Closing Bell - Closing Bell: Pullback or Pop? 3/27/24

Episode Date: March 27, 2024

What lies ahead for stocks at large, for tech as a sector and the broadening of the market? Solus’ Dan Greenhaus, Chris Harvey from Wells Fargo and Crossmark’s Global Investments break down their strategies. Plus, star Apple analyst Erik Woodring weighs in on whether or not the company’s big event coming up could shift investor sentiment. And, Tesla shares driving higher today. We tell you what’s behind that pop and what Altimeter’s Brad Gerstner had to say about the EV maker. 

All right, welcome to Closing Bell. I'm Scott Wabner, live from Post 9 here at the New York Stock Exchange. And this make or break hour begins with this question, whether investors should prepare for a pullback or another pop in stocks in the quarter ahead. We will ask our experts over this final stretch. In the meantime, your scorecard with 60 minutes to go and regulation looks like that. Now we've gone positive, albeit slightly in the Nasdaq. We've been positive for the Dow and the S&P for much of this day. Merck, Amgen are putting in solid gains today from the health care space. Home Depot, Caterpillar and Honeywell are also standouts in the session. As for technology declines in NVIDIA, Microsoft and Meta were weighing on that sector for much of the day. You see they're still red. Apple and Tesla, though, are higher. And Apple, by the way, the worst performing mega cap

tech stock so far this year. And by the way, all-star analyst Eric Woodring of Morgan Stanley joins us shortly with his take on what could turn that stock around. It does take us to our talk of the tape. What lies ahead for stocks at large, for tech as a sector, and for the broadening of this market? Let's ask Dan Greenhouse. He is Solus Alternative Asset Management's chief strategist. He's here with us at Post 9. I know you're as excited as we are about Eric Woodring coming up. I'm happy to be here and to contribute to the show. OK, good stuff. So what about the momentum of the rally? Is it waning? And is that a negative sign or is it just a rest refresh as we round out another good quarter? We're going to be five months in a row up for stocks and we just carry this momentum as we begin a new quarter.

Yeah, listen, I think you're definitely having a bit of a breather here. But in the context of what we've experienced off the October low, call it a 30 percent plus rally for the overall index, more obviously for a number of the names driving the gains, some level of breather. And we've talked about this and a number of people on the show have talked about this. Some breather for a period of time here into earnings season. Probably not unexpected, probably not unwarranted. We're able to go up without tech and that has to be viewed, I would think, as a positive sign for the overall direction. Sure. I mean, listen, I've talked about this for a

year. The industrial space continues to be a standout, both fundamentally and technically. Energy is suddenly back on the tip of everybody's tongue. A number of names in that space, something that... You've been talking about that. It's been the leading space this month. That's right. It's been the leading space. Now, obviously, we're not, Solus isn't trading that quickly. But yes, I think there are a number of names in the energy space that fundamentally still look quite good. And obviously, the space is playing a bit of catch-up here, being as under-owned as it is.

But yes, you'd have to take the broadening out of the market as a positive. All else equal. So we did our Delivering Alpha investor survey where we asked many of the folks who end up coming on the network and talking about the markets, do you think the market has run too far too fast? Almost two-thirds said yes, we're in for a pullback. What do you make of that? Well, I didn't contribute to that survey. How would you? How would you?

Folks, nobody told me about it. What I've said. Listen, we've talked about this in the past over the years. I struggle with the phrase too far, too fast. I don't know what that means. No one has ever really defined that. Do I think that a point like Joe Terranova has made in the past? Is the index too far away from its 200-day moving average? Probably. And some level of at least a pause is probably worthy. So if that's your barometer for quote-unquote too far, too fast, yeah, it's probably gone too far, too fast. But again, that doesn't mean that you need to have some 15 percent decline in equities in order to restore equilibrium. It just means you can't keep going up at the pace that we've been going up. And there's nothing particularly difficult or unusual about that. Have we gone up the way we have? If you think, yes, maybe it's too far,

too fast. Is that because of pending rate cuts? Because, again, in the same survey, when you ask, you know, how many times is the Fed going to cut rates in 2024? Two is almost two thirds of the vote. So the market thinks three. The Fed dots suggests three. Our smart investors and market watchers think, no, more likely two. Yeah, I thought for a while that two was probably or over under, maybe three. But but let's call two and a half was your over under. The market was always I'm sorry, the Fed fund futures pricing was always incorrect. I'm not even really sure how to explain to viewers why that is, other than to say six or seven rate cuts was almost never going to happen unless you had some sort of meaningful drop-off in economic activity, the likes of which I and numerous other people did not expect.

So your over-under is call it two for the year, maybe one in the summer, and maybe they sneak one more in before the election or shortly thereafter. But do I think that matters? No, I don't think that really matters per se. And you've seen this 30 percent rally we've had off the lows has come as we've scaled back those expectations, as longer-term and medium-term treasury yields have backed up. You've still had both a broadening out in the market and a perpetual move higher, both of which are positive and are independent, really, of what the Fed is likely to do. What if we don't get any cuts? Like James Gorman, right, the former Morgan Stanley CEO, now executive chairman, he suggested on the network, I'd be surprised if they move in the first half of this year.

I wouldn't be surprised if they don't do anything this year. Yeah, listen, they might not do anything. I still think your over-unders is call it two and a half. What if they don't do anything? What if he's right? Do you think NVIDIA's earnings, NVIDIA's going to earn 30 bucks or whatever, like whether They might not do anything. I still think your over-unders is call it two and a half. What if they don't do anything? What if it's right? Do you think NVIDIA's earnings, NVIDIA's going to earn 30 bucks or whatever, like whether the Fed cuts once or twice? No, I don't think that matters.

Do I think Google's going to earn seven or eight bucks whether the Fed cuts or not? Yeah, yeah, I think they do. Or at least I should say the market thinks that they do. I think there's so much weight being put on the Fed still in an environment in which I don't think the Fed matters nearly as much as it has at intermittent periods over the last certainly 10 or 15 years, but let's call it the last two or three years. Doesn't it matter to certain trades? Like you can't possibly tell me that, well, they may cut none and the Russell's going to do well. No, that's fair. There are different trades levered to rate expectations.

The Russell obviously being in the next more heavily weighted towards variable rate debt is probably a little more susceptible. But Google and Meta and Apple, et cetera, et cetera. These are not long duration equities. But you're making the case then we get a continued play towards the top half of the market. That's why the mega caps will continue to do well. Because of the examples that you just gave, you're like, well, does NVIDIA's earnings matter on the Fed? And then you now you're talking about other mega caps. Yeah. And you're giving all the reasons why people continue to put money there. Well, yes, but I would I would apply that same rationale

to not just the top five or seven, but let's call the top 50 or 70 names or the top 100 names. I think at this moment, there are times where what the Federal Reserve has to say is crucially important. And that's been true for, let's call it, 10 to 15 years. It's because they can engender a risk-taking environment, the likes of which we've seen, again, intermittently over the past couple of years, which results in multiple expansion or profit expansion on the part of some companies. And that's all good for the broader risk landscape. Right now, I don't think that matters. The economy is humming, for lack of a better word, could be doing better, but the economy is humming, for lack of a better word. Corporate America continues to do well.

And I don't think whether the Fed cuts one or three times on balance affects most of the top names. If you look at the, think of the number of megaprojects that are being built in this country and the data center expansion, et cetera, et cetera, the Inflation Reduction Act, et cetera, et cetera. Nothing that's going on in the industrial space tells me that they're at all concerned about rates. I don't think, let's just pick a random large-cap name, Eaton, out of a hat. Eaton's not going straight up.

ETN is the ticker if somebody wants to pull it up, because investors in that name think rates are going to come down. It's going up because of the broader environment in which they're operating. But if you get a, you know, let's just call it a continued unwind in the momentum trade and rates remain a little sticky. And we'll find out what happens with PCE on Friday when the market's closed. Obviously, we'll trade it next week. But if rates remain sticky, the momentum trade unwinds. Does that in any way undermine the idea that the market's going to continue to broaden? No. So for starters,

I don't think the momentum, listen, is momentum tech, is tech, is momentum tech equals growth? There's certainly some element of that, but no, I don't think so. I mean, look at a chart of AMD, for instance. AMD has got to be 15, 20% off its high already. Intel has got to be 15, 20% off its high already. I think you've already seen rotation, not just more broadly into energy, let's say, but within semiconductor, within tech. And again, I don't think that's exclusive of what's happened with the Federal Reserve, but I don't think it's also because of the Federal Reserve. All right. Let's bring in Chris Harvey of Wells Fargo Securities and Victoria Fernandez of Crossmark Global Investments. Great to have you both with us. Chris, good to see you here.

You've heard what Mr. Greenhouse has suggested. If growth underperforms in the weeks ahead, is that an issue? Or are we having enough broadening that doesn't really matter as much as we once thought? I don't think it's an issue. And I think what you're seeing is positions have gotten too big for portfolios. The procrastinators have to pare them back. That's what we're seeing today. Late yesterday, you saw a sell off. That looked like it was rebalanced from equity to fixed income. And so you're seeing some window dressing at the end of the quarter. If growth underperforms in the short term, I don't think it really means all that much. You need to see a little bit of pullback or repricing of risk. And I think that's healthy. Are you bullish going forward? We think you could have a market melt up. What the Fed did last week-

You seem pained to say that. Because it's difficult for you to wrap your arms around that. Most people appear pained to be bullish. I want to know why. Give me the psyche of why. It pains me because we're putting so much more emphasis on positioning. And if you got the positioning right this year, it really didn't matter about what you thought about the market. If you got the positioning wrong, you're not too happy. So we focus more on positioning.

And we're in a situation where the market's not really looking at valuation. The market's looking at relative growth. The market's looking at the Fed saying, hey, the macro is a lot hotter than we thought or somewhat hotter than we thought, but we're still going to apply the same amount of accommodation. So we're back to a certain degree. We're back to 2021 where you have an economy that doesn't need the accommodation, but is going to get it. All right, Victoriaoria you say you're still cautious and i mean i i can't remember from mark most recent conversations of the last many months that you haven't been cautious why so

why still so cautious as this market continues to leave the bears of the more cautious by the by the side of the road you know i think being cautious for us doesn't mean that we're not fully invested. We are invested. We're just trying to be cautious in where we're positioning.

You're talking about positioning being a key component for people. Look, there is this momentum trade going on and we think it's gonna continue in the short to intermediate term. You've got 98 days, consecutive days, that the S&P is above its 50-day moving average. You still have more of this AI component that's leading.

And you've got this rotation in the market of sectors where their constituents are making new highs, going from tech to energy. You've got 80 percent of the constituents in the energy sector that made new three-month highs on Monday. So there is this momentum, but you still have some red flags out there. You still have some of the tailwinds of this market over the past few months that I think are going to pull back, the Fed being one of them. I do not believe we're going to get three rate cuts. You have the market believing this Fed put is back

in place after the last meeting. And I think you have to be cautious about that. And that'll be a surprise to the market. And I think the consumer is going to pull back. You're seeing interest payments as a percentage of disposable income surge 40 percent over the last year. Consumers are spending more than they're making. So all of that is going to come into play and you've got mixed data, right?

Regional Fed reports were down. You've got LEIs though that did turn positive for the first time in two years. So there's just this mixed bag of data that we think leads to us being cautious in where we're putting our money to work. Yeah, I mean, listen, I think there's a lot of what we just heard that's legitimate. I don't mean to say anything that's illegitimate.

I mean, there's a lot to agree with. But at the same time, the hesitancy that Victoria and Chris, like, we've seen this for the better part of a year now. And heard it. And yes, it's the same refrain. It's all going to happen. It just continues to not happen, not happen. But it's eventually going to happen.

That's what the more cautious, embarrassed viewpoints continue to send. Because otherwise, why would you be negative? Yeah, I mean, listen, not to take issue with both of them, although I'll take issue with both of them for fun on the show. But but like there's always mixed data. There's been mixed data for 15 years. There's always things you can point to to say X is going to happen and Y is going to happen. On balance, the economy is doing fine. Profit is doing fine. We're coming out of the earnings or we've come out of the earnings recession. Victoria mentioned that the LEI is starting to turn up, that the ISM is starting to turn up, like some of the more bearish things on which you would have hung your hat a couple of

months ago are starting to turn. So maybe you're getting that positive tailwind. And the one thing I would take issue with is the idea of the quote-unquote Fed put. The idea of the Fed put is that the Fed's going to ride to the rescue if something goes wrong. The Fed's not cutting rates engendering a Fed put. The Fed's cutting rates because they believe, correct or incorrect, that the inflation environment is shifting in such a direction that they don't need as much accommodation, as much restriction. No, but if the economy fell out of bed, they'd cut rates. That would be the Fed put. But the point is that right now, the reason why they're cutting rates is not because they see broad-based or even narrow weakness throughout the economy. They're cutting rates because they think inflation has moved back into a position where they don't need as much restriction.

And all else equal, if the economy continues to perform, that's terrifically positive for the equity market. It has been, and it is likely to continue to be. Isn't the whole thing just being overcomplicated? Look, the tightening regime's done. It's done. The next move is lower. Unless there's a shock I mean, unless there's a shock, okay? Let's do it with the caveat that there's a shock, okay? And they have to hike again. That seems extraordinarily unlikely at this moment. So if we know the next move is a cut, why isn't that period end of story?

Let's not overcomplicate it. We've been overcomplicating it for a long time. Yeah, I think that's right. I think you're spot on. That's period end of story. What we saw is we should be in a tightening cycle right now. Right now, the equity market should be down because we went from seven to three. But the equity market's up 10%. So does the equity market really trade on Fed funds? I don't think so at this point in time.

And the other interesting thing is when Fed funds got pushed back, the equity market, I think it was CPI a couple of weeks ago, S&P was up 1% and small caps were flat. Why? Because that's a situation that's very positive for growth and growth is driving larger cap market. Victoria, you suggest that there are some warning signs in the positioning where others would say not at all. It's actually healthy signs in the positioning that this market can withstand a drop back in the so-called momentum trade, a pullback in the tech trade. As I mentioned, it's number six on the list of the best performing sectors of this month. Markets hung in there, done just fine.

Yeah, the market has hung in, and that's part of this momentum trade that we have seen, and the one that we think is going to continue in the intermediate term, and why you should be invested in the market. But you do look at some things like stochastic indicators, right? It's above 90 now for 17 weeks in a row. That's extremely overbought when you look at that signal. It's only happened seven other times. So I'm not saying it's doomsday. And, you know, six months ago, we would have called for a mild recession. Now we don't think you'll probably have that. We think you'll see a slowdown, and that's why we're still cautious. But I do think you have to agree the momentum is there.

Where I think we're going to see some concern is that I don't think the markets are going to respond in a positive way if the Fed doesn't do what they expect it to do. I understand in the long term if they don't cut in June, they cut in September, or they only cut twice instead of three times. That's not going to have a huge change in the economic outlook over the next couple of years, but I do think it makes a difference in the way that the market reacts in the intermediate term. And that's where I think we'll get some pullback. I think it's where we could see yields go a little bit higher. I think the Fed is not as restrictive as maybe the market anticipates it is. How can you say you're restrictive when you're actually increasing

your inflation expectations, increasing your growth expectations, and still saying that you're going to be accommodative? It doesn't seem to make sense. And so I think there's going to be some shifts with some pullbacks in the market. That's our cautious component. But overall, I think you have to be invested and continue to find those areas like health care, like energy that I think in the second half of the year will try to catch up to the rest of the market. And that's where you have some opportunity. Chris, the most interesting question coming into the new quarter and, you know, you're going to

start earnings and all that is what happens with the Nasdaq. OK, that's where the focus point has been for obvious reasons. This month, it's underperformed the S&P and certainly the Russell. Brad Gerstner of Altimeter was on me on halftime today. He's a holder of many of the mega cap stocks and said it's not a bubble. OK, if you look at the multiples, he said Google trading at 19 times, Meta trading at 22 times, NVIDIA 31 times. That's not bubble territory. You have to get it right. We continue to own those names in our portfolio.

He also suggests that if you look at the long term, you know, the historical peaks, not even close for things like that. We're not in a bubble. All this talk about bubble, I think, is kind of silly. If you're talking about bubble, you probably didn't live through 1999. 1999 was a bubble. Or you haven't been invested in these stocks. Or you haven't been invested in these stocks.

As far as the NASDAQ and some of the stocks, you've heard me say this before. We love, we think the communication stocks, you've heard me say this before, we love, we think the communication stocks, which are the Googles, the Metas, the Netflix of the world, those have good valuations. They have good fundamentals. They have positive momentum. Those will continue to work. This is an environment where the economy is not really strong.

It's still a growth market. And momentum, you only break momentum when you have regime change. And regime change is usually going from contraction to expansion, from when you can drive a truck through credit spreads and they contract tremendously. You don't see that. The things that are going to drive momentum or cause a point of inflection just aren't where they need to be. Where we are right now is we're in the process of raising market risk. We're in the process of lifting risk. That's a heck of a ride up. And at some point, we'll push it too far, but we're not close yet.

Last and quick. Yeah, listen, I think if you think this is a bubble, you have no idea what a bubble is. That's very simply put. Whether it's the 90s, whether it's Japan, the tulip bubble, you've done no research whatsoever to ascertain what's a bubble. Full stop. All right, we'll leave it there. Everybody, thank you.

Victoria, we'll talk to you soon. Chris and Dan Greenhouse, appreciate having you here as well. Post 9. Pippa Stevens has the stock. She's watching as we head towards the close. Hey, Pippa. Hey, Scott. Robinhood is popping after announcing its first ever credit card.

The Robinhood Gold Card offers cash back that users can deposit into their Robinhood account. CEO Vlad Tenev telling CNBC the goal is for customers to have all their assets custodied at Robinhood with every financial transaction going through the company. And shares of Coinbase in the red after the SEC scored a big win in its lawsuit against the crypto exchange. A U.S. district judge ruled the SEC's claim, which alleges the firm engaged in unregistered sales of securities, can move forward. Stock down 4 percent. Scott? All right, Pippa, we'll see you soon. Thank you, Pippa Stevens. We're just getting started here. Up next, Apple off to a rocky start this year, facing scrutiny over its lack of AI strategy. But is it about to turn it all around at its

upcoming developers conference this summer? Star Apple analyst Eric Woodring gives us his take after the break. We're live from the New York Stock Exchange and you're watching Closing Bell on CNBC. All right, we're back. Apple, the worst performing mega cap tech stock this year. The company facing criticism over its AI strategy, increased regulatory scrutiny as well. Our next guest sees catalysts ahead that could drive out performance from here. Let's bring in top Apple analyst Morgan Stanley's Eric Woodring. It's good to see you again. Welcome back.

Scott, good to see you as well. Why has this stock been such a dud this quarter? We have seen, for perhaps the first time in several years, a multi-quarter stretch of negative estimate revisions for Apple. Each earnings period we get to, the narrative is maybe the end quarter numbers are okay, but the future outlook needs to come down and gets ratcheted down. Alongside of that, we've seen about four turns of multiple compression since August of last year. That is probably, simply put, as simple as I can make it. Again, there's other factors that play into that, but negative estimate revisions, multiple compression. We have a stock trading at 170. Why is it going to turn around? So our thesis generally is twofold. One,

if you look at the stock, we think there's relative asymmetry in the risk reward. A bear case of about $155, call it 9%, 10% downside from here. A price target of about $220, call it 30 percent upside so three to one risk reward but ultimately you need a catalyst to go from one seventy to two twenty we do think until you get past March quarter earnings in the June quarter guide the stock before then the stock will maybe trade trade as it has been but once you get that out of the way kind of a clearing event, which we thought would be the March quarter, we were wrong, it wasn't, you get closer to the developer

conference. And we think the developer conference will be fascinating in the sense that this will be probably one of the biggest software upgrades that Apple has gone through in years, instilling some of this generative AI technology into iOS, then onto the iPhone 16, giving users a reason to say, I need to upgrade my old devices, buy a new device. And maybe there's actually even some potential for AI-related services spend that we could get on the back of that. You know, at prior times, Eric, of let's call it stock chart discomfort, you've come on with me and said look I wouldn't add fresh money to it here and that wasn't that long ago right and then the stock went back up

but here we are we find ourselves questioning what we should do what would your advice be in that regard today yeah so my advice is simple is between now and let's call it the end of April early May you know the stock's going to trade likely sideways there's still concerns about China we obviously had the DOJ case filing last week- which which. To my surprise caught the market by surprise- once we get past. March quarter earnings. That to me this is a catalyst rich story we get the negative news out of the way.

You have two positive catalysts in the June 10th developer day, the mid-September iPhone launch. So to me, if you need to be tactical, there's a month where you're going to get a stock trading sideways. If you have longer duration, $170 with a three-to-one positively skewed risk reward is a good opportunity to add to the stock. Again, we've gone back over the last decade. This is the worst start to a calendar year that Apple has had. Again, with catalyst rich kind of events coming up over the next four months, we think that would be the opportunity to take advantage of that, add to a stock that we believe is trading at a discount when you take into account what AI can do for the next iPhone cycle. How do you assess the DOJ overhang here? I mean, you have to look at it in two ways.

And also, how long do you think it's going to last? Because you could say, well, in prior instances of the government looking into these big cap tech companies, OK, it amounts to a fine. We get it. Write a big check. It's a rounding error in the big story. However, if it drags on for years, you do have the suggestion by Bill Gates and others who lived it at Microsoft of the distraction. Just as this new technology is taking hold called AI, where, you know, Apple is sort of playing catch up. At least that's what the narrative is, right? So you have the the outcome but also the distraction of the process how would you assess both the challenge with the doj case and you're seeing this play out

with alphabet in the market today is these things take years you can go back to 2012 with the apple ebook price fixing doj investigation something that was actually not all that complex, took four years to resolve. Now we're talking about the U.S. Department of Justice going after five different angles of kind of Apple's closed ecosystem. That is going to be complex. That's going to take years to play out. Again, do we know how to discount that? No, it's hard to quantify what the eventual outcome could be. But I do look at Alphabet and I say, the DOJ investigation with them started in October of 2020. Here we are about to approach closing arguments in May, and the stock has almost doubled. My point being, if there are fundamental drivers that can ultimately influence investors' view of the stock, that plays a more

important role as what's happening in this investigation behind the scenes really plays out. So it is going to be a lingering overhang, don't get me wrong, but anything that changes, again, an AI-driven iPhone cycle, that will come to the forefront of valuation in investors' minds far before any DOJ outcome. Let me go back to AI just for a moment before I let you run. How high do you think the bar is for WWDC? Again, put into context also that now the narrative is, okay, well, they better deliver because everybody else seemingly is delivered and here we are still waiting. So what does that do to expectations and what kind of bar that this company now has to meet? Sure. I think you framed it perfectly. The bar is high. This is probably one of the most

consequential developer conferences that we've had in years that I can remember. And so the bar is high. I can leave it as simple as that. But again, that's one, a function of where the stock is trading today, but also a function of, you look at their mega cap peers, maybe their business models are a bit different, right? They're not necessarily trying to sell devices like Apple is, but at the same time, you know, Google, excuse me, Alphabet, Microsoft, were hyping up AI features last summer. Apple is a year behind that. Apple is historically behind, right? Don't get me wrong. Apple is usually never first to market. But ultimately, Apple does need to deliver on multiple fronts here. Yeah, not first mover, but oftentimes best mover, as your point is being made. Eric, I appreciate your time as always.

We'll talk to you soon. Thank you. Thank you so much, Scott. That's Eric Woodring of Morgan Stanley. Up next, IBM backing a new company looking to change the way investors approach the market using what else? AI. We'll speak with that company's CEO, Ron Insana. Name sound familiar? It should. And IBM's senior vice president of software. Just after this quick break, closing bells coming right back. The AI revolution sure to change many parts of our lives in the year ahead, including how we invest in the markets. A platform called iFi AI wants to be at the forefront of that transformation and is partnering with IBM to make it happen.

Ron Insana is iFi CEO. Of course, you know him as a CNBC senior analyst and commentator. And Rob Thomas is IBM's chief commercial officer and senior vice president in software. As you see, both are with me here at Post9. Welcome. Thank you, sir. Good to have you here at the Post. Good to see you in person. iFi AI. Tell me about it. What is it? It stands for intelligent finance. So there's $6 billion in assets under advisement that our business has used, or I should say AI tools, to create portfolios, to pick stocks, to create asset allocation models. We're transporting with IBM's assistance that very same technology

so that individual investors can take a look at as many as 1,000 stocks and ETFs and determine what they're going to do in the next month based on our forecasted models. So we use artificial intelligence to determine these forecasts. and ETFs and determine what they're going to do in the next month based on our forecasted models. So we use artificial intelligence to determine these forecasts. And what we've seen is that a lot of investors, whether they're high net worth or whether they're millennial and Gen Z, have been asking generative AI services what stocks they should pick. We're trying to give them a leg up by offering them forecasted rates of return over time, transparency, accuracy, and also degrees of confidence in those forecasts. So predictive outcomes for what stocks are going to do, research, actual stock selection, fundamental technical analysis, the whole nine yards.

So through WatsonX, all of that is encompassed every day in the millions of bits of information that are taken in that result in a forecast for any individual stock. So if you went on the app and you touched one of the stocks, it would give you a forecast rated return over 30 days, the degree of confidence the model has that that will happen, and the accuracy over time with respect to those forecasts have been made. This is live now? It is live now, yeah, absolutely. How did this partnership come together, and what really is IBM's role in this technology? I guess it is through Watson X. Yeah, Watson X is embedded into iFi AI.

And it started with we launched Watson X about a year ago, working with many clients around the world. We have a lot of companies coming to us saying we want to use Watson X to make our product better. So this became an engineering partnership. IBM technology teams working with Ron's team to say, how do we deliver an outstanding user experience and unique insights? We believe AI should augment decision making. So it's about how do we look at all this data, collect the data, organize it, and then present recommendations that you can bring to a user or to a wealth advisor. So I love the word augment rather than replace. One of my first thoughts, obviously, was, well, what does this mean for the traditional advisor? Well, so we have a tool

for individual investors who are self-directed traders and investors. We have coming within the next month a tool for advisors that will allow them access to portfolio construction tools, asset allocation models, model portfolios, which, and the entire industry is moving in this direction, Scott, where the less time they spend worrying about the investment process, the more time they are free to build their businesses by dealing with existing clients or prospecting for new ones. So we're really giving them additional tools as we are, you know, self-directed individual investors and traders in making all those decisions and

putting together their portfolios or their single stock selections. I'm also thinking about as we move to a more democratized investing world, it does have the possibility of removing the so-called expert or the advisor out of the equation in some sense where maybe the individual investor tries to do this on their own with the help of the Watson-powered platform that you have? How should I think about that? You should think about it as an assist. We're not making recommendations. We're not making decisions for people. We're giving them the tools with which to make better decisions. You know, we're going to have multiple periods in which these forecasts are made.

One day, one week, one month, out to one year. So if you're trading zero-date single-stock options, you'll be able to look at the app or the website and determine what stock is going to do, what individual stock will do over the course of a day, a week, or a month, and trade accordingly or invest accordingly. It's not really going to replace anything because we're not telling people what to do. We're really offering them an assist. And with IBM's powerful engines they have, we're running millions of bits of data through Watson X every single day. It's just more information than any single individual or advisor can take in on their own.

How are you thinking about it? As we wrote in the intro, this AI is going to transform our lives in ways we don't even know at this point. There are a lot of fears about it, clearly. How are you thinking about it, IBM, harnessing this technology so that it's used in a positive way? First of all, it is technology.

It's not magic. People have to remember that. And AI is probably the greatest productivity tool we've ever had access to. So when you think about the wealth advisor example, this is making them way more productive. They can't read a million documents. AI can read it, summarize it, and surface results. As I look at clients we're working with, it's really fundamentally about how do you automate tasks that are repeatable tasks.

So we think about things like back office automation, customer service. It's being used widely now for code as Watson X is being deployed in companies. So this is really about a productivity tool because every company now is focused on productivity. What about recommendations on shorting stocks or assists, as you want to use that word, on things like that? And also the user cost. What's associated with somebody using this platform? Well platform well if you go on the website or on the app you'll see the various verticals that we have and the and the costs associated with each level of sophistication that we offer uh from a free all the way out to you know more sophisticated tool what we call i-5 free i-5 fan i-5 fanatic and i-5 fa which is for the advisory community. And so, yeah, with respect to shorting, we'll have forecasts that'll say a stock's likely to go down 20% with an 80% confidence rating and

an accuracy rating that goes along with it. So if someone is inclined to do that, and that's entirely up to them, they'll have an entire list of over a thousand stocks or ETFs with forecasts about in which direction these items may go, these investments and trades may go. Interesting. I'm glad you shared the story with us. I appreciate it. Well, thank you. It's good to see you, too.

Good to see you as well. Always good to have you back. First time at Post 9, you said? My first time at Post 9, yeah. I mean, it used to be between Post 10 and 11 way back in the day. All right. Well, hopefully it's not the last. That's Ron Enstine and Rob Thomas. Thank you so much from IBM here at Post 9.

Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens is standing by, of course, with that. Hey, Pippa. Hey, Scott. Thank you so much from IBM here at Post 9. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens is standing by, of course, with that. Hey, Pippa. Hey, Scott. A second act for one COVID vaccine maker is boosting the stock. We've got all the details coming up next. Well, there are 15 minutes to go before the bell rings.

And look at the Dow. It's up now by more than 400 points. Goldman Sachs, one of the big performers today. Home Depot is an outperformer. Merck and Caterpillar. So it's a pretty widespread move here for membership in the Dow. Honeywell is having a good day, as is Amgen, Boeing and Apple, by the way, which is accounting for about 28 or so points there. But we'll continue to watch that as we inch towards the close. Back to Pippa Stevens for the stock she's watching. Pippa? Hey, Scott. Merck is popping after the FDA approved the pharmaceutical company's drug to treat a rare and deadly lung disease.

The approval is a big win for Merck as the pharma firm looks to diversify after its blockbuster cancer drug, Keytruda, sees a shrinking market share. Moderna is also gaining after announcing plans to move three of its vaccines to final stage trials. This update brings Moderna closer to having products on the market beyond just its COVID shot, which has seen plunging demand. Scott. All right, Pippa. Appreciate that. Pippa Stevens still ahead. Tesla shares driving higher.

We'll find out what's behind today's pop and what altimeters Brad Gerstner had to tell me what he had to say about the EV maker. That's coming up. Closing bell's coming right back. Coming up, RH reporting results at the top of the hour. The retail are having a volatile few months, but can it turn things around? A rundown of what to watch for when those numbers hit the tape. That after the break as we take inside the market zone we're now in the closing bell market zone cnbc senior markets commentator mike santoli here to break down the crucial moments of this trading day plus morgan stanley

cutting tesla delivery estimates phil laboe has details. And Bertha Coombs looking ahead to RH earnings. They come out in overtime today. But before we get to overtime, Mike, we may hit a new all-time high, a record close for the S&P. We're above that level now, 52.41 and a half. There's the number you need to watch. We go above that, which we're there right now. It would be a new record close. Yeah, I mean, first in what, less than a week. But you had three straight down days. I mentioned four bad closes in a row. But you never got far from the highs.

So we continue to just sort of churn right at the highs, finding a way, because there's a lot of turnover today in the index performance. You look at the winners, they're the year-to-date losers, right? It's Enphase, and it's VF Corp, and all this stuff that's been beaten up. And NVIDIA's down, and Chipotle's down, and Netflix is down. So you're in the current of a lot of this rebalancing type action. It's happening in a very healthy way. Breath has been strong all day. That being said, I still think that the question remains. We've managed a four-week momentum underperformance. The highest momentum stocks for four weeks now have actually really cooled off relative to the rest of the tape. That's been a positive,

because the big question was, was something mechanical going to blow loose because you had such extreme performance and momentum names? Hasn't happened, so it's all to the good. It's kind of a don't short a dull market type of rule. I'm still on the lookout for, you know, something that disturbs the soft landing case, but it's not showing up. I mean, industrials today, nice Honeywell, Cat, we said, Banks, Goldman. Yeah, it's a nice variety. The thing about industrials is I feel like there's a lot of momentum. We love Dan Greenhouse, but Eaton Corp's at 30 times earnings, double its average for the last 20 years. That's not going to hold if people start getting more doubts about the macro picture. All right, Tesla's higher today, too, but sharply lower,

as you probably know, for the year. Altimeter's Brad Gerstner told me earlier today he bought shares on that weakness. Listen. You start with probably the best product engineer CEO on the planet, a stock that sold off a lot. Right. And, you know, when everybody else is negative about things like negative on Google, negative on Tesla, that's when we start getting excited, particularly when they're run by a founder who's as extraordinary a product leader as Elon Musk. All right. That's Brad Gerstner, Morgan Stanley trimming estimates today ahead of delivery numbers next week. Let's get to Phil LeBeau for more on that. Phil. You know, Scott, when you look at the delivery numbers that we get next week, the consensus, at least today, and I expect this to come down by Monday because we'll probably get the numbers on Tuesday, the consensus is 471,000 vehicles delivered in the first quarter. Last year, they did just over 422,000. There are a few whispers out there that there might be a rare year-over-year decline in deliveries.

I'm not sure that'll happen, but the Morgan Stanley estimate is getting attention today at 425. Why? Because it's coming from Adam Jonas, who is widely followed, and people look to him and say, well, what are you expecting from Tesla? By the way, as you take a look at the full-year deliveries from Tesla, last year they delivered $1.81 million. The expectation from Adam Jonas is now it's going to be about $1.94 million. It was the consensus of $2.06 million. I expect that consensus also to come down. As you take a look at shares of Tesla, Remember, we get these numbers sometime early next week. My guess is, Scott, probably before the bell on Tuesday is when we will likely get the Q1 delivery numbers. Gerstner today, Phil, said, you know, as we said, he bought

the stock. He's like, yeah, they probably missed their numbers for deliveries. Doesn't matter because the stock sold off so much and you still have Musk that it's still an attractive name. Yeah. And look, I can't argue with that. Everything he is saying and everything he said during your interview, spot on in terms of if you are long for Tesla. You just got to go through this patch here where everything when it comes to electric vehicles, it's just not growing as quickly. And I know that's not what the bulls want to hear. The Tesla maniacs who are online are going to say, no, that's crazy. The reality is there. There are just fewer of the vehicles, electric vehicles, including Tesla's being delivered relative to expectations. The

growth rate is slowing down, still growing, just not growing as quickly. All right. Good stuff, Phil. Thank you, Phil LeBeau. To Bertha Coombs now on what we should expect from RH in OT. Well, one of the big things, Scott, that investors will be watching for with RH is whether the high-end furniture retailer can get back beyond discounting and get its inventory levels right in what has really been a tough home market environment. Analysts are looking for adjusted earnings of $1.67 per share on revenues of $775.5 million, which would be up fractionally from a year ago. Last quarter, the company missed on sales, operating and gross margins, but management said that they intend to work on gaining share here in the U.S., even as they look to expand internationally.

I appreciate that, Bertha, as we wind it down here. We've got less than two minutes to go. So right now we would have a new record closing high for the S&P, about 30 points away for the Dow as we inch towards 40K. Yeah, I mean, obviously we're kind of putting a capper on a pretty good first quarter. It seems like, you know, today seemed like we're going to get all the executions done. Maybe we get a long weekend out of it. The S&P has spent the last week or so right here between 5,200 and 5,260 intraday.

And so very, very tight range. Again, it's the don't short a dull market. We'll see what, you know, what the new quarter has for us here. I can see a lot of scenarios where, you know where everything has had to kind of come in right, which is yields in a comfortable zone. We absorb a Fed message where they're going to be a little slower than we anticipated. I think that's fine. To me, the question is, everyone assumes the economy is just humming right along.

And it's not. The consumer is hanging in there. I think a surprise on, on growth, if it were to look like it was getting a little ragged, might be the thing. But for now, it just, it just doesn't matter when you have this kind of earnings growth expectation and energy in the market. See if we get a surprise on PCE too. You know, that's going to really kick us off for the quarter one way or the other. It's going to either be a fumble or you're going to start running down the field again. It seems like it's de-risked

people aren't clinched up ahead of it, probably makes sense, but they'll be able to react to Sunday evening with the future. That bell marks a new record close for the S&P 500. I'll see you tomorrow into overtime with Morgan and John.