do not miss a special cnbc event live from omaha, nebraska. mike santoli speaks with thomas russo. head over to cnbc.com at 11:30 a.m. eastern time. >> that does it for "power lunch," everybody. guys, thanks welcome to "closing bell." i'm scott wapner apple earnings, the final fang to report. there's your countdown clock little more than an hour and a half stocks remain unsettled after another rate hike from the fed more turmoil around the regional banks. here's your score card with 60 minutes to go. the dow weaker several household names come under pressure

boeing, goldman sachs, disney among the losers talk of the tape, the road ahead for stocks let's ask the star dan ives with me here. man, all the stuff going on in the market and apple, only the biggest stock in the market, reporting. what do you ex pect >> it's the heart and lungs of tech we've seen an uptick in china in terms of iphone demand i'm expecting some positives from the services. overall iphone demand continues to be rock of gibralter. >> it's expected to be down 5% they're expected to report a decline in sales

it would be only the third time in a didecade apple reported back-to-back declines in revenue. >> headwind in terms of currency, but i think in terms of that china number, the street is front and center. can you see growth in china? what's important is margins and free cash flow margins have been up it just shows cook is navigating apple through the storm. i believe especially in china, going into iphone xv you'll hav some positives. >> you nervous at all that the stock is up? >> i think many have heeded -- from an institutional perspective, many underown apple. >> you really think people

underown apple >> i do. institutionally speaking, this year, many have bet against it they're waiting for the next shoe to drop this is the kentucky derby of tech earning season. i'm expecting positives that we see after the bell. >> you've already had a lot of the mega caps report in the kentucky derby, not every horse wins this is more exposed to the consumer than others, which are more enterprise driven obviously you have the services business too how do you think about all that? >> in the services in terms of the app store, we've seen an uptick key to the sum of the parts, service is worth 1.2 to 1.3 trillion then it comes down to the golden install base you have 2 billion iphones i believe about 25% of those based on our estimates have had an upgrade that's the key. >> why isn't the valuation at 27

times forward too rich that's what i hear from people who don't own the stock. they say the valuation is too rich. >> it makes sense. at superficial value, i view the parts. look at the service business and what the hardware business is worth. the sum of the parts, this is north of the $3 trillion mark cap. i think it's important on margin side they're owning more and morean that's giving cook the margin leverage. >> chips, what qualcomm delivered didn't make you nervous? they suggest the handset slowdown is maybe not over that doesn't move you at all >> no doubt some -- we've seen similar caution coming out of asia, but i think what's happening here is apple gaining share in china, that's why

despite the caution and nervousness, i think it's a flex the muscles moment for cook. >> the other thing, before we broaden this conversation, china is more of a question mark today than it was. most were assuming china is re-opened, everything is great everything's roses then estee lauder says we're not seeing the retail travel we thought. that's different than inside china. you've seen some other evidence that maybe it's not like the doors just swung open and everybody rushed in. >> i'm not expected champagne and roses. >> but you paint a very optimistic picture and china is a key part of your thesis. >> china has 150 million iphones that are in the window of an upgrade opportunity. that install base -- they've added 100 million new iphone users.

>> we'll see you'll stay with us. let's bring in joe taranova and jason snipe. joe, you just added apple back into your etf. what are your expectations >> that's the reaction if you're looking at price, that's what you should be doing. the stock is well above its critical moving averages 50-day is at 159 dan, you're the highest analyst on the street at 205 what's interesting to me is that the 12-month average price target for apple it's on the 1.75 that's a muted expectation that's roughly 4% higher if you think and if you analyze the why, you're seeing a compan that's going to have a second

quarter of a revenue and earnings decline you have to see what this guidance is going to be. how conservative will they be? my way to respond to your initial question about the stock, i believe being long is the right position to have i would not be surprised to see the stock fall back further from where it is today. let's remember, microsoft and meta, boy, they raised the bar significantly for apple today. >> i wonder what qualcomm did, jason, in terms of where the bar is you may have been moved by that quarter from qualcomm. >> without a doubt, scott. i was very concerned about the qualcomm quarter they raised concerns about the head set business and weakness in china for me -- we were talking about china being a very important

factor in how apple performs going forward. decreased slowing revenue growth on services and iphone sales that's a concern for me. dan makes a great point. 2 billion -- the customer base there's 2 billion iphone users this is significant. they've been continuing to grow share. 45% of the revenue growth in the cell phone business was owned by apple in 2021. 2022 it raised over 50%. the consumer base continues to grow also, what could be a positive for this stock is the average selling price for a lot of their wearables and products that could be an opportunity for them going forward i also like them opening up india. the supply chain, not just the stores, could be a catalyst. >> jason, answer this question if you didn't own apple today, would you buy it at 27 times

earnings >> i wouldn't. i wouldn't at this stage i think you would likely be able to get it cheaper at some stage later on this year i mean, it's up 28% year to date to your point 27 times forward earnings is expensive. for the cycle it's been, it's been cheaper for me, i'm a holder i wouldn't be entering here at this point >> you know where i was going to go. >> i understand that quite candidly the strategy is telling me it will be difficult to get it back at the december lows it would be difficult to get it back there i'm not going to sit and wait for an opportunity that ultimately doesn't present itself jason is 100% right. the ten-year valuation on apple is 18 times. it's sitting at 26 times it's rich. i understand the fundamental

arguments right now. >> in an unsettled market. >> i understand. but the other market environment lends itself to owning the type of stock that apple ultimately is with that $90 million buyback. >> dow's down about 260. some of those regional bank stocks are looking ugly today. did the fed make a mistake yesterday? >> fed made a mistake in december of 2021 everyone said they made the mistake. let's move on. you can't move on. they raised the interest rates 500 basis points that had a dramatic impact on assets do they have options if we reach a moment where we see there is financial instability? we certainly have a crisis of confidence right now i thought where chairman powell failed miserably yesterday is

effectively communicating what those options would be to the market the market needs to hear what the options ultimately are going to be. is there a coordinated effort with the fdic treasury and the federal reserve? i have no confidence after hearing him yesterday that, in fact, is in play. >> the market doesn't believe the fed, in fact, at all let's bring in steve liesman who passed along something that i thought was stunning a 60% probability of a cut by july that's what you see? >> yeah. the market thinks that the move yesterday was wrong to the point that the -- they believe the fed takes it back as soon as two months from now. if you look at the probabilities right now, scott, 80% probability they hold in june, but there's that 60% or 63%

probability that they take it back in july and then take it back again and again look at this fed market gap. this is a line that we had -- that we watch all the time the gap between where the market thinks the fed is going to be and where the fed thinks it's going to be. you note we were a 50-basis point gap. okay now we're at 100 there's a 1 percentage point differential between the fed and market for the year end. there's some squaring up to do the market thinks the fed is going to be reversing course quickly. the fed yesterday, i think, held the line on that you heard powell say he doesn't foresee cuts yesterday's hike, scott, as you know, we've had roger ferguson on this morning, another person who typically is someone who supports what the fed discuss, think that yesterday was a

wrong-footed move. >> he doesn't think they should have moved listen to what he said. >> people are pulling money out because there's absolutely no reason to keep their money in. you can get higher interest rates thanks to the fed. you can get bills at 5.2% for a couple months. you know, the two-year treasury has fallen over 100 basis points in the aftermath of these bank failuri failures it seems to me that deposits will keep drifting out >> jason, did the fed make a mistake? was it one too many? >> i think for me, as i look back from a year ago, 500 plus basis points over ayear, i think it's been about the pace in hikes this is tremendous, the fastest in 40 years. that is concerning

i'm of the view that it's -- they didn't need to make that last hike yesterday. i hope this is the last one. i i hope they don't move ahead in june all the lag effects we're starting to see play out, that's why i didn't think it was necessary. we'll see what they do later this year. it's interesting to see they're pricing in a 60% chance of cuts in july. that's really early and not what they said yesterday. >> liesman, there's this idea -- you heard it too -- that the fed just doesn't get it. when powell himself uses the words of the banking system being sound and resilient and then not two hours later we're watching pacwest shares down 50%, you're like what are they looking at >> yeah. i don't know what they're looking at, scott. what i know is my idea that the fed should have held yesterday

was based upon thinking maybe they had concern about what was going on in the regional banks you look at how the regional banks reacted to the rate hike yesterday. you can see it fell out of bed and then it woke up to the idea when powell said no cuts this year it just continued to go. i thought that the fed would care more about bank equity. i know it doesn't care that much about equity in general and doesn't want you to think there's a putout there when it comes to the banking stocks, i have to think the fed has more concern really where we're at is a place where -- if you listen to the question i asked powell, what did you do after the warning and he's the second fed official to say not very much? the question is is the fed able to supervise and run monetary policy

it's a discussion we haven't had for a long time. in 1998 england separated supervisors from monetary policy makers to the extent to which this is not a top-notch issue where the fed is thinking about changing monetary policy because of the health of banking system, it's maybe a discussion we should have again. >> i remember that exchange. you came off to me a little incredulous, steve, that that's the answer you got you went back to the chair and said i'm not trying to be argumentative was the gist of what you were saying i mean, it was a rather unsatisfying answer i think is fair to say, right >> he's the second fed official to say that. we had a background briefing with a senior official who said there was no action taken after the february warning. >> he's the big kahuna. >> he is it's unclear where the buck

stops on this. they wrote a report. the report said the supervisors failed it said the bank executives failed i think that's true, but the report didn't deal with what happened at the leadership of the fed. there was another report warning about the potential impact on the banking system of higher interest rates in the fed's defense i think the story is more that they're super focussed on the big six or eight or ten banks what happened is they were not as focussed on this next, say, 10 to 20 size banks. that's the thing that seems to be in motion now, some of which were quite healthy some of which have problems. the question is whether or not they should have gone slower let's remember esther george was the only dissent in this process because she was concerned about

the banking system robert kaplan, a banking expert, said the fed should not have hiked yesterday. i hope this thing works out and there's stability in the banking system we'll get more information at 4:30 today and 4:15 tomorrow i hope powell is right that there's stability. t >> he also said, the fed chair, that conditions have improved in the banking system. >> look, i've been -- i'm being very critical of him today i want to be respectful of what steve just said. i don't need information on the bank i can see it in the market i can see a three-month to ten-year is out to 1.99. i can see that gold is trading

at an all-time high. >> the resteepening of the curve as well. >> the market is saying the economic contraction is going to unfold faster. look at the cdx market high yields, dead issue, all backed away today. they all backed away as i said before -- i don't know if steve knows this. what are the policy options to respond to the stress in the regional banking crisis? >> steve, leave us with this thought because he did kind of double down on the idea that they can deal with everything, right? they can fight inflation while dealing with the regional bank fl flare-ups. he was almost dismissive of the staff calling for a recession. >> they call it the separation principle. we can do monetary policy and

supervision over here. i asked that question, joe, and didn't get an answer i think the fed feels like this idea where they have this new banking fund in place where they can finance their paper that's underwater, they think that is sufficient what i haven't heard is that they've told the super vvisors o sharpen their pencils in to be more forceful. i assume that's happened. >> better late than ever steve, thank you dan ives, thank you. we'll see what happens with apple. joe and jason, great to have everybody in that conversation. let's get to our twitter question of the day. how will apple stock trade after its earnings report, higher or lower? vote and we'll share the results later. we're just getting startied

here look at that chart amd up near 7% on a new report you have to hear the details. we'll get the reaction from dubravko about the fed and if he thinks more hikes are ahead. thinks more hikes are ahead. you're watching "closing bell. he used to do side jobs installing windows, charging something like a hundred bucks a window when other guys were charging four to five-hundred bucks. he just didn't wanna do that. he was proud of the price he was c"rging. ♪♪ my dad instilled in me, people before the money. be proud of offering a good product at a fair price. i think he'd be extremely proud of me, yeah.

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amd shares spiking after a report that microsoft is helping to finance the company's expansion into ai processers joining me now is stacy raskin from bernstein stacy, i saw this and i say get raskin on the phone asap what do you make of it >> this is what i do look, there's not a lot in the article. i mean, the idea that microsoft is doing their own processing is not new. code name athena, they've been working on since 2019. the commentary about them offering financial support, i wonder if it's more of a semi custom model rather than a direct silicon sale. amd will help customers design pro processors the way this works is the

customer funds the development costs. amd designs and builds the chip. when they sell it, the customer gets those costs back. the game console chips have 20% gross margins. to me offering financial assistance sounds like that. i think that certainly is good there's nothing wrong with that. >> forgive me for interrupting i want to get to the heart of it is it a game-changer in the way you look at amd when invidia has all the chip hype around ai? >> if nothing else, it bolsters the narrative. amd has been trying -- i didn't count how many times amd said ai in the call, but it was a lot. they're trying to spin that as a growth driver for the company. they have a gp robot

hoping for a lot -- it's a lot of hope. this is something that maybe is more concrete and it does help to bolster that narrative if nothing else that is helpful. so we'll see how this goes we'll see if microsoft is the only one semi custom models can happen for many different players. >> let's not forget too, we're just 48 hours removed from amd giving weak sales guidance we're not talking about that anymore, are we? >> sorry >> we're not talking about that anymore, are we? >> no, the stock is almost back to where it was before the earnings everybody is looking for athe ai winners and losers right now, right? if this narrative can help you put amd in the basket of ai

winners, that's good even if from a fundamental basis my guess is significant revenue is going to be a while that's how these things work if it helps the story, it helps the story. >> doesn't sound like you're going to be looking in the days ahead, even the weeks ahead to rethink your estimates >> i doubt it has anything to do with estimates in the near term. they've been working on it for several years. if amd has been involved in several years, there may be something on the runway. we don't know yet. said they may deploy the first gem next year. the article suggested it probably wasn't going to be compe competitive, which is typical for these things it takes time. when amd first started selling server chips, the initial sales were very small.

it took years to ram eventually it did ram. >> big stock move. thanks for coming on needed to hear your voice on this. >> any time. we have a news alert regarding the s.e.c. and the chair. we have the details. kayla? >> reporter: the chairman of the s.e.c. posted a statement to the commission's website moments ago that reads this in full. as i've said in times of increased volatility, the s.e.c. is focussed on identifying and prosecuting any form of misconduct that might threaten investors or the markets that statement where he mentioned, as i said, links to a similar statement to march of this year following the failures of silicon valley bank and signature bank when he made proclamations on the same topic.

there's no mention of specific banks, no mention of short selling or any activity. we'll see what the s.e.c. comes up with. scott? >> kayla, thank you. up next, the rate hike debate dubravko lakos-bujas is back we'll find out what he's expecting now from the fed and if he sees a recession on the horizon. "closing bell" right back.

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turning negative for the year as the investors digest the fed's hike my next guest says the risk of recession is far from priced in. joining me now jpmorgan's dubravko lakos-bujas good to see you. we have another rate hike. we're still concerned about the regional banks what's your view here? >> my view is simple in that the risk/reward for equities remains

unattractive you have three disconnects one is equity bonds. bonds seem like they're smelling weakness there's a pretty hefty rotation to growth stocks you have a disconnect between wall street and washington, d.c. when it comes to the debt ceiling. investors not bothered by it geopolitics, things are not easing, but no one cares. >> let's say the fed is done for argument's sake. the risk/reward is not improving. >> if you look at the past cycles going back 50 years, market was a good short right at the last hike. potentially that was yesterday or at the first cut which could be in three months, a month, six months it's a question of what you think about that that's what history suggests

when i see bigger picture, you have a an earning cycle under pressure you have a market trading at a high multiple with a lot of these good tech stocks crowded, very narrow leadership banking crisis which maybe parts are fixed, maybe parts are not it's not just the fed but ecb. it's a very tricky outlook. >> it's a group of issues, which i'm not surprised to hear you talk about a lot of people are. let's listen to what jeffrey said as to why he's turning bearish. >> i'm turning more bearish. i think the markets for risk assets are too complacent giving this cocktail of higher interest rates and credit contraction certainly we should expect higher default rates and lower quality fixed income securities as we move into the end of this year i'm strongly of the opinion that investors should be going up in

quality and bond portfolios. >> what do you think of that >> i agree with the term complacent if you look at the sub prime market, whether credit card or auto loan or multi-purpose loan, you're seeing cracks you have questions around commercial real estate there's some come complacency on the residential side what are companies going to do with these workers you saw construction numbers, construction workers not moving in the right direction you see some layoffs there cost of capital going up at such a fast pace after we were at zero or 1% and persisting at these higher levels is creating problems we don't know where the risk is going to pop out i see the risk of unknowns is

simply moving higher the longer we stay at this interest rate level. >> talked to liesman a few moments ago. market pricing in a 60% chance of a cut by july is that a negative or positive if that happens? >> i think once that happens i would argue it's a positive. the problem is what's the pain threshold for someone like the fed, for someone like powell we're not there yet. you still have between now and then in the meantime you can see a lot of headline, a lot of volatility, a lot of pain. once you see signals that the fed is looking to cut and ease and then the regional banks, the business model starts to make more sense, then you got relief. >> longed dated treasuries, europes over the u.s., buying gold, what's the dubravko

playbook >> our playbook on the equity side has been trending towards the defensive sectors. on a day like today or yesterday you're paid to be long utilities. health care, defensive parts of health care, that's what i would be leaning into. when i look at the data, i don't think the market is pricing in a recession. i think this rotation from cyclicals into defensive is only 35, 40% at most under weight the defensive trade will become a lot more crowded than what it is right now as we get closer to an eventual contraction. >> it was crowded last year to the point where it got too expensive. now there's been a rotation. it's not too expensive, staples, utilities, health care. >> staples is my least favorite.

on a relative basis that's where i would want to be i'm not sure this is a buy moment and go into the cyclical trade for the second or third time i would argue industrials could be the next shoe to drop it started with tech last year we're dealing with the banking fallout. >> speaking of tech, apple is going to report in about an hour what's hanging on that given what mega cap take has done? overall tech has done incredibly great. >> three things come to might not. rate expectations are coming down and that's helping build up the tech sector. two, i think the ai has caught a lot of attention the whole theme of ai and a handful of names benefit from

that tech has been responsible in cutting costs. then, again, the question is tech has become more cyclical over the years if you believe the cycle is going to slow and contracts, will tech be able to dodge the bullet i'm doubtful. >> when you look at what's happening in ai around some of these big tech names, do you say this is a bubble a lot of these stocks like invidia, obviously they have great products around ai, they're up for a reason. do you feel like there's a giant bubble being inflated as we're concerned about the overall state of the market? >> ai and so forth, i don't think it's anything new. it's a theme that's been in place for many years it's going to remain in place for many more years to come. the question is how hype has the theme come you mentioned invidia. that's what i would be worried

about. if you look at leadership this year, increasingly thin and it's increasingly more concentrated that's where i would be more cautious. >> good to catch up. dubravko lakos-bujas, jpmorgan joining us. up next, a game changer for the banks. why lauren goodwin thinks one of the regionals could be in a broader sector. we're waiting for those earnings from apple. do not miss cnbc pro talks tomorrow hosted by mike santoli. a special live event from omaha ahead of the berkshire hathaway meeting. "closing bell" will be right back

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top stocks to watch, kristina partsinevelos on the case kristina >> we have a new ipo that just hit the market words i haven't heard often. kenvue is a health spin off from johnson & johnson. it had its debut on the new york stock exchange with shares already 21% higher, trading at $26.28 the biggest restructuring move

in johnson & johnson's 135-year history. paramount down about 25% after the company reporting earnings that fell short of estimates and slashed its dividends from 5 cents a share. paramount shares down 28%. >> ugly day. kristina, thank you. last chance to weigh in our twitter question how will app sckleto trade, higher or lower? the results after this break hes both large and small, communities and the people who live and work there grow and thrive. we're proud to call these places home too. they're where we put down roots, and where together, we work to help move everyone's financial goals forward. pnc bank.

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barely wins, but it does speaking of apple, just a few minutes away from that report. up next, mike santoli breaking down what he'll be watching when we take you indeheart nesi t mke

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trying to process what we witnessed yesterday and what we're feeling today with the banks. >> we are. with everything that's cooking right now, i think we've gone from being frustrated to, i think, being grateful that we remain in this range a lot of what's going on, two-year yields plunging, regional banks setting new lows, you would have thought the broader markets would have held to the lows of the day i feel like the market is waiting for a few cards to fall. the weakest parts of this mart have been weak for so long because of the diverging since the low of the morning, you've seen some banks get some bids m and t is up.

i think that's in a preliminary way a positive. >> it's like an east coast, west coast thing. risk/reward still not great. that's the hurdle. >> it's very tough to look at what the bond market is doing, seeing the signs of finding stress, seeing a clear message that the bond market thinks it was a policy mistake and saying it's time to grab on to the risk the index itself has done its best to digest this, in microsoft we trust. >> lauren goodwin, you're concerned about the regional banks. >> i am. the difference between pacwest and some of the others is these were foundationally good banks there's a difference between a id i don't continue kra tick events and a slow moving bank run. that means the economic data is

going to start moving faster credit conditions impact -- with not as long as a lag as people think, employment. for investors i'm thinking we sit waiting to see what happens. there's some clear markers of what would trip this market downwards. it's employment falling off. it's the treasury general account falling off after the debt ceiling gets resolved if that happens and it's earnings if those are three, four months away, volatility is a good thing for investors. >> no surprise when you see the turmoil in regional banks, as liesman was saying, the probability for a rate cut is 60% in july, right we spent the time saying, well, the market's predicting a cut in september. now it's creeping up and closer and closer and closer. >> i think this says the market

is getting more worried something bad is going to happen the way i read september, not oh, the fed is going to cut 25 basis points, but instead -- most people are expecting the market to do what they said they were going to do, stay put instead there's a major event that's going to happen. >> i'm going to act like i heard everything you said in that moment. >> there's been for example some huge trades in vix people expecting a huge spike in the vix. that doesn't mean we're going there. it's saying it looks like we have some ingredients and let me put that on as a bet it's the same thing in the short term >> if there's a cut as early as

july, do you see that as a positive or negative i asked dubravko the same question how would you answer that? >> strong negative if the fed is cutting in july, it's not because inflation is under control and they see a sustainable economic picture it's because something is breaking and it's breaking hard. i think we need to hope that the fed does what it says and stay pat. the alternative is likely more of a risk. >> there's your two-minute warning. apple earnings yet to come lauren, do you think it's a mistake what the fed did yesterday? >> i thought they were going to go i thought they should have held. the fed is so focussed on inflation. with the tightening credit conditions, we could probably let this run its course. with inflation not under control, a pause is not the same thing as a pivot even today. >> it's been great having you

here mike, apple, the final fang. >> i do feel as if apple has done most of the job it's supposed to do, which is protect the index and hold its value if you're looking, it's bumping up against the street's price target it's in the low 170s the street needs some excuses in this report to have a much brighter growth out look, to get some clarity on where it's heading, whether they can latch on to the energy running through the ai story line, as silly as that sounds. we'll see if that can happen everyone is saying buy quality they buyback 4 to 5% of the stock every year stock's up 900% in ten years either that's an amazing formula or it's done what it's going to

do for the most part and you should say thank you >> heading into a critical moment dow is down near 300 it's dramatically cut its losses i'll send it to "over time" with morgan and john. apple, that's the score card on wall street i'm john fortt with morgan brennan. get ready for win of the busiest hours in earnings season we're counting down to 30 minutes. >> we'll have expert annual cyst and our reporters standing by to bring you earnings from lyft, coin base, expedia and more. >> we'll bring you an interview with the