Closing Bell - Closing Bell: Stocks Sink on Concerns over Israel Response to Iran Attacks 4/15/24

Episode Date: April 15, 2024

Our all-star panel of Dan Greenhaus, Lauren Goodwin and Erin Browne break down what is at stake for stocks amid all of the geopolitical uncertainty. Plus, Plexo Capital’s Lo Toney explains how he is navigating the tech sector. And, market expert Mike Santoli breaks down the most crucial moments of the trading day on an ugly day for stocks. 

Welcome to Closing Bell. I'm Scott Wabner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the tension between rates and stocks. And what happens to the rally if yields keep rising, even for the alleged right reasons, the strong economy? We'll ask our experts over this final stretch, including PIMCO's Erin Brown, who reveals her playbook in just a few moments. We're looking forward to that. In the meantime, take a look at the scorecard with 60 minutes to go in regulation. Been a battle for much of this day, as elevated yields have capped the market once again. A much stronger than expected retail sales report showing just how robust the economy remains. The dollar still

catching a bid on those heightened tensions in the Middle East. Gold and oil are both lower. And two stock standouts from the Dow to highlight for you. Goldman a nice winner after a turning this morning. Salesforce, though, selling off sharply on a report of another possible acquisition. It does take us to our talk of the tape. How much are stocks currently at risk and will earnings save the day for the rally? Let's ask our panel. Dan Greenhouse is the chief strategist at Solus Alternative Asset Management.

Lauren Goodwin, portfolio strategist with New York Life Investments, both with me at Post 9. It's good to see you, Lauren. I begin with you. It feels like all of a sudden everybody's cautious. I mean, you had this midday headline which sent stocks to the lows of the day. Israel's military chief of staff says there's going to be a response to the Iran attack. I've got BTIG's Jonathan Krinsky talking about downside potential. I've got RBC on the rising risks. Even bull Ed Yardeni talks about a potential stall. And then Renaissance Macro, Jeff DeGraff says we're not oversold enough. You have more downside ahead. What do I make of all of that? I think the reality for the markets is that we're not going to see a sustained downturn in the U.S. equity market until we have an earnings problem, which we do not have right now, and the labor market cracks, which

is not happening right now. And the labor market cracks, which is not happening right now. And so I'd anticipate that the jitters that we're seeing are a result of, yes, valuations are high. There's a lot of uncertainty. That's been true for months. So that's a reality check that, yes, obviously risk has been introduced. And anytime there's geopolitical risk, especially in that region, you're going to get a little bit nervous. You had the market, you know, the rally went up a lot. You know, tax days today, maybe some of the selling late last week was due to that. J.P. Morgan says they're still bullish, and here's why.

And I think it plays right into what Lauren's talking about, and I think that's why we need to debate it. We don't think the rapid repricing in the Fed's rate cut expectations changes our bullish view as above trend GDP growth still supports corporate earnings. Yeah, listen, I think that's exactly right. And just to tie this together, the right reasons is the important adjective. That's why I put that there, because right there. Why are they rising? Yes. Well, listen, you have the strong retail sales. You need to look no further than the curve itself. At the short end of the curve, rates are up, call it, two, three, four, five basis points maybe. At the longer end of the curve, you're up 10 basis points. And obviously, some of that is positioning. Some of that is going to be worries about oil.

And some of that's going to be the strong retail sales report and the idea that the economy continues to do well in the first quarter, which generally corresponds to higher or better earnings prospects. Certainly, I think, better than what the consensus is in right now, is looking for right now. And when you put that together, assuming the economy, to Lauren's point, doesn't roll over or something tragic happens that we don't know about, then the bias remains to the upside in the medium term, even if in the short term we need to consolidate. And it doesn't matter, Lauren, that earnings growth expectations have come to come down so substantially where it was, you know, close to 10 percent and then it was down to 7 percent at the beginning of the year. And now we're under 3 percent for earnings growth

expectations. Does that matter at all? It appears not to matter a whole lot in terms of the pricing of the market today. It's something that we've been pointing out for for months, that earnings expectations over the course of this year are high. I think what we've been seeing in the U.S. economy, though, is that there's so much resilience. And when we're looking at Q1, which is what we're in the process of sort of unveiling, there's still a lot of optimism. We expect 2 percent earnings growth, 3 percent revenue growth this quarter. That's still a pretty meaningful tailwind for the market. And to Dan's point, that doesn't mean we can't see moments of consolidation. In fact, growth, 3% revenue growth this quarter. That's still a pretty meaningful tailwind for the market. And to Dan's point, that doesn't mean we can't see moments of consolidation. In fact, one of our high conviction calls is that there hasn't been quite enough term premium on long-term bonds.

It's an area where, just considering the inflation and growth volatility that we've seen in the market, not even to mention supply and demand, that we'd expect to see a little bit more volatility. Not surprising that we'd see a couple of days of volatility as a result. Part of the issue, too, Dan, isn't it that, you know, you've come here in a large part because of multiple expansion. Now it's time to put up or shut up. Like, earnings have to justify where multiples have gone to. You can't just rely on the valuations and multiples to continue to expand to take stocks

higher, can you? Maybe you can. Well, listen, you can when you're at 12 or 13 times earnings, but not at 20 times. It gets a little tougher. But this has been the conversation we've been having for the better part of a year or two and in large part, the better part of 20 years. The number of times people have said over the last 20 years, it's all earnings growth from here on out. I'd have a million dollars for every time someone said something like that. And again, you just brought up the most important point. Just look in the Q4 of last year. I'm sorry. Through the first quarter of this year,

you went from nine to seven to six to five to four to three to wherever we currently are, call it three percent EPS growth. And the stock market's gone up, call it 20, 25 percent off the lows. It's made no difference whatsoever that earnings expectations have come down. And I would add, listen, we're having a little bit of a pullback here. It's been a strong rally and I would expect us to consolidate hopefully somewhere down like around 5,000. But in a positive take on things, the fact that earnings expectations have come down into earnings season sets the stage for a lower hurdle for which stocks to beat, and they probably will. The only variable now that you have to add in, Lauren, is the fact that rates are backing up, which is why it matters even more that earnings

justify the move. You could say, well, you could have multiple expansion if earnings are just, but rates are coming down. So that plays into the story. I can make a good case for that. Now it's harder. Yeah, I think there's a couple of really important things we can take away from this balance. First of all, what this says to me is that the market probably isn't going to tolerate much conversation around rate hikes without a broader market event, including a tightening of credit conditions and certainly broader financial conditions, which includes the equity market. And so when we talk about, oh, this activity seems to be refirming in the U.S., should there be a rate hike back on the table? I think the bar for a rate hike is really, really high. Especially when the talk continues to be about cuts just pushed further back than

we once thought they would be. You have to figure the bar is really, really high for another cut. I think those of us that follow the Fed. I mean, for another hike, excuse me. That's right. Those of us that follow the Fed pretty closely, I think, are in universal agreement that they really sound like a group that doesn't want to hike rates anymore and would much rather just leave rates up at an elevated level. Oh, they want to cut rates badly. And they want to do it because, in part, they don't want to ruin the story that they're able to tell, right? They got us further than most people thought they would in terms of, you know, landing this thing okay.

They don't want to wreck it now. Well, but yeah, no, that's true. But it's also the fact, I think, and this is why my over-under for the year has always been two, that they really, I think, you know, in the back rooms, the smoke filled—does anyone smoke anymore? But in the back rooms where these decisions are made, do they feel like getting one cut in, assuming the economy is gliding to where they think it is, getting one cut in sufficiently far away from the election insulates them somewhat? I think they would probably agree as a group.

So if not June, maybe July. I still think they want something in the summer. You're still modeling two. You still have two. It's it's I think the Fed wants to cut so badly. And there are, you know, lots of reasons, but I think the most important of them are as follows. First, floating rate credit starting to have trouble. And the signal that just moving from a plateau to a cutting cycle, even if that cutting cycle

takes years and years, is so important in terms of the extend and pretend that floating rate credit has to do. But also importantly, the curve is still inverted. And that's a dynamic where it's so difficult for banks to be reliably profitable when it comes to interest income. It's just a very challenging lending environment. And that constrains the real economy. The Fed would like to back off of that area of restrictiveness.

And so I think they're going to try to cut. Which is why do you want to be negative in the face of that backdrop? Well, we know the backdrop is what it is. Yeah. That's going to cut just a matter of when. Barring a major surprise from here from an inflation reacceleration. But the ECU is not showing you that. That's right.

And that's why this immigration story, which I don't think has gotten too much attention on the network, and rightfully so, because it's a bit esoteric. But why the economics profession, if you will, the Fed and and sell side economists have latched so hard onto the immigration story as being not a silver bullet, per se, but a really powerful explanatory variable. It gives them some scope for reducing the level of restrictiveness while understanding that the labor market doesn't have to weaken nearly as much as they thought it feels like the only thing that would upset the bullish narrative from here is, as Lauren just said, and Adam Parker writes today, the most significant challenge to that outlook, at least

in the near term, is tightening financial conditions that would cause a market sell off. I think we can all agree that if you had a sudden tightening of financial conditions, mostly through the credit market, not necessarily the equity market, but spreads are tight, so you're not seeing that now, but that would be a potential game changer. I think so. One thing I want to point out, though, is that market financial conditions are credit and equity prices. And so for me, what it really comes down to is why would financial conditions meaningfully tighten? And again, that's all about growth. That's about earnings coming in meaningfully under expectations. Usually it's turning negative or the labor market starting to crack. And again, until we see meaningful signs of either of those

things, any sort of consolidation, I think, is a buy from an equity market perspective. The blood flow, if you will, of the economy can do just fine if the stock market has a correction, for example. Of course. It gets a little bit harder for it to flow if you have all of a sudden much tighter credit. That's right. And listen, right now, credit is largely wide open. Investment grade spreads are sub 100, which for viewers who are not familiar with this is super tight. High yield spreads are depending on your index down around 300. For viewers who aren't familiar, that's super tight. There's really, I mean, refinancing is wide open. The maturity walls have been pushed out. There's very little evidence, if any evidence, in the credit markets that something is awry. And in fact, when you look

at the Fed's lending standards data, which is the nucleus, if you will, of all of this, that's starting to ease. Banks are starting to ease up on the break a little bit, which is going to help reaccelerate things. To answer your question two minutes later, yeah, that's a powerful tailwind. Yeah. Let's bring in Erin Brown now of PIMCO, get her playbook on what that firm is thinking about right now. It's nice to see you. Welcome back. Thank you. I think the last time you were on, you were pretty bullish. Do you remain so? I do. I mean, I think, you know I think the last time you were on you were pretty bullish. Do you remain so? I do. I mean, I think, you know, like the panelists before me just stated, I do think that we're

still in a cyclical recovery in the U.S. economy in particular, to some extent the global economy as well, all of which is underpinning a really robust earnings environment for stocks. And I do think that ultimately that's going to be what drives stocks higher from here I do think though the last two trading days did underscore two points which are important first rates are moving higher we've seen a 45 basis point back up in the 10-year yields over the last month or so and so what that does is you know those who were you know calling for getting back into laggards buying the small caps over large caps and a real rotation in the market, I think are likely going to be disappointed. They certainly have been disappointed over the last couple of weeks.

And I think that's likely here to stay. The Fed, I think, is likely not going to cut rates until the back half of this year. And I do I would take the under in terms of what the market's pricing and currently and what that means is that small caps and those companies that are really leveraged to easy credit are likely going to be disappointed. I think the second point is that you are starting to see a broadening out of participation in the leaderboard for the equity market. And I think particularly for more industrial cyclical economies that have some leverage

to inflation, I think that that's a really interesting spot for the market right now. Okay. So what I hear you saying is that you can still be bullish, but you just can't express it perhaps as broadly as you once thought you might be able to do well I think that you can start to express it more broadly across cyclical parts of the economy but you want to stay large you want to stay liquid you want to stay up in quality and really avoid the smaller cap laggards that have underperformed certainly over the last year or so so you mean the broadening

story can continue just not with the Russell participating? Exactly. Not with the Russell, not with certain segments of the market, but I do think you want to start expanding your exposure to industrials, to metals, to some extent energy, if you haven't already, that are going to be advantaged by the manufacturing cyclical uptick that we're starting to see, not just here in the U.S., but also on a global basis. So even over the last year, you really...

No, I'm sorry. Finish your thought, Erin. I apologize. No, I was just going to say, over the last year, you really just wanted to be in tech and tech only. Now you can start to expand that lens outward, but really focusing on the large caps. I mean, I was just going to say, you know, even with energy and materials already up, you know, quite a lot, that trade has worked in large part on just the whole story coming

into focus. Now, if we're rethinking things, have those kinds of stocks moved too fast? Well, I think there's two things. First, you're seeing inflation tick up on the U.S. Second, you're seeing manufacturing surveys also tick up in the U.S., but also globally. And then you really haven't seen any participation from the global stage in terms of commodity demand, particularly out of China over the last year or so. And you're now starting to see slowly that begin to turn as well. So I think that that trade does have legs over the medium turn.

Yeah. And so, Erin, I would just add to your point something that I've been discussing with Scott as well. I would largely just want to echo what you were saying, which is this narrative that in order for the rally to broaden, it's got to be exposed or expressed in the Russell 2000 is an idea with which I totally disagree. And you see it sectorally within the S&P 500 and certainly in the mid-cap space as well. And there's no better example, as you mentioned and Scott alluded to, which is energy, a name that lagged for quite some period of time. Big cap tech is obviously running into trouble now. But when you look at the refiners, you look at some of the integrators, even some of the other riskier sectors, energy has done

incredibly well. And again, if you're looking for evidence of broadening, why isn't energy, and I'm not saying you said this, but why isn't energy a sufficient evidence for that broadening? Yes, I would absolutely agree with that. I'm still keeping long my large cap tech names. I still like the AI trade. I still like things that are levered to large cap tech, but not selling that portion. But where I'm buying right now is more on the sort of industrial cyclical sectors.

Is that where you think, Erin, that earnings are really, the rubber's going to meet the road once these large cap tech companies start to report? They're going to basically give the market all of the signals as to why they've worked from a year ago until now. They've been able to be offensive and defensive. And if people are going to get a little bit more defensive in the here and now,

it's yet another reason why those stocks may continue to work. I think that's right. I mean, first of all, they are defensive. They have large cash files that they're sitting on and they continue to invest and deploy that capital, but they're not required on the market broadly for financing. So that insulates you a little bit from the rate move versus the smaller cap tech names, which are very leveraged to rates in particular. Second, they are able to grow in absence of strong GDP growth and so they are levered to the growth somewhat in the overall economy. But there's a very strong secular growth trend that's underpinning what I see as increasing quarter over quarter earnings growth. And so I think you have strong growth, a defensive sector that's going to do well because of the secular drivers that are underpinning this. And I really think that when you look at valuations, the valuations of these stocks really haven't moved over the last two, three years

because they're growing into their earnings. I think that's likely to continue. Lauren, Aaron makes the case, much like Tony Pasquarello at Goldman is now. Keep your eye on the ball. Stay large. Go big or go home. And stay with those types of stocks, mega caps, for all of the reasons that Aaron just articulated. I think that it's very clear that though the market performance has been broadening lately, quality is still the trend among the leaders. And so that, yes, points to large cap.

It points to free cash flow. It points to good fundamentals. And if we were expecting to see a really broader equity market performance, you would expect to see the junkier, more cyclical things really expand, which is not what we expect. I want to just reemphasize something that Aaron's

pointing to around structural trends, bringing it back to what you were asking earlier around geopolitics. Because the U.S. has become the biggest energy producer in the world, and because structural trends around AI and digitization and the energy transition supply chains all point to an inflationary impulse. The cyclical element of what Aaron is describing, if you add a macro volatility component to that, so your oil, your gold, your dollar, your 10-year, you now need materials and industrials to support that macro volatility trend. So for different reasons, I completely agree with those investment themes, especially as the U.S. economy continues to reaffirm. Why don't you also give me a thought, Lauren, before I wrap this up on bonds?

Where do I want bonds to be? I mean, if you're nervous, you're buying bonds, yields go down. Well, today, yields are up even though we're nervous. Ten years at 463, we'll call it. I love a duration barbell in this environment. So you and I have talked time and time again about if the market believes, as I do, that the Fed's next move is a cut, then inching into short duration credit helps to manage some of that reinvestment risk on the short side.

But because of the volatility that we've seen in bonds, we don't like duration as a major bet in our portfolio. So we balance with longer duration actually in the municipal curve, which is not inverted. Erin, PIMCO obviously has a view on how to play credit right now. Yeah, I think that the next move, I think we all agree here, is a cut. The question is when. Historically, you want to start terming out

your duration at the point that the Fed starts cutting. So right now, I think it's comfortable to start setting your target levels to start buying duration, particularly longer duration for every 10 basis point move higher that we see in the 10-year yield. But I do think if you're a medium-term investor or a longer-term investor, buying duration is going to pay to own now. So you can start inching into that trade as we move higher in yields. But I do think that from a risk-adjusted basis, duration will pay out dividends for investors. The question is when you start to get that. And I think at these levels, it's a pretty good time to start to buy.

Greeny, you have a view here? Yeah. I mean, listen, if the Fed's going to start cutting later this year, then belly shorter, like you could pretty much make money everywhere. Obviously, duration adjusted, it's going to be better for you at the longer end. But at the end of the day, for me, risk assets are where you're going to get this tailwind. If they're threading this needle, if inflation is going to continue to come down, if they're going to tolerate it north of 2% while they're cutting, you're talking that's a pretty good mix for the stock market. All right. We'll make that the last word. Aaron, I appreciate it. It's good to see you as always.

Lauren, thank you so much. Dan Greenhouse to you as well. We are at the lows of the day as we send it over to Steve Kovach for a look at the biggest names moving in this declining market as we head towards the close. Steve. Hey there, Scott. Yeah, let's start with Logitech shares of the computer accessory maker down as much as 7% today after Morgan Stanley analysts downgraded it to underweight. The analysts said to expect just 3% annual revenue growth through 2027, which is below consensus estimates. And medical properties trusts going the other way. The health care real estate company shares surging about 17% today after the company announced it would sell majority interest

in five hospitals located in Utah to a new joint venture company for $886 million, Scott. Steve, we'll see you in a little bit. Thank you. We're just getting started here. Up next, your big bank setup, Morgan Stanley and Bank of America are out tomorrow morning with their earnings. So we hear from top bank analyst Mike Mayo now with what he's expecting from those numbers, given what we saw from Goldman today. We're live in the New York Stock Exchange. You're watching Closing Bell on CNBC. We're back to financial sector in the red today. Goldman isn't, though, holding on to gains thanks to strong results this morning. Morgan Stanley and Bank of America among the last of the big banks reporting. And that's tomorrow. For more

on what to expect now, as well as Fargo's Mike Mayo is here on Post 9. It's good to see you. Thanks for having me. All right. So let's talk about Goldman, because that's what was this morning. And that is bucking this trend in the market today. And you just upped your estimates, too. You like what you saw. I like what I saw a lot. We've all been waiting for David Solomon. Can you get the job done when the investment banking momentum comes back? And today the answer is a definite yes. They beat expectations. They grew investment banking. I think this will be best of breed in first quarter when it comes to capital markets. So I don't know, is it over? This is Goldman back.

I mean, is that a fair question to even ask? They go anywhere. I mean, the stock, you know, was underperformer for a while. They back one quarter does not make them back. The returns last year were a piddly 10 percent, which for Goldman is not where they want to be or where they should be. This quarter, it was about 15%. So if they can put a few of these quarters together, then we can say Goldman's back, but they're at least pointed in the right direction. But you still, what are you,

overweight on the stock? I'm overweight on the stock. They have two very strong businesses, and that's global banking markets and wealth and asset management. Wealth and asset management, it's lagging. It's one third. But those hobbies that we talked about over the last three, four years, markets, green sky, all that stuff, it's really not much of the equation anymore. And they reiterated today that they should break even that third business line, platform solutions, next year. So you're back. Goldman Sachs is going back to its roots. And by the way, next month is its 25-year anniversary being a public company. It's their silver anniversary.

And today they at least delivered silver for the investors. Okay, well said. But you still like Citigroup the best? Citigroup is still my number one pick. They went through a watershed organizational restructuring. It took seven months, 200,000 employees. They de-layered from 13 down to eight layers. They eliminated 300 committees. And everybody said they're doing so much so fast, they're going to blow up. They're going to lose all their good employees. They're

going to lose their revenues, lose their clients. And guess what? Friday, they beat expectations on both the top and the bottom line. Revenues came in better than expected. There's more of a clear path. They reiterated their target for this year. The stock has sold off since Friday. I think that's a great opportunity for investors. I still think Citigroup is a double over the next two years and three quarters. Why is Morgan Stanley an outlier from a stock standpoint year to date relative to the other banks we just talked about?

And you throw J.P. Morgan in the mix, it still is that. Well, Citigroup is my number one, my number two, number three top picks. They're worst in class, becoming less bad. Morgan Stanley has been best in class, becoming less good. They have very difficult comps. They've had eight consecutive quarters of outflows in investment management. So we need to watch that. Their inflows to the wealth management business have been decelerating for some time.

And by the way, that wealth business gets hurt from the same higher interest rates that hurt a lot of regional banks. So we have to watch that, too. Do you expect anything to come of these stories we've been hearing about the wealth management business? Well, there's been a few articles in The Wall Street Journal, unconfirmed by Morgan Stanley, about regulatory investigations, about whether they're choosing their clients appropriately. It could lead to extra costs, maybe turning away from some clients, but they're not allowed to comment on the regulatory investigation. Okay, that makes it even then my next question is even more relevant than how much of an overhang

potentially is that with the fact that they're not going to speak to it? Well, I think we're going to have to look at the results. You've seen decelerating inflows to wealth management. If those inflows continue to decelerate, they were up to 10 percent. They went down to 3 percent. Are they still growing wealth management assets or not? And then this could be this has potential to be an additional headwind. That's not the make or break issue.

The make or break issue is are they running their business to gather those assets? Sure, but isn't the wealth management the crown jewel of the business? It absolutely is. And my point is between wealth management and investment management, that's half the company. That's the premium part of the company. That's becoming less premium-like. All right, so Ted Pick tomorrow, right, is presumably going to be on the call. It's becoming less premium-like. All right. So Ted Pick tomorrow, right, is presumably going to be on the call. It's his first earnings report. It's his second

earnings report. It's his second. Yeah. Time flies here. It does. My mistake. But he has to really win over, I think, win over the wealth management side of the house. He's an investment banker through and through. He has a strong record over a decade leading that business. His whole career has mostly been at Morgan Stanley. He was born to become CEO of Morgan Stanley. But the side that needs his attention is the wealth management side because that's what's going to drive the stock price more than anything else. Also, Goldman Sachs has set up some tough comps for Morgan Stanley. So will Morgan Stanley keep up with Goldman Sachs? Okay. And what about

Bank of America? Bank of America is a lower risk, long-term play. I'd say the three C's apply to Bank of America. First, capital markets are picking up for the industry. You should see some of that at Bank of America. Second, credit quality is so much stronger than I or anybody thought at this stage. And Bank of America has the lowest loan losses in the Fed stress test each year. So that should look quite good. And third is the consumer. Bank of America is a play on the U.S. consumer, which is remarkably resilient. Got another look today at retail. Obviously, it tells that story. What about higher rates? If we're rethinking the trajectory for interest rates, higher for longer is not good for the banks, is it? Well, I put out a note right after the CPI came out last Wednesday,

said this might be a sell on the earnings situation between the higher for longer rates and the stocks having performed better here. So opening day in baseball is a couple weeks away. The opening day for bank stock, sustainable outperformance might be pushed out a couple months due to higher for longer rates. Having said that, Citigroup benefits from higher rates. And by the way, Bank of America, higher rates might not be so bad for parts of its business. All right. It's good to see you as always. Thanks for coming by. Thanks for having me. Mike Mayo here at Post 9. NASDAQ falling as we head towards

the close today. Up next, Flexo Capital's Lo Tony joins us once again to tell us how investors should be navigating the tech space right now amid all of the geopolitical uncertainty to back up in rates and more. That's next. Losses steepening in the last hour of trading. NASDAQ leading the way lower today. My next guest is still bullish on that sector with earnings set to kick off later this week. Let's bring in Plexo Capital's Lowe Tony. It's good to see you. Welcome back. Thanks for having me. It's always a pleasure. Yeah, it's tough. It's tough right now in tech, certainly today, obviously, with NASDAQ. But you think earnings are going to deliver when we start to get going in this space?

Yeah, look, I think, you know, there, there's probably two letters everyone's looking for twice. AI, both for artificial intelligence and hopefully that's going to lead to additional income. Well, I thought the letters you were going to talk about is NVIDIA. We're hoping we're going to save the day. NVDA. Do our hopes hinge on that? You know, I'm spending a little bit more time thinking about some of the other big tech players like Microsoft to see how integrating AI is going to deliver for products like 365. I'm interested in Alphabet. I think Alphabet needs to show what's going to happen with Gemini, how that's going to lead to integration across some of the other product lines really work to add additional revenue to the bottom line and bottom line for Amazon. And then finally, you know, Meta, you know,

Meta is making a big investment into AI. When you look at that unit that houses both the Metaverse and AI, you know, who knows, they don't break out the numbers, but we suspect over $3 billion will be invested this year across both. And, you know, Meta changed their name to Meta to represent the Metaverse with this big investment in AI. Maybe they'll change their name to Artie. What a sign of the times. I mean, Low Tony goes through the list of the mega caps that matter most and he ticks everything off and there's no apple that says everything yeah you know i think for apple what we really need to see is okay go back to what we talked about with big tech big tech's been talking about integration

of new technologies specific to ai for the past year or so. Now we're starting to actually see those results in the earnings statements, in the income, and on a big topic of focus and emphasis on the earnings calls, because people want to see, is big tech delivering what they promised months ago? You know, Apple has been a little less at the forefront, which is typical for Apple. Apple typically takes a little less at the forefront, which is typical for Apple.

Apple typically takes a little more measured approach. And so I think what we'll look for from Apple are some signals around how they're going to integrate AI. Who knows? You know, some of the analysts are saying the potential integration of AI into some of the next generations of iPhones, you know, could that lead to another reset like a 5G reset? We're not sure, but I think that's what we'll look for from Apple is giving us that indication of things that we should look for to be on their development path. Are you comfortable with where multiples are right now, even if, you know, rates are going to back up a little bit? Yeah, I think we got a little bit ahead of ourselves

in anticipation of where rates were going to fall to this year. Obviously, with some of the numbers that we've seen around inflation and the signaling, we probably won't see those. You know, it was more of a matter of, you know, kind of when rates were going to drop. I think now it's a question of if rates are going to drop. And given the geopolitical tension as well, yeah, I think the earnings really are going to have to come through for big tech to prove that they can remain resilient with all of the headwinds we might face at the back end of this year. What should our viewers think

about Reddit today? You know, following a successful IPO, there's not a tremendous amount of love on the street for it. It's mixed, I think is fair to say, as you start to get initiations, you do have a fair amount. You know, there's neutrals, underperforms. I get that 58 percent have overweight ratings. So that's still healthy, obviously. And I should also mention, of course, that Plexo was early in Reddit, too. How should we be thinking about it today? Yeah, I think when we look at the latest batch of analysts that are covering the stock, initiating coverage, that's correct.

It's mixed, right? So we see some folks that are building a very bullish case for the stock. And I think, you know, that bullish case would be based on, you know, a few things, you know, looking at the engagement of the users, looking at the potential for new revenue streams to potentially even serve AI, you know, to talk about AI again, because Reddit is a big repository of data that obviously the AI models would salivate to be able to train across. And we've even seen the beginnings of what could be a new revenue stream with the deal with Google. But, you know, I think the main thing is that if people are thinking about Reddit two ways, number one, hey, how should I think about Reddit as a potential holding?

And how should I think about Reddit as a potential barometer for IPOs? You know, I think you have to dive in deep and just really think about where Reddit is and how much anticipation and excitement there was just for an IPO, coupled with that announcement around AI. Possible that it could be running a little bit ahead of itself. But if you do the comparison, you could also make the case that is kind of right where it should be at the moment. And then I think thinking about it as a barometer for IPOs, look, we've got a long way to go before we can get back to some type of normalcy with the IPOs. You know, Reddit in and of itself is not going to get us there to open the IPO window. There are some other names, you know, obviously names like Databricks, Turo on the consumer side. And of course, everyone's waiting for Stripe. But I think we've got a few years to go before we're going to see some type of normalcy back within

that IPO window. Wow. That's longer than I expected you to say. A few years to get back to some level. You use the word normalcy. I mean, you know, if you extrapolate, say Goldman Sachs delivers their results today, they're obviously hopeful of a return to capital markets. Economy still robust. Stock markets, you know, not that far off record highs. And we're still a few years away from normalcy in the IPO market. Yeah, I think so, because we have to think about where we are today. You know, you need about six months when you're IPO ready to actually get all the filings in place. So I think pretty much we're probably set for the IPO calendar for this year. And you got to think back. I mean, where was the peak? The peak was like twelve

hundred, thirteen hundred companies a couple of years ago. So we're so far from that that I think, you know, we'll see hopefully some improved performance in some of these private companies that give them the confidence to be able to go out. But I think also remember a lot of these companies and the best performing companies have raised so much capital that it really is a necessity for them to be able to go out into the public markets, number one. Number two, the secondaries market in the private side has gotten much more efficient. So for those companies that are private that did have pressure from some of their investors, there's alternative paths to be able to provide liquidity other than just the IPO.

And I think the third point is that when we look at what happened a few years ago with that rush of IPOs to be able to get us to that record, you know, there were a lot of companies that went public that probably should not have gone public. I think we're going to see a new barometer kind of moving from, hey, you know, if a company has, you know, 100 million or a couple hundred million in revenues and can get to maybe a couple billion dollars in market cap, I think we're going to see that bar go up and really look for companies to get closer to really a billion dollars in revenues and then potentially have a multibillion dollar market cap to truly be IPO ready,

where they can maintain some nice level of performance and resilience in the markets to drive that demand, not only from consumer investors, but from the institutional investors that really matter. Great insight. I appreciate it as always. Lo, thank you. Once again on Closing Bell. Up next, tracking the biggest movers into the close. Back to Steve Kovacs standing by with that, Steve. Scott, yeah, the dramatic decline in one social media stock continued today, plus Guggenheim downgrading a cloud name, saying it's overvalued. We'll show you both those names when Closing Bell returns after this.

Heading towards the Closing Bell, back to Steve Kovach now for the stocks he's watching. Steve. Hey there, Scott. Yeah, shares of Trump Media down 18% today after the company said it plans to issue 21.5 million new shares. The stock has been on a steady slide for weeks after the company, which of course operates former President Trump's Truth Social app, disclosed it lost $58 million on just over $4 million in revenue last year. And shares of cloud services companies ServiceNow down more than 3%, about 4% now actually, heading into the close after Guggenheim analysts downgraded the stock based on its valuation. Guggenheim taking that stock to neutral from buy, Scott. All right, Steve. Thank you, Steve Kovacs. Still ahead, Tesla tumbling on the back of some major layoff news.

We'll talk about how this could impact the stock in the months ahead. That's just coming up. All over this leg lower as we head towards the bells up next. We'll discuss how to navigate the uncertainty in the market zone. We're now at the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Julia Boorstin on Salesforce heading for its worst day in 16 months. Phil LeBeau on the big sell-off in Tesla today.

Mike, I'll begin with you. What's on your mind as you see stocks worsen as the day progresses? They did worsen as Treasury yields lifted. So to me, that's basically you have the bond market searching for the pain point of not just stock investors, but the economy to a degree. So, yes, I agree with the conversation earlier that we're seeing yields go up for positive reasons on balance, which is the economy is holding up better. You're seeing a hot retail sales number. You're seeing the manufacturing stuff in Flecktire.

All that stuff is good, but it can also be self-undermining. And you see the consumer stocks are not exactly celebrating a strong retail sales number. So I think that's the main dynamic, especially over the last 10 days, the TLT long-term treasury yield has been marching the stock market down in the context of a market primed for some excuse for a 3% to 5% drop. We're 3.5% off the highs. We went from persistently overbought in an uptrend to we cracked the momentum. We kind of broke the short-term uptrend. And now after today, we'll probably be oversold. The VIX went up toward 20.

So all those dynamics seem to be falling into place, even if we still need a little more clarity on whether bonds are going to find some buyers here. And, you know, and obviously all the other headlines that have been distracting us. Okay, Julie Borsten, what's happening with Salesforce today? We have talk of another potential deal and this stock is selling off hard on that. Yeah, shares of Salesforce plummeting about seven and a half percent right now, falling today on reports of the companies in talks by data management firm Informatica. Now, there were no reports on the size of the transaction, the price tag, but Informatica does have a market cap of more than $10 billion.

Now, shares of Informatica also falling today on the reports, down over 7%, but its shares have gained more than 43% in the past year. Now, Salesforce has made more than 70 acquisitions since 2006, an acquisitive strategy that has drawn activist investors, including Elliott and Starboard, Salesforce responding to those activists by disbanding its committee focused on M&A. But if this deal goes through and roughly at the market cap that Informatica is trading at, it would be Salesforce's largest acquisition since it purchased Slack for nearly $28 billion back in 2021. Before that, it bought Tableau for $15 billion in 2019 and MuleSoft for $6.5 billion in 2018. Salesforce declined to comment and Informatica did not respond

to CNBC's requests for comment. Back over to you. All right, Julia, I appreciate that. Julia Portman, now to Phil LeBeau. This Tesla slide, Phil, on reports of job cuts. Job cuts, and you got a couple of key executives leaving. Let's talk on reports of job cuts. Job cuts, and you've got a couple of key executives leaving. Let's talk first about the job cuts. Announced early this morning in a company email from Elon Musk, more than 10,000 employees.

They've got about 140,000. That means approximately 14,000 will be let go. He says we need cost cuts, and we also need to increase productivity. In his memo to employees, Elon Musk says, there is nothing I hate more, but it must be done. This will enable us to be lean, innovative, and hungry for the next growth phase cycle. Just take a look at shares of Tesla. As I mentioned, there were also a couple of executives announced today that they're leaving, including Drew Baglino and Rohan Patel. Those are two executives who have been there a long time. Scott raises the question, what is the future at Tesla? We'll find out April 23rd when the earnings call happens.

All right. I appreciate that, Phil. Thanks for that update there. That's our Phil LeBeau. We've got about a minute left, Mike. So we have the Fed chair is speaking in D.C. tomorrow. Just pay close attention to that. Not necessarily on the direction of interest rates, but you never know what you're going to get. And given where rates have backed up to, it's pertinent. Yes. And, you know, the market is definitely kind of raced to a point of saying we're not expecting any real help from the Fed, even though we know the Fed is inclined in that direction. In the end of next week, we're going to get that piece of inflation number that will probably settle things for a while right now. So, yep, you got to listen to you have to listen to what they have to say.

The S&P, interestingly, has gone right back into the range that I was talking about earlier of the NVIDIA earnings pop day. And so, in a way, we're kind of testing the whole scenario of, was that just an overshoot to the upside? And now we probably have to chop around for a little while with rebills from the month. All right, so we'll go out with a decline of at least 250 or so on the Dow. S&P off by 1% or so. I'll see you tomorrow.

Look forward to that.