Closing Bell - Closing Bell: Will Mega Cap Tech Deliver? 4/24/24

Episode Date: April 24, 2024

Trivariate’s Adam Parker, iCapital’s Anastasia Amoroso and Wells Fargo’s Sameer Samana break down what they are expecting from earnings – and what it could mean for the broader market. Plus, Meta shareholder Doug Clinton drills down on what he’s watching from that report tonight. And, Elizabeth Burton from Goldman Sachs Asset Management reveals how investors should be positioning their portfolios amid all of the rate cut uncertainty. 

Ty, thanks so much. 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 the countdown to Meta's earnings report. It is the first of the big names to deliver Q1 results. Big question, can they deliver enough to keep the stock surging? We'll ask our experts in this final stretch, including shareholder Doug Clinton, coming up in just a little bit. In the meantime, your scorecard with 60 minutes to go and regulation looks like that. Major averages really unable to get much going for most of the day today. Interest rates have ticked a bit higher. Maybe that's capping things. Maybe we're just waiting and seeing now for Meta and the others

that are in the day ahead. Sector action pretty split too. Defensives leading the way today. That gives you an idea of the kind of day it's been right there. Staples Utilities Real Estate in the green. Doesn't mean there haven't been some standouts today in the session, both up and down. Visa, well, it's a winner after earnings. There's Teledyne, though, down near 10 percent on its own results. Does take us to our talk of the tape. Will mega cap earnings deliver? And where do stocks go from here? Let's ask Adam Parker. He's the founder and CEO of Trivariant Research, a CNBC contributor. Back with me at Post 9. Welcome back. Thanks for having me, as always. You say you are more bullish now than you were at the start of this month.

Yeah. Why? Well, I think we got a downdraft based on perception about hawkishness. We got a little bit of rates finally making some stocks sell off. And I think, you know, the earnings trajectory doesn't really look different to me than it did on April 1. So all else equal, when stocks go down and the earnings don't change, I guess I like them a little bit better. But, I mean, you know, this idea of higher for longer was going to have an impact at some point. We can't just dismiss the fact that rates are higher for likely longer.

Right. Right. And the impact that might have on multiples and just overall sentiment. Right. Yeah. I think when we look through, initial reaction, though, what you're left with is do you really want the economy and unemployment to get bad such that you need all those cuts? Or is there like a Goldilocks scenario where economy holds in okay, earnings are pretty good, and you can dream accommodations coming? I think what freaked people out a little bit was just, oh, there was some commentary, but maybe we need to hike one more time. And that, I think, was a little bit surprising to some people.

But when I look at earnings season so far, we have, as you know, a couple hundred companies coming here in the next 10 sessions. Starting in an hour, right? An hour. Yeah. I mean, NVIDIA is May 22nd. Everyone has that memorized and circled, so there won't be any missing that. But I do think that when we look at what's happened so far, pricing's been pretty good. I haven't seen major misses from any important companies in terms of the revenue outlook.

And I think the earnings trajectory looks intact. And as we've talked about for months now, margins are still pretty good for a lot of companies. So I think that bull story of cyclical, structural, and AI on margins is still well in place. And so, sure, financial conditions hit tight and made me freaked out for a couple weeks. But I still think that bull story is in the lead. The idea of no cuts or later cuts, maybe one cut if we get any cuts, right? Right. You say, quote, no action is the bull case. Yeah. I don't I don't hear too many people saying that. Well, you know, I don't know. I mean, I hear that. You know, I like to do a no

Fed May if I could. Yeah, I hear. OK, well, the economy is so strong. Wait, we don't need rate cuts. But you suggest no cuts is the actual bull case. Yeah, I sometimes think that the dream of the accommodation is better than the reality, right? Because if we actually get to the reality, it probably means we have some deteriorating data that's a little bit surprising to the downside versus where everyone's head is today. If it's, hey, things are pretty good, but they're slowly eroding, but unemployment still looks kind of low, and inflation might have a little bit of a sickle uptick before it comes down, and we need to make sure people believe we're going to get it down to eventually someday. So, yeah, we're going to be accommodated, but we're data dependent.

We're data dependent, that thing they always say. That might be a juicier scenario for equities than things are eroding and they're getting bad and the consumer is slowing and whatever would be the precursor for people thinking there's going to be a serial set of cuts coming. So I just kind of meant sometimes the pause can be good. What do you think is most important this week, Meta, Microsoft, Alphabet or PCE on Friday? If you had to choose rather than just say they're all important. I'll take the... I'm heading you off at the pass. I'm not letting you take the easy way out. PCE on Friday, if you had to choose, rather than just say they're all important?

I'll take it. I'm heading you off at the pass. I'm not letting you take the easy way out. No, I'm not afraid to be wrong, as I am all the time. I think the corporate earnings could create more volatility if they go the wrong way. I think the PCE, it's like, look, we kind of know where we are, I feel like. Do we? I mean, after CPI, the last few CPIs, I think we're kind of wondering where we are. But I don't think we're going to get a huge, you know, I would be surprised if the data were incrementally hawkish, such that people thought, oh, now we're going to hike for sure.

I mean, if that happens, sure, I guess there's a little bit of risk to that, but I don't think that's the base case or something I would pre-position for. I think more likely you want to hear that the fundamental trajectory of the AI story is intact, there's new product, you know, all that kind of stuff. The thing that would make the market go down, in my opinion, would be Meta telling NVIDIA that they're good for a quarter or two. Then I think we'd get, you know, the earth would stop rotating. I think that's not very likely. I think they're going to continue to invest. I mean, they've already sort of come in on the drunken sailor idea of just spending and spending and spending and spending. Right.

They've had this year of efficiency. But to circle it back to Meta, you. These guys, I don't know which one and when or maybe all. They need to invest in power. I'm still kind of hearing every day that Sam Altman comment about, you know, we need power to fund this thing. I wouldn't be surprised if you get some sort of collective investment in power. I think that's the gating factor for a lot of these companies. So we'll see if that's something that comes out of the news this week.

You've maintained for a while now to stay overweight on mega cap tech. It already has a sizable place, as we all know, in the S&P. You want to be overweight on mega cap tech. It already has a sizable place, as we all know, in the S&P, you wanna be overweight. You still hold that position today, given what's happened of late, right? I mean, you look at the pullback in these stocks, obviously they had a massive run from the low in October, but they've struggled pretty good lately,

and you've got a number of stocks that are well off of their recent highs. Our view is that they're mostly risk management stocks on Alpha. Remember, you don't know anything that nobody else does. They're not very idiosyncratic. If the market goes up and growth beats value, they basically go up. And I can't really replicate them with their name. So I've kind of told people, own at least the market weight, this group. Most people have been underweight and underperformed because of it. Don't let them help you or hurt you and then pick your shots elsewhere.

I still generally feel that way. I don't think the market is going to go up and these guys are going to go down. Well, I mean, it's been rotating lately. A little bit. You don't believe in that longer term? No, I don't think that can be a sustainable trade. I think things rip, they go up a ton. You try to collect some profits and rates, you get a little hawkish shore. But if you're looking out six, 12 months, this batch of the companies is going to grow their net income dollars a ton. And how do you want to manage a portfolio of equities and say,

I always think this way. What if somebody says to you, one of your investors, hey man, I've read in the paper about this AI thing. Am I getting any of that in the fund that I gave you my money? And you're going to be like, nah, I didn't give you any of that because they're too expensive. No, you're just an idiot. Do you think there are any of those people left who haven't invested in their client's money in an AI-related place? I think that people are underweight and have been materially. You think they still are? I think some people are, or they romanticize that they're going to get it down 20%, 30% and nail it for the next trade higher. I don't believe that's likely. Like you said, am I smart enough to know exactly when NVIDIA is peaking?

I would love to know three to six months before demand. I mean, it went from 900 plus to 750, and then it's had a nice rally over the last couple of days. Today not included. But the question is, is it going's had a nice rally over the last couple of days. Today not included. But the question is, is it going to be a linear path to $2,000? No. But is it going to be there in the next three or five years? Of course it is. So how nimble are you going to be at trading?

I think you want at least market exposure to the MAC-7, and I take my shots elsewhere. I don't expect the earnings season is going to be skewed to the negative. You've already painted NVIDIA as the most important data point of the whole season. For sure. And you still hold that view? For sure. Well, that's a month away. Yeah, it's a month away.

I don't think there's any other stock that could bring the whole stock market down 10% in three sessions. If they tell you they're close to meeting demand and there's a pocket coming, the stock market will go down a lot, and the NASDAQ in particular. I don't think that's very likely. I wouldn't pre-position for it. I think that will happen at some point in the next three or four quarters. But I think all the data points point to it still being in pretty good shape at the current moment. The gross margin forecasts are going up the next couple quarters.

And you want to own semis where the gross margins are going up. It's that simple. So I like the risk-reward, and that's kind of the point you made up front, which is if the stocks are down, I don't think the fundamentals change. Yeah, I like a little bit more now than at the beginning of the month. All right. Let's bring in Anastasia Moroso of iCapital and Samir Samad of Wells Fargo Investment Institute. It's great to have you both with us. Samir, I want to come to you first, because as I read your notes, you're not nearly as bullish as Adam Parker. Why? You know, I think the tricky part is just the valuations,

right? I mean, especially when you think about long-term yields having kind of increased the way they have. I mean, I was running the equity risk agreement this morning. It's basically flat, right? So whether you're in the 10-year, whether you're in the S&P, you're getting about the same yield. Now, you could argue, well, the growth rate is what maybe gives the S&P the slight edge. But I would say that, you know, here in this 5,000, 5,200 area, you're pretty close to fair value. So I think if you get a pullback, a bigger pullback than the one we've gotten thus far, then I think we'd get interested. But here, I think it's OK just to be neutral. You say it's time to be cautious. I mean,

let's be clear, right? Yeah, I mean, look, we've been saying for some time to be cautious, right? I mean, we're pretty much back where we were in February. We think this pullback could probably surprise to the downside. Again, the market's finally coming around to what we've been saying for some time, which is the Fed's either not going to cut as much as the market anticipates, or they might not cut at all. And I would say that that's probably a much bigger risk even now than the market appreciates. I haven't found equity risk premium to be a really good predictor of subsequent return for equities in time horizons less than three to five years.

I think if you're managing a huge pile of money for a really long investment horizon, then you might get worried about it. But there's no question the equity risk premium looked really unattractive starting in April of 22, and for a whole six months, the market went down, and then it had an explosive upside. So I think I don't believe I can forecast the S&P in one-month horizons. I've looked at it every which way I can for many, many years. I think it's incredibly hard to predict. So I think the question is, you know—

Well, strategists have learned that lesson the hard way. Yeah, of course. I mean, we knew that. We talked about that for years, right? So I don't think that that's—I think that's a fool's game. I think the Egris premium is a good, interesting academic benchmark to think about. But the reality is, I think it doesn't help you predict asset allocation in a short-term horizon at all. So I don't use that framework. None of the clients, institutional equity guys that I talk to use it.

No, but I think his broader point is, you know, higher for longer is going to have an impact, right? The market's coming to grips with that. That's what this pullback starting last week was about. I don't agree with that in the long term. And the reason I don't agree with it is I think it's actually the opposite. I think we're all kind of screwed up since the financial crisis. Historically, when the economy was good, the 10-year yield backed up and equities went up. They were all symbolic of things being pretty good. And I found in the last two or three years that bogey moves more than anything else. It's like, oh, man, the equities can't work if the 10-year gets above two and a half, and then it's 3, and then it's 3.

Let's see. If the economy is better than people think and it backs up a little, I bet your equities go up. You want to make that bet? I mean, that's kind of where my head is. So I think the problem with the 10-year yield is no free-willing human being would buy that and hold it to duration. It's a garbage investment.

You'd much rather own equities, get access to all the awesome companies, and add a little alpha on top of it. Okay. So let's ask the Brandsie operation. Anastasia has the very small task of settling this debate. That's the only thing on your shoulder. He's not wrong. I just think it's timing. I mean, it's timing. Here's how I would settle it. I do agree with you, Adam, that when you look longer term, what determines equities returns? It's not so much valuations. It's about earnings growth. And you can look at a number of high growth areas, whether it's technology or biotech or broader health care. And what we know that since 2000 or even before, what was the key, key driver, even when valuations compressed, it was whether you were in hyper growth, whether you

were delivering on those earnings growth expectations. So that's why I do think that even if the Fed does stay pat, Scott, I think this could be a supportive environment for stocks. And by the way, we know that from prior economic data. When we look at what the market returns were during the period when the Fed was on pause, they were positive. So I would argue that return expectations for investors have actually improved since the beginning of April, because we now have this 5% pullback. We retraced that a little bit. But guess what? The price targets for the remainder of the year, I still think we can get to $5,400 or $5,500. So if I was investing, I was looking for that, you know,

when we were trading at $5,200 on the S&P, that's clearly not as attractive as when we were trading below $5,000. So I think investors are getting another entry point here that's quite attractive. Samir, why isn't the quote-unquote unbelievable economy that Jamie Dimon described yesterday good enough? Who cares about rate cuts? Don't need them. Yeah, I mean, look, the tricky part is Amorosa, Anastasia just mentioned, you know, 5,400 is kind of a year-end target. I mean, look, from today, that's only about 6%, and you can get about 4% if you just kind of do a pro-rated yield on just Fed funds, right, or the two-year. So I guess you're taking all that risk for what, maybe one or two additional percentage points? I mean, again, you know, look, we've been favorable

on large caps. We have not bet against tech. We are neutral there. We're neutral on comp services. We're unfavorable on discretionary. That's kind of where the EV and e-commerce players live. But, you know, it's not like we've been fading the market outright. But I guess I go back to, look, if you really have a good economy, why aren't small caps working, right? Why aren't emerging markets working? Why don't you have cyclicals outperforming growth to a much greater degree? I mean, that's a litmus test. That's the market's litmus test right now. I mean, rates are more elevated than some thought they would be. That's why they're not working. I don't necessarily think small caps, which are loaded with regional banks with a period of higher rates, are the greatest litmus test for how

either the economy or the stock market is doing, to be quite honest. I mean, historically, no asset class has been more economically sensitive to the U.S. economy. So you're judging, you're not going to get more bullish on the market until the Russell 2000 starts going up? Well, so we've been favorable on large caps, right? So, I mean, again, I think most of our clients have actually done really well because they're getting the alpha from large caps outperforming and small caps underperforming. So really, we've kind of had our cake and eaten it, too. I think what I'm saying is if you look at smalls relative to large, I think that's a really good indicator of how the overall economy is doing. I mean, I think there's a few other indicators to

look at when it comes to the economy. And Scott, you know, one of the things that I'm really encouraged by, for example, is the real-time consumer spending. And by the way, going into the meta-earnings later today, you know, if you look at the digital advertising checks, for example, they're very strong because you've got consumer that's out there spending, you've got business confidence that is recovering, you've got the global manufacturing momentum that's picking up. And I think that is benefiting the large caps because, Scott, you kind of pointed it out. How can you do well as a small cap when you have debt to EBITDA leverage that is well higher than it is for large caps? And by the way, you have a floating rate exposure on some of that

debt. So I think we can see this divergence that actually continues. But to the other point that Samir made, let's say it is 6% upside to the 5,400 for the S&P. Maybe that's not as attractive. But first of all, that's a base case of if the Fed doesn't cut rates. If the Fed does cut rates, which I don't rule out for this year yet, that I think that gives you that extra mile for the S&P. And then the second point is we like to pick our spots within the S&P. And I think there's plenty of beta and plenty of outperformance potentially you can find there. I would look to semiconductor as one of those areas. I mean, look, Rich Clarida, former Fed vice chair, yesterday told me on this program he still expects a cut at least. Yeah.

Maybe one or two. Right. Yeah, they pushed off. Maybe we don't need them right now. But the Fed wants to cut. Yeah, I mean, two things I, they pushed off. Maybe we don't need them right now, but the Fed wants to cut. Yeah, I mean, two things I was thinking there were, one, look, I guess with Samir, I would agree that if you're, and you're not, but if you're massively bullish on the equities, then I would expect small caps to outperform in the uptake. I think it challenges them outperforming in the

downtake. So we probably would agree on that. I just, look, what I do for a living, a lot what I do for a living is talk to institutional investors. I'm lucky enough that I talk to, you know, lots of people who have made, you know, hundreds and hundreds of millions of dollars personally, billions investing all the time. I don't remember any of them ever using the phrase ERP with me. So, like, guys who pick stocks for a living and hold them for 6, 9, 12 months don't care about equity as premium. For me, it's more of a large, complex asset allocation framework to sort of think about things over a multi-year horizon, then sure, it doesn't look that attractive. I don't think it has any predictive value from now to the end of the year, so I don't think it's fair to say there's six, seven percent upside to equities plus the dividend, maybe get seven,

eight percent from here to year end and then compare it to bonds. If bond yields back up, you can lose money there too. So like, you know, to me, I romanticize it can add a couple percent alpha on top of that return and it still looks pretty good to me, all else equal. So I, but that's kind of, maybe I'm just, you know, kind of screwed up by who I talked to for a living. Whatever. Samir, you can respond. You can respond to that. Well, I mean, it's not so much that. I mean, I think it makes more sense to maybe talk a little bit about the areas that we have favored, right? So we like industrials, we like materials, we like energy, right? All of those are outperform year to date. If anything, in some instances instances they've actually done better than growth so i do agree that if you can

pick your spots this is a really good market again i wouldn't say we're necessarily bearish you know i think cautious is different from bearish no but you said you said you've been cautious for some time i'm trying to you use those words we've been cautious for some time that's exactly what you told me i'm trying to understand like what that means for where you've got where you've been cautious for some time. That's exactly what you told me. I'm trying to understand what that means for where you've been invested and where you think we're going from here. So we've gone from 52.50, right? We had almost a 5% pullback, almost 6% pullback, right? So that's right to be cautious, right? And so the areas that have done well during that time are actually kind of short-term fixed income. We like that. We like commodities. Those have done really well. Some of the sectors, right,

industrials, energy materials, they've all done well. So I guess, you know, in some ways, I would argue caution at the index level, right? The index is going to have a very difficult time, in my mind, really setting new highs until probably after the elections. Anastasia, you want the last word here? Well, I think as we move closer to the election, we can certainly see some volatility. And that's when you look at the VIX curve, that's what it's implying. But one thing that we do know from investing around the elections, you want to stay invested leading up to it and especially after it. So I tend to look on the opportunity side of the spectrum. And to me, some of these pullbacks that we have that we had right now, you buy those gradually. One thing I'm worried about maybe changing my mind on is, you know,

we've been recommending energy. Changing your mind already? No, in the last nine months, not during this program. It's just, you know, we've been recommending energy. Yeah, you have. And it's before many, A, before it started working and before many others. Yeah, it was wrong and it looked okay. And now I'm sort of like, you know, I think it should have been up more. Demand's been weaker than I would have thought. And I'm starting to worry that the multiple just continues to erode, even as the cash flows look relatively attractive. And I think what the market's discounting now a little bit is that Trump's going to win.

I mean, just looking at data, I'm not giving any personal opinion. But it's also a cyclical straight. Yeah, both. And I'm saying if Trump's going to win, I think you're going to get a lot more catbacks that comes out, or that'll be the perception. And so maybe they just can't act well until after the election. So I'm a little bit worried about that relative to where my head was three, six months ago.

I look up, 20 minutes have gone by. That means we had a good conversation. Guys, thanks so much. Samir, I appreciate you being here very much. Anastasia, thank you. Nice to meet you, Samir. Take care. All right, let's send it over to Christina Partsenevelos now for a look at the stocks moving into the close. Christina. Thank you, Scott. Well, after several rounds of job

cuts last year and a streak of disappointing earnings, it looks like cost-cutting measures may finally be turning things around at Hasbro. The toy maker beat street estimates for the first quarter today and reaffirmed its fiscal 2024 outlook. And that's why shares are up almost 12% right now. On the downside, though, shares of freight carrier Old Dominion are sliding after posting a mixed bag of results. Earnings were in line with expectations. Revenues fell slightly behind. Comments from the CEO did sound a little more optimistic,

saying the company improved financially despite, quote, continued softness in the domestic economy. Those shares down 11 percent. Scott. Christina, we'll see you soon. Just getting started here. Post nine up next, the countdown to meta. The tech giant seeing serious gains this year.

That stock's up nearly 40 percent. We do have shareholder Doug Clinton from Deepwater Asset Management standing by right off the set, ready to take a seat. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Oh, here we go. Big tech earnings kicking off in less than an hour. Meta reporting its first quarter results today.

Meta shareholder Doug Clinton of Deepwater Asset Management with me here at Post 9. It's good to see you. How are you feeling going into this? I feel okay. I think expectations are higher, I think, this quarter than last. If we remember, last quarter, Meta was up 20% after they reported. It was incredible. I mean, they did everything right. Dividend, buyback, guidance was great. I think that we're not going to see the same magnitude of stock move after the market.

20% is a pretty high bar. But I think investors are optimistic going in, and I wouldn't be surprised if we see a more muted reaction. I mean, the magnitude of the beat. Forget about the magnitude of the stock move, because one, let's not put the car before the horse, right? Can they keep up the pace, right? They're coming off the best quarterly sales growth in two years. Can they keep up that sort of revenue growth? I think they can keep up a pace. I mean, 26% is the bogey for this quarter for ad revenue growth. I think they can exceed that, but I wouldn't expect to see as big of a guide up as

we saw last quarter. I think what they need to do, though, is show that solid, stable ad revenue base. We saw last week with Taiwan Semi, people care about the core business. It's not all about AI. But I do think AI is the other ingredient going into tonight. People want to hear more about Llama 3, which they just launched last week, and they want to hear more about Meta AI. So if they can't keep up the same pace that they've kept up most recently, given the fact that the stock's been up a lot, what do you think the reaction is going to be on the backside if it's a beat and a good one, just not a blow you out of the water one? I think the stock ends up being okay because if you look at meta

they're still only trading around 24 25 times forward earnings that's kind of within their range over the last 10 years and it's in the ballpark of google it's in the ballpark of apple it kind of puts them in line with some of their peers in the mag six so i think they're in a good place the wild card again for them is they've got some really different ai things that they're in a good place. The wild card again for them is they've got some really different AI things that they're doing, particularly on the open source model side. And I think that creates optionality. You know, margins are good. You know, the multiple has expanded. Now, multiples have come in a little bit lately, obviously, in the upset. But in order to keep the multiple expanding, you have to keep up the growth. And at the same time, you got to make

sure you don't spend too much on AI and all of these other things that, you know, look, let's be honest. I mean, this company was really criticized for spending like crazy in the past. So they've had this year of efficiency. Can they can they handle that tradeoff? Can they keep the growth rate up and keep the spend down? I think they can. I actually think they have much more leeway now, ironically, now that they've gone through their year of efficiency than they had 18 months ago when the stock bottomed in October of 22. I think investors trust Mark Zuckerberg.

He has regained a reputation with them for being frugal, driving innovation at the company, and spending on the right things, including $10 billion on H100 chips. Okay, so let's look forward to tomorrow then, right? Because Alphabet's a big position for you as well. It is. Are you as optimistic there as you are with Meta? A little bit more cautious on Google, but here's the funny thing about Google.

You look over the last month, there's only one Mag7 stock that is up over the last month. It's Google. And I think the story with that is a month ago, investors had totally written off Google. They gave up on it. We had the Gemini issues. A lot longer back than a month ago. It was ugly. You know, we've been basically for the last year, the noise around that company is that it's lost. Yes. Not only lost the AI race, but it's just lost. Right. Internally, I think the good news, though, is it feels like we're starting to see just a little bit of them coming back to sanity, coming back to reality.

And maybe a meta-like year of efficiency. We saw yesterday the search boss talked about urgency. And it's funny, but hearing their search boss say, we need urgency at Google is empowering, you know, and it's important for me as an investor to hear that, because that is a fair criticism of Google over the last year. They need urgency. Hopefully we hear more about it tomorrow on the call. It's funny that the stock performance hasn't matched the narrative. You said it on a shorter term basis, but even on a 12-month basis, when really we started getting hot and heavy on AI, this stock has done better than Microsoft. People would have you believe otherwise.

The narrative would have you believe otherwise. What about for Microsoft then? Well, I think it shows you something specific about Google, and I'll speak to Microsoft in a second, but Google has all the assets to still be a player. I think that's why they've done well over the last month, two months, is investors have come back to the reality that they have distribution. Billions of people use their platform. They have CapEx. They have money. They have TPUs. They have all the ingredients. Microsoft has a lot of those ingredients, but they don't have the same data. They had to go and work with OpenAI to bring AI to reality on their systems on Azure. So I think Microsoft's in a great place.

Certainly, if you think about the MAG6 stocks, Google, Microsoft are probably at the top from a software application standpoint. But Google, we prefer here. We continue to own it. Lastly, the mega cap trade in general. Are you feeling shaky about it? Do you feel a comeback is in order? And is this the week in which that starts? We still feel good about it. I think when the market is up 13 weeks in a row, that's when I feel more nervous than when it's down a few weeks in a row. So I think

this has kind of been a healthy adjustment for us. We're still confident in Meta, still confident in Google as AI winners, and we're sticking with them. All right, Doug, I appreciate it. Good to see you here. Thanks, Scott. Doug Clinton joining us here. Up next, Goldman Sachs' Elizabeth Burton is here to tell us how investors should be positioning their portfolios amid rate cut uncertainty and where she is seeing some flight to safety right now. She's at Post 9 next when Closing Bell returns. We are back. The S&P and Nasdaq making their way into the green in this final stretch.

Dow's trying to get there. We'll watch it. It's awfully close. Investors looking ahead to this week's key economic data that could influence whether the Fed will begin cutting interest rates anytime soon. My next guest says now is the time to position for fewer cuts ahead. Joining me now at Post 9, Elizabeth Burton of Goldman Sachs. Good to see you. Welcome. Good to see you, too.

I think that's partly what this market's been figuring out, how to best position for fewer cuts and hire for longer. What's the best strategy right now? What are you telling your clients? Well, I do think that folks should be thinking that we may have fewer cuts. I actually think if I was still in the CIO role that I would be thinking about protecting my portfolio for even longer extension, because I think there's always risk that those cuts could be pushed further out, even if it's not our baseline. It's a bigger risk to portfolios for a quarter

point hike than a quarter point decrease. And if you're a CIO managing a large pool of assets, that's your concern, not, you know, what's the Fed going to do and how many times this year? You think the market needs cuts? I mean, how would you assess that question? You hear, you know, the economy is awesome. It's incredible. We don't need rate cuts. But the other school of thought is like, well, at some point we do. And we may get them this year. So what if we don't get as many as we once thought? How would you answer that? The market needs certainty.

I don't know if it needs cuts or it wants certainty, I should say. So no matter what's happening, I think that's the more important issue. So I won't say whether or not I think it needs it at this point. We've still got time, too. Who knows what's going to happen between now and June? I think the harder challenge is deciding what to do when you don't know what's coming. Actually, I have a paper coming out in a little bit that talks about if you had perfect foresight into certain economic data, which things would you want to know? And none of the things I list are a quarter point here or there.

It's more like, where do you think we are a year from now? Okay, so then tell me how you would recommend investing with a year from now time horizon. Well, for one, part of the reason I said that is I think investors are already on one side of the fence with respect to that. And I think they're looking for a little bit of confirmation bias either way. So thinking a year from now, if you think that rates are potentially higher, do you want to be locking in short-term rates? Do you want to be locking in fixed rate at this point? Or do you think that rates are potentially higher, do you want to be locking in short-term rates? Do you want to be locking in fixed rate at this point, or do you think you have more bandwidth? I mean, short-term rates are attractive here, right, but that would change your opinion on whether it's important to do it right now or whether you have some leeway to think about some other sorts of things.

Do you actually think that rates could be higher a year from now than they are today? I'm not saying that rates will be higher a rate from now, but when you're managing assets, you want to think about the risks, right, to the upside. They could be the same level they are now, but I think what you're asking in the rate cut question is are rates going to be lower a year from now? I think most people would think that they would be because we're eventually going to get cuts, plural.

We are eventually getting cuts, right? And Goldman Sachs would agree with that message 100%. Sure. But is it now? Is it a year from now? That's what I'm saying. What really matters is where do you think we are a year from now, not necessarily where do you think we are at the end of July? No, but I mean, between now, let's say, and the end of the year, do I want to be in small cap stocks? I want to be in cyclical stocks. Do I not relative to where rates are today? Not so much where they're going to be a year from now. I've got to make some investment decisions that are going to carry me over the next few months. And maybe the landscape's a little bit different than I thought it was going to be, both from an economic standpoint and a

rate cut standpoint. Right. Well, on the small caps, which everyone's sort of talking about these days and we're super constructive on them, We think that if there are rates cuts coming, that'll be a tailwind for small caps. In general, we think there's a lot of tailwinds for small caps, though. So do you have to wait on whether or not there's a rate cut in July? Probably not. There's other reasons why you should be looking at small caps right now. I think a big concern for investors continues to be, actually, this is interesting, on our internal website, concentration was actually not in the

top key word search until this quarter. It wasn't last quarter. And now folks are worried about it, which I would have thought maybe they would have been worried about it in the last two quarters. So they're looking for diversification everywhere they can sort of get. It's so interesting that you say you want to be overweight, small caps. I mean, it is a good debate right now. The market action, I mean, the price action of the Russell would suggest that you don't, because anytime rates go up, the Russell's going down and vice versa, obviously. So how would you contend with that? Right. Well, in some parts, you know, the Russell suffers from somewhat of a benchmark issue. Not

everything in the Russell is maybe something that you want to buy. There are certainly, you want to pick your spots. And I believe that Goldman has been clear on that, that we think that this is a market you want to be active in. And by the way, not just in the U.S. We think like ex-U.S., it's an opportunity as well. But there's a lot of tailwinds behind that. And we're all exposed. Most institutional investors have to be exposed to the U.S. equity market. So they're just looking for other ways they can gain that exposure when they've already experienced so much frustration this year. Like, think about if you were in active management this year. How frustrated would you be with large cap active management, right?

It's been tough. So I think they're looking for what else is there. Is there an alternative to this? Is there an alternative to what we're in now? So let's take the large cap thing for a moment. And we got Meta obviously reporting tonight. And in the subsequent days, we're going to have other big ones too. How do you feel about mega cap tech right now? I think there's been a good story behind it. I think the bigger issue for me this week is I think

I've said every time I've been on here that investors don't care about these short-term things. I actually think this time, like it or not, there's probably some caring. It's been such a big story. But again, I go back to the confirmation bias. People already know how they feel about what they think is going to happen for the growth outlook. And this week, these earnings are either going to confirm that or they're going to keep looking for other data points. We've already seen strength in the economic data that the U.S. is on a good path. Now we're looking for it in confirmation from corporates.

I'm not letting you out of here before we talk about Everest because I've never met anybody and I've never had anybody on either of my programs who climbed Everest, which you just did. Well, let me be honest. I climbed to Everest Base Camp, so I'm not Sir Edmund Hiller. I'm still giving you the gold medal for that. Well, thank you. Can you just give me an idea of what that experience was like.

It was great. I went alone. You know, it's not always a vacation if your family's with you. So I got some good solo time. But I think, you know, it helps me reset. It helps me relax. Hopefully that's not too much of an insight into my personality. But it was epic.

And I'm very grateful for the time to do it. And, you know, lots of small steps to go a long way. Yeah, I bet. Well, congratulations on that. Thank you. That personal challenge and success in doing that. Elizabeth Burton of Goldman here at Post 9. All right, up next, we're tracking the biggest movers into the close. Christina Partsenevelos is back with that. Christina.

Another acquisition looming in the software space. And leisure travel still booming, and that's helping shares of one hotel chain. Can you guess? Those stock movers next. Exactly 15 from the bell. Let's get back to Christina now for the stocks she is watching. Christina. Bad weather didn't stop travelers from booking hotels at Hilton properties. The company beat estimates even though renovations, weather, and unfavorable holiday shifts weighed on performance, this according to the CEO.

The chain is so confident the travel boom will continue. It's raising its full-year guidance, and that's why shares are 4% higher. Software firm HashiCorp continuing to move higher today on a Bloomberg report that IBM is looking to buy the cloud software provider for $35 a share. Expect to hear more about this company on IBM's earnings call, which is out after the bell. The consulting business, though, that's a big segment for IBM, will be a major factor considering IBM's competitor Accenture lowered its revenue growth guidance very recently.

You can see shares of IBM barely up 1%. The other company has she up over almost 8%. Scott. All right, Christina, thank you very much. Christina Partinello still ahead serving up gains. Chipotle reporting results in OT as well. Will recent price hikes hurt the stock or is there more upside ahead? We will discuss coming up. Coming up next, your big earnings set up. Meta, IBM, Chipotle among the big names reporting in OT. We tell you what to watch out for when we take inside the market zone next. We're now in the closing bell market zone CBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day.

Plus Julia Borsten on what to expect from Meta when it reports an overtime. Chipotle also out in the next hour. And Kate Rogers is watching that for us. All right, Mike Santoli, this is we're like loitering now. We're just like waiting around, right? We need to have some activity here. So we know that some of the most important sales in the market spreadsheet are going to be filled in and, you know, more even after today. You know, Meta before its last earnings report, which is less than three months ago, was a $400 stock. Races to 510. It's pulled back 7% from there.

So it's hard to say the bar is really low, but it represents 2% or so of S&P earnings, much more of that of the growth. So yes, it does matter. I don't think it's all that matters. But I think the market welcomes the opportunity to fixate on the earnings story. Atlanta Fed GDP finished out. Final estimate is 2.7 percent first quarter annualized growth, real growth. You got 2.7 percent PCE maybe coming on Friday. That's five and a half percent nominal growth at an annual rate. Seems like we should make our numbers on earnings, you know, I mean, not just for that reason, but for others. So I think that

we're comfortable there. Yields are are you know, they're on the radar You can't kind of get away from the fact that they're that they're near the highs I don't think it's a huge threat But you're aware of what's happened before with these yield driven sell-offs almost speaking to what I feel is, you know Sort of underlying this market a little bit of late and that's a rotation. Yeah, sure You're you're almost opening the door and saying it's okay relative to the growth that you just talked about to go into these other areas. Right.

And we're not so heavily reliant on the Metas, Microsofts, and Alphabets that we otherwise might have been. Not so heavily reliant, but also people just feel like they have enough exposure there, even if they don't do anything else. NVIDIA is really acting erratically. I know that's what it does. Yeah. But it's just kind of bouncing all over the place

in this kind of correction mode that it's been in for a little while. But banks up another half percent today. To your point, that is, you know, this kind of messy rotation ongoing. All right, Julia Borsten, meta, meta, and meta. What should we expect?

Well, meta shares are up 40% year to date and revenue at the company is expected to continue to accelerate its growth rate. The top line is projected to jump by 26%. I think that's the number one key number to watch, a 96% growth in earnings per share. Now, all of that growth is expected to come from tailwinds, from reels, from AI driving results for advertisers, a solid digital ad market, as well as perhaps some early revenue from the messaging business. Now, analysts are very overwhelmingly bullish. 86% have a buyer overweight rating on the stock. 11% have a hold. So we'll have to see if Meta says anything about

more benefits to come from AI or how it could benefit from a TikTok ban. Back over to you. All right. Julia, we'll see you in OT. I mean, Mike, you can't possibly keep up the sales growth pace. The question is, how much do you have to? Exactly. And as this year goes on, it's going to be interesting because growth is stepping down from monstrously high rates. 70% EPS growth last year for Meta.

It's supposed to be 35% this year. 25% 2025. It's supposed to be 15% growth. So it's a matter of what you pay for that. I mean, you're less than 25 times next year's earnings. It's not like a super expensive stock if you're talking about reliable mid-teens or at least double-digit growth. But you have to see if they give you a little bit of a window on their clarity on those growth rates. Yeah, I mean, Chipotle doesn't really, K. Rogers need to play second fiddle. I mean, the stock's done quite well. It's, I think, a highly owned name. What do we expect there?

So, Scott, analysts are looking for EPS of $11.68 on revenues of $2.67 billion for the quarter. Same-store sales are expected to increase 5.2%. That metric will really be key for analysts as well as any commentary around consumer sentiment and pricing power, which Chipotle has really maintained here, even in the face of some pullback from lower-end consumers at some of its competitors. Another thing we're going to be looking out for, traffic growth. Chipotle saw traffic increase by more than 7% last quarter. That's the bucks and industry trend of falling traffic in this competitive environment. So far this year, you mentioned Chipotle is among the best performers in the restaurant sector. It's up nearly 30%. And CEO Brian Nicol will join us exclusively before the analyst call in overtime. So tune in for much more on the quarter. Back over to you. All right,

we'll see you in a little bit, Kate Rogers. Thank you very much for that. Do you want to opine on this one too? Yeah, I mean, you know, they've done absolutely nothing wrong and really kind of earned the benefit of the doubt in terms of being able to maintain these growth rates. Plus, they're still adding stores. They still add 8%, 10% to the store base every year. So they're not fully kind of saturated. But it's 50 times earning. I mean, it really has.

Always, always gets that massive premium. It's holding it. It's an $80 billion market cap, which is like big for a restaurant company, but not big really for a consumer bellwether. So very interesting to see, especially if they're talking about maybe they push price as far as they can or not. Overall price action with less than two minutes left. I mean, we're at 50-75 on the S&P. Weren't really sure we were going to get back to this level so fast. No, it was, you know, so you basically did a couple percent up.

It may be reasonable to say last week's low, 49.50, thereabouts. Looks like you should assume that to low end of the range at worst for the moment until proven otherwise. You do have some stuff above. You have to be careful. Sure, but last week's high, I think you said was 50.80. Last week's high. Last week's high, yeah.

Last week's low was like 49.50. No, no, that's what I mean, 50.80. So we're looking at last week's high. Last week's high, yeah. No, no, that's what I mean. 50-80. So we're looking at last week's high as the next hurdle. And then you start talking about 51-20, 51-50, which is the 50-day, 100-day averages. So that's where oversold bounces are going to peter out if that's all it is. If there's more behind it and you can kind of get a little back-and-forth action, I think it's fine. The big thing to me is we didn't fully flush out optimism in this market because earnings are good enough. Everyone said we need a 5 percent pullback. So you don't always need it.

But sometimes you're going to get a better kind of snapback rally if, in fact, people had really liquidated and gotten out and need to buy back in a hurry. Not really the case. I think that's why you kind of settle at a higher low of pessimism or optimism. Look, if Jamie Dimon had said, you know, the economy looks like garbage and we're in trouble, maybe we'd have a different sentiment. He said it was unbelievable. The reason why... I don't know. It seems like when Jamie's been scared, you want to buy. You're right. Good point. But maybe you can get just a 5% pullback because the backdrop underneath it, the floor is very strong. The foundation is strong.

The underlying trend is strong. All right, that's Mike Santoli, of course. Meta, minutes away in the OT.