Closing Bell - Closing Bell: Stocks rally into the close, National Economic Council Director Brian Deese on the state of the economy & consumer, and Carnival’s CEO on when the cruise line could return to normal 3/22/22

Episode Date: March 22, 2022

Stocks closing near the highs of the trading day as investors raise interest rate hike expectations. National Economic Council Director Brian Deese on the strength of consumer demand and the labor market. Carnival CEO Arnold Donald discusses booking strength and when the cruise line could return to normal. And Interactive Brokers Chairman Thomas Peterffy on why he thinks the return of the meme stock rally is bad for retail traders.

Stocks are firmly in the green and yields are at multi-year highs. The most important hour of trading starts now. Welcome to Closing Bell, everyone. I'm Sarah Eisen. Here's where we stand in the market. Rising again, the S&P higher for the fifth time in the last six sessions and up a full percent as we go into the close. The Dow is off session highs but still up a healthy more than 200 points. The Nasdaq is doing the best of the big three, up 2% right now.

Technology and consumer discretionary in the lead. Small caps also coming back up more than 200 points. The Nasdaq is doing the best of the big three, up 2% right now. Technology and consumer discretionary in the lead. Small caps also coming back up more than 1%. We're higher for the month of March, and we are building on last week's big win streak. Here are my top takeaways on the biggest stories today. Nike jumping. You will hear analysts talk about China, supply chain improvement, pricing power, all true. But one thing to pay attention to that nobody's talking about yet, Nike's new all true. But one thing to pay attention to that nobody's talking about yet, Nike's new virtual strategy. In the call last night, CEO John Donahoe announced Nike Virtual Studios to build Web3 products and experiences and to scale it. Nike acquired a startup artifact, launched its first NFT this quarter.

Reminder, Nike was ahead of the pack on digital, so watch this space. A lot of companies did well during the pandemic and into this year because of lockdowns, work from home, virtual school, and consumer staples especially. But that trade is not working anymore as the pandemic fades and life returns. Truist says it's time to buy P&G, Procter & Gamble, above the rest because it actually emerged stronger from the pandemic and is ready to separate from the pack that just got a temporary lift from pandemic trends. And why are stocks rising and bond yields shoot up? Usually, this kind of rate move spooks stocks, especially technology.

One theory, Fed credibility is bullish for the market. Fed Chair Powell's pivot and tough talk on inflation this week restores cred to a central bank that was behind on the inflation fight. As Ironside's Barry Knapp said in a note today, it's bullish for the asset class that benefits from capital formation, productivity and real growth, namely equities. Let's get straight to our top story. The signal from the bond market yields on the shorter end end of Treasury is jumping to multi-year highs. It's happening faster than longer term yields, fueling a big debate about whether the bond market is about to signal a recession. Joining us is the National Economic Council Director Brian Dietz from the White House. Brian, it's great to have you back on the show. Welcome.

Happy to be here. So you're an economist. You follow the yield curve. Fetcher Powell played it down yesterday. Are you worried about recession signals? Well, when we look at the strength of the economy, we try to look at indicators across the board. And I think one of the striking things about the economy right now is the resilience of the American consumer and demand. We're seeing that in data over the course of the month. And so we continue to believe that we've got a resilient economy with a very strong labor market and with a consumer that is continuing to sustain and has continued to sustain through a number of shocks and changes

as we've come through this recovery. So that's our assessment as we sit today. Obviously, there are risks and uncertainties looking forward, but the strength of this recovery is quite notable. And so we believe and expect that that will continue. Strong enough to handle seven, maybe eight interest rate hikes this year. That's what the market's starting to price in. Well, look, we have had a historically strong economic recovery. The economic growth that we've seen is the strongest in 40 years. The labor market performance is the strongest that we've seen ever in a modern economic recovery.

And we've seen that through a number of unexpected twists and turns, including the pandemic and the Delta variant, the Omicron variant, some of the supply chain challenges. And obviously, we continue to have real challenges on the supply side of this economy and with el-affiliated inflation. But we think that the most notable issue right now is the resilience of the American economy. And I would note unique among advanced economies in the world. The president's heading to Europe later this week. And the American economy stands out for that resilience as well.

But the inflation picture has changed and it's gotten worse. I know you met with CEOs yesterday. Brian, what did you hear from them and what did you tell them about what you're expecting now as far as how long inflation is going to last, especially with this new shock we're seeing in food and energy prices? Well, we had an important meeting with CEOs from sectors across the economy yesterday. The principal focus was on the war in Ukraine, both in terms of giving them an operational update on facts on the ground and our sanctions and export control efforts,

to thank them for the work that they're doing in partnership with the government to effectuate those sanctions and for a number of companies to take individual steps as well, and then to talk through the outlook and the resulting impact on the global economy and the American economy. The good news is that the sanctions package and the impact is being principally felt by the Russian economy, and we are taking steps to mitigate wherever we can the impact on the European economy and the American economy. But there will be impacts. Certainly that's true in energy markets and gas prices as well. So we talked about the ways in which we can continue to work together

to maintain this crushing blow on the Russian economy while mitigating the impact here at home. There was also discussion of cyber threats, and President Biden warned the CEOs that there's evolving evidence while mitigating the impact here at home. There was also discussion of cyber threats, and President Biden warned the CEOs that there's evolving evidence that Russia is considering launching cyber attacks, that they have a patriotic duty to step up spending on their defense. What more can you tell us about which industries or sectors might be most vulnerable? Well, I can tell you this. The president made a very clear call on the corporate community

to do everything they can to harden their cyber defenses for critical infrastructure, which in the United States is operated principally by private actors. This is not an issue that we come to recently. We've been working for months with the private sector around how to encourage them to take steps to harden their own defenses. But it is made acute right now because the Russian government has these capabilities. It's signaled its intention to use them, to react to and to respond to the sanctions package that we have put in place. And so everybody needs to be vigilant and on a high state of alert. And one of the things the president underscored is that for many of these companies that operate critical

infrastructure, this is not just about the benefit of their shareholders and their stakeholders, that the benefit of the broader American public and the broader economy is on the line. And so therefore, it's important that we all do everything we possibly can at this moment. I can't tell you when exactly Russia may act or on what sectors, but what the president made very clear is that risk is real. Is there any evidence that it started? We have not seen any evidence of wide-scale or very targeted efforts at U.S. firms. We have seen some activity in Ukraine that has spilled over

and has had some impact on European and, in some cases, American companies. But the fact that we have not seen it yet should be a reason for vigilance and for action, not complacency, that this threat is real. And that was what the president tried to underscore. A lot of partnership between the federal government and the private sector is going on. That's a good thing. But everybody needs to step this up and be on a high state of vigilance. Those cyber stocks flying today. Brian Deese, thank you for joining us with an update from the White House on that meeting. Thanks, Sarah.

After the break, a slew of airlines have come out with bullish demand forecasts, but what about the cruise lines? We'll ask Carnival CEO Arnold Donald about what he's seeing from customers next. You're watching Closing Bell on CNBC. Dow's up about 225. Carnival out with earnings today, reporting a miss on both the top and bottom lines for the first quarter, citing a temporary slowdown in bookings due to the Omicron variant. Joining us now for a Closing Bell exclusive is Arnold Donald, CEO of Carnival Corporation. Welcome back, Arnold. Nice to see you.

Hey, good to see you, Sarah. Good afternoon. Good afternoon. So the miss was blamed on Omicron and now you're talking about very strong booking volumes that you're seeing. What's driving that? Is it simply getting out of a pandemic phase? Talk a little more about what you're seeing. I know, absolutely. We have about 75% of our ships as of March sailing again, which is fantastic. We've seen unbelievable strength in bookings in our Carnival brand. The past three weeks are wave season type bookings, so extraordinary bookings at higher pricing. So we have a lot of momentum going. Of course, we've had to change some itineraries over in

Europe. And so I would like to take a moment now to say along with everyone else we stand for peace. We have thousands of employees from Ukraine and from Russia and our hearts just goes out to everyone who is being directly impacted, who loved ones are being impacted. But even with those sailings while we've had to pull out of Russia, we've been able to replace it with itineraries going to different places in Sweden and Latvia and Norway and Denmark. So things are really positive from a demand front and from a booking front looking forward. Even in the international cruises, is that where people want to go right now? Because what we hear from the airlines and hotels is that there's this boom, but it's largely domestic. Well, keep in mind that we're a global company. We have nine

world-leading cruise line brands, and they sail and home port all over the world. So we source a lot within Europe. And of course, Europeans, many of them still want a vacation. And so those brands are seeing good booking strength and good onboard yields when people are onboard, as are our North American brands. So, yeah, you see pockets of where people may have some sensitivity to specific itineraries or specific locations. But overall, North America and Europe, as we said in our business update today, we have good booking momentum at strong pricing. So on pricing, fuel is definitely going

to hurt. Hurts the airlines, certainly hurts you guys. How much of a damper does that put on the financial recovery that you expect and how can you offset that? Are you raising prices? Well, what we do, first of all, is manage consumption and we've done a good job of that. So we've had a 30% reduction in unit fuel consumption since 2000, mid 2000s. And we've done very well with that. We have additional opportunity for reduction in consumption both because we have 25% of our ships will be new ships once we back at 100%. We took out less efficient ships, about 22 of them. Plus we have many initiatives on board our ships for a better fuel efficiency from itinerary

planning to fine tuning the engines to using different lighting, conservation on board of water as well as food waste and so on. So we have first and foremost for us is consumption. Fuel prices go up, they come down. It's happened through time. We've suffered through fuel spikes before and we'll see how long this one persists. And if it does, then we'll take a look at other actions to take if that needs to be, proves to be necessary. When, Arnold, do you feel like you'll be back to normal as an industry as far as demand, capacity, service? I mean, there's just so much coming at you. I know you got the level lowered by the CDC, which was probably good news for you. When do you go back to normal? Yeah, the world is always not normal. And so for us, when are we

going to see a return of 100% of our fleet and EBITDA greater than what we had in 2019, etc.? Right now, we're looking at positive EBITDA in the third quarter is what we're looking at for the third quarter. And so in 2023, we're optimistic we'll have the full fleet sailing. We already have 40 sailings already now that are 100% occupancy. And so we see that as an additional indication of strong momentum. So we have to see what happens around the world because, you know, you never know. But based on the trends today and the demands today, you know, we're optimistic in 23, we can return to seeing 100% of our fleet sailing at the occupancy levels and at stronger pricing. But almost 30% of Americans are not double vaccinated. Arnold, doesn't that represent ultimately a challenge

if you are doing these 95% vaccinated cruises in terms of demand? Well, Sarah, the way things have worked out for us, and we work very hard with medical experts and scientists around the world. In fact, the incidence of COVID cases is lower, consistently lower on board the ships than they are, you know, shore side than they are in land communities. We've been very diligent with testing, with vaccinating our crew. But you have to be vaccinated, right? Right now you have to be 95 percent vaccinated in the U.S. So we are, for example, children under five are not counted against that. And then we do have, you know, some exceptions for other reasons. So at this point in time, but we'll see how that plays out over time as the world has become increasingly vaccinated. And as the virus has had variants that have not created hospitalizations to the same degree or worse, then it becomes something that we learn to live with, becomes an endemic versus a pandemic.

And so we'll see if that trend continues you know the variant b that people are experiencing around the world again while people have it they don't seem to be as sick of course we have better treatments now a lot of people are vaccinated all of that contributes to that and as society moves forward and learns to live with the virus then things are returned to more normal. And that's the trend we see now, and people are having a great time on board. They're spending more money than ever, but more importantly than that, they're creating those joyful memories and moments, which is why they cruise in the first place. And it's going very well and has been for some time. Good to hear. Arnold Donald, thank you for the update.

Thank you, Sarah. CEO of Carnival. After the break, the flattening yield curve leading to some questions about whether recession is looming. But Mike Santoli takes a different indicator that could ease some of those fears. He takes a look in the dashboard next. NASDAQ up 2% as we head into the close. Technology and banks are what's leading this rally today. You're seeing it in the big cap tech that ships up just near session highs. There's the NASDAQ up 2%. The S&P up 1%. The treasury yield curve continues to flatten, though, today, sparking some fears of a looming recession. Brian Deese from the White House isn't worried about it, and neither is Mike Santoli, who is looking at one other indicator of a potential recession. Brian Deese from the White House isn't worried about it, neither is Mike Santoli, who is looking at one other indicator of a potential recession.

Yes. That's not so bleak. The Index of Leading Economic Indicators, it's a composite. It's not just a single source. Now, the Fed, the New York Fed, has a yield curve-based recession prediction model. It's one component. It's the three-month Treasury yield versus the 10-year. Three-month 10-year, not two-year 10-year. This is a composite of things which, over a long span of time, as you can see, it goes back over 60 years, has almost always rolled over before the shaded area, which is recession. Not always too far in advance, but you see there's almost no recessions that have not had this really degrade a little bit

before you get into recession. However, 2020, there's a difference, right? That wasn't a normal recession. That was the economy forcibly stopped. So it's still pointing higher. It was actually higher in February versus January. January dipped a little bit. So this is at least a slight reassurance that even if things are slowing down, even if the risks are rising, we're not on the precipice, most likely, of a domestic recession. And we were just talking about what goes into, it's a number of indicators compiled into one, the market. I do know stock market is included in there. And I believe there's some employment stuff in there, some manufacturing stuff, maybe credit markets as well. So, you know, it's a blend. It maybe isn't perfect, but I do think there's some reassurance from people who

are screaming about the 210 years. Pushback against all that negativity. Well, don't look now, but meme stock mania is back. GameStop and AMC soaring right now. Up next, we'll get reaction from Interactive Brokers Chairman Thomas Petterfie. His thoughts on the state of the retail investor when we come back. Check out shares of GameStop up 25% today. Other meme stocks higher as well. AMCs up 14%. BlackBerry, Bed Bath & Beyond also outpacing the market. Joining us now is Interactive Brokers Chairman Thomas Pederfee. Thomas, it's great to have you. I know that you sometimes overlap with the Robinhood set, right? But you claim that you have a little more sophisticated investor. What does this kind of action in these stocks tell you about where retail traders are

right now? Well, I don't think this is a good situation for retail traders because in the fullness of time, these stocks are very likely going to go to zero, right? So somebody is going to end up holding them at the time when they really go to zero. So I hope that not many of my customers, Interactive Brokers customers, are not in these stocks. What are you seeing from the Interactive Brokers customers in terms of participation and appetite for stocks right now after a pretty brutal start to the year, but a nice little bounce here in the last week and a half. Yeah, so interestingly enough, our customers, Interactive Brokers customers, are not participating in this latest rally.

In spite of the fact that IBKR offers margins as low as 1.83% to all the way down to 0.83%. Our customers' margin loans have decreased by about $8.5 billion, or roughly 7% in the current quarter. Similarly, free cash deposits have increased by 7% to $95 billion. So most IBKR customers do not seem to believe the current rally. And I think that there'll be, or they think that there'll be a better opportunity later to get back into the market.

So pretty defensive posture there, is that what you would say? What about overall just activity as far as stimulus checks have faded and Fed is tightening interest rates? What about just retail investors' embrace of the markets at all? So our average customer has about $200,000. So these are more sophisticated customers than people who are basing their investments on relief checks. What about technology in particular? What have you seen as far as inflows and outflows and that once beloved part of the market that has been most vulnerable to what's changed here? So I think they are all worried about the Fed hikes, right? And although I don't think that the Fed will be able to raise rates high enough to stop inflation. I think that this is because they don't want to appear

to be starting a recession right before midterm elections. Second, the higher they raise the rates, the higher interest rate payments will become on the freshly issued debt that will contribute to the nation's indebtedness. I think Treasury made a big mistake in not refinancing at much lower rates while they were available. And this situation is further aggravated by the very high level of borrowings in the $11 trillion private equity space, where managers have been trading companies among each other at ever higher prices, loaded with more and more debt, that work just fine with interest

rates that are zero, but they will not work at 3% from 5%. So I think we'll see a lot of bankruptcies in this space. I know you've been warning of that and worried about it. What about your own results, Thomas? Do higher interest rates, net-net, help your earnings or hurt because of what you just described? I just said that we're sitting on $95 billion of customer cash. So obviously, higher interest rates are going to be helpful. Thomas Petterfie, appreciate you joining us.

Thank you very much. Always good to get an update. Here's where we stand in the markets right now. Going strong here into the close, the Dow's up 240 points. Technology is in the lead. As I mentioned, NASDAQ been hit harder in the markets right now. Going strong here into the close, the Dow's up 240 points. Technology is in the lead. As I mentioned, NASDAQ been hit harder than the rest this year. It's up 2% and having a bigger rebound. The S&P up 1%.

Small caps up a percent as well. Up next, venture capitalist and crypto investor Katie Hahn on whether private crypto company valuations are starting to look expensive. What's Wall Street buzzing about today? Venture capitalist and crypto investor Katie Hahn. After leaving her high-profile role at Andreessen Horowitz last year, Hahn now breaking records with her $1.5 billion debut fund. Kate Rooney exclusively sat down with Hahn in her first interview after leaving Andreessen. Kate, tell us more.

Hey, Sarah. Yeah, this is the largest debut venture capital fund ever by a female founder and the biggest debut crypto fund, according to PitchBook. Han Ventures is going to be split into two parts. It's $500 million for early-stage investments and $1 billion for the the later stage growth side. Han led and co-led Andreessen Horowitz's multi-billion dollar crypto funds before leaving the firm in December. She was an early investor in Coinbase and sits on that company's board. She says a smaller team will help her be more nimble. Han also tells me Bitcoin prices and publicly traded

crypto companies getting hit is not spilling over to private startups quite yet. We're still seeing very high valuations in the crypto space. I will say, though, that some of those high valuations, you know, some of those companies are actually profitable and have metrics that you can go look at. And so I think it's important that we don't treat crypto and Web3 as a monolith, because they really are very different in terms of what problem they're tackling and different projects out there. Han has invested through multiple bear markets, sometimes called crypto winters, and says that's when some of the best companies are built. And as far as where the opportunities are, she mentions blockchain gaming and identity verification. Sarah. We will watch it.

Kate, thank you. Kate Rooney on the buzz. When we come back, NVIDIA unveiling a new chip aimed at speeding up AI computing. And Tesla cuts the ribbon at its German gigafactory and soars to the top of the S&P 500. Those stories and more when we take you inside the Market Zone. 20 minutes left of trading we are now in the closing bell market zone cnbc senior markets commentator mike santoli here to break down these crucial moments of the trading day plus needams rajagil on nvidia's new product announcements what it means for the stock can accords jed dorsheimer on tesla beginning deliveries at its Gigafactory in Germany.

First up, though, on the broader markets, stocks are rebounding again after yesterday's big sell-off. The major averages are near session highs. Dow's up 250. NASDAQ now past 2% or so, Mike. And what stands out today is that Treasury yields are really jumping. We're seeing fresh multi-year highs on the 2-year, on the 10-year. They're at 238%. Usually, that would spook equity investors a little bit, especially in technology, right?

You worry about the effect of higher interest rates on the economy and on longer duration assets. What does today's action tell you? Yeah, I mean, obviously, treasuries were in the wrong spot for a fast-tracked Fed tightening program that they're now talking about. So there's no doubt about that. The question was how rapidly the market itself might adjust. What's interesting is we're now up to levels of yield that treasuries have not spent a lot of time above over the last, let's say, eight years. I mean, 2.4% on the 10-year.

Yes, times in 2019 and a little bit before that. You did get above that in 2017, but not a lot of time. So we don't necessarily have a stock market that's been stress-tested for that level. I don't think there's anything magic about these particular thresholds, but it is interesting. When it comes to tech, I mean, look, we had a 20% pullback in the NASDAQ. The relative performance of the NASDAQ 100 to the S&P hit a new two-year low basically a week ago. So all we're doing is doing some catch-up here. The duration, you know, discount back at a certain rate, the earnings of long-term assets, that story is a small piece of the valuation puzzle.

It's not relevant right now. Final point, if we're slowing down, you go for the stocks that can grow their earnings, which are growth stocks. Growth stocks, true, which is working today. NASDAQ still about 13% off the highs. S&P, Mike, wanted to also note, because we did pass 4,500 for the first time today since February. Give us the Santoli big pick on just where we are this move after last week's big rebound and now some follow through today. Yeah, a lot of folks focused on an area about, let's say, two percent up from here, just under forty six hundred. If you look at that chart there, there's basically twice in February. That's where the index peaked out. And even when we were

at the lows, a lot of folks were saying, hey, even if we bounce from here, we're probably in a range that goes from, you know, forty two hundred to forty six hundred. So we may be relatively close to testing that proposition. Like I said, one or two percent up from here and you'll be just about at the doorstep of it. Up 1.2 percent right now. NVIDIA announcing several new products at today's Investor Day, focusing on AI enterprise products and teasing plans to build what it says will be the world's fastest supercomputer. Shares are down today, but have gained about 20% since last Monday. Let's bring in Needham analyst, Raji Gill.

Raji, welcome. What do you think were the biggest takeaways for investors today? Well, this was probably one of the most comprehensive, the most compelling analyst days I've witnessed for NVIDIA. And I've been covering NVIDIA for well over a decade. There are a couple of kind of major things that were quite exciting. I think number one was their new GPU. It was the Hopper H100 processor. This has 80 billion transistors. It's six times the performance of the previous

Ampere architecture that was introduced two years ago. And one of the interesting stats that Jensen Wong, the CEO, mentioned, if you have 20 of these H100s, it can basically power the whole world's internet traffic. That's how powerful and computational this new chip is. So this chip basically is going to enable the adoption of more advanced machine learning and artificial intelligence into enterprises, whether that's deep recommender systems, genomic sequencing, natural language understanding. So because of the raw speed, it will enable that level of processing. I think the second thing that was very interesting and I think speaks to the longer-term potential of NVIDIA as a software opportunity, they outlined about a $300 billion TAM just in software. They're building a long-term subscription software model by licensing their software to enterprise servers, also to the omniverse.

And this has been one of your themes, NVIDIA into a software company. I'm just curious, why is the stock, why do you think the stock is lower today on the back of some of these, as you're describing, pretty bullish announcements? Yeah, I mean, the stock had, as you mentioned, rallied, you know, 20%, you know, heading into this analyst day. There might have been an expectation that the CFO would have raised the near-term outlook. But to me, this is just kind of near-term kind of trading. The bigger picture is the revenue growth, the earnings growth, and the TAM, the total adjustable market that's available for NVIDIA. And if you look at NVIDIA, NVIDIA has been growing about 200 percent over the last four years. It's grown earnings, net income, 300 percent over the last four years.

It's one of the most pristine financial companies, not only in semiconductors, but of all of technology. And the TAMs are enormous, $1 trillion TAM that's available. So are you changing your numbers? It's still about 24 percent off the highs for NVIDIA. Are you changing your numbers, the valuation on the back of what you heard today? I have a street high price target of $400. The $400 equates to a $1 trillion market cap company. This would be the first $1 trillion semiconductor company. That only is about 50 times next year's earnings. So I have them doing about $8 of earnings and the multiple expanding back to 50 times.

At one point, NVIDIA was trading at 60 times. The multiple is compressed to 35 times. But if you look at other tech companies like Tesla or software companies that basically either have no earnings or a fraction of the earnings, they're trading at well above 50 times already. So 50x times, you know, $7 to $8 of EPS is not that far-fetched. And I think ultimately we'll get to it. And just really quickly, Raji, any implications for any of NVIDIA's competitors or maybe its suppliers? I think there really is no competitive implication except maybe perhaps to Intel.

But essentially, NVIDIA has been at the forefront of pushing artificial intelligence and machine learning into the enterprise, into the hyperscalers, into vertical industries. This is a secular kind of theme. This is not going to slow down. And then the ultimate kind of move to 3D virtual worlds through the omniverse, virtualizing physical worlds, whether it's designing skyscrapers or designing buildings and doing that in the virtual world enabled by NVIDIA software. This is, again, a completely new market that NVIDIA is leading. So it's not really relevant to look at the competitive landscape. It's really more relevant to look at where the revenue growth is now and

can it grow into these massive TAMs that are available to the company. A lot of people watching TSMC as well, longtime supplier for Intel. Raji, thank you for joining us. Raji Gill on NVIDIA. Shares of Alibaba surging today, up 11% after the Chinese e-commerce giant said it would increase the size of its share buyback program

from 15 billion to 25 billion, largest ever buyback for Baba. Overall, it's been a volatile year, though, for the stock and all the Chinese internet stocks, which continue to face regulatory tightening from the Chinese government. Today's gains nearly wipe away Alibaba's losses for 2022, but not quite. The KWeb ETF, which tracks the entire group of Chinese Internets, up 8 percent or so as well. Mike, I mean, it's been a pretty big comeback. Hard to call the bottom when you're dealing with China. But there's also a report today from Reuters that China's regulators were

asking some of these tech companies to beef up their auditing disclosures, which could be taken as a good news, good sign when it comes to dealing with the U.S. What's your take? Yeah, I was going to say it's hard to call the bottom there, except when the Chinese authorities are working hard to send the message that they think a bottom should be put in here. By having a different tone in their messaging to companies and investors, clearly Alibaba, with this pretty aggressive buyback announcement, it amounts to about 8-plus percent of the market cap over a couple of years, they might do this buyback at a pretty discounted valuation.

So it's pretty good in balance sheet terms how this means in capital allocation. It's understandable why the stock would be up this way, but it also seems to come with the tacit approval of Chinese authorities. So probably more of a two-way market that it's been. That's not a very controversial proposition, given that it's been straight down for a while right now. But it does absolutely seem as if China does not want there to be this continued punitive tone about their companies and people who own capital in these. So basically, J.P. Morgan analysts mark the bottom when they called the stocks uninvestable. It's lining up that way at the moment anyway. Yeah. Last week. All right. Look at Tesla. Tesla shares at the top of the S&P 500 today.

The company officially beginning deliveries at its gigafactory in Germany. Tesla expects the plant to eventually produce up to half a million cars per year. Let's bring in Jed Dorsheimer, analyst at Canaccord Genuity. Jed, with Tesla up 8% right now, talk about the financial implications. Does it hurt? Does it drag on profitability in the near term? How are you looking at this new gigafactory? Yeah, I mean, thanks for having me, Sarah. So let's just take a step back for a second. I'm down here in Houston at this power electronics conference. So the guts that go into these Teslas and doing this interview on an iPhone. And when I focused on the cell phones, most pundits said, you know, never imagined that I'd be able to do what I'm doing today with you here on an iPhone back in 2002. And so I think the context, thank you very much. So I think the

context of what Tesla is doing is we have to take, we have to look at it through the eyes of a manufacturing juggernaut that we have not seen since Henry Ford with assembly lines changed and created the automotive industry that we know today. And so when we look at Austin and we look at, which is going to be coming online in a couple of weeks, when we look at Berlin, which is going to double their manufacturing, and we look at electrification is a bigger trend and the value that that brings to the market, I can't help but think that these are all positives with respect to Tesla. And it also reduces the geopolitical risk that we're now seeing increased tensions from Russia, Ukraine and China as well. Because they were using the Shanghai

factory and shipping cars from China to Europe. Now they could theoretically now just supply them the European demand from the European factories. What sort of opportunity does that represent? Well, two things. You're exactly right. So first, over 50 percent of the cars that they're producing now are coming from Shanghai. So you're going to reduce the dependence on China is that central low cost hub for where you're shipping to. Imagine all the embodied energy that's actually attached to floating these cars on a ship all around the world and being able to regionalize with local manufacturing. And lastly, these are going to be cars that are moving to the 4680. And a lot of

people don't understand this. That's just the size of the battery. But it's really important because in our view, it creates an Apple-esque type strategy here, which opens up other markets, namely the market that they haven't been doing much in, which is energy storage and battery backup. We haven't seen much, but they've said that they've been supply constrained on the 2170s. And so this opens that market up for them. And we think that's going to be an area of growth to augment the automotive growth that they're going to be more than doubled. That's what I was going to ask about, because all of the EV companies now, Jed, are supply constrained, are they not, with the price of the materials that go into batteries spiking and a lot of them stuck in Russia and Ukraine? Elon Musk has complained about this on Twitter.

Where does Tesla stand relative to other EV competitors when it comes to dealing with these issues and potentially raising prices? Yeah, so Tesla's raised prices across the board. They're not going to be immune from the supply chain challenges. I don't think any companies are going to be immune. You're going to see that flow through. However, one of the things that Tesla's done really well is they've looked at a system design, which other companies are starting to do. But Tesla is way out in front of the pack. So, for example, using silicon carbide for their inverter to get more out of the electrons that are going into the batteries, which allows you to get to a smaller battery pack or to reduce the amount of copper to lightweight the vehicle.

Those are going to be things that are going to become more important. That's why I'm at this conference down here in Houston, listening to these semiconductor companies talking about what the plans are actually going to be. So I think near term, Tesla is not going to be immune to the supply chain challenges. We think that's going to create opportunities with the volatility to buy on pullbacks. But I think when we look longer term, it's clear to us that the trend towards electrification, which includes transportation as well as decentralized electrification on the generation for solar and battery backup, are clear winners in terms of a

much larger trend. So you're buying on the dips. Tesla's still down about 6% for the year. It's 20% off the highs, but it is surging right now and has had a good month or so here. Yeah. I mean, I think in this market, you know, we have a buy, we have a $1,200 price target, but recognize it's like the pilot coming on on the flight saying there's going to be turbulence. There's going to be a lot of choppiness. Our macro strategist, Tony Dwyer, has talked about that and actually has been proficient in calling a lot of these trends. We do think that things are going to be bumpy, but we would be buyers on pullback because this is where the puck is going to be going. Jed Dorsheimer. Jed, thank you very much.

Thank you. Appreciate it. On Tesla, which is up right now about almost 8 percent. Financials among the leaders in today's rally, as well as treasury yields continue to rise. While conventional wisdom says a yield curve inversion signals a recession, Bank of America says investors should buy financial stocks now that the three-year, 10-year yield curve has inverted. The firm says the traditional view no longer applies and that a yield curve inversion does not necessarily signal trouble for the banks, with the sector outperforming 50 percent of the time during yield curve inversions, which does make you scratch your head a little bit. Mike, what do you think of the call? Yeah, I mean, the business model of banks is no longer what it used to be traditionally,

principally, which was, you know, taking short-term deposits, lending out 10 years or borrowing very short and lending out 10 years. The curves that matter more to bank earnings are on the shorter end. So those are still relatively steep. And also just the absolute level of short term yields matters a lot for the deposit heavy banks. So that just means as the Fed hikes rates, it flows right through. So all those things are true. And I think that the curve has inverted in recent cycles when we kind of gotten later in a cycle. But we've had long cycles. So, you know, it stays late for longer.

And I think that's one of the reasons banks have continued to be OK. And valuations got reset a little bit. If you look at like a Bank of America, it was basically at its high end of its range for valuation before these little pullbacks. And it obviously got a little more in the target zone for buyers. So it all makes sense to me. As we remember, everybody piled in. It was a stampede into banks and energy at the beginning of this year. And only energy has really given you a smooth ride. So we'll see if investors are going to be gun-shy in really rushing back into financials after that. Well, it's certainly happening today with the rise in yields, Mike.

It's a weird day because we're seeing these yields spike. The two-year, the 10-year, really across the board, even though we're seeing some flattening. And equities are doing pretty nicely. We're coming off the highs, but we're still up 1% on the S&P. NASDAQ up 2%. You know, it makes financial conditions a little looser, which make Fed Chair Powell's job a little bit easier when it comes to tightening them.

He has more of a green light to do it. I just wonder, ultimately, if it's the right trade, what's going on right now, given the Fed Chair is doubling and tripling down on this inflation fight. Yeah, it's not the cleanest read at all. And I think a lot of times what I would resort to in trying to figure out what's going on is, again, to go back to positioning and where we started from. You go back a week and there was absolutely rock-bottom sentiment and risk positioning. It's obviously gotten taken care of.

People chasing this rally. We've been talking about the late-day rallies every day. Well, guess what? That often means people feel underinvested, underexposed to a stock market that's not letting them in. That can't in itself last for very long. Maybe it's actually running its course right now. But to me, that helps explain why the big index stocks, which are the big growth stocks, are playing catch up today, even as rates go up. Tesla, Apple, Microsoft, Amazon, Google, Facebook, all leading the triple Q's higher. We've got two minutes to go.

What do you see in the internals? It's been positive, Sarah, but I wouldn't say overwhelmingly so. The equal weighted S&P is actually lagging the main index. And you see here, it's about, you know, two to one, two and a half to one advancing versus declining volume. In terms of the number of stocks, it's really not that overwhelmingly positive on the New York Stock Exchange. But we talked about both tech and financials doing well. Look at it on a month-to-date basis. Software and financials, both in positive

territory so far for March. And again, that's a very similar looking curve. And that hasn't been the case over the last year. Those groups have been more diverging than moving together. The volatility index continues to cooperate. It's down another half point, so down under 23. Remember, we peaked in the high 30s not that long ago, and that's a good, again, spike on the chart. You want within the next week or two, probably for this to recede below 20, to really have a sense that the market is on firmer footing and is back in gear, Sarah. As we head into the close, I'm just watching Nike, which has given up some of its earlier gains. It's up about two and a half percent after what was considered a very strong quarter from that company. Taking a look at the broad averages, the S&P is up one percent. What is working today? Consumer discretionary.

Thank you, Tesla. Communication services, financials, technology. We've hit all the tech and banks themes. Energy is the only sector that's lower right now. Everybody else is higher. The Dow, best performer in the Dow or biggest point contributor would be Boeing after that slide yesterday on the Chinese plane crash. Nike, Salesforce, Apple all adding to the Dow gains as well, as well as JP Morgan and some of the banks there. The Nasdaq, the biggest winner of all three, it's adding, well, about 2% here. The small caps also adding a percent or so. So that makes five gains of the last six sessions for the major averages, building on last week's strongest rally since 2020. Still down for the year, but a pretty strong day considering yields jumped.

That does it for me on Closing Bell. Send it over to Scott Wapner in overtime.