Closing Bell - Closing Bell: What Lies Ahead for Stocks? 3/31/23

Episode Date: March 31, 2023

What lies ahead for stocks as the calendar turns? Will tech continue to lead? Will the Fed continue to hike? Sebastein Page of T Rowe gives his expert take. Plus, Capital Wealth Planning’s Kevin Simpson gives 5-star investing advice and breaks down where he is putting his money to work right now. And, Hightower’s Stephanie Link gives her forecast for Meta as it closes in on its best quarter since 2013. 

All right. Thank you very much. Welcome to Closing Bell. I'm Scott Wapner, live post nine right here at the New York Stock Exchange. This make or break hour begins with stocks on the run again and about to close out a strong quarter for your money. Here's your scorecard with 60 minutes to go in regulation and in the first quarter. Dow up nicely today, basically flat on the year. The story is really elsewhere. S&P 500 up more than 6 percent over the past three months. And as you know by now, carried primarily by tech, which has been the standout for sure. And speaking of that, NASDAQ, a stunning 16 percent gain. The biggest names in that index from Apple to Nvidia, Microsoft and Meta and Tesla showing some of the biggest moves there. That is our talk of the tape today. What lies ahead for stocks as the calendar turns? Will tech continue to lead? Will the Fed continue to hike? So many questions.

Let's ask Sebastian Page. He is T. Rose Chief Investment Officer, and he is with me on set. Welcome. Thanks for coming up. It's good to see you. Thanks for having me. So what happens now, right? Seasonality, they say, is on our side. Do you believe that is enough? No, I would say I'm a bear.

I'm a reluctant bear. You know, the bearish narrative is just so compelling. We talked about it last time I was on. LEIs are flashing red, yield curves inverted, housing heading down, concerns with commercial real estate, and on and on. Stocks look expensive. Earnings expectations are for positive earnings growth. That looks optimistic. Why are you so reluctant then? It sounds like you should be bearish based

on your view. I'm a reluctant bear because, first of all, you have to have more conviction to be bearish than to be bullish. Scott, stocks beat bonds 72 percent of the time on a rolling 12-month basis historically by an average of 6%. You know, I love watching your show. You often have a bull and a bear. To me, it's always harder to make the bear case. And right now, what makes me reluctant is that all these indicators coming down, PMIs dropping 16 points, they're all from very high levels. We're taking liquidity out of the system from very high levels of liquidity. PMIs are dropping from very high levels. We're taking liquidity out of the system from very high levels of liquidity.

PMIs are dropping from very high levels. Atlanta Fed GDP is still at 3 percent. So it's an uncomfortable sort of bearish position. But I just can't get away from how compelling the bearish narrative is. We're on the doorstep of 4100 on the S&P literally as we speak. And who knows, we may end up hitting that level while we're having this conversation. Is that a confirmation signal or a sell signal to you? It's more of a sell signal. You know, if you think of where the price earnings ratio is on the market, you talk 17, 18. That means that stocks are actually more expensive right now than they were before they started selling off in 2022, if you adjust for the level of rates. We are in a higher rate environment,

so we need to rethink valuations. They look high right now. Okay. We have this delivering alpha survey. And by the way, you're not alone, right? The bearish case is very easy to make. 68% of those we asked said the S&P has more room to fall. 16% said closer to a bottom. Nobody, hardly anybody believes that we are at some beginning stage of a new bull market, though there are those who would suggest two quarters in a row up. You don't see that in a bear market. Maybe the bears are wrong. You know, inflation is sticky and the Fed is still in play. And the Fed is going to I don't think the Fed is going to cut three, four times like you would

imply from the Fed fund futures. You think they're going to cut at all? I think they might stay for the rest of the year. It would take a major event for the Fed to cut. So I don't I don't think the market is pricing that right right now. And let me just say, Scott, this banking stress, this banking stress is just one more negative, one more bullet for the bears. But you don't think we handled it, if you want to put that in quotes, handled it rather well. Right. I mean, the response was was pretty quick. Yeah, it was pretty dramatic. Look what the stock market's done since then. The stock market- It doesn't compel you in any way?

Yeah, look, and by the way, we're invested, we're just underweighting stocks. So I don't like to say go all the way to cash. I'm just putting some nuance here. I think we handled it okay. The stock market likes how we've handled it. There's this question about what are we backstopping, right? Yellen didn't say we're going to backstop all deposits everywhere. She said we're going to backstop deposits only if there's a systemic risk in a bank run.

Now, I can ask you, how can a bank run not be a systemic risk in the current environment? In other words, so why isn't that implicit then from Yellen that they will backstop deposits if necessary? I think it is. Where the negative economic impulse comes from is not from necessarily whether we're backstopping deposits for bank runs. It's the fact that, first of all, people are moving to money market funds, $100 billion a week over the last three weeks moving to money market funds. You know, do you want 0.4% in your bank account or 4% on a money market fund? So that's a more of a systemic effect. On the asset side of the banking sector, it's been a duration shock. They lost money on their long treasuries position,

but credit is lurking and they're going to be tighter. They're going to be more reluctant to land. I mean, you're making a case not to own the banks, but that doesn't mean to not own anything else necessarily. Yeah, you know, the banks are a key component of economic growth. The banks lend to companies that invest, that hire people, and that spurs economic growth. The banks, all else being equal, are going to be more reluctant to lend. If you look at financial conditions index over the last couple of weeks, we've actually tightened by almost one standard deviation. So it is a negative for the economy, whether or not we're backstopping the deposits.

OK, we're going to have some breaking news that I do want to get to. We'll get back to our conversation with Sebastian in just a moment. But New York Fed President John Williams is speaking as we speak. Senior economics reporter Steve Leisman has the headlines for us. Steve, what's he saying? Yeah, Scott, I'm speaking just about what you're speaking about. John Williams speaking in Connecticut says stresses in the banking system will likely result in a tightening of credit conditions. The magnitude and duration of that credit tightening is still uncertain. Now, he does repeat that the Fed has a forecast

for rising rates, but he just repeats the Fed's forecast. In that section, he follows it by saying he'll be focused on the evolution of credit conditions, the effect on growth, employment, and inflation, but doesn't go further in saying what ultimate effect it'll have on his monetary policy. He does expect modest GDP growth this year. Picking up next year, he sees some softening in the labor market,

which he says has been extremely resilient. Unemployment, he says, should gradually rise to 4.5% over the next year, and it will take some time for inflation to move to the 2% target. And just getting to what you guys were talking about on inflation, we did get some new inflation numbers this morning, lower than it was in January, both on the headline and on the core, a little bit better than expected on the core, but not really falling that fast. Just take a look at this quick graph we have here. You can see that it went up pretty sharply and it's not coming down quite as sharply. You're looking there at both the core PCE, which is the Fed's preferred inflation

indicator, and that other thing that Powell is so focused on, which is the core services x housing. And that's kind of flat on a year over year basis in the latest report scott so that's why uh as uh your guest just said the fed is still in play yeah no doubt uh and likely will be steve i appreciate that that's steve leesman breaking news headlines from new york fed president john williams do you worry that the fed is going to have a mistake we again in this poll, the biggest risk to the market is a misstep by the Fed. 35 percent think so. Do you? I don't think so. You know, but what I worry about with the inflation numbers is the longer term numbers, the five year break evens have actually been going up over the last two weeks. So the Fed is in play. But I don't think that the Fed wants to break, you know, to

the to the extent that the economy goes through the windshield. Right now, we had a few banks that weren't wearing their seatbelts, right? And they've gone through the windshield. Yeah, but I mean, you know, they obviously are content in having credit contract, I think, more substantially than it has to this point. There's certainly no indication by what many of the Fed speakers this week have said that it's the opposite of that. You know, the market is pricing it as if this credit contraction is making the Fed more dovish. I think it is making the Fed more dovish, but not as much as the markets are pricing in. Look, we're not in a 2008 sort of

systemic bomb situation. I don't believe that. One of my colleagues called it not a black swan, but a black duck, you know, which are more common. We're in a situation where the Fed will consider credit tightening to be somewhat restrictive. And even Powell sort of hinted, you know, he kind of caught himself. He said something like this is equivalent to a rate cut and then caught him cut himself and sort of said well we don't know exactly equivalent to how many rate cuts it is well it is sort of doing the Fed's job for it exactly exactly so Stephanie Link of Hightower she joins us now as we add to our conversation CNBC contributor of course a reluctant bear is the gentleman to my left. How would you describe yourself after this quarter heading into the new one, Steph?

Well, I understand that there are a lot of headwinds and I see them too, right? But I still look at jobs, wages. I still look at the consumer. Consumer spend is actually running up 4% this quarter sequentially on an annualized basis. That's versus 1% last quarter. So those areas of the economy are kind of helpful and offsetting some of these other things that we see that are disturbing. I am worried about money supply for sure. The numbers that keep coming in are just terrible. But that being said, as I say, 70% of the economy is a consumer, so we have a little bit of an offset. So to answer your question, Scott, I think I'm just more balanced. Last year, I was a little bit more aggressive. I was a little more cyclical.

I was a little bit more value. This year, I am a combination of growth and value. I'm a long-only investor. I have to be invested. So I want a little bit more balance and take a little bit of the risk off for the remainder of the year. Sebastian, what do you make as Steph says, okay, value, growth, a balance there. The move in growth has surprised a lot of people, and maybe you included. Has it? Yes. Look, we're going from a duration shock that was last year to potentially a growth shock and now people are looking at growth stocks especially mega caps as safer stocks and you're seeing that effect you're seeing the effect of potentially peak rates as well so we're like stephanie pretty close to neutral between value and growth at the moment

steph so what do you make of this run in tech to continue? In the survey, and I don't know if you participated in the DA survey or not, and you can let us know if you have, what area will you be concentrating on to start the second quarter, we asked? High-dividend stocks is first. Mega-cap tech, despite the run that we've seen, second to last, 16%, only think that it's right to concentrate right now on the mega caps. Is that misguided? What do you think?

Well, I think the rally in growth and in tech is really almost all macro, right? Its rates are down. Inflation is coming down. It's still quite high, but it is coming down. It's a flight to safety because of the bank scare. And it's also mean reverting, Scott. You know that tech and growth got killed last year. And I was just looking at like the last year's performance of something like an Amazon. While it's up a lot, double digits this year, it's still down 36 percent from a year ago. Right. Uber is still down 12 percent from a

year ago. Even Microsoft and Salesforce are down from six percent a year ago. So my point being is it can continue. I think the rally in growth and the rally in tech can continue, especially as rates come down. So that helps long duration assets. And I think I just don't think it's going to be at the speed of what we have seen. That's that's my point. And I still think you want to balance it with some value. I do believe in the onshoring theme. I believe in the aerospace cycle, agriculture. So I like the industrials, as you know. I just mentioned the spending levels, the savings rate

for the consumer is very strong. I think the inventories are coming down and freight costs are coming down. So I like discretionary. And I know that's kind of counterintuitive, but I think the inventories are coming down and freight costs are coming down. So I like discretionary. And I know that's kind of counterintuitive. But I think that there are places to play in this market. And I just think you want to have a definite, you definitely want to have a balance, though. I'm watching the S&P 500, Steph, as you're talking. We're about six and a half points away from 4,100, which would be a significant number to get to in the first three months of this year, just given where we were at those low points back in October. We're going to watch that.

Do you think, Steph, that that would be a sell signal to you? Or is it a confirmation signal, as I asked Sebastian earlier, of the rally that we've had? In fact, that it could go further? I think we remain in a trading range. And yes, into strength, if I'm up in stocks, double digits, I will trim for sure, because I just don't think we're out of the woods with the Fed. I mean, if you look at the core PCE for the last three months, it's about the same. It's like 4.6, 4.7 percent year over year. So the Fed isn't done, unfortunately. And they may not even be done after May. So we're all data dependent. We got to figure that whole thing out.

And then we have to ask ourselves again, like, how much do we slow? Is it a recession slow? Is a hard landing slow, soft landing slow? But we're going to slow. And if we slow, that means growth actually is going to continue to do fairly well. But yeah, I'm going to take profits along the way, Scott. You know, that's kind of my style. And then if we were to pull back to the to the October lows, I certainly would be a buyer because long term story in equities is still very, very favorable. Best returns, Sebastian, for the remainder of 23. The last question I'll ask you about our survey. Thirty three percent to your treasury. That takes the cake. Still, short end of the curve, bond market, treasury market, still the place to be?

Those survey respondents are clearly bearish. You know, you have a possibility that as we go through this year, Steph just talked about the liquidity impulse. That liquidity impulse is going to reverse back to positive with China credit, weaker dollar. So you're going to you're going to I'm not necessarily going 100 percent cash here. I think you've got to stay invested. I also listening to Steph, I think she's also a reluctant bear. So you just pull back a little bit, keep some cash, get ready for the trough. What makes you incrementally more bull? Because I feel like you're

on the cusp. I feel like you say you're a reluctant bear, but I can almost sense that the next time we speak, your disposition on this market may have turned. Give me a market drawdown with a VIX above 30, some sort of capitulation, and don't change the macro picture that much and we'll be leading in. And I expect Steph will, too. VIX north of 30. You know what the VIX is right now? It's under 19 as we speak. Right. And if that doesn't sort of reflect where we've been and where we are now, I don't know what does. That's that's pretty remarkable in and of itself. Steph, thank you. Sebastian, it's great to have you here. Thank you. On our set as well. That's Sebastian Page joining us. Steph, we'll see you in the Market Zone.

Let's get to our Twitter question of the day now. We're asking, which of these Q1 winners would you fade here? Would it be NVIDIA or Meta or Tesla? All. Look at that. NVIDIA's up 90% in the quarter. Are you kidding me? Meta, 74%.

And Tesla, 68%. Please vote. Head to at CNBC Closing Bell on Twitter. We'll share the results a little bit later on in the hour. We are just getting started, though, here on Closing Bell. Twitter. We'll share the results a little bit later on in the hour. We are just getting started, though, here on Closing Bell. Up next, five star stock picks. Capital Wealth Planning's Kevin Simpson bracing for more market swings. Tell us where he's putting his money to work ahead. You're watching Closing Bell on CNBC.

We got 40 minutes to go and we are at the highs of the day. Take a look at that. Dow's good for about 350. S&P 500, I'm going to stay on that because it may hit 4,100 as we're talking about this in what's been a real stellar quarter for stocks. S&P is up near 7%. And obviously, mega cap tech has played the largest role in all of that, which is why I'm looking down at the Nasdaq, too. The gain there has been nothing short of astounding, 16.5% over the last few months. And there you go. S&P 500 is back at 4,100. We'll keep our

eyes on that, of course, over the final half hour plus of the trade here, last day of this first quarter as we try and turn the calendar. We'll watch some stocks to watch, too, as we head into the close. Christina Partsenevalos here with us, as always, with that. Christina? I was cheering you on for that 4,100 call, but let's talk about shares of Latin American e-commerce and payments giant MercadoLibre that are higher today. Morgan Stanley analysts are reiterating that it's one of their top picks, saying there are multiple opportunities for upside. That has the stock trading at its highest level since January 2022, and it's also up 55% this year. And EVgo is extending yesterday's gains as analysts at Evercore ISI reiterate their outperform rating on the stock.

That follows its upbeat quarterly results that we talked about just yesterday on the show. EVgo is up more than 40% this week, which would be its best gain since January. Shares are up 11.5%. Scott. All right. We'll see you in just a bit. Christina, thank you. That's Christina Partsenevelis with the stocks.

We need to watch over the final 35 minutes or so. The S&P 500, as we said, at 4,100, set to post its second straight positive quarter. Our next guest, though, believes that investors should be bracing for more volatility in the months ahead. He's making some big moves as well in his portfolio. Kevin Simpson is CIO and founder of Capital Wealth Planning. Welcome back. It's been a minute. It's good to have you back. Hey, Scott. How are you? I'm good, thanks. So our prior guest described himself as a reluctant bear. Are you a content bear? What are you now as we, you know, we mark some pretty interesting

levels in the stock market here as we finish this quarter? Yeah, well, what a great way to end the corner. I consider myself an eternal optimist, but I tend to lean into what Sebastian and Stephanie were saying, which is the validation of 4,100 at this point just still, to me, seems like we're a little bit ahead of our skis. And it seems like, Scott, you and I for the past year and a half have been having a similar conversation where I just can't justify markets being valued at this level. I don't know that we need to retest the lows. I don't think I'm a bear or a buzzkill by any means. But I think a range bound market is the best that we can expect for the foreseeable future.

Why have we rallied then? You know, is it about a Fed pause? Is it about the environment growing better? Investor sentiment improving? You know, if you can hate on a market all you want, if it keeps going up, so be it. Yeah, well, I love being wrong when the market's up you know we're an equity manager we're our mandate is to be fully invested so it's always good when i'm wrong but i think that the idea that the fed pause was forced into uh existence because of the silicon valley bank has given a shift a shift in sentiment like i've never seen before and and i think that the enthusiasm is maybe a little

bit overdone because it's a real banking problem that's causing the Fed to pause, if indeed they do. And if they don't pause, they're pretty darn close to the rate hike peak. But the problem is we're not seeing enough of a debatement in inflation. And that's what makes next week's CPI report so important, because with PCE this morning, it's still the same as it was in February, the same as it was in January. I mean, leveling out is certainly better than going up, but it's not going down that much. I know, but if you're negative on the market, why are you buying Apple up 27 percent over the past three months? Well, we had sold it just about six weeks ago at 156. And I took some losses in some health care names that didn't quite work out the way we wanted.

Apple at the time about a week ago was at 150. So we're up a little bit over 8 percent on the trade since the rotation back into it. And my love for Apple is sincere. But we don't always love the price that it trades out or the multiple that it trades at. So if you're in Apple right now and you've enjoyed a really nice run, we'll be writing covered calls on it next week. Yeah, I'll note as well, we are getting close to a 400 point gain here on the Dow, Kevin. And tech has clearly been the story of the moment, right? Do you? There it is. Just your live picture of the big board here.

Three eighty three. There's your NasdaQ, one and two-thirds percent, just building on that 16-plus percent gain that we've seen in the quarter. Do you think this tech move has more legs to it, or is it run a little too far too fast? Well, we have to look at the base that it's coming off of. So if we say that the NASDAQ was down 30 percent on average in 2022, it has a long way to go to get back to a break even. So maybe it was oversold at the end of the year. Maybe there were repositioning. They

were there were lost losses being taken. And to see it rebound is it makes sense. And I think it could certainly continue. But I'm not backing up the truck on anything from a valuation standpoint. We're looking at a market that should be much more of a range bound speed bump type market. And that and that bodes well, because, you know, we're going to be in a market that at some point will turn into the next bull market. I just don't think that can happen in a sustainable way until we really see inflation coming down. And you want the Fed to pivot. You want the Fed to lower rates. And the idea that that can happen this summer, to me, just seems very, very far-fetched. I'm looking at that as a point forward.

Sorry to interrupt you, but some would simply settle for a pause. And to them, that would be at least the first part of the pivot. At least if you knew that the Fed was done, then that would be good enough for some. Now, you mentioned when I asked you why you bought Apple that you sold some healthcare names. Just quickly, you sold Medtronic and you sold Amgen. Can you just be brief on those? Yeah, we thought the healthcare theme was gonna be really strong in 2023. We were wrong.

One of the best lessons that I can teach is to keep your losses small. Don't have an ego. Every stock that you pick doesn't always go up. Medtronic was really a break even for us more than anything we took about a 10 loss in amgen but we use a tight relative under performance metric to get out of positions you take a small loss you can live to fight another day and and these are names that we've owned off and on over the past decade i'm sure

we will again in the future but we just don't like the price action. I got you, Kev. Be well. We'll see you soon. That's Kevin Simpson joining us here once again on Closing Bell. We're wrapping up a wild month for stocks. Up next, bespokes Paul Hickey is here on where he thinks we are headed from here. There's the Dow up near 394. He'll tell us two stocks he is betting on as well as we head into April. We're right back on Closing Bell. All right, 30 to go on this Friday. Before the Closing Bell, Christina Partinovalos is back with a look at the key stocks that she is watching at this moment. Christina.

Let's talk about the investors that are shirking off BlackBerry's Q4 earnings miss, instead cheering on the expected improved performance for 2024. And the stock is soaring 15% right now. Gone are the days of its iconic cell phone that I loved so very much, as cybersecurity revenue is now the leading driver for this Canadian firm. Much of last quarter's miss had to do with hurdles in closing cybersecurity software deals. Shares, though, are having their best day since June 2021. Morgan Stanley likes Elf Beauty, saying that the stock not only stood out during the pandemic, but is still gaining momentum today. The stock is up over 48% year to date, but they expect further upside with a $94 price target. Shares are almost at $82 right now. And the analyst cites the latest U.S. scanner data, which shows a jump in sales,

which is trending above historical levels right now. And I guess the lipstick effect, when consumers continue to treat themselves, even if times are tough, and if we think that times are tough, is still holding strong. Shares are almost 4% higher. All right, Christina, thank you. Thanks. Christina Partsenevela, still to come, navigating the volatility. But, folks, Paul Hickey is with us. He is flagging some big opportunities for your money as well amid all of this uncertainty.

Closing bell right back. Dow's up 387. We're back right after this. Got about 25 minutes to go in the quarter. Take a look at stocks as the major averages continue to add to their gains this quarter. Dow's been virtually flat for the quarter, but nonetheless, it's going to go out with a better than 1% gain if things hold here. S&P 500 still hanging about above 4,100, albeit barely. And there is the Nasdaq up one and a half percent. It's been a bit of a volatile month.

Our next guest says history, though, is on the side of the bulls as we head into April. Joining us now is Paul Hickey. He is the Bespoke Investment Group co-founder. It's good to see you. Welcome. Good to be here. So goes Q1. So goes the year.

That's what history seems to suggest. Yes. So if you look at that, the first quarter's strong. Rest of the year tends to be strong, about three times the historical average for all years. If you add to that the fact that we were down last year after a positive first quarter, you've been positive every time after that for the remainder of the year, not just for the calendar year, the remainder. So from this point going forward. It feels like throw history out the window, though, just given everything that's going

on, the uncertainty we have. We're worried about the banks. We're worried about credit. We're worried about the Fed. Right. Well, yeah, I mean, you never want to bet completely on seasonality. But, you know, I can come on here and you've had guests for the last week telling you, making credible arguments that the Fed should be hiking rates, that the Fed could pause or the Fed should cut rates.

I've never seen that kind of uncertainty in all these years where the arguments are so credible for a decision a month from now. But so there is a lot of uncertainty, but that's been manifested in this sentiment of investors. You have conference boards, more investors saying this, more consumers saying the stock market's going to decline and rise. The CNBC survey. Yeah. And our survey said the same thing. Two thirds. So, yeah, you talk if you try and give a bullish argument right now, people laugh at you and say, how can you be bullish given all these negative things? But it's like a polar opposite of late 2021 when we were expecting the roaring 20s going forward and the Fed wasn't even thinking about thinking about cutting hiking rates. Right. So, I mean, it's when everything looks the plan should go a certain way. It usually the market

tends to make things go the opposite way. You know, one thing we haven't really spoken about a lot and we need to and we will, obviously, earnings. Yeah. Rubber is going to, you know, meet the road soon. Well, yeah. On earnings. We're only what, a couple of weeks away from the numbers to start coming out. Two weeks. We start getting the banks and those should be interesting. But, you know, for the last several couple of quarters, we've been talking about the upcoming earnings apocalypse. And the last two earnings seasons have been very strong for the market several couple of quarters, we've been talking about the upcoming earnings apocalypse. And the last two earnings seasons have been very strong for the market we've seen. The month of March so far, we've seen 63% of companies beat EPS forecasts, 66% of companies beat revenue forecasts. Those are down from the post-COVID quarters, but they're actually still better than the historical average. Guidance, we've seen about 11% of companies lower guidance,

11% raise guidance, 14% lower guidance. That spread is right in with the historical norm. So these factors, if it gets worse from here, that would be a problem. But so far, earnings have been holding up relatively well. You have a stock that you wanted to talk about, which we talked about with one of our prior guests. Kevin Simpson had sold Medtronic. You like it here. So when we're looking for stock ideas, we want to focus on triple plays. So what we call a triple play is a company that beat earnings, beat sales forecasts,

and raise guidance going forward. So they have a positive outlook on things. Medtronic has been in a downtrend for well over a year now. COVID put a crimp in their business device. Those kind of procedures weren't done. So there's pent up demand. Plus, people didn't get any healthier during COVID. So cardiovascular, diabetes treatments. And Medtronic reported an earnings triple play in February, first one since 2019. Stock trades for 15 times earnings. It's raised its dividend for 45 straight years and yields about 3.5%. So I think in that kind of respect, that's a company that trades at a below market multiple,

has a little bit of guidance going forward, and you can see a catalyst for the stock going forward. Quick on Generac, which you like too. Why? Generac, triple play machine over history. 13 of the last 20 quarters, Ernie's triple plays. The last few quarters have been a little bit tougher.

You know, they over expanded. But as you come in, they have three tailwinds working in their favor. The unreliable grid, extreme weather, and work from home. If you're working from home,

you need electricity. I appreciate you running over here. Literally. You're catching my breath from Q1. They only knew what the traffic was like. Thanks for being here. That's what spokes Paul Hickey joining us here on Closing Bell. Last chance to weigh in on our Twitter question. We asked which of these Q1 winners would you fade? NVIDIA, Meta or Tesla? You can head to at CNBC Closing Bell on Twitter. We got the results right after this break. Our Twitter question now, which of these Q1 winners would you fade?

Nvidia, Meta, or Tesla? The majority of you saying Nvidia. Only up 89% this quarter. Up next, one big tech stock is closing in on its best quarter in a decade. We reveal the name. We speak to a shareholder about where that stock could be heading from here. It's not Nvidia, but we'll tell you which one it is next when we come back in the Market Zone. All right, let's do it.

We're in the closing bell market zone now. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day. Plus Keith Lerner of Truist on why it's time to play defense. Stephanie Link is back to talk meta as it closes out its best quarter in a decade. Mr. Santoli to you first. Yes the Dow looks nice up 334 but that's not the story this quarter, is it? No, it's not, at least in terms of the driver. Again, this week was more balanced.

But, yeah, the NASDAQ has ripped. And, you know, just looking back to we're at the same level in Treasury yields. We were January 12th in the 2-year and the 10-year. And the NASDAQ went hundreds up 15% since then. So don't tell me it's about yield. It's about stability. You've never liked that story. It's about, you know, shelter from other things we're worried about.

That being said, let's think about the last three Fridays before today. We had SVB circling the drain. That was three Fridays ago. Then we had Credit Suisse. They're going to save it or they're going to let it go. That was two Fridays ago. Last time was the engineered panic over Deutsche Bank with the CDS caused another morning sell-off. And the market was resilient against those things.

We got a psychology shakeout. I do think you also had a pretty good positioning reset. And so that somewhat explains this lift that we're getting here. It's an unclenching of tension. Now, that said, it's getting a little spicy. Three hours ago, I said, oh, it's not really overbought yet. Well, in the short term, you're getting closer to that. You're a couple percent away from being similarly overbought to where we were at the early February high and then maybe in August. But again, I don't think that this is something where it's a true, full-on chase that people are

excited about. If they're chasing, it's because they feel they-on chase that people are excited about. If they're chasing, it's because they feel they need to. Three Fridays ago, to your point, I know few people thought we'd be at 4,100 on the S&P 500 as we sit. And therefore, nobody was positioned for it. We're just below it by a few points, but we'll watch that. Keith Lerner, you're not compelled by any of this. You still think it's time to play defense?

Why? Well, great to be with you, Scott and Mike. You know, we were with you on March the 1st. We talked about a pullback in the market that the risk reward had marginally gotten better and that expectations had been reset somewhat. But on this rebound, I know there's some excitement. Our view is the risk reward is actually becoming less favorable, and we would fade this rally in the 41 to 4,200 range. And the way I think about this is a couple of things.

The first thing is where we are today, we're trading back to an 18 times forward multiple. And that's the high end of the range. In fact, over the last 30 years, we've only been able to sustain a valuation above that two times, the technology bubble and then the post uh pandemic stimulus overshoot and then i'm gonna you have to forgive me keith but we need to work on your audio uh because i'd say there's an echo but that's an understatement and it's a little disconcerting so let us try and fix that i'll continue the conversation with mike santoli about the run specifically in tech um because, you know,

Stephanie, Link's going to come on in a second, talk about one of Meta's best quarters ever, NVIDIA, up 80 percent. That's astounding. It is. And it is mostly in part it's simply snapped back from the damage of last year. In part, it is this very, very sort of violent reversal in the growth value dynamic, which has had, as we've gotten the Fed picture whipsawed and you had this move in yields, that seems to have taken place. Now, something like NVIDIA, you're also seeing something else there, which is finally somebody people are trying to latch on to a longer term secular story that's reasserted itself around AI. But if you look at the big Nasdaq stocks, only NVIDIA and Meta are even above their August highs. So they've made it up in tremendous chunks in a hurry. But it's not as if they've really kind of plowed new ground, even though they're making like, let's call it six month highs. It's not to forgive the valuation

because they are still the source of the excessive valuation within the overall market. But it's a little more explainable based on what happened leading up to this year. Steph, your largest position at the moment is the aforementioned Meta having one of its best quarters ever. Yeah, I'm to be honest, I'm inclined to trim a little bit, Scott. It's really big at this point in time. And a lot of it is because I was, as we talked about yesterday, that a lot of it was because I was buying all the way down last year, averaging down. But look, this was an expense story. That's what I was expecting for 2023.

And we got it, right? It's the last five months, you've had 25% drop in headcount. You had a 12% drop in expenses and CapEx is down 14%. So we know that. We know this is a year of efficiency. The new piece, and I think the reason the stock has got another shot in the arm, is because now people are all jazzed up about revenues and how revenues by the second half of this year could actually grow double digits. So that's Reels. Reels is running with a revenue run rate of six billion last quarter. Click to Message has a 10 billion dollar revenue run rate last quarter. We have very easy comparisons. We lapped the Apple privacy issues. So you could see something like 11 to 13

percent total revenue growth in the second half of the year versus declines last year. Right. So you could see something like 11 to 13 percent total revenue growth in the second half of the year versus declines last year. Right. So that's where the narrative has changed. And the valuation is not commanding at 13.4 times 2024 earnings. But that being said, you know, this talks up a lot. And I think it is prudent to trim when you have a 70 percent gain year to date. But I still do like it very much for the long term. You didn't even talk about TikTok, right? And the, you know, the potential ban. I'm wondering how much of that do you think is in the stock and how much of that has added to this last little push? And if in fact it doesn't happen, what that might mean?

Well, that's why I mentioned some of these other things that they have going for them. And I'm impressed that TikTok is still around, right? And yet Reels is up and running substantially higher from a year ago levels. They have done an enormous amount of work with AI making Reels a much better experience. Oh, by the way, didn't even talk about digital advertising and the returns on investments that an overall meta can provide for companies. And so it's still the company of choice when advertisers are looking for better ROIs. It's just softening now. That is actually a cyclical thing, not a secular thing.

If that comes back, then I think you have even more upside to revenues. You know, you've got a couple of good stories to tell, at least, Steph. The other one, and it's a bit of a I know you weren't prepared for this particular question. Can we throw up GE and maybe a year to date on GE? Because because that's been a good one, too, Steph, right? Yeah, that one is a good one. You're 50 percent. Wow. I know we you know, I always talk about spins, right, and how I like when companies spin off other companies, right, because mainly when you're a conglomerate, these companies within the big company,

they kind of get ignored or they're not as efficient or the spotlight is not on them. And so when GE announced that they were going to spin out the health care business and then next year they're going to do the power and renewables business, you have three very simple companies. They're not simple companies, but simpler stories to understand for investors. GE was a bear to try to understand in years past. So I give all the credit to the CEO, Larry Culp. He's executing on his plan. And oh, by the way, we now have an aerospace cycle that's on fire. And that's according to Boeing. And by the way, there's rumors that Boeing is going to up their 737 MAX production numbers.

That came out yesterday. They haven't announced it yet, but I suspect that's going to happen. That's going to benefit a GE who provides the engines for Boeing. You know, Mike Santoli, we're at the highs of the day. Dow Jones Industrial Average is good for 405 points. Call it also the year of the turnaround story, albeit the young year, whether it's Meta or Steph's GE, Boeing, for example. A lot of good stories to tell. And all of them that are really being seized upon by investors because you don't have to have a big macro call to actually get behind it. So individual corporate restructurings or other dynamics that you can just sort of latch onto

and say, I don't need to know exactly where the Fed's going to end up and I don't need to know the cadence of GDP this year as much to get used to it. So I do think there's a sense out there that there's stuff to do in individual stocks, even if you've had this big index move with the mega caps, of course, carrying more than their weight. Although I'll go back to on a two year basis, it's really like lockstep in terms of Nasdaq 100 and the broader market. So this, again, has just been the sort of trading off of leadership on a multi-month basis. You did say earlier in the day today that, yes, that's been the story, the outperformance of mega cap tech. But this week, things have broadened out a bit, which is only adding to some people's optimism about the move overall, the widening breadth, if you will.

Right. Four percent on the S&P equal weight up this week. I think that the most bullish action here would be the indexes settle back a little bit or settle down and cool off, and maybe the big stuff has to pull back somewhat, and then everything else holds together. If I'm looking at the banks as the should I worry more indicator,

they're not up a lot this week. They more just stabilized. Regional banks, in fact, have been fairly unimpressive in coming back. If we could just attribute that to massive earnings overhang and the fact that they're going to have higher funding costs, that's fine. If it's we're going to have another bout of stress where you're going to have to worry about, you know, banking system volatility, that's a different issue right now.

But I do think the Fed balance sheet news last night was a slight reassurance on that front. Yeah. Steph, I'll say goodbye to you here. We'll see you on the other side of the weekend. Have a good one. As we look at the major averages here, closing out the quarter, everything this week, all of the major averages are going to have at least a 3 percent gain on the week, even the Russell 2000, with all the concerns about the banks, the smaller ones, of course, the regionals. Mike, we're going to have, you know, we just had the two-minute warning, obviously. The re-steepening of the yield curve, we haven't talked about that yet. It's still hanging out there, right, which is yet another one of those

alleged recession sirens. Yeah, I would say alleged and generally proven correct in past years. You just don't know what the lead time is. I do think that the extreme influence of the bank failure on the moves has been something that it's hard to necessarily incorporate that into the historical patterns, because if the market collectively was saying, we think the Fed's going to have to be cutting way before they were thinking before simply because it's a financial stability issue, that's a little bit different than saying, well, the cycle's rolling over. We can see it coming.

So again, take them all with a grain of salt. Don't dismiss them. That's what I keep saying. I'm not going to dismiss the leading economic indicators and where they sit or what the curve has been suggesting or the fact that, you know, unemployment at three and a half percent is usually not a great starting point for getting excited about stocks. It tends to be late cycle. All that together, the market itself is not breaking down. It's refused to break down. Economic numbers have come in better than expected. And we have a Fed that if nothing else, even if it's not done, is trudging along at a quarter percent per six weeks.

Speaking of re-steepening, let's show Apple as well year to date. The re-steepening of the Apple chart, you want to call it that. The stock's up near 27 percent year to date. So it's been a nice run there as those mega caps. It really carried the load. NASDAQ's gonna go out and get 17% higher. S&P leading the way as well. What a quarter, I'll see you on the other side. Morgan Brennan picks it up at OT.