Closing Bell - Closing Bell: The Pullback from Record Highs 5/4/26

Episode Date: May 4, 2026

Goldman’s Tony Pasquariello breaks down his forecast for markets, earnings and much more. Plus, Vista Equity Group’s Robert Smith joins David Faber from the Milken Conference with his take on the recent rally in software. And Strategas’ Chris Verrone weighs in on the interest rate landscape. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to closing bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This maker breakout begins with the pullback from record highs as a backup in interest rates is weighing on stocks today, along with news, of course, from the Middle East. There's your picture here with an hour to go in regulation. Dow's down more than 1%. The Russell's down about a half, and then the S&P and the NAS are also read today. Comes amid some notable moves in the Treasury market. As we said, the 30-year yield hitting 5%, the 10-year. There you see it, pushing towards 450. I want to get right to the markets with Goldman's Tony Pascarillo. He's the global head of hedge fund coverage with me once again at Post 9. It's good to have you here.

Good to be here. How big of a story is this, this backup in rates if it continues, do you think? It's something to watch because we're clearly pushing kind of the upper end of the recent range along the curve. As Rick Reader reminds us, every time the long bond, the 30-year Treasury pushes 5%. Duration buyers usually show up. So it'll be a little bit of a tell whether they do or don't. It is also one of those periods, so, Scott, where rates are on the highs, oils on the highs, and stocks are just off the highs.

And so different assets anchoring to different things. You know why stocks are at or near record highs, even with the other ones there? You know because earnings are at highs. Yeah. I mean, the earnings numbers have been pretty incredible, albeit with the outsized contribution of tech, playing the role it is, but nonetheless, I mean, it's been pretty astounding, don't you think? Yeah, terrific is the word choice I'd use. So when we're going in the reporting period, consensus was for 12 percent. You're on your growth. It's looking like it'll be at least 2x that.

61% of companies beat by more than one standard deviation compared to an average of 49. Good. And then check this out. I think you mentioned it earlier. Only 5% of companies have missed by more than one scenario deviation, which outside of the reopening and two, 2021 is the lowest, aka the best rate we've seen in the past 25 years. The hyperscalers clearly stole the show in a way, 61% year-on-year net income growth. So earnings have been terrific. Okay. So if I put that all into the soup pot, right, and I mix it up, do I still come out with something that's going to continue to taste pretty good, even if the Middle East is on the front pages, if oil remains elevated, and now if we have interest rates to think about

also, and you do have a more hawkish tilt, I think, on the Fed. I think that's fair. So a complicated mix, as you suggest, I still think in the end it's net positive and most of the big dynamics in that equation are net positive. Why do I say that? Well, the U.S. economy is doing fine. We think full year GDP growth this year is a touch better than 2%. We expect double-digit earnings growth, if anything, that plus 12% figure for the full year feels a little bit lower. We think S&P and turn ends the year at 7600. And then you have, of course, this KAPEX super cycle, which is upon us. I would say, for the sake of sobriety, the market has ripped off the March 30 lows. You surprised by that, by the speed in which it has? So I read this morning that it is the

fastest recovery of a 10% sell-off in market history. So I think everyone is probably to an extent surprise. The market, I think, is attaching to that strong growth. It's attaching to earnings growth. it's attaching to all the spend. But again, in the context of risk reward, I think you asked the right question. And my judgment would be, or my tactics of navigation would be long delta, long vol. So what does that mean? You're long the stocks in which you have the most conviction. For me, that's the global AI circuit. And then you take advantage of insurance when the market offers it to you. And right now, the cost of tail protection is really pretty low. I mean, you say, you said back on April 27th in a note of yours, I wouldn't be chasing this market, nor would I be fighting it. And that stands today, which leads me to outside of what you just said, lean into those AI-related names, what else do you do? That's the most tactical thing you can do right now. Protect yourself with some VAL hedge and go just keep riding these big tech names. I think that's right.

But it's also, you know, this comprehensive AI Kepex story. It has hooks into materials, into industrials, in a way, into energy, into the power trade. And so it's not just like saying, I'm going to pick five stocks and a little bit of Korea and a little Japan and go. I think it is more comprehensive than that.

Okay, so speaking of a little bit of Korea, it makes me think about the chips and what's been happening there. Parabolic moves, like insane, like some of these names. How much pause does that give you? So choose your superlative to describe what happened in the month of April,

and you narrated this along the way. 18 straight up days in the socks, a 38% rally. The distance between the socks and its 200-day moving average has it been this wide since the dead highs in the spring of 2000. And so, again, you're right to ask the question

of how sustainable is this. My guess is there will be due for some consolidation at some point. The market probably needs to do a little bit of work. But the big picture is this, which is most of that rally is these stocks being at the dead center of this AI CapEx super cycle that I mentioned,

most of that rally is justified by net income growth. You don't feel in any way that the market is whistling past the graveyard of what's happening in the Middle East and rates and the fact that the Fed is not going to be as friendly as everybody once thought, even though you have Kevin Warsh, who people think is, you know, wants to, is predisposed to cutting rates. The president continues to make the argument that rates are too high. Well, Mr. Warsh is going to find a harshly divided Fed when he takes that seat, isn't he? So Kevin is a wildly talented person. And I think if you went in the laboratory and said, I'm going to come up with the next Fed chair, you might come out with Kevin Warsh, private side experience, particularly in Silicon Valley, public market experience at the right hand of Stan Druckin Miller for 15 years. And central bank bona fides, he was a Fed governor, of course. And so I think Kevin is the right man for the job, for sure. I would say this, our stocks are whistling past the graveyard. I think people are pretty relaxed. I think positioning is reasonably high, both in the trading community and in the household sector. volatility has compressed. The market very clearly, right or wrong, the market very clearly moved on

from the war the day that sees fire was declared. No question about that. And has continued to breathe easy. It's funny, like people like Ed Yardinney, you know, who obviously have seen a million markets, he talks about investor sentiment today being surprisingly lackluster. Now he thinks the market still is up, up and away from here. Those are the words that he uses. Do you agree with that? Do you feel like sentiment is lackluster still, or has everybody rebounded so quickly that we've turned our attention away completely from the war? And we want to believe this earnings story is as durable as durable could ever be. Viewed from the seat I occupy at GS, I wouldn't characterize the people I speak to sentiment as being lackluster necessarily. There's still some caution at the edges. But again,

I would use this. I always use a scale of minus 10 to plus 10 to calibrate investor positioning, The start of this year, I would have said that it's like a plus eight at the lows of March, maybe minus four. Today I put that plus six, plus seven. So I do think people have added a decent amount of risk. Okay. So I mean, and you talk to, you know, the kind of people that you're talking about are some of the, you know, the highest AUM hedge funds out there. Have you noticed a shift in tone from those kinds of money managers? I think the hand that has worked really well and many are playing. is not to look at stocks just in isolation, but to think about kind of the mosaic.

And I think what is a fairly agreed upon position today is you are long stocks with a bias towards technology and AI, and you are long oil. And that has worked remarkably well. Again, stocks on the high oil, essentially on the highs. And then selectively setting some shorts in the bond market is kind of that mosaic that has served people very well over the past couple of months.

What do you make of the fact that as you want to lean into the, It sounds to me like the, you know, on the market cap scale towards the high end, the Russell's up 11% in a month. What's that about? So I admit I'm like a little bit agnostic on the Russell. The start of this year was like the perfect setup for Russell. Why do I say that because you had the expectation of a cyclical acceleration and yet rate cuts. Yeah.

But that's why I'm like astounded by over a month. Russell's ripped and interest rates have done nothing but pretty much go up. That's right. Yeah, so impressive, perhaps speaks to positioning. I noticed over the weekend we've had eight consecutive days of people shorting Russell 2000 futures. So maybe it is a bit of a squeeze, a bit of a pain trade. Again, I'd prefer to make my bones at the top of the index than a small cap.

Yeah. But I wouldn't fight it necessarily. Well, what about groups like the financials? Like, if you try and look away from tech, what gets you excited or sort of turns you off in terms of, I don't want to really lean in on that space right now? I do think it's a good setup for the banks. I'm not unbiased in that regard, of course. But I do think we're sitting here.

Your future's bright. Don't worry. We know. It's all good. We're looking at, again, a durable economy. We're looking at regulatory relief, which is coming in brick by brick day by day. And we sit with a lot of anticipation around the capital markets runway in front of us and the M&A runway in front of us. What do you like the least in the market right now?

If I had a pick on something, I pick on Europe, which I'm wanted to do. I'm picking on a geography, not a sector. Okay. But I would say the prospect of rate hikes into the late cycle is not something that draws me in. Well, I was thinking about, you know, the international markets in the context of how the war has made people rethink about where real opportunity and value is. There were a lot of people thinking that international markets were going to outperform the U.S. again this year.

Then the war hits, and now you have energy prices. Supply chains are massively disrupted there. Has that also weighed on your mind in thinking, about other parts of the world that can do well? Sure. Again, I like the Japan trade. I like the Korea trade. So specific to Asian parts of EM, I think there's some good rides to go on. But I think a lot of this affirms the validity of the U.S. case, right? Which is we're independent of energy. We're next net exporter of food. We're net exporter

of defense. And I think this was another one of those earnings periods, as it was one year ago, post-liberation day, that reminded people that in a DM economy, if it's profits you seek, the U.S. offers the best of the bunch. That's a good mic drop. Tony, we'll speak to you soon. Thanks, Scott. Thank you. It's Tony Pascarillo of Goldman Sachs. Tech is coming off its best month since 2002, in part because of stocks like Micron, which is surging yet again today.

Christina Parts of Nevelos has more on why this chart that she's going to show us, I know, looks like it does. Hi there. Oh, hi. Well, to your point, Micron's move really just is about AI demand, colliding with a shortage of high-end memory. The market is, can I say, waking up to the idea that Micron isn't just a cyclical chip stock anymore. It's becoming core AI infrastructure.

And you guys just talked about it with Tony. The key piece is high bandwidth memory, which is essential for training large AI models. Supply is extremely tight. At the same time, you have hyperscalers like Microsoft, Amazon Meta, that are signaling heavy AI spending and flagging rising memory costs. That implies pricing power for Micron. You're also seeing a strength across the group. Sandusk is up roughly about five. right now, 6% after Bernstein raised his target to $1,700 from $1,250.

You can see it's trading at $1,65 right now, tied in part to a shift towards longer-term contracts, reinforcing that more durable crisis. So for Micron, this isn't just about momentum. It's a structural re-rating. The risk, though, is if supply catches up or AI spending slows, the memory cycle can turn fast like it has in the past. Look at those gains. Christina, thanks. We'll come back to you in a bit.

Let's welcome in our panel now. CNBC contributor, High Tower, Stephanie Link, and JP Morgan Asset Management's Jordan Jackson. Good to have both of you with us. Jordan, I'll begin with you because your note is interesting. You think the conflict in the Middle East is going to be more drawn out than anticipated, but then you cite the power of the strong earnings by the hyperscalers, which people are obviously betting big on continues like Tony Pascarillo.

The push and pull of that. How do we come out? Well, if you think about the level of earnings growth, we're expected to see coming from the hyperscale is the max 7, you know, 25%. Even if we're, if we aggressively shave off due to higher oil prices, let's say 5% to earnings growth, you're still at double-digit rates of earnings growth, comfortably double-digit rates of earnings growth. So I think that's what the markets are, at least risk assets, are banking on.

I tend to believe equity investors are optimists and bond investors are realists. So maybe the equity markets are a lot more optimistic on a resolution. obviously the fundamentals are hanging in there. Bond investors, at least looking at base rates, they're a little bit more and easy on how things can play out and maybe are a bit more in line with my thinking that this could be a bit drawn out. So we're looking at rates here.

Steph, how big of an issue is this backup in rates? 5% on the 30, and we're not that far from 450 on 10s. Yeah, I mean, I think we can see some back in fill. And if that's the excuse, that's the excuse. But we have rallied substantially. Like you and Tony were just talking about from the March 30 lows. The S&P 500 is up 14%. The NASDAQ is up 21%.

And it was, again, what you guys just talked about. The economy continues to hum. And while the consumer, watching the consumer because of oil and inflation and all of that, I don't think the war is going to change anything with regards to the AI food chain. And we have a CAPEX boom. We had Caterpillar with $62 billion in backlog. And we also had something interesting happened last week where Caterpillar is trading at 36 times. Invidia is trading at a 10-year low.

How about that? And that is exactly what I've been talking about for years on end. You want to have exposure there. And again, earnings are running well ahead of expectations. Even for me, like, I was kind of skeptical at 16% in the beginning of the year. It's at 28%. Well, it's because of the outsized nature of what the mega caps are delivering. It's more than that.

It's more than that. It's every food chain possible. I get it. But we're not even close to 28% without the mega cap earnings growth. We are well above trend without the mega caps. Scott, I'll give you that. But look at some of the semiconductor companies. Look at Sandusk and Micron.

Those are leaders. Look at the Lera. Well, no. Micron is in its own right skewing the earnings growth, that and V-Intyre, for example. I mean, come on. It's more than just tech, but it's semiconductorsers are holding their own absolutely. But it's energy. It's the industrial companies. I mean, we are having, we have never seen backlogs like this in the industrial companies

that are all focused on the AI food chain. And that's my point. Maybe it is all tech without it being obvious, right? Maybe industrials are tech. And maybe just by extension of that, if you look at the 493, 2Q, 3Q4Q this year, 16, 19, 20 percent year on your earnings growth across those quarters for the 493, not the max seven. So again, this earnings robustness is quite broad.

So if the consumer starts to crack it all because gas prices remain elevated for longer than people think, Does the AI spending by the hypers offset that for performance in the stock market, or can we not overcome that to some degree? We need the consumer. It's still 70% of the economy. So we do need them to hang in. Do they slow the pace of their spend? Possibly.

But I'm watching the labor market. That's the most important thing. Because people have jobs. They will continue to spend. We are a nation of spenders, whether we have the money or not. But can't have them collapse, Scott. If it slows, I do think that. AI and that cycle will absolutely offset.

How do we reconcile that? Well, I think it comes back down to labor markets. And we see an environment where initial unemployment claims came at some of the lowest levels that we've seen this cycle. You still see evidence of a job market that is more imbalanced, I would say. We're actually seeing those jobs who were, there was worries about, you know, broad AI layoffs. Radiologists' employment has been increasing call centers out of the Philippines, have been increasing.

You know, so it's kind of the Jevon's paradox, if you will, which has been talked about. Sure. The more demand this is creating, the more spending that we're seeing coming from the hyper scale is actually the more demand that it's ultimately creating as costs are coming down. Let me ask you quickly about Medicare. I knew you were going to ask. I don't know if you saw the interview, but he said, quote, I think they're going to shock the world in the second half of this year with some products and models that they're going

to roll out, but they have to deliver. I mean, he talked about the fact that, you know, they're spending a lot. And I'm sorry I couldn't come on last week. I was traveling. So I didn't buy more, but is absolutely on my radar screen to add to it. Well, what are you waiting for it? It was like screaming on the radar like down a lot. You know what? It was up 25% into the print. So it gave back 9, 10%. Let it settle a little bit. But you have ad revenue growth of 33%, rather. You had operating margins that beat by 600 basis points. You had add impressions of 18% and time spent, which is the most important. critical piece of this whole thing, up 8% for Facebook and Instagram. It's not the front of course. All of that is good. It was amazing. Yeah, but the market's concerned about the spending.

Well, you know what? They're delivering, though. That 33% in ad revenues was double from last year. That is monetization. So I don't like that they're spending. But by the way, they're actually cutting employee count to offset the spend. So it's a little bit. I mean, they increase it by $10 billion.

Come on. They increase it by $10 billion. And they had operating. margins of up 600 basements? Yes, you can. Absolutely. They can cut more if they want to. I don't like that they're spending. They're not cutting $10 billion worth of impurities. No, but they're also going to... I mean, they pay well. Stop. Stop. I mean, honestly, this is a really wonderful story. It's not, it's not derailed by the quarter. I'm not happy with this spend. However, I think it does lead to monetization ahead. So, hey, by the way, 19 times forward estimates. That's cheap. Okay. Steph, thank you.

Thank you. We'll see both you soon. We are just getting started here on the bell. Coming up next, on the front lines of the software swings, one of the world's leading software investors. Vista Equity Groups, Robert Smith. He joins us live from Milken next. All right, welcome back. Software stocks had a nice rally last month, but are still, as you know, down substantially from their recent highs as questions about AI disruption continue to weigh on that group. For more, we go back to the Milken Conference where our David Faber is with one of the world's top software investors, Vista Equity Groups, Robert Smith. Hey there, David.

Scott, thank you. Yeah, Robert Smith, of course, is the chairman, founder, and CEO of Vista. And you're awfully calm for a man who many would say, wait a second, sit on all these software companies. We've been seeing the tumult and private credit. And in all seriousness, you do seem to be quite calm about your portfolio. Why? I think a lot has to do with three years ago as we really started to understand the implications of artificial intelligence as relates to generative AI. We embarked upon the journeyed in, not last month. And so as result of that, our factory, our agentic factory, we now have, you know, 54 companies that are now agentic and have agentic products. Can I just stop you there for a second? Yeah, sure. Because you say agentic factor.

Oh, right. And I've been in with you. We've talked about this, but I think many of our viewers may not really understand what that means. Sure, sure. Yeah, that's a good point. You and I spend a lot of time talking about, you know, what is actually the impact of this technology. You know, what has happened is software has gone from software as a product to software as a service, which everyone refers to SAS, to now software is becoming a worker. And because it's a worker, it now is starting to engage in the actual interactions with datasets and through workflows of businesses. And that's an agentic system. So that agent, that software, actually does work. And so building out the capacity to create agents that do work within workflows, within workflows, within

companies and within our companies, is now creating a massive unlock of potential in total addressable market and profitability. So what we've been doing is building out a factory. So we have the ability to deliver those sort of capabilities to every one of our 90 enterprise software companies. So, you know, starting on it three years ago gives us some piece as to where we are today. So where you are today. And makes you feel what, Robert, because of Of course, the narrative would be you're sitting on a lot of software companies that obviously are leveraged. You took them private, and their business model may be disintermediated. Their exit multiple certainly may be impacted.

And you say what? Enterprise software is likely to end up in what I call three states, agentic, agentic enterprise software companies, those that actually have agents operating and doing the work at speed and capacity far beyond what humans would be able to do. should have an expanded addressable market and expanded what we call terminal value, which is one of the reasons it's caused some issues in the market. People say, well, what's the terminal value of SaaS? SAS has been tied to the number of seats and licenses.

Now we can tie it to the outcome. And the outcome actually is how much value is created for the customer as opposed to how many people are actually operating on keyboards. The second category is what we call AI enabled. So the reduction of cost in delivery of the products to our customers. A year ago, if we were sitting here, which we were, our enterprise software systems were delivering about 30% productivity for code development. We're now getting 80 to 90% productivity for code development across every single code base in our

portfolio with the exception of one code base. As a result of that, we now have the ability to reduce cost and bring efficiencies across our product development, our go-to-market, our customer support. So those two are very important states that inflect the terminal. value of enterprise software. And the third category is those that can get disintermediated. You say don't have a right to exist. Right. So those are the three categories. So the effort is to drive, of course, all of our existing stock into categories one and two and underwriting only to one and two going forward. Obviously, sure. What is the conversation like with a customer when you're

saying, all right, we're going from a seat-based to an outcome-based pricing model? Right. Do they push back? Do they say, no, you know, no, or I can figure this out with Claude on. my own internally, and thanks so much for your help, guys. Yeah. So part, like I say, the proof of the pudding is always in the eating, as they say, you know, importantly, what has to happen is you do not want to take your data, your workflow, and expose it to these public models, because in those public models, in essence, have absorbed what is 20, 30, 50, 100 years of intellectual property for a company. So less than 1% of enterprise data actually exist, and these models have been trained on. So that's an important fact. And so what they've realized, and actually Satya Nadella talked a bit about this,

at Davos this year, is you actually need to bring the models to your data, not take your data to the models. So large corporations, our customers are saying, I need to operate in an environment where I am not compromising my data. My data is not exposed, but I get the utility of this AI solution set. Once you actually have proven that you have the ability to do that, driving agentic solutions into existing workflows, existing enterprise software companies, and utilizing their data in air-gapped environments

or what we call secure environments, they start to see the productivity of it. And then it's a question of how you get paid associated with it. Some cases it's based on outcomes. Some cases it's based on usage. But there's a new business model evolving and emerging that will have to be understood

for the public, ultimately in the private markets because we adopt a little faster, that will ultimately be measured against in the Is the conversation beginning? Where are we in that whole? I mean, because I've had conversations today as well about diffusion of AI and the enterprise and the inertia and how difficult it can be. So how far along are we? Right. And I would say we're still in the early stages of that messy middle. I know one of my colleagues, Ashley McNeil talks about the messy middle. But the early stages are now showing dramatic proof points in these companies. We actually now have to

install these agentic systems in our customers. And our customers are seeing astounding returns associated with it. But like all things, it takes a little time. Remember that as we put, we went to the cloud, it was literally a decade plus to get at about a 50% absorption or diffusion rate of that particular technology. This, I think, will happen faster. You do? Why? Because of the rate and utility of the infrastructure. The infrastructure we have today are well-defined, you know, workflows and capabilities and connectivity. We didn't have that. Remember, we were going to the cloud from on-prem. So a lot of the, call it, the rails weren't in place. The rails are in place now so you can actually install these agentic systems and actually prove out much more quickly the efficacy

of the products. This factory that you have created, that Vista has, I guess, that you are then diffusing within your own companies that are then using. Correct. You have the compute for it? We do. All right. Well, that would seem to be a lot. Well, what has been interesting is every one of our partners, which are the hyperscalers, we started, of course, The first factory that you and I talked well over a year and a half ago. First company came out through the Azure platform with Microsoft. We now are, of course, utilizing every platform in AWS and most recently the strategic partnership we have with Google. That has enabled us to bring their top technologists and scientists to work with our technologies and scientists and our portfolio companies to now build capabilities.

Each one of the hypers understands what they really want ultimately is companies utilizing the inference, utilizing the compute, the intelligence to drive their businesses forward. But they also realize companies aren't just going to take their data and put it into these public clouds or in these GPU environments. What are these compute environments? What they want is they want it in a secure environment. And that's where we provide a unique place in the marketplace. Let me, in the brief time we have left, let me take it down to the real world in terms of your portfolio.

I think your largest asset, most watched sort of position, you know, you put together Cystrix and TIBCO. Right. It's a $16.5 billion merger then, obviously. You've also, I think, raised fresh capital around that, or another $5.6 billion continuation vehicle, retain the asset, $2.7 billion in fresh secondary capital, and then $2.2 billion from your other funds. So explain to me how that deal, which, you know, you haven't found an exit yet, or, and some of your investors may say, all right, give me the example here as to how that's going to be beneficiary of what you're discussing. Sure. That is a company that clearly falls into that category, too. The EBAA margins of that business are over 70%. We have been able to return capital through dividends and through recaps. It is a mission-critical essential product that now, as you drive agentic solutions for the delivery of those products to the customer base, you now have the ability to return capital to your investors on a pretty consistent basis.

So that's the exciting thing about that. That is, I call it a category two type of AI-enabled software company, not necessarily delivering a swath of agentic products to the customers, but utilizing AI to reduce the cost and the efficiency of how they operate the business in and of themselves. Finally, though, your business is based as well on exits. Obviously, you buy these things. You've got your genetic factory.

You're going to hopefully weather what is an interesting period of change here. But you still need the investors on the other side to say, hey, I want to pay a multiple for this. Right. Now we look at the public markets. They're not. Right. Is that delay your exits on many of these investments? In some cases it can.

But I think, you know, we just sold one of our businesses, best business alleges to United health care. Well, why? Because we had agentified that product and they view that as a way for them to now take that platform, those capabilities and drive them back into the business that they own that is similar, similar in its construct and in its strategy. So that's a big part of it. So what we're seeing is strategic buyers. Okay, financial buyers may not be as, you know, understanding, but strategic buyers are saying these agentic solutions create massive upside opportunity and they use those as catalyst to drive agenic solutions across the base of their companies. Robert always appreciate it.

It's a pleasure. Much time as we have. Thank you. David, thank you. Robert Smith, of course, Vista Equity partners. Scott, we got to get an agentic factory. You and me down at the New York Stock Exchange. What do you think?

Yeah, this fascinating conversation, David, as you and me both know, everyone with Robert Smith tends to be just that. Thanks for bringing that to us. Sure thing. All right. That's David Faber, of course, with Robert Smith. Still ahead, top technician Chris Ferone, mapping out a new month for your money. He'll tell us where he sees this record-setting rally heading from here.

We're back after this. Stock's pulling back a bit today at a rise in interest rates and concerns over the Iran-war way on sentiment. Chris Ferron is Stratigis's chief market strategist with us once again at post-9. It's good to have you back. Great to be here, Matt. I mean, what are the chance that rates, not oil, could be the undoing of this record-setting rally? Yeah, I mean, I think in particular, when you look at short rates, two-year yield has changed trend in our work. So we had a downtrend in two-year-year-year-year-year-year-year for about 18 months, maybe two years.

And now that two-year yield has flipped in our model, I think you should start thinking about where can the two-year yield go from here. We think above four, maybe four and a quarter. To what effect does that disrupt the move in equities? I might phrase a little differently. I would say, is it disrupting what was a three-year bull market in gold? I mean, gold does well when short rates are fallen.

Now that we've seen a turn there, I think it actually puts gold at some risk. But the two-year, if you want to focus on that first, to me. The paradigm has changed a bit with the two-year, obviously, as the Fed's road has gotten a little more flipped from where we first thought, right? The two-year starts to go up if you don't think the Fed is going to cut rates on the path that you once assume. But like the backup in the 10-year and the 30 seems to be getting everybody's attention today, arguably more so than the two-year. If that continues to back up, like, if we go to 450 and beyond, on the 10-year, is that a problem? So I think if you look at the 30-year yield of particular, pushing through five today. Today. I would be more alarmed by that if credit conditions were also weakening, if defensives were outperforming, that's the missing part here. So if we're going to say there's some level in rates, whether it's five or 550 or some number higher than today, where you start to really upset the economy, I think credit has to express that as well,

and there has to be some life from defensives, which is so far been elusive. I mean, Staples are on the lows, Health care has been so underwhelming here. So you're not seeing that knock on effect. What I think is important to remember, and kind of we're in the camp that we're in some type of a meltup phase here in equities. Where are we in the meltup phase before you get to the punchline here? Like if we're in a meltup, like where are we within the meltup?

I think that we already had a really fast meltup. I think ultimately into the SpaceX IPO, which maybe let's call it mid-June, maybe late June, you could see 75, maybe 7,600 SMP here. Now, let's put that a little bit of context. If you look at the prior big meltup periods, Japan in 89 or NASDAQ in 99, part of that was also rates going parabolic as well.

The last phase of a meltup is typically equity is up and rates up. So we have that similar flavor starting to come together here. Now, ultimately doesn't end well. And if you think about how the curve here is changing shape with a flattening impact, you're seeing it on the banks here a little bit. The banks are actually starting to weaken, particularly on a relative basis, J.P. Morgan, Wells Fargo, So there's some fissures emerging, even as I think this equity market has that meltup look.

Well, because, I mean, rates are not going up necessarily for the right reason. I mean, you do have more concerns about inflation, and you heard them yet again today from Williams, the president of New York Fed. I think unclear on right reason, wrong reason, only because if it was truly the wrong reason, the economy is weakening, inflation is coming back with a vengeance. I would expect defensive stops to be doing a lot better than cyclicals, and that hasn't been the case. So I'm a little bit reluctant to embrace that, oh, they're going up for the long reason type story. I think ultimately, though, you can kind of assume two positions here.

We say, listen, but we're in this melt-up environment, and we're also keeping an eye over our shoulder. Flattening curves, some weakness in the bank, so I think deserves to be addressed. Just keep riding tech? Is that your play, do you think? You know, it's more than tech. It's anything AI or power adjacent, and that infects so many different sectors. I mean, think about Japan, for example. At the start of the war, the fear around Japan was they're an energy oil importer.

There's no way they can work in this environment. Yeah, but they also have Tokyo Electron and Fanoek and Disco and Key Ants and all these stocks, the market craves so much more. So I think the market is telling us the AI-centric world is still more important than whatever not going to affect from higher energy. Awesome. We'll leave it there. It's going to talk to you. Christine is always. Chris Ferron.

Coming up next, we track the biggest movers into this close, which is getting closer. Christina Parts of Nevelis is standing by. It's getting really close. We have a billionaire who wants to buy one of the Internet's oldest marketplaces. Amazon coming for the shipping giants and a weekend crypto deal, sending one stable coin play surging. We'll have all those names next. We're about 10 for the bell. Back to Christina now for the stocks that she's watching.

Hi there. Hi, Scott. Well, let's talk about the senators over the weekend who agreed on language for the Clarity Act because specifically it would be a bill that would regulate the crypto market. And that is sending crypto stocks higher like Coinbase Robin Hood up about six and four You can see over here. All of those gains, though, really just lags circle because the bill preserves stable coin rewards, which essentially acts as interest for investors. The stable coin provider is surging almost 20% on that news. And then lastly, eBay hit a record high today after

GameStop CEO, Ryan Cohen, that was the billionaire. T's made an offer to buy the reselling platform, but he said in a CNBC interview earlier today that he had not broached the subject with eBay's management and declined to comment on specifics of the deal structure. A lot of analysts. that I've read the reports don't seem to buy it either, but shares, eBay, almost 5%. Scott. All righty, we'll come back to in a little bit because we have your overtime setup coming up.

Yep, what to look out for when Palantir and on Semin. Record, top of the hour. We're in the market zone next. We're now on the closing bell market zone. Mike Santoli and Evercores, Julian Emanuel, are here to break down these crucial moments of the trading day, plus Oliver Renick watching the action in the commodities market today live

from Cebo Global Markets up in Chicago. and your earning setup. Simomodi on Palantir, Christina, is watching on semi. Michael, your thoughts as we become fixated to some degree, at least for a day or so, on race? Sure. Rates definitely, you know, pushing the upper bound of this long range, you know, year or two, basically four and a half percent on the tents, has been mostly a barrier. So that's part of the story, and I think obviously rates been moving in lockstep with oil, so that it's been harder to sidestep that when you don't have all. all of growth in tech surging on a given day.

And you really don't. It's narrowed out, even semis are down as a group, but the memory stuff is up. So I do think you're still seeing some wear and tear on the cyclical parts of this market. And that's been something that you were able to point to for a little while saying, look, the economy itself, based on the market's message, seems to be doing okay. But right now you've got consumer cyclicals equal-weighted, really making new lows relative to the overall market. So whether that's justified or not, I do think that's the market we have. but still obviously in a pretty good trend.

And, you know, we sort of reasserted the upside with Friday's lunge to the highs above 72, 7,7300. So all to the good, I mean, I think in general, but, you know, it just raises the bar for being pleased from here on out. Yeah, we've got some key earnings. And you and Mel, I know we'll be all over that in overtime. We'll see you then. That's Mike Santoli. Oliver, let's talk about the options action at the CBO. Tell me more.

Yeah, energy plus earnings, Scott. to Occidental Petroleum reports tomorrow, and Bulls have been piling into this energy sector favorite. Right now, call volume outpaces puts seven to one, with almost three times more calls being bought rather than sold. Among the top 10 trades today by dollar amount, eight were buying upside calls, including the biggest trade of the day,

a $175,000 call spread expiring this Friday. That person bought 5,063 strike calls in Oxy, and sold the same amount of 69 strike calls. That is a bullish trade looking for a fresh one-year high in the stock by the end of this week. Recent earnings history does make a compelling case. Oxy's rallied after 10 of its last 12 reports, including a 10% Ripper on its last report in February, Scott. Oliver, thank you. Oliver Runic at Cibow. Speaking of reports, there's a critical one, Cima in overtime.

A lot of eyes tonight on Pallantier. Yeah, Scott, Palantir has certainly been in the spotlight, and earnings will provide an important gut check on Palantir's government business and geopolitics with the ongoing war with Iran, continuing to expect it to continue to drive sales growth. City says bigger defense budgets stemming from both the U.S. government in Western Europe presents a sustainable tailwind for the company. Now, the stock has fallen about 17 percent this year on broader AI software displacement fears that have challenged nearly every software company. We also reported last week that OpenAI is poaching highly skilled engineers from Palantir. So we'll look for comments from CEO Alex Karp as to whether that is happening. Scott. Yeah, as I said, closely watched and we'll see you with those numbers and overtime.

Seema, thank you very much. Christina, tell me about On Seming. Well, the stock has ripped 65% just in the past month. You could say part short squeeze, part momentum chase. Either way, a very high bar heading into the print. Peer readthroughs, though, are pretty constructive. Texas instruments flagged auto-improving with rest of world. outpacing China, which is key because auto is roughly half of On's revenue.

STM micro, or STMicro, I should say, pointed to strengthen EV power chips and driver-assist sensors, both core on businesses. And while AI is roughly about 4% of On sales, it's in chips that manage power inside of AI data centers. A pocket peers have really flagged as hot and seeing continued growth. The number of the watch, though, is the June quarter guide. This management team tends to be a little bit cautious on calling a rebound. But don't be surprised if on semi-CEO talks stabilization while waiting for cleaner demand signals.

Bottom line, the print may be fine. The guide really decides whether this rally has another leg. We'll see. Christina, thanks. Christina Parts and Evelas. All right, Julian Emanuel is here with us at post night as we count down to this opening, closing about, excuse me, got about three minutes or so to go. You raise your earnings numbers today. We did.

First quarter, nothing short of extraordinary earnings. And it's not just tech and it's not just energy. It's financials, which are actually beleaguered year to date in terms of stock price performance, but also industrials. It is a very clear strengthening. And to us, the bigger picture is it's going to be another double-digit earning growth years. 10 out of the last 11 double-digit earnings growth years, the market's been up, average 13%. It's really a big building block of our bullish story. Wow, your bullish story reads pretty well.

7750 is your S&P target for 26? 2026? It is. And you're staying with it. It is. We're staying with it. And look, the flying the ointin, I think everyone knows is the oil price. The fact that yields an oil than climbing the way they have and stocks have tried to shake it off

and done a pretty good job speaks to the earnings strength and speaks to the earnings. and speaks to the fact that the public is really, really getting its animal spirits up. What about rates, right? I've been talking about rates since the show started. I mean, you know, as rates go up, it puts more pressure on the multiple. The saving grace of the whole thing is the earnings story is delivering to a degree that I don't think people had on their bingo cards, but can the earning story still outpace this rise in rates? We think it can. Look, if you get pushing the tenure towards four and three, quarters, that's when the market's likely to get a little queasy. Could that happen at the end of this

cycle? It certainly could. But in our mind, you've still got a runway for public participation, for great IPOs, and for really good, robust capital and earnings-driven environment. You got like your Denny level of optimism thinking you could even have an overshoot of 9 to 9,000 in the cards if you get a little crazy in this market. There's a lot reminiscent of 1999, Scott. We'd almost rather it doesn't work out that way, but with all these great IPOs, with all the mean stocks in play today in the last few days, it's possible. Well, that'll be a story, and then we'll have to definitely have you right sitting in that chair as this bell rings. Julian, thank you. Thank you. It's Julian Emmanuel. They're cheering.

It's going to be a red day, though, for a variety of reasons. Some geopolitical, others obviously in the interest rate complex today. You had a 30-year cross. percent for the first time in a while. You have 450 approaching for the 10 year. And then, of course, you have those headlines out of the Middle East, just a damper, a Lisa's fit on Senate. We'll see you tomorrow. What it brings into overtime with Mike and L.