Closing Bell - Closing Bell: Stocks rebound ahead of CPI, Fanatics CEO on sports merch, the “no landing” scenario 2/13/23

Episode Date: February 13, 2023

Stocks rose to start the week ahead of Tuesday’s key inflation report, which investors will focus on for clues about the Fed’s next move. Wall Street Journal reporter Nick Timiraos joins to discuss the increased rumblings on Wall Street of a “no landing” scenario. Wells Fargo’s Chris Harvey talks about his call that the bear market is over, but the bull market is stuck in traffic. The CEO of Fanatics breaks down the demand for sports merchandise following the Super Bowl, and talks about opportunities in livestreamed shopping and his prospects in the IPO market. Edgewell’s CEO gives his read on the consumer and talks about a warning from Walmart telling suppliers not to raise prices. Plus the latest on Microsoft’s continued strength, another pop for Meta, and Ford’s newest EV move.

Stocks are jumping to start the week as investors await tomorrow's key inflation report. NASDAQ gaining back around half of last week's losses right now at 1.2%. This is the make or break hour for your money. Welcome everyone to Closing Bell. I'm Sarah Eisen. Take a look at where we stand in the market overall. Dow's higher by almost a percent, about 290. High of the day was 350 points or so.

The S&P 500 up almost a full percent. Technology is leading. That's your best sector. Information technology along with consumer discretionary and communication services. What's weaker today? Energy. That's the only sector that's down. Utilities are underperforming as well. The Nasdaq is the center of the action. Tech stocks rallying. Yields are a little bit lower, at least on the longer end of the curve, 3.7 on the 10-year. Microsoft, Apple, Nvidia and Meta lead the way. Look at the Nasdaq 100 and you'll see the story here with the strength. Coming off of a down week last week, Illumina having an 8.3 percent surge of earnings. Some of the Chinese tech stocks like Pinduoduo also rallying today. And the media names continuing what's been a strong showing so far this year. Warner Brothers up another 5 percent. Coming up on today's show, we're going to get an early read on inflation ahead of tomorrow's CPI

report when we talk to the CEO of consumer products company Edgewell, who says Walmart is warning companies like his about raising prices. Plus, we will speak to Michael Rubin, CEO of Fanatics, recently valued at more than $30 billion about last night's Super Bowl, and the demand he's seeing for athletic wear, gambling, a lot to talk about there. Let's go start with the market dashboard. Senior markets commentator Mike Santoli. Kind of a quiet from a headline perspective, but path of least resistance is up. It is today, Sarah, levitating a little bit.

Yeah, volumes are light, but really not a lot to stand in the way of the S&P 500 essentially traveling a pretty high percentage of last week's total range. Last week we were down one plus percent, but really felt worse because we were chopping lower most of the time. Obviously are going to be waiting for that CPI number. That'll render the near-term verdict on whether this makes sense. Longer-term yields tame today, so that's leaving room for the growth stocks to work pretty well.

Also, consumer discretion on an equal weighted basis doing really well today. Not to mention some of the other names outside of energy. So there you go. We broke the downtrend, as we've been saying for a while. Definitely a hesitation here in the last week or so. Pretty good two sided debate on whether this rally has gone far enough or has shown some staying power and really sniffing out that the economy is in a firmer spot. Take a look at the one-year Treasury bill yield. I keep kind of highlighting the one-year maturity because essentially it's making new highs. It started at the jobs report a little over a week ago,

and it's now the highest yield on the curve, and we're basically pushed 5% at times today. So essentially you get the 497 or something like that. So this is where you're capturing the possibility for the Fed to perhaps go a little further. And we're basically pushed 5% at times today. So essentially you get the 497 or something like that. So this is where you're capturing the possibility for the Fed to perhaps go a little further than currently priced in or than we thought about a couple weeks ago. And it's essentially the strong patch of the economy, maybe even that we're not going to land at all soft or hard for a little while type scenario. And that's definitely reflected here. Yeah, we're going to talk about that in a second. So ahead of the CPI report tomorrow, how's the market position? We're not really that we were overbought like a week and a half ago. You know, we went to those new highs and we've

worked that off. So I think you're a little more in balance at this point. Clearly, yields are going to decide exactly how much stocks can handle from that number tomorrow. There's also been some commentary that people are running the numbers in advance and are suggesting for statistical reasons there might be upside to the formal consensus on CPI. As a matter of fact, the real-time tracker of inflation data is suggesting a little bit to the high side. So maybe people are already braced for that. You could get a little bit of relief. I would point out the last on target CPI report last month did not create a big equity market response. If you remember, it was kind of shrugged off because people assumed we already knew inflation was going. It rallied into it. We rallied into it. And we did. Yes.

And now we're rallying still off those what disinflation comments from Powell. We're rallying, but we're within the range. So we're not really carving new ground to the upside just yet. All right, Mike, thank you. Perfect setup here. Tomorrow's CPI report will be a key indicator of the Fed's next move. And whether we'll head into a soft or hard landing, but with strength in the labor market and consumer spending, could we be heading into a so-called no-landing scenario?

Joining us now is Wall Street Journal reporter Nick Temerose, who wrote about that topic over the weekend. And it really piqued our interest, Nick, because that has been the debate of the last year or so, hard landing or soft landing. What do you hear about a no landing? What does that even mean? Well, a no landing means you don't get the slowdown in growth that economists and, importantly, that policymakers of the Federal Reserve have been anticipating. So I think a no landing scenario is probably just a delayed landing, right? If you were thinking that you that policymakers of the Federal Reserve have been anticipating. So I think a no-landing scenario is probably just a delayed landing, right? If you were thinking that you were going to have

a recession this year and it now looks like the Fed isn't going to bring the plane down, then you're looking at something like that happening in 2024. A no-landing is probably a delayed landing. And the longer you delay this, the more likely it probably is that you're looking at a hard landing. I mean, part of the shift has been an acceleration of the economy, something no one really expected to see at this point after so much tightening in the system. How do you think the Fed would react to a hotter than expected inflation report tomorrow? Well, they're going to have two reports, Sarah, before their next meeting. So they don't have to, you know, mark to market their views right away. And if you go back

to the December FOMC meeting, you know, there was a lot of pushback from economists and from commentators to those inflation projections where they said they thought inflation was going to end this year at around three and a% using their core PCE measure. A lot of people said that's implausibly high. And so now I think you're starting to see that data dependence does run both ways. And Powell didn't push back against the market's more benign view of inflation a couple weeks ago. And then after the jobs report, I think you've seen the market come closer to where the Fed is. And so that's sort of what I would expect to see if this does go

on the high side tomorrow. I was going to ask if you think that the market has been too enthusiastic about a Fed pause, Fed cuts, given what you're hearing and how you're reading the Fed. I really think, Sarah, it has to do with the data. You know, if you think that you're hearing and how you're reading the Fed. I really think, Sarah, it has to do with the data. You know, if you think that you're going to see a lot more disinflation here, you're going to get the help on the shelter side, you're going to get the goods disinflation, then the market forecast from a couple of weeks ago, you know, didn't seem absurd. And I think that's why you didn't see Chair Powell push back against it. But, you know, the Fed, I think their view has been that this is going to be harder. Last week, Powell said this could be bumpy.

And so you could almost interpret that as they're not expecting progress in inflation to be in a straight line. They don't think every report is going to break in this sort of miraculous melting away of inflation. And so I think that's where it's going to be difficult, because we're going to have these questions around how long does this sequence of 25 basis point increases go on for? Right. And so the data is going to tell it. And particularly, it seems like the inflation data is going to tell it is a hard is a no landing scenario that you write about. Is that bullish or bearish? Because it's good if we don't go into recession, good for earnings, theoretically good for our economy, but it's bad if it keeps the Fed at a more restrictive level for a lot longer.

I think the Fed has been pretty clear here, Sarah, that they want to see things slow down. You know, they keep talking about a labor market that's out of balance, that demand is too strong. And so if they don't see the slowdown, it means that they're going to take steps to try to create a slowdown, whether that means a higher terminal rate or just, you know, holding at a higher level for longer. I think that's what we're going to find out in the weeks ahead. But a no landing here is not consistent with what the Fed says they want. And so that's why I go back to the first point. A no landing is probably a delayed landing.

I wonder what we think the bar would be for them to double up again and go 50 basis points again instead of 25. They've shown flexibility here relating to the CPI reports. They've shown flexibility, but really more in the sense of adding 25s. So I asked John Williams, the New York Fed president last week, about whether they would put a 50 on the table for March. And he really didn't seem to want to go there. So, you know, anything's possible. But right now they seem to be trying to get everybody to understand that their reaction function to hotter data is, you know, higher for longer using 25s and then getting markets to price out those cuts. Those are the two mechanisms I think you're more likely to hear about right now.

Nick, thank you for joining me. It's good to talk to you. Thank you, Sarah. Appreciate it. With all these topics front of mind for investors, Nick Timoros of The Wall Street Journal. After the break, the CEO of Fanatics joins us to talk consumer apparel demand following the Super Bowl, plus his thoughts on the environment right now for late stage private companies and more. We've got a rally today up almost 300 points on the Dow. Again, Nasdaq leading Microsoft, Apple, Nvidia leading the charge here with the rally in the Nasdaq of 1.2 percent. You're watching CNBC. We'll be right back. Rally's gaining some steam here in this final hour of trading. S&P is up almost a full percent.

Remember, we're coming off of a down week, lost more than a percent on the S&P. Biggest weekly pullback since December. Coming back strong today in information technology, consumer discretionary communication services. Those are your top three performing sectors. They're all up more than 1% apiece. But it's broad. Everybody else is up, too, except for energy today. And the Nasdaq, in particular, is getting some strength on the back of big tech rallying today. Yields are mixed. The two-year yield higher. That's the one sensitive to the Fed. The 10-year yield a little bit lower, a bit sensitive to the economy. Let's check out our stealth mover, Fastly. The stock is sky high today. Bank of America Securities double upgrades the cloud services provider to buy from underperform, hikes its price target to 16 from $10.50. The analyst there believes Fastly is speeding toward

profitability in 2024 because the new CEO's turnaround strategy could drive revenue growth, reacceleration, and also margin expansion. Music to the market's ears right now. As we head to break, Dow's up about 300 points. We're just off the highs of the day. And there's the Russell 2000. Just want to mention also participating in the rally at small caps of 1%. Wells Fargo out today with a big call saying the bear market is over, but the bull market may be stuck in traffic. The firm's head of equity strategy will join us to tell us how he's positioning these in-between times next. And as we head to break, check out some of today's top search tickers on CNBC.com. Tenure gets the most interest and love, as always. 3.7, some buying of bonds today, followed by Tesla, Fidelity National Information Services, which is getting hammered today, down 14 percent. Microsoft, higher, and the two-year yield

makes the list for a change. We'll be right back. Welcome back to Closing Bell. I'll show you what's happening right now. S&P is up almost a full percent. We're rebounding after losses from last week. Got a big CPI report coming out tomorrow on inflation. Wells Fargo is out with a new note today saying the bear market is over, but warning that the bull is stuck in traffic. Joining me here at Post 9 is the author behind that note, Wells Fargo, head of equity strategy, Chris Harvey. Why are you confident that the bear market is over? So, Sarah, there's a couple reasons. One, when the wheels fall off in a bad bear market, usually what you see is balance sheets that are upside down and backwards.

That's not the case. Balance sheets are pretty good. The second thing is you want to see things reflected a certain way in the credit markets, in the bond markets. What we're seeing in the bond markets is typically the action we see after a bear market end. So we're seeing credit spread tightening. So the cost of capital for a lot of companies is much lower today than it was three and four months ago. And what that also says

is there's not a tremendous amount of stress. And the last thing is how we got here. We think we got here because the cost of capital went much higher last year, not because the fundamentals fell apart. So as a result, the underlying fundamentals are okay. But doesn't that all suggest that we could still have this recession or a correction in earnings? So we do expect, how do we say this?

We call it an economic malaise. And we do, our price target is $4,200. Our EPS number is 210. So we're expecting numbers to come down. We're not expecting a great economy, more of an economic malaise. But all that said, what we think is the bear market is over because the underlying fundamentals or the systematic risk just isn't that high. And so now what we're in

is just your average everyday garden variety type market. But it wasn't that high last year when we were in a bear market, was it? What was it that high? Well, you didn't have the balance sheets that out of whack. Everyone kept saying corporate America is in a strong place. Yeah. And that's what it was. It was the cost of capital went much, much higher, right? The Fed surprised people. If you roll a clock back 12 months, what happened? 12 months ago, people were talking about recession. That was very controversial. People talking about this Fed going 75 basis points, even 50 basis points was controversial. And everyone thought growth would never go down. Growth has corrected a significant amount. So a lot of work has been done and the underlying fundamentals,

and that's the most important thing, the underlying fundamentals are okay. For a bear market to continue, you really need that systematic risk to be high. You really need balance sheets to be bad, either on the consumer or the corporate side. And that's just not the case. So basically it's a call for the market to sort of march in place kind of for a while toward a little higher. I think that's fair. We don't see a ton of upside with large caps where we think the real opportunity is down capitalization with small caps, with mid cap. We think your best risk reward is mid cap growth. You have good valuations. You have numbers

coming lower. You have technicals on your side. And you have a space where you can really power through this economic malaise. And you like pharma as a defensive. We do like pharma. We think valuation looks pretty good. It has pulled back here. And unlike staples, you don't have to worry about a lot of the inflation issues weighing on top. What was your target last year? Our target last year was 40. Well, at the end of the year was 4,300. Right. We came in expecting the market to be down a little bit. We were expecting a 10 percent correction, but the market was down more than we expected. And so we readjusted down midway through the year. Got it. And you're at 4,200 this year.

4,200 this year. Thank you for joining me to talk about the new call. Thank you. Chris Harvey from Wells Fargo. Coming up, the CEO of Edgewell Personal Care, which makes chic razors and banana boat sunscreens. He's going to be here to give us his latest reading on inflation ahead of tomorrow's crucial CPI report. Closing bell back in a moment.

So the Kansas City Chiefs taking home the Super Bowl win last night in that comeback victory that came down to the final minutes. Fanatics, the e-commerce sports merchandise giant, says Kansas City products are on pace to be the second best-selling championship gear ever. Joining us now in a Closing Bell exclusive interview, Fanatic CEO Michael Rubin. Michael, it's good to talk to you. Welcome.

How are you doing? Good to talk to you. Tell us why. What makes Kansas City Chiefs such a big seller right now in terms of Super Bowl champ merchandise? Sure. Well, first, a little bit salty for me. I'm a big Eagles fan. I'm of Super Bowl champ merchandise? Sure. Well, first, a little bit salty for me. I'm a big Eagles fan. I'm from Philadelphia.

I know, sorry. Eagles would have been even a better outcome for fanatics and for business. But that said, Kansas City is still a great champion. I think they're 15% better than they were two years ago. Look, they've got great fans. I mean, Kansas City has incredible fans. They love their football team, and they're coming out and showing incredible support. So incredibly happy for Chiefs fans. But as a strong Eagles fan this morning, not waking up feeling very happy, but I'm looking forward from Philly, so sorry for the loss. Look, I wanted to ask you just in general how the business is doing. You're a private company. We don't hear about it that much.

In general, how's it been going when it comes to merch? You cover all the leagues across categories. What does the business look like? Absolutely, yeah. Business overall has been very good. I mean, obviously, look, we're a consumer company, and every consumer business is a little bit off from what it would have been. But last year we grew 19% organically in the merchandise business. That's our biggest business. This year we'll grow kind of in the low to mid kind of double digits.

So still tremendous growth for us. I mean, look, sports, secondly, is very strong. I think our business continues to grow not only domestically but globally. It just has tremendous demand. So we're approaching this. You'll be almost $8 billion in revenue. That's without all the trading card rates that kick in over the next couple of years from the NFL, the NBA, college, WWE, UFC. So for us, business has been, I think, really strong overall.

Right. So I was going to start asking you about some of the levers that you're going to pull when it comes to new revenue streams. Live shopping for these cards, for the Topps business. I know you've made a big hire. What is the vision here? I don't know that a lot of Americans do their shopping in a live way, but I know a lot of companies like Walmart or Amazon or eBay have all been interested in it. Yeah, well, first, live shopping in China is a massive business. I think it's like about $600 billion in revenue this year.

So it's pretty nascent in America today. But we believe long term it's going to be a meaningful business. And what's so exciting for us about Launching FinanX Live and having Nick Bell join as CEO is that trading cards and collectibles are the single biggest category in North America in live shopping days. Probably 20% of the entire business. So Fanatics today, being such a strong player in trading cards and collectibles, has an inherent advantage. It can really build something incredible for collectors. So we're excited to launch later this year, have a great leader in Nick Bell, great vision of Fanatics Live, and we believe in the business long-term.

And for us, we like to plant seeds on things that we think are going to benefit our fans, be good for innovation long-term, and Fanatics Live certainly falls within that thought process. I think of it like a modern-day home shopping network. Is that the right idea? What even is it? Definitely. Yeah, I mean, really think about, I think if you thought about, you know, QVC or HSN, you know, kind of with great brands, you know, through the Internet.

I mean, that's the most basic and simple way to think about it. It's live shopping through the Internet. If you think about it, you've got so much great content in sports, that's a great way to launch live shopping. And I think you're going to see a lot more companies go after this. Again, today in our China business, as an example, it's about 50% of our revenue. So if you look at the NBA's revenue in China, it's half of our revenue comes from live shopping, people watching different hosts talk about the products live and buying them.

And we have so many great people involved, whether it's the 3,000 athletes that we have under contract today that can, you know, host different content with us. And, you know, so I think this will be something that will be incredibly exciting in the sports business. You're also jumping on the sports betting bandwagon, which was obviously really big for the Super Bowl. And there have been great high hopes about this, even though some of the stocks have been disappointing, like a DraftKings. What are your plans and when does that launch? Yeah, so we are big believers in online sports betting and iGaming long term. I think it's been our view that we have real inherent advantages. Today, Fanatics has close to 100 million fans that we work with, over 60 million buyers within our merchandise business alone. Then we have additional collectors in the trading card and collectibles business.

And so we think, if you think about online sports betting and iGaming, it will be a very big business long-term. And we think we have real inherent advantages based on the strength of our brand, the strength of our customer base. And so I agree with you. The stocks have been disappointing, but I think they were just really overvalued in the early days. But if you say, will this be a big business long-term, the answer is yes. And do we have inherent strategic advantages? Absolutely. So we're going to launch in beta by the end of March. I think by the end of this year, we'll be basically in every major state in the U.S., other than New York, where it's very hard to make money with a 51% tax. But we're really bullish on what this means for us long term.

And half of our customers today tell us that they want to gamble with us, that they really do online sports betting, that can actually be a great place for them to place bets. So it gets to the overarching question here, Michael. You were recently valued at $31 billion, able to raise a few hundred million more. I reported that in recent months you hosted an analyst day of sorts, which is interesting for a private company. So how are you thinking about an IPO and where you may be on this path? Yeah, well, first, we actually raised over $700 million, all common stock with the majority of the shareholders that were new. For us, all that money gets used on M&A.

We generate free cash flow today. All the businesses other than gambling are profitable businesses. So the merchandise business, collectible businesses are good profitable businesses. We're obviously investing in gambling like everybody else. But for us, we think going public will make sense. It's not something we're doing in the near term, but it's something that we will do in the midterm. And when the time is right, we're going to do it.

Are you thinking of yourself as an e-commerce company, a sports betting company? How should future investors value you and think about your comps? Yeah, so the way I really think about this business is we're really creating a kind of digital sports platform for sports fans to get anything they want digitally. about your comps? Yeah, so the way I really think about this business is we're really creating a, you know, kind of digital sports platform for sports fans to get anything they want digitally. So whether it's merchandise, whether it's a place that bets on sports, whether it's collectibles over time, I think there'll be other things you'll see within this platform.

So it's really a platform that will give the sports fan anything that they want to buy. You know, people really think about Fanatics for the merchandise business. Hey, I'm going to get my, you know, my NFL jersey or my Yankees product, my Manchester United product. But for us, we really think about how do we give the sports fan whatever they want digitally. I think that's a really big opportunity. There's really not another company that's going after this other than Fanatics. And so I think that gets us really excited. Sports is a really big business. And I think we wake up every day and we're obsessed with how to improve experience for the sports fan. And I think if we keep working at that really hard with our 18,000 associates every day,

we've got a big opportunity to give sports fans exactly what they want digitally. And we feel like we're just really getting going. It's crazy for a company that's going to be almost in the $8 billion range without some of these new rights this year. We feel like almost a young startup company, and that's what's so exciting about what we're doing. Michael, keep us posted. Thank you very much. It's good to talk to you. Absolutely. Great to talk to you.

I know you had a killer Super Bowl lunch as well with all the celebrities there in Arizona. We had a fun weekend. You'd think that I didn't want to get on video with you because I was like beat up in the soup bowl, but we made an attempt for like 15 minutes to get on video with you, but my voice is raspy, so I at least want you to see that I actually looked presentable today. I know. Well, we were looking forward to having you. It was a

shot issue, not a hangover issue or anything like that because it would look like a fun party. Michael, thank you. Michael Rubin, CEO of Fanatics. By the way, Fanatics was once a CNBC Disruptor 50 company, and we are now accepting nominations for the 11th annual list of innovators. If you're a private venture-backed company, you can scan the QR code right there on the screen or go to CNBC.com slash disruptors to learn more. Take a look at where we stand. We're continuing to build on these gains up 330 now on the Dow. S&P is up a full percentage point. We've got only one sector lower. That's energy. Everybody else stronger today. Information

technology is leading the charge. It's the best performing sector right now in the S&P 500. And that's thanks to a number of names like the SolarEdges, Microsoft, some of the semiconductors like Intel, NVIDIA. They're all rallying. AMD up two and a half percent as well. Up next, we'll get a read on inflation ahead of tomorrow's key CPI report when we are joined by the CEO of Edgeware Personal Care. And during February, we are celebrating Black Heritage through the stories of some of our own CNBC teammates, contributors, and leaders in business. Here is former BET CEO, Deborah Lee. Growing up in the segregated South emphasized to me at a young age the importance of being

an African American woman. I've always been very proud of my heritage, proud of our history, proud of all we've accomplished. And one of my greatest desires in life was to be successful and to be able to give back to my community. I'm very proud of being able to do that. And I hope that it has had an impact on the rest of the world. Tomorrow's inflation numbers will offer a look at just how much consumers are paying for a range of goods. But pushback has already begun. We're just reporting that Walmart is warning suppliers, including shaving and sunscreen maker Edgewell, to avoid hiking prices because consumers can no longer keep up. Joining us to talk about this and a lot more in a Closing Bell exclusive interview is Edgewell CEO Rod Little.

Rod, welcome back. Nice to see you. Hi, Sarah. Always good to be with you. So tell us what's happening with prices out there for the consumer. Well, I think we've seen a period where prices have gone up. We have taken pricing, like all of our our competitors have based on rising input costs, both wage and raw materials, chemicals and whatnot. And to this point, the pricing that we have anticipated taking has been executed. And so we've seen the consumer be resilient. Our market shares are holding up.

We're holding or growing market share in most every category we operate in. And so I think it may be more difficult from here to take pricing, but we've executed the pricing we have in the plan for this year. And to that report I mentioned, what are you hearing from Walmart, which is obviously, I think it's probably your biggest, right, in terms of clients or in terms of the retails that you work with?

Yes, Walmart is our biggest customer globally. That's correct. And I think what we're hearing is the consumer is potentially coming into a period where they're going to be stressed and everybody's looking to protect their own margin structure. And so I think we're in a period, though, if you have good innovation, good ideas, and you bring something interesting to market and you can price for it, there's price to be had there. If you don't have that, it will be difficult from here. So how are you thinking about how to manage some of the costs when it comes to commodities. You've clearly done a good job on productivity savings and passing on prices to consumer, but you're saying things look like they're going to change now. Yeah, I think we're at an inflection point

in our business with gross margin percentage and where it heads. We've come through a period where gross margins have been declining not only for us, but our whole peer group in the industry. And we're looking at a period as we get into the second half of our fiscal year here, beginning in April, where we're going to expect gross margins to expand and become accretive. Part of that's the pricing we've put in. Part of that is the good cost productivity work that we've had. But also part of it is moderating inflation year over year. If you go back two quarters, we had 700 basis points of margin headwinds. The quarter just finished, it was 500 basis points. And we're projecting 350 for the full year. So moderating as we go to the back half and full year gross margin accretion. So we've got pricing power with our brands. We've

done a good job on the cost productivity work. And I think we set up, you know, for the future where we have organic growth, we have gross margin rate growth. And so we think it's quite interesting for the future. What about discretionary spending or are you more of a staple? Are you seeing any pullback in terms of customers spending on premium brands like yours for sunscreens or razors? Yeah, we are not seeing a pullback, Sarah. Our categories have all continued to grow through this period. Men's grooming, for example, growing double digits, femcare growing, shave growing. And so we're in a period where the consumer has been very resilient, particularly here in the United States. And so with a healthy

consumer to this point, categories that are growing, the other thing we look at is trade down. Is there any meaningful trade down happening? As you know, we have a private label shape portfolio where we're the leader here in the United States. And we're also not seeing any meaningful trade down in our categories. Not to this point. Well, that, I mean, a good sign on the consumer overall. Rod, I have to ask you about some of the sunscreen voluntary recalls with Banana Boat that seem to have expanded. Why is this happening?

Yeah, there was one lot that we added into the recall that was from last summer, Sarah. It was a specific hair and scalp formulation that we wanted to make sure that we were on the right side of safety so that when any time a consumer goes and chooses Banana Boat or Hawaiian Tropic, our two main brands, they know what they have is safe and effective. And we just wanted to be sure that we had captured everything in the recall. There's really nothing to recall. There's no financial impact to

this. It was a smaller third-party batch that we had made. So really no news there other than we just want to lean into safety. All right, good. Outsized because of the brand is so well-known, I guess, attention in the news. Rod, thank you very much for joining me. Appreciate it. Thank you, Sarah. Go Chiefs. Go Chiefs. Oh, go Chiefs. All right. We had an Eagle. There we go. We had an Eagles exec and now a Chiefs exec making everyone happy. Microsoft, I'm still upset about the Bengals. Microsoft rallying 14 percent this year. It's having a good day today as well, up three percent on a number of bullish Wall Street calls that we will hit straight ahead. That story plus Meta surges and Ford's

new EV strategy when we take you inside the market zone. Be right back. 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, we've got Julia Borson here on Meta's move higher and Phil LeBeau on Ford's EV update. We'll kick it off with the broad market, Mike. We're just about the highs of the session right now at 352 on the Dow. S&P 500 rallying nicely here into the close and into a big CPI report tomorrow where you said the setup is looking better. I don't know if you read Marco Kalanovic's note out of J.P. Morgan, the strategist there. He's had kind of a mixed record lately,

but he was warning that he thought a lot of the good news was being overly priced in on inflation and in the Fed. I think arguably the market has fed off of a lot of relief on both the inflation front and the idea that the Fed is pretty well priced right now, that we know the destination, how fast they'll get there. So, yes, anything that upends that comfort is probably not going to be received that well by the market. But I do think last week it is very quiet, sideways digestion type move. Didn't really do much damage to the charts were like one percent below the highs from the week before last. So in decent shape, home building related stocks today doing very well. Credit markets are calm.

So you're not getting a new reason if you came into work today to be incrementally worried. So we'll see if that changes with CPI. I don't know. Edgewell just said margins, inflection point for margins. Consumers going to push back against all these higher prices. That might be consumer staple specific, but I thought it was good, interesting color. Let's hit Microsoft because it is spiking again, leading the tech sector higher. The stock in the spotlight in the past week after relaunching its search engine Bing with technology developed from

that investment in OpenAI's chat GPT. Analysts saying it's more than just AI. The Morgan Stanley reiterating an overweight rating and Stifel updating its price target both on strength in Microsoft's cloud and office segments. Morgan Stanley calling it one of the best secular growth stories in tech. Mike, either way you look at it, another big move up for Microsoft. Yeah, it's a stock that the street loves to find fresh reasons to love in general because it is so well managed. It is so well diversified. It just is sort of a very steady play on just the growth in the digital economy. And then you have this public embrace of the story when it comes to

AI after last week. So I understand the momentum. What was interesting about the Morgan Stanley note is it was really just a lot of slicing and dicing of the existing guidance and how that's going to filter into the accounting for the next few quarters. And in other words, coming to the conclusion that they can resume earnings growth faster than the market thinks. Now, the current fiscal year ends in June. It's supposed to be basically a flat year profit-wise with last year. So they're basically saying it goes up from here, which is required, if you ask me, for a stock that's already priced at 28 times earnings.

So it definitely has the momentum. We'll see how much is left in the tank in terms of getting that valuation up, getting people to believe numbers are going higher. Adding about 49 points to the Dow by itself. Salesforce adding 24. So all the cloud names are working today. Meta is also on the rise after a report from the Financial Times that another round of job cuts could be coming. Meta eliminated more than 11,000 positions, remember, back in November, among the first big tech companies to undergo layoffs. Julia Boorstin joins us now. So,

Julia, what do we know about this next round? Well, look, we got a no comment from Meta when we reached out about this. But what's interesting about this FT report is they said that this pending set of layoffs that's in the works is delaying the ability for budgets for teams to set their budgets. But I think what's most interesting here is a B of A securities analyst, no doubt on this headline today, maintaining its buy rating, $220 price target for the stock, saying that the year of efficiency, which is what Mark Zuckerberg called this year, may just be the beginning and more layoffs are possible and saying they're very bullish on this idea. There's more opportunity for Medet to be far more disciplined when it comes to how they're managing their costs. So that's seen as a very bullish thing from B of A.

But I just want to point out, Sarah, that we had some other news from Medet today, which is that Marnie Levine, who had been chief business officer, is leaving. And they're effectively replacing her with two other executives who've been around for a while. Nicola Mendelsohn and Justin Ossofsky. And they're going to be taking on expanded roles and reporting up to the COO. So more changes at Meta. Yes. And potentially, I don't know. Is that a good thing? Is it is it are they trying to, I don't know, take out a layer management or is that is that unrelated? Well, look, I think Marty Levine was the one who decided to leave. She'd been at the company for 13 years. I think it's worth pointing out she was very close with Sheryl Sandberg and is one of a number of very senior

women who has announced her departure in the past several years. But it does. So there's I think there's questions about whether or not that's a good thing for the company. Probably will be a tough transition there, even though the people replacing her have been around for a while. She's certainly a valued part of the company. But it does seem like the sense that more layoffs could help the company be even more focused and more efficient. It does seem like if there are these additional layoffs that have been reported, then that would be a good thing. Mike, how does Meta look? It's had quite a comeback this year. It has, but it did get very washed out. It did look very cheap, even based on earnings before we were filtering through all the job cuts and cost cutbacks that we're seeing right now.

So it looks like it's got the same valuation as Alphabet. They just have come at it from different directions. Meta is a unique situation in terms of the big communication services and tech companies in that they could win back the street simply by pulling the lever on costs. You didn't have to do anything else. And I think investors are going to start to get even greedier about this. They're going to want more buybacks. They're probably going to want more margin protection. We'll see if they do get any more from here. But right now, you know, it's still got the price momentum to go along with the fact that the valuation isn't yet challenging at this level.

Got it. Julia Borsten, Julia, thank you. Let's hit Ford announcing it will partner with China's CATL to build a new $3.5 billion EV battery plant in Michigan. Ford will own the plant and then license the technology from the Chinese company. Earlier on Power Lunch, the CEO, Jim Farley, discussed how this deal will help make EVs more profitable for Ford and also more affordable for the consumer. We're scaling up to 600,000 units by the end of this year. And these batteries are less expensive, as you said, for the consumer. They're also better business for us, and they'll help us get to that 8% roadmap for profitable EVs. You know, scaling EVs is great, but you have to make money on them.

Phil LeBeau joins us. So, Phil, how does this fit into Ford's EV strategy and what's new about it? Well, what's new about it is that LFP batteries, and that stands for lithium iron phosphate, that's the battery composition there. That's different than what they currently use, which is nickel, cobalt, manganese. And those are more expensive elements to have within a battery pack. LFP batteries, they're cheaper to produce. They're a lower cost, so you can bring down the cost of the EV that you're ultimately selling with that battery pack. And while the range is a little bit less, it's not a huge drop off. So for many people, LFP makes more sense in the long run to buy.

And if you're Ford, having LFP production here in the United States helps out a lot, as they're ramping up to 2 million in annual EV sales globally by the end of 26. That's their target at this point. Is that more like what Tesla, how Tesla uses the batteries? Yes, that's your standard. That's the battery composition for the standard range Model 3 and Model Y. So you'll see this from all the automakers. They're all gravitating towards, let's do lithium iron phosphate. You can still get what about 85, 90 percent of the range that you would get from the other composition that is currently in use.

And you don't have to worry about as much nickel cobalt. It just makes more sense. And I think when you look at what Ford's decision is, this is a decision to say we want to make more EVs affordably priced as affordable as possible and bring down our costs at the same time. And it gets produced in the U.S., importantly, right? So they can get the credits from the IRS. Right. Absolutely. Absolutely. Raw material still remains an issue, but they've got until 26.

This plant won't be up and running until 2026 in south central Michigan. So who knows what the tax credit situation will be by then? And who knows what the supply situation will be? Mike Ford, over the last year, it's been tough. It's sort of straddled in between these longer term plans that investors were excited about on EVs and then the shorter term cyclical worries on the the auto market and rates and everything. For sure. And that is really keeping a lid on the stock and the valuations. And really, you know, I can understand Ford has to constantly send the message that they are scaling up in the one part of the auto market that is growing and that they're going to be a significant and lasting player in EVs. And it's not going to be just about cannibalizing their

own market share. For the moment, though, I mean, the stocks were it was a dozen years ago and 23 years ago before that. And it's a six, seven times earnings picture. So, yes, it reflects a lot of concern about the durability of the current cycle and and how they can remain profitable throughout it. So not a new story, but definitely one that's, I think, gotten an extra set of extra bit of urgency here with management at Ford just to send the message that they're not going to be kind of outmaneuvered, outinvested in this area. Got it. Phil LeBeau. Phil, thank you very much. Enjoyed your interview. By the way, tomorrow we've got another big CEO interview,

an exclusive with Bank of America CEO Brian Moynihan from his firm's financial services conference. That's going to be live at 10 a.m. on Squawk on the Street with me, Brian Moynihan, 10 a.m. tomorrow. Mike, we've got just about two minutes to go here in the trading session. Looks like a strong day. What do you see in the internals? Yes, certainly has been strong, Sarah, about three to one advancing volume over declining volume. So it's yeah, even though Microsoft is up big and is having a big impact on the S&P, it's really a pretty broad rally right here. 2.1 billion shares on the buy side, although it is overall somewhat lighter volume. Look at stocks versus bonds year to date.

This would be the TLT long term Treasury ETF relative to the S&P. They were going up together for the first month of the year. And you see stocks outperforming since then. Yields going up. Longer term Treasury selling off a bit. That inflection point there was the jobs number in the first part of this month. So clearly, stocks still taking comfort that the economy is kind of sturdy, not yet panicking over what it might mean for yields

and the Fed at this level. Take a look at the volatility index. It's backing off only slightly, even though it's a Monday. And normally, you have a little bit of a give back. So scraping along that 20 area, clearly the CPI tomorrow is something that is keeping it more elevated than it otherwise would be here above 20, just given how calm and relatively firm the equity indexes have been themselves. All right, Mike, thank you. Into the close, we've got the Dow rallying 350 points, high of the day. We've got 28 out of 30 Dow stocks higher right now. The only losers are Disney and Chevron. Everybody else is gaining. Microsoft, Home Depot and Salesforce, biggest contributor to the Dow gains. Up 1.1 percent on the S&P 500. Again, rebounding from a week last week where we were down more than a percent in the biggest pullback since December or so.

Every sector higher except for energy right now. What's working best is technology, consumer discretionary, consumer staples, financials having a good day up 1 percent. Got a little curve flattening. Two-year yield is higher. Ten-year yield is lower. The dollar is stronger. The Nasdaq is up one almost in the half percent, 1.4 percent. Thank you, Microsoft, Apple, Amazon, Meta, NVIDIA, Netflix, a lot of the media names like our parent company, Comcast, Warner, also having a good day. That's it for me. I'll see you tomorrow, everyone.