Closing Bell - Closing Bell Overtime: Why Tom Lee Remains Bullish Despite Record Highs In Tech 5/28/24

Episode Date: May 28, 2024

The Nasdaq closed above 17,000 for the first time as Nvidia continues to help lift the markets. Fundstrat’s Tom Lee breaks down why he remains bullish equities heading into the summer. Earnings from Box and Cava, with Wedbush analyst Nick Setyan giving his instant reaction to Cava’s report. Redfin senior economist Chen Zhao on the housing market. 

Well, the NASDAQ closing at a record high to start this shortened week, driven by another surge for NVIDIA in what was otherwise a mixed day of trading. 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 coming up on today's show, reads on software spending and the consumer when Box and Kaba report results. Kaba's more than doubled so far this year. It's up nearly 4x since its IPO last summer. And Fundstrat's Tom Lee will join us with his updated thoughts on the market and just how high he thinks stocks can still climb. But we begin with the market in a mixed session today. As we mentioned, the Nasdaq hitting a record high. The Dow pulled back. The S&P finished basically flat,

all as higher rates pressured stocks. Joining us now, Barbara Duran of BD8 Capital Partners and Adam Crisafulli of Vital Knowledge. It's great to kick off the hour and the week with both of you. Barb, I'll start with you. The fact that we saw NVIDIA trade higher 6.5% today on, I realize, thin trading volume in general for the market, but on more AI news, is this warranted? Does it speak to AI versus everything else in the market? Well, I think it does. I think, you know, what you also have going on today is a poor auction in terms of yields. So I think that's taking a little bit out of the market. But you've got a lot of interesting AI. I think NVIDIA reconfirmed that this is big,

it is long lasting, and it's going to affect a lot of companies, whether it's right now the hardware layer, it'll move to software and applications. So there's a lot more to be done in this space. So I think it does help also confirm that we are in a bull market because it is having such a positive effect. So yeah, I think it's a good thing. Yeah. Along those lines, Adam, the fact that you've seen yields moving higher in recent sessions and stocks, for the most part, moving higher, at least hanging in there, is this a dynamic that can continue? Not necessarily. I think for the time being, the yield hasn't been too dramatic just yet. We're going to get some important

May economic data in the coming weeks. And I think investors are really curious. We've seen two hot numbers with the flash PMIs last week and then the conference board consumer confidence survey today. If the other May numbers, the ISMs, the jobs report,

if that is similarly hot, then you could see yields move up further. That could really unnerve equities. I think for now, the two can move in lockstep. The leadership of the market today in particular was very thin. you know, the two can move in lockstep. You know, the leadership of the market today in particular was very thin. So you did have a huge move in NVIDIA, but you saw heavy selling a lot of safer haven groups like Staples Healthcare and then also Sixpils Transportation Capital Goods. Those stocks got hit hard as well. So the underlying price

action today was a lot weaker than it looked on the headline. I think NVIDIA's market cap is up about $450 billion just since earnings Wednesday night, so Thursday, Friday, and then today's session. So obviously, the fundamentals behind AI are huge and very bullish. You saw two data points today with the XAI fundraising confirmation and then OpenAI announced they're beginning to train their next model. So a lot of enthusiasm, but, you know, potentially you could be getting into an overheated part of the rally for that sector of the market. Yeah, about that, Barb. I mean, the whole overheating idea, you point out that the downside is limited because

there's been lots of cash flowing into stocks lately, people getting excited again. But say you're an investor who's been pretty fully invested already. Where do you put your money now? Can you still put it into those same stocks? Should you? Because the cash is falling in now? Or is that a sign that maybe the end is near? Well, one always has to ask that question. What we've seen, and that was the Wall Street Journal article this morning that did some good work about the cash flows into ETFs, and it's seven of the top 10 are in stocks. It's some $170 billion. So people are getting bullish and putting money to work. And we always mention the $6 trillion sitting in money markets. So that, I think, is support for the market on the

downside. Because the market, the economy, you know, gone over all the macro, the economy is strong. Inflation, you know, seems to be, we'll see if it's stable, if you've got the PCE number here. But I think there's still, you know, a bullish, you know, posture to have here. Now, the question on NVIDIA, I mean, I own a lot of NVIDIA. It's now really overweighted in the portfolio. So you go, what do you do here? If I didn't own it, would I buy it here? I wouldn't necessarily buy it here. I'll be trimming back to simple risk management and positions get too big. But I think, you know, when a name runs like this, there is always some pullback and just really because of profit taking. So if I were looking for a place to

invest, I'd wait on that kind of a name. Now, Apple, for instance, is something that had been recovering. We had good news today, but that had lagged name. Now, Apple, for instance, is something that had been recovering. We had good news today, but that had lagged. Google had lagged previously, caught up in this last few months. So I think there continue to be opportunities in these kinds of names. And basically, though, it points to stock picking. People keep having to change their mind in terms of rotation. Do we do industrials? Do we cyclicals? Do we go back to staples? And I think last month you saw an example of that where you had utilities and financials both making highs. Financials are typically early cycle, early economic cycle, and utilities are typically late cycle.

I think that's telling you there's a bit of confusion about when rates are going to come down and where that puts us in the economic cycle. So I think stock picking is still what you have to do. Well, some of the stocks that did well today, Adam, were in the data center category. We've mentioned NVIDIA, but beyond that, Dell had a strong day. So did AMD, Seagate, Pure Storage ahead of its earnings, and NetApp. What is the symbiotic relationship, perhaps, that you see between some of these data center names and the AI stock surge? You know, I think there's just the belief that there has to be a complete reworking of existing data center infrastructure to make way for all the new AI technologies.

And that's something Jensen Wang talks about in all of his conference calls, that there's this huge footprint of legacy data centers that has to be turned over. And that's going to require not only new NVIDIA chips, but new servers, new storage, et cetera. And that trickles down to all those other names you mentioned. So, you know, Dell, Pure Storage, et cetera, all these names presumably should benefit from this build out. You know, it's not going to be a completely linear process. So there's going to be, you know, pullbacks and hiccups along the way. But I think the secular theme and trend is that we're at just the beginning of a huge multi-year, $100 billion plus data center rework process. And that's going to give a long runway of growth for a lot of these

companies. We'll get the next round of AI data points Thursday night when we get Marvell and Dell earnings. And those two companies have a lot of leverage to AI infrastructure and they'll provide insight to kind of how things are going. Yeah. And of course, we've seen them move higher in sympathy with NVIDIA, call it over the past week or so as well. Speaking of tech, we've got box earnings out. Dear Drabosa has those numbers for us. Hi, Dee. Morgan, they've been all over the place in the after hours. They were up more than six or seven percent, briefly negative., they've been all over the place in the after hours. They

were up more than 6 or 7 percent, briefly negative. Now they're higher by about just less than 1 percent. This is the cloud content management platform beating on the top and bottom line. EPS beat of 39 cents adjusted versus 36 expected. Revenue coming in at nearly 265 million versus 262 million, which is what the street was expecting. The guidance was mixed, and that is likely what investors are digesting right now. The second quarter revenue outlook was a little light. Fiscal year 2025 EPS on the lower end of expectations and full year revenue guidance slightly below expectations, too. So that's probably what is making the stock volatile in the after hours. I did speak to CEO Aaron Levy not long ago, who said that he has met with hundreds of customers over the past quarter.

Their primary singular focus, he says, is how to leverage AI to drive productivity, growth, efficiency. He said that Box is seeing healthy upgrades to enterprise plus, largely driven by their own AI offerings. The stock, though, not reflecting that very much this year. It's only, it's down, I think, about 2 percent year to date. Back to you guys. All right. Deirdre Bosa, thank you. Shares of stock up one percent right now or shares of box, I should say. Barb, want to get your thoughts on this, especially those comments from Aaron Levy, given the fact that they have been rolling out this AI product. And this is one of those key things that investors are looking for in terms of the traction.

Well, I think investors are wanting to see what is happening with the AI rollout because it just started and the feedback initially has been very good. But they have a lot of issues, whether it's, you know, their currency headwinds with Japan, because that's a big part of their international sales. There's the macro issues for them in terms of customers. And they've also got this competitive overhang with Google and Microsoft who are giving away some free products, you know, that directly compete with them. So we've got to see how much this is going to help because they also, we want to see how much they're getting larger customers because that's important because once they get those locked in against some of the legacy customers, it could be important because they have a lot of different products they can cross-sell and up-sell into these customers.

So there's a lot we want to hear on this call and see if this is indeed the trough in their earnings. We'll look forward to it. It turns slightly lower now in overtime. Barb, Adam, thanks to you both. Thank you. Now let's get to CNBC's senior markets commentator, Mike Santoli, with a closer look at how NVIDIA and other mega caps are impacting the market. Mike. Yeah, John. Well, the way they're impacting the S&P 500 is, of course, positively. They're insulating that index from what otherwise would look like a little bit of pullback and weakness. Today, the S&P was flat, the equal weighted version down about three quarters of one percent. And this has been a dynamic that has become pretty pronounced once again. This is a five year chart. So it shows kind of cumulatively

how the market cap weighted S&P 500 has created some distance between itself and the equal weighted right here. So I wouldn't necessarily say this is outright bearish because the equal weighted itself is hanging in there. It's above the old highs for now. The way I think about it is just because the equal weighted itself is hanging in there. It's above the old highs for now. The way I think about it is just because the extra credit kids are pulling, you know, four and a half GPAs, it doesn't mean that a 3.0 is failing right now. And that's what, to me, the equal weight is. And the real dynamic here is when yields are rising and there's some fear as to whether the economy can handle it, that usually impacts the average stock,

and the defensive mega caps can benefit on a relative basis in that environment. Now, when it comes to earnings, it's been a pretty good picture. And this is really an explanation for why the overall market has done well, even as yields have gone higher and Fed rate cuts have been pushed out. So this is the current 2024 full year estimate consensus for the S&P 500 earnings. And it goes back to before this year started, middle of last year. It's really held up well and has come up recently during this past reporting season. The average historical trend is for analyst estimates to just get cut back over time and then eventually maybe get beat.

So this definitely explains it, especially because of those big tech stocks that are over-earning or driving a lot of that growth. The overall market has so far had a buffer here on a fundamental side, John. Okay, I like your classroom analogy for these stocks. It really seems lately like the teacher's pet is NVIDIA. It looks like it's, what, like just a few tens of billions away from Apple's market cap. I'm looking here. NVIDIA looks like it's $2.8 trillion and change. Apple, $2.9, just about bang on. Could we end up with a situation soon where it goes Microsoft, NVIDIA, Apple?

And I'm trying to remember the last time Apple was in third, given that NVIDIA is about to split pretty soon. It's been quite a long time. I mean, it would take basically like another day, like today, for NVIDVIDIA if Apple were to be flat and you kind of have that at least for a moment. It is really interesting because as many, many people keep repeating, most of what NVIDIA stock is doing is following the fundamentals, the upward revision in earnings, just exactly how heavy the spending is that's moving to their bottom line. That said, on a price to sales basis, I mean, you know, Apple's got like three times plus the sales of NVIDIA. It has 60 percent higher net income expected for the current year. So it shows you that there's a little bit of aggression priced

into that valuation for NVIDIA. One other small wrinkle is Apple, of course, aggressively buys back its own shares and almost works against its own market cap in that way. So we'll see how it plays out. Nice caveat. Mike, thanks. Now, Kava earnings are out. Kate Rogers has those numbers. Kate. Hey, John. Being on the top and bottom lines for Kava,

a Q1 earnings per share, $0.12. That is much higher than the $0.04 that analysts were looking for. Revenue is $259 million. That is also higher than the $246 million that analysts were looking for. Revenue is $259 million. That is also higher than the $246 million that analysts were looking for. A reminder here, though, those are revenues for Kava Total Restaurants and its consumer packaged goods brand. It sells dips and hummuses. Reminder for viewers here. Also, Q1 same-store sales up 2.3 percent, better than the 1.6 percent that analysts were looking for. Full year 2024, same restaurant sales guidance has been raised by the company to a range of 4.5% to 6.5% that is higher than the previous range of 3% to 5%.

But as you can see, the stock is lower by around 6.5% right now, though. Reminder, it's up about 90% year-to-date, guys. Back over to you. All right, maybe a little profit-taking there as people digest this name. Kate Rogers. Just a little hummustaking there as people digest this name. Kate Rogers. Just a little hummus dip there. Oh, that was good. After the break, we're going to ask FunStraps Tom Lee about the NVIDIA-driven rally for tech

and if he's standing by his bullish thesis as stocks continue to set new highs. Plus, much more on today's After Hours Action. We're going to talk to an analyst about Kava's quarter and what it says about the health of the American consumer. When Overtime comes right back. We have some news alert on Robinhood. The stock jumping in overtime after the company just announced a $1 billion stock buyback, which it says will take place over a two to three year period starting

in Q3 of 2024. Robinhood is now up nearly 70 percent on the year. And as you can see right there, shares are trading up about four and a half, almost five percent here on this news. People excited. All right. Speaking of the NVIDIA and the AI powered rally showing little sign of slowing today with the chipmaker hitting an all time high high. The NASDAQ closing above 17,000 for the very first time. NVIDIA is up nearly 20% since its earnings report just last week. And check out some of the other names in the chip sector hitting all-time highs today. Micron, NXP Semi, Qualcomm, and Texas Instruments. So, should investors count on NVIDIA to keep driving the market higher?

Joining us now is Fundstrat's head of research and CNBC contributor, Tom Lee. Tom, good to see you. So you're still bullish heading into June. You say there's too little investor confidence, too much cash on the sidelines, but it seems to be flowing in now. So how do you invest and not get burned by volatility? Well, it has been one of those years where investors have been hesitant all year. And I think we have had some short pullbacks. But I think the best strategy for investors is just really stick with what's working. And what's working is AI-related names, whether it's N or highly correlated stocks like Cadence or Supermicro.

You know, the Ozempic-related trades, you know, industrials, financials are doing great. And the Bitcoin and the proxies, as well as, I think, a growing small cap stealth rally. So I think there's still a lot of ways to be invested in this market. The small caps have been hot to the touch, though, not in a good way, especially with yields occasionally spiking. So are there certain areas within small cap that you'd say average into or how are you treating them compared to the mega caps? Well, small caps, I think, have been very sensitive to the probabilities of a Fed cut. So I think they're very sensitive to actually probabilities of a Fed cut. So I think they're very sensitive to actually when the Fed begins cutting. And the last few comments from the Fed have actually

hurt small caps because the odds of a June cut have been pushed out and maybe the odds of a September cut are diminishing. So I think that weighs on small caps, but it doesn't take away from the fundamental attractiveness of small caps. You know, earnings growth is close to 19 percent in the median Russell 2000 stock and the median P.E. is 11 times. So you're getting far better earnings growth in the S&P and a much lower P.E. multiple. What's incredible about that, Tom, is the fact that we went from at the beginning of the year, a market that was aggressively pricing in this flurry of rate cuts to now a market where stocks are continuing to move higher as investors digest the possibility or I guess are hoping for the possibility that we have a Fed that doesn't raise

rates again before the end of the year. That seems to be the thing that's sort of being taken as the thing every time Powell or somebody else comes out and says, oh, you know, we think we think the peak is in. We don't think we have to raise again. We've really seen an incredible pendulum swing. And it raises the question, how much now hinges on earnings if that's going to be the scenario? Well, I think that's spot on. I mean, first, you know, the number of expected cuts has shrunk, but it's really shrunk for the right reasons. You know, the economy's been good. Inflation is progressing, maybe not the speed anyone would like, but the reality is, you

know, 3% or even 2%, 7% inflation is really good for corporate profits. So I think the earnings outlook actually is far better than most expect. I mean, you know, you can see the beats by Nvidia as an example, but S&P earnings next year, you know, maybe if consensus at 270 something, it might be closer to 280. So you can see why there's upside for stocks. We just had the S&P close at 5306 today. I believe your year end target is still 5200. Does it need to come up? How are you thinking about it? Yeah. I mean, our year-end target is too low because, you know, next year's earnings, if it's 280 and you put a, you know, 20 multiple, that's way above 5,200. But it's,

you know, it's only early June. And I think we're still just deciding whether or not there is a speed bump between June and December. But yeah, I'd say 5,200 is too low. Tom, how do you treat the weight loss and overall health trade? Epitomized by Lilly, it's up at real highs now, three quarters of a trillion dollar market cap. But it's been bouncing around in this range for about three months. Yeah, it's it's I think a lot of large cap stocks have been leading show similar patterns of sort of consolidation. And, you know, I think it would be too early for someone to say that, you know, Ozempic and the, you know, the glyph drugs are have peaked. So to us, it's really an opportunity for someone to be accumulating. I don't think it looks that different than NVIDIA into earnings or, you know, many of the stocks that have broken out recently.

U.S. stocks, is that really the place to be right now? Or are you looking abroad as well, especially if you do have an ECB, for example, that's going to cut before the Fed? Well, it's nice to see other central banks cutting because, for example, that's going to cut before the Fed. Well, it's nice to see other central banks cutting because, you know, from our perspective, inflation probably is tracking better than most expect. But I think the best companies, especially in technology and financials and health care, really mostly are in the U.S. So I'd feel a lot more comfortable recommending investors stick with the best companies in the U.S. rather than try to buy something outside the U.S. because of relative valuation. OK, Tom Lee, great to have you on.

Great. After the break, we're going to talk more about Kava's earnings report, why the stock is pulling back despite strong numbers across the board. And speaking of big gains, check out shares of biotech company Innsmed doubling in today's session. We're going to tell you why and discuss if this name could be a potential takeover target. Overtime will be right back. Welcome back to Overtime. Let's get another look at Kava. Those shares are slipping despite posting a revenue and earnings beat down about 7.5% right now.

Joining us now is Nick Setien from Wedbush. Nick, why is the stock lower here? We had same-store sales that beat, top and bottom line beat. Full year guidance looks pretty strong. What are we seeing? Yeah, you know, there's two things. One, the Westbrook numbers are closer to mid-single digit in terms of the comp. They did a 2-3 versus a 0.9 consensus.

But again, the whisper numbers were a little higher. And then two, the guidance, you know, essentially they're raising guidance by the amount of the beat, which doesn't allow numbers to really go up for the rest of the year. Again, I mean, this management team has been conservative since the IPO, pre-IPO. You know, it's a surprise to me that, you know, the numbers necessarily are, they're not allowing the numbers to fly off the page, but I'm going to chalk it up to their conservatism. And I do think essentially, you know, tomorrow, a lot of the, especially the small cap growth funds are going to buy up this by a buy, buy, buy this dip.

It does seem like we've been talking a lot about the bifurcation of the consumer. It has been playing out in real time among the restaurant stocks. Look no further than today. We know Kava has been sort of lumped in with the Chipotles of the world. I'd argue Dutch Bros is probably in that bucket as well. And then on the other side of the equation, just today, Dine Brands announcing more promotions, more price cuts across its chains. And you've got the rollout of the McDonald's value menu again this summer. How to navigate this environment? What does it say about the consumer?

Like, I mean, essentially, it's about exposure to the lower income consumer. You know, and the fast casual category, Kava Chipotle, they just have about exposure to the lower income consumer. And the fast casual category, Carver, Chipotle, they just have less exposure to the lower income customer. Names like Applebee's, which is Dine Brands, McDonald's, et cetera. I mean, the QSR category, a third of their transactions are under 75K, perhaps even under 50K consumers. So there's just a lot more exposure to the lower income household within QSR and then

obviously within certain segments of full service, which Applebee's and IHOP certainly fall into those segments. So that's the bottom line. There's just less exposure to the lower income customer. But speaking of that customer exposure, Kava did say that they hiked their prices slower than some competitors to keep momentum going. And they talk about this effect of high end consumers trading down from died in to Kava. So do you expect that to continue or is it a signal that the macro environment eventually is going to affect even a name like Kava that's got this strong growth profile?

That's some smart language that Kava is using there. Like, I don't necessarily think it's going to catch up to Kava. You know, they're actually raising their, you know, margin guidance by 100 basis points, which is still going to be conservative as the year progresses. So a name like Cava, names like Chipotle, they have room to take less pricing because of how profitable they are. And so I think that's part of the advantage. That's part of the reason why they're going to continue to win is because, number one,

they are a relative value. Number two, that relative value advantage is only going to grow. They know that, and they're just doubling down on it. So what category do you sort of put those two in completely separate from some of the fast food? Are there other, even if they're not exactly the same as these brands that you think are in the cohort? It's all about the perception of relative value, right?

So the five names that we've talked about going into this year, Domino's within QSR, really just Domino's within QSR, you know, within Fast Casual, Chipotle, Cava. Roadhouse is the only winner within Casual Dining. And then Wingstop, you know, which is kind of a hybrid QSR slash fast casual. So those are really the five names that we really continue to like. All right. Nick, thanks. Nick Tatian. Thanks for having me. Well, time for a CNBC News update now with Christina Partsenevelis. Christina. Thanks, John. Well, prosecutors in the Trump hush money trial presenting their closing arguments to

the jury this afternoon, and it appears court may go late. After more than an hour, the prosecution said it's about one-third of the way through, making it unlikely the jury will get the case today. The Democratic National Committee plans to nominate President Biden virtually before the party's convention in August. That would allow him to appear on the ballot in Ohio this November. The convention falls after Ohio's ballot deadline. The move comes also as Ohio lawmakers opened a special session today to resolve the issue. And Albert Ruddy, the Oscar-winning producer of The Godfather and Million Dollar Baby, has unfortunately died. Ruddy made more than 30 movies over his storied career. While producing The Godfather, he famously

negotiated with crime boss Joseph Colombo, who originally didn't want the movie made. He changed his mind after Ruddy agreed to remove the word mafia from the script. According to a family statement, Ruddy died on Saturday in Los Angeles. He was 94 years old. Morgan, back with you. Christina Parts, thank you. Thanks. Kava's results aren't the only signal on the consumer today. Consumer confidence data coming in above expectations for May. But there could be some red flags beneath that headline number. Mike Santoli returns.

He's going to break it down right after this break. Welcome back to Overtime. Consumer confidence ticked higher in May after three months of declines. Mike Santoli is looking beneath that headline number. What are you seeing? Yeah, so the top line was a bit better than expected, Morgan, but there is this wide and maybe chronic seeming gap between what consumers say is the present condition of the economy and what they expect over the next six months. So that orange line is the expectations index really just stuck at these lows that are comparable to, you know, the 2010s levels when the economy was performing really subpar. It was a post-financial crisis period. But, you know, right now, more or less, things look OK. This is what now consumers are saying about the overall business outlook, the overall economy.

What they say about their own finances, though, remains interesting. And it's a little bit more of a positive story. This measure softened up a little bit. So if you look at the individual households' expectations for their own finances, again, over the next six months, in general, more people continue to say, and this is always the case, more people continue to say they expect better things for themselves over the next six months versus those who say it will be worse in six months. And a lot of this is the gap between people who expect higher income versus lower income

has widened out a little bit. So it's net good news, but it doesn't get at this conundrum out there where there's kind of this societal bad mood about the economy. Obviously, the accumulated effect of all that inflation is a big part of it. Also point out older consumers in particular. Nothing seems to please him right now, Morgan. I mean, is this the way it usually plays out, especially in a higher inflation environment, which I know up until the last couple of years, we really hadn't had in a while? Yeah, I would say usually in the sense that we do know that inflation, because it kind of hits every household, does have this long lasting effect

on people's assessment of the economy. So I do think it's on one level predictable. On another level, there's a lot that says that there's a detachment of the confidence indexes. It qualifies for University of Michigan sentiment as well versus the inputs into what should determine whether the economy is considered well. So in other words, if you look at the formula for for what level of consumer confidence we should expect, given where the economy is, it is higher than what we're getting right now. So it sort of fits with this general sense out there that people think everything is kind of going the wrong way. All right, Mike, thanks. Yep. Now, stop me if you've heard this one before.

Home prices hitting another all-time high. You're supposed to stop me. Up next, Redfin senior economist on whether there's any sign prices could be slowing and how a potential rate cut could impact the housing market. Plus, the spectrum war is heating up as T-Mobile dials up another big deal. We've got those details when Overtime returns. You can stop now. Welcome back. Shares of U.S. cellular jumped 12 percent today. T-Mobile hit a record high after T-Mobile announced plans to acquire U.S. Cellular's wireless operations customers and

some of its Spectrum assets, about 30 percent of its Spectrum, in a deal worth $4.4 billion. Now, the deal will enable access to more than 2,000 towers for T-Mobile's coverage. They get to rent that access in a move that the wireless carrier says will allow access to more than 2,000 towers for T-Mobile's coverage. They get to rent that access in a move that the wireless carrier says will allow it to improve coverage for customers in rural areas. Both providers expect the deal to close in mid-2025, assuming they receive regulatory approvals. John, this goes back to what we've talked about before, which is spectrum, the need to be able to access it, and the need for continuous connectivity that consumers and businesses alike are ever more salacious to get. Yeah, a challenging telecom environment as well.

Meanwhile, new data out today from the S&P's Case-Shiller Home Price Index showing U.S. home prices hit an all-time high in March. The measure of home prices across the country showed that all of the major metro markets reported a month-over-month price increase and a 6.5% year-over-year increase. Joining us now to discuss is Redfin senior economist Chen Zhao. Chen, welcome. So long-term, it seems to me, there's a danger for consumers stretching too much into housing and prices don't have to dip much to hurt you if you need to move or if you lose your job and you can't sell the house for what you bought it for. When's the last time we saw this kind of unaffordable environment? Hi there. Thanks so much for having me today. Yes, absolutely.

Unaffordability is really the story in the housing market right now, as the Kay Schiller data today showed. And one thing to keep in mind, though, about the Kay Schiller data is that it is somewhat backward looking. So this data is for the three month period that ends in March. Redfin has our Redfin Home Price Index, which last week we released data for April, and that showed that home prices were up 7.3% year over year, which was very similar to what we saw in our data in March as well, meaning that there's really not, doesn't seem like there's much relief on the horizon in terms of home price growth. So I think for the average consumer, what that really means is, you know, as long as

inventory is very constrained, which it has been for the last couple of years or so, home prices really do seem like they will continue to appreciate at a fast rate. OK, so what do you see happening geographically that investors should know about? Absolutely. So there is a good deal of variation from market to market. Where you're seeing the most weakness right now is in the Sun Belt, where there has been a lot of construction over the last couple of years since the pandemic. There you're seeing the most supply. So that is leading to softer home price appreciation. In some cases, like in Texas and Florida, you're seeing pockets of price declines as well. But in other markets like the Northeast, where you have less new

construction, their prices still continue to appreciate a pretty fast flip. How does all of this translate to rental prices? And we know rents and shelter prices are an outsized portion of the CPI. They do funnel to a certain extent into PCE, which we get later this week as well. What are you seeing in real time across these different markets, whether it is the Sunbelt as we start to see prices ease on the home purchasing side or in some of these more expensive areas like the Northeast? Absolutely. So for the rental market, what we see in our real time market rent data is that rent prices are very Absolutely. So for the rental market, what we see in our real-time market rent data is that rent prices are very flat. So our latest measures, they're up about 1.1% year over year. That is very similar to what we've seen for like the last 18 months or so. The geographic

variation is somewhat similar to what you see in the housing market. So you do see the most weakness in markets that are in the Sunbelt, where you did have a lot more multifamily construction, and you also have a lot more supply that is yet to come to the market. But that, like you said, has really yet to kind of filter through to the official inflation statistics. That lag seems to have been longer than anyone really anticipated. And there, it seems to be a story that's really about renewing leases versus, or sorry, people who are renewing their lease and then not moving versus those who are a new tenant moving into a new apartment. When someone renews, that rent tends to go up a little bit

less. So it takes a lot longer for them to catch up to the market rent. And that seems to indicate that it's going to be a while yet before we really see the market rent data fully flow through to whether it's, you know, CPI or PCE. Which, of course, raises the questions about when the Fed cuts, why the Fed cuts, and if in the meantime, whether homebuyers, especially since we are in this busy spring home selling season, are now getting more comfortable with the idea of these higher mortgage rates? Yeah, I mean, so I think for the Fed, you know, the consensus expectation right now is really that the Fed will hopefully be able to cut by September. I think that there is some chance, you know, that the inflation data that is coming out in mid-June or mid-July could

be a little bit better than expected, in which case July is back on the table. And July has the advantage of being a little bit farther away from the election in November. But if you're a home buyer, you know, I don't know that this kind of like July versus September calculus is really what you need to be, you know, like totally wrapped up in right now. I think what you need to know is that probably we should expect a little bit of rate relief going into the second half of the year. But for a typical home buyer, what's really much more important is kind of long-term considerations. If you're looking to stay in your home for more than five years, you will most likely see home price appreciation. You know, when rates come down, you can refinance. It's much more important

to consider your own personal circumstances and whether you can find a home that you can afford that is appropriate for your family than to worry about whether the Fed is going to cut in July versus September. OK, Chen Zhao, thanks for joining us. Thank you for having me. Check out shares of Biotech Insmed. More than doubling after announcing positive late stage drug trial results huge mover today up next we're going to discuss whether that data could make it a takeover target and shares of online gambling companies draft kings and fan duel uh parent flutter entertainment they're out of luck today after illinois senate passed a budget that includes a provision raising taxes on sports betting.

We'll be right back. Welcome back. We've got a news alert on American Airlines. It is pulling back sharply in overtime. Philip Bowe has details. Phil. John, that's what happens when you drop an 8K like American did just a few minutes ago. The company is bringing down its guidance in terms of earnings per share expected for

the second quarter. Previously, it was expecting to earn between $1.15 and $1.45. Now says it'll earn between $1.00 and $1.15. Revenue guidance does improve, but chasm is, or excuse me, revenue guidance coming down, and then you've got chasm coming down as well. They are also announcing that Vazu Raja, who has been the chief commercial officer for some time, is leaving the company and stepping down as chief commercial officer. But again, the real pressure coming on the stock right now is because it is lowering its guidance for Q2 EPS from $1.15 to $1.45 down to $1 to $1.15. We will get more details about what's behind the lower guidance tomorrow when

we hear from the chief executive officer, Robert Isom. He will be presenting at a conference in New York in the morning. Lots of questions until then. Guys, I'll send it back to you. And we know you'll bring us the details. Phil LeBeau, thank you. Interesting, too, with airfares softening as we get to PCE, and there's an expectation that that could show some signs of stabilization, the PCE reading, in part because of those airfare prices coming off. Well, some big moves in biotech today, meantime. Corset Therapeutics jumping on trial data for Cushing syndrome treatment. Agios Pharmaceuticals is higher on a deal to sell royalty rights for its brain cancer drug.

And in Smed, more than doubling one of the biggest winners on Wall Street today. Those shares skyrocketing after it announced positive late stage trial results of its experimental lung drug. We've got Angelica Peebles here on set. She's going to join us. Give us all the details. I mean, this was a huge move. I feel like it's been a while since we've seen something like this for a name that would be large enough for us to be talking about on CNBC. Exactly, Morgan. Like you said, those shares are nearly doubling, or excuse me, more than doubling today. And that's because they had these positive phase three results from a drug that treats a condition called bronchiectasis. And that condition

is when you have damage to the tubes inside your lungs, resulting in inflammation and infection that can land people in the hospital. There are currently no approved treatments for this condition. And now in this trial, Insmed's drug cut the rate of flare-ups by about 20 percent. The company now is planning to file for FDA approval by the end of this year. And look, this condition might not be a household name, but it affects a ton of people. Evercore estimates almost half a million Americans alone have it. And analysts see $3 billion or more in peak sales. There isn't much competition here either. Analysts I spoke to called out a few names that could be on the horizon, but Insmed right now clearly has the advantage. And that could make this an especially attractive opportunity for big pharma companies

on the hunt for new drugs. Taking a zoom out and looking at a longer chart, say five to ten years, Insmed was really at a recent low before this spike. If you bought it a year ago, you're not seeing nearly that double. Did investors maybe just not see this coming at all? Was it a total shock? Well, this company has had a little bit of a checkered history with drug development. And even going into this readout, there was a lot of controversy over whether or not this would be positive. And it's kind of interesting because typically by the time you get to phase

three, your odds of it being positive are obviously higher. But there was still some controversy on whether or not this would succeed. And obviously today, the company is showing that it did, in fact, succeed. Yeah, indeed. Angelica, thanks. Well, Insmed's CEO is going to discuss those promising drug results in an exclusive interview coming up on Fast Money. And then tomorrow will be a big day for tech and retail earnings during overtime. All the names that need to be on your radar coming up on Fast Money. And then tomorrow will be a big day for tech and retail earnings during overtime. All the names that need to be on your radar coming up next. Welcome back.

Here's a look at our overtime movers. American Airlines sinking after lowering guidance. Those shares are down almost 5% right now, taking some other airlines lower in sympathy to Robinhood, though, popping on news of a $1 billion stock buyback, adding to big gains on the year. Those shares are up 3.5%, CAFA pulling back pretty dramatically despite strong earnings and a beat on same-store sales growth down about 5%. And Box beat on both lines, strong Q2 earnings guidance. That stock, though, did give up earlier gains. It's trading basically flat right now.

And speaking of earnings, tomorrow is going to be a busy one here on Overtime. We're going to hear from Dow Components, Salesforce, along with other tech names, HP, Nutanix, and Okta. Pure Storage and C3 AIai reporting numbers as well. Both CEOs joining us right here on Overtime. Pure Storage's Charlie Giancarlo and C3.ai's chairman and CEO, Tom Siebel, for exclusive interviews before the earnings call. Meantime, today is the first day of a new faster settlement period taking place in the U.S. markets. It's the so-called T plus one, which means buyers and sellers of securities will be allowed one day to finalize a trade. That's down from the current two days. Tomorrow's trading session will be the first time counterparties will be required to settle after one day.

We're going to bring in Mike Santoli to discuss this. Mike, we saw the move to just two days back in 2017. It was not without some issues initially as the adjustment was made and it was rolled out. But in general, I think the SEC would say that they've moved to one day because it's longer term going to cut some of the risk out of that settlement process in the market. Yeah, that's exactly the goal, Morgan. I mean, when I first started covering this stuff, it was T plus five. They've wanted to get it toward T plus one. The catalyst for mandating that a couple of years ago seemingly was some of the trade fails that happened around the meme stock craze. Robinhood's having to halt trading in certain stocks. That's because the longer you have till settlement, the more the stock prices can move around. And, you know, the brokerage

firms have to put a margin to protect against that. So this should make the whole system more efficient. Your money and your investments are going to get where they belong quick, more quickly. But I would expect maybe there'll be some bumps. There might be some some settlement fails, as they call it, where you can't quite deliver on time. And I do think international investors, because you have to have a currency translation in there, might have a challenge. But, you know, the industry, the back office of all the firms and the clearing corporation have been trying to prepare for this for a while. Well, the reaction time to Mike gets better, right? If there's something that you want to buy and you have to

sell something else to get it for, there was more of a risk. OK, if I didn't have the dry powder just sitting there, I wouldn't be able to do it. You're cutting that down by a day. You should be doing that, absolutely. Now, look, a lot of stuff trades multiple times a day. The machines kind of hand this stuff back and forth. But for real people, for real investors, it couldn't make a difference that way. All right. Mike Santoli, thanks for joining us. We did get a record close on the NASDAQ. The SOX moving higher record as well with semiconductors and NVIDIA really powering the gains. We're on $2.9 trillion watch for NVIDIA. That's going to do it for us here at Overtime.

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