Closing Bell - Closing Bell: Sell Before May and Go Away? 4/13/23

Episode Date: April 13, 2023

Wells Fargo’s Chris Harvey urged investors to “sell before May and go away” … calling for a meaningful correction in stocks. He explains his point of view. Lauren Goodwin of New York Life Investment and Joe Terranova of Virtus Investment Partners give their forecasts. Plus, Morgan Stanley’s Chris Toomey says we’re facing a “fairly dramatic” sell-off. And, the key themes every investor needs to be watching when United Health reports tomorrow morning.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This make-or-break hour begins with a big rally on Wall Street, another inflation read coming in cooler than expected. And here is your scorecard with 60 minutes to go now in regulation time. Tech surging today as the year's best-performing sector looks to take its next leg higher. Discretionary and communication services leading the broader market higher today. A pretty strong day across the board as well, helped in part by the fact that interest rates have been mostly lowered, though, as you can see here in the last 30 minutes or so, have started to creep up just a bit. It leads us to our talk of the tape and the note that grabbed our attention

this week. Wells Fargo's Chris Harvey urging investors to quote sell before May and go away, calling for a meaningful correction in stocks. That was, of course, before a couple of good back to back reads on inflation. Mr. Harvey is here with us on set to explain. Welcome. I'm glad we finally corralled you because I saw this note. We're like, let's get Harvey our call. This is I'm quoting from your note, OK? We're within spitting distance of our 4,200 S&P target now shifting direction. Expect a 10 percent correction in the next three to six months. A front end inversion, a 7 percent year to date run in a banking crisis that will likely take an economic toll triggered our reversal.

And here we are. The market still looks like it wants to go higher. Dow's up 400 points. What say you? What I say is the same thing I said before. We're going to have a correction. We're at 4,200. Our price target is 4,200. That's 20 times a 210 number. Those are both really, really healthy numbers. I can't get a bear case from this level. And what we expect is we expect a pullback over the next three, six months, whether it's related to banks, whether it's related to the Fed, or whether it's related to multiples compressing. At the end of the day, the risk reward just does not look that attractive. What do you think this rally is about? Is it on a belief that the so-called bad news that

we've gotten on the economic front, some of the Fed speak. They're just going to continue to do what they do. They're going to eventually put us into a recession. They're going to have to cut rates. Yeah, Scott, typically when we have a tightening cycle and you get a pretty big rally, you get a 3% rally in one month, you can get upwards of 8% in three months. And I think that's what's going on. But if we're going to have the Fed cutting, something bad had to happen. And so we're in this sweet spot right now, but we're not going to stay there for very long. What if the worst that was going to happen happened? What if somehow we actually have a soft landing? And it's not off the table. No, no, Scott, it's not. So the bull case is that rates go down, the Fed stops,

we don't have a big recession, and oh, by the way, you don't have to pay back your student loan. Okay, that's possible, but is that probable? I don't think that's probable. And our issue is what kind of growth are we going to see in 2024? It's not going to be very much. Do you think the Fed cuts this year? We do think the Fed cuts this year. How many times? Gosh, I don't know, but what I can tell you is I think the Fed will have to cut more than they expect

because what we know is interest rates or the economy is not as interest rate sensitive as we thought and Regulations coming down the pipe for banks if we have the pullback that you expect How do you think we finish the year? I mean do we when they start to cut do we rally back and we still have a decent year? I think so. So we're not lowering our price target. So what we're expecting is a Bible pullback We think it's around 10%. We think you get the $3,700, but you're right. If the Fed does start cutting rates, then that's generally a good thing for a short period of time. And we can end up back at $4,200.

So you think $4,200, that's still your end of year target? End of year target, yeah. Now, earnings obviously hot and heavy tomorrow, starting in the morning, UnitedHealth and then obviously the banks. The market you don't think has priced in a soft recession, I'm assuming, at the level that we're at now for earnings, which are still around 220. 220. So what I think is happening is we're going to get multiple compression. The market's going to start to say, oh, wait a minute, we didn't think about this. And then we might have a little bit of, again, what we're having right here right now is euphoria around the Fed. The Fed's ending.

Rates are going lower. It's all good. We're going to have the soft landing. But we really have to deal with the reality. And the reality is we're at the end of the cycle. We're going to get a blip because of the SVB. And we had a banking crisis, that never leads to more credit availability. I know, but it was so idiosyncratic, you could make the argument, that it doesn't necessarily have to be that next big cataclysmic event. So here's the thing. We think, tells you lose, heads you lose. Because if banks don't make financial conditions tighter, then the Fed will. So it doesn't matter what happens because if the Fed says, hey, the banking situation is fine, they're going to tighten even more.

What do you think the banks have to say tomorrow? Is that sort of the first sort of thing that you think breaks this move? I think the banks, the large cap banks will actually do OK here. And I think what it is, it's the regional banks are going to have more problems. And then we're starting to see some of the industrials like Fastenal came out today and said, hey, March, not as great as we expected. Right. And what you're going to see is people. So if you roll the clock back to fourth quarter 2018, what the CEO said were, hey, we're reading the papers. We're looking at the stock market. But our consumer is still strong.

Business hasn't stopped. What I think they're going to say is, hey, we're reading the papers. We're looking at the stock market. And so is our consumer. And things have slowed down. You think the consumer is going to roll over? I don't think they're going to roll over, but I think they have to pause. And I think they're leaning way too much on credit at this point in time. And that's just not a kiss to build a dream on. But I mean, if the consumer doesn't roll over, I mean, we're still an overwhelmingly consumption-based economy. That is what a soft landing idea is based on, that the consumer holds in enough. Yeah, that's fair enough.

But if we look at retail sales or real retail sales, three to the last four months, we had negative numbers. That's not great, right? And so the consumer is starting to retrace. The consumer is being affected by price and the consumer is slowing down. The idea of technology, you mentioned it today, NASDAQ's up better than 2% as we speak. What do you make of this trade? We like, so we've like... That's a big sigh. I mean, it's confounding you that it's gone up so much? It's not confounding us. So we thought the long-duration trade would work.

We thought media and entertainment was the best place to be. It's up 25%, 26%. We still like it, but that's a heck of a move in a very short period of time. We want to see a pullback. We expect to see a pullback. And if I'm wrong, let's make believe the market goes higher. You should see tech pullback and more of your value cyclical start to work. And that's the opportunity to get a little bit more aggressive.

Why do you think tech is working to the degree that it is? There are a number of different theories, but I want to hear from you what you think. Yeah, I think you hit on one of them. It's AI and that next big wave. It's rates coming down. One of the reasons we have a 4,200 price target is we thought rates would come down. The economy would slow. We were talking about an economic malaise.

That's better for growth and growth stocks. S&P is a growth index, and it would go higher. And that's exactly what's happening with growth. It's nothing really too sophisticated. Rates come down. Economy's slowing down. You have a positive with AI, and people get very excited. You have better balance sheets. You have what you know we're gonna discuss in a little bit

this idea of you take your medicine first in terms of right sizing your business. Yep. This so-called year of efficiency. Yeah. You come out of it first, right? Yeah and what I would say is we said this early in the year, I kind of forgot about this is the a lot of tech companies took a page out of the energy companies. What they did is they said we're gonna going to forget about growth at any price.

We're going to look at profitability. And the companies that started to do that, they reacted very aggressively. When you saw numbers being cut, when you saw heads being cut, when you saw them looking at balance sheets and profitability, they moved very aggressively. Let me ask you a question before I bring in the others. What makes your call wrong? What has to happen? Where do you get surprised and you're like, I just didn't see that? No, what makes our call wrong is, again, the Supreme Court says you don't have to pay back your student loan.

You don't have to pay back your student loan. That's a big, big stimulus that's going to come down the pipe. Furthermore, if that's happening and the Fed has eased, you can get stocks a bit higher than where we are. That's how we were wrong. What if earnings just don't deteriorate to the degree that some think? I mean, I don't hear anybody talking about the Supreme Court case on student debt. Well, that's why we're talking about it because others are not talking about it. And as far as numbers, it's hard for us to get numbers higher than where we are. We're beginning to see multiples compressed and they will continue to compress or margins compress and they'll continue to compress. Hard to see numbers go higher on that. Let's kick it around. Joe Terranova, Vertis

Investment Partners joining us today along with Lauren Goodwin of New York Life Investment Management. Lauren, you first. You heard what Harvey says. What do you think? I am very sympathetic to Chris's arguments and sort of the arch of the year that he's putting forward. And specifically with the point that we have seen the impact of interest rates on multiples. We have not yet seen the impact of interest rates on the economy on earnings. Investors tend to think of the markets as forward looking and markets do tend to lead the economy out of recession, which is one of the reasons why I'm sympathetic with an aggregate end-of-year call that looks okay. But in the meantime, earnings do not reflect recession until the data gets there.

And we have not seen that element of the bear market yet. It's one of the most common questions I'm getting from investors is, isn't recession already priced in? And the answer is no. Well, clearly, Joe, it can't be priced in at these levels where earnings are still projected to be. That's what Pazani and I were talking about over the last 24 hours. You know, you're still at 220. Maybe you've got to go to 200 on earnings if you have a recession. But what's your view on what Chris Harvey says? Sell before May and go away and you're going to go to 200 on earnings if you have a recession. But what's your view on what Chris Harvey says? Sell before May and go away, and you're going to have a pretty good correction coming up. So the first thing I think about is portfolio management, because if you're utilizing the strategy of sell in May and go away,

you're really a passive investor and you're just buying the index itself. You go over the last 10 years. It hasn't worked well. I talk with hundreds of advisors. They ask over the last 10 years. It hasn't worked well. I talk with hundreds of advisors. They ask me the question all the time. Should we sell in May and go away? OK, the question really comes down to I, by the way, believe that Q3 will be the weakest quarter from a performance standpoint in 2022. The problem that I have with it is what am I selling and what am I moving into? And then I'm giving up on active management, which in fact, I actually think is the right strategy in this environment.

So if you go back one year, the market is basically flat, but there's been areas of the market where you've been able to outperform. And I think that is the more productive conversation. I think that you could look at technology and understand there's a disinflationary effect that right now is causing money managers to rebuild positions. So I'm not so sure I agree with you that you want to step away from that because ultimately, Scott, at the end of the day, the question comes in, are you that good to assume the reinvestment risk and go back into the market? Because Chris said it himself. He thinks the market at some point will recover. Sure, but you could also agree with that and say that, look, you know, technology has had just too big of a move.

You're suggesting that maybe it's not time to lighten up on tech. Scott, what's happening now with technology is the fundamentals are finally coming back into play to support the rebuilding of positioning and and that's as you said that's ai that's apple which is you know seeing services revenue potentially increase as we see strength in the mobile app but ultimately it's back to that disinflationary effect just look at the composition of the what the market's doing today what is gold telling you gold is telling you that we have this disinflationary shock at a far greater velocity than we ever expected. Biotechs are rallying today. Why?

Because the market's realizing, okay, this is an economic climate in which we're going to have to search for growth. The premise, sorry, one last point. The premise that bad news is bad for the economy, I disagree with. Bad news is actually good for the market right now because guess what? It signals peak yields and the Fed, you're wrong. Okay. All right. The floor is yours.

The floor is mine. All right. A couple of things. Yeah. One, we're at 7.5%, maybe 8%. You're annualizing a 30% return year-to-date. That's pretty healthy. Two, if you want to weigh on active management, that's fine,

but these are really healthy numbers. If you take some money off the table, you put it in the bonds, hey, you're getting a pretty healthy yield at the front end of the curve, 4%, 5%, 6%, depending on where you're putting it. Three, everyone tells me, oh, my goodness, you can't be bearish because everyone else is bearish. And that's the bull case at this point in time. Signed, sealed, and delivered.

That's the big pushback that I get. Hey, everyone else is bearish. You can't be bearish at this point in time. That's not a great one when the market's up 70%, you're annualizing 30%. What about to Joe's point of what, if you say sell before May and go away, what do you want people to sell before May?

Well, what I want them to sell is risk. So they should be selling risk. They should be selling value and they should be selling cyclicality. Because that risk, three years ago, risk was priced. You could have bought it with two hands. Now risk is not priced properly. You're not getting a good rate of return. You're not getting a good risk reward at this point in time. Cyclicality. We still haven't seen numbers come down. So numbers

are going to come down on the cyclical side. And then the last thing, value and cyclicality, it goes hand in hand. Value had a great year last year. You're having rates come down. We're going into a recession. That's what you should be selling. What do you think? I mean, you like, you know, fixed income plays still. You don't disagree on the idea of risk reward in the market not necessarily being on your side right now, right? Yeah, I love a good yes and. Thinking about where we are today versus a year ago, for the last year, stock bond correlation has not worked. Diversification hasn't worked. And yields have come up a fair bit.

And so now stock bond correlation is working better. Yields are higher. That is a story in favor of reallocation for many investors. And if you think about the drift that portfolios have engaged in over the last 15 years, a lot of investors are still stock heavy. Now, there's nothing wrong with that per se, but the risk-reward of that 80-20 portfolio, when you have yields where we have them, maybe doesn't make the same kind of sense anymore,

especially when, and look, whether you think the Fed's right or wrong, the bar for cutting interest rates this year is pretty high, and especially by July, which is what the market is pricing right now. That different sort of economic environment where inflation's moderate, rates are moderate for the next two, three years, that's one where, again, focusing a little bit more on the bond side of a portfolio, taking advantage of income where price appreciation has been the story for so long, I think makes sense. What about, are you unmoved by the inflation reads of this week?

No, I think it's great. Because again, your note was before the reads. That's right. CPI and PPI, both cooler than expected. You're unmoved by that? If you had to write the note today, would you use the same language? I would use the exact same language. There's no difference. Remember, we're still at 4,200. What we said is sometimes the market moves

a little faster than we can write. And so we wanted to get out there and say, OK, we're above 41. We're getting to 42. The risk reward doesn't look great. And we see some bad stuff. And we see a lot of risk on the horizon. As far as the economic numbers, the inflation numbers, they were coming down. We expected inflation to come down. We think the Fed has stopped or unlikely it has stopped. That doesn't change anything. The market's going to be positive on this inflation news, and that's fine. It gives you an opportunity to reposition a portfolio, to take the risk out.

Okay, so you'd use the pop, like, for example, what we're seeing today to lighten up. That's right. We'd use it to lighten up, to reposition, to take risk out of the portfolio, take cyclicality out of the portfolio. If you can find can find garpey garp is where you want to be right and you do want somebody said it before you want better balance sheets at this point in time you don't want to rely on the credit markets you don't want a very levered situation because credit's going to be more difficult to source aren't you making the case for the very tech stocks? Techology. I mean, is it just me? Some of those are viewed, you know, the bigger ones,

Garpy, growth at a reasonable price, and the balance sheets that you're talking about to look out for. And this is why we're in media and entertainment. There's a lot of tech stocks there. We do like software over hardware. So we're not anti-tech. But when you're up 25%, 26% in the first couple of weeks, first couple months of the year, maybe you need a little bit of pullback to get longer term.

I know you got shellacked last year in those stocks. You did. That's fair, right? And so I just can't tell you to put new money to work right here, right now. We want to be more opportunistic. We want to tactfully move into these names. And we think if I'm wrong and the market goes above 4,200, these names are going to pull back. And that's your opportunity. Last thought from both of you. Joe first. 4,200 is a number that I've been talking about on the network.

I actually think it's a trap above 42 for the bulls. So I agree with you on that point. I'm surprised you didn't mention the debt ceiling because that is going to be a challenge in Q3. And maybe it's selling treasuries. And the last point, just on the whole premise of your note, which is a very thoughtful note, maybe it's not so much sell in May and go away. Maybe it's rotate in May and go away. I think that's fair, right? What we want is the guy who has to look at his own ETF and may have some surprises for us as he looks to potentially rotate to get back into position where he was offside.

My own bit of commentary. Lauren. I think one thing that's interesting that none of us have talked about much in this conversation is cash. We're all making positions that are some degree of fully invested or close to it. And in an environment where, yes, inflation is moving lower, but it's still high, the hurdle rate that investors have to hit to maintain their wealth, to build wealth over time, is higher as well. And so that rotate in May and go away, I like that a lot. All right. You guys are great. I loved it. Thank you so much for being here.

That's Chris Harvey. Lauren, thank you. Joey, thanks to you as well. Let's get to our Twitter question of the day. Do you agree with Chris Harvey? Should you sell before May and go away? You can head to at CNBC closing bell on Twitter. Please vote. The results coming up a little later on in the hour. We're just getting started, though. When we return, tech's year of efficiency. We just mentioned that the sector rallying so far this year a lot. It's up again big time today amid widespread cost cutting measures. What Amazon CEO Andy Jassy had to say about that on this network today and what it could mean for the big tech stock in the long run. We are live

from the New York Stock Exchange and you're watching Closing Bell on CNBC. About 40 minutes to go in the trading day. Let's get a check on some of the top stocks to watch as we head into the close. Christina Partsinevalos is here with that. Christina. Let's start with Western Digital hitting a session low this afternoon as hackers claim to have stolen significant amounts of data from the company. The hackers are demanding a hefty payment in exchange for not publishing the data. And this comes after Western Digital disclosed a security incident just back on April 3rd. And we talked about it on the show, saying it was still working to understand the scope of the breach. We've, of course, reached out to Western Digital, haven't heard back, but the company declined to comment when TechCrunch asked them

about the hacker's claims. The news, though, has spooked investors somewhat, the stock down about 3% and 2% month to date. And let's move on to some movements in the C-suite. Harley Davidson, the CFO, will step down to join toymaker Hasbro, with treasurer David Vinny serving as interim CFO for now. The company also getting a price target cut from B of A to $55 from 65. And pretty much other analysts, too, are concerned about a drop in Q1 retail sales. UBS, I was just reading a note predicting a possible 20% fall in Q1 for retail sales. Hog shares are down about 2% right now, but have fallen 30% from its February 52-week high. Scott.

Christina, thank you. We'll see you in just a bit. Christina Parts, another of us. Amazon shares up 20% this year as tech has rallied the most of any sector. CEO Andy Jassy addressing the company's major cost-cutting moves during an exclusive interview today right here on CNBC. It's part of what's been a so-called year of efficiency for big tech overall. Our Frank Holland joining us with more on that story. Frank. Well, Scott, Amazon is certainly one of those mega cap tech companies outperforming this year following layoffs and cost cuts. Meta, they actually coined that year of efficiency up more

than 80 percent year to date. So following the release of his annual shareholder letter, Amazon CEO Andy Jassy, he discussed Amazon's own focus on efficiency. In that letter, Jassy really emphasizing a need to maintain a lean culture and a cost-cutting culture. He also said this, I'm optimistic that we'll emerge from this challenging macroeconomic time in a stronger position than when we entered it. Also, take a listen to his comments on Amazon's refocus around cost. I think it's a pretty significant streamlining of costs. We went through a process in every one of our businesses where we looked at where we had our resources allocated and which things we really had conviction were going to have good returns for customers and for the business.

And we made some repriorization decisions, which led to those reductions. But I think it's a pretty good balance. So mega cap tech, including the triple Q's, outperforming even with rate hikes as their strong cash positions and those companies in that ETF, they really insulate them from the rising cost of capital. But more speculative tech also beating the S&P, including the ARK Innovation ETF, where top holdings Tesla, Zoom, Roku and Block have also cut jobs, Scott. You know, and there's been some calls this week almost every day,

either reiterating buy ratings on mega caps, Frank, price targets going up, notes from analysts like Dan Ives who say, yeah, you'll get, you know, cautious comments probably, but at least the earnings will likely be steady. And I wonder if in part of this is the belief that because they were first in, in terms of laying off and right-sizing their businesses, they emerge healthier and leaner and even meaner than they were before. Yeah, you know, absolutely. I think Salesforce is another great example of that. They made some cuts that appeased some of those activist investors that were in on the stock. They resolved a lot of that. And you're seeing other companies making similar moves, getting big rewards for cutting

jobs, cutting costs. You're seeing stocks pop. On the other end, another one of the ETFs I showed up there was the WCLD ETF. A lot of questions about the quality of that outperformance. We look at some of the top holdings, a company like C3AI, 29% short interest. A lot of people believe that stock's being held up by short covering. Yeah, got to focus on many more stocks than just the mega caps. That plays right into your beat as you cover cloud. Frank, thank you. That's Frank Holland joining us right here at Closing Bell. Here is where we stand right now. A little more than 30 minutes to go.

We're basically at the highs of the day. Dow is just off of a 400-point gain, good for about 388. There's the S&P 500, 4147, one and a third percent. Technology, just talking about that, of course, with Frank, the big outperformer this year. The big outperformer today, good for 2%, is the NASDAQ, the Russell 2000. Those small caps doing quite well as well. Up next, making the case, I guess another case for a correction. Morgan Stanley's Chris Toomey is back.

He's a top-ranked financial advisor. He's also bracing for some big market risks on the horizon. How he's advising his clients in these volatile times, we'll discuss next on Closing Bell. Stocks may be rallying today, but they could face a fairly dramatic sell-off in the coming months. That is the call today from our next guest. Does run one of the highest-rated private wealth advisory teams in the country at Morgan Stanley. His name's Chris Toomey. He's back with us at Post 9. So you and Harvey, Chris Harvey, have obviously been hanging out. Do you think it's

time to sell also? Sell before May and go away? Yeah, I mean, I think we've been fairly defensively positioned for a while and we've been pretty open about that. I think tomorrow starts the earnings season in earnest for Q1. If you look at last quarter, down earnings. This quarter expected to be down about 9%. That's with top line revenue growth being at 2%. Second quarter down again. So you're talking three quarters of negative earnings. This is an earnings recession. It is. And if you look at what the street is calling for, 220 on the S&P 500,

18 times multiple, that's pretty expensive for us. And in our mind, we think earnings in reality are going to be closer to 195. And I think that's where the rubber is going to meet the roses. The bears or those who are more cautious, with no disrespect in any way, they all tell the same story because the story is easy to tell in the same manner. It's like, you know, the economic news is showing deterioration. Earnings are still too rich, and those estimates are going to come down. Stocks are too richly priced at these valuations based on what earnings really should be. Right. I mean, I've kind of laid it out.

It's pretty easy to do. Yeah. But that's the point. It's kind of easy to do. What if all you guys are wrong? Well, I mean, if we're wrong, I think we're in for an even worse outcome. I think the further the market goes up, the more those fundamentals get worse and the more downside we're going to see. Why so? So, I mean, I think, look, look at a situation like financials, right? It's the second most important part to earnings this year. Everyone was concerned about deposits. Right now, I don't think it's a solvency issue.

I really think it's a return issue. If you look at the basic business of financials, you know, you're lending through deposits at one rate and then you're loaning out to earn money. Right now, that's inverted. The net interest margin is what you're talking about. Right. So, you know, Rob Seachin was on earlier. He talked about peak net interest margins. That's going to be a critical problem within the financials, which the Fed spoke about in their minutes. You know, they were ready to go 50 basis points and halted because of their concern about what's going on in the financial markets. And I think that's only the first problem.

I think the second problem is if you look at a report that Morgan Stanley put out last week focusing in on the debt wall that we're going to be seeing over the next two years, it's $5.3 trillion. A big portion of that is commercial real estate. So you're one of those who are getting more worried about the commercial real estate effect as well. Absolutely. I mean, you're in a situation where rates are significantly higher than when these loans were priced. They have to reprice and valuations have to come down 20 to 40 percent

on a lot of these properties. That's going to be a really troubling situation. And don't forget, the banks don't just lend in these situations. They also invest through CMBS. So if the banks are impaired, that's going to be an even bigger problem for the economy. Well, I mean, the bank's going to really say something tomorrow we don't know. I mean, they'll surprise us. What could they possibly say? I think the guidance is going to be a lot lower because especially of the fact that banks actually are so in touch with regards to what's going on in the consumer. And I think the consumer is the heart of this issue. Consumers have been pushing this economy through this. They're two-thirds of the economy. And a lot of it had to do with that savings glut that they had, as well as the fact that employment is very, very strong, right? But

we're at a situation where the savings rate is at almost an all-time low and credit card debt is at an all-time high. And credit card rates are also at an all-time low and credit card debt is at an all-time high and credit card rates are also at all-time high. Something has to give there. And when the consumer has to start trading down, as the Amazon CEO said in that previous interview, you're going to start to see that come down, the economy come down, and at some point prices have to come down. Why are discretionary stocks doing so well? I mean, they're obviously doing well today, but as a group, I mean, they're up 14%. I mean, look, I think the story is at the beginning of the year, everyone was expecting a soft landing, right? So you had equally weight do very well. Cyclicals were going to do

exceptionally well. And then all of a sudden, wait a second, the numbers aren't looking good. We're going to go potentially into a recession. Let's go hide in tech, right? And that's where everybody moved. And tech has done exceptionally well. And part of that also is a lot of people who are off sides. And you bring up a good point with regards to the fact that if you say quality, we want to be in quality. We want to have great balance sheets. We want to have great cash flow. Yeah, that's typically when you think about big cap tech. The problem is they're not immune from the consumer. And if the consumer really has a problem, it's going to affect top line. And don't forget, you know, tech was the first to start

laying off people, but they were the ones that were the most aggressive with regards to hiring, and they still have a ways to go. So I could see more pain. Maybe, but they could also be the first one on the other side to come out. Well, they might have already been, right? I mean, the other thing is, if you look, let's just say, you know, if you say the consumer is going to weaken, that's going to hurt tech. I mean, I'm thinking, okay, well, who's selling like hardware product? Apple? I mean, you see what's LVMH doing, right? The high-end consumer isn't slowing down at all. Would you consider Apple a high-end consumer-based technology company? Yeah, so I would,

and I would say some of this also has to do with China reopening, as well as the buying in those global brands that were also relatively cheap. Thank you, Apple. I mean, that's right. They get, what, 20% of their revenue from China. Exactly. But the fact of the matter is, is at some point, that has to slow down, which we think is starting to happen, because at some point, the consumer can no longer drain on its credit card. And the sentiment has gone down. Consumer sentiment is down by over 60 percent. So in that type of situation, you looking ahead, along with the Fed's base case, is a recession, right? Like when was the last time? I mean, that's the Fed staff. I mean, if the Fed membership actually

agreed with that, they wouldn't perhaps be talking about and even raising rates again in May, not necessarily. Unless they were that concerned about inflation, right? If they were that concerned that going from 7% or 8% to 5% was the easy part, and if they really had a mind of getting to 2%, that that might be real painful. I'll ask you the same thing I asked Chris Harvey. I mean, what makes you wrong? The bad story is easy to tell. It goes on and on and on. We've all heard it. We know it. What makes you wrong? I think what makes us wrong is probably something geopolitical, some sort of solution with regards

to UK and Russia, some sort of trade agreement with regards to US and China. Otherwise, you're in a situation where economy earnings are decelerating. The economy is decelerating. The Fed is still raising rates. At no point has earnings troughed before a recession. They always trough in a recession. And we're in a situation where the earnings risk premium is at 200. And it should probably be close to 400 or 500. In that type of environment, you're talking about earnings at 195 and probably not a 15 multiple, maybe a 13 or 14 multiple, which is going to be really painful. So October low is revisited, if not breached? I mean, I'm asking you. That's my concern. That's my concern. And that's what we're positioned for. I mean, I'm asking you. That's my concern. That's my concern. And that's what we're positioned for.

I mean, in the meantime, you know, we're sitting in treasuries. We're collecting four to five percent. We've got some equity exposure that we're hedged out on. You know, in our minds, if we're generating, you know, with very little risk, a five to six percent return and the market sells off and we've got some cash, that's a good place to be. And I think I heard somebody say, you know, we get paid to be risk takers. We do not get paid to be risk takers. We get paid to be risk managers. At this point in the cycle, you're not getting paid for the risk. So you don't want to necessarily play. You wait until valuations get in line and you get paid for that risk. That's a perfect way to end it. It's good having you back.

Thanks for having me. That's Chris Toomey joining us once again here, Post 9. Up next, we are tracking the biggest movers as we head into the close. Christina Partsenevelos is back, standing by with that. Christina. Well, an almost rejection by the FDA is enough to lower shares of one biotech name. I'll explain all of that and much more just after this short break. Just more than 15 minutes to go before the closing bell. I'm going to get back to Christina

Partsanovalis now for a look at the key stocks to watch. Christina. Well shares of fintech firm Affirm are about 3% higher although still off the highs of the day. The company is expanding to my motherland Canada and it's getting a little help from payments processing firm Stripe. Stripe has been available in Canada for over a decade with an already established relationship with merchants, so a firm can now capitalize on that, and it's helping shares climb three and a half percent higher. Now let's turn to biotech, which is mostly having a strong day. The biotech ETF XBI is firmly in positive territory and heading for its best day since November. Leaders include CRISPR and Relay

Therapeutics, which was initiated as outperformed by Raymond James. But there's an outlier in the group. That's Sarepta Therapeutics. That stock is lower as Stat News reports that some staff at the FDA were leaning towards rejecting the company's Duchenne muscular dystrophy gene therapy until a top official intervened. Because of that uncertainty, it's weighing on the stock, which is down almost 9.5% right now. Scott. Christina, thank you very much. It is the last chance to weigh in on our Twitter question. We asked, do you agree with Chris Harvey? Should you sell before May and go away? You can head to at CNBC Closing Bell on Twitter. It's yes or no.

The results after this break. Let's get the results now of our Twitter question. We asked, do you agree with Chris Harvey? Should you sell before May and go away? The majority of you said no. No, we should not. Fifty four and a half percent. The winner up next. We're counting down to United Health Earnings. We have a shareholder standing by with the key themes. He'll be watching when those numbers hit the tape. Got the banks to talk about this nice rally we have into the close as well. We'll do it in the market zone.

All right, we're now in the closing bell market zone. Jack Manley from J.P. morgan asset management is here to share his market outlook joe taranova back with us to make the case for united health care ahead of its earnings report tomorrow morning papazani back with us to break down the crucial moments of the trading day as we head into the close jack i begin with you i feel like we're like on a one-way train to nowhere here it's like harvey at the top to in the middle. Now in the bottom of the show, you want us to get really defensive and cautious too? I think there's a real good chance that this market's ahead of its skis right now. We're looking at multiples that keep going up.

We look at fundamentals that keep getting worse. I have a really hard time imagining that we don't see some sort of stumble at some point in the next couple of weeks, couple of months. But long term, Scott, I'm still a big bull when it comes to this equity market. We're still a long ways off from where we were back in January of last year. And so I think it has everything to do with your time horizon. You know, if it's short term, I think now it's probably a little dicey. A little bit longer term, I wouldn't mind putting money. Why are we rallying on what has been, aside from two cooler than expected-expected inflation reports, still not fabulous. Why are we rallying?

I think it is a lot to do with that inflation report. I think the surprise there was good. I think people are misreading it entirely. PPI numbers this morning were pretty solid. They indicated a slowdown on that front, too. That's encouraging. And look, every day is one step closer to that Fed meeting in May, which hopefully signals that conditional pause.

So I think we're just grasping at anything that looks good. Well, wait, now I feel like you're making a more bullish case, like inflation is actually good. It's coming down. Well, it looks like it's coming down. If you open up the hood on that one, so much of what happened was driven by energy prices. They've already rebounded from those lows that we had a few weeks back. Energy is likely going to be a headwind moving forward, not necessarily a tailwind. But again, it's all down to time horizon. Two, three months, I'm not very confident.

A year, two years, I'm feeling a whole lot better. What about technology, which we've heard a lot about, obviously, lately, and the suggestions from many sell it. It's gotten too rich. It's gotten way ahead of its skis. I mean, the argument's made by everybody. Yeah. Look, it's ahead of its skis right now, but those earnings, I think, will eventually justify the valuations. The question is, you've got to look for those higher quality names. I'm not looking at anything that's junky.

I'm not looking at anything that cannot survive in a world where rates are off the floor. But if you're a high-quality tech investor with a longer-term horizon, I wouldn't necessarily dump that position. What about the banks quickly ahead of the earnings tomorrow morning? They're going to set the scene and set the stage for us. It's going to be a dicey earnings season for the banks. A lot of headwinds going in on there. But at the end of the day, net interest margins, I think, are pretty decent. And the high quality ones will be able to make a whole lot of money. All right. That's Zach Manley. Appreciate you being here. Joe Terranova, UnitedHealthcare, the other one tomorrow. Important. You own it.

I do. It's going to be very important. It's going to set the tone for health care. It's been in the ETF since inception. It's one of 10 names that's been there. But let's keep in mind, prior to the month of April, this was a name that was down five consecutive months, and it correlated with a lower dollar. Ninety-seven percent of its revenues come from the U.S. So it's been a significant contributor to the Dow Industrial gain in the month of April. Nearly 70 percent of the Dow's gain comes from UnitedHealthcare. It's a company in which you're going to get EPS growth, double digits, probably around 10 percent. You'll see revenue growth somewhere around 12 percent. I'll take that in an environment we're talking about a potential earnings recession. And lastly, you

resolved the Medicare Advantage pricing for 2024, came in higher 3.4 percent relative to what the initial take was in February at 1.1. That's a fundamental strength. We also get don't we get retail sales tomorrow? Very important. We're not talking about that enough in terms of the string of economic reports that we've gotten have all been pretty bad. I'm not including the CPI and PPI in that, but the ISM, PMI services, not great in the last 10 days or so. A lot of the leading economic indicators have been soft. So this is holding even more importance now? It is. I've said that all week. It's really a read on what the consumer is doing. Are they becoming more cost conscious like Costco told us last week,

as American Airlines told us the other day? I don't think tomorrow in retail sales, you're going to get anything that's going to energize the economic growth cyclical story. Why are you hanging on American Airlines and not what Ed Bastian said? They're going to have a gangbusters summer travel season, sounds to him. Why aren't you focusing on that? Because I think what we're seeing is that weekly bookings statistically are coming down and we're seeing that flyers are searching for lower fares. That's behavior that they haven't had in the last year. You couldn't see your eyes in the back of your head, Pisani, as I was saying. Delta, why aren't you focusing

on that? He's like, uh-huh, why not? Right? Because that was pretty good. It depends who you listen to, and then you make up your mind on what side of the coin you're on. Delta moved 6% in an hour this morning. As you could see, the investors could not figure out how to interpret. They missed. And yet the guidance is fantastic. Basically, they said, don't worry, we're going to make it up to you. And they sold it right off into it, and then buyers came in and it moved around. So that to me is a sign of cluelessness. Not in I'm not trying to say there's people investors are stupid. I'm saying they can't figure out what's the right way to

interpret this. And I think this might be a problem throughout earnings. Those stocks can't get out of their own way, no matter if you have every fight, every every flight full. Right. At extraordinarily high prices, the stocks still don't seem to react. Even other things, Fastenal this morning I thought was not a terrible report, and yet they came in right early on and started selling that. I think this is going to be a problem for earnings seasons overall. By the way, have you noticed we're going to break out today? If we close over 41, 46, or 7, that's the highest level since February right now. Very few people talk

about the charts. The chart on the NASDAQ looks fantastic. Moving averages are all turning up. The NASDAQ looks incredibly strong. Ron and Sana was talking about a breadth thrust earlier, our old buddy, Ron and Sana. Breadth thrust means a lot more advancing than declining stocks. Today, three to one advancing to declining stocks. And it's not just you're right about the Nasdaq, but you mentioned UnitedHealth. Healthcare has been on a tear. Any kind of medical devices, HMOs, hospitals have been really strong. Consumer staples have held up well. It's a very broad rally overall.

Tech's holding in there. But you've got outperformance from industrials, materials, consumer staples, health care. That's a pretty broad rally overall. I think the problem, as you and I have been talking, is the market's priced for this perfect Goldilocks scenario. Heaven help us if we get any kind of mild recession like the Federal Reserve was talking about. The market is positioned against the Fed at this point. I mean, everybody is still so negative, though, Bob. I mean, you heard it on our show today. Top, middle, bottom. Every person comes on, has a view of the

market, and they all tell the same story. It all makes perfect sense. It's fantastic from a contrarian point of view. Yes, it's fantastic from a contrarian point of view. But look what the market is doing here. We were just talking about the fact, you know, typical recession, earnings go down 10 to 20 percent. The multiple goes down 20 percent. We have not seen this at all. Now, the bulls will argue, oh, we were down last year. We were down 25 percent last year. I got 30 seconds left.

Are the banks going to rain on this little parade we're all watching go by today? I think the banks are going to try to punt. I think the banks are going to say, you know, most of our depositors, they stayed with us, and we can weather this storm, but you're going to definitely see higher deposit costs. That's going to weigh on the net interest rate. What are they going to say that we really don't know or expect them to say? We're going to find out in the morning. We'll obviously talk about it right here again tomorrow.

For now, that's wrapping it up on a big day.