>> they told bankers the fed wouldn't hike the rates a lot and then said they would good luck to them in the meantime >> it will be a fascinating day. thank you very much for "power lunch. glad you could join us >> "closing bell" starts right now. welcome to "closing bell," i'm mike santoli this make or break hour begins with stocks steadying after a dramatic weekend of forced bank mergers in europe and central bank backstop measures globally which all brings us to our talk of the tape. can this calm be trusted suspense is building for a fed decision, a choice between staying the course on tightening or backing off for fear of more financial upheaval here to help us answer those questions is camryn dawson good to see you. >> good to see you >> you know, the s&p 500 is down about 1% since the day before silicon valley bank buckled. it's up 3% from the low of early

monday morning last week do we take that as a show of resilience here or of indecision or that maybe the rescues are enough for now >> i don't think all of the names in the s&p 500 are created equally. we have seen this resilience in the overall index being driven by the safest of the tech names. there is a flight to quality we're seeing staples outperform. health care outperform this is not a full risk-on move and we see the number of names trading above their 200-day moving average fall precipitously, it's now 40%, which is lower than it was at the december lows, which tells you there's fraying under the surface. >> no doubt. it's relatively unimpressive five or six months out from what seemed could be a market low nothing that happened the last ten days has made the economic

growth picture better or the credit conditions surrounding bank lending any better. i guess the only question is did it do anybody any favors in terms of creating more dovish fed than we might have otherwise had? >> that's the hope that's the hope of what you're seeing within some of this tech trade, mostly in the speculative parts of the market. those are the areas that are most sensitive to liquidity. if we are in a world where liquidity starts to expand because there's issues other places, that's that breadth of relief from those speculative tech names the problem is broad tech overall is trading at a valuation that's above where it was pre-pandemic and at the same valuation it was when money supply was growing at double digits. how much of this easing fed is priced into valuations at this level? >> yeah. i was just looking last week, the nasdaq 100's premium over the s&p 500 is back to where it was at the peak in late 2021 you could say that seems like it has done as much as it might be

able to do today, that's not the dynamic. you have microsoft down 3% basically a reversion of what was happening last week. we're holding together so far. >> yeah. you are seeing a little bit of this give back the reason microsoft rallied is not necessarily because of microsoft-related things they are aaa rated, so that helps in the flight to safety. there's another tone in the market where we are seeing the cyclicals fade that was a big thing at the beginning of this year where industrials were leading, materials were leading, now you're seeing that cyclical trade lose a lot of steam. one of our favorite indicators to watch is equal weight discretionary. i think that's important to watch going into the next couple of weeks >> the economic message from all that would suggest more uncertainty, more downside risk than upside. and, so, what would you do tactically in that environment

anything to be done about that or just to be on alert that there are fewer pistons working for this market? >> we were looking at our health care overweight and growing a little bit uncomfortable with it because it had underperformed so much we looked at it a couple weeks ago and decided not to change it i think we're relieved we did that because you're starting to see a bid to some of that defensiveness within the market. i say don't necessarily chase cyclicals here they are generally oversold in an uptrend if we see them break down, that would be a sign the trade is over if they bounce, there may be a bit more to go >> it was only two weeks ago that you had people jumping over people to say the terminal rate for the fed will be 6%, maybe more than 6% now massive debate equally distributed right now on are they done? is there another quarter point you could -- i think you could spin that either way and say the one big thing we were worried about two weeks ago, front and

center, is no longer as scary. >> that's maybe some of the relief you've seen in valuations as yields have fallen. what we've seen in the bond market is this aggressive pricing of interest rate cuts into the back half of 2023, starting at the june meeting if the fed doesn't deliver in those because they still are in this inflation-fighting tone, which depends on not having more banking crisis or this becoming something more systemic, that might mean these aggressive bets for rate cuts are ahead of themselves but this is a while whipsaw and we have not seen anything like it in the fed funds market >> yeah. we actually see the market basically split evenly ahead of a fed meeting within two days. do you think it matters what they do or what they say what would your expectation be >> it matters what they say and it matters about the dot plot. we get an update to the dot plot on wednesday if the dots move higher, and

powell told us expect the dots to move higher, that was before all of this bank stuff happened. if the dots move higher, it's a reflection that the fed might think this is more idios idiosyncratic, that they contained it if they move lower projecting more rate cuts in '23 and '24, that would be a reflection that it's systemic and they might see something we don't see >> i have to say, it's not that easy to make that call you have these false dawns sometimes when you have crisis psychology in the markets. you would think they expect that what they've done to be enough at this point. you hear people say this may be a massive overreaction to two banks or four banks in distress or there's something really rotten underneath. >> that's one of the reasons if they don't hike this week, that would be a sign they probably see something or that's riskier underneath the surface

i think it's a question of how much of this, which has really been a duration liquidity issue on high quality assets on the balance sheet, is there a risk this becomes a credit issue, is there more underneath the surface we need to become concerned about? if that deposit flight continues, could that reveal credit issues on some of these balance sheets we don't know yet. >> that's the thing to be concerned with the losses on treasuries and mortgage-backed securities are smaller now than two weeks ago because of the rally in bonds. let's bring in matt miskin from john hancock investment management matt, how are you reading this ahead of the fed do you think any opportunities have been surfaced by the recent upheaval in the markets or is it a warning sign >> we're learning into the quality factor it's funny that cameron brought up balance sheets, that's what we're talking about as well. we believe you need to start any stock screen, any part of the

market you're looking at, you have to start with balance sheet analysis the quality factor we believe on a relative basis will be making a comeback over 2023 2022 was a tough year for it we think better balance sheet companies, more stability, higher return on equity will be the pocket in the market any dips today where you see selloff in that market we would look at it opportunistically and rotate further into quality as the year goes on >> matt, depending on how you define it and run the factors to get you to that quality bias, it's going to end -- you'll end up with a ton of tech in there a lot of the biggest nasdaq stocks have all those attributes you recited. is that okay is that what you're after? is it something to be side-stepped >> we like technology as a quality part of the market it is 40% of the quality index, 20% is health care, cameron was talking about health care, that's another sector we like because of that higher quality

almost, not as expensive as other parts of the market and it's more defensive. we like more defensive parts of the market combined with quality. we are okay with large cap tech. we think those balance sheets are strong and margins are strong we prefer that to other cyclical parts of the market. >> growth decelerating, if that's what it is, not terrible, really growth falling away in a big manner and getting us into some kind of harder recession is probably something not priced into earnings estimates. is that your expectation >> yeah. earnings estimates have come down a smidge. frankly the places that have the highest earnings growth estimates for 2023 are financials, industrials and consumer discretionary we do think those are too high we don't think consumer discretionary can do 20% earnings growth this year, but

that's what the street is looking for. earnings growth is low single digits we see some of the cyclicals, the cyclical love that was starting to happen earlier this year will fade over the course of the year and you'll see the rotation overall, it will be tough. this market is a challenging one. we're leaning more into bonds versus stocks, but in the equity part of the portfolio, we're seeing opportunities and higher quality assets that have been on sale last year, that's where we think the relative opportunity exists today >> cameron, i don't know if this is the question that comes right away on wednesday or if it will develop thereafter don't fight the fed has been trusty for a while, it kept you out of trouble, even though the markets have chopped sideways for a while now. if the fed pauses or indicates it will be pausing, if the fed is in emergency management mode and is trying to keep the

symptom liquid, what does fighting the fed mean? staying defensive and bearish? or is fighting the fed buying riskier stocks >> it's interesting because that moment where the fed pauses, we saw it in '16 and early 2019 was good for risk assets, that was because there wasn't a huge earnings cliff the difference is when we saw the fed pause back in 2007, it was really bad for risk assets because there was such a huge earnings cliff that's what is the uncertainty about the fallout from banking issues, will we see tighter lending conditions work their way through economic growth, restrict economic growth and the end result have a bigger downside adjustment to earnings. >> matt, i know that in addition to your leaning towards quality, you think it's u.s. over the rest of the world at this point or u.s. over the rest of the developed world? >> yeah. you go outside the united

states, you decrease your quality factor the highest exposed sector is financials, that's been bucking the trend of overall global financials underperforming, and it's the high dividend factor and momentum european equities are still the best performers in the world we see a mispricing in risk assets when we look abroad the china reopening trade has faded. it's been much less of a significant pull through in demand than we think was priced in we would trim some of that exposure and prepare for continued volatility >> in terms of banking stocks, regional bank stocks down 40% as a group. basically collectively trading around book value. book value, of course, that's a

rear-looking snapshot. not all of them are going away i wonder if they priced in something more severe than we thought would be happening a couple weeks ago >> possibly, but i have a feeling they'll remain volatile. there will be remain to be opportunities. but chris varone, a technical analyst, always talks about avoiding the scene of the crime. you have areas that are hit heart and usually it takes a long time for them to recover and become stable parts of the market again babies have been thrown out with the bath water there are pockets of volatility but we're still in the midst of this happening, which might need to have less of a shorter time period, trades, not investments. >> for sure. we're in one of those treacherous feedback loop moments, hard to predict cameron, matt, thank you very much appreciate the conversation. >> thank you let's get to our twitter question of the day. we want to know which of this year's sector winners would you

fade right now communications, technology or consumer discretionary we'll share the results later this hour. we're just getting started on "closing bell." up next, one wall street firm upgrading a key regional bank to buy. you're watching "closing bell" on cnbc. ♪ ♪ the vehicles are all-electric. the feeling is all mercedes. the choice is all yours. see your dealer for exceptional offers today.

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we're getting a news alert out of washington. eamon javers has that for us >> the white house is expressing support for fed chair jay powell kelly o'donnell asked if powell's views the stewardship of recent weeks as a risk to his position the white house saying no, they have confidence in jay powell but they're looking at this as the fed's decision to raise interest rates so an expression of support for jay powell >> eamon, thank you very much. >> you bet all right. this year's worst performing sector so far, energy, could find a bottom in the next week and enjoy a sharp two-month

rally according to mark newton from fundstrat good to see you. >> thanks, mike. >> energy, maybe people loved it a lot six months ago questioning it now, it had a rough go what do you see that suggests a cyclical low >> three different things. a cycle composite that i developed that looks at energy and wti crude, that is close to bottoming in the short run it looks like we'll get a decent lift during a seasonally bullish time for energy. second is a lot of these energy etfs and crude itself have gotten oversold in the short run. there's been a lot of pessimism in general towards the market. we look at oil demand set to pick up pretty sharply in the second half of the year by 2 1/2 barrels -- 2.5 million barrels a day. all of that combined suggests energy looks like a good risk/reward. >> does it seem like the kind of thing that is going to reassert

leadership or you feel it has a comeback in it >> that is difficult to say technically yet because we've seen such weakness since november crude oil has given back all of its gains for 2022 that part will take some time. i feel confident we'll get a decent lift between now and summertime >> what about more broadly and how the market has managed to hang in there in the face of this banking stress, some damage below the surface perhaps, the indexes are hanging in there >> a lot of that is due to technology and to its credit being the largest sector for the first time in a while, a lot of sectors have rolled over in the past couple of months, that is troublesome when you look at industrials, materials, financials being the third highest in the s&p tech has hung in there, and it's not just faang if you see a broad-based rally in technology, that has the opportunity to bring markets higher particularly when everybody is pessimistic >> does it seem like that's

poised to happen there's a couple of contrasting views on that. one is that while the nasdaq ha had another big run of out performance, it looks stretched. but semis, things like that, looking like they're in decent shape. >> if we can get some stabilization in the finals group at a time when tech is still doing well, i would argue that everybody who is a naysayer when technically stocks are hitting multi-month highs and apple, microsoft, meta, normally it's time to double your position and not listen to the naysayers. things are going well for a reason the market is typically one of the best economists that any of us know. >> that being the case, what's your broader read on where we are. you have the october low s&p up 12% still kind of has not quite gotten free of the lower end of that range >> i understand. i think that the events in the last month give me a little bit of concern that if we don't see sharp rebounds out of financials

and energy and industrials and health care soon, that it could be setting up potentially for a challenging maybe four to six weeks. i'm still quite bullish between now and the end of the year. my target is 4,500 i think we have to get through a choppy second quarter, but sentiment right now is so negative across the board that if tech is acting well, it makes me want to participate with regards to your ball game thinking, i think we're potentially through the fourth inning we've seen a bear market, and my thinking is we'll have a decent bounce in the next couple of years before potentially we see a late decade pullback i think the recession potentially could be postponed it probably can't be avoided completely, but for this year and next year, i'm in the no landing. hopefully this banking crisis won't be systemic. we've seen evidence of mismanagement, but i think we're hopefully -- with interest rates coming down sharply, that's a

positive for the banks >> i was talking earlier about how -- not to say this is a prediction, but there's enough history of an october low and then in march a bit more anxiety and you kind of get down to or near the low and then there's been a recovery from there you don't want to be too specific that it's going to happen again, but it's interesting. >> typically they bottom out in march, so there is some thinking this might happen. seasonally speaking, we're in one of the bullish times of a four-year cycle. i like trusting the seasonals when people are negative if i can see more strength out of health care and financials have a better-than-expected bounce, that will put the market on better footing. >> mark, great to catch up with you. >> thanks. up next, we're tracking the biggest movers as we head into the close.

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here's where we stand. the s&p 500 just under 3,950

right around the highs of last week as well as today. the russell 2000 outperforming after having a tough week up 1.3% right now let's get back to kristina partsinevelos for the key stocks to watch into the close. >> there's a change of guard at norwegian cruise line holdings frank del rio will step down as ceo, president and board member as early as this june 30th but he's going to stay on as a consultant and replaced by larry sommer, the current ceo of norwegian cruise lines he's been in that position since 2020 shares are off 1.7%. the maker of slim jim and redi-whip getting an upgrade conagra's current valuation reflects its cautious outlook. you can see shares are up almost 2% today and lastly, cnbc learned

that virgin orbit is scrambling to avoid bankruptcy which could come this week if they don't get a deal shares are down a whopping 29% >> absolutely. thank you. it is the last chance to weigh in on our twitter question we asked which of this year's sector winners would you fade? communications, technology or discretionary? head to "closing bell" on twitter. we'll bring you the results after this break

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let's get the results of our twitter question we asked which of this year's sector winners would you fade? looks like technology nosing out consumer discretionary as the one folks want to fade up next, we're forecasting the fed, what powell's next move might be and what it might mean for your money plus, the safety plays that and more when we take you inside the market zone

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market zone. keith lerner from truist is here and morgan shank with a deep dive into the world of online dating and the one stock that could be a good match. welcome to you both. keith, on the broad market action, the index continues, the s&p quite resilient here barely down for the month thanks in part to the big growth stocks doing the work on the upside last week, but we're at one of these moments where central banks rescuing the financial system with liquidity measures, maybe the fed will be done earlier than thought

are those things that can continue to support this market or not >> first, great to be with you nice to see some green on the board today. as far as our positioning, at the end of january, early february after that rally, we went to more defense and took some -- took some money out of stocks and raised some cash. as much as the market has been exciting, we see it somewhat unexciting we're still more in a defensive position even if the fed decides to pause or people are looking to the end of the fed tightening cycle. i think part of the reason you have this balance, this tug of war is because the fed came in, the overall markets were acting orderly as a whole, if you look at the overall market, you're trading around 17 multiple with above-average macro risk yields have come back quite a bit as well.

so, it's good to be defensive and patient at this point because we're not seeing any real compelling opportunities across the capital market space right now. >> with what's going on in financials or the severe pullback in energy areas, none of those things feel timely for you? >> typically there's a long period of basing and back and forth and they get quiet after these shock periods. so we're more or less neutral in financials energy, we were overweight most of the year. we downgraded that earlier this year the structural case for energy is still there if you have a longer timeframe, one to three years, fine the challenge that energy had is that it got overcrowded and energy prices has come down quite a bit. it's one of the cheaper sectors. the one area we're still overweight is industrials. we think there's structural

positives for that sector as far as the strategic battle with china means defense spending moving higher. and the stimulus bill passed last year was underappreciated there's hundreds of billions of dollars of infrastructure spending happening in the next few years, but we are tactical and we did that with the market move up earlier this year. at this point, you don't have a fat pitch, you're in the middle of this 3,800, 4,100 trading range and interest rates have come down. it's okay to be patient. we have high conviction that there will be better opportunities. >> do you think that type of opportunity will have to be a real flush towards the lows of last year? it seems to be the call. if you think it's a 3,800 to 4,100 range, that doesn't mean a retest of the lows, but it seems like a delicate balance here

the fed is dealing with inflation and the risk to growth, and then the financial system kind of credit contraction we're seeing >> it's a good point i know you know this well. markets historically have never bottomed before a recession, but they typically don't go down 20% before a recession starts. the one which was interesting was 2000 the market dropped from march of 2000 to about march of -- sorry, 2001, about 26%. it had a reflex rally of 17%, which is eerily similar to now but you had a crisis back then of 9/11. you are in this slog where it's not that exciting. i think there will be tactical opportunities within, but if you don't have more of a flush, you're in an unexciting environment where being

overweight, getting paid to wait still makes sense in our view. >> do you think there's a lot more downside to earnings? we've already seen a lot of degradation in the 2023 earnings consensus from the middle of last year. it was above 240, we're down 20 bucks on that measure and the s&p is more or less where it was ten months ago it's kind of absorbed it, it found a way to stay supported here even as some of the biggest stocks have not done well. in 2000, 2002, that was the story, right first you got valuation coming down then earnings fell apart. >> yeah. i just -- you said the last ten months i looked at the average price for the last year in the s&p, it makes 4,000. it makes sense we've been going up and down in that level. i think there's more downside in earnings forward estimates have

stabilized the last month, i think that's why the market has been resilient also because nominal gdp is still strong. our take is that all these rate hikes and then -- all these rate hikes will filter into the economy. as you've been watching and we're watching as well, we think lending trends become tighter and that weighs on earnings more towards the back half. we think there's more downside in earnings. but the economy got off to a good start this year that's more of a back half story. that's why until then the market is back and forth in a trading range. l ultimately we're likely to see more downside later in the year. >> we want to get to lauren on the online dating call i was interested in part because it's been so noteworthy how match and bumble have been poor performers after great runs during the lockdown pandemic times. i wondered what the market was suggesting about the long-term growth outlook for this area

what has been pressuring this group and what are you suggesting could be a better outlook for them perhaps in coming years >> absolutely. so there's two factors we think have weighed on these stocks one, there has been some macro pressure on the ala cart revenue side which is your one-off purchases. saw a lot of softness when gas prices were at their peak. the second is the concern that the industry is overmonetized, oversaturated and mature that's what we tried to address in this note today, which we don't think is the case. if you look at the past decade, the industry growth has been buoyed by user growth. the adoption of the simple subscription product, that was the easily leg of growth from here, it's more dependent on monetization. monetizing from those uses who have not paid anything, but increasing the amount that paying users are spending. that will fuel the leg of growth

going forward. we think it's not mature in our view >> you make the analogy of what happened in video games. draw that out briefly in why you think this industry can resemble that >> absolutely. if you look at the video game industry, user growth has been slightly negative, yet revenue in the industry is up 230% we think it's an interesting parallel for an industry where there has not been as much user growth as people expected or thought that would be necessary in order to drive the revenue growth it's delivered, but still has been a successful industry and the stock has done quite well so, we think there's a similar analogy here yes, user growth is important but ultimately is not the major driver of what you need for this business or these industries to be successful. >> you like match group. what is match going to do to try to get, i guess, the average

revenue per user to pay for more attributes of the service? >> tinder has had a hiccup in terms of growth rate from here, we think it's dependent on product innovation. they brought in a new executive team there primarily to drive better ala cart features some product optimization, pricing optimization, we think that will fuel the second half revenue growth for this year going forward, it's about monetizing two different groups. gen-z, the younger users who are aging in who may not be as likely to sign up for a 30-day sub ssc subscription, introducing a weekly subscription like bumble does, and one-off purchases that you can make that enhance your experience but ultimately don't tie you down to an ongoing revenue commitment the other side of it is

monetizing power users so the top 1%, 2%, 3% of users who are willing to spend $50, $60, $80 a month but don't have the products available to them today in order to do so, so rolling out some of these more ala cart features that are about gamefying the experience more and providing incremental value when you do spend more overtime. >> a one-week subscription, that seems to raise the stakes a bit to make it work. great to have you run through that with us thank you very much. >> thanks for having me. keith, with the market as stable as it's been here, do you think it changes what might happen wednesday with the fed? is there going to be clearance for them to push through another hike >> it's funny, we were discussing this on our team last week i said the fed, as much as they're ph.d.s and economists, they're just like us and watching the markets a lot will depend on where the market is. as you mentioned, it's been pretty serene and orderly.

i think the best case is they do 25 with a dovish conference from powell afterwards. historically, it would be normal for the markets to rally off of that our position anything we get closer to 4,100, 4,200 level, we would fade that rally. we think later this year we'll be talking about a slowdown in the economy. >> got you you think that they will -- the two-year note yield is back up to almost 4% do you think they're going to be cutting hard in the latter part of this year i think the market is getting ahead of itself. i would say earlier the market was pricing in the three rate cuts if that happens, that likely means the economy is weaker than people expect. that won't be good for corporate profits. that's not the scenario you want as an investor either. >> the bad news for the economy then is just bad news.

keith, thank you very much appreciate it. >> thanks. as we run towards the close, we are going out close to the highs of the day that 3,950 area has been sticky. it was also around the highs from last week when we did have those rallies in a down market in general also oil has gone from negative in the morning, it has bounced a bit. wti crude up 1.2%. decent breadth today, the large list of stocks with larger stocks performing. microsoft was the big winner last week, up more than 10%, it's now down 2.5% at this point. the volatility index is down below 25 that's not necessarily calm levels but it tells you that some of the panic that might have been expected over the weekend after those bank rescues has not come through those bank stocks themselves are bouncing perhaps not making any real dent

in the decline so far. the regional banks index up 1 opinion 2% it has been down some 40% from its highs. that will do it now for "closing bell." the dow is up 380 into the close. s&p is above that 3,950 level. we will send it over to "overtime. [ bell rings ] a relief rally to start the week as bank stocks bounce that is the score card on wall street the action is just getting started. welcome to "closing bell overtime." coming up this hour, we'll talk to glenn hubbard about the signals he sees in the economy ahead of the fed decision and think his thoughts on the latest round of layoffs from amazon. and we'll hear from affirm's ceo max