Closing Bell - Closing Bell: The Great Wait 4/9/24

Episode Date: April 9, 2024

What’s on the line at 8:30 am tomorrow morning with the release of the critical CPI report? Sofi’s Liz Young, Corient’s Amy Kong and Bank of America’s Jill Carey Hall break down their predictions. Plus, Alex Kantrowitz from Big Technology weighs in on the big developments in the AI arms race. And, the Dean of Valuation Aswath Damodaran looks ahead to tomorrow’s critical CPI print. 

Yeah, 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 a nervous market. Investors on edge ahead of tomorrow's CPI. That six-month rally potentially hanging in the balance now, so we ask our experts over this final stretch what is really at stake in the morning. In the meantime, your scorecard was 60 minutes to go, and regulation looks like this. The great weight clearly evident in the price action today. Major averages really failing to get much going. Dow's down 0.5%, just shy of that. Not much for the S&P, nor the NASDAQ today. Interest rates, well, they're lower across the curve today.

It doesn't mean there aren't several stock stories of note. There are. Boeing is one, dropping midday on reports. The FAA is now investigating a whistleblower claim around the 787 Dreamliner. Tech in focus to Alphabet holding a big cloud event today and Amazon going for a new record closing high. We're going to have analysis on both stories coming up shortly. It does take us to our talk of the tape. All that is on the line at 830 a.m. tomorrow morning. The release of the consumer price index. Let's ask Liz Young. So far's head of investment strategy. She is with me at Post 9.

It's good to see you again. Yep. All right. Are these all the marbles here for this rally tomorrow morning? Big day. Big day. Well, I mean, the rally has already sort of conked out, trying to figure out whether or not it should keep going.

I think today, if you look under the surface of what's happening, first of all, we're on day 284 of no 2% correction in the S&P, which is the longest. I did one by one. I tallied them all up. It's the longest we've gone without a 2% correction since 2018. So I say that because we are used to the market going up. We are used to this for now a very extended period of time. So some of these pullbacks feel really alarming. But in reality, since the last high in the S&P, we're only down about 1.2%, this is not a big deal. So when you look at the rally pausing, I think what a lot of investors are still waiting for is that bigger correction. And the narrative continues to be that on a correction or a dip, it should be bought. We haven't really had a good,

meaningful dip yet. Tomorrow could be the day that starts a good dip, but that doesn't mean that it has to end everything. Anything but very hot on the CPI is good. We can in line, obviously. I mean, JP Morgan says in line, the trend stays in place. Stocks grind higher, led by large caps. So largely the story that's been told, very cool. You could have an even bigger move. I don't think that would be a surprise to anybody. It's the very hot scenario that could lead to some weakness. And then you really get some nerves tested as to where we are. Well, and just to prepare everybody, the expectations are for headline CPI to be higher this month than it was last month. So there will be some heating up. What the Fed has continued to say is that January and February coming in hotter than expectations is still in line with their

expectations. If that's the narrative that we get from them, again, maybe not alarming. And there's been plenty of Fed speakers over the last two weeks to tell us what they're actually thinking. Of course, I think a way too hot CPI number is going to be a problem, right? That would send jitters through bond markets. It would send jitters through equity markets. It would send jitters through rate expectations, all of it. I think the real issue would be if, number one, there's two options. The first real issue would be if hikes come back on the table in a real way. Right now, we're still trying to decide whether or not we'll get a cut in June or if we'll get two or three this year. If hikes come back, but if you get a hot, Not as much as... I think they're less of an outlier

now than they were in January. That's probably an agreeable thing. Because of the recent hot reads that we had? Yes. And because of growth staying as strong as it has, because earnings have stayed intact, because the labor market has stayed intact. So the economy has proven against all odds that it's been able to withstand these hikes. And if inflation continues to be a problem, and we're looking at 3.4% headline CPI tomorrow, I would still call that a problem for the consumer, then the Fed does have to reintroduce the idea of getting harder on it again because we haven't quite defeated it yet.

So your notes in part say if a correction happened now, rotation beneficiaries would suffer first. So we're talking about all of these sectors that started to work for March that have us believing, many of us, in the broadening story. Those are the most susceptible if this market pulls back. Yes, I do think so. A lot of those are cyclicals. So a lot of the broadening story had been predicated upon the economy is still very strong. We're going to get some loosening from the Fed, which loosens up financial conditions, makes more capital available. Growth is OK, so activity can pick back up. I think some of that narrative dies off. So that's part of what would give it

back. The other part is that we've just had such a strong rotation and such a strong rally into a lot of those names. And if you look at, again, what's going on under the surface today, the factors, momentum is dragging the whole thing down. So everything that's done really, really well up until this point is doing pretty poorly today. And I think that would continue to happen because usually when you have a pullback, it's the stuff that's easiest to get rid of. It's the biggest gains of stuff that's run up the most in the recent time. What about earnings? Are you optimistic? For the first quarter, I am optimistic. I don't expect that there's anything that's going to come out of left field and tell us things were

worse than we thought. Now, earnings growth for the entire year is expected to be pretty back-end loaded. So we're still relying a lot on that fourth quarter number to carry us through 2024 with double-digit growth. So we can continue to sort of kick that out into the future and not worry about it this quarter. I don't think first quarter earnings in and of themselves are going to be a concern. The guidance that we hear from financials, I think, is going to be really important to listen to. What are the risks that they may be seeing in the coming quarters? What have they done to prepare themselves for those risks and why? And I think that's stuff that we're going to have to listen to very closely.

Why isn't all of this bullish for stocks? The economy's good. It's not like rates are, we had inflation at 9%. I mean, rates are, okay, so the 10-year is where it is today. It's not historically like, you know, some crazy level. Economy's good. Earnings are going to be good. Yeah.

We don't need rate cuts now. Isn't that a good thing? Yeah, I don't think we need rate cuts right now. Well, I don't think we should have rate cuts right now because inflation isn't solved yet. And you don't want to ignite a reheating that drives this commodity trade higher, that drives inflation higher again. Here's the problem. If inflation reignites right now, it's no longer a story of demand is strong, consumers are spending, and that's what's reigniting it. Now we've got commodity prices reigniting it. So costs are going up and companies are going to have a hard time pushing through another round of hikes in

prices just because commodities went up. Meanwhile, consumers are feeling the pinch at the gas pump. They're feeling the pinch at the grocery store. They're feeling it in everyday life. And I think pushing that through like we did before, which raised revenues, supported earnings, is no longer going to be the case. Now, your question was, why isn't this bullish for stocks? I think it has been bullish for stocks, but we've seen that bullishness already. And now we're at the juncture of, OK, the economy is stronger than we thought. What happens if it starts to cool? When will stocks decide, wait, we wanted it to cool, but not quite this much? But it's not really cooling to the degree where we'd have to worry about that. We're

still expected to stay above trend growth. Correct. Which would keep inflation high. Not necessarily. So far it has. So if that changed, if we stayed above trend growth and inflation came back down and we got closer to target, or if at least it started to come back down, it's sort of plateaued for a while now. If it started to come back down and we felt like we were actually on a path towards 2% and the Fed started to message that as well, then I think that is bullish for stocks. Well, I think the PCE would suggest we are on the path towards 2 percent. And the Fed started to message that as well. Then I think that is bullish. I think the PC would suggest we are on the path towards towards target. But you had messy reasons, CPI and PPI, but that the preferred measure that the Fed looks at is actually closer to target and on track to reach target. That is true. Well, it's not by the end

of this year. Even the Fed's own projection still has it at 2.6% by the end of this year. It doesn't have to reach by the end of this year. They've made it clear they're going to cut rates well before it reaches target anyway. Fair enough. Yes. PCE is one measure. The other measure that they had hung their hat on for a long time was the SuperCore and said that as long as that was coming down, which it was for a while, that we were okay

with it. SuperCore is the core services ex-shelter. That stopped coming down. And now we've got this, we talk about sticky inflation. Sticky inflation is services inflation, which is still around and still an issue for companies and consumers. So that's the piece that we need to like budge off of the cliff. Okay. So let's bring in Amy Kong of Coriant and Jill Carey-Hall of Bank of America Global Research into the conversation. It's nice to see you both. Amy, I'll turn to you first. I mean, you've been sitting here listening to what Liz has had to say about the market. Where do you stand? I think she made a lot of very good points. I'm not in the camp that we're talking about rate hikes at the moment. I think if CPI or any of these inflation data points

turn hotter or is not reverting back to the 2%, we might start to talk a little bit about the number of rate cuts being reduced further from baseline of 3. I think the market starts to react when you have officials start talking about, are rate cuts even necessary for the rest of the year? That's where the market starts to react a little bit more dramatically. But if it gets pushed out, I think the markets are okay with that. Yeah. Jill, what are your expectations? Let's just start with tomorrow morning. What do you think is really on the line for this rally that's been just tremendous since the end of October,

set new records along the way? What's hanging in the balance here? Well, I think, you know, one of our core views has been that small caps could outperform this year. And, you know, I think the next catalyst that many small cap investors are looking to is the Fed, because we've seen a number of supportive factors for, you know, that size segment of the market and the market overall. Profits growth has been accelerating. The market leadership has been broadening out. We've seen GDP come in better than expected. But I think for stocks that have a lot of refinancing risk, that's going to be an issue for many small caps.

So I think the Fed is sort of the next catalyst where our house view is that inflation should continue to cool. The Fed does hike in June and we get cut in June, rather, and we get three cuts this year. But obviously, it could be a close call. So the inflation data tomorrow, I think, will be important to many investors in that regard. Your base case, Jill, is three cuts, right? Yes, that's right. And you haven't wavered off that in any way. What if I told you that there's no way we're getting three, that if we're lucky, we're going to get one.

Would that change your outlook for the market? Well, I think, you know, if if we don't get a cut in June, then there's risk that we don't get a cut for some time. So, you know, the the market, I think think, has held up well despite inflation. I think for, you know, companies, when we look at what they've talked about on earnings calls, pricing power has been surprisingly strong. I think from here, obviously, as was just discussed, it becomes more and more challenging to raise prices as you've raised prices this many times. I think if, you know, we're seeing commodity inflation generally, you know,

parts of the market like small caps have actually been able to hold up well in those environments given their sector exposures. But given where we've come from and given how inflation has trended, I think a lot of investors are now looking for inflation to cool and for the Fed to be able to cut to sort of catalyze some of those segments of the market, like small caps that have lagged to outperform. For the broader market, we're targeting 5,400 on the S&P 500 for year end for our target. Amy, do you think that we're too optimistic about how the economy is going to end up? I think that's been one of the principal things that Liz has been talking about for many

months, that history would suggest when you raise interest rates as much as the fed has raised this time there's going to be something to pay for that on the on the other side in terms of economic weakness jamie dimon in his letter this week says markets like 70 to 80 percent on soft landing that's probably too high what do you think yeah i think you raise a really good point and right now what is propping the markets up is obviously a little bit of momentum, but earnings is still okay. And I think the next earnings season and really the rest of the year is something we're paying a lot of attention to. As long as earnings continue to grow to the expectations mark, I think that's going to continue to keep the price to earnings ratio for the market higher. What we're also seeing is a pretty stretched out consumer. And I think that is something to keep in mind as well. You've got a savings rate as a percent of disposable income now to low single digits. You've got delinquency rates start to move up a little bit. I think there's a pull forward of future savings to propel the economy today. And that's something I'm keeping

a lot of tabs on. What about the broadening story? As Liz suggests, if there's a correction in this market, the broadening story is going to end quickly first. Do you buy that? Do you believe in it? Does it have durability? What do you think? I think certain corners of the market that rely on interest rates will probably fall backwards. I think a lot of maybe some of the REITs, for example, that are more interest rate sensitive could be a little bit more sensitive if the number of rate cuts start to diminish for the rest of the year.

But ultimately, it's all an earnings story. And there are a lot of companies out there that need financing but have good earnings. And I think those companies will do just fine. I guess more controversial perspectives is, as you suggested, that small and mid-cap stocks can continue to do well in an environment where, what if we don't get the rate cuts that we expect? Now, maybe you're making that call based on your own personal view or the house call over there that you think we're going to get three cuts. So then, well, of course, you would think that maybe the small caps would outperform other areas of the market but i've heard people more definitive and say until until you get an actual rate cut you can't trust the move in in the russell

and in the small caps and the mid caps for all the obvious reasons that everyone always suggests right i think you know our view is that small caps will outperform this year. Obviously, our view is also that we will get rate cuts this year. I think there's been other positive factors in light of, you know, profits recovering, economy, GDP growth coming in better than expected, market broadening, a lot of the macro and regime indicators inflecting. So that's an environment where small caps usually do well. Usually small caps do outperform when the Fed is done hiking, as well as after the first cut. But I think I agree with investors that at this point, all eyes are on the Fed and that just ending the hiking cycle may not

be enough given refinancing risk, the fact that 40% of debt for small caps is short-term or floating rate. So I do think outperformance of small caps is going to become more challenging if we don't see the Fed cut in June or other times this year. And then I think it makes sense to be more selective. And there are areas within small caps that have a lot more refinancing risk, like real estate than others. Some of the energy, materials, industrials, commodity-oriented sectors that, you know, have some less refinancing risk, less potential hit to earnings if rates stay high and could do well if, you know, commodity prices stay elevated. So we think this is a year to be selective, you know, pick stocks.

And that'll be especially true if we don't see rate cuts and the performance of the Russell 2000 may be more challenged going forward if that's the case. Liz, if I told you that we're going to remain above trend growth for the foreseeable future and the Fed is going to cut interest rates at least one time this year because they cannot because they have to. Would you change your call on the idea of what you have said in the past that we're late cycle? Would that force you to rethink where we are within the cycle? Because in the same light, if you think we're late cycle, as you do, it does color your view on what you think the equity market can then do. Yeah, well, it does. And I guess it would change maybe where I would expect more upside in the equity market. So if we stayed above trend growth and yields, I'd have to add another piece in that, yields stayed under control.

Well, that's what I mean. Because that's a huge piece. I put them together. I say, OK, so you're above trend growth, the Fed cuts. OK, because they can, that implies that rates are going to go down. Yeah. The Fed doesn't usually cut mid-cycle. So I would still probably say we were late cycle. If we managed to chug through with good growth and they managed to cut because they want to, not because they have to, that's the part that I'm the least optimistic about. Then I still think that it's because inflation came down, we finally got

things to cool off a little bit, and then we just sort of hum along in this comfortably late cycle zone. And it's much like what happened in the mid-90s, where we hummed along for a while, and then it reheated late 90s for the reasons that we all know about the tech bust and everything. It's possible that we just hum along there. But if you look at things like the unemployment rate, right, if we were earlier mid-cycle, the unemployment rate would be much higher than this and coming down. It wouldn't have already bottomed and be possibly going back up. If we were earlier mid-cycle, we'd have inflation starting to heat back up, not necessarily coming back down at this point. And we wouldn't be

looking forward to cuts. We'd be considering whether or not hikes were coming sometime soon. So I'd still probably stick with late cycle. Doesn't mean that it's not going to last a very long time. And my outlook this year was titled a cycle for the ages. And I stand by that. I think this could end up being the cycle where we set a lot of records for the length of time in between all these metrics. And that we keep, Amy, surprising people in terms of, you know, the fact that the economy can do better than people think, that earnings are going to be better than people expected, and that the Fed is actually going to be able to pull this off at the end of the day, despite, you know, some of the naysayers like I said, it's all really based on earnings, based on whether or not the valuation levels can support that, whether earnings can grow into the PE ratios that we're seeing. And ultimately, I think, you know, at the end of the day, as long as earnings

can continue to buoy the valuation levels, you probably, and barring no shocks to the system, you certainly could have a humming along kind of environment like we've seen so far. All right. Well, it's going to get interesting this week because after tomorrow, and then the next day with PPI, we're going to be talking about earnings. So we will see. Jill, thank you. Liz, thank you.

Amy as well. We'll see all of you soon. We're just getting started here on Closing Belt. Up next, the AI arms race in full effect again today. Google and Intel unveiling new AI chips while NVIDIA shares are feeling some pain today. Big Technologies' Alex Kantrowicz is standing by to break it all down for us. He joins us at post-night after the break. We are live at the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. The battle for AI leadership heating up again today with NVIDIA shares under some pressure after both Intel and Alphabet announced new AI chips. Christina Partsenevelos joining us now with those details. Christina? Well, let's start with Alphabet. Well, Google announcing its fifth-generation cloud tensor

processing unit, the TPU, which is an in-house chip not only capable of powering Google's search engine and AI-related work as well, but also serves as an alternative to NVIDIA's GPUs. Intel is also releasing specs today on their new AI chip, the Gaudi 3, which they say is faster at inferencing and has better power efficiency than NVIDIA's H100 chip, the Gaudi 3, which they say is faster at inferencing and has better power efficiency than NVIDIA's H100 chip. What's missing, though, from both Google as well as Intel's offerings is NVIDIA's entire ecosystem, especially when it comes to the software NVIDIA offers, which is incredibly popular with developers. But nonetheless, the news from both of these companies is driving NVIDIA shares lower. Even though if you take out the news from today, NVIDIA has actually been down six out of the last seven sessions as the AI mania trade takes a breather.

The AI conferences like GTC, Intel's AI conference are behind us now. And investors are looking into how exposed they are into chips as we head into the next earnings cycle. You can see shares down 3% right now. Scott. All right. I appreciate that, Christina. Thank you. That's Christina Partsenevelis. Joining me now at Postnight, Alex Kantrowitz. He's the founder of Big Technology and a CNBC contributor. It's good to see you. Does NVIDIA have anything to worry about here? I wouldn't be too worried. Remember, you have the big tech companies, including Amazon, Microsoft, building their own silicon,

and NVIDIA is still crushing right now. I think what Christina mentioned, the fact that developers look to NVIDIA software to both train and run these AI models just gives it an advantage that is very, very difficult to catch up to. So Intel can tell us all day long about how powerful its chips are. It doesn't have that software advantage that NVIDIA does, and that means AI developers are locked into the NVIDIA ecosystem, at least for the foreseeable future. Okay, two words, for now.

For now. The question is, for how long? Because you do have, whether it's AMD, ARM, Intel, and all of these other players, Broadcom, who's a player, all of these other folks who want a piece of the action. And you have to believe they're going to spend whatever they have to spend to get it, and they probably will get some of it. The question is, how much, and when does it get some of it. The question is how much, and when does it start to eat into whatever first mover advantage NVIDIA has? My personal take is it's going to be a while. Now, I speak with developers about this,

and what they say is there's a momentum to it, right? You've built on NVIDIA, you've trained on NVIDIA. So in order to get your developers to work on another system, the other system has to be orders of magnitude better in order to make that move because you're telling your developers you're running this successfully. By the way, AI is the most important part of your business right now and you're going to now go to another system. So that has to be orders of magnitude better performance in order to merit the move. And it's a for now, but for now could be quite some time with Nvidia. So you could look at the Google Arm announcement and say, OK, what does it mean for ARM?

But I would make the argument that this is a more important day for Alphabet. Just given where the narrative has gone around its AI ambitions over the last, I guess, year and how there have been some recent stumbles of late. How should we assess where they are today? And by the way, I said this on the Halftime Report, if you look at the stock performances of both Alphabet and Microsoft over the last 12 months, they're identical. The narrative wouldn't have you believe that at all. Yeah, it's a great point. So I think both these things can be true, right? The narrative that Google is in trouble because their margins are going to be lower. And that's, by the way, them building out their own chip brings down the cost to run these models. That's actually a margin place. So that's actually pretty big for them.

But then again, the story of everything changing for Google's business, that's also true. We might see differences in search. Now they can ride some of this shake-up and actually make some moves in cloud, which they have been doing, right? They're actually gaining on Amazon and Microsoft. But it's a different world for Google so that you can have lower margins but also new opportunities. And that's why we've seen the drawdown, the bad narrative, but also the come-up. You think they were written off too early? Well, we've talked about it in the past. I always said with Google you have to wait.

This is a very big company. They're completely competent from a technical standpoint. Their culture was moving slow. So it was like, let's give it some time to see if they can right the ship. I'm not 100% confident that they're going to. There are still cultural issues within that company, but they're not. I mean, people who said it's over for Google, you know, that was way too early. Now, even thinking about search, Bing hasn't really cut into Google's lead. We're more than a year and a half away from the introduction of ChatGPT and the OpenAI partnership with Microsoft.

So how would you assess, let's switch to Amazon, which is trying to close at a new high today. It may not get there at this moment. It's now negative, but it's right around that. How would you assess the job that Jassy, Andy Jassy, the CEO, has done, the hand that he was dealt, and the time it's taken him to turn the ship around? I mean, is that too much to say that they've turned the ship around at this point? Can he declare victory at this point? Yeah, I think they've turned the ship around, but in a Can he declare victory at this point? Yeah, I think they've turned the ship around, but in a very particular way. And what that means is they've

cleaned up some of the mess that Jeff Bezos left. Remember, Jeff Bezos just kind of wanted to do everything. So he's off in all these different directions and not all of them were working. And then they overbuilt during the pandemic. And that second thing is really important because they had to pull back and figure out how to make this business work again in an era. They're too bloated, right? Way too bloated. And basically planning. They had to plan for an era where everything moved to e-commerce in the way that it was during lockdowns, because if they didn't and it continued, they would be sunk. It obviously didn't happen that way. So they had to do this pullback. And they have. They've gotten costs under control. They seem to be narrowing their bets. But then the question is, Amazon's always been this always day one company, an experimental company, right?

A company that will say, you're only as good as your next bet. You're only as good as delivering to the market what it needs today. And Jassy narrowing focus is something the market wanted. And I do wonder whether they're going to lose that inventiveness and experimental nature that they had under Bezos,

which doesn't seem like they have as much now under Jass. When people ask you what's going on with Apple, stock is at 169. It's obviously been the worst performer of the mega, mega caps, you know, Tesla notwithstanding. What do you tell them? It's a rough moment for that company. Now, they have been so good at building this device, the iPhone. Their culture hasn't exactly been ready for the next big thing. And you saw that with the car, right? It's not like they didn't put billions of dollars towards a self-driving car, but they didn't have the culture that could build it because they weren't flexible enough. Like a lot of these other companies, they have flexible culture for all their faults.

If there's something new, they'll throw people at it and they'll be open. They have open cultures, not silos like Apple does. And they're used to designing things that don't have this hardware timeline, even though Apple's got a very good operating system with iOS. And I think you've seen that also with AI, right? They are behind on the next bets because they haven't been experimental enough, way too top-down still. And that's what they need to change if they're going to play in the next era of computing. Well, the narrative is that they're behind. We truly don't know. We've got almost two months to the day where we're expecting to find out. That's going to be a seminal moment. Absolutely. A lot of pressure on Apple to deliver

a very big announcement, AI announcement at WWDC. And even then, you know, there's still some incumbent risk. How much of your device do you want to change to enable this new era for AI? If you're Apple, same issue with Google, right? Do we want to blow up search in order to make way for generative AI? If you're Apple, do we want to blow up the way the phone works in order to make room for this new computing method? And if you're not willing to go far enough, is another phone manufacturer going to come in and say, hey, let's just throw in a bunch of AI features and it's game on against Apple. That's a risk. All right. It's going to to be exciting alex i appreciate your time as always alex can't do it here at post time by the way

don't miss the google cloud ceo it is a cnbc exclusive interview it is tomorrow 1 p.m eastern time up next class is back in session the dean of valuations athwath motor and well he is back he gives us his market view ahead of tomorrow's critical CPI print. What he's forecasting for the mag seven as we head towards the second half of the year. Bozy Bell is coming right back. Welcome back. Stocks pulling back across the board with NVIDIA leading big tech lower today. Investors looking ahead to tomorrow's CPI print. The question now, are stocks overpriced ahead of this week's key economic data and earnings season just around the corner? Let's ask the dean of valuations, Aswath Damodaran,

NYU Stern School of Business professor of finance. Professor, welcome back. It's good to see you. Thank you for having me. I feel like you've taken a bit of a bearish turn from your notes. Is that an accurate assessment of your current market view? I am more worried than I was a couple of months ago, I mean, or even six weeks ago. And there are a couple of things. One is the good news for this year has been that earnings estimates have been going up,

not by a lot, but almost consistently over the course of three months as earnings reports come out. But at the same time, inflation seems to be much more stubborn than people thought it was going to be at the start of the year. So I think tomorrow's numbers are going to be pretty significant in where the market goes next. And to be quite honest, that's where inflation goes for the rest of the year. It's going to drive the market, not what the Fed does or does not do. But you think tomorrow morning is a binary event. Something too hot could mean the end of this. Would you think tomorrow morning is a binary event. Something too hot

could mean the end of this. Would you say it's the end of the rally itself? No, not necessarily. But I think that to the extent that people have pulled back already, and I see a lot more skeptics in the market now than six weeks ago, it gives them another reason to stay on the sidelines. So even if they're not selling, they're not buying. And that can that can by itself cause have an effect on the market. So I think it's going to be not necessarily the event, but it's going to be one of a series of events just as in 2022, the collection of inflation announcements that got us into trouble. This is going to be one more piece of information we use to make a judgment on, you know, where's inflation going? You know, I have a feeling. Yeah, go ahead. No, you know, please, forgive me. You go ahead. Now, I was going to say, looking at the bond market, which to me is the best indicator of

what investors think about expected inflation. And you look at the T-bond rate is up from 3.88 percent to 4.35, 4.4 percent. That suggests to me that investors in the bond market are expecting inflation to continue to stay above 3%, no matter what the Fed says about that inflation. So you suggested to our producers, and I'm quoting from the note here, the market is over-adjusted to two positive developments over the course of the last year, the decline in inflation from the heights of 22 and the receding of worries about recession. You sound like you're stealing a page from Jamie Dimon's note, you know, where he suggests you could see a further spike in rates and that the market's just gotten way too optimistic and over its skis on the idea that

the economy is just out fully out of the woods. And I agree with Jamie on that one, because I think that especially on the inflation front, inflation's history is incredibly stubborn. And you think you put it away for a while, but it keeps coming back. And while the probability might be low that you're going to go back to a 2022 level, there is a chance it could happen. I mean, the economy is hot. Commodity prices are up. So I don't think you can rule it out. And I don't think the market's incorporating that likelihood enough in terms of pricing it in. What's your own view on rate cuts? Because I would assume that in some respects, that has to partially at least color your view on

the valuation of the market. I'll be quite honest. The Fed can raise rates, cut rates, or do nothing to rates, T-bond rates, which is what I watch. I don't care about the T-bill rate as much. T-bond rates are going to take their own path. And that path is going to be independent of what the Fed does. I mean, remember last year, the Fed, you know, if you think about raising rates, they raised the rates three times.

The rates, the T-bond rate did not move over the course of the year. It was responding to inflation. And I'll make the same prediction for this year. On December 31st of 2024, when we look at the T-bond rate, whether it's 3% or 5%, it will have nothing to do with whether the Fed cut rates. It will have everything to do with whether inflation is below 2.5% or 2%, or whether it stays about 3%. Do you think the market's overvalued today? I think it is setting itself up for disappointments, at least in the second half of the year.

I think that if you think in terms of asymmetry, the risks on the downside are higher than the risks on the upside. I'm not one of those who sells everything and runs for the hills, because I don't think it's ever worked for me. I'm not one of those who sells everything and runs for the hills because I don't think it's ever worked for me. I'm a terrible market timer. But this is not the kind of market I would jump in with both feet because you are, I think, heading,

and it's not just economic uncertainty, it's political uncertainty. I'm surprised the market is not factoring in some of those uncertainties more in pricing stocks. I mean, we obviously have an election not that far away. Some would suggest the only thing that really matters in the face of everything is the trend change from the Fed that we're going to get cuts, we assume, at some point.

And why fight the Fed? You know what? I've been hearing that since the start of the year. And markets are up in spite of the fact that the much-promised Fed cuts have not come yet. I'll make a prediction again. The Fed cuts rates. I wouldn't be surprised if the market went down rather than up.

Interesting. Even if the economy remains strong and inflation comes down, that would be a good scenario, wouldn't it? I think that to the fact that, you know, it goes back to my point about inflation. Is the Fed serious about inflation or is it not serious? Inflation doesn't come down below 3% and the Fed proceeds on its rate cuts. It's sending a message saying we're not that serious about inflation. And that would be a pity after two years of fighting inflation as, you know, making that your number one priority. All right. Tomorrow a.m., I guess it's going to get real.

Professor, I appreciate it as always. Thank you. Aswath Damodaran from NYU joining us once again. Up next, we're tracking the biggest movers into the close. Christina Partsenevelos is back with that. Christina, I am. And we have another Boeing whistleblower raising concerns about the Dreamliner aircraft. And Moderna shares moving on early travel results. I'll explain those stories next. We're just about 15 out from the bell. Let's get back to Christina Partsinovalos now for the stock she is watching. Christina. Well, I'm watching Moderna shares right now because they're jumping about six and a half percent on optimism around its cancer vaccine and the positive response in an early stage trial in patients with a certain type of head and neck cancer. You can see shares are up, well now six percent, but they're still roughly 31% off their 52-week high.

Boeing shares dropping 2.5% on a New York Times report that the Federal Aviation Administration is investigating an engineer's complaint about safety issues with the 787 Dreamliner plane. The Boeing employee who had worked on that particular plane said certain parts were not properly fastened together. And that's why you're seeing the stop jock about 2 percent. Scott?

All right, Christina, thank you. Christina Partsinello. Still ahead, trading teen trends. Piper Sandler out today with a new survey shedding light on which retailers teenagers are favoring and the ones that have fallen out of style. We'll give you the names and how it could impact those stocks when Closing Bell comes right back. Coming up next, we're on Record Watch. Amazon just below its closing record high. We're going to track that name and much more when we take you inside the Market Zone next. We are in the closing bell market zone.

CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Kate Rooney on Amazon shares approaching that major milestone. Courtney Reagan here as well with the key takeaways from Piper Sandler's teen survey. I, of course, begin with Mike, as we always do. So Bostick giving an interview in which he says CPI coming in at consensus would be a welcome development. Yes. Code just good is good enough. Right. And remember, Bostick is on the hawkish end right now. That's right. He's moved to one later this year. So he was essentially saying there are conditions under which he would pull those expected rate cuts further or into the present or closer to the present,

which would mean if obviously disinflation resumed or he said if there's pain in the job market, the point being conveying some flexibility, trying not to be perceived as having an unduly high hurdle for getting to, let's say, a June or July rate cut. I think that makes sense here because the market has has done enough maybe to get the wall a little bit higher. And it just makes sense. I know everybody says but the economy is strong but inflation still isn't at

target. Like they're kind of talking around the issue, which is inflation went from 9 to 3. The Fed knows 5% plus Fed funds is in the wrong spot if inflation even is at 3 or below 3 on PCE. And therefore, they want to do the optional cuts. It's the only way you can punctuate a tightening cycle. That's what some say now is like inflation is at the level now where they should cut. That's an argument from those who are bullish cuts. And they more or less have endorsed that. I mean, in their outlook, I just think that they're trying to be either a little bit too demanding of the data or being a little too cute or saying, what's the risk of

waiting? And it's true. What is the risk of waiting? Market's 1% off. It's high. Credit spreads are great. Jobs are still growing. So it's true. There hasn't been any pain associated with it. But I think they want to get moving in that direction just so that the perceived risk of staying too tight too long is not as high. I mean, you noted the market did move a bit on Bostick. Yes, it did twitch higher. On the very notion that you suggest. It twitched higher. Look, we're definitely wait and see mode. We've been kind of churning around for a couple of weeks now. And it makes sense that we really, really do need to see this number. There's not that many more inflation numbers to come before June I also think it underscores if it's a genuinely cool number and there's no you know oh but look out for this other element of it that makes you more concerned the market it'll have a relief rally oh that's the new high JP Morgan you know going through the scenarios this morning was very much that a very cool number is whether real real buying follows whatever pop we get, and that remains to be seen. All right, so we're watching the S&P just going positive.

Dow's way off of its lowest levels, too. We are watching Amazon, Kate Rooney, to see if we get this record, and maybe it, too, will turn around. As a matter of fact, it is now in the green. Yeah, that's right, Scott. Yeah, it is approaching this record close. The number to beat for Amazon, $186.57. Not quite there, but we've got a few minutes here. Until the close, there has been this wave of optimism lately around Amazon.

A handful of price target increases and calls reaffirming it. As one of Wall Street's top picks, the average price target now $209. That's about 13% upside to where it's trading now. 95% sell-side firms have a buy rating. There are three holds, no sell ratings on Amazon. RBC calls it one of the internet's largest true alpha dogs. Talks about scale and e-commerce combined with that cloud business, AWS. Jefferies, for its part, says still plenty to be excited about. Plenty of runway ahead for Amazon. Topic for Morgan Stanley, too, points out better cost to serve, more efficiency and more upside there,

plus prime driving some of the recurring revenue and cloud adoption, plus advertising potential. That's the bold case. Risks, they're there. But any AWS decline, that's Amazon's golden goose. Anything, any weakness there could be seen as a big weight on the stock. Any sort of e-commerce competition from Shein and Timu, which is one of the downside risks as well, Scott. All right. Okay, Rooney, thank you. About a dollar away from that new closing high on Amazon. We'll watch it closely over the final three minutes or so as we turn to Courtney Reagan.

All right. You know, teens are fickle. We know that. But what are we learning today from this Piper survey? Yeah, interesting to it. Kate had to say there they still love Amazon. Far and away their number one site for shopping. Shein and Taimouk sort of on the list, but way far behind Amazon. Twice a year, Piper Sandler surveys teens on all sorts of topics. But retail brand preferences, that's always key. And it actually does change its analyst ratings.

It moves stocks. So today's release is no exception. Let's go through some of it. Overall, teens report they're spending 6% less than they were last year, but 1% more than they were in the fall. And 65% think the economy is worsening. And while Nike is still teens' favorite brand for apparel and footwear, it's lost share with them for the first time in years in this survey, actually.

Piper Sandler says the survey gives it more confidence in demand trends at On Running, Decker's Hoka, and Birkenstock, but caution on Nike because of what we just talked about, VF Corp, Crocs, and Lululemon. In all beauty spendings at six-year highs, there are areas of moderation. Still, Piper comes away saying, look, we remain bullish on e.l.f.,

slightly more cautious on Alta, no longer a top idea, but we still remain buyers there, which is interesting after what we heard from the CEO saying that he's starting to see this deceleration more broad and earlier and potentially more intense than he had anticipated. Appreciate that. As always, Courtney Reagan, thank you very much. Mike, I'll turn back to you. We've had the two-minute warning, got about 90 seconds to go here. Some interesting buying in some of the mega cap tech names as we approach the end of the session today. Yes, there has been. It's interesting because a lot

of the dynamic today in the absence of a lot else going on fundamentally is selling of the winners and then a migration into perceived either laggards or defensives. So you have had Apple qualifies as laggard. And then NVIDIA, I think people are concerned about a little bit of a breakdown, a little bit of this sense out there that maybe their kind of lead might be diminished. You have Google going elsewhere. You have Intel making noise. I don't think anybody thinks that story's changed, but the stock ran so much as they have. That's the biggest single weight on the S&P 500. I did find the interesting profit taking in the year to date winners. A dozen of the year to date winners earlier in the S&P 500 were almost all down like 2%. Uber, JP Morgan.

Yeah. I'm looking at those specifically. Super micro. That tells you, in part, people are raising cash. Maybe they're paying their taxes. Maybe we can write that off. Or maybe it's just portfolio pruning ahead of CPI after we've had this really nice run. And we want to know whether this is just a wobble or the start of something a little more.

All right. Well, Dow is trying to work its way to the flat line, too. But S&P is positive. Looks like it's going to go out that way. NASDAQ as well. And it all points to tomorrow morning. Cannot wait for tomorrow. Let's go to overtime right now with Morgan Brennan.