Closing Bell - Closing Bell: The (Not So) "Magnificent 7", Fed Outlook & Apple 3/5/24

Episode Date: March 5, 2024

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

All right, welcome to Closing Bell. I'm Scott Wobner, live from CNBC Global Headquarters today. This make-or-break hour begins with tumbling tech, and whether this is the start of a bigger pullback for that sector, we're going to ask our experts over this final stretch. In the meantime, take a look at your scorecard with 60 minutes to go in regulation. NASDAQ, the center of the action today, that is clear. Apple, take a look at that. That stock's around 170 for most of the session today, barely hanging on there. It did dip below it for the first time since October. Almost every other mega cap down as well today in the session.

NVIDIA really the only one threatening to finish positive today. We're going to watch that closely over this final stretch here. The stock did barely go green a little while ago, so we need to watch that. Names like Uber, Salesforce and Tesla also pretty ugly today. Elsewhere, Target is one of the stocks of the day after its earnings guidance. Not so great, but the market seems to have seen enough to send those shares surging today. It does take us to our talk of the tape, the rally and the state of stocks with Fed Chair Powell speaking on Capitol Hill tomorrow morning. Maybe some of today's weakness trying to get ahead

of that appearance, perhaps. Let's ask Anastasia Amoroso, iCapital's chief investment strategist, with me here at our global headquarters on sets. Nice to see you out here. Good to see you. All right. So we're weak across the board today. I mean, Dow's down nearly 500. NASDAQ, I said, center of the action down by 2%. Yields are falling. And the data today was just weak. Not great. The data was not great in some spots. Obviously, ISM, broadly speaking, was not a good print. It was weaker than expectations. But if you look at the details, it was really the employment subsector that was a little bit weaker. But prices paid actually declined, which is a good thing for Fed Chair Powell.

And also the new orders component actually picked up. And then, by the way, that was the ISM number. Non-durables was like the weakest in four years. Yes, there was a weak spot there. But the other number I'm also watching is the manufacturing and the services PMI number from the S&P Global. And that did actually come in ahead of consensus. So I think net, Scott, if you look at the GDP that's tracking for this quarter, we're still looking at close to 3%. So I think there is a strong economy narrative that is intact.

You told our producers that you think that stocks are in a sweet spot. Why so? Yeah, because if the economy is strong, that means the earnings momentum should be to the upside. And actually, I was just looking this morning at the earnings forecast for 2024 and 2025. They are inching higher. So this is, of course, makes sense because the economic data is inching higher as well. So higher earnings, higher revenues, higher margins that bodes well for stocks, even if the Fed doesn't actually cut rates. But then on the flip side, Scott, if you do have some disappointment in data, you know, then the pendulum swings, swings and says, well, we have to cut interest rates. And if we cut rates, that's good for valuations. So sort of no matter which

way growth breaks, I think there's support for the market both ways. OK, so what I hear you saying is that nothing else matters, essentially, other than the fact that we know the Fed's next move is a cut. I don't don't this is just don't fight the Fed. I mean, you made the case that either they cut for the right reasons or the wrong reasons, but they cut and that's good for stocks. Yeah, I think if they cut for the reasons that the economy is weakening, that is still good news. And by the way, they now have a lot of room to cut. Interest rates are five and a quarter percent. Inflation is a two point eight percent. The core PC number we're looking for two point three percent. So that's a lot of wiggle room. That's a lot of several hundred basis points that the Fed has to work with. So that's a lot of wiggle room. That's a lot of, you know, several hundred basis points that the Fed has to work with.

So that's good news. But if the Fed doesn't cut again, I think what really supports the stock is that the economy apparently can function with five and a half percent interest rates and stocks can still be supported. So we've had this broadening move in the market and we've highlighted that almost every day. And the activity, whether it's in the sectors or the large number of stocks and the large market cap stocks that continue to hit new highs, would suggest that, too. But how troubling is what's happening in tech? Are you concerned about that trade at all? I'm looking at Apple. We highlight it at the top of the show because it's hanging on to 170 and it's traded terribly of late. It has.

Look, there's some macro elements to it. And what I mean by that is, obviously, the Nasdaq was massively overbought from a technical standpoint. It was very much stretched to the upside. So it makes sense that there's some consolidation there and everybody has been massively long tech. So that, to me, makes sense as a broader tech sector development. What I don't think makes sense is Apple and Tesla being significant for what's likely to happen with the rest of the tech sector. And if I look at those two stocks in particular, there are idiosyncratic catalysts.

There's weaker sales in China in the case of Apple, and there's weaker shipments out of China in the case of Tesla. So that is very specific to those particular stocks. By the way, both sort of have to do with weakness in China. So that's another story as well. But when I look outside of that, and if you go to the other stocks within the big tech sector, you know, you look at the artificial intelligence trade. And to me, that is so alive and well, because when I look at the cloud CapEx from some of these hyperscalers,

that's forecasted to grow at 22 percent this year and 10% next year. And when you look at the number of AI mentions across the Russell 3000 companies, that's expected to reach record highs by the end of March. So I think what the markets are starting to do is differentiate within the big tech, and that's a healthy development. You know, I wonder, there was a period of time where if an Apple and an Alphabet and a Tesla faltered, this market would be in trouble because their market caps were so large. And in many respects, some of those were an indication of where risk sentiment was. Now you've had this broadening. You've had the cyclical trade pick up the slack, even as some of these tech stocks have faltered. Now, NVIDIA is sort of its own animal unto itself

because it's been able to buck whatever sort of trend is going on in these other Mag7 stocks and virtually go up every day. What if the cyclical trade falters? What if the industrial trade, if the financial trade, if the materials trade, those are three pillars of what's happened in this market over the last month. What happens if those stop working? Yeah, well, I think we know the answer to that is the stock market stops

working. But I don't actually think the cyclical trade is on the verge of a reversal. I think it's on the verge of a breakout. And I say that, you know, Scott, because you look at the manufacturing PMIs once again, maybe they were a little bit weak in the United States. But globally, you look at China, surprise to the upside. You look at India, an uptick in PMIs there. You look at Brazil, the same story. So actually globally, the manufacturing PMI is back to the level of 50, which is a very healthy development. And then, you know, late or maybe at some point last year, we were talking about the chase, which was in tech stocks. And now I think the chase is actually playing out in cyclical stocks. And if you look at hedge funds and where they're allocating capital, they're going

into the industrial space. So if you look at the overweight to industrials, it is the record highs relative to the history we have going back to 2019. So I think momentum is there from the economy side and momentum is starting to be there from the perspective of allocations. So I don't expect those things to fall. Do you think there's risk around Chair Powell tomorrow on the Hill? First day of two days worth of testimony? I mean, there's always risk, you know, with an event like this. But the markets have priced out a great deal of rate cuts. So I think that risk is much diminished. And what is most likely to say is that the economy is strong and we're not in a rush to cut rates. But I think the markets know that and the markets take solace in the fact that

the economy is growing at three percent. So even if he pushes it back to June, I think we can be OK with that. All right. Senior economics reporter Steve Leisman is with us as we set the table for what may happen tomorrow. Steve, how should we be thinking about what Chair Powell may say? I have a lot of variables in my head as I ask you this question. I've got, you know, weaker data today. I have a strong economy overall, it would appear. And then I have a rip roaring stock rally, which has to be influencing him. You would think somewhat Bostic alluded to it in his commentary the other day. Yeah, I think actually just a little bit of disagreement with Anastasia there that there is some downside risk. And it's hard for me to figure out what the upside risk is here.

I think that the game has been lost on a March and May cut. Pretty much that's priced out. I think June is what's in play. And the question is, does Powell, I think he's going to try to strike a more a neutral tone, but I'm not sure the market's going to hear it that way, in part because I wonder the extent to which he is potentially thinking about this idea that, you know, what is exactly broken the economy that requires these rate cuts? So I'll be listening to Scott for how he talks about how much restraint is on the economy

right now and how if he's asked, he answers the question about, well, if there's so much restraint on the economy, why is it performing so well? And it's not like I think he's going to go out of his way to say that. It's just when I think about what the downside risks are around the rhetoric to policy, I think they're more that way. And it's hard for me to think he's going to say anything that's going to make put, say, March or even May back into play. I feel like, Steve, I love your opinion, too, that there's there's a very small window now for Powell and company to cut rates. So you say forget March. You say forget May. So then you've got June, July in play. But then you have the election on the horizon, too.

And he doesn't want to bump up too close to that and risk the obvious. And that is the criticism that he's being political one way or the other. I'm wondering what the challenge therein lies as a result of that. I think all of that is true, Scott. I think he'd love to stay away from September. He may not have that choice, depending upon what's happening with the economy. And I think, by the way, the politics tomorrow are likely to start to cut both ways. Remember, Scott, you get into election season, there's this hormonal response in all the politicians. And all of a sudden,

even the guys who are level-headed and the women who were level-headed become slightly crazy. So we'll be listening to, for example, the Republicans talking about the need to fight inflation and maybe sort of talk Powell away from the easing. And you'll have Democrats who have mostly been very quiet about Fed policy perhaps start to push the Fed towards that easing and start to question why that's not coming or happening. But you're right. And that creates another issue, Scott, that's really, I think, very important, which is not only is there the debate about when, but the other debate is about how much. And you start to compress time, you compress the ability of the Fed to deliver. And you have Bostik yesterday and previously talking about just two rate cuts

this year. The market is still priced a little closer to four. So there is still a bit of a gap to be closed there between the Fed and what some on the Fed are saying and where the market's priced. Well, because, you know, Bostick also alludes to I think he said CEOs were, quote, ready to pounce when the Fed actually cuts rates. And then I suggested, well, investors have already pounced on the idea that they're going to cut. And that's one of the reasons why I think we've had the rally that we've had. The question is, how much, if at all, do you think Powell is influenced by this stock market rally that he doesn't want to unleash animal spirits to the kind where once the genie's out

of the bottle, it's over. You know, Scott, I would, first of all, I want to go back and use that term that Bostick used, which may or may not become an operative phrase in monetary policy thinking right now, which is this idea of pent up exuberance. And it was that was the phrase he used that then led to him talking about the idea of, remember, CEOs pouncing. I think that we want to separate out that exuberance. The stock market exuberance is one thing, and it does have a potentially inflationary effect. But I think the investment side is perhaps the more worrying part to the Federal Reserve here, where if there's this surge of investment, surge of

corporate activity, apart, for example, from the surge in stock market activity, that is the one that would more concern the Federal Reserve. You and I have talked about this a lot. I think the Fed is a whole lot more interested in what's going on in the bond market and financial conditions through the rate structure than it is through the equity structure. But that's a little bit different from talking about what the CEOs are doing in the C-suite and what kind of investment decisions they make off of that. And what Bostick is talking about is a potential inflationary effect of that pent-up exuberance.

Yeah, sure. Powell looks at the bond market and he's like, well, spreads are crazy tight, right? They're not blowing out at all. They're not widening. I've got more cover. That gives me the time to wait until we're confident, to use the word he always uses, we're confident that we do have, in fact, inflation under control. Steve, it's going to be an interesting day. It always is when Chair Powell testifies, especially on day one before the House.

And we're going to see that tomorrow. We look forward to that. Thank you very much, Steve Leisman. Let's bring in Bryn Talkington now. She's a CNBC contributor, of course, of Requisite Capital Management. What do you make of the sell-off we have today? Near 500 on the Dow, more than 2% for the Nasdaq. But most especially, some of these big holdings within the Nasdaq. Apple threatening 170. Microsoft's down a fair amount. Tesla's been really weak. Salesforce is weak. AMD today. Uber. You know, some of the names we've been talking about a lot is these big winners rolling over a little bit. Well, first of all, you've got diamond hands with the NVIDIA shareholders. It's just fractionally down.

And so I think that's where you really make a mark, where we are going to continue, as I've been saying, really all year have a separation between these mega cap names. And it's like Apple started this. And I think that you really have to look at that as like, what multiple is the market going to pay for Apple when, if that report is true, that their iPhone sales are going to be down 25% year over year, well, they sell expensive hardware. And the same with Tesla. So I think you have this, to Anastasia's point, this idiosyncratic event with these individual names. On top of that, we've had really for the last month or so, 80 percent of S&P names, over 80 percent are over that 200-day moving average. The last time we got to that was in 2021 at 90 percent. And so I think you have technicals to say we need a breather, but also that Apple news tells us that not all of these companies are created equal and multiples do matter. And so I think you're going to continue to see that dispersion on top of obviously talking about what is Jay Powell going to say in the next couple of days and is it going to be reminiscent of what Bostick just told us yesterday?

The other thing we, Anastasia, need to worry about is the Fed waiting too long to cut. Based on what Steve said, if you start to sniff out that you've got the possibility of some economic issues, you look at the data as we referenced today and say, well, if they wait too long, they're going to snatch defeat from the jaws of victory. It's a very fine line and he has to thread a very small needle. I think that's right. And I do agree with you, Scott, that the window is sort of narrow and is narrowing. And we talked about this late last year. If they wait the entire year to cut rates, it might actually be too late for parts of commercial real estate, for example, for parts of leveraged loans. And a lot of those structures are counting on rates to move lower

in the first half of the year and not the second in order to make their financial model sustainable. So I do think the time to cut is in the next quarter or so. Now, the conversation that I think we may be having different sides of is, you know, the cuts, what is the magnitude of the cut? Nobody is talking about, you know, 300 basis points of cuts. But I think psychologically, if the Fed does deliver 50 basis points, maybe 75, you know, maybe that's when they ultimately settle in, because the economy clearly can function even with this level of rates. But the justification for them to do something is because we are near full employment and inflation is approaching or will be approaching

2 percent. So why should they hold real rates in such restrictive territory when they seem to be hitting on both sides of their mandate? Bryn, I almost feel like the trade of late has been the bear's worst nightmare. And I think I said as much in a few of the last programs in that what a stock market when you can have the biggest names within it in the area that has dominated the action like mega cap pull back and yet you've got all the slack pulled up by these huge market cap stocks within other areas of the market that are hitting new highs the rally has diversified it certainly has broadened and its broadening has grown the bull case in some respects has hardened as well. And Estesia used the words

in a sweet spot for stocks. Do you agree? I think that as long as earnings hold up, and I do think that the analysts are still a little bit exuberant. For Q2, the analyst estimates are for earnings to grow at 7%. For Q3, I believe they're at 14% year over year. So a lot is baked into are earnings actually able to grow as much as analysts are thinking? But I do want to say For Q3, I believe they're at 14% year over year. So a lot is baked into, are earnings actually able to grow as much as analysts are thinking? But I do want to say that, think about as Apple has moved down in market cap,

guess what's moved up? NVIDIA. And so I do think you're having this pole position where NVIDIA is moving up, holding up these mega cap names. Because if you take NVIDIA out of that, these names outside of meta really haven't done much this year. I think it's very healthy we're seeing a broadening out and i think you know

at the beginning of the year we really out we wanted to allocate to rsp which is the equal weight because there were such a big disparity between the equal weight and the market cap and i still think that's a great trade stay large cap stay away from small cap i think stay large cap and go equal weight and add that to part of your tech holdings. You worried at all about what's happening within any of the chip stocks, Bryn? And I don't mean, you know, worried because they're not trading well. I mean, worried because they're trading too well. Yeah. Yeah. No, I think that we'll see. We'll see Broadcom later on today. You know, Broadcom is real. I think that what you're seeing, though, is I wouldn't be a buyer of the SMH. I would absolutely be buying individual names because I know we're going to end up seeing

only a few companies are really going to monetize this. We talk that semiconductors are in the picks and shovels, but I think there are some picks and are some shovels, but they're not all a basket of picks and shovels. And this is what happens time and time again. So I think investors still want to be judicious about what they're buying in the semi space and look outside of that if you missed NVIDIA. How do you look at the chips? AMD ripping almost every day. Now, I know they're down today. So this is X the action today. Super micro. NVIDIA up every day. AMD's been going crazy. A lot of these other stocks have, too.

Some talk about bubbles, others say they don't see it. Well, I think semiconductor chips have been due for a breather, for sure. You know, that is natural. But I do agree with Bryn that the fundamentals do justify holding select stocks. And one trend that is so strong for semiconductors right now is the growth in data center demand for artificial intelligence chips. And I'm not talking about NVIDIA as a stock in particular, but I'm using this as an example, Scott. A lot of people looked at the consensus price targets for NVIDIA back three, six months ago and said, well, we're bumping up against this price target. Therefore, the upside is capped.

But guess what happened since then? The analysts continued to revise higher their price targets because the stock delivered on earnings expectations and then some. And I think select stocks within the space can have a similar trajectory as well. But the last comment I'll say on the semiconductor space more broadly, last year revenues for semiconductor space were down about 7 or 8 percent. This year they're expected to be up 7% or 8%. So last year, broadly, was about multiple expansion for semis. This year, it's actually delivering on earnings growth. So for that reason, if we have that pullback, I would be a buyer of those names. Bryn, last point to you. We're looking, by the way, at the screen here,

Dow down an even 500, maybe a few points worse than that. Again, you had yields falling today and for the wrong reasons, if you will, that weaker durable data, the ISM services below 50 yet again. So it raises those concerns about a slower economy. I'm not sure, Bryn, that what Target had to say. I get the stock is up, you know, 11, 12 percent today. But I'm not so sure what Brian Cornell and company had to say over there makes you feel all that great about the consumer, perhaps at that level. Now, I know there's been some disparity between consumer top end, consumer lower end. But how should we feel moving forward here? As long as the consumer and the unemployment are one and the same person. So as long as employment stays sub 4%, which we're well below that, and unemployment stays low, the economy is going to be strong. If that changes, that changes for the consumer because we also know the debt numbers are creeping up in terms of credit cards and used car loans.

And so I think it all hinges on the consumer. I also think tomorrow we want to hear about Powell, want to hear about the reserve repo, QT, what's happening there. I think it's a good time just for the market saying we're going to sell off going into Powell speaking for the next two days. It's always a huge event. We're going to see right when Powell finishes on the Hill, of course, on halftime. We'll wrap it all up, see what the market does. Bryn, thank you. I'll see you then. Anastasia, thanks for being here as well. Anastasia Amoroso. Let's send it to Christina Parts of Nevelos now for a look at the biggest names moving into the close. Christina. Well, let's start with AmorSports. Its first earnings report since its IPO,

and it failed to impress investors. The maker of Wilson tennis rackets and the Arcteryx brand said its losses actually shrank in the fourth quarter, driven by stronger sales in China, but specifically ball and racket sales declined year over year. Why is that? Last year at this time, the company was dealing with a supply shortage and overordered equipment. This year, they're trying to get their inventory levels in check. The stock is down 4.5%. Shares of AeroEnvironment are moving in the opposite direction of Amr after the defense contractor boosted its guidance. The company makes drones and ground vehicles. And the CEO said they have a strong backlog and growing pipeline, which is why they anticipate double digit revenue growth in 2025.

And we'll get more on that story later when the AeroVironment CEO joins Closing Bell Overtime tonight. Christina, thank you very much. Back to you in a bit. Christina Parts and Nevelos. We're just getting started. Up next, five-star stock strategies. Capital Wealth Planning's Kevin Simpson is back, bringing three big trades with him, including trimming one semi-name. We're going to tell you what it is. Plus, how he's positioned as the sell-off picks up steam today. He'll join us right after the break. We're live from CNBC Global Headquarters today.

You're watching Closing Bell on CNBC. There's your NASDAQ down a little bit more than 2%. We're right back. All right, we are back. Stocks tumbling today. Steep declines in major tech names dragging the market further from record highs. Among today's carnage, the semis, Capital Wealth Planning's Kevin Simpson is trimming one name in that space. Joins us now to tell us what it is. Kev, welcome back. Hey, Scott. What are we talking about? What name did you trim off? Well, we took a little bit of a profit in Broadcom. And I know the semis have been on fire,

and it's so hard to sell stocks. I mean, because you have a two decision process. First, if you sell something, then you're going to have to buy something else and you kind of monitor the two things. And it's never easy. But if you think about when we got into Broadcom, Scott, it was at the end of November. We sold out of our Apple position in its entirety. And we took a lot of heat for that because, you know, who likes to be out of Apple? But we felt that at the time, the multiples were a little bit entirety. And we took a lot of heat for that because, you know, who likes to be out of Apple? But we felt that at the time the multiples were a little bit stretched. So we rotated into Broadcom and the stock is up like 50 percent since we bought it. And knowing how conservative and dividend oriented blue chip strategies that we run, you know, how often does that ever happen? So we still like the name. They have coming out on Thursday we think they're going to be really good. We took a little bit of the profit. And we rotated into

Apple. Apple was the same stock that we had sold to get into Broadcom so now we're using some. Profits are. Apples down about 15% from the end of November. Broadcom's up blank fifty. So for us this is an opportunity to rebuild our

Apple position down here. Could it go to one sixty short could it conceivably go to 160? Sure. Could it conceivably go to 150? Maybe. But it takes us a long time to get into a position. So we love days like this. Sure. But I mean, you're not buying Apple today or yesterday or whenever you did it on the assumption that it's going to go down to 150. Certainly you're not expecting that or you wouldn't have done what you did. But what do you make of the weakness in that stock for something that frankly looks broken?

Yeah, I mean, they're taking a couple of punches from different directions right now. But under the surface, we think their margins are at all time highs. We love the service business and their free cash flow because that's what we're all about. Their free cash flow for the past 12 months is back up over $100 billion. So for us, we're not looking at Apple and saying this is time to run for the hills. I don't think it's going to go to 150, but you can never time the exact tops or the exact bottoms. The stretch for the forward multiple 26 and change, it's still a little bit high. But I think that in the 160s, we're going to have an opportunity to backfill this particular position.

And for us, it's also a really good name to write calls on because you get volatility in the tech names that you don't in a lot of our other stocks. So we're excited about the idea of looking at Apple, especially, you know, you want to buy things when they're under a little bit of pressure. Yeah. What about Marathon, which I see that you've added to that? That stock hasn't been under a lot of pressure, has it? No. In fact, Scott, it's at a 52-week high today. Exactly. In the wake of everything that's going on. Exactly. I guess it was kind of a rhetorical question.

Listen, if you look at these two companies, it's all about free cash flow. Apple is returning just tons and tons of cash to shareholders through buybacks and dividends. Same thing with Marathon Petroleum. They just committed another $5.9 billion to implement more share buybacks. I was looking at Apple earlier. They've cut their float almost in half since 2012. Marathon's done the same thing since 2021. So it's not like you're looking at the price of oil. The stock's not going to trade like a commodity, but free cash flow, returning cash to shareholders, increasing dividends. These are the things that we love in any investment that we

make. And that's the similarity between Marathon, which is at a 52 week high and Apple, which, you know, everybody wants to run for the hills today. Wrote calls on Visa and McDonald's. Tell me why. You know, there hasn't been a lot of volatility and you've covered this really well on the network with respect to the VIX over the past few years. But whenever we can get some type of vol behind any name, we want to take advantage of it. Both McDonald's and Visa, these calls will expire next Friday. So it's a very short term opportunity for us that we're annualizing premiums that are in excess of five percent. So Visa, for example, is a very low dividend, amazing dividend growth, but it allows us to produce a little bit of a hedge, a little

bit of an extra yield. And for McDonald's specifically, if you look at just the price action and the chart, it goes up to 300. It bounces there and it just had such trouble breaking through 300. I wish it would split like Walmart did. Maybe that's a consideration for McDonald's. We love the name. We've owned it for over a decade. But writing a short term call here heading into some volatility turned out to be a good trade. If we see more vol, we'll be able to take advantage of that. And I certainly expect that we will with Apple in particular in the next couple of weeks. You feeling pretty good overall about where the stock market is? Yeah, I mean, it's stretched.

You know, there's a tremendous amount of momentum behind it. When you look at the fear and greed index, when you look at the enthusiasm for the retail investor, when you look at the professional investor, I mean, everybody is bullish. But the momentum behind it is real. Earnings came in fairly decent. Inflation is coming down, even though all the momentum behind it is real. Earnings came in fairly decent. Inflation is coming down, even though all the economic data isn't perfect. You referenced today the ISM service under 50. You never want to see that under 50 for too long. But in general, you've got a strong consumer. We've got a lot of labor information. I know the Fed is going to be the

big talk on Wednesday and Thursday. We've got a lot of jobs information coming out Thursday and Friday. And wage growth, I think, is going to be the important number. But so far, the economy has been resilient. The consumer has been resilient. And if the consumer is spending, you know, stocks will go higher. Kev, we'll talk to you soon. I appreciate it very much. Kevin Simpson, Capital Wealth Planning. Coming up, bruised Apple shares. They're dragging on the mega cap trade again today, now down double digits for the year. And one top chart watcher says that slide could spell more trouble for tech in the weeks ahead. BTIG's Jonathan Krinsky making that case after this quick break. We're back talking a lot about shares of Apple today, sliding on a report that iPhone sales plunged in China in the first six weeks of 2024. The stock now down 11.5% this year.

Meanwhile, other tech names have been getting a boost amid the broadening of the market rally. My next guest says this divergence may point to a pullback soon in the broader tech trade. Let's bring in BTIG's Jonathan Krinsky. It's good to have you. Welcome. I mean, you asked the question today whether Apple is going to play catch up and have a bounce or whether the Qs are going to come meet Apple in some respects. And you actually think it could be the latter. Yeah, good to see you, Scott. So it's pretty unusual to have this amount of divergence between Apple and the Q's, largely because Apple, you know, for much of the last couple of years was the largest component. It's still the second largest component in the Q's. So what you had yesterday was a unique situation where Apple's daily RSI was below 30 while the RSI for the Nasdaq 100, the triple Q's, was above 65. That's actually never happened in history back to 1999 when the Q's started trading. The closest parallel we could find was in late January 2018 when Apple's RSI was below 35 and the Q's RSI was above 65. And so that scenario had a similar setup where Apple kind of sold off about 8% as the Qs were hitting new highs.

And then, of course, that led into that period that we now know as volmageddon, where you had a pretty severe drawdown over the next couple of weeks. And so, you know, we don't necessarily think we're set up for something like that. There's a lot of different, the setup is a lot different than it was then. But I think that, you know, to your point, the question is which, this divergence, which way does it resolve? Does Apple bounce or do the Q's move lower? I think today we're starting to see that move in the Q's moving lower. The fact that Apple couldn't hold 173, that's a very important level in our work. There's been a ton of volume that's traded at the 173 level over the last couple of years. So that was a pretty big breakdown.

And now you're seeing, you know, broader distribution among the tech sector. So, you know, we don't think it's, you know, anything like Volmageddon, but certainly a well overdue shakeout for the tech sector. Sure. But, you know, one day doesn't the trend make. And as I said to Mike Santoli earlier today, you know, lo and behold, we're going to talk about all this gloom and doom suddenly in big cap tech. And then the buyers are going to come in and buy on the dip. And then we're not going to be having this conversation in the same way. Yeah, I mean, again, I don't I don't think it has to be fatal. If you go back to even volumegeddon after that quick 10 percent drawdown, the Nasdaq actually went on to make a new high in early March. The other thing is we're seeing,

you know, as of now, it's a rotational affair, right? We're seeing kind of the hedge fund community, the long, short momentum trade unwind a bit. If you look at the regional banks, you know, they were up 4% at one point today. There's other pockets of the market right now that are working. So at this point, it's not, you know, a sell everything type of market. So as long as that continues, I think there's places to find other opportunities. But I think, you know, some of the long momentum trades are certainly at risk for a deeper pullback. What looks good to you? I mean, when you say longer momentum, you're not talking about things like biotech, which there's a lot of momentum in. That's, you know, one of the areas where some have pointed to some speculative, if not frothy

behavior. What about that space? I'm looking at I'm looking here, you know, at the market, which is obviously pretty broad selling today, X staples and energy. Yeah, I mean, there's there's so there's two different parts of the momentum trade. There's the kind of established momentum that's been performing extremely well for the last 12 months. You know, that's your semiconductors, some select retailers, consumer names. And then there's kind of the newfound momentum, which, you know, that's your semiconductors, some select retailers, consumer names. And then there's kind of the newfound momentum, which, you know, we've been kind of more constructive on. You mentioned biotech that had a pretty meaningful gap breakout last week. So we still think that's valid. Even, you know, we talked about materials with you last week. They hit a new high today. Energy even is, you know, kind of an area that's I think sentiments cooled off certainly a bit.

But energy has been acting a little bit better. So those are types of pockets of the market we think can participate as we kind of get this much needed consolidation in the tech trade. remains intact, we can absorb, if you want to use that word, these declines that we may witness from a more substantial standpoint out of the Q's and big cap tech. It's almost like, OK, that's exactly what you want to see. One big area of the market may slip and then it gets the slack gets picked up by many other things. Yeah, and I think as long as, you know, the selling in tech remains, you know, as it is today, it's, you know, we'd also mention the NASDAQ 100 hasn't had a down two and a half percent day in, you know, about 14 months. That's the third longest streak since 1990. So that just goes to show how well overdue we are for, you know, a decent down move. But, you know, I think as long as you're kind of in the,

you know, five, seven, eight percent window drawdown, things can probably remain OK. You start getting more than that. And then I think the selling might expand to the other as a market, but we're just not there yet. Want to give me a view on the Russell quickly before I let you go? Yeah, I mean, the Russell 2000 is still a bit bifurcated. You still have some growth names in there that's kind of pushing push-pull. But I think keep an eye on small cap value. VBR is the small cap value ETF. That hit a new high today. At one point, it was up over 50 basis points on the day.

And so that's an area that I think is worth looking at. Jonathan, we'll talk soon. Thank you, Jonathan Krinsky, BTIG. Up next, we track the biggest movers into the close. Christina Partsenevelo standing by once again with that. Christina. Well, we've got maybe growth on the horizon for Target, and investors are worried about share dilution for one lithium miner. I'll have all the details next. All right, we're 15 from the bell. Let's get back to Christina Parts and Nevelos now for a look at the key stocks she's watching. Christina. Well, it appears to be all about a return to growth for Target. Scott, I know you mentioned that earlier.

This is a company that reported higher sales and gross profit in Q4 versus last year. And even though same store sales are down year over year, the stock is still popping over 11 percent because CEO Brian Cornell promised to spend more to drive store traffic. Here he is on Squawk Box earlier this morning. We're putting capital to work, and that drives more traffic. It makes our brand more prominent. We'll continue to invest in new stores for the next decade, and that's going to be a big part of our long-term growth. And let's switch to another company, a change of direction for Albemarle.

Shares, after climbing 20% in February, the lithium stock is down, what, 16 percent, almost 17 percent today. After announcing it was raising more capital or specifically two billion dollars in depository shares, investors are worried about dilution and they're selling off the stock. Scott. All right, Christina. Thanks so much. Christina Parsonevila still ahead. Your earnings rundown. Crowd strike in box among the big names reporting in overtime tonight. We'll give you a full breakdown of what to watch for. Closing bell comes right back. All right, we continue to watch this market sell off with about 10 minutes to go in the session.

Dow's off its worst levels, but still down more than 400 points. With us now, Ed Yardeni. He is Yardeni. He is Yardeni Research, with Yardeni Research, the president, of course. Ed, it's good to have you. What do you make of what's happening in price action in the market today? Well, I think a lot of this is the market recognizing that there's a recession out there just out in the United States. It's in China. And so a lot of the stocks that have exposure to the Chinese market, there's lots of companies who thought that there was nothing but upside in the Chinese market are now realizing that that economy may be slowing down substantially and consumers aren't buying the way they had been. I mean, you say that, I think, about Apple, obviously.

I mean, 20 percent of revenues come from there. It's just one of the issues around that stock. Let me ask you this. You've seen a lot of markets, OK? You understand what it means clearly when one of the biggest stocks within the market goes through a period of selling. In this kind of market, what's the implication of that in the broader picture if Apple does, in fact, go through a prolonged period of being broken? Well, you know, Apple hasn't repeated the mantra AI, AI, AI too often. As a matter of fact, they've gotten out of the self-driving auto business for now. And so they're kind of viewed as yesterday's story and it's just not an AI story.

Look, in a couple of weeks, NVIDIA is going to have this convention in San Jose, which is going to be a great AI fest. And I think that's going to continue to be a positive for the technology area, particularly the semiconductor area. So I think we're getting some splitting here among the mega cap eight or mega, you know, the magnificent seven is some column. They're not

all that magnificent. Tesla's got some problems. Apple has some problems. And it's actually good that the market's starting to be a little bit more selective. And I think it's going to broaden. Well, you were one of the first, I think, to use the word exuberance in this current cycle and in the current market rally. I mean, that was like 100, if not 200 points ago in NVIDIA and a substantial amount of points ago in the biotechs and a substantial amount of points ago in some of these sectors that have just absolutely gone bananas. Does that concern you? Don't forget Bitcoin. Don't forget Bitcoin.

OK, I'm not. But OK, you continue to paint a picture, though. What does it tell you? Right. Well, we have exuberance out there for sure. I think some of it is rational. Some of it may be becoming irrational. But right now, as we've seen with NVIDIA, the forward P.E. of NVIDIA has actually come down because analysts have been raising their earnings estimates so much faster than the price has gone up.

So the fundamentals, I think, are there for the economy. I think some of them are maybe overstated to a certain extent. But right now, I would put us more sort of if we're looking at the 1990s, which was the last time we talked about exuberance, I don't think we're at 1999 just yet. You worried at all about what the chair might say tomorrow on the Hill? Well, I anticipate that he'll say, don't get excited about us cutting rates. We're not rushing to do it. And he might actually say some things that suggest that there's a possibility they might not lower interest rates at all this year. And the reason for that is the economy is doing fine.

Inflation's coming down. And the economy is doing just fine with interest rates where they are right now. I have not been in the camp that thought we would get several interest rate cuts this year. I think the Fed has actually normalized interest rates, and they're perfectly good where they are right now. Well, I can't imagine that if Chair Powell, he's not going to say this. I can't imagine, though, if he does say we're not going to cut rates at all this year, that the market just says, OK, hey, we're good. The economy is great because the durables report today was the weakest in like four years. And ISM services today was below 50 yet again. That that doesn't sound like an economy that's necessarily going gangbusters.

I get the pockets of strength, but let's let's be a little tempered in how we view what's actually going on out there. I agree with you. And I, I, I am not rooting for I'm certainly not rooting for irrational exuberance. I'm not rooting for a melt-up. I'm rooting for 5,400 by the end of the year, not by the middle of the year. And for the past few weeks, it almost felt like we could get there by the middle of the year. So I have no problems with the market taking a break here. Not a major break, of course, but a break. I don't think we're going to get a 10% correction out of this move.

Again, we've got NVIDIA's conference coming up, and a lot of the excitement has been about technology, particularly AI related. But but I feel like you're insinuating that if they don't cut rates at all this year, the stock market's going to be OK, because in your words, the economy is doing just fine. Yeah, I think I think what I what I'm insinuating, what I'm actually saying is that I think we're not going to have multiple rate cuts this year. And I wouldn't be surprised if the economy does do reasonably well. Look, at the end of the week, we're going to have employment. Employment should be pretty solid.

Initial claims just keep running just north of 200,000. Initial claims are consistent to a 25 straight month of the unemployment rate being under 4%. The consumers have jobs. It's hard to see the economy slowing down meaningfully when the consumers continue to get employed. Your view shared by many. One of the reasons why we have been where we are in the stock market. Ed, I appreciate it very much. Thank you.

Thank you, Denny. We're now in the closing bell market zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus two earnings out in overtime we are watching very closely. Kate Rogers on what to expect from CrowdStrike. You remember Palo Alto? Well, maybe CrowdStrike even more important now. Steve Kovac is watching box results as well.

Mike Santoli, your take first on what's happening in this market today. Well, I see it as part of a process of trying to fight the market's way of trying to fight through some significant barriers that really came up about a few weeks ago. So I was talking about 50-50 on the S&P. Seemed like the destination point. We overshot that 16,000 NASDAQ composite, all the rest of it. Today's pullback starts out as a neat and tidy rotation. It gets a little bit messier. So I think that is really partly because you've had a lot of this instability, flows into the speculative stuff, the high velocity moves in crypto,

and the market sort of had a hard time just fully absorbing that. So, look, if this is a 5% pullback, it would be nice and clean going down to 4,900 on the S&P. That's the 50-day average. I'm not saying we have to get there, but that would be normal, but it wouldn't feel normal after four and a half months of not even having a 3% drop. Pullbacks never somehow feel normal, no matter what the circumstances are, no matter how much the market went up before it pulls back. Back to you in a minute, Mike.

I want to go to Kate Rogers on what to expect from CrowdStrike. I feel like maybe the stakes are even higher now relative to what the stock has done and relative to what Palo Alto reported not that long ago. That's right, Scott. So analysts are looking for EPS of 82 cents adjusted on revenues of $839.1 million for the fourth quarter. The cybersecurity company is also projected to have subscription revenues at $788 million, professional services revenues much smaller, $50.9 million. In a recent note, BTIG wrote,

our checks on Crowd were universally positive. While EDR commentary was good, we were most encouraged by new product adoption across multiple categories. To be balanced, expectations are high. Going into this report and execution, as you mentioned, needs to be near perfect. The firm also warning, our checks were very encouraging and we have a lot of confidence in the 12-month outlook for crowd but given the reactions that other higher growth companies in our coverage we're expecting some volatility for

crowd around earnings and as you can see that stock is lowered by more than five percent now back over to you all right we'll see in ot kate rogers thank you very much for that i'll go back to mike santoli mike we've come off the lows at least on the dow by about 100 points or so still down roughly around 400 points. A lot of focus, obviously, on the mega caps. We're showing Amazon and Tesla, of course, continuing their sell-off. Apple's been right around, if not slightly below, 170. All of it leading into Chair Powell tomorrow.

And I'm wondering how you think the market is going to take whatever he says tomorrow relative to this move that we've had. Yeah, I mean, I think the market recognizes it's in data dependency mode, and therefore the Fed is as well. And look, I don't think he wants to foreclose on any possibility, but the expression of, hey, we're going to keep our options open and we don't feel the economy needs to be rescued at this point is okay, but it raises the stakes for how the economic data come through from there. You know, I've thought starting last November, when inflation really showed decisive downside action,

that all of a sudden that meant good news was good news, the economy and the markets. And that's been mostly the case. I think we're starting from a point, though, where everybody has now embraced the softer no-landing scenario and the idea that the Fed has room to cut, even if it doesn't have to happen soon. So you actually start to see the bond market get a little more excited today on cuts in, you know, let's say June. We'll see if he has anything to say about that. I don't think that's what really this sell-off is about, but it could probably, you know, touch a raw nerve if he seems a little bit unfeeling toward some of the market's macro concerns. Well, the tentacles, to your point, of the mega cap sell-off along with Apple extend in all sorts of different marketplaces. And now you're witnessing that through all the majors, certainly not the Russell, but the others for

certain. I'll see you tomorrow. It's going to be a big day and I look forward to taking you through it.