Closing Bell - Closing Bell: Stocks soar into the close, billionaire venture capitalist Jim Breyer on which tech stocks look cheap, and Former Ford CEO Mark Fields on which automakers will be the big winners in the EV wars 3/17/22

Episode Date: March 17, 2022

Stocks staging another big rally into the close. Billionaire venture capitalist Jim Breyer reveals which beaten-up big tech stocks he has been buying amid recent weakness. Plus, he explains why the metaverse is overhyped. Former Ford CEO Mark Fields on how rising commodity prices are impacting the auto industry and which companies are winning the EV wars.

Stocks are near session highs, oil spiking 9%. The most important hour of trading starts now. Welcome to Closing Bell, I'm Sarah Eisen. Here are my top takeaways on today's big stories. Dividends are going up. Dollar General and Nordstrom both resuming or upping their payouts today. Global dividends set to rise to $1.9 trillion for 2022,

back to pre-COVID levels. According to a Jeffries note, the firm likes buying these income-paying stocks because a lot of what we're dealing with right now, inflation, rising rates, volatility, yield curve flattening, are all supportive of dividend stocks. Mortgage rates passing 4%. First time we've seen that in years. Housing has been a healthy part of the economy, and it is showing signs of cracks. Homebuilder sentiment this week falling to a six-month low. Prices have skyrocketed.

Now mortgage rates are rising as the Fed raises rates, making it more unaffordable. Watch for a slowdown in housing sales. And Cignet is soaring. Talk about stocks getting crushed, but fundamentals turning out to be solid. The stock was down more than 30% this year, with all the hand-wringing over stimulus wearing off and pent-up demand cooling down. Well, today, Cignac gave upbeat guidance for the quarter in the fiscal year 2023. CEO Jenna Drossos' turnaround is working, and weddings are also coming back.

She'll be on Mad Money tonight. Concerns about the market, about demand falling off a cliff, proving to be overdone in some cases. Let's get straight to the top story right now. The comeback for stock continues despite some major risks. The major averages all firmly higher. Stocks are on pace for the best week of the year, in fact, and that is despite the Fed signaling that it is going to keep raising interest rates and this raging war in Ukraine. Also, another spike in oil prices. So should you trust the rally? Joining us now, Mark Mobius from Mobius Capital Partners and CNBC's Mike Santoli. Mark, Mark, I'll start with you on global stocks. How are you feeling?

It's not like the Fed said that it wasn't going to be raising interest rates. That's been a headwind. It's not like we have any resolution here when it comes to Ukraine. Should you buy stocks? You know, my thinking is that definitely we're going to see higher and higher rates. And I expect to see rates in America go up to 6 or 7 percent. But that doesn't mean the stock market has to go down. As you know, if you look at the history of interest rates in the stock market, there's not much correlation. And anybody who wants to protect themselves against this inflation must hold stocks. They must hold companies that are able to adjust their prices to inflation.

And it's interesting that if you look at the global picture, very mixed picture, you see countries in Latin America up or at least sideways movement. And even in Asia, it's the same thing. So despite the fact that China has gone down dramatically, other markets around the world are not doing too badly. Six or seven percent is a very aggressive target for interest rate hikes from Mark Mobius. Mike, but what are you gathering from the commentary post Fed about whether stocks can continue to rise? Because it's interesting that there is follow through today. It didn't look tentative this morning, but follow through on top of a rally, even though the Fed said, hey, every meeting is live.

We're going to keep going. We think the job market is tight and our inflation is our number one fight. Yeah, very weak dip this morning. Obviously, the kind of people felt they were not positioned if this market was going to recover. So what I take away from that is, yes, the Fed is the market has spent the last five months clenching up in fear of a start of a tightening cycle and pricing that into bonds. And yesterday's message from Powell, even though the effort was to seem very, very firm and resolute against inflation, was not incrementally hawkish enough relative to

what the market already maybe understood. And the market's oversold. And all that litany that you mentioned, we tested the market for one hundred thirty dollar oil. We tested it for a land war in Europe, at least in the short term. And of course, the start of the Fed tightening cycle. And it didn't quite buckle. That's all we can say. Look, it's a five or so percent rally in three days. That's great. It definitely goes some distance toward proving that the bulls are still in the game. But we're right at those levels where something like this would peter out if it was just a reflex technical bounce. Mark, China have to talk about we started the week getting nervous about the lockdowns in China and the economic spillover effect. You have liked this market for a while, and I'm sure your portfolio holdings are down certainly for the year. But they've come in

and said they're going to support the market. So is that ultimately why you stay there? Because the authorities can just do that? They can just swoop in and save the day? Yeah. Basically, the Chinese government can say, we like the market. We want it to go up. And it'll go up.

Because investors in China listen to what the government is going to do and act accordingly. We don't have very much in China. We have much more in India and Taiwan. That doesn't mean that we're not looking because there may be some opportunities. But there are a lot of things that are hitting China that make it very, very iffy. The situation with Russia, for example, puts a lot of people on edge, delisting of ADRs and a number of other issues with the U.S. makes China somewhat risky at this stage of the game. However, there are going to be opportunities going forward. EEN, the emerging markets, Mark, are not participating in today's rally,

and they've been lagging. Does the war in Ukraine or the Fed hiking cycle change the thesis on emerging markets and how they could do this year? There's no question it changes the thesis for some of the markets, very dependent upon oil. They're going to be dealing with very high oil prices going forward. And then you see what's happening in China. But as I said, many of these markets are doing quite well. South Africa is up. Brazil is up. A lot of the markets are moving sideways. They're not showing a lot of problems as a result of the Russia situation.

So there's going to be lots of opportunities in these markets around the world. What's your favorite market right now? Quickly. India. India. There are great opportunities in India, despite the fact that the market has gone down a little bit, but there are great opportunities in India. Mark Mobius, thank you for joining me. Mike Santoli, I'll see you soon. After the break, inflation taking the wheel. High gas prices are hitting owners of traditional vehicles, while the pop in metals could lead to rising EV costs.

We'll ask former Ford CEO Mark Fields about the impact on the automakers next. We're looking at the Dow up 277. Session high was just above 300. You're watching Closing Bell on CNBC. S&P is up almost a percent here as we head into the close. Automakers, though, are underperforming right now, facing a number of issues. Among them, rising oil prices, WTI going back above $100 a barrel today. Take a look at the spike, up 9.6 percent. And the global chip shortage leading Toyota to cut its April production target.

The Russian-Ukraine crisis also expected to weigh on the industry, with S&P cutting its car production forecast by more than two million units for 2022 and 2023. CNBC contributor and former Ford CEO Mark Fields joins us now. Mark, good to see you. What are you expecting from auto sales this year, given all of these headwinds on shortages and higher gas prices? Well, I think, you know, you're going to see the market under pressure this year, but it's not because of demand. I mean, there's still a lot of demand there. The consumer is their financial balance sheets are pretty healthy. This is really about supply. And, you know, you just mentioned it, not only the semiconductor shortage, but literally in the last week, whether it's, you know, the outbreak in COVID in China and a couple of provinces that produce a lot of automotive components to the situation in Ukraine, where a lot of components like wiring harnesses come out of,

to just the last day or two, the earthquake in Fukushima, which has shut down at least temporarily a couple of semiconductor plants that provide chips to the automakers. This is going to be a supply issue. And the most important job in the automakers roles these days in their C-suites is the chief procurement and logistics officer. So if that's not happening, what do you expect to happen to prices given that kind of dynamic? Well, I think, you know, what you've seen, obviously, average transaction prices literally every month are going up because of the supply constraint. Now, when you lay in fuel prices, I mean, everybody looks at the comparison to 2008.

We're in a very different time versus 2008 because, you know, today a lot of crossovers and SUVs are built on car platforms, which are a lot more fuel efficient. Inventory is scarce, so therefore the automakers have some pretty good pricing power. Whereas back in 2008, the last time we saw $4 a gallon gas, the automakers were producing way more cars than the industry wanted. And then finally, just the consumer and the economy are much healthier, right? Because in 2008, you had the financial markets collapsing, you had layoffs that were mounting, all those kind of things. So I think you're going to continue to see a very strong pricing environment just for the fact that supply and demand is unbalanced right now. But I wonder if we see markets shift in consumer behavior toward EVs, given the fact

that we are looking, what was the average? $4.28 per gallon across the country right now. I'm not sure they're easier to get and they might be getting more expensive as well. But do you ultimately think that this tips us over into more demand for electric vehicles? Well, I absolutely do, right? When a consumer comes up to the pump and they're paying $60, $70, $80, even $100 to fluid their tank, that's going to provide a pivot point for people to be more interested in EVs. I think the issue, and you mentioned it, is they're tough to come by these days, given the whole production constraint in the EV. Plus, you know, the industry forecasters said,

listen, the total cost of ownership between an ICE or an internal combustion engine vehicle and an electric vehicle, they would have crossed probably in the next year or two. That's now been pushed back because of the increase in the minerals that go into batteries like nickel and cobalt. So the pricing is going to go up. So, yes, there'll be more interest, but the consumers are going to have to wrap their head around that they're going to cost more. So who's best positioned? You're not leading Ford anymore, so you can honestly answer the question. Is it a Tesla, which is raising prices and sort of the first mover and the king of EVs in terms of market share in this country, or the GM and Ford strategies, who are also going all in? Well, I think the best positions are the ones that are coming out with EVs over the next year to two years.

To your point, I think Tesla is very well positioned. They were first mover in the marketplace. You've seen literally over the last two weeks they've raised prices significantly around the globe. I don't think that's going to dent their demand. I think Ford is well positioned. They've taken their most iconic vehicles, whether it's the Mustang or the F-150 Lightning that is coming. I think they're well positioned. And GM, you know, they're introducing probably 20 some odd products in the next couple of years. So I think all those automakers are well positioned.

And those that are being very aggressive in their rollout over the next year or two are going to capture market share. Their challenge is going to be as their costs go up because the batteries are going up because of the minerals, they're going to be faced with the decision, do they pass that cost on to the consumer or do they eat part of it, which will impact their margins? The stocks have been hit really hard. 30% down this year for GM, about 25% for Ford. Coming off of good run-ups. Mark Fields, good to get your take. Thank you.

Let's get a check here on the markets. Dow going strong. We've really come up near the highs of the day, up 229. The S&P 500, every sector higher, by the way. Energy is in the lead on that spike in crude oil. That was the opposite story yesterday. Technology is higher today, but it is underperforming. The Nasdaq's up seven tenths of a percent. And small caps playing a little catch up, up 1.3 percent. But we are continuing this rally we have pretty much seen now all week long. Coming up, we'll break down the charts on today's jobless claims number,

what it signals about the health of the economy. Plus, today's closer is venture capital billionaire Jim Breyer, his take on China, where he's been investing for decades, tech valuations and the names he likes right now. We'll be right back. We are getting some breaking news from Capitol Hill. Elon Mui with the details. Ilan. Well, Sarah, the House has the votes to pass a bill that would end normal trade relations with both Russia and Belarus. That vote is still ongoing, but currently 292 lawmakers have voted for it.

That's well ahead of the 218 they need to pass this bill. And there is strong support from both Republicans and from Democrats. Now, this bill would also allow the president to raise tariffs on individual Russian goods. It calls on the president to push for Russia's removal from the WTO. And it allows for individuals to be sanctioned for human rights violations as well. Now, this bill is expected to clear the Senate quickly. President Biden has already endorsed it. And now the House just set to pass this bill to end normal trade relations with Russia. Guys. Ilan Moy, Ilan, thank you. One piece of good news on the data front

today. Initial jobless claims showed only 214 Americans filed for unemployment insurance last week. That was less than expected. The number's been trending down. Mike Santoli here with a closer look at the job market for the dashboard. And one of the best, most timely economic indicators, and usually one that leads a recession, in other words, starts to rise, claims due before a recession. So this is the history of this data from 1970 to the very point at which the COVID crash happened in 2020. And what you'll

see is it bottoms and starts to rise before these shaded areas, which are recessions. That's a pretty consistent pattern in almost everyone. It was not starting to rise before the COVID crash because that was a shock and not a typical recession. So take a look at what's gone on since the pandemic through now. We are at the same level, Sarah, but 214,000 or 220,000 four-week moving average of claims. That's a positive. And you see this line? It's not starting to rise yet.

The problem is this broke the chart. The numbers were so huge right there that you can't see the subtleties of it. But this at least argues in support of Jay Powell saying what we know now, not seeing the signs of recession coming. Well, numbers at these levels are healthy.

Yeah. Bottom line. I thought one of the most noteworthy things he said, I read the whole news conference again last night, was the line that the labor market is so tight, it's tight in an unhealthy way. Yes. Because that suggests that this is their mandate. It's to get a healthy jobs market and to fight inflation. And that means they can go aggressively to fight inflation. And they are not worried about the impact that will is their mandate. It's to get a healthy jobs market and to fight inflation. And that means they can go aggressively to fight inflation and they are not worried about the

impact that will have on employment. Two thoughts on that. One, it's good that his renomination hearings are over because I don't think that would have played well politically to say that a tight job market can be unhealthy. Two, though, he is marshalling whatever evidence he can to say that there's so much room in the labor market, so many open jobs, that they can slow the economy, get rid of the unfilled jobs, and still not jeopardize the current employment levels. That's the hopeful bet. Yes. And it seems the market sort of is on board with that idea. Buying it so far. Up next on the show, billionaire venture capitalist Jim Breyer, who was an early investor in Facebook, and whether Chinese tech stocks look attractive

after a wild swing, a wild week of swings. We'll be right back. Today's big picture, Dollar General. Take a look. It's jumping on a strong forecast for sales this year. In the big picture, we try to glean a macro message from a stock story. In this case, it's the low-income American consumer increasingly feeling the pinch from inflation. That is good news for Dollar General, where prices are super low. As the CEO said on the conference call this morning, quote,

once that gas price reaches over $4 a gallon, which it has now, we normally see the consumer stay closer to home, which bodes very well for that value and convenient message that we have out there. In other words, the confident and upbeat forecast from Dollar General actually spells trouble for consumer spending, especially at the low end, despite the wage gains and the job growth we've seen because inflation is taking its toll. Here's where we stand in the markets right now. Higher across the board, energy is the leading sector. It's up more than 3.3%, though it has lagged lately. Materials, consumer discretionary health care,

those are other leadership groups. Technology is up, but it's underperforming down at the bottom of the barrel with staples. The Nasdaq up about eight tenths of one percent. ARK Innovation Fund continues its comeback. It's up four percent, still about eight percent lower on the month. Up next, venture capitalist Jim Breyer on tech valuations after a strong week for the Nasdaq and where he's looking for opportunities right now in the public and private markets. S&P up eight tenths of one percent. Closing bell back in a moment. Nasdaq's having another strong session, third in a row, now up more than five percent for the week. Today leading the charge.

Amazon, Tesla, Facebook, Netflix. But overall, big cap tech has taken a dive this year. Meantime, the Federal Reserve raised rates for the first time since 2018, with more on the way just this week. That's been a big part of the story. Joining us is billionaire venture capitalist Jim Breyer. He was an early investor in Facebook, a board member. He's invested in more than 40 tech companies that have merged or gone public. Always good to hear from you, Jim. Welcome. Sarah, congratulations on the new gig. Thank you very much. Pleased to have you joining and phoning in for the first week. So talk to me about big cap tech valuations, because I think you were last on in the fall when they started cracking and you were saying, I'm buying more. I think you named Microsoft, Google, at least, and Apple. I know they're on the forefront of what you're into right now, AI, quantum. Would you still, have you been buying and are you still as bullish on

these stocks as they've gotten cheaper? I sure am, Sarah. And particularly Microsoft, Apple, Google sit at the heart of what will be the next generation of AI and quantum opportunities. And so on weakness, I continue to add all three to the portfolio. What I would also say in the private world, we spend so much time doing analysis of management teams and leaders. And so as long as Tim Cook and Satya and other leaders are running the companies, I'm a long-term buyer and holder. These are some of the best executives in the world, and they are recruiting some of the best AI and quantum talent in the world. What about Meta or Facebook, the company that you invested in? How old was Mark Zuckerberg when you first invested in that company? 20? Well, he was 20. He was a month away from 21. And I speak to Meta

often. I think what is underappreciated about Meta is Instagram, which a lot of people do appreciate, but it sits at the heart of so much of Web 3.0 with worldwide growth and a really important worldwide brand. I think obviously at $600 billion market cap, it's still expensive, but on a fundamental look forward basis over two to three years, I think it is a long term buy. But I have not added to the position at all. The ads are Microsoft, Apple, and some of the deep tech companies. I was curious to ask Jim about what you think of Zuckerberg's big strategic pivot to the metaverse, which I know you're in. I think you're in the company that Bob Iger announced this week that he's joining the board of Genies for making Metaverse Avatar. So what do you think of Zuckerberg's strategy and

all the hype around the Metaverse in general as an investing theme? Well, the Metaverse is overhyped, but is fundamentally important. The investments on a private basis that I've made tend to be in the gaming companies. And so Fortnite and Niantic, a number of these companies are really at the forefront of what the beginnings of the metaverse will look like. I'm long if I take a five to seven year view, but it's going to take time. It always does. And one of the things that's really interesting right now, private valuations in the world of venture capital have not adjusted. And we've known that over, we've had a 20% correction in many of the best public companies. And therefore, there's this tremendous opportunity, I think, to arbitrage a bit. When I'm thinking about the next generation opportunities and where is the

best development talent in the world going, they're going to crypto in the blockchain, and they're going to the intersection of AI, healthcare, and medicine. And I've made 12 investments since the early investments in crypto, Circle, and Coinbase in 2013. And in AI medicine, as we discussed in Davos, Sarah, a couple years ago, if I could advise our children, grandchildren, what to study, where to go, it would be at this intersection of AI and medicine, where there are companies that are revolutionizing cancer diagnosis, receiving FDA approvals for their AI, have been showing efficacy and reducing error rates, helping our doctors and our nurses in so many ways. And so I have a portfolio of 12 AI and medicine companies that are doing many of these types of applications, working with our great hospitals such as MSK and MD Anderson.

But at the same time, drug discovery is being revolutionized by the quantum revolution. And quantum is not just about quantum computers. I always have to emphasize that, as I did earlier this week with Michael Dell on the panel here, there's a range of quantum technologies that are more near term, where AI particularly will provide superb advantages. And again, Amazon and Microsoft are two of the leaders in many of the fundamental AI in startup quantum companies focused on medical applications and other verticals. In fact, in about a week, I will have an announcement to make about a stealth company that has some of the best and brightest out of one of our mega cap companies focused on quantum technologies. Good tease. It is really exciting stuff. I have a four-year-old that maybe I should start to sign up for AI health tech, I guess, according to you, Jim. But can you talk a little

bit more about the disconnect between the private market and the public market and what you think is going to happen in venture capital? This was the red hot part of the markets last year when capital markets were soaring. So do you think it's just going to fall with a lag? I think it will take six to nine months to reset some, but there isn't reality that is set in. And part of my analysis is I spend a lot of time trying to understand where we are with worldwide supply chains and shipping from China to the U.S. has been well publicized. What has not is how much comes from China through Moscow to Europe. And so I think we're going to see a period of shortages of many of the most important components, higher prices, higher inflation. And that leads, I think, to a view that for certain kinds of companies, they're going to have real difficulty getting the parts they need over the next nine to 12 months.

Well, you bring up China, and I did want to ask you about that because you have been in that market, what, for the better part of 20 years right now, Series A and Baidu. Jim, there's a big debate over whether China is still investable, given all the shifts lately in regulation and their domestic policy, the geopolitics of it all. You're still in that market, correct? Are you making any changes? Are you rethinking what to do? We have, absolutely. Starting about 18 months ago, we stopped focusing on core underlying deep tech and have focused on healthcare, medical services, again, where AI and medicine intersect. And I'm not a buyer of some of the companies that we were involved with long term, Tencent, Alibaba, Baidu. I think there's too much complexity around how the central government is looking at these businesses to really have a long-term investment thesis. But there's a next generation of companies in medicine and healthcare in China that are representing great opportunities that do have very significant central and provincial backing. I will say we're in a really important race in quantum versus China.

China is the only other competitor to the U.S. Are we winning or losing? We are losing right now, but I am doubling and tripling down in quantum technologies. I believe we're probably on the second hole for golfers in the audience of an 18-hole match. We're losing, but I'm confident we'll be able to, through policy, but most importantly entrepreneurship, combine AI and tech in ways that, in quantum, that China cannot. So very bullish, again, because it's not just about the quantum

computers that are being built in China and the U.S. It's about a series of quantum technologies. And that's why I know you like Microsoft and Apple and Google, bringing it home to the investor. Jim, great to talk to you as always. Jim Breyer, a lot of ideas out there. Sarah, great pleasure. When we come back, rising recession risks. Why Goldman Sachs chief economist Jan Hatsias says Boys, Jim Breyer, a lot of ideas out there. Sarah, great pleasure. When we come back, rising recession risks. Why Goldman Sachs chief economist Jan Hatzias says the chances of recession in the U.S. could be as high as 35 percent. He'll join us to explain that call and what he made of the Fed chair yesterday.

When the market zone comes right back, Dow's up 277. Stocks are climbing. 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, Goldman Sachs economist, chief economist, Jan Hatsias, on the outlook for bonds and the economy and the Fed. Wolf Research's Bill Caracocci on his big call on credit card stocks today. First, though, let's hit the broader market because we are at session highs. The S&P up a solid 1 percent. The Dow is up for its fourth day in a row. And Wall Street's volatility index, the fear gauge or the VIX, Mike, is hitting a one month low. Significance of that just just as everybody was getting so negative. Right. It's a tension release rally is what we're seeing right now because we had some of those known kind of stress events go into the rearview mirror.

Obviously, the Fed meeting, but also some kind of equilibrium or some sight toward progress in Ukraine oil off the highs, even if it's from all the things that were pressuring us. So to me, it's an excuse for an oversold market that's gone straight down with one of the worst starts to any year in history to pick up some ground right here. I would say two percent rallies from the S&P two days in a row, followed by a one percent rally. If it holds right here, it's nothing to sneeze at. We are up at levels where a lot of folks are saying it's going to be very hard to make further progress. But that is the kind of action that you normally see when the market is at least suggesting there's a chance we've bottomed. Treasury yields are on the rise again after spiking on the Federal Reserve's decision to hike interest rates yesterday, first time in three years, and signaling more hikes are on the way. Joining us on that is Jan Hatzius, Goldman Sachs chief economist.

Jan, you predicted, I think, seven hikes this year, and that is where the Fed is right now. So what, if anything, did Powell say that surprised you? It surprised me a little bit that the balance sheet runoff is likely to come a bit earlier. So that's the one change we made on the back of yesterday that we thought it was going to be announced in June. Now we think it's going to be announced at the May meeting. But in terms of the path of the funds rate, we still think seven hikes of 25 basis points each this year, including yesterday's decision, and then four hikes in 2023. And I think that was pretty consistent with what we heard from the chair. The market and the Federal Reserve, Jan, appears to be in this place where it's not pricing in or expecting a recession. In fact, Powell even said recession risks are not

elevated right now. You do think they're a little bit elevated, don't you? You raised your recession odds to 35 percent recently. Can the Fed go through with this inflation fight and everything else that's going on with the world and avoid a recession here? Yeah, we noted that if you look at the slope of the yield curve, that's probably implying 20 to 35 percent risk of recession, depending on what yield curve slope measure you use. And I think that's roughly the right area or the right range. I do think it's higher than just the normal probability of maybe 15 percent per year on average over the cycle, because the labor market, it looks quite overheated. And I think very consistent with what Powell said yesterday, we do have an extremely tight labor market.

And so the room for additional above-trend growth, I think, is more limited. We do need to see a slowdown to about a trend growth pace. If we do see further significant labor market tightening, then I think that is going to raise the risk of recession because it's difficult to generate a soft landing once you've overshot full employment to a significant degree. It's very hard for the unemployment rate to edge up and generate a bit more room in the labor market without that turning into a recession. I don't think that's a foregone conclusion at this point, but I do think that the risk is somewhat higher than it was, you know, six months ago or 12 months ago. Where do you think inflation finishes out the year, this year?

We have a similar forecast to the Fed. So for the core PCE index, we're also a little over 4 percent by the end of this year. And you think we peak where? Over 10 percent? I mean, in terms of headline inflation, I think it's still going to go higher from here, you know, just given the increase in energy prices or in the 9 percent range, you know, it depends a lot on energy over the sort of near term. But, yeah, 10 percent, I think, is I don't think it's going to be quite as high as that. And since you mentioned your call today on the balance sheet runoff starting next meeting, I think you said, in May. What do investors need to know about that? Because stocks have been very correlated with the Fed's balance sheet in recent years, right? As that's gone up, they love stimulus. Taking that away could be painful. Is it priced in? Is it going to cause weakness? What do you think? Well, I think it is to a significant degree priced in.

I do think people are expecting balance sheet adjustment. There's been uncertainty about the exact pace of runoff and the timing. But I do think most of this should not come as a surprise. I also think it was interesting that Powell said the start of balance sheet runoff is effectively the equivalent of another hike. I think that makes it a little less likely that you'll see a 50 basis point move at the May meeting if that's what they use for the balance sheet announcement. They'll pair those two instead.

Jan Hatsias, great to have you post-Fed. Appreciate it. Thank you. Chief Economist at Goldman Sachs. We are accelerating those gains with 10 minutes till the close. Energy still in the lead. The S&P up 1.2 percent. A new note today from Wolf Research, downgrading several credit card issuers,

saying hot inflation and rising gas prices will hurt lower-end consumers, impacting names like Capital One and Synchrony Financial. The analyst behind that call joins us now, Bill Caracacci from Wolf Research. Bill, it's good to have you. Do you not think these concerns around the low-income consumer and credit quality and deterioration are already priced into the stocks? Hi, Sarah. Actually, I don't think that they are. Our concern is that there is incremental pressure on the low-end consumer as a result of, as we look at the developments post-Russia-Ukraine, even if there is a peaceful settlement tomorrow, the risk of inflationary pressures remaining elevated for longer, particularly if Russia remains isolated, are quite high.

And credit card issuers with elevated exposure to that low-end consumer are at risk of having credit normalized faster. And so we're not talking about a draconian credit event, but simply having credit normalized to, say, 100% of 2019 levels is enough for there to be certainly a greater headwind than what we think is contemplated in numbers. And so that, in our view, is what exposes names like Synchrony Financial, Capital One Financial, which have higher subprime credit exposure, Alliance data systems, to relative underperformance versus names that have greater prime and super prime exposure, like American Express and Discover, which we think have customer bases that are relatively better positioned to absorb those higher inflationary pressures.

So what sort of price targets do you have? What sort of downside do you see? And are you suggesting a recession here or just weakness in low-income consumer? So we're not suggesting a recession. And so this is truly a relative value call. These stocks, before Russia-Ukraine dynamics hit the stocks, they were already trading at low valuations. If you look at their relative valuations, both relative and on an absolute basis, they were trading at low valuations versus their historical 1.35 and 10-year average P multiples. So it's certainly not an outright call to short these stocks, but on a relative basis, we do see room for relative outperformance to be overweight.

Those names that have greater prime, super prime exposure like Amex and Discover versus the names that have. We think you'll get that relative outperformance. We don't see meaningful, absolute downside from these depressed valuation levels, but we do see that relative outperformance opportunity. Thank you for joining us with the call today, Bill Karkachi. But we do see that relative outperformance opportunity. Thank you for joining us with the call today, Bill Karkachi. And Mike, just quickly, Bank of America, Merrill Lynch took the other side of this. They actually today reiterated their positive view on the credit card stocks, claiming that a lot of this is priced in and that there aren't really signs yet of the consumer breaking, even at the lower end. I mentioned Dollar General with that upbeat forecast,

but there's nothing to suggest that that has really broken credit quality or anything like that at the low-end consumer. What do you think of the call? Right. The upbeat counter to that is that consumer balance sheet remains in aggregate pretty good. Obviously, on the lower-end, lower-income scale, not as great. But even that, job market strong, income gains continuing. We have a strong nominal growth economy. I always try to remind people of that. Even if inflation stays high, it means the whole pool is getting bigger in nominal terms. So I think it's a fair call on a relative basis that maybe the lower end issuers are going to suffer more. But the

market's gone a fair distance into trying to take account of that. Take a look at Warby Parker climbing today. It is climbing after being lower. Very volatile pre-market trading earlier where the stock was down as much as 13 percent. The eyewear company, e-commerce company, reporting revenues in line with estimates. But management said sales were hurt during the previous quarters due to the Omicron variant. The company also issued a weaker than expected sales forecast for 2022. Warby has been a weak performer since basically its debut in the public markets late September,

down nearly 50 percent. Mike, you put that in the category with the sweet greens and the all birds. There was so much excitement when these companies went public. They capture the consumer. They've grown very fast. They have not been good public sector, public company investments. They have not been good public sector, public company investments. They have not. And I put them all together in this kind of recognizable consumer brands that really became buzzy several years ago, you know, more like the millennial consumer was an early adopter of them. And I think it's a real story about the 2020 and 2021 IPO markets and how forgiving it was if you had a consumer, especially direct-to-consumer

stock. We could put Oatly in there. We could put Bumble in there, for that matter. All terrible stocks. Now the big question is, have they been left for dead? Have they been neglected long enough? They're orphaned IPOs right now. And is there some room, as Sweetgreen has recovered after its results recently, is there room for trying to sift for some value in the wreckage? Well, and the other question, which we've been asking a lot lately, is what's an appropriate valuation for a company, a pre-profit company like this that has been growing fast? The fundamentals haven't changed, but the valuation has and the valuation picture around interest rates has. So were they just priced too expensively when they came out of the gate last

year in that kind of market? Or are they cheap now? I think the rule is at issuance, people treated them as a fundamentally different type of company than an eyeglass company, a shoe company, or a fast casual dining chain, if you're looking at those three stocks. And they're not fundamentally different in terms of the overall drivers, even if they are going to be gaining market share. So to me, you have to do the comps with the legacy companies as opposed to just say consumer app driven companies, you know, trade at 10 or 20 times, you know, forward sales. That

game is over. Right. Just just put them up against their competitors and start valuing them that way. Take a look at crude oil, everyone. Big pop today, jumping more than 9 percent after the International Energy Agency said three million barrels per day of Russian oil could be shut next month. Let's bring in CNBC's Pippa Stevens for more. Pippa, was the big drop in earlier that we saw for oil earlier this week just a fluke given the reality that those Russian barrels are coming offline? Hey, Sarah. Well, these wild swings are becoming pretty commonplace here for oil, and that's a combination of uncertainty on the fundamental front as well as trading dynamics. So we had Goldman Sachs just now cut its Q2 Brent forecast thanks to potential shutdowns in China and slowing demand amid those COVID cases,

as well as a potential slowdown in overall economic growth. However, they also said that the sell-off that brought us back to the pre-invasion levels was overdone and that this market remains very tight. Looking forward, they expect that Russian oil exports will be smaller than expected disruptions. And so a little bit of a disconnect there from what the IEA said and what some other firms are saying. And that really gets to the heart of it right now, which is this huge uncertainty in the market. As CIBC's Rebecca Babin put it, there's a big disconnect between what's being said on the supply side and what's actually happening.

So at this point, we really just need some more data, more clarity on how Russian exports will be impacted. In the meantime, Pippa, the administration has called on U.S. energy firms to ramp up production, despite some criticism of the administration on that front. Have they been? I know you don't just turn it on, but what have we been seeing out of the big U.S. producers? Yeah, exactly. You really can't just turn it on by any means. And if they were to start drilling today, you know, we wouldn't see those new barrels come to the market for another, you know, six to nine months. And so while the rate count is going up and these prices are tempting, they're not bringing production back online at the same pace that, you know, $100 oil would have meant in the past. And that's because they emerged from

the pandemic with wholly new business propositions. They're paying dividends, buying back stock, and really keeping production steady between 0% and 5%. So definitely not an uptick for the time being. Pippa Stevens, Pippa, thanks. Mike, energy stocks are at the top of the market today at 3%. They're the only group that are lower for the week going into a Friday, down 4% after some pretty big gains already. So is it just a call every day on the direction of where oil prices go? For the most part, I think it all fits together with a very high momentum move, that surge we got into the highs.

Now it's a correction, even though it's a deep one, even though we went down more than 20% in crude, it still doesn't really do much of anything to change the overall longer-term trend. I would say if you go out a few months, the crude futures are trading, you know, in the $90 range. There's still a $10 discount if you go out a little while. That means near-term shortage, but the market expects more to be coming on in future months. A little bit of a divergence here in tech as we go into the close. Amazon, Tesla, Facebook leading the triple Qs higher, tracking the NASDAQ.

AMD, Microsoft, JD a little bit lower, getting back some. Got two minutes left to go, Mike. What do you see in the internals? It's been strong pretty much all day. We have not gotten one of those sort of buying panic days where you have 90% of all volume to the upside. But today, if you look at the split, it's, you know, well over two and a half to one advancing versus declining volume.

So certainly no issue there. Look at new 52- week highs and lows on the New York Stock Exchange. Now, we still do have more lows than highs. The market is still down, you know, almost double digits as a whole. So that's not surprising. But this is one of the smallest numbers and the smallest kind of differentials between highs and lows we've had in a while. So slowly, the market is trying to get a little bit of traction underneath. They want to look at metals, the XME, that's the metals and mining sector of the S&P 500 relative to financials. They were pretty much neck and neck. If you look over a few months, a couple of months ago and boom, you got the Ukraine invasion. And it's all about hard metals and less about paper, paper, wealth and assets like financials.

Well, yeah. On supply concerns and safety concerns. Mike, thank you. As we head into the close, less than a minute to go, session highs for the Dow. We've continued to see this surge in the final hour of trading in the last few sessions. This is four straight day in a row of gains for the Dow. Biggest contributor to the gains today is UnitedHealthcare, American Express, and Caterpillar. S&P 500 going out with a strong gain as well of 1.16%. Energy in the lead.

Consumer staples behind, but everybody is higher. And the Nasdaq is also underperforming today, but stronger as we head into the close. Nasdaq going out with a gain of 1.3%. That does it for me here on Closing Bell. See you tomorrow. Now I'll send it into overtime with Scott Wapner.