Closing Bell - Closing Bell: Sizzling Summer for Stocks? 6/4/24

Episode Date: June 4, 2024

The fate of stocks this summer is front and center. Is there enough momentum to keep stocks climbing? Trivariate’s Adam Parker and BNY’s Alicia Levine tell us what they are forecasting for the next few months. Plus, CIC Wealth’s Malcolm Ethridge breaks down what he is expecting from Crowdstrike earnings and the software space as a whole. And, Wells Fargo Securities’ Chris Harvey tells us why he is changing his tune on the reflation trade. 

So much welcome to Closing Bell. I'm Scott Wobner live from Post 9 here at the New York Stock Exchange. This mega breakout begins with this move in the markets as the final stretch gets underway. We're going to show you the scorecard right now with 60 minutes to go in regulation because it's looking a little different than it was just half an hour ago. In other words, it's green. It was red. The major averages have spent much of the day in the red. Even as yields have fallen. But buyers apparently have seen enough and they started to buy some stocks. Most S&P sectors, they were red, but now several are turning green there, too, including real estate, consumer staples,

health care, technology, comm services. They're all green right now. Tech names, NVIDIA, Apple, Amazon, they've definitely helped with the turn. Look at Apple there, pushing $195, been up six days or six sessions in a row. Today would be seven. And it happens in front of the Worldwide Developers Conference. We're going to be live from there on Monday. Can't wait for that, the moment, the AI moment, we think. We'll see what happens. We're watching CrowdStrike 2 ahead of that company's

earnings tonight in OT. It is the best performing cyber name year to date. So a lot is on the line. Look at that chart and then the run up that you see there. We're going to ask shareholder Malcolm Etheridge whether it can live up to that hype. It does take us to our talk of the tape, the fate of stocks this summer and whether there's enough momentum to keep them climbing. Let's ask Trivariate founder and CEO Adam Parker. He's back with me right there. He is at Post 9. Welcome back. Thanks for having me. So how does the markets feel to you now that we've turned the page to June? I thought it was really interesting the last couple of days. Yields down, stocks down. Haven't really seen that. And just as I was about to say that to top the show,

we have a little bit of a turn today. Yeah. You know, when I was on with you a couple weeks ago with Joe Terranova, he we had a debate about whether a vacuum of information would be bearish or bullish. Remember, he was sort of this notion of, oh, now there's no news out. So we'll trend lower. I don't know. I kind of feel like now we've got, you know, some economic data coming this Friday and a couple next Wednesday with CPI, with the Fed. And I think the risk we're skewed to the positive, actually. You know, I don't really make the short term calls, you know. But to me, I think people think fundamentals are hanging in OK. The company guidance has been pretty decent. The conferences so far in the last week or two, nobody's really taken down numbers a lot. So I don't think the fundamentals are deteriorating at a rapid enough rate that

would indicate we're going to have like a growth scare this month. Well, I mean, I was wondering if you think we're having that now. If this is some kind of growth scare and that's why as yields have fallen, stocks are falling too. But you're suggesting it's a scare. That doesn't mean it's a reality. The area that I feel most valid about the scare is software. Because as you saw, whether it's now or CRM or WDA. Mongo. Yeah. A lot of these big companies that every growth manager owns, at least a couple of the stocks we just listed off, if not all of them, they're down 25%, 30% in the last three months. And they're down for reasons that you can't just

say, oh, now it's cheaper. You have to say, like, is there risk to that? I mean, I think we counted 19 software companies that were down 10% or more last week. You said you wouldn't buy the dip either. Yeah, and I feel worse about it. Exactly. So that's an area where I think the growth scare feels a little bit more merited or I need to see some confidence that's not real. Was it a growth scare? Or is it just money is being diverted to more direct AI plays and players? Yeah, that could be because you've seen some of the, obviously, NVIDIA goes up every day. But even some of the other semis, analog devices had a huge move this month,

which is a real company. So I think some people are just worried about how software is changing, how time to market is different, how old code gets obsolete, how AI can maybe help there. And so a lot of these small and mid-cap software and some of the big ones, their growth rate is a little bit under threat. So that's an area where I'd say the growth scare,

I'm a little scared, right? Whereas other areas, you know, kind of more macro consumer, I'm not as worried that we're about to hit like some sort of consumer cliff. Do you feel like we're like primed for another April-ish thing or not? As we get closer to perceived cuts, is there a reason to think that we should be more negative? I mean, I ask you that, I guess, with a tinge of skepticism that as we move closer to the time where they're actually, we think, going to cut, are you really going to get negative now? What I'm worried about the way I'm recommending positioning is that the historical Fed playbook says you own industrials, you own discretionary, that that typically works first when they get accommodative. We upgraded industrials a couple weeks ago, just worried that I was too negative on that space

and retained the negativity on the discretionary companies, many of which have had monster moves in their stocks, either because of short squeezes or slightly less negative comps. So I kind of look at the world and say, all right, the stuff that's down that I'm more worried about is software. The stuff that's up that I'm kind of worried about is retail. So there's kind of both sides. I can see things to be worried about and negative on both sides. So you're making a story that says, well, then just stay with the mega cap techs.

I like tech, the mega cap tech. I like the mega cap tax. I like NVIDIA. I know he's signing women's clothing today, so I don't know if that's a sign of a local top for NVIDIA when your CEO starts signing people's clothing. What do you mean, signing autographs? No, he was signing. It was like Talladega night, so he didn't see the X on that.

You'll see it later. But, you know, look, I mean, I think if you're trying to figure out where you need exposure in this world, it's got to be these growth themes. It's AI semis. It's kind of life sciences and what that could bring. It's power. You know, you've seen that from the utility sector. Yeah, was that real? I think it's real. What was that story? I think it's real. Up 13% year to date, utilities. I think all men from OpenAI saying that we don't have enough power for AI really awaken people. And I think that the odds you get these big four or five, Mag7, Mag5, investing in nuke or investing in power is pretty high. So I can still buy utilities after that run?

Yeah, I think so. That's right. When you say utilities, you've got to be careful. You don't mean like, you know, coal-fired. Well, I don't mean every single utility. Gas, that's the marginal price. But the entire space has had a move. That's because where GDP kind of managed growth businesses

for the previous 40 years, and now a lot of them are growth stocks, and they're going to power, you know, kind of AI airports all around the world with 70-pound NVIDIA chips like candy all over the floor. So it's a different world. And I think, you know, there's no growth investors in that space. It's 0% of the small-cap growth universe is utilities.

What would you—you always come with names. You're not afraid to talk names either. Sure. Have you updated any kind of short ideas in the market that you want to talk about that you think we should lean out? I mean, look, I definitely think these traditional retailers that have gone up are in your basket of short ideas. You know, obviously one I picked on a lot is Target in the last 18 months. And that was right. And then it was wrong. And then it was right again. But these businesses are impaired. They don't grow in the store. They don't add new stores. They don't grow online.

So I think it's a lot of those. We'll see. We got some dollar store stuff this week. That doesn't mean that every single retailer is bad. I mean, it's a bifurcated market as we've seen from Walmart and Costco are different. And Amazon, obviously, is different. But if you're Target, you're kind of subscale in your competitive categories and you don't grow. And I think the same thing is probably true for the dollar stores. And look, there's Kohl's. I mean, Kohl's is obviously going to zero, just whether it's three years, five years, ten years.

But there's a lot of those kind of businesses out there. Obviously, that's a little hyperbolic now. I mean, the debate is just if it's three, five, or ten years. But there's no need for those kind of stores, right? They don't do anything that adds value. But everyone knows that. It's hard to make money shorting something that's been under reform for a decade. So if you're at a fund, you're not going to have a massive short position because you're worried they put up one halfway decent print and there's some part.

Well, your face is going to be on the wall. Partially true story about their real estate value. Don't go to Kohl's. I've never been there, and I'm not about to go. That's not my jam. Here's a piece of advice. If they sold air conditioning units for this table, I might buy one. I don't want you.

Believe me. Yeah, but nobody, you know what I mean. So I think the physical retail, everyone's known for 15 or 20 years that's impaired. I think the question is, you know, do you get run over because when the Fed cuts, they rip. And that's the risk, especially these ones that have short interest. That's how you've seen it with Foot Locker and others where the stocks have huge moves on OK Quarters. So, you know, that's the part that I'm worried about. But I know I don't want exposure to physical retailers.

I know I do want exposure to AI semis. And I do want exposure to housing, which we didn't mention, power, and probably health sciences, just life sciences generally. Those are the places I like. All right, let's bring in Alicia Levine of BNY Mellon Wealth Management, also here at Post 9 with us today. You're pretty bullish, right? You have been and you're staying that way. We're staying that way, although, you know, there are some clouds out there and that's essentially coming from the consumer sector. Some of the data the last week has definitely given pause to your note earlier that bond markets rallying yields are down, the market's down, it's because the market can be okay with higher yields as long as growth is coming in better than expected.

But when the U.S. is missing on some of the data points, ISM manufacturing, new orders, consumption, that's when the market starts to get a little freaked out. Well, why aren't you more freaked out? I'm not freaked out because I just think this is a positive. In the end, what's the big story? The big story is that household net worth is up $40 trillion in the last four years, $11 trillion since the beginning of November.

That is going to power the economy. That's not to say there's not pain in some areas that Adam, my friend here, has been talking about. And clearly the lower end consumer, the lower end of the income scale, those are the folks who are. But that's not what's that's not driving the aggregate data. And that's not driving AI. And that's not driving the investment in AI. I thought part of the story, though, was that we were OK with, you know, fewer, if not,

you know, no cuts because the economy was going to be good enough to give the Fed cover to wait. Right. What if the economy starts to weaken, but inflation doesn't come down to the degree that the Fed's comfortable in cutting? So doesn't that wreck the story? You're saying is it stagflation? And what I'm saying is, I don't think it's stagflation. No, not stagflation. There's a piece in the middle. Stagflation implies no growth and really high unemployment. We don't have to be talking about that. But my story for the bull market was growth is good, jobs are plentiful gives and inflation is coming down. But, you know, so the Fed's not ready to cut. They don't have to cut. They don't need to cut.

Who cares if they cut as long as the economy remains good and earnings stay good? You can't have it both ways. If the economy starts to weaken and they're not cutting for the right reason, then don't you have a problem? That would be a problem. But we don't think that's the problem, because in the end, we think growth is going to hang in there. And we do think that the labor market is what is strong, normalizing, and the earnings are coming in. I mean, the forward 12-month is now up to $2.59 or something like that for next year. So the forward 12-month earnings keeps on moving higher. Forward 12-month margins are at 13%, which is the highest it's been in 18 months.

So the fundamentals of the market are still hanging in there. There's very little evidence that there's an actual slowdown going on in the aggregate. As to software, yes, software is 10.5 percent of the S&P, but 7.5 percent of that is Microsoft, which is the hyperscaler that is exposed to AI. So you're talking about 3 percent of the market where maybe, maybe the earnings models have to change a little bit. It's not going to be detrimental to the overall market. Will we have more volatility in your scenario? We will definitely have more volatility. Yeah, I would have answered the question, yes, if people get afraid, whether it happens or not, it's really about whether they get afraid that stagflation is a higher probability, then yeah, the market's going lower. I would agree

with that. I agree it's not the base case, so maybe we're all in agreement. It doesn't have to be static inflation, though. No, it's people afraid that the economy's slowing and raising high. What if you just have below-trend growth at a time when the Fed's not ready to cut? Market's going lower. If that happens, if people are really afraid that's going to

happen for six or eight weeks, the market's going lower. Yeah, for sure. I think the story for the bull market has just been simple. Financial conditions have been easy and margins have been going up. And if you want to fight the U.S. equity market with those two things, you go for it. But you're going to get your face ripped off and you're going to get fired. Okay, it's that simple. We had easy conditions since last November and margins were going up for most companies.

You've got to be long. So now I think the question is not what we're all kind of trying to figure out is, when will financial conditions tighten some? What's going to cause them to tighten? Is it failed auctions on the 10-year yield? Is it something else, some rumblings in the real estate part, which we saw a little last week or two and not much? I mean, it's got to make you afraid that conditions tighten,

that lending tightens up again, that kind of stuff. I'm not really seeing any signs of that, but that would be something that would make me worried because then multiples could track. And margins are still going up for a lot of businesses. We've got to watch commodities. We've got to watch productivity versus wages. But so far, I think 75% of the companies are forecasted to have margin expansion in the next 12 months. That's the one thing the sell side is good at. They're good at knowing whether Mars will be up or down. They're not very good exposts at forecasting price targets and ratings and earnings, as we know. Right. But they're pretty good about you're painting a bullish case right now. There's no reason to get overly negative about it. That's right. You shouldn't get overly negative about anything subject to the fact that a financial

business start tightening. You're going to have to change your mind. And what you described in your scenario is financial conditions tightening, in my mind. Okay. Or the pocket where the Fed stays hawkish and the data continues to be weak and the Fed doesn't move fast enough to change its hawkish tone. Because as we know, the institution itself is slow, right? So does the data move quicker than the Fed? That's your pocket for a volatile moment. But overall, we just think the base case is still positive. Look, rising margins, rising earnings,

you can't fight it. You can't fight it. You'll find your weak areas for sure in the market. Don't fight the margins. Don't fight the margins. Look, in the end, you know, look at small caps. Small caps telling you the story, which is high rates hurt some areas of businesses and some areas of the market. And it's going to continue to be that way. Either we have a slowdown in small caps bad or, you know, we have a 5% Fed funds rate and small caps bad. That's what small cap is telling you. You have to be in large caps.

Maybe it was a little too mean to Coles before, so I've got to say something positive to equilibrate the conversation. Did they reach out to you and say, you know, what the hell? No, no, i don't care maybe the fed isn't slow about that we need to do a good job i know everyone i know everyone who's not as experienced doesn't have a much access to the i mean i i i i i'm no

expert but like they seem like they're pretty smart missing with the backs is good information in the markets ripped so maybe they do know what they're doing i don't know but one likes to say they're slow, but I— Well, they were slow at the start. I don't know. Well, they admitted it. Okay, but what happened?

Like, things stayed long equities. I don't know if you cared. Did you care? Well, I mean, it's not like— It was one month last— It's not like 2020—what was it, 2022? It's not like that was a great year. There was one month in 2023, and one month this year,

the market's been down 2.5% or more. Every other month it's been pretty good. I'm just saying, I don't know, I'm just saying maybe they're doing okay. And I don't want the Fed to cut a bunch of times because if they do, that means the economy and everything got way worse. So what am I rooting for? Kind of like nothing. Pause. Maybe do one cut if things get a little worse.

I don't need them to start freaking out. And I don't know why people had seven cutsots or whatever the hell they had in January. That never made any sense to me. I don't know who they interviewed for that, but it's got to be the most. Well, we're going to get a look next week, Alicia, from the forecast. Wednesday, right? Right. We'll get it next week.

I mean, I. So. Yes, you bark your calendar. OK. After you get back from Coles. I'll be on a plane. Yeah. I'll be on the screen.

Yeah, please. Look, you know, in the. Look they're likely to their target fund rates is probably going to go lower for the go. They're not going to cut more for this year. I think they're going to let the market know it's to this year. OK, so then do I want to do what Tony Pasquarello of Goldman's been telling people? Right. You've been thinking, go big, right. Stay big. His is, you know, mega caps, continue to play the mega caps, sword and shield. I keep saying that because that's what he says. Sword, offense, shield, protection. It's both.

It's not having to borrow. It's having free cash flow and having the businesses to invest $350 billion in AI and still not kill your margins. That is extraordinary. That's the moat. That's why they're 30 times earnings and not 15 times earnings. And that's why they're still growing their their multiple and their earnings forecast. So you have to be in large cap. Isn't it interesting to a day like today, speaking of sort of large cap versus small cap? Again, the yields down, Russell down, small caps down. That tells you everything about

growth scare, right? Otherwise, you'd have Russell up. But if you think that the most economically sensitive stocks within the market, small caps. I don't understand. There's a group of people who think small caps can outperform in a down, flat to down tape. And I don't get that at all. I think if you get way more bullish again, then maybe you could say it's risk on small caps, regional banks, kind of more grungy. But at this point where we are, we've had a huge move. I think you want to own the businesses that have pricing power, that have productivity, that have huge technology modes,

that have exposure to the right end markets. We know what those are, and they're not a lot of small caps. What about financials? Financials had a nice move and now not so much. I just downgraded them a couple weeks ago. I don't think they're going to benefit from AI in the first wave on the cost side like maybe healthcare or other places will. Most financial businesses have to do things in duplicate. They have to predict their employee and customer behavior. They have a lot of spending up front

before maybe they can realize the productivity. And as you know, at least it depends what bank you go to, but the bank I go to, they invest in productivity. I just get worse and worse service every year. So I'm not sure it's great for the shareholder. We'll see, but I know it's not good for the customer. So we'll see what happens. I'm less optimistic on banks.

Last point to you. I think on the financials, it's about the Basel III endgame here. And part of the reason we had the rally is the signaling that the endgame was not going to be as stringent as originally proposed as part of that massive rally we saw because the capital needs are not going to be as high. So you return more to shareholders as part of what we saw. Ultimately bullish. Some clouds out there.

Go big. Okay. Go big and go U.S. I'm bullish on air conditioning. Maybe we should own Carrier. We blast some of their products. You look like you need some more right now. It is so hot in here.

I think Carrier is my favorite stock. Ever since the Kohl's comment, you've been beading up a little bit. No, I've been saying that for 10 years. So it's not, you know, there's nothing new there. All right. Yeah. Useless. Thanks, guys.

Appreciate it. Adam and Alicia, we'll see you again soon. Thank you. Two Christina parts of Nevelos now for a look at the biggest names moving into the close. What do we see? Scott, it's time to say goodbye to P&O Cruises Australia. Carnival Cruise Line will fold the Australian line in March 2025 and rebrand them, of course, as Carnival.

Demand is so strong that Carnival actually needs to leverage the extra space and the extra ships. This fold is part of the latest in a series of strategic moves aimed to increase capacity. Everybody wants to go on a cruise. Shares up 5%. Shares of betting firm Flutter Entertainment are up over 1% right now after Oppenheimer analysts said the stock has now performed. They raised their price target to $240.

They say the company offers players the most pre-built gambling selections compared to the competition, and they believe the company could absorb higher taxes better than FanDuel as well as DraftKings. That's why shares are up, but still up only, what, 7% year-to-date. Scott. All right. Christina, thank you. We'll see you in just a bit. We're just getting started.

Up next, we have your earnings rundown. Crowd strike reports in overtime. Shareholder Malcolm Etheridge, he is standing by. Tell us how he's playing that space and the overall software space, which Adam Parker does not like, as he just told you. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back.

Software stocks losing some of their luster recently, now on track for their worst quarter in some two years. The sector faces another critical test later today in overtime when CrowdStrike reports. Joining me now, CrowdStrike shareholder and CNBC contributor Malcolm Etheridge of CIC Wealth. It's good to see you. I mean, we kind of can separate some of these software stocks from the pack. This stock has done it, right? CrowdStrike has had the best performance of any of the cyber

names year to date. Adam and I were just talking about the upset and some of the other names over the last week or so. So where are your expectations going into overtime? Yes, Scott, I actually think so. I own CrowdStrike personally. A number of our clients in the firm do, too. And it's been my single best performing stock in my own personal portfolio since I've owned it. I bought it in January of 23, right at about the $100 mark. And the reason that I'm so bullish on the sector itself plus software, one is because cybersecurity has become just a non-discretionary spend, right? The SEC coming out and mandating large companies to let us know of any material incidents around

cybersecurity is just another tailwind at the back of these companies. But CrowdStrike, specifically to your point, being cloud native, it's no surprise that it's become the best performing one out of the pack, especially after Palo Alto inadvertently justified CrowdStrike's model by talking about the need for platformization and getting everything under one roof in such a fragmented market. But what about the fact that the stock's up so much, as I said? I mean, what does that do to the bar? Didn't we see what happens when stocks go up a lot or where the bar rises a lot and then you don't meet that moment? Hello, ServiceNow. hello, Salesforce, hello, Mongo, I could go down the list.

So I do think it's definitely going to take a beat and raise to impress CrowdStrike shareholders tonight. But I think a little bit beyond today, right, this is the sector that I have the most conviction about over the next 12 months plus for a whole host of reasons. Right. PwC did a survey of about 4000 global leaders in the enterprise spend on cybersecurity is expected to increase in 2024 for these guys above 2023. Right. Gartner's research says something like 215 billion dollars is the number we can expect globally on cybersecurity defense. Right.

So this is, again, like I said, a non-discretionary line item for a lot of these companies. So if there are shareholders that don't like what they hear today, decide to dump those shares, and we start to trend toward, I think, 270 is the support level for this name, I will definitely be a buyer of those shares because long-term, this is the sector that I want to be in. What about Palo Alto, though? Because, again, you know, all cyber security software stocks, say that 10 times, are not created equal. So I think it's interesting that Palo Alto was once upon a time the leader and the dominant name in this space.

They still are by market cap, but CrowdStrike is gaining on them. I think it definitely is something to be said that they have receded. But I also think it was an overreaction by the market to sell off Palo Alto shares when the word platformization was used and came out. Yes, they definitely have quite a bit of legacy on-premise technology that's going to need to be moved to the cloud. But the opportunity in this space, the number of dollars that are going to have to be spent in this space, because just as good as the cyber defenses are becoming, the attacks are getting even better with the use of AI and everything else that we've talked about

countless times on this network. And so I just think it's short sighted for shareholders to look at a Palo Alto, for example, who's going to benefit from the 10 billion plus that's in the Biden administration's budget for cyber defense this year alone, because they have the highest level of federal contracts in the cyberspace. I just think it's short sighted for investors who are considering selling off either of these names, but specifically CrowdStrike, because their model, the whole land and expand model that they offer, is just easy for me as an investor to understand. You got five of our modules that you really love. Well, here's another five that you'll love more. And you like those 10?

Well, here's another five that you'll love more. And they just incrementally weave their way through your organization to the point that they're the only provider that you have in a very fragmented otherwise sector. There's a lot of opportunity for consolidation here in this industry and I think CrowdStrike being the leader shouldn't be very much of a surprise what about tech at large you know roared back from the April lows it's up seven and a half percent in a month what now well you know I love software I love tech primarily because of this little thing called operating leverage. Right. Anytime these companies build a product, it costs them almost nothing to push that product to the very next customer once it's built.

Right. So the operating leverage for them being able to sell one more seat on that software is what makes these companies so attractive. And unfortunately, I look at a company like Tesla where Elon Musk has proven just how easy it is to keep things humming. Twitter is still alive after he bought it and let go about 80 percent of the workforce. And so that right there proves the thesis that once the software is up and running, it doesn't really cost them very much to get it in the hands of the next customer. I mean, I don't know if that's the greatest example. I'd be honest with you. I mean, the value is a lot less than what he paid for it. Yeah, no, I don't mean necessarily that that is a great investment. I just mean that it proves the thesis that you don't need necessarily a ton of lift once the product has been shipped. And that's where

the operating leverage is for these software companies. So the sell-off in Salesforce, I kind of understand. I think, again, a little bit short-sighted for investors, primarily because they don't have a surefire offering in AI, AI, AI that's exciting enough to say that they're going to be able to register the same way Microsoft, for example, can with ChatGPT. But I think software and tech more broadly is definitely going to be the winner by the end of this year as we look at where the opportunities are. And as you guys just got done talking about, it's the sword and the shield, right? We talk about safety. We look for a safe haven when things get bumpy, as they probably will later in the summer. Tech is going to benefit once again. You think we're higher or lower by the

end of the year on the S&P from where we are now? Let's call it 5,300. What seems reasonable to you? I think we end the year higher than where we are today. I think investors are showing an interest and a desire and a willingness to continue to invest irrespective of what we considered in January to be bad news coming into this year, right? Higher for longer has hit us now. We're in June and we started the year expecting, we were talking about the over over under on about six rate cuts in January. Now we're having conversation about whether we'll have any at all. That tells me that this is a resilient and there's a resilient investor out there that says, irrespective of all of that bad news you want to throw at me, I still feel good about the market more broadly. All right. We'll leave it there, Malcolm. I appreciate it. We'll see you soon. Malcolm Etheridge up next. Wells Fargo Securities. Chris Harvey's back with us to break

down the sectors he's betting on to, quote, keep yourself in the game while he's changing his tune just a bit on the reflation trade. He'll join me to explain just after the break. Closing Welcome back. Stocks are struggling to find their footing as we head towards the close today. Here to share his market playbook right now is Chris Harvey. He is the head of equity strategy at Wells Fargo Securities. Welcome back. It's good to see you. Good to see you too, Scott.

How's this market look and feel to you right now? Feels a little choppy. Feels like we're looking for a catalyst. There's no real catalyst out there. And I think this chop lasts until we have earnings season. Because there's really nothing to hang your hat on. That long? Bonds are up. Yields are up one day.

Yeah, I think so. I mean, anything can change on a dime, obviously. But I don't see a ton of catalysts out there. What we need is we need earnings to get things higher. Until we have another earnings report or earnings cycle, you're not really going to get a good feel for the power of the earnings cycle. And so I think we have to wait until the summertime, probably second week of July, before we start making substantial headwind, substantial upside. So Fed meetings and data is somewhat irrelevant?

Yeah. I don't think the Fed's going to tell you anything that you don't know at this point in time. Fed's going to say, hey, we're following the data. We can follow the data too. The data's okay. The economy looks like maybe it's not as strong as people expect. It looks like people are getting very nervous about the consumer.

And inflation looks like it's, tame is not the right word, but it's not hot at this point in time. So what is the Fed going to tell you that you don't already know? I don't see that as a catalyst. I just see that we have to digest more of the information. We have to get to earnings season. And then we can start making some more substantial moves. You do have a big call, though, about some moves that you think viewers should make. Last time, you liked some of the reflation trades, right? Energy, industrials, and things like that. Now it's time to fade those or what talk to me um so so what we liked and

maybe there's a misquote here what we liked is we think the industrial space is a great place for stock picking you have a lot of companies that are AI AI adjacent you have a lot of companies that are tied to the super cycle but for the most part we haven't liked the reinflation trade it's a trade that we want to fade and and is beginning to fade. And we think it will continue to fade. Oh, I got you. Okay, so then what's going to work?

Okay, so what's going to work is we're really boring. We've been talking about this for the last year and a half. It's a barbell with something garpy, something growthy. That's the communication space, right? And we want to barbell that with something more defensive. That's healthcare, that's utilities in a 60-30-10 type allocation. And that's worked out very, very well year to date and for the last year and a half. What about tech, which is, you know, back awake?

You've got some tech with communication. We just like the valuation, the communication space. We like the technicals in the communication space. And if you look at the fundamentals, the fundamentals continue to power higher. Tech is really just a couple names. And if you look, what's driving tech year to date, it's NVIDIA and most everything else

is a secondary or tertiary trade. So I can't get behind tech right now. We're neutral on the space. We think that software is a little bit better than hardware, but we don't have real strong conviction with tech at this juncture. We're looking at utilities, you know, and I think there's a debate in the market as to why they had the move that they did recently. Obviously, over a longer period of time, they haven't had nearly as great a move relative to the equal weight S&P 500. So just saying the move, I guess, isn't the most accurate. The recent move that we've seen those stocks really go off to the races to some degree.

Does that continue? Should it? I think it does continue. It'll be a little bit of a bumpy ride. We upgraded the space at the end of the year. It was really washed out. It was oversold. We thought it could work for multiple reasons. We thought if rates go down, it works. We thought that you could get an oversold bounce. We didn't really appreciate the issue around the electrification or the power trade.

That has been moving it. A lot of people are asking us, hey, if you look at utilities, they've really outperformed year to date. Do you want to take profits? We don't want to take profits at this point in time. We think the valuation is still compelling. We think the opportunity set is still compelling. And we think that the technical picture is still very positive. Overall for the market, you think we can hit 5,500 and then maybe all bets are off?

All bets are off. We think you can get over 5,500 this year. You know, we'll think about as we go through this pace and what we're looking for is we're looking for the winners to keep winning. We're looking for the more profitable companies to continue to gain market share. That's what we're seeing. There's a massive, as you know, there's a massive secular trend. It's continuing to play out. We don't particularly like the economy. We don't think the economy is particularly strong. But if you're tied to that secular trade, we think there's still a tremendous amount of upside.

If you're tied to the consumer, selectively you can make money. But overall, I'm not sure why you'd want to be real aggressive on the consumer at this point in time. All right. It's good talking to you. I apologize for tripping you up there at the beginning. We'll do this again soon. No problem. All right. It's good talking to you. I apologize for tripping you up there at the beginning. We'll do this again soon. No problem. All right. That's Chris Harvey of Wells joining us once again. Up next, we're tracking the biggest movers into the close.

Christine is back with that. Tell us. We've got too many sales promotions hurting one retailer, while a freight company is moving in the opposite direction on higher shipments. I'll have those names after this short, short break. Thanks. We're 15 from the bell. Let's get back to Christina Partsenevalos now for the stocks that she is watching. What do you see? Bath and Body Works, because that's one of the worst performers. Actually, worst performing share move today since 2021. Share's down about 12% right now. The Q1 earnings beat was really no match for its disappointing earnings guidance. Executives said on the earnings call this morning that they did have to issue more

promotions in the start of the quarter, but promised they've cut back on those sales as demand has grown. SIA shares are up after the freight company saw an acceleration in daily shipment counts through the first two months of the second quarter. The company also posted a 16% year-over-year increase in shipments in Q1. The stronger results, and I should say SIA is up about 6%, but the stronger results helping other freight firms like Old Dominion and XPO. You can see both up a little bit over 1%. Scott. Christina, thank you. Christina Parks and Nevelos. Still ahead, Bitcoin is bouncing today. We're going to tell you what's behind that rally and how the rest of the crypto space is faring as well. There you go. Over 70,000 was over 71 earlier. We're right

back. We have some terribly sad news to report. Frequent guest, longtime CNBC contributor and a friend to many of us, Ben White, has died at the age of 52. he was an accomplished journalist holding positions at the messenger politico the new york times and the financial times ben's partner sarah posted on x earlier this afternoon that he passed away saturday june 1st after a brief illness our condolences go out to sarah ben's two sons and his entire family. We're now in the closing bell market zone. CBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Kate Rooney on what's behind the Bitcoin rally

and Pippa Stevens looking ahead to PBH earnings. They are out in overtime as well today. Mike, I'll turn it back to you. So we had falling yields, falling stocks, and a little late-day move here. Three we had falling yields, falling stocks and a little late day move here. Three days in a row. We've had a low of the day between like 12 and 1 p.m. Eastern time. It seems as if now we've definitely had this split market still. You have twice as many stocks down as up today. It's definitely more attention being paid by the market to

hints of some economic slowdown beyond what we'd prefer. And so yields are down, but the sector makeup's not really following along to script, as we've mentioned. You know, banks down, small caps underperforming. But it seems as if the moves are mild enough, and if yields are falling, the market can get into only so much trouble. The split nature of the market, too, is kind of offsetting things on an index level, so volatility remains low. So low volatility, yields are more friendly. You know, the intraday traders are just saying like, OK, we're not going to necessarily sell hand over fist until we get something that sways the debate about the economy, the soft landing. Does the Russell being lower with yields lower just underscore

growth scare? I think so. I mean, that's my takeaway from it. It's been a couple of days now where the script hasn't been followed on that front. And I guess that would be the way to interpret it. I don't know how else you could. You want to withhold a little bit of judgment in terms of whether this is a new trend or whether it's a little bit of noise

after you had a weird month-end move and now you have this quiet, apprehensive trading in the new month. All right, Kate Rooney, pretty good rally in Bitcoin, both Bitcoin, Coinbase. I mean, the things that have rallied a lot week to day, Coinbase, I mean, is up, geez, on the week, 8%. Yeah, it's having a really good week. You've seen Bitcoin this week back above 70K, and it really had been trading in this tight range of kind of the high 60 000 level it's been really sensitive to rates and the macro economic data as well anything that could affect

the fed's path kind of similar to what you see in tech and high growth names it did first cross 70k yesterday on the back of lower bond yields and then ether which is the second largest up more than 20 or so in the past month after the SEC gave this key green light for ETFs there, similar to what we saw in Bitcoin. The real moves and way more volatility we're seeing in sort of these riskier pockets of the asset class. If you look at the crypto proxy stocks, as they're often known, one of these mining companies called Core Scientific is up more than 40% today. It announced a deal to expand into AI data centers.

That headline may have grabbed some attention and sparked the rally, but this looks like a short squeeze. It's a really highly shorted stock. About 88 percent of the available shares out there are shorted. The average stock, by comparison, is closer to 5 percent. And then you've got MicroStrategy higher this week, despite announcing a tax fraud settlement between its founder, Michael Saylor, and Washington, D.C. And as you said, Scott, Coinbase having a really good week. Shares today at more than 6% or so. Kate, I appreciate it. Thank you.

Kate Rooney, I mean, some of these correlations, right, others that you look at, it's like, okay, if Bitcoin, for example, is an indicator or barometer of risk, well, it's not like a ton of risk-taking in the market today that this thing is running. It doesn't feel like it. Although maybe the closest correlation with Bitcoin since the middle of last year has been NVIDIA, literally one for one. And NVIDIA is another one of these things where, you know, it trades in a twenty six dollar range, like a two and a half percent range for no particular reason. And you also had the intraday rally in NVIDIA that helps out the indexes. So I don't

really think that that's that's necessarily causal, but it just shows you that there's a little bit of a scrambled setup right here with some of the weird macro moves overnight, too, in terms of Mexican markets and currency and India. I just would point that out as a way of saying people are a little bit on the defensive. If you had conviction about where you're going in terms of macro and in terms of sector correlations, it got a little bit upended this week. I like the word you use, scrambled. I think that's perfect to describe what we've seen. PIPA, PVH. So yes, CrowdStrike gets a lot of the play today, but don't forget about this one. That's right, Scott. And PVH is moving lower ahead of its report. And what's been a pretty choppy earnings season for retailers. The Calvin Klein and Tommy Hilfiger parent warned in April about the softening consumer backdrop and conservative wholesale environment it saw at the start of the year, saying it led to a

cautious approach to planning for 2024. Now, PVH previously guided to an 11 percent decline in revenue for Q1, although it did forecast gross margin expansion. Ahead of the print, Telsey reiterating its outperformed rating on the stock, saying that while a slowing and increasingly promotional European market is a concern, they continue to see evidence of underlying brand health. That stock down 2%. Scott? All right, Pip, I appreciate that. Pip Stevens, Mike, we'll turn back to you.

I mean, we're going to be looking forward to a jobs report. You know, Joltz today gives us a clue on how tight or is or is not the labor market. You look at it, you know, kind of in a vacuum and say, well, this is the more balanced labor market that the Fed's been playing for and wishing for. It's kind of here. And it does sort of aggravate that sense out there, though, that things maybe are softening up more than we want. I don't really think that we have much to go on on that score, but it does feel as if you're never fully satisfied with the perfection of the data flow.

I do think yields lower, disinflationary action across the world, real reversal in copper, in oil, in these things that had people a little bit worried that we were in this different regime. And, you know, obviously all that stuff works in the Fed's favor. I do think that, you know, we're going to have one week from tomorrow is the decision on the Fed. And they're going to have this to work with all the market stuff in front of us to work with. And I also feel as if they're just not consumed with this idea that we had loose financial conditions and we have to do something against that. If the

inflationary indicators are, you know, kind of wind at their back, they're going to be happy with that. So maybe the market is just kind of stuck here for a little bit until we get confirmation that that's how it's going to go. All right. Thank you, Mike Santoli, our senior markets commentator. So a decent little move, you know, later in the day takes us green on the S&P. We may not get to 5,300 today, but we're trying to work our way back. We'll be a little shy. Dow will finish, though, looks like better than 100 points. I'll see you tomorrow.

We'll go over to you with John Kors.