. All right. That does it for us here at Overtime. Fast Money starts now.