Closing Bell - Closing Bell: To Cut or Not to Cut? 2/11/25

Episode Date: February 11, 2025

The Fed no doubt grappling with whether it should cut or not. The Wall Street Journal’s Nick Timiraos tells us what’s at stake in tomorrow’s CPI report. Plus, iCapital’s Anastasia Amoroso and JP Morgan Asset Management’s Jack Manley tells us what they think the tariffs could mean for the markets and your money. And, we break down the latest in the tech space amid the ongoing drama between Elon Musk and Sam Altman – as well as Apple’s potential new partnership. 

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the road ahead for the markets. With one of the world's great investors saying Trump's tough tariff talk has already caused damage, we will explain ahead. In the meantime, we'll show you the scorecard. There it is, with 60 to go in regulation. Pretty mixed picture, as you see. And that is ahead of tomorrow's CPI inflation report.

It is critically important. That's what one Fed watcher, Nick Timoros of The Wall Street Journal, says. He's going to join us momentarily. We can't wait for that. We'll also have the latest on the Musk-Altman battle royal, where all of that is heading. New twists and turns there. It does take us to our talk of the tape. To cut or not to cut and when? A key question the Fed is no doubt grappling with these days. So let's welcome in Nick Timoros. He is the chief economics correspondent for The Wall Street Journal. It's nice to see you again. Thanks for having me, Scott.

So I guess we'll get some clues in the morning with CPI, which you say is especially important this time around. Why? Well, remember, we're lapping those very high prints of one year ago. And in the last two years, we've come into the year thinking, all right, inflation is looking better. It had declined at the end of 22. It was declining a lot at the end of 23. And then forecasters and the Fed were sort of hit by these rude, firm inflation prints at the beginning of the year. So I think the question now is, is there something going on where we are in the business cycle, the high inflation we've had, that is leading to larger turn of the year reset? Or are we through all of that? Well, the other problem is, of course, as he continues to say, is they don't really know what the impact of the tariffs is going to be, no more than anybody else does.

So that just muddies the water a bit in terms of their road ahead. Yeah, 100 percent. I mean, put aside the tariffs for a minute, Scott. And if you were able to get through this first quarter with three reasonably good inflation numbers. You know, the forecasters I talk to say you could be at 2.3 or 2.4 percent year over year on core PCE for the March reading that we're going to get at the end of April, right before the May meeting. So if you had, you know, 2.3 percent to 2.4 percent core CPI, I think you would feel pretty good about the economy. Again, assuming the labor market hanging in there, we're at 2.8 right now. So I think the conversation, the narrative would change quite a bit if we had 2.3 or 2.4 percent core P.C. inflation. But as you note, then you have this sort of

question of, well, what about the tariffs? And are we even going to get to the promised land of something below 2.5 percent on inflation with some of the tariffs that are beginning to move into the system. Cut through the Fed speak as you do so well. When Powell says he's in, quote, no hurry to make their next move, what do you think he's really thinking about? The probabilities in the market suggest nothing's going to happen in March, but that it's really anybody's guess after that. What are your own thoughts?

I think that's exactly right. It's anybody's guess. What Powell seems to be doing here is just maximizing his optionality. He can do whatever he wants, depending on what happens in the numbers. So you get really good inflation numbers and the economy is doing OK. There still may not be a reason to move. We heard that message from Dallas Fed President Lori Logan last week. You see more weakness in the labor market like what we thought we were seeing last summer. Maybe that puts interest rate cuts back on the table. You see inflation going

back up because of tariffs. And again, I think you can see why the Fed chair would want to have all of his options open right now. Well, not only that, I thought it was very interesting. I think it was late last week when Chicago's Goolsbee essentially said, you know what, we've kind of learned our lesson from what supply side disruptions can do to inflation. That's exactly what the pandemic bore for the Fed. And that was the conundrum in thinking that, well, we need to crush demand when in reality it was mostly supply driven. Do you think that that has changed the way that the Fed thinks about what its job truly is and how difficult it is to assess things like tariffs and disruptions that they might cause? It has to at some level. I mean, somebody said to me, well, they're going to fight the last war again.

In 2021, they were fighting the war of very weak growth after the GFC. Now the last war would be you don't want to have a big, ugly, right-tail inflation surprise like you had in 2021. So that would lead you to be more cautious. And that was what you were hearing from Austin Goolsbee. You know, the person making the other case on the other side of this is Fed Governor Chris Waller, who I know you've had on the program. And he's made the point we should look through this. The Fed should simply say this is a one-time increase in the price level, and you wouldn't necessarily want to dramatically change your monetary policy. I think the question is going to be, how do you define look through something? Do you keep cutting into it? Because that's what the SEP would say. If you're really going to look through something,

you shouldn't do anything different from what you were going to do. So the SEP would say. If you're really going to look through something, you shouldn't do anything different from what you were going to do. So the SEP would say keep cutting. What you hear from most of the people on the committee who are talking about this right now, I don't think they would cut into a big increase in tariffs. And so that would freeze the Fed, you know, for some indeterminate period of time. Maybe it's the unknown of sorts that, frankly, I thought one of the most interesting things today out of the hearing in Senate banking was what Powell wouldn't say. And I want you to listen to this exchange. I have a feeling you know where I'm going with this, but let's listen to this back and forth between Senator Kennedy and Chair Powell, and we can talk on the other side.

The fact is, knock on wood, we have experienced a soft landing, haven't we? Not for me to say, really. I'll let others make that decision. Well, have we experienced a hard landing? No, we sure haven't. Are we in a recession? No, we're not. I call that a soft land. And it seems to me that you and some of the ladies and gentlemen who are your colleagues at the Federal Reserve behind you deserve some credit for that. Thank you.

I don't know why you don't take the credit. Everybody else in Washington, D.C. does. I thought that was really interesting, that exchange, Nick. Why doesn't he take the credit? Why is now not the time to declare victory? Well, I don't think he's ever going to declare victory. What's to be gained from doing that? It could all fall away at some point down the road. But I agree with you. That was the most interesting exchange of the hearing. If members of Congress are unhappy with the recent conduct of monetary policy, and you think back to the 50 basis points in September, some people said it looked political. Maybe you didn't need to do it. I mean, that was

where the commentary was going. But if members of Congress are unhappy, you sure would not have been able to tell from most of what lawmakers said at the Senate Banking Committee this morning. And so I think that just speaks to, you know, the economy doing fairly well. And if you go back two years and you told the Fed, this is the economy you're going to have, you know, they would have given their left arm for it. I've also been thinking a lot, like I know investors have, about the relationship between Powell and President Trump. The idea of what the president told Davos in his address, I'm going to demand that interest rates go lower. And the Treasury secretary really within the last week or so kind of walked that down to the point where we're not going to do that. We're really focused on keeping the 10 year note yield down. Powell obviously was asked about, you know,

could you be fired by the by the president? He's like, well, he doesn't. It's against the law to do that. I'm paraphrasing, obviously. But, you know, and I'm sure you heard what he had to say. I'm just wondering how you think big picture about how that relationship is going to evolve over the months ahead. The Fed chair clearly wants to do more cuts. It's just a matter of when, not if, one would like to believe. You'd also like to believe that the president would like him to cut more when the time is right. Maybe it's not going to be at the exact time that the Fed chair like him to cut more when the time is right. Maybe it's not going to be at the exact time that the Fed chair wants to, though. Well, Scott, I think the one I mean,

the one sort of bittersweet note in the exchanges of lawmakers today was around the long end and around mortgage rates in particular, because that's one place where you really haven't seen much benefit since the Fed began cutting. And it's one place where lawmakers are hearing it from their constituents. The housing cost is still quite high. And if Powell's right when he said today that he thinks the neutral interest rate is meaningfully higher than it was before the pandemic, that would suggest mortgage rates may not go much lower, maybe a little bit lower, but not much lower if the economy continues to hum along here. So I think that is a point of potential friction down the road. But, you know, Powell's done this rodeo before.

So the whole kind of Trump Fed show, it feels like we've been through that before. He's keeping his head down. He's trying to cultivate allies on Capitol Hill to provide some sort of guardrail if the going does get tough here. I mean, we haven't been through the Powell-Musk show, however, which took an interesting turn of its own today, which I'd like you to react to as well. We can show the post on X. There it is. All aspects of the government must be fully transparent and accountable to the people. No exceptions, including, if not especially, the Federal Reserve. What should we take from that? What should Powell think about that? I'm not sure. I think, you know, one thing to reflect on is that, I mean, Powell will speak on Capitol

Hill for two hours, three hours in testimony tomorrow. He did two hours today. And again, I mean, lawmakers have a chance here to ask the chairman of the Federal Reserve almost anything they want. So if they don't like what they're getting from monetary policy or from the Fed right now, they have a chance to do it. And sometimes I'm struck by the fact that lawmakers, you know, use their five minutes of questions to talk about things that the Fed doesn't really have a whole lot of sway over. Well, you make a good point. I'll leave it at that rather than rather than say anything else on that in that regard. We'll see tomorrow before the House, which is always interesting. Nick, thanks very much. That's Nick Timoroso, the Wall Street Journal. Thank you, Scott. You bet. Let's bring in Anastasia Amoroso of iCapital, Jack Manley of

J.P. Morgan Asset Management. It's great to have you both with us. So tomorrow morning, you know, the CPI is what's hanging in the balance, do you think, for the market that investors may not really be thinking about today? I think there's some hesitation going into the CPI print tomorrow because Nick Flagden and others have as well. There is this potential for one-off annual reset in price levels. And if on an annual basis companies do raise their prices, Do they still have the same ability to do that as they did last year? So bottom line is there might be scope for an upside surprise on inflation. And one point that I really found interesting from what Nick said is to what extent is the Fed going to look through the tariff thread and to what extent they're not? So are they going to

cut interest rates if inflation is sticky because of tariffs, or are they actually going to hold it steady? So tomorrow, when I look at the CPI, I'm going to be looking at what's happening with goods, what's happening with core services. And I do think if core services inflation continues to come down, that regardless of tariffs, there's scope for the Fed to cut interest rates. I thought very interesting, Jack, today, the commentary from Ken Griffin, the chief executive of Citadel, who was at the UBS Financial Services Conference and said of the proposed tariffs from the president, quote, from my vantage point, the bombastic rhetoric,

the damage has already been done. And it's a huge mistake to resort to this form of rhetoric when you're trying to drive a bargain because it's like imprinted tears into the minds of CEOs policymakers we can't depend upon America as our trading partner regrettably the other side of the story is the uncertainty and chaos created by the pair of dynamics between us and our allies is it in impediment to growth it makes it difficult for multinationals I mean there's one of the world's greatest investors saying that the rhetoric's not good, the damage has already been done, and there's chaos as a result.

Is that a problem for markets or no? I think to some extent it can be said that any sort of uncertainty from a policy perspective is going to flow through uncertainty at the executive level in any sort of business, right? And there may be a hesitation to invest there. The bigger problem for me, though, Scott, is how uncertainty around policy compounds with the uncertainty that we already have in data, right? This idea that Anastasia just brought up that maybe tomorrow's CPI print could be a little bit warmer. And uncertainty in data plus uncertainty

in policy translates into even more uncertainty in interest rates. It has a compounding effect there. And that volatility that we've been seeing in interest rates is likely only going to pick up over the course of the year, which then translates into choppy markets, stocks, and bonds. So that's where I think the issue really is, is just all that craziness. However, I would say that, yes, obviously, I think investors would agree with most of that. But we do have certainty in the place that you could make an argument matters more than anything else. Earnings. Earnings have been really good. Otherwise, the market wouldn't look like it does.

It wouldn't look like it did yesterday when you had all the reports of tariffs coming by the end of the day. The market was up. It's able to look past all of that because earnings have delivered. That's right. I mean, we've all talked about the choppiness and the volatility. If you look at the daily swings, they have been amplified so far this year. But Scott, if you look at the market returns, the S&P is up 3.14 percent. The Nasdaq is ahead. The AI power theme is, by the way, up 10 percent, despite what happened with DeepSeek. And I think it's spot on. It has to do with the fact that, yes, there are headwinds, but I think they're incremental headwinds and they're not going to derail the entire earnings story. And so consensus is looking for a 13 percent earnings

number from the S&P this year, another 13 percent growth next year as well. And let's say the dollar does appreciate and we shave off two or three percentage points of earnings growth. Let's say some of the tariffs do go into effect or maybe there's the uncertainty discount. Maybe this shaves off another, you know, a percent or two, but it doesn't derail that entire 13% earnings growth story. And I think that's why investors keep coming back to stocks. And by the way, they really keep coming back to artificial intelligence that continues to be the anchor for the market. I mean, this is why you you argue, Jack, it's a it's still a risk on environment. No one's naive to the risks that are out there, but it is risk on, as you say, Jack, it's still a risk-on environment. No one's naive to the risks that are out there, but it is risk-on, as you say, with a healthy dose of caution. Yeah. Because

of tariffs and because of other things and because of the potential backup in rates, a slower Fed than even we think now? It is partially tariffs, but that's certainly not the big story. You know, to me, what we're looking for in 2025 is this broadening out of earnings growth participation. It's something you've seen happen already in the fourth quarter. But a lot hinges on the macro data for that broadening out of the earnings story to actually take place. Right. This narrative was that, hey, rates are coming down a whole lot. Inflation's going to come down a whole lot and wage growth is going to come down a whole lot because the labor market's going to cool out.

And we don't actually know if these things are going to happen, at least on the margin. I like the way you put that, Anastasia. It's a marginal issue. So, yes, things are better now than they were a couple of years ago, but are they as good as we thought they were going to be a couple of years ago? That's where the question is. And so I still think you are going to have some winners and losers this year in the face of a lot of uncertainty, policy or otherwise.

The loser so far this year has been tech, right? It's the worst performing of the sectors out of the S&P. Whereas you have things like financials, which are up more than 6%. Healthcare is up better than 6%. Now, comm services is up better than that. Thank you, Meta, which is on this astounding and unprecedented run for any of these stocks.

But what about areas other than tech? Time to really lean in. You know what financials and health care have in common? They have the domestic focus. And if you think about the stocks that have really been outperforming in the last couple of weeks, especially as we've had this back and forth tariff ping pong, it's stocks that don't have a whole lot of cost of goods sold that are importing from outside of the United States. So think financials, think health care. And it's also stocks that are not selling a whole lot internationally. So they're not subject to those retaliatory tariffs. And so that's why tech, some parts of tech, non-AI parts of tech have been lagging. So, yes, I do think, Scott,

that it is time to focus and tilt the core of the portfolio to domestic sectors of the economy. It's financials, it's health care. By the way, it's quite inexpensive relative to the S&P. And it's also utility. So I think that's what the core should be. But again, I come back to artificial intelligence story. I think the Trump administration is going to continue to support the investment. And you mentioned Meta. You know, the biggest read through for me from Meta and the likes of Meta and Amazon is they continue to invest in artificial intelligence CapEx. So, yes, if you look at the SMH, you know, ETF, the semiconductor ETF, it's not gone anywhere. But if you look at AI semis, if you look at AI

software, it's up 18 percent for the year. So even in tech, you can find spots. I give you the last word. I mean, financials, health care, where you want to lean in. You totally agree. I do agree. Absolutely. I mean, you have that domestic focus, which is great. You also have some pretty interesting idiosyncratic tailwinds. You've got a lot of excitement in health care around in American innovation and GLP-1 drugs. In the financial services space, you have this prospect of deregulation alongside increased IPO activity, M&A activity, better markets, all of these things supportive of earnings in addition to macro tailwinds, in addition to that domestic focus. It's a good place to be. All right, good stuff. We'll leave it there. Jack, thanks. Anastasia, you as well. We'll see both of you back.

Let's send it to Christina Partsinevolos now for the biggest stocks moving into this close. Hi, Christina. Hi, Scott. Well, Fidelity National Shares are the worst performer right now on the S&P 500 after it reported disappointing revenue and guidance for the current quarter. The weaker guidance really shows a slower acceleration in revenue. Specifically, there's been some contract delays. Raymond Jane's analysts say this company has become a show-me-once-again story. They lowered their price target to $78. Shares are about down 10%, its worst day in almost two years. On the opposite end, let's talk about Intel shares.

They're moving right now up over 6% after Vice President J.D. Vance said the White House would make sure the most powerful AI systems are built here in the United States with American design and manufactured chips. The stock is the top performer on the NASDAQ 100, up about 7%. Keep in mind, Intel is building these fabs in Ohio, Arizona, et cetera. And so it's seen possibly as a winner and have support from JD Benz. Scott. All right. All right. We'll see in a little bit. Thank you, Christina. We're just getting started here. Up next, the latest on the escalating drama between Elon Musk and Sam Altman. Plus, it looks like Apple could have a new partner in the AI arms race. We will discuss all

that with big technologies. Alex Kantrowitz coming up after the break. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. All right, we're back. The war of words between Elon Musk and Sam Altman taking a new twist and turn today and potentially a very expensive one. Kate Rooney here to explain this latest salvo. Hi, Kate. Hey, Scott.

Yeah, so OpenAI CEO Sam Altman, the latest we've heard from him was on the sidelines of an event in Paris calling Musk's offer ridiculous. He said the company is not for sale. It's another one of Musk's tactics, as he put it, to try to mess with us. Musk saying through his lawyer yesterday

that he and a group of investors do intend to bid on OpenAI's assets for $97 billion. This could, among other things, throw a wrench in OpenAI's plans to convert to a for-profit. Musk is a co-founder of OpenAI. He is sued already to block OpenAI's restructuring. He now has a competing AI firm as well. I did get a copy of a memo Altman sent to his staff about all this. it. Altman says the board has not gotten a formal bid, but if they do, they intend to make it clear they have no interest in this deal and cannot imagine it being in the interest of what he calls the mission. He says the tactics are aimed at

quote, weakening us because we're making great progress. I did talk to UCLA professor Ellen April about this. She told me Open Eyes board would legally need to consider a formal bid if it does indeed come in, even if this is unsolicited. So because it's a nonprofit, it's going to be, it would be hypothetically selling assets to Musk. And one legal requirement is that they sell at fair value. So she sees this as a move by Musk to ratchet up the value of these assets. And while the nonprofit board is not serving shareholders like a traditional board, it is required to serve the public good legally, which is determined by the attorneys general, Scott. And something tells me we haven't heard the last of this, maybe even for this day. You let us know what else if there's if there's a new response from Elon.

I'm sure you'll bring it to us. Kate Rooney, thank you very much for keeping us up to date on that. Elsewhere in tech today, Apple shares the best of the mega caps thanks to the defense of a top analyst and some AI news from China. Our Steve Kovac is following that for Steve. Hey there, Scott. Yeah, this is coming off a report this morning in the information that said Apple and Alibaba, they're working on a AI partnership together. And this is all coming amidst this ugly China story from Apple. You might remember a couple of weeks ago when we reported earnings, they said sales in China were down 11 percent in that December quarter. And so now we have this new idea of a new AI partnership. Let me give you some examples of why Apple may be doing this. Apple intelligence still has not launched in China. When all these

reports started coming out about Apple intelligence, Baidu was actually the Chinese partner that was said to be the one Apple wanted to use in order to get this launch off the ground there. But they still need China's approval to launch and still looking for that chat GPT alternative. That's because, of course, chat GPT is blocked in the country. Tim Cook, he told us a couple of weeks ago that no artificial intelligence on the iPhone is part of the reason why we saw that sales slow down in China. But there's another factor here that Apple doesn't talk about as much. And it's the chart I'm showing you right now. Huawei's resurgence. Look at that. It is up 22.8% year-over-year unit change.

That means they've sold 22% more phones than they did a year ago, just eating into Apple's market share there. There is some potential hope in China, though. Eric Woodring over at Morgan Stanley, he focused some of his note this morning on these new subsidies over there in China for smartphones. Woodring over at Morgan Stanley. He focused some of his note this morning on these new subsidies over there in China for smartphones that includes Apple iPhones under $800. That would mean pretty much all the iPhone 16 line, just not the pro models. And by the way, Tim Cook teased that there would be more to share on this next earning season because basically the Chinese customers are

getting the subsidy of 15 percent on these new iPhones. So there's a chance here that could boost some sales growth. Finally, Scott. OK, Steve, thank you for that as well. That's our Steve Kovach. Joining me here post-night to discuss all is big technologies, Alex Kantrowitz. Welcome back. OpenAI first.

Your reaction to the Musk offer when you heard it was what? I mean, it's just typical Elon Musk. He is a person who acts based off of emotion. He hates Sam Altman, and he's trying to mess things up for Altman. Now, Altman has this big move that he has to make. He has to spin a for-profit off of a nonprofit. Not exactly traditional. In fact, I would say unprecedented in business history to spin off something the magnitude that OpenAI is going to try to do. And Elon Musk, he feels

jilted about the way that his money has been taken care of and his legacy has been taken care of after he helped found OpenAI with Altman under different premises. So he's trying to throw a stick in the gears. Does he have, and I discussed this earlier with Kate, does Musk have a right to be even more than angry? I mean, he put in near $50 million, okay, in the beginning, right, with Altman, of what was a non-profit. So you get no equity when you put that money into a non-profit.

And then if Altman wants to convert it into a for-profit, and now he's raising at a post-money valuation of like $340 billion, like the likes of which we have never seen for a private company. And they suggest that the nonprofit is worth but $30 billion, and Elon's going to get nothing out of any of this. Doesn't he have a right to be mad? Yeah, I mean, who wouldn't be mad? Not only

did he put all this money in at the start, it's not non-meaningful money, it's meaningful money that he put in. He helped found OpenAI based off of a mission where he found Google to be profit-seeking and developing AI in directions that he wasn't happy with. So he met up with Sam Altman and said, let's try to build something focused on safety, a non-profit, and I'm going to give money to start it. Now he's seen that OpenAI has gone in a different direction and he hasn't even been represented when it comes to going for profit. So anyone would be piping mad about what's happened. Well, it's one thing. Does he have a right to be mad? Does he have a right to the money? Some money.

I mean, if you put in 50 million dollars of what was a nonprofit and then suddenly it's not going to be a nonprofit anymore and you're like, well, well, I should have some piece of the upside to the conversion here. If I was in from the beginning and I invested alongside of you as a co-founder, what do you think is going to happen in court? Well, look, the circumstances of his exit are going to matter. Again, he left while it was a nonprofit. So that is going to play a role. However, I do think he is entitled to money here. It was his help. He helped seed fund the thing. So how are you going to go from a nonprofit with seed funding from Elon to a for-profit and not have his interests represented at all? Well, it's almost like it's a no-lose for him in terms of making the offer, trying to get a true, quote unquote, value for what the nonprofit is,

go to court and then see how how it all transpires from here. In the meantime, you also get to, you know, poke Altman at the same time, like you've been doing all along and seemingly taking great joy in doing so. Right. It's not like is it is this just to get it, Altman? It's partly that you would think, but it also has a lot to do with the money. Yeah, most definitely. And look, there's part of the messaging that's all about altruism. And Elon Musk is going to restore OpenAI back to its charitable mission. And you have to see through that because they do have a competing company in XAI that's

going after OpenAI in the very business that OpenAI has been dominating, and that is scaling large language models. So it's not like Elon Musk is going to try to return open source and help heal the world through his purchase of OpenAI. There are business incentives here. But I also like, I wouldn't fully discount the role that Pride is playing here. I mean, these two men really do hate each other. You could see it in Elon's comments and you could see it in Sam's comments. And ultimately, that does matter with these, you know, very rich people in Silicon Valley. I'm sure Elon didn't like when the president himself praised Sam Altman in the White House, no less.

Yeah, he risked his relationship with Trump by going after that deal and saying Sam didn't have the money. I mean, Elon has invested a lot in building this relationship with Trump. And to now say that, you know, one of the projects that Trump was announcing was effectively fake news is a pretty big risk that Elon took. Quickly, on Apple, the Alibaba move, how significant is that? As Apple's got a big problem, as we've said, in China, needs to reverse. Look, they get a little less than 20% of their revs from there. They got a problem there. Yeah, I think it's big if you believe that Apple intelligence is going to be the game changer.

Again, we saw the rollout of Apple intelligence and Apple iPhone growth still slowed down. So if you think Apple intelligence is going to be the game changer, maybe a year or two down the line, it's a good sign that Apple has found a partner in China that can build the models that it wants. You know, it tried with Baidu. That didn't work. We've seen a rise in Chinese AI and Alibaba is like right there at the top, maybe with DeepSeek. And now Apple is partnering with them. That's a good sign. So you have to be happy about that. It means that Apple intelligence is likely to roll out in the country after it got stuck because it couldn't satisfy regulators. But again, it all comes down to how big is Apple intelligence, and that's a major open question.

Excuse me. I appreciate you helping us understand all this. Alex Kantrowitz, thank you very much on big technology. Up next, top technician Jonathan Krinsky is raising the red flag on one key sector. He tells us exactly what it is next. We're back with some more Fed-related news for you. New York Fed President John Williams speaking as we speak at Pace University at the Economic Society right here in New York. He says monetary policy is, quote, well-positioned that modestly restrictive monetary policy should support a return to 2 percent inflation.

However, the economic outlook remains highly uncertain. Williams also says he expects inflation to remain around 2.5% this year and reach its target in coming years. We'll continue to monitor that, of course, bringing any headlines that we get them on the same day that you did hear from the Fed chair on the Hill. And you'll hear from him again before the House tomorrow. Up next, we track the biggest movers as we head into the close. Christina Partsenevelos once again standing by with that for us. Christina. Well, we have a beverage giant stock bubbling up on Wall Street, all thanks to America's growing thirst for zero-sugar drinks. Plus, why one major hotel chain's big bet on China could be backfiring.

Those details next. We've got about 15 or so before the closing bell. Back to Christina now for the stock she's watching. Coca-Cola, that's what I'm watching, because shares are popping on better-than-expected Q4 results. The beverage giant seeing growth from price hikes, unfortunately for all of us, but also increasing demand for sparkling soft drinks like Coke Zero Sugar. Shares fueling the Dow higher up about 4.5% right now.

On the flip side, though, Marriott isn't having such a great day. Their hotel business in China is struggling as Chinese consumers are being a little bit more careful with their spending. This is particularly challenging since Marriott has been actively growing its presence over there. The company disappointed its profits with its forecast, I should say, for the year. And that has sent shares down almost 5% right now, Scott. All right, Christina, thank you very much. Christina Partsenevelos, discretionary stocks selling off again today and adding to losses over the past week.

BTIG Chief Market Technician Jonathan Krinsky joins us now to share his outlook. It's good to see you. You're zeroed in on discretionary. Is that right? And the signal it might be sending? Yeah, hey, Scott. So discretionary is a funny sector. If you look at the cap-weighted version, it's obviously dominated by a handful of names, Tesla, Amazon. But when you look at the cap-weighted version, it's obviously dominated by a handful of names, Tesla, Amazon. But when you look under the surface, it gives you some pretty good signals. And what we know over the last 12 to 18 months is the low-income discretionary stocks have been considerably underperforming the high-income discretionary stocks. And that makes sense.

You know, we know the reasons behind that. But what we've seen over the last couple of weeks is some of not only the high income stocks, but the high momentum, the higher quality discretionary stocks start to give some poor trading action. And, you know, what we define as kind of false breakout. So that stocks that are in good uptrend that, you know, regardless of the news, they kind of gap up and then sell off hard. And we could give you a handful of those names, but it's really widespread across retail, restaurants, hotels, across the board. So that's kind of the issue. And then at the same time, we're seeing some of the consumer staples stocks actually start to assert themselves to the upside. So when you watch that ratio of discretionary versus staples, it can often give a good signal to the consumer so it's something we're really closely focused on here in terms of what it means for the the broader market the direction of the s p 500 is

that what you're getting at yeah so there's a pretty high correlation if you look at the ratio of discretionary to staples and you overlay that with the s p 500 there is a pretty good correlation um and that makes sense if discretionary is more of an offensive sector, you know, that's outperforming staples, which are a more defensive sector, that's usually a risk on signal. And that's what we've seen for the most part, you know, over the last couple of years. Now, it's very early that the ratio did hit a high in the last month or so, but it started to turn down. And again, it's looking under the surface at some of those false breakouts, names like Marriott, Restoration Hardware, VF Corp. Some of these leadership names in the discretionary space have really started to, you know, have some selling pressure under the surface.

And so, yeah, we're thinking it's, you know, potentially an early, you know, warning sign. I think it's a little premature to, you know, to sound the alarms fully, but it's something we're watching. At the same time, you're seeing subtle widening of credit spreads, which also has a high correlation to that ratio. So, again, very early innings, but something that, yeah, go ahead. I mean, you know, look, consumer sentiment recently was a little squirrely. I get it. Inflation expectations may be playing a role in why those stocks sold off. I think it's a little dangerous to look within it. You know, Tesla's obviously been driving everything lower within discretionary, down 10 percent this week, down 17 percent in a month. I hear you, though. So what are the what's the key level then to watch on the S&P?

You know, look, we're not as keyed in on the level. Obviously, on the upside, we keep bumping up against 6,100. The downside, there's various support levels that have to get tested to see any real concern. What we did note, though, is that the clock is ticking for a test of that 200-day moving average. Since 1990, there's been five calendar years when the S&P has not tested 200-day moving average at all, like it did last year in 2024. In each of those five years, the S&P did test its 200-day moving average in the subsequent year, and three of the five times came in the first quarter. So we do think the clock is ticking. Again, these consumer names,

I think, are worth watching as a potential canary. But ultimately, we do think, you know, there is some risk back below 6,000 for sure. All right, Jonathan, we'll talk to you soon. Thank you, Jonathan Krinsky. Still ahead here, Lyft gearing up to report in top of the hour in OT. We'll find out what's at stake coming up. We're back with some breaking news out of Washington. Eamon Javers joins us now with that. What do we know, Eamon? Scott, we know that Elon Musk is in the Oval Office right now and he's talking to reporters alongside President Donald Trump. This is a scheduled event. You see a picture there from reporter Jeff Mason of Reuters, Elon with his son. This is a scheduled event to sign some executive orders in the Oval

Office with the president. They invited the press in. They're speaking to the press. And what we know so far is that Elon Musk has said that basic controls are needed at Treasury in terms of spending. That continues a theme that he's been hammering for a week or so now in terms of what they're saying are improper payments going out from the Department of Treasury across the country. We'll see what additional detail we get here when the pool of reporters come out of the Oval with a full report for us. But what I can tell you is that I was told these executive orders that the president

would be signing at this time would be Doge-related executive orders. So efforts to curtail government spending in one way or another. And we'll see whether Elon takes more questions here. All right. You let us know, Eamon. Thank you very much for that update. That's Eamon Javers on the North Lawn Forest. Up next, what to watch for when lifting Gilead report in OT.

We do that in the Market Zone. And that's coming up next. Time for the Closing Bell Market Zone. CNBC Senior Markets Commentator Mike Santoli is here to break down these crucial moments of the trading day. Plus, two earnings reports we are watching in OT. Deirdre Bosa on Lyft. Angelica Peebles on Gilead. Mike, I begin with you. Sort of a kind of a whatever day ahead of CPI in the morning. Nothing big from the Fed chair today. Apple, a nice winner. And Meta going for that, what, 17 in a row now? Yeah, the market's kind of withholding its true feelings

here a little bit. It's very split. I looked a minute ago. The New York Stock Exchange up versus down stocks was 1,350 against 1,350. So volume's light in the index products. If you had to say there's a story, aside from what you mentioned with Apple and Meta picking up the slack, it's that Tesla's down $75 billion in market cap on the day, and the rest of the market is managing to counter it and keep the S&P harmless at these levels. I do think the kind of churn has a little bit of a flavor of defense and laggards kind of coming to the fore a bit. Nobody's having a real growth panic, but I do think that there's a concern out there that if everyone's eyes are on inflation and tariff effects of inflation, you might take your eye off the ball when it comes to a little

bit of waning momentum in the near term in the economy. But I don't think, again, the market has a strong enough view that that's what's going on to really overreact to it. Bond's kind of steady right here ahead of CPI. Lyft is going to report in overtime. The stock is D off 6 percent going into the number. That's interesting. Yeah, cutting some of those gains from yesterday and really over the last few months speaks to the idea that ride sharing appsaring apps have moved most on robo-taxi announcements. Will they be displaced or will they be a platform for a hybrid driver, no driver world? So in Lyft's case, that announcement yesterday that it will roll out mobile-powered robo-taxis in 2026,

that sent shares higher and still year-to-date gains are just over 10%, outperforming the S&P, but underperforming larger rival Uber, who's rolling out more partnerships this year. Now, in terms of the core, the existing core business, Uber's earnings and guidance last week, they came in soft. That's perhaps a mixed signal for Lyft. It won't have the same kind of Forex headwinds because Lyft doesn't have an international business. But we'll have to see on the cost and market share picture, especially as Waymo expands, Scott. All right, Dee, thank you very much for that.

That's Georgia Bosa, Angelica Peebles following Gilead, as I said. What should we look out for? Yeah, Scott, Gilead reporting fourth quarter results in just a few minutes. And we're looking at how its HIV drugs and cancer medicines performed in the quarter. Some of the key drugs to watch are Bictarvy. That's a daily pill for HIV. Descovy, that's a pill to prevent HIV, and cancer drug Tridelvy. All eyes are on 2025, though. Analysts expect Gilead's revenue will take a hit this year from changes to the Medicare prescription drug program that requires pharma companies to cover more of

the cost. So we're looking for Gilead to quantify what the impact will be. We're also watching for details on the upcoming launch of Gilead's long-acting HIV prevention shot. It's the most closely watched catalyst on the horizon for Gilead, and analysts want to know how Gilead's preparing for the rollout later this year. So we'll be listening for that. Scott? Angelica, thank you. We'll look out for those numbers in your reporting when they do come out. Mike, I mean, health care is back with a vengeance this year. Yes.

Up 6%. What are the better performing sectors? Although there are a lot of them. I mean, it's pretty wide. It has been a swath of gains sharing the wealth a little bit more. Yes. And within health care, it felt like it was mostly a move of, you know, the neglected sectors of last year, you know, getting a little bit of a bid. But now it is more of a forceful outperformance that we've seen right there. I do think you have to be careful in terms of the kind of high momentum names. You mentioned Meta. It feels like they're just kind of emptying the tank to get this last quarter percent of upside. You've got Palantir down 3.5% today.

You've got Robinhood down 5% after absolutely massive, very vertical runs higher. But it just sort of shows you a little bit of fatigue in the retail favorites that have been pacing that part of the market. So, again, it's not something where you say, oh, the market's character has changed overnight. But it's showing you the maturity of some trends. What did you make of what Ken Griffin down at that bank conference had to say about the prospect of tariffs, some of the rhetoric causing damage that's already been done. And, you know, it's going to be a hit on growth potentially. I think he's giving voice to the way the market instinctively feels about process. It's not necessarily the goals that there's an issue with or even that there's something specific in terms of a fear.

It's a matter of, it's just kind of an erratic decision-making process. It's not like tracking legislation through Congress where you can kind of handicap the probabilities. And it does feel as if the intent is to kind of move almost too quickly to have people figure out what you're going to do and what the implications are. That seems like the mode. So I am not surprised that Griffin, as a general kind of free trade, free market guy, is much more interested in getting the process clear,

making sure the ends are known, and then proceeding methodically. Well, he knows that, you know, look, markets don't like uncertainty, and markets like chaos even less. So I think that's what he is understanding. In the short term, yeah. All right, so bells ringing out, and we're going to go out next. That's us for us. See you tomorrow.