pushback but they raised prices 13% year over year and still seeing high demand >> exactly we talk about a weaker economy, inflation hurting everyone, yet we are still paying as we saw on that board >> people seem willing to step up >> for now >> who do we do with the remaining ten seconds? >> catch up on our day chitchat >> thanks for watching chose "closing bell" starts right now. >> i'm mike santoli in for scott wapner we are live from post 9 at the new york stock exchange. this make-or-break hour begins with an end to the calm, the first 1% daily drop in the s&p 500 in more than a month appears under way on a fresh round of economic slowdown concerns and mixed earnings results the s&p 500 is down almost 1.5%. that leads us to our "talk of the tape" and text moment of truth. will impending reports from the

giants of the nasdaq ease or exacerbate investor worries? here to help us answer this question and more is a cnbc contributor and nicole webb. welcome to you both. malcolm, i old love your read on today's action we've been almost complaining, at least some of us have, about the lack of movement in the indexes. we have had the slow volatility period today, familiar, but i guess reminders of a slowdown fear in the economy, consumer confidence taking a hit, and a mixed bags of earnings seems to have jolted the markets along with those bank concerns with first republic is it just a blip or the start of something worse >> yeah, mike. i don't think the calm will continue throughout the rest of this week. i think we're probably going to get whipsawed around over the next few days throughout each trading day as new earnings continue to come out and especially after you hear about the microsoft and alphabet movements.

40 40% of the s&p is scheduled to report before friday >> nicole, on balance, reports are coming in in aggregate anyway, better than expected s&p 500 off a couple points for month, so it's not rushing lower. again, it's not particularly new we're worry about a slowing economy. how do you think the market is absorbing it and i guess the regional bank stress is this other thing that's nagging at psychology >> yeah. i would also add that we had the newest break this morning that we think that tax revenue was up about 35% on the heels of no capital gains last year. so that pushes that debt conversation a bit further or closer into the future as opposed to further away. when we couple that with some of the yes, the consumer is not yet balking at the fact that we have passed along higher and higher

prices, inflation remains so sticky, the labor market is being resilient. so that brings us to that fed meeting in may the likelihood that the 25 basis points does occur, where do we go from there. to some degree is it just kind of the sell-off of looking backwards, which is what we're reporting on now, positive, but going forward, we haven't seen expectations go to the downside, but we're hearing a lot hangs on the consumer and their ability to keep spending >> it's been the theme pepsico is up 2% today and they're basically saying, look, consumers are paying the higher prices on their products mcdonald's, hints of some slowdown at least in terms of size of ticket and then gm with very good numbers and a little hesitation about the outlook as to whether it's sustainable >> i have a little hesitation about the way gm reported on the cu consumer, talking about new packages, more and more add-ones, the average price of

cars above $50,000, and we're seeing for the first time in a long time default on auto loans. these are spending patterns that erode the savings component as we look forward to higher for longer expectations bringing down the profits over time and where do we kind of play that out. to your point about mcdonald's, there is some positive news thinking about ad spend, some of the search premium revenue coming forward so, again, looking to tonight's earnings calls, you know, we might see a revision to the upside there on the heels of not just ai but some resilience in business >> yeah. and malcolm, i do want -- you mentioned with microsoft and alphabet reporting today obviously might be a swing factor for the overall index, but you did sell alphabet this morning. is that on a specific concern about the quarter? >> not necessarily a concern about the quarter even though i believe alphabet has the last four quarters in a row missed on

earnings, which can't be good coming into a softer quarterly report but it had more to do with the fact that i don't see how they managed to sustain this war with microsoft over generative ai and the chat bot wars without cannibalizing their main business, which is search. so, to me, the only thing that keeps alphabet alive is being able to talk about some other business unit like maybe cloud computing or something like that as sort of carrying the water, so to speak. and we all know that revenue is expected to be down or at least flat at amazon web services as well as azure right now as far as cloud computing is concerned. so it can't be all that good for the third player in that space either so to me i just don't see any positives to be owning that name right now near term. >> got you it is down 1.3% at the moment. let's also bring in lo tony. it's great to have you it seems as we get ready for these reports, a few themes will be the pace of cloud revenue

growth on one side for alphabet and especially for microsoft then you have the ai question as to whether it's a source of excitement or a threat and then just the general macro fear of, you know, pc and business investment in technology so what most stands out to you as kind of the animating force of the reports that are about to come i think those are all right. i think we'll get a good feel for what the advertising health looks like in that market from alphabet and meta in particular. what we're looking for is, okay, we want to see that there's a consolidation that happens usually in slowdowns, so seeing the ability for alphabet to hold court on performance and then get someindication of the bran marketing through youtube, that would be interesting of course meta has much more of their revenue base tied specifically to advertising. so i think some of the things to look for are, is meta still facing headwinds from the macro

as well as platform changes by apple and android on the mobile side, and bright spot for meta might be what's happening with reels. i think on the ai front it will be positioned as a positive, maybe to be able to offset any potential, you know, not-that-exciting news on the cloud side i think in particular, when we look to microsoft, you know, this is a big opportunity for microsoft to be able to take some of that share from alphabet, google, which we haven't seen before, right this is an existential moment for alphabet one analyst said for every single point of share that microsoft can take away from google, that represents $2 billion in revenue and 10% in earnings, so we'll be listening closely. alphabet recently consolidated the beat mind team from other bets and merged it with their internal team, showing the seriousness of this moment >> yeah. it's gone from being kind of in

the lab to in the business at this point, i guess. lo, the other piece is the cost-cutting theme, which of course all these companies have made a priority. we've even had some say we saw a flurry of job reductions and maybe we're even through it. i wonder how much help from margins might come from this point on. >> yeah. you know, look, one of the metrics we used to look at may be, you know, over a decade ago was revenue per employee at these tech companies i think what's ended up happening is we've had such explosive growth over the past decade for big tech, and historically within silicon valley, there's always been this competitive land grab of the best talent available, even if that talent was not necessarily required to drive the growth of these businesses and as a result of that growth, it would sometimes mask the impact that these employees were having i think when we look back to spring of '20 when there was a

little bit of uncertainty, then the rapid rise and the tailwinds from all the activity online, we saw these companies massively hire, and the secret on the street was, hey, these employees really weren't doing that much so, when we talk about efficiency by reducing workforce, i think we're really just returning back to the norm and the ability for these employees, even with reductions, to still maintain the business is clearly apparent. hopefully we'll see some drop to the bottom line as a result of the cost cutting we really need to understand from alphabet what is going to happen, are there going to be further cost reductions on the employee side. they have also paused some of their real estate development for the larger projects, and then they've done a little to reduce the employee perks. meta has been the most aggressive in reducing the employee workforce >> that's right. and most of that savings is certainly headed for bottom line for meta we'll see that this week nicole, to kind of wrap it up on

an investment level, these stocks, many of them end up in a lot of the filters for quality balance sheets and returns on equity, all the things people say this is the moment when you should be looking in that direction. in other words, they've qualified as defensive plays >> mm-hmm. >> is that correct at this point? because they also do have the higher valuations and you see on a day like today you can have a little bit of a ripple of doubt run through these stocks about great rates and it hurts them. >> yeah. and i think to some degree people who put their toe in the water for the first time during covid don't understand the cyclical nature of these businesses, but at the same time, microsoft has now positioned itself more as an enterprise utility, being able to stack on top of the office suite of products, bringing in security measures, now the overlay of ai. when we look at alphabet, you know, i think about the data they have on humans globally, more of it so if they were to apply that to a large language model, i think

the possibilities are infinite that is a business shift for them from pushing your eyeballs towards something to now how do we monetize the data we have and utilize it in an ai functionality. so, is that interfacing with youtube between you and i to create the specific advertisements in front of us that would actually would move us to purchase again, there's a lot more to unfold there, but i don't disregard alphabet for being behind i think for them it sometimes is just a scattering of, well, how do we reorganize our train of thinking, take the data we have, and progress forward >> malcolm, if you don't think that alphabet necessarily has the answer at the moment for some of these competitive issues, where else might you be looking in terms of what the market has delivered, in terms of potential opportunity on this pullback >> i think about a name like spotify, which i own personally.

but showing their earnings and showing they have managed to right is the ship since a year ago since the ceo plunked down $50 million of his own capital out of his pock tote sort of signal to the market the bad is all out and we've actually managed to turn our focus back to helping people enjoy streaming and helping people enjoy listening to audio more so than trying to put all of our capital behind superstar talent and so forth, they've actually changed the business successfully and shown it through their earnings numbers this morning i think a company like that is actually going to manage to buck the trend of reduced spending and at least manage to continue to maintain its positioning while they add a few more paid subscribers each quarter and not having to worry so much about ad-supported revenue it's just a nice little add-on or sweetener to the package. i think a company like that with a different business model and isn't so reliant on ad spending at a moment we see the most

dominant companies in ads as far as alphabet and meta having slowdowns in that particular arena. >> yeah. certainly on the report, the street likes the spotify numbers, up big year to date we'll see if they can follow in that path. and netflix, which seems to be the model there. malcolm, lo, nicole thanks so much for the time today. let's get to our "twitter question of the day. will investors feel more bearish or bullish after tech earnings we'll share the results later in this hour. let's now get a check on some top stocks to watch as we head into the close. kristina partsinevelos has those. >> thank you, mike the food and drug administration plans to grant accelerated approval for the first drug for a rare genetic form of als, also known as lou gehrig's disease. biogen makes this drug despite the uncertainty of its effectiveness, it's going ahead

with approval. treatments can cost over $100,000 annually. the stock is lower about 3.5% pending approval for another alzheimer's drugs, and earnings came out this morning. cal-maine seeing it shares down 5% right now analysts down graded the name with a lower price target of $60 a share, still higher, trading at $49.58. they say is pricing environment for eggs and chicken isn't the greatest and it's best to move to the sidelines now shares down 5% egg prices coming down mike >> all right people were waiting for it here it is thank you, kristina. we are just getting started on "closing bell. up next, the road ahead for u.p.s., that stock sinking on the back of its quarterly report cnbc caught up with the ceo for exclusive comments and first republic shares tumbling do an all-time low. we'll tell you why and hear from moody's co-head of global banks, where she sees the regionals heading from here.

♪♪ choosing miracle-ear was a great decision. like when i decided to host family movie nights. miracle-ear made it easy. i just booked an appointment and a certified hearing care professional evaluated my hearing loss and helped me find the right device calibrated to my unique hearing needs. now i enjoy every moment. the quiet ones and the loud ones. make a sound decision. call 1-800 miracle now, and book your free hearing evaluation.

♪ imagine, a car that goes as far as it does fast. as sleek as it is spacious. as smart as it is beautiful. introducing lucid air. experience the best. ♪ ♪ (music) up top by the hogan ♪ ♪♪ woah (sfx) car racing -final boarding flight to wait... is that a phone? look at the performance! the graphics. that thing's a gaming machine. a new challenger! faker! that man's a gaming legend. everyone fasten your seatbelts.

and here we goooo! ♪♪ millions have made the switch from the big three to the best kept secret in wireless: xfinity mobile. that means millions are saving hundreds a year with the fastest mobile service. and now, get the best price for two lines of unlimited. just $30 per line. there are millions of happy campers out there. and this is the perfect time to join them... right now, get $500 off the new samsung galaxy s23 series. learn more by visiting your local xfinity store or xfinitymobile.com today.

first republic shares falling to an all-time low today after new reports that the bank is weighing up to $100 in asset sales and sources telling our david faber that regulators are considering their own plans to stave bank this follows first republic's deposits dropping 40% in the first quarter. joining us now is the managing director and co-head of global banks at moody's to talk about what this industry is facing right now, ana when it comes to a first republic, i suppose what options are on the table for the bank?

and i guess how applicable are these issues across other regional banks >> great points. i mean, we have been obviously active in the last six-plus weeks. and first republic was unoral one of those banks that was caught in the significant deposit outflow. roughly 50% of deposits have left institutions since that fateful march 11th weekend so the issue is why strategic options are difficult for these banks, because they have significant available for sale in maturity losses that means whoever buys, they have to halt capital into the institution. >> yeah. >> so, therefore, what has happened is a very constructive solution where the large banks have a consortium. they have infused $30 billion of deposits to bridge this deposit

outflow that has happened. and i assume there is reporting as you just noted, some strategic options that are waiting, such as sales, et cetera. i cannot as you know comment on speculation, but certainly what we know from other issues is that once a bank ends in a situation where they have to significantly structure, that at least weighs on your profitability. >> sure. >> weighs on your culture, on the confidence of your clients and employees and particularly for wealth management-focused institutions, a lot of those bankers want to go somewhere else >> sure. >> so the key is to watch what kind of retention is there and attrition from both clients and banks in light of this environment. >> i guess the market has, since the events of early march, moved on to a thought, well, there's a selective handful of

institutions that seem to be in a tough spot systematically, not that big of an issue yes, there's going to be deposit flight, but it's not leaving in a rush and the larger banks seem to be net beneficiaries. can we get some comfort that that remains the case? >> well, i kind of bifurcate it. i think the nature of the environment in the u.s. is to a certain degree responsible why there's a bifurcated story the large banks, absolutely. we just finished the results of the large investment bank, and the story is very strong we have very strong profitability and very strong deposit franchises that's delivering profitability and higher rates asset quality is keeping up. there's some reserve built, but they can afford wit the profitability and diversification they have. and we think that they're a nice buffer, if you will, for systemic risks it's a very different story than 2008 when the large banks, not all were in such a strong position and in all the regulatory moves,

if you will, post the financial crisis, was really focused on the institutions so make then stronger and more resilient, which has happened and is the case and the market is benefitting from that. on the other side, some institutions were left in a less stringent regulatory environment. so, no real lcr-focused rules, lower capital, you know, rules, et cetera. so that has allowed for some banks to take increasing asset liability management risk. and the governance is inconsistent not all regional banks and not all smallb bangs are having the same issues. there are very small banks who look very good and banks above $400 billion that have increased risk so, it's not just one story. what we did is we did take a reading action on friday affect

2g 2 banks so, there were 11 downgrades, but these downgrades were for six institutions that were most impacted on that weekend of svb failing, and institutions that are were already negative. if i can draw the attention of sort of what is the theme, the theme is higher level financial deposits, more deposit outflight than average regional bank, lower capital than some, and for some, high exposure to commercial real estate >> yeah. >> so, that's the theme we're focused on >> and the market has been trying to separate those out as well we will certainly give a look at those that were named. thanks so much appreciate the time today. >> thank you for having me it has been an ugly day for u.p.s. shares on the back of its earnings frank holland spoke with the company's ceo, and he joins us now. hey, frank >> hey, there, mike.

i spoke with carol tome. she's very confident that the volumes reaccelerate in the second half, that 56% of profit will be in the two final quarters including the holiday season but investors are focused on declines and u.s. volumes that accelerated during the quarter but u.p.s. says stabilized in april. she says macro factors are a head wind. >> we saw retail sales in the united states take a marked decline in the month of march and saw that in our business as well there's a real change in consumer shopping behavior, moving from goods to service, spending more of their wallet on things like food 9% of household budgets is going to food now compared to 7% just a couple of years ago. >> she says negotiations with the teams has impacted business. the union is about two-thirds of the u.p.s. workforce and is seeking pay increases and other

concessions. that accouncontract expires at n of july. tome says there will be a deal by then. >> will's no guarantee in life except for death and taxes, so it would be naive of us to think there wouldn't be some volume of diversion, and there has been, but not much we saw decline, as you mentioned, in our average daily volume in the first quarter. >> u.p.s. is beginning to use artificial intelligence on pricing models to adjust supply and demand, something tome calls exciting and a bit scary back to you. >> those negotiations under way with the teamsters union and i guess some of the other comments that carol tome had about volumes and consumer behavior. what are analysts saying about what it's going to mean for profit margins it seems as if that's what some of the focus is today with this stock decline. >> yeah, absolutely.

i mean, it certainly is a concern. not only the teamsters making more money but volume declining at a potential for pricing power being lower as those buy-ins decline. i was reading a note from citi analyst chris weatherby. he believed some of the forecasting was wrong. they believe volumes will accelerate and some of their volumes are lower because companies are just nervous about this teamsters contract and the possibility of a work stoppage by the union and that for companies that really need reliable shipping, especially on that second half of the year for the holiday season, they may be looking elsewhere and taking their volumes elsewhere. >> got it. frank, thanks so much. all right. here's where we stand as we head into the close dow is down about 276 points you see the s&p 500 just barely lift off the lows, down 1.3% on the day. nasdaq and russell 2000 have been the underperformers all day. up next, pimco's erin browne

betting on one key of the market that might surprise you. and mcdonald's on a record run but falling back two-thirds of 1% at this hour. we'll break down what's ahead for the stock and what the thste tli autis signangbo e atofhe consumer.

you founded your kayak company because you love the ocean- not spreadsheets. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire

stocks pulling back broadly today as shares of first republic tumble, sparking new fears about the banking sector our next guest sees more downside ahead for the market. let's bring in pimco's erin browne it's great to have you here. we have a day when some of the economic slowdown risks are more front and center than they have been some other days, the consumer confidence numbers, u.p.s. results, and some more of these regional fed bank business surveys that really have been rather weak. i guess the big question is, now that we have seen this rotation towards defensive sectors and bond yields come back in, is the market correctly priced for

what's to come in the economy? >> i don't think it is keep in mind, the market on a year to date basis is still up 6.25% and stocks are flirting with 4,100 we're not seeing, you know, significant levels of fear and the absolute level of stocks nor in valuations. they're still trading at, you know, 18 1/2 times forward multiples. so still trading, you know, fairly rich. i think that, you know, certainly today is a significant hit on a one-day, you know, lookback basis, but when you take a larger step back and look at where the market's trading today, there's really a lot of complacency that's still priced into stocks. >> i know that you were looking at the unusually low realized and implied volatility levels in the market coming into today and thinking that it was a pretty good bet to maybe essentially play a potential rise in volatility we got some of that today. do you think that we're in for something worse, or is this a routine pullback >> no. i do think that you'll likely

see over the course of the next couple of months, as we see debt ceiling come front and center and discussed in the market, as you start to see the economy roll even harder, i do think that volatility sub-20 is pretty remarkable, and i would expect to see that you would be trading in a more normalized 20 to 30 range over the course of the next, you know, six months or so i would not. >> given that's the case, you still are warm toward the big global banks why would that be the case here? >> so, i think that the large-cap banks, what we call as the systematically important banks, are going to be the beneficiaries of some of this pullback that we're seeing, you know, across deposit flows, across lending, in the smaller banks.

you'll ultimately -- we now have a significant number of assets that need to be sold by another bank, and who's going to be stepping in to buy those assets? it's going to be the larger banks, you know, the capital providers that are able to step in and really take advantage of dislocations in the market and dislocations in the banking sector and i think that, you know, these large global systematically important banks are going to be the ones that ultimately will be the winners, you know, 3, 6, 12 months down the line so i like stepping in in periods of weakness today in the large-cap banks. i think you'll be a beneficiary in the medium to long term sure today you take a p&l hit, but, you know, ultimately they're the winners of capital outflows from the small banks, and the winners of some of these asset sales that will be taking place over the next couple quarters >> also like to hear your thoughts on china-gears played s

as well. a comeback in chinese equities they've come down 4% this week and 7% on a month-to-day basis, but i wonder what the rationale is thinking they have some room. >> so, there's a lot of fears right now priced into china. the first is that there's concerns about the macroeconomics slowing from here there's concerns at the meeting upcoming that you're not going to see additional measures of stimulus priced in and also when you're hearing from companies, you're seeing some, you know, gains that, you know, trying to reopen and companies talking through earnings that they're starting to see some light at the end of the tunnel but, you know, certainly given the pace of the run-up that we saw, the talent of last year, you're not seeing earnings come out really blockbuster that are suggestive of a new regime yet for china. i think the consolidation you've seen in the last month or so is

a little on the back of all three of those factors going forward, though, the realtime data that we're hearing out of the casinos, out of the airline companies, out of the hotel and lodging sector, out of the food and beverage sector in china is all extremely positive. and you even heard that from u.s. companies really levered to china today in this morning's earnings reports i do think that china is going to be the country that outperforms with respect to growth over the coming year and really, really in early stages, early innings of this trade right now. if you don't want to step back on china companies outright, then own u.s. companies that have big footprints in china some of the consumer staple names and luxury names are front and center for that trade. >> yeah. it's interesting having those two huge economies in such different points in their cycles, see how that plays out erin, graeat to talk with you

appreciate it. erin browne from pimco up next, we're tracking the biggest losers heading into the close. kristina partsinevelos has those. >> we have hundreds of jobuts c at one company and mice pryce hikes at another details next at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire

21 minutes until the closing bell back to kristina partsinevelos for key stocks to watch. >> cnbc has confirmed that gap plans another round of layoffs, more than 500 positions after cutting 500 corporate positions last year. shares reacting 6.5% right now companies are still flexing their pricing power. pepsico raised prices 16% year

over year in its latest quarter. yes, volumes did fall but only 2%, and margins were still up. the company boosted its outlook for the year, and shares are up 2.2%, one of the best performers on the s&p 500, and also hit a 52-week high mike >> certainly a rare one today. thank you. last chance to weigh in on our twitter question we asked, will investors be more bullish or more bearish after tech earnings? ready? so it all started when i was at a friend's party. mia, can you send me that? sure! everyone keeps asking- even my french neighbor- mia! green light! i mean all the time. red light! can you send me that? i'm not making this up. hey, can you send me that? everyone. sure! ♪it's incredible♪

s&p 500 down at its lowest of the day, off about a percent and a half and a two-week low as

well our twitter question, will investors be more bullish or bearish after tech earnings? the majority of you, 57%, saying more bearish up next, your earnings rundown. we're just moments away from microsoft, alphabet, and chipotle results with yourself. (seth) not to brag, but i just switched to verizon. (cecily) so you got an awesome network... (seth) and when i switched, i got to choose the phone i wanted. for free. not bragging. (cecily) you're bragging. (neighbor) oh, he's bragging. (seth) who, me? never. oh, excuse me. hello, your royal highness, sir... (cecily) okay, that's a brag. (seth) hey, mom. i gotta call you back. (vo) switch and choose the phone you want, like the incredible iphone 14, on us. (cecily) on the network worth bragging about. (vo) verizon

and this is ready to go online. any questions? -yeah, i got one. how about the best network imaginable? let's invent that. that's what we do here. quick survey. who wants the internet to work, pretty much everywhere. and it needs to smooth, like super, super, super, super smooth. hey, should you be drinking that? -it's decaf. because we're busy women. we don't have time for lag or buffering. who doesn't want internet that helps a.i. do your homework even faster. come again. -sorry, what was that? introducing the next generation 10g network only from xfinity. the future starts now.

i was born on the south side of chicago. it has been a long road, but now i'm working for schwab. i love to help people understand the world through their lens and invest accordingly. you can call us christmas eve at four o'clock in the morning. we're gonna always make sure that you have all of the financial tools and support to secure your financial future. that means a lot for my community and for every community. ♪

i think i'm ready for this. heck ya! with e*trade you're ready for anything. marriage. kids. college. kids moving back in after college. ♪ finally we can eat. ♪ you know you make me wanna...♪ and then we looked around and said, wait a minute, this isn't even our stroller! (laughing) you live with your parents, but you own a house in the metaverse? mhm. cool...i don't get it. here's to getting financially ready for anything! and here's to being single and ready to mingle. who's ready to cha-cha?! ♪ yeah, yeah ♪ ♪ we are in the "closing bell market zone. wells fargo will break down the sell-off and key bank reacts to

mcdonald's quarter and what to watch for in chipotle's earnings after the bell and big bets on ai and microsoft heading into their reports >> samir, finally a deeper pullback in the market today, a couple, 3% off the recent highs. what's your read on what's driving today and whether the market with its defensive shift that's been happening under the surface has already kind of figured out we're in slowdown mode in the economy. >> yeah, mike. i guess first things first, i would say we're not surprised by the move today we just pulled more money out of equities last week starting with small caps and moving to midcaps and even a little large caps and fixed income because we couldn't figure out why the market was trading at 4,150 with all the risks ahead of us, the negatives we foresaw from that standpoint, you know, i think it's all the usual suspects it's been the leadership thus far. you have tech, energy, financials, all kind of coming

back to the forefront with respect to how do they work in a market that needs to discount a recession, and, oh, by the way, you have the risks like the debt ceiling still lurking out there. >> sure. i guess the counter to that would be for all the choppiness in the economic data, we've still been clicking around the 2% real gdp growth, nominal growth better than that, the fed looks like it's poised to pause relatively soon, unless you think that's not going to happen next week. >> we do expect two additional hikes, so we are a little bit at consensus. we don't think they're done next week that being said, if you look at history and use it as a guide, it never repeats but it does rhyme, history tells you that the market doesn't bottom until after the first federate cut, not the pause, not the last hike, it's ooh after the first cut. even then, it's almost nine months after so, again, if you think that the first cut isn't until the first part of next year like us, you're probably looking at the

true bottom probably sometime in 2024 >> that does make sense based on how history has acted. on the other hand, we can go back a year and a few months and i could say history says that stocks go up in the first year after the fed starts hiking rates and until earnings peak, usually the market can keep climbing so i guess the counter to that was are we out of step with the cycle as historical patterns would tell us? >> yeah. it's a great question. i think you have to look at valuations, right? if you have valuations that are cheap enough to where you can overcome some of the things that, you know, maybe history says aren't all that great, fine but you're trading right now at almost 20 times peak earnings, so you have a market that's still counting on 2023 coming in around 220, so bringing us right in line with last year you still have the market paying close to 20 times on that peak earnings number. the tricky part is there's no margin for error in this market.

>> so, aside from preferring fixed income at the moment, within the stock market, are there places to get some shelter? >> i think you can still participate in the larger-cap, higher-quality areas we like tech, energy, and health care, so some of the pullbacks in tech and quality is an opportunity. we took it from a most unfavorable to a neutral we think as the year progresses, people will view especially developed markets being just as high quality but trading at some really nice, attractive multiples. i go back to what i said a few minutes ago, if you can get those valuations in the low teens, that means you're at least getting paid to take the risk while you wait. >> got you sameer, appreciate the update. thanks so much mcdonald's topping earnings estimates today. higher menu prices driving revenue growth but the ceo did warn inflation could impact consumer spending

in an interview on "squawk on the street" earlier. >> still by the end of the year we 'll be looking at high single-digit inflation on a full year, which is certainly much elevated than what we've been used to over the last, you know, kind of prior period where typically would be in the low single digits. so, that is pressuring margins we're trying to very thoughtable about how quickly we pass on this pricing to consumers. >> eric gonzalez covers mcdonald's with a bay rating, raised his price target to $320 a share. what's your read on the modest pullback in the shares today they have had a pretty good run, but is there some concern about the sustainability of this comp growth >> sure. thanks it's great to be here, mike. thanks so much for having me the bottom line here is that mcdonald's delivered another strong quarter that included double-digit same-store sales growth in each of the major three segments in the u.s., 12.6% ahead of consensus of 8%, but perhaps

more in line with what our clients were expecting one dark spot is food inflation didn't moderate quite as much as we would have hoped. this caused some contraction in the company on margins but this was offset by cash flow improving year over year from the first quarter after declines last year. overall, it's a strong result. >> the comments we heard from the ceo, that's not causing you to adjust what you think they can deliver in the latter part of this year >> yeah, sure. look, the company suggested there were some macro challenges that were surfacing, including a down tick in items per order, so fewer people having fries with their order, an uptick in price elasticity suggesting customers are being more mindful of spending habits. but we believe the brand is well positioned to outperform should economic conditions continue to deteriorate further, we think they would outperform their peers.

>> macro is causing mcdonald's to slow down, and people like the stock. talk about chipotle looking at the numbers. what are you expecting from them and how do you feel the stock is positioned >> sure. so, for chipotle we're expecting our 9% same-store sales growth in the first quarter, margins in the low to mid-20% range that's consistent with their guidance in february with that 9% comp, looking for low single-digit positive traffic, perhaps offset by some negative mix, which has been the trend in the past few quarters as people shifted from group orders back to individual store visits the key is how the brand is performing in april. the stock's had a nice run year to date. it's up 29% to 30% and about 10% to 11% in the last month a lot of this reflects the optimism that traffic has accelerated in recent weeks, perhaps that midsingle-digit range. they took prices up 25% to 30% since the start of the pandemic, and we have seen pushback from

consumers in the second half of 2022 so the stock near 1,800, the company needs to show it's maintained pricing power based on the work we've done, we're confident it's happening >> you have a price target on 1,870, so it's pretty close to where we're trading right now. the question has always been a premium valuation on the stock do you think it can sustain it here >> we do it's still within its historical ranges this is a company that has an opportunity to drive margins from the mid-20s towards the mid to high 20s, call it 27%, 28%. they have a lot of white space in north america they're talking about a 7,000-store opportunity. and the cash-on-cash returns are the best in the injury sales are 15% higher and have a thousand points bet owner the cash-on-cash returns, 65% to 70%

range. a really exciting white space opportunity. we think the premium valuation is justified for a company that doesn't have a major direct competitor >> i guess a good reminder knowing your saturation levels of chipotle stores thanks a lot >> absolutely. thanks so much don't miss a first on cnbc interview with chipotle's ceo. that is coming up in "overtime." steve, we know ai will be a theme for microsoft. how do you think it's going to come up in the calls today for these two companies? >> yeah. monetization, so these are the 2 two leaders in ai, neither yet to make any money on this, but as far as getting products out the door, microsoft is the perceived leader because it's actually putting stuff out there for people to use. we know about the bidding for ai search they're selling it to customers in microsoft 365 sbooets, so

using it in teams and outlook and things like this google has an experimental chat bot called bard that you can sign up and play around with, but they don't have a monetizable product they can put it into yet. any hints from google and alphabet, when they'll start putting it into search and google docs, they've said they're going to do it i would note their i.o. conference, a big developer conference every year, that's next month, so maybe we'll get some announcements then. i guarantee you on the call it will be when are we going to start seeing this come out in your products. >> steve, i guess we're at that stage where simply showing momentum toward having products with ai might be enough, but it's still remarkable to me that microsoft with a $2 trillion market cap and all these actual real here and now profits coming in the door every day is trading on this basis. do you think that this is just a

phase, or this is going to be the driving story for these stocks for a while >> i think it comes down to search, mike, because, look, remember last week we were talking about the report in "the times" from samsung just, you know, considering even ditching google as its main searchengin and devices, that was enough to send google shares down 2% or 3% so it's this idea that maybe microsoft with its early lead here in ai can kind of eat into that now, it hasn't proven out yet, but just the idea that some people are excited about it, that's enough to move the needle for sure >> you know, i've seen some commentary that given this arms race you have among the big companies, everything seems to move in the direction of, well, you should love nvidia more on the hardware side of things. >> yeah. >> the fact these companies are forced to spend so heavily and pay any price to build up their capacity here, i wonlder what it's going to mean margin-wise pop? that's another thing i expect on

the call, how much are you spending on this just to answer queries on the chat boxes, very expensive to do at scale google claims they have a way to do it faster and cheaper and more efficiently than microsoft can, so that's why we also see these companies say we're exploring making our own chips so we don't have to buy the super, pensive chips from n nvidia we can do it in-house. so how much are you spending and when do you expect it to pay off. that's a question for today. six minutes from now >> we'll come back to you for all the details. less than a minute to go, we have a 1.5% loss on the s&p 500. this 4,070 level, where we are at the s&p, is one that's been in the sights of traders for a while. it was sort of considered to be a first possible area of support in a normal pullback it goes back to the lows in the early part of april. it looks like we might finish exactly there. we have seen an uptick in

volatility the vix has gone above 20 for today but settled back treasury yields lower on the day as we did have a fair bit of slowdown of the latest news in the economy. 10-year about 3.38 that does it for "closing bell." to "overtime" with morgan brennan and jon fortt. >> the action is just getting started. welcome to "closing bell." i'm bren been with jon fortt it is one of those afternoons of earnings, busy, busy earnings season day our team of reporters is standing by to bring you the results from microsoft, alphabet, visa, chipotle, and many more. >> that's a lot. and a first on cnb