unicorn but not a tech or ai economy. a mining company raising $200 million. bill gates' venture fund, they explore for metals >> lithium, lithium, lithium >> "closing bell" starts right now. we'll see you tomorrow kelly, thank you welcome to "closing bell." i'm scott wapner whether the bulls can keep up this newfound momentum schwab's liz ann sonders answering that question. first your scorecard with 60 minutes to go in regulation. stocks have been red for most of the day. we are keeping an eye on apple it's been about $5 away for much of the session there it is. 1 185.52 that stock is up 42% year to date to our talk of the tape.

industrials, materials and small caps are posting a good month. is that a sign liz ann sonders of schwab is with us. good to see you again. judging from your notes you don't seem to be fully sold on this market. >> reporter: i think the breadth widening out it may be short lift enough that we can't assume it's a trend but a key thing i'm watching and, again, we've seen it a little bit in terms of percentage within these various indexes trading at 52-week highs or shorter moving average. it's still fairly low. i would be looking for that. the other potential rub is that sentiment conditions are not quite into frothy territory but that level of pessimism both on

the attitudinal side. were those conditions to move into real frothy territory that may be a near term strike against the market >> industrials are up 7.5% materials up 6%. small caps up 6% s&p 500 is up 5% this isn't that market that was just dominated by large cap tech and everything else was terrible are you moved at all by what i read to you? >> it's a good initial sign. we haven't seen it last for a long enough period of time, doing better relative to cap weight to be able to stamp, okay, a new trend is in place. if it continues it's a very positive sign.

the market got a bit overbought and you're seeing pullback that can continue to happen on a day-to-day basis it's a positive sign but at this point it's a sign. it's not definitive yet. >> principle, i think, among the bear arguments is that earnings are still just way too inflated, at least expectations are, that the economy is going to take a continued downturn and earnings are going to continue to get hit. where do you come down on that perspective? >> earnings for the calendar year 2023 have trended up a little bit what's missing in the simplicity around that analysis is the 2023 consensus has moved up solely because of first quarter having come in better than expected and better than a lowered bar. second quarter, third quarter, fourth quarter all estimates trending down. you had enough of a beat in q-1

it's lifted 2023 even though there are more companies providing some sem brans of guidance analysts are still making decisions about adjustments to out quarters over a more limited time frame during reporting season they might make adjustments based on what they're hearing from their company managements but not doing much, three quarters down, four quarters down the nature of the cycle and the uncertainty associated with it we'll be at a point we can get a better sense of the outlook. the relationship between tmis, lending conditions, the ten year suggests there's probably at least a little more down side to

coming estimates for the second half of the year, but we may not get a color of how much more until we're in second quarter reporting season >> if we had a mild recession, what would the stock market look like, do you think what do you think is priced in and what isn't >> we've already had recession in some segments of the economy, in rolling recessions with manufacturing, housing, certainly ceo confidence, some of the capex trends. the question is now whether we're starting to see some stability and we're seeing more than that in things like housing such that if services starts to falter more than the tiny little cracks we're seeing do we have offsets in terms of stabilization in those areas that got hit the market probably does have priced in for the most part a condition of the nature.

if something more were to happen, the market probably hasn't priced that in. best case scenario is not a traditional soft landing because that ship has sailed for those parts of the economy that got hit but a continuation where new pockets that got hit are offset by pockets that had been hit and their strength i think the market would probably do fairly well under that scenario. >> you think the overall blow is lessened because you've had a rolling recession so you've already had a bottoming out of certain sectors along the way. it's not like we're going to feel this all at once -- >> it's not an all at once >> -- and have a major correction >> the mash holds the key to everything, to fed policy. they're pretty confident in disinflation, maybe not imminently getting to the target but disinflation continuing. now i think it's the labor market i think both of their dual

mandate comes into clear focus and in thaerms of consumption behavior excess savings, though that's starting to dwindle and has gone well down the income spectrum. confidence about the labor market services being stronger than goods, that's a larger player that's kept the labor market afloat if something happened more acutely over a condensed period of time the ripples into parts of the economy could happen more quickly. that's the needle the fed is trying to thread they want to crush job openings without crushing jobs. so far so good but it is a pretty narrow opening in the needle they're trying to threat. >> i find it interesting when you look at what's happened with mega cap tech and the hype and euphoria around ai and the gains

we've seen and the real players there it doesn't remind you of '99 but maybe earlier in that period of the internet, right? >> i think there's probably a common threat thread, just the enthusiasm around what the technology could bring, being life changing. what developed in the latter part of the period into the early 2000 is that you actually had the pocket of internet stocks that were nonprofitable actually were the ones seeing their stock go up even more than the more established profitable companies. that's not the case this time. it's nonprofitable tech doing

well if you look just broadly at r.o.e. higher, valuations higher then than they are now on a side-by-side comp there are more differences than similarities it's part and parcel of this environment that is always key a very positive backdrop for the stock market when it gets into frothy territory you can run into trouble i think you're right it's probably akin to a few years prior to that. >> at what point do you get uncomfortable with where valuations have gone i'll use apple as an example

it's 30 times earnings and the critics of that would say it doesn't deserve to be at 30 times relative to where the earnings story is today and where it may go in the quarters ahead? >> perfectly valid statement too many people get caught in this notion that valuation can represent a timing tool for a stock or a sector or the overall market we have the plugs. we know what the p/e is even if it's on a forward basis. you can look at some scale over history of what might be considered cheap or expensive. an indicator of sentiment, sectors can get wiley inflated

be careful about using valuation as some market timing indicator. it's sentiment you could argue based on history those types of stocks are expensive. that doesn't mean they can't get more expensive before the sentiment tide shifts. >> let's bring in greg branch to continue the conversation. it's good to see you i'm glad to see you here on set. you're still as bearish as you've been, unmoved by anything that this market has done, the resiliency that it's shown >> i am unmoved. >> why >> the macro backdrop hasn't changed. let me count why i am unmoved. as liz ann recounted, i think when we look at the consensus

numbers in terms of valuation, the market is trading 18 1/2 times con seven tus numbers which means probably trading in excess of 20 times one of the few things i disagree with, this market is taking into account a softening, a weakening or any type of recessionary environment. the other thing why i am unmoved is that i agree with her wholeheartedly this rally is in part based on the fact we're re relieved we got a better first period than we expected. we tame in around a 2% contraction. did not take liquidity out of the system the fed supplied liquidity that helped the first quarter and will help the second quarter as well. i have no idea how we're going

to get to 2% growth. >> you say the macro backdrop is unchanged. you thought we would be closer to a recession than we are >> i did >> you thought earnings would be worse. that changed you thought the consumer would be worse off than they are at this point, right? >> that's true >> i just gave you three things to your perspective that changed. >> and all three of those things were buoyed by the fed spending $700 billion and putting in $500 billion of additional liquidity. let's see if they remain the same when we take liquidity out and as the consumer -- we see the signs the balance sheet is deteriorating. the losses across the banks, and we'll watch in the second

quarter, the 89-day credit card delinquencies have ticked up, mortgages, autos have ticked up. the loss experience is going to increase >> liz ann, having a conversation about the market and you have an unmoved bear as i do sitting right to my left, what's the counter which certainly sounds like it makes a lot of coherent sense. >> i think greg made a lot of good points. i'm not a wild economic bull here i just think that, as i mentioned, best case scenario is a continuation of the roll through. that said more likely than not we get an officially declared recession. it's a little trickier in this environment because of this roll-through nature of it.

it does make it a unique situation. i think we're sort of at the moment of truth here broadly for the economy but also for companies. revenue has been tied to inflation. as disinflation continues we see there's not as much real pricing power. and given the biggest cost is labor for most companies i think we're where companies say we maintain our profit margins or instead of cutting hours we'll have to cut people that could ripple through and make it more obvious that an actual officially declared recession is upon us that's probably not priced into the market this continuation of the roll through i think most of that damage probably is reflected on what the market has done in terms of where performance has

resided outside of the magnificent seven or whatever we want to call it. >> you suggest, greg, market breadth is voting no confidence in the sustainability of this group. i read to liz ann, and you heard the numbers, industrials 7.5% this month and i could go on and on what was a narrow rally to where your argument could work has broadened out. breadth is better. >> it's better than it was the s&p 600 has outperformed the 500 as well. just because we've gone from extremely narrow to very narrow doesn't mean we're at the type of breadth that would sustain the rally. >> that's -- >> in a month? >> pretty darned good. >> since june 1.

month to date. >> that's pretty darned good, isn't it >> it is encouraging that we are seeing the performance broaden out. i think we need more than three weeks of data to say this portends everyone will participate. we're past the debt ceiling. the fed has paused i think folks interpreted that as being safe to go and dip your toe in the water i think we'll get other data saying it's not forthcoming. >> you still are sticking to your terminal rate above 6%. >> i am. >> you were implying we have 75 to 100 basis points more of tightening >> i am. >> what leads to you that view >> you're still incredulous by this >> i'm not incredulous you seem to be unwilling to move

in any way even when the evidence suggests it might be time to move that's where the bulls would come at the bears and say here is my problem. refuse to acknowledge the goal posts have changed >> three weeks of a broadening breadth -- if we're talking three months, that would get me to rethink the fed moving the goal post and moving to 3% that would get me to change my view. they've indicated another 50 i don't think i'm that far outside of the fed's thinking. >> that's not a prediction that's a forecast, right >> fair enough i'll tell you what would get me to come off that as well and i

think it's one of the reasons the fed paused not because they saw inflation moving down meaningfully core inflation has grown consistently but what the fed wants to see how much will happen by the banks, by other events if we have some dislodging events, then we don't need the terminal rate to be where it is. >> liz ann, if you have someone who suggests the fed is far from done, and greg's clear point is the market is taking this whole thing for granted. assuming this pause means they're done or at most one more, what do you think about that >> i think we don't know if they're done

the fed doesn't know if they're done the dots plot representation assumptions where the fund rate will be not a road map in any way. perhaps if you can go into the future and tell me what the inflation reports will be between now and the july me meeting, i think we can all make an educated assumption of if it's one more hike or two more hikes. a fed that is very firm, it's a function of the data where i think the market is still not quite in line with the fed's thinking is the period of time that the fed is inclined to stay at the terminal rate, the higher for longer is not quite, i think, in the expectation of the market, it's often the case this notion of the fed pivoting sooner than they're telling us

that is wrapped in the bullish narrative. the conditions that would give the fed the green light to cutting not just pausing would be ugly in terms of the ba backdrop the terminal rate or one or two more -- i'm not saying it doesn't matter but i think it's the firm we're going to stay there for a while that maybe the market doesn't quite believe the fed on that one. >> the other side what have causes the fed to cut doesn't necessarily have to be it's so ugly that they have to, that inflation continues on the trajectory and it is lower and is coming down quickly core services, things like that, have proven to be more sticky. nonetheless, inflation is coming down >> it has come down. i don't know if we can use it interchangeably but it is coming down it has come down

the cpi, most of that was energy and base effect. we didn't see it in autos or across the board >> used car prices are coming down >> some months it's been up. has housing come down the way we expected it. >> it's come down to the degree versus coming down are two different things >> fair enough i would certainly agree inflation has decreased. i guess where you and i have a difference is i don't know if it is actively doing so now or if it will do so without action and if they were we wouldn't see a dot plot >> i'm just taking the other side of your argument whatever side you want to argue

liz ann, thank you let's get our twitter question of the day will the s&p 500 get above 500 we share the results later on. kristina partsinevelos is here another electrical carmaker will add momentum to tesla's bid to set the industry standard an overrate for tesla citing chinese ev sales and rivian is a buy on highly desirable and well-reviewed vehicles rivian up almost 5%. shares of nike, though, are falling in the other direction, down almost 4% ubs expects nike's full-year guidance to fall short of

expectations leading to a downward revision. the analyst chtrimmed to $145 fm $155 nike's earnings will be out june 29th scott? >> kristina, thank you up next, five star stock advice. kevin simpson of capital wealth is back here at post 9 to tell us why he's ringing the register on some tech stocks. he's at post 9 next. you're watching "closing bell" on cnbc.

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the big tech rally driving the broader markets so far this year the nasdaq is up 30% year to date, and my next guest says it's time to ring the register on that sector joining me now here at post 9 is kevin simpson of capital wealth planning good to see you in person. so you're ringing the register but you have large positions in apple and microsoft. give us context on what you're doing. >> you've talked so much today correctly about valuations and at some point you have to look at these things and say it's not the worst thing in the world to take a little bit of a profit. as portfolio managers we do this to right size physicians, rebalance, look at everything from a risk management perspective. we own apple, scott, and microsoft. both of these names have been, let's face it, doing pretty well

this year. what we've been doing is trimming into strength week after week, maintaining a 5% position in each of them but we don't want to be overweight in either one name. >> but if you're keeping that size position that says to me you're not overly concerned about valuation or would be keeping a much less position than 5%, wouldn't you? >> i'm no market timer, scott, i think a 5% position, having a 10% weighting in tech has good risk budget for us quite frankly imagine the celebration, we would allocate across all sectors from my perspective i want an exposure to it but i don't want to be overexposed to it. >> do you think apple is overexposed at 30 times? >> i do. momentum could move things markets can move stocks even higher when you get that kind of trade. from a valuation standpoint it's a little ahead of its skis. >> are you thinking of valuation differently than you otherwise would because of the unknowns of ai and i mean that in a positive

sense to what that ultimately could mean for earnings of these stocks >> that's a great point because you were talking earlier about comparisons to 1999, and that's the difference these companies have earnings. there's another untapped revenue stream that can come into it when we were talking about stocks in 1999, forget revenues, forget earnings, that was a hype train. so i think you can i think people always pay up for growth i'm not sure what that valuation should be, but i have the confidence to keep an allocation to both names. >> you have a new position in starbucks. why? >> starbucks is a name we rotated into we're taking some profits in the big winners and looking for things that have underperformed. we haven't owned starbucks in years but is off 15% since earnings paid over a 2% dividend. pretty strong dividend growth over the past three years. and, for me, the multiple is a little bit strong but relative to starbucks over time it doesn't seem that overpriced >> how are you judging what is an obviously critical growth area for that company being

china, which has been a disappointment that's one of the reasons i'm sure the stock is where it is. >> i never put too much value on what china says they're going to do or not do, so i'm kind of discounting that from our equation if the china reopening story does happen, that would be great for us because it will put the stock at a higher price. >> how can you discount that part of the story if it's such a significant part of the overall story? >> we think that's why the stock is down 15%. >> is because the reopen -- >> it hasn't happened. >> that's my point if that becomes the base case at this point that it's much further pushed out than we thought. >> that stock could go lower and what i did i took an initial position, a 15% pullback on the stock, we took profits on things that are up 40, and we took a small position i'm not convinced china will reopen if that stock trades lower, we'll add into it. >> got you fedex reports in "overtime" in a little bit

you added to u.p.s why did you choose u.p.s. over fedex? >> it is head and shoulder above what fedex is trying to do u.p.s. is so far ahead now they've got problems, scott. that stock is down 10% since earnings and they have to fight against the union in terms of what that will look like i'm expecting that could look like another billion dollars to keep labor satisfied correctly, properly, and keep them in the game >> general mills, right, you wrote a cover call on? >> there's no volatility on a consumer staple. we wrote for 55 cents. doesn't sound like much but translates to a 7% annualized return you're getting almost a 10% yield on a cereal company. >> kevin, thank you. kevin simpson, capital wealth planning joining us here at post 9. an end to the ipo drought. cava made its debut last week and now investors are wondering

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have one i think it will be mild, and i don't think it will cause profits to go down more than maybe 5% or 10%. banks are under pressure lagging the market for a second day in a row this as the justice department says they're rethinking the way they'll evaluate bank mergers. to leslie picker for more following the money. >> reporter: justice department officials are rethinking the way that they evaluate bank mergers and figure out what is market concentration. jonathan kantor who runs the antitrust division spoke earlier today. he said it's time to update the way regulators evaluate those mergers. the current guidelines date back to '95 and focus on deposit levels as a proxy for market concentration but cantor said the banking industry has changed so much in the last three decades. >> the division is modernizing its approach to investigating and reporting on the full range of competitive factors involved in a bank merger to ensure that

we are taking into account today's market realities and the many dimensions in the modern banking sector >> reporter: he says the agency will bring back competitive factor reports, pulling in data sources for market concentration not just local deposits and branch overlaps. things like fees, interest rates, branch locations, product variety, network effects, inoperability, customer service to name a few. of course the potential rebound comes amid an industry that's experienced tremendous turmoil in recent months consolidation, a heavily debated topic with one camp believing mergers could stabilize the industry the other thinks smaller banks are an important part of the local economy so perhaps today's market reaction to this is sort of reflective of the tug of war here >> you know, i know that banks are also thinking, leslie, and i'm sure you know a lot about this topic, too, from the people you've been speaking to lately

about a return of the capital markets business >> oh, yeah. >> whether it's m&a or cava, for example, a lot of excitement down here and a pretty big pipeline of companies that we know want to go public it's a matter of when not necessarily if what are you hearing >> reporter: those fees are critical for the universal banks that derive a lot of fees from managing these ipos and the conditions do appear to be ripe for more ipo activity, but that doesn't mean the floodgates are about to open. the broader markets are higher on the year. recent ipos are as well and volatility has been tame so that bodes well for companies seeking to maximize valuations in capital raised and price discovery and cava churns out returns for those who got in by doubling their money on one ipo. many will be looking for more opportunities although shares slightly lower today now certain industries will see activity cava's panera to go public and

flicks has invited banks to pitch to manage its ipo. but bankersources tell me management teams aren't frantically calling to rush out deals in the wake of cava's deal instacart, reddit, stripe and data bricks names ipo watchers have been tracking for quite some time but each one grappling with a different set of issues that makes for poor timing, scott. >> what about valuations, leslie what are you hearing in that regard >> reporter: that's a key determinant whether a company goes public f. you're a vc looking for return on your money, the company executives who most likely own some stock in the company want a decent return there as well so if companies don't think they can get decent valuations in their ipo and maybe the valuations are down from where they were, say, in 2021, they're not going to go public now we're going to wait for things to improve, for the fed, if it does intend to do two more rate

hikes, wait until they're through with that and they can really see what this economy looks like before going public especially if they have the cash on hand to wait. at this point there are still significant uncertainties out there. they may choose to do so >> it's one thing to go and another to go with the valuation you want leslie picker following the money. up next tracking the biggest movers as we head into the close. kristina partsinevelos is standing by with that. kristina is this i have two names, two major oil companies lowering concerns about chinese growth and much more after this short break. this is the all new, all electric lucid air. a car that goes as far as it does fast.

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we have just about 15 before "the closing bell. to kristina partsinevelos for a look at the key stocks she's watching >> shares of alibaba down on a leadership shuffle daniel zhang will be stepping down as chairman and ceo and replaced by joe tsai tsai seen as the more international facing executive and eddie wu can help drive ali pay. they are considered insiders and close to jack ma zhang isn't going far. the company did announce it would be spun off. exxon and chevron, both about 2% leer or more right now

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the results of our twitter question, will the s&p 500 get above 4,500 this summer? the majority of you say, yes, it will nearly 65% up next, fedex's earnings a few moments away what to watch for when that company records in "overtime." that and much remo when we take you inside the market zone what if you could make analyzing a big bank's data... no big deal? go on... well, what if you partner with ibm and red hat, use a hybrid cloud solution to connect data across clouds, then analyze all that data with watson. okay, but this needs to meet our... security standards? yup. compliance standards? mm-hmm. so they get the insights they need... yup.

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bell" market zone. mike santoli to broke down the trading day. plus, kristina partsinevelos on the rally in paypal shares frank holland on what to watch for as fedex reports earnings in "overtime. mike, the nasdaq going positive here >> pretty much everything would have pointed to let's take a break after we got that multiple weeks upside and the nasdaq looking super overbought but it's not really cooperating with that i still think this is a rally that's no longer going to sneak up on anybody. it's right in front of us all. you no longer have quite the same juice in the underpositioning of everybody and sentiment is depressed you have this idea that we got some relief on all sides the fed pause which may or may not be lasting and really the economic surprises have come in better than expected i think the tape action is encouraging enough people that why am i going to rush to sell,

probably have to give some back before very long >> a lot of nonbelievers still you heard greg branch unmoved by anything this market has done. >> i would say there's a fair number, a core of folks, who still are clinging to what are very defensible positions about how cycles have behaved in the past and maybe we have a longer lead time and last year's decline went some distance in the earnings hiccup that we got. you can take shelter in 5% yielding safe paper is making people slower to psychological buy in to the stock market at this level when markets go up and valuations get high again, forward returns are probably not going to be as great

the math people still continue to crunch doesn't force them in. >> still see the s&p down about 16 points. kristina partsinevelos, paypal i'm looking at shares up more than 8% in a week. up more than 13% in a month. >> this is a big transaction deal $44 billion of paypal's buy now, pay later loans originating in europe as well as acquiring any future eligible buy now pay later zones. over 3% higher because this is an influx of cash that allowed paypal to extend deeper without tying up capital or credit risk. paypal says the transaction is reflected in its full year earnings guidance. they can allocate an additional $1 billion to share buybacks this year, again, part of the reason you see the stock higher. there's two major overhangs that exist. increased competition, in the

merchant space coming from apple and clover and then a lack of new management as the company still needs to find a new ceo or cfo or tell us who it is the paypal stock has not climbed as much as buy now pay later competitors. this is a year-to-date chart sofi, 86%. paypal down 3% >> i was going to say who needs a ceo with what the stock has done lately, but i get your point. i'm just kidding >> insaw the reaction on my face, what i know you're joking >> it's had a nice run kristina, thank you. >> frank holland in overtime, against a backdrop that's shaky against a bar that i think feels pretty low ground volume five straight quarters of year-on-year declines, missed revenue estimates four straight quarters as well. what are you anticipating here >> first off we have to start with the stock performance

shares are outperforming rival u.p.s. when the logistics giant announced a plan to consolidate. the freight unit which offers trucking into one integrated company next year. so really the big thing to watch is the progress made on the drive initiative that's a major cost cutting plan in response to lower freight volumes and weaker volumes from china and weaker volumes in europe and the united states the plan i was talking about that transformed the company away from that original structure put in place by founder fred smith about 50 years ago. that plan also forecast to save the company billions in coming years by management. that progress will have a big impact on the guidance for the next fiscal year with the consensus 23% earnings growth but a lot of questions about that you have to remember even the guidance we're seeing for this quarter was put in place a couple months ago when it seemed like china's recovery was going a bit faster than it is. fedex shares are down. >> we'll see what that print is.

do you still look at transports the way you used to as a group >> i don't know that you can look at the dow transports yeah, i think so things like rails and air freight in particular. let less so the commercial airlines because they're subject to a little more of a whipsaw. the relative trade against u.p.s. on fedex on a five-year basis is still really crushing fedex, so there is ground to make up. they are still in this restructuring, rebuilding credibility phase on the strategy and the earnings for this fiscal year still down from prior peaks. i think that will be the take away >> getting harder as we said earlier with liz ann and greg branch to tell this market is so

narrow story it's turned around month to date, i read the numbers before industrials are up 7.5%. materials 6.5. things are coming along. >> the markets rejoineder as the narrowness became such a loud crescendo. you still get that situation where without those big nasdaq stocks you wouldn't be up nearly as much. it doesn't mean everything else is suffering still a long way to go, i think, before you properly broaden things out right now what we're dealing with is internally looking overbought in the short term everything seems to need to settle down a little bit credit is in line. i don't think that's something you should be concerned about the way credit is trading. points in the direction of we have this luxury of being able to assess the macro to a position of relative calm.

volatility is down depending on what powell says tomorrow >> we'll give a little back today as all three of the majors are in the red mike brings up a good point. the fed chair on the hill tomorrow we'll be paying close attention to that and will talk about it tomorrow when i see you then for now "ot" with morgan and tyler. the scorecard on wall street off the lows, the action just getting started. welcome to "closing bell overtime." i'm jon fortt with morgan brennan and we are moments away from fedex's latest earnings we will break down those results as soon as they're released. the ceo of natural gas and electric provider of pseg on the outlook of home charging stations and now today's market action joining us is adam from vital knowledge. adam, welcome.