Closing Bell - Closing Bell: Rescuing First Republic, What Will The Fed Do Next? 3/16/23

Episode Date: March 16, 2023

Scott Wapner breaks down the big break for First Republic.  Eleven banks, including JPMorgan, Citigroup, Bank of America and Wells Fargo, deposite $30 billion in First Republic Bank. In a joint statement from the heads of the Treasury, Federal Reserve, FDIC and the office of the Comptroller of the Currency writing, “This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.”  SoFi’s Head of Investment Strategy, Liz Young, weighing in on what it all means for the markets and your money.  Plus, one of the top-rated financial advisors, Chris Toomey, on how he’s positioning his clients through the volatility.  Why he’s saying now is the time to stay defensive. The tech trade heating up, Requisite Capital’s Bryn Talkington on where she’s putting her money to work.

Welcome, everybody, to The Closing Bell. I'm Scott Wapner, live post nine. New York Stock Exchange's make or break hour begins with stocks surging today on news of a rescue for First Republic, one of the regional banks in the eye of the storm. Other banks sharply higher as well, as concerns around those names seem to ease a bit, at least for the moment. Here's your scorecard with 60 minutes to go in regulation. Dow is ripping higher. It is the Nasdaq that is a key part of the story today. It's at the highs of the session right now. Mega cap tech stocks are outperforming the market, as we will show you. Yields are moving higher, too, and that after the ECB goes ahead and hikes rates, only adding to questions over what our

central bank will do when it meets next week. And that's our talk of the tape. Your move, Jay Powell, for more on how stocks will react no matter what the Fed does. Let's ask Liz Young, SoFi's head of investment strategy here at Post 9 with us. So we'll get to the quote unquote rescue of First Republic and the implications moving forward in a moment. But I just want to start with the question of the moment. Should the Fed hike or should it pause? You know, I've changed my mind about 14 times on that over the last 24 hours. I think the responsible thing to do right now would be to pause only because I think it looks like if they hike, they are not paying attention to everything else that's going on. However, even if we get a pause, I think they

hike again. I don't think that's the end of it. I think we continue to get another hike. The risk here is that I don't think the market likes it either way. I don't think the market likes 25 basis points. I don't think the market likes a pause next week. I think that we are in a state where, again, once again, we're stuck in this range. And you've got a day where yields are up and growth is up. They can't both win that game. So we've moved into this area where we're waiting for every tiny little piece of news. And I'm worried that we're not, as investors, stepping back enough and looking at the bigger picture, that we've gotten so many bad headlines over the last five days that a rally just can't continue at this clip. No matter what the Fed does. Well,

I think actually some of this rally is predicated on the idea that the Fed might pause and might have to reverse course. And obviously the idea that we've seen some bailouts or some rescues so that there's a backstop again. But the rally, look at what is actually rallying, right? Gross stocks, large cap tech is rallying. The NASDAQ is rallying. It's almost as if investors continue to be conditioned that, OK, rates down, growth is good again, and we can just carry on. What I would warn people about is that if inflation, we still have a six handle on inflation, OK? If inflation does stay that high or if they reverse course before it's fixed, we have a semi-permanent higher cost of capital.

That is not good for growth stocks. There is an idea. We'll get more to the tech trade in a minute because it obviously has raised a lot of eyebrows over what it's been doing. There is a suggestion that what's happened over the past five, six days or so has done a lot of the Fed's job for it. Sure. At least in the near term. Sure. has done a lot of the Fed's job for it, at least in the near term. Eric Rosengren, former Boston Fed president, interest rates should pause until the degree of demand destruction can be evaluated.

Undoubtedly, what has happened is a contractionary event. Disinflationary, contractionary. So the argument is, why not pause? Take a look around. You don't lose anything. By 25, no 25 for one meeting. Big deal. Well, and that's why I've gone back and forth about should they, should they not? I do think you lose sort of control around the liquidity environment in the sense of if they do pause, there's a chance that the market really likes it. And financial conditions ease on the back

of that, which is actually the opposite of what they need to happen for inflation. So, you know, looking, I mean, even at the European Central Bank today, hiking 50 basis points, their inflation rate is higher than ours right now. Look, if you would have told me yesterday, quite honestly, ECB is going to go 50 and we're going to be on the air for closing bell at 305. And the S&P is going to be up near one and a half percent. The Nasdaq is going to be up two and a third percent. And the Dow is going to rally by 300 points. I said that sounds unlikely. Yet here we are. Yeah. Yeah. So so here's the thing. I mean, if they pause next week, the intention would have to be crystal clear. The intention would have to be that they were waiting to make sure that there weren't more cracks in the system that would actually do the rest of the job for

them, right? If they do 25 next week, I don't think that's a catastrophe. I think that's actually pretty consistent with what they've been saying. The risk is that then there's this narrative that they purposely are putting us into a recession or they're purposely trying to break more, even though there are signals that things have already broken. So the news that we are still digesting from today, right, what David Faber was reporting earlier, this rescue injection of deposit money from many of the big banks, if not all of them, sort of like a bear hug.

Yeah. It's like, we got you back. Now, First Republic was up a lot on that initially. Now it's only up five percent. Do you feel like the worst is over as it relates to the whole banking issue or are you still nervous about what else is out there? Well, I heard somebody say yesterday there's rarely ever just one roach in the wall. That's probably true. However, I think what happened since last Thursday, particularly on Friday, is that we found out that it wasn't going to become this huge crisis that everybody was just going to kind of raise their hands and say, you know what, not our problem. Let the market figure

itself out. What I would say, though, about what's happening today and the headlines that we've reported and that we've talked about, these are not headlines that you get during stable market conditions. And these are not headlines that you get, especially because now there's a theme to the headlines, right? It's not just one isolated incident. It's now a theme that's occurred in a few different banks around the U.S. and around the world. This is not stuff that happens in the beginning of an economic expansion. This is not stuff that happens when the markets are comfortably moving in an upward direction. So do I think we've seen the last of the stress from this hiking cycle? Absolutely not. Yeah. So you mentioned what's happening in tech. We note the Nasdaq is the big outperformer today. This idea that mega cap is back as the port in the storm, the defensiveled trade that worked 13, 14 months ago and prior that was out of favor last year

is suddenly back. Is it legit? Have staying power? So this is going to be an intricate way to say this, but if we do have another drawdown, I think it's because we find out that the economy is actually worsening. It's one of those bad news becomes bad news scenarios, right? If that's the case, and we have another big flush in the market, it's possible that tech does not get hit as hard. I think tech had its worst hit last year. It's possible that it holds up better than the rest of the market, but it probably still goes down because valuations get hit in any scenario like that. I think cyclicals would actually get hit harder than tech in that case. However, I don't think that it's going to be what leads on the other side of something like that. And that's where I would caution people to, I use this Kenny Rogers song

all the time, don't count your money while you're sitting at the table, right? Don't assume that just because rates are coming down and you think that we've seen the peak in rates, that they're going to stay low and that's going to be absolutely positive for tech. I understand, but if you can, if you make, let's just break the relationship between rates going down and tech doing well, because that's not necessarily the story, you know, today, for example, it's a more micro focus on companies that are producing cash hand over fist, which is trumping everything else, especially in this environment. So forget about rates. As long as we are in this new environment of five, six days ago, why won't these mega cap tech stocks continue to work?

Well, part of it is I think tech went through this cycle before everybody else did. So obviously they got hit last year in the rate environment. Already this year, you've seen all the job cuts occurring mostly in tech. You've seen the cost cutting occur in tech. That's been rewarded by the market, rightfully so, because they should react that way and they should manage their operating margin by cutting costs. And I think that that is something that deserves being rewarded. But if we go back into an expansion, if the cost of capital is semi-permanently higher, that's a drag for tech. And now they've cut resources that they were using to produce that growth. It takes a lot longer to build those resources back up and get approval to build those resources back up. So they'd be coming out of it with less than what they started with

in an environment where the cost of capital is higher. Though they are becoming more nimble and more, as Brad Gerstner would say, fit by the job reductions that they've had. Let's bring in Joe Terranova. He, of course, Virtus Investment Partners, a CNBC contributor as well. I like the way you put it is as we're having this conversation about whether the Fed put is back, you say the mega cap put is back without along the lines of this conversation. It backstopped the market this week. We're all talking on Sunday about the Federal Reserve backstop. It's the mega cap backstop. You're looking at, you know, whether it's it's meta, Amazon, Alphabet, Microsoft. They're all up 9% this week. So clearly, okay, that's allowed there to be a degree of support underneath the overall index.

And I think what that's going to do, quite candidly, if this continues and the S&P sitting at 39.50 right now, I agree with you. We should not be raising rates at the meeting next week. But if the market's sitting here and I'm Chairman Powell, I'll go another 25. Why shouldn't the market gives the market gives them the reason? Let me push. Let me just play the other side of the debate. Why shouldn't we? 25 basis points is really going to make that much of a difference. What if they say if what if it's a dovish hike? It's 25. But yeah, we get it. Now we're going to make that much of a difference? What if they say, what if it's a dovish hike? It's 25, but yeah, we get it. Now we're going to look around. ECB goes 50, Dow's up 320. Why not? So back in 1994, I keep telling you about this Orange County bankruptcy. That's exactly what Chairman Greenspan did. He went after the Orange County bankruptcy, went one more time in February of 95,

and then he was done. Chairman Powell could raise 25 basis points next Wednesday. I believe he's either done on Wednesday or he's done after that, because this is so disinflationary that he is going to have to pause. Why I'm saying if he wants to go 25, which I don't think he should, if he wants to go 25 on Wednesday, the market's kind of giving him a little bit of a free pass that he can do it. There's still six days before the decision. The market's not doing anything. He doesn't have to worry about it. If the market's here next Wednesday, he's got a little bit of a pass. I don't think he should do it.

I think they should be done, and I think they'll be done after either Wednesday or going into the next meeting. Do you think, Liz, is the market picture worse today than it was one week ago today? Yes. Or is it the same? I think it's worse today. Because of the banking issue? Because we've identified some fragilities in a pretty big sector, in a sector that all Americans would like to feel safe in, right? So we've identified fragilities that I don't think we really knew existed entirely. Some people knew, but the broad market did not know that they existed last week, Thursday.

I'll tell you why I think they shouldn't go next week, because it would confuse the narrative. They've consistently said, we're data dependent, we are making sure that financial stability is intact, yada, yada, yada. If they're data dependent, they have to wait for the data to come in. We know that this is going to be disinflationary. I don't think it's going to be disinflationary enough, to be fair. But they don't have any extra data that says it's actually working yet. I don't know. I mean, they have to wait for it to come.

If you listen, Joe, to what Rosengren is talking about, this is undeniably going to have an impact on demand. Credit growth is going to be slower. Loan growth is going to take a hit. So demand and sentiment, by the way, consumer sentiment, how can it not be somewhat impacted by all this confidence and the like. So if demand is going to be destroyed somewhat by these events, then he doesn't have to do anything, does he? Well, demand gets destroyed after you break confidence. And this these events absolutely broke confidence. I believe it's one

of the reasons why the bank banks are now trying to place these deposits of billions of dollars into First Republic. It restores a degree of confidence. And I think we need that confidence to return once again. So, you know, I think we're going back and forth on 25 basis points, not 25 basis points. I've shared my feelings all week. I think they have to stop. But I just think the biggest question right now for this market is what goes on as we

look forward for positioning? Because you can't tell me this week that you have not had a capitulation of consensus. And consensus was energy, financials, health care, right? Shorting bonds, being long, commodities, all of that has been unwound through the entirety of this week. And now that you've had that capitulation, how does the market think about that going forward? Where's the consensus? I'll tell you what. I have no clue. Where should the consensus be?

Should it be in growth? Should it be in value? Should it be in commodities, bonds? Where do you go from here? Because to your point, Liz, the whole investment playbook has been turned on its head in six days. The things that we thought were going to lead this year to begin with hadn't been working anyway. What led last year, like energy and tech was beaten up. And here it is, one of the leadership groups. But now, if you're worried

about a recession being pulled forward by the virtue of what's happened through this this issue, is not the whole playbook turned on its head? It is, yes. The other thing I would say is, like you said, it's been six days. We probably look back on this period and it looks like a really quick flash in the pan, right? I don't think that during a time when things like bond volatility and stock volatility

have risen so quickly and been all over the place, I don't think this is a time that you make big moves in the portfolio. I think you wait and hold until we have more information, which is probably the Fed meeting. But I don't think that you need to really do much of anything. I'm going to assume that a lot of people have already concentrated themselves on the short end of the curve in money market funds, in things like gold. I think gold has become a pretty consensus call, and I would be on the side of that consensus call. Joe is on the side of that consensus call because he's been buying gold. One part of the commodity space that's getting a lot of attention, as you alluded to, with energy. Mark Fisher, you know, your buddy, used to work for him, says everyone with

short bonds, long oil, that's been blown out. He called me earlier and he's like, here's what's going on. No one wants to buy oil with recession fears percolating. It's a total buyer strike, and there's no real reason to buy it either. And this is somebody who looks to be nimble in and out, depending on what is happening at the time. He said oil should be bought at 65 and sold at 85. It's going to be in a wide range, according to him. It's still too early to buy it, though. But it sounds like it'll be trendless. And I think the market might be exposed to a little bit of that trendless environment as we go into earnings, where there's a little bit of a strike on the part of new capital

that wants to come in and try and figure out exactly where we should be concentrating, which sector, which equity size class, which asset class. So I think looking forward over the coming weeks, that's a condition we might have to be dealing with until we get an understanding. Has there been a further deterioration in earnings? Guys, we're going to leave it there. Joe Terranova, Liz Young, thank you very much. Here at Post 9 with us, let's get to our Twitter question of the day. Now, is tech the new safety trade? Want to know from you? Head to at CNBC closing bell on Twitter. Please vote. We got the results coming up later on in the hour. We do have a news alert regarding Pfizer. Our Meg Terrell, who else is here with that? Meg.

Hey, Scott, a panel of outside advisers to the FDA just voting now in favor of Pfizer's antiviral Paxlovid getting full approval from the FDA. Remember, up until now, it's been available under emergency use authorization. Getting full approval is really important for the drug becoming available through the commercial channels later this year after the public health emergency ends. You know, there were a couple issues that the committee had to consider that were different from the time when this drug was studied. For example, most people now have either been exposed to the virus or vaccinated or both. In the trial, people were not vaccinated. Also, the trial was run during a period when Delta, the Delta variant, was circulating. Now, of course, it's Omicron. Still, the panel overwhelmingly voted 16 to 1 in favor of this drug. It's a $19 billion product this year for Pfizer. Or sorry, 2022 and 2023, they estimate $8 billion and increasing from there,

Scott. So very important for Pfizer. Back over to you. Yeah, no doubt about that. Meg Terrell, thank you very much for that breaking news. Up next, the message from a top rated financial advisor. How defensive should you be in this market now? We'll debate that. You're watching Closing Bell on CNBC. Keep it right here. We've got 40 minutes to go in this trading day. Let's get a check on some top stocks to watch as we head towards the close. Christina Partsenevel is joining us with that. Christina. I have a retail theme today, Scott, and it may not necessarily be good news for parents. Mattel shares are almost above 4% right now after its CFO said at a conference

that it was reiterating its full year guidance and that they would continue to raise prices in 2023. This is the company that makes those monster dolls and Star Wars plush toys. They have suffered from high inventory levels, so they'll be cutting production, keeping prices high so margins stay intact. Meanwhile, Dollar General is blaming its mixed earnings report and weak profit outlook on higher borrowing costs. Profit, according to them, should take a 3% point hit due to higher interest rates, but the CEO did promise to invest $100 million in its at least 1,000 stores across the country, with much of that cash, unfortunately, going to

higher labor costs. The stock is down over 2%. Got it. All right, Christina, we'll see in a little bit. Christina Partsinello, stay defensive and hedge your equity exposure. That is the message to high net worth clients from one of this country's top rated private wealth advisory teams. The head of that team at Morgan Stanley joins me now. Post nine, Chris Toomey is back with us. Good to see you, especially during these times. I mean, you've been negative. You've shared that consistent view with us and our viewers for months. Do the events of the last week make you more so? Yeah, I think so. I think from our standpoint, we've been pretty patient in our defensive position. We've watched rates go higher.

We saw the multiple contract. And we started to see that flow into that negativity with regards to earnings. Earnings have come down about 11%. So we think that started. But this operates in long lags. So we have been a little bit antsy with regards to the fact that this has gone a little bit longer. And we think there's a reason for it right the reason has been there was so much liquidity put into the system there were these additional facilities

put in place which kind of elongated that liquidity in these businesses where they didn't really have that judgment day and I think we're really starting to see all of that work the Fed do come to fruition so what does that mean then for where if you're a little more net negative than you were before, where do you think stocks are going then from here? You know, I think we're what I would say is we're not at the end. We're at the beginning of the end. So what we're seeing here is a situation where the beginning of the end of the pullback, the beginning of the beginning, the end of where we can start getting a little bit more excited

about putting money to work. OK, I think what we're seeing is the market is realizing that all of that activity that the Fed has put in in such a quick fashion is really creating breakage in the system. And so we saw that specifically within the banks, which we think are the things that are providing the liquidity and the acceleration with regards to growth. And as they start to have problems, we start to think that that'll manifest itself in other places within the economy. So that leads me to the Fed, right? What do you think the Fed's going to do next week? I almost don't care what you think they should do. What do you think they're going to do? Because that's ultimately what matters. We all have opinions. They don't matter. So I'll answer it two ways. So the first thing is, I think right now the market's like a coin flip,

whether it's 25 or zero. I think in reality, it doesn't really matter. I think the damage is done. This is the situation where the guy at the bar has eight shots of tequila. And you know what? Like having a bunch of coffee or stopping to drink the tequila doesn't matter. The damage is done. We're going to start to see breakage in the economy. And I think despite the fact that even if the Fed pauses, what has happened, the damage has already been done. But then, well, it has to run its course. I mean, what reverses, if they stop, if they don't hike anymore, doesn't that lessen the damage? Even if some of it's already been done, it doesn't take the next step of making it worse. No, because I think what we'll start to see is we'll start to see some real damage

within underlining businesses themselves. So some of these businesses that really shouldn't be operating at a level where the cost of funds is at this level have to start to come down in value and have to start going out of business. And so we started to see some of these people that were offsides getting caught offsides, and I think we're going to see more of it. You never see a situation where you have this type of breakage in isolation. It's something that's going to fester throughout the rest of the economy. And so for that reason, I think you still need to be defensive. You still

need to sit on cash and you don't want to be aggressive with regards to adding equity exposure. Let me just let everybody know that the official release of the Faber reporting is now out. That consortium of banks, really what it is, all of the big names on Wall Street, plus the likes of BNY Mellon and PNC, State Street, Truist, U.S. Bank, and again, along with all of the heavyweights. And you can see on the screen here the amount of money. We're talking about uninsured deposits totaling $30 billion into First Republic, trying to at least, you know, give a little bit of a rescue here and ease some of the concerns, soothe the markets, however you want to characterize it. Now that the release is out, the stock is back on the move

higher. If we can show an intraday of First Republic, when news of this broke with David, the stock obviously took a big leap up. Then it dipped negative for just a second or right on the line. And it's on the way back up by some 12 percent. So we'll keep our eyes there. There's nothing to say, by the way, that there's more, that there are other banks that are going to somehow have a major problem? No, that's pure speculation. I think from our standpoint, it just demonstrates the fact that there are problems within the economy that are starting to manifest themselves. And some of those we can anticipate. So these are businesses that are dependent on liquidity. These are businesses that are running out of money.

These are businesses that are trading at higher multiples. Those are the places that we think are going to have the most problems. But I think the fact of the matter is, is that we don't want to speculate. We want to talk specifically about facts. And the facts are the Fed's raised rates dramatically. Banks are going to be raising their credit standards. Liquidity is going to be drying up and that's going to be negative for equities. So you want to be then more in cash than you even have been in the past, which I mean, you've had the most cash, I think, than you've ever had. That's right. So I think we're pretty happy with where we're positioned. We're pretty happy that the market is coming to us.

And we're looking where the opportunities are to deploy that cash. I mean, your head gets comfortable on the pillow at night. I hear you. What turns you more aggressive? What's the one thing you're looking for? Real pain in the market. The market coming down significantly where values we think are more, prices are more equipped to the values that we put on them.

So I'm thinking, you know, probably 10 to 20 percent we should start looking to put money into work. That's kind of 3600 is where we start looking. You think we could get another 20 percent? I do. Well, we'll see. We think we could get another 20 percent? I do. Well, we'll see. We'll talk to you again. I know we will. That's Chris Toomey, Morgan Stanley, private wealth management.

When we return, why our next guest is betting the Fed will get it right next week. Will they hike and should they? Getting another check as well. We'll answer that question. Here's another check on the markets here. Everything's up at least 1%. NASDAQ, as we've told you already, the outperformer. We're back in two minutes.

Stocks are rallying into the final hour of trading. NASDAQ on pace for its best week in nearly two months. Our next guest, though, still believes that markets are heading back to their October lows. Let's bring in CNBC contributor Greg Branch of Veritas Financial. Good to see you again. Why are we going back to the lows? Why are we going for the obvious reasons of just something just broke and things are going to continue to deteriorate? Yeah, for the for the opposite reasons that we've seen the rally this week, that what is going to happen is different than what we think should happen. I love that you made this distinction with Joe. It doesn't matter what we think should happen. It doesn't matter what we want to happen. And right now, I think the market is discounting those things versus what the evidence says is

going to happen. And so a week ago, there was a 70 percent chance based on Fed funds trading, Fed funds futures trading, that a terminal rate was going to be five to five and a 70 percent chance based on Fed funds trading, Fed funds futures trading, that a terminal rate was going to be five to five and a quarter percent. Now, you know, that's lower than I am, but there's a plausible scenario that that's where it was going to be. Right now, there's a zero percent chance that the terminal rate is going to be above five percent. So I think what we've seen is a motion takeover and people take the position that the Fed is done or that the Fed should be done or that we're even back to folks postulating that we're going to have rate cuts in the back of this year. I don't think

that that's a plausible scenario, which means that there's downside and negative surprises in store that I think will shake the market. So let me ask you this. You obviously are dialing back your own expectations of how high the Fed will go, right? You're the one who came on this network a week or so. But hold on, let me finish. A couple of weeks ago, I think, a week, two weeks, whatever it was, and said six and a quarter, six and a half, to which I was like, really? And you're like, yeah. Now, obviously, you have to be dialing those back, as you said. So how can you be as negative as you were before if at the same time you're dialing back your own expectations of how high the Fed will go?

Well, both things can be true. And you're right. I am considering whether or not they need to go that high, because while I do agree with Liz, you know, two months from now, we likely won't be talking about this anymore. It still will do some of the Fed's dirty work for them. You cannot contract credit the way that the lack of faith in regional banks is doing. You cannot put companies in a liquidity crutch and not have that have the impact on unemployment that the Fed is looking for. So this will do some of the Fed's dirty work, which means I am considering coming down a bit. But I'm still so far away from consensus. The reality that I see is very different than the reality that consensus sees. And so as long as I believe that to be the case, then I believe that the market has a negative surprise in store. And we know what happens when we have negative surprises. We get equity values

that are less what they are today. I don't believe that this market can sustain itself. What if the Fed doesn't do anything next week? Does that change your opinion? Does that tell you that they've, you know, they've they've seen what can happen by virtue of what they've already done and they don't want it to get worse. So what if they do nothing? It will depend on what they say to us, Scott. If they do nothing and say, we're done, we're going to wait some months and we think what we've done is enough and we're going to wait for the lag to kick in, then yes, that may change my opinion. But if what they do is say, we're going to pause right now and wait

for the fragility in the system to heal, that will probably worsen my opinion because what it means is that we're dragging the rate-height cycle out longer into the future than we otherwise would. So it'll really be dependent on their commentary about what they do. I do not think that that's a plausible choice, though, for them to pause at this juncture. Well, I mean, but that would tell you if they did say that, that they're paying attention, that they get it. And I think the market would actually like the fact that, you know what, we're not giving up on this fight against inflation, but we're also not discounting what just happened, right?

We've missed some of the signals in the past regarding inflation. We've made mistakes, and we're not going to make this mistake. And there's no reason to rush. I don't believe that there's a reason to rush. But as Liz and I think Joe were saying, I don't think that a 25 basis point hike is a meaningful enough number to really cause any consternation in the market. On the other hand, what I think a zero action Fed meeting does is give mixed messages to the market like they did in June, like they did in July. And I think that they're very, very sensitive to sending mixed messages. And so they certainly won't go 50, right? Because I think that they're very, very sensitive to sending mixed messages. And so they certainly won't go 50. Right. Because I think that that's would say that they are tone deaf and not necessarily paying attention to the fragility we've just uncovered. But I don't think

that they'll go zero because at the end of the day, Scott, that would signal to a significant population that they're done. Joe just said that or that the fight is over. And I don't think that they want to send that signal either. We're going to see. That's going to be the talk for the next six days. You better believe that. Greg Branch, we'll see you soon. All right. CNBC contributor from Veritas joining us once again in closing bell up next. We're tracking the biggest movers as we head into the close. We're about 25 minutes or so, a little less than that away. Christina Partsenevelos. What we're seeing is, is office real estate the next big threat?

We're going to look at the stocks that could be caught up with that concern. All of those details and more coming up right after this short break. 20 to go until the close. Christina Partsenevelos standing by once again for the stocks we need to watch. Christina. Yeah, so Progressive getting a double upgrade right now to overweight from Wells Fargo. They like the company's February results and its growth improvements. Analysts also expect the market to reward more defensive names like Progressive amid broader credit concerns. Shares up already 5 percent. Analysts at Wells Fargo also cutting the price targets of a number of office landlords.

They say the office REIT space is facing, quote, everything, everywhere, all at once, with headwinds from raid hikes, the employment picture, and remote working trends. Names like Boston Properties, SL Green, Kilroy Realty, all down, well down, 3%, 4% across the board. There you have it. All right. Thank you for that update, Christina Partsenevelos. Last chance to weigh in on our Twitter question. We asked, There you have it. Dow is better than 400. S&P highs of the day, too. NASDAQ is up 2.5%. A little bit of relief in the banks today, obviously, and that is helping the Russell 2000, the small caps. Russell's up one and two thirds. Now the Twitter question we asked, is tech the new safety trade?

Majority of you saying it is not. 53.5%. Up next, FedEx reports in OT. We'll talk to a top analyst with a look at what investors should be watching that and much more when we take you inside the market zone. We are now in the closing bell market zone. CBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus requisite capitals. Bryn Talkington on where she is investing in tech and energy. Cowan's Elaine Becker on FedEx

ahead of that earnings report. In overtime Mike Santoli a little bit of a stress relief. For sure this rescue if you want to call it that. Into first republic has helped sentiment yeah. Talk to me the bets that this could be

localized that we could basically- kind of take care of isolated issues in the banking system and not have it spill so far are getting into the money. That, along with what I would characterize as a little bit of a chase into the newfound momentum in the big growth stocks. It looks like it's getting really extended in the short term, but it has a certain logic to it as a catch-up move. All of that is taking this index, the S&P, back into last Thursday's range. I think it's important to keep that in mind. Last Thursday, we lost 100 points intraday in the S&P. That was when the Silicon Valley bank stuff really started to come to the surface and to everybody's attention.

And so now we're right back into that range, expiration tomorrow. You've got sentiment pounded down to really depressed levels. Everything you look at, the fear and greed index, the retail investor poll. And that's what the function of a lot of these scary headlines was, to get those folks a little bit spooked. And now we have a retracement trade. I'm not sure you necessarily want to extrapolate that. The NASDAQ 100 right now is back to as high a premium relative to the S&P in terms of PE, forward PE, as it was at the peak in November 2021.

Oh, wow. So everyone's kind of piled in in a hurry. Do you think the reaction today has anything to do with saying, OK, ECB, we absorbed it. We're OK if the Fed goes or or one has nothing to do with the other? I absolutely think that's a piece of it, at least in the sense that maybe the stakes are perceived to be dialed down a little bit. I've always thought the stakes between zero and 25 basis point move is not huge economically, but was it going to be huge in terms of market psychology? By the way, it's not like we're sitting here trying to figure out an answer

that already exists in terms of what they're going to do. It's not determined what they're going to do. They don't know what they're going to do. They don't know what the next five days hold. So I think we can talk about, you know, the tradeoffs and the perceived risk reward of doing one thing or another. But I do think the idea that there's probably a pause sooner than we thought there was going to be a week ago. Two-year note was at 5% just over a week ago. Yeah, it's incredible. It really is incredible when you think about that. Absolutely.

Of where rates have gone. So Bryn Talkington of Requisite Capital, you heard what Mike said about the NASDAQ and the premium to where it's trading ahead of the S&P, which was really a stunning stat. Implication being this can't last for much longer, can it? Yeah, I agree with Mike. So tech stocks are acting like we're going into a soft landing. Energy and bonds are acting like we're going into a recession. And regional banks are acting like we're going into a depression. And so I think that energy is over very oversold

and tech stocks are very overbought. And so I think that energy is over very oversold and tech stocks are very overbought. And I think you have this like algorithmic trading, this big rotation out of energy is specifically into tech. And so I think it's overdone on both sides. Overbought can get more overbought, though, in tech if they're deemed to be. And the idea we posed at the top of the show as to whether these stocks are back as defensive plays. Now, our Twitter poll suggested that, you know, at least the sample of the viewers who voted suggest it's not. Yeah, well, I think multiples matter, though. And so I don't think that, I mean, I own Apple, the Qs, Microsoft, Roblox, Tesla, PayPal.

So I think it's great these companies are going higher. But do I think Microsoft's going to touch 300 anytime soon? No. I just think that multiples do matter. The NASDAQ has still done about 17% per year for the last 10 years. It's just over-earned. And so I think this is more about positioning and trading versus investors trying to extrapolate some longer term trend. So I'd be careful here adding to new positions in technology. Would you be careful adding to energy, which has been a surprising loser, to say the least? Yeah, no, you know, I should have bought I should have taken Steve's Devin yesterday when he sold it actually added to my energy names this morning.

I added to XOP. I added to BH BHP, which is a diversified commodity play. And then I also added another ETF RYE, which is like twenty five, twenty five different energy names. I think I'm going to trade around those. But I think that people, the narrative shifted too quickly if we're going into some hard recession, when I think that the Fed is going to be able to fix the plumbing. And if they fix the plumbing and they put this program together, I think that we are going to be able to separate the two. I just think markets are very skittish right now. And so they're using energy as a source of funds to buy technology. Not only that, they're buying gold too, right, as part of the commodity complex. What do you make of that?

Well, when you really trade commodities, most people stay within that commodity complex. And as you're seeing, rates are coming down. That gives you a bid to gold. I think the trade has somewhat started to play out. If we do get the Fed to say, we're going to pause, I actually think the Fed's going to pause quantitative tightening. I think they're going to stop increasing the balance sheet because they already are doing QE with this new facility.

And I think that's another narrative where gold can have a bid if the balance sheet is not getting reduced. And if those financial the financial tightening is looking to ease from the Fed, that helps that that gold narrative as an ultimate flight to quality. Bryn, thank you. Bryn Talkington of Requisite. Helene Becker is joining us now of Cowen as we look ahead to FedEx and those results in overtime. It's nice to see you. Was reading some research today and just some general reports about this company. Stocks up 20 percent since December. I'm reading an analyst here who said we do not believe the optimism is yet justified. What about

you? Yeah, we have an outperform rating on FedEx, and our view is that you have a pretty new management team, a relatively new CEO and CFO, and they're really focused on getting costs down. One of the biggest announcements they had earlier this year was that they were going to have layoffs of about 10% of the corporate workforce of senior managers, and they've never done that. They usually offer early retirement programs or things like that. But this was the first time they actually went down the layoff path. And I think they're serious about wanting to cut costs. And I think that's part of it.

So even though we expect volumes to be down, and you probably know this better than I do, but most of the time after they report earnings, the stock goes down the next day. So I'm not that hopeful about tomorrow. But as I think about FedEx over the next six months to a year, I'm pretty optimistic. Do I see this correctly, though, that your price target on the stock is 185 and, you know, it's at 20205,000 now so is that is that right? Yeah, no, I think our price target is closer to $220,000. Oh your price target is closer to $220,000. Maybe that's the new one. I'm looking perhaps that at a bit of an old old research report. Are the, my apologies for that,

it's a cost-cutting plan, the cost-cutting plan, is it enough? Well, I don't know the answer to that question specifically. I'm going to say yes. But I think when I think about these companies, whether it's in my airline universe or FedEx or UPS, I think that they have to be vigilant all the time because costs can kind of get out of control, especially during the peak shipping season when they have to hire lots and lots of workers. And then in January, a lot of those workers leave because they're just seasonal. So they really have to be vigilant so that head count doesn't get out of control coming out of the peak. And then they have to prepare for the next peak, which they do most of the year. So kind of a long way of saying we think they can do it, but they have to prove that

they can do it. All bets off if there is a recession? Well, yes. You make me sad. But yes, I think if there is a recession that's consumer led, that causes people to retrench and rethink how they're spending their money and they they turn to more savings rather than spending, then yes, I would expect the shares to sell off again. All right, Helene, thank you. We'll see what they deliver. Pardon the pun in overtime tonight. Back to Mike Santoli as we walk up to our two-minute warning. You'll hear the sound effect coming in about 15 seconds or so. Looking at the yield complex, so we're back above 4% on the two-year, 4.17. Maybe the expectations of a move by the Fed next week are starting to get ratcheted up and digested.

They're getting rebuilt. But also, you know, we talked yesterday about how there was just such a violent squeeze in the short-term end of the Treasury curve and in the Fed funds futures that it really seemed as if you weren't getting a very considered read on what the market really expected. And now it's relaxing a little bit off of that. You know, I will point out, we were also, you know, at February 2nd, above 4% on the 10-year. So it's all kind of come down to this point where we don't think there's that much more to go. And the risks are to the downside in terms of what the Fed might be forced to do.

So even though we're getting a little bit of comfort for the moment that, you know, regulators and, you regulators and an industry consortium has sort of come to the rescue of some of the troubled financial institutions, you're never quite sure that that's the end of it. So we're going to be on alert for that. Commercial real estate, that whole sector is just urgently for sale right now in the market. The publicly traded REITs. And that's kind of where a lot of the regional and smaller bank conservatism or retrenchment is going to hit, you know, another sector. So I still feel like we're going to be in this monitoring closely mode for a lot of these different pulse points in the economy. But the market has been resilient in itself. And it's sort of the mix of stuff in

the index has essentially really helped. The Russell 2000 got blasted because there's too many bank finance companies there. Yeah. Nice and broad today, right? Today it's decent. Communication services, technology are the outperformers, but financials, obviously, for obvious reasons, up near 2%. Discretionary, up near 2%. Materials doing all right.

And it's about 70% upside volume, which is healthy. Not overwhelming, but pretty good. Volatility index also down three points on the day. So that's got another decent spike on the chart. And tomorrow is a quarterly expiration. So we might have some of this exaggerated upside action just because of some of the maneuvering around the hour. We're close. Not too far off the highs.

Green across the board. That does it for us.