Closing Bell - Closing Bell: The Bull Case for Meta 5/7/24

Episode Date: May 7, 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.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the rally. Stocks going for their fourth consecutive day of gains now. Been a quick move back from the April bottom, which some suggest is a sign there could be more to go here. We'll ask our experts over this final stretch whether they agree with that or not. In the meantime, your scorecard with 60 minutes to go in regulation looks like that. Been green for most of the day, though. Been leaking a little bit over the last 30 minutes or so. You see Nasdaq's now red. S&P barely holding on.

Bond yields are mostly lower today. That's been a big story of late. It certainly has helped the Russell 2000 outperform. It has helped the tech trade overall, and it has taken the pressure off the overall market. It does take us to our talk of the tape, the great bounce back for stocks and whether it is in fact sustainable. Let's ask Adam Parker. He's the CEO and founder of Trivariant Research with me here at Post 9. Good to see you again. Great to be here. I get the feeling from reading

your notes of late that you're not so sure this is sustainable and you're maybe a little more cautious than you've been in a few months. Is that fair? Yeah. When we talked, I think, last week on halftime, you know, I think the conditions are still the same. I see about equal chance we're at 10% up versus 10% down from here. And it makes me a little less confident because I think the data are mixed. I think if you really look at it for every good thing I get, I get a slight upside maybe on retail sales, a little down on housing. You know, it just seems like there's some good and some bad and enough to feed both bulls and bears at this point. You have to get to a soft landing somehow, right?

Isn't that kind of the definition of? Were you looking for the economy just to keep roaring along and figuring that the inflation story was going to work in your favor even if it did? I think just erode, not implode. You know, that's kind of the base case that we slow down from what was the highest nominal gdp in our lifetimes right so we knew we were going to slow but the question was just at what pace and i think the good news is that you don't have a synchronous contraction because so many things were the cycles were you know at different times you know housing is a little bit different cycle than auto is a little different

than semis a little different than electrification industrials. You know, there's enough things that are working that I think things can be positive. I think earnings will grow. The street's got, I think, 278 in earnings next year, bottom up. So 1584, what is that? About 18.6, 18.7 times the number. Maybe it's 19 if they're a little too high. Seems okay. I don't think it's like crazy expensive where you're like, wow, this is awful, especially as you pointed out when, you know, bond yields come a little bit lower. So it's OK. But I don't feel as positive about the risk award as we did, you know, 12, 15 months. I feel like you're if there's an area you're getting more concerned about, it's tech.

Yeah. Where, you know, now we've gotten a couple of notes in a row from you that one of the headlines here today is why technology investing is getting riskier. Now, how do we get from in a few weeks, right, from wanting to still be overweight mega cap tech to now it's getting riskier and, you know, we're riding the surfboard. Now it's maybe time to put the surfboard back on top of the car. I think when you run a portfolio, a guy who's got 40, 50 stocks trying to beat the S&P long-only, and they've been correctly benefiting from AI and semis and software, I think what their debate is going to be, and I had a big debate with a big long-only manager earlier today, is how much do I lighten that? If we worry, not that we get stagflation,

but just that others think it has a higher probability, the first thing that's going to get sold, two things that get sold are tech and energy, and what's going to get bought is staples, you know, kind of health care, maybe a little bit of utilities. Why are you using that word, stagflation? I mean, you're not... If the economy slows and inflation picks up cyclically,

people will worry about it. I don't think that's the base case, nor do I think I should position for it. I mean, the economy slowing is not stagflation. No, but the question is if people, right, what do you think right now? Half think no landing, half think soft landing, and we're somewhere in that, you know. Were you not convinced by what the Fed chair said last week where he said no stag, no flation? Should I ever be convinced by what the Fed chair says? I mean, isn't that, what do you mean?

Like, I should. But there are no signs. Should I position my portfolio listening what the Fed chair says? I mean, isn't that, what do you mean? Like I should, but there are no signs. Should I position my portfolio listening to the Fed chair? No, but I mean, people, people have been, you know, getting crazy about the stagflation word. In the last two weeks, it's, it's, if you, if you like in my world and my, if you searched on it the previous six months, there were zero mentions and now it's like rocket in the last two weeks. And it was all because that one day had a little bit of like a high PCE and a little bit of a weak GDP and all the big houses lowered their GDP numbers.

So again, I don't think it's the base case. I'm just saying tech's ripped. It's higher beta than ever. If you take stocks and you look at their bounce versus the market or the beta, half of the stocks that are 1.2 beta or higher are tech. So if we do somehow get a little bit of like a hawkish thing or a little bit of an economic slowdown, just directionally, that's going to go down more than normal. So I think guys who have done well, who are really up this year, 7, 8, 9, 10, are saying, all right, I don't want to like lose it all in just like we had the great, what do you call it, the great, you know, pickup here. If we get a bit of a 4% or 5% downdraft again, like we were below 5,000

a little, a few sessions ago, I think people are like, you know what, maybe I should buy a little consumer staple that's got something interesting or maybe healthcare services that everyone hates, and I'll sell my Palantir, which was on our list of risky stocks in the note you talked about before it blew up today. So I think it's that kind of logic that you're trying to just protect yourself a little, just kind of protect that it's gotten a little riskier in the portfolio. So we had Brad Gerstner of Altimeter on halftime, right? He's a growth manager. He invests in a lot of mega cap tech stocks. Here's what he said he's doing in terms of his positioning

and in reaction to what Adam has written about protecting your capital. Listen. We've taken down our own exposure by a thousand to two thousand basis points in our hedge fund and our long only fund. Right. And that we've done that by both adding shorts, custom basket shorts. We're worried about some some things in the world, as well as reducing some of the overall position sizes. Again, this isn't about all or none. This isn't about 100 percent net long or zero percent. This is simply about going from none. This isn't about 100% net long or 0%. This is simply about going from 80% net long to start the year to something closer to 60% net long today. Yeah, makes a ton of sense. Makes a ton of sense, man.

You know, to me, I think that you're always trying to look. If you're a growth manager, you want exposure for the next several years to AI, software, life sciences, electric patient adoption. You're going to want to belong in those stocks, but there are times where you're going to try to manage the risk. And this is one of those times? I think there's a little bit more risk management involved today than what six months ago. Yeah, I do. And that's why we're indicating that. If I were correctly overweight a ton of this stuff, I'd be lightning a little bit just until I get more clarity on the direction of how much the economy is eroding and where estimates are going to come out. I still think a number of companies are going to have margin expansions we talked about for a long time.

I still think that the Fed's more likely to be accommodative than not. That's a good cocktail for equities. But the stuff that's really ripped and looks the most vulnerable is a lot of the high-flying growth stocks. So, I mean, like Stan Druckenmiller, you see him on Squawk Box this morning. He trimmed his NVIDIA stake, right? He thinks all of this has been a little bit overhyped. He's a long-term believer in it, like many are. But the flip side of that, you know, are others who say it's underhyped,

just relative to what AI is going to deliver. That was Eric Schmidt this morning on Squawk as well. AI is being underhyped. Yeah, I do think and I have a lot of sympathy for the view that you can still make tons of money for a long time on things that are obvious. So I don't want to, you know, I don't think the NVIDIA trade is over. And if you're going to lighten stuff, that wouldn't be the one I would lighten. Oh, it wouldn't?

I know May 22nd is circled on everyone's calendar. I have no idea what they're going to print, but I just feel like that's the one that benefits the most and has the most upside on the revenue. So I would probably lighten other AI stuff. Let's get specific then, because you don't shy away from getting specific. Yeah, I'll try. Which ones would you lighten up? Well, we look at all.

I think there are a lot of semis that don't benefit as much as NVIDIA, that are up a lot. I think, again, long-term, you want exposure. They're all the names you want. Cadence, Synopsys. I think the Semicap equipment are up too much. Maybe Micron. Well, like AMAT? Yeah, K-LAC, AMAT, LAM, Cadence, Synopsys.

They're all great businesses. They'll benefit. But I don't know. If I have to light, if I have a 1500 BIPs exposure in my portfolio out of five or six names like this, NVIDIA wouldn't be my first choice to lighten. I think the risk would still pretty good into the print. I don't think Jensen's going to get on the quarter and say things are bad.

I mean, Jensen's going to be on overtime tomorrow. Awesome. So we'll have to say. By the way, that's a pretty good, that's a pretty, speaking of declines day over day, me to Jensen on a 25 hours is not, you know. Well, I always remind people because I don't take for granted that, you know, people know everything about everybody who comes on. I mean, you used to be a semiconductor analyst.

So you really speak to the knowledge that you have on this space. If you had told me 20 years ago that that company would be adding Intel's market cap on a one-day basis, I would have laughed in your face. So they've done a lot of things right over the last 20 years um I look I I want exposure to the best companies in in the first second year of a 10-year trend and so I'd rather keep that one and then some of the tangentially related ones that people are playing maybe I like a little bit again this is all from the position of you were correctly overweight a lot you're a little bit worried that you know you could have a bit of a tactical correction,

the stuff's higher beta, yeah, maybe I'd take a shot at some stable. Well, you're talking like Palantir, though, was one you specifically mentioned. Yeah, that was the top of our list on our note. Yeah, just things that, you know, I'd say higher beta tech. I'd probably sell Shopify. I'd sell Monolith Power. I mean, some of the names on our list are high beta. They're pretty good businesses in some cases,

but I think they're more vulnerable. If the market goes down three, they're going to go down six, seven, eight. And I want to avoid having one of those sort of like, oh, the market just kind of gets a little nervous and things are down. And these things are down disproportionately, not because they reported anything fundamentally, but because they have attributes that people sell first. Are you thinking about like many others are thinking about, speaking of power, not energy stocks, so to speak, but more like utility plays, the power plays into AI. That's becoming a pretty popular trade. It's like Vistra, you know, Daniel Loeb at Third Point adds it. One of the reasons is because of the arms race.

Buffett and company talking about it. Lots of investors are now sort of looking at these other AI plays that are not up to the moon in a short period of time. I was a little surprised that we didn't get an announcement during this earnings season from one of the MAG7 that they were some investing in power. Like, I think at some point before the end of this year, you're going to get some sort of the big MAG7 saying, we need our own power. We can't just rely on it. We need to have these kind of giant centers of AI around the country. And like, we need power. These things are just rely on it. We need to have these kind of giant centers of AI around the country. And like, we need power. These things are, and we don't get enough from, you know,

so we'll see. Remember when Delta bought a refiner? Yeah, of course. Right. So it makes me think of that as you're talking about it. Exactly. I think there could be more of that. And, you know, people are playing Constellation, they're playing those names. And I think that makes sense. And they're probably not covered by folks who are used to thinking about a GDP plus seven or 10 growing business. They're used to thinking about GDP growing. And so maybe the multiples continue to expand. So I think there's closet ways to get exposure to this that aren't the obvious, except NVIDIA to me, I don't know, it's just like the best looking person walks in the room and everyone likes them. So you decide you don't like them

because everyone else does. It just doesn't make any sense. All right. Let's bring in Shannon Sikosha, CNBC contributor of NB Private Wealth into the conversation. Shannon, it's good to have you. Is it time as it relates to the growth trade to protect capital or chase returns? Well, I don't I certainly don't think it's time to chase returns, Scott. And, you know, I think one of the things that we've continued to talk about is that, you know, this broadening out trade. You know, we've seen some stalling in that trade, the growth to value trade over the last couple of weeks. But there have been two things that really have driven that. Number one, rates, interest rates related to technology. It still matters.

We talked about this actually last week on Closing Bell in terms of the impact of interest rates and interest rate expectations on tech stocks. And then number two, earnings have come in fairly strong for comp services, for discretionary, for technology. So you're seeing these questions about this broadening, about this rotation. And in the short term, it's been sort of this two sort of this two factor experience that's really created this little bump, if you will. Interestingly, you know, you talk about where to go from here, Scott, and you mentioned health care staples. I mean, health care earnings have not been all that

stellar. And so I think it's a really difficult environment right now for people who are feeling like from a risk management perspective, they maybe want to lighten up on the tech trade to Adam's point, if they've gotten it right. Where are you going from here? And where do you feel most comfortable? Maybe financials, but those have already seen some performance. So I think it's tough right now to go truly defensive from where if you're overweight in tech. And so I think you're trying to thread the needle a little bit in some of these other exposures and really looking at kind of sub-industries and where there might be opportunity. I think, Adam, what strikes me a little bit about your opinion of the market here is that the market clearly was soothed by a Fed chair who wasn't as hawkish as some feared that

he would be. He gave you the idea that they definitely want to cut. They just aren't going to do it quite yet. And he had a confidence about him that they believe that they're going to pull off the soft landing without, you know, the whole thing deteriorating. I almost feel like you want to play a contrarian type view to what we got last week that in some respects ended the pullback in its tracks and has us back to where we're up like four or five percent since the april bottom i mean shannon's right as usual right i always like the way share takes away stuff but changes to perceptions about rates and changes to perception about growth is what drives the equity market and i agree there was a bit of a change in the perception about the rate path there were definitely some people saying well maybe they're going to hike one more time.

He kind of said, no, we're still asymmetrically skewed toward cutting. So I get that. We're down 20 basis points and the 2 in the 10 since then. And I get that. And I think that's part of what happened. I think sitting here now feels like that's through the kind of pipe, and now we have to look for the next incremental data point. And we'll see. I think he also got help by, I'd say, a little bit of a weaker jobs

outlook, and that was sort of a dovish data point from that standpoint. So we'll see what happens over the rest of this month. I think earnings have been decent, and guidance has generally been decent. So it should hold in, and I think we'll probably get close to a fair level, at least in the near term. Do I think we're probably close to a fair level, at least in the near term. Do you think we're going to have a recession? I don't even know. I don't know. I don't think so. You don't think so. And I don't know if I care. Okay. What I care about is do I think earnings are higher this year than next year for the biggest couple hundred companies? They're

going to be. I think so. You still think your margin story is going to hold up? Yeah, sure. I do. There's so many reasons that gross margins are going to oscillate higher levels. I just worry a little bit Bloomberg Commodities Index or wherever you look at it's up eight, nine percent from lows. So maybe the tailwind is a little bit less on the input costs. Labor productivity is going to be huge. So definitely, I think it can hold up in this level of economic activity. And then we'll see about AI. I mean, on her point on health care, obviously obviously she's spot on. The numbers haven't been great. I think the question is, does it set up better for 2025? And I'm looking out in the middle of this year, what could happen in 2025? And I've seen huge earnings, you know, down revisions at Humana and Centene. And, you know, United kind of told you it wasn't as bad.

And, you know, maybe it sets up for better risk-reward with low expectations as I look to next year. It might be a little early to put that trade on, but I think that's what people are thinking about. I know as a small business, these guys have massive pricing power over me, and I also know that these are the businesses that ultimately will benefit from AI the most as they don't hire really ever again as the revenue grows and maybe fire people. So they're kind of an AI beneficiary, not like NVIDIA on the revenue side, but on the cost side. So that would be the bull case for healthcare, but maybe that's a little too dreamy for Shannon right now, and it could be.

What do you say, Shannon? No, I was actually going to say, I mean, Scott, I think if you go back, I mean, two things I've been pretty consistent on have been utilities and healthcare, and you guys have mentioned them both today, so I appreciate it. On the healthcare side, Adam, I actually don't think you're back, I mean, two things I've been pretty consistent on have been utilities and health care. And you guys have mentioned them both today. So I appreciate it. On the health care side, Adam, I actually don't think you're wrong. I think what's happened is that there's been so much concentration in terms of performance and so much emphasis on GLP-1 that the overwhelming opportunities outside of GLP-1s and health care, you know, there's also a management issue here. I think GLP-1 came out of. You know, there's also a management issue here. I think GLP-1 came out of

the gate so fast last year. And I think a lot of healthcare, either healthcare services, whether you're talking about managed care or whether you're thinking about disposables and consumables on the healthcare side, they didn't react. They weren't ready for it. And I think now it's like they've looked at their estimates. They've looked at what's happening in terms of GLP-1. They're extrapolating that out. They're modeling. They're giving better guidance. And so I would I'd have to agree with you. It may very well be a 2025 story, but the valuations are setting up to be attractive. And I do think there's pockets of opportunity there. But I think right now the sentiment, especially with an Amgen coming out

last week with their own GLP-1 offering, I think that's just getting a lot of attention in this short-term period. Yeah, there's a lot of stocks to me that look pretty interesting and idiosyncratic in health care. And they're starting to really get on my radar screen the way we look at things at Trivera. Like United Therapeutics, like find me one stock that grows faster with higher margins that's cheaper. And the whole stock market, or BioRad, they own more Sartorius than their whole market cap. There's just some dislocations underneath. And I'm, like, hitting my screens of, like, all right, there's some stuff on sale in here. And bottom-up stock pickers should probably be paying attention to set up for 2025.

Given who your clientele is and who you speak to, you said earlier you spoke to a, you know, a growth manager, presumably a reasonably well-known one. The word coming out of Milken out in L.A., it's hard to find a lot of pessimism out there, which to me is a little bit surprising. Usually you get a collection of big investors, billionaires in the same room. They're all kind of negative on the market. Are the clients that you're talking to, are they optimistic on where we are or not? I think more balanced to negative.

I think the guys who run big piles of money and do asset allocation are always going to be more negative. I think bottom stock pickers see some pockets of opportunity probably more in the headspace where I think Shannon and I are centering around. Look, when you go to Milken, and I've been a couple times, you should feel good about life. You're in the Waldorf and Beverly Hills, and you're seeing famous people in every industry and learning incredible things from interesting people. So if you don't like that, you're not somebody's role here.

When you go to a lot of conferences, you find that people in that stratosphere are genuinely more cautious, maybe a little more pessimistic. People who pick stocks for living or try to beat the S&P are not outright bullish. Okay, we do whatever it is, 630 meetings a year, whatever it is we do, it's a huge number like that. I'm telling you right now, people are not max bullish on the stock market right now. And this little 3% move hasn't really changed their view. I think they think it's mostly about the Fed, as we talked about, and a little bit of getting the edge case off the table. What's wrong with that?

Nothing. But it doesn't make them from here say, I'm going to increase my bond to equity allocation. I think people believe there's going to be a lot of buybacks from corporates, and that could be a near-term bullishness. That's true. I think people think maybe a little more speculative retail guy comes in, and there could be a little bit more mode of this trade. So very tactfully, maybe people. But I don't think people who are really allocating big piles of money are like, wow, it's time to back the truck up for a second-half rally. And I think the biggest reason is consumers slowing a little, China not recovering a little. I hear those a lot.

And the estimates for the second half do hockey stick a little, and they get a little bit harder to achieve. So that's sort of the offset to the short-term sentiment stuff you're talking about. We'll leave it there. Shannon, appreciate it. We'll see you soon, Adam. See you soon. As well.

It's Adam Parker, Shannon Sikosha. We are keeping our eye on Disney shares as well today, dragging down the Dow on pace now for the worst day in some 18 months. And that follows earnings. Julia Borson with the details now. Julia. Well, Scott, Disney shares are down over nine percent after the company warned that its parks divisions operating income would be flat in its fiscal third quarter. That compares to expectations of double digit percentage gains in the quarter, and they say that that would be ahead of a fiscal Q4 rebound expected. Bernstein writing, Parks is the anchor of the company's valuation. Plus, Disney's quarterly revenue was a hair light of expectations.

Disney warned that its direct-to-consumer entertainment business would report a loss in the fiscal third quarter and also wouldn't add any new subscribers then, while its Q2 linear TV operating income fell 22%. Now, that was the bad news, and that outweighed the fact that Disney beat on the bottom line. It raised its full-year earnings outlook, and it reported a surprise $47 million in profits for Disney Plus and Hulu. CEO Bob Iger is saying that streaming will be a growth driver for the company, especially as they start to crack down on password sharing. But that's not helping the stock today

down 9 percent, Scott. Maybe, I don't know, a little sell on the news too, perhaps, Julia, because the stock has had quite a move as well, right? Quite a run this year. Yeah. I mean, if you look back over the past several years, it's still down. The shock is up dramatically this year, in part because Bob Iger has defeated that proxy battle with Nelson Peltz and sort of laid out all the changes he's going to make. I mean, there's a sense that this battle with Peltz really accelerated Iger's moves to, say, improve the studio performance, accelerate the streaming plan. But I think, yeah, you're right. maybe it'll be able to sell in the news. Take a look at the stock. All right, Julia, we'll talk to you soon. Thank you.

That's Julia Borsten. To Christina Partsenevelos now for a look at some of the other big names moving into the close. Christina? Let's look at Coke shares. They're up, what, 19% hitting a one-year high after net sales increased and profitability improved in its first quarter. But the real driver for Coca-Cola Consolidated Inc. is the stock's $3.1 billion repurchase plan. The market cap for Contax pre-buyback announcement was about $8 billion. So this buyback represents almost 40% of its market cap.

So a lot, and that's why shares are higher. Shares of consumer health company Kenview are also higher after announcing, sadly, hundreds of layoffs or about 4% of its workforce. Recall that Kenview actually split from Johnson & Johnson a year ago while they still market brands like Listerine and Band-Aid. The job cuts really come as the transition between both firms just winds down. So the firm, though, also beat on quarterly profit estimates. So that's how you're seeing the stock up about 6%. Scott?

All right, Christina, thank you. Christina Partsenevelos, we're just getting started. Up next, big techs, big bounce back and whether the May rebound has some staying power. Deepwater Asset Management's Doug Clinton. He's here at Post 9. Find out how he's sizing up the mega cap momentum. The names he thinks have more room to run. We're live at the New York Stock Exchange and you're watching Closing Bell on CNBC. We're back. Shares of Meta up 31 percent since the start of this year. Altimeter's Brad Gerstner betting big on that name, as you may know, as the AI boom heats up. Here's what he told me on the halftime report earlier today. It's the single greatest beneficiary of the AI boom because AI powers all of their engagement, whether it's videos that they're showing you on Instagram or

on Facebook, or whether it's the monetization, the targeting that they're providing, you know, to their advertisers. As a long-term shareholder, this is radically different than 2022. The company is the most fit and efficient company of the big cap in tech today. All right, joining me now, Doug Clinton of Deepwater Asset Management. He is a meta shareholder. What a difference a couple of years makes for this company, right? You agree with what Mr. Gerstner has to say? I do. I do. I wouldn't say that they are the biggest absolute beneficiary. We also own Google. I think you could make a case that Google, with all the things they're doing in AI, maybe has an even better play to create AGI than Meta. So they're certainly a big potential winner. But for all the reasons Brad talked about, I mean, AI enhancing ads, AI enhancing engagement.

Certainly those are things that work at Meta. And I do think they are a leaner and most importantly, more hungry company than they were in 2022. Interesting. When you hear big investors like Stan Druckenmiller talk about the hype around AI. Now, he was referencing specifically NVIDIA. But others would suggest that the whole space has benefited from maybe too much hype. Do you have a comeback for that? Do you disagree? I think it's an appropriate amount of hype. Actually, if you think about where we think we are in the cycle, we think we're probably in inning three or four of what will be a multi-year AI bull market.

And so should there be hype? Yes. Has there been hype? Yes. I think, though, that we still have a long way to go. There will inevitably be pullbacks from here to the peak, whenever that is. And I think Stan, I mean, he's the greatest trader ever. And he's probably better than me at calling when those little local peaks might be. But I think if you zoom out, there's a lot more. Well, let me ask you the question differently now that I think about it. So if you think the hype is in the second, third or fourth inning, maybe the multiples have gotten into the eighth inning pretty quickly. Are you comfortable with where the valuations of these stocks are? We are. I think you can find stocks in the AI hype space that still have reasonable valuations, particularly if you believe

that there is more revenue coming from the AI boom. And if you look at just the MAG6, we're still at about 28 times forward earnings. That's right in the middle of the historical range over the last 10 years. So I don't think that's overly inflated. And then you look at some names that we own, like Vertiv, VRT. It's a stock that's in AI data center play. They specialize in liquid cooling. They trade about mid 30s forward EPS and we think that number's probably too low. I wanna, let's circle back to Alphabet,

how Brad Gerstner is also a believer in that, which is interesting because there was a point in time, and it wasn't that long ago, where he wasn't, right? Where he famously sold the stock he criticized management He said they missed out to Microsoft now more recently You've got Daniel Loeb of third point saying hey for longer term investors alphabet that that whole mess and the noise Created a buying opportunity Gerstner himself bought it back and talks now about how they can get more fit. Listen. They're still in a great position. There's still a lot they could do to trim, you know,

and get fit over at Google and get the flywheel going. But we were impressed by the AGI searches they discussed in the quarter, both the rate at which they're moving to AI enhanced searching, but also the monetization of those searches, which are coming in at basically the same monetization as they're seeing in core search. They're going to be a dog in this hunt. Thoughts? Agreed 100%. And it's something that we've been saying about Google since the beginning of the year, actually, is that we wish they would have a meta year of efficiency like we saw in 2022.

And it's not just about the leanness and margin. That's not actually what we care about the most as investors in Google. What we're interested in is finding that hunger. We talked about the pace of innovation at meta. That I think is really what's driving the results of the company even more so than that better margin. Google has been, I think, hesitant to really push with the urgency that they need to push with to win the game of AI. OpenAI has not been hesitant at all. And I think that tells the story between why OpenAI is ahead and Google's not. Well, do you think now a fire, so to speak, has been lit under that company? And now they know they have no choice but to go full speed ahead. And by the way, if you look, I've been bringing this up of late, because if you look at the performance

of the stocks over the last 12 months, so Alphabet is up 62 percent over the last 12 and Microsoft's up 32. Yeah. The narrative would have to believe otherwise. It doesn't match. And I think if you actually rewound the clock to March when sentiment was super negative with Google, that may have been a little bit closer, that delta that you're talking about. So it's very close. It's changed really in two months. I mean, two months, the narrative has shifted almost completely with Google to now. I think investors have come back and they've started to believe that they have found the fire. We've heard about efficiency on their earnings call. And if you really back up, this is the reality for Google.

They have all the pieces that you need to win in AI. That's never changed. They have distribution, billions of users. They have data better than anybody. And they have the engineering and infrastructure to do it. They just have to put it together. Well, this is why when they're sitting on, sitting on deep mind and the, you know, that's where the narrative developed. You're like sitting on this gold mine and did nothing with it, even though that's, you know, obviously not necessarily the full case.

But that's the market case that drove that stock down. It's good to see you. Thanks for being here. Thanks, Scott. Doug Clinton. All right. Coming up, trends in high places. Major averages are climbing back towards all time highs. S&P and Nasdaq within striking distance of new records. Now, top technician Chris Farone, he flags some bullish signals in the charts that point to more gains ahead. Averages are climbing back towards all time highs. S&P and Nasdaq within striking distance of new records. Now, top technician Chris Farone, he flags some bullish signals in the charts that point to more gains ahead.

He'll explain exactly where they are next. We're back with some news on the Biden administration and the chips space. Megan Casella has the details for us. What are we learning here, Megan? Scott, we've just learned that the Commerce Department has revoked certain licenses for exports to Huawei. This is meant to impact the supply of chips available for Huawei cell phones and laptops. Commerce did not tell us any specific companies that would be impacted, but the Financial Times has reported that Intel and Qualcomm will be hit here, that they'll be limited in their amount of sales they can send to Huawei. This comes, of course, as the Biden

administration has been trying to limit the amount that China can build out its chip manufacturing, its semiconductor supply chain. And there was an indication that Qualcomm knew that this was coming in their earnings. They had indicated that they didn't expect to receive revenues from Huawei beyond this calendar year. So there was an indication there that companies knew this was coming. But what we know for now is that Commerce has revoked these licenses for exports to Huawei. Scott? All right, Megan, appreciate it. Keep us up to date.

Megan Casella. Stocks trying to hold on to gains here in the final stretch. S&P now less than 2% from record highs. Chris Verone, head of technical and macro research at Strategas, is back at post nine with where he sees the market going. I mean, gosh, it was, what, a few weeks ago we felt like, oh, we in the store for a 10% or more correction, and here we are. Should we be believers in this bounce back? Yeah, I think we should, and really for a couple reasons. You know, by, call it third week of April, you started to see the oversold conditions come together. And, you know, the judge of any oversold is how the market responds from that. And I think it's been

very compelling since. I mean, number one, you have the VIX back to where it was pre-correction. You have credit conditions, which never deteriorated, even as the market was coming in. So look at BBB or even CCC spreads are on their lows. And I think maybe most importantly of the lot, financials are right back at the highs. I mean, these banks have acted great through the correction and now coming out of it. And Scott, I think when you're working through these corrective phases, you always want to be paying attention to

what are the first groups making new highs coming out of this? And the banks are there. A lot of global markets already back at the highs as well. So this still looks pretty good to us. All right. So now take all that. What's it mean and for how long? Yeah. How long is this sustainable?

We have good seasonality basically from mid-May through about late July. The old sell in May and go away, I don't know where that came from. It doesn't work. When you look at the data historically, late May through about late July is actually one of the sweet spots of the calendar. But what I think is more important here is how the leadership might be evolving. Look where the strength is coming from. Financials, materials, rest of world. The strength in China is underappreciated.

The strength in Europe is underappreciated. UK FTSE just broke out of a massive rain. So maybe we're changing what's driving it, but I would expect new highs in December. You would. I guess we've seen this movie before with a more broad move higher. What does that mean for the tech trade where there were real questions about it, but then it kind of came back and it came back strongly as a result of earnings? I don't think it's quite as monolithic as it has been the last six or seven months. You saw it with

the mag seven earnings. There's been some divergence. Even Microsoft, which is not too far from the highs on a relative basis, that's been a bit underwhelming. The strength has really come from Google. That chart continues to look fantastic. I think the rally in Apple, we ought to be a little bit careful with. We're back into some resistance here. But the bigger story, as you just said, there's a broadening re-happening here. And I think the most important part of that is these global markets trade great. You know, what's interesting, too, is that the AI story, we've been talking about it a lot on the network in the past few days at minimum, has made what may be considered traditionally defensive areas of the market not necessarily defensive. And I'm zeroing in on utilities as I say that, which are up one and a quarter percent this week. Because of all of the thought about,

well, what's going to power all these data centers and all this production of these AI chips? How are you thinking about that space and then other traditionally defensive areas? It's a great question. The first rule in our work is we know we don't know, right? We're trying to give our best guess and play probabilities, but I'm shocked how many times I've heard that line of reasoning over the last five or six weeks that this move in utilities is the next way to play AI. I'd be careful with narrative creep. Whenever you start to see narrative creep, it does raise an antenna for us. Perhaps utilities are working simultaneously with staples because there is a bit of a counter-cyclical streak that's running through markets here. So I would be careful about making the AI jump. If you want to play AI,

buy AI stocks. I mean, NVIDIA is closer to the highs than it was a few weeks ago. They're so crowded. I mean, and the valuations have gotten stretched, right? I mean, if you're looking for other ways to play AI, I'm not saying like go out and buy every single utility name. Yeah. But that appears to be a legitimate angle and maybe the next angle to the AI story. Let me propose another hypothesis. Is it possible that utilities are turning here because bond yields don't run away from us? Is it possible that utilities are suggestive that bond yields move lower? And that's where I think is the more consequential piece of information. Yes. Choice C. All the C, all of the above.

Perhaps all of the above. I agree with you 100%. I think for macro investors, the more important question is, six months from now, is it 10-year yields at 5.25 or is it 10-year yields at 4? And I think this turn in utilities to strengthen the banks, I argue more of a likelihood of 4% 10-year yields than 5.5. Well, if your market thesis is going to work, I sure as heck hope so. It's good to see you, Chris.

Thanks for being here. Thank you. Chris Ferron. All right, up next, we're tracking the biggest movers into the close. We're back with Christina Partsinevelos, who's standing by. Christina. Another software name post strong earnings, but investors still aren't impressed. And shares of a luxury car brand are lower.

It once sold the most expensive car in the world. Can you guess? Details next. 15 from the bell back to Christina now for the stocks that she is watching. What do we see now? Well, let's start with Datadog because that's trading lower about, what, 11 percent. The president is stepping down by year end and the revenue growth of this security software provider was a little light of buy side expectations. As Morgan Stanley puts it in a note this morning, there's nothing really wrong with this earnings report other than expectations had really crept

up after we saw growth in Microsoft Azure as well as Amazon Web Services. Shares down 11.5. Did you guess the name of that sports car? Ferrari. Also disappointing investors with its underwhelming earnings report, flat deliveries, and the fact that it reiterated its full year forecast. The sports car maker doesn't plan any price increases on existing models either. They said that on the call, but would rather push on personalizations given the higher margins. That means you pay more for paint color or a specific fabric to create that one of a kind look should you be so lucky. Shares down 6%. Scott. All right. Christina, thank you. Christina Partsenevel is still ahead.

Reddit's first earnings report as a publicly traded company is out after the bell. Those shares are heading higher into the print. Still trading, though, right around the IPO price of $47. We'll discuss what to look for coming up. And a quick programming note. Don't miss Starwood Capital's Barry Sternlich. He's live from the Milken Conference tonight on Last Call. 7 Eastern, back after this. Welcome back. Billionaire investor Stanley Druckenmiller locking in some gains from his NVIDIA position, saying AI might be a little overhyped in the near term.

For a list of other AI-related names that may be vulnerable to profit-taking, you can head to cnbc.com slash pro-pic. Up next, counting down to Reddit and Wynn Resorts as both companies set to report at the top of the hour in overtime. Tell you a rundown of what to watch for when those results hit the tape in the Market Zone next. We're now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, two earnings we're watching at OT today. Julia Boorstin on Reddit. It's the first earnings report as a publicly traded company.

Contestant Brewer on Wynn. Michael, we're pushing up right at 5,200. I don't know if we're going to get there today, but we're close. Been able to hang in there. You know, it's been this little bit of a sprint, 3, 1% up days in the NASDAQ and all the rest of it. Volume is super light. I say that as a way of people's distress kind of draining out of the market. I mean, if you look at the S&P index fund ETF or the QQQ, it's like not that much more than half of an average day's volume so far.

That means people are more comfortable with this setup, whether you kind of have the horses to just blast through the old highs. Obviously, still unclear. I heard Verone talking about the financials. That's also something I've been fixated on. Banks are kind of holding their gains today, being able to make some hay with the decline in bond yields. And even consumer cyclicals, that's something I've been kind of watching for how heavy they've been in the last couple of weeks, are improving on a relative basis to things like staples. So, you know, things are holding together reasonably well. What do you make of the commentary around the growth trade? Druckenmiller, NVIDIA, Gerstner talking about maybe trimming a little bit across the board. Adam Parker writing about protecting capital as a growth manager. Thoughts?

I do think, well, first of all, you've seen the evidence of that in the actual market, the way that these stocks have flattened out on a relative basis and they've gotten a little bit jumpier in response to earnings. I mean, the way meta, if you look at a one-year chart or even a two-year chart of Meta, and you have these two vertical lines on there, it's this massive company. And so people are a little touchy about exactly what the trajectory is. I think there's also this huge debate in the market right now of we know the obvious beneficiaries of AI, but ultimately don't new technologies mostly kind of have the gains reaped by software, not hardware? So the build-out, we've capitalized it.

The rest of it, I think there's uncertainty around that. So it's an interesting next phase, but also I think it's about portfolio positioning and going out of the crowded and toward things that have been underexploited. Hey, now we're talking about utilities as AI plays. Yeah, I think that's a little bit of a— So we're down that road. It's a little bit of a sort of reverse logic on that. You know, they're also going to have to spend an enormous amount of money in CapEx to try and get that capacity up to deliver the power.

And you had actually Greg Abel at Berkshire Hathaway talking about that over the weekend. Yeah. Julia Borsten, Reddit's the first earnings report as a publicly traded company. Tell us more. That's right. The very first one in the question is whether Reddit shows the same kind of digital advertising growth that we saw from Meta, YouTube and the other ad giants. The stock is up about 45 percent from its IPO price of thirty four dollars a share. And analysts expect the company to report revenue of two hundred and thirteen3 million and a loss of $8.71 per share.

Analysts are also looking for the company to report 76.6 million daily active users. That would be up from the 73 million that Reddit reported in its S1. That's as of the end of last year. Now, going into today's report, 53% of analysts have a buy rating on the stock, 40% have a hold, and 7% have a sell. Back over to you, Scott. All right, Julie, appreciate that very much. Julia Borsten, now to Contessa Brewer, who's going to tell us what to watch for when Wynn reports. Contessa.

Well, you know, Scott, Wynn is coming in here at the tail of casino earnings, so we've already gained some perspective on Macau through MGM and Las Vegas Sands and in Las Vegas with MGM and Caesars. So any excitement will come from Wynn significantly outperforming its competitors or I guess underperforming. Analysts though are likely to ask more about Wynn's plans to open its Middle East casino resort

in the UAE early in 2027. We got artist renderings released just yesterday. Look at this. And as you can see, the tower's underway. This is really going to be a game changer for the Middle East. I mean, gambling in the United Arab Emirates. Meanwhile, let's get to the numbers. The street's expecting Wynn Resorts to come in with revenue of $1.79 billion and earnings of $1.27 per share. They're up against tough comps from last year's first quarter. And then win shares we've seen up more than 6% this year. That outperforms Sands and MGM, which are negative on the year to date. Scott.

Contessa, I appreciate it. We will see you when those results hit the tape. Mike, with about a little less than a minute to go here, really nice and balanced over the last full week. Every sector is up. And actually, this is week to date. I'm sorry. Week to date. Every sector is up. Everything's up at least 1 percent, save for a couple. So it's been pretty nicely balanced. And overall market breadth has been good. Today, it's more like 50-50 volume-wise, but it's been pretty nicely balanced. And overall market breadth has been good. Today, it's more like 50-50 volume-wise, but it's been very good. You've had this nice recovery. To me,

the question is, look, it's a bull market. The dips tend to be brief and shallow. You have to grant that. It's not clear to me that we really got to the point of getting stretched to the downside enough that it's really going to launch an exuberant new up phase. It's much more about recovery. We're happy where we are. Earnings are up 5%. For the year, they probably look okay. We'll see where that takes us. Only a couple percent away from new highs.

Verone says, hey, we're going to get it this summer. We'll see. I'll pick it up tomorrow. Linda O.T. with Morgan & John.