Closing Bell - Can Tech Keep Carrying Stocks Higher? 6/28/23

Episode Date: June 28, 2023

The future of the tech rally is front and center for investors – with Apple and Nvidia taking center stage. Big Technology’s Alex Kantrowitz gives his forecast for the sector. Plus, Evercore’s Roger Altman weighs in on the fed and when he thinks the next rate hike could be. And, top bank analyst Mike Mayo explains what he is watching ahead of the release of the bank stress tests. 

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9, right here at the New York Stock Exchange. This make-or-break hour begins with two big tech stocks on the move today. Apple on the doorstep of history again, hitting $3 trillion in market cap, trying to anyway. And NVIDIA, one of this year's biggest winners, under some pressure today on reports of possible new export restrictions to China. We are following both big stories and asking just how much of this rally is now hanging on those two closely followed and widely held names. We'll ask big technologies Alex Kantrowicz in just a moment. In the meantime, your scorecard with 60 minutes to go in regulation. Stocks mostly lower for most of the day. Health care and some defense names dragging

the major averages lower. There's the S&P, a fractional loser. The Dow's a modest loser by about one third of one percent. But the Nasdaq, take a look at that. It's trying to buck the trend. We'll see if it can over this final stretch. Takes us to our talk of the tape, the rally, the second half and whether tech can continue to carry stocks higher. Alex Kantrowitz, founder of Big Technology and a CNBC contributor, joins us right here, right now. So Apple on the doorstep again. Is the second time going to be the charm for the $3 trillion stock? Feels like it should, right? Because the last time Apple reached $3 trillion, there were things on the horizon that looked really menacing. For instance, supply chain

issues. We were on the doorstep of Omicron, or actually in the thick of Omicron. Inflation was about to get started. Rate raises were coming. We've been through all of that now, right? So we know what's in store for the market. And the fact that the company's been through that and is about to hit $3 trillion again leads me to believe that this is much more sustainable. You suggest, though, that the pressure is on now because it's coming off of two quarters consecutively of sales declines. So if you're going to get to three and then hold the line, so to speak, you have to reverse that, don't you?

Heck yes. I mean, the fact that this thing is going to $3 trillion after a couple quarters of sales declines, and by the way, probably another one on the horizon, is like, it boggles the mind. So then you look, why is this happening? Okay, $90 billion in share buybacks certainly help. So now what we have to see from Apple is either, A, a reversal of this sales decline, or B, even more share buybacks.

Now, do you want to commit to doing $90 billion of share buybacks, let's say, every year in order to keep your stock price where it is? I don't think that's the place you want to be if you're a company like Apple. You need to reverse, and you kind of have, and you think you're going to continually reverse the decline in iPhone sales and the sales growth, right, which was down 8.2 percent in the first quarter of 23. It rebounded up 1.5 percent in second quarter of 23. We need to keep going in that direction now. Absolutely. And by the way, the 15, I'm excited for the 15. I think for the first time we might see USB-C charging at the bottom of that thing as opposed to the traditional Apple charger. We have many people who are waiting to upgrade. Maybe that's the compelling event. Maybe they continue to expand their, you know, little island

they have at the top of that thing. And all of a sudden people want to upgrade. I think this iPhone 15 will show some strength. What about the time frame of that, right? You're talking about the new iPhone, the September quarter. That's when, you know, they put all the money on the line, right, for the September quarter, which may be happening as the economy's taking a bit of a spill, some would suggest. And that could have an impact on a company that's trying to sell $1,000 phones, no? It could, but it also feels in some ways that Apple is recession-proof. I mean, we have a winners and losers economy, and Apple sells a lot of iPhones,

but it sells to a lot of people who really don't seem to feel the shocks the way that the rest of the economy is. So I think that they'll be able to continue the momentum in iPhone. They have a good product. Maybe it takes a little bit of a hit, but I don't think that's going to be a serious issue for the company. You have an appropriately named company, big technology founder, because it's been a big technology kind of year for stocks, right? Number one, are you surprised by what you've seen and do you think it can continue? Yes, I'm surprised. I mean, I think the main thing that's driving this is the AI narrative, which came out of nowhere. So that's a big part of it. The other thing is we've had the stock buybacks. So if you have this financial manipulation and you have a big narrative

that can propel companies, even in a time where all the odds are stacked against each other. Now, can it keep going? I mean, why not, right? It seems like these factors will continue to be in play. And then we're also going to have, you know, the Fed. I mean, of course, we're hearing now maybe a couple more rate raises. But once they pause, I mean, you expect that these companies, even though maybe it's baked in a little bit, but they're going to start ripping. You mentioned the AI narrative, in your words, coming out of nowhere. What should we make of that? The fact that all of a sudden you had something come out of nowhere, take the market completely by storm. Everybody is talking about AI.

It's led to a lot of the incredible gains that we've seen thus far. That make you nervous at all that it seemingly came out of nowhere. Maybe it didn't really come out of nowhere, but the market seems to have noticed it all at once. It's a little too frothy for my liking. I mean, it's a narrative that emerged out of nowhere. That's the generative AI narrative. And that often gets kind of meshed into the fact that AI is in companies across the economy, which, by the way, we've been talking about major advances since 2015. So it's not like, you know, all of a sudden AI is here. But then you see a company like NVIDIA going up 180 percent in the year on the strength of AI.

So I think that generative AI has created for a lot of people this iPhone moment. Right. But we haven't yet seen the iPhone product. And if you think about how much the narrative has bolstered these companies, is there going to come a point where the market's going to say, well, you know, when's the rubber going to meet the road? Where's that iPhone for us? And if that happens, we could start to see a little bit of a drawback based off of the enthusiasm that we've had up until this point. Yeah. What's your opinion of what you've witnessed with NVIDIA specifically? You mentioned the kind of game that it's had year to date. It's been really the AI stock of the year. I think we can honestly say that when the company came out and gave the

kind of revenue guidance that it did, it just blew everybody away. The problem with that, and I've read some analyst reports today where analysts themselves suggest, I don't even know how to model this company at the present time. So I'm pressed to say what it can do from here because I just don't know. Even NVIDIA itself is probably shocked at the valuation that they have on the company. I mean, they're expected to do $11 billion in sales next quarter. So for comparison, AMD did $5 or $6 billion in the most recent quarter. So you're talking about maybe double the sales, but five times the market cap. Five times the market cap. Now, they're not the same company, but is this

company really five times what AMD is? I don't think every company is going to go out and train their own models on NVIDIA chips. Of course, investors needed to find somewhere to put their money when they want to invest in this AI trained, and they went to NVIDIA. But there's going to be other places that they're going to look for. They're going to try to diversify, and some are going to take profits. So if there's one stock that I don't think can keep up the run that we've seen from big tech, it's NVIDIA, absolutely. When people say it's a bubble, the whole AI space, what's your response to that? I would say probably not.

I'm a believer in generative AI. I think it can have real impact. But do I think there's some probability that a lot of this enthusiasm and froth that we're seeing, especially in this first half, can go away as people try to say, well, what are those products that I can use now that I can talk to computers and they can talk back now that they can draw pictures and make up audio and video? If people start asking those tough questions and they don't have real answers, then we can see a drawback. I don't think bubble, but I think, you know, the word's been used, effervescence. Well, yeah, I mean, people, it's easy to say, oh, this is 1999 all over again. I mean, that's been sort of the easiest way to,

if you're trying to throw cold water on what we've seen, oh, this is 99. Others would suggest it's 95. Or that sort of period of time, like the earliest part of when we started to get our arms around what the internet could truly be. Is that essentially what you would subscribe to as well? I guess I just, I hear these comparisons to 95 and 99, and they just don't fully compute to me because that's a moment where the internet was really beginning to take off for consumers. And we already have an established Internet. It's not like we're starting search. We have search. This is just a different way to search. So I think it just puts a lot of weight on this space to say it's 95 or compare it to 99. I mean, ultimately, and I know it's kind of cliche, but I look at it as 2023. We have to think about this in the context of the economy that we have,

not the economy of the past. It's not the birth of the Internet, that's for sure. We're just not used to seeing the kinds of gains in some of these stocks, you know, year to date, whether it's NVIDIA or whatever else that has risen so dramatically and that their whole the way of modeling these companies has become so difficult because you just don't know. We have Christina. Is she good? Yep. Christina Partsenevelos is here with a closer look at NVIDIA. Christina, there is some news today. I mean, the stock is trying to shrug it off. And you can see the intraday chart is pretty interesting. Yeah, exactly. To your point, when there was a meeting with the CFO at a webinar, you could see the stock price actually came off the earlier lows. It was down about 3 percent earlier today. NVIDIA CFO Colette Kras actually downplayed the effect of potential

export restrictions at this Piper Sandler webinar. She said new chip export restrictions wouldn't have, quote, an immediate material impact to financial earnings given the strength of their products worldwide. That's even as China contributes roughly 20 to 25 percent of total data center revenues. That's according to her. And since the tighter curbs aren't set in stone just yet, it's really tough to estimate the financial impact. But previously, NVIDIA warned there could be roughly 400 million dollars impacted to revenue in the quarter. Analysts expect similar numbers this time around. But again, nothing in stone. You can see that, like you said, shrugging it off is down earlier 3 percent.%, now it's down 2%. You've read the same analyst reports I have, I'm assuming today too, where

that seems to be the general take, right, today from the analysts who are looking at this company that this is much to do about nothing, at least not yet? The bullish theme is intact. And why is that? Because of the AI hype. They believe that demand for these GPU units coming from NVIDIA will offset any type of declines coming from China. Yeah. Christina, thank you. That's Christina Partsenevalos there. Alicia Levine is with us today, too, as we expand our conversation, thinking about what all of this is going to do for the second half of the year. When you look at the gains that we've seen in tech, does it have enough momentum to keep going and the importance that it does? So it's very important for the rest of the year, but the kind of linear progression we've seen is

unlikely to continue from here. Oh, you mean NVIDIA is not going to be up another hundred and some percent over the next year? Sorry, but you could see by the chart. I mean, it's a vertical line. So that doesn't continue. But the sense of the tech being the center of the trade is very important for further gains for the rest of the year. So to Alex's point here, we've moved very far, far, very quickly. And as you know, the anticipation of an inflection of growth can turbocharge stocks. And that is what we've seen. So we have to see some sort of reality based on what this is happening here. I'll say this. I don't think this is the 99 bubble here, because I actually think this is a thematic change. This is a structural change. Not entirely clear who exactly the winners are.

It isn't? I mean, isn't that what this is all about? Like the purest of pure players are the ones who have seen the biggest gains. We might not know yet about the so-called second and third tier. We may not know that. I'd say this. There is a second derivative trade coming, which are the industries and the companies that are going to harness this technology and change their growth models. And I think that's the great next investment opportunity. So whether it's health care, drug discovery, I mean, you can think about what AI is going to do there to be able to do things quicker, smarter, more efficiently, and with more productivity. So I think if you've missed

the trade here because you couldn't get in because every day these stocks were up and you were waiting for the moment and it didn't happen, I think there's a second derivative here for various industries. Yeah, good, interesting points that you make. What do you make of that? These ideas that we need to just change the way we're thinking about many different sectors of the market, not just the magnificent seven that we've come to call these names. That computes to me. And I'll say this, the one thing that makes me a little bit concerned is we have seen this inflection point. Meanwhile, in the background, this stuff was going on years before. So just take Alphabet, for example. Within DeepMind, they were decoding

how to play this game Go with AI. They were decoding proteins with AlphaFold before this mass moment of enthusiasm came in. Actually, if you bought the stock this year, you were getting in on that. So now we're seeing this inflection point. Everyone's trying to figure out a way to put their money to work in the AI trade. And the question is, like, are you coming in too late? Yeah. Do you feel, Alicia, like the risk reward is better as we make the turn to the second half? Because there are many people who would suggest it's not. If anything, it's gotten worse because you've had this big move in the market. Right. We're up 23 percent from the lows. So how can there be less risk going forward? I'd say there's less fundamental

risk, meaning if you have a pullback, you're unlikely to ever see that 3,500 point again, or maybe even 3,800 again. And so when you think about what's the asymmetric risk here to the downside, it's just not as terrifying as it was six months ago, because although it looks like we're going to have a slowdown within the next 12 months, everyone's been wrong. We've been very surprised as well. Let's face it. We all thought also we were headed to a recession. But when you see housing inflect from the bottom and actually have higher rates cause a better housing market, you have to ask yourself, you know, maybe all these traditional macro ways of looking at the world we're in today are not making sense. And just look at the companies and if they're

growing earnings and there are many companies that went through their recession, the industrials have gone through it. Tech has gone through it. And these coming companies are coming out of it. In the end, it's the earnings. And so I'd say the macro risks appear to be less and therefore the downside risks are less. I'll tell you who's missed it, too, in sort of projecting where the economy was likely to be now is the Fed itself. As much you heard, you know, from Sarah's conversation today with the chair over in Portugal. I know they're surprised as to how resilient the labor market has been. He led us to believe as much, which is one of the reasons why he says we're not done yet.

Listen. We believe there's more restriction coming. My colleagues and I, as you will know, wrote down in our SEP two more additional rate hikes. The median was quite a strong majority actually wanted two or more rate hikes. And the reason for that was, if you look at the data over the last quarter, what you see is stronger than expected growth, a tighter than expected labor market, and higher than expected inflation. So that tells us that although policy is restrictive, it may not be restrictive enough. So Alicia, the market, I don't know,

doesn't really care. The market doesn't care at all. Let's just remind everybody that the two-year moved 100 basis points in yield in three months, and tech went straight up in the teeth of that, whereas last year that's exactly what caused the tech breakdown, which was the rise in two-year yields. The market just sees the end of the cycle. Whether it's one more hike or two more hikes, it's not another 200 basis points. And in the end, that's what the market is anticipating the end of the cycle. Whether it's one more hike or two more hikes, it's not another 200 basis points. And in the end, that's what the market is anticipating the end of it. Well, does it not care until it does or just it doesn't care at all from this point because it knows it knows we're

near the end of the road. Who cares if we're once one stop away, one rest stop away, we're near the end of the road. I think the 10 year yield, if if it gets to 4% and it's kind of banging on the door there, that could be a wake-up moment for the market. Won't care till it does. There's a sense that 10 years has peaked and therefore it's going to be easier on valuations going forward. I would say that's the one thing that maybe could drive the market on a fundamental basis. When you look at growth and inflation and rates and put it all together, that would be the fundamental thing that could actually drive the market lower, over a 4% yield. Last comment to you.

I mean, you had a panel of essentially hawks today with Sarah. And rates go down, the market yawns, and tech is managing the Nasdaq's higher by some 15 points. Now, it's a modest gain, but nonetheless, that's an interesting dynamic that's playing out. And maybe that continues. And if it does, if rates don't start to rise more dramatically, does that essentially keep the tech trade on? Yeah, I think it does. And the one thing that I worry about is geopolitical risk. Like we talk about NVIDIA's skyrocketing share price. And today we get news

that we might have the Commerce Department limiting its ability to do business in China. By the way, this is a chip that was the one that it built specifically so it could get into China, which is the one that now the Commerce Department might be targeting. The world is pretty turbulent right now, I would say. And so to me, my focus shifts from what's the Fed going to do to what happens in geopolitics. Good points, everybody. Appreciate it very much. Alex, thank you. Alicia, thank you as well. All right. Let's get to our Twitter question of the day. We want to know, will Apple hit 200 bucks a share before the end of July?

The clock is ticking. Head to at CNBC closing bell on Twitter to vote. The results are coming up a little later on in the hour. We're just getting started, though. Up next, bracing for serious downside. Evercore's Roger Altman is with us. He's forecasting some rough waters ahead for stocks. He'll explain why and what he thinks the Fed's next move might be. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. I think there's a significant probability that there will be a downturn as well, though.

But it's not to me the most likely case. I was thinking of even a recession. To me, it's not the most likely case, but it's certainly possible. And of course, many forecasters do predict that. Well, that was Fed Chair Jay Powell earlier today with our very own Sarah Eisen in Portugal at the ECB Monetary Policy Conference, sharing his outlook for the U.S. economy. Our next guest, though, believes that a recession is still on the cards. Let's bring in Roger Altman. He's Evercore founder and senior chairman. Roger, welcome to our program. It's nice to see you today. Nice to see you, Scott. Thanks for having me. Why do you differ with the Fed chair?

Well, if you look historically and you look, for example, at 1989 and then 2006, you see that the yield curve inverted. And then it took 18 months from the moment of inversion for us to see a recession. that our firm at least thinks and our economics department through evercore isi which i think is a very good one thinks is the more likely scenario because monetary policy operates with such a lag now i in i agree entirely that it looks about 50 50 uh There are some very smart people, and Chairman Powell just in your clip referred to this, who think we won't have a recession and then some very smart people who think we will. But to me, the more likelihood is a moderate recession. You can look at the yield curve. You can look at the NFIB Small Business Confidence Index.

You know, you can look at so many data points which are pointing downward. The various special surveys that Evercore does, company surveys, especially the trucking survey, which is right around recession levels and correlates most closely to GDP. So the data is mixed and the jury is out. But I think a more moderate recession towards the end of the year is a little more likely than not. Have you considered the idea, Roger, that maybe we're looking at this all wrong and that none of us have a great handle on the disruptive nature of the pandemic and the amount of stimulus that was put into the system and what it means to the way that the economy is reacting. And you need to throw all of the

textbooks, so to speak, out the window. I think it's fair to say that the Fed perhaps has misjudged the way that the economy and particularly the labor market was going to be on the backside of the pandemic and for that matter, what their own policy, even with lags, would mean today. Have you thought about that? Scott, I think yes. And I think there is a lot to that. Number one, inflation, really, this inflation surge was really caused by the pandemic. And we could talk about that, but I believe it was. And I think most people do. Secondly, you have still 500 billion or so of excess personal savings as a result of the pandemic. You have perhaps some labor hoarding going on by employers on account of pandemic related factors and how hard it's been to find workers. And so, yes, I think there's quite a bit to that. But I don't think it necessarily means, presto, we're not going to have a recession because we've seen the, you know, the steepest hikes in monetary policy in 40 something years.

And again, looking at history, it would be too soon for them to have had their full effect now. Six months from now, different story. Powell said today, as I'm sure you heard, we believe there's more restriction coming, alluding to the fact that they're not done. I'm curious as to what you make of the fact that the market listens to all of that and says, OK, you know, bring it on. It doesn't seem to have much reaction. Well, the stock market has been remarkably resilient.

You know, we all know the S&P 500s had a very good year the nasdaq an even better year uh and and if you just look at look at the headline numbers on the market you say to yourself uh it doesn't see a recession um but you know the stock market we all know is fickle uh and if i knew precisely what the market was doing, Scott, you and I could be phoning this in from my yacht. But I don't know. And there is no yacht. But I don't think today's market is really indicative of whether at the end of 23, we'll see softening business conditions and a moderate recession. Just because stocks are resilient today doesn't tell me that at the end of the year,

we won't have a recession. I think that latter date is too far off for markets to be reacting to yet. I want to ask you another question about something I know you think about, and that's deal flow and when you think M&A is going to pick up again and whether you think this administration

is too negative on deals, particularly the FTC and the makeup there and the person who's leading it. Amid a report yesterday, Roger, that the FTC and the DOJ are prepared to seek more data on prior mergers and labor impacts, that they could propose changes to pre-merger paperwork and the like, just to make what already feels like a big hurdle even higher? Well, on the first part of your question, activity levels from an M&A point of view, and by that I mean planning and thinking, activity levels are pretty good. Although volume itself, you know, announced transactions year to date is down a lot from last year, down 30 to 50 percent,

depending on your measure, whether you look at total dollars or whether you look at number of transactions and so forth. On the second part of your question, there's no doubt that the FTC and the Justice Department have taken an entirely different approach than we've seen in many, many, many years over the last two and a half years of the Biden administration. And it's a much, much more restrictive approach, as everybody knows. And they're, you know, they're winning some and they're losing some in court. It'll be very interesting to see, and we're not involved in this, what happens in just a few days in terms of

the closing date on Microsoft Activision and whether the FTC gets a stay on that to prevent the closing or whether it doesn't. That's a really big one, probably the biggest test for the FTC so far under Lina Khan. But they are showing their true colors, Jonathan Cantor and Lina Khan. And I think we know what those colors are. They they don't favor mergers generally, and they're going to do whatever they can to try to prevent them. Have they gone too far? I mean, let me just ask you, you know, do you personally think they've gone too far? You know, look, you're a well-known and former high-ranking official in a Democratic administration. So what would you think about that? I think they are too zealous on this.

Yes, I do. But I don't expect them to make a turn. I don't expect them to change. I think they see themselves on a mission, on a crusade. And as long as they hold these positions, that crusade will be on. I don't see any changes in it. Well, Roger, I appreciate your time so very much. We'll see you soon.

Thank you. All right, Scott. Thank you. All right. That's Roger Altman joining us today on Closing Bell. Up next, breaking down the banks. We're just about an hour away now from another big event, the stress test results hitting the tape.

Top banking analyst Mike Mayo standing by with what he is watching ahead of that. And all month long, CNBC is celebrating pride, sharing stories of corporate leaders with you. Here's Sixth Street partner and vice chairman, Marty Chavez. People will often tell me, Marty, you're such a pioneer on Wall Street. And I would say I don't see myself that way. I do see myself as somebody who's just myself. And I always have been that. When I first came out to my interview in 1993, I came out in that interview just because

that's how I did it. And I was out in Silicon Valley and I saw no point in going back into the closet. And so I would say just authenticity. It's a lot of wasted time to pretend to be something that you are not. All right, welcome back to Federal Reserve, set to release the results of its annual bank stress test in just about an hour from now. Those results giving a look into the health of the nation's biggest banks following the collapse of three regional ones earlier this year. Joining me now with what to expect, top bank analyst Mike Mayo of Wells Fargo. It's good to see you. What are you expecting? Any surprises? Well, I want to put this in context. We may be approaching a tsunami of bank regulatory changes over the summer, and this would be the first of three waves. So this Fed stress test could increase the buffers for capital and how much banks can buy back in stock.

But after this, you also have the Basel Committee, the international committee, resetting standards for the largest global banks. And then you have Vice Chair Barr at the Fed who will have new rules to post Silicon Valley. So this is the first of three waves. So that's my preamble. Having said that, I love the Fed stress test and I hate the Fed stress test. What I love about it is this is one of the toughest tests yet. I mean, we're talking about a 9% drop peak to trough in GDP, 10% unemployment and a 40 to 45% decline in housing, commercial real estate, and stocks. And after the Fed assumes that for the largest banks,

they should still have enough capital left over, not only to avoid capital raises, avoid dividend cuts, but to have 5% dividend growth this year, and for the largest banks, still buy back stock, albeit half the pace than prior years. But you just said, you laid out in your self-described preamble what sounds to me like a more onerous regulatory environment. But then you just pivot and suggest that it's still good for the banks? Well, I have a love-hate relationship with this.

So you just got the love side. The hate side is this Fed stress test, it is, and it's always been a black box. The banks literally do not know the cost of goods sold until after the fact. So in an hour from now, we'll get some data saying how much different categories are hit, commercial real estate or housing or credit cards. And the cost might be more than the banks originally expected. So I don't like the black box element. I also don't love the rote mechanistic aspect to this. Last year, Bank of America was assumed to have 20% higher expenses in a recession, even though 20% of their headcount is incentive comp.

So there's things like that. But the issue is the cumulative effect. So you take the buffers from the Fed stress test for higher capital, you take the Basel committee for higher capital, you take Vice Chair Barr at the Fed for higher capital. Those sound like three negatives. Those are tail risks. Those are concerns. So the risk is that this could lead to a credit crunch. And you're already seeing banks talk about shrinking balance sheets

or what they call RWA diet, reducing risk-weighted assets, increasing pricing, or most likely more business being pushed off to the shadow banking system. The unregulated shadow banks are likely to get more business. And you're already seeing banks, you know, de-lever balance sheets, selling off assets. So I love the stress test because it ensures the largest banks are resilient. And I love the largest banks the best. So JP Morgan seems to get better day by day. On the other hand, the regional banks, with the cumulative effect of these regulatory changes, it can change their business models. This could be the equivalent of a 100-foot wave for some of the smaller regional banks

if they have to implement all this too soon. Financials as a sector under the S&P are down 4.25% year to date. Do I have any reason to believe as an investor that that's going to change over the next six months? Well, I think the market's braced for a tsunami when it comes to regulatory and interest rates and recession. And I don't think you're going to get all of those three things happening. So when you talk about regional banks, they do have major business model changes. When you're talking about JP Morgan and Citigroup and the largest banks, you could say go G G-SIB or go home, because they are not having these tsunami-type changes.

Yeah, I understand that. But you would think if the alleged recession is being pushed further and further and further down the road by those who watch the economy that closely, that at some point that would be reflected in bank stocks. And it hasn't necessarily happened. And I'm curious as to why and when it will. Well, I do think that the bank stocks reflect a kitchen sink and more, at least the largest banks. They reflect a bank crisis discount. They reflect a bank recession discount. And they reflect a bank regulatory change discount. You're not getting all

three, at least not for the largest banks. And the idea of the bank crisis and more big bank failures, I think, is a thing of the past. And now we're just talking about, on a normalized basis, banks trading at less than half of the market P.E. You talk about a tech stock with a $3 trillion market cap today. I guess that was Apple on your show. Meanwhile, J.P. Morgan, best-in-class bank, struggles to have a $400 billion market cap. Should the best or the largest tech company be worth over seven times more than the best bank? I'm not so sure about that. So either the stock market as a whole is going to come back down to the level of the banks, or the banks are going to rise back up to the level of the market. All right. We'll leave it there. Mike, thank you. That's Mike Mayo ahead

of the stress test results up next. We're tracking the biggest movers as we head into the close. Christina Partsenevelos is here as always with that. Christina. It's going to be exciting. Air taxis and commercial space flights. The future is here and several stocks are moving on the news. Don't change that channel. We're just about 15 minutes away from the closing bell. Christina Partsenevelos has a look at the stocks as she is watching at this moment. Christina? Yeah, let's start with Joby Aviation.

The stock is soaring, and we'll bring up that script in just a second, but the stock is soaring 42% after it announced that it's going to be launching air taxis. Not necessarily with passengers just yet, but this is the latest news for the company and why it's soaring. The fact that they got the green light is adding to this name. And let's move on to the next company that we are going to talk about. And that has to do with Virgin Galactic, since I, you know, I teased that before the commercial break. Virgin Galactic is up about 8% right now,

and that's because they are soaring ahead of their first commercial space flight. A three-man crew is set to jet to the edge of space tomorrow from New Mexico, and the excitement over the launch is causing this name to soar 8%. And last but not least, we're on this, I guess, travel theme, if you want to call it robo-toxies and then, you know, space travel. Cruise stocks continuing yesterday's rally. Shares of Carnival are up about 8.6%, almost 9% right now. Norwegian jumping about 7.5%.

And Royal Caribbean also up higher, a little bit less than the rest, but at 2%. There's strength in the travel sector. All of these three names are currently trading at 52-week highs, which is why I had to bring them up on the screen right now. So you've got that lots of travel movement. I'm really excited about that EV robo travel in the sky for Joby. That's the exciting one we were all talking about in the newsroom. Yeah, you seem it. You seem very excited about it. Well, it's something different. Instead of, you know, we're talking about semis, talking

about everything else. Every once in a while while it's nice to have something different. I hear you. I hear you. Christina, thank you. That's Christina Partsenevelos. Last chance to weigh in on our Twitter question. We asked, will Apple, which is on the doorstep of hitting $3 trillion in market cap again, hit $200 before the end of July?

Had to add CNBC closing bell on Twitter. That's the share price price not the market cap obviously we'll bring you the results after the break to the results of our twitter question we asked will apple hit 200 bucks a share before the end of july and the majority of you said yes it will better than 61 percent up next speaking of results micron their results out in O. T. the metrics every investor needs to be watching that's just ahead. That and a lot more

inside the market zone. Now the closing bell market zone CNBC senior markets commentator Mike Santoli is with us to break down the crucial moments of the trading day. Plus, Alex Sherman on why Oppenheimer is getting more bullish on Netflix. And Christina Partsenevalos is back to look ahead to Micron earnings out in overtime.

Michael, I'll begin with you. Feels like the market today just taking a little bit of a rest, taking a look around, seeing what's what before the end of the week. Yeah, it continues in this mode. Now, yesterday was a nice, broad rally. We've held on to most of it in terms of the indexes. But it doesn't necessarily feel like this period of cooling off digestion that started about a week and a half ago is necessarily complete. You know, about an even up and down volume underneath the surface. You still do have that persistent bid in, you know, the favorites of the Nasdaq, Tesla and Apple, the upside push today.

So I still feel as if there could be a little more of a reset lower just to kind of reload this market for a while, especially given the fact that it seems like we've gotten a pretty full embrace of the soft landing scenario, brings up the possibility that the next direction of surprise on the macro front might not be to the positive end. Yeah. Alex Sherman, I'm looking at Netflix, another one of those Nasdaq stocks that's having a nice gain today of some 3%, as Oppenheimer gets more bullish and more bullish than most in terms of a price target to 500 bucks. The average fact set target is just below 400. A lot of whiplash for Netflix, right? You remember during the pandemic, this was one of the highest flying stocks. Then last year, the air totally came out of it as the growth story stopped, as streaming subscriber growth really plateaued and investors kind of lost faith in the company.

Now this year again, another big roaring back from Netflix and this price target hike by Oppenheimer really driven by two tailwinds. One, Netflix is testing in Canada a plan to eliminate its ad-free basic tier, which currently costs $10 a month. The thinking here is that the ad-supported tier of $6.99 has been so successful from an ARPU basis, an average revenue per user basis, meaning if you add up the money that it gets from subscriptions, $6.99, plus all the revenue it gets from the advertising, it's actually on par with its standard plan, Netflix had said, which costs $15.50. So you eliminate this per month, that is. You eliminate the basic tier, that's going to be billions of dollars, theoretically, in added revenue from all of those people that are switching over to either the ad-supported tier or the standard plan. And

you're thinking about those tens of millions of customers now in this country and in canada that have been sharing their password for the past few years that password crackdown is coming right now so all of those people are going to need to spend revenue on netflix when they never have before the other thing just quickly is that the writer's strike is gaining speed here gaining steam. No end in sight there. Netflix generates a lot of its content internationally, and that content is unaffected by the writer's strike. So Netflix may actually pick up some subscribers that are canceling other services

if the content becomes limited there in the next few months. Yeah, you know, Mike, Apple, as you said, and NVIDIA and throw Tesla in there. They've grabbed all the headlines and all the hype, but we should pay more attention this year to Netflix. It's up 55 percent year to date. Yeah, and the buy side is completely behind the story. I mean, as Alex was laying out, it feels as if the analysts are kind of catching up and refining their models and refining their calls to fit with the fact that we have price momentum, earnings momentum. If you look to next year's numbers now, this analyst is essentially got a price target implying 25 times 2025 projected earnings. So it's getting aggressive on the valuation front, but it's been a lot more expensive than this right now.

And it almost feels defensive within the media sector. Yeah. Christina Partsinovalos, maybe Micron's biggest problem is it's not AMD and it's not Broadcom and it's not NVIDIA and it's not at the forefront of this AI hype. Exactly. And that's probably contributing to why the company is largely expected to miss Q3 estimates, maybe guide below for Q4. And that's But having said all of that, Scott, much of Wall Street is actually still bullish. There's 24 out of 36 buys at the moment. So let's start with just some of those overhangs. Firstly, you've got China that imposed a critical infrastructure ban impacting revenues by what the company calls low double digits.

The ban came into effect May 24th, which means much of it will be felt in this current quarter. So that's going to hurt Q4 guidance. That could cause Micron to write down more inventory, which is the second overhang you're seeing on your screen. And lastly, the AI hype, to your point, Scott, means companies are cutting back on central processing units and memory used for storage and data centers, what Micron's really good at, and then buying more GPUs. And that hurts companies like Micron that may not make the most advanced memory chips for those GPUs. The pros, though, memory prices are considered to be on their way to a bottom and potentially stabilization that we're seeing within PC and smartphone sales could help.

We will be looking for commentary today on how these Chinese bands could weigh on Micron's recovery trajectory, given that it was the low-hanging fruit that China went after. Yeah. Mike, there are, I guess we're learning AI haves and AI have-nots, those who've got the hype and those who are trying to get a little piece of it. Yeah, and I think there's a chance for there to be kind of miscalculation on both ends of it, just in terms of how generous the market's been in crowding into and inflating the valuations of the consensus winners in this area. Now, when it comes to Micron, I mean, the earnings trajectory,

I should say the loss trajectory has not been that encouraging. So whatever they say about inventory, state of the cycle, I think is going to probably supersede in the near term what they say in terms of positioning toward the AI trend. Yeah, as we look towards the end, we just had the two-minute warning, got less than 90 seconds to go. Are you surprised that yields are behaving as they are today, even in the face of all of that hawkish central bank speak with Sarah over in Portugal?

I don't think terribly surprised. Most of it was reiteration in one form or another. The short end of the yield curve already sort of leads in the direction of being open to further rate hikes if it comes down to it. So I do think in general, range bound and sleepy Treasury yields have been pretty comfortable for the stock market. And all in all, you know, we might get the move in July. That's probably OK. No matter what, you're kind of close to the to the end of things in terms of what what the Fed's going to do. Now, the inflation number coming on Friday, we'll see if that throws a wrench in that general setup of relative calm in terms of

the Fed outlook right here. To me, the message of the market's been pretty encouraging when consumer cyclicals and industrials and transports have been outperforming. Recession-type stocks like consumer staples, some of the weakest today. And, in fact, they are also disinflation victims. So that, to me, is a good macro message. The only question, again, is whether we've all just sort of decided to get complacent about the economy exactly when the numbers change. Well, you'll have a lot more tonight on Taking Stock, of course. That's our CNBC special in which Mike is hosting at 6 o'clock Eastern time. Don't miss that.

Dow's going to go out a loser off the worst levels, though. I will see you tomorrow.