Closing Bell - Closing Bell: Tech Surges, Elon Musk takes a big stake in Twitter, and Risks of a Recession 4/4/22

Episode Date: April 4, 2022

Tech stocks rallying to start the week on Wall Street after Tesla CEO Elon Musk bought a 9% stake in Twitter. Jefferies’ Brent Thill discusses whether Musk’s purchase could impact Twitter’s strategy. Former Federal Reserve Vice Chairman Roger Ferguson reacts to JPMorgan CEO Jamie Dimon’s warning that the Fed could hike rates more than Wall St. is expecting and whether the risk of a recession is rising. And Wells Fargo’s Mike Mayo explains why he is cutting his price target on Morgan Stanley & JP Morgan and the bank stock he thinks looks most attractive in a rising rate environment.

Stocks are at session highs. The Nasdaq's jumping nearly 2%. The most important hour of trading starts now. Welcome to Closing Bell, everyone. I'm Sarah Eisen. Here's where we stand right now in the market. Tech-heavy Nasdaq stands out today, up 1.75%. But everybody's higher, and we've recovered from a nearly 200-point decline in the Dow. S&P 500 up 0.7%. Why is tech doing well? Well, you've got the Chinese Internet name soaring today on some friendlier moves from the Chinese regulators on auditing. You've got Twitter carrying the S&P 500 communication services, the best performing group. Tesla is doing well on deliveries and technology, consumer discretionary and communication services. Those are the only green sectors on the S&P 500. Here are my top takeaways

on today's big stories. New highs for energy names today. APA, Hess, Kinder Morgan, Marathon Oil, all hitting new highs. Oil moving up 4% as European politicians are horrified by the new images of atrocities coming out of Ukraine. President Macron in France calling for oil and coal sanctions, but Germany is yet to get on board. Despite the market's recent hope of peace

talks, the war is still raging. Sanctions are still ratcheting up and investors that are looking past it may need to recalculate. Oil and energy stocks remain the tell, both elevated today. Starbucks suspending its buyback under the return of founder Howard Schultz as the CEO of the company now wants to use billions in cash instead to invest in stores and employees. Wall Street doesn't like it. But Schultz has proven in the past to be a very shareholder-friendly CEO. During his tenure, shares gained 21,000 percent, according to BTIG. Earnings are 10 times what they were when he stepped back in to save the company in 2008.

Will this time be different? We will see. And warnings from Jamie Dimon's shareholder letter. CEO of J.P. Morgan decidedly less upbeat than we've heard him in the past. He cites the war in Ukraine and resulting sanctions that will, quote, slow the global economy and it could easily get worse. He warns Fed tightening will cause lots of consternation and very volatile markets. And he says he thinks the Fed will move rates significantly higher than what the market expects. And although he did say the U.S. consumer is in excellent financial shape on average,

the overall message was one of caution. Investors, Diamond says, should prepare for negative outcomes. Let's get straight to our top story, though, today. The Musk effect on Twitter. The stock is soaring near the highs of the day at more than 28 percent after the Tesla boss bought more than 73 million shares, representing a passive 9.2 percent stake in the company. The purchase comes after Musk's recent frustration toward that company about its free speech principles. He's even considered building a new social media platform, he says. Joining us

now is Brent Thill from Jefferies, CNBC technology correspondent Steve Kovach, and CNBC wealth editor Robert Frank. Let's dive in. Brent, you've got a hold rating on Twitter. Does this news of Musk's involvement change the story? As we say, D-BAM, don't bet against Musk. There's a halo effect in the interim. But I don't think a 30 percent return is justified for a new shareholder. If any one of our clients came in, that certainly would create that kind of move as a passive investor. So fundamentally, Twitter has been struggling relative to its peers. Stock's been cheap and many of these names are down. But we think that ultimately this move now reflects that fundamentals are getting back on track. The new

CEO is obviously going to have a positive impact in the next few quarters, but I think it's way too early to call the fundamental return of Twitter. Many of the advertisers still are struggling with their ROI or seeing a better ROI on other platforms. So you think it's overdone. Steve, have we heard anything from the company? They do have a fairly newish CEO. I wonder how he's going to handle this new challenge or opportunity. Yeah, Sarah, I'm actually kind of surprised we haven't heard an official comment. I've been bugging them Twitter all day saying you've got something to say about this. They have a new stakeholder, 9 percent. And it's not just any stakeholder. It's Elon Musk. Just complete radio silence from the company today on that. And all we've heard from Elon is the LOL hi tweet. So take from that what you want. Saw that. Yeah. So there's nothing official about what Elon's intentions might be here, how the board is thinking about in line with this vision that Twitter is going towards,

this decentralized idea of Twitter where people can kind of build on top of the Twitter platform and create their own rules. So that sounds like something Musk would be really interested in, Sarah. And he's got the money to do it, Robert, right? Robert Frank, today's move on Tesla and Twitter alone will more than pay for for this investment. Right. Yeah. This trade has already been profitable on both ends. So if you look at Tesla shares, which are up remarkably today, more than five percent, he's already added more than nine billion dollars from his Tesla gains today. Coupled with the fact that when he bought these Twitter shares, he paid about $2.3 billion for them in mid-March. That value of that stake now at $3.6 billion. So he's up $1.3 billion just on the Twitter investment alone, added to the $9 billion at least that he added

today on Tesla. So look, this was not about the money for him. This was about the influence. But, look, he made $10 billion today on both sides of this trade. Yeah, not bad for a new position. Brent, you know, Twitter's seen some excitement before when it comes to heavyweight investors. Steve Ballmer, they were involved in a challenge from Elliott. Paul Singer, Prince Aluolid. I'm thinking back, Mark Benioff almost made a bid to buy the company. And none of those really changed the game for the company. They brought a lot of firepower in terms of big names and enthusiasm. So what's it going to take? Exactly. I mean, I think this is all

surface. This isn't fundamental, Sarah. And if you look at what has to change uh twitter just has to be more usable anyone that uses these services realize you know it's it's it's a hard service to use and it's not been optimized for the end users so i think ultimately there's a lot of work and i think the new ceo is obviously going to have a huge impact on on changing this having been a company for a decade in product roles that they can make the product easier and more consumable. Can they start a subscription program? Can they have an ad driven program?

There's so many different call options, but they've got to do something because it hasn't been working. We talk to advertisers on the inside all the time and no one wants to come Twitter out, but everyone has also said, hey, they keep coming back with a story that breaks. Then it comes back with a new story and then it breaks. It's just a yo-yo, and they've got to get more even with their

execution. So we think they can do it. It's just they've got to prove it. And again, it's been somewhat of a broken record the last couple of years. So it's encouraging. No doubt this is a positive step in the right direction. Robert Frank, there's also chatter that he could all out buy the company, right? He can afford it. Has he ever done anything like that? No, you know, he's not a portfolio investor. So he's really just got Tesla.

He's got SpaceX. And then he's got a little bit of crypto on the side. And, you know, remember back when Jeff Bezos bought the Washington Post for $250 million, everyone was worried about the influence that he would have on that newspaper and on the debate. And clearly here, you know, he could buy the whole thing with, let's say, just the gains that Musk made in March alone. He gained $50 billion. So now the market cap of Twitter is around $40 billion. So Musk could buy the entire company just with the stock gains that

he made in March. I don't know if he wants to do that. Clearly, this is listed and categorized as a passive stake for now, but he could easily do it tomorrow if he wanted. Yeah, and there's some scrutiny around that, that use of passive stake already when he's had the Twitter poll out there. We'll talk about that later with Mike Santoli. For now, Brent, Steve, Robert, thank you all for joining me on Twitter, which is soaring 28 percent right now. Coming up next, Bridgewater's view on the market. We'll talk to Karen Carneal-Tambor, CIO, about today's big push higher for the Nasdaq and the biggest risk she sees in the market right now. Remember, they've been betting big on commodities. You're watching Closing Bell on CNBC.

Session highs with the Dow up 100 points. Check out today's stealth mover. It's Roku. The stock getting a big pop after the streaming company said it reached a multi-year extension of its distribution agreement with Amazon, which allows customers to maintain access to Prime Video and IMDb TV on Roku devices. Terms of the deal weren't disclosed. Roku had been one of the darlings of the pandemic as more people streamed from home, but shares have had a rough stretch this year, down around 40 percent, even with today's pop. Sticking with tech, the Nasdaq outpacing the other indices today. It's up about one and three quarters percent. This has been the trend over the past month, with the Nasdaq up more than eight percent, but still lagging on the year. Let's

bring in Bridgewater Co-Chief Investment Officer for Sustainability, Karen Carniel-Tambor. Karen, it's great to see you. And it is not just Twitter today that's moving tech higher. It's Tesla and Apple and Amazon and Microsoft and NVIDIA. And that has been a story. Though, as I recall, you guys weren't huge fans of tech. You were really into the commodities trade. Has anything changed now that valuations have corrected? I think that we are just much more macro investors

that look broadly at what's happening in the economy. We're much less likely to make sector trades. supply everywhere, in every sector, in every situation, that that inflationary problem that was brewing and brewing is now vastly exacerbated by Russia's invasion of the Ukraine. And that means that inflation protection is extremely important for investors. And when we look at the stock market, we see the stock market telling us that the Fed is really not planning on tightening all that much, that the economy is going to stay fine and yet inflation won't get out of control. And that seems pretty unlikely to us. It seems much more likely that the Fed will need to tighten more than is priced in, especially, you know, next year, the year after, and that you'll get you'll need to slow the economy somewhat in order

to get inflation under control. So are you guys in defensive sectors like utilities or staples, which have actually been doing well on this idea that the economy will slow? We really just rarely invest that way in terms of selecting sectors. We are much more macro investors are likely to pick between countries. And when we look between countries, the United States certainly has had the biggest pockets of overvaluation, has had the most significant inflows into the United States relative to other countries. There's been a big U.S. exceptionalism story for quite a while in the stock markets. So we like a bunch of other country stocks like Japan, like some of the emerging markets more than we like U.S. stocks broadly because there's just already been so many inflows into American companies. And if you look at the tech sector, certainly a piece of that, it's already priced that American companies will continue to outperform basically every other

company in the world for a very long time. And so there's no way to surprise on the upside by America remaining exceptional. There's a lot more room for others to catch up. Are you in the recession camp for the U.S.? Well, I don't think the Fed has signaled nearly enough tightening at this point to cause a recession. I think they will need to tighten a lot more than is currently priced. I mean, they were priced to do so little coming into this year, and now they're priced to do, you know, a good amount of tightening this year. But almost no tightening is priced in for 2023. And you look at the bond market and it's telling you, don't worry, the Fed's not going to tighten and inflation will get back under control. That'll all be fine. If you look at historical periods,

that's very unlikely. And so it seems to me like first, the Fed will have to tighten a lot more than people expect. And eventually that will need to threaten the recovery. What are you expecting on that front? Do you have an estimate on how many hikes this year? And it sounds like you're expecting them to go into next as well. Yeah, I think what's priced in this year at this point looks roughly reasonable to me. You know, it could be off by a bit off there. But after this year, there is almost nothing priced in. And so when you look at the yield curve, you know, inverting and, you know, it's been flattening for a bit, but finally inverting. You look at that and it's all, you know, hikes priced in the next year or so and then very, very little.

And so I would expect that that has a long way to go. And one way of really seeing that is looking at what people like to call real yields or what's the real interest rate you're paying for anything, whether it's a home mortgage or for borrowing. And with inflation running as it is, you still have very, very negative real interest rates. And history would tell you, you can't really slow demand. You can't really affect inflation without actually raising the real interest rate. So unless inflation magically comes down very, very quickly, you need significantly higher nominal rates. So why do you like emerging markets in that environment? If the Fed is tightening so much, doesn't that hurt them? I don't think all emerging markets, and I don't think, for example, I would separate, you know, the companies from the currency exposure and depends where you are and what. I think that

most investors are, most importantly, just radically under-diversified. And emerging markets, one of the nice things about things like the companies is that they haven't really received the inflows. And so you went through this post-COVID period where people got all these checks and spent all this money and put it into stocks, into crypto, into things. They didn't really go into emerging markets as a place to go. So there are a lot of places there where company valuations are very attractive. There are places that are going to benefit from the commodity boom, for example. And you can really separate that view from a view on the currency, which is more sensitive to balance of payments. But you have to look at each place, of course. Karen Carniel-Tambor, always good to hear from you. Thank you.

From Bridgewater. After the break, the market's next catalyst, earnings season, officially kicking off next week. Mike Santoli taking a look at Wall Street's latest expectations in today's dashboard. As we head to break, check out the NASDAQ 100 heat map, and it is the Chinese internet names getting the biggest boost here on hopes of easing listing regulations. Names like Pinduoduo, Baidu, JD.com, all jumping and leading the charge right now. That on top of some gains from Tesla, Apple, Amazon, Microsoft, Facebook, NVIDIA, Google, Netflix, and Qualcomm. It's a big day for the NASDAQ 100. We'll be right back. Up about 90 on the Dow. Earnings season officially kicks off next week when the big banks report results. Mike Santoli here to take a look at earnings expectations, Mike, and stock valuations

for the dashboard today. And it has been surprising that these earnings expectations haven't come down more, hasn't it? Absolutely, Sarah. In fact, it's probably the steadiest single input into all of what markets get priced off of. You have this steady march higher in projected S&P 500 earnings. That's the blue line, left scale. It's above $230 per share right now. So basically around 20 times earnings at $4,600 on the S&P 500. And as you see that estimate, that valuation has come down from the low 20s

back several months ago, back during the pandemic, when you really had the overall market just surge and essentially price in a massive profit recovery. So the fact that you see the estimates crossing above the valuation level, that know, you see the estimates crossing above the valuation level, that's kind of arbitrary in terms of where we place it. But it does underscore the point that we do have some kind of earning support here, assuming, as you suggest, we don't get lots of estimate cuts. Now, analysts have trimmed first quarter estimates just by a little bit, not even by as much as they do typically historically. But for the remainder of the year, supposedly we're going to make it up. That's a big question. Where are the earnings going to come from? Are

there going to be margin pressures? Right now, though, that's not really been the swing factor. It's all been about the Fed and how much we're going to pay for each dollar of earnings, not whether the profits will be there. I wonder, though, how much of the revisions are oil, which is getting oil companies, which get their revisions higher. A lot of the upward revisions absolutely are from energy. But because energy is such a small part of the S&P, that doesn't necessarily explain why the overall estimates are going higher. But, yes, that's been a big strong point. Also, the big five, you know, NASDAQ names that are the big five in the S&P,

they're a quarter of the S&P right now, and they're very steady, right? So you have to just keep in mind that a lot of the earnings are almost baked in before you get into a year. I think the strong dollar will hurt. We'll see. At the margin, it will. Yeah. That tends to be with a lag as well. Mike, thank you. We'll see you soon for Market Zone. Mike Santoli, J.P. Morgan CEO Jamie Dimon warning the Fed could raise interest rates higher than Wall Street is expecting. Former Fed Vice Chair Roger Ferguson weighs in when Closing Bell returns. J.P. Morgan, CEO, Jamie Dimon out with a warning today about the Fed's difficult task of engineering a soft landing. Writing in his annual shareholder letter, the stronger the recovery, the higher the rates that follow. I believe that this could be significantly higher than the markets expect and the stronger the quantitative tightening.

Joining us now is former vice chair of the Federal Reserve, Roger Ferguson. Roger, always good to see you. How much work in tightening do you think the Fed has in front of it in controlling inflation? What's it going to take? Well, I think Jamie's letter and general message is roughly correct, which is indeed, you know, inflation is far beyond their 2% goal. And the market is expecting, I think, roughly two 50% tightenings over the next two meetings and maybe 25, 50 basis point tightenings over the next two meetings, then 25 basis points

after that. That sounds roughly right to me. But as Jamie says, it is very, very difficult to engineer a soft landing. So if you were in the Fed and I consider you a Fed insider, you were there as the vice chair, would you tolerate a recession in order to get a handle on inflation? Well, I think you put your finger on exactly what the dilemma is. Unfortunately, engineering a soft landing is very, very difficult. If one goes back to the early modern period of the Fed in the 1950s, they tolerated three recessions, two short and shallow, one pretty deep, in order to get rid of inflation.

And obviously, Paul Volcker put the country into a very severe recession in order to get rid of inflation. That's, you know, Paul Volcker put the country into a very severe recession in order to get rid of inflation. That's the tradeoff that they're confronting. They don't want to go there, but I think they may be forced to deal with that very, very tough tradeoff sooner rather than later. The odds of recession, to put it mildly, have certainly gone up, but it's not the Fed's goal. However, they may be forced into that hard choice. Yeah, there's this idea, and Kathy Wood, ARK investor, put it's not the Fed's goal. However, they may be forced into that hard choice. Yeah, there's this idea, and Kathy Wood, ARK investor, put it out on Twitter this weekend that the inversion of the yield curve is a signal that the Fed is going to raise interest rates, she says, as growth and or inflation surprise on the downside, and that would be a mistake.

Would that be a mistake? Is that what the bond market is telling us? Well, I think the bond market, first, there are many yield curves to focus in on. And so I think the one that people were most excited about last week was the difference between the two-year rate and the 10-year rate. That inverted slightly. The data show, actually, the yield curve that's more important in terms of forecast recession is the very short end, three months to ten years. That's still in very positive territory. So I think the market's gotten overly excited about one yield curve. I think what the market is saying to us is, you know, the amount of tightening called for may be a little less than perhaps the Fed might be pushing for,

i.e. the risk of recession has gone up. But I wouldn't get overly excited about this one yield curve inversion. I think the broader question that Jamie raised is the one that we really focused on, which is the balance of risks between unstable or excessively high inflation and a risk of recession. I think that's the knife edge or the tightrope that the Fed is walking right now. And how one relates to another. What's been surprising in a way is how strong the U.S. consumer really is. The fiscal stimulus is largely worn off, and yet we're still seeing companies have pricing power and the ability to push on these higher prices onto the consumer. Do you expect resistance to that at some point? In other words, how strong is the consumer when it comes to dealing with these spiking prices on everything,

including food and gas? Well, first, we start in a place where the labor market is very, very strong. We have unemployment practically at pre-pandemic lows of 3.8, 3.6 percent. We've started to see an increase or a slight pickup in the labor force participation rate, which is another positive sign. Yet, the data also show that real wages, wage increases minus inflation, are still not enough to keep up with inflationary pressures. So real wages growth is negative. And so I think what we're seeing right now is some fundamentally strong labor markets pushing up against these inflationary pressures. And at some point, there's going to have to be a reckoning, so to speak. Right now, individuals are clearly

dipping into very vast pools of savings that will go on for a period of time, but not forever. And so that, again, takes us back to this tightrope question, because if, in fact, there is a recession that occurs, it will be from a combination of interest rates that are tightened more than the economy needs, just as consumers are starting to slow down the consumption pattern that we've had thus far, because their wages aren't keeping up. The other thing to talk about, obviously, for many is house prices. So rents are also going up. Houses themselves are becoming less affordable. All of that is putting pressure on consumers. Right now, I think the strength of labor force is playing out as the

winner, so to speak. But that's not going to last forever. And so that's why you're getting this range of concerns around the possibility of a recession, even if the Fed is not attempting to engineer one. Is that what you're telling your company? You're on the board of Alphabet and Corning and IFF. When they ask you, Roger, where's the economy going? What do you tell them? The recession is coming when?

No, no. What I say to them is that the risk of recession has certainly risen. It's not over 50 percent yet, but it's much higher, maybe 35, 40 percent, maybe a little higher. If we get into recession, it will not be an intentional one such as the ones in the in the 50s or the one that Paul Volcker maneuvered. And so the Fed will, I think, move very quickly to avoid that problem. And so, you know, as Jamie's letter said and others, I think what we're in for is a lot of uncertainty, a great deal of market volatility, headline risk. And in that sense, sort of buckle up your seatbelts. Possibility of recession higher than we'd like. And therefore, at least think about what one might do to be defensive in that space.

Not a foregone conclusion. And the second point I'd make is if the odds play against us and we end up in a recession, I think the Fed will move relatively quickly to avoid having that be long and deep. But, you know, we will see. So much of this depends on the other thing, which is inflation expectations, which have been rising a little bit. And obviously, a great deal of this inflation that we're dealing with has to do with supply chain matters that we were hoping would sort themselves out. And then finally, we see oil prices, which are very volatile and headline-driven. And so it's a complete witch's

brew of forces and factors, some which the Fed controls, some which they don't, some which reflect geopolitics, some which reflect the domestic developments. So a highly complicated system, and the Fed is trying to walk that tightrope as best they possibly can. Well said. Roger, thank you for joining us. Appreciate you summing it up for us. Roger Ferguson. And to that point about positioning Walmart right now,

trading at levels we haven't seen since December 2020, new 52 week highs for a defensive company. Wall Street buzzing about two big SPAC deals today. Is the SPAC comeback for real? That's next. What's Wall Street buzzing about today? SPACs. News of their death may have been greatly exaggerated. Two notable ones out today. Westrock Coffee announcing it'll go public, striking a deal with Riverview Acquisition Corp. It's a supplier that ships coffee and teas to restaurants, retail hotels, and consumer companies,

valued around $1.2 billion. Also today, Hypebeast saying it's going public through a merger with IronSpark. The platform is a must-read blog for sneakerheads, has 26 million social media followers and a loyal customer base of Gen Z and millennials, me included. Tom Brady, Naomi Osaka, Kevin Durant, and other celebrities are investors. So SPAC mergers are still happening, but the numbers are significantly down from this time last year. Only 54 SPACs have priced in the first quarter of this year. Compare that to 203 in the first quarter of last year, a decrease of 73%.

And blame the performance of many of these companies that have gone public via SPACs and regulation, of course. And just last week, the SEC advanced a set of rules that, if implemented, could make it harder for SPACs to execute mergers. Up next, AMD makes a big buy, and what Elon Musk's new stake in Twitter could mean for Tesla shareholders. Don't seem to mind today. The stock is up more than 5%. Those stories and more when we take you inside the Market Zone. 17 minutes left in the trading day.

We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here as always to break down these crucial moments of the trading day. Plus, Bill LeBeau is here on Elon Musk's huge stake in Twitter and Bernstein's Stacey Raskin on AMD's big cloud deal. But first, let's start with the broader market because stocks have been gaining steam into the close. The Nasdaq leading the way up nearly 2 percent, Mike. And if you look what else is working today, energy is doing well, materials, industrials, financials. The bottom performing groups are utilities, health care and real estate. So it's kind of the opposite of what we've been seeing in recent days, pushing back against the recession theme. What stands out? Why is Nasdaq doing so well today? Well, to me, the market's showing signs of being somewhat back in gear. I don't think there's a specific why are the big Nasdaq

stocks working today, except for this sort of jolt of energy from the Musk Twitter purchase and the fact that there's been a big lag. You know, growth stocks had really lagged value and defensives for a while right now. So it makes sense that there was a buy in there. What's interesting in terms of the as the day went on, dynamics was you got buffered by the mega caps at the beginning of the day. And then the rest of the tape just kind of came around. Small caps went green. So it shows you some signs of having a little more of that constructive rotation type action that we got used to.

And just in terms of where we are with the S&P, we've clawed back up to the levels where we kind of fell off a cliff on Thursday at the end of the quarter. There was that mechanical sell-off. So I don't think you've necessarily kind of gone up in a way here, but I think it's net positive action here. It's not just the mega caps, as you say, in tech. It's DraftKings up 7%. Roku, as I mentioned earlier. Block, which is doing well. Some of the biotechs, the ARK Innovation Fund is having a more than 4% up day. And it sold out of its shares of Twitter, which is the story of the day. Take a look at shares of Twitter surging on news

that Elon Musk has bought a 9.2 percent stake in the company, making him the largest shareholder, outside shareholder, that is. This comes less than two weeks after Musk polled people on Twitter asking them whether or not the platform adheres to free speech principles. Separately, Tesla also out with some delivery numbers over the weekend that slightly missed estimates. The company delivering around 310,000 cars. Expectations were for around 317,000. Let's bring in Phil LeBeau. And Phil, despite falling short of the estimates,

bullish commentary and a bullish stock reaction for Tesla. What's driving it? Well, a couple of things, Sarah. First of all, it was not a huge miss. This was not like they had a big drop-off in production and deliveries. And also, when you take a look at the momentum that they are building for this year, most analysts believe that this is a company that should hit about 1.45 million vehicles delivered this year.

You've got the Texas Gigafactory coming online in terms of deliveries this week. Berlin started a couple of weeks ago. They're ramping production. So there's a lot of momentum building here. Mike, on the Twitter story, can we talk a little bit about the filings? Does anyone think he's really going to take a passive stake? And then I want to get Phil's take on that as well. Well, it's sort of a choice to say, at this point, do not have plans as a 9% investor to try to affect change, to try and be hostile, to try and get board seats or anything like that. So you can file under the category of passive investor. So obviously, to Judge McCaul, maybe there's going to be scrutiny on that.

There's also some scrutiny on how long it has apparently taken for this filing to happen when the purchases of Twitter shares seem like they were done maybe three weeks ago. All that stuff in the mix. to happen when the purchases of Twitter shares seem like they were done maybe three weeks ago. All that stuff in the mix, obviously not exactly a rule follower, Elon Musk. But for now, there may not be specific intentions. And as you can see, it's all about just sort of looming over Twitter as a presence and having people follow him into this trade, which is why you have the stock up the way it is. What do you think, Phil? And do you think it's a risk for Tesla shareholders that he might get more involved? No, I don't think it's a risk. I'm sorry to cut you off there, Sarah. I do not think it's a risk for Tesla shareholders.

Look, Elon Musk has shown that he can multitask with the best of them, whether it is with SpaceX, the Boring Company, Neuralink. He has his hands all over the place, and investors are used to that. In fact, I would say they kind of enjoy it. They like the idea that here's a guy who is out there thinking, what can I do next? What is the next move that we can make? Because generally speaking, he's been spot on with his calls. Now, it may not happen as quickly as he expects it to, but I think investors are pretty comfortable with what he's doing here. They'll wait and see. Yeah, more SEC fines. Who cares? And the question there is that he did file a 13G, not a 13D,

which would be more of an active stake, given the fact that he put it on Twitter. And by the way, he put that out there before the disclosure came. Anyway, we'll leave it there for now. Phil, thank you. Starbucks, the worst performing stock in the S&P 500 right now, after founder and interim CEO Howard Schultz announced that the coffee chain will be suspending its share buyback program in order to invest more in employees and more into stores. The move comes amid a big unionization push by workers over there and other challenges, including rising costs and supply chain issues. Kate Rogers joining us now. Kate, do we know what types of investments Starbucks will be making in its employees and cafes with this cash?

So, Sarah, he had a letter out to partners today, and Howard Schultz didn't say exactly what those investments would look like just yet in both its cafes and its workers. But remember, Starbucks did announce last fall a wage hike of getting to at least $15 an hour by this summer. So we could see more of a wage hike there. It could be investing more in training and making the stores run a bit smoother, which has been a big complaint of the workers in particular that are seeking to unionize. What is interesting to me is how this is all going to be received by the union, which called Schultz both good and bad cop by making this move,

but then, in their words, launching a, quote, vicious anti-union campaign. So they're really pushing back on him. It seems like this won't be enough for them just yet. Mike, I mentioned the stat earlier of the 21,000 percent increase in Starbucks price since as Howard Schultz has been CEO and he had two previous stints. Now this is his third. Is he still going to be a shareholder friendly CEO? Because that has been his reputation. There's no doubt. But most of that return, of course, dates back to when this was a tiny company in the 80s, went public at a relatively early stage and became ubiquitous. So I don't think it's about how he's done managing the mature version of Starbucks

and trying to balance all these countervailing constituencies. I understand why the stock would be down today. The anticipated shock buyback of well more than $10 billion over a couple of years was quite significant relative to Starbucks' market value. So if you're removing that and if the read is that, you know, Howard Schultz is going to be much more about stakeholder capitalism, it's going to be an investment phase for the company, it's just a little bit of a change of message.

Not disastrous, of course. The stock's already was down quite a bit and is not really that expensive based on its history. But I understand why you have those doubts out there as to whether shareholder first is going to be the credo going ahead. And at what cost is he going to fix this issue with workers? And so, Kate, any more union votes expected at Starbucks? I know we saw the successful Staten Island push at Amazon. What else should we be monitoring for this space? Yeah, so the union had a pretty big win last week with the New York City Reserve Roastery. That was the first roastery that wound up organizing and successfully unionizing more than 160 stores now in 27 states.

Sarah have now petitioned the NLRB for these votes. So they've been coming just about weekly at this point. But as you mentioned, Amazon, I think it's important for viewers to remember Amazon, you know, had hundreds, thousands of workers voting at these cafes at Starbucks. Sometimes it's just a dozen or two dozen. So perhaps a bit easier to get everyone on the same page. And if you've been following this closely, like we have been at CNBC, they've been notching win after win. Right. Because they've been organizing successfully in stores where they know the workers do want to organize. But it's spreading very quickly.

And initially, a month or so ago, Starbucks Workers United said it took off even faster than they had anticipated. Is that why Starbucks stock is down so much, Kate, because of these union efforts? It's a great question, Sarah. A lot of the restaurants have been struggling over the last few months. And the stock has been down since the union push began last August. When you look at it over the last six months or so, it's down about 20 percent. So it has been struggling. But that's not to say other restaurant names aren't struggling as well. True. Kate, thank you. Kate Rogers. Thank you. Take a look at the chips getting a lift today. AMD announcing an acquisition this morning, saying it will buy private cloud startup Pensando for

$1.9 billion. The deal should bolster AMD's data center startup amid booming demand in the sector. AMD CEO Lisa Su was on Squawk on the Street this morning discussing the purchase. Listen. High-performance compute is the fastest-growing, the most exciting part of the industry, and we have all the components for it. So, of course, we love our traditional PC and gaming markets, but the data center is the most strategic area. Joining us now, Bernstein Research Analyst, Senior Analyst, Stacey Raskin. Stacey, market likes it. How much does it change the AMD story, which there's been some negativity around lately,

just because the stock has had such a good run? Yeah, I mean, most of the negativity recently has just been growth stocks have sold off early in the year and people are getting a little more worried about the PC space, especially notebooks. But I think Lisa's right that the real long-term narrative here is data center. It's not PCs, it's not anything else. And data center is absolutely the growth driver for the company. I like this deal. I think it makes a lot of sense. It bolsters their ability to offer data center solutions, especially in the enterprise. You look at this company. They've been around since 2017. They've got 100,000 deployments at numerous enterprise customers that we've all heard of, Goldman and IBM and Microsoft and Oracle, tons of industry partnerships. I think this is going to be really good for them. But also Bolster's, their SmartNIC portfolio, it's very synergistic with Xilinx that obviously they just closed a couple of months ago as well.

It should fit in very well with that too. I like this deal. Who is most threatened by it? Who of the competitors? Threatened by this? I don't know that anybody's threatened by it necessarily, but it is AMD continuing to strengthen their data center portfolio and their data center offering. So I guess the extent that AMD's data center business in general is getting stronger, I mean, obviously it's bad for Intel. Right now the markets that they play in are kind of a duopoly.

I don't know that this specific deal is necessarily good or bad for anybody else, but I do think that it really does help AMD strengthen their own individual position. Obviously, that's what they're focusing on. $180 billion market cap for AMD, $201 billion for Intel. Do you think that AMD will surpass the size? And is there any significance there? They actually did surpass them a few months ago. I think AMD's peak was at the end of November. The stock hit 160. And at that point, I think their market cap actually did surpass Intel's. Yes. Should it be above it, I guess, is the question. You like it better. I think it can happen again. I'm sorry, what was your question?

All right. Stacey Raskin. Stacey, thank you very much. Earnings season kicking off with the banks next week. Wells Fargo says the street is too bullish on some of the big names, cutting its price targets on Morgan Stanley and JP Morgan, lowering quarterly estimates for Goldman Sachs today. Joining us now via phone, Mike Mayo behind the call, Wells Fargo senior banking analyst. Mike, why did you make this call? Is it the weakness we've seen in capital markets? Yeah, the equity market's been pretty shut in the first quarter, and it's just about relaying this to our estimates for the quarter.

But I'd say for each J.P. Morgan and Morgan Stanley, there's a little bit extra. And the big news for J.P. Morgan today is Jamie Dimon's CEO letter came out. And I would say I'm convinced on the direction the company is taking, but not the details. And Jamie Dimon doesn't disappoint. He says, change or die. And they're changing. It's kind of Jamie Dimon against the world. He's talking about competition, not just from banks, but from non-banks, neobanks and shadow banks, which are twice as large as the U.S. banks. Remember, these are all non-regulated competitors. So JP Morgan is spending, buying, and paying whatever it takes to compete.

On offense, they say they want to be an international digital consumer bank. On defense, they say they want to make the ship, quote, tip-top shape, unquote. But wow, they still will have likely the greatest expense increase in their history. So the devil's in the details. And so we need more information on revenues, returns, and key performance indicators for all this spending. So we have one of the low estimates on the street for the year for JP Morgan. And then for Morgan Stanley, the transformation with their deals, E-Trade, the engagement has really fallen off. And with Eaton Vance, kind of a bond house, bond fund outflows have been happening for the industry as a whole. So we think JP Morgan and

Morgan Stanley don't look as good as investors think they do. So we would prefer being with the likes of a Bank of America. Because you like the whole Wall Street, the mainstream banking theme better, given the weakness in the markets? Absolutely. Look, you have Wall Street banking headwinds, Main Street banking tailwinds. And we think Bank of America is a better play on that Main Street banking theme, especially with the Wall Street headwinds being a bit more than we and we think consensus expects. You also like the regionals on that theme? Yeah, we do. The regionals have sold off big. Look, in the first quarter, we think equity will get hurt from securities losses. The banking industry has six trillion dollars of securities.

So don't think there aren't losses and all that means is book value might not grow or it might go down but after the first quarter you start to have the best main street banking growth since 1984 and i just don't think people appreciate the magnitude of not only the top line but especially the bottom line as the tech revolution of banks allows more of every dollar of revenue to fall to the bottom line. So, yes, like U.S. Bancorp or Truist. Or Truist. So can you just clarify how the shape of the yield curve influences the financials? Because we have seen interest rates rise and we know the Fed is going to keep raising rates and all of that should be good for banks.

But then you've got this inversion in many key parts of the curve, which typically signals recession. So how does that all add up for the performance of financials? Well, the stocks are being hurt by the sentiment. You had the two 10-year spread actually turn negative the last couple of days. And so people are saying recession, recession, recession. I'm telling you from a bottom up perspective, I don't see it. But that's the concern out there. And the logic is Fed rate hike, slowing economy, recession, sell cyclical, bankers cyclical, therefore sell banks. And I get it. It's like a Pavlovian dog effect or something. But I think that's wrong if you look out over the next year

because I think credit quality will be better than people expect. Even if you had a recession, you just started having loan growth the middle of last year. Even if you had a recession, you won't have big losses. And then you get this amazing Main Street banking tailwind. And expense control, banks should grow revenues faster than expenses. This is the moment for banks. Now, it might be the opposite of other earnings seasons. Banks have sold off, and now maybe they recover once banks report.

And the past earnings seasons, you've seen, you know, banks get fed up only to sell off. True, the setup. First quarter might be the opposite of prior earnings seasons. Mike Mayo, thank you very much for jumping on the phone with these new calls, taking down the price target of JPM to 150 from 180. Less than two minutes to go in the trading day. Mike, what do you see in the internals quickly? They've improved throughout the day, almost 2 to 1 positive to negative volume right now, Sarah,

on the New York Stock Exchange. It started out about 50-50, growth versus value. It's a growth-led day today. Also, March was growth. Here's over a six-month Russell 1000 growth growth kind of catching up to value at this point. Volatility index also continuing to tell a constructive story down below 19 for parts today for the first time in a while. As we go into the close, we are looking at the highs of the session of 37 points on the S&P 500. Energy just joined the positive sectors on the day, along with technology,

communications services by far the winner. Thank you, Twitter. And of course, consumer discretionary. The Nasdaq is doing the best of the major averages, up almost 2% into the close, 1.9%. There goes the bell. The Dow up 100 points. Biggest contributors there, Salesforce and Microsoft. As Mike said, it is a growthy kind of day. That's going to do it for me here on Closing Bell. Have a good evening, everyone. Now I'll send it into overtime with Scott Wapner.