Closing Bell - Closing Bell: The AI Arms Race, Bitcoin Slides & The Fed's Next Move 3/19/24

Episode Date: March 19, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

All right welcome to closing bell I'm Mike Santoli in for Scott Wapner. This make or break hour begins with another show of resilience down a couple percent earlier, but not far from the flat line. So drifting between small gains and losses. However, the rest of the semis mostly pulling back after that amazing run coming into the month of March. Strength in energy, software, industrials, banks are all driving a pretty modest S&P 500 rally, but one again that gets us near record highs. Here's your scorecard with 60 minutes to go in regulation. That S&P recovering from a bit of a morning dip. Small caps also outperforming. The closing high on the S&P 500 is just above 51.75. So we're within just about five points of that.

Despite sharp losses in top components, super micro in the Russell 2000 and micro strategy. The Russell is managing to outperform Treasury yields down slightly on the day, though still near a three month high with a Federal Reserve meeting now underway, culminating tomorrow. That takes us to our talk of the tape. Can this market continue its levitation and rotation act for much longer? And how high are the stakes now riding on the Fed's decision and policy message coming in less than 24 hours? Let's turn to Lizanne Saunders, Chief Investment Strategist at Charles Schwab, for some thoughts on all that. Lizanne, it's good to see you. How are you? All right. So you've been noting the level of kind of churn and leadership shifts underneath the surface of the index.

You know, the S&P 500, it's kind of flattened out and slowed down a little bit this month, but it has kept aloft near these highs. What's the message you're pulling out of that action? Well, the real churn and the most significant rotation has occurred within the Nasdaq. So the Nasdaq is trading near all time highs and at the index level has had no more than a 3 percent drawdown at any point this year. But the average member maximum drawdown this year within the Nasdaq has been negative 26 percent. Obviously, that's bear market level declines. And the recent breakouts that you've seen, and this is across indexes, not just the Nasdaq, the strongest breadth, at least

relative to 50-day moving average, has been in materials and financials and energy. So I think all else equal, it's not a bad thing to see this rotation and churn happening under the surface, sort of a corrective process without the indexes coming down all at once. But I think it is sending a message about economic resilience. And that's why there's more of a cyclical bias to what has been working. For sure. I mean, in some ways, I guess it is sort of a hallmark of a bull market that instead of, you know, nasty, sharp pullbacks, you do get some of this rotation. And I guess the question is, how much interest rates are acting to restrain any of the economic activity or the market? Because it seems as if we've managed to deal with this lift in bond yields,

as well as a repricing of what the Fed might do. And both the economy and the markets have taken it in stride so far. Yeah. You know, in terms of the economy, we know there are some buffers. Corporations have, in many cases, particularly the large corporations, have termed out debt. Many of the mega cap companies earn more interest on their cash and they pay interest on their debt. That's not the same thing if you go down the cap spectrum, certainly into the zombie world. And I think that has manifested itself in stock market behavior, too, whereas last year, particularly the second half of last year, there was a direct and almost perfect inverse relationship between bond yields, longer term bond yields and stock prices. It's a little more nuanced this year. You're still seeing it with an index like the Russell 2000, less so with a larger cap index like the S&P. So that relationship is there. It's just not as clear cut as it was in the latter part of last year.

For sure. And I guess the other question is the recent uptick in some inflation measures and how the Fed might characterize or deal with that or maybe, who knows, look past it or make much of it tomorrow. And whether that's either a concern or is that just, you know, part of this backdrop of a relatively high nominal GDP growth economy? Well, obviously, we've been through this adjustment process throughout the course of this year, going from at the start of the year, an expectation of a March start to cuts and six to seven cuts. And that's consistently been priced out courtesy of not just pushback on the part of the Fed, but the data itself that was not supportive. Of that and now it's it's even a point flip for June very low probabilities. In May and I think the dots plot could show that we've taken you know yet another. Cut out

of what have been three per that that. So the question though is at what point. Does it hit the market given we've had this market resilience I think ultimately it's not just about the Fed reaction function, but the sustainability of the economic growth profile. I think an environment, sort of worst case scenario, not that this is what we're anticipating, but worst case scenario would be a continued uptick on the inflation side of things, weakness in economic growth, sort of strangleholding the Fed and keeping them in this pause mode for longer. But I think we'll get at least a little

more color on that at the upcoming Fed meeting. Yeah, I know some have characterized that type of environment as a reverse Goldilocks. I guess everyone hopes we're not in for that. Let's stop for a second here. Let's for more on the Fed, bring in CNBC senior economics correspondent Steve Leisman. So, Steve, I know you've been kind of talking about this message from tomorrow, what we're going to get from Powell and, of course, from the committee regarding the dot plot and how many cuts might be projected from that as a close call. I guess I also wonder sometimes, as you know, Chair Powell sort of dismisses the dot plot sometimes. He says, oh, you know, we just write something on a piece of paper and

maybe it's not something to be dictated. So how much are we kind of riding on what that tells us? Well, there's this constant tension, Mike, which is people understand that the dot plot is not policy. The only policy statement there is, is the statement that comes out at 2 o'clock. That's the only thing the committee does as a whole. The individual forecasts are submitted just that way, and that creates a mean and a mode and all kinds of other funny things that the market looks at and kind of embraces as policy. Sometimes you're right.

Fed Chairman Powell says, you know what, hey, this is a pretty good bet on what's going to happen. And sometimes he says, you know what, they're old or they're not really the market and the Fed at this moment are in perfect agreement as to what happens this year until tomorrow where we get the new projections. And of course, there's concern and a lot of talk that maybe the Fed, the mode or the average change is there to just two cuts this year. I think that the market has had a lot of time to think about this and digest it. And if the other side of this story is that, as Lizanne was talking about, there's more growth, there's not a big unemployment problem, and earnings are pretty good, then I think it's not a bad trade-off that you're going to trade 125 basis point rate cut essentially for the better growth outlook there. I think the market would probably take that, and that's not a big selling point. Sure. And to be clear, so by January of next year, if we're at 460, that means three quarter point cuts, give or take, right? That's three. Yeah. So we January of next year, if we're at 460, that means three quarter point cuts, give or take, right? That's three. Yeah. So we'll see how that contract adjusts tomorrow.

Yeah. And it is worth also, I guess, pointing out that there have been longer pauses, you know, in terms of rates staying where they were at the highest level after a tightening cycle, but not that recently and not that much longer. Right. I mean, in 06 to 07, I think it was a little over a year. June of this year will be 11 months. Yeah. And then remember, Vice Chair Jefferson in a recent speech talked about the 1995 model. I don't remember how long the Fed paused there, but it was a long time. They cut, they waited, they cut again, and then they came back and they were on hold it was a long time they cut they waited they cut again and then they came back and they were on hold for a very long time they came back they actually rose uh uh increased

rates again so that's another possibility i think that that's where we are right now powell at the last press conference mike talked about it as beginning the process of cutting rates which is i think he's afraid of this idea that once they start, they're going to kind of be forced to keep going and he's not going to have the optionality or the flexibility to stop. And I think he needs to maybe spend some time tomorrow, perhaps, to kind of claw back that flexibility. Right. Yeah. And I guess start the process of becoming less restrictive is also how they've been trying to catch things as well to convey that they think the policy is restrictive right now.

Steve, thanks a lot. We'll talk to you plenty tomorrow. Appreciate that. Let's bring in Brian Levitt of Invesco as well, along with Lizanne. So, Brian, how do you stack all these factors up with a market that's already had a really good run and has so far been able to sort of shrug off these challenges of, you know, potentially less Fed easing and obviously higher bond yields. Well, we talk about the different market leadership. I mean, if you remember November, December, big small cap rally, mid cap rally expectations that rates will go down significantly. It's been a bit more. It's been different this year as we've recalibrated, but yet the markets have continued to press higher.

And the way I view it is if you look historically, peak inflation, peak tightening, peak interest rates historically is good for stocks over the subsequent years. So I'm not surprised to see the market significantly higher than where it was in June 2022 when inflation peaked. And I'm not surprised to see it significantly higher since the Fed was in June 2022 when inflation peaked. And I'm not surprised to see it significantly higher since the Fed's been done raising rates. You may have some nuance in leadership. The market right now is expecting some improvements in growth. And so cyclical sectors are are coming to the fore in the near term. And I think that's appropriate. It does seem like, Brian, a little bit of a struggle for people who try and handicap where the index will go to try and substantiate much upside if we're just using market wide valuation. So how do you treat that? How do you think about valuation as it translates into projected returns?

Well, valuations aren't great timing tool so I would advise people to not think of valuations when they consider where they should be allocating dollars for the short-term valuations over the long term may suppress your return expectations but in the short term they tend not to be timing tools and if you compare an earnings yield on the broad market right now to the US Treasury yield you're pretty much in balance neither one is particularly expensive to the U.S. Treasury yield, you're pretty much in balance. Neither one is particularly expensive to the other. So I would say you want to be exposed to stocks, typically want to be exposed to stocks about 80, 85 percent of a market cycle. You just don't want to be there when things are heading towards a contraction. So you look at where we are now. Are we comfortable

taking risk? It doesn't seem like the end of a cycle. You know, there's not a lot of leverage in the system. The credit markets are behaving. So, you know, I wouldn't be overly focused on valuations. Yeah, for sure. No, no doubt about that. Credit markets, even the way the market has behaved, Lizanne, tends not to line up with, you know, four months of of gains and no pullbacks. That tends not to be how an ultimate peak happens. But although I do, Liz, I want to get to something you mentioned earlier, which is, you know, if you do look, you can see evidence of parts of the economy slowing down, showing some fatigue, whether it is in retail sales, some softness in the internals of the labor market.

And it's probably a decent reminder that the one reason you'd be concerned if the Fed were going to wait longer to cut is if you think that they are making an error and essentially ignoring the possibility that the economy decelerates from here. How would you suggest the chances of that size up right now? an armchair quarterback of the Fed or a Fed critic, but there's certainly a lot of louder critics out there saying the risk they run if they stay in pause mode for a more extended period of time, given long and variable lags, is that they elevate the risk of recession. I just think this cycle is so unique that we have to think about what's already happened, which is we've had recessions in parts of the economy that were the early beneficiaries of the stimulus, Sarah, a couple of years ago. Those went into their own recessions, manufacturing, housing, housing related. But now I think what's important to watch is whether we get stabilization and recovery. We may be starting to see it in some of the housing related data. So there is a scenario where,

yes, whether it's because of Fed policy, Fed inaction, or other reasons that you start to see more weakness in the labor market, more than just cracks on the services side. But then do you have that offsetting recovery on or in the areas, the goods-oriented manufacturing housing side of the economy that already went through their own individual recession? So I just think this entire cycle, we have to look at it in a more nuanced way. It is today's Apple versus history's oranges. Yeah, for sure. No doubt about it. The other thing, Brian, is I know I was just asking about all valuations. Don't they look like they're kind of late cycle? But, you know, we're only like 8% up from where the S&P was two plus years ago.

We've had basically two bear markets in the last four years. So it's not as if there hasn't been a period of payback here. No, that's right. And if you think about 2022, I mean, that was the market pricing in a mild recession a year ahead. Twenty five percent down is very much in line with a mild recession. And so far, this economy has been more resilient. Yeah, there's some names at the top that may be trading a little bit in excess with regards to valuations, but those are the companies

that have been driving a lot of earnings growth as well, and their PEs have been pretty stable. The average stock in the S&P 500 is not significantly overvalued. In fact, pretty much trading at average. I think Lizanne makes a very good point in that, yeah, there are some things that are going to slow in the economy. That was the idea. I mean, the Fed wanted to slow the consumer down. But to her point, you know, manufacturing looks like it may be recovering. Housing looks like it may be

recovering. So in aggregate, it's a consumer driven economy. So we may see the economy slow down a bit. But that's exactly what the Fed was trying to accomplish. You know, historically, in a slowdown, you may pull back a little. I heard earlier discussion of ninety four ninety five. We went down eight, nine percent. But ultimately, that was just a great setup for for markets to continue to move further. And I think we're in a similar situation now. Yeah, although in that scenario, we're already well into 95 and not too many pullbacks in 95. And it's hard to link it up too directly as much as I and others have tried to do that. Great to talk to both of you.

Brian, Lizanne, appreciate the time today. Thank you. All right, let's send it over to Courtney Reagan for a look at the biggest names moving into the close. Courtney. Hi, Mike. Yes. So shares of Unilever, those are jumping as it announces it, separating out its ice cream unit. Ben and Jerry's and Magnum. Those are some of the brands to be impacted in that restructuring, along with 7500 jobs. The ice cream business generated about seven point nine billion euros last year. It's about 13 percent of Unilever's total sales. Unilever does expect that the separation will have a cost savings of about 800 million euros. And while plans are yet

final, a, quote, demerger is the most likely form of separation. International paper shares, those are popping, too, as a new CEO is named. Andrew Silvernail will start on May 1st. He joins from KKR and succeeds Mark Sutton, who has been CEO of International Paper for about a decade. And Reuters is reporting, citing sources that Macy's has agreed to open its books to Ark House and Brigade Capital. Remember last week there was a proxy statement that revealed the department store was drafting a confidentiality agreement to potentially get to this step. Macy's has not yet responded to CNBC's request for comment. Arkaus has declined to comment, but shares are moving. So we bring you that Reuters report, citing sources. Mike, back over to you. All right, Court, thanks very much.

We are just getting started. Up next, it's day two of NVIDIA's big GTC event, the company unveiling its next generation of chips. We'll take you there live after this break. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. Some big headlines in the AI world. Microsoft hiring the co-founder of DeepMind to head its new AI division. Steve Kovac standing by with that. And Christina Parts-Nevelis joins us live from the big NVIDIA event in San Jose, California. So, Steve, let's start with you. Talk about this acquisition, what it means for Microsoft. Well, not exactly an acquisition, Mike. I'll get to that in a second. So Microsoft is forming a new division dedicated to AI, and it's going to be run by a big name in the AI space. That's Mustafa Suleiman. Now, Suleiman will be the CEO of the new group, which is called Microsoft AI, focusing on consumer products, especially Copilot, which is the AI tool Microsoft has been putting in all its products. He's going to report to CEO Satya Nadella,

who made the announcement today. And Suleiman, he's best known as the co-founder of DeepMind. If that sounds familiar, it's the AI startup Google bought last decade and is now central to Google's own AI efforts. DeepMind's CEO, in fact, is now in charge of all AI at Google. But Suleiman, since he left Google in 2022, he's been running a startup called Inflection AI, which makes a chatbot called Pi, similar to ChatGPT. Now, Inflection has named a new CEO and said it is pivoting its business away from consumer AI and will instead focus on making AI tools for software developers. However, it's still going to support the Pi chatbot for current users. But it's not just Microsoft poaching one executive here. An Inflection AI spokesperson tells me Microsoft will hire most of the startup's 70 employees.

It's effectively an acqui-hire without Microsoft actually buying the company, which would come with loads of regulatory scrutiny, Mike. Interesting. Steve, stay with us. Let's now send it over to Christina for the latest from NVIDIA's GTC event. And, NVIDIA, Christina, sorry, we're not going to name you NVIDIA yet, but maybe after a couple more days there. I was going to say the stock has firmed up

since the morning lows. I know there's an analyst meeting component of this. What have we learned so far? I'm going to tell you all of that because I attended the analyst meeting and the press meeting running between hotels. But I have to start with saying that we're going to really have to reframe how we refer to NVIDIA because CEO Jensen Wong told this room full of analysts that, quote, they are an algorithm first company and that they, quote, basically run everything. So not just a hardware firm. We did have NVIDIA's CEO on CNBC earlier this morning

talking about just that. Listen in. Everything that we do starts with software. Everything we do starts with software. And everything we do is in service of all the software developers who are solving these really difficult algorithms. We are represented by $ hundred trillion dollars of industry here in order to monetize that software nvidia is launching a new subscription model called nim which stands for nvidia inference microservice to help companies use their own nvidia gpus their

proprietary data to build large language models the nim NIMS service will cost roughly $4,500 per GPU per year. So if you have a lot of GPUs, it's going to be expensive, but it is a reoccurring source of revenue for NVIDIA. The hotly also anticipated new GPU chip based on the Blackwell platform was also announced yesterday with a launch date later this year. I'm unsure. I was sitting in the financial meeting, unsure if that means it's going to be pushed back to Q4 from Q3. So we're still waiting to hear from that. And then NVIDIA's CFO also warned today that supply constraints on these new Blackwell chips will still occur this year. Earlier this morning, Jensen Wong, the CEO of NVIDIA, said these chips could cost anywhere between $30,000 to $40,000 per chip. He said that on our airways, but maybe 20 minutes ago, I asked him specifically about

that price point because I was a little confused. I thought it would be a little bit more. He said, quote, he didn't intend to put a price on a chip, and then it's not just about the chip but about designing the entire data center. So we can assure that it's probably going to cost a lot more for companies. I also asked Jensen Huang about the $1 trillion total addressable market. He reiterated that it's going to come out to roughly $250 billion per year for the entire market, something he said before. But today he said that he expects their percentage of that $250 billion will likely be higher than in the past. And Mike, to your point, that's the

reason you saw the stock move higher once those that TAM came out and he reiterated that they're going to get a larger portion of it. Interesting. And I guess, Christina, the discussion from Jensen Wong about how, you know, it's a software based company, they're an algorithm company, algorithm is just instructions, right? I get that. And no doubt about it, a massive software component. But we're still talking about physical shortages here of stuff that people want to buy. Right. So it's hard to know how to think about what drives the business and what in short supply in the near term because they're only going to make a certain number and you know, everybody's going to be clamoring to get these new Blackwell chips. But when you think about the bigger picture, they are selling more than just chips. You have to buy the Ethernet cables that come with, or Ethernet switches, I should say.

You're gonna have to buy the software. And so Nvidia is saying, hey, we're doing much more than just selling the chips. We're selling this entire package, making the switching costs higher. But yes, to your point, at the bottom of that, there's still a supply shortage, it seems like, for these new Blackwell chips that are going to come out. Exactly. Okay. And Steve, talk about what this new AI division within Microsoft is going to encompass and what it might represent in terms of their ambitions. Does it house the open AI investment, for example? It doesn't house the investment. That's kind of a separate thing. This is really just building out that co-pilot product that they're putting in everything.

That's the digital assistant that started going on sale last year. And this is a huge part of how Microsoft plans to monetize AI. For enterprises, for example, they sell that for $30 per user per month. They say it's growing just fine, I guess, but also it's making its way into hardware, too. A couple months ago, Microsoft announced that it's going to add a dedicated Copilot button to Windows PC keyboards, and that just shows you how important they think this product is. So expect, you know, Suleiman to basically have a purview over how the future of Copilot and actually getting it into more people's hands. Right now, there's a free version of it. There's a paid version for consumers.

But they really have to get it out there even more than that. And that's going to be his big task. But it's all Copilot, Copilot, Copilot. That's their marquee product. Yeah. Well, I mean, the sense of urgency being shown by a couple of, you know, multi-trillion dollar market cap companies is pretty remarkable. Appreciate that, Steve and Christina. Up next, top technician Jeff DeGraff is raising the red flag on this market momentum while he's seeing some potential weakness in the charts. He'll join us after this break.

And a quick note, you can catch us on the go by following the Closing Bell podcast on your favorite podcast app. We'll be right back. Welcome back. The major average is seeing gains across the board, the S&P 500 heading toward a possible record close in what would be its 18th of the year our next guest however see some cracks forming under the surface for the momentum trade let's bring in jeff de graaf chairman and head of technical research at renaissance macro jeff uh it's good to see you so you i mean you've been uh pretty bullish for a while you know observing that this is a bull market will probably continue to be so. But take us below the surface a little bit in terms of what your call is on the momentum factor within this market, what it means right now. Yeah, look, I mean, we are momentum players

too. Like, I mean, you know that we like trends. We like things that are going up. That tends to be good news. And we tend to play it that way. There are points where momentum will punch you right in the nose, and we ought to be careful of that. And one of the things that we look at is just the spread between the returns of high momentum names and low momentum names. And when we get into that 90th plus percentile, it makes us nervous that the continuation of that trade, which usually represents the consensus call, is probably running out of gas, running on fumes. And so it's not bearish for the overall market, which I think is really important and, frankly, refreshing. But it does imply that there is this convergence between losers and winners,

mostly because the winners will tend to consolidate, go into sort of a corrective period. Again, not big tops, not a big problem, but I think more frustration for Bulls. And then the laggards will catch up. And that's really how we're positioned for the second quarter and maybe into the third quarter of this year. I mean, in a sense, you're kind of describing, I know you've been looking at this for a little while, what the last couple of weeks have felt like a bit. You know, in terms of the momentum factor coming in a little bit, hasn't really destabilized much of anything, but what areas do you specifically think are going to be net beneficiaries if this convergence continues? Well, from a sector

perspective, and there's a little cross-pollinization here so I want to be careful but if you look at what's represented by the lowest momentum names you've got healthcare which is probably the most dominant you've got some of the staple names you've got some of the material names and we have started to see some breakouts there the relative performance which we wouldn't expect isn't isn't very good but we do think that there's a little bit more left there for those names to sort of catch up in the second quarter. Again, as the Q1 names start to soften, as the semis soften, some of the software soften, some of the Ozempic sort of related drugs soften, we think that there's an opportunity to catch up. So the good news, and I think what people miss around this, is it usually means that breadth improves and the market actually looks a little healthier. It might not be in the

things that people are concentrated in, but overall, it ends up being a little bit more healthy of a market when that does take place. Right. And I guess the other piece of it is just how sentiment and seasonal patterns might fit into this. I guess, you know, we continue on this hunt so far unsuccessful for some kind of a meteor pullback or some kind of, you know, gut check that says, OK, we can sort of refresh the rally here a little bit. Maybe we don't need it, but I'm wondering what you're seeing there. Well, I think if there's one thing that is on the edge that has us a little concerned that might be a shift in the narrative is where we are on the 10-year yields. Now, we're not bond bearers. Maybe we should be.

But until you really get yields up through 440, the trend in yield still looks to be lower to us. That's driven partly by what we're seeing globally. The global yields, with the exception of Japan, still look like they're topping and about ready to contract. But if we punch through that 440 on the 10-year yield, it starts to trigger a bunch of our work, our yield impact models, some of these other things that historically does have a negative impact on the equity markets. And so, that might be a little bit of a reset or a rethink for the market. Again, I think it'd be more tactical than strategic. I don't think we're on our way to 6% or some of these crazy numbers that are out there. But I do think it might start to question people's thinking around the alternatives that they can get in fixed income

versus the equity markets at these levels. So that's one of the things that we're keeping in mind as we search for ideas as to what might be the disruptor here. And then what do you make of the recent outperformance of things like energy, basic materials, some of this commodity-based stuff that has moved higher? And, you know, I guess you could draw a macro message from that, or you could say it's just a little mean reversion. I think it's both. I think it's, you know, for us, the relative trends haven't changed. They're not leadership names, but they are participating.

So that's welcome, because what it really means is that, you know, we probably aren't on the cusp of some global recession or, you know, something worse, for that matter, even with what we're seeing out of China and some of the concerns there. So I think it's refreshing that it still says that, you know, there is demand here. You're starting to break these out a little bit. In a lot of ways, as long as they break out and participate, but they're not relative strength leadership, that's actually a really healthy message because it says that, you know, the productive assets are somewhere else, not just in raw materials, but that the economy is firm enough that they're well bid. So I kind of like to see that. And in many ways, it's a Goldilocks scenario. Yeah, certainly would better than having them sort of under liquidation. It

raises tougher questions. Jeff, great to talk to you. Thanks so much. Thanks, Mike. All right. Up next, Bitcoin sliding today. We'll tell you what's behind that drop and how the rest of the crypto space is reacting. That's after this break. Closing Bell will be right back. Less than 20 minutes to the closing Bell the major index is holding on to gains of half a percent give or take me while bitcoin slipping in today's

session with the rest of the crypto space also taking a hit CNBC dot coms today and McKeel is here with me at post nine to discuss and look I'm always a little bit wary to go off of my own explanations for what moves Bitcoin up or down,

but obviously, at one point, we're $10,000 off the recent highs. Yeah, definitely. I think this weakness that you're seeing today is a continuation of a lot of the activity you saw last week after Bitcoin hit its most recent all-time high. It's been notching higher and higher since the beginning of the year, really. So after Wednesday, when it hit that all-time high, you started seeing traders start to take some profits. That triggered a wave of long liquidations over Wednesday, Thursday, Friday,

a little break from the weekend. But again, just in the last 24 hours, you're seeing more than $140 million in long liquidations in Bitcoin. So know, stocks related to Bitcoin's performance have cut some of its losses today, but still a little bit under pressure. It seems as if the story of the Bitcoin spot ETFs and the fact that they did attract a fair amount of money has had, I would argue, longer life than you might have expected. In other words, it's been behind the bull case for a while now. We did see some outflows I know people were focused on. I mean, I guess that just reflects the activity you're talking about. Yeah, you know, and that could be a number of things.

The grayscale Bitcoin ETF obviously has an exorbitantly high fee compared to a bunch of the newborn ETFs that we saw launch in January. You know, I think a lot of traders would also say it takes a lot of investors a little bit of time to get accustomed to this. So we've been saying, yes, these ETFs will give a lot of investors new access that they didn't have before, but still they need to kind of come around to the idea of what that's going to mean for their portfolio and what they really want to do with their investments. Just because they have the access to the ETF doesn't mean everyone's going to be jumping

in all at once. We also did have, you know, MicroStrategy, which is obviously one of the biggest leverage Bitcoin plays. They raise more capital to buy more Bitcoin. I just wonder if that's one of those things where once it happens, you know, they bought what they were going to buy in the short term and the momentum reverses. Yeah, that is a strategy that they've become known for and really leaned into. And even just last month, they said that they were going to pivot and kind of rebrand themselves as a Bitcoin development company.

Look, this month has really been the theme of this month has been a rise to new highs for Bitcoin, followed by steep losses. So MicroStrategy got praise on Wall Street just last week for its Bitcoin strategy. They said, you know, this is something investors are becoming accustomed to, and it's going to pay off for MicroStrategy in the long term. But yeah, you know, the setup for Bitcoin is still pretty strong, but you're going to see those steep losses, those pullbacks. And MicroStrategy up 125% year to date-date, but 22% off its high. So it moves fast.

Yeah, absolutely. Tanae, great to see you. Thanks a lot. Thanks for having me. All right, well, still ahead, Nordstrom shares popping on the back of a new report. The retailer is trying to go private. All the details and if it looks like a deal will actually get done. Closing bell will be right back. Thank you. Closing bell will be right back.

Coming up, 314's Warren Pies is standing by to break down the final moments of the trading day, what he's watching from the Fed and where he sees stocks headed from here. With the S&P 500 headed toward a possible record close just a couple of points away, plus the latest developments in the activist battle over at Disney, that and much more when we take you Inside the Market Zone. We are now in the closing bell Market Zone. 314 Research co-founder Warren Pies is here to break down these crucial moments of the trading day. Plus, Courtney Reagan on what has Nordstrom on the move. And Julia Borson with the latest on Disney's proxy battle with Nelson Peltz. Warren, you know, I know you've been giving

the bull market this rally the benefit of the doubt from late last year. Very strong move off the lows. You got a resilient economy, earnings turning higher. Next move by the Fed, probably down. You have well-behaved bond yields. We're almost a quarter of the way into the new year. We haven't had much of a pullback. What's your current checkup on all those things? Yeah, thank you for having me. It's kind of gone according to script. Our view is that we're having a soft landing. And if you go back to history and you look at what that implies for the S&P 500, that we should be at roughly 5,200 by the first time the Fed cut rates. And our view at that time was that the first cut would be May. And so everything's kind of on track, if not even better than we expected.

And so I do think that it's appropriate for us to consolidate the gains here. Obviously, tomorrow is a big deal. Everybody's focused on the Fed, what they're going to say, how many cuts are going to be implied by the new dot plot. My view is that it's probably going to stay status quo and that gradually we're going to transition away from paying so much attention to the Fed and a little more to earnings as we progress through the year. So in our view, it's still a constructive backdrop for the market. It wouldn't be surprising to get some kind of consolidation after a huge move. But yeah, things are looking good for the bulls for now. In what way might tomorrow and the Fed's decision and message be a big deal? Is it just a matter of whether, you know, the bond

market, you know, takes it as a signal that higher for longer is more likely or or something else? And maybe that Powell feels compelled to say maybe the economy is a little bit too warm to get inflation where it has to go? Yeah, I think that's one concern. You know, I'm going to watch the real Fed funds rate. So to me, that was the big spark for the rally we've enjoyed in 2024 was at the last SEP going back to December, the Fed lowered their real Fed funds rate. So that's the difference between the end of 2024 projected Fed funds rate and their projection for core PCE. And so that implies just a looser Fed. And that was the first time we saw that real Fed funds rate come down for 2024 in more than a year. I want to see if that stays steady, which is what I expect more or less,

or if the Fed retightens based on kind of the early year inflation readings that we've had. We're basically working through those. I think that there's a little bit too much concern about inflation. People are looking at oil and CPI swap rates and break-evens and things like that. I think you're jumping the gun. A reacceleration of inflation is possible down the road. But I think the data right now is actually still on a disinflationary path. Got it. We do have the S&P clicking to what would be a closing record high. Warren, just a real quick word on oil. You mentioned it there. It's obviously got a little bit of momentum with WTI into the low 80s. Where does it head? I think we top out

here around 90. You know, our model had been bullish for the whole year, gain of about 8% on that trade. So we're happy with that. But that signal's closed. I think that we went from a market that was extremely pessimistic come end of the year. And now everybody who comes on CNBC wants to be long the energy sector and long oil in some way, shape, or form. So I think we're close to the end of this move. Again, like I've been saying, that Saudi OPEC oil sits on top of the market and puts a

soft cap on us around 90 bucks a barrel. Also, oil is very connected to CPI swap rates and break evens. And I think there's a little bit of a misread going on if you think that this rise in oil is going to sustainably cause inflation to be higher. I think there are other reasons to be worried about inflation, but not oil and not right now. All right. That's sort of reassuring. Warren, great to talk to you. Thanks. Thanks for having me. Cordy, Nordstrom up almost 10 percent today. A little deal making in the air. Yeah, exactly. Here's a story that we've heard before, but it's worth talking about because the stock is moving on it. Reuters is reporting that Nordstrom is working with Morgan Stanley and Centerview Partners to explore the possibility of taking the company private. Now, shares are spiking on the report here up more than

9%. Nordstrom tells CNBC, though, quote, as a matter of policy, we don't comment on rumors or market speculation. Now, in 2018, you might remember there was a similar exploration by the founding family, which ultimately was abandoned. Part of the issue then was reportedly that the family wanted to retain the ownership under a sale, and a deal couldn't be reached under those terms. Now, insiders currently own around 40 percent of Nordstrom shares, with a number of family members holding leadership positions at the retailer as well, including CEO Eric Nordstrom, President Peter Nordstrom, Chief Merchandising Officer. Jamie Nordstrom as well. And so Nordstrom shares are down over the last month, well short of the XRT in that time. It

recently issued Mike Akasha's forecast with its off-price rack division stronger than its full-line department store business. It's no secret that the department store business has been through a little bit of a reckoning. Obviously, Macy's has announced the store closure program, and I can report that Macy's has now confirmed that it is opening its books for due diligence to Arthouse Capital as potentially moving forward with some consideration of maybe a deal. They have offered $24 a share for that as well. So a lot of potential dealmaking going on in the space, at least, let's say, exploration of such. It is interesting. I mean, if you just look at where these companies are valued, the traditional department stores, it's like 20% of sales, the last 12 months sales.

And that's been in decline for years. So there are these buyers out there who seem to think that maybe that is some kind of a floor level or one they can work with. I mean, Kohl's, I know, is not part of this, but it's also trading in that zone. Yes, exactly. And again, each of those, they're all department stores, but they're very different. Macy's has always sort of been a real estate play, at least in recent years, when you have these activists go after that, which seems to be the case here with Arkaus and Brigade. They don't have really any history running a retailer. They claim that they want to continue to run it, but

they also do point out the value of the real estate that they're trying to unlock. Yeah, fascinating, especially given what's happening with commercial real estate. Court, thanks very much. Julia, the latest on the back and forth with Disney. That's right. Well, Disney shares are up nearly 1% going into the close after this morning, George Lucas, Disney's largest individual shareholder, said he supports Bob Iger, Disney's CEO, and Disney's proposed directors in its proxy battle against Nelson Peltz. The filmmaker, George Lucas, received 37.1 million shares of Disney back in 2012 as part of Disney's $4.05 billion purchase of Lucasfilm.

Now, sources, this is according to sources which confirmed this to CNBC. Now, Lucas telling CNBC, quote, I remain a significant shareholder because I have full faith and confidence in the power of Disney and Bob's track record of driving long term value. I voted all of my shares for Disney's 12 directors and urge other shareholders to do the same. Now, Disney has gotten the endorsement of Walt and Roy Disney's heirs, as well as JPMorgan Chase CEO Jamie Dimon. But Lucas's endorsement is notable not only because of the number of shares he's voting, but also because of the critical acclaim and box office success of his various franchises. And a notable counter to Ike Perlmutter, right, who obviously was a seller of Marvel to Disney and is waging part of this fight. Exactly. So Ike Perlmutter is who was giving Nelson Peltz control over his shares.

He was, of course, part of the Marvel transaction. George Lucas was part of the Lucasfilm transaction to Disney. Those were two different IP empires that really drove the success of Disney and now both on different sides of this. All right. See how the voters weigh in on this, Julia. Thanks very much. We are just about 30 seconds ahead of the close. The S&P 500 right on the verge of a potential new closing all-time high, 5176. The prior high was one week ago, just above 51.75. You have actually pretty decent market press. The majority of stocks are up today, even as you do have some things pulling back, such as the recent leadership group of semiconductors. Bond yields, still a big story,

but they've eased back, gotten out of the way today. 4.3 on the 10-year yield going into the second day of a Fed meeting. We're going to hear from Powell tomorrow. That's going to do it for Closing Bell. We'll send it to overtime with Morgan and John.