Markets' Wild Ride, Earnings Parade, Exclusive with ECB President Lagarde 4/16/24

David Faber (0:00)

Market Insight and Analysis. You're listening to the opening bell of CNBC, Squawk on the Street.

Carl Quintanilla (0:05)

Good Tuesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Mike Santoli, a Post 9 of the New York Stock Exchange. Cramer has the morning off. Futures once again on the hunt for some stability after a near 3% drop over two days for the S&P, worst in more than a year.

Dow's gonna benefit from UNH as corporate earnings pick up some steam. A roadmap begins with the market volatility, six negative sessions in a row for the Dow.

Nasdaq's coming off its worst day in a couple of months.

David Faber (0:31)

We also have a busy day on the earnings front. We've got UnitedHealth, Bank of America, Morgan Stanley, Johnson & Johnson, all a-beating on the bottom line, although different reaction in the markets.

Plus, Sara Eisen sits down exclusively with the ECB president, Christine Lagarde. They will be discussing inflation, interest rates, and of course, where the central bank is diverging from the Fed when it comes to rate policy.

Carl Quintanilla (0:53)

Let's begin with the markets today. Stocks look to rebound again. Similar picture in terms of the premarketists yesterday, but we know how beholden the market is to some of these headlines today.

Mike Santoli (1:02)

For sure. And beholden to really what the bond market decides to do with it. The yields are basically still pushing higher at a pretty moderate pace at the moment. But in search of the paint threshold for stocks and for the economy, this has been kind of a similar backdrop to what we had late last year, except with the economy in more secure footing, it seems.

So we've basically unwound this idea. You could have the immaculate disinflation. Now we're all of a sudden talking about the economy almost in overheat mode, even if that doesn't really hold up longer term. So what have we done or accomplished in the markets so far in April? Well, that long streak of no 2% dips in the S&P, that's over.

One of the longer streaks ever with the S&P above its 50-day average, that's over.

So you kind of had this unwind of the momentum and the systematic trade that was very, very long going into all this. And it is a lot of it about whether yields impinge. We haven't had yields above 4.6 on the 10-year, in the post global financial crisis world, except for October of last year. So October of last year, that's what really kind of was the crucible of the deepening of that correction. Where was the S&P then? Under 4,400, 41 to 4,400. So it shows you when earnings come through and the economy's in better shape, it's not a one-to-one yields are here, therefore stocks should be here. But if it starts to look like it's been melt up mode for yields, that's what has backed off the stock market.

Carl Quintanilla (2:25)

Interesting, fund manager survey out of the Bay today where you've got record exposure, I'm sorry, expectations for higher global inflation going back a few years and for global growth, right?

Mike Santoli (2:38)

The no landing scenario is at kind of a record high in the last couple of years of this survey. And that's the world that this new reality has been encountering, which is everybody kind of embracing the idea, not only that the economy was in good shape globally, but that you could have this sort of no trade-offs world where you didn't have to worry about inflation staying higher or maybe the Fed being more patient. You know, it seems mostly all good excuses for the market to have what it needed to have anyway, which is a little bit of a reset, 10% up in the first quarter in the S&P. Every single time that's happened, except for one, the rest of the year was higher, but the smallest pullback along the way was 4%. And that was back in the 1960s.

So in the last 50 years, if you're up 10% in the first quarter, the minimum pullback has been 6% or 7%. We're down 4% in the S&P right now.

David Faber (3:26)

On more of a day-to-day basis, this time yesterday, we were all remarking on how it seemed somewhat unusual how strong the market appeared to be given the geopolitical tensions we're all well aware of. We're at no better position to understand what the Israeli response will really be right now to the Iranian attack over the weekend.

And then we, of course, reversed yesterday. You know, anything that you can share, Mike, in terms of how, when it comes to day-to-day and geopolitical tensions and or what may happen in the price of oil and everything else in terms of the overall impact here?