Closing Bell - Closing Bell: Rate Cut Reality 4/4/24

Episode Date: April 4, 2024

Is the bull market at risk? All-star panel of NFJ’s John Mowrey, Mike Santoli, Steve Liesman, BofA’s Marci McGregor and Hightower’s Stephanie Link give their expert market takes as stocks sell off in the final hour of trade. Plus, Evercore’s Roger Altman lays out what he is expecting from the fed in the months ahead – and how tomorrows jobs report could impact its next move. And, Pippa Stevens drills down on the big spike in oil amid the broad sell-off. 

This make or break hour begins with the reality over rates and whether later than expected cuts by the Fed might soon put the bulls on the defensive. We'll ask our experts over this final stretch, including Evercore founder and senior chairman Roger Altman. He'll join us in just a little bit. Take a look at your scorecard with 60 minutes to go in regulation. Well, stocks were green throughout most of the session, and that's, well, about 30 minutes, we started to head south. That's when the sell-off started. Oil higher. The VIX jumped. Yields fell. And that is threatening to upset what was a pretty nice broad day for the major averages. There's your picture now.

So remember, there's crude north of 86. That's been steadily on the rise. Got a little bit of a breather, but it is moving higher. Look at that big jump in the VIX. Let's show an intraday, guys, of that if we can pull that up, because it is up by 14 percent and really most of that coming within the last 30 minutes. Tech, well, bouncing a bit, led by a big jump in shares of Meta. There's the VIX and there's the move I'm talking about. We can debate what the reasons are. There are some headlines moving regarding geopolitics over in the Middle East. Maybe that's in part due to it. You have the Kashkari headlines,

perhaps throwing cold water, as Tyler was saying on this thesis of rate cuts coming this year. We'll get into all of that. One of the stock stories of the day, Disney. It's higher. Well, it was initially after officially winning its proxy fight over Nelson Peltz. Even that now turning negative in this final stretch. It does take us to our talk of the tape.

The bull market, is it at risk? Let's ask to NFJ's John Mowry. He's the chief investment officer there. He was one of the first to say last fall it was time to buy stocks. He was right. He's with me here at Post 9. I've got Mike Santoli here on the desk, too. We might as well widen it out because I want to get to the bottom of what's taking place into this final stretch, because now the Dow's at the lows of the session, down by more than 400 points. It's about a 425-point loss. I said to you when you sat down, you get nervous because you were bullish before most. Now we're questioning where we are. Good to see you, Scott. I'm not getting nervous, but I do like a different group of stocks today than I did a year and a half ago. Maybe I'll first start with the first quarter. One of the factors that really drove returns in the first quarter was price momentum.

In fact, if you go back to 2000 and look at quarterly observations of that factor, you're in the 97th percentile of observations. Historically, when you get into those percentiles of that ranking, you should expect a reversal. So I do think that there is room for stocks to pull back, particularly those with the best momentum, where I think more interesting opportunities lie are in some of the traditional value areas, as well as small caps and mid caps. Yeah, Mike Santoli, I mean, you're getting, I think, a real time and real world view, if you will, how jittery the market is to any major developments relative to geopolitics. That area of the world obviously is already on edge. So we're watching

that. You know, oil moving higher is not great for the bull story about where inflation is going. It ratchets up sort of concerns overall. We make that move in the VIX, too. Well, a lot of things came together around 2 p.m. Eastern time, one of which was the, you know, Biden tells Netanyahu he wants to cease fire right now. Another one was Kashkari of the Fed saying maybe we don't get any rate cuts at all because if inflation keeps bumping sideways. All of it happened at once. I look at yields plunging and oil up and the VIX where it is and say, this ain't about Kashkari saying we might be on hold on rates. That's exactly right. I agree with that. So that's sort of if you want to just triangulate. But what was the setting for all of this,

which is you mentioned markets jittery. The market hasn't had a care in the world for months. And so it's been very calm and placid and just rotating and been able to be perfectly cooling off sideways. And I think you just got a little slippage in that rotation. The gears are slipping a little bit for now. The S&P 500 is basically back to a level it first got to about March 8th, so the beginning of March. We've been playing around these areas where we first got to from the March Fed meeting two weeks ago. None of this is a reversal of trend. None of this is anything but kind of frictional action because of this little jolt of uncertainty in a very certain, self-satisfied, agreed upon, happy market.

But this has always remained kind of this outlier risk that, you know, the market for the most part, Mike, has looked past and that being geopolitics and more escalation in an already tense area of the world, especially coming now when you've had a bit of a backup in rates. Now, I know a flight to safety. You see what's happened with the yen and you see what's happening here with bonds getting a bid and rates going down. But the market hasn't really fixated on what's been taking place in the Middle East. It's looked past it. It has. And honestly, if you had to kind of give your preferences for why the market has an intraday reversal, you'd almost prefer it would be one of these like, oh, we're clenching up because of a

what if geopolitical scenario, because usually those are fleeting and usually those aren't, you know, the major trend changers. But yeah, you're absolutely right. I do think that there's been enough of a kind of, you know, incremental tensions raised, Israel-Iran. I don't want to speculate on the scenario. Sure. It just shows you at a moment when a lot of people feel like the market maybe deserves to back off for some reason or other, at a market where momentum has been carrying the day,

when we do have some jitteriness just ahead of the jobs number, I mean, that's coming on Friday, too, and there's two-way potential swings on that one. I think that explains part of how we just reacted to some of these headlines. For certain, I can tell you. By the way, it's also tax time. You're going to find, you know, I always say it's it's murder on the Orient Express. Everyone did it. You know, you go through all the culprits and they all tried to kill. Yeah, I can tell you, I mean, traders are certainly talking this afternoon about what the catalysts are for the kinds of moves in the market we're

seeing. But let's bring in our senior economics correspondent, Steve Leisman, who's been following what has been one of the more busy days, Steve, for Fed speak in a while, I think seven in total today. And Kashkari seems to be the last and maybe at this moment the most powerful, suggesting that, hey, if inflation continues to do what it's doing, maybe we don't do anything. Yeah. Scott, if I could just for a second, a little context around what we're talking about here. It's not a huge move to the downside. I think Mike would concur with that. It's about 0.7 of a percent. But it did go straight down around two o'clock. What exactly happened that we're still wondering about? What we do know is in the middle of that, Neil Koshkari, the Minneapolis Fed president, said what for some is the quiet part out loud. He said, if inflation continues to move sideways, it makes me wonder if we should cut rates at all

this year. We've had many analysts on if we should cut rates at all this year. We've had many analysts on our air Fed experts talk about this idea. Of course, that's been in the air. We can't remember a time it's been said that goes along with a lot of other folks out there saying, hey, we're going to take our time on this. Barkin, smart for us to take our time. Mester anticipates cuts later this year. Harker, inflation is still too high. One dovish comment from Goolsby, who said he's worried about employment if we stay too restrictive for too long. And if you look at the tail of the tape, Scott, who knows what the story is. But in the middle of that decline, you had to move to the downside again exactly when

Kashkari was talking. All of that said, allow me to contradict myself for a second. Yields are lower on the two. They're lower on the 10. Rate probabilities or cut probabilities are actually higher for June. All of that speaks to a market that's a little bit more worried about economic downside and less worried about the Federal Reserve not cutting interest rates. It's interesting. I don't know if you recall, Steve, the words you said on our program at the halftime report today. You said, quote, I keep waiting for somebody to step out of the fold and say something dramatic. I'm not hearing it. I'm confounded by how everybody

has been in the same camp here. Well, did we just have that moment? I think Neil did go a little bit further than others have gone. I won't say, Scott, that what Neil Kashkari said is not embedded or implicit in what others have said. The difference is that other Fed officials keep insisting that they believe or they're confident inflation will continue to the downside. They don't continue the sentence to say, if it doesn't go to the downside, we're not cutting rates. Kashkari continued the sentence this afternoon. Yeah. And you stay with us, Steve? John Mowry? I feel like there's a little bit of a good cop, bad cop scenario. Yesterday, Powell says, hey, I think we're going to be bringing them down because inflation is coming lower. And then today, Kashkari says something different. But

I think that what investors should be doing is focusing on where they have a margin of safety. Defensive areas are cheap, Scott. If you're worried about the markets, you can buy utilities. You can buy staples. Those are cheap. Small caps are also very cheap. And you can't play defense in small caps. I'm going to stop you right there. Well, you're not going to play defense in small caps. I agree with you, but small caps are cheap. So the margin of safety is there. And I want to make a couple comments on small caps because I heard on your show earlier this week, kind of the argument made that perhaps small caps were less meaningful because they're such a small piece of the total market capitalization. To put that in a historical context, in 2000, the Russell 2000 was around 6% of the S&P 500 if you look at market capitalization. Today,

it's 5%. If you bought the 2000 value at the end of the late 90s, you were still beating the S&P 500. To contextualize this in another way, Scott, if you look at total employment in the U.S., okay, as measured by non-farm payrolls, it is, if you take that number, roughly 45% of Americans work for companies with 50 employees or less, okay? So that is a big deal. Powell does care about that. Employment does matter, and the small companies are an enormous part of the U.S. economy. And so when you're getting those at a steep discount relative to history and you're getting faster growth rates with many of these companies, I think investors should be wise to allocate there, particularly given the run in large growth. Yeah, well,

small companies also are more susceptible to the pitfalls of higher interest rates. And I think you would admit that as much. And that adds to as much the consternation over where rates may be going from here as we get Fed speak in plenty today. Marcy McGregor is with us today, too, of Merrill and Bank of America, private bank. There's Stephanie Link, of course, of Hightower Advisors, a CNBC contributor. Steph, I'll go to you here. What are you making of this late day trade action? I mean, I think it's not surprising because we have to deal with a whole bunch of things. Right. Number one, it's where are we going to settle out in terms of interest rates and the Fed? Is it zero? Is it three? We know it's certainly not six, probably not even three.

But I step back and I think, why are we talking about less cuts? And that's because the economy is actually growing better than expected. The Atlanta Fed tracker is at 2.5% for GDP for the first quarter. And the consumer continues to be strong. And I know we get a very important job report tomorrow. But ADP was really encouraging, especially on the wage front. 5% wage growth for consumers. And if you switched a job, 10%. That is wonderful

for the consumer. I know at that help, that hurts the inflation story, but the consumer is 70% of our economy and we root for that. And then of course, manufacturing, we've got some pretty good manufacturing data, not only here in the States, but also overseas in China. And I think that's encouraging as well. And so we just have to step back here and say the economy can handle these higher rates and we're doing just fine. And why is that important? It's important because it means that earnings can continue to grow. We grew 10 percent in the fourth quarter. We're going to grow about 8 percent this year. We're seeing a broadening across the various different sectors, which, by the way, X technology, pretty attractive

in terms of valuations, in terms of financials, energy, materials. Those have been doing quite well. So I'm pretty encouraged. Marcy, Steph is obviously in the good news is good news camp. And we've been there at times. But I feel like we're teetering here and trying to figure out if it actually is, because that may be those later cuts than expected. And that may be that inflation is more sticky than we once thought. I think what's going on with this market is we're in one of those vacuum periods between earnings seasons. And I won't be surprised if we see a little breather here, some consolidation. We have to remember that healthy markets do have pullbacks right on

average three five percent pullbacks a year for the S. and P. but what I keep coming back to is I don't think this rally we've seen the last five months is all enthusiasm around rate cuts. Yes it helps but we have a fed that what they're

essentially saying is their data dependent so of course we're going to hang on every single data point. Like non foreign payrolls tomorrow but I think you have earnings growth, you have liquidity and easier financial conditions. That's also helping. If you sprinkle on a Fed that's transparent and communicating clearly, I think it matters a lot less whether it's two cuts or three cuts or whether it's June or July, because there's a lot of fundamentals supporting this rally. The problem, Steve Leisman, is that the market seems to have decided long ago

that the data had already made the case that the rate cuts were coming because the trend was going in the right direction. Now, if we have to question that, it leads to the uncertainty that causes days like this and moves within various asset classes like we're witnessing? Yeah, Scott, I think it's a piece of it. I wouldn't I wouldn't say it's everything, especially because as I look at these probabilities for the June rate going higher, I'm not sure that's all that's bothering the market. I think it might be a piece of it. But look, I think this is useful commentary from Kashkari, because I don't know if you remember several years ago when Bullard got criticized for saying that the funds rate could go from five to seven percent. And

somebody said that's irresponsible. And I said, no, it's irresponsible not to consider that. The idea of the Fed not cutting because inflation stalls is on the table. It's something that should be part of your investment thesis out there. If you need the Fed to cut by 25, 50 or 75 basis points for the year to work out for you, well, maybe you should alter the mix of your investments right there, because it is some probability that those things do not happen this year. Where we are right now, Scott, as you know, is we're in these doldrums here, this lack of clarity. January and February were kind of lame when it came to the progress on inflation. You had a guy like Waller say, you know what, we didn't overreact to these numbers, but we did react to them.

And the idea after the last March meeting, everybody moved to the right. They're still at three, but just barely three hanging on by a thread or a single vote that's out there. So, yeah, the risk is higher for fewer cuts. And that makes sense. But as we've been talking about, if you end up with more growth because of that, lower unemployment, higher wages, well, that's an interesting trade for the average investor out there. Well, of course, because, Mike, you'd normally take that as great news, except we've decided maybe this week that perhaps too good of news is not great news because you have the commentary around the Fed of later, if ever, at this point. I'm not convinced that good news is directly interpreted as bad news.

It's bad news if you think it's temporarily good. It's bad news if you think that the Fed keeping rates above 5% is just raising the risks that they're going to be there too long and parts of the economy are going to fall by the wayside. It's not in the absolute. In other words, if you get 250,000 net new jobs tomorrow, I think that's pretty much good news. The market's going to make its peace with that unless you feel as if it's empty calories. It's going to reverse, and therefore the rate cuts are kind of needed to take the pressure off.

Again, I also want to say the Fed has told you they're targeting inflation. Listen to Goolsbee today. It's all about shelter inflation. It's all about whether that filters into the numbers. It's not about unemployment right now. And so even though we're so used to the idea that rate cuts are the Fed rescuing the economy and we have to look at the economic inputs to decide what the bank shot effect is off of inflation, they need inflation to go down. That's kind of the whole game. Dow's down about 400 below its 50-day moving average, we're told, from our markets desk for the first time since the very beginning of November, just around when the market had come

off of its lowest levels. What about valuations? Are you comfortable, John Mowry, with where we are? 10-year average for the Dow is 16.7. Today, we're at 18.4. 17.9 is the 10-year average for the Dow is 16.7. Today we're at 18.4. 17.9 is the 10 year average for the S&P. Today we're at 20.6. 21.8, the 10 year for the NAS. Today we're at 26. What do you make of that? Multiples are higher. I mean, there's just no way around that. They're too high? Well, they're rich. They're mature. They're stretched. I mean, take NVIDIA, which is an amazing company. It trades at 70 times trailing earnings.

That's the same multiple that Microsoft traded at in 2000 on a trailing basis. Now, I'm not saying that it's going to be the exact same scenario, but valuations are stretched. That's why I'm pivoting away from some of the larger companies and arguing that small caps at 15 times earnings. I mean, Scott, the SOX index, the semiconductor index, trades at 30 times earnings. Okay. The average is 15. So they're rich. There's just no way around it. Now they do have earnings growth. They do have a lot of tailwinds. I would argue that investors should be looking, if you want companies that are growing quickly, like CIMI's, looking at life sciences. They're direct beneficiaries of the AI boom in all types of applications, and they're trading at much steeper

discounts. So I like some of the opportunities there. And I totally agree that inflation is the key. And I also believe that shelter is also the key. It's one third of the CPI. That is a lagging indicator. And what I would say about interest rates briefly, the two-year bond yield has been telling the Fed to take out 100 basis points. It sits at four.5. The Fed fund sits at 5.5. You have a committee deciding one. You have the market deciding the other. The market generally wins out.

And it's been telling Powell to do this. Powell's been signaling he's going to do this. But to be clear, Scott, I do not think it's prudent to be investing on, hey, I'm expecting cuts in June. To me, that's not really the way to do it if you want to compound capital over long periods of time. Look for the dislocations. Take advantage of when people are nervous. If you stepped into the market this year, Scott, why would you want to buy what's been underperforming? You wouldn't do that. You

would say, give me what's working. And you can see that with the momentum trade in the first quarter. Sure. Well, at least for the last month. Marcy, do you believe in the broadening story that John Mowry is telling that it's time to look to underappreciated areas or cheaper areas of the market, even given some of the concerns we have about geopolitics, the economy, the Fed and everything else? I do. I believe this is going to be a year of rotation because it's really supported by the profit cycle. If you look, you've seen profits perking up on discretionary industrials, financials. Right. So I think that tells a big story. I would also point at ISM this week, breaking 50 for the first time since October of 2022. My colleagues

at Bank of America Global Research did a little work and found that when ISM breaches 50 for the first time in six months, and clearly this is much longer than that, forward estimates rise by 12 percent. So I think key to the story is going to be the profit cycle. I also agree that small caps are going to join this party later in the year. But look at an area like energy. Free cash flow generation, where crude prices are, is really attractive. It positions you for a red-hot geopolitical world and a world where inflation could be a little bit stickier at a much more attractive valuation. So I do think the story this year is a rotation that continues, but it's supported by the profit cycle. Steph, you're a believer in that, too, whether it's margins, profits, earnings coming in better than anticipated. We're going to get

the banks late next week. Yeah, right. And in terms of rotation, we have been seeing it for a while now. So on February 9th, the Russell 1000 growth was outperforming the Russell 1000 value by 900 basis points. Fast forward to today, Russell growth is still beating value, but only by 300 basis points. So value has certainly picked up the slack. You talked about or asked about valuations. We can talk about banks. They're trading at one, 1.2 times book value, very well capitalized, good dividends. And I suspect you're going to start to see and hear more about buybacks now that regulation is kind of getting pushed to the side. You look at energy at six to seven times forward estimates. Look at the M&A you're seeing

in energy. Obviously, the energy companies see value if they're making four to five hundred billion dollars worth of M&A in the past year. Industrials, some of them are expensive, but some of them aren't. And especially if you are going to see the manufacturing part of the economy continue, then they are cheap. And so I think there's a lot of places to be investing. I'm looking at some places in health care. I'm looking at United Health Care. I don't even own it. But the stock is down 12 percent in a straight line. It's the best company in the industry, trading at 16 times forward estimates. So I think you're getting a lot of opportunities in a lot of other places beyond tech. Steve, you know, I'm going to get you the last word because you alluded to this yesterday when I asked you a question about the tone,

maybe the tenor of the group, the Fed, whether they're in simpatico or not. And, you know, you suggested that they're not and that maybe we could be setting up for some battles in the room, so to speak. And it's interesting that I would I suggest that Powell seems to be the most dovish of the speakers of late. Is that possible? I think he's on the dovish side, Scott. One thing I do wonder when I read this statement, I always try to make this distinction between what's policy and what's a forecast. The dots are forecast. The statement is policy. The statement says that we don't think we're going to cut until we're confident that we're headed towards 2 percent. It tells me that policy is to cut. That tells me that that's where the

chairman's head is at in reducing interest rates. And that's what he thinks ought to happen this year, that that's the direction of policy of the Federal Reserve. They raised, they peaked, they held, and now they're thinking about policy is to reduce rates by how much is not policy yet or when is not policy yet. But I do think that Powell wants to cut. I don't think he cares that much about the politics of all of this, but I think if he had all things equal, he would cut before we were into the silliest part of the election cycle, and he'd get out of the way of that. But if he needs to, he will cut or hike in the middle of it if needed.

But I think he'd love to get out of the way, which means he'd like to do it earlier. But he needs to have his committee with him, Scott. And you've got guys like Kashkari, who doesn't vote, by the way, until 2026. So you need to discount that a bit. But still, he is saying that I don't think we ought to be, if inflation stalls, maybe we shouldn't cut it all. I wouldn't be surprised to hear Waller on board with him on that idea, maybe even Bowman. So there's going to be a faction of the committee that's going to be a bit more hawkish and a faction that's going to be a bit more dovish. That's the way things go. That's the way the committee should be. He may have to use the power of persuasion.

He does have the bully pulpit. He is the chairman after all. So we'll see how he wages that. Steve, thank you. And thanks to everybody, really. Mike, I'm going to see you back for the markets. John Murray, Marcy and Steph, thank you so much. We will continue to watch these markets. Right now, Dow's down 436, again, below the 50-day moving average for the first time since November. Christina Partsenevelos is watching stocks within this moving market. Christina. Yeah, I'm going to start with two companies that are big names in the food business, but their stocks are really telling two different stories. Kanaga Brands climbing today after topping Wall Street expectations for the company's fiscal third quarter but Lam Westin you can see getting

smashed its shares getting smashed over the potato processor reported a lackluster quarter shares down almost 20 percent Wayfarer on the other hand is having a better day after Evercore isi upgraded the stock to an outperform rating driven by what cost-cutting measures the analysts saying as the home furnishing business recovers wayfarer can expect to gain market share and that's well shares are up barely one percent right now they were a little bit higher but coming down scott christina thank you we'll see in just a bit christina parts of nevelos we're all over this late day sell-off evercore isis roger altman is

with us next we'll talk about these big market moves, expectations for the Fed, geopolitical concerns and much more. Don't go anywhere. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. We're at session lows as we come back on the air here in the final hour of trade. Investors digesting the latest Fed commentary and some geopolitical headlines. Joining me now, Evercore founder and senior chairman, former U.S. Deputy Secretary Roger Altman. Deputy Treasury Secretary, excuse me. Roger, it's good to have you back. Thank you for being here.

Hey, Scott. How are you? So I'm well. Thank you for being here. Thanks, John. How are you? So I'm well. Thank you. You know, we seem to be debating what the Fed is going to do, and maybe it's going to be different than what we first thought. We've had two famous investors on our air minimum over the last couple of days, both Steve Cohen and David Einhorn weighing in on this question. I'd like you to listen to what they think is going to happen, and then I'd like your own view. Sure sure i think the market

expects three cuts i think that's the number i don't i don't i don't disagree with that i you know i think inflation's been you know somewhat contained and i think i mean ultimately what it'll come down to is that a true statement or not uh you know we think the fed thinks they you know eventually is going to come down to 2 percent inflation rate. What do you think? I think that's going to be hard. How many times are they going to cut this year? I think fewer than are priced in right now. So fewer than three. Sure. You think they cut. You think there's a chance they don't do anything? There's a chance. I think inflation is reaccelerating. I think there's a lot of indication of that.

So, Roger, what are your own expectations, given what those two gentlemen had to say? Well, first of all, I don't think that inflation is re-accelerating. I'd be interested in what data David Einhorn is looking at, because I'm not seeing that. I do think it's sticky on the downside. It always has been in earlier periods of higher inflation moderating to lower inflation. So that's not a surprise. And it may prove, as Mr. Cohen said, hard, really hard to get to 2 percent. I think it's possible that just isn't achievable, at least over the medium term. My own expectation is pretty much in line with the latest market expectations. I think, as of earlier today, there was about a 56 percent chance, based on the futures markets, of the first cut taking place in June and still a base case of three cuts. I think that's as logical a scenario as any. I paid a lot of attention to Chairman Powell's own comments, as Steve Leisman was talking about a few minutes ago. And as Steve said, he clearly wants to cut, and he essentially brushed off the latest data as not

changing their basic framework. And so absent negative data, and that could happen tomorrow morning with the jobs report, but absent negative data that is seen as continuing, and by negative I mean stronger than expected, on growth, jobs, and inflation, I think that is still the most logical expectation. But if you say to me, is the risk, if I can put it that way, risk, quote unquote, more likely to be fewer cuts or more likely to be more cuts, I would agree with the sentiment that Einhardt expressed in that case, such that the risk is fewer cuts rather than more.

But what if the last mile here, Roger, is much more sticky than we thought. Well, I think the Fed wants to be sure that it doesn't keep the funds rate at this level too long. And it's willing to take some risk in that regard. And that's why I think Powell wants to cut. And I agree with the sentiment expressed by someone earlier on the show that it might be good to get the first cut in and early 80s, the last time we had really high inflation, although it was higher than this then, of course, it proved really hard until we got the Volcker recession, and it was a deep one, to bring it down to the Fed's target. So it shouldn't surprise anybody that it's going to be hard to get from 3% to 3.2%, which is where we are now on most measures, to 2 percent. And whether or not we really need to get to 2 percent, I think is debatable. I mean, debatable in the sense that

as to whether it's really required for economic stability and debatable as to whether the Fed will really require it also from its own point of view. So it will be hard. Do you want to weigh in as well on what kind of wild card do you feel like geopolitics are at this very moment? I think it's a big wild card. Look, if you want to be a little pessimistic, you see escalation between Iran and Israel. The Israeli airstrike on the compound in Syria, where several of the Iranian military leadership were located and were killed. Netanyahu's statement even today that Israel intends to take action against Iran. If you want to be a little pessimistic,

you see very little standing between where we are right now and a wider conflict in the Middle East. Now, yes, most of the powers in the Middle East, other than Iran and other than Israel, do not want that. But it's quite, I think, a palpable risk, which is why oil prices are much higher. I mean, WTI was at 86 when I looked at it earlier today, Brent at 90. That reflects the latest take on that risk. So I think geopolitical risk is really high, especially there. Do both of these... I think geopolitical risk is really high, especially there. Obviously, there are issues like Taiwan and Ukraine in the background.

They're important. But that's where the acute risk is right now. Forgive me for interrupting you, but do you feel as though both of these variables, be it uncertainty around the Fed and rates and now this maybe newly, this new geopolitical flashpoint scenario that we have to get our arms around, are both going to weigh on the possibility of the deal market reopening. You do run what has been termed by at least the FT Goldman North for your advisory business. So you obviously have a dog in that fight. How does that impact your principal business? Scott, let me first make a comment about the

difference between these two risks, the Fed and the path forward there and geopolitics. I think the word risk is an odd one when you talk about the Fed and the path forward, because six months from now or nine months from now, it's not going to have affected the world very much whether the Fed cuts three times in 2024 or two times and whether some of these cuts slip over into 2025. That's not going to make a lot of difference to the medium and long term. On the other hand, the geopolitical risk is much more acute and much more dangerous. I mean, the market debates as it ought to every minute. The outlook for the very short term and the Fed plays a central role in that. But it's just an inherently very short-term debate without particularly large, medium, or long-term effects,

even though day-to-day changes are very important for any investor, of course. I just think the two risks are very, very different. In terms of the deal market, 2024 is so far better than 2023 was. All the data on transaction flow indicates that it's not uh the difference between night and day though uh the broader market seems to expect and i'm referring to stock prices uh an even better uh dynamic in 2025 we'll see um as to whether i don't think the where the fed wherever the fed goes very short term as i alluded to, is going to have any impact in particular on the deal market. I just think the deal market inherently reflects longer term factors than that.

On the other hand, geopolitics, if it goes the wrong way and there's a real conflagration, that could put a chill into the deal market, although probably not over the longer term. Grateful for those insights, Roger. Thank you. We'll talk to you soon. My pleasure, Scott. That's Roger Altman joining us up next. Capital Wealth Planning's Kevin Simpson. He's coming back. Why he's selling a stock. He's going to tell us why he is selling a name he's owned for 10 years and what he's buying instead. We are keeping a close eye on this market sell-off. We are at session lows with less than 30 minutes to go in the session. We're coming right back. Welcome back. We have an intraday reversal on our hands and not a good one if you're bullish this market. There's the S&P currently down by just more than 1%. We're at session lows.

Dow's below its 50-day for the first time since November 2nd. All S&P sectors are now negative to start the second quarter. Our next guest, though, still banking on the bull case and is making some big moves in his portfolio. Capital Wealth Planning's Kevin Simpson is back with us now. It's good to see you. Hey, Scott. Give me a thought on this market before we go specific. Yeah, I don't think it's anything to freak out about. I mean, we're seeing a sell off, which is a normal course of market behavior. If you look at the first quarter and you go back

to the October 27 lows, the S&P was up almost 30 percent in five months without any abatement. And I think that that's something that even the uninitiated or not the you don't have to be an expert in market history to know that the stock market's not going to perform like that forever. I think the bullish case is still intact. But if we get a five, eight percent pullback, I'm absolutely going to be a buyer here. And I would encourage viewers and investors to do the same. We teased your segment today by suggesting you sold a stock you've owned for 10 years and bought something else. Talk to us. So we've owned Johnson & Johnson for almost a decade, Scott. Now, full disclosure, we had it called away very briefly in the pandemic recovery, but it was a very, we were

out of the position for a very short period of time. Now, we all know that the talc litigation has been hanging over them for a long time. That's nothing new. But as you look at the pipeline for new tier one drugs, there's just not that much there to get excited about. So we have a rules-based process. If we see a stock that's relatively underperforming, its peer group, its competitors, its sector, then we'll exit the position for that relative underperformance. And that's all that was here. It's a rules-based process. We like Johnson & Johnson, but the stock price has not performed. We own Merck. And if you look at that chart, I mean, it's through the roof. So we're exiting a position that we've owned a long time. And it's hard. It's a two-decision process. You sell Johnson & Johnson, and we rotate it into Amgen.

So now you're kind of looking over your shoulder a little bit to see how these two horses fare over the short and intermediate term. But we like Amgen better for the prospect of that pipeline. They made an acquisition of Horizon Therapeutics, and they've got a number of really great tier one products. You're looking at what could potentially be close to 20% revenue growth this year, far better than Johnson & Johnson. Similar in terms of their forward PEs, similar in terms of their dividend payout. Amgen has a much stronger dividend growth, which we like, 10% per year on average over the past five years. And they've committed another $500 million to share buybacks, which they're probably getting on sale today if they're in this market. But Amgen's a name we're excited

about moving forward. Are you looking right now to buy more dips or sell more spikes? Well, we've been writing covered calls into the strength and trimming positions, but absolutely I'd be a dip buyer here. This isn't a situation where we think there's going to be a cascading downside or a major sell-off. We've just been so strong for so long, 21 times know, it's a valuation play. There's a period of time here before earnings where we hang on every word from every Fed speaker. June was never the shoe-in that we thought it was, nor was May. I guess, heck, neither was March for that matter. But we'll get some cuts

at some point. A rate-cutting environment is better than a rate-hiking environment. Kev, we'll talk to you soon. Thank you. Kevin Simpson, Capital Wealth Planning, joining us. All right, we're all over the sell-off. As you know, up next, we're tracking the biggest movers into the close. Christina Partsenevelos standing by with that. Christina. Well, Alphabet reportedly thinking about buying a software firm, and Meta getting some love from Wall Street analysts. I'll have all the details next. We're less than 15 from the close. Let's get back to Christina Partsenevelos now for a look at the stock she's watching.

Christina. Well, Meta getting some love from Wall Street today. Jeffries is betting the social media giant will gain market share this year driven by increased ad revenue and the popularity of search engine reels. They bet the stock still has at least $60 upside, which is trading at $5.13 right now from today's levels. And RBC says that Meta is outperforming Google based on advertising perception and high social media engagement. Shares of online marketing firm HubSpot jumping about 5% right now on a Reuters report

that Google parent Alphabet is considering making an offer to buy it, even meeting with Morgan Stanley bankers. If the offer goes through, this would be Alphabet's largest deal considering, or purchase, I should say, considering HubSpot has a market cap of roughly $33 billion. Neither company, though, has commented just yet. Scott. All right, Christina, appreciate it very much. Thank you, Christina Parts and Nevelis. We're all over the sell-off into the close here. We are continuing to move lower here as we head towards the bells. We'll be right back. We are in the closing bell market zone now. CNBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading day.

As stocks sell off into the close, plus Pippa Stevens on the spike in oil prices. Mike, I'll begin with you. Pretty dramatic turn over the last couple of hours. It has been. I always think more in terms of excuses and triggers than reasons, but there was a lot coming together all at once to a market that had been kind of doing its best to rotate away from danger and essentially stay in this uptrend. Now, a couple of things might happen today. One, we're very close to booking the first 2% drop from a high. It might not happen on a closing basis,, we're very close to booking the first 2% drop from a high. It might not happen on a closing basis, but we're in that vicinity. The first one since October.

Also have cracked below the 20-day average. I keep pointing to that because it's been this miraculous kind of net underneath the market that has managed to work. So, you know, you have to be on alert for a change in character of the market in a consensus that seemed to come into April thinking above trend economic growth, a Fed that was going to ease into it, stocks at a record high, sentiment getting elevated. None of it was going to come to roost. That's all we are. I think you have to ask, maybe we got capped for a while on the upside. The S&P is back where it was about a month ago. So nothing too much has necessarily changed about the big important stuff. You know, earnings are probably there.

Companies are largely out of the market buyback-wise because they're in the earnings window. So I think you have to be aware that you should have expected some turbulence. I've been on pullback watch for a few weeks. This is nothing at this point. We're doing it from a higher level than I thought we were going to get to. But there you have it in terms of the tactical market action. It shows you we're a little more on edge than we were with the VIX above 16 and people trying to sort out what we actually want out of the economic data. Looking at, you know, sectors that some may have deemed the most fragile or maybe, you know,

the most susceptible is probably a better way of saying it to a pullback, like chips, which have ripped. And you're looking at some of these declines today, which are, you know, pretty big. AMD, for example, is down near 8 percent. NVIDIA is off in Broadcom. And some of the names we've been mentioning on numerous occasions as being these outliers to the upside are paying the price today. For sure. A lot of the year-to- date winners are definitely getting sold hard, such as Uber, for example, is in that category as well. Some housing related. So it all makes sense in terms

of what people are trimming back. I think the bigger question is, you know, do you still you do still have the benefit of the doubt of how strong and broad the rally was off the lows? It's just a matter of did you kind of use up a lot of that fuel in the short term? You do also have, and we've heard from some of them on our show today, that the dip buyers, they're not gone just because there's a little turbulence over a 24, 48, 72 hours here. Kevin Simpson, for example, suggested he'd be buying on the dip. John Mowry sat next to you 54 and a half minutes ago and said he's still bullish. There's no doubt. And look, the human discretionary dip buyers are absolutely there. They're probably not in any hurry. What you do

lose in these moments is the automated dip buy. You know, it's like, well, VIX ticked above 15, time to buy S&P futures because we've always had that be a little bit of a seesaw that's working. So once those equations start to come up with the wrong answers, then it's a matter of finding where you have buyers with conviction. And so sometimes the market has to move the price farther to get to those buyers with conviction if it's not just this kind of automatic self-correcting trend in the market. Pretty interesting reversal in the energy market, Pippa Stevens, which you obviously watch very closely. Crude oil pushing 87 or at least getting closer to it. Yeah, that's right, Scott. So WTI did spike above $86 as tensions rise in the Middle East with international benchmark Brent settling above $90 for the first time since October.

So President Biden today did warn Israeli Prime Minister Benjamin Netanyahu that strikes against aid workers and the humanitarian situation in Gaza are unacceptable. And meantime, the Jerusalem Post reporting that Israeli embassies had been put on high alert after Iran vowed retaliation following that missile strike on its consulate in Damascus. So all of this is renewing fears around supply disruptions in the region. And as RBC put it, the Iranian response could be more forceful than a previous retaliatory actions. And this all comes as Ukraine is also ramping up its drone attacks on Russian oil refineries. So, Scott, for so long, oil was stuck in a range since no supply was actually disrupted. But now there are growing

fears that some of that oil might actually come off the market, which is why we're seeing prices rise. Mike, dare I say, how big of a problem would one hundred dollar a barrel oil be? Short term on a reflex, it would probably be a problem. And I think the reason it becomes a problem is not just the pure feed through to inflation numbers. It's because it does restrain growth. Now, it's not like we have the most energy intensive economy the way we used to or anything like that. And as I said an hour ago, I do think if you if you needed to set your preferences for why the market panics a little bit, geopolitical worry is a good one. Because almost always it's not the thing that sticks. Usually you can kind of accommodate it or people kind of flinch before you actually get any real conflict. Let's hope that's the case right here. But, you know, oil is definitely moving in the wrong way, maybe for the wrong reasons in the very short term.

It's not make or break. We were above 100 a couple of years ago. It didn't really undercut the economy in a big way. I do think, though, the whole, you know, we don't want to see growth falter. ISM services was a miss yesterday, even though people took heart in the prices paid going down. The consumer companies are not telling you universally a happy story right now. We are seeing the manufacturing side pick up, and people, I think, are embracing the ISM manufacturing as if it's, you know, hey, it's early cycle again. But it's not as clear as that. So I think that's why with valuations where they are, with people having already gotten equity exposures higher, it's time for a break and a little bit of a reset probably. Thanks to Pippa Stevens covering oil for us today on a big day there.

It's been a big week and month. Mike, we're down across the curve, all across the curve now in yields, which just plays to that flight to safety. It does. A bid in bonds and a drop in yields. They're modest moves, you know, versus yesterday's close or versus where we were a week ago. But directionally, it does show you that there was just this kind of quick rush for a bid in bonds. And that sort of, you know, tells you that you're a little bit removed from the Fed speak right now. I don't think the Fed knows where it's going, so therefore they can't tell you where they're going.

So it's not like they're hiding the actual plan from you. It's just about, we've got to see how inflation comes through in the next two months. We'll see if it still makes sense for them to get the desired cut in there by the middle of the year. And we can all hope that the economy gets it, but doesn't needs it, because that's sort of the underlying premise of a lot of what we've seen in the market. One of those rare days of late, at least, where you see rates moving lower and the Russell moving lower, too, which is down by more than one percent. It goes to what you're saying about,

you know, concerns about the economy. Geopolitics obviously playing a role in all of that. Although, interestingly, Russell not underperforming, you know, actually, because it is a lot of the big growth games that are down. It's pretty even-handed in terms of the majors and the Russell. Everything is off by a little bit, more than 1%. But we're going to end this day, Mike, near the lows of the session. Yes. It looks like we will probably just about get to that 2% drop from a high, as everyone has said. This year started in the fashion of some of the strongest, lowest volatility years on record. A 2% dip does not negate that. It still is one of

the stronger bull markets we've seen in a while. So we'll see how it digests this in the jobs number first thing tomorrow morning. We'll seen it a while, so we'll see how it digests this in the jobs number first thing tomorrow morning. We appreciate your help all the way around today. We'll see you tomorrow, obviously. Jobs report, big, and we'll pick up where we left off today. I'll send it into overtime with Morgan and John.