Closing Bell - Closing Bell: Too-Stretched for Comfort? 5/31/24

Episode Date: May 31, 2024

There was no sell in May and go away as the major averages pace for their sixth positive month in seven. But what’s next? NewEdge’s Cameron Dawson, Hightower’s Stephanie Link and Odyssey’s Jason Snipe tell us if they think stocks can climb in June. Plus, Dell tanked after last night’s earnings. But EMJ’s Eric Jackson has been saying he sees the stock as a “stealth play in AI.” He explains where he stands now. And, clean energy had a huge month. Pippa Stevens tells us what names drove that space higher… and if the rally can continue. 

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 some big questions about this rally. Is there enough to keep stocks climbing in June or is this market already too stretched for comfort? We'll ask our experts over this final stretch, including Goldman's Tony Pasquarello. He will be here at Post 9 in just a little bit. In the meantime, your scorecard with 60 minutes to go in regulation in the week looks like this. The Fed's favorite inflation read came in as expected. The market, though, unable to get much of a PCE pop.

The Dow's up about two thirds of one percent. But as you see, the S&P and the Nasdaq are negative yields. They're lower, too. But as we said, stocks not getting much of a bump from that, nor is tech. It's the weakest sector today, as names like NVIDIA, Microsoft, Meta, and Amazon all give a little bit back today. Gap, though, is surging after its earnings. Dell, though, the opposite direction. It is dropping and dropping sharply by 19% on its outlook. It does take us to our talk of the tape.

There was no sell in May and go away as the major averages paced for their sixth positive month in seven. Big question now. What now? Let's ask Cameron Dawson, chief investment officer for New Edge Wealth, here with me, as you see, at Post 9. Welcome back. It's nice to see you on this Friday, last trading day of the month. That is the big question. What now? April was bad. We roared back in May. What do we do from here? I think we have to appreciate just how much deterioration there has been under the surface and a lot of churn. The market's been a bit like a duck, calm on the surface, but a lot of commotion underneath. And what that's resulted in is deterioration in breadth. Only about 40 percent of names are above their 50-day moving average. We've seen a waning of momentum, So the market's kind of losing some steam.

We think that translates to a bit more volatility. It's not the end of the world. It's not to say the rally is over, but to say that we have some more churn to happen. That volatility is likely viable as long as growth estimates hold in. But that's what we what we will be watching for in June. Is the narrowness that you point to unhealthy or is it just fine? It is disconcerting to see the amount of deterioration we did in some of the broadening out trade. It evaporated in a second over the last two weeks. You saw industrials completely reverse all of their relative performance over the last year or the last year to date in just two weeks. So some of that is concerning to see the deterioration in trend, which again just suggests that there likely is some more volatility to go.

What gets the trend going again? Is it because of a growth scare? Is it in part because rates had backed up? What is it? Well, what got this trend kind of deteriorating is I think that there has been more question about rates and the Fed and this question of if we could have a Fed hike back on the table. We don't think the data as it stands necessarily supports a Fed hike at this time. We think that PCE is just in this kind of middling territory where it's not cool enough to say that they can cut, but it's not hot enough to say that they can hike, which means that we did see a little bit of a lift in the market today on that data, maybe taking those hikes off the table. Well, let me ask you this. Why don't we see more of a lift in the market today on that data, maybe taking those hikes off the table. Well, let me ask you this. Why don't we see more of a lift in the market today on the data?

I think we move very far, very fast. Tech is what's dragging this market down. And if you look at tech valuations, they're trading back to 2021 highs. It raises the question, is 28.9 times or around 29 times the ceiling for tech? Yes, the earnings are great. You're seeing earnings revisions move higher for tech. However, positioning is very stretched. And you had Jeff DeGraff on the program yesterday, and he talked about option positioning within semiconductors being extraordinarily stretched. So if tech doesn't work, that's why this market has trouble. But tech is what's lifted this market up from the bottom, right? Tech is up 8%.

The sector's up 8% in the month of May. The NASDAQ's up 5%. So you're talking about much more recently where some of these trades have started to unwind, really in the software space. Like if we showed you this week, and you guys can throw them up if you want, Salesforce, ServiceNow, Oracle. You can throw up some others too that pretty much tell a software role. And we have seen software rolling over really for the last two months.

It's been under the surface where we saw Microsoft spend a lot of time below its 50-day moving average. And so we think that software has been deteriorating for some time, and it's not cheap. It's trading at about 30 times. That's up from 22 times just a few months ago. So what you have is, again, crowded positioning and a lot of high expectations that are then being met with these high valuations. You mentioned a graph over at Renaissance Macro. He says of software from cracks to canyons, at a minimum, the bar is now higher for holding software names as the strength of the group has now become more of a headwind than a tailwind.

How big of an issue is it if the sector continues to trade poorly as long as the mega caps do what they've been doing and chip stocks have been doing what they've been doing? Well, some of software is a mega cap, right? Microsoft is a mega cap, right? Microsoft is a mega cap. And what we'd say is the way we would judge it is that if we see these counter trend rallies or a bounce off of oversold conditions, right? Salesforce is very oversold. Look to see how it does in that bounce. If it hits resistance and it rolls on over, it could call into question some of the earnings estimates and some of this very bullish sentiment for a lot of the software and broader tech space. All right. So Microsoft's down about five and a half percent on the week. NVIDIA has been, you know, unbelievable, to say the least. It's up two percent on the week. Apple's had a nice little comeback. It's going to be virtually flat on the week. What about within the Mag7, the fact that you could have a Microsoft do

what it's doing, but NVIDIA and Apple, right, the money rotates around within that mega cap group. Yeah, we've seen Tesla fall out of that magnificent seven groups, certainly this year. I think the real test for the mega caps will come in the second half of 24 into 25. And that's because we see a meaningful earnings deceleration for a lot of mega cap names. NVIDIA's earnings go from 120 percent this year down to

about 40 percent next year, a similar rate of decline or deceleration for Amazon. And so how will the market tolerate big second derivative declines in the pace of earnings growth? The earnings are still extraordinarily impressive. However, you'll have to square that with where valuations sit. All right. Let's bring in CNBC contributor Stephanie Link of Hightower and Jason Snipe of Odyssey Capital Advisors. Good to see you both. New month. What do we think for stocks? Jason Snipe. So I feel good, Scott. I mean, when I look to when I look to earnings, earnings growth rate was five point nine percent. That's the best earnings growth rate we've seen since q1 of 2022 you know we had an earning surprise uh eps beat around 72 percent well i'm sorry 78 so very positive earnings story

now as it as it relates to some of the macro data that we've seen over the last couple of weeks and and and even over the last day or so obviously pce came in line you know prices paid were slightly softer um than we what we expected consumption was two percent this this month as opposed to two and a half percent that we saw last month so there is some deterioration and i think also from a consumer perspective there absolutely is some discernment around spend. I think the consumer is looking for value in the marketplace, but margins are still good and earnings are still good. So I'm relatively positive for the next six months of the year. Steph, I hear people talking about, you know, chop, expect more chop, expect more volatility if, you know, rates remain where they are.

You know, we're going to be picking at every single data point, whether it's related to the economy at large, consumer spending. Is that how you see it? Yeah, I think because earnings were done with them for the most part, I think we're very much focused on the macro and the economic data points and also obviously on the Fed. Next week, we get nonfarm payrolls. That'll be an important number. I think it's going to be pretty strong with average hourly earnings of about 4%. The following week is even bigger because you have the Fed meeting and then you have CPI. And we really have about five weeks until we see earnings again. And so we're going to probably

slosh around, Scott. But I think looking at the data this week it wasn't all that great it was it was pretty mixed but I think about kind of the consumer which is the backbone of the economy and the job market still remains very strong and that's what's key to me and that's what makes next Friday's number so important I can't explain the Chicago PMI to you today I wish I could I think some of it what it was so weak that I think some of it was so weak that I think some of it was Boeing, but it's still under 40, which is really quite contracting. But I still think within manufacturing, there are pockets of where you want to be, aviation and

grid and power and sort of thing. So if consumer is OK and parts of manufacturing are OK, inflation is coming down. I think the setup into earnings is probably pretty good, but I'm not expecting a lot of move here on the upside over the next couple of weeks. Yeah. I mean, I don't know, Cameron, if you can suggest the consumer broadly is OK. It seems bifurcated. Some consumers are OK. Some consumers are not OK. All consumers may at some point be pulling back their spending. We've got 10 days or so till the Fed decision. Are we in some level of no man's land until then? I mean, the jobs report, as Steph said, is going to be critical, but we're going to get the outlook, too, with this next Fed meeting, right?

We didn't have it this last time, but we are going to get another one. The so-called dots are going to give us a little better idea about the roadmap, if you will, for cuts. And that's the thing to watch. We think it actually will be a hawkish dot plot, at least relative to March, where you had three cuts priced in. We think this dot plot could be two and maybe even one cut priced in for the rest of 2024. Is that a problem if that happens? It was a problem last year when we did get a hawkish dot plot. But if you think about the commentary out of people like Lori Logan and Kashkari who are saying we're not even sure if we're restrictive, we think that you could get some defectors higher in the dot plot where they're saying

we don't think we could cut rates at all in 2024. I don't know. I mean, the president of the New York Fed yesterday laid out a pretty good case that he thinks they're restrictive. I almost felt like he was building a case to be able to cut rates sometime this year, at least once. Look, there are certainly areas where you can see signs that interest rates are finally starting to weigh on the economy. But what Lori Logan really was talking about is that financial conditions up until a couple of weeks ago remained at their easiest level since 2021, with stocks at all-time highs, with credit spreads being really tight. So you ask the question, how much are interest rates actually weighing on that part of the economy?

We think nonfarm payrolls, as Stephanie said, is the thing to watch. If we get a weaker print, that's what opens the door for Fed cuts. All right, we've got to wait a week. So we're going to have to watch gyrations around parts of this market, including tech, Jason Snipe. I'm wondering if valuations have gotten to the point where they're a more severe headwind than they have been in the past. The forward P.E. on the sector at large is near 29 percent. The 10 year average is a touch below 20. I love the chart that Goldman Sachs put out today about valuations, the S&P 493 versus the MAG 7. You see the dispersion between and the divergence between the two of those. How about that? Valuations in a sector that, you know, now we've

gotten more narrow, so we're more top heavy again. How do we see that? We're absolutely stretched, Scott. I mean, we know about the price action over the last five weeks. It looks like it's obviously going to get broken this week. You know, we know about the price action over the last five weeks. It looks like it's obviously going to get broken this week. You know, we know about the AI halo effect and all the names that reside in the space and how well they've done, you know, over the last several quarters. But I would say going forward, you know, and I look at some of the blowups that we've seen, whether it's MongoDB, whether it's Salesforce or you name it, there's been quite a few. I think the margin for really a strong call and a strong report is obviously growing smaller. And I think as it relates to AI, we've talked about last year was kind of buying just the idea, AI and all the integration that will happen. And we see all the spending from the hyperscalers.

It doesn't matter which call you were on to see what's going on there. And now it's just about what is the use case and how is that going to show up in revenue? And that's clearly what we did not see in Salesforce. It's going to take some time. So we're in this really interesting space where we're going to have to wait for some profitability on the use cases going forward. And I think when you look at the multiple and you look at that Spread I think that's where we've seen some of the difficulty that we've seen over the last few days

Steph are we supposed to buy these software names on the dip? It's your snowflakes down thirteen and a half percent Adobe's had a bad week We said Salesforce and service and snow, you know, it's no big as we said, Oracle, Mongo, what do we do? Well, I think there's a really big difference between semiconductor companies and software companies. Semiconductor companies can't make enough of the chips. There is a supply constraint situation. And so on the dips, I think where I'm going is I want to buy some of the semiconductor companies that have the pricing power, that have been monetizing AI along with other parts of their businesses.

And I would argue there are a couple of companies, you know I own Lam, where we haven't even seen wafer fab equipment and NAND pick up yet. So I think that's a second half of the year story. But I want to own more of the semiconductors. On software, you want to be really careful. A lot of the valuations are very extended and they are still in product development with regards to AI and they're not monetizing as quickly as the expectations have been. And so that's why I think you want to be very particular, very careful.

There's going to be a time, Scott, because if you look at the software ETF, the IGV, it's down 14 percent from February 9th. So it's already corrected quite a bit. We know some stocks are down even more. So there's going to be a point where you want to add to them. I'm just not sure as yet. I mean, you suggest that other sectors are picking up the slack from whatever pullback we're seeing more recently within technology. I mean, that may have been the case, but not so much now. Most other sectors are down on the week, particularly the ones that had done quite well.

I'm looking on my screen, for example, things like year-to-date utilities up 7%. Well, they're down this week. I'm looking at energy and I'm looking at consumer staples. Those types of things haven't been working well lately. They haven't. And, you know, this past month was not easy for that, those sectors and for the broadening out. But I do think in the last two days, it's only two days, but in the last two days, as tech has melted down, the other sectors are picking up steam. If you look at energy, energy is up today. Financials, financials are up today. Some industrials are up today. So I think if we can continue to, if we continue to see the meltdown in software and in technology

in general and people just taking profits, if it goes into these other sectors, that's actually quite healthy. And it should go into these other sectors because the earnings for those sectors were quite healthy. And it should go into these other sectors because the earnings for those sectors were quite good. What about, Cameron, these other sectors? Believe in them? No? I think that you can buy great companies in any sector if they're oversold and uptrends. But we think that this churn in the market that you're seeing where it really lacks conviction, the fact that you saw industrials, as I mentioned, give up all of their relative performance, financials really break down on a relative basis. Just shows that this market doesn't have conviction right now.

And we think that that's pretty interesting compared to the fact that if you look at positioning and sentiment, they still remain pretty elevated. Sentiment is in the 90th percentile, positioning 94th percentile. So maybe that says that this market still could be caught flat footed simply because you have high expectations. Jason, it feels like the market cannot, you know, is going to have trouble dealing with a moment where NVIDIA rolls over again. I mean, let's remember, it's not that long ago that the stock had traded from nine something to 750. Now it's, you know, near 1100. Okay. Given the narrowness more recently of the market, what happens if there's a role in NVIDIA? Jeff DeGraff yesterday, as we've been talking about a couple of the calls he made, suggested that the chip names could potentially

go down maybe 20 percent, not excluded, you know, not singling outling out nvidia but just the fact that they were so amazingly overbought 100 scott and i mean you know we talk about nvidia all the time but i mean in the last two years it's added two trillion in in market cap so what we do know which we don't talk a lot about is there's absolutely boom bust cycles as it relates to semiconductors not to say that that's anytime soon as it relates to NVIDIA and the infrastructure and what they provide in terms of their GPUs. But yes, when you have a stock that's got a $2.8 trillion market cap rolls over, there clearly will be an impact on the market.

I just don't see that in the near term. But I do think, as Steph kind of alluded to earlier, I think as we kind of, we're in this interesting space where I think the price action will be, you know, we'll see a lot of back and forth. I don't, because I think the market is looking for a new catalyst, and we'll have to likely wait for a few more weeks until earnings start all over again. Steph, how about that question? I mean, you suggest that the market's broadening out, when in fact it really isn't.

Not now. It was. that the market's broadening out when in fact it it really isn't not now it was so it if nvidia has a moment here where it gives something significant back again what's going to pick up the slack well i mean as i as i mentioned the earnings have been pretty good in the other sectors and so i think you can look and point towards some of the industrial companies in the themes that i like, as I mentioned, aviation and grid and power and that sort of thing. If those stocks come down, I'm a buyer all day long. That's a decade-long theme in both of those subsegments. I think energy is certainly interesting. I love the M&A that we're seeing.

Obviously, these companies, the CEOs and the management teams, see real value. And we've seen about $500 billion worth of M&A in the energy sector in the last year. So they see value. I see value as well. And I'm encouraged, again, that they're up today. They were up yesterday. And I think some of the materials names. And then also, the companies that you and I talk about all the time, those companies

that are creating value for shareholders, like the ones that are spinning out non-core businesses. And there are so many of those out there that are offering great value and great ideas. So I'm looking for any kind of choppiness to be adding to those sectors. You know, I also I do like tech. I've been adding and I'll continue to add there, too, if we get if we get a good opportunity. Again, these stocks are still up so much. Expectations are so high that it breathe for a little bit and let other sectors take the slack. We're going to breathe ourselves. Take a little break. Cameron, thank you, Steph.

Thanks, Jason Snipe as well. We'll send it to Christina now for a look at the biggest names moving into the close. Christina, much like we saw with Abercrombie yesterday, Gap is also seeing a resurgence among shoppers. Feels like my old high school years all over again. But Gap's brand, Old Navy, Banana Republic, Athleta, posted positive comparable sales for the first time in years. Management also raising their full year guidance. And that's why you're seeing the stock almost 29% higher right now. And we're going to stick with retail because there's a shakeup in the retail space. VF Corp snapped up a former Lululemon chief product officer as its new Vans global brand president. Wedbush says the new hired VF Corp, which owns Vans, other brands like Supreme, North Face,

they said, the analyst said, it's a much needed step in the right direction. And that's why you're seeing shares up 8.5%. Yeah. All right, Christina, thank you. We're just getting started. Christina Partsenevel is joining us there. Up next, Goldman's Tony Pasquarello is back with us to tell us which sector he is calling the best game in town. He'll tell us right after the break.

Live at the New York Stock Exchange, you're watching Closing Bell on this Friday on CNBC. Welcome back. Tech stocks taking a hit today. NVIDIA sliding more than 1%. NASDAQ now on pace to snap its five-week win streak. Let's bring in Tony Pasquarello. He is head of hedge fund coverage at Goldman Sachs. Got a real good eye on what the biggest money is thinking and doing.

Welcome back. Thank you, Scott. So you've been pretty much urging investors to remain fairly positive, if not bullish. Affirmative. Okay. Month coming to an end. Now what? Well, we should call it what it is, which is a pretty tricky week that closes out an otherwise totally respectable month. And so I don't want to dismiss

this week because it's been messy and really messy in specific parts of the market. But I'd say point to point, we're still looking at S&P up 4% for the month, NASDAQ up 5% for the month. I think could the market continue to chop around and do some work? I think it probably will, for sure. I think the big dynamics in the game more broadly are still pretty favorable. Why do I say that? We think growth is fine. We think the U.S. grows, call it 3% this quarter, 3% this year. I think that's a good backdrop for risky assets. On the Fed, I know you had Jan Hatsias on recently. We think they cut in September. Do they? Do they not? I don't know. I just know the Fed can avail themselves of 525 basis points should they need to. And then the view on mega cap tech is still, for me, just don't constrain your imagination around the supremacy of the biggest and the best companies on planet Earth.

Is the technical setup demanding? It is. Is valuation demanding? It is. Do we have, again, a couple of hot spots in the market this week we need to sort out? We do. So I think, I guess what I'd say is I think the primary trend is still higher, but I think probably the gradient of the rally or the upside can actually see the rally will be flatter in the next phase of the game. But if the technicals and the valuations of large cap tech are a little challenging,

what does that mean from a performance standpoint, do you think, as the summer gets going? Well, I think what I'll continue to do is separate U.S. mega cap tech, the Magnificent 7, from the rest of the tech stack. And so I still look at the Magnificent 7. I think to myself, convexity to the AI theme, buybacks, capex, a bit of dividends, and then that sustained superior earnings growth. On a given day and a given stock, of course, there can be softness.

I just think as a cohort, like I said, I don't want to constrain my imagination about what these companies can accomplish. Keep your eye on the ball is how you've been telling your clients to think about these names. 100% correct. You called them, I think, earlier in this week, the sword and shield. The implication being that they give you offense when you need to play it, and they protect you when you need a little bit of protection. That continues as well? I think so. And again, there's going to be at various turns parts of that cohort that fall off the pace. I mean, Tesla's been down meaningfully all year. The Magnificent Seven as an index unto itself is still up 20 percent. And so I'm not.

Thank you, NVIDIA. Thank you, NVIDIA. And, you know, thank you. I mean, the majority of that stack is slough. NVIDIA is the bright and shining example of this winner to take more dynamic. Yeah. I still think we're going to live with that in the next phase of the game. But what happens if the shiniest example of the mega cap rally starts to get a little tarnished? Sure. What happens? It's going to be a tough putt. It is, I think, the most high-profile stock on planet Earth. Since October of 2022, when everything made that low, a $280 billion market cap became $2.8 trillion. Why? Because earnings grew tenfold. So it earned that. I think it's now a question of kind of the law of large numbers and sustainability. Again, I'm not smart enough to

know when to sell that stock. I hope I'm smart enough to basically stay out of the way of the law of large numbers and sustainability, again, I'm not smart enough to know when to sell that stock. I hope I'm smart enough to basically stay out of the way of the upward momentum. And I think, you know, you go into your Twitter feed and you find some of these, I think, kind of lazy analogs drawn to Cisco in the year 2000. And I think to myself, well, if you were too early to that trade in 98 or 99, that stock rallied 140

or 150% per year into the peak. So I'm just not willing to say now's the time to sell that stock. OK, I think the other question beyond, you know, whether tech is too stretched or valuations have gotten too rich is the consumer, where you suggest that the consumer will, quote, defy the bears. What gives you that confidence? With appreciation for how much pressure there is at the very low end of the income stack. If I take a bigger step back and I take a look at the U.S. consumer in totality, I'd say, again, U.S. is growing above trend, full employment. Wages are now outrunning the rest of the inflation basket.

So real household disposable income is going up as the year goes along. And I think it's kind of this Rick Reader point about the balance sheet. So, yes, $20 trillion of debt is a lot of debt. $156 trillion of household net worth is enormous. And so I think that the compounded effect of the wealth effect from the housing rally and from the stock market rally is now measured at $50 trillion in the COVID era. And so I think, again, there will be selective pressures for sure. But I think in totality, if we're right on the labor market and we're right in the economy, the consumer is going to be OK. So you believe the story that I'm glad you mentioned Rick Reeder.

He made that case right here on this program, specifically as it relates to the baby boomers. The amount of money that they have amassed, whether it's been, you know, growing their cash through either the stock market or money markets or, you know, for whatever. And now they have amassed, whether it's been growing their cash through either the stock market or money markets or for whatever, and now they have all of this investable income. Really buy into that story. I think the point that he made very well is for the first time in 30 years, households have more cash than they do debt. That's a change. That's not something even in our long careers we've seen. And so I think the longer you park your money wherever you do

and you effectively earn five and three-eighths, that's an up arrow for consumption, not a down arrow in the context of interest costs. Are you, last question. So I said 10 days or so we get this Fed decision. We get to see the so-called dot plot. Give us an idea of when we may get or how many cuts are expected. If it's more hawkish than the market expects, is that a problem? Are

you thinking about that in your near-term forecast for the market? So the Fed wrote down three in December. They stuck through to the present day, as you say. The market's pricing less than two, though. So I think if there was a modest adjustment, I don't think that's going to be a big surprise for the market. What if it's none? I think that would be some local turbulence, for sure. Now, I would say this. I think the bar for them to raise rates is very high. The bar for them to delay cuts is very low.

And so where I keep coming out is I think they're probably going to leave the car parked at 5 and 3-8s for a while longer. And I think we know from the past year, since last July, the U.S. economy and the U.S. stock market can do just fine at 5 and 3-8s. Okay. We will see what happens. Tony Pascarillo, thanks so much. Thanks, Scott. All right. Tony, joining us, of course, from Goldman Sachs.

Up next is Dell's run done. That stock, there it is, getting slammed today, dropping double digits following a year of serious strength. Now, EMJ's Eric Jackson, he is flagging Dell as a key player in the AI space. I mean, that's what they've been saying. That's why the stock's been doing well. Not so much today. He's going to tell us what to do now next. We're back. Ugly stock in this market today is right there, down near 18%. It's Dell. And that's after last night's earnings.

Shares are heading for their second worst day ever. Investors reacting poorly to weaker than expected backlogs for its AI servers. Earlier this month, EMJ Capital's Eric Jackson told me he sees the stock as a stealth play in AI. He joins me now to share how he's playing that name. Welcome back. It's good to see you. Hey, Scott. Good to see you. Was it really stealth? I thought the stock was doing pretty well because it was caught in this AI halo effect. And now we're seeing what happens maybe when your outlook is disappointing. Well, it wasn't one of the immediate names that I think people were defaulting to as an AI play,

like Supermicro was that had obviously a great run earlier in the year. So it was flying a little bit more under the radar. In the last two weeks, it came out of stealth mode and it's been doing crazy. So even on this tremendous pullback today, we're only trading back to levels where the stock was back on March 4th or May 14th, rather. So we've round-tripped the last two weeks. And I think when there's a level setting now of what they've delivered and where the stock is going, I still like it because this thing is cheap relative to a lot of other AI names. It trades at 10x forward EV to EBITDA. Compare that to a super micro at 16x forward EV to EBITDA or Avertiv at something like 26x.

This thing is still a steal, in my opinion. Are those the right comps to put it up against rather than some of the other larger names? Well, for their AI server business, I mean, I think those are the right comps. Obviously, a big part of the Dell story also has been the PCs. And that was sort of like an anvil around their necks for the last couple of years. But, you know, earlier this week we saw HP, you know, jumping off the mat because there were signs of life in the PCs there. We hear talk now of AI PCs from a couple of weeks ago when Jensen spoke about them. So I think there are a lot of reasons to look positively.

The big question that hurt them last night was from Tony Sacanaghi on the earnings call, where he said, where's the money that you're making for the one point seven billion in new money that you delivered this quarter relative to last quarter in AI servers? We didn't see a bump in operating income. And that's a totally fair point by him. But, you know, this they will be making money. And, you know, there are rumors that they they want a big deal with with Tesla and Elon, where they probably had to take a price cut. They are going to sell professional services against all these AI servers that they're shipping.

And most interestingly, they're going to sell a lot of storage services. So they didn't show that last night in the prior quarter. But I think there are a lot of reasons to get excited. And again, with the valuation, I think it's going to be compelling for a lot of people. Interesting. You suggest to us that you've been putting money to work in names like Coinbase and Carvana. But the one that frankly jumps out the most to me is Arm Holdings. The reason being that we've had some calls on this program this week, yesterday, if not the day before, that that space is so

stretched and it's susceptible for as much as a potential 20 percent downdraft. Well, you know, obviously there are haves and have nots in the chip land and NVIDIA is the poster child of what happens when things go right and when gross margins are high. But I do like Arm. I do think that they're producing CPU-based chips, which some would say is not as exciting, obviously, as the AI space. But you need those chips in all these AI servers that are being built out. And they have a great partnership with Nvidia.

Nvidia obviously tried to buy them several years ago. They're also rumored to be the chip that's going to be powering the latest iPhone that's coming later this year. We'll find out about that. They've documented that as they sell more chips this year, their royalty rates are stepping up increasingly. So it's not a value play like Adele is, but I think there are going to be a number of catalysts for a name like Arm, you know, for the rest of the year that make me think that it is going to continue to pop on those news events and do well. Coinbase is interesting. It's down more than 6% on the year. I feel like, you know, these stocks, just like crypto itself, is a barometer of sorts for risk. Risk has been a little bit choppy and uneven this week.

How do you think about that if you added to it recently as we enter a new month for the markets as a whole? Yeah, they're a proxy play. I agree with you for risk in general. But obviously, Coinbase is the biggest public company of all the crypto related stocks that trade. And as crypto goes, so goes Coinbase. And I think the theme that has played out this year and I think will continue to play out is sort of like the crypto being a digital gold, the debasement of the U.S. dollar, fears about that. And obviously, first half of the year, the big event was the Bitcoin ETS.

But now we have confirmation that we're going to get the Ether ETS later this year. We don't know exactly when, but if you go back to the charts, Coinbase really took off when it was evidenced that the flows were coming into the new Bitcoin ETFs. And, you know, chances are that we'll see something July, August for in terms of when these new Ether ETFs will start trading. And so I do like Coinbase to continue to rise as we start to see that, you know, the new

flows come into those ETFs. Up to 50 percent in a year. So I can see why you like that chart, at least over that time period. Eric, thanks. We'll see you soon. Thanks. It's Eric Jackson up next, tracking the biggest movers into the close. Christina Partsenevelos is standing by once again with that.

What do we see now? Well, Scott, we have the CEO of a software firm that's promising investors. No, they're not losing market share, but investors are saying otherwise. And another tech stock that was priced to perfection heading into earnings, perfection that was promising investors. No, they're not losing market share, but investors are saying otherwise. And another tech stock that was priced to perfection heading into earnings, perfection that was not had. Those names next. We're about 15 to the closing bell. Let's get back to Christina now for the stocks that she is watching. Shares that were priced to perfection. That's what Oppenheimer says was the case for Marvell Technologies, a chip firm, and other tech names like Dell as well.

Despite the 7% sequential increase in data center sales, also up 87% year over year, management also calling for bottom and cyclical segments. Marvell shares still selling off, almost 10% lower right now. But I read a bunch of notes, Scott and Wall Street still remains quite bullish on this particular name. That's not the case, though, for MongoDB. You can see shares are down even worse, down, what, 25% right now. The database software maker issued light guidance for the quarter and cut its forecast for the full year due to macro conditions,

but assured investors they weren't losing share to competitors. So don't worry. Scott. All right, Christina, thanks so much. Still to come, Caesars is surging thanks to a fresh bet from't worry. Scott. All right, Christina, thanks so much. Still to come, Caesars is surging thanks to a fresh bet from Carl Icahn. All those details are just ahead. What it could mean for the rest of the entertainment space as well. The bell is coming right back. Got a little something going here as we edge towards the close on this Friday, the final trading day of the month of May. Dow, Dow's at the highs of the day, almost 400 points.

S&P's gone positive. NASDAQ's still negative, but it is also off its lows of the day as well. We're back next with clean energy getting a big boost this month. It's best month-to-date performance in years. We're going to tell you which names are driving that higher if the rally can continue when we take you inside the Market Zone next. We're in the closing bell Market Zone now.

CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, contested Brewer on Carl Icahn's big bet on Caesars. Clean Energy, it's among the top performers this month. Pippa Stevens with those details. Mike, begin with you. We've got a nice move, as I said. We're going to go 500, it looks like, right now on the Dow.

Yeah. S&P is up 33 points, so that's the highs of the day there, too. 52.67. Banks looking good. Had some buying in Apple, in Alphabet, in Uber, even NVIDIA is off the mat. I would put more weight into the majority of stocks being up most of the day in response to lower yields and the fact that we got an on-target PCE inflation report. Then this little melt we're seeing into the close, it probably, and not to say it's illegitimate, but I'm almost sure it's month-end and also quarterly MSCI index rebalance. Whatever had to get done over the course of the day seemed

to get done, and now a little bit of a bid into the close. Big picture, market's been a little sloppier, as people have been saying this week. It's been a little hard to trust. A lot of stocks, you know, actually weakening below the surface and then getting picked up. Rippy action in general. Big picture, though, really, really strong first quarter in the market. We've held on to most of it two-thirds of the way through the second quarter. And the trend has remained okay, even if it's been noisy at times. So up six of the past seven months. The S&P putting in a pretty good month, up four and a half percent. It certainly looks a lot different than April did.

And to your point, you know, we've come a long way in a short period of time, and now we're looking for catalysts to see what happens next. Yeah, a long way in a short period of time going back to late last year. But I think it's probably a good thing that we've been sort of sideways for a couple of months. We're right about where we were at the end of March. And that's taken us to a point where you can say, OK, let's check the macro. Let's check earnings. Estimates are at a record. Yields, they're at the high end of the range, but they're OK at these levels for us. Fed can't do anything soon, but hopes to be able to work in a cut soon. So I think a lot of things are unchanged, even as valuations are demanding and you have some some churn around some of the individual themes around tax.

All right. Contessa Brewer, we're watching Caesars today up on news that we confirmed, of course, on Carl Icahn's big bet in that name yet again. Second go around at least. Yeah. I mean, you talked to him and I talked to him today. And what he said to me was like, we don't talk about our positions, but Caesar shares are off at about 25 percent year to date in spite of quarter after quarter of brag worthy results. And look, Scott, even last quarter where Caesars missed expectations, it was bad luck. It wasn't bad management. Carl Icahn, I know he thinks highly of the CEO, Tom Reig, after all. He essentially put the guy in the job when El Dorado made its acquisition bid for Caesars. I mean, this was like David taking on Goliath. And Tom Reig told me today

he agrees with Carl Icahn that Caesars shares are undervalued. So, of course, they're a good deal. Caesars is likely going to see another boost this year. The strip just off its best April ever. Revenues were up 7 percent year over year against tough comps going into summer with tight room inventory because the Mirage and the Tropicana are shutting down operations. That's all going to be great for Caesars. But casino stocks largely have been stymied in spite of these remarkable, record-breaking results in Vegas. And look, noteworthy performance in the regional casinos as well. A rebound in Macau. It does not show up in the share prices of these companies.

And then we saw this activist letter today urging Penn Entertainment to sell itself. Shares soared up almost 20 percent, but still down year to date, 33 percent. One industry insider told me today, look, investors just don't have any patience to allow the digital and sports gambling to hit the stride. They are not giving any credit for old fashioned slots and table games and the bricks and mortar casinos, which are just raking in the dough. Yeah. Interesting day. I come back and Caesars contestant. Thanks so much. All right. Pippa Stevens, tell us about these clean energy plays. Yeah, Scott. Well, pulling back a little bit today, but still wrapping up a big month with the Tan Solar Fund up about 20 percent. It's best month since July 2022 and seeing its first inflows of the year. Now, part of this is bouncing off a really low level after the sector was beaten down.

But it's also optimism around power demand growth driven by data centers. The tech companies building these data centers all have sustainability commitments, which should drive clean energy deployment. Now, that is lifting utility scale solar shocks with First Solar up 50 percent this month. It's also the largest weighting in the TAN fund, so it does have an outsized impact. Next Tracker Array and Canadian Solar also make equipment for large projects. But analysts say while that group may have bottomed, the same cannot be said for the residential players, which, Scott, continue to get really hit by higher rates. Back to you.

Pippa, I appreciate that. Thank you, Pippa Stevens. Mike, so you get some buying today in energy, which is outperforming. You've got utilities, which have obviously had a huge run and look like maybe they're going to be on the verge of giving a good bit back up nicely today, along with every sector but tech. Market is kind of keeping everybody off balance. It sort of tends to do that when it's not driven by sort of a very strong discovery of a new macro trend or we're not in earnings season. So I think a lot of it, we're seeing the aftershocks of that big momentum crescendo performance into April. We unwound a lot of it. Market wanted to go to sort of laggard groups like utilities. It picked some of those up. Was it overdone? Oil is really tame right now. In fact, almost in danger of breaking down a bit, which would be great news, I think, from the macro. So many of the things that sectors are telling us have a pretty positive message for the path of inflation. I think that's one of the things that's propping up the market right here.

So I wish, you know, investor sentiment got a little bit more despondent near the lows. I wish we didn't necessarily have as many people piling into NVIDIA call options every minute of every day. That would tell us that maybe a lot more of the froth is out. But right now, pretty decent underpinnings to what's been driving the market for most of the last eight months. Good stuff. Mike Santoli, good weekend to you. See you on the other side. Sell in May.

Go away. Didn't work. S&P's going to put in about 5%. I'll send it in to OT now with Morgan and John.