Closing Bell - Closing Bell: What’s Next for the Stocks’ Record Run? 4/17/24

Episode Date: April 17, 2024

What does the back-up in yields and expectations for rate cuts mean for the rally? Josh Brown from Ritholtz Wealth Management, Hightower’s Stephanie Link and NFJ’s John Mowrey all break down what they see in store for stocks. Plus, top technician Jason Hunter explains why he sees some trouble brewing in the charts. And, Sebastien Page from T. Rowe Price went from being “reluctantly bearish” to being “aggressively neutral.” He tells us what it would take for him to turn bullish. 

All right, thanks so much. Welcome to Closing Bell. I'm Scott Wabner, live from Post 9 here at the New York Stock Exchange. This Make or Break hour begins with major questions about this bull market, whether it can withstand a further rise in interest rates and what happens if it can't. We'll ask our experts over this final stretch. In the meantime, take a look at the scorecard with 60 minutes to go in regulation. Well, a rare respite in the rate rise, but it's failing to get much going for stocks. As you see, we're still in the red across the board. Tech and industrial sectors are weighing on the major averages today. And how about ASML putting a big dent in the chips following its earnings? And NVIDIA and AMD are among the names sliding in sympathy, as you see right there.

Utilities and staples, perhaps no surprise, they're higher as investors look for defensive positioning today. It does take us to our talk of the tape, what the backup in yields and in expectations for rate cuts mean for this market, this record-setting run in stocks. Let's ask Josh Brown. He's the co-founder and CEO of Ritholtz Wealth Management with me here at Post 9. It's good to see you. Been asking all day, really for the last several days, whether the playbook for investors needs to change as expectations on rate cuts are firmly reset. How would you address that for the calls that you might be getting at Ritholtz? So, look, I think the big thing that's happening right now is we're washing out some of the excess enthusiasm that we came coasting into the month of April. If you remember what we were talking about late February and throughout the month of March is the broadening of the rally. And truly, it was broadening. It

even eventually found its way into small caps, which is a group that honestly can't get arrested, even though stocks are going up. And now we get a little bit of a washout of some of that enthusiasm. But a lot of big charts are still intact. And what's really changed here on the internals is the percentage of stocks that are in their own individual bull markets. 39% of S&P 500 components are currently above their short-term moving average, 50-day moving average. That number was 90% coming in to April. So it's definitely a correction-ish thing happening for small and mid cap. Large cap, there's not a lot of damage. Apple's actually one of the worst names in a 15% drawdown. Most

large caps are still intact. They don't look as bad as Apple. And I think if you were to pull semiconductors out of the equation today, we might even be green. Are we moving back to a stay big and don't go broad market? So over the last month or at least month to date, to your point, Russell's down seven and a half percent. But if you look at other things that are impacted by a backup in rates, real estate's down nine and a half percent. Dividend aristocrats down five. Staples down four. Utilities down three and a half. So do I need to rethink the whole thing right now? No, because those drawdowns that you're quoting to me are off of new highs in many cases, like not necessarily real estate, but the dividend stocks, for example. You've had new

highs in these segments, and these are stocks that have gone up anywhere from 20 to 50 percent since the bottom in October. So I don't think that a 5% or a 7% pullback is disastrous. And in fact, you would probably expect it to be part of a healthy bull market. So I don't think we're in this moment where we want to rethink. I think what we do want to do right now is remember, semis are 9% of the S&P 500, 20% of the NASDAQ 100. And let's look at what ASML actually said. It's not great, but it's highly company specific. They beat on earnings, but they missed on sales. Q1 sales

were already forecast to drop year over year, but this was a much worse outlook on booking. And booking is how these companies make their numbers next quarter, in the quarter after, etc. Q1 bookings, 3.6 billion euros. The forecast was 5.4. It's an ASML story. Now, Intel gets hit, video gets hit. And again, remember, semis are a huge part of the S&P. They were never 9% throughout my entire career. And so you're going to have this outsized effect at an index level. But when I look at my screen, I have green. I have tickers that are higher. Defensive stocks are doing their jobs. They're acting defensively. Utilities are up a lot right now. I have pharma names that are up. So I don't think it's this across the board rethink. I still think we have enough positive breadth away from large cap that the entirety

of the story remains intact. I just think it gets a little bit harder. Let me just zero in for another moment on dividends, because they're so near and dear to a large swath of our viewing audience, I think. And, you know, we are coming off of a tough year for dividend stocks. Yeah. And the narrative coming in was, OK, rates are coming down, so dividends are going to be good. And they're going to have a good comeback. And now if rates are going to back up, maybe not so much. Maybe those who really spend the time looking for the dividend stocks to get that income are going to have to rethink at least that part of the market. So, as you know, Jenny Harrington and I...

I'm thinking of Jenny. We have a, I don't know, seven-year blood feud running. I disagree with the premise of let's identify a specific dividend yield and then hope we like the stock that's attached to it. I just don't think the majority of investors are targeting in on a yield and then working backwards. I happen to think the better companies pay dividends, not usually the highest dividends, but the dividends that are most consistently growing from one year to the next. And oftentimes when we're talking

about dividends, we're talking about quality, number one, and we're talking about companies that are also, in addition to paying out a dividend yield, doing a decent-sized buyback. That story, I also think, remains intact. We should see $1.2 trillion worth of buyback activity worldwide. It's actually growing overseas faster than the dividend activity is recovering here. You would be understanding, looking at companies in 23 and 22, slowing down with the buybacks and slowing down with the dividend growth. There was a lot of uncertainty, and people just weren't sure how they would fare in a higher interest rate environment. Now we're in one. We've been in one for a while.

We kind of know we'll be in one for a while to come, and companies are still looking opportunistically how they can return cash in the most shareholder-friendly fashion. I don't think that theme's going to be extinguished this year. You mentioned chips. Let's throw up NVIDIA, if we could, because the stock's been in correction. And Adam Parker makes the case this week, including yesterday, sitting right in the seat in which you are today, that this is the most important data point for this period. What, NVIDIA earnings? NVIDIA earnings. Yeah, I think so. And you agree with that because there's no bigger booster of this stock than you and very few who come on the network who've owned it as long as you have. You agree with them?

I think it's important. And I think it's not just the numbers, but I think it's their commentary because they sit at the epicenter of what is the biggest growth story on planet Earth right now. So really, I hope Jensen Wang understands the weight that his words carry. I think he's a straight shooter. I think he tells it like it is. I've been invested in NVIDIA during 70% drawdowns from a tie, so I understand what it's like when they're having a great quarter and a terrible quarter. But I think what's changed now is how high the stakes are for

every other technology company based on demand for AI products, AI workflows, AI infrastructure. Like a lot of it is balancing on what he's going to come out and say. Remember when I told you semis are 9% of the S&P? Well, NVIDIA is 54% of that 9%. So it's a really important stock to the overall market. It's 31% of the semi exposure in the NASDAQ 100. So I agree with Adam. Everyone's paying it to everyone who's watching. So I feel like you have a mostly sanguine view still on the market looking for areas in which to be constructive and maybe part of that is due to the fact that you think perhaps this issue of higher rates for longer may have a more positive effect on the overall economy than some are perhaps anticipating in that if

you've been sitting in a money market fund at 5% growing your cash wealth so to speak that funnels its way back into the economy at a time where maybe we're doubting the direction of the economy based on the trajectory of higher for longer rates Scott do you remember the early 1980s? Not well. OK, but you existed during that period of time. OK. I used to stay up late to watch Robin Leach.

And it was this new thing on television where they were documenting literally the lifestyles of the rich and famous. That took place during a time where interest rates were, I don't know, 14 percent. There's a reason why wealthy people absolutely love higher rates. And that reason is they earn stock-like returns without taking any risk. There is a wealth effect that comes from huge cash balances that are throwing off four and five and five and a half percent yields, taking zero zero risk and i'm starting to see now articles in the press and and economists and people like david einhorn talking about how weird this

situation is but bizarrely it might turn out that for the top 10 percent of households by income or net worth really high yields and they're not really high now but really high relative to the last 15 years uh actually might be stimulative. Who do you think is buying all these airline tickets with Delta? Who do you think is buying these hideous Cybertrucks? It's people who have piles of cash that are generating more cash faster than they could spend it. I work in wealth management. We serve 4,000 client households. I am telling you, this segment of the population is not only not pulling back because rates are higher, but in many cases, they feel like they're doing better than ever. It's a really weird situation, but here we are. It turns out wealthy consumers in America are not overly dependent on overnight rates, Fed funds rate, or even mortgage rates when they're

in a position like they are today. Let me ask you a what if. What if, under the surface, the economy isn't quite as strong as people would have you believe? The evidence of that could be taken from the Beige Book today, which was softer in many regions than the data would otherwise suggest facebook whatever you can call it whatever you want the fact that matters there was there were surprises within it today that would suggest that certain metrics that we've been clinging to relative to economic strength maybe aren't quite as strong as as as we would we would believe um bank of america looks at yields

today as others have asked the question at what point would you have a breaking point? And they suggest, well, you could be over 5% on the 10-year buy Memorial Day. Is that a line in the sand problem? I think it's a red line. I think 5% is a red line that forces people who are in the asset allocation business to make a decision. Do I really want to reach, for the average annual return, 7, 7.5, 8% for U.S. stocks much lower for foreign stocks do I really want to reach for that or do I just take the 5% lock it in for 10 years

guaranteed minimal volatility minimal risk relative to the stock market it's an asset allocation question that I don't care who you are work in an insurance company large pension, college endowment, institutional asset allocators must sit up and pay attention when they get a 10-year at 5%. And I think if you look at the history, and we did this work yesterday, it was

on my blog, downtownjoshbrown.com. When you look at the history of the 10-year yield crossing above 5% from below for the first time, you look at short- of the 10-year yield crossing above 5% from below for the first time, you look at short-term and intermediate-term returns for S&P 500, it is not great. It's like negative 5% versus a more typical 2.5% positive. It's very rare that you see that, and it usually accompanies that type of rising weight above 5. Now, we can live at five. We get used to it eventually. Actually, the long-term 10-year Treasury average is about five.

It's that initial crossing that forces allocators to think twice about that, adding that incremental dollar into equity market risk. And I think that's where we are. I mean, we're not far away from people seriously having to make that decision. And I'm definitely mindful of it. Let's bring in John Mowry now of NFJ Investment Group and CNBC contributor Stephanie Link of Hightower Advisors. Good to see you both. Hey, guys. Steph, so are you are you getting a little nervous on the on the what is certainly a more bullish view that you have on where we might go from here that we need to reset our expectations just given the push off of

rate cuts? Look, I think we've hit an air pocket because we are trying to adjust as to what we think the Fed is going to do. And I know we've talked about we you know, I was thinking two to three. I'm now thinking maybe zero to one in terms of cuts for this year. And I think that's what the market's trying to figure it all out. Powell's commentary yesterday did not help in that regard so that we have to think about higher rates, high rates in general for longer. But I step back. And so to answer your question, no, I'm not more nervous because the growth in the macro economies around the world is actually much stronger than people have expected. You're at 2.9% in the U.S., you're at 3.2% from the IMF global growth. China is actually seeing some signs

of life, a 5.3% GDP yesterday, second quarter in a row above 5. No one's thinking anything about China, by the way. Japan has had a whole new lease on life with their growth and benefiting from the problems in China. So you have a lot of growth around the world, and that's why inflation is a little bit more elevated. We are one print away, Scott, a PCE next Friday, that if it comes in as expected at 2728, I mean, that's going to calm people down. But at the end of the day, growth is what I prefer, even if we have a little inflation that accompanies it, because that means earnings are going to be better. And that hasn't changed in my view. That's fair. But, John Mowry, higher rates do have an undeniable impact on the kinds of stocks

that you need to pick relative to whether rates were going down. I feel like, John, the places that you've made an argument repeatedly on this program that offer value are the danger spots, perhaps, in a higher for longer environment. Small and mid caps, utilities, REITs. You're not rethinking your strategy whatsoever. So the bond market knows more than the Fed. The bond market is still telling the Fed to cut, albeit by less. If you look at where the two year bond yield sits, it's close to five. Fed fund rate is sitting at around five point three, five point five. So Powell really wants to cut.

He's been signaling that. But the committee, as well as the numbers, are pushing him to temper his rhetoric to the public. So I think that he is in a precarious situation because as we move toward the election, he's got to make a decision. Do I cut now or perhaps do I wait for after the election to skip over any criticism of letting politics intertwine with Fed decisions. That being said, Scott, I do not change any of my views on where the dislocations are. I think that those are the areas that are simply the most attractive. When valuations are very low, that provides a margin of safety. And I totally agree with the comment Josh Brown made around yield. You should not just search for yield. There's plenty of yield traps. They have lots of debt. Those companies are not what you should be looking for. And dividend growth is absolutely

a thermometer for the company's health. But the areas that I think are particularly attractive, and they are predominantly in some of the value indexes, are those REITs, utilities, as well as some of the banks. By virtue of what? They're attractive to you by virtue of what? That their valuations are much cheaper than other parts of the market? Because that's a dangerous way to look. As I said, I think value is a dangerous word to use because things could be cheap for a reason.

And what is perceived value today may not be value tomorrow. I have a hard time believing that the small and mid-caps, that utilities and REITs are going to do well in a higher-rate environment. The market seems to be proving that out, and I'm not exactly sure as to why you're not changing in any way your outlook based on the overall outlook changing. Powell did not sound like somebody yesterday who was in any rush to cut interest rates. I'll give you the fact that the last time he spoke, he sounded that way. But that wasn't the chair we heard yesterday. Well, I want to be very clear. I think that if everyone is

looking for the Fed to tell them how to pick stocks, that is a very poor way to allocate capital. The way that you should go about allocating capital is looking for dislocations in valuations, but not dislocations in fundamentals. I think that's critical. If you look at Nextera Energy, you're getting one of the steepest discounts there relative to its history, relative to the markets in over a decade. Alexander Realty, the same thing, Scott. No break in FFO, no break in sales, no break on the collection rates, but a significant break in the valuation.

That is because of the higher rates. I have a hard time with the argument that you wanted defensive stocks heading into 23, bracing for the recession. Now you don't want defensive stocks, even though they're materially cheaper and valuations have gotten to extreme levels. I mean, Scott, utilities are the cheapest since 2000, relative to the market, whether you look at price to book,

whether you look at dividend yield. And there's some similarities, Scott. The yield curve has the longest inversion going in history. I don't think a lot of people have talked about that enough. I mean, this yield curve inversion is material and it is absolutely impacting the yield sensitive areas. And that is what creates the dislocation. That's what creates the opportunity for those areas that do not have breaks in fundamentals. Steph, I mean, look, you've been resilient in your belief that the bigger picture is what matters more than anything else. Your eye's been on the economic ball, suggesting that growth supersedes cuts and that as long as we have continued growth, you're going to have good earnings. And at the end of the day, the market's going to get over this little pocket of

insecurity, if you want to call it that, and focus on the prize at the end of the rainbow. And that's good growth and ultimately cuts. Yeah, and I love earnings season because that's when we learn a lot of different things and we get to see and we get opportunities. You know, I call earnings season silly season for that very reason, because you get these over exaggerations. I have 9 percent in cash right now in my portfolio, Scott, because I have been trimming, taking profits in the last couple of weeks. But I actually see opportunities and especially I see opportunities when the stocks go down on decent news. I think the banks are way oversold.

The reactions were way overdone. I think Morgan Stanley is a buy right here. It was the best quarter of the big six. They absolutely executed on institutional wealth management expenses. And you have a CEO that is so dialed into the institutional part of the business, and they're going to gain massive market share, and it trades at 13 times forward. So that's it. And initially's so initially it sold down last week on all the banks in terms of the initial reads. And that's your opportunity. So to me, I think there are opportunities and we're going to get more and more throughout the earnings season again, because the macro backdrop is good and the underlying fundamentals are decent. And you're going to get these great chances. Josh, you want to give us a last word?

I don't know. I look at these travelers down 7% today. This is the worst single day for travelers since June of 2020. And I know that it could be explained away. It's idiosyncratic. They had hailstorms in the Midwest and blah, blah, blah. But there are more and more stocks that are having earnings reactions like that. I was looking at Home Depot yesterday.

So I just think we've had a really nice run. It's perfectly fine if stocks come in. If the reason they want to come in is because the economy is too strong, I'll buy that dip all day. I'm perfectly fine with it. So I think I'm on the same page as John and Steph. And even like if you're a Dow Theory person, you look at the transports, they don't look great. Lowest, the average RSI in the segment is 42. None of these stocks are in uptrends. Some of them look particularly bad. So it's just like if we're going to have the annual correction,

let's just have it. We're like halfway there. But see, I don't think you're on the same page, though. I really don't. I'm a buyer of it, though. I don't think you agree that you should buy small and mid-cap value stocks, that you should buy utilities or buy REITs today. In fact, I think you sold a REIT yesterday or a commercial real estate-related company because it was down six days in a row as rates backed up. I don't think we're on the same page. Well, John might have a different time frame than I do. I think when I'm here talking, I'm talking about what's happening now. It might be a really smart strategy to think about the most out of favor areas. If your time horizon extends

six months, a year, those can end up being incredible investments, two years. So I think we might just be talking about different time frames. Sure. But I think people have learned the hard way that you can be directionally right on the economy and positionally wrong in the market. You can believe in the story that the economy is going to do well, but you can be invested in the wrong kinds of stocks. And the rubber is going to meet the road. And I got to go, but finish your thought. Finish your thought. Fortunately, there are more than one way to skin the cat. There are people that focus on valuation primarily. There are people who focus on technicals. And a lot of this stuff is dependent on how long you have to allow things to work. Guys, to be continued. Steph, thank you. John Murray as well. And Josh, of

course, thanks for being here at Post 9. We're getting some news out of Washington now. Megan Casella has that for us. Megan, what do we know? Hey, Scott, the Biden administration is moving this afternoon to reimpose oil sanctions on Venezuela. We're just learning about this. They'll be ending a six-month reprieve that had been contingent on the Maduro government in Venezuela adopting more democratic regimes. The guidance says from the Biden administration that they're issuing a 45-day wind down on current activity and no new activity will be started during that time. Now, we do know the Biden administration has hesitated to take this step. They've been worried about the impact it might have on gas prices and immigration in an election year, but they are moving forward today to reimpose those sanctions that will kick into gear in 45

days. Scott? Megan, appreciate it very much. Thank you, Megan Casella. We're just getting started here on Closing Bell. Up next, trouble in the charts. Top technician Jason Hunter is breaking down the key levels he is watching today and how he's navigating this uncertainty in the market. He'll join us after the break. Welcome back. The S&P on pace for its fourth straight down day after closing below its 50-day moving average for the first time in nearly five months earlier this week. So is there more trouble brewing in the charts for stocks? Let's ask J.P. Morgan's head of technical strategy, Jason Hunter. It's good to see you again. So what are you watching more than anything else right now to help us figure out where we might be going from here? Well, now that we step back and have seen the most bearish momentum since the fourth quarter of last year, with things like the relative

strength index momentum gauge falling below 50 and into bearish territory for the first time since that period, now the important part is how the market responds to support. So the initial support for the S&P on that breakdown was, you know, 5,000 or just below. There's gap support there. That's where the short-term top pattern from the last two months, it measures out to that area. Now the question is, does a bounce develop from there, number one?

And if it does, is it able to get back above the breakdown levels, the 50-day moving average, the area where it gapped down from? So we're looking really at 5150 to 5200 in the S&P as the key resistance now. So I think on a near-term basis, you keep a tactical bias while you're below that. I mean, you're also understanding of the idea that even if we have some kind of correction directionally over the longer term, it's hard to get too bared up, you would suggest, because as Mike Santoli and others have made the case, bull markets don't typically end because the economy is too good. No, I mean, we're pointing to a couple of things. Number one, the curve's been inverted for quite a

while now. And even when you look at the post-1980 period, when the lags of monetary policy to the market eventually rolling over and the economy getting hit, they're long and variable. You're really into the average period when you look at the recession periods in that post-1980 world, when the markets finally start to respond. So the one thing that we highlighted, while bullish momentum has dominated, and for me, it ran me over in the fourth quarter of last year. I didn't think the rally was going to extend nearly as far as it did. But the fact that you have curve inversion, you have low frequency trend deceleration now, where April is going to close weak, it looks like, certainly lower than where it closed in March, the highest probability, because March closed at the high. That's going to trigger some low

frequency bearish signals with an inverted yield curve. Historically, that's actually not led to good things. At best, it's continued deceleration that eventually has topped the market out, and at worst, it's immediately turned the market into a bear market. So we actually think actually quite the opposite. Every time you see a short-term top year, you have to respond to that, you have to hedge your portfolio. And what we basically suggested in our last note was if the market did break down, as it did in the last week and a half, you want to hedge your portfolio, put a trail stop overhead. And while the momentum, yeah, it's been strong and I've been back on my heels for the past quarter as the market surged through this 5,200 area, it can't lose sight of the fact that it looks like we're late in the cycle if you're going to

use the yield curve as an indicator. And historically, when you get these signals, it hasn't led to good things. Sure. Big question, obviously, about mega caps. You know, we're going to get those earnings coming in a week or so. And this market's been unbelievably resilient, even at times where it's looked fragile. It hasn't taken that much to get the train going back down the tracks again. I wonder if that's the moment and what recent trading activity and price action within the Nasdaq 100, for example, tells you. Yeah. So, you know, two things. Number one, what was interesting in March, the Nasdaq and the

mega cap were first to stall out. You saw this, you know, unexpected shift to cyclical leadership where small caps started to get pulled along. You saw deep cyclicals, industrials, materials, energy, financials, take the lead and take the S&P higher while the NASDAQ stalled sideways. Like I said last time we were on the show, we thought that was suspicious given where the yield curve was. And sure enough, it's a catch-22. The same manufacturing data you need to support that type of broadening of the rally

is going to make the fixed-income market question whether the Fed can actually ease. And we saw a miniature version of that self-contained dynamic unfold in the last two weeks. The two-year note broke 475, and small caps, cyclicals came under enormous pressure. And you saw a bit of that rotation back to the mega caps again. But even at the NASDAQ 100, we've been looking at the 17,000. I think it's 750. Similar support. It's a 50-day moving average.

The market's broken below that. And as you said, mega cap's been the leadership. If that really struggles to regain ground, I think that'll be the marker that the broader tide is really starting to turn to the downside. I think it's a fair question. Of course, the counterargument would be, well, that remains to be seen. Let's see what happens first, and then can, you know, pass judgment later. I appreciate your time as always, Jason. Thank you.

It's my pleasure. Take care. Yeah, it's JPM's Jason Hunter joining us. Coming up, T. Rowe Price and Sebastian Page. He went from being a reluctant bear to aggressively neutral. What is he today? I'll ask him next. Stocks are under pressure today. Big tech is leading the Nasdaq and the S&P lower. My next guest remains neutral on stocks, says don't fear the momentum trade.

Joining me now, Post 9, Sebastian Page of T. Rowe Price. Good to see you. Glad you're here at Post 9. So you're neutral. Still neutral on U.S. stocks. Why? You know, enthusiastically neutral on my asset allocation. So from reluctantly bearish to now enthusiastically neutral? Convincingly, aggressively neutral. You know, the reason why I mention this is as asset allocators, we do a lot of work on strategic asset allocation. And you had Josh talking about this a little bit. Why not stick to your strategic asset mix and be invested in the way that matches your risk preferences? So that's why I say enthusiastically, aggressively neutral. It's like on your show on my asset allocation committee.

I have bulls and I have bears, and we have the debate. Why are you right in the middle? I mean, what's preventing you from being more bullish? Yeah, let's look at that. So you want me to make the bearish case primarily. The bears on the committee are looking at two things that are worrisome. Of course, high valuations. But it's not just high valuations. It's high valuations with upward pressures on the 10-year, so rising rates. So you're starting to see that.

Yeah. But the bears have been wrong. Yes. Yes. And look, the bulls, very simple thesis, right? Rising earnings and declining interest rates. So that's how you end up in the middle. Yeah. I mean, you didn't mention anything about solid economic growth, right? So it's like good earnings. Growth remains solid. And there's no reason to believe that the Fed's not going to cut as its next move. Correct. I think there's some doubts starting to surface on that. Only in the timing. Yeah, I think so. I think the longer term direction of rates is down, but it could take longer. I do think the upward pressure on inflation is real, and that makes investors nervous. Look, you know, the bullish thesis is still intact.

It's just high valuations. And I think you've had quite a few guests talk about, you know, waiting for a pullback to add more, to become more aggressive. But if you say the bullish narrative is still intact, I don't get the feeling from our many conversations that you're in any way bullish. No, we're neutral, right? So if you think about the pressure on rates and how it's making the markets nervous right now, and the fact that valuations are high, we've had a really good run in stocks. Where we'd rather be invested is at our strategic weight and also position for market broadening. Look, Scott, I think stocks will do OK as the

main base case. I think credit will do OK. But the risk is to the downside. So just stay invested in a way that matches your risk tolerance. Don't take more risk than usual, as well. That's fair. But I mean, if I'm sort of worried about the impact of, you know, higher for longer, right, maybe they don't hike at all this year and what are the impacts are going to be on all of that? How are you then advocating for a broadening market? You know, there are many ways the market can broaden. I think it's more likely to broaden towards large cap value stocks than towards small. We're actually neutral now between

small and large, but we are long value and we're adding to value. There's a valuation case to be long value. You're in the sort of bottom quintile of the price earnings ratio relative to growth. If you look historically, you get five to seven percent value outperformance historically on average for the next 12 months. That's okay. But as you often say, Scott, valuation is only one part of the picture. You need a catalyst. I think there are catalysts for value stocks on the fundamentals, earnings accelerating for value relative to growth,

on macro, higher commodity prices, and just pressure on rates. When you say value stocks, large cap value stocks, put that into practice for my viewers. Like what? So we like energy stocks. We like technology in the value space, which is interesting and attractively valued. And those are stocks that if you look towards the end of the year, by the end of the year, the consensus is that because of some easier comparables, value earnings will actually grow faster than growth earnings, believe it or not.

That's what is kind of baked in right now and could maybe surprise parts of the markets. And the one last I wanted to say, the other catalyst for value is sentiment. You know, value's been unloved. 92nd percentile in terms of flows into growth funds relative to value over the last year. So you have a coiled spring of valuation and you have some fundamental macro and sentiment catalysts that are starting to take shape. So the way you do it is you rebalance, right? Growth is rallying your rebalance into value, and you start to increase your target tactically.

Good to catch up with you. Likewise, thank you. Yeah, Sebastian Page joining us from T-Row. Up next, tracking the biggest movers as we head into this close. Steve Kovach is standing by with that. Steve? Hey, Scott. Yeah, a popular tech name is seeing a boost tied to a congressional aid package

and a software company sinking today due to an internal investigation into its financial reporting. Details when Closing Bell returns. We're 15 out from the bell. Let's get back to Steve Kovach now for a look at the key stocks he's watching. Steve. Hey, Scott. Yeah, let's check out Autodesk first, which is down more than 4% today. This after the company once again delayed releasing its 10K as it continues an internal investigation related to reporting the company's finances. Autodesk said yesterday it expects to hear from NASDAQ it has 60 days to file that form. And SnapShare surging up about, let's see here, 6% or so now, was up as much as 8% earlier after Bloomberg reported the House of Representatives

would lump the TikTok ban into a package for funding for the Israel and Ukraine wars. President Biden has previously said he would sign the ban into law if Congress passes it. Scott. I appreciate that, Steve. Thank you, Steve Kovacs. Still ahead, Las Vegas Sands reporting top of the hour. Fed stocks had a volatile year thus far. We're going to tell you what's really at stake in this report and all the key themes and metrics to look out for. Closing bell is coming right back. Coming up next, Las Vegas Sands and Discover Financial among the big names

reporting top of the hour. Give you a rundown of all the key things to watch for just after this break. Get in the market zone. We are now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, two reads on the consumer out in OT today. Contessa Brewer on what to expect from Las Vegas Sands and Kate Rooney on Discover Financial's earnings release coming up top of the hour. Michael, I'll go to you first

as we end this hour and we're just kind of hanging around this market. I mean, in general, tape is still kind of heavy. You had a couple of rally attempts that were knocked right down. On the other hand, you're not seeing a lot of urgent get me out. It's just basically more stocks up than down in the New York Stock Exchange today. Equal weight is flat. It's really about just semis getting hit today. And that's

OK. So we almost have a 5 percent pullback in the S&P peak to where we are right now, four and a half or thereabouts. So what's supposed to be accomplished in a typical 5 percent pullback? You get sentiment come off the boil. You kind of refresh some buying power as you look at valuations and also just reassess the fundamental story that got us here. I don't think there's a major rethink going on if bonds are going to stay tame. And you did get finally Treasuries responding to being oversold and getting a bid today. You definitely ratchet up the nervousness if you hit that 5 percent pullback level. And then you start looking at literal levels on things like the S&P,

where we were right at or just above 5,000 not that long ago today. 5,007 was the low in the cash S&P. And we've rallied a little nicely from there over the last couple of hours. We'll try it. I don't know if I'm going to invest it with a ton of significance in a lasting way, but it is part of this testing process. So 5% down again. That happens multiple times in a typical year. So it's not something that you really raise alarms about. But as you know, every 10% starts with a 5%. That's right.

Hiding out in the usual suspects today. Utilities, staples among the green sectors. Financials are green. Materials green. So it's not all red. No, it's not. And you've got some relief on the consumer cycles, which I've been a little bit focused on,

seeing how weak they've been with this moving yield. All right. Contessa Brewer, LVS, Las Vegas Sands, what should we watch out for? You know, Scott, it's interesting because Las Vegas Sands is now solely relying on its Asia business for business. And so that focus has got to be on Macau's recovery and whether the Chinese visitors are feeling flush and they're spending freely. From what we heard from LVMH, there are some questions about whether Chinese tourists are spending inside China. We know that gross gaming revenue for Macau was up overall 53 percent year on year in March. So that's all of the casinos operating there.

They have certainly been driving, though, the results in Singapore. And we'll be watching to see whether the most lucrative casino resort in the world continues to set new records. That's Marina Bay Sands. The street is expecting nearly three billion in revenue for the quarter and earnings of 62 cents a share. The share price, by the way, Scott, it is not reflected the gradual ramp over the past year in Macau's recovery since post-COVID reopening. They are lower by 14 percent over the past year in Macau's recovery since post-COVID reopening. They are lower by 14 percent over the last 12 months. Is that a buyback opportunity at this point when you just have the share price sitting there, just hovering, showing no movement in spite of quarter-on-quarter of improvement? Contestant, I appreciate it. Contestant Brewer, see you at the top of the hour

with that report. To Kay Rooney on Discover Financial, what do we need to know? Hey, Scott. So consumer credit is a big theme for today, a big thing to watch for Discover. It's the fourth largest card network operator out there behind Visa, MasterCard, and Amex. So today could be a bit of a read-through in terms of what to expect for the other card names as well. American Express is the next out of the gates on Friday, but it does cater to a more affluent spender. Watch the delinquency rate for Discover. That rate fell slightly at the end of March, 1.7 percent versus 1.74 percent at the end of February. Discover is also a bank in addition to being a card issuer. So investors are watching things like net interest income provisions for loan losses and then net charge offs. Any updates

as well on the Discover Capital One deal? That $35 billion acquisition was announced in February. It's expected to close later this year or early next year, pending regulatory approval. We may get some commentary around that on the call, Scott. All right, Kate. Appreciate it. We'll see you at the top of the hour as well. Michael, I'll turn back to you. Got a few minutes left. The trade, they get Netflix earnings tomorrow. That's sort of the start of talking about these larger cap technology stocks. It's the start of really kind of the growthy stuff, which really has been the source of a lot of the earnings momentum.

So that matters. A ton of Fed speak tomorrow as well. I think we've got three or four over the course of the trading day. And it's interesting. It'll be a test as to whether we've been a little desensitized to the Fed's new message, because we're all in the same place right now. Yield's going up. Inflation's sticky. Growth is good. And maybe after Powell's comments yesterday, we built up some calluses against that. So I think that'll be an interesting test, again,

to see if this deep sell-off in the Treasury market maybe for now has run its course and gets some stability. I was hoping that the chair Powell yesterday had sort of put an end to this fixation on Fed speak because the largest voice with the biggest megaphone spoke. I think there's a chance that the market has essentially said we got this. So if you do have people repeating a similar message, Bostic is going to be out there tomorrow. He's been on the you know, he's actually been leading. Yeah, he has been leading the charge on the push out way further than you thought. It's much more about does the market essentially shrug and say, thank you, we understand where we are right now. And every narrative overshoots, right? The soft landing plus a Fed easing overshot in one direction and

the unstoppable overheating economy with sticky inflation maybe is overshooting in the short term as well. So, you know, hopefully we can, you know, come back from the brink of that a little bit. We're going to have a day in which the chips didn't perform well. ASML obviously was a problem and you had some sellers in sympathy. And as we march closer and closer and closer to NVIDIA's earnings report, it grows more and more and more important. Four weeks-ish, four to five weeks. Yeah, we got a little while to go.

You know, last quarter, I was a little bit skeptical that it was going to be the big market moving talent. And it absolutely was. And I mentioned earlier today, we're trading right in the gap created by the market reaction to earning to NVIDIA's blowout earnings almost two months ago. So, yeah, it's worth keeping an eye on. I had a call on Apple today, too. We've added as our call of the day on the half, a on the half a firm questioning whether it was dead money in the near term, if not for the foreseeable future, until the tide turns on what's been a

really upset stock of late. It hasn't been able to get out of its own way. And it really did. And many people did say at the time the evaluation got ahead of itself, given the growth rates. And it seems like it's rationalizing that for now. The street has really cooled on it, and that might not be a negative thing. In other words, you only have like a 50-50 buy versus non-buy rating on the sell side. So you've extinguished some of that optimism. Well, I mean, for a stock that's not used to going into an earnings report, consider dead money, right? How often have you heard that? Normally, it's a stock that runs up into the number. But it has been dead money in reality for like, you know, 12 to 18 months at a time.

It hasn't happened often, but it has. It's time for the AI trade to put up or watch out. For them to start to participate. As you heard, you know, Jason Hunter of JPM talking about the technical breakdown of the NAS 100. And you need to watch that closely. There's no doubt about it. So we'll see if you have to pull the slingshot back a little bit more to get a real bounce. All right.

Well, we've got a big crowd here for a very big reason. And we're going to show you the balcony because it's a momentous day for us here at CNBC as we mark our 35th anniversary. A heartfelt and very large thank you to all those who helped us get here. And it does take a village. Our president, Casey Sullivan, obviously, is up there on the podium today. Other senior executives and longtime employees of this network. It's a proud day for everybody, to say the least. Into OT with Morgan and John.