Closing Bell - Closing Bell: Same Bull, Different Month 3/1/24

Episode Date: March 1, 2024

How hot is too hot for a market on the verge of a 16th weekly gain in the last 18? New Edge’s Cameron Dawson and Shannon Saccocia of NB Private Wealth give their forecasts as we wrap up a busy week. Plus, new reports surfaced today that Boeing is interested in buying back Spirit Aerosystems. Top aerospace and defense analyst Sheila Kahyaoglu gives her first take and breaks down what could be at stake for those stocks. And, Bill Miller IV tells us how he is playing this week’s big bounce in the crypto space. 

And welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. This make or break hour begins with same bull, different month. The remarkably persistent stock market rally extends into March, carried by a familiar mix of AI excitement and what seemed to be Goldilocks economic conditions. The major indexes running to further new record highs to finish out the week. You see the S&P 500 up 0.8% of 1%. It is solidly above that 5,100 mark. It is now up about 25% from the October low, about 1,000 points off that late October low. The eco-weighted S&P also finally closing in on its former record. That goes back to the very beginning of 2022. And it's been a big complaint about this market that the average stock had not been participating. NASDAQ composite working on a second straight all-time high. The momentum chase in semiconductors refuses to quit for now. NVIDIA surpassing $2 trillion in market cap as Dell's strong results after the close yesterday triggers a feeding frenzy along the AI food chain.

The gains coming despite continued malaise in Apple shares and another jolt of concern in regional banks related to New York Community Bank. That takes us to our talk of the tape. How hot is too hot for a market on the verge of a 16th weekly gain in the last 18? Let's ask Cameron Dawson, New Edge Wealth Chief Investment Officer. So we have momentum. There's nothing you can deny about that. On the other hand, the S&P 500 is like 13, 14 percent above its 200 day average. It's looking stretched on a bunch of these different metrics. You can then go back and say, well, when you're up in January and February, things tend to follow through to the upside. It felt like this was the week when folks stopped fighting and started chasing.

Yeah, yeah, certainly. I mean, momentum is a beautiful thing. And it's a question of how long can it last? Clearly, there is also an aspect of earnings, the optimism around that being that you're starting to see earnings estimates get revised higher. Interestingly, not for 2024, just for 2025. So things are getting a bit more back in loaded. But momentum is causing this chase and causing this big rally higher. And I think to your point, the question is, when does positioning get so extended that it can't go any further? And we're not quite at the point where we're at extremes like we saw in early 2021 or early 2018, which just suggests things could go further. Exactly. I mean, it's worth remembering,

I guess, that as much as it seems like we're up a ton in a short period of time, the S&P is up like 7% from two years and two months ago. Right. So, in other words, you're not that deep into record territory. You mentioned the earnings picture. It has felt as if, and, of course, it's easy to say in retrospect, that NVIDIA's numbers enabled the market to say, OK, we don't have to wait. We don't have to worry for another three months about the AI story completely falling apart in terms of supply constraint. And then

the PCE inflation number yesterday was good enough for people to say, OK, we have another month before we have to worry about something like that or at least another couple of weeks till CPI. And then you add on top of it the PMIs today, which surprised to the downside. So you would normally think that that would be bad for the earnings picture. There's a good correlation to PMIs and earnings growth. However, it eases some of the pressure on the expectation for a more hawkish Fed. You saw bets on Fed pricing for May cut, for example, start to go higher again. So that may be one of the things that's providing another lift. Yes. And we definitely are going to get to the Fed picture. I guess the question is, you mentioned it doesn't seem like we're at extreme

extremes. And I agree with that in terms of overall exposures and flows. It doesn't seem like people are really going crazy, throwing money at the market. But you're starting to see the speculative fringes come to life and what's happening in crypto and all the rest of it. So it's more an art than science to figure out when that's going to really come to life and what's happening in crypto and all the rest of it. So it's more an art than science to figure out when that's going to really come to bite. And look at the options market. We've certainly seen very aggressive behavior in the options market. You can buy protection for very cheap right now as captured in option skew, which just means that there's no demand for downside protection, a lot of demand for upside optionality. The problem with positioning

or the challenge with it is that it's never a great timing tool. It's a better timing tool to the downside than it is to the upside. So it can persist. But we're watching these flows. We're watching a stock allocations. All of these things are getting closer to being back near extremes, but just not quite yet. Sure. Yeah. And absolutely all the stuff I watch. And then if you want to go back to, you know, the range we played in in the late 90s, then things can get a little a lot nuttier, I guess, before you had to worry. Let's get back to the Fed, though. I want to bring into the conversation senior economics correspondent Steve Leisman. Pretty busy morning, Steve, speaking with Richmond Fed President Tom Barkin,

Chicago Fed President Austin Goolsbee. Knit it together in terms of what you discern as the current state of thinking on the Fed for when and how much and what this economy does and doesn't need. Well, Mike, I want to bring you through a little tale of the tape and sort of show you how my general take on the Fed is. They're all out there being hyper data dependent, and the market is too. And I don't really hear anybody, even Goosby or certainly not Barkin, being very dogmatic about the direction of policy. So first, let's take a look at the 10-year. The 10-year shot up this morning.

People said on the comments that Barkin gave us, and I'll play those comments in just a second. And then it came back down. Let's hear first what Barkin had to say, which was basically he's in no hurry to cut. It's an important time because the overall numbers are likely to come down over the next few months because the comps from last year weren't very good. And so we're rounding over. We're losing those those high inflation comps. And so we've got a shot here to bring inflation down very close to our target. On the other hand, if the monthly numbers come in at a level inconsistent with where we're going, that'll tell us something. But you don't sound like you're in a rush to cut rates. I'm never in a hurry to make any decision. So, OK, so he says that you get the

shoot up you can see right there in the 10 year that seems to be in response to market. But then take a look at the data that came out. Mike, I think you were there at 10 o'clock or if not shortly thereafter. Three data points, all of them coming in below expectations. There's the actual there's the estimate. What happened to rates? They came down. So basically, a Fed official makes a hawkish comment. The market disregards it because they know the Fed is following the data, Mike, and they're not all that dogmatic about the direction of rates. Another bad February inflation report. Well, we're going to be talking about a different scenario. Inflation comes in in February. My guess, Mike, is those cuts are back on the table, perhaps for May and certainly for June.

For sure. And just for the record, I'm always here, whether I'm on camera or not. So I was absolutely here for the 10 a.m. data. But I do want to get at that a little bit, why the market seems OK with this, because it doesn't feel as if there's any emergency to be responded to. So the only reason you'd be concerned that the Fed is in this wait and see mode is if you feel that the strong economic numbers are a head fake do, but I'll throw out four reasons for you to chop down. One is that the Fed is not hiking here. I think there's some talk about that, but I don't think the Fed's in a position where it's going to be hiking interest rates. I think if it does anything, it'll allow rates to remain higher for longer, but not raise them further. I think that creates a certain stability for the stock market

that allows you to say, OK, I know what my bogey is now, and it's going to be this five and three eights, maybe going down to four or six is my estimate. So I can invest and make sense of the world in the future in that regard. Secondly, the Fed is talking about the possibility of reducing the balance sheet runoff. That's a potential positive. And third, Mike, as you know, there have been a lot of really negative headlines from the Middle East, other places. The worst does not appear to have come to pass from those. So all of this happening, I think the Fed is in context of a lot of things. And the Fed is something you would put in the context of the worst hasn't happened from the Fed. Yeah, we may not get the cuts, but we're probably not getting hikes either.

No, absolutely. Agree all across the board there, Steve. Also, history says that a slow easing cycle is more favorable for stocks than a fast one, because obviously that usually means things are going wrong. Steve, I appreciate it. Have a great weekend. Let's continue talking about this. We'll bring in Shannon Sekosha of NB Private Wealth as well. So, Shannon,

give us your take on how the market has been able to respond to some of the chief complaints or at least maybe warning signs people were throwing out at the beginning of the year, which is this market's only up here because the Fed's going to cut soon and deep, or two, the market's too narrow and it can't sustain itself if a few of these big stocks fall away. And, you know, it's managed to power through both those things. Do we not? We don't have Shannon's audio. OK, so, Cameron, let's let's just pick it up right there. I mean, this sense out there that we are not as Fed dependent, perhaps because the economy is OK. And what you said about earnings, is that something we can actually be comfortable with? I think it's a 2025 problem, which just means that you start refinancing in late 24 and 2025 in a much bigger way at higher rates, meaning if you don't get rate cuts and you have to refinance at these high rates,

that's when you start to see the pressure and pinch much more so on broader balance sheets. So the fact that the Fed isn't hiking more certainly helps. But the problem, if they don't cut, becomes an issue more in 2025 than it would be today. Now, we did just see in February something like $200 billion in corporate debt issuance that the market just completely absorbed without a hiccup. So it seems as if right now, at least, we have the conditions where you can allow the current level of rates to get locked in and we're OK with it. And look at credit spreads. They continue to come in in a very meaningful way. High yield spreads are now at a level that we haven't seen since 2021. They're not back to 21 lows, but they are extraordinarily tight, which effectively is

saying the bond market is not concerned about growth, not concerned about economic weakness. Now, if rates keep going up and you see all of this refinancing, then you'd say, hey, credit spreads could move higher, which would be a key risk as we get into the second half of the year. Yeah, for sure. Credit is not really being given you a reason to worry. I guess bringing down it to a practical level here, S&P is up almost 8 percent on the 1st of March for the year. You clearly have elevated valuations, whether like a lot of sell side firms, you want to try and rationalize them, or maybe they're a little bit too rich. What would you do in terms of within the market at this point? Because you have the high momentum growth stuff, some of the other areas starting to come around. Yeah, what we've been saying is we want to let our winners ride, which just means that if we have growth positioning,

we're not at the point yet where we're trimming. Valuations, yes, are extended, but trends are strong. To the upside upside momentum is strong when we're looking for new capital to put to work that's where we're looking for areas that are closer to the beginning of their up cycle so we're picking out a value we're not buying value indices we're being very selective because there's a lot of junk in those indices but also finding opportunities within small caps within international where we don't have as much valuation risk, because if the liquidity tide turns against us, we don't want as much room to fall in valuations, which is why we're being very careful about chasing growth too much.

Right. And then I guess we should bring up this New York Community Bank issue. It seems somewhat idiosyncratic. It has from the beginning, but it has been exacerbated right now. Obviously, the stock is showing that there's greater concern about this particular institution. Regional banks, community banks as a group are down like 1% on the day. So not any kind of panic. But I do wonder if there's a shadow over that part of the market. It certainly seems that way in the sense that if you look at the KRE or even individual regional

banks, what you see is that they rallied a lot in the fourth quarter. They rallied right into resistance, rolled over, and are continuing their downtrends, which just means that there's not a lot of confidence that we're turning a corner on the earnings trajectory. I think for New York Community Bank, the question will be going forward is, what does the deposit base look like? All of these headlines have been very negative. I think we have to watch very closely deposit trends. That was of course a 2023 issue. We haven't really been thinking about it much. Then the next question is what happens to BTFP. The Fed effectively said we're ending that program. What does that mean for the balance sheet. Yeah exactly. That's the backstop for the deposits. Shannon I hope we we have you here. I'd love for you to

to basically weigh in and say you know what do you do with this gift of a market that doesn't want to quit making new highs and is essentially pulling in a lot of former skeptics? Well, I think it's pulling in a lot of former skeptics because we've been waiting for the broadening out that we have experienced in February Mike we look at. The dispersion and I think there was a lot of concern about that dispersion. In the you know super seven magnifies the seven top ten stocks- because we're concerned about what that would do from an overall earnings perspective and performance

perspective for the S. and P. five hundred. But if you look underlying. There are a lot of sectors that are starting to participate in this market companies that are participating. In this market that didn't in two thousand And if you think about the opportunity to take advantage for areas like industrials, healthcare, even places like REITs, those are companies that have

an opportunity to generate higher gross margins, that have an opportunity to have some of that margin recapture, grow the bottom line, even with top line starting to, you know, potentially just come down just from disinflationary trends. But also, even in the event, which we do think will happen, that we'll continue to see some slowing of the economy, those companies, from a valuation perspective, are more attractive. So you're pulling in the skeptics because they see this broadening out and this real divergence in

bifurcation. Of those top companies as a positive because it's an emphasis on fundamentals and companies that are going to continue to be able to drive earnings growth maybe not at the levels that we thought for this year we were

anticipating but to Cameron's earlier point. We're seeing increased expectations for 2025. So there's a little bit of a longer tail on this as well, I think, for investors who are looking outside of what participated last year. Yeah, good things, even if they're far on the horizon, like a potential rate cut,

like acceleration earnings growth, they can work for the market to give it something to look forward to for a while. We'll see how it goes. Shannon, appreciate it. Cameron, great to see you. Everybody have a good weekend. We are just getting started here. Up next, a big move by Boeing. New report surfacing that the company is interested in buying back Spirit Aero Systems. What it might mean for Boeing at its stock price, top aerospace and defense analyst Sheila Cayalu will be here. And we're keeping a close eye on

NVIDIA on track to close above a $2 trillion market cap for the first time. We've got you covered live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Shares of Spirit Aerosystem surging after reports Boeing is in talks to acquire the struggling fuselage supplier. Spirit spun off from Boeing back in 2005 and has, as of late, been at the center of quality issues affecting Boeing 737 MAX jets. Joining me now at Post 9 to discuss is Sheila Kailu of Jefferies. So, Sheila, good to see you. Put it in some perspective.

First, I guess, what's the presumed business logic here of actually bringing the supplier in-house? So I think in a perfect world, Boeing would operate by itself. Spirit would be an outsourced supplier of fuselages. They would each enjoy profits, and they would go on with their business. But clearly, you know, Dave Calhoun has softened his tone over the last few months, given the aft pressure bulkhead issues, the Alaska Airlines incident. And it seems like Spirit has to come in-house to be better managed. And would that be, is it your read that they feel like they need to have more control, that they have to show that they have their hands directly on the production and safety issues,

or how would it play? Yes. So I think just given the FAA audit, it's in week four of six. There's a DOJ investigation. There's clearly a lot of manufacturing mishaps that are going on. So Boeing has to bring Spirit in-house. Now, we don't know the price associated with that, which could be a takeover or a take-under at this point, just given the issues Spirit has had. Right. Now, Spirit is also, part of its business is a supplier to Airbus as well.

So the presumption is they would separate that out. Yeah. So about 20% of sales is to Airbus. The thing is, that business is actually losing $200 million of cash flow this year and $150 next. So what do they sell that for? Likely not much is our base case assumption. And then what do you do with the rest for Boeing? So we assume that Boeing basically takes the cogs in-house, so takes home about 10% per fuselage that they don't have to pay Spirit for. But obviously, they have to manage that better and take on that working capital risk themselves. Right. And so I guess if you bottom

line it in terms of what it might mean for Boeing and in terms of financing the acquisition and then what it means for their own earnings and cash flow? So it depends if they're going to have to raise equity. Boeing has $16 billion of cash on its balance sheet. We think they're going to use $2 billion in the first quarter. That takes them down to $14 billion. They need $10 billion to operate. So we don't know if they'll have to raise $8 billion of equity

or $8 billion of debt. We think they could do it with debt and cash on hand. So that also takes into account the accretion analysis or not. But we pretty much think it's a wash to Boeing's free cash flow at this point. If you want to be a bull, you could put $300 million of free cash flow at a 6% yield, but essentially a wash. Right. So you're kind of reacquiring that free cash flow that was the margin. We're just taking something in-house that clearly is being problematic to remove issues and get up in production.

We think Boeing's only doing sub-20 maxes in February. They're trying to get to 38, which is not happening. And so where do you come down? I mean, obviously, this isn't a huge swing factor in terms of Boeing's valuation. Where do you come down on it in terms of the level of stock right now and the attractiveness of it? No, we have big upside to Boeing shares. And it's all about the max getting up in rate. Clearly, Spirit has been one issue after the other.

So maybe taking it in-house is the final solution to get to, you know, we were at September, we were at 20. Somehow we're back at 20 maxes a month again. We're supposed to be at 38. We're actually supposed to be probably at 45 at the end of the year, and we're not there yet. So we have a 50 percent move based on max rate getting up. So a 50 percent move to your price target. Both the price target and the max rate. Got it.

So they're almost aligned with one another. So maybe we're getting it pushed out, but we should get there. All right, Sheila, good to see you. Thanks so much. Thank you. All right. Some news we want to get to. Federal Reserve Governor Adriana Kugler is delivering remarks at the 2024 Stanford Institute for Economic Policy Research,

saying she is, quote, cautiously optimistic on progress on disinflation without significant increase in unemployment. We'll continue to monitor and bring you any headlines further as we get them. Up next, crypto's wild week. Bitcoin surging more than 20% since Monday. Bill Miller IV is breaking down how he's been playing the rally and what he's forecasting for the space in the months ahead. Closing bell. We'll be right back. It's been a big week for Bitcoin, surging over 20 percent, with Bitcoin ETFs seeing record high trading volumes over the last five days as well. Meanwhile, MicroStrategy surging over 51 percent this week alone

after adding to its crypto stake, now worth $11 billion. Joining me now to discuss is Bill Miller, the fourth of Miller Value Partners. He owns MicroStrategy. And Bill, it's good to see you. Not only do you own it, in mid-January when we spoke, you spoke about the bull case, and it's more than doubled since then. Obviously, we know what Bitcoin prices themselves have done, but MicroStrategy, a bit of a leverage play on it. So I guess, what do you think at these levels and where can it go? We absolutely love it still, Michael. Thanks for having me on.

It's our largest holding at about 14.5%. And it still has a massive runway ahead of it. You know, it's our position that we are in the very, very early innings today of a massive capital repricing event. So we're going to the digital pricing of cap. Capital is becoming digital. And so if you look at the data on Bitcoin right now, what you see is that the realized capitalization, this is very different. It's different than the market cap. It's the realized capitalization of Bitcoin. What the realized cap shows you is the price at which every last Bitcoin has traded. That's 24,000 today. Why is that important? Well, it tells you that the average Bitcoin

holder is up 150% on their investment right now. It also tells you that $500 trillion of fiat right now has been, I'm sorry, 500 billion of fiat right now has been converted into Bitcoin. It's been repriced. There's hundreds of trillions of dollars of capital out there today, and we're only at $500 billion being repriced into Bitcoin. And we're right ahead of a halving event in April. So we are massive bulls on this. It's our biggest position. The other advantage you get with MicroStrategy, not only from a business perspective in terms of being able to develop a new technology and businesses tied to Bitcoin, you also get a really interesting capital allocation strategy. not only from a business perspective in terms of being able to develop a new technology and businesses tied to Bitcoin, you also get a really interesting capital allocation strategy in that

Michael Saylor understands basic math. He understands very complex math. He understands basic math around how to create more Bitcoin per share for their holders. So if you look at when he first started buying Bitcoin, they owned a lot fewer Bitcoin per share than they own today. And today, he can still arbitrage the price between Bitcoin and his shares in a really interesting and creative way, which can accrete value to shareholders that are long-term owners. So we love it. That financial engineering tweak absolutely seems like it's the basis, really, for how the company is valued. But I do wonder about, you know, you sort of alluded to, you know, developing technologies using Bitcoin or blockchain.

I mean, it seems like that's the missing piece. And I guess, do you need it? Because if you're talking about it basically just being, you know, another asset class that is early in its adoption, maybe that's enough. It certainly is enough. I mean, it's been enough for a lot of people and it will continue to be enough, I think, for a lot of people. it will continue to be enough, I think, for a lot of people.

At the end of the day, you know, there are use cases around it outside of just turning fiat into a digital ledger of transparency and trust. So, yeah, there will be additional uses longer term. Again, I still think we're really, really early, which is why it's a really interesting and important technology for people to hold in their portfolio just for the appreciation potential. Where are you in terms of assessing the rest of the market here, the equity market, in terms of, you know, whether it's a fruitful time to be hunting, you know, for well-valued stocks and companies or not, because you've obviously seen massive momentum thrust in certain segments. Other stuff maybe just grudgingly coming along. And of course, the economy has held up better than many thought. For sure, the economy is in good shape. We're always 100 percent invested plus.

So we are finding good opportunities. There's still a lot of things, I think, in the home building space that are really compelling. So one of our other big positions is a company called Builders First Source, BLDR. We've owned that for a while. It's still actually a really good value if you look at its position in the home building market as a dominant supplier to home builders and their pricing power and their returns and their free cash flows. It's still a really good thing to own that you can buy and put away for years. So we love that. Another one we own is Master, hold on, let me pull it up exactly.

Master Brand Cabinets, MBC. If you look at the earnings potential of what this thing could generate in a few years, recently came public in an IPO. It just had a great report. It's breaking out to an all-time high and it's gonna generate a lot more free cash flow in a few years than it does today. And it's trades at a really good valuation. So there's a lot of really good things out there to buy. I know that you also

have exposure in some sort of maybe specialized ways in financials. What would your general outlook be there? Because it's one of these deals where the market's suggesting we're kind of mid-cycle here and maybe the fears about, you know, credit really deteriorating have been overblown. But what is your current view of how things look there? Because, you know, it seems like there's not a lot of sponsorship, broadly speaking, for anything outside of J.P. Morgan. Right. Well, we don't tend to invest thematically in big sectors like that, but we do have some individual picks that we really like in financials. So Jackson Financial trades at three and a half times earnings, 5% dividend yield. We've owned that for a while. We love it. Another

great chart, but it's still a really cheap business. Bread Financial Holdings, BFH, that's a unique one that we think has been well oversold and is actually worth a lot more longer term. So we're stock pickers and we'll buy individual equities. But, yeah, we're bullish on financials. Yeah, gotcha. All right. Well, as you mentioned, MicroStrategy, 14 percent of the portfolio. I know you got the ETF tracking that as well. So folks can check it out.

Bill, appreciate it. Thank you very much. Thanks a lot, Michael. All right. Up next, we are tracking the biggest movers as we head into the close. Christina, standing by with those. Hey, Christina. Well, investors are worried about customer demand for one cybersecurity firm, and NetApp shares are soaring double digits. I'll tell you why after this very short break.

24 minutes until the closing bell. The S&P holding in record territory up about three quarters of one percent. NASDAQ up one percent fully. Let's get back to Christina for a look at the key stocks to watch. Well, data infrastructure firm NetApp soaring today after an earnings beat and a strong guidance from the company for the company's fiscal third quarter. Management really talking up order backlog and their flash storage business and improving end market trends, which includes demand tied to AI, similar comments we also got from Dell and Pure Storage. And that's why shares are up 19%. Cybersecurity company Zscaler having a tougher day. Shares slipped despite coming out ahead of

what Wall Street was expecting for Q2. Analysts are blaming weak guidance that indicates a year over year to slow down in billings growth for the company. And that's why shares are down almost 10%. You don't want to miss an exclusive interview with Zscaler's CEO in the next hour on Closing Bell Overtime. Mike? All right, Christina, thanks so much. Well, we're keeping a close eye on the S&P and NASDAQ, both still on pace to notch record closes.

Up next, HSBC's Max Kettner, why he double-downgraded global equities last month and where he stands right now. And as we head to a quick break, getting another check on shares of NVIDIA, it is on track to close above two trillion dollars in market value for the first time. We'll keep you up to date on that move now up three and a half percent as we head toward the close. We'll be right back. We're getting some breaking news on Reddit. Leslie Picker has that for us. Hey, Leslie. Hi, Mike. Yes, I was able to confirm with a person familiar with the matter, the valuation that Reddit is targeting in its IPO. Of course,

this is a closely watched one for being one of the biggest this year. I'm told that it is planning to target a price range of $31 to $34 per share. That would imply a fully diluted valuation as high as $6.5 billion. I had reported earlier that they were looking to target between $5 and $7 billion, but the narrower target valuation has to do with some communication surrounding one unique aspect of this deal, which is that employees will be able to sell shares in this IPO. And so part of this has to do with just some communication surrounding employees declaring whether they do intend to sell and if they do, some information regarding that decision making. Now, of course, this is still fairly early in the process. That roadshow is not imminent.

The S-1 needs to be public for several weeks before they start officially marketing the deal to investors with a price range and a valuation range before ultimately debuting. So that range could be adjusted between now and then. But at least in the near term, that targeted range is 31 to 34 share, implying a $6.5 billion valuation, which on a fully diluted basis would represent a discount to the $10 billion valuation from 2021. Guys.

All right, Leslie. Yeah, it'd be an interesting test of a mostly dormant IPO market for growth companies. Appreciate that. Well, the S&P 500 and NASDAQ again on track to close at record highs after hitting fresh intraday highs earlier in this session. The NASDAQ surpassing its 2021 record as investors bet mega cap tech is still the best way to play slowing inflation and the AI boom. Joining me now is HSBC Global Research's Max Kettner. Max, it's great to have you on.

And I want you to take us sort of back to how you were thinking about things starting the year and where it's brought to you right now. Because I know you were bullish in 2023, correctly so. And you thought maybe we'd get some payback. It didn't happen. Yeah, thanks for having me. Look, that is exactly right. We started the new year basically thinking that, you know, shorter term inflation expectations already subsided quite a lot, right? When we looked at, for example, two year break even inflation in the U.S., right, what tips were pricing or what even inflation swaps were pricing at the front end. In all of them, we were actually starting to look at sort of below 2% inflation expectations for the near term. So having played

all that Goldilocks and disinflation theme last year, and like you said, right, we've been pretty bullish last year, we sort of thought, look, we don't even need to have a view that there's a big next inflation wave coming. All we really need is one or two data points on the inflation side that might be surprising a bit to the upside. Then we get inflation expectations up. We've got rate expectations perhaps repricing a bit higher. And that then will weigh on multiples, will weigh on equities, but it will also weigh on credit spreads, right? So for us, that's what we thought is this sort of reverse Goldilocks period where for at least a couple of weeks, you know,

we're going to hit the pull button on all the asset classes. But clearly, it hasn't happened, right? Yeah, in fact, what we have seemingly is sort of Goldilocks on steroids here because you both have the soft landing somewhat coming to pass and getting priced in by the market, as well as you have this extra kicker of the excitement around AI-related technology. So I guess, where does it lead you now in terms of positioning? Do you say, well, we missed the move, but we're still cautious,

or is it time to play? No, I think, look, we missed the move, right? We definitely missed the move, particularly in inequities and at high-yield credit. I think emerging market debt is still something where we're a bit cautious around, right, both on the emerging market, local currency and hard currency debt side. But that's a subset, right? Otherwise, you know, we've closed the underweight in equities. We're neutral there. But we've actually almost gone full on maximum overweight and high yield credit once again, just like last year. Because, you know, when you look, for example, at high yield, the next refinancing wave only really comes in the second quarter of next year. So it doesn't really pay to be sort of on the sidelines and say, oh, you know, maybe spreads

go up 10 basis points and then I'll buy it. That, you know, you just can't play that move and you can't really time that move as well. On equities, perhaps we start to see a bit of a dip in the next couple of weeks, perhaps, for example, the February inflation data is a bit higher than expected. But what we thought at the start of the year would be a sort of 10% plus X setback. That looks increasingly unlikely simply because rates have repriced, right? Rate expectations are no longer as exuberant. So, you know, with with rate expectations already being much more realistic, it's also unrealistic to us to say, oh, yeah, you know, this is the factor that's going to send everything down. We've got to be more realistic and say, yeah, a dip of a couple of percent. But you've got to jump in really quickly.

And I guess you mentioned that the whole rate path that central banks might take has been repriced to a fair degree. How much do we actually need outright easing by the Fed? Or do you think that this is just kind of a steady as she goes economy right now and the rate structure is OK? Yeah, to be honest, the economy is pretty fine in the U.S., right? Even in Europe, I would argue like it doesn't really need an awful lot of upside surprises to be massively surprising to the upside. Not because the European economy is so great, right? But I've probably not been the first guy on the show to say, you know, Eurozone economy doesn't look great. Germany looks like it's the sick man of Europe.

Again, everyone kind of knows that, right? And with such a bearish setup, even in Europe, you've got the tiniest little bit of a whiff of upside surprises. That's a massive, massive upside surprise. So to me, it's steady as she goes, both in the US, particularly relative to very, very bearish expectations, even in Europe. And that, for me, tells me we don't need as much easing as the market has expected at the start of the year, perhaps two to three rate cuts. I guess the market could take it as a bit of a disappointment if indeed the Fed dot plot does get changed to two rate cuts only.

But, you know, that's a risk and it's only really a temporary setback. I think as long as we are seeing a few rate cuts this year and sort of the path, you know, the path of least resistance for rates is to go down. That's good for spread products. It's good for equity. Yeah, certainly has been so far. Max, I appreciate the update. Thanks so much. Coming up, plug power shares are popping after dropping 10 percent earlier today. We'll tell you what is behind that big reversal next. And three four teens Warren Pies is breaking down the final moments of this big trading week that and much more when we

take you inside the market. We are now in the closing bell market zone Leslie picker on the sell off and NYC B shares that the Stevens is on plug powers major reversal. Plus, 314 Research co-founder Warren Pies breaks down the final moments of this trading week. Welcome to you all.

Leslie, New York Community Bancorp, another shoe, if not the last shoe, dropping today. Yeah, this has been a tough day for New York Community Bancorp. The latest news just salt in the wound for investors who have held onto this stock for the better part of the year. The stock, of course, plunging after a filing revealed that management found, quote, material weakness in the company's internal controls related to internal loan review. That review not yet complete, meaning more problems could arise. NYCB attributes the weakness to, quote, ineffective oversight, risk assessment, and monitoring activities. As a result, NYCB needs to delay its annual report, its 10-K, and it says it will formulate a remediation plan,

although it does say it should be able to get that 10-K filed within the next two weeks or so. We've seen some downgrades in recent weeks, but the latest coming today from Piper Sandler, downgrading the stock because they say the slew of recent announcements gives them concern that there could be more issues, undiscovered issues, coming down the pike for this company.

And that uncertainty, of course, pressuring the shares now down 26%. A lot of this, though, will fall into the responsibility of the new management team. There was a new CEO, Sandro Dinello. He had been appointed executive chairman just a few weeks ago. He is assuming that top C-suite role now to try and regain confidence that has been shuttered in this company, at least among the investor base, over the last month or so. Mike? For sure.

And the rest of the sector is sort of trading as if it's somewhat idiosyncratic, maybe not systemic. We'll see if that proves to be the correct call. Leslie, thank you so much. Let's get to Pippa on Plug Power. And, look, this stock likes to move. What was behind today's? Yeah, it was down 10% in pre-market trading, this stock likes to move. What was behind today's? Yeah, it was down 10 percent in pre-market trading, but now in the green. And so Plug Power did eliminate the going concern

language from its annual filing last night, saying it now has enough cash to fund operations for at least 12 months. Now, that comes after the company sold roughly 300 million in stock as part of the one billion dollar at themarket offering announced in January. Of course, dilutive for shareholders. Now, Plug also announced Q4 results with revenue light and margins a big miss. But on the positive side, the company's Georgia facility is now producing green hydrogen after months of delays and is forecast to reach full output by the middle of Q2. Plug Power also expects to receive conditional approval for a $1.6 billion loan from the DOE's LPO office by the end of this month. But of course, Mike, as you said, this is a very volatile stock, high short interest, and shares are down more than 70 percent in the last year. All right, Pippa, thank you very much. Warren, weigh in on what we've seen

in the market this week, but also coming into this week, where you basically had people kind of give up a lot of the stories for why the stock market couldn't perform, whether it was related to the Fed, whether it was related to earnings or the concentration of the market. I know you've been kind of giving the market more of the benefit of the doubt recently, but where does it bring us today with this close? Yeah, thanks for having me. I kind of look, this week started really all the way back. It's a continuation of what we saw last November when the Fed embarked on its verbal pivot. And I think that this kind of move was inevitable. I think at that point in time, the soft land became the base case. And our view was that there is just not enough buy-in from investors. And so the beginning part

of this year has really been, and more near term has been, can the market move higher while rates also move higher and bonds kind of reset from that manic rally at the end of last year? And we've kind of proven that we can. I think that earnings have taken the baton from macro, which is what I would call the Q4 rally. And so that's where we're at. Now it's just kind of momentum is doing the rest. I mean, strategists are underweight. Their targets are under what the market's at right now. That's usually bullish for the market. Despite the fact that we've rallied a lot, I don't see the typical euphoria you see at tops. And so for me, I think this is a catch up trade. And a lot of people are just being forced into the market, which is kind of what we expected to happen at the beginning of this year. And obviously, we're at new highs with the indexes. It's not as if

there's a certain level that we have to surmount to necessarily be the next test. But when the market starts to run really fast, you know, it takes a little pebble to knock it off course. I wonder what you'd be more worried about. Are we worried more about a little bit of an uptick in inflation or of growth faltering at this point? Yeah, that's the great question. I think that's the two big risks. I would say growth is a bigger near term risk to the market. Because if you think about inflation, how does inflation hurt the stock market? It hurts the stock market by forcing bond yields higher. And eventually, those yields disturb the relative valuation of markets.

We went through an episode of that, where we went from 3.8 on the 10-year to 4.3. And the equity market just breezed right through that. So what the market's telling me is that it can handle a little bit of inflation. It can handle the Fed delaying these cuts. It wouldn't be able to handle if the Fed totally reversed for us. So on the other hand, I think growth is the bigger real concern. And the market's telling us ultimately that it can handle this inflation and delayed Fed cuts, which makes sense. I mean, as long as it flows through to earnings, then, you know, I think that stocks will ultimately be OK. And the message they've received from the Fed

from last November to now is the Fed has your back. If something were to go wrong on that growth side, the Fed can cut immediately. They can end QT. They can do whatever it is. And that's why we said going into the year, yesterday's tightening becomes tomorrow's stimulus. The Fed has your back. The Fed's put is back in play. Yeah. And it's a good reminder that, you know, two percent's the Fed's inflation target, but the markets are pretty good with something a little bit above there. Do you want to get you to weigh in quickly on oil as WTI pushes 80? It's had a little bit of a stealth rally here. Yeah, again, we thought that oil was set up for a push higher, about 90, but I just don't

see anything above 90 in the cards. My honest feeling, our model is still bullish, and that's really how I navigate the crude oil markets is quantitatively. But my honest feeling is as we go through this year, OPEC oil has to come back on the market, and that's going to weigh on the market. So OPEC is trying to navigate its own and engineer its own soft landing of that oil coming back onto the market. Odds are it's going to be somewhat disorderly and push prices down as we uh move through the

year march opec meeting uh is where i think that you're going to get some good news for the oil market they'll probably extend cuts out to q2 maybe they'll talk about into the end of the year i don't expect that but one way or another that oil has to come back, and it's sitting on top of this market like a soft ceiling. So that's how I see it. Well, and that would be, I guess, good news in terms of inflation risks as well. Warren, great to talk to you. Appreciate it. Have a good weekend.

As we look to finish up the week, we are going out near the highs in the S&P 500. It's up about eight-tenths of 1%, also up close to 1% for the week. You see the NASDAQ composite up one point one percent. That would be its second straight daily new all time high. Last one was November of 2021. And you're seeing decent participation today, about two thirds of all volume to the upside. That Russell 2000 number people are watching is just under twenty one hundred. It is up one percent. That's been the laggard, but it's starting to come around. This week, help buy

some of those big growth stocks. That's going to do it for Closing Bell. Let's get into overtime with Morgan Brennan and John Starr.