Closing Bell - Closing Bell: Retail Earnings Season Underway 3/7/24

Episode Date: March 7, 2024

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

Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. This make or break hour begins with the bulls running toward daylight. The key index is headed again for more record highs. The S&P 500 galloping above 5150. It's never closed above there. It's powered by a familiar formula, AI enthusiasm, propelling high momentum semiconductor plays, widespread belief in a soft economic landing, supporting industrials. And if that weren't enough, Fed Chair Powell leaving expectations of summertime rate cuts, or at least one, intact. The rally is relatively broad today.

You've got two-thirds of all stocks higher on the New York Stock Exchange. The S&P Mid-Cap Index joining the big caps in record territory. And even energy coming to life just a little bit as the laggards get noticed here. NVIDIA, let's see where we are, up about three or four percent all day. On no real news, three and a half percent. There you go. Stock working on a sixth straight daily gain and is approaching Apple's weight in the S&P 500 right now. So there's plenty to like out there and investors are loving it as signs of rampant optimism emerge in surveys and elsewhere. That takes us to our talk of the tape. Can it

stay this easy for much longer? Let's ask Cameron Dawson, New Edge Wealth Chief Investment Officer and Virtus Investment Partners, Joe Terranova, a CNBC contributor, of course. So, you know, that kind of lays it out. I mean, if you were just looking, Cameron, at the behavior of the market, it got overbought and it's staying that way. That's usually a sign of a pretty durable rally. You're seeing this broadening action that we saw. And then with stocks at record highs, credit spreads tight, the economy looking OK, you have the Fed not doing anything to say, stop thinking about rate cuts. So I think it's one of those situations where, you know, is the only bear case that there's no bear case? Probably. I mean, right now, growth and the Fed aren't giving the market any reason to pause this momentum.

If those things were to change, yeah, maybe you would see some digestion. But to your point, you're still seeing this chase into the market and something that we're watching closely because positioning is extended, but not at extremes, which just means that dips are getting bought and you still have the chase to get people invested. Eventually, everybody will be on the same side of the boat. And that's where we'll really have to watch positioning, sentiment, valuations all be extended. For sure. You know, and even this this little one day pullback, Joe, that we got, it was just one day. You know, and this has this little one day pullback, Joe, that we got, it was just one day. You know, and this has been the pattern for a while right now.

We had one percent down on Tuesday. It got picked up. And so the dip buyers are getting rewarded immediately. So that's just self-reinforcing here. And it reminds me a bit of the beginnings of 2013, 2017. And that was where you had this acceptance of the bullish consensus about the economy and about the markets. 2013, you broke to your first record high in 13 years. 2017, it was going to be tax cuts and a revitalization of the economy. And then the market kept going, even though it felt like it had to pull back. So that's not a prediction, but that's an observation.

Well, it's also, remember, what set the stage for all of this was a reversal in fundamentals. Sure. Coming into 2023, you were in the middle of an earnings recession. You carried that into the fall for the S&P 500. You had an adversarial Federal Reserve that really didn't step back from the disposition until December. foundation for an environment which overwhelmingly bearish sentiment was still dictating that positions sit in those cash yielding equivalents. And what you foster from that is a very strong technical rally. And I think it's important to understand a lot of times when you break out from a significant high and the January 22 high was significant, not so much in terms of price,

but in terms of the duration in which you didn't revisit it once again, nearly two years. Once you break out for that, you know, the bearish argument is, well, you'll potentially get a failed breakout. This was the complete opposite of that. You're 6% above that breakout high. This is a powerful momentum driven rally. And right now, what that suggests is you just want to continue to buy high, sell higher, own the winners. Well, yeah, that's been the game. And I guess, Cameron, the things that really do give you pause, if you just look at the broad setup of fundamentals, technicals, everything, are the things that aren't very good at timing the market, right? So it's valuation, the backdrop.

It's hard to slice it in any way that says that valuations aren't full or worse. And then, you know, you mentioned the positioning and sentiment stuff. So I'm looking at the Retail Investor Survey, the Investor's Intelligence work, and it's all right up flashing in that upper end of the range where you're starting to get excessive readings. On the other hand, if you look at prior bull markets, they can stay there for a really long time. It's not a moment of a top. It's a process. Exactly. And I think the notion is that complacency needs a catalyst for those things to become an issue for the markets,

for stretch valuations, stretch stress positioning and as well as stress sentiment to become a problem. You have to have something that causes people to de-risk. That could be growth estimates coming in. But at this point, we're not seeing any real reason as to why we should be cutting GDP estimates at this time. We see a recovery in some cyclical areas. We see the consumer remaining strong. So growth estimates still might have some upside, which means that until we get them to turn over, then valuation, sentiment and positioning become just poor timing tools. Sure. And yeah, Joe, no, that's such a great point that there has to be an exogenous shock at this point in this breakout of the trend. it comes from the economic data. I think we know I actually think right now sitting there being, you know, the Monday morning armchair economist is going to hurt you. You know, you have a disinflationary trend in place. We know that growth is good right now. And the Federal Reserve and the

ECB and the central banks are looking to begin a rate cutting cycle. So don't focus so much on the economics. I think what reverses this strong momentum, to Cameron's point, is something that we don't know that is the exogenous shock. Exactly. And so therefore, it kind of doesn't pay to try and figure out what the shock might be, except you can know that the risk reward is not great if this is like the beginning point for new positions. OK, but but the insurance on that is incredibly cheap. You know, you've you've got to be below 15. So you could buy the insurance if you need it.

And you got to you know, you have to be the type of person who's willing to let the market have some fun without you. If you are one of those. Let's get more on the Fed. Let's bring in senior economics correspondent Steve Leisman. So, Steve, obviously, second day of testimony from Chair Powell, as well as, you know, I know you've spoken to some other voices. Yeah, and Joe actually gave me the perfect lead in because, Mike, on both sides of the Atlantic today, there were strong hints in the air of summertime rate cuts. Fed Chair Powell saying again on day two of his congressional testimony that he's not far from having the evidence or the confidence he needs to cut rates. When we do get that confidence and we're not far from it, it'll be appropriate to

begin to dial back the level of restriction so that we don't, you know, drive the economy into recession rather than normalizing policy as the economy gets back to normal. Later in the day, in an exclusive CNBC interview, Cleveland Fed President Loretta Mester saying that a couple more good inflation reports could provide the confidence that she needs to cut. And of course, there was ECB President Christine Lagarde starting off the morning, sparking a bond rally. She had a similar hint about what summertime in Europe might bring. We clearly need more evidence, more data. And we know that this data will come in the next few months.

We will know a little more in April, but we will know a lot more in June. June. So now two days of testimony by the Fed chair, multiple central bank speakers, and a bunch of data. The market is pretty much where it was. A one in four chance of a May cut and a three in four shot at one in June. And Mike, I think there might have been some concern going into all this that Powell may end up a little more hawkish, but he did not. He did not for sure, Steve. And I think any hawkish turn that might have been anticipated would have had to be a total change of the story and the framework that they've been using for a while, wouldn't it? I mean, they've been sort of pointing out the fact that just on paper, their policy is restrictive based on where inflation has gotten to. And the normalization

process can be slow and measured, but it should probably start before too long. Yeah. And all of that is predicated on the data behaving the way it's going to be. I really like the way Joe said that the risk is not necessarily going to be in the economic data. Of course, we have the jobs report tomorrow that shows just that's supposed to show a step down from that really unexpected $353,000 in the prior month to around $200,000 this time around with a low unemployment rate. But the market, I think, is really interesting. It is fine with what has happened, which is this extended extension of when the Fed will cut. And also, by the way, a decline in the number of cuts you're going to get there. And the market has kind of shrugged its shoulders at it. Of course,

maybe it wants a little bit more, but it also doesn't want the other side of this, Mike, which is the idea that if the Fed is cutting and cutting fast and cutting strongly, it's doing so because the economy is weak. Yeah, that's for sure. Steve, appreciate all the color. Thank you very much. And, you know, that's something we've talked about, Cameron, which is a slow and kind of grudging rate cutting cycle is usually, based on history, the best kind for stocks. Yeah, we saw that 95, 98, 2019, all times when the Fed cuts rates by three times, markets continue to rally, hit new all time highs by the time that the Fed was done, effectively saying no recession here. The thing that's really interesting, though, is that in each of those times, there were recession fears. PMIs were declining.

We had this overarching fear that the Fed needed to do something, even though it didn't end in a recession. This time around, we're seeing PMIs start to reaccelerate, start to bottom. So I do wonder if the data really is going to work in their favor to cut by May or June, as the market is expecting, mostly as we continue to watch things like gasoline prices moving higher. They're up 10 percent in the last month and a half. There have been a lot of these mismatched subcycles, you know, over the last few years, right? I mean, you saw manufacturing going to a tailspin. I mean, one of the cleanest reads on what the market has been pricing is that we had

the recession. It just really didn't register fully as one or it was an earning setback, but barely you had the two quarters of marginally negative GDP. And then that's all you were going to get, at least for now. Again, it's an excellent point. 2022, you had a hard landing for risk assets. Why? Because the market did its job looking into the future and seeing the earnings recession. And I think the place that we're in now is where the market is actually leading the economy to a certain extent. I don't see it's that the economy is leading the market. And just in terms of what we were receiving from Chairman Powell today, I mean, this is as dovish as you were going to hear the chairman since, well, December, right,

when he was extremely dovish. He just didn't indicate that rate cuts were coming. He talked about Basel III, which was a major surprise. He also suggested that the Federal Reserve would contemplate moderating the duration on security. So he even touched on the balance sheet. I mean, he really gave the market everything that they were looking for today. It's true. I think it all does knit back, though, to, you know, where the market has reached at this moment when we've gotten this broad acceptance that everything's everything's working and everything's favorable. And, you know, Nvidia is not the whole story. At least it's trying not, you know, to be every day. But it's kind of skyscraping in terms of its technical position,

its market cap. And everybody seems to be willing to say, yeah, but it's not that expensive because the earnings keep going up, right? But look how loose financial conditions are. It'll be really interesting next week if Powell has to answer the question about broad financial conditions. They're easier than they were when they started hiking rates. That's not just because of equities, but it's also because credit spreads are really tight, which just means that this is not a market that necessarily is sending you a signal that the Fed is too tight today and needs to act. That is true. I do think, though, that the targeting of financial conditions to me is like this bank shot where they have to use it to do, to hope inflation does what they want it to do or jobs do what they want them to do.

Whereas if inflation itself is managing to head in the right direction, we don't need to play around with the other side. I don't know. I mean, look, we were at an all-time high in 95 when they did cut for the first time. So it's not that strange. And let's remember generative AI helps the Federal Reserve because it's disinflationary in its nature. I had a fellow money manager say to me the other evening, why are you worried about Apple and Alphabet? Right now, it's the semis that are building out the generative AI. and the story will evolve into Apple and Alphabet delivering to the consumer the ability for generative AI to elevate productivity. I mean, is that because GPUs aren't in the CPI basket?

I mean, basically it's somehow a disinflationary thing today in the here and now. Yeah, it's a question. We got the productivity numbers today. I think on a near-term basis, it's hard to put a lot of weight in a quarterly productivity number, but they're helping at least. And look at the different paths between semiconductors and hardware.

So that's where you're contrasting something like NVIDIA versus Apple. Eventually, the trade will be go into hardware, which is unloved and oversold, and go and leave semiconductors. But we don't think the time is for that yet. There's still likely upside to the semi-cycle, even though you've seen this move so far so fast. Short-term digestion, but the reality is we're still probably a little bit away from this being integrated into the hardware. Which brings us actually to Broadcom, which is

going to report today after the bell. And it's been caught up in this whole move, obviously. It's more expensive than it's ever been on earnings. It's being given credit as an AI play, Joe, even though what is it, about a quarter of the revenue are really AI. They bought VMware. It's a roll up of a lot of other things. So where does that leave this field position? Well, the growth on this company has been in decline for the last two years. Eighty five percent, as you cite, of the businesses is non AI oriented. And remember, last earnings report, the stock was down nearly four percent post earnings until CEO Hock Tan got on the call and said, well, wait a second. Generative AI is really going to begin to grow as a percentage of our overall revenue. So, you know, it's going to test, I think,

maybe the resiliency of the AI story. Look, the healthiest thing for the market would be a correction. I'm not afraid of a correction because I think a correction will be met with the response that we had on Tuesday. But Broadcom, AMD, NVIDIA, they are the center of the universe right now in building out this generative AI infrastructure. I mean, I guess really the question is the markets hunger for the next play because it looks as if, you know, NVIDIA has gotten away from a lot of people and, you know, Dell last week, just absolute afterburners as soon as it seemed like it was in the mix. I guess where does that leave us?

I mean, that's what will eventually separate the men from the boys. NVIDIA is such a unique story because its earnings estimates for 2025 have gone up by 4x in the last year. You look at Broadcom, they've gone up by 25%, which just means a lot more of the upside in the stock is driven by valuation re-rating. So you need to see earnings estimates to keep going up to make sense of that valuation. Eventually, earnings estimates will peter out. You'll see some lost momentum. And then we'll look at the whole landscape and have to say, who are the areas most exposed to de-rating because we've put multiples up too high? Would a 7% move in either direction tonight surprise anyone?

Oh, sure. Because that's what the option market is actually suggesting, which is not as volatile as you might think. Well, no. I mean, what would that bring you back to last week prices if it went down? It's $100, basically. So, no, I mean, this is kind of where we're in. It's a sort of a higher metabolism economy and market that we have found in 2024. All right. Good to talk to both of you. Appreciate it. Thanks, Mike.

All right. Let's send it over to Christina Partsenevelis for a look at the biggest names moving into the close. Christina. Well, talk about a plunge. Victoria's Secret shares are heading for their worst day on record after the company warned of weaker demand, especially in North America, even as the company did beat its latest earnings report. JP Morgan cutting the stock to underweight and slashing its price target to $7 from $15 a share. And you can see shares are trading at $17.94 right now. Analysts over there cite the increasingly cautious economic backdrop and expect margins to remain constrained over the next year or two. And that's why shares are down a whopping 30 percent. On the other hand, though, Burlington

is at its highest level in more than a year. After improved inventory levels and higher sales, the discount retailer's guidance also came in ahead of estimates, with CEO Michael O'Sullivan expressing confidence in the year ahead. Despite uncertainty in the economy, despite the uncertainty we just heard from Victoria's Secret, Burlington shares are up 8%. Mike? All right. Christina, thank you very much.

Speaking of the consumer, up next, countdown to Costco. The big box retailer trading at all-time highs ahead of reporting results in overtime. Analyst Greg Mellick is standing by with what he's expecting after the break. And later, how today's tech trade compares to the dot-com boom of the 90s. We are live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Shares of Costco hitting an all-time high today. It's been doing that a lot lately ahead of reporting results after the bell. Several analysts recently raising their price targets on the retailer based on a strong start to the year for sales and the possibility of membership price increases ahead.

One of those analysts, Evercore ISI's Greg Mellick, joins me now. He has an outperform rating on the name with a $770 price target. Greg, great to see you. So, you know, you've lifted your price target. It's at 77. The stock keeps out running it. Just how high is the bar, I guess, would be the initial question in terms of results today. I know Costco reports monthly sales, so maybe there's not much suspense. But what's its state? The bar is high in near term. And I think that's one of the reasons we took it out of our top five portfolio earlier this year. But I think the real upside is still in that they they can keep membership income growing to 7% or 8%, we probably have a fee hike coming in the next 12 months. And as that layers in, you're going to have numbers next year being well in excess in calendar 25 of $18 of earnings power.

And historically, we've seen when Costco is doing well, it can get to a 2.2 times the market multiple. So I think their expectations are high, but for a very good reason, which is they're one of the few companies around where you've had consistent traffic growth, accelerating traffic growth, membership growth that is renewing at record rates. So we still like Costco as a core holding, even if we find some other areas with more upside in the near term. Well, actually, I mean, I think based on forward 12 month earnings, it's basically at two point two times the market multiply. It's like 48 times for Costco, you know, whatever, 20, 21. So I guess we would say the S&P goes up every day. We can get sort of well over 800. It doesn't make the upside that it clearly had six or 12 months ago.

Sure. Absolutely. Do you have a read on I mean, mean, there have been, you know, rounds of membership price increases before. This has obviously always been a very well-managed retailer. Do you have a read on why the stock has caught flight quite so much right now? It's sort of in that momentum basket with a lot of others. You know, honestly, I think Rich Ross, our technical strategist, has probably helped us the most on that in the sense that it's in the triple Q's.

And maybe the fact that people are looking to go after the triple Q's, that will also bring some incremental buying into Costco. And so maybe it's being dragged up with some of those names that people are trying to get some more funds into. No, exactly. It's a great point. Not many retailers in that NASDAQ 100 ETF. And you mentioned that you kind of pulled it out of your top five, but you did put Target in in the wake of its results this week. What are you seeing going on there that makes you more constructive? Actually, just a bit of correction on that. It was actually AutoZone that we put in originally and put in five below, but that's fine.

We're basically trying to lean a little more discretionary as we've gone through this year on that. It was actually AutoZone that we put in originally and put in five below, but that's fine. We're basically trying to lean a little more discretionary as we've gone through this year in our top five. And we thought with AutoZone, of course, that one just popped. So now we've gone to five below, which is actually still down year to date. So we try to be a little more active with the top five portfolio in our ratings, and that's how we show that. Other names in there that I think still have plenty of upside would be Walmart. I think they had a great traffic number in the fourth quarter, and we would say there that one's done well, but you back out Flipkart and other things, and Walmart's trading Walmart U.S. at only 18 times our next year numbers. So you can still find some decent value in here with some of these real good, strong, compounding retailers.

And then when it did come to Target, I mean, did you just take your price target up? Is that what it was? Yeah, we took our price target up on Target. And I'll give them credit where it's due. Where they beat was really the traffic was less negative than we had feared. We have an in-line view on Target, basically because we think as it gets back to 17 or 18 times, they still need to get traffic growing positive, I think, to get any more re-rating there. And then when it comes to, you know, being favorably disposed toward things like Walmart,

you mentioned AutoZone, Five Below. Is it based on anything in terms of consumer spend re-acceleration or is this kind of a steady situation there in terms of consumer spend? No, we think we do think retail sales are bottoming in the U.S. in the first quarter. We're looking for 3% growth over the year, but for something that's probably too unchanged in the first quarter. And we think that acceleration through the year will be across retail generally, but more on smaller ticket discretionary and the fact that grocery deflation seems to be over

and now it's just sort of stabilizing. Bigger ticket discretionary is still struggling a little bit. So we'd like to have Sherwin-Williams as our home improvement name. I would also say Home Depot, sort of more smaller ticket maintenance pro-oriented is another good name that we look at. And we think the auto parts are still in a pretty good space because the consumer is value focused, no doubt. And I think that's where you see that across our names if we'd like. And then which would be kind of more exposed toward that bigger ticket durable? I would say in across my coverage of Broadline's hard line, something like a floor and decor or a Lowe's, you know, bigger ticket things where we maybe over consumed a lot of units

during COVID where there's a lot of units during COVID where there's a lot of replacement cycles. It's just going to take longer for people to come back to those bigger ticket things. Makes sense. Greg, appreciate the time. Thank you. Great, Mike. Thanks. All right. Getting some news on Archer Daniels Midland. Pippa Stevens has that for us. Hi, Pippa. That's right, Mike. So the FBI is reportedly delivering grand jury subpoenas to Archer Daniels Midland's employees, to both current and former employees, according to Reuters, citing three sources with knowledge of the matter. They reportedly directly relate to the accounting issues that the company said in January were the subject of the internal probe. The stock was higher earlier in the day, but now falling to session low down here,

half of 1%. Mike? Pippa, thank you. All right, up next, it's a question that so many are asking. Trading like it's 1999? The big tech bounce has led many to compare this market action to the dot-com boom of the late 90s.

But is the recent run for real? We'll discuss with Datatrex's Nick Kolas after this break. Closing bell, I'll be right back. Welcome back. The surge in tech stocks over the last few years has drawn numerous comparisons to the dot-com boom of the late 90s. Similar concerns around sentiment and valuations. But our next guest

says today's record Nasdaq rally is much more grounded in reality. Joining me now is Nick Colas, co-founder of Datatrack Research. Nick, it's good to have you on. You and I, we were both there. We saw it up close in 99. And I do find it interesting, I think, to start that this debate always pops up and seems like it almost over-anticipates this moment when things might be getting out of hand. But what do you think are the most relevant benchmarks to compare? Yeah, you're right. It is an interesting conversation. We have it every couple of years, and we're having it now. The way I look at it is, you know, there's more than just price action that dictates a bubble. So, for example, the IPO market gets super hot during a bubble. So in the 1990s, the average IPO was up 25% to 40% in the first day of trading. And it was a

very heavy IPO calendar. We don't have that. We also don't have that close kind of hallmark deals like the AOL Time Warner that happened in the early 2000s, where you had a big tech company taking over a traditional company. We don't have any of that dynamic now. And the NASDAQ's only up 41% over the last 12 months. We're not in bubble territory until we hit a double. That's what happened through February 2000. So we don't have any of the real ingredients that make it similar, make today's environment similar to 1999, 2000. I mean, yeah, the NASDAQ basically tripled in less than two years, I think, going into the top.

So the velocity of gain is not there. But, I mean, you'll find some folks who will look at a few things such as, you know, you can overlay what NVIDIA has done on Cisco from from that period of time in terms of the magnitude of gains. Yeah, the valuation is not as high as Cisco was, but also the concentration of the market and how big semiconductors or tech more broadly are within the index. And it just feels as if there's some of the atmospheric conditions that would suggest maybe taking some care. Yeah, no, it's a fair point. And just because you're not in a bubble doesn't mean you'll still go straight up. So all the usual caveats about investing apply. But look, I mean, over the long term, the market's driven by really a handful of

stocks. You know, one to two percent of stocks are responsible for all the gains in global and U.S. equities from 1990 to 2020. So abnormally concentrated leadership is not unusual and it tends to be in tech names. So we're kind of checking all those boxes right now. Yeah. And again, you start off by saying, you know, that you have some pretty strict definitional conditions for what a bubble is or what you should call a bubble. And I think it's worth reminding folks that really, if you say something's at a bubble or a bubble is peaking, should call a bubble. And I think it's worth reminding folks that really, if you say something's at a bubble or a bubble is peaking, you mean it could be cut in half in value or go down by 75 percent to get back to the trend, which is what happened to the Nasdaq. Yes, exactly. I mean, again, our benchmark is a double is a bubble. And it happens in oil markets.

It happens with the S&P over a three-year period. It happens with the period happens the nest of over one year period. That's the thing to look for that kind of tremendous price velocity. Which is not justified by fundamentals and could never be because the market's not a hundred percent dominant given year. So seeing a double means

we're in a bubble. I guess I'm setting aside the- you know this the- the grading what we're- looking at here relative to ninety nine- does it feel as if people are perhaps just over-extrapolating the good news at the moment? Or do you feel like mostly this is grounded in some real economic fundamentals? Yeah, this to me feels like a classic mid-cycle market, where you're not going into a recession, that's late cycle, and you're not in a recession,

that's early cycle. Everything else is kind of in the middle. And the market always climbs this proverbial wall of worry during a mid-cycle market. They worry about rates. They worry about earnings. They worry about concentration. These are all the same dynamics that we have right now. But again, based on what we've been talking about, not a bubble by any means, just kind of a normal grinding higher mid-cycle market. Yeah, I've seen you, you know, write a bit about that, this sort of mid-cycle environment. And while it seems as if if you were to look in retrospect at those periods on a chart, you'd say, well, that was easy. You just sort of sat there and did not much of anything. And the market kind of did its work for you and

appreciating relatively slowly or relatively orderly. It's hard, though, to be honest. It's hard to feel as if the market isn't missing something when it's mostly just repricing the same news every day almost. Yeah, that's very fair. It is just because things are quiet with a VIX below 15 and actual volatility quite low doesn't mean it's easy. In some ways, it's harder because you're always looking around the corner for that next shoe to drop. And it doesn't until the end of a cycle. I don't think we're there yet. Yeah.

And I guess there's only one other thing that keeps getting dredged up as a supposed indictment for the market. And this happened back in the 90s, too, which is, you know, people's dedication to passive indexing somehow is distorting things. And somehow that leaves the market a little bit more at risk because I don't know why, but essentially because there is this sort of autopilot acceptance of just owning the index. Yes. And that's been a conversation really since the 90s, right, when indexing first took off with the Q's and the spiders.

And people thought that would lead to incremental volatility. But if you look at a long-term chart of the VIX, it has those classic low periods that go on for years. It even happened in the 2010s when indexing was kind of in full bore. We didn't get incremental volatility. It just kind of chugged along. So I don't feel indexing really is to blame for what we're seeing. It's really more of a feature than a bug. Yeah. No, there's no doubt that it seems like, you know, this is something that people are

grasping at to try and find something. All right. We'll have to look for some other stuff to worry a lot about if it's not going to be a bubble. Nick, good to talk to you. Thanks a lot. Thank you. All right. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens is standing by with those. Hey, Pippa. Hey, Mike. Well, one stock is hitting a movers as we head into the close. Pippa Stevens is standing by with those. Hey, Pippa. Hey, Mike. Well, one stock is hitting a record on a possible new weight loss drug.

We've got the details coming up next. 19 minutes until the closing bell. S&P 500 tracking for a record close up about 1%. Let's get back to Pippa Stevens for a look at some key stocks to watch. Hey, Pippa. Hey, Mike. Well, Novo Nordisk is at an all-time high after reporting positive phase one trial results for its new experimental weight loss medication. The new drug is delivered in pill form and appears more effective than the company's blockbuster injectable weight loss drug, Wagovi. Those shares now up nearly 9 percent. And Comores is having

its best day since last June as the chemical giant says its preliminary results won't be impacted by its internal review. The probe found that top executives, including its CEO, altered some payments and deals to meet certain financial targets that were tied to their incentives. Shares fell more than 30 percent a week ago when the company put those executives on leave. Now, despite today's gains, the stock is still down around 11 percent from that initial drop. Mike? Quite a month. Yes, Pippa, thank you. Still ahead, new money, new management. Former Treasury Secretary Steve Mnuchin stepping in with a group of investors and a billion-dollar lifeline for New York Community Bank. Hear what he has to say about the company's future. Closing

bell. Be right back. Shares of Rivian surging after the company unveiled its new SUV and crossover models. Phil LeBeau just spoke to the company's CEO at its event in Laguna Beach, California, and he joins us now. Hey, Phil. Hey, Mike, this was an important day for Rivian and for RJ Scourge, CEO of Rivian, for a couple of reasons. First of all, the R2, which has been highly anticipated for some time, we finally get a peek at this midsize SUV. Frankly, we see the whole thing. But there was a couple of surprises today. First of all, back behind me, you see the R3.

Now, this is a crossover utility vehicle that will be built after the R3, after the R2. Exact date when it comes out, what the pricing will be, that remains to be seen. The other piece of news that came out is that the R2, which was supposed to be built at a new plant in Georgia that Rivian is developing. Rivian said, you know what, we need to get this to market quicker. They're going to build it at the existing plant in Illinois, and they're pausing development on the plant in Georgia. Not scrapping it, but pausing it. And I asked R.J. Scaringe, I said, look, you've made these decisions here to save capital,

to move quicker in the market. Are you worried about the fact that the EV market overall is slowing down? Here's what he had to say. The world will electrify. Every car sold in the United States, and for that matter, all markets will eventually be electric. Now, the question we can debate is when that happens. But key to that is getting great choices. Customers need choices that are deeply compelling.

And part of that is the R2 coming in at an estimated price of about $45,000. Look, it doesn't come out until the first half of 2026. That price could change between now and then, depending on development costs, battery costs, et cetera. But Mike, the bottom line is this. If you were a Rivian investor, you looked at this event today, you got a taste of the future with the R3, and you got some good news that they're going to be saving a little over $2 billion near term in capital investments by not putting it into the Georgia plant. Eventually, they plan to build that Georgia plant, but they're just putting it on pause for now. Mike, back to you.

Yeah, for sure. And, of course, the starting point for the stock matters quite a bit, right? This is a more than $100 stock shortly after it came public. And, you know, it's gotten down to around 11 before today. And, you know, it's gotten down to around 11 before today and, you know, a modest market cap. And I guess the question, Phil, you know, in terms of the company's expectations for what it can do in an EV market that may or may not be decelerating. I mean, they don't necessarily have such massive volume targets that they have to, you know, take over this market. Presumably they have a market share strategy here. Right. The key here is that they want to get to positive profit margins by the fourth quarter.

That's their guidance. So what do you need to do? You need to control your capital costs. You need to cut costs wherever possible. That's why the decision not to spend $2 billion developing the Georgia plan is so critical. And you need to race to market quicker with more modestly priced vehicles. The R2 is not coming to the first half of 26. You could make an argument that's still a long ways off, but RJ and his team realize that they have got to move faster in terms of cutting costs and getting to break even as quickly as possible. Yeah, absolutely. Phil, good stuff. Appreciate it. All right, up next, your earnings setup. We're gearing up to get numbers from Costco, Gap, Broadcom and more. A rundown of what to look out for from those

reports. That and much more when we take you inside the Market Zone. We are now in the closing bell Market Zone. Leslie Pricker brings us the latest on New York Community Bank, plus several key retail and semi earnings are out in overtime. Courtney Reagan on what to expect from Costco and Gap and Christina Partsenevelos on Broadcom and Marvell's latest quarter. So, Leslie, a relief trade, let's say, in New York Community Bank. No surprise. What is the, I guess, structure of this new deal? This is the team that's done something like this before with a different bank.

Yeah, that bank was IndyMac back during the financial crisis. This, of course, is Steven Mnuchin, the former Treasury Secretary, who is at it again, this time with New York Community Bancorp. That deal announced yesterday a billion dollars worth of new money. You've got new management, a refreshed board, investors really signaling they're willing to gut out significant dilution from this transaction, which took place at about $2 per share for that boost of confidence that you're seeing today up about 4% right now.

Credit quality has been a big concern since New York Community Bancorp reported earnings at the end of January. Former Treasury Secretary Mnuchin, whose firm is leading that capital raise, said there will be problems in the portfolio. He's expecting those and that those were taken into account when deciding to underwrite this deal. We did extensive diligence on the large loans. You know, the bank will look at the reserves and we'll make sure over time it has the appropriate reserves. And that can be done through a combination of our capital and earnings. We cut the dividend down to a penny a share. So we're going to retain almost all of our earnings.

And we think the asset side is very manageable. Mnuchin added on his interview in Squawk on the Street today that if they need to take more reserves in the future, they have the capital base now to do that. And he also said he was more concerned about the bank's exposure to office than he was to multifamily, which he believes will be bolstered by lower interest rates over the next few years. Mike. Yeah, you know, Leslie, I mean, you've spoken. I've spoken about the degree to which there were some unique elements in NYCB in terms of the nature of its loan portfolio and specific markets it's in. But one thing Mnuchin said there about why time can be your friend if you're a bank in these situations. If the rest of your business is OK, you're sort of earning your way into a bigger cushion for that moment when you have to figure out, you know, what those commercial real estate loans might be worth.

Yeah, I mean, just take the headlines from yesterday as a microcosm of this. There were reports out there and headlines out there that New York Community Bank Corp. was seeking capital. The act of seeking capital sent that stock price plummeting more than 40 percent. Then once they put out a press release midday saying they have obtained the capital, listed the investors that were there, those with a track record of doing something like this in the past, as you mentioned, then the stock price rebounded and saw, you know, quite the roller coaster ride on that news. It was one of those by the news type of instances. And that's because when you have a billion dollars worth of capital at a bank

that's NYCB size, what it basically gives you is kind of a chance to figure this all out. And that is the lifeline that, you know, we saw in the news yesterday and continues today. Yeah, it's a big difference between, you know, office buildings and securities. You're going to get margin called on. So you can maybe take a little time to sort through it. Leslie, thank you very much. Now, Courtney, we were just talking about how strong Costco is again, but they're reporting as well as Gap in a little bit. Yeah, exactly. So the as well as Gap in a little bit. Yeah, exactly.

So the street looking for Gap Bank earnings to come in at an adjusted 23 cents with revenues $4.216 billion for its fiscal fourth quarter. So this is the holiday quarter. Old Navy, the only division expected to post positive comparable sales with Banana Republic sales. Those weaknesses, that weakness, I should say, expected to still continue. And while Citi is expecting a big earnings beat for gapping, driven by stronger old Navy comps and hopefully stronger gross margin, according to the analyst, the firm acknowledges expectations are pretty high for the quarter, but that uncertainty is higher than usual for the year ahead with new CEO Richard Dixon's plan for the business. Gap shares, we should note,

are down 10 percent over the last three months. Near-term options imply a more than 14 percent move, I should say, in reaction to the results that we will get shortly. Now, analysts estimate that Costco, Mike, will put up earnings of $3.62 for its fiscal second quarter on $59.156 billion in revenues. Remember, we still get monthly reports from them, so I don't expect too much to change with those sales numbers. Shares have well outperformed the retail ETF over the last three months. So the XRT not nearly is up as much as Costco, moving 27 percent higher. I mean, Mike, you don't usually see Costco shares move so much, especially as a consumer staple. But we have seen quite a run. So I wouldn't be surprised to see a little bit of sell on the news when we get those results. Exactly. We were just talking with Greg Malek

about how that stock is in the Nasdaq 100 ETF. It seems like it's riding along with those stocks. Thank you very much. Christina, Broadcom. Let's hear what we should expect from that. Well, Broadcom does have exposure to legacy infrastructure, but investors are really betting that AI is going to help offset any cyclical weakness, like wireless after a muted outlook

that we got from Qualcomm and Corvo, or possible weakness from enterprise and telecommunications after a warning from Cisco. But Broadcom's stock has soared just, what, over 50%? Because investors, just in the last three months or so, because investors are focused on two main drivers,

AI and software. The AI demand bump should come from its custom silicon chips, which can perform specific tasks, and they tend to be cheaper. And then you got to keep in mind, Meta, Google have all promised to spend lots more money on their AI systems, and Broadcom already counts them as customers. And then that second driver is software. Broadcom acquired VMware and that should help its software business. Broadcom previously guided fiscal 2024 total sales of $50 billion, break that down to $30 billion for semis, $20 billion for software. We'll see if that number goes up. And then lastly, a similar focus for Marvell and its networking and custom chip business, AI Darling as well. But the street does expect the wireless 5G weakness to impact this name a little bit more than

Broadcom. We'll see if there's any improvements. Look out for gross margins. That number is supposed to be 63.7 percent for the year. If that changes, you'll probably see a stock reaction. But you can see the run up in both of these names. Thank you very much. All right. As we head into the close, we are going to be closing at a record in the S&P 500. You see it there, 41.58, up 1%. The NASDAQ up a percent and a half. Semiconductors as a group up 3.5%. More than 600 new 52-week highs on the New York Stock Exchange and the NASDAQ.

Market likes the idea of a potential rate cut in a few months with a relatively strong economy. That does it for Closing Bell. We'll send it into overtime with Morgan and John.