Closing Bell - Closing Bell: S&P Hits Record 01/19/24

Episode Date: January 19, 2024

Is the S&P record a vote of confidence in the soft-landing story? Or a note of dissonance given the rally’s top-heavy leadership and lack of clarity on the interest-rate path? Trivariate’s Adam Parker and John Hancock’s Emily Roland give their expert takes. Plus, Scott Wapner sits down with billionaire and New Fortress Energy Founder and CEO Wes Edens. And, Gabelli’s Kevin Dreyer is flagging some under-the-radar stock picks he is betting on right now. 

Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner today. Scott, stocks are barreling higher. The index is up by more than 1% across the board. The Dow ahead by 400 points. They are at fresh intraday highs. We've got you covered as we head toward the close. Scott Wapner is live from the American Express PGA Tour event in La Quinta, California, and he will join us shortly with a big interview that you will not want to miss. Billionaire and New Fortress Energy founder and CEO Wes Edens. But we begin here, this make or break hour with the most important U.S. stock market index on track for a new all-time high for the first time in more than two years. The S&P 500 set to join the Nasdaq and Dow Industrials in record territory, largely on the strength of those familiar and dominant tech giants,

as the average stock continues to lag the mega caps. Today's move, coming as Treasury yields have risen notably for the week, the 10-year up to about 415 at this point. It was under 4% a week ago. This on a mix of solid retail sales and consumer sentiment data, as well as some noncommittal Fed speak across the week, which takes us to our talk of the tape. Is the new S&P 500 record a vote of confidence in the soft landing story or a note of dissonance given the rally's top heavy leadership

and lack of clarity on the interest rate path? Let's ask Adam Parker, founder and CEO of Trivariate Research. He's also a CNBC contributor. Adam, I mean, you've been leaning in this direction. It has actually been a slightly long wait for a break to a new high, considering that a month ago we got to within 1 percent. So we've kind of been chopping around and digesting, at least on the big cap level. We're there. What message do you take from it? Yeah, I mean, I don't know. You're in New York, it's snowing and you're, you know, I have hundreds of dollars and Scott's in California with good weather. So I don't know, you know, with the billionaires trying to do glass half empty,

half full. I think, you know, the path for bullishness continues to be the same. The average company's gross margins have a decent chance of expanding. I think earnings probably grow this year and they can grow again next year, or at least as far as the eye can see. And I think the Fed, you know, as long as things don't collapse, will scoot toward being accommodative in a way that helps multiples. I think what you just pointed out is good news and the economy is good for stocks. And I like that, you know, equation. And I never want to believe good news is going to be good for stocks. And I like that equation. And I never want to believe good news is going to be bad for a sustained period. So that's how I interpret it is things are a little bit better than people thought. Yeah, I mean, this week has been an interesting test of that proposition because it wasn't a sure thing, I guess,

coming into the week that we would have been able to, you know, deal with a really hot retail sales number for December. You can talk about seasonal adjustment effects or whatever. You know, Plunge and Weekly claims the Michigan consumer sentiment today, you know, has this vertical move, basically, kind of just coming around to the hard data. I look at the macro economy as like, look, I think economic activity is probably bottom. Industrial activity has been quite bad. It might bottom. The biggest risk is the consumer. And the consumer data pretty clearly

had slowed in the fall from a very strong level to a little bit weaker. Credit card delinquencies at 90 days were picking up. There were some signs of squishing. Yeah. So if now your thesis mark to market for the week or two weeks is maybe the consumer is eroding at a less rapid rate than I thought, then, yeah, that's good news is good for your economic prediction, at least for now. Yeah. I mean, obviously, you could decide what to emphasize. I guess the Discover Financial credit loss number, not great. You know, it's not exactly the leader in terms of consumer lending at this point. But it's something to note.

And, you know, the mood around the economy changes a lot faster than the economy does. I think that's one of the things you have to keep in mind. I agree. It could be lagging. I saw Discover's results carefully. You look at synchrony. You look at capital. You try to find, is it correlated?

Is it not? Is it part of the low end? Or what's auto? What's subprime? So everyone's parsing through. There's no doubt the low end consumer has slowed. But as you know, the total dollar spent a lot is skewed toward the upper end of the wealth spectrum. And that cohort seems to be functioning handsomely at this juncture.

At least until further notice. Well, let's bring in Emily Rowland of John Hancock Investment Management to the conversation. Emily, good to see you. I mean, I know you've been a little bit more cautious here, not necessarily thinking it's time to chase risk at these prices. But how do you interpret what's been going on in the markets, both the nuances of what's leading and what's lagging, and then also how we've been managing to deal with at least this latest bump higher in interest rates and bond yields? Yeah, sure.

So it is surprising, I think, to see bond yields backing up this week and still seeing the S&P 500 reach these new all-time highs, of course, driven by tech. If you can get tech to move higher, there you go. You've got it for the markets. But we've had this almost perfect combination this week of continued disinflation traction. So you mentioned the University of Michigan Sentiment Index, year-ahead inflation expectations coming in the lowest since 2020. So that's good news. You got some Fed speaker this week saying, you know, maybe we should wait until the summer to start cutting and maybe the cuts won't be as fast as markets might expect, but really not a lot of pushback on the

Fed pivot here this week. And at the same time, you saw slightly better than expected data around initial claims coming in sub 200 yesterday. You saw retail sales coming in better to Adam's point, some more strength of the consumer here. So I think the market certainly got a lot of tailwinds coming into 2024. You mentioned some of the Fed speak where there's an effort out there of essentially preserving all their options. And you don't want the market to rush too far ahead and assume it's going to get that easy that soon. It was interesting to listen to Austin Goolsbee, Chicago Fed president, this morning on Squawk Box. Now, he's considered to be on the dovish side. He really seems to think inflation's on the way down. But here's what he did have to say

about how he's thinking about it and basically remaining data dependent. Inflation has come down a lot, and I've been highlighting for months with you, Steve, and elsewhere. That's the thing that everybody should be watching to determine what will the Fed's rate path end up being. It's not about secret meetings or decisions. It's fundamentally about the data. And what will enable us to become less restrictive is if we have clear evidence that we're on path to get to the 2% target. And Adam, I mean, he means specifically, I think, and by his suggestion, just the inflation numbers, right? So it's like we have a target. We think we're

progressing toward the target. The most recent data look even better than the more distant data in the past. So everything moving in the right direction. But I wonder if that means that they're finished targeting, you know, the kind of related atmospheric conditions of inflation, right? They don't necessarily care if markets go higher. Maybe they don't need unemployment to go up a lot to meet their goal. I mean, that's the ideal case is that all they care about is PCE gets toward 2%. I mean, I think their mandate is full employment and stable pricing. So I don't know if they can really ignore the employment environment. All the data points from the corporates, which obviously we focus on much more in the economy, have seen some more layoffs picking

up through earnings season. So if you today, we'll see if that trend has enough to slow the labor market and wage inflation. It's possible. I think the pushback to any bullish rhetoric, pushback that I got after our year ahead outlook that we did is probably one, you're talking about the front end, but what about quantitative tightening in the balance sheet?

And that's obviously, last time we had the accommodation, it was with also the balance sheet. So it's not exactly the same. I think, two, maybe increasing concerns that China demand environment could be weak. You know, that seems mark to market a little bit worse than it did a little bit earlier. And, you know, I think maybe just that the U.S. consumer, which looks better now, this is a bit of a lagging thing, and it continues to slow. And if those three things turn out to be worse than we currently think now,

that's probably the most well-articulated bear case for corporate earnings. And Emily, just in terms of how the bond market is absorbing all of this, I talked about yields going a little bit higher. They're still in this range where it doesn't seem like it's really upending anything in terms of the economy or in the stock market. But how do you see the bond market right now? Is it fairly priced? Is it a little bit too optimistic about inflation coming down? I know you have corporate spreads also very, very tight. So not a lot of worry there. Yeah, bonds definitely might have gotten a little bit ahead of themselves with the dramatic drop we saw, which, of course, caused the Fed pivot party at the end of 2023. And we're digesting that a little bit.

I'd call it the hangover. Maybe we're trying out dry January here as far as the bond market goes. We've kind of seen this little backup in yields here. But we still think that bonds offer a lot of value at these levels. Typically what happens as economic growth decelerates and as contraction unfolds, which ultimately is our base case, it's taking a long time to get there. You see bond yields fall precipitously. So we think that there's a really important opportunity here for investors to grab a hold of high quality bonds at four or five percent we are modestly underweight credit here spreads are incredibly tight there's

no risk at all being priced into the bond market even though defaults went up by 80 percent in 2023 investors are largely ignoring that so we think areas like investment grade corporates mbs and even municipal bonds offer a lot of value here. Adam, yeah, what were you going to say? No, I was just going to say, I think when you look at the S&P 500, very few companies are really affected by the bond environment. And I think it's kind of funny how things oscillate, where sometimes it seems like, oh, bond yields and stocks,

they have to act differently. Of course they can act, both go up at the same time. When the economy is relatively better, they should go both at the same time. So I actually don't think it's all that surprising. Well, and I think it's also worth looking at just the last few years. I mean, two and a half years ago, maybe, a three and a half percent 10-year would have completely knocked the stock market out. Then you had to kind of make your peace with four, and now it seems like four and a quarter's okay. If nominal growth is four to five, that's okay. But stocks, to me, still look awesome. So a lot of like cross-ass people don't think it's enough premium.

But the 95-year return average is 11.7% per year for the S&P. It was 13 and change the last 10 years. So let's say it goes back to 11 or 10. I still think that's plenty of premium on top of the alpha I romanticize I could generate to beat any bond. My current favorite point is that the S&P first got to 19 times forward earnings almost exactly four years ago, like to the day. Right. That was before COVID, right?

Remember, we had FANG leadership there, too. We've compounded at 11-plus percent total return since we first got to 19 times. Now, massive stimulus from every direction. There was some ball in there. Yeah, exactly. But there you have it, point to point. On the biggest. Yeah, exactly. But there you have it, point to point. On the biggest 20 companies, just you made me think of it. If you look at their net income, like the dollars they earned then versus now, it's almost twice as much of the biggest 20

companies. So they kind of go up because they just grow a lot. And I think that's a little bit like discounted when people say, oh, the Max 7 is expensive. Like the Max 7 is awesome. But to that point, you did start by saying you think the median company can expand its margins at this point. Yeah. Exactly how? I guess what's going on that's allowing the typical company that's not one of these elite to do so? So, first of all, I think they have dropped. If you look at the last six, eight months, the median company's gross margins have dropped and come up a little.

The analyst estimates actually are for more companies to expand their margins than normal next year. That could be bearish if they miss. But on average, analysts are pretty good at knowing if margins are up or down. They're not very good at getting the numbers right, but they know up or down pretty well, about 75% of the time. So there's some evidence. What could it be? Productivity. I think that's huge. I don't think, I think we're in the top of the first inning on AI contribution to that. But generally, companies are focused on productivity, software, labor. Wages are not going up at the same rate. We'll see what happens in the red sea. Logistics costs generally have come down.

Look at the commodity indices of whatever you want. They're coming down. Currency could help. So I don't think it's depreciation. I don't see a big capital spending and depreciation burden. So when I look at COGS, cost of goods sold, wages, materials, labor, generally, I think they could be better for some companies. Well, we'll see how the rest of earnings season goes because expectations have been cut down pretty good for the fourth quarter. Beat rate, it looks all right.

You've got mid-cap index also looking at a 1% gain. So it's not strictly the NASDAQ today. Everything in record territory on the big cap side. Adam, Emily, thanks very much. Yeah, appreciate it. Good to see you. All right, let's send it over to Pippa Stevens for a look at the biggest names moving into the close. Hi, Pippa. Hey, Mike. Well, Wayfair jumping 9% after announcing plans to lay off around 1,650 workers, or about 13% of its staff. That includes a 19% reduction for its corporate team. And as part of Wayfair's

effort to right size its cost structure after CEO Neeraj Shah said the company went, quote, overboard with its hiring. This is Wayfair's third restructuring since summer 2022. And it's not just Wayfair. Macy's cutting more than 2300 jobs or about 3.5 percent of its workforce. The retailer also said it will close five stores as it looks to streamline operations and trim costs amid slowing sales. That stock down 2 percent. Mike? All right, Pippa, thanks. See you again in a bit. We are just getting started. Up next, we're heading out west. Our Scott Wattner sitting down with billionaire investor Wes Edens. Hear what he has to say about the recent collapse in natural gas prices,

U.S. infrastructure, and if a soft landing is in the cards, much more as well. We are live from the New York Stock Exchange. S&P 500 in record territory, up 1.2 percent. You're watching Closing Bell on CNBC. Welcome back. We are on record close watch. Stocks levitating into the weekend. Here's another check on where we stand right now. The Dow up 1.1 percent, the S&P 500 up 1.2 percent and basically a full percent into new record closed territory. It was under 4,800 was the prior record closed more than two years ago. NASDAQ outperforming once again up 1.6 percent. Let's send it out to Scott Wapner, who is live from the American Express PGA Tour event in La Quinta, California. Hey, Scott. Hey, Scott. Hey, Mike. Good to see you. Thanks so much. New Fortress Energy founder and CEO Wes Edens has his

hands all over the economy through infrastructure spending and energy, and of course, through sports. He is the owner, after all, of the Milwaukee Bucks. But we started our conversation today talking about energy, talking about natural gas. He is a big believer in it. So I asked him about the tremendous collapse in prices. That's where we started. You look at the U.S., the U.S. now is producing about 13 billion barrels of oil a day, right? The most amount by any country in the history of the world. And with that comes a lot of associated gas.

And so you have the byproduct of all that oil production is a lot of increased gas production. And so if you can't evacuate and you don't have demand for it locally, prices go down. And that's basically what's happened. Yeah. How long do you think it takes for it to recover? You know, I think that, you know, the oil companies have become so good at extracting, right? It's not really exploration anymore.

It's really just processing. And so I think it's going to continue. And I think that for the gas companies domestically, I think getting connected to the international markets is actually really important because that's that's really where the incremental demand is. You've been importing LNG for a while. You're reasonably new to the export game. I'm wondering what you make of these reports that the Biden administration is reviewing the criteria it uses to approve new export projects. What do you make of that? Well, I think that they're focused on trying to understand the implications for increased fossil fuel production, what that means for the renewable kind of goals and the clean energy goals that they have.

I feel strongly that the U.S.'s position as a gas exporter gives us tremendous standing in the world. It's a big geopolitical benefit for us. It's obviously a big economic benefit. So I'm hopeful that actually it will continue kind of as planned, but this is something they're obviously reviewing. Yeah. You're big in hydrogen, too. You're building a plant down in Beaumont, correct? We are, you know, and so we're in discussions actually with the government. They put out rules on how these projects will work, right?

And the key to the whole thing is the use of renewables and how connected they have to be. So, for example, if you have to connect them 24 hours a day to renewables, like right now it's a little dark outside, the solar wouldn't be working very well out here. So we think there's some modifications to the rules as they've been promulgated that would be constructive for it. I am a big believer that decarbonizing industry in particular can really happen effectively with hydrogen. So I'm an optimist about it, but we're having discussions right now. What role does nuclear play in this conversation? Are we still a not in my backyard country? You know, there hasn't been a new nuclear

plant built in this country since 1977, which is kind of crazy. You know, last year I was in Singapore, and I saw in a dry dock a nuclear submarine. And I asked the guy that ran the shipyard how many nuclear-powered vessels there are in the world, and the answer was 650, which is an amazing number, I thought. And so I think that the notion of whether or not small nuclear reactors can work efficiently and safely has been answered. And so I am a huge proponent of nuclear power, and I think that it has a long ways to go. I'm an optimist about it.

But in this country right now, it's a very, very hard thing to develop. How do we get over that last hurdle? You know, I think this is where government can play a huge role. I really do. I think that last hurdle? You know, I think this is where government can play a huge role. I really do. I think that a lot of it is regulatory. When you look at the timelines it's taken to get permits and what it's taken to make it all happen, it hasn't. But I'll give you a simple math example.

If you take a 300-megawatt power plant, conventionally, a gas plant, maybe it costs $300 million to build it. If you paid $10 for your gas, that's another $300 million a year in fuel. So run that for 20 years, right? So 20 times 300. I've heard estimates that a 300 megawatt small nuclear plant could cost $4 billion, which is about the same in terms of what you're going to spend on that, and actually, obviously, much, much cleaner. So I think the raw economics could be very, very powerful. And I think that if the government got behind it and tried to kind of develop a handful of these things just to see what the best technology is, I think it's got real promise.

You're a big player in infrastructure. Yes. Obviously, your rail, the Bright Line in Florida from Miami to Orlando. Yep. How's that been going? It's going great. You know, we opened the service a few years ago. We opened the long-haul service from Orlando to Miami just at the end of September.

So just a couple of months. And we've had every month steadily increases in ridership. It's actually a very significant increase in ridership. And, you know, people love the service. You know, the producer scores of it are off the charts. And, you know, who doesn't love a train? So it's been a great start to the service. I guess enough so that you've turned your attention west to Vegas to California.

You got a big grant from the Biden administration, too. Where's the status of that? Yeah. So we were fortunate enough to to apply and be awarded a three billion dollar grant to build that high speed rail. It's as I call it, it's kind of version 2.0 version 1.0. We built basically on an existing railway for the most part. Version 2.0 in California and Nevada. We're going to build right in the middle of I-15. So it'll be literally built in the median of the highway. It's 100% permitted. It's 100% of the right-of-way.

Now we've got a big chunk of the financing. So we're hopeful to break ground to that in the next couple of months. I find it interesting. You're just getting things done, whether it's power plants or infrastructure and rail lines. Is there something that you're doing, your approach is different than others, that you're able to get these massive projects not only awarded but completed? You know, the actual process of building them is not that hard. You know, if you think of a railway, it sounds complicated, but for the most part, it's a civil engineering job. You're building a road and then putting some tracks on top of it. So it's a little more complicated than that, but it's not that hard. You know, if you think of a railway, it sounds complicated, but it's, for the most part, it's a civil engineering job. You're building a road and then putting some tracks on top of it. So

it's a little more complicated than that, but it's not that hard. You know, these big projects, I think, it's funny, I was talking about it with somebody the other day, and I said, I think that the phrase for them would be venture infrastructure, which there is no such thing, right? And it takes kind of an unreasonable willingness to take a little bit of risk and focus on it. But I think that anything is possible if you really put your mind to it. And these are things I really believe in. I've got a team surrounding me of really, really capable people that believes the same thing. And knock wood, we've made some pretty good progress. Given your reach in various parts of the economy, I would think you have pretty good eyes on what's happening in various

segments of the economy. How do things look to you? I think that it's pretty likely we're going to have rate cuts. And I think that consumption is about two-thirds of GDP. So if you can help people pay less on their credit cards, their mortgages, car loans, that's a good thing. So I feel like that's good. I mean, I think the Fed has done a very good job thus far trying to manage kind of a soft landing in the economy. It's too early to declare victory, obviously. But I think if inflation is under control, you bring down rates, I feel like consumption is going to be pretty good, and I think the consumer is going to be good.

Is that the camp you lean in today, soft landing? Is that your base case at this point? I think it is. You know, I'm not the expert economist, but we talk to a lot of people about it, and I'd say that it's a reasonable case to be made for it, so I feel actually pretty good about it. And the combination of interest rate declines and just kind of productivity gains, employment still seems very strong. So I think we're pretty optimistic that it's going to be something soft. Have you kind of recalibrated your own view of

what distress could look like now that the trajectory of rates seems to be lower and not going in the opposite direction, which obviously would create more potential distress situations? Yeah, you know, my, I'd say, concern or anxiousness has less to do with the U.S. today and more long-term in terms of balancing the books. I mean, anybody who spends more money than they bring in eventually is going to end up in trouble. And that's kind of the position we're in as a country right now. So domestically, that is something I think to really keep an eye on down the road. Internationally, I feel like there's significant geopolitical risk. I really do.

I think that all these regional conflicts that people kind of don't seem to be concerned about, I think any one of them could be something which is really substantial. So China, Taiwan, or Hamas and Israel, or substantial. So, you know, China, Taiwan, or, you know, Hamas and Israel, or, you know, Ukraine, Russia, you know, people kind of seem to be pricing that at zero, and I think zero's probably the wrong price. You're thinking a lot about election risk, and by that I don't mean necessarily just in the United States. You're going to have dozens of elections around the world this year.

Yeah. I mean, the craziest statistic is something like 50 percent of everyone on Earth is going to elect a new leader this year, right? It's quite a year. And so it's a huge number of people that are going to be elected. Obviously, that could be significant amounts of change. We're right in the middle of the election cycle here. We just started the first primaries here a few days ago. So I think stay tuned for what's going to be a pretty action-packed year here in the U.S., but around the world, it's the same story. Your other job, of course, is being the owner of the Milwaukee Bucks. Are you marveled at all by where valuations have gone?

Well, I think it certainly has exceeded our expectations. That's not why we made the investment. We thought, obviously, it's something which we hoped would be a good investment. We made it 10 years ago, and it's turned out to be a very good one. But, you know, the unique character of sport is it's the one we hoped would be a good investment. We made it 10 years ago, and it's turned out to be a very good one. But the unique character of sport is it's the one thing that cannot be delayed. In the new age on TV, where you don't have to go to the theater to watch a movie, you can watch it on Netflix whenever you want to, if there's a Bucs-Celtics game, you need

to watch it just right then. And I think that that, in large part part has driven the media values. That's what's really driven the other, you know, the values for the teams themselves. Yeah. Are you looking ahead to, you know, thinking about what that renegotiation of the media rights deal is going to bring? Yeah. I mean, we're optimistic about it, right? So obviously there's a lot of people at the NBA and around the league that are intimately, you know, focused on it. I think that there's a lot of reason to be optimistic. I mean, it's a tremendous product, in my view. I'm biased, of course. And I think that'll reflect itself in

the terms of the people who want to be a part of it. Why do American billionaires want a piece of the Premier League in England? You own Aston Villa. Yeah. And it seems like every year we're hearing about new owners from the United States buying into teams there. Why? Well, it's the best league in the world, right? So the MLS has got a lot of promise. There's lots of other great leagues in the world. But the Premier League is an extraordinary competitive league.

And, you know, if you're interested in sport and you want to compete at the highest level, it's the place to go. It's a lot of fun, actually. Yeah. The other thing I know you're having fun is premium tequila. Yeah. You're a co-founder of Sincoro. I am. With Michael Jordan, Wick Grosbeck, his wife, Amelia, Jeannie Buss, and some others as well. That is a crowded market. Yeah. How do you stand out? You know, we have the best tequila. I mean, modestly, you know, we didn't really set out to build this to make a lot of money with it, whatever. We simply wanted to have the best tequila. You know, Michael was the inspiration for the thing as a guy that drank a competitor that he liked a lot. And we said, we can make

one better ourselves. And I think it's an extraordinary group of people that have done a lot of hard work on it. And we think we've got a great product and a great space. It is, you know, it's not that drinking is healthy for you. It's the healthiest portion of it, right? It's the, you know, it's the only alcohol that's a stimulant, not a depressive. It's a low calorie, you know, drink. So we think that it's got a lot of merit, but of course, most importantly, it tastes great. You look at what, you know, Clooney and Gerber did with Cosmigos. I mean, you think about the eventual exit. Is that the ultimate goal? No, I don't imagine an exit.

I think it's something that as long as we continue to have fun with it, and it's a lot of fun, I think we could be involved with this forever, definitely. Easy to find out. He's got so many hands

all over the economy, guys. So it was interesting to get his perspective on all of those areas. I should tell you, you do have more than 20 of the PGA Tour's best in the Amex this year. And you can catch coverage today through Sunday on Peacock and the Golf Channel starting 4 p.m. Eastern time. There's the promo there. So check that out. Look at that spectacular backdrop.

And speaking of we wouldn't have this backdrop, I got to give a shout out to John Nakashima for his patio today, because without this, we don't have that. So thank you, guys. I'll send it back to you and I'll see you on Monday, Mike. Beautiful. All right, Scott. Enjoy it. Thanks so much. All right. Up next, Gabelli's Kevin Dreyer with the stocks he's banking on right now and the names. It just might surprise you. He'll join me here at Post 9 after the break. S&P 500 tracking for a new record in the next half hour. Closing bell. Be right back. Stocks surging to close out the week.

We are green across the board with the S&P hitting an all time high on track as well for a record close. The Russell 2000 also seeing an uptick today amid the broader rally. My next guest continues to see value in some small caps and has his eye on several under-the-radar names he thinks could see big returns this year. Gabelli Fund's Kevin Dreyer joins me now at Post 9. Kevin, good to see you. Good to see you. It's been easy to, I think, point to the small mid-cap areas of the market and say, oh, there's a lot of hunting to be done there. It looks like there's good valuations.

They've been somewhat neglected. But I like that you kind of look at it with a catalyst in mind to some degree anyway, because I always feel as if you should go to a small cap CFO and say, why hasn't private equity bought you yet if you're so cheap? Or, you know, not that's to exaggerate. But how do you approach that and what are you finding right now? Yeah. So our approach is what we call private market value with a catalyst. So we try to look at a company and decide what would a private equity firm or a strategic buyer pay to own the whole business, and they'll look for catalysts like a takeover or financial engineering, but sometimes just things as simple as new management

or a change of cash flow allocation that could narrow the discount to what we think that stock is worth. I know you actually had a company that just announced it was getting taken out today. Yeah, so Command, which is an aerospace supplier, they announced that they're being bought out by a private equity firm. Stocks basically double where it was trading yesterday as a result. And I think that highlights, number one, the attractiveness of that general market. A lot of aerospace suppliers, notwithstanding some of the issues Boeing's had recently, have very, very attractive businesses. It's got long-term tailwinds behind them, but also that valuation gap in a lot of those small cap names that can be

surfaced. What other kinds of timely ideas do you have? I guess, obviously, a company that's going to remain public for a little while. People can buy them. Yeah. So last time I was here when rates were a point or so higher with Scott. I talked about two companies, Bellring Brands, which makes premier protein shakes, and Atlanta Braves Holdings. And both of them as potential takeover targets. Interestingly, both went through financial engineering themselves. Bellring was spun out of post. They were first IPO'd and then spun off. Atlanta Braves Holdings, part of Liberty Media, they did a split off transaction. So they're both pure play companies now. Bellring in particular, they're going to come up on the two-year anniversary of the spin in March,

which has certain potential tax advantages associated with it. So that might be the start of where bidders look to come in and buy that one. Sure. As you look at these companies, is your premise that the economy is going to continue to be good and we can plug that into the earnings models? Or do you have a macro feel at all for how things are going to go? I mean, we're very bottom up when we look at companies. We look at a variety of scenarios.

We'll probably have a base view, I'd say, you know, personally from the inflation situation. Obviously, it's come down a lot. Wages will probably be a bit stickier. Market might have gotten ahead of itself in terms of expecting so many rate cuts this year in such a quick manner so we'll see how that all plan plays out but we tend to really like companies that will do well regardless of the environment I look at and especially when they're doing things internally like Spectrum Brands for instance is another one not necessarily a takeover target but they had a business that they sold. It was their hardware and home improvement business for over $4 billion.

Went to a net cash position. They say they want to go to two to two and a half times net debt to EBITDA. They've got another small appliance business that they could potentially sell off to. They're left with a pet business and a home and garden business. And with pretty reasonable assumptions, you can get to a much higher stock price than it is currently if they take all that cash and they buy back stock. Yeah, that's sort of, I guess, maybe a former roll-up of consumer brands. They had a bankruptcy. They came out of bankruptcy. So there's been a lot of moving parts. Exactly. But they've been slimming down and shutting off the pieces over time. Interested in your take on Campbell Soup. It's obviously some

bigger company. This has been an out-of-favor group. People worried about loss of pricing power. What's attractive here? Yeah, So first of all, the whole food and beverage sector had a tough 2023 and it was really a perfect storm of a few things. The companies have raised prices very aggressively to cover input costs going up. So volumes were declining and that hit with all the news on GLP ones and what that might do to their business. That didn't really affect the results. The volume declines from the price increases, I think, combined with that narrative and just really hit the stock prices. But multiples came way down. Campbell's in particular, they're buying Sovos, which that deal is not completed yet.

I think it gets done. It may or may not get done. But they own Rayo's Pasta Sauce, which is growing very, very well. That'll help their revenue growth. And what they might do as a next step after they complete that would be to potentially split up that business. They have a snacking business, which those companies generally garner much higher multiples than other businesses.

And then I'd say generally, looking at the economy, if we do have a somewhat soft economy, we might see more eating at home. So as we lap those volume declines, you know, it starts to be easier comps and we might see good results, especially with the costs coming in. Right. Yeah, I know. And I do know that I know it's not your premise, but Campbell's is a bit of a counter cyclical play as well. In other words, you don't need a great economy for Campbell's. No, if anything, people eating at home will help. Yeah, you hear them talk about the soup business in a recession. So, Kevin, great to talk to you. Thanks so much. Great, thank you.

All right. Up next, we are tracking the biggest movers as we head into the close. Pippa Stevens is back with that. Hi, Pippa. Hey, Mike. The semi-surge continues with two names hitting record highs. We've got all the details coming up next. About 17 minutes until the closing bell. Let's get back to Pippa for a look at the key stocks to watch. Hey, Pippa. Hey again, Michael.

NVIDIA hitting an all-time high as Meta's Mark Zuckerberg lays out plans to spend billions on NVIDIA's AI chips. Zuckerberg saying by the end of this year, Meta's AI infrastructure will include 350,000 H100 graphics cards from NVIDIA. AMD, Arista and Pure Storage also on the move as derivative plays, according to Wells Fargo. And Broadcom jumping to a record high as well after Goldman Sachs reinstated coverage with a buy rating. The firm forecasts double digit revenue growth for Broadcom's AI business, as well as a recovery in its semiconductor division. That stock up 6%. Mike? Yeah, Pippa, thank you very much. Semi's a big contributor to the upside. Check on the S&P 500 as we come into the close. Up 1.2%. Just about the prior closing high from over two years ago

was about 47.97. So comfortably in that record high territory. Still ahead, shifting gears, Ford changing up its production plans for some of its top vehicles, all the details, and what it might mean for the stock straight ahead. Closing bell, be right back. Welcome back. The S&P 500 on track for a record close as we head toward the bells. We'll be all over that major move in the market zone.

Plus, your earnings setup, Netflix gearing up to report results next week. We'll hear from an analyst with what he'll be watching when those numbers hit the tape. The market zone is next. We are now in the closing bell market zone. Contessa Brewer is here to discuss the big move in travelers. Plus, Phil LeBeau on Ford's F-150 production cuts and Loop Capital's Alan Gould on why he just raised his price target on Netflix ahead of that company's earnings. Contessa, Travelers, big upside contributor to the Dow today. And this actually has been a strong group, a strong stock and a strong group. So what's happening with these numbers today?

Well, the earnings came out and they just blew away expectations. Wells Fargo's analysts, in fact, just published a note raising her price target from 182 to 211, which travelers is at right now, as you can see, up almost 7% on that massive earnings beat. The global insurer, Mike, set record quarterly highs in core income earnings per share and return on equity. That came in at 24 percent year on year. Look, they're just writing lots of new policies. They are charging more for premiums. They are keeping the customers that they have even when premiums are higher. And look, those higher interest rates have been good for insurers in general, for sure good for travelers because so much of their investments are in fixed income. By the way, fourth quarter certainly helped by lower catastrophe losses. That was a reversal from the much higher catastrophe costs in the previous quarters of the year. Part of the reason why it

hurt travelers so much is that they had come down on the amount of reinsurance they had. And so much of the insured losses had to do with thunderstorms, convective storms. So those don't do enough damage to even reach the point of reinsurers. Travelers had to shoulder all of that in the second and the third quarters. We have seen them raise the amount of coverage that they have in reinsurance by a billion dollars going into 2024. That might make a difference. But by the way, Gallagher-Ree is out with this report that says $100 billion or more in insured losses globally, the fourth year that that's happened in a row. And half of that, more than half of it, came in from those thunderstorms in the United

States. That climate risk is volatile, it's unpredictable, and it's something that hits the insurers quarter by quarter. But when they get a free and clear shot from the weather, boy, does that make a difference on the results. Yeah, as those other things continue to work on pricing and being beneficiaries of higher bond yields. Contessa, thanks so much. Let's get to Phil on what's going on now with Ford's production plans on their electric pickup trucks. On the lightning, Mike, they are cutting production plans again. This will kick in April 1st. So here's what Ford announced today. It is cutting one of its two shifts at the plant outside of Detroit where they build the lightning. And again,

effective April 1st. They're going to shift some of those workers over to work on building the Bronco and the Ranger at a plant nearby. This should not come as a surprise. We have talked about the EV market growth slowing down overall for all automakers, not just for Ford. And remember, it was just a month ago that Ford said, you know what, we're going to cut our production plans for 2024 in half. Well, now they're cutting them again.

At the end of the day, you have to look at this and say, this is a prudent move by the automaker. Hybrids have been in much greater demand than electric vehicles. The F-150 hybrid is selling well. As you take a look at shares of Ford, I know there will be some people who will say, well, this is proof the Lightning can't sell. Not proof the Lightning can't sell. It's perhaps proof that the growth plans that Ford originally had for the Lightning, they're just not there yet. Could they be there in 25, 26, maybe late 24? Yeah, that's possible. But right now, Mike,

the market is not favorable to ramping up EV production. And for a company like Ford, I guess you have the benefit of them being able to be somewhat agnostic about what type of vehicles a customer might want. You mentioned that it's not right to conclude that the lightning has not been a hit. I mean, we remember when everyone was anticipating their deliveries initially and how fast they got to their initial sales target. So did they just exhaust that demand? I don't know if they exhausted that demand. I think there were a couple of things. One, they had production problems last year. They had to shut down production for a little bit. And so you have a couple of issues.

One, you didn't have quite the production that you were expecting. And two, when you talk with dealers, the market has clearly shifted much more towards hybrids. And we're seeing that in the pickup truck market. You talk with a Ford dealer. The F-150 hybrid is very much in demand right now. The Lightning, not as much. And that's going to be the way this market is, I think, for the near term, Mike. All right, Phil, appreciate it. Alan Gould, looking at Netflix, you raised your price target well above 500 bucks. It's had a hard time getting above there except for a little while during the pandemic. What do you like about Netflix that people haven't already been

celebrating? Because it seems like, you know, folks have really come around to feeling like it's the one clear winner in streaming. Yeah. Hi, Mike. So they had a great quarter last quarter. The stocks reacted nicely. I think the key is the environment is getting better. I mean, first you have the competition, the other streamers starting to raise price and say they're going to spend less on content. Both would be good for Netflix. Now, this quarter, the big change is you're seeing even more of the other streamers or the other studios licensing their content to Netflix. So just as Netflix was probably about to have a little bit of an issue due to the strike, they've got all this licensed content.

One of their top shows this past quarter was a Warner Brothers show, Young Sheldon. Their library increased in terms of the number of titles in the U.S., even though they produced fewer originals. So we put out a note today, if you can't beat them, license to them. And that's what's happening. I think the next move that we're going to see is it'll be the inevitable consolidation. At least one or two of the existing streamers will go away. That should lead to a less competitive environment. Now, I guess the question, too, is they benefited a lot, obviously, from cracking down on the password sharing, adding subs de facto that way,

raising some prices. What do you think is the key threshold that they have to cross, either at sub growth or average revenue per user in the coming quarter, to sort of please the street, given the run the stock's had in the last year? Well, this will be the first quarter where they have double digit revenue growth in two years. That's a positive. I expect the guidance book for revenue will also be double digit next quarter we're frankly expecting that going forward i'd like to the biggest number is still the sub number or the implied sub number um and as long as the subs beaten one beaten 4q and the sub the

revenue implies some pretty strong sub growth in one queue. That's probably the biggest factor. It'd also be good to hear how the advertising business is doing. They did recently announce they've got 23 million monthly active users there. And also, let's see how the free cash flow and buybacks are going. Yeah, I was going to say about the advertising tier, it seems like a somewhat slow start, but they just have to prioritize it really just to almost serve the advertisers to get scale and have it sort of justify itself. Yeah, I mean, they originally said for a walk, run,

but I think they expect to have more than 23 million users at this point in time. That's probably roughly 10 million subscribers to two members per subscription. But I think they're going to get there. I mean, Netflix has a reach that no one else has. They reach audiences no one else does. It's taking longer.

You're starting to see some hard bundles. For example, the deal with T-Mobile is now the ad tier instead of the ad-free tier. We'll probably see more of that. And Netflix is adding more features to the ad tier. So the ad free tier, we'll probably see more of that. And Netflix is adding more features to the ad tier. So they're starting to prioritize it. All right. Alan Gould, I appreciate the time today. We'll see how those numbers come through next week.

As we get into the close, we are going to be heading for a record on the S&P 500. Remember, the prior record was under 4,800. That was at the very first trading days of January in 2022. So we've gone over two years without a record high on the benchmark. Historically, when you finally do crack through a record high after a very long period, it tends to mean better forward returns on the six and 12 month basis, even if we consolidate from there. You are still going to have some folks noting small caps have been left behind. The average stock has not fully participated as the headline S&P has,

although it has broadened out today. The Russell 2000 up 9.10 to 1%. It is still 6% off of its high. Of course, the NASDAQ and the Dow Jones Industrial Average were already at record highs as Treasury yields finished the week 10-year by 4.14%. And that is going to do it in the 4830 for the S&P 500. Closing bell sets it right there.