Closing Bell - Closing Bell: Stocks surge ahead of key tech earnings, Atlanta Fed President weighs in on rate policy 4/19/22

Episode Date: April 19, 2022

Wall Street finished the day sharply higher ahead of key tech earnings from Netflix and IBM. Alli McCartney from UBS and Barton Crockett from Rosenblatt debate whether or not tech earnings will help the Nasdaq catch up, after lagging all year long. The CEO of Citizens Financial Group breaks down earnings as that stock finishes near the top of the S&P 500. And Atlanta Fed President Raphael Bostic lays out his latest thinking on inflation, the economy, and the Fed’s rate hike path.

And Wall Street is in rally mode. The Nasdaq leading the pack up around one and three quarters percent. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Let's show you where we stand near the highs of the day, up more than 400 points on the Dow, up one and a quarter percent. Nearly every Dow stock is higher at the moment. Boeing actually adding the most, as well as Nike, J&J and Disney. S&P 500 up 1.4%. It's the beaten down Nasdaq that is leading us higher, up 1.75%. All the FANG names are higher. Amazon is actually adding the most to the triple Qs. Microsoft, Apple, Facebook, Tesla, Alphabet, NVIDIA, all higher today as well. Small caps bouncing back to the tune of 2%. Check out the S&P 500 sector heat map. Just shows you the breadth

of this rally. Everybody's up today except for energy. Consumer discretionary is in the lead along with real estate. Those sectors up a nice 2% or more. Communication services, industrials, just energy coming down after crude oil fades a bit. We've got a big interview coming your way this hour. We're going to talk exclusively with the Atlanta Federal Reserve President, Rafael Bostic, after the World Bank and IMF both just slashed their global growth forecast for the year. We're going to discuss Fed policy, the inflation outlook and much more. First up, though, our top story, a pivotal day for tech stocks, tech earnings kicking off after the bell when Netflix and IBM report results. And it comes as the Nasdaq makes a big move higher, up around 2%, and outpacing the Dow and the S&P.

But the index, still sharply lagging on the year, down about 13%. Compare that to a 6% drop for the S&P. Will earnings help the tech space catch up? Joining us, Allie McCartney from UBS Private Wealth Management and Barton Crockett from Rosenblatt Securities covers a lot of these big tech names. Good afternoon to both of you.

Ali, hard to know what to make of a day like today, if it's just sort of a pause in the bear market, especially for the Nasdaq, or the sign that all the bad news is just baked in. What are you telling your clients? I don't think that all the bad news is baked in. And I don't think there is a lot of rationality between days. That's what we're seeing. We're seeing a lot of volatility and a lot of fickle trading because sentiment is terribly negative. You can see that in the lack of committed buyers and support on the individual and the institutional side. You can see that in the AAI numbers, which just came out. There's a bull rating of about 16 percent. That's one of the lowest that you're used to

seeing. People are really struggling to have conviction in this market. And I think it has a lot to do with the buzzword stagflation. There are two major questions. Has inflation peaked? We at UBS think that it has, in fact, in March and hope that that will be shown when we see the April numbers. And is there growth and earnings, which I think are largely driving the positivity we're seeing today, are going to prove that out? I think that once we see this earnings season come through, we have a 10% EPS growth rate on the S&P. We're seeing beats. We have an ISM manufacturing that's 57, which tends to lead to very high levels, 85 percent of revisions. We're hoping that we can see a relief rally come out of this earnings season because expectations, both from a street level and from an individual level, are just so very low, Sarah.

Well, they're low on Netflix. That's for sure, Barton. Right. And the stock basically crashed on the last quarter on that disappointing guidance and has not recovered. In fact, it's only moved to lower lows. So what are the expectations for that stock today? Well, the good news for Netflix is that expectations are set low. I think the bad news is that that may not be an inappropriate place to be. You know, I do think that we're going through an evolution in streaming media, a time when everyone was signing up for services and Netflix owned all of it, to now a time when there's a lot more discretion.

The consumer is not as eager to sign up for anything that's put in front of them. I think we're starting to see separation of winners and losers, signs of saturation in some markets. And it's going to be difficult, I think, for Netflix to navigate this transition from go-go growth to maturity. But that's, I think, what we're coming into at this point. So you're not such a fan, it sounds like, from your tone there and also by the looks of your neutral rating and your $354 price target. Who is the winner then? Well, I think streaming overall is looking a difficult market. We're seeing lots of competitors come in late, try to spend a lot of money to get people to add that fourth and fifth subscription, which I think is a tall order.

Yet these guys are putting up great content, making a big push. Hard to see where the margin comes from in this business until we get a shakeout. You know, I think Netflix is, you know, not, you know, purely affected by other streamers, but also by the broader environment where people are generationally evolving, right?

They're watching more TikTok, you know, viral video. I think generationally, there's a change that Netflix needs to navigate. You know, from Netflix perspective, you know, their core subscription business is maturing. I wish they'd get into something slightly different advertising, which they've said they don't want to do, but everyone else is doing it. And I think that could be the one thing that changes the tone, changes the sentiment, certainly mine, if they embrace that. Got it. Ali, would you include the big tech, the FANG names in your optimism about earnings? And do you tell people to buy those stocks? Because last you were saying to be defensive in this kind of environment, but you did express some optimism around just how much is already in the market and what the

earnings are going to do. Look, I think, and to the point that was just made about Netflix and streaming in general, I think this is the time for selectivity. And I think to a certain extent, we have had so many years of just a beta market where you could buy an index or everything went up that that's almost baked into people's buying behavior. So whether you're talking about selectivity between sectors, so let's say energy over tech, whether you're talking about within sectors, so within tech going for big data, the more defensive, more mature companies that have shown an ability to produce free cash flow, to add to margins in gains in technology and infrastructure development, or simply whether you're saying, you know, right now we prefer the U.S. over other areas of the world. I think selectivity is absolutely key because growth in the last year has been very disparate and will be even more so going forward. So does that mean, so IBM and

Netflix both report very different stocks, different profiles. Ali, it sounds like you're more in the IBM. I know you don't talk specific stocks, but that one's down 3% this year. Netflix, a growth stock, is down 40% this year. Sounds like that's where the market wants to be right now, more slower growing. Well, look, I think so. I mean, that's exactly, exactly. Look, and we have been sort of in and out of very long and very quick economic cycles as a result of the pandemic and the low interest rate cycle. But that's what happens in

later cycle, right? You get more defensive, you get more value oriented. And when you're talking about a streaming company, for example, as opposed to sort of an icon of the Dow and a company that supports infrastructure and growth everywhere, I mean, streaming is one of those areas where probably years of growth was brought forward during the pandemic. And so that has to come home to roost when that happens. We'll leave it there. Barton, thank you. Barton Crockett on Netflix, Allie McCartney on the market. We appreciate it. Take a look at shares of Citizens Financial jumping today on the back of strong earnings before the bell. We'll talk to the CEO about what drove the beat next.

And later, don't miss our exclusive interview with Atlanta Fed President Rafael Bostic on inflation, the economy and the Fed's policy path. We've got a rally here. Dow's up about 430 points. You're watching Closing Bell on CNBC. Check out today's stealth mover. It's stealth mover. It's Plug Power. Shares of the alternative energy company surging after a deal to supply Walmart with up to 20 tons of hydrogen per day to power the forklifts at the retail giant's U.S. distribution and fulfillment centers. Do not miss an exclusive interview with Plug Power CEO tonight on Mad Money, 6 p.m. Eastern.

Check out shares of Citizen Financial popping today near the very top of the S&P 500 after a strong Q1 report and pretty upbeat guidance for 2022. Joining us now of Citizen Financial popping today near the very top of the S&P 500 after a strong Q1 report and pretty upbeat guidance for 2022. Joining us now is Citizen Financial's CEO, Bruce Vinson. Bruce, great to have you back. The quarter looked good. The earnings call sounded good, especially in contrast to what we got from some of the bigger players earlier in the week and last week. Why the discrepancy? Well, I think we put up some really good numbers for the quarter. The balance sheet is well positioned to benefit from rising rates. And so we're starting to see that come through. We saw

a nice uptick in commercial loan demand. That was another positive. And while the environment put a crimp in first quarter capital markets fees, the pipelines are still really, really good. And so we think that'll come back as markets stabilize over the balance of the year. When we look out over the remainder of the year, we basically called that revenues would be about 200 million net higher than what we thought in January, 300 on the net interest income side, given the higher rates, but then a little offset on fees from mortgages and capital markets down about 100.

Net net plus 200 expenses about the same, and then credit costs well-behaved and should be really good on the credit front for the balance of the year. Just wanted to pick up on what you just said about mortgage banking, because I know the fee drop was attributed to capital markets, but also mortgage banking, which was a weak spot for a lot of the banks. What do you expect for that business and for the housing market down the road with the Fed getting more aggressive, raising rates? Yeah, I think the refinance side for originations will clearly be off for the balance of the year with rates being higher. I still think the purchase market should be reasonably strong.

There's good underlying supply-demand dynamics that I think you'll see people wanting to move house and get resituated over the summer move season. So we would expect the purchase market to be reasonably okay. Part of the question is there's now excess capacity, which was built up in the industry to handle the refi wave. And so we need to see some of that capacity come out so that margins expand. So we'll see how it plays out. But again, I think there's a limited downside from here. We've already had mortgage come way off the highs that it had back in 2020. And I think capital markets will help pick up the slack over the balance of the year. I think the big overarching question for bank investors, small and large right now,

is that we finally got the higher rates that they were hoping for. And clearly that's helping your bottom line and you're very rate sensitive. So that's all good, except with the Fed going so fast now and so big on rates, there are worries about a recession or a sharper economic slowdown. And ultimately that hurts your business. Where do you stand on the outlook and what that'll do for the banks? Yeah, so, you know, the Fed has a difficult job here. They got behind the curve on inflation. And now they realize the seriousness of the situation and need to catch up. And so it wouldn't surprise me at all if rates go up 50 basis points in the

next two meetings. And then we'll see where it goes from there. They still are trying to engineer a soft landing while corralling inflation and keeping expectations, bringing them back into line with a 2% to 3% level, which is, as I said, going to be challenging. The markets still think that they'll have a good shot at delivering the soft landing, but I think a bit of worry has crept in as to maybe sometime in 2023 that we could have a brief and shallow recession. We've emphasized today that we really like the way our credit risk profile lays out, both on the consumer side and the commercial side. A lot of the companies that made it through COVID got leaner on their expenses.

They went digital. They've strengthened their business model. So the ones that had weaker business models already took a hit on those back in the COVID era. So the book looks pretty clean, whatever transpires, whether there's a light recession or not. And on the consumer side, the consumer's in great shape. Lots of liquidity. They bankrolled a lot of cash during the pandemic,

starting to get out and spend again, but don't see any signs of distress at all on the consumer side at this point. Well, very valuable to get your comments on all of that. Bruce, thank you for joining us. Stock rocketing higher today. Bruce Fentz on the CEO of Citizens Financial. By the way, the entire market taking a little leg higher. Session highs right now up more than 500 points, 534 on the Dow. Again, Boeing, the biggest contributor, along with actually Home Depot and Goldman Sachs right up there as well.

S&P up 1.7 percent. Coming up, our exclusive interview with Atlanta Fed President Rafael Bostic, following comments made yesterday by his colleague, Jim Bullard, who said he wouldn't rule out a 75 basis point hike. And then later, shares of Lululemon jumping today after Truist upgraded the stock to buy, bumped its target by more than $100. We'll talk to the analyst behind that call when Closing Bell comes right back. Up 525 on the Dow now. Check out the travel stocks working today. Airlines, cruises, hotels, casinos getting a lift and among the biggest winners in the S&P 500. The pop comes as oil

prices give up about 5% or so of recent gains. And after a federal judge in Florida struck down the CDC's mask mandate on planes and public transportation. Let's bring in Seema Modi. And Seema, I guess investors think that people will be booking more travel because they don't have to wear masks anymore. What does the data show? Well, Sarah, this is something that the travel companies have been fighting for. So it's seen as a big win for the industry. And from speaking to industry experts, anything that eases the level of friction around travel, reduces the

stress, is a positive for travelers who are still on edge about getting back on the road. Plus, the unruly behavior that we've seen on board planes related to masks, certainly not a welcome picture. Do we see more demand in the coming weeks? We'll be watching that bookings data. We usually get it out around Thursday, so in two days. Either way, it is providing a nice boost to the airline stocks. You're looking at United Air on pace to break a two-day losing streak. Marriott on track for its fifth consecutive positive session.

And the cruise lines, which relaxed guidelines around masks a couple of weeks ago, also trading sharply higher. One question we still need an answer to, Sarah, is if we see Europe and Asia adopt similar mask ruling. Back to you. Right. Seema, thanks. Keep an eye on that into the close. Up next, Atlanta Fed President Rafael Bostic reacts to the IMF slashing its global growth forecast today and discusses the risk of whether recession is rising here and abroad. We'll be right back. Nice update.

And just about at session highs, up 530 on the Dow. NASDAQ is leading the charge. It's up about 2% right now, but it's been a rough start to the year overall, especially for the tech sector. NASDAQ's down 13%. And this comes as the Fed plans to increase rates throughout the year overall, especially for the tech sector. NASDAQ's down 13 percent. And this comes as the Fed plans to increase rates throughout the year. Joining us now for an exclusive interview is Atlanta Fed President Rafael Bostic. President Bostic, welcome back. Nice to see you. Nice, Sarah. It's very good to see you as well. So I feel like you might be a little more dovish than some of your colleagues we heard from lately. I would love to get an update on your thinking about how many rate hikes we're in for and how big they're going to be over the

coming months. So I think I'm in the same area as my colleagues philosophically in that I really think it's very important that we get to neutral and we do that in an expeditious way. The really difference in view, I think, is in terms of our thoughts about how the economy might evolve as we are moving. And where I am is right now, I don't think that it's easy to know for sure how strong the economy is going to continue to be as we move through the summer and into the fall as we increase our rates. Because there's so much uncertainty. And, you know, if you think about a catch word for the pandemic more broadly, it's been uncertainty. There's been all sorts of things that we thought we knew were gonna happen. They haven't played out that way.

And because of that experience, I'm kind of uncomfortable to declare with that much certainty that I know exactly what's gonna happen, such that I can tell you exactly how fast or when we should get exactly to neutral or even if we should go beyond it. What is neutral? What is the significance of neutral? What number is that to you? Yeah, no. So to me, neutral is somewhere in the two to two and a half percent range. And I think neutral is really sort of conceptually the place

where the economy is standing on its own and our policy isn't pushing or putting the brakes on its trajectory. And so I think the economy is in a place where it can stand on its own. And if we can get there, that puts us in a much better position to respond if we see overheating persist and or if inflation doesn't respond to the policies that we are putting in place. I guess one question is how fast you get there. Your colleague, President Bullard, is saying he's not ruling out 70 base 75 basis point hike. Is that something that you would consider? Well, you know, I've been saying for months now that any action is actually possible, although it's not something that's

really on my radar right now. Look, I think what's going to happen is that you're going to see a steady march of our policy, assuming that the economy evolves the way it has over the last several months. And as we take each step, it will give us an opportunity to observe and adapt our policy based on what we see. You know, even just now, if you look at what's happening to real wages and real personal incomes, real personal incomes have grown at a negative rate. They've decreased over the last six or seven months. And real wages are in retreat. If that continues, there is a real case to be made that arrogant demand is going to slow down in ways that our policies will lead to accelerate, but it will allow us to not have to push as hard. But all of that is

conjecture at this point. We're going to have to watch and see what happens and then evolve as we learn the reality. I guess, so you're more worried about an economic slowdown. What is your pain threshold when it comes to seeing that kind of weakness at the same time that we're still seeing very high inflation rates? Well, you know, we do have to get inflation under control, and that's task number one. And I do think that it is important that we start to see inflation move back down closer to our 2 percent target. I do think, however, that some of that's going to happen by actions and developments that may not be associated with us. If we can get supply chains to resolve, we can start to see people come back into the labor force so that employers are able to increase their supply.

That can reduce the gap between demand for goods and the supply for goods, which is an important contributor to the elevated prices that we're seeing today. So I think there's a lot of stuff that's going to go on and how those other things play out will inform how I think about the appropriate course for policy. And that can be stronger or faster than where I am right now. I really have us looking at one and three quarters by the end of the year. But it could be slower depending on how the economy evolves. And if we do see greater weakening, then it's in my baseline model. Well, one source of weakness could be the global growth picture.

We just got another big downgrade to global growth today from the IMF. Does it feel odd to you to be so aggressively hiking into that kind of environment? Well, this is one reason why I'm reluctant to really declare that I want to go a long way beyond our neutral place, because that may be more hikes than are warranted, given sort of the economic environment. I was actually watching your reports on the IMF reports and their estimates about how the economy is evolving. And to me, that's just a sign that we definitely need to be cautious as we move forward. I mean, we definitely need to get away from zero.

I think zero is lower than we should be right now. And but at the same time, we need to just pay attention. And, you know, one of the things I've tried to tell people as we've gone through the pandemic is that the Federal Reserve actually is paying attention. We have people out in the field gathering information, getting on the ground intelligence. And that's intelligence I bring to my colleagues to make sure that they're hearing the most current ideas and realities about what's going on. My hope is that that intelligence will allow us to avoid getting the economy to a recessionary point because our policies won't push hard When that's not really where it needs to be What are the odds in your view of recession this year or next at this point?

Well, you know, I'm not I'm not a gambler so I don't put odds on anything I I've said my staff asked me this all the time and I've I've said many times My goal is to have there not be a recession while i sit in this chair and i'm just going to do all that i can to make that make that make that be true right now i would say there's a lot of momentum in the economy even so our gdp now forecast for this quarter is around two percent and uh for the year we have the economy growing somewhere close to three percent which is significantly above its long-run potential. It says there is momentum here, and I think that momentum can carry us in a way that

will allow us to avoid a recessionary outcome. Do you think inflation's peaked at this point? There are signs. So I'm watching this,, there are some signs out there that suggest that inflation has maybe capped off. But at the same time, I'm hearing from others that there is still some inflationary pressure to come down the road. You mentioned the global outlook. I've talked to a number of people in the agriculture sector who tell me that the increases in fertilizers and other things are going to push up prices for food and other materials. And so we're just going to have to watch and see how this plays out. I will say in the last several months, there have been surprises to the downside in terms of pressure on prices. And that's a good thing from my perspective.

And finally, I'm just curious, President Bostic, how you're viewing the balance sheet tool in all of this. I know that you guys are planning to start shrinking it potentially as soon as this month. You've laid that out in the minutes. How should the market think about what the size of the balance sheet should be in, say, three years? Should we assume that it's a trillion in QT every year and so it'll go down to six trillion by then? That's a very good question. And I think being able to say with certainty about what's going to happen three years from now is very difficult. What I will say, though, is that we increased the balance sheet in response to a major crisis that turned out to be a global crisis. And we saw markets ceasing to function. I think as

long as the markets continue to function, we should continue to reduce the size of the balance sheet to get it back to a more normalized level. And my hope is that that can happen orderly over the next two to three years, in which case the scenario that you call out might be appropriate. But we'll just have to see how the economy evolves. We'll have to see how markets respond to the other the removal of liquidity and that will really tell us when we've gone to that sweet spot we appreciate that the time and the thoughts as always always great to talk to you Sarah you you too Rafael bostic president of the Atlanta Fed we're going to be talking much more about Central Bank policy when we host the IMF's debate on the global economy it's on on Thursday. Mark your calendars,

1 p.m. Eastern time. It's the IMF Managing Director, the Fed Chair Jay Powell, ECB President Christine Lagarde, the Finance Minister of Indonesia, Prime Minister of Barbados, a very, very good lineup to talk about all things global economy. It's going to be on CNBC and CNBC.com, YouTube, Twitter, and Facebook. Take a look at where we stand right now in the market. Holding on to these gains here into the close 24 minutes left and we've got a 530 point rally on the Dow. Every sector higher in the S&P up 1.7 percent except for energy because oil is given back about 5 percent or more. The Nasdaq leading up now 2.2 percent. Coming up, the analyst who just put a big new price target on Lululemon. Why she sees strength beyond the pandemic. The

stock is up 4.6 percent. We'll be right back. Check out some of today's top search tickers on CNBC.com. Ten-year yield holding the top spot and a pretty big jump right now. You can see that Treasury prices down and yields are up 2.94 percent. So continued jump in yields. It's not hurting and holding back the tech stocks today. They are zooming higher. Twitter's down 4%. Of course, a top search one amid the drama with Elon Musk trying to take out the company. J&J after earnings up 3.3%. Tesla, another strong day, up 2%. And Apple up 1.5%. All the FANG names are higher. Today's going to be a test with

Netflix reporting after the close. Lululemon is also a big winner today after Truist hiked its price target by more than 100 bucks. The analyst behind the call joins us next. That story plus the numbers you need to watch when IBM and Netflix report results after the bell. We're taking you inside the market zone next with the Dow up now more than 550 points. Dow's up 532 points. We are now in the closing bell market zone. Allies, Lindsay Bell, here to break down these crucial moments of the trading day. Plus, Meg Terrell on Johnson & Johnson's big rally and truist Beth Reed on why she raised her price target on Lululemon by more than 100 bucks today. Stocks are in rally mode, though, for the first time in three days. We're

now at session highs, having a little climb here into the close. Joining us is Lindsey Bell, chief markets and money strategist at Ally Invest. And Lindsey, just talk to Rafael Bostic, Atlanta Fed president. What was notable to me is, so all the Fed presidents are ready to raise rates steadily, which he confirmed. But he said that the difference in opinion right now at the Fed is on what it's going to do to the economy. And he sounded a lot more cautious than some of his peers, for instance, on the uncertainties that are in the economy right now. He cited real wages actually being negative, said the global growth from the IMF taking down forecasts today is an uncertainty and that they're willing to sort of see how the economy and the markets digest the rate hikes. It's very different

from Bullard talking about 75 basis point hikes, not taking that off the table. How do you think it's all impacting the market? Yeah, I mean, there's clearly two sides to this story. And I think the reality is, is that we're kind of in this wait and see mode where we're trying to determine which way growth goes. And the Fed's going to play a very critical role in making that determination, right? So it was encouraging to hear that he's saying that they're, you know, reiterating basically that they're going to be data dependent. They're going to follow and wait and see what happens to the growth trajectory from here. It also, you know, is probably comforting to some degree to investors

that potentially he's taking off that 75 basis point hike at the next meeting. But the market is already pricing in. Right, right, right. But the market's already pricing in several rate hikes this year. We're looking to get to the end of the year with two and a half to 275 on the Fed funds rate, which, according to him, is the neutral rate. So that's a very swift pace to get to that level. And there's going to be market implications there. You've already seen a lot of volatility in the market just as as participants really try to understand and gauge the speed in the direction of which the Fed is going to go,

not only with Fed funds rate, but also with balance sheet reductions. Which he was interesting on that, too. Sort of didn't say it was on autopilot, said that they would react if the market can't digest all the QT, the tightening and shrinking, they would readjust, which I thought was notable. Lindsay, at the same time, yields keep going higher. Ten-year yield is now almost 2.95 percent. Today, that's not holding back tech stocks or stocks overall. Is that a signal that maybe it's really getting fully priced into the equity market? I don't know if it's necessarily a signal. I just think today we're in a market where different things are shining. We've got a great earning season so far.

And today, the market is focusing on that. They're focusing on the VIX that's coming down. And of course, oil prices, the fall in oil prices helps the inflationary story, right? And even some of the data that we got this morning, the housing starts data, while up surprisingly to the beating the consensus estimate, you did see that single family housing was down, likely being impacted by those higher mortgage rates. So higher interest rates are flowing into the system. They are impacting demand and ultimately should impact the inflation trajectory from here. So again, wait and see what it means for inflation. I know you've been pouring over the earnings estimates and we're

getting into the thick of it. Which sector has the best setup, do you think? You know, I've got my eye on the consumer discretionary sector. Not only has that sector been significantly beaten up from a price performance perspective going into the earnings seasons, but expectations have come down quite sharply for that group. Unlike the other sectors where we've seen estimates remain pretty stable to start to move higher going into the earnings season. So I think that the consumer still remains very, very healthy. There's over $2 trillion in excess cash on the sideline that the consumer has access to. While real wages might be lower, they are rising. We saw in the consumer sentiment survey last week that the consumer is very upbeat and positive about expectations. Their tune seems to be changing. They're becoming less

worried about inflation and more excited about potential wage growth moving forward. And so I think the consumer is in just a very healthy place compared to where they were at the beginning of the COVID crisis. And I think the market hasn't given the consumer enough credit with their ability to be resilient throughout the remainder of this year. I guess it's the outlook, what we hear from these companies, that will be key on that front. Lindsay, thank you very much. Consumer discretionary, by the way, having a great day today. Every stock within that sector is higher, led by Wynn Res results, except for Dollar Tree, which has been a winner lately.

J&J, Johnson & Johnson, one of the best performers in the Dow today. The pharmaceutical giant beating profit estimates but missing sales expectations and lowering its full year revenue and earnings guidance. On the call, the company's CFO warned of headwinds from commodity supply issues, higher labor, energy and transportation costs. Meg Terrell joins us. Meg, J&J also suspending its COVID vaccine sales guidance. How is that impacting that stock and the vaccine makers? J&J is up nicely today. Yeah, Sarah, it's been a really interesting story for J&J today. It started off lower on all of the things that you just mentioned that seemed like negatives in the quarter. And their commentary on the COVID vaccine essentially saying there's a global surplus right now and there's uncertainty when it comes to demand. That affected other stocks of vaccine companies. We saw Moderna trading off. We saw BioNTech slightly lower, Novavax lower.

They have largely come back. You are actually seeing Pfizer lower, although that may not necessarily be related. There's another story suggesting that demand for Paxlovid globally may be a little bit weak. So maybe that's driving that. But in terms of J&J, really seeing the stock come back from that as analysts parsed through the information and really saw what they call a recovery in medical devices coming back amid concerns about COVID slowing that business, the consumer business doing pretty well despite those headwinds that you talked about. But of course, there's continuing questions about what inflation and what the supply chain impacts are going to look like for the rest of the year, Sarah. What generally are you expecting from the health care sector?

Because it has been seen as a bit of a port in the storm lately, a defensive place for investors to hide amid I mean, concerns about an economic slowdown and rising rates. I'm not sure if this is an expectation or more just sort of communicating the hope that I'm hearing from people, particularly in the biotech sector. But there is a huge hope and appetite. We're seeing some more business development and some more M&A, particularly as you're seeing the biotech sector so beaten down and you're seeing a lot of cash and a lot of need for new products and growth within the bigger pharma companies that have been really well appreciated by the street more recently. So that is a real question. Are we going to start seeing these companies start to acquire more? Will that bring biotech valuations back a

bit? Yeah, it's been brutal. Down 16 percent here today for IBB. Meg, thanks. Meg Terrell, shares of Roblox and Electronic Arts rallying today despite being downgraded by Goldman Sachs. The firm cutting both stocks to neutral from buy, slashing price target on Roblox to 50 from 108, while trimming its target on EA to 145 from 183. Steve Kovach joins us. Steve, this just seems like a catch-up move for these analysts. They're basically taking targets down to the prices of where these companies. What else did you glean from that report? Yeah, Sarah, I read maybe 100 pages of video game research for you today. So let me just boil it down the best I can for you. So what they're basically saying is the comps are going to look really tough for these companies after this pandemic boom. They saw just astronomical growth since

Roblox first IPO'd and, of course, EA Games with really big hits like Apex Legends, which is kind of their answer to Fortnite. So all that growth is going to look very tough year over year. And they're just basically warning of a tough comps over the next 12 months but the long-term Sarah is what they're really interested is what's really interesting that Apex Legends game we're showing now is coming to mobile soon and mobile is the biggest gaming platform in the world you got to keep in mind the reason why people are so bullish on video game stocks right now is because at least half the population and the entire planet is playing video games in some capacity whether it's on a console whether it's on the phone or whatever you may and soon the at least half the population and the entire planet is playing video games in some capacity,

whether it's on a console, whether it's on the phone or whatever you may, and soon the glasses, right? And that's where Roblox plays in too. So the long-term goal here from that Goldman is saying is that there's just a lot of upside, especially for Roblox as these new kind of gaming platforms come out. And of course, Roblox is the only metaverse company really out there, the only public company making the metaverse in front of us. And if you want to bet on the metaverse, Roblox is really it. Well, that's what I was going to ask, is what happened to that whole hype around the metaverse? Did that just die down with the fear of rising rates?

Because even meta hasn't done that well. Facebook. Yeah, well, I mean, let's do a reality check on Meta. Meta is so much in the early days as far as building this metaverse thing that Zuckerberg keeps talking about. Roblox is doing it right now, Sarah. Sure, the technology might not be there. And this whole vision that we've been talking about for the last year and a half, two years about what the metaverse can be. Sure, we're not there yet. But Roblox virtual worlds happening right now in Roblox. This is how kids are socializing and interacting and spending their parents money.

And the real challenge is going to be how do we move beyond the kids into, you know, older and older audiences to get them into it, too. But again, Goldman very bullish on that. Yeah, for the long run. Well, the stock is already down about 60 percent this year. Roblox, that is. Steve, thank you. Steve Kovac. And we are at session highs, continuing to build on gains here. Shares of Lululemon jumping as well today after Truist upgraded the stock to buy from hold, raised its price target by more than $100. The firm saying it believes Lululemon has momentum beyond the pandemic, and they view Lululemon's higher income customer base as a key asset in this inflationary environment. Joining us, the analyst that made the call, Beth Reed from Truist Securities.

Beth, thanks for joining us. What happened to the Lululemon growth story? This was everybody's favorite stock and there was so much runway ahead of it. And then it sort of has been underwhelming in the past year or so. Yeah, absolutely. Hi, Sarah. First of all, thanks for having me. I would say when we initiated coverage on the stock in December with a hold rating, we were bullish on the brand and the business and secular category tailwinds, such as the consumer's prioritization of health and wellness. Valuation was a bit full in our view at the time. There was a bit of a sentiment overhang given around Mirror,

which didn't perform up to expectations. Sales for the business ended up coming in about 50% of what we had initially expected. So I think there was really just a kind of drag on it. Some investors maybe perhaps bucketed in with other COVID stories. But I think now as we look at coming out of the pandemic, consumers are still going to prioritize health and wellness. As you mentioned, the higher income customer base and pricing power we see as key assets in an inflationary environment. And then thirdly, the company's TAM is larger than what we thought it was in December. And so expanding into footwear, golf and tennis collections, as well as when we come back to the

office two, three days a week, whatever it is, we're not wearing suits. Lulu has a product for us. So I think they benefit from all of those trends. The valuation is actually closing in with that of Nike. So Nike is at 36 times next year's earnings. Lulu is about 40. What should that gap be? Well, when we – so we're looking at a 2023 P.E. ratio. And so when we initiated

on Lulu, that was in the mid 40s and it's come back to 35 times. And so I think this is an attractive buying opportunity for what we view as a long term growth story. And when it comes to Lulu's performance during recession or periods of economic slowdown, I know you said it does well during an inflationary environment. They've always had good pricing power. What happens to—does it just get thrown out with all the other consumer stocks when there are worries about the economy? I think that would be unfair.

I mean, I think, you know, we're starting to see the bifurcation potentially between the lower-income customer cohort and the higher-income customer cohort. And I think Lulu definitely stands to benefit from its premium positioning with the higher income customer base. So I'm not concerned about their performance fundamentally in a recessionary environment at this point. All right. $4.95 price target on Lulu suggests another 90 or so plus gains. Thank you, Beth. Beth Reed from Truist. Thank you. IBM, one of the big tech names set to report earnings after the bell today.

Seema Modi here with a preview. Seema. Sarah, it's made bold bets over the last year in the cloud and cybersecurity space since the beginning of 2021. It's acquired 18 companies, spending about $4 billion. Does this remain a key part of CEO Arvind Krishna's strategy

to grow and develop IBM into a more competitive, cutting-edge tech player? Software and consulting combined make up the largest share of its business, so the company's lens into corporate IT budgets will be listened to closely. And its dividend of 5% has made it a value play, Morgan Stanley upgrading the stock to overweight, calling it a popular place to hide amid macro uncertainty. You'll see shares of IBM, they're down this year, Sarah, but outperforming the S&P tech sector, among other heavyweights like Microsoft and Meta. We'll see if earnings can allow it to continue to outperform when they're out after the bell. Only down a bit. Seema, thank you. Netflix, the other big name, of course, on the earnings calendar after the bell. Julia Borsten here to break down the key numbers to watch for there. Julia. The key number to watch is two and a half

million. That's how many subscribers Netflix itself forecast that it would add in the first quarter, though since then has likely lost about a million subscribers since it shuttered its service in Russia. Analysts also expect the company to forecast the addition of 2.6 million subs in the second quarter. And on the upcoming earnings call, investors are looking for insight on the impact of competition, on price hikes, on inflation, on the crackdown of password sharing, and of course on the pressure to potentially launch a lower price to ad-supported version of the service. Netflix is expected to grow its revenue about 11 percent, while earnings per share are projected to drop by nearly 23 percent from the year earlier quarter. Julia, I just want to highlight Twitter here because there's some news

coming through on the wires on the Twitter bid, private equity potential participation? What can you tell us? That's right. The Financial Times just reporting a couple of minutes ago that Blackstone Group, Vista Equity Partners and Brookfield Asset Management are among some of the biggest private equity industry groups who have decided against providing an equity check for a buyout. This is being reported by the FT. Now, the FT also says that Musk or any other bidder would need well over $20 billion of new equity to complete the deal with the remainder coming from debt or potentially existing investors. So we see Twitter shares now down nearly 5%. Sarah?

Julia, thank you. Julia Borson, not over yet, I guess. One minute to go here before the bell. And we are looking at the best day for the Dow in about a month. It's a pretty strong rally we've got on our hands. It's built throughout this closing hour. And we're near session highs, up more than 500 points. There we go, up 500 points or so on the Dow. Most positive impact there is Home Depot. Travelers is the biggest weight. Not a lot of Dow losers today. It's just Travelers, Chevron, and Merck that are lower. Everybody else is higher right now. S&P 500 also with a broad-based rally here. Every sector higher except for energy.

Consumer discretionary in the lead thanks to the travel stocks, the hotel names, some of the retailers as well. Real estate's doing well. That sector up a nice 2%. So is communication services. We'll see what that does after Netflix's quarterly earnings after the bell. Industrials are having a good day as well. The Nasdaq is coming back. Nasdaq 100, which we like to look at, up 2.14%.

It's still about 15.5% or so off its highs, but still a very strong session and a big bounce back. Small caps also with a gain of about 2% into the close. Dow closing with a gain of more than 500 points. That does it for me on Closing Bell.