Closing Bell - Closing Bell: Trading Mixed Messages? 3/23/23

Episode Date: March 23, 2023

Investors are struggling to sort of the likely economic toll of the banking crisis – are Yellen and Powell sending mixed messages to the market? Our all-star panel of Joe Terranova of Virtus, BNY Mellon Wealth Management’s Alicia Levine and Greg Branch of Veritas Financial Group break down their forecast for the market. Plus, Jefferies analyst Trevor Williams explains what’s at stake for Block after Hindenburg Research announced it was adding the company to its short list. And, BTIG’s Jonathan Krinsky drills down on the key levels to watch – and why investors may not want to trust the bounce in stocks. 

And we start with that breaking news coming out of Washington moments from now. Treasury Secretary Janet Yellen will be testifying before the House Subcommittee on Financial Services. She'll be speaking on the 2024 budget and overall economic outlook. We'll be monitoring that and bring you any headlines as they cross. Remember, comments by Yellen in Congress yesterday did spook the market with regard to bank deposit policies. Welcome to Closing Bell. I'm Mike Santoli, in for Scott Wapner. Well, a rebound attempt in the market from yesterday's post-Fed sell-off that was led by big tech in the morning, it has fizzled,

as persistent financial stability worries drag down bank stocks and Treasury yields, and then the broad indexes. You see the S&P 500 just barely bouncing back up to a positive return in the last few seconds. That leads us to our talk of the tape. As investors struggle to sort out the likely economic toll of the banking crisis, are Yellen and Powell sending mixed messages to the market? With us now, Joe Terranova, CNBC contributor and senior managing director of Virtus Investment Partners, and Alicia Levine, BNY Mellon wealth management head, Head of Investment Strategy and Equity Advisory Solutions. Welcome to you both. You know, we have to bridge the D.C. to Wall Street divide here a little bit,

I think, and really just talk about the whole collective of what Powell did yesterday, what Powell said yesterday, what the Treasury and Congress are dealing with with regard to banking stability, and then the markets attempt to handicap just exactly what kind of a drag that's going to have on the economy and earnings, Joe. What do you read into today's action with regard to all that? Well, the market seems to be following the direction of the Russell, obviously, because of financials. We had a nice bounce this morning. Mike, I still think what I'm most bearish on is time, not so much price. I don't think people fully understand this is a correction, the magnitude of which we have not seen since the great financial crisis. And we're continuing to consolidate in this range between thirty eight hundred and forty two hundred.

We've only had two closes since the midterm election, below 3,800. So I think as it relates to Treasury Secretary Yellen, I think the market expects or wants her to do something that in reality she can't do. First of all, she legally can't do it because of the requirement that Congress would have to raise the limit on FDIC. But I think that Treasury Secretary Yellen is trying to communicate that she doesn't think she needs to do it. That's right. Now, the market is saying something completely different. And I think what you look at is the market always ultimately. I think the market has been right throughout this process. But lastly, let's remember something. Treasury yields, in particular, a two-year treasury, Mike, it's down 140 basis points since 10 days ago. New low for the year. That's actually

helping and offering some relief for a lot of the long-term assets that are sitting on bank balance sheets that were so stressed 10 days ago. That is true, although, Alicia, what it also means is the market has quickly gone to pricing in a pretty significant round of Fed rate cuts later in the year. Fed says that's not going to happen. The market thinks it's going to happen. It's going to press that bet. And it really gets to the point, which is we're now closer to when the Fed perhaps is done tightening than we thought we were going to be a couple of months ago. But at what cost in terms of what it means for the economy? Right. And the question is, of course, why will the Fed perhaps is done tightening than we thought we were going to be a couple of months ago, but at what cost in terms of what it means for the economy? Right. And the question is, of course, why will the Fed be closer to the end than to the beginning? And is the Fed done altogether?

And, of course, the answer is, well, that must mean that there's a slowdown coming in the real economy driven by the contraction of credit from the small and medium-sized banks, which they will have to do in order to right-size their business models as of today. And the stock market's actually really interesting because it is hanging in there to that 3,800 low, really looking through what might happen in the real economy to where the Fed's going to cut. And it's taking the lead from the bond market to say, look, if the Fed is done and if there are cuts by the end of the year, we're going to stabilize and therefore the market's going to be OK. Now, the question is, this is this the trade after the trade or do we have to live through something worse in between?

Right. Right now, the stock market is telling you it's going to be all right. Or that there's a path, right, to it being all right. I mean, look, the formula seems to be Microsoft goes up almost 2 percent a day. And that way, that means that the regional bank stocks can be down 3 percent every day. I mean, that can only go on for so long. It seems that relationship's got a little stretch. It's very stretched. It's very extreme. These kind of parabolic moves don't last for long. There's an end to them. And when they end that, those relationships tend to right size themselves. But again, when we still have Treasury Secretary testifying on this, it's in the news, it's in front of mind. And there's rush to those stocks that are the safety trade, which have historically worked. And the question is, is that really where we're going here?

Yeah, Joe. I think the market sees the disinflationary effect. And if there was anything that I was disappointed in yesterday, it was Chairman Powell did not really acknowledge properly the disinflationary effect. And the disinflationary effect means ultimately that when he used the word pain, he was probably correct in using that word because that really is what is ahead for consumers. You look at commodity prices, the significant decline that you're seeing there, that's signaling the disinflationary effect. You're seeing the flight to gold.

Mike, you're using Microsoft as an example. But a lot of these mega caps are perceived to be as not in need of capital in an environment where we know three to six months from now, if you get your hands on capital right now, don't worry about what the rate is. Get your hands on the capital and make sure that you have the liquidity. It really, Alicia, has come down to the case, and we hear it constantly every day from so many people who've looked at the risk reward and the case for sticking with quality in equities and maybe quality and fixed income is very strong. It's very intuitive. And it just has this nagging effect of saying, if everyone thinks that you should be paying up for quality right now, is it the right thing to do or is it just all the

market's going to give you? So so crowded trades are scary trades, and right now the crowded trade is tech. It is not the safety trade. So the safety trade would be health care utilities and staples, and those are precisely the stocks that have sold off so much this year in relation to NASDAQ and in relation to tech. So actually we think that's where investors should be going here to ride out some of the volatility, because we do think the chances of recession have increased this year, pulled out from 2024 and going into 2023.

First, we had that shock and inflation and the Fed coming in hawkish two weeks ago and then the banking issue. And you put those two things together. There has to be a slowdown in order to get inflation close to two to three percent here well if there is is if there is a safety trade where there's participation from investors and institutions in the market then yes i agree with you they're looking towards big cap uh consumer discretionary technology consumer discretionary let's remember something cash balances if you look right now in a lot of the investment banking community, they're at historical highs. So a lot of people are sitting in cash right now. So that might be the real defensive position. And it makes you wonder, has the market not reached the capitulation moment because so many people are already sitting in cash?

How many other punches does the market need before it actually goes down? It's wobbled, rightfully so, but it hasn't gone down yet. You've seen massive inflows into money market funds and other cash proxies. It's tough to pull that apart from people just being afraid of banks and just putting it there. But I agree with you. People have kind of brought their exposures down over the last 12 months. So we'll see if that's going to be enough as a buffer. Let's bring in CNBC contributor Greg Branch of Veritas Financial Group for his view. And Greg, bring us up to date here a little bit. I know you've been pretty consistent in kind of higher rates for longer. You thought maybe the Fed was going to have to get well above what

market expectations were towards 6 percent, perhaps. Where does yesterday's events and comments by Powell leave you with that? So the events have actually done and will continue to do some of the Fed's work for it. And that's the reason that they can now forecast only another 25 bps. And so I obviously have to reconsider what my target for terminal rate was at 6 percent because the Fed's not doing it alone anymore. What we know from what happened in the financial system is that credit will be harder. That will slow the economic growth. What we know is that the slowed economic growth, unemployment will probably rise. And so with all that, underwriting standards going higher,

more caution both from employers and from banks, again, that's going to do some of the Fed's work for it. I think when we look out, there's still things that I'm concerned about, even though I'm not concerned about the market not discounting a terminal rate that's factual for a long time, I think, through the summer and winter. So I'm not going to be a hypocrite here because I argued that people were not listening to the Fed. And so I'm going to listen to the Fed and I'm going to believe them, which does not necessarily rule out that we'll see some reflation in that back end. We'll see. But now I'm concerned about things that the market is not discounting. And so when we look at consensus estimates for the fourth quarter of this year, there's still a 10% earnings growth. I don't know what the pathway is to get from the negative 5% we saw in the fourth quarter

that just passed to a 10% earnings growth in the fourth quarter of this year. And I'm having a hard time trying to justify that. I think what the market is probably missing is the deceleration in earnings

and maybe some margin contraction in terms of profits. And so I think that there's still things that the market's not discounting that keep me prevent me from going really bullish here at this time. Well, I mean, I understand that there certainly could well be downside to earnings estimates in the latter part of this year, although we're talking about the year over year percent change. I mean, that's just maybe the fourth quarter is going up against easier comparisons than the first quarter was. I just wonder whether as that gets into the consensus numbers, where were we on 12 month

forward earnings eight months ago, like at 240, 250, and now we're down in 220 area and the market is just kind of chopped sideways. Do you see any particular areas at risk in that process where you think the economy is going to kind of know, kind of drag earnings estimates lower? I think we'll see a reversal of what we've seen the last few months, what we've seen in 2023 so far. As my colleagues noted, the things that worked in 2022 largely traded down the first couple of months of this year, as I think that the market was at least hoping that the Fed would stop or pivot and that we'd have just a general tide that lifted all boats in the wake of the Fed being done or pivoting or what have you. I think what will happen going forward is

that we'll see that reverse. And what worked in 2022 will work again. When we talk about defensive positioning, the problem we have is that now you can be defensive by going into short-term fixed income where you're being paid to wait. And so being paid a 3% or 4% yield with no market risk, that's a defensive position. So we're not obligated to find that exposure in sectors in the stock market. But I do think that that's where the equity flows will go to those sectors that will deliver for us consistent earnings growth that we can count on no matter what the macro environment. And as we've said, that's utilities, that's health care, that's some select areas of technology and maybe even some financials as we get down close to one time's price to book. Yeah, that's pretty much where the the regional banks are, I suppose, if you can believe the book. And I guess that all has to be shaken out.

But that's an interesting potential opportunity if that starts to feel a little more like there's a margin of safety in financials. You know, Alicia, it's worth keeping in mind that if you looked at what the Fed committee's projections were for the economy, for rates, for inflation, they're essentially saying that we're going to be in negative growth at some point pretty soon in the next few quarters, right? Because they're saying 0.4% GDP for the entirety of 2023. The first quarter, depending on the estimates you look at, are probably 2% plus, right? So the math gets you to negative somewhere along the line or stall speed.

On the other hand, we're still at four, five percent core inflation at best, maybe trending down to three. So what I'm saying is we have a three to four percent nominal GDP story underway if, in fact, it goes the way they're projecting. Is that something that the stock market can live with for a while if we're not really plunging into negative nominal territory. So that's a great summary of what the Fed said. Not only are they expecting negative growth for the rest of the year, but if you move unemployment from the low of 3.4 percent to the high of 4.6 percent, you've just said

a recession is coming. Because as you know, when inflation moves up half a percent, that tends to coincide with a recession. If nominal growth in the real economy is still 3 or 4 percent, you get earnings growth of about 5 to 6 percent. And that is enough for the market to stabilize here, which I suspect is why with our high core inflation, this is still hanging in there at the 3800 line, because you won't go negative growth on earnings. And maybe you do in one or two quarters, but you may grow at the end of that. And that's enough for the market to stabilize. Yeah, it's a good it's sort of just a good reminder of maybe what the market might be

seeing out there. I just want to point out we are getting some headlines out of those Treasury Secretary Yellen hearings. Yellen says strong actions taken to ensure deposits are safe and that the administration is prepared for additional deposit actions, quote, if warranted. So, again, this gets to somewhat what Jay Powell was saying yesterday, too, which is your deposits are safe because if there is another emergency, we will respond to it. Right. Not that there's going to be some broad new policy or, you know, or backstop that we're going to go out with proactively. Yeah. Again, it's not explicit in the message. And I guess maybe it can't be explicit in the message. It is implicit. Similar to what Chairman Powell

tried to communicate yesterday, I think what the Treasury Secretary is speaking towards today is that they have a degree of comfort that they have this ring fenced and this is not 2008. I'm hoping that they know way more than we know and that that, in fact, is correct. Certainly, though, the behavior of the market in the last several days is a little bit suspicious of that. Rightfully so. Oh, absolutely. Well, they're suspicious of that. And also, I imagine, Greg, because nobody knows exactly what the impact is going to be of the behavior of banks from here, but we can guess that it's going to be calling in risk, making fewer loans, showing more liquidity and being more risk averse that we know which direction it pulls in, if nothing else.

That's exactly right. And I might slightly disagree with Joe. I don't actually think the market got this right. I think that what we had was a few deals in credit risks that we've treated in the market is treated as systematic. And I don't think this is systematic. I think the market was trying to read tea leaves. Of course, when the Fed opens a facility, people are going to pledge things that are that are not really at par and take down those loans just for safety purposes. It doesn't mean that there's any particular trouble at some of those banks that took those loans, but it was available to them and they should. It's a measure of safety. What worries me more in terms of the behavior, Mike, and you talked about it, is I don't see how, and I'd love to hear Secretary Yellen explain to us how,

that the facility can loan out $160 billion of cash, the FDIC can take down $40 billion of cash, and yet we haven't hastened the X date into May or June. I'd love to see that math because I don't understand how that works. Well, it's not really coming out of the Treasury operating budget, right? I mean, isn't that the answer? I mean, they're borrowing from the FHLB. There is this facility. They're kind of doing collateralized lending. You know, didn't they play some games with the exchange stabilization fund? I mean, in other words, they're pulling from places that I don't know, there's there. Didn't they play some some games with the exchange stabilization? I mean, in other words, they're pulling from places that I don't know is the same budget. Yeah, but they're doing that for everything. Like at the point in which you're already using

extreme measures, cash is cash if you can have access to it. Yeah, well, we will most likely this this Yellen hearing is supposed to be about the budget. So maybe we're even going to get some clarity on that and when the date comes in terms of the debt ceiling deadline. Thanks to you all. Appreciate it. Joe, Alicia and Greg. Let's get to our Twitter question of the day. We want to know, will the Nasdaq continue to lead as it has been? Head to at CNBC closing bell on Twitter to vote. We'll share the results later this hour. And we're just getting started. Up next, short seller Hindenburg taking aim at payment firm Block. That stock is feeling some serious pain, down almost 16 percent. We'll discuss what's at stake. Plus, Coinbase falling on the back of a warning from the SEC. The company's chief legal

officer responds in a CNBC exclusive. Next, We're live from the New York Stock Exchange. You're watching Closing Bells with CNBC. Welcome back. Coinbase getting hit today on the back of a key warning from the SEC. Christina Parson-Evelis is here with more on that. Hi, Christina. Hi, Mike. Well, the SEC issued a Wells notice to Coinbase, like you said, which means they may seek legal action over securities law. Coinbase doesn't run an SEC securities exchange, but allows users to trade hundreds of crypto tokens. The SEC thinks that these tokens and other products should be treated as a security and therefore regulated like a security. Earlier this morning, I interviewed the chief legal officer from Coinbase, who said they do run a rigorous review process and have rejected more than 90% of assets

that have applied to be listed on Coinbase, although he couldn't say the same for the SEC's review processes. They do not actually review assets in advance or up front. It's up to companies like Coinbase and individual issuers to make those assessments for themselves. Applying the rules, if any, that are provided by the SEC and the law that shapes those rules. The problem we've had is there are no rules for crypto. So we've been left to guess as to how the SEC thinks about these issues. Coinbase has been running for over a decade, went public two years ago. But the SEC is only issuing this warning now, causing, as you can see on the screen,

the stock to plunge down over 15 percent. Coinbase says they welcome a legal process. Mike. Christina, thank you very much. I want to get over to shares of Block plunging after Hindenburg Research announced it was adding this company to its shortlist. Hindenburg alleging that Block allowed criminal activity to operate on its platform and inflated Cash App's user base. Block is denying the allegations and vowing to fight claims by the short seller, writing, we intend to work with the SEC and explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our cash app business today.

We have reviewed the full report in the context of our own data and believe it's designed to deceive and confuse investors. Let's bring in Jeffries analyst Trevor Williams for his take on this back and forth. Give us a sense, Trevor, of where you come down on this. Clearly, the market found something to be concerned with in some of these revelations. Yeah, thanks so much for having me on. I mean, there is a lot in the report. I mean, to us, there is not a ton of really all that Cash app that basically belong to a number of users that have multiple accounts that they've used to facilitate fraudulent activity.

There's not really all that much by way of real quantification in the report, so it certainly reads salaciously on that point. And look, we're not dismissive of the allegations, but ultimately, we think it's going to be a fairly contained issue, at least by way of the number of users that could be affected. And then most of the rest of the report is really not all that new or incremental in terms of the types of allegations, or at least the types of information that they're bringing to light around some of the revenue streams within the cash app tied to the debit card that's used, the implied interest rate on some of the instant transfer products that they have. So we think kind of even the stock reaction over the course of today is kind of indicative of

initially, obviously, there was a negative reaction, but investors have gotten, I think, incrementally more comfortable over the course of the day as they've digested the information in the report. Sure. Although it's, you know, it's down 15 percent on 10 times average volume. So I guess there is a little bit of a of a stampede and one maybe just people getting aggressive on the short side of it, if not longs liquidating. But what about some of the things about the revenue streams in terms of interchange and how they route the the the revenue from that area to get around some regulations and really maybe just more about maybe the user base and the profitability of this user base is less than the company has made it seem and therefore maybe going to be less valuable over time?

Well, so yeah, on the point about the user base, again, there was no quantification in the report on trying to say what actual percentage of the about 50 million active users that they had as of the fourth quarter. They did not try to say what percentage of those users they believe were quote-unquote fraudulent. On the revenue streams within the Cash App, the debit interchange, the unregulated debit interchange that Square earns by utilizing partner banks for the debit card that's issued to users. Again, what's being brought to, at least what's being brought to the forefront in the report, is not new or incremental information. Square and many other fintechs who are not banks use partner banks that are under the Durbin cap of $10 billion in assets to issue debit cards on their behalf.

And that allows them to earn higher rates of interchange. And this is something that is very well known and understood by the market. The information is being brought to light by Hindenburg today. It reads salaciously. But again, it's not new or incremental. Yeah. And I guess the question, who knows, is if some of this is now brought to the attention of regulators on one side of this or another. There was a lot about, you know, the facilitating fraud in COVID relief funds and things like that. We'll see if it does have another act here.

Trevor, we really appreciate you coming on with your perspective on it. Thank you. Let's now send it over to Seema Modi for a look at Hindenburg's track record. Seema. Well, my block is down about 16 percent. And our CNBC analysis of 10 companies targeted by Hindenburg saw their respective stock price fall about 32 percent on average in the three months after those Hindenburg reports were published. The latest being Gautam Adani, who at one point was the richest man in Asia, but following the short-seller's allegations of corruption, $70 billion of his wealth erased. India's Supreme Court is currently conducting an investigation.

Hindenburg is probably best known for its bet against electric car company Nikola, which led founder Trevor Milton to resign as CEO. A year later, he was charged with three counts of fraud in federal court. The stock is still trading at all-time lows. Soon after, short seller took aim at another electric vehicle company, Lordstown Motors. Chamath Palpatia's SPAC Clover Health. On Twitter, it was first short and then long the stock once Twitter filed a lawsuit against Elon Musk. As, Mike, you pointed out to me. So more wins than losses. That's right. Yeah, they did flip-flop on Twitter.

And it wasn't really a big one of these kind of deep research calls, I don't think. But it's a really good rundown on their performance. I would also point out not every short research firm has such a high hit rate and a good track record. You know, some of them do try this type of thing and it doesn't always work. I think when people call his research is financial forensic research and it's paid off so far. Yeah, it has indeed. We'll see how this one goes. Seema, thanks so much. We're still monitoring Treasury Secretary Janet Yellen testifying before the House. We'll bring you all the highlights as we get them. Up next, forecasting the Fed. Former Philadelphia Fed President Charles Plosser joins us with where he sees rates headed from here and what Powell's next move could be. Closing bell. We'll be right

back. Dow down 56. That TikTok hearing on Capitol Hill wrapping up just moments ago. Julia Boorstin joins us now with the latest on how it went. Hi, Julia. Yeah, the TikTok hearing wrapped up. The CEO, Shou Chu, just left and entered his vehicle after that very intense hearing. There were two areas in which he was really criticized and grilled on. The first one was the fact that TikTok is owned by ByteDance. It's a subsidiary of ByteDance. A lot of concerns that ByteDance, being a Chinese-based company,

had two elements of control, both gathering U.S. data and also potentially manipulating the U.S. public. And then the other category of concern from both people on both sides of the aisle in Congress that we just heard was this idea that teenagers, young people are really being damaged by the content on TikTok. So two key areas of questioning there. I have to point out, we just got a comment from Senators Mark Warner and John Thune pointing out some particular concerns when it comes to TikTok's Chinese ownership, saying that under PRC law, all Chinese companies, including TikTok, whose parent company is based in Beijing,

are ultimately required to do the bidding of Chinese intelligence services should they be called upon to do so. Saying nothing we heard from Mr. Chu today assuaged those concerns, saying it is vital for Congress to establish a process to review and mitigate the harms posed by foreign technology products that come from places like China and Russia. So some commentary there about the quick momentum and strong bipartisan support they saw in Congress today. And certainly, I have to say, I've never seen such bipartisan support, particularly when it comes to the approach to these tech hearings. Guys? For sure, Julia. Thank you. And of course, Senators Warner and Thune are co-sponsors of one of the bills that might restrict TikTok's activities if it were

to pass. Thank you, Julia. We are watching Treasury Secretary Janet Yellen's testimony on Capitol Hill before the House Subcommittee on Financial Services. Yellen saying regulators are prepared to take additional deposit actions if if warranted, to prevent contagion in the banking sector. Joining us now, Charles Plosser, former Philadelphia Fed president. Mr. Plosser, it's good to see you. This, of course, was top of mind during yesterday's press conference with Fed Chair Jay Powell. He attempted to essentially tell folks that their deposits are safe, even without there being a lot of specifics about programs or backstops or anything like that. Is that the right message from this point, or should there be congressional action to try to make things more explicit?

Well, I think there needs to be congressional action. I think Powell did a pretty good job yesterday in general trying to walk a fine line and reassure the banking system. But for there to be explicit insurance on all deposits would be a huge step in expanding what we call the safety net and be very expensive. How much is it going to cost banks to the FDIC and those will be the taxpayer or customers of banks. And we've had a terrible problem over the last decade as we keep expanding government's bailouts and backstops for companies, depositors and other things. And that's just what I would call a creepy moral hazard.

And the more we get of that, the less market discipline is going to occur to discipline both firms and risk takers, as well as bad business plans, if they're not allowed to fail. So I think this would be a bad, bad step. And they weasel their way around it this time by declaring a medium-sized bank to be systemic. And that just sets in motion a lot of moral hazard problems and risk-taking that you really don't want to have. Of course, as Powell, I guess, tried to characterize it, he felt as if the consumer response to what happened at that one midsize bank

could potentially have become systemic if it were to continue. So I guess it takes some guesswork as to exactly what likely would have happened if there were not those programs. I do want to get your thoughts, though, of how it does influence the monetary policy program right now. Right. I mean, we now seem to have the Fed prepared to perhaps do one more quarter point hike. Maybe they've left the door open to yesterday's being the final one because a lot of the banking instability and the credit contraction is going to do some of that work for it. Is that the correct posture right now by the Fed? Well, I think at the moment that's a fair argument to make.

I think there's a huge amount of uncertainty out there, as we all know. I mean, look at the dispersion and the views that we have. And so there has to be some way of waiting to see how all this plays out. You know, if the banking volatility, if it becomes more stable and less concerns and inflation doesn't fall, we may be in a situation where more rate hikes should be on the table. So I think we ought to not get ahead of ourselves too much here or let the markets get too much ahead of themselves on this matter and be very careful that there is a lot of uncertainty and much can happen in the near term. Yeah. Well, obviously, with the two-year note yield

a full percentage point below the Fed funds rate, the market's trying to get ahead of it. We'll see if the Fed officials have to do something to talk it in the other direction. Charles Plosser, appreciate your time today. We're going to have to run. Thank you very much. Up next, we are tracking the biggest movers as we head to the close. We'll tell you what's driving Regeneron stock higher today.

Closing bell. We'll be right back. Welcome back. Shares of Regeneron popping today on some strong drug data. Our Meg Terrell just caught up with the company's president and joins us now. Hi, Meg. Hey, Mike. Well, this is already a major drug for Regeneron. It's called Dupixent. And these were phase three results in COPD or chronic obstructive pulmonary disease. This is a huge disease that affects a lot of people, millions of people in the United States. And there have been a lot of attempts to develop drugs for it that have been unsuccessful. So in these phase three results, Regeneron showed that the drug reduced exacerbations

of COPD by 30 percent compared with placebo and also showed significant improvement in lung function and quality of life. They do have another phase three trial expected to read out in 2024. So we'll see what the regulatory pathway looks like going forward here. But Regeneron's president and chief scientific officer, Dr. George Yancopoulos, pointed out this drug has already been successful in many diseases that are sort of mediated by the same disorder in the immune system. Here's what he said. In all of the diseases, they're all unified by dramatic responses to dupixin, which means that all of these diseases are driven by this common systemic immune disorder, which is upregulation

of type 2 inflammation. Dupixin calms down the type 2 inflammation and makes all of these diseases better, whether they're in your lungs or in your nose or in your skin or in your esophagus. This is what the industry calls a pipeline in a product. Analysts already estimate that this drug will bring in $10 billion in revenue this year and that it could add $3.5 billion worldwide, according to Evercore ISI, with this new indication in COPD. So you see both Regeneron and its partner Sanofi up on this news. Mike? Yeah, Meg, very encouraging. As a matter of fact, Regeneron hitting a new 52-week high today on that move. Appreciate that.

And join CNBC's Healthy Returns virtually on March 29th for the inside scoop on the hottest health care trends, breakthrough vaccines, digital health, investing insights, and more. Scan the QR code to register or visit CNBCEvents.com. All right, last chance now to weigh in on our Twitter question. We asked, will the Nasdaq continue to lead? Head to at CNBC Closing Bell on Twitter. We'll bring you the results after this break. Let's get the results of our Twitter question. We asked, will the Nasdaq continue to lead the majority, a slim majority, 55 percent, saying yes, it will. Up next,

believe in the bounce. Top technician Jonathan Krinsky is back, and he's breaking down the key level he's watching to help answer that question and where he sees markets headed from here. That is next. And tonight, I'll be hosting a CNBC special report taking stock at 6 p.m. Eastern. We're talking all things TikTok, the market, and more. You will not want to miss it. Closing bell. Be right back. The S&P back to positive. We're now in the Closing Bell market zone.

BTIG's Jonathan Korinsky is here to break down the crucial moments of the trading day and share his next must-watch levels. Plus, Oppenheimer's Tyler Bertore on whether the rally in the housing stocks can last. Jonathan, it's good to check in with you here. You know, the S&P 500 has traded the same 2% or so back and forth about a half dozen times in the last couple days here. How do you think this choppy range is going to resolve? Yeah, you know, so it's really a perfect situation where you've had extreme dispersion below the surface. We know the banks have been kind of front and center. Then you've started to see REITs started to break down,

insurance broke down today. And then on the other side of the coin, you have, you know, large cap tech growth, semi-software, you know, really doing quite well. And so we think it's largely a function of internal rotation. And if you're a long only money manager with a mandate to be fully invested and you've been selling cyclical stocks, of course, that money is going to find its way into the perceived safe haven of large cap growth and tech. Ultimately, we think, you know, we've been saying this rubber band is stretched. You can look at any number of metrics, small caps

to NASDAQ value to growth. It's, you know, we're pushing decade extremes in some of those ratios. And so, you know, the question is, does it resolve by banks and small caps rallying or by tech and growth pulling back? And we think it's the latter. Typically, you know, that's how it resolves. Breath continues to narrow, which is what we've seen. And ultimately, you know, the loan holdouts finally succumb to the downside. So we think we're closer to that point. And ultimately, that brings the S&P lower from here.

Yeah. And do you think that we have to be bracing for something that goes below this lower end of the broader range? I mean, you know, we did hold above like the December lows. We've managed to stay a little bit clear of those October trough levels so far. Yeah, I mean, again, if you look at, you know, something like the equal weight S&P 500, that's still flirting with its December lows. So we do think, you know, for the cap weight S&P 500, ultimately the October lows are probably broken. Again, you know, there's just continued deterioration below the surface. Also today, take a look at the airlines and

railroads breaking down. Railroads are back to their October lows. Airlines pretty ugly today. So, you know, all of this deterioration suggests to us that, you know, once you finally get the road, once you get the internal rotations done and technology finally gets pulls back, that's what's going to ultimately drive the S&P lower. And then quickly, gold is catching some attention. It's been flirting with that 2000 level. It obviously is kind of been leading the way here among asset classes, although I have to say it's failed a few times around here in the last few years, hasn't it? Yeah, you know, it's it's it has. And so if you've been waiting for that breakout, it's been a bit frustrating. But we think now it's kind of setting up as the perfect storm here for gold because you have a moderating dollar and the dollar is falling as expectations

of of rate cuts come into play, right? So you have a falling dollar, which is bullish for gold. You have falling real rates as the economic slowdown picks up steam. So those are two pretty bullish ingredients for gold. Plus, you have some macro uncertainty, right? So we think that's constructive. If you look at gold in other currency terms, it's already broken out to multi-year or all-time highs. And so we do expect gold to finally break out above 2000. And if and when that finally occurs, that's when we think

you're going to get finally some outperformance in stuff like the gold miners and silver, which have been lagging during this gold move. All right. Worth watching. Jonathan, thanks very much. Appreciate it. Talk to you again soon. Oppenheimer's Tyler Batorre here to talk about the homebuilders, which really have kind of hung in there, Tyler, pretty well. KB Homes, pretty good numbers there. Stock is responding. Can we believe that we've seen the low in homebuilding activity? So we think that we can and we're constructive on the home builder industry. We're very constructive on these stocks as well. A couple of points that will make you look at mortgage rates stable in this 100 basis point range between 6 percent and 7 percent since the fall.

Demand appears to have bottomed in November and improved sequentially here in March. That's something that we heard from KB homes last night and we think the public builders are really well positioned. In this environment if you look at the existing home market there's really not much inventory. That's the opportunity for the

home builders to take market share and if you look at where these companies are positioned right now. Leverage has never been lower balance sheets have never been in a better position. There's a focus on return earns buying back stock so we think There's a focus on return. And buying

back stock. So we think there's a number of tailwinds here. For the sector that can drive the stocks even higher. Doesn't the affordability- equation have to start working more in favor of of buyers to some degree here because that is the piece you

mentioned rates are stable. But just in general prices have not given way very much. Yes it's a great question i think one of the key advantages of the home builder business model is their ability to offer incentives so if you look at the prevailing mortgage rate right now at about six and a half percent if you're in the existing home market and you're looking to buy a home it's probably what you're going to be paying if you go to a home builder they can buy down that rate in the 5% range, perhaps even into the 4% range. They're also lowering prices as well to try to drive sales. So yes, affordability is a concern. This is something that we're very focused on,

but I actually think it's a competitive advantage for the builders in this housing market. And it's really a reason why we think they can take market share from the existing side of things. Is there a way to handicap how the banking stress might make its way into things like single family mortgages? I know mortgage spreads on the securities have widened out. And obviously, banks are going to be a little more in kind of risk mitigation mode right now. Yeah. So, so far, and it's still early, we haven't heard any changes to mortgage underwriting standards. I mean, if you look at where things have been really since the great financial crisis, pretty strict in terms of how the companies are looking at mortgage underwriting. What I would really watch, a lot of the private, smaller builders out there, they actually do use a lot of local, regional banks to fund their operations, to fund their land acquisition strategies. So perhaps there could be a little bit of dislocation on that side of things. I think it'd be a positive for the public builders, just given their capital positions,

potentially present an opportunity for them to take some market share. And which one or two of the builders do you prefer at this point? So PHM, Pulte Homes, that's our favorite name in this space. And if you look at this company, balanced buyer exposure, which we like offers a little bit of a hedge diversity depending on which sort of buyer segments are doing better. They have a

backlog of homes that they've already sold. That lowers volatility gives them a little bit extra visibility. In terms of their earnings and if you look at their capital position. The very focus on buying back stock should have some of the

best. Are we metrics in the entire sector. This year valuation tradesation trades below its long-term average as well. So Pulte Homes, PHM is the best way, we think, to play the strength of the homebuilders. Tyler, we appreciate it. Thanks very much. Thank you. All right. As we, less than a minute till the closing bell, the S&P 500 back in positive territory. It was up about 1.5% at the highs and pretty much regained yesterday's losses. And it has dipped negative a couple of times.

But it is up again on the strength of tech, which is up 1.4%. NASDAQ 100 really running the show lately. Small caps much weaker. The regional banks, again, the pressure point down almost 3% on the day. That continues to be an undersell. And that is going to do it for Closing Bell on this Thursday. Going to send it over to Overtime with John Ford.