Closing Bell - Closing Bell: Preparing for a Momentum Meltdown? 3/12/24

Episode Date: March 12, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

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 the battle within big tech. Whether your best move now is to stay with the year's big winners or switch to the laggards, we're going to ask our experts over this final stretch. That space is staging a big rebound in today's session. We're also going to hear from investing heavyweight Ken Griffin. We'll do that in just a few moments. In the meantime, your scorecard with 60 minutes to go and regulation looks like this.

The major average is all but brushing off today's CPI report, which was a touch hotter than expectations. Yields did move modestly higher, stayed mostly steady, too, after a midday bond auction graded a C- by our own Rick Santelli. He's a tough grader. NASDAQ outperforming as several of the momentum names within that index bounce back today, led, of course, by what else? NVIDIA, back above $900. Oracle gets the best name in the S&P following its earnings report. That stock hitting a new high in the session today. And 3M is the best in the Dow, that after naming a new CEO.

All of it takes us to our talk of the tape, which is all about the rally, obviously. Is it running out of steam, as some now suggest? We're just taking a momentary breather, but no real breather at this moment as we come on the air. Let's ask Gabriela Santos, chief market strategist for J.P. Morgan Asset Management, with me at Post 9 once again. Welcome back. Thank you. I have to say, reading through your notes, you sound really positive on this market.

We do sound positive, positive first on the fundamentals. For the economy, we see growth normalizing this year, 2%, but zero recession in our base case. We see inflation also moderating towards 2% by the end of the year. So you still have a pretty resilient nominal growth backdrop for companies. So resilient revenue growth, at the same time that it seems to us that the big takeaway from fourth quarter earnings was a bottoming in the margin contraction from last year. I mean, I read through the notes here. I mean, you sort of hesitated for a second where I said you seem pretty positive, but you say positive trend for stocks should continue. Fundamentals point to further gains. You use the word sweet

spot at the overall level. Expect equity multiples to stay elevated. That's somebody who's pretty positive on this market. I hesitate when we say very positive just because I want to. Sorry for using the word very. No, no, no. We are positive. I just want to clarify some nuances beneath the surface. I think when we speak about the fundamental backdrop, it is supportive, but there are pockets of important normalization here. We're not talking about re-accelerating above-trend kind of economic growth. We're also not talking about a very swift return to normal interest rates. So things that are really tied to nominal GDP or to rate cuts are not the environment we want to be focused on. Okay. Okay. Today's CPI really did nothing to

upset the story. It's not like we expected anything in March anyway. And now there's a bunch of data still going to come around before June when the market still is placing that big bet that you're going to get the first cut. Is that how you see it? That's right. I mean, it really didn't change the narrative. If you were bullish on inflation or bearish on inflation, you took away the same conclusion you came into the report with. Ultimately for us, I mean, if you actually take it out to two decimal points, CPI beat by very little. It increased 0.36 percent. So it wasn't a hot 0.4 percent. And it's still the same remaining inflationary pressures of shelter and auto insurance. People forget auto insurance is adding 0.6 percentage points on its own. So it doesn't

change the narrative. These are lagged measures. We do expect inflation to continue normalizing. And it's really nice that we had already taken out three and a half rate cuts since mid-January. And now the market is completely aligned with the Fed dots. So if there was any doubt, June is really the earliest for cuts, but still very much on the table. What do you make of what some suggest is now the changing makeup of this rally? One that was led primarily by NASDAQ, large cap growth stocks. Maybe that's changing a bit. Maybe it's changing a bit even within that space of large cap tech. It is changing quite a bit.

And I think it's actually a healthy sign. For example, within mega cap tech, the Magnificent Seven that dominated so much of returns last year, there was dispersion within the group, but they were all up. This year, you're seeing quite substantial dispersion within the group. Some are up double digits, some are performing in line with the market, and some are down double digits. That's very healthy to see, thinking of the actual companies as individuals. You're also seeing other parts of the tech sector participate and other sectors, things like health care, which we had talked a lot about last year as being one of our favorite sectors contributing as well. So I think it's a

very healthy appreciation that it's not just AI, it's not just about the initial beneficiaries of that theme. It's also about resilient earnings. At the same time, you suggest it's perhaps too early to invest in areas of the market that need rate cuts. Now, if there's one sector today that you look at or one index, the Russell is red. No big shock, because if CPI still reflects that inflation to some degree is maybe a little stickier than people think or it keeps rates at least a little elevated, that space is probably not going to work well in that environment. Is that a fair assumption? That's right. I think if your investment thesis is purely dependent on substantial rate cuts as the catalyst, it's still too early for that. The time will come,

but it's still too early. And the place to really express that view is, for example, size. So a preference for large or mid cap versus small cap. And it's even within sectors. So, for example, it's quite impressive over the past year since the SVB crisis a year ago, that regional banks are down 10 percent, while the large cap banks are up 14 percent and the broader market is up 22 percent. So it's nice to see that differentiation in size, but also within sector. To those who say, well, the rally is kind of looking a little tired and maybe they use NVIDIA as a litmus test on the power and strength of the market. If Nvidia gets a little tired for a little while,

does that have any difference, make a difference at all on the quality or the strength of this move? I think it very much does at the index level, just given how large, not just Nvidia, but several of these companies have gotten. And at this point, the top 10 companies represent 33 percent of the index. So at an index level, it certainly matters. But our perspective is that it is getting a little bit long on the tooth, this hyper focus on the MAG7, but we don't expect them to collapse as a

group just for there to be a little bit more muted returns from here and that big differentiation within companies. I think for the space, which is rallying today again, it's really not about CPI rates, the macro. It's just a little bit of fatigue around the AI story. And there are several conferences and industry events that can help pour a little bit of cold water on the theme. Our technology correspondent, Steve Kovach, is going to join us now. Because, Steve, this is quite a snapback that you're getting in some of these names and it really isn't just NVIDIA though it obviously stands out because it always stands out it's up better than five percent but Microsoft's up near three uh Amazon's having a pretty decent day uh Microsoft is up two and a

half percent the only one that's really not really participating is apple which is green uh but what else is new yeah and and look and apple like we've been saying for the last couple weeks scott is just apple has been such a laggard in this group because there's still no like coherent ai narrative around apple yet they're trying to paint one they're trying to picture one they released new laptops a couple days ago and called them AI computers. No one really bought that. And again, it's all hinging on that WWDC announcement about whatever their AI product is going to be. I'm also looking at Oracle, though. I know we don't put that in the mega cap tech at the same time, but it's just so demonstrative. The results were mixed. You know, they missed on revenue slightly, but they just

said AI about 10 billion times on the call. And that's what got people excited. They said things like the demand for our AI product is outstripping our supply. Boom. That got people excited. They expect to see, you know, book more contracts around AI. That's what got people excited. So that is kind of telling me that all these other kind of companies that sat out last year of the AI narrative are coming into the fore. The opposite story with HP Enterprises a couple of weeks ago, and they reported earnings basically saying we can't get enough NVIDIA chips in order to do what we want with AI. They got punished. But Dell was the

opposite story. They said we got gobs of AI chips and we're able to do what we want to do on the cloud side there. So I would also point out there, as we're looking back to the mega cap tech stocks, Microsoft was not punished the same way that Google was punished with its snafu with Gemini. Last week, you might remember, our Hayden Field on cbc.com reported, Copilot, the image generator there, is having very similar problems to what Gemini had. But the market kind of brushed that one off, perhaps because of the lead that Microsoft already has, or that perception of the lead. But that is also very telling, that maybe some of these problems don't really worry investors. It just kind of depends on the company. I like that. I like that comment that you make there and noting the differentiation between the way that those stocks have been treated. So, Gabriella, Steve, you know, since he brings up AI,

we've had a debate on this program multiple times over whether we're late cycle or we're actually much, you know, more towards a mid cycle because AI has either prolonged or renewed the whole business cycle. The whole way that we're going to think about corporate spending and the way that, you know, lives are changing and stocks are moving and the economy is evolving and all that. How do you weigh in on that critical question? I think it is so refreshing to talk about the economy as being in a business cycle again, rather than just binary soft landing, hard landing, no landing.

We do think the cycle is extended this year. We don't think it is going to be the Fed that kills this economic cycle. So ultimately, it's going to be what determines the end of this expansion is going to be based on whether we have some kind of shock. And here, oil prices traditionally is a shock that ends expansions. Otherwise, you can be in what we would consider a late cycle for a considerable amount of time, for years and years. And there are many indicators you could look at. The one that suggests later cycle is really the labor market, right, with the unemployment rate below 4% or 4% for 26 consecutive months. So it just makes the economy more vulnerable to a shock.

But if you don't get that shock, the expansion continues, which is good news. If NVIDIA takes a break, how much do we need Apple? We used to think we needed it a lot. This market has sort of thrown a little cold water on that idea because so many other things have worked, even though it hasn't. But to what degree do we need it if some of these momentum trades actually take a longer than we think break? I would answer that two ways. The first is defining what taking a break means. I think if you all of a sudden have going up every day. Exactly. I think stop going up every day is perfectly digestible, especially if you continue to see other tech companies, other sectors participate in the rally.

If you get to a situation where you actually have a substantial momentum unwind and you actually have a fall in not just a couple of the Mag7, but more than half or all of them, then you're in trouble at an index level temporarily. But that is not the case that we expect. We do think there are good fundamentals for some of these large companies, and you can have the other ones catch up. You end up somewhere in the middle. Steve, you know, the other thing I hear from investors who are around the Apple name is,

yes, there's a lot of optimism about WWDC this summer and what AI is going to bring. But it's also that buyback, which is so large as being a bit of a backstop, if you will, or a floor underneath shares to some degree. They may dip below 170, but they may not stay there very long for that very reason. Which is exactly what happened last week, Scott, dip below 170. And then everyone suddenly remembers there's massive buybacks every year that only keep going up. And that's what Apple does. Two years ago, when the market just went through that horrible period, we saw Apple kind of stay afloat, too. A lot of people thought that was because of the buybacks stay in Apple because you got that guaranteed check coming in. And

that's probably a lot of what's holding it up now above 170 is because they know that's coming, even if the AI picture is not clear. Another thing about the AI thing or lack of AI, rather, is all these estimates we're getting for late in the year for the fall iPhone cycle, the iPhone 16 cycle. And the question becomes, are those bullish estimates because the analysts think, OK, there's going to be some magical AI thing that only the iPhone 16 can do. Therefore, everyone's going to rush out and start buying iPhones again. Or is it just that we're on this cyclical part of the iPhone cycle where a lot of people just have old phones and are ready to upgrade? It feels like more of the latter, but we have to wait and see until ideally June with this WWDC announcement. All right. Good perspective from Steve Kovach. Thank you very much for that.

Let's bring in Keith Werner of Truist Wealth. Keith Lerner, excuse me, of Truist Wealth. So, Keith, how does your view match up to what you've already heard on the program? Well, first, great to be with you, Scott and Gabriela. It actually matches up pretty well, I would say. Overall, Scott, you know, we've been positive since October. At this point, we think the underlying trend is still positive. When we look at forward earning estimates, they just made a new record high last week as well. Economic growth is, we expect a step down, but we're still showing resilience. The inflation picture will be, you know, it's still moving down, but it's not going to be perfect.

So all in all scott we're still constructive a lot of discussion about tech uh tech's moved a long way we are seeing that um you know that broadening beyond just a few names uh you mentioned to me before we only have four of the max seven stocks up this year and despite that the market's up eight percent so again uh we're gonna have you know some gut checks along the way. But at this point, we think we should still respect the underlying trend, which is positive. Where's your favorite place right now in the market? Favorite place? If you look out over the next year, we still like tech and communications. So

that would be the place that we still think makes the most sense. Because when you look at those areas of the market, earnings momentum tends to be the most important. And part of our thesis over the last year with tech is that even if the economy slows down, that companies would continue to have to invest in tech, otherwise be left behind. And we heard from Salesforce, and then also what we saw with Oracle yesterday confirms that point of view. But I would say outside of that, I mean, we also like financials making a new high i think if the economy still is resilient um the financials will do well it's an interesting status financials are actually up more than tech maybe by about a percent uh since the october lows and we still

think areas like mid caps uh equal weight makes sense to at least diversify some of the concentrated concentration risk but to your specific question we still think tech and communications are among the best sectors for the next six to twelve months so to those who say that that tech especially is either too stretched or showing signs of a bubble you you say what um we we do not see a signs of an overall bubble i think we see signs or pockets of speculation we see people starting to use ai in every transcript even when it's not you know really even when the business isn't there. But as an example, Scott, we look back and I was in the business in the late 90s. During a three year stretch at the highs, tech outperformed the S&P by about 250 percent.

Over the last three years, tech's outperformed by 30 percent. We don't think that's bubblicious. Earning trends is the key. What would make us more negative if we start seeing those relative earning trends start to weaken. We haven't seen it yet. That's what happened in 2022. But again, does that mean we won't see some cooling off or where you have a big kind of blow off move, you know, where you consolidate sideways? I think that's going to happen. But again, if you stick with the underlying trend for the next six to 12 months, we still think it's up. But what's that mean? Signs or pockets of speculation?

And then in the same breath, you mentioned AI. Are you worried that a lot of the trades that have ridden this AI wave are exhibiting too much euphoria? I need you to be more specific. Yeah, well, if we look at some of these small cap names names that there's a there's you know some news and it goes up 25 in a day or the biggest name in the russell 2000 is now you know much bigger than everything else um i think that's it these kind of smaller speculative plays but if you look at the big cap stocks as a whole i mean they're trading around 25 to 30 times uh you know valuations or on a p basis and a p growth, they look much more reasonable and a lot different than 50, 75 times that we saw more broadly in 1999 or 2000. So when I say pockets of speculation,

you see things in the morning that don't make sense. But I don't think you see that broadly, of course, the market, especially not in some of the big mega cap stocks that have really good cash flow and fundamentals and that we think are not cheap, but are reasonable relative to the growth outlook. How would you address that question? Speculation, bubble in certain parts of the market. I'm not suggesting in any way that the overall market is a bubble or anything, but some stocks have gone up an awful lot since the October low. They have gone up an awful lot. And here we're specifically talking about that cohort of the Magnificent Seven and then some select small cap companies,

as Keith was mentioning. But I do agree that at the broader fundamental level, we don't see signs of a bubble because ultimately, especially for the large companies, there were fundamentals behind that increase, which are earnings, right, which increased 30 percent last year. These companies are already monetizing AI, cutting costs. And of course, their valuations had been cheap to begin with. With that said, I think we do have to be on a lookout a little bit further down the road, whether eventually it becomes a little bit more frothy, when you start seeing Google searches for things like AI start to match the level for crypto in the pandemic, you just have to be a bit on the lookout and think about not just what worked, but what can work in the future. But I mean, I'm thinking of things like the chips.

If the control room, can we pull up, I don't know, let's pull the SMH up from November 1st, if we can, until now, or from the late October bottom, because it's going to show you way low left, way high right. That's well beyond mega caps. That's well beyond NVIDIA. That's, I mean, there's your chart. It's, you know, you've gone virtually one way, whether it's, you know, it's NVIDIA, it's Broadcom, it's AMD, it's Taiwan Semi. I mean, I go down the list of things that make up that index that have ripped. Are we worried about the semis at all? Well, what I think is interesting about the Semi moving away from just a pure AI plus story within that group is I think it's a great example of different parts of the market that have been following very different cycles, right? You actually had quite a recession within semiconductors earlier before November of

last year, and you had a lot of pain in those kind of companies. And you're now starting to see a nascent recovery in semiconductor production and sales. And here, not GPUs, AI related, but more related to computers and cell phones and electronics more broadly. So I think that's a great example of what's been working the past four months. But we can't forget where it's come from, which was a very painful cycle before that. Keith, give me a comment on the semis as we look at this chart here, which tells a pretty dramatic story about what this trade has done. Yeah, I think it's listen

they're extended i mean they're ripe for a little bit of a correction but again if you think about if you're bullish on tech you have to be somewhat positive on semis because semis lead so again i think probably a cooling off phase but again if you have six or 12 months we would stick with that underlying trend and gabriella just hit on this too we can't forget that in 2022 you know the mag 7 was down 40 percent. NASDAQ was down a lot. A lot of these names were down quite a bit. So if you zoom out a bit, it doesn't look that as stretched. But again, on a short-term basis, Scott, yeah, I mean, look at that chart. It's straight up. It's like a hockey stick.

So what does that tell you? That means a cooling-off phase. But again, I would expect more of a cooling off in time as opposed to a large, significant correction. All right. We'll make that the last word for this segment. We'll talk to you soon, Keith. Thank you, Gabriella. Thanks as always for being here at Post 9. Let's send it over to Kate Rooney now for a look at the biggest names moving as we head towards the close. Kate. Hey there, Scott. Let's start with On Holding. That's the Swiss shoemaker of on clouds and on running. It is on pace for its largest ever one day percentage drop, reporting a surprise loss for its fourth quarter, citing considerable currency impacts. It saw about

a six cent loss versus expectations of 13 cents in terms of EPS for its fourth quarter. Then you got Archer Daniels. It's on the rise today as it wraps up an accounting probe. The agricultural company says it completed an internal investigation at its nutrition subsidiary and now says that won't have any sort of material impact on finances. It's taking away some of the overhang on shares. Quarterly results did fall short, but guidance was upbeat, Scott. All right, Kate, appreciate that. Kate Rooney, we're just getting started. Up next, extra credit. We're going hunting for yield with the credit markets in the credit markets with Sycamore Trees' Mark Okadaotta plus why he thinks the

fed's inflation fight is far from over and what that could mean for this record rally and later you're going to hear from citadel founder and ceo ken griffin exclusively from a conference down in florida we're live at the new york stock exchange and you're watching closing bell on cnbc doubt Welcome back. Green across the board. Dow's at the highs of the day. S&P 500 on track for a record close. Today's CPI print showing inflation rising again, slightly hotter than expected, but clearing the way for investors to resume buying high-flying tech names.

That seems to be what's happening. Joining me now, Post 9, Mark Okada of Sycamore Tree Capital Partners. Nice to see you in person. It's good to be here, Scott. You have a big smile on your face. You sat down and said, it's weird to be bullish. Yeah. But you are. I am. I am. Once they decided to turn on the spigots on that pivot and you got Yellen doing the same thing. Markets are washing liquidity, streets wide open. It's a busy time. There's a lot going on. You got a lot, you know, it's picking up, you said, as you sat down. In what respect? Well, supply has been the thing that I've been thinking about a lot. I mean, you've got to learn from things. What we learned from COVID

and we learned from the inflation that came out of that was it was all supply. If you got the supply wrong, you got the housing market wrong, you got kind of everything. The Fed got it wrong. I mean, they didn't, they thought it was transitory. They didn't understand the supply side. So I've been thinking a lot about supply. And from a supply standpoint, labor seems to have topped out.

I mean, I'm in Texas. We got a lot of people came over the border here a lot. But I don't think there's going to be a labor shortage anytime soon. So that's kind of off the table as an issue. And, you know, the other parts of supply is really about treasuries. And then we have the CPI print and the other things about M&A. M&A is something that I think is going to continue to rebound hard. Wow, I cannot remember a time that we've spent together where you've been this bullish. You say this is the most bullish we've been on overall risk, at least in credit.

You're talking about specifically credit? Because, I mean, that's your wheelhouse. Sure. It is weird because credit people see the world as half empty. But if you're going to have this big of a move in what the Fed's doing as far as leaning against the economy and leaning against markets, and then you have this dynamic where I think Yellen, as a former Fed chair, has kind of politicized the whole situation. And we are in an election year and Biden's approval rating is not good. So I don't think there's any way that they let a recession happen anytime soon. So credit people care about bad things like recession. If recession's not in the cards and we're making 9, 10 percent in higher quality credit, let's go. Yeah, but I mean, the Treasury Secretary, she's not the one responsible for cutting interest rates. That's right. That's right. But on the other hand, look at what she

did in flooding the world with T-bills in December. And look, they've forgiven $130 billion of student debt. There's more levers to pull on the other side if things get weak. So I don't really think we're going to have a cycle anytime soon. I wish we would. It'd be kind of fun to have that. But what do you think? Are we mid-cycle? Where are we? You thought maybe before we were late cycle. And we are long cycle, very long cycle. But again, I think what happened in November, December actually resets the clock a bit on this economic cycle. And it's hard. We don't see broad weakness anywhere we look.

Consumer, capital markets certainly. And there's plenty of flows. And every time I talk to people on the street, it's like, let's go. There's been this huge drought of M&A. We haven't seen 23, 22, 23, probably some of the worst years for M&A in a long time. If that bounces the way we think it's going to bounce, there's going to be lots to do. New issue is always a good thing to play with as opposed to trying to figure out secondary. And it's just starting. It's just getting going. I mean, we're doing a lot of dividend financing and things like that that aren't that interesting.

But once this sort of M&A sort of actually gets going, I think we're going to see a lot more deal flow and, you know, and good deals. Wow. I mean, when the credit guy is all bulled up, that makes me a little nervous. Yeah, you should. Definitely a sell signal. Yeah. That's kind of a top. Yeah.

That's kind of a top. When do you think we get the first rate cut? Because I mean, it sounds to me as though that is really the overriding factor for you, that we had a trend change, right? The Fed pivoted, and now it's don't fight the Fed and don't fight liquidity. Don't fight the supply. Yeah. Yeah of everything. So last time he had me on I said there's no we were that's it We were they were pricing seven cuts at that time and I said no way we're in the higher for longer camp Mm-hmm. I think there's a good chance that they don't they don't hike at all this year I actually think that's probably a good thing cut They don't cut at all and and maybe if some people are talking about maybe one hike that would be upsetting a bit But that seems really unlikely. Yeah, right. That's a that's an outlier case. I think the case where they don't they don't cut it all this year is still an outlier case. I mean, the Fed is pretty

much telegraphed that they're going to they're going to go at some point. They sure did. Right. Jay Powell, the Fed chair, was he was dovish last week on the Hill, don't you think? A hundred percent. And so I think they go in maybe June. But I don't think markets care. Today is a good point. CPI comes in hotter. This market's all-time high. This is not a Fed-centric market right now. It's really about liquidity and momentum, I guess. But I'm not an equity guy, so don't ask me those questions. But why do you think that a second wave of inflation is the base case? You made that statement to our producers. I mean, be careful which metric you look at, because

PCE is closer to the Fed's target than CPI, and this PCE matters more, doesn't it? It does. It is, because PCE is data. CPI is survey, right? One makes a lot more sense in this kind of world. So are we going back towards the number? No, no. So history tells you that it's rare to have one peak in inflation, that usually there's another hump somewhere down the road. I think that's coming at some point. I don't think it's right now, but if you were in an election year, we took financial conditions very, very easy. That's why I'm talking about M&A. That's why I think that continues to go. That's going to be very accretive to the big banks, the money centers, but it's going to take a bit. This bout is over. We're definitely from a supply standpoint. We don't have the labor sort of pressure, I think, on that inflationary dynamic.

Right. Wage pressure's coming off a little bit. And this was mostly, wouldn't you suggest, a pandemic-induced supply shock? 100%. But it's not going to happen again. Right, because I hope not. I hope we don't lose a lot of people again from a pandemic. I'm not saying ever, but I'm saying we're not going to get a pandemic induced supply shock to cause a second wave of inflation right and then some of the

stimulus that we did out of washington now we probably did too much but that still is going to run off the economy is is strong i think i think if you if you were sat at my desk and you saw all the things that were happening, you'd think, wow, the GDP numbers are probably a little light. So if we start to heat up in here, you could certainly see another bout of inflation. But the thing that's a little more concerning, Scott, is the supply of treasuries, right? We've got to issue 24%. You didn't even talk about the deficit. Yeah. No, come on. I'm bullish 24%. You didn't even talk about the deficit.

Yeah. No, come on, I'm bullish. I don't want to talk about that. All right, we'll save it for the next time. See how bullish you are the next time we see each other. Be well. Thanks, Scott. Mark Okada from Sycamore joining us right here at Post 9.

Coming up, Citadel's Ken Griffin. He's live from the International Futures Industry Conference. We're going to get his thoughts on everything from the markets and interest rates to the presidential election and regulation. It is an interview you do not want to miss, and it's coming up after this short break. Well, welcome back. Citadel founder and CEO Ken Griffin speaking exclusively with our own Sarah Eisen in Florida at the International Futures Industry Conference. Here's what he had to say about the market, about AI, and regional banks. So as an investor, what do you do right now with a record high stock market? Is it time to be adding risk or pairing risk? Look, I think the stock market is the tail of many

worlds right now. You've got the Magnificent Seven, you've got this incredible story that's just ripping through the equity market about the transformative changes that are coming with AI, and then you've got much of the market is at earnings price levels that are far more in line with historical averages, particularly across the industrial base so it's these are this is a moment in time where you can you can in some sense you can sign up for big bold you know these companies are changing the future or you can put your money to work in areas the market where price earnings ratios are much much more

in line with historical averages and have a very different risk-reward profile which what which one are you I'm so happy I've run a hedge fund multi strategy multi strategy hedge fund I let my colleagues have to make those choices although you must have thoughts on on AI and the momentum that we've seen in some of these stocks and whether it looks frothy or it looks like we're at the beginning so none of us know where we are in this journey what I will tell you is the team and whether it looks frothy or it looks like we're at the beginning. So none of us know where we are in this journey. What I will tell you is the team in NVIDIA looks like they're really on top of their game right now.

Yes. I mean, there's no ifs, ands, or buts. They have done just an incredible job. This is like the gold mining in California. Those that sold the picks made a lot of money. And it's very clear that NVIDIA right now sells one of the most important ingredients the AI story they've done an incredible job of capitalizing on it what's really interesting to see is that the large language models the barriers to the production of a world-class model

appear to be somewhat lower than we had thought they were nine months ago or 12 months ago I mean if you look at just recent events, you know, Anthropic's most recent model release is a real competitor to what's been done at OpenAI. And that's one hell of a statement. And in fact, I think you could argue that there are... You're not an investor in Anthropic, right? I'm not.

Okay. I'm not. Just see if I'm chalking my book. Yeah. Sorry. That's fair. Just to see if I'm chalking my book. Yeah. Sorry. That's fair. No, no, go on. So there are competitors.

We want to find out who the next NVIDIA is. I don't know who the next NVIDIA is going to be. I don't know where AMD is going to get on their race against NVIDIA. I don't know where Intel is going to get. But right now, NVIDIA sits in a pretty good position. Also in the market, there have been some worries. Some concerns were one year out from SBB collapse, and regional banks, commercial real estate has been a problem spot.

Just last week, New York Community Bank, you were part of the capital infusion, along with Treasury Secretary, former Treasury Secretary Steven Mnuchin. Why did you invest a billion dollars into that bank, which looks to have some problematic commercial real estate exposure and also, I think, has some problematic internal controls? Look, the question with every investment is about whether or not it's the right price. That's the fundamental of investing. A building where rents have come down may still be an incredibly attractive building

at the right price. And for the risks intrinsic in New York Community Bank, I think that this is the right price. And to be clear, Steve has an incredible record investing in the banking space. He's very thoughtful on these issues. I think if you wanted to know, you know, blow by blow how he thinks the bank should best be run to address the issues at hand, you should ask him to join you live on TV

because there are very few people in this world who are as talented as he and his team are at thinking about opportunities in the banking sector of the economy. Do you expect more ripples from the regional bank fallout? I think we're going to see just a continuation of these one-off idiosyncratic stories over the next couple of years as both commercial real estate struggles and as the broader economy encounters various different idiosyncratic setbacks.

So we'll see more of these stories over the years to come. Are there any risks? All right, that was Citadel founder and CEO Ken Griffin. You can add him to the long list of invidiables. That is clear. And you can catch the remainder of that interview streaming live on CNBC.com. So please do that. Up next, we're tracking the biggest movers as we head into the close. Kate Rooney is standing by with that. Hi, Kate. Hey, Scott. So a leadership change in

the C-suite helping one Dow component. It's leaving the blue chip index today and then a failed drug trial sending shares of a pharma company in the other direction. We'll bring you all those details next. We're 15 out from the bell. Let's get back now to Kate Rooney for a look at the key stocks she's watching. Kate. Hey, Scott. So 3M is the biggest gainer on the Dow today after news that its CEO is stepping down. Mike Roman will pass the torch to an outsider, Bill Brown, who ran L3 Harris. Shares of 3M have been under pressure amid its legal battles over so-called forever chemicals. It's also got an upcoming spinoff of that health care division and continues to face a decision about its dividend.

And then Acadia Pharmaceuticals has been dropping double digits today after a failed drug trial. This was for its late stage schizophrenia treatment, which didn't demonstrate a, quote, statistically significant improvement over a placebo in treating some symptoms. Scott, back over to you. I appreciate that. He still had Boeing under pressure as new details emerge around its max production problems. We've got the latest and why it's dragging down that broader airline space today, too. We're keeping a close eye as well on the S&P heading for its 17th record close of this year. And as we head to break, a quick message as CNBC celebrates Women's Heritage Month.

Being a changemaker means embracing uncertainty to deliver outstanding performance. I think to do that, you've got to start with curiosity, be curious about the challenges in front of you. You then have to have the commitment to go the long haul to do that. It often requires partnership to come up with creative solutions. And lastly, it requires agility to pivot when you need to. Coming up next is lights out for the solar stocks. Enphase Energy is tumbling.

We're going to tell you why. Plus, Boeing's production problems pressuring the airlines today. Those stories and much more when we take you inside the Market Zone. We're in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Let's fill a bow on what has Boeing and the airline stocks moving today. And Pippa Stevens on the sell-off in solar. Micah, begin with you.

Well, NVIDIA has a big fan in Ken Griffin. We learned that today. And that stock continues to have many fans because it's up almost 7% in a nice snapback. Yeah. So a couple days, 10% take us back a few days, really, or maybe a week in terms of where the price was. And you're trading $60 billion worth of the stock today and a 6.5% move higher. So this is the game that will stay underway for a long time. And the market is performing, I have to concede, very admirably.

You have a lot of dispersion. Breadth is like 50-50, up-down today. You do have the big caps doing their job. I'm surprised to see the volatility index down 1.3 points. It's under 14 again. All we had to do is get past CPI and have it not be inherently a scary number. And all of a sudden, we're sort of locked in. It's a very well-lubricated market. You have a lot of house money. People take more risks when they're sitting on house money, on profits. And I think you almost have to wait for a ton of equity offerings or supply or something to really break the fundamental piece within tech to get a real pullback or correction at this point. Although I still will say I don't think

it makes sense to just fully expect the choreography to stay this positive. But you'll get a bear almost every day, you know, one a day saying, oh, the rally is exhausting. It's looking tired as they continue to try and hang on a key point and say, you see, this just can't continue the way it is. And the market has shown this unbelievable resiliency to say, maybe we can. No, and it absolutely has for a long time. I mentioned to you those years that this year looks like 2013, 2017. You never got an across the board, deep pullback. And every little wobble lower tended to get bought. And you took turns in terms of what was resting and what was moving aggressively to the upside sector wise and stock wise. And it can stay that way. I just think, again, it's a matter

of setting your expectations based on where we've come from. And again, we're only 8 percent above the early 2022 highs. So it's not as if we're plowing tremendous amounts of new ground. But, you know, I'm usually a little wary of when it seems so good to just assume it's going to stay that way. Well, I appreciate that. We'll be back to you in a minute. Phil LeBeau, I mean, Boeing, the stock just can't get out of its own way because we continue to have negative headlines around this company. Yeah. Production issues as well. And all of it sort of a perfect scenario for the stock to remain troubled. Yeah. As long as there are three investigations going on, which there are right now with the DOJ, FAA and NTSB. And as long as some of these details leak out about things like the safety audit.

And that's what happened overnight. The New York Times had details about the safety audit done by the FAA. Look, these are damaging numbers. Eighty nine production checks were done. Thirty three of the times they found failures. Ninety seven instances of noncompliance. All of that was enough to push shares of Boeing lower today. By the way, Boeing's head of commercial airplanes, he put out an employee memo today outlining some of the changes that they're making as they assess their quality controls. That was not enough to push the stock back up to even break even. Max production, remember, is capped at 38 a month. Why do I bring that up? Because you look at shares of Southwest hammered today after the company said that it is going to be reassessing its full year guidance in addition

to cutting its 737 max delivery plans. They were expecting to get 79. They're going to get 46 this year. That's enough for shares to be under pressure. And we heard not bad comments, but just there's some caution that many people have surrounding the airline stocks, despite airlines today. Some of them dealt a reaffirmed positive guidance, Scott. But right now you have investors looking at the airline saying, is it really going to be that strong? I should point out, Scott, every CEO tells me that there is strong demand right now. They are not seeing a slowdown in bookings. All right, Phil, appreciate that. Phil LeBeau, Pippa Stevens telling us about solar stocks today getting hammered. That's right, Scott. Solar stocks are getting crushed and it all comes back to today's CPI print and concerns around higher

for longer rates. If rate cuts are pushed out further, it will have a big impact because solar companies depend on borrowing, especially residential installers. And higher rates also make rooftop systems more expensive and so cut demand. Now, this is playing out in today's performance with Sunrun, the largest U.S. residential installer, down more than 10 percent. Sunova, Enphase, Sunpower and SolarEdge also declining. And as Piper Sandler put it, higher interest rates have, quote, ransacked demand and valuations of companies levered to the shorter cycle resi development. There's also a growing overhang as we approach the election and what that means for the IRA's lucrative incentives. Scott.

Thank you. Getting about the bell here, Mike. Cleared until the Fed meeting next week. It was seen. Yes. PPI Thursday, but generally to the Fed meeting. Absolutely. Yeah.

I mean, after PPI. What's the PPI going to tell us that we don't already? Probably not a whole lot. Yeah. Thank you. Mike Cianci What's the TPI going to tell us that we don't want to raise? Probably not a whole lot. Yeah, okay. Thank you. Mike, you and Tully, we'll see you on the other side tomorrow. Dow's going to go out near 250 into OT with Morgan and Johnson.