Closing Bell - Closing Bell: Trump Tariffs Sink Stocks 4/3/25

Episode Date: April 3, 2025

What will Trump’s Tariffs and now escalated trade war mean for stocks in the months ahead? Tech is at the forefront of that question as names like Nvidia get smashed today. And it’s not often you see a decline like this for Apple shares. We discuss with Erik Woodring from Morgan Stanley. Plus, our all-star panel of iCapital’s Anastasia Amoroso, Hightower’s Stephanie Link and Requisite Capital weigh in on some massive sector moves. And, Trivariate’s Adam Parker tells us how he is navigating today’s big drop. 

Welcome to Closing Bell. I'm Scott Wapner live from Post9 here at the New York Stock Exchange. In the thick of all of it, this make or break hour begins with the final stretch of an ugly day for stocks, following the president's much worse than expected tariff announcement. Take a look with 60 to go in regulation, how we are faring. Pretty brutal. And right from the jump today, the worst declines for the major averages, as you probably know by now, in years. Across the board, big declines, discretionary energy, two of the weakest sectors there.

We'll have special reports coming up a bit later on the stocks you need to keep the biggest eye on today. Yields are down too, the 10-year hitting its lowest level since last October. Flight to safety, buy bonds, yields go down. It takes us to our talk of the tape. What will Trump's tariffs and now escalated trade war mean for the stock market in the months ahead? Tech is at the forefront of that question with names like Nvidia getting smashed today. It's not often you see a decline

like this for Apple shares. For more on that, let's bring in Morgan Stanley's Eric Woodring, the analyst there who so closely follows this company. It's great to have you on a day like this. How much worse was this. Than you anticipated. Thank you for having me Scott. It was worse than we expected of course really when you. Look at the incremental reciprocal tariffs

coming. Coming from China or applied to Chinese exports. When you look at the reciprocal tariff to- markets like India or Vietnam- or Thailand where Apple has diversified their supply chain to- markets like India. Or Vietnam- or Thailand where apple has diversified their supply chain to- there really is. Nowhere to

escape a hundred percent of effectively a hundred percent. Of apple's products sold in the U. S. will be tariffed at a pretty exorbitant rate right now so- that was not my base case- I'm not sure that was my bear case either- but here we

are so- we're seeing the stock react in real time to it. I'm not sure that was my bear case either, but here we are. So we're seeing the stock react in real time to it. But I mean, if it's worse than what your bear case even imagined it could be, what does this now mean for the estimates that you try and put on this company and for our viewers and the stock that they love to own, the share price? Sure, so I think there's a near term

and a longer term vision here, right? This tariff dynamic is not necessarily related Sure, so I think there's a near term and a longer term vision here, right? This tariff dynamic is not necessarily related to the product, the innovation, the services longer term. Could it impact it? Sure, but what we're talking about is somewhat, the uncertainty at least somewhat similar to March of 2020 where sure there's a first order effect of. There are tariffs imposed on your goods imported

to the U. S. what do you do about that. I'm almost more worried about the second order effect which is you almost certainly have to raise your prices- good old supply demand tells us when you're raising your prices- your your your

units your volume is going to be lower- how much of an your volume is going to be lower. How much of an impact is that going to have? We just don't necessarily know. There's a lot of unknowns right now. So, you know, this is a time where where we as analysts try to do our best to make predictions about whether it's volumes or pricing or margins. But at the end of the day,

you know, I think there has to be a for even for a company like Apple. A pretty significant cut simply because the great unknown still does exist when you look at the way that stocks are moving- today and you think about even as us as consumers.

If if my iPhone if my Mac book or any other product is. Fifteen twenty percent more expensive, am I really going to buy it or am I going to wait and determine maybe there is some relief in the future? You just don't know. That is ultimately the most challenging part of this job right now.

I mean, we've been having this conversation about the sluggishness of iPhone sales. And I'm pulling a number out of a hat, at $1,000. Now you're going to tell me it's going to cost $1,500 and all of a sudden you're going to get a flood of buying? Oh, no, that's not what I'm saying. But no, I know you're not saying that. I know you're not saying that, but I'm saying the collective, the zeitgeist is like, okay, I wasn't really going to buy it at $1,000, but you but you jacked the price up now to 1500, I'll buy it now.

Yeah, no, exactly the opposite in fact. Although I would say we do believe that to offset the price or the cost of these tariffs in the U.S. Apple would have to raise prices kind of across the board by call it 17, 18%. And the one good thing about when we think about buying our iPhone is that most of us, actually around the world, still do buy

on an installment plan. So yes, at first we'd say $1,000 phone goes to $1,200, definitely an impacted demand, I'm not denying that. But maybe the silver lining is, at least for a company like Apple, where there is some insulation from these challenges, is amortize that over two or three years, and maybe your $42 a month goes to $46, $48, $50. You're not necessarily, quote unquote, breaking the bank mentally as much,

as opposed to if you're buying something outright for $1,000, $2,000. Obviously, that is much more painful to your wallet. I mean, bigger picture, you know, the other topic we've talked so much about is Apple's China problem. And this only accentuates a problem that has existed there and it just creates more fog of when they can extract

themselves from the issues that have existed there. It does. So the way I think about it at least is on one end Apple is the largest Western employer in China. We think they have something like seven million either direct or indirect employees in China. So they're big in the scheme of things, but what theoretically would

happen if China came back and said, you know, you can still build your iPhones here, you just can't sell them here, right? I don't know if that happens, but you have to think kind of worst case scenario in this type of environment. You know, that's 30, 35 million iPhones shipped annually at an ASP of $1,000. That's $30 to $35 billion that can effectively evaporate. Again, I'm not saying that is what is going to happen, but in this type of environment, think worst-case scenario, it seems like each side is really, in this geopolitical situation, is kind of digging in.

So, again, real challenge on their hands. You know, the administration has tried to make a point specific to Apple as well. You know, the company has announced in planned investments in the country that, you know, there's a scenario in which you've got these robots building the iPhone here, and you know, people are gonna have high paying jobs

who are assisting the robots and to do all of that. Can you ever see a scenario in which Apple is literally building, not assembling, building the iPhone here with all of those components or the great majority of them? I think that's a real challenge, and let me frame the cost for you at least initially so. In two thousand ten Hanhai finished its

Zhangzhou facility which is where basically half of iPhones are produced in China. In two thousand ten dollars with- you know some kickbacks and tax subsidies and power subsidies for one point five billion dollars. That's just building

the facility that's not inclusive of paying your workers or anything like that- you would have to replicate that. In the United States obviously times two that's just half of the facility- those costs are

multiple billions of dollars- the years to build that out are multiple years. And then we have to think about the other side of this which is paying the people are finding the resources in the U. S. that are willing to not only work

this job but have the expertise you know for a long time- Apple supply chain has been in China and in Asia more broadly there's a lot of two there are a lot of tooling engineers that are out there. That are very skilled at what they do.

Yes, we can adopt humanoids, robotics. I'm a full believer in that, but at the same time you still need human beings at some point in these facilities, not only what will you have to pay them, but do you have enough of them to work in these facilities? Where are you going to locate these assembly plants? So I think that cost is a barrier. of them to work in these facilities. Where are you going to locate these assembly plants? So

I think that cost is a barrier. I think that time is a barrier. I think that resources is a barrier. And completely apolitically, this is a second term president who has enacted tariffs through an executive order that just creates uncertainty. So if I'm a company like Apple and I might need to commit billions of dollars to build something in the U. S. do I make that decision at this exact moment in time I think that's a really hard decision to make to up in your supply chain. And don't

forget most components still come from Asia so then you're talking about shipping components from Asia to the U. S. it gets more expensive- point being. A lot of money that Apple and its partners would have to invest to really move things to the US.

I appreciate you going through that so explicitly so that people have a clear understanding about, you say something, but you back it up with numbers and real data on what this sort of effort would end up doing. Before I let you go, I was hoping that you would react to something that the former Treasury Secretary Stephen Mnuchin said on our air earlier today, talking about the investments that Apple has made and is planning to make and what it might get in return for that. Let's listen and I'd love your reaction on the other side please.

Sure. Apple's announced big investments in the U.S. That's going to take a while. I hope the president will consider giving people credits for those people who actually have made real commitments, not just announcements, but real commitments to build in the U.S. Because there's a transition period here that needs to be adjusted to. I thought it was an interesting take.

I'm wondering if you're thinking about that sort of stuff and how that would change your overall view of what seems so punitive today might very well have some benefits down the road. Sure. I think my response is twofold. One, let's remember Apple has made similar comments in the past. In 2018 they committed to $350 billion over five years. In 2021 they committed $450 billion.

I believe it was over four years. And now they're talking about $500 billion over four years. So we're seeing an increase, of course, in that total kind of investment or impact into the economy, which is a good thing and shows you that Apple is obviously committed to creating economic value in the United States. At the same time, I'd be remiss if I didn't, again, just highlight a lot of the kind of underlying assembly work

gets done in Asia so that the economic value that we're talking about adding is maybe kind of underlying assembly work gets done in Asia so that the economic value that we're talking about adding is Maybe you know kind of second and third derivative effects so to speak so I don't think that that should be taken That should be taken with a grain of salt. I think that is important, but ultimately you know now It's up to kind of the administration to balance Apple investing five hundred billion dollars or at least creating $500 billion of economic value in the U.S. over multiple years versus manufacturing outside of the United States and trying to pair those together to figure out what exactly is the best path

forward. That's a challenge in my mind. Eric, I appreciate you so much today helping us understand this so much better. We'll talk to you soon. Thanks for having me. That's Eric Woodron with Morgan Stanley today. We are getting some news out of the chip space. Christina Parts-Nevoulos has that for us.

Hi, Christina. Hi, Scott. Well, the information reporting that Intel and TSMC have sketched out plans for a joint venture to run Intel's chip factories, with TSMC grabbing a 20 percent stake. So the majority ownership would still stay with Intel. According to this report, the Trump administration initiated these talks. Recall that he previously accused Taiwan of stealing America's chip industry. I reached out to Intel.

They told me they wouldn't comment on rumors. But keep in mind, just two weeks ago around March 19th, TSMC board member Paul Liu denied that TMC was going to help out Intel. Supposedly other board members were also against it, so it's not confirmed just yet. But these rumors have been milling for quite some time, Scott, and so that's why you're seeing a stock reaction in both. The Taiwan Semi down over 6 percent. Intel did get a bump up in the news.

All right. About 6 percent. Opposite direction. Thank you very much. We'll see you soon. Cristina Partzanovalos. Let's bring in now Anastasia Amoroso of iCapital, Stephanie Link of Hightower, and Brynne Talkington of Requisite Capital Management. Stephanie and Brynne are CNBC contributors.

It's great to have everybody here on this really important day. Anastasia, I'll turn to you first. Your reaction, what you would be telling people to think about today? Well, I think the stock reaction is completely justified because the nature of the tariff changes is completely sweeping. And Scott, as you talked about, it is way worse than it was expected. And so investors in this process of pricing in, what does this actually mean for earnings? And so the first order impact that you have to price in is if you have a tariff increase, effective tariff increase of about 20 percentage points,

that shaves off probably up to 10% of earnings of the S&P 500 companies. So we were at 13% earnings expectations going into the year. We were about 10% heading into March, and now we sort of have to erase all of that, and that leaves us with about zero. So from that perspective, it's completely justified. But the other thing I would say, Scott, is I don't think this is a quick reversal because what really it takes to reverse the trend to reverse the tears that were imposed. It either takes concessions from a lot of these countries. It takes moving production to the United States. It takes more than just

those announcements. And so the question is how quickly would those countries go into that concession mode? And I think it is a process. It is a transition and adjustment. And so for that reason, I think investors need to really be patient here. And this might be a bear market for a while. Okay, Steph, based on what you've told me over the last week at minimum on various programs, is it fair to say that you underestimated the how punitive these tariffs were going to be? Well, I think this was much worse than expected, but that's why the market is reacting as it is today.

So certainly I'm surprised, but I think the whole world is surprised, to be honest. So if you think that this is not gonna be part of a negotiation tactic, which we have no idea, you're looking at something like one to one and a half percent hit to GDP, a one percent increase to inflation. I think there's some offsets there and specially on

productivity- and then in as Amarosa said it's a hit to earnings I think it's more like a three to five percent hit earnings not a 10% hit. But we just don't know. Look there's a way I'm thinking about is if I was buying a

week ago and I've been buying and adding to my positions because I did see value into the decline because we had seen a lot of declines over the last couple of weeks. If I thought that that was an opportunity then I absolutely

think that this is an opportunity today and certainly probably the volatility. Will last for a while and I'll continue to be adding. To the companies that I think earnings are actually more protected for the most part or if the

valuations have come down so much and I believe in their balance sheets and their free cash flow and their positioning in the in their respective industries I want to take advantage of that you know I'm a very big theme investor and I

am and tariffs are not going to change my themes I still think that you know I'm a very big theme investor. And I'm and tariffs are not going to change my themes I still think that housing is a decade long theme and I'm even more positive on it now that interest rates are at four percent the ten years at four percent. Cyber security

you're not gonna see numbers change in cybersecurity chief technology officers can't afford not to spend on cyber security on shoring that's the whole point of these tariffs. So the onshores and the industrials in infrastructure companies are going to benefit. Energy was exempt from this.

And I know why it's down because of the recession fears and demand fears. I got it. But they made money. I mean, Steph, we're talking about... I'm sorry, but we're talking about, like, you're talking about ons I'm sorry but we're talking about like you're talking about on shoring these things as if it's happening next week which it isn't or next month which it isn't or next

year which it isn't. These are longer term goals that the administration believes they can pull off. It remains to be seen. I mean what was value a week ago obviously wasn't because the stocks are severely lower today what was perceived to be value yesterday obviously wasn't because the stocks are much lower now and now there is absolutely no visibility into where earnings are going to be. How how

can any investor out there have any view which they think is clear in any way to buy a stock based on earnings now which are completely unknown and opaque. I don't okay first and foremost your infrastructure comments are wrong. I have followed the whole onshore

reshore grid situation for years and I've been talking about this for years and we have one point seven trillion dollars worth of projects that are going to be spent over the next couple of years. In the meantime we have seen real results from companies they're seeing that that that that are participating in building out the grid and in building out the data centers and in focusing on power we've seen real backlogs record backlogs record earnings double digit EBITDA growth margin expansion so it's real and I

jump when my point being is if you believe in it and you believed in the stuff this theme a couple of years ago this today this is not bad news for that that particular part of the- economy and that those sectors now in terms of stocks no one's

perfect at picking stocks all I can tell you is that I'm looking at the industry fundamentals look at company fundamentals and looking at valuations that actually in some cases in terms of where I'm buying are back to covid levels sure our earnings

at risk absolutely but you're not talking about wiping out a hundred percent of the earnings and I'm buying stocks that are trading at 11 12 13 times earnings. Okay, is that 12 13 or 15 times earnings after numbers come down? Maybe but I'm averaging in because you want to buy low and I'm not saying that they're gonna say you're gonna see a snapback Immediately, but I'm trying to take a longer-term view and I'm trying to upgrade my quality in my portfolio buying the best in breed on sale and I think you're getting a lot of them. Brynn is that tactically I don't know is it the right move.

Steph's been doing this a long time she's seen a lot of markets she's still doing this for a long time because she's made her way through a lot of markets. Some that have felt just as terrible as this one today does. What's the message there then for those who are watching the program saying, I don't know if the market's going to go down this magnitude again tomorrow or next week. And I'm not exactly sure what to do about that. But I do believe in Steph's long-term vision. I do believe that the good stuff from the administration is going to happen.

What do I do? So today's sell off is on par with 9-11, March 2020 and COVID when you look at the spread between consumer discretionary and consumer staples. So you're having this massive dislocation for all the reasons that we've been talking about. But I think there are times when you just have to hold your nose and buy. And so I think that's where Stephanie has a basket of companies that she knows, and she's owned them before. And so you can't play all this narrative out. Stan Druckenmiller talks about it all the time. When you're investing, you cannot invest based on today.

You must have the vision to look out over the next 12 to 18 months and say, what does this look like? And so I would say today, to me, what's been very frustrating is that I wish that the Trump administration, who is the administration of common sense, would stop talking about tariffs and would actually be honest about, this is about right-sizing the trade deficits, which by the way, we've had since World War II. And I think what's complicated today is they keep talking about countries,

but really what's happening today are US companies are getting fleeced by these tariffs. Because if you look at Vietnam, you have Apple there, you have Nike, you have restoration hardware, these great American companies that have set up their supply chain, not only about tariffs, their supply chain, to have, guess what, cheap labor.

And so I think the discussion with Congress, with the American people very quickly, is going to turn to what type of manufacturing do we want in the US? Do we want, do American skilled workers wanna go make Nike shoes and build restoration hardware and furniture? I think not.

I think they want better skilled jobs. And so what type of manufacturing are we gonna bring in? And that's what to me is where like, I don't think this, that part with isolating a Vietnam which has a trade deficit because they're importing a lot of goods that American companies are building there last very long because you're just going to blow up U.S. companies that are taking advantage of the global supply chain totally separate from the trade tariffs. And unless the look unless the the end game here and the real desire is to bring in revenue

to pay for tax cuts and to pay down the deficit. You mentioned Brin some of the retail names the Nikes of the world and others on that note. And you guys stay with me. I'll come back to you in a second.

Discretionary stocks are getting just crushed today. Staples of course going in the opposite direction as you might expect. Courtney Reagan has more on both of those moves. Hey, Courtney. Yeah, we've got a chart here, Scott, to just show our viewers to see this very stark divergence your guests are talking about between the two consumer ETFs for instance just over the last 24 hours. You got the discretionary XLY down more than 5%, 6% now almost following these wide sweeping and deep tariffs that were announced

at about four o'clock yesterday. Consumer staples, that XLP, however, that's actually slightly positive to the tune of about 6 tenths of a percent. Now, Jeffries analyst, Randy Konick, tells me retailers are quote, more concerned about demand destruction from higher prices than they are about compressed margins.

So in other words, they're more worried about the impact on consumers' willingness to spend than these tariffs will actually have on the cost of doing business. Look at names that have been mentioned. RH, Five Below, Gap, VF Corp, Capri, Ralph Lauren, Wayfair, Kohl's, Macy's, they are among the hardest hit. We're talking double digits. Look at that. Holy cow. Wayfair down 27%. I mean, RH really has this double whammy because it reported disappointing results, but also said at the end of last year that it sourced 72% of its goods in Asia, 35% from Vietnam, 23% from China.

The CEO also cursing on its own conference call when he noticed how much his stock was falling. I mean, more than half of Five Below's goods are also made in China, now subject to a very, very hefty tariff in aggregate from what existed before and what we're looking at now. Food staples, though, those are getting some safe haven treatment today. Kroger, Coca-Cola, General Mills, Kraft Heinz, those are all higher today. We got to eat, right? I mean, that's

really sort of the reason there. And notable divergence even just among retail subsectors Look at the difference between Dollar Tree and Dollar General Investors are doing their homework on this one UBS Scott estimates that almost a third of Dollar Tree's goods are imported from China Whereas Dollar General's China exposure is four percent. And so you've got Dollar Tree down 11 percent today in Dollar General actually Dollar Tree down 11 percent today and Dollar General actually up 5 percent. But they both serve that lower income consumer to a certain degree. But look at that divergence because of the cost of doing business. Back over to you. All right, Court, thanks for that.

Courtney Reagan. The panel's back with me. Steph, I go to you. I mean, you have been buying more Target ahead of today. And, you know, that stock obviously is not having a good day. How are you thinking about these types of stocks in the here and now. I've been buying target

but I've also been all adding to Amazon as well. One is a winner one's been a loser but the loser of target. It once was a winner and I do think that they have a game plan in place to turn the company around in terms of execution because that

has been miserable. That is not to say that they're not going to be impacted from all of this. I don't think that they have a game plan in place to turn the company around in terms of execution because that has been miserable. That is not to say that they're not going to be impacted from all of this. I don't think that they do as much in terms of sourcing from and supply chains in China or Asia. They are more impacted on Mexico. And actually, I was breathing a sigh of relief in terms of no additional tariffs on Mexico or Canada for that matter. But certainly they're going to be impacted.

But this stock has done nothing for two years. It's actually down 34% year to date. It's trading at 11 times earnings. It yields 4.7%. I think they're doing a very good job in terms of what they're all about. And that's more on the discretionary versus consumables. But they have 40% of their revenues are consumables. The way the stock is trading, it's as if it's 100% an apparel company, and it's not. So I think that they're doing internal things right to fix the company, and then they will navigate through this. But I think they will return to be a winner.

And I think you have three winners right now. You have Costco, Walmart, and Amazon. They're the market share grab takers. But I think Target has a chance to make a comeback as well, three winners right now. You have Costco, Walmart, and Amazon. They're the market share grab takers. But I think Target has a chance to make a comeback as well, especially at this valuation. Anastasia, how about the consumer, which has already come into today with significant questions around where, you know,

their collective heads are. That's right, I think- Not to mention their wallets. All right, and the tariff outlook certainly worsens that expectation. I think the market is doing a good job discerning who the beneficiaries and the laggards are going to be.

And I am concerned about consumer discretionary spending because if the estimates are right and we get one and one and a half percentage points increases in PCE inflation, and if we get something like $3,000 hit to disposable income that is going to hit consumer discretionary sector. The reason why consumer staples, by the way, are holding up so well is because more of those input costs are actually produced in the United States.

They're not imported. It is the least imported cost of goods sold of all the different sectors. So I understand why that is holding up well. Look, I agree with Bryn. I agree with Steph. When you have these market opportunities, when you have the sell-offs, you do want from a long-term investor mindset, step in and buy some things. Things that I would be dipping my toe into buying though, for now, would still be defensives like consumer staples, like utilities.

I also think, Scott, if there's one silver lining from all of this, it is yield. And yield to lower across the curve, I do think it might force the Fed's hand as well into cutting rates later this year as well. So that really benefits real estate. So those are some of the things. Mag-7 is probably not my first choice, but if I were to pick a part of the AI trade, something like AI software, which is domestically oriented, that's what I would be dipping my toe into. Okay. No benefit at all for energy today as you know. I mean obviously oil is down because of growth concerns, demand concerns. Pippa Stevens has a check on that space for us today. Hi Pippa. Hey Scott, so oil and energy was left out of the reciprocal tariffs but oil is plunging thanks to three key factors. The first fears that the tariffs will cause an economic slowdown,

cutting demand for oil and petroleum products. Plus CIBC private wealth, Rebecca Babin notes, India and other Asian nations hit by the reciprocal tariffs were seen as key regions for future demand growth. The second reason is a surprise announcement from OPEC plus today that they will increase production in May at a faster than expected rate. Now the decision to announce that today is notable and could suggest the group is interested in growing market share, calling into question the so-called OPEC put that had been acting as a floor of sorts for the

market. And finally, ample spare capacity worldwide, which compounds any growth jitters. So on top of all of that, energy is now the worst sector today with the refiners. That's Marathon, Valero, and Phillips 66, the biggest laggards on expectations of lower fuel demand. The drillers like Oxi, Diamondback, and Devon also seeing big losses because of that commodity price exposure. Scott?

All right, Pippa, thank you. Pippa Stevens. Brynn, the investor in oil country, Houston, Texas. What now? What now? Well, Pippa talked about OPEC. I think that's an understatement. I think that is the main reason it's down today.

From what I read, they were signaling they're going to increase their production like three months worth. So it was quite meaningful, and I don't think it was an accident it was done today. So I mean, this is obviously economically sensitive. And when everything is down globally, 3 to 15 percent, listen, energy is going to have a beta of like one and a half to two. So I'm not surprised. And so I just think that you have to just sit still.

I'm not doing anything with my energy names here. Just like sit still. And it's just like not fun when you have this like I think it's more than more than a growth scare. It's like if this lasts very long, you like, I think it's more than a growth scare. It's like if this lasts very long, oil is gonna go lower from here for sure, which also reduces inflation, which I know that is the narrative,

and that's not a narrative, something really important. The Trump administration wants to do so one way or another, they may get their way, but we're not sure what everything's gonna look like after they do. Steph, I'm gonna give you the last word. I want you to have that. I feel like, and I've asked this question

to many guests over the last, I don't know, week. Stocks really start to get upset. The hardest thing to do, the hardest thing to do, as you know better than me by far, is to buy stocks on days that look like crap. And this is one of them And this is one of them. This is one of them. Because you try and tell yourself to look

at the forest through the trees. The president's on the tape saying the market's gonna boom. They're probably gonna start talking more about what they think is going to be the good stuff for investors. How do you keep your head level in thinking about that and making those decisions at times like this? Well, I have been doing it a long time and I do know my companies very well

and I do not own any stock in my 40 portfolio, stock portfolio without knowing the management team, without knowing the bench, without knowing their track record in Challenging times and I do use these times to own one number one or number two in any given industry And I will sell a number three or number four if I really lose faith or if there's such a tremendous opportunity To own best-in-class on sale, people say they buy low and sell high. They do not.

They buy high and sell low. It's really hard to do. And I know this panel totally agree with me on that. So look, I'm not gonna be right today or tomorrow, maybe not a month from now, but I do feel good about what I own and the quality of the portfolio over the long term. That's why we wanna hear from you on days like this.

Ladies, thanks so much. Brent, Steph, and Anastasia, we'll see all of you soon to senior economics reporter Steve Leesman now Investors have had to rethink this CEOs have had to rethink this I gather the Fed has had to rethink this or is in the process of doing that on that note Some are speaking today including a very important member Yeah a couple of them Scott But they're not pointing to any imminent change in policy, as you might expect as a result of those massive tariff increases from the Trump administration.

But they do note they're watching the economic impact and more concerned than they have been about higher inflation and weaker growth. Here's what Fed Governor Lisa Cook said. The tariffs were, quote, larger than expected and could lower disposable income. That would reduce spending. It can stall hiring and investment, but it would also lead to negative growth and a weak labor market. She added tariffs and rising inflation expectations argue for holding the restrictive stance that the Fed is in right now for longer, not talking about rate hikes at the moment.

Fed vice chair Phil Jefferson saying the Fed should respond to the quote cumulative effects of policy change from the administration that includes everything, immigration, tax policy and deregulation, including tariffs. Here are those probabilities, Scott. Markets still very much looking for rate cuts in June, September and December, maybe even a little bit earlier. Some of the month earlier ones are also reasonably high. Some could argue that these are ambitious

given the coming increase to prices that are coming from tariffs got I just wonder whether you know how you would how you are thinking about the idea that the fed's hands going to be forced right I mean yields are going down sharply because of economic worries that that's why and if the economic picture deteriorates even, even if you have a more elevated inflation situation and I know some have been on the tape of late saying, wholly focused on inflation, number one thing. Right. But I mean, at some point, Steve, if the economy starts to get really ugly, they're going to

have to do something. Well, look, Scott, there's no reason for me to scream anymore because the market is not whispering. It is absolutely screaming right now. And I must make a remark about the unbelievable situation where you have the most business oriented cabinet of all time, apparently not caring about the impact on the market from these policies that have been passed. I think the Fed will care deeply about this. It looks like we're at or near session lows here,

down 1,600 as I speak. And then President Trump saying that things are going swimmingly well, I guess is what he was quoted as saying earlier. And then Howard Lutnick coming on and saying, this is all about something the economy is going to boom as a result of this. You're just not getting that.

And you're right, Scott, if you do have a kind of market Impact on unemployment a major decline in growth the Fed is going to have to respond But it's going to be looking over its shoulder Scott And I think there's some issue as to the timing here that can the Fed come to the rescue at the right time if you're still processing increases in prices from tariffs. I mean the whole the destructive nature of the wealth effect being destroyed in front of people's faces. I mean we're down 15 percent on the Nasdaq there about on the beginning of

the year. But I mean the wealth effect has a real effect and maybe a bigger effect than ever on the actual real economy. I think that's right, Scott, especially what you're talking about is spending by higher and upper income people and how they have basically been a major part in keeping the economy afloat

through consumer spending through the wealth effect. I think there's a major issue here, Scott, which is that I don't know that the Fed models are even able to take the kinds of numbers that I've heard economists talk about today. We had an economist on from the Tax Foundation who said they are expecting a one-third increase in imports, minus $900 billion of imports. I don't know that even the

very sophisticated fed model knows how to think about that number and then output either a GDP unemployment or an inflation forecast. That's why someone said today I think it was Brad Gershner, the fog of war. That's what we're in. Steve, thank you very much. I appreciate that from you. That's Steve Leesman. Session lows across the board. Steve alluded to what's happening on the Dow down 1650 points. That's 4%. The better look certainly is with the Russell down more than 6%. NASDAQ down just about that amount as well. You're watching Closing Bell on CNBC. We're back right after this. All right, welcome back. Alternative asset managers among some of the biggest decline-ers today.

Leslie Picker here with those details. What do you see, Leslie? Hey, Scott, yeah, really ugly day here for the Alts. Each down double digits, names like KKR, Carlisle, Aries, TPG, plummeting. Most seeing half of their year-to-date declines today alone. Across the industry, their portfolio companies represent essentially a levered mirror of the

broader economy and the health of the capital markets. For years, they've remained within these funds the portfolio companies have, as the IPO and sale opportunities were largely dormant. So the tariffs now may make exits even less tenable as some of these companies rework their supply chains and their pricing structure and risk hits to their margins as well as a potential macro slowdown. The biggest names in the sector have lost more than a quarter of their value in 2025. But just at the end of January, multiples actually got a bit stretched. That's their near term highs.

So from a technical standpoint, they've also been harder hit lately on days where the market sells off Scott Leslie, thank you Leslie Pickard following the money now. Let's bring in Vista equity partners head of equity capital markets Ashley McNeil, welcome back. Thank you. Good day to have you. It's a day for us anyway I don't know about for you. I mean what is going through your mind when you see this? I mean disappointment because things are worse than we had anticipated but at the same time sort of being prepared and excited about what the future holds. We sort of have a moment in time it's not the clearing event as you've pointed out and it's obvious we're not going to get the clarity we're craving and so

we're entering a world of predictable volatility like we've spoke about before. And so it's just about figuring out defensive places to put position money and also to look at various sources of capital and where will the capital be coming in the future. When you talk about defensive places to put capital, what kinds of things are you thinking about? I mean what should our investing viewers take from the space you specialize in, especially tech? I mean you guys are such a software heavy firm, the kind of investments that you make in enterprise software and you all have done quite well doing that. What sort of wisdom would you impart on our viewers

because of that? Well, first and foremost, it's one day. So we just have to take a step back. We're long-term, long-duration investors, and the public markets only represent about 5% of our investable universe. So that's part one. So looking outside of the public equity markets

is something that we do on a frequent basis. Part two is we fundamentally believe software is a defensible sector. And if you look at other time periods of market dislocation, it's been a great place to go, but you do have to look for specifics around these software companies. So you're looking for durable growth

that has survived other periods of dislocation. You're looking for defensible sectors. I've heard some of your guests talk about, you know, generative AI, but I would think of like cybersecurity or vertical SaaS. And then data modes. Because what's gonna happen with generative AI is so up in the air right now, given everything going on, you want those data modes. Given that, you know, this is, it's a one-day really, you know, bad market day, but it's been more than one day, right? We've pulled back a bunch.

If this continues, and I mean, multiples have already compressed in enterprise software, along with everything else in this market, does that continue more than likely if this level of predictable volatility and uncertainty continues? I think it's, look, we're around normalized valuation levels, at least we were kind of in March as we headed in. And you had Brad on earlier talking about us being at like 2016 lows. I think it's a fantastic time to be deploying capital in software. But I do think you have to check into your duration and you need to look for those characteristics I outlined.

I think everybody is quite obviously just sort of rethinking where we are versus where they thought we might be at the beginning of the year. Certainly on election night right when we did our special programming here and everybody was feeling bullish. Deal making was one of the areas where there was all of this I mean optimism doesn't even do justice. It was animal spirits, like, let's go. We've been waiting and waiting and waiting, and here we are waiting. Well, I think my answer might surprise you,

but I don't think that volatility and animal spirits are mutually exclusive. And I do think that you're gonna continue to see some deal activity in 2025. If you look at Q1, and I realize things have changed, but let's just look at Q1 for a minute, while M&A volumes were down, tech M&A was up, and global IPO volumes were actually up too. So while I do think that boardrooms and executives are going to be distracted by the volatility and uncertainty, and I do think

that's going to take away from deal making and uncertainty. And I do think that's gonna take away from deal making innovation. I still think that there's going to be deal making. It's just gonna be more window driven or pocket driven throughout the year. You feeling like that's part of the so-called good stuff, you know, that investors were all excited about with the tax cuts and deregulation. You still feel confident and comfortable

that that's gonna happen this year? It's just the timeline has been pushed further off than maybe you first thought? I have a high degree of confidence that we're still going to see a fair amount of deal making. Is it going to be as robust as we had hoped it would be at the beginning of the year? Absolutely not. But do I think that there's a ton of strategic deals that are still being worked on and in play? Absolutely. I think IPOs are still going to find a home. It's just going to be very pocket driven and it's going to be in periods where we have more certainty than we have today. And companies are staying private much longer. This doesn't do really anything to get them

off the couch and go public, does it? I mean, it's definitely a warning sign. Ashley, thanks so much for being here, helping us understand all of this better on a day like this. Ashley McNeil with Vista Equity Partners. We'll see you soon. Thanks so much. Getting some news out of the auto space. Phil LeBeau has that for us. Hey Phil. Scott, take a look at shares of Stellantis falling near the lows of the day, down almost 10%. The company is saying that it will be idling one of its facilities just outside of Detroit. It'll be

the Warren truck plant that will be idled for the next month. Why? An engine shortage. And so they're going to take the supply that would normally go there to support production of the Ram 1500 over at its Sterling Heights facility also in suburban Detroit. We should stress, and this is the statement that they sent us, we should stress this is not tariff related. They've got a number of issues at Stellantis aside from the tariffs in terms of straightening out issues at that company that we've talked about over the last several months. This is one of them. Again, they're going to be shutting down their Warren truck

plant for the next month. Scott, we'll send it back to you. All right, Phil, appreciate that. Thank you. That's Phil LeBow. Today's selloff coming ahead of a critical earnings season, which, by the way, kicks off next week with the banks. Joining me now, Trivariate Research's Adam Parker a CNBC contributor. It's good to have you here. I'm glad you were able to do this for us. What are your thoughts? Worse than expected clearly I'm sure last night but now what?

Because you've been a little tepid on this market anyway. Yeah look we outlined in the outlook in January first that we thought you know tariffs were in the price that the market will be down and volatile and I and then when you and I talked earlier in the week it's like yes we point blank is in the

price I said no and then we had a weird awkward pause. I'd love to get bullish at that the bottom right but I'm convinced that I need to see. A couple of things one I need to see all the guidance for Q2. And I can't understand why any CEO of a big company would guide optimistically when they report in April for the July earnings.

And two, I need to see that stock behavior you and I both love, which is company guides down and the stock doesn't go down. And so until we get that, I think it's going to be skewed to the negative. And what you see, obviously, the last 20 minutes of trading, there's tons of levered ETFs and all kinds of stuff that it causes an unwind. So I think it's going to be skewed to the negative. I mean, what you see, obviously, the last 20 minutes of trading, there's tons of levered ETFs and all kinds of stuff that it causes an unwind. So I think it's just too early to take a ton of risk right now. I mean, you are pricing in a lot of negativity already. I mean, what is a CEO going to say next week or the week after and following that that's

really going to surprise us at this point? And their stocks have already corrected some twenty to thirty if not more percent. I think it just depends on- how much people believe. That you know that the disconnect between- the current earnings and GDP need to be true to

GDP expectations are a lot lower earnings have come down only a little bit. And you know it's funny I was talking to a buddy who's- a pair trade semis today saying, is the right call long companies that report later in the earnings season, short those that report earlier? Like maybe I could arbitrage the fact that the ones reporting earlier get punished more. Like I think people are really concerned about the guidance and the applied guidance for the second half of

the year. I don't think it's all in the prices yet, Scott, because I just think it's too uncertain about the growth trajectory. I know we were together election night. I heard your comments to Ashley, and I agree. There was a lot of optimism. Our note that day was buy the election and sell the inauguration, because I think the hard work is the first six months after the inauguration. I want to be optimistic and say, well, ultimately we're going to get to talking about taxes, talking about less regulation, lower rates, as Anastasia said earlier, could be good for housing and all that pathway for multiples. But right now, I don't see how any company is going to surprise on the revenue guidance.

I think the revenue is what matters right now for Alper Forman. I'm thinking about what I've asked some guests about already today. It's impossible to pick the bottom, unless you're like the late great Mark Haynes, who made one of the greatest calls of all time. Exact day. All time, obviously.

On that note, we're down a bunch. Stocks go up over the long term. They're going to do tax cuts. They're going to extend the tax cuts at bare minimum. They're going to get that done, right? They've got the votes, presumably, to get it done. They may even sweeten it with some other things that are thrown in. They're going to add more deregulation efforts to what they've already done. I mean, we know that

as fact, right? Yeah. And that's probably going to make things a little bit better many months down the road. If I believe that, why am I not adding to risk today if I'm a long-term investor? You know, look, I mean, the most optimistic thought I could have today is I probably would cover my target short. You know, it's a stock you the most optimistic thought I could have today is I probably would cover my target short. You know, it's a stock you and I have talked about for two years that I thought was going way lower, that was overvalued. I heard Steph say earlier she's buying some, so she's maybe a little more fortitude than I do, which is probably true.

But you know, that's a company I've hated. And now I'm looking at it at the current price thinking, all right, maybe 10 to 12 times earnings is reasonable for a low growth business. That's that's gonna be a survivor So, you know, maybe the best the most optimistic thing I could say right now is there's some stuff that's getting killed that if I was You know right to be short I might be tempted to cover kind of backing up the truck to get long. I think it's harder Just because I think there's a chance that earnings could be way too high for some of these businesses. And I'd like to see any evidence that stocks act well on those guy downs before I get in there.

So I guess, you know, what I will do is like stocks at higher prices. So it's exactly what Steph said, where you want to buy low and sell high. I'm going to buy them higher because I'll be more confident at that point that, you know, the bad news is in the price. You know, you don't like a micron today down 15 and a half or a broadcom down 10% or an Nvidia down seven and a third percent. Again, I'm asking about the chip names because you know the space as well as anybody, if not better given your prior job.

And I asked you about these names a lot but they're getting getting getting killed today. You know me well it's almost like you had a little Alexa in the Trivarian office today because we're working on a big semi cycle piece just trying to figure out like when we hold our nose and take a shot at at some

of these names. You know obviously I got five questions today on a webcast we did earlier about you about Nvidia and when is it time. My gut feeling is it's too early because I think the inventory levels for a lot of these businesses will have to come down more to normalize. I think revenue is declining or missing.

As soon as I get the sense that gross margins would go up six months later, I'll get into the semi cycle. If you put a gun to my head, I'll say it's closer to July earnings than April earnings. Adam, appreciate you coming to the television, coming to the camera for us today. Anytime, I'll see you next week. Glad that we could hear from you.

That's Trivariate Research's Adam Parker. As he said, also a CNBC contributor. We are in the closing bell market zone now. CNBC's Senior Markets commentator Mike Santoli's here to break down the crucial moments of the trading day. I'd like to just give you the floor here and let you riff on what you think. First thing I'll say is this area

that the market has been pressing down on, 5,400 in the S&P, a lot of the people I watch and follow, different processes are converging on that. It's kind of a critical point. You really want to see the market, you know, kind of gather some traction in this area. It's like the September low, you kind of break through certain trends. So just on a tactical basis, the question now is have we seen enough? Have we seen enough damage done? Have we seen the selling pressure flush through? You got about 20% of all stocks in the NYSE and the NASDAQ making a 52 week low.

That's pretty high. It's not as high as you've seen some time. You have 89% of volume to the downside of the New York Stock Exchange. Everything is just sort of up against those levels where you say, I don't care what the headlines are, close your eyes and buy. But that's different from saying,

we found some kind of strategic fundamental support. We just haven't rebuilt some kind of margin of safety or cushion under this market if the earnings path is as we fear it might be, which is going lower from here. So I think you have to keep those two things in mind. There's a tactical setup where we've been for sale for six weeks and the market's down 12% you know off a high

it seems like it's oversold enough you really want to see it respond to those conditions. Job market job report tomorrow yeah should be pretty important. Arguably you want to see just that the economy was holding together once we went into this. I don't think we're sitting here rooting for the ugly numbers of the Fed act sooner because I think that's tricky Especially if we're talking about the May meeting, you know It's it's really stunning when you look at the degree to which a lot of High quality big-name stocks are way off their 52 week highs. Let's start with the banks get your thoughts there Morgan Stanley 24% now off of its 52 week high.

Citigroup almost 26. You've got some of the Bank of America, I mean almost every bank. JP Morgan is the only one that's only down 18.3%. Everything has a two handle in front of it as in like 25% off of its highs. Yeah, I think that what you're seeing obviously is just the amplified version of the macro

fear and the consumer and you've seen the consumer levered financials really get smacked today, you know, the kind of lower quality credit card issuers and things like that. The other piece of it is it felt like banks were a bit of a complacent hold. And I've said it a million times, the cleanest story on deregulation is bullish is implemented through owning the banks. Because that's where you can just say, hold less capital, do whatever you want, make your own rules, as opposed to sort of feeling like it needs, you know, drilling new oil well. So I do think you're seeing some of that just back out because really financials have been

the one cyclical area that have hung in better. I don't think today wipes that away. You have insurance doing pretty well today of various types. Berkshire Hathaway is a huge piece of the XLF. It's been a massively defensive holding for many, many reasons. But I do think that this is it. This is that acute version of why the banks are suffering right now is they have layers of Risk toward things that we're now getting more concerned with tech Obviously is a trouble spot today a lot of once high-flying AI related names If you look at the Vistras and the Dell technologies and the Vertis and the Eaton's You are talking about declines now off of their

highs of some 45 to 60% in those types of names. Second derivative AI plays I mean they really were sources of a lot of buzz and it got a lot of fast money and that's been unwound and that makes more sense. What's interesting is traditional utilities kind of have done more or less their job during this tough period, low rate play, domestic and all the rest of it. So that that all does What's interesting is traditional utilities kind of have done more or less their job during this tough period Low rate play domestic and all the rest of it. So that that all does line up What is interesting? I know you guys were talking about it earlier in Microsoft relative strength today. Yeah, maybe active defense Listen, it's one of two triple-a rated companies and it's down a lot on a one-year basis and it's pretty steady

So you can see why that's the case. I don't know if we're gonna be able to steer the entire index higher. In fact, if we get one of these climactic crescendo type lows and we start to rip off of that, it's gonna be the lowest quality junk that flies farthest in the initial burst, but that's not necessarily what you wanna

kind of average into with hopes of holding it for a while. The travel stocks have been a problem for a while as the soft data, the so-called soft data. Delta had that negative commentary felt like two, three weeks ago. The surveys have been bad. Those stocks have traded exceptionally poorly. They're down a lot today.

And they're down a lot too off of their 52 week highs. I mean, I'm looking at Delta and United, Disney off of those types of consumer facing names. Yeah. I mean, there has been a real give up trade in the most discretionary of consumer discretionary type stocks. Those all qualify. And then you have to also add the other factor, which is, you know, America as an island, and, you know, obviously there's been a lot of that survey work of global travels, incoming travels really taking a hit and probably will continue to do so. So all those reasons, I do think you have to have some concern.

I mean, look, the question you go up and down the line is how much is too much? How much of an earnings hit is already getting priced in to these areas. The market's not going to fully abandon the idea that there's some negotiability here in the level of tariffs or how long they stay on or whatever. Whether that's true or not, the market's going to hang to that because it does seem as if it's going to be at various levels hard to sustain. I think the market hopes it doesn't have to kind of push the issue and say that they're going to force it. But I don't think a 12% drop after two consecutive 20% up years in the S&P is necessarily enough

to have people say, you know, this is an absolute market emergency. There was a time where you would on some days like this hide out in some of the large cap tech stocks. Not not today, obviously. You know, it's not often you see Apple down 9% in a day or Nvidia down near eight and some of the other big losers. That one, I mean, honestly, you have to say it makes sense, you know, in terms of just the linear earnings model

situation and where the valuation sits. But software stuff that's not dealing in traded goods, it doesn't have manufacturing plants everywhere else, in theory, that could become some kind of a defensive trade. I think one of the issues with the mega caps is the rest of the world owns a lot of these stocks too. I mean you see this huge shift of relative performance outside the US. The dollar doing what it's doing is kind of a fascinating move along those fronts. So at this point it feels like, you know,

if you're an investor today in equities, it's basically survive and advance. And survive would be holding around these levels and surveying the damage overnight into tomorrow, seeing how oversold we are, how that stacks up with the reset of sentiment that we've already gotten, and make that decision of, have we seen enough for the short term forget about what the old highs were

forget about anybody's target of 6800 in the S&P doesn't matter you can have a tactical relief type of a trade at some point without having to make the big call that it's up up and away. Alright so thank you. That's Mike Santoli. We will pick it up tomorrow obviously and see what this market has in store on jobs day. But we're going to close at the low. The Dow is down by 1700 points. S&P is going to go out about a 5% decline in overtime.