Closing Bell - Closing Bell: Potholes in Stocks’ Road to Gains? 4/16/24

Episode Date: April 16, 2024

What is next for stocks? Trivariate’s Adam Parker, CNBC’s Steve Liesman and Truist’s Keith Lerner break down their market forecasts.  Plus, Samantha McLemore from Patient Capital is still bullish on stocks. She explains why – and where she is seeing opportunity right now. And, Bank of America CEO Brian Moynihan gives his first take on the quarter. 

Welcome to Closing Bell. I'm Scott Wapner live from Post 9 here at the New York Stock Exchange. This make or break hour begins with stocks on edge as interest rates continue to move higher. We're going to ask our experts over this final stretch what the breaking point for investors might be. Bank of America CEO Brian Moynihan coming up in just a bit. He's going to weigh in on that question, obviously. In the meantime, take a look at your scorecard with 60 minutes to go in regulation. Not much steam at all behind the major averages today with that back up in yields 10 year moving closer to 470 today we've got our eye on that over the final stretch and fed chair powell speaking

within the past couple of hours our steve leesman joining us shortly with the most important takeaways for investors oil down again gold higher so we're watching commodities too and the dollar there's been some buying in big cap tech today. Nvidia, Microsoft, there you go. And Meta are all staying green in this session. A nice bounce for AMD as well as we watch some of those chip names. Better than 2% there. And some big names working on some big time losing streaks.

How about Boeing? It's been down for 11 straight days trying to break that streak. Six in a row for Berkshire Hathaway. Don't hear that all that often. And Home Depot and IBM, they've been off for the past five straight. So we'll watch that, try and end some streaks or continue them. Over this final stretch, it does take us to our talk of the tape, the road ahead for stocks, and whether some bigger potholes are now lurking.

Let's ask Adam Parker. He's the founder and CEO of Trivariate Research and a CNBC contributor. Back with me at Post 9. It's good to see you. Yeah, good to see you. So, man, you've been bullish, right? You've been laying out your case for higher margins, higher stocks. Things look pretty good.

Are you rethinking that now? No. Not really. Higher rates don't do that for you? I think when you're in this band, good news is good and bad is bad. If it gets too hot, the economy, then I could see us getting back to that, uh-oh, too good, it's running too hot, they're going to cut, they're going to suspend cutting, maybe even hike.

You got the last 48 hours, you got a little bit of that, but I think it's fits and starts. It's not, you know, the conclusion isn't in. I think it's mixed. Like, the housing data was light, retail sales was strong. It's mixed. It's like the weather. It's 80 and then then it's going to be 50. I don't see it as clear. That's annoying, right? Just make up your mind. Make up your mind. So I think they're getting that sort of inconsistent data right now in the

economy. I don't think it's enough to make them start hiking rates. I think it's just delaying. Remember, we were at, what were these guys at? Seven cuts at the beginning of the year, which we all thought was a little bit, equity guys thought was kind of ridiculous. So, look, maybe we're in that band where to the upper end, if we run a hot, people will freak out. But right now, I think the economy is still okay. I feel like the Fed isn't changing the weather, though. It's like cloudy with a side of higher for longer.

And now we're trying to figure out what that's going to mean for stocks. Which I'm good with, I think, earnings so far. You know we have, what is it, 200 companies reporting in the next 10 earnings sessions in the S&P 500. There's a lot in front of us. We've got the financials mostly behind us. And we've got the big next couple of weeks. But I haven't seen what I would call a bellwether tell me demand's bad or, you know, the outlook is being reduced materially. You know, a big company. So we'll see if we get that.

But so far, I think earnings season has been okay. We were due anyway for some kind of a correction. You don't get bottom left, top right. It's not a guy giving right to happen every day. So yeah, you can get little retrenchments. People worry about maybe a little bit less accommodation. I still think the dream of accommodation is going to be better than reality. As long as the economy is okay and earnings are okay and margins are going up, stocks are good.

The thing I watch every day is financial conditions. And if we start seeing them really tighten, then I think you're going to get a bigger shift more toward higher quality. Can't they tighten with a stock market correction of magnitude if rates continue to back up. It's not just a tightening of credit. Spreads need to widen. The whole kind of complex needs to get more risk off. What about multiples? Do they get harder to justify in a higher for longer world or not? You know, we did a whole bunch of work on the relationship between multiples and margins last week because there's a lot of old school folks who would just say, look, like the market's expensive.

That's all I need to know. Eventually, we're going to mean revert down. And I think the problem with that is if you use history for the S&P, you're not really accounting for the fact that there's so many businesses. I think 36% of the S&P 500 market cap now is 60% gross margin or higher. It was like 15% 25 years ago. There's just less manufacturing, more software, more services in higher margin businesses. And higher margin businesses, you know, sort of asymmetrically get higher multiple.

So I think you could be oscillating around this level, not back to 15 to 17 times that I think a lot of old school people have as the sort of anchor in their head. Yeah, but I still think, and if I recall correctly, I remember, you know, Buffett on our air, you know, not that long ago, handful of years, justifying, you know, elevated multiples based on how low interest rates were. So how can multiples be justified at high levels with low rates? And then now we're justifying the same multiple at much higher rates than where we were. You know, ex post, I don't think you should have had as high multiples with low rates. I think the truth is extreme yields are probably because the world's a little riskier and those should be lower multiple environments. And now we're kind of in a more healthy, normal 10 year, year band

that we would have learned in school is sort of probably a higher multiple, more normal situation. I think it was just all the fiscal stimulus on top of the monetary policy that sort of confused people when rates were low. I think this is a more normal, healthy 10-year yield range to be in, and I think multiples can trade above 20 times as long as I dream. Martins are growing, and earnings can grow next year over this year. Okay, so you're very much, it sounds like, a like a risk rewards positive. Keep your eye on the ball. Yeah. Fed is changing. It's already changed. It just hasn't made the move to express it.

Right. But it will. And that's all that really matters at the end of the day, along with a good economy, earnings and margins. Yeah. You can't have any one of those stories. If the consumer starts really slowing, if, you know, financial conditions tightening is the number one thing that will cause the market to sell off. Two, consumer really materially slows, and we start really hearing about, you know, kind of blowups in demand. And I've seen some kind of lower quality companies still take pretty good pricing. So I haven't really seen like, ooh, boy, you know, big revenue. You know, obviously if you get a Walmart telling you demand, you, you get a Bellwether, we're not seeing that. And the last thing would be if China somehow gets incrementally worse.

And when the companies report industrials and tech in the next couple of weeks and they say, oh, you know, order slow. But that's really hard for to get a read on. It feels like China is getting incrementally better, if anything. Yeah. You know, the data are mixed to slightly positive off of a low base. Yeah. Yeah. Well, I mean, the Fed chair made some comments today that are certainly being tossed around and find out what they mean in the big picture. Senior economics reporter Steve Leisman has our download, if you will, that the thing, Steve, that we need to to think about most are what?

Scott, I think there's a change now or potential change in the Fed's base case about rate cuts being likely appropriate this year to perhaps not being likely appropriate this year. And if you'll bear with me for a second, I want to walk through what Powell said and what he didn't say and why I think that's the case. He said that restrictive policy needs to be, needs further time to work. He went on to say recent data have not given us greater confidence to cut. It may take longer to get that confidence and we can maintain restrictive rate as long as

needed. That's what he said. Let's take a look for a second at what he didn't say, Scott, which was not in his remarks, nor were they in Vice Chair Jefferson's remarks today. He did not say, quoting the committee, if the economy evolves broadly as we expect, FOMC participants see it as likely to be appropriate to begin lowering the policy rate at some point this year. Scott, he left that out of his comments. He left that out. Jefferson left that out of his comments. He had made those comments. Jefferson did back in February.

Powell said what he just said back as recently as April 3rd. Take a look at what's happened now to the probabilities. They have declined quite a bit now. In fact, I want to get you a fresh quote here. What we're looking at now is just a 18% probability of a rate cut in June, 44% for July, and 70% for September. Now, I guess one question for you, Scott, and perhaps for your guests there, has the market sniffed this out already? Take a look at the S&P from Thursday, Scott.

We are off 2.7% from there. Now, part of that, of course, was a sell-off on perhaps a flight to safety with what was going to happen in Israel. But then take a look today. The market heard Powell's remarks sold off. And I want to say Nick Timoros from The Wall Street Journal hammered this angle on a potential discussion of whether the cut at all. And his story came out. But then the market rallied back. So I think it's a question, does the market know this? Does it need cuts? Certainly the challenge from higher rates, from a two year approaching five percent, from a 10 year that's up as well, elevated as well, present a challenge for for stocks for a longer period of time now than perhaps the average investor had thought of recently as a month ago. You raise good questions as usual. I'm just going to give it right to Adam Parker to let him answer that question. Has the market already figured this

out or is it still in the process, I think, maybe of figuring all this out? Look, I remember years ago people saying, oh man, if the 10-year gets a 2.75 or higher, the equity market's going to get killed. And then if it gets a three or higher, it's like game over for multiples. And at 4%, 10-year yields, the sound barrier and the PE is going to crater. It's one variable of a 19-variable problem we're all trying to solve. If we know what's coming as accommodation, I still think it's bullish. I think the market can see through that. Long-term, 50-year returns, 20-year returns, whatever it is, equities go up 12% per year. So is the 10-year yield at five, is that a safe five with probably some vol and I get a hold of it for then? I still think the equities look attractive on Equus Premium, personally. So I

think I need a much higher 10-year than five for me to start really saying, you know what, man, take all of your money or a big chunk out of U.S. equities and hold that thing to duration. Let's just see what happens with the United States of America. That seems really unattractive to me. I could see somebody saying on the two-year at five, I'll move a little bit out. But that's been the case for two years. But on 10, no way. Equities still look good to me.

Steve, I also thought it was interesting what the Fed chair didn't say today. And when he didn't talk about the possibility of hiking rates, as you say, if inflation persists, we can maintain the current rate. He talked about the current rate being high enough. Now, if he would have suggested, hey, you know, we're prepared to raise rates if inflation persists, the market wouldn't look like it does right now. So I think in part, as the market processes all of this and makes right now. So I think in part, as the market processes all of this and makes its own adjustments, it's still hanging on the fact that it thinks the Fed's done and it can deal with the fact that it has to wait longer than it originally could,

because as the Fed chair himself underscored today, the economy is really strong. Yeah. And Scott, I would say that shows you to be a keen and astute reader of Fed speak and Fed rhetoric. I think that's right. They're not there, but I could say dot, dot, dot yet. And by the way, both Powell and Jefferson seem very close in how they're talking about it. I can't remember the exact language that Jefferson used this morning, but it was very close to just that idea. Something about the current rate will be appropriate to lower interest rates. And somebody texted me at that time, does that mean lower inflation? And somebody

asked me, well, does that mean that cuts are off the table? If you think about what the prior base case was, there were these, what do you want to say, optional rate cuts or soft landing rate cuts, you could call them, Scott, the ability of the Fed to cut interest rates while still en route to the 2 percent target because they thought essentially that rates were higher than they thought they needed to be in order to make further progress. That analysis is going off the table slowly but surely. All of this, all these comments by the vice chair and the chair were preceded by very hawkish talk from members of the committee. And now we have the kind of exclamation point on that hawkish talk from both the vice chair and the chair here, where this idea of you can lower rates and still get inflation progress seems to be going by the wayside.

It's funny because I was wondering, Steve, going into today, whether it was going to be a big nothing burger, given that it was supposed to be about the Canadian economy. And here you go with a number of headlines that are relevant and pertinent to how investors are thinking about. Can I comment on that, which is, I think, a really another really good point, Scott, which is the Fed chair might have gotten away with just talking about Canada and the wonderful relations with our our brethren to the north. He did take some time out to talk about some of the great actors and musicians who come from Canada and said, let's import more of those. So there was a moment he could have done that, Scott. But instead, on the first question, he decided to talk specifically and pointedly about the recent inflation disappointments that

there have been, how it has undermined the confidence and thely about the recent inflation disappointments that there have been, how it has undermined the confidence and the confidence in the confidence in the sense that we now don't have the confidence. We're going to have the confidence very soon. Just a big asterisk here, Scott. All of this can change with a couple, one, two, three, perhaps good inflation reports. And there are still those out there on the street who have that forecast built into their base case. I don't know where the Fed chair or the Fed in general has it. They had a 2.6 percent inflation as a median for the committee for this year on the core PCE. Powell gave us a little bit of a heads up on what's coming at the end of this month with the core PCE, saying it's going to be 2.8. It's really not going to change. So that's three months in a row you're not getting progress,

and that has undermined their confidence in getting the confidence to cut. True, but it's better than higher and moving in the opposite direction on PCE as well. So I get where you're going with that. Steve, thanks so much. I appreciate it, as always. Our senior economics reporter, Steve Leisman. Let's bring in Keith Lerner now of Truist Wealth into the conversation because you think that it's good good to see you by the way, that okay the pullback may have more to

go but you've got your eye on the ball and say that the trend is still intact. Is that correct? That's right. Great to be with you and Adam Parker as well. That's you know our view coming into this quarter was that the market was a bit stretched. We had five straight months up. We had a 10% first quarter. And we were likely to see some type of pullback. Now, if you think about it, when we have 10% first quarters, you look the rest of the year, you've been up 10 out of 11 times by the end of the year. But the minimum pullback you see at some point is 4%. And the average is deeper than that. So listen, I think the market got stretched. We had expectations that moved up. And we've seen some volatility in interest rates and inflation. And we're having a bit of a reset. That reset likely has a bit longer to go in time and price. But as you all discussed

before, the economy is still relatively resilient. Every week we see forward earning estimates make a new high as well. And also, everyone's kind of searching, what is that 10-year yield that really breaks this market? Before the financial crisis, the average 10-year since 1950 was about 6%. The average cash rate was about 5%. And the equity market, as Adam alluded to earlier, grew about 11% or 12%. So I think rates moving up at a fast pace really caps the upside. It may provide some choppiness. But credit markets are really well behaved. So that's telling you that the economy is still OK as well. So I think this likely goes on longer. But ultimately, I think the primary trend

is up. And as the market pulls back, we would be leaning into that. And I think the downside is probably limited in this 5% to 10% range for the market. Right, Adam. I mean, I do think you got to be careful about going back and looking at historical references and saying, well, the market has been fine for however many decades with a 10-year at whatever rate you want to pick, because this time is different. You're going from zero to 5% in a reasonably short period of time. Let's also not forget that we had reset our expectations to where rates were going to be to at least in part justify where the market was and the kind of multiple that you're paying based

on where you thought rates were going. So you can't have your cake and eat it too. I think he's spot on. He's spot on. It's change and the pace of change, not just the level, right? Obviously, if we back up and the VIX backs up, that's clearly all a financial condition tightening situation. If it sort of slowly backs up because the economy is decent, then I think that market

can handle that and earnings and multiples, the market will be higher. So I think it's, he's spot on, it's the pace at which it backs up that I think could spook people. Well, of course, when the 10-year got down to four and briefly dipped below, you know, bulls at that time didn't have five on their bingo card, okay? We had accepted the fact that, all right, economy's good, earnings are going to be good enough, and hey, the Fed tells us they're going to cut, and they're pricing in seven cuts. Now we're not pricing in seven, we're pricing in three.

Now we're not pricing in three, we're pricing in two. Now we're going to be lucky to get any. I'm sitting here listening to, you know, the economists all year reading. I'm just trying to figure out if they're all, like, just terrible at what they do, right? Like, they're just bad. Or if it's just unknowable and unforecastable. It's one or the other. All of them are just brutally wrong in both directions for 20 years on the Fed.

I mean, honestly, like, I went after Morgan Stanley. We called for the rates to back up every single year for eight years in a row. I mean, so it's obviously hard to do. These are smart people. So how can I position a portfolio based on stuff that's always wrong? I can't. I have to take a step back and say, wait a minute. Is the Fed, they ran below 2% for a decade.

They convinced us they'd get it back up to two. Equities work. We're going to run above two for a decade. If they convince us it's on the way to two with some fits and starts, maybe it can be good. That's what you need to believe to be bullish. If you think it gets out of that comfort band and they can't control it, then I think you get more nervous and you get a risk off trade. It's hard for me to position for that now based on what I see at the stock level.

But I'm certainly not going to listen to some economist at some firm tell me that there's seven cuts and then four and then two. They have no idea. Well, which is why, Keith, some say, given all the noise, if you want to characterize all of it as noise, stay large. Stay with large U.S. stocks, big market cap U.S. stocks is what I'm trying to say, whether it is mega cap tech or otherwise. Yeah, we're still in that camp. The other point I'll just make real quickly, too. I mean, today, just today, the IMF upgraded their U.S. economic forecast from 2.1% to 2.7%.

In the beginning of the year, the average economist was around 1%. So we're more than doubled that already, and that should support earnings. But to your point, we are seeing some bifurcation in the market. As the higher for longer with interest rates happen, we're seeing real estate at a 20-year low relative to the market. That's a sector we've been underweight. We're still underweight. You're seeing small caps, which on some metrics look really cheap, but they're really interest rate sensitive, also at the lowest relative price of the S&P since COVID. So we would stick with large caps. I think this consolidation that we've seen or this more kind of sideways relative performance for tech was a positive. And I think we're likely

to see more tech reassert that leadership because they have earnings momentum that's positive. They have these big balance sheets. They don't need financing from the debt markets. They also, by the way, have a lot of cash or they're earning more cash or interest on that cash as well. So we still think that's a place to be, even during this more volatile period that we're seeing right now.

Which is why you've seen quickly Adam buying on the dips of big caps. Yeah, I mean, yeah, I think I think I totally agree with that statement that you just you need access to the biggest 20 U.S. equities and they're 15 percent per year in that income growth. And you can't get that through any bonds. But what he said is also interesting, which is I'm paraphrasing and making what not only were the economists wrong on rates, they were wrong on the GDP also. Well, sure. Right. So it's tied together, but I usually.

It's been difficult. The Fed chair himself. Right. They were wrong on a lot of this. So if you're an equity guy, right. In terms of where growth was going to be, what they thought they had to do to get inflation down, whether they had to choke off demand. Now it's not so much because, as Powell said today,

this type of inflation was caused by something different than what you would historically think. You know, there's like a no drinking in January type of thing or no shaving. Dry January, yeah. Let's do like a no Fed May. Let's just forget what they say and focus on something that matters that's actually forecasted. I don't know if I can promise you that. I'm not going to shake on it. All right.

All bets might be off. Keith, I appreciate your time very much. Thank you. Adam Parker, thanks to you as well. Seema Modi has a look at the biggest names moving into the close. Hi, Seema. Hey, Scott. Both in the healthcare space, starting with UnitedHealth surging today on heavy volume and lifting the Dow following strong earnings that beat expectations. The healthcare company also reaffirmed its full year guidance despite that February cyber attack on the change health care billing system. You'll see shares are up 5.7 percent. Humana and Elevents up as well at this hour. Let's also take a look at Johnson & Johnson, which is moving in the opposite direction, sliding to a new 52-week low. The drug maker posted

a solid Q1 earnings beat, but revenues came in light. The company saw strength in cardiovascular device sales, but its blockbuster psoriasis drug, Stelara, missing expectations. We're looking at the stock down nearly 2% at this hour, Scott. All right, Sima, I appreciate that. See you shortly. Sima Modi, we're just getting started here. Up next, no signs of slowing. That's what patient capital, Samantha McLemore, says about this bull market. Why she is still staying so positive amid some uncertainty. Where she's finding opportunity within stocks right now.

She joins me next. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. We're back with stocks trying to snap their recent downtrend today. Rising yields and the threat of higher for longer rates weighing on investor sentiment yet again. Our next guest, though, says the bull market is showing no signs of breaking down. Joining us now, Patient Capital founder and CIO, Samantha McLemore. It's nice to see you. Hi, Scott. Thanks for having me. Wow. So you're still pretty bullish, undeterred by this recent volatility, the backup in rates and everything else. Tell me why. Well, we think this is a normal, natural pullback. We had a huge move

in the market, almost 30 percent upside in the S&P from the lows in October. So that's a huge move. And it was the fourth longest period with the market staying above the 50-day. So strong, prolonged. And I think the S&P is now 4% off its highs. That is a very measured pullback, especially when you think about interest rates going from the high threes to almost 4.7 percent this year, crude moving up significantly to the mid 80s from the high 60s, geopolitics, Fed rate cut concerns. Given all of that, I think most people would have estimated that the market would have had a more significant pullback. So I think that the market shows, you know, a very measured response. Sure. But I mean, if if if what got you here, at least in part, you know, was the expectation that rates were going to do just

something different than what they're doing now, if if that's changed, which it seems to have changed, doesn't the outlook need to change at least somewhat in the near term? Not talking the big picture or where we think the overall trend is going, but in the in the near term, not talking the big picture or where we think the overall trend is going, but in the near term here? Well, I would say that must not have been what got us here, because coming into the year, people estimated we'd have six rate cuts this year. Now people are estimating less than two by December, and the market has been OK. So I think what this rally and a continued bull market depends on is the economy remaining strong, inflation remaining contained, employment remaining steady. So far, we see all of that.

So we don't need cuts at all this year? It depends. We'll see. I think it depends on what the economy does. If the economy slows, then we might need rate cuts. I think what the market fears is that we will stay restrictive too long and that that will, you know, lead to a recession. So I think as long as that doesn't happen, no one really knows what the neutral rate is and where that, how high that interest rate can stay. But that's something that we're watching quite closely. And I think given what we're seeing, given what we saw for retail sales employment, the economy remains quite strong. So what should I do? What are you guys doing within the market to express the view? Well, we love buying beaten up names on pullbacks, you know, where we think the intrinsic value of

businesses is much higher than where names trading in the market so you know there are a number of names uh like that that we're adding to in this market one example of that is cosmos energy which is uh you know a smaller uh earlier stage emp company it's one of the few energy names that we can find that we think has significant upside even if a normalized crude price is at 65 rather than 85. So the stock's trading at six dollars a share now, and we think it's worth 12 to 14 and even higher than that if prices stay here. Beyond sort of idiosyncratic stories like a Cosmos, for example, do you believe in the broadening story continuing well beyond mega cap tech. I ask you the question because it sounds like you would,

given your overall view of the market. Well, we certainly saw broadening out of the market late last year and early this year. And so that's what we've seen. And last year, a lot of the economically sensitive names, in my opinion, were pricing and recession. So as the odds of recession have come down and people have gotten more comfortable with economic growth, we've certainly seen that broaden out. Now, it still looks like large cap growth are the market leaders. They continue to lead both on the upside and the downside. They don't have as much upside to intrinsic value as other names that we find. But we have a balanced portfolio, you know, across the different

types of mispriced securities. Yeah. I mean, so you added NVIDIA around 550 or so in the first quarter. It's obviously run a lot. You do have some people talking about bubble like qualities out of some of those names trying to justify what they're you know, are their multiples really worth what they've expanded to? I know that NVIDIA's multiples come in as the earnings expectation has gone up. But how would you assess that broad picture of the mega caps in general? Yeah, so we just looked at the mag seven because there's a lot of talk about how narrow the market's been, how they make up most of the returns, whether it's bubble like. I think we can confidently say it is not at all on the level of the tech bubble.

You know, I think tech peaked at 55 times then, and these names are 35 times, and tech at 35 times. And these are some of the best companies that have ever existed in the history of the world, these Mag7. If you look over the past decade, they've grown revenues 24 percent a year, free cash flow per share over 40 percent a year. They've doubled their returns on capital. They have huge free cash flow margins, great balance sheets, and they're still growing quite strongly. So during that time, if you exclude Tesla, which we do think, you know, is overpriced for what the current business is, the multiple on the other six went from 23 times to 25 times. So the premium to the market actually shrank from a 50 percent premium to a 25 percent premium. So I think it's really hard to argue that those names are significantly

overpriced in aggregate. Samantha, I appreciate it as always. Thanks so much. We'll see you soon. Thanks, Scott. All right. Up next, shares of Bank of America slipping post earnings. That stock down about three percent today. We hear from Bank of America Chairman and CEO Brian Moynihan. Next, his first take on the quarter. What's next for the bank? We're back after this. All right, welcome back. Shares of Bank of America moving lower today. The company reporting an 18% drop in first quarter profit, the latest big lender to feel the squeeze of higher interest rates. Earnings, however, did top expectations. Sarah Eisen joins us now with a first on CNBC interview with the chairman and CEO of Bank of America, Brian Moynihan. Sarah? Scott, thank you. Brian, thank you for joining us. I first just have to ask if you're surprised by the market reaction,

because the numbers mostly were better than expected with a big pop in trading as well. Well, we had a great quarter here at Bank of America, exceeding expectations. And, well, one day's market, as I always tell myself, you can feel good or bad on that day. But the job for us is to drive the things we control and continue to produce for the shareholders. We've got 14 percent return on tangible common equity this quarter. And, you know, if people are selling a stock, we'll be buying it back at lower prices today than we thought we'd be buying it back. But let's wait till tomorrow and see what happens.

All right. That's an expression of confidence. You did reiterate guidance. And the market, I guess, had higher hopes. We saw this with Wells and J.P. JP Morgan as well that higher for longer would be better for net interest income outlook and and profitability. So what what are you expecting on that front? Well we basically told people that for the first quarter of 24 we had told them at the time we did earnings for the fourth quarter last year

that we would actually be down a little bit link quarter. We actually turned out to be up link quarter, up $100 million, which was $300 million, $250 million, $300 million to the upside. We then said you can kind of lock that in. So the second quarter for us always comes down a little bit from the first quarter. We said you can lock that in, and it will grow from then on out, which is a different path than other people have. And that's because of the power of our deposit base. Our deposits are growing. Our loan growth is still muted because the economy is still adjusting to all the things that your colleagues have been talking about all day. And so we saw loan growth year over year, but linked quarter loans were down a little bit due to the seasonality

of credit cards. Credit quality is still good. So we feel good about what we're doing. But the key on NII is that we actually had more than we thought we were going to have. We expect to have more than we thought we were going to have next quarter. And it grows from there and frankly starts to get to the point where it's net growth year over year for the company. So what about the consumer? Because you have some pretty good visibility into people's deposits and their credit card spending. Is it doing better? Is it doing worse? Is it the same? Well, if you look in the spending data for our consumers, you have to put a little bit in historical context. So at Bank of America, we have the honor of serving 60 million U.S. consumers,

and we see what goes in and out of their accounts on a daily, weekly, monthly basis. And if you think about if we were sitting here last year or a year and a half ago, we were talking about consumer spending being very strong. A lot of people were saying, well, the consumer is going to run out of money. Didn't happen. The consumer was going to over-leverage. Did not happen. The consumer wage growth was not going to keep up inflation.

It didn't happen back then. But what did happen as you move forward from that standpoint is the consumer has slowed down their spending. So they went from a 10 percent year-over-year growth early last year to 5 percent last fall. And now they're running about 5 percent, a little less than that in March, April a little stronger. And what that means, that growth and movement of money across $4.5 trillion on an annual basis out of the Bank of America accounts is consistent where we were in 17, 18, 19 when the Fed had raised rates, lower inflation, 2%-ish type growth economy.

So you're seeing the consumer hang in there and continue to spend, but spend at a level that's more consistent with a more trend type of economy. And we'll see how it plays out over the next quarter. What about what Chair Powell just said on inflation this afternoon? He said recent data have clearly not given us greater confidence that inflation is coming under control based on everything you see from how consumers are dealing and also how businesses are passing it on. How do you assess inflation and the path down to 2 percent? Well, if you look at our research team, which is the best in the world, what they have done is just constantly pushed out the effects of the Fed tightening before that and other things.

So, originally, 18 months ago, they had a recession planned for last part of last year, early part of this year. Then they pushed it out into the early part of this year. Then they said it's not a recession, it's soft landing. And now they say it's basically continued with trend economy, economic growth. So you had a 4 percent plus growth rate in the third quarter. You have 3 percent in the fourth quarter last year. And now they're saying it's going to be two and a half this quarter. That reflects just the ongoing attributes of, A, the consumer being solid, businesses making money, unemployment staying low. They have

unemployment not getting up to above 4 percent until the end of 25. Originally, they had it this year. All that is just sort of pushing out the impacts, because I think the debate's going on, and you're talking about it every day, and we're Fed watching way too much right now. The reality is that the issue is that the Fed has put a huge constraint on economic growth due to the massive stimulus in response to the crisis and the lowering of rates and the things that went on. It is still having an effect. You've seen the economy slow down even from third quarter last year to fourth quarter, but it's taking longer than they think. And those experts say it takes about four years to wind out of inflation. And so while the Fed has a plenipotent power to make the decision, they don't have the power to decide what the facts are. And so, at the end of the day, the facts are going along based on a solid economy, okay, and not moving as

fast as some people might have thought. And that is the day-to-day impact on three cuts, four cuts, seven cuts, two cuts. At the end of the day, our company will operate well in any environment. When do loans pick up again? When are we going to start to see growth there? Oh, so the interesting part of that is if you sort it out by the businesses, there are a couple of things going on. One, in the high-end global corporate investment banking business, we had a great quarter for investment banking fees. And part of that is debt capital markets. So people are going into market and financing and paying off either temporary credit for an acquisition or paying off and refinancing bank loans into the market because they're cheaper and have longer duration to them. So that's the places we did not get loan growth

in the quarter, really around there. We had a typical seasonal decline in credit card, but that's usually planned for. And all the other areas grew slightly. So the middle market business grew a little bit. The business banking, which is a small business, grew a bit and small business itself grew. And so what we're seeing is a steadying of the draw rates and lines of credit sort of flattening back out. It was declining, and now it's sort of leveled off. But we're not seeing robust loan demand for two reasons. One is it's expensive. One of your colleagues was talking about you went from 25 basis points to five and a quarter,

five and a half on a Fed funds rate and add the margin to that. That's a 20-fold increase in the interest cost base. And so that's had the impact of saying, I'm not going to borrow if I really am convinced there's an opportunity. And so what you're seeing is companies being careful in their borrowing, careful in their employment levels. They're not laying off as much people, but they're not hiring as much people. So labor is more, you can find labor more easily than you could before.

And they're just being generally a little more conservative, because they're listening to all the stuff that you've been talking about all day. And I think, but at the end of the day, we're seeing some loan, year over year, we're up 1% in loan growth. That's, you know, that's fine. But we expect to see more as the economy running this strong, you'd expect to see more. But I think it has to do with general borrowing conditions still muted due to, even on home loans, obviously higher mortgage rates slow down the borrowing process there. Yeah, it's the plus minus of high rates. Thank you very much, Brian, for all the color.

Really helpful as we look at the stock come off the lows. Brian Moynihan, the CEO of Bank of America. Scott, back over to you. All right, Sarah, thanks so much. Up next, tracking the biggest movers into the close. Seema Modi standing by with that. Seema. Scott, electric vehicle investors got some rare good news this morning when one company received an upgrade.

And there's a social media stock that continues its decline. We've got more on the closing bell movers right after this. Well, less than 15 from the closing bell. Back to Seema Modi now for a look at the stock she's watching. Seema. Hey, Scott. Riven is breaking a four-day losing streak after UBS upgraded the stock from sell to neutral, citing the company's R2 orders as a potential catalyst.

This is the company's lower-priced car that is anticipated to hit the market on 2026. Stock hitting a 52-week low, but then it got that upgrade. Shares rebounded, now up nearly 5% at this hour. Worth noting that short interest has been rising in the stock. Take a look at Trump hour. Worth noting that short interest has been rising in the stock. Take a look at Trump Media. Continuing to fall after the company announced its Truth Social app is moving to launch a live TV streaming platform seen by the market as a cost-intensive business. And it follows a filing that showed the company may sell more stock. We're seeing shares in the market cap decreasing by more than $5 billion since it began trading as a public company at

the end of March. Right now, down 13%. Scott? All right, Seema. I appreciate that. Thank you. Seema Modi. Still ahead, United Airlines reporting at the top of the hour. Stocks have evolved a little year so far.

We will tell you all the key metrics to look out for when Closing Bell comes right back. Coming up next, United Airlines and Interactive Brokers among the big names reporting in overtime. We'll tell you what to watch for when those numbers hit the tape when we take you inside the Market Zone. We're now in the closing belt Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial. Bo on United Airlines, Kate Rooney on Interactive Brokers. Mike, I'll go to you. Your takeaway from a day rates up yet again.

And nice update from the Fed chair, I think, on where we stand. Rates up yet again. Powell's comments were a decent test of kind of what we've already more or less absorbed about the current environment. You know, him saying that, you know, maybe we're not going to have the circumstances to do any cutting or at least not much. The market says, what do you think we've been doing here for the last week? We've been pricing that out. We're up 35 basis points in 10-year yield in six days. So I think that was a decent test, though, to say that's not going to jar us. And I'm with everybody who says, hey, we can live with this if the economy is good, if earnings

comes through. There's nothing inherently dangerous about 4.7 percent 10-year treasury yields in a nominal growth economy of like 5 to 6 percent. But it does change how you weight the probabilities. It changes how you weight the probabilities that the economy either won't be able to fully handle it or, you know, we get the kind of real estate world and housing looks like it takes more on the chin. And all of a sudden you're talking about the feedback loop of those tighter financial conditions. And by the way, when the market does what it's been doing, that is tightening financial conditions. It's not like somebody decrees, hey, tighten financial conditions. And then the market reacts. Stocks down, yields up, volatility up, even credit spreads up a little bit. That is, and dollar up, that's all tightening financial conditions. So that somehow kind of does a little bit of the work of restraining the economy and who knows, maybe getting inflation

lower. Phil LeBeau, United Airlines, I guess will tell us if we have tightening booking conditions. Yes, and that's going to be one of the main things we're looking for, Scott. Three things will stand out in this earnings report for United for the first quarter. First of all, what did it see in terms of demand in the first quarter? Remember last week, Delta saw an acceleration, especially with corporate demand in the second half of the first quarter. Did United see the same thing? So what's the strength of demand, if you will? Fleet plans, we know what's going on with Boeing building fewer 737 MAXs.

That clearly has to impact United. And then we know that they were in the market for an Airbus replacement order, if you will, because they won't be taking delivery of the MAX 10s. Do they announce one? Don't forget, United is expected to report a loss of 57 cents a share. So the street's not expecting a profit here. And remember, tomorrow morning after the numbers this afternoon, we will be talking with United CEO Scott Kirby. Lots to discuss here beyond the numbers in terms of fleet plans, Boeing, Airbus. You don't want to miss that interview on Squawk Box. Yeah, we won't miss it, Phil.

Look forward to it. Thanks so much. That's Phil LeBeau, Interactive Brokers, by the way, reporting as well. Kate Rooney. Hey, yeah, Scott. So the momentum for Interactive Brokers that it's seen this year, it's expected to continue when we get that report out after the bell. Account growth is a key thing to watch. That's expected to accelerate.

Watch for trading activity. That's going to be reflected through something called DARTs, Daily Active Revenue Trades. Net interest income is going to be key as well amid this rate environment. Margin lending also a big one. Piper Sandler upping its price target this week for Interactive, saying any negative impact you might see from rate cuts that it could have on IBKR's revenues, that has been overshadowed by a number of positives. They call out 70 plus percent operating margins. They do expect account growth of about 20 to 25 percent with what they call a healthy amount of excess capital. Citi, meanwhile, calling out companies strong organic

growth and momentum potential, says it's well positioned from the current rate environment with offsets in a lower rate environment. So saying it can kind of operate in both. You've got founder and chairman Thomas Petterfee coming up on overtime. Always a great interview, Scott. All right. Look forward to that as well. Kate, thank you. Kate Rooney. All right, Mike, I'll turn back to you with about a minute left. I guess, look, now that Powell has spoken, maybe we can just sort of move away from that narrative for a little while and get real focused on earnings. Ideally, I think that's what a lot of investors would prefer. I do think the market has some business to take care of, just in terms of the real tactical stuff, right?

What does it mean that at the highs, when we ramped 10% in the first quarter this year, you go up 28% off the October low, everybody said, we got a 3% to 5% pullback in our future just because they happen. We're down 4%. It always is accompanied by a bunch of headlines or narratives that say, hey, maybe this could be more, maybe it could be tougher.

So far, nothing really telling you that this is particularly nasty at this level, but I still do think there's some churn ahead of us. We've got options expiration coming up. So we'll see if we can get that focus on the fundamentals. The market behaving pretty well on a day you get Jefferson and Powell. There's the bell. So we'll go out with a loss on the S&P. We'll pick it up tomorrow. I look forward to being with you then in overtime with Morgan and John.