Closing Bell - Closing Bell: What does rising stocks and falling sentiment tell us about where the markets might be heading? 4/29/24

Episode Date: April 29, 2024

Dan Greenhaus from Solus Alternative Asset Management, CNBC’s Steve Liesman and Shannon Saccocia of NB Private Wealth discuss what they’re expecting. Plus, Plexo Capital’s Lo Toney is mapping out what he is watching from Amazon and Apple this week. And, top technician Jeff DeGraaf tells us if last week’s choppy trading was just temporary or a sign of more downside ahead. 

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with this resilient market. Stocks higher following the best week since November. Even as cautious comments continue to flood the street today, we'll ask our experts over this final stretch whether that's warranted or not, as another big week is about to heat up. In the meantime, your scorecard with 60 minutes to go and regulation looks like that. We are green across the board, and it's Goldman and Boeing among the names leading the Dow today. Apple is, too, after an influential analyst comes off the sidelines for the first time in some six years. He upgrades the stock.

Interest rates, they're slipping today, probably helping with those green arrows. There's your treasury curve today. It does take us to our talk of the tape. Rising stocks, falling sentiment. And what that tells us about where the markets might be heading. Let's ask Dan Greenhouse of Solus Alternative Asset Management with me here at Post 9. Welcome back. Thank you, sir.

That's interesting to me that we have this resilient market coming off the best week since November, stocks rising again, and I feel like sentiment is slipping, deteriorating. Is yours? Are you bullish still or less so? What's the story? No, I think I feel pretty much the same. We had talked the last couple of weeks that the market was, I hate saying due for a correction because that, of course, means nothing.

But it felt like the internal technicals suggested that perhaps we were running out of steam. And we did. And we were down, call it, a little over 5%. I thought we were probably going to get down 6% or 7%. That would have been a more substantial decline. Although, really, what's the difference between 5% and 7%? We're splitting hairs here. But it feels like the market wants to stabilize at this level. Earnings season is coming pretty well. But obviously, you have the Fed on the horizon. And that's sort of a broader damper. I mean, I've got technicians out today saying, well, we're going to fail and turn lower.

RBC says the pullback may not be over. JP Morgan's looking at summer drawdown risk, looking at a year ago and saying, maybe we're going to be in a similar scenario. That's sort of to my point of, well, I mean, the market bounced back pretty sharply, but yet it feels like sentiment is offsides. Well, I think we spent two or three months going straight up and all of a sudden we were down 5%. All of a sudden may not be the right way to put it, but it felt like it did. It did. And I think people got a little shook.

And there's a feeling like, as I just articulated, maybe we need a little more than a 5% pullback. And so the fact that the pullback is, quote, only going to be 4% or 5% or 5. half percent might be insufficient for a lot of people, which is why they may feel like I need a little more. I want you to listen to something that Adam Parker told me today on halftime about his new note. The headline is and then we'll play this down. The headline, our recommendation had been that the bull case was far more probable than the bear case, driving our judgment that there was material upside to the S&P 500. But now our view has changed. You told me why. The three pillars to the bull case were easy financial conditions, you know, gross margins expanding and a belief that earnings are going to grow. The three pushbacks we always worried about were kind of a tightening set of conditions, slowing consumer, and a China recovery that's

punk. We could get some cyclical pressure on inflation a little bit. Two, the consumer is definitely slowing. And you can see that through some of the corporate earnings and macro variables. And then third, we scoured every word of every earnings call transcript year to date for any mention of China, China growth, China demand, China initiatives. And it really hasn't picked up. What do you make of this? Do you think the three pillars, to use his phrase, are weakening? I understand what Adam's getting at. And Adam's obviously one of the best market watchers there is. I mean, my view of things is over the last week and change, let's say, revenue expectations with reporters has only gone up, called 50 basis points.

But EPS expectations have jumped by well over 200 basis points. So from the margin standpoint for the market as a whole, you've seen some support right here. Now, granted, a lot of the heavy lifting last week was done by Meta and Google, et cetera, very large companies. But when you look up and down the spectrum of sectors, I don't really notice, other than health care, which is suffering from the Bristol-Myers issue that I think most people know about by now, most of the sectors seem to be holding in there pretty well on an EPS expectations basis. And that, I think, has a lot to do with margins. So at least from that standpoint, I think the market's doing pretty well. Pasquarello over at Goldman put a note out

that says, you know, he expects the market to chop around a bit. You're going to have, you know, maybe volatility pick up a little bit. He says, quote, there's times to go for the break and times to go for the gas. Superficially, my instinct is equity people should be tapping the brakes. That's a person who's been pretty bullish, too. Sure. And listen, I think Tony's great, and I think he's probably right. And leaving aside what Solis is doing with the fund or not, when you look at the size and the scope and the scale of the rally off the October lows, and then you layer on top of it the stickiness of inflation and what will probably be an ongoing shift in the Fed's narrative coming from Jay Powell at the meeting

later this week. I wouldn't be surprised to see some dampener on the market for a little period of time. Is that what you think? You're going to get a change in tone or a change in language? Well, I think you've already had it. I think it's shifting to the Fed meeting later this week and we're going to bring in someone else. I mean, it starts tomorrow. So it's right. It'll be front and center here. Sure, sure. But I think it's going to be hard for him to say, as he had been arguing, that the data was going to shift in a way to give them confidence that inflation was returning back to two percent. And when he has the press conference on Wednesday, my expectation and I think everyone's expectation is that he'll make a dissimilar comment, which is that he doesn't have that confidence right now.

And that's going to continue the shift in the narrative away from we want to cut by or what sounded to us like we want to cut by the summer to something that will be interpreted as we just don't have enough data to cut by the summer. I mean, let's bring in our expert, Steve Leisman, our senior economics correspondent. So, Steve, how about that? Are we expecting a change in language from Chair Powell this week? Are we going to hear things like a lack of confidence that we're heading back towards the level we need to be? Yeah, I think he has to skew more hawkish about the current data. But I got to throw something back at Dan because I actually don't know the answer to this. The thing I'm interested in here, Scott, is does, and this may sound second derivative, but does Powell have the

confidence that he will get the confidence? In other words, does his forecast remain that inflation will come down in the future? That is the forecast of the FOMC. Do they feel secure about that? And so it's really not a matter of are they abandoning cuts because I don't think they're doing that. I think what they're doing is they're delaying them. I think there's a big difference in that for the market. So I suspect he's going to hold on to the confidence that he has. Inflation will be coming down. I don't know if he'll put a time period on that.

I don't think he'll abandon that. What he will do is skew more hawkers in terms of not having the confidence right now. So then why don't you come back then at least? I mean, if he does skew more hawkish, what happens to stocks? Well, first of all, I think everything Steve just articulated is largely correct. The confidence is not there. And it's amazing that even one data point like the March CPI is sufficient to cause that shift. But I don't think he has the confidence now. But PCE is different than CPI. It is most certainly different and much more relevant.

Why are we focusing more on PCE if that's what the Fed focuses on? Why are we so fixated on the last three CPIs? I think, and I imagine Steve would agree, obviously the PCE coming in more or less, quote-unquote, in line is very helpful, and it could have been a much more difficult conversation right now if pce had been 0.4 let's say instead of 0.3 i'll say so sure but i think and i imagine steve uh you'll agree it's the totality of the data and so so i think when you put the pc along with the cpi and the idea that the economy is holding up i think they're going to come down to the side of what's the rush i'll tell you where where i'm working now

scott in terms of my thinking is the idea that has he now look you go back a couple years to jackson hole and maybe a little before that powell was fairly convinced the economy had to slow below potential in order to bring inflation down that didn't need to happen and didn't happen um and now we get to this last mile question. And I'm wondering right now if Powell's at a point where, hey, we can't do it. And I will tell you, we asked this question in the Fed survey. And we said, do you think we can get to the target, can the Fed get to the target without below potential growth and without the unemployment rate rising by half a point?

And 50 percent say no, we can't do it without those things happening. So that may be where we are right now. And I don't know, and hopefully we can explore on Wednesday, the evolution of the chairs thinking that, hey, we got this first part. It was mostly and largely supply chain improvement with a little bit of Fed tightening on top of it. And now it's all going to be on Fed tightening. And if that economy does not run, remember, Scott, today in our poll, our survey, look, it's opening days or the opening bidding on the Q2 numbers.

But basically, we're looking at still above potential growth for the second quarter here. And that's been a string of above potential growth. So I don't know if we can get back to that 2% target without that and I don't know if the chair believes that yet Wow I mean then you're potentially saying we could be setting our ourselves up for another eight minutes of of hawkish I mean that that's alluding back to what you were suggesting about that that now famous Jackson Hole speech which I think was like literally eight minutes long. But that's all it had to be because the Fed chair was as hawkish as he could possibly be within those eight minutes.

Yeah, that's right. I don't know if he's going to be eight minutes on it. I don't know if he's gotten there yet, but there are a couple of people out there. I mean, Barry Knapp had a nice comment in our survey where he said, look, we can't do it without fiscal tightening or at least less fiscal input here. And guess what? The chair won't say anything about that and and has no control over that. So if the fiscal deficits are going to run the way they are and if that indeed is a major source of the inflation, the Fed chair has to deal with that. It's going to have to lean against that. That just appears to be a reality. Which brings me to another topic that we probably shouldn't miss.

We might get a QT announcement about slowing QT on Wednesday. And we get maybe an equally significant Treasury funding announcement. So, Scott, whatever you're going to be drinking Wednesday morning in terms of coffee, I would double it up and be prepared and put your seatbelt on. It's going to be an interesting day. Well, I mean, I'm looking right as we speak. I think this just moved on these Treasury quarterly financing estimates about the number to which they're going to have to borrow. And they look to me to be higher than prior estimates. And I wonder if that's why the stock market's lost like 100 points almost in the last five minutes,

and the S&P now is, I don't know, about a range of a 10-point swing. It was up, and now it's lower, too. So, I mean, I guess the point, Steve, is there are a lot of moving targets on a lot of different things. It is a multivariate equation, and Dan Greenhouse will smile when I say that, I believe. And the Fed is really just one of them. And not only, you know, you have the one good thing we have going, Scott, is when I look at the economy, my assessment at this moment is we have risks, but there do not at the moment appear to be evident weaknesses. I know you had Parker on talking about the weakness of the consumer. Well, you don't see

that in the March consumer spending data that the government put out. You don't see necessarily in our CNBC retail monitor or some of the other things. Yeah, there is some talk about the weak consumer, but we've had that talk for quite a long time there are risks out there but not weaknesses and so all of that is part of the reason why i think the fed can lean hawkish and will lean hawkish um and keep this idea of of these higher rates which by the way don't forget they are restrictive they are very restrictive and there's an argument that the fed could trim a little bit without really have much effect on that restrictiveness. It just won't because of the optics of it.

Yeah, just to give more context to the headline at the bottom of the screen, too. I mean, I remember the last estimate that came out was below expectations. And that maybe took a bit of a simmer off of where yields were going. And the stock market definitely got a jump on that because I remember I was here doing the show the day that that happened. So it works both ways. If you if the estimates come in above the funding estimate, you're going to have a little bit of leakage in the market. But we'll follow it, Steve. The next couple of days are going to be interesting. You'll be all over it. And we'll hear a lot from you. And I look forward to that. That's Steve Leisman. Let's bring in Shannon Sakosha now, Neuberger Berman, NB Private Wealth Chief Investment Officer. It's nice to see

you as well. So, you know, game out this market in what is a especially pivotal week yet again. The busiest of earnings season, Fed meeting, jobs report, everything. Yeah, there's tons of push and pull here, Scott. So it's macro versus micro. It's past versus future. Coming into this earnings season, you know, it wasn't all that demanding from a top line and bottom line perspective. And so when we think about what the market was really looking for is that we've been looking for that guidance. And so a lot of people are pointing to earnings season not being that bad and probably better than expected, yada, yada, yada.

We see that all the time, especially on the bottom line, and especially with a lot of the cost cutting that's gone on over the last 12 months. But if you look forward, we're really looking at guidance. And what are people guiding for? Are they guiding for this re-acceleration of manufacturing? Are they guiding for middle income and high income consumers to remain engaged? And I think when you think about the Fed, I mean, Powell can go hawkish in the Wednesday meeting. In our view, he's not going to hike rates, right?

Whether we're at peak rates from a Fed perspective, in our view. And so I think that it's the pace that you talked about confidence. The confidence is going to come with not the past, not the Q1 GDP number. It's going to come in some of this data that's coming on on a week-by-week basis. PPI was in was was in line with you talked about PC already you're looking at reacceleration the

manufacturing economy does that offset the consumer. I think that you know prospectively we need to think about where our earnings going to go and more importantly with inflation a little bit stickier Scott maybe we don't see those top line

declines and maybe the comps aren't quite as bad as they were. Given the fact that aren't quite as bad as they were, given the fact that we're going to see a little bit of that upward pressure on the top line. I get it. But so then distill all that down to me on what your market view is now and whether you agree with an Adam Parker who says, you know, the bull case was far more probable than the bear case, driving our judgment that there was material upside. I'm quoting from his note yet again. Our views changed.

Pasquarello, as I said again, I'll read to you. Times to go for the break. Times to go for the gas. My instinct is equity people should be tapping the brakes. Have things changed even incrementally or not? In the short term, I think that we're getting as we get further along in earnings season, Scott, there is more risk to the equity market. Earnings keep investors in their seats. They can look at the results.

They can read through to the micro and they get a better sense. Once we get out of earnings season, we get into that no man's land. And frankly, that no man's land is, is the Fed going to cut? Do they feel really concerned? What is this next economic data point? And the Fed has really backed us into that thinking. So outside of earnings season, we're being just as data dependent as the Fed is. And that's not good for the equity market. We need to keep a longer term view. The second half in areas like financials, banks in particular,

is slated to be stronger. But if everyone is thinking about what does it mean the next few weeks? Yes, at the end of earnings season, that macro takes over. And right now, macro isn't that supportive, especially with the Fed not having that confidence. Shannon, I'm going to disagree with you because I think the idea that somehow the market being more data dependent is a bad thing would be true if the data was moving in the wrong direction or wasn't good and right now as steve alluded to earlier you've got stronger than expected gdp earnings season as you mentioned and i mentioned is going better than expected we talked about that steve talked about some of the strength of the consumer you're also not hearing any weakness

from visa or american express who reported about the consumer. So I think to the extent that we move past the next Fed meeting, obviously inflation is going to be a concern, and that's something to which we have to pay attention. But the data underlying the growth in the economy and the data boosting the stock market has been, for lack of a better word, pretty darn good. And I don't, at the risk of starting an argument here, I don't know why focusing on that better than expected data and strong data would be a bad thing for investors. Because the S&P 500 is dominated, continues to be concentrated in the top end of stocks that sell at a higher than than much higher average valuation. And so for me, it's for me, it's a multiple perspective. The multiples

for that higher end of stocks, which are impacted by rates, which are impacted from by inflation, that's where you're seeing that a shorter term weakness. And I think that if you look at the overall valuation of the market, that's where equity bears are going to pin their concerns because of this concern about inflation. So I don't disagree with you. The fundamentals of the underlying economy are still strong. I disagree in some ways with Adam in terms of the consumer. Yes, credit card delinquencies have moved up, but auto loan delinquencies have not. They are not back to pre-pandemic levels, even though credit cards are. So there is an undercurrent of growth. And to be fair, and Steve made this point last week,

Scott, on the show when you weren't there, we wanted growth to slow down a little bit. This is a more supportive environment for inflation. But I do disagree. I think that as long as the market is looking at CPI, I think that's going to be an issue in terms of adding some additional volatility to the equity market. I mean, bears would have you believe that growth is slowing too fast. Inflation is getting too sticky. Mega caps are overvalued, you know, blah, blah, blah. And at each sort of train stop on the way, the trains left the station without them. I'm looking at Nick Timoros right now, Wall Street Journal, OK, puts on social media some 13 minutes ago. The New York Fed's measure of inflation persistence, OK, declined to 2.6 percent in March from a downwardly revised two point seven in February and from three percent in January.

So don't tell me that we've got some, you know, overly either sticky inflation problem or the fact that we're trying to tick in the other direction, because at least by some measures it's not happening. And inflation is still trending by virtue, even what the PCE reported in the right direction. Yet, you know, you have the naysayers who look at the CPI, the last few and say, see, I told you. And let me let me add. I'm sorry, Shannon, I meant to address that to you specifically. Oh, OK. Thank you. So, no, Scott, you know, clearly, if we if you look at what we think, we think inflation is going to be lower by the end of the year. The challenge right now is that we started with six to eight rate cuts in November and December. Then we went to four. And now we're, you know, a little under two for expectations. And so I think

that there are still folks in the equity market that are looking at the potential for rate cuts to be the accelerant or the justification for some areas. I'm trying to figure out, is that bad that we've taken down the number of rate cuts? The market went up 20% the whole time. We've taken up the expectations on the economy. Yes. And I think that that is where if you look at that tipping point, we're in this tipping point where the second half of the year is likely to continue to be supported by the trend of improving economic growth, perhaps not as hot because there is likely to be some slowing. But that slowing will allow the Fed the latitude to be able to move. And so our view is that by the

end of the year, interest rates will be lower. The economy will be continue to be able to move. And so our view is that by the end of the year, interest rates will be lower. The economy will continue to be positive and that we won't see a sharp uptick in unemployment. However, in this very short term period, which, Scott, is what you asked me about, I think that there could be some volatility in this period between now and, say, mid-June. Listen, Shannon's right about a lot of what you just said. I agree with a lot of it. The one thing I'll just reiterate from before about the larger stocks and interest rates, the reason why you care about interest rates and tech stocks is because they are what everyone jokingly calls long-duration assets. What does that mean for investors? It means your earnings are further out in the future. So if you are a riskier stock and more of the value of your company is in the terminal value,

then lower interest rates is better. But for a Microsoft, for a Google, for a Meta, all of whom reported 17%, 20%, 25% EPS in revenue growth, there's earnings right now. In the case of Google, obviously, now you have a dividend. There's cash return that happens right now. And those companies are much less susceptible to interest rates. And I would just argue, and I don't think Shannon necessarily disagrees, that in this type of an environment, those companies should get a premium multiple to the market. And to be clear, in the case of

Meta and Google, the broad market's trading at, let's just call it 20 times forward earnings. Google and Meta are trading at like 22 or 23 times forward earnings. So it's not exactly, the group as a whole is not exactly screamingly expensive relative to a market which is trading by itself above its previous multiples. So I think and again, I don't think Shannon disagrees. I think there is something to be said for those stocks getting a premium multiple being insulated from the interest rate environment. The data underneath the economy and the stock market being relatively strong. And while I agree with Shannon and I said earlier, you're probably going to have a bit of a choppy moment here while we sort out the Fed and the inflation story. At the end of the day, if those tailwinds remain in place, then all else equal, the bias for stock prices and risk assets should be to the upside. And last word.

Yeah, listen, with this, the shorter term versus versus longer term, by the end of the year, rates are lower. We think growth remains intact. And our view is that there are opportunities. We just think those opportunities are in sectors outside of big cap tech. And you know I felt that way for some time. So I'm just going to ask you one more question then because I feel like it's open. It's left open.

By the end of the year, if you want to talk about where rates are going to be by the end of the year, rate cuts and what have you, where's the S&P? Is it higher or lower than 5,100? I think there's a possibility that it remains higher. I mean, that could go higher. But I think that it really relies on the fact that we need to see kind of this economy remain in this consistent groove. And I think that this manufacturing uptick, Scott, that we don't talk nearly enough about globally, I think that's going to be a helpful catalyst to some of these more cyclical sectors. Shannon, we'll leave it there. Thank you. Shannon Sikosha, Dan Greenhouse, appreciate it as well. To Christina Partsenevelos now for a look at the key stocks she's watching into the close.

Hi, Christina. Hi, Scott. Well, consumer fintech companies so far plunged today, even after beating the streets expectations for the first quarter. And you're wondering why is the stock down 11 percent? Well, Wall Street was looking for second quarter revenues about 580 million dollars. But SoFi said they can only expect to post revenues of a range of 555 to 565 million. All you need to know is a lot less than what the street was anticipating. The company saying that 2024 remains a, quote, transitional year, hence that 11% drop. Domino's may be used to putting toppings on its pizza, but today they topped Wall Street earnings estimates for the first quarter while posting revenues that were in line with estimates.

U.S. same-store sales grew 5.6% during the quarter, which the CEO attributed to the company's five-year hungry-for-more plan. Investors are clearly hungry for more of this company. You can see shares up 5%. Scott? All right, we'll see you in a bit. Christina, thank you. Christina Partsinevelos, we're just getting started. Up next, navigating the tech trade.

It's a big week again. Amazon and Apple results are front and center this week. Plexo Capital's Lo Tony standing by with what he's going to be watching from those reports. Join us right after this break. NASDAQ giving up earlier gains, hovering just above the flat line this hour, despite a boost from Apple this morning. That stock climbing after getting an upgrade from Bernstein. An analyst there who was on the sidelines for some six years upgrading that stock today. We are keeping a close eye on both Apple and Amazon ahead of this

week's earnings report. Here to discuss Plexo Capital's Lowe Tony, a CNBC contributor. Welcome back. Thanks for having me. So before we look ahead, let's look back. I mean, what was your takeaway from last week from these big tech reports that came out? Well, like I said, AI means both artificial intelligence and additional income. And what we saw, I think, from the big three that I focused in on in Alphabet, Microsoft, and Meta, you know, the first two, Alphabet and Microsoft, really delivered, and I think they've given a very clear articulation of how they're looking at the opportunity in AI to drive revenues, and at the same time have really articulated a little more clarity around how the return on investment

from the investments that they're making into their infrastructure to support AI are gonna play out. Now, I think even though Meta did deliver great returns, the lack of clarity around how their investments are gonna drive additional revenue, I think, needs to be further understood. You know, in fact, when you look at Meta, they announced that they're going to invest an additional $5 billion or so into infrastructure, kind of bringing that to about $37 billion

for the year. And I think investors are having this eerie sense of reflecting back to what happened to Meta stock when they announced heavy investments for the artificial, the virtual reality, right? And so I think this Metaverse investment that Meta did that didn't quite play out yet, I think investors are looking at AI now and wanting to just have more clarity from Meta around how those investments are going to drive growth. Was Alphabet the standout? And I ask you that also, I mean, the fact the stock's up 10 percent over the past month

and also it continues to trade at what some would suggest is a much more reasonable valuation than some of these other names with, you know, not nearly as much of a premium as a couple other names that you could easily point out. Yeah, no question. That's a great insight, Scott. Well, look, first of all, it doesn't help when a dividend is announced along with the share buyback. But putting that aside, I think looking at the comments around the CEO for the infrastructure that Alphabet has

across its business units, you know, they're very bullish that that's the best infrastructure in the business to be able to deliver on the promise for AI. So I think going back to your comment, yeah, I think Alphabet is very well positioned and, again, has clearly articulated a return on investment strategy that we feel will deliver at least a 50 percent return on investment on an annualized basis look I think it also shows that the the search business the YouTube business those core businesses for the revenue drivers and income drivers for alphabet are showing a lot of resiliency. And, you know, as we look towards this environment where we may see, you know, increasing or at least no rate cuts, you know,

normally, you know, those are that environment is devastating for growth companies. But, you know, as your guests alluded to, that's because a lot of these, you know, revenue streams are on the back end. But when you look at, you know, a company like Alphabet, they're delivering cash flows with the dividend share buyback and delivering revenue right now. So I think it's very well positioned. Let's talk Amazon and then Apple. But what are your expectations here from Amazon this week? Yeah, you know, I think Amazon is going to deliver solid results. You know, I think what the market's looking for in everything that I'm seeing is, you know, the analysts feel like there is more that could be delivered from Amazon stock.

And when you look at the fundamentals, you know, I would have to agree. I think there's more that Amazon can deliver based on, you know, what we're seeing with these trends at some of these other companies around the cloud business. And then Apple, which I mentioned at the very top of our program, gets this upgrade today by Tony Sakonagi over at Bernstein, who hasn't had a buy or outperform on that stock low in six years, but finally comes off the sidelines and says, quote, by the fear. Yeah, well, there's definitely a lot to fear when just thinking about that. Well,

look, first of all, I mean, the analysts are expecting probably a buck fifty on a little over 90 billion in top line. And, you know, those are solid numbers. But there's a little bit of a drag because of what's happening in China. I think the interesting takeaway that I had from the Bernstein analyst was, you know, a lot of people are concerned that this drag in China is because of shifting consumer behavior, especially amongst the younger audience, coupled with the fact that some of the domestic manufacturers in China have really made strides to add 5G technology along with more advanced features that are at a price point which competes with some of the lower-end iPhones that Apple is selling in China. Now, this Bernstein analyst has more of a contrarian view. He doesn't, you know,

kind of feel that that's, he feels that that's just cyclical right like a lot of that is because of the pressure that the chinese economy is under and kind of once that pressure is relieved then the consumer's taste will shift back towards this higher end price point that iphone delivers i'm not sure you know i think if we think about the cycle you know we didn't really see a lot of consumer demand from the 5g upgrade it was really more of the push from apple to make sure that the functionality the foundational functionality will be in place once some killer apps come through maybe in the form of of artificial reality we'll have to look at those vision numbers. But perhaps we'll see a return to normalcy with this next upgrade cycle when much anticipated will be some of the AI

functionality built into the phones. Maybe that will have a little bit more of a consumer pull. Going to be a fun week. Thanks for previewing it. Lo, I appreciate it. We'll see you soon. Lo Tony. Sounds good. Take care. Up next was last week's choppy trading. Just a temporary setback or a sign of a bigger pullback ahead? Top technician Jeff DeGraff will give us his take just after the break. The S&P coming off its best week of the year.

Still on track, though, to snap a five-month win streak as investors debate whether the pullback from the March highs has run its course. Joining us now, Jeff DeGraff. He's the chairman and head of technical research at Renaissance Macros. Good to see you again. You look at this snapback, we'll call it the bounce. Do you believe in it? Should we, from a technical standpoint? Well, I think so, Scott. I mean, it's not a lock. There's three things that we look for, for a good, what we call tactical lows and an uptrend. And no doubt we're still in an uptrend, so that's the good news. We look for an external oversold condition.

We look for an internal oversold condition, which both of those we've had. And then we like to see a sentiment flush. We like to see a rise in put call ratios and some of the other high frequency data, which we haven't really seen. But we did get that external oversold condition. Our oscillator got down to an oversold level that usually provides some type of bounce. I think the risk is when you're in an uptrend, if you wait for all three conditions, it's great to have them. It obviously improves the probability that good things are going to happen. But if you wait for all three

to happen, the risk is that you miss out. And so when we get two out of three, as Meatloaf said, it ain't bad, and we stick with the trend. I get you that we were due for a bounce. I think everybody would suggest that we were. But that doesn't necessarily mean that the risk-reward for stocks in the near term, at least, hasn't changed, even if it's just an incremental move. You start talking about words like stagflation, et cetera. Maybe that's a difference maker. Well, I mean, there's no doubt and it's look, it's been the case for at least six months now that we think the biggest risk to

equities is elevated 10 year yields. That translates specifically into elevated real yields. We're right at the cusp. We're right there. When we get to this 2.25% in real yields, that starts to push against equities. It's not dramatic, but it certainly gives us more of an elongated pause until you start to catch your breath there. So we'll see what happens. But I think absolutely, if you had to say what is the biggest risk to equities here from a valuation standpoint, all these things filter back to real yields. And that's one thing that I think can keep a lid on things. But keep in mind, we are in an uptrend. And usually what that means is that you're going

to go into a consolidation, you're going to pause, you're going to refresh, and then you're going to break out higher again. And I think that's what we're doing here. Differences are obviously what helps make a market. I find it kind of interesting that whereas Adam Parker puts out a note suggesting he's less bullish, at least right now, because maybe China is not recovering like we expected it to. Whereas you say you're becoming more strategically bullish on China. How so? Yeah, that's interesting. I know Adam, but I don't read his research. But that said, we made a tactical call on China back in early February.

Now, I will be the first to say that was luckier than it was good. I mean, there are obviously signposts that we used to buy, and it was really very timely. That was a tactical call. Now, sometimes, and this is one of those times, that tactical call will turn into a strategic call. That's because we start to see evidence that the trend's changing. We saw a breakout in Hong Kong. Obviously, that's the kissing cousin to China. We're now seeing a breakout, a 65-day breakout in the Shanghai 300. The 50-day is not yet through the 200-day, but the price is through the 200-day

moving average. So incrementally, build by build, we're starting to see better things happen. And I think it's really reflected in some of the metals that we're seeing globally, right? I mean, copper is broken out. It acts well. Maybe what we're seeing is these interest rates here are going to end up putting a lid on the inflationary pressures, on the growth pressures here domestically. But at the same time, the baton gets passed to China and they actually start to help elevate or at least buoy global growth. We'll see if that happens. But we think the equity markets in China have turned. They are turning, but we are actually making the case that they're turned.

All right. We'll see you soon, Jeff. Thank you. Thank you. Appreciate your time. Jeff, up next, tracking the biggest movers into the close. Pippa Stevens is standing by with that. Hi, Pippa. Hey, Scott. One streaming name is popping after a call. The stock is oversold. We've got all the details coming up next. We're 15 from the bell. Let's get back to Pippa Stevens now for the key stock she's watching. Pippa. Hey, Scott. Philips is surging after the medical devices company agreed to one point one billion billion settlement in the U.S. for personal injury cases linked to the recall of some of its sleep apnea devices. The company did not admit any fault or liability or that any injuries were caused by its devices,

though shares up 26 percent at a two-year high. And Roku is in the green after Seaport upgraded the company to a buy. The firm said the stock was oversold on fears of streaming competition, but that Roku is central to the connected TV advertising market and the risk reward is attractive. Scott? All right, Pippa, appreciate that. Pippa Stevens still ahead. Tesla shares are surging today.

The automaker reaching a key deal with China, marking a major milestone for its driver assistance service. The details and what one top analyst is saying this could mean for the stock, we'll tell you next. Coming up next, NXP reporting top of the hour. That stock's seen gains of more than 30% over the last six months. So can that momentum continue? We will discuss when we take you inside the Market Zone next. All right, we're in the closing bell Market Zone. CNBC Senior Markets commentator Mike Santoli

is here to break down the crucial moments of this trading day, plus Tesla heading for its best day in more than three years. Phil LeBeau, of course, on that. And Christina Parts-Nevelos looking ahead to NXP earnings coming out in overtime. Mike, I'll obviously turn to you first. OK, earnings are important this week. And I suppose not whether the Fed chair is going to be a little hawkish. It's well, I shouldn't say little. It's how much how hawkish is the is the question. How much will he hold out hope that he still thinks that inflation on its own is going to moderate? Is he still going to focus on the lagging indicators within the inflation report?

They still think it's going to kind of be helpful to them at some point along the way. And yes, Steve was saying earlier, how much does he really think you have to slow the service economy down in order to get the job done at this point along the way. And, yeah, as Steve was saying earlier, how much does he really think you have to slow the service economy down in order to get the job done at this point? And really, if he shows any tolerance at all for PCE inflation being in the high twos, which is kind of where the committee thought it would be around right now, too. So all that does matter. I feel like we got a nice little shakeout multi-week in the S&P, stabilized off of that.

Market found its footing. Earnings do look OK in aggregate. That's not really a part of the story that you're worried too much about at this point. It is about what you pay for it. So you see some little sensitivity to the moving yields. You know, at the top of the hour, you're mentioning the Treasury refunding report, which is so silly that the equity market is focused on that. The bond market barely budged. budged. There was nothing else to focus on until four o'clock. And so there you go. It actually takes a shot. But I do think that also shows you the lingering trauma of last year. We're fighting the last war where it was treasury supplies running out of control. Yields are going to five percent. That was the story of late summer

last year into October. And I feel like everyone's kind of making sure they're not going to be caught off sides on that again, even if it doesn't seem like as much of a threat. How are you thinking about Apple this time around? Yeah, I mean, you know, it's interesting to me. You're up a little bit less than 3% on the Bernstein upgrade. The upgrade seems to me very logical. Like, basically, the stock had a lot of risk come out of it. The valuation is lower than it was.

People have not really been expecting much fundamentally out of it. So it feels like it's fine, and it's interesting that it and Tesla bouncing today. It's kind of like the losers of the Mag 7 are carrying things, whereas you have the other ones are backing off today. So it makes some kind of sense. I don't know if it really makes too much of a thing about earnings at the later part of the week, because it's not that much of a business bellwether because it's its own thing, you know. Sure. We will see. Tesla, by the way, best day in more than three years. Phil LeBeau and Adam Jonas likes seeing Elon Musk over in China, doesn't he?

He does. You'll hear from him shortly. Let me quickly explain what the China deal represents, the significance he? He does. You'll hear from him shortly. Let me quickly explain what the China deal represents, the significance of it for Tesla. And it's all about the potential for future revenue growth, especially as it tries to offer full self-driving or does offer full self-driving technology on a subscription basis or on outright sale basis in China. This deal expands the driver technology ability within China, and it does clear the path for full self-driving rollout. Remember, it's not fully autonomous. It's just full self-driving driver assist technology, but they haven't offered it in China. Sources also tell us that Baidu

will providing the mapping data. Regardless of the fact that it's unclear when Tesla might be able to tap into the potential revenue of FSD in China. Adam Jonas at Morgan Stanley likes this. He writes, whether Tesla's CEO is sleeping on a floor or on a plane, the message is clear. He's back. And because he's back, you got another pop in Tesla shares today. Keep in mind that the market cap, which was down about $460 billion just last Tuesday, now topping $600 billion. Gives you an idea of where we are in terms of the market and how quickly things can change, Scott. Yeah. Back in terms of, you know, his takeaway is that he's focused on Tesla, all in the words that he used, Phil. Yeah, he believes that. And look, if you take the conference call with analysts and you take the news over the weekend,

these are the two best days. If you're a Tesla bull, the two best days that you have to hang your hat on to say, yeah, we have a vision for the future here. You didn't have that for the last month and a half or so. I got you, Phil. Thank you. I appreciate that. Phil LeBeau to Christina now on NXP. What does the setup look like here? Well, I'm going to use OnSemi, a competitor, as a setup guide. And they got it actually below estimates this morning, reflecting softer auto as well as industrial and market inventories. Luckily, though, for NXP, it's less exposed to electric vehicles because it made sure not to overship just over the last three quarters. It also has fewer shares shorted than on Semi, according to FactSet. The concern, though, is NXPI or NXP Semiconductors' exposure to China.

Given China was NXP's biggest market, contributing over 30% of total revenues as of last year. So watch out for any comments or slowdowns for that market. But both Evercore, ISI and Mizuho are boldly betting the bottom is in for the auto cycle cycle and anticipate improvement in the second half of this year nxp also suggesting at their analyst day which happened back in november that they would revise their current gross margin model which could be a very big positive for share should that happen i appreciate that christina thank you we'll see in overtime as those numbers hit, Mike. I mean, this again highlights the difference between AI chips and industrial chips. The AI chips get all the headlines. We'll see what happens, at least with this one today.

They are getting all the headlines, although I do think people are alert for a turn in the analog chip space as well, just because it's been really on the outs for a while. What is fascinating, too, is the way that the earnings reports from the big guys are getting received. And even one of the reasons I think we're pretty forgiving, even of what happened with Meta, is that it's a decision to spend more. Their destiny is in their control. They're deciding to have light guidance. And so we'll see if that carries through some of the big guys like Amazon this week, where you basically say, aha, that's why we pay the premium for these dominant companies. So we had a bump about, I don't know, 59 minutes ago. Right back to the covered though, because we're going to go out

green across the board. You see it and I'll see you tomorrow.