Closing Bell - Closing Bell: The Changing Makeup of the Market 3/13/24

Episode Date: March 13, 2024

What stocks are going to lead the next leg of the bull market? Josh Brown from Ritholtz Wealth Management, Solus’ Dan Greenhaus and Ayako Yoshioka from Wealth Enhancement Group give their predictions. Plus, PIMCO’s Erin Browne tells us how she is navigating inflation and where she is seeing big opportunity in stocks right now. And, Ed Yardeni breaks down how he is playing this rally – and the one thing that he thinks could be a big risk to the market in the months ahead. 

All right, welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. And this make or break hour begins with stocks at record highs. And what can keep this rally going? It's a big question we'll ask our experts over this final stretch, including big time bull Ed Yardeni coming up in just a few. In the meantime, take a look at your scorecard. With 60 minutes to go in regulation, the broadening market is well on display today.

The Russell 2000, the Dow outperforming with sectors like energy, industrials, materials leading the way. Tech taking a bit of a breather again. What else is new? NVIDIA lower, even as another firm raises the price target there. Tesla shares are falling again after the analyst at Wells Fargo says it's time to sell that stock. And finally, shares of U.S. Steel cratering midday on news. President Biden will soon express his concern over its planned transaction with Japan's Nippon. We'll keep our eyes on U.S. steel as well. Takes us to our talk of the tape, the changing makeup of this market and the stock likely that the stock likely to lead that next leg higher if in fact one happens. Let's ask Josh Brown, co-founder and CEO of Ritholtz Wealth Management, here with me at Post 9. It's good to see you again.

The moves that you've made in the market of late and the commentary that you've given me lately suggest that momentum is a place that you want to avoid right now, and you're looking elsewhere. Well, I think the way I would phrase that, Judge, is former momentum. So the tricky thing about momentum is you have to measure it on a specific time frame and you have to do that consistently if you're trying to define it. It's a little bit easier for me because I don't have to do that. I'm not running a rules-based momentum ETF, for example. So we've got a lot of big technology names that were momentum. Now I would consider them to be former momentum. And you can see that there are technical

breakdowns happening in that space. And one of the things I've been coming on the show each week to say is give me anything but big cap tech, anything but Magnificent Seven. I want to hear about it. Even as you're a holder of NVIDIA and I think Alphabet and some of these names, you like a lot of these. That's right. Apple. Nothing wrong with these companies. But when we're talking about the current setup, those are the stocks, to me, that look the worst. I've seen nothing but unbelievable charts all over the market. I just don't see them in mega cap tech. NVIDIA has been incredible.

Put that one aside. It's almost in its own solar system. Is this a breather for these stocks, or is it a real trend change? Because you look at that kind of stuff, too. Tesla is a trend change. Tesla has now lost half a trillion dollars in market cap. That's not a breather, okay? Apple, I think, is innocent until proven guilty.

Microsoft, too. Meta really hasn't let up yet to the upside. So, yeah, I think it's more reasonable to say these stocks have done a lot of the heavy lifting for the indices. The money is coming out of there and looking to go elsewhere. Perfectly natural, perfectly normal, par for the course for a standard bull market. And Judge, I want to tell you, we have a few milestones that we're celebrating right now that not a lot of people are even aware of. First of all, the S&P 500 has now gone 265 straight sessions without a drop of 2% or more. That is the longest streak,

second longest streak since 2018. We had one of these streaks last year too. You've got a VIX that's sub 20 for 96 consecutive days. This is the second longest streak since 2018 as well. This is a market that really has not rewarded people for jumping out the window every time, for example, an inflation print came in hot or every time a large important company missed on earnings. You have gotten absolutely no quarter if that's the way you've been trading. The people who are being rewarded the most right now are the people who have managed to ignore macro and focus on trend. And trend is higher. And there's been almost no volatility in sight. Last thing I want to tell you, this two year, 10 year yield curve

spread, it's now 424 consecutive trading days inverted. That is officially the longest inversion ever for the two tens, even surpassing 1978 to 1980. We're in uncharted territory on that metric as well. No recession in sight, no slowdown in sight. And it's well over a year and a half with that inversion in place. So it's a really interesting environment. The people who are thriving right now are not buying the broken momentum. They're not looking at what's the next tech stock I can add. They're looking at areas like home building. They're looking at quick service restaurants. They're looking at really a lot of consumer areas like travel. And they're finding charts that are working. You're looking at charts like eBay, NASDAQ, CBRE and buying more Pfizer. And those

are moves that we've documented earlier on halftime. Yeah. You know, week, that that's where you're putting your money to work. Yeah. And that's part of the overall statement that you're making about what you like and what you don't like right now. Yeah. So, look, these are non-technology companies. I mean, I guess you could say they're companies that utilize technology. I don't think anybody thinks eBay is a cutting edge technology name. It's certainly not a momentum stock. But look at a chart. It's been running like a scalded monkey. And there's a reason for name. It's certainly not a momentum stock. But look at the chart. It's been running like a scalded monkey. And there's a reason for that.

It's 10 times earnings. The value is there. There's almost no expectation for growth being priced in. There's a leadership change in this company. And there's a market that's hungry for, okay, we know NVIDIA's great. What's the next stock? There are so many charts that look like eBay and CBRE and NASDAQ. And I mentioned Marriott yesterday. There are so many charts in so many industry groups that look like that.

It's OK if Apple's in a 10 or 12 percent drawdown. The market is acting exactly as it should if it's a true bull, which it is. What does it tell you about the types of things that will, so you obviously think that we're going to have another leg higher to this bull market, and it seems to me you're defining the kinds of stocks you think will take us there. I asked at the very opening read here, what are the stocks that are going to lead the next bull, the next leg of the bull market, if in fact you believe that one's going to happen. So I think the story in the second half of this year becomes capital markets return. So let's pull up a chart of NDAQ. 71% of IPO listings go to NASDAQ. And not only is that

true in the United States, NASDAQ is operating 10 exchanges around the world. And not only that, a huge thriving software business, fintech business, cybersecurity businesses. This is the company that I think is going to win as we start to see IPOs print behind us at, what is that, post 10 or whatever. This is the stock that's going to play there. Yes, the investment banking stocks will play there too, but you could look at NASDAQ almost as a pure play for market activity. That's what I think the second half of the year is going to be about. And you'll notice that's really not a story that's reliant on the next two words to be uttered out of the Fed or anything like that. So there are a lot of specific stories out there. And the way to find them is to look at the technicals first. Look at stocks that are breaking out right now and try to

understand why they're breaking out and whether or not you think what's happening is likely to continue. It's a much better way to play than to sit here and say, well, what's my macro thesis? And then try to find good looking stocks that match your intuition. This way is better. This way actually works. I'm doing this with stop losses. So in a reversal, I don't have to get married to any of these stories individually. Yeah. Let's bring in Dan Greenhouse now of Solus Alternative Asset Management. Also, Ayako Yoshioka joining us, too, of the Wealth Enhancement Group. It's nice to see both of you. Dan Greenhouse, you've been sitting here listening to Josh Brown.

Sorry about that. Do you agree with the sort of direction he thinks that this market's going to take and what is going to drive it in that direction? The bias is certainly to the upside now. And I would reemphasize a point Josh made about the number of charts that look great across the spectrum right now. Look at all the private equity names, Apollo, KKR, Carlisle, et cetera. They look terrific. There's a third of the S&P 500 right now is within 5% of a 52-week high.

It's Home Depot and Lowe's. It's Netflix. It's Disney. It's a cross industry. It's Home Depot and Lowe's. It's Netflix. It's Disney. It's a cross-industry. It's a cross-sector. And this is certainly an anything-but-tech rally. And I don't know why that doesn't continue for the immediate future. Is there any level of complacency about anything? You know, Josh mentions the 210 spreads inverted for the longest in history. You still have an overwhelmingly large number of people saying and dead set on soft landing or no landing. That inversion would obviously scream otherwise to many.

Listen, have we moved beyond that? I'm a card carrying member of the yield curve is always right camp. So I wouldn't dismiss it. But to Josh's point about no. You kind of just did, though. You know what? I did just. You're bullish, right?

Yes. On the equity market. Sure. And you think that this stock market could continue to know what? I did just. You're bullish, right? Yes. On the equity market. Sure. And you think that this stock market could continue to go higher. I do. So in some respects, you are dismissive of it as, you know, people are just becoming numb to the yield curve. Well, meaning anything. Listen, I think here's the thing. The macro indicators that you normally look at call it leading economic indicators, building permits, jobless claims, et cetera, the yield curve, any one indicator by itself is not particularly helpful.

The group of indicators are very helpful in helping understand the macro landscape. But even more helpful is what companies are doing, what the economy is actually doing. And when you hear earnings season, company after company after company talking about, in some cases, demand being stronger than supply, the consumer continuing to hold up, Visa, company that I own personally and I've continuously used as a barometer, saying they see no weakness anywhere. That's more important to me than all this other stuff. It's not that I'm dismissive of it.

It's just I have to understand all these other things bear more importance. Fair, which, Aya, is why, when I see the notes that you suggest it's still all about the Fed, some would say it's the exact opposite, that it's no longer about the Fed because we know what's coming. The how many and when isn't so significant at this moment because growth is good. Earnings are good enough. And here we are in the midst of undisputed bull market. Hi, Scott. You know, I agree in terms of, you know, this is kind of like waiting for a company to report earnings. And we know that earnings are going to be in line, but we're all waiting for guidance. And I think that's why there's still some attention that needs to get paid to

what the Fed's going to do next week and what they're going to say. We all know that they're not going to raise rates or cut rates next week. But what type of commentary are they going to provide? And are the dot plots going to stay the same? I think that's what everybody's sort of still going to be looking at. And there is still a macro narrative that plays into a lot of this, despite the strength that we're seeing on the earnings front. Aya, when was the last time? You made the case repeatedly, Josh, that we're less reliant,

that the Fed is almost irrelevant at this point. I was going to say, I was going to ask Aya, when was the last time you guys made a portfolio allocation change based on anything the Fed had to say in either a presser or congressional testimony? Have you done so in the last, I don't know, six to 12 months? No, it's really not about what type of move we're going to make. But I think, you know, knowing where the market has come already, we're, you know, at all time highs, We're seeing the broadening out, which is great. You know, anything sort of can be a catalyst to sort of, you know, create a correction or a pullback. And I think that's all an opportunity in the long term because we're

seeing this fundamental, you know, positive earnings growth from many companies. We agree. Here's where I think the puck is going next. The Russell 2000, we could use the IWM ETF, is up 2% year-to-date. That's versus an S&P 500 on a total return basis up 9%. Here's what's happening beneath the surface that maybe some people are aware of, but they're not really paying very close attention, and perhaps they should. The breadth in the Russell 2000, which I view as a precursor to a rally, is starting to get better and better. Four percent of the Russell 2000 components are now at a 52-week high. That is the highest level since March of 2023, exactly one year ago, right before the banking crisis.

I don't think we're on the verge of another banking crisis this month. I could be wrong. So absent that, if you have a Russell breakout, starting with the internals, and then we see it in price, that is a new leg to the story. The Russell is selling at 15 times forward earnings. The S&P is 21. And I would tell you one other thing. We're seeing fewer lows in the Russell 2000. 2% of the index is now at a 52-week low, which is half the historic average, the lowest we've seen since that mini banking panic a year ago. So this is what I'm focused on. And when you start to see stocks that you've never heard of hit the 52-week high list, it's exciting because you know people are exploring and they're going outside of the mega caps and looking for opportunity. That is the

textbook definition of a market wide bull. And that's what I think we're on tap for this spring. Aya? I agree. And, you know, credit spreads, if you look at credit spreads, they're confirming all of this, too. We're at, you know, years long tights in terms of credit spreads and high yield has performed well. And so I think there's a lot of momentum that can occur, again, to Josh's point, in the small cap space, because that's not where the momentum has been in the past, right? It's where the momentum can be in the future. Greeny, I hear people, you know, tell me as for the Russell and small caps that it's too soon. You can't buy those until the Fed

actually cuts rates for the first time. How do you address that? Yeah, I don't care about the Russell. I don't think I need the Russell at all to confirm. I mean, everything Josh said is correct. I just argue that the points I made earlier are more valid, that you have any number of stocks outside of technology, Home Depot, Lowe's, you mentioned some of the hotels, et cetera, et cetera, that are at or near 52-week highs, the mid-cap indexes we all know breaking out to new highs. Right. That, to me, these are real companies. My problem with the Russell 2000, you mentioned when stocks you don't never heard of are making

52 weeks high. Nobody's heard of 95% of the stocks in the Russell 2000. I was going to say, you and I have heard of them, but like most normal people. But you're pointing, I like where you're going okay the fact that you have both quality and momentum doing incredibly well that's the point you're making yes you look at both of those etfs they've both done well because it's a reasonably small concentrated group of stocks in a wide swath of sectors that has done well amex caterpillar i could name you know the metas of course there's technology stocks with it i hear you marriott

josh mentioned that earlier the russell matters though if you do get some sort of pause or breakdown in that whole quality matters maybe maybe matters is too much because i've been making the case that over the last year, people that are focused on the lack of Russell participation have missed the rally. So I don't know. I agree with Dan. It's not like, oh, I need the Russell to confirm.

I guess what I'm saying is, oh, okay, cool. That's good too. Like that's the way I'm thinking about it. But if you're in the market, that's a target rich environment. These are stocks that have not done much and it doesn't take a lot of market cap coming in for them to move. That's a good point, Aya. So if I look at year to date, you know, NASDAQ's up 8 percent, S&P's up a little bit more than 8. And there's the Russell staring you in the face. It's up,

but it's only up two and a third. It's up-ish. So, you know, if you're looking for other areas, Josh suggests it's, you know, target rich because a lot of the other targets have been picked over and hit the bullseye on numerous times. Got to look elsewhere at some point. I agree. I mean, I think that's why small caps look very attractive. And as, you know, Josh mentioned, the valuations are much more attractive relative to large cap. I mean, I think that's why small caps look very attractive. And as Josh mentioned, the valuations are much more attractive relative to large cap. I think they're at a historic discount on a relative basis, small caps versus large cap. I think they're still at about a 25 percent discount from a P.E. ratio standpoint. And so I think there's a lot of both multiple expansion and earnings growth that can occur in the small cap space.

I'll just add real quick. One thing you mentioned earlier about you can't buy the Russell until the Fed's actually cutting. The issue for a lot of people tell me that on this show. You mentioned other people have said I never heard that one. Well, the reason that the reason why one might say that had had Scott not perhaps completely made it up. But let's just say people did say it. The reason is because the Russell has a disproportionate share of their debt is floating rate. say that had Scott not perhaps completely made it up. But let's just say people did say it. The reason is because the Russell has a disproportionate share of their debt as floating rate. And so I think it's depending on how you want to do the divvying it up,

30 to 40 percent of debt in the Russell 2000. And a third of the companies within the Russell are completely don't make any money. That's right. And again, when you look at the Russell 2000 stocks, 11 through 20, I think 95 percent of investors have never heard of any one of them. Maybe they heard of 1 through 10. But the point is, when the Fed starts cutting rate, that's an added tailwind that you get to the Russell 2000, which is already left behind, which is already trading at a discount. Yes, yes. It's instructive to look at the S&P 600 because those are all profitable small caps. But I mean, they often confirm each other, and now is no different, which I think to Aya's point speaks to the fact that we really don't have alarm bells going off in credit.

The S&P small cap 600 is actually down year to date by one percent. So it hasn't done anything either. Let's go Gretzky style. And to your point, go where the puck you think may go. Energy. Are you a believer in the energy trade, which is one of the leading spots today, if not the best performing sector on this day? So my friend Nick Colas likes to remind me, whatever you do, you can't sell your energy exposure because that is your only hedge for the worst case scenario of a commodity price spike, an oil price spike. That really does work in a portfolio. So I keep a slug of IEO in my portfolio, which is U.S.-based producers.

It's not Exxon and Chevron. That's kind of its own category. I have exposure to that through the S&P. These are really the companies all over the country that are going to have the most sensitivity to a price spike in either nat gas or crude oil or both. But that's how I think of those names. And I think for that reason, they're a permanent part of the portfolio.

I'm not necessarily being tactical there. I'm not good enough to be able to do that with the prices of the commodities. Sorry to interrupt you. Aya, you like energy? I do. I do. And I like it long term, too. And if you like tech and you understand all the spend at the data centers and the energy that's going to be required in order to power all of this, you know, energy in the long term is there's still a use case for it.

And it's not going to be, you know, renewable overnight. Last point real quick, as Josh mentioned, you know, the wipeout in market cap of Tesla. As I just look at Apple, you know, red again, Tesla's been red, and that's been a trend for both of those names. Does it matter? Does it matter to this market or not? My opinion doesn't matter. I mean, if I told you coming into the year, Tesla was going to be 40% off its high, down 30% for the year. Apple is going to be down upper single digits,

and Google would barely be positive, give or take. And the overall S&P 500 would be up 8%, 9%. You just said unlikely. You would have said extremely unlikely. And yet here we are. So the answer is unquestionably, it doesn't matter. How would you address that? And we'll make that the last word. These stocks are a source of funds. Look, the money comes out of Apple. I don't think it's going into a money market. I think the market uh flows have been largely out of banks so what happens when when someone sells apple i'll tell you what happens they go home they watch the new episode of shogun they wake up the next morning they look at their portfolio they say why do i have 80 000 sitting in cash right now look at all these other green stocks and they go buy something else that's an incredibly specific set of circumstances i'm not

saying that was me per se i'm saying hypoth, that's like a guy that sells shares of Apple and looks around and says, why aren't I investing right now? It's a bull market. I don't need to go back into Apple and I don't need to sit here in a cash sweep. So that's what a bull market does. It affords people opportunities to take profits in one part of their portfolio and then rotate that capital somewhere else where they think there's a better opportunity. It's happening all day, every day. It's extremely healthy. All right, guys, I enjoyed that very much. Thank you.

I will talk to you soon. Dan Greenhouse, of course. Thanks for being here. And Josh Brown, we'll see you soon. Let's send it to Christina Partsenevelos now for a look at the biggest names moving into the close. Christina. Well, let's start with McDonald's ramping up its dollar menu and other promotions to keep lower income customers coming into stores. At an investor conference, McDonald's CFO warned that price sensitive shoppers are actually turning to grocery stores instead of McDonald's for dinner. And they're also seeing overseas markets

like France and the Middle East were pretty much softer sales in 2024. The warnings pushing McDonald's shares lower by over 3% right now. Shares of GE Healthcare also falling after announcing another second stock sale to 14 million from 13 million shares. Recall that GE Health was spun out of General Electric in early 2023, and now General Electric is the one selling existing shares. So some of its existing stake. So it shouldn't create share dilution. Nonetheless, shares are down almost 4 percent right now. Scott. Christina, we'll see you soon. We're just getting started. Up next, the PIMCO playbook. Erin Brown back to break down her strategy for navigating inflation, where she sees opportunity within the stock market right now. Joins us after this quick break. We're live at the New York Stock Exchange and you're watching Closing Bell on CNBC. We're back with investors

looking ahead to tomorrow's PPI report, the next inflation print that could help indicate when we might start seeing the first rate cuts from the Federal Reserve. My next guest says this final stretch of inflation normalization will be the toughest, the old last mile being the hardest. Let's bring in PIMCO's Erin Brown joining us as you see. Does it make you less bullish on the market because you think that last mile is going to be tough or does it have no bearing on your overall view of stocks? I think that it certainly has a bearing if we were to start to see inflation accelerate from here. But, you know, I think it's well understood that this last mile is going to be the most challenging and that inflation is going to continue to come down, albeit on a much more volatile path than sort

of the directional disinflation that we've seen over the last year. So for me, you know, I think it makes it more challenging, you know, harkening back to your last conversation to invest in broad, small caps right now. But I think for companies that are large, that are liquid, that have access to capital and are not reliant on the Fed accelerating their pace of easing, I think it's still a good environment to invest in equities. And you've seen that play out over the last couple of days. So you're bullish U.S. stocks still. And to what degree do you think they can continue to move higher? So I think that they're going to continue to grow low double-digit earnings growth this year. Equity markets can probably, you know, between now and year end, grow sort of high single digits for the rest of

the year you know so that's a pretty healthy number for the equity market you know as long as we don't see some accident where the Fed is having to back away from their more dovish stance and start to hike interest rates again growth is still good real wage growth is quite positive you're seeing financial conditions ease in part because of the higher stock markets and consumers have excess savings. And you're seeing this now play out in consumer stocks and homebuilders, you know, all of which are doing very well. So you have seen a broadening out of performance this year. Granted, it's still in the large caps, but all of that is a very

healthy sign for the equity market, which makes me pretty bullish U.S. stocks right now. Do I want to stay with quality, which has been working? We can talk momentum in a minute, but what about the quality trade versus going, I don't know how you would describe, down the risk scale, so to speak? So I think that quality is still going to perform. The way the market is performing right now with quality and momentum outperforming is very familiar to a late cycle environment. And that's sort of the cycle that it feels like we're in right now. And I think that that's right. I think that it's an environment where inflation still runs a little bit hot, hotter than at least a more normal earlier cycle environment where quality and

access to capital liquidity outperforms and remember the the Fed is still restrictive with respect to interest rates and that you know doesn't really hurt the large companies with access to capital markets or more quality companies but it does hurt companies that are down in size diet down and scale and are really reliant upon either bank funding or really easy capital conditions for smaller cap companies. And that's not environment we're in right now. So I think that quality factors

really focused on return on equity, the ability to grow intrinsically, as opposed to really relying on very high GDP growth. Those are the type of stocks that are going to outperform. And so, you know, for me and my portfolio, we have a very significant quality lens that we're looking through in terms of how we're investing. I'm not going to suggest that we're, you know, early cycle, but what makes you think that we're as late in the cycle as you suggest? So I think it's really a function of how the economic data is unfolding.

Now, that doesn't mean that we're heading next into a recession. I think that we could potentially go back into an early cycle environment in the latter part of this year, sort of skipping over a recession. And we did do that in 2019, as a reminder. We sort of very quickly, I guess, went into a recession in early 2020 following the pandemic, but quickly came out of that and went right back into sort of an early to mid-cycle environment. But I do think that based on the economic data, it would all suggest, based on our model, the PIMCO, that we're in a late cycle environment right now, albeit, you know, not necessarily, you know, meaning that we're heading, you know, directly into recession thereafter. What about credit? What's the best

opportunity you see on that side of the ledger? So for credit credit credit spreads have narrowed really dramatically dramatically you know in the fourth yes in the fourth quarter of last year and then even in the beginning of this year there's a lot of issuance that's been sort of on the docket to start this year and we expect that that's going to continue through year-end so my preference is to be long equities relative to credit if you want to own own credit, I think that looking at structured credit is probably a more attractive opportunity set right now than looking at just corporate credit outright. And then I think, honestly, if you want to own credit, just

invest in the Barclays Ag. I mean, that's yielding pretty lofty yield levels right now. Fixed income, I still think, is a very attractive asset class, particularly over a more medium-term horizon. And instead of going into just straight up corporate credit, own a little bit of equities and own a little bit of duration and have that barbell approach to your portfolio. And I think you're going to outperform than buying corporate credit spreads right now. Lastly, we're looking at the list of your long opportunities, and Korea is on the list. Why? So you're starting to see an inflection.

Korea underperformed materially last year, and it's underperformed the semiconductor space over the last 12 to 18 months pretty substantially, which is a real significant underperformance relative to history. Typically, you see Korea really highly correlated to semiconductor stocks. And you saw that divergence emerge over the last 12 months or so. You're finally starting to see that, I think, narrow. And I think that that gap is going to materially narrow as we move through the rest of the year. So it's a really cheap way to get AI

and tech exposure and semiconductorctors exposure more broadly. And you're also seeing a lot of positive steps towards corporate reform, similar to what we saw in Japan several years ago. So I think that this is a really attractive opportunity right now that's being overlooked by investors. Enjoyed the conversation as always. Aaron, we'll see you soon. Thank you. Aaron Brown, PIMCO, joining us live on Closing Bell. Up next, our big time bull, Edgar Denny, is back.

We'll find out how he's playing this rally and the one thing he thinks could be at risk to the market in the months ahead. He makes his case after the break. Closing Bell is coming right back. Right across the board today, the S&P 500 pulling back from yesterday's record close. NVIDIA cooling off from its red-hot rally to start the year. Joining me now, Ed Yardeni, Yardeni Research. Welcome back. It's nice to see you.

Thanks, Scott. As you see the makeup of this market change a bit, right, NVIDIA cool down and some of these other areas pick up, what are you thinking? I'm thinking this is a healthy development, quite honestly. We've seen a lot of focus on the outperformance of the Magnificent Seven. And as we know, some of the Magnificent Seven haven't been so magnificent recently. And if some money comes out of the Magnificent Seven and spread more evenly across the rest of the market, that would be a healthy thing. For example, the S&P equal weighted index has recently gone to a new high, which is a good thing. So I think that broadening of the market is probably what's in store. And I think we're also likely

to see less momentum. I just looked at the latest investors intelligence bull bear ratio, and it's off the charts. It's not completely off the charts, but it's up to four point two. It can go higher. It has gone higher in the past, but this is up from zero point five six right at the bottom of the of the bull market. Right when the bull market just started, the sentiment was horrible. Now everybody's bullish. And that means there may not be enough bears around to convert into bulls to keep the momentum going. So I think we're going to see some weakness in the momentum trade and more of a spreading of the market to other sectors and industries. It's interesting that you say that. I was going to ask you whether you feel

like you still have to prove to people that this is, in fact, a bull market that's not close to being finished yet. Well, I think we're way past the point where I have to prove that this is a bull market. I think we all know it's a bull market. But bull markets can last a long time until we get hit by another recession. And that requires the Fed to be raising interest rates. I didn't anticipate a recession over the past couple of years. We just went through an environment where we had the most widely anticipated recession of all time. So it turned out to be a complete cadeau, complete no-show. And I don't see a recession this year or next year. I mean, the Fed has already raised interest rates. I think inflation has come down. I think it's going to stay down. You know, excluding shelter, the CPI inflation

rate is already at 2 percent. You know, when you have kids and you go for a drive and they say, are we there yet? Well, we're there except for shelter and shelters coming down, shelter inflation is coming down. So I think it's a long-term bull market. I got still 5,400 by year end. That was a pretty bold call off like a year ago, but right now it's looking pretty conservative. Why not more? I mean, people ask me, why aren't you raising your numbers? And so, well, you know, there are kind of limitations in terms of what earnings can do and how much higher valuation can go. But I see six thousand next year on the S&P 500 and sixty five hundred after that. And do you do you dismiss the inversion of the yield curve because the Fed is going to be cutting rates and thus you'll have a restepening? How do you how do you view that?

I'm in a short little study that's on Amazon. I'm not promoting it because I'm going to make any money on it. But because in 2019, Melissa Tagg and I, my colleague, we wrote a piece on the yield curve and what does it really mean. And this notion that an inverted yield curve means that we're going to have a recession, I think, misses an important point. What it really does is it predicts a process. It predicts a process that if the Fed continues to raise interest rates, something will break in the system, and that will lead to a credit crunch, and it's credit crunches that cause recessions.

Well, the yield curve got it absolutely right again, and we did have a financial crisis last year, but the Fed came in and played whack-a-mole. That liquidity crisis, they whacked it right down with the liquidity facility. And we didn't get a credit crunch, so we didn't get a recession. So as long as we don't get a credit crunch and not a recession, I think the bull market continues. I mean, you've never had a recession without an inverted yield curve, but an inverted yield curve alone doesn't mean you're always going to have a recession.

I think that's the fair way to say it. But it's been inverted for so long that, you know, people are still at the stage of, well, I got to keep my eye on that because the yield curve has always meant something. And the bond market has been right many times, as you obviously know. Yeah, well, I've been fighting the inverted yield curve story. I've been fighting the leading indicator story. I think the leading indicators really are an indicator of what's going on in the goods economy, much more so than in the services. And the inverted yield curve, again, I think it is it came in with liquidity to keep the financial crisis from turning into a credit crunch.

I really should correct myself. I mean, the Fed got a lot of experience dealing with these credit crunches and avoiding them back in 2008, 2009 and again in the pandemic. So they're pretty good now at playing whack-a-mole with liquidity crises You've warned of too much exuberance, you know, you've used that word multiple times, you know over the last I don't know a couple of months that we've been speaking Yeah Do you think that Nvidia got into a danger zone and and now obviously a lot of that's cooled off But did it get to a point where you started to really worry about what the implications of the move in that name alone was starting to mean?

Think of my attention like everybody else is paying attention to it. It'll be fascinating to see what happens next week when they have their festival. They're happening. They're going to have a conference uh for three days and it's gonna be all about artificial intelligence it'll be interesting to see whether the market gets hyped up on it and nvidia continues to go up or whether there might be selling on the news and some profit taking and i think there might be look i think it's still a healthy bull market i think there's uh still plenty of opportunities in in the bull market. The exuberance concern is, you know, again, 5400 seemed like a pretty bold forecast for the end of this year.

But I'm worrying that we might get there by the middle of the year. And then I have to ask myself, was that a sign of irrational exuberance? And I'm sure you'll ask me again if that's the case. I will. I will. If we get there, I certainly will. Ed, we'll see you soon. Thank you, Ed Yardeni. Thank you. Once again on Closing Bell.

Up next, we're tracking the biggest movers into the close. Christina Partsenevelos is back with that. Christina. Well, we have pent-up demand that could drive up sales in one travel sector. This according to an analyst and rumored White House concerns about the takeover of U.S. steel. Those stock movers next.

We're 15 from the bell back to Christina Parts and Neveless now for a look at the stocks that she is watching. Christina. Well, Wall Street must be getting ready for summer. I am because Royal Caribbean shares are up today after Goldman Sachs initiated coverage of the cruise liner with a buy rating. Carnival Cruise also felt the love, also getting its own buy rating. The firm said pent up demand and pricing power behind those strong ratings. That's how you can see shares are up almost 2 percent right now. On the downside, U.S. steel shares taking a hit after reports said Biden or President Biden was planning to issue a statement expressing concern over the planned acquisition of the company by Japanese steelmaker Nippon Steel.

The almost $15 billion deal had previously drawn White House scrutiny in December, with President Biden noting the national security risk of a foreign entity purchasing U.S. steel shares are down almost 13 percent at this moment. And speaking of the Biden administration, the Justice Department is investigating Archer Daniels Midland ethanol, specifically the ethanol trading desk and its accounting practices. That's new news from today. Are this according to Reuters? ADM not only makes animal feed, but they make the ethanol. And that's why you're seeing the stock. It is up 2 percent, but it did drop when the news hit maybe about 10 minutes ago.

Scott. All right, Christine, appreciate that. Thank you. Coming up, tale of two retailers, Dollar Tree and Williams-Sonoma moving in opposite directions today. I'm going to tell you what's behind those moves, of course, and what it might mean for the state of the consumer. Closing bells coming right back. Got your earnings set up. Coming up, Lennar reporting in overtime that stock's seen serious gains over the last six months. The question is now, can that strength continue?

We will discuss that and much more when we take you inside the market zone next all right we're now in the closing bell market zone cnbc senior markets commentator mike santoli is here to break down the crucial moments of this trading day plus courtney reagan on what has william sonoma rallying and dollar tree tumbling, and Diana Olick looking ahead to Lennar earnings coming out in overtime. Michael, I'll turn to you. It has been a broadening market and still a bit of a taking a break market, too. Yeah, it has largely been.

I mean, I guess you can say never short a dull market. It's very calm. It's sort of self-healing, in a sense, in terms of broadening out. I think the issue that does hang over it, though, aside from, you know, sentiments looking a little bit stretched, and you've got insider selling pretty heavy, and all these things that are just kind of out there in the atmosphere that say it wouldn't be surprising to get a pullback, is when you detail the bull case, the strong economy, earnings higher, credit great, the trend is higher, Fed's going to cut at some point, the market might just say, yes, exactly, and that's why we're here right now. So we did hesitate a little bit.

There was a little bit of a tick lower by a quarter percent. I wouldn't make too much of it. But it's just, again, one of those questions of, do you expect the market to continue to kind of perfectly choreograph this type of rotation? So far, it's doing it. I mean, look, you've got the dot plot next week, too, from the Fed. So, you know, I'm sure there's people out there who don't want to really get ahead of anything too aggressively before you get PPI. Which is, you know, look, you've got CPI.

We kind of know what to expect here. But the outlook from the Fed is going to be important because you just don't get it every time. What we're looking ahead at is PPI has very direct implications for the Fed's PCE inflation indicator. You do have this big index rebalance on Friday and options expiration. You do have the Fed next week. And, you know, I think we should take the Fed at its word that they see the risk as balanced between slowing growth and inflation staying high. And therefore, you have to be sensitive to slowing growth indicators as they come along. So, again, not fatal, but something to sort of keep you on alert. OK, Court, what's going on with William Sonoma and Dollar Tree? Yeah. So Dollar Tree shares having the worst day since May of 2022. Earnings missed expectations,

but it's first quarter guidance. That's what's really taking the shares lower. Executives less confident in reaching that $10 previously announced earnings target. They're focusing more on $7 this year. Dollar Tree's performance expected to be strong, but the family dollar banner, that has been and is expected to remain challenged due to the merchandise mix and the pressured lower income shopper that it caters to. The discounter plans to close around 600 underperforming dollar family dollar stores in the first half of the year, 370 more over the next several years, and then $30 tree locations when the leases expire. But it is also planning to

open somewhere between 600 and 650 new stores in the fiscal year. So we'll see how that ultimately balances out. But conversely, Williams Sonoma shares having the best day since March of 2021. The home retailer put a better than expected quarter, including better margins, while also issuing a stronger full-year revenue than straighted forecast management. Also largely positive about the trends. Quarter to date shares higher by 17 percent. Back over to you. All right, Courtney, appreciate that.

Courtney Reagan. Diana Olick looking ahead to Lenar. Those earnings coming in over time. And I guess a lot to live up to because this stock's been on a bit of a tear. Yes, it has, Scott. And Lenar is super interesting in the builder space because they've been very aggressive in production, even as other builders pull back due to higher mortgage rates. In their fourth quarter, there was a lot of focus on tight margins,

as well as the fact that the company was holding on to a lot of cash, over $6 billion. So we'll be watching those very closely. Mortgage rates, though, of course, will be front and center. You see where the average on the 30-year fixed hit its last peak at the end of October, falling only slightly through November, but still over 7%. That's when Lennar's Q4 ended. Rates then fell sharply in December, and builders did see a small rush on that. But rates began to climb again, and we're back over seven percent in February. We know builders have been buying down rates using other incentives as well. And I will ask Lenore's chief executive chairman, Stuart Miller, for an update on that in an exclusive interview later this afternoon after they report on fast money. Good stuff. All right, Diana, thank you. Diana, you know,

housing, by the way, Mike, is may go down as the most surprising of all of the things that have happened in this market over the last 12 months, just given mortgage rates have remained so elevated. At times, the housing market just couldn't move a muscle, okay? And a lot of these stocks have just ripped. Well, there's anything that is linked up to new supply as opposed to turnover has done really well. And it's also one of those things that's making a staticky message about where we are in this cycle. It's kind of become very unhelpful to talk about a cycle right now because you have had many cycles that have been, you know, not in harmony, like housing, like manufacturing. And now consumer and jobs kind of slowing down. We are going to get the retail sales number tomorrow. You know, I think we're ripe for something that says we're not necessarily on the exact fairway of perfect soft landing. So we'll see if that's retail sales plus PCE or something else.

Keep our eye on the chips, too. Two-year note yield, by the way, made a new high, too, in the last half. Thank you for noting that. Chips, AMD, down 4%. Some of these other major foods, large-towns down near 3%. So we'll watch all of that. Let's turn the page into OT now with Morgan and John.