Closing Bell - Closing Bell 01/10/24

Episode Date: January 10, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with these edgy markets. All that's riding on these next two days as inflation numbers, earnings reports, they're looming large. We're going to ask our experts what all of it means over this final stretch. In the meantime, your scorecard with 60 minutes to go and regulation looks like this, picking up a little bit too. Once again, mega caps, they're leading the way. NVIDIA doing much of the leading. What a remarkable run for that stock as it approaches another new high. Meta, a nice winner today. Even Apple reversing midday. It's now higher, was in the red for much of the session. Take a look. There it is. Tesla was red for all day as well. Now it's green too. Elsewhere,

energy the biggest loser. Financials, they're in the red ahead of earnings on Friday, and interest rates are modestly higher ahead of tomorrow morning's critical CPI report, all of it taking us to our talk of the tape. The not-so-fast NASDAQ. In other words, don't count it out just yet because it's outperforming once again. Does it mean that space is still the place to be? Let's ask Josh Brown, Ritholtz Wealth Management co-founder and CEO with me at Post9. Welcome back. That's ask Josh Brown, Ritholtz Wealth Management co-founder and CEO with me at Post9. Welcome back. That's where the money's going again. And Nasdaq's hunting down 15K again last year, just before New Year's. Yeah, it's look, it's really these are the types of markets that are bear killers. Even yesterday, we gapped down at the open. Everyone said, OK, finally,

we're going to get that washout day that's been overdue since the start of the year. Nope, not really. And you end up finishing. I think HOD is where we close today. Same thing. We build an intensity off of nothing. It's so frustrating if you're on the sidelines waiting for your moment. Your moment just doesn't come. Of course, that's probably not sustainable forever. But while it's happening, you're watching this market trend and you just cannot think straight.

So here's what we did. Sean and I, my research associate, took a look at the internals on the NASDAQ because what we're trying to figure out is at what point does this get so unsustainable that the reversal is here? And honestly, there's just nothing there right now. 83% of the NASDAQ 100 components are above their 200-day.

Everything looks good in all of those individual names. That's well above the normal reading of 60%, which we've seen since, let's say, November. So it's almost like a rally within a rally. Then you look at 52-week highs in the NASDAQ. 11% of stocks are making 52-week highs, meaning not overheated. If that number were 40%, 50%, I would say, okay, stove's a little bit too hot. That reading hit 30% in December, dropped to 2% last week. Back up here at 11%, I think we're still kind of lukewarm.

Now you want to look at RSI's. Zero percent of the XLK names, tech alone, have an RSI below 30 or oversold. But that doesn't mean everything is overbought. The NASDAQ 100 has a 14-day RSI, this is math, not my feelings, not my opinions, of about 54. That is right on average. We're not at 70, we're not at 80. So we're not overheating. This can continue. I know if you're waiting for your opportunity, it's driving you crazy. I understand that emotion. I just don't have any good news for you. That's telling me all of a sudden we're going to see this reversal happen. What kind of statement do you think the Nasdaq's making and these stocks, these mega caps are making at a time where you had people starting to line up to say,

ah, valuations too rich, time to pivot, time to rotate into these other areas. And over the last few days, as I said at the very open, the Nasdaq suggesting not so fast. So I'm conflicted there because if you just look at the Dow 30. Is Nike a technology name? No. Is Walmart a technology? All these stocks are green and you can find green almost everywhere. Energy is a little bit impaired right now. Russell's taking a bit of a breather recently.

Just OK. Here's the tell. In two days, you're going to get JP Morgan, BlackRock, Citigroup, Bank of America. I don't know why they're all in one day. Maybe it's maybe it's good for TV ratings, but it's tough for investors to sort out what's going on. Those numbers are coming out on the heels of CPI, which is Thursday, PPI, which is Friday. It's going to be a lot of action in bonds, and there's going to be a lot of action in bank equities. For me, that's the tell. If you get follow-through in names like Citi on the heels

of those new inflation numbers, I think that that's going to lead to a broadening of what we've seen this week into next week. That becomes really important. Last thing is really important. Actually, we got a hotter than expected jobs number on Friday. And I said to myself, well, this is the thing. This is the thing that could knock us back. There was some action in rates, but honestly, if you look at the March rate hike expectations, rate cut expectations, they dropped from 80-something percent to 60-something percent. It was not that big of a drop-off, and the stock market rebounded within an hour. What does that tell you? So I really think the setup here remains bullish.

I want to come on and have something provocative to say that all of a sudden we're going to reverse. It's just not in the data that I look at. Well, I mean, you've said if you want to be provocative, you know, Rich Clarida, former Fed vice chair, was on. Nobody knows what it means, but it's provocative. You've said that the Fed, like what they do at this point, it doesn't really matter, right? Inflation's come down. You've got the trend going that way. Clarida today throwing cold water on the idea that you're going to get six cuts. And by the way, he said, you don't even want them because that doesn't mean that things are necessarily good, right? If I have to cut six times, that means things are bad.

I totally agree with that. You see, I'm over 18 years old. So I know that there are market environments where stocks go up and rates don't go down. I know that this is a thing that exists because I've lived through it. In the 1990s, they were raising rates during a bull market. And guess what? Nothing fell out of the sky. It was OK. So I don't need six cuts this year. It would be nice if we could bring down overnight borrowing rates, at least to be in line with inflation. We don't have to, but it would be nice. I don't need six rate cuts. I think it's

unnecessary. And I don't hear the bulls screaming that they want rate cuts. I think they're okay with the prospect of rate cuts if they're needed. That's not the bull case right now. The bull case right now is when all is said and done, this should be, we'll know in two weeks, this should be the second quarter, consecutive quarter of earnings growth. That's after three consecutive quarters of negative, then we stabilized.

If this continues the trend of earnings growth, that's better than rate cuts. Well, the market is kind of betting on some kind of cuts because you've got to justify the valuation of the market. You do that through strong economy. Growth remains good. Earnings are good. Rates come down. You justify a 20 multiple on the S&P. I'll take the earnings, but I'll take the earnings growth versus the rate cut any day of the week, and so will most investors. What about these other areas of the market that I said, the Russell, for example? You know, it has this big burst.

It's up 5% in a month. And that's when everybody's like, OK, this is the trade that's not going to work. Megacap's going to take a backseat. Market broadens, Russell, and all of that works. And then lately, let's say over a week, it's been Nasdaq roaring back and the Russell sort of pulling back. Yeah, but it's OK. The Russell is digesting a monster move from Thanksgiving into the end of the year. It obviously shouldn't be as vertical as it was. I think the Russell from November 9th into the end of the year did 18 percent.

Somebody could fact check me on that. That is an absurd seven week rally. It should digest. There should be some consolidation. That doesn't mean it's over. That doesn't mean we've seen the top. And by the way, there's a parallel story going on. Almost none of our viewers are aware of it because we don't talk about it enough. Internationally, every country stock market you could think of other than China, which we don't talk about anymore, is either at a 50 tweak high or an all time high. This was your contrarian call on halftime as we roll those out from the committee. It's time to look a little bit elsewhere, even though there are concerns on

the macro globally of, you know, Europe in recession or certain economies in Europe in recession. China, you just mentioned, which has had, you know, one step forward and two steps back in their recovery. The narrative is the narrative. But then look at price. Why is the FTSE? Why is the United Kingdom breaking out to record highs? Why is the CAC 40? Why is the DAX? And I'm not showing off that I know the names of these exchanges. They're really moving higher pretty much across the board again, other than China. The Nikkei is at 33 year high. Why is this? Don't fight central banks. Isn't that the answer? Well, no, these are all, but these it's where they came from. These stocks have done nothing in so long. Yeah, but literally that's going to be part of the story too, is the idea

that you've made the turn, so to speak. And now you've, you've had nine holes in a row of bogeys because you've had rate hike after rate hike after rate hike. Now you're making the turn and you got some holes that you think you can play well. Yeah, that's a good point. But also we were under this false assumption again that rate cuts were necessary. And if if moderate rates are good, lower rates are better. And if lower rates are good, take them to zero. And if zero is great, go negative. That's actually not the case. It turns out in Europe they they get more bullish when there's a nominally positive rate. When there's an actual interest rate, people feel better about the economic situation. And I think that's being reflected in all of these country markets around the world.

Even Japan has a nominally positive bond yield. It's a miracle. So again, back to my original premise. Yes, rate cuts maybe will be helpful if they're not emergency rate cuts. They're just not the fulcrum of the story. They're not the most important thing. The most important thing is that the S&P 500 companies are phenomenal at passing along higher costs to the consumer. And as a result, we have found earnings growth in a place where originally the consensus predicted a recession.

It's a nice place to be. All right. Let's bring in Liz Young of SoFi, the head of investment strategy. I need to take a drink of water. It's a good idea. You were on a roll. Liz, what do you got? You breathe and we'll let Liz talk.

All right. What do you make of what this guy has to say? Well, I guess I'll start at the beginning. I don't know how much time we have here. I'll start at the beginning. We got time. Obviously, we had this big year-end rally. It sort of conked out.

It didn't necessarily turn in the other direction. It conked out so that investors have questions to ask themselves. You guys talked about the NASDAQ. Does that have more strength to come? I look at things like cyclicality. What kind of signals is the market sending about cyclicality? And we've got a couple charts back there in the control room, if you can pull them up, looking at things like transports versus utilities and things like

discretionary versus staples. What you saw from the end of October through about the end of December is that cyclicality was alive and well, and the market really believed that things were going well from a cyclical perspective. Right when the rally conked out, you saw those cyclical sectors roll over and suddenly the message is not as clear. And then there's another chart we can show of copper versus gold. This is a pretty clear signal as well. You see cyclicality expanding. It rolls over.

Things are not as clear. So here we are sitting very near all-time highs in the S&P, which we've knocked on a few times. We are, by the way, 4796, OK? 4796 is the all-time closing high on the s p and you're not that far away you can't get across it that's the thing the market is sitting there wondering should we be higher than we were back in january of 2022 so far we don't have a clear answer on that the russell 2000 is another indicator of this if you take a russell 2000 chart out a year so a trailing one year basis you see it get to about the same level three or four times, about 2000, 2050,

and it fails every single time. It's right around where we are right now. Right where we said, earnings is going to be that catalyst, assuming that they get off to a good start. Do you agree with that when the banks start reporting on Friday? Well, what's interesting is that all of the cyclical indicators that I just talked about are showing weakness, except for the banks. The banks have held in there. So I think this bank earnings season is going to be a big tell for whether or not banks can confirm that we are, in fact, going to do OK in the first and second quarter. You don't sound that bullish, though. Am I wrong? I mean, I still don't think that this ends any differently than it has in the past. I still think we need a contraction.

And the recession, you mean? I'm going to call it a contraction. I mean, it might be a recession. I think people get scared of the word recession as if you were calling for some kind of catastrophe, right? Recessions are healthy. I'll call it a contraction, a pullback, a cooling. I still think that that has to happen. And the sequence of events so far is intact in the sense that the market falls first. Then you have an earnings recession. Then you have an economic cooling. We haven't seen the economic cooling yet that I think is still to come this year. The big question is, how far down does it go?

Does it surprise the market and go down further than right now? What is price? This is maybe the great weight that never happens. I mean, I'm in the opposite. I mean, I hate to disagree so much with Liz. So now I'm actually getting nervous. I'm in the absolute other side. I think the danger is we overheat and the Fed has to reintroduce tightening. That's what I honestly think that that's where we're headed. So it doesn't mean that we don't end up in the same place that you're saying. Yeah, it's just maybe for a different reason. For example, a lot of the people who have been bearish, they would have thought by now

the banks would be reporting these big losses and they'd be building their loan loss reserves. We're going to find out in two days if that's this quarter. And I don't think it is. No, nobody has made any noises about it. You know, leading up to these reports. It's not going to come out of nowhere. So if Citi and Wells Fargo and Bank of America are not coming out and saying delinquency rates are going up on credit cards, on mortgage, if they don't do that this quarter, what's like the negative catalyst that tells you

something has materially changed? I don't know what that is. I don't think there is either. And I think maybe we're actually saying the same thing. I don't think we're going to get as many cuts this year as the market thinks we're going to. Okay, so I agree on that. Why would they have to? Why would they have to? Does it even matter?

What's going to convince them? Does it matter? I think it matters because it's priced in. Well, six cuts cannot. I mean, I don't necessarily think that six or seven cuts are priced in here. What's not priced in is... Even though the market's expecting it in deep quotes. What's not priced in is what I'm worried about, which is the data starts heating up. You get a CPI report on Thursday that is a little bit hotter than expected.

Again, last week, slightly hotter on wage growth. Slightly. Tiny. You almost can't see it. Nano. But if that becomes a trend and the Fed not only stops talking about rate cuts, but maybe even introduces the idea of, you know, every meeting is a live meeting and we could actually tighten if we need to. Like if that rhetoric starts again, that's not priced in the market. You will absolutely be down 5 percent. They're already saying that. They don't even have to reintroduce it. They already try to say that. Just nobody listens. Nobody believes it. Oh, hang on real quick, you guys. i'm sorry to cut you off here i'll get back to blizz i promise forgive me uh speaking of the fed we do have some breaking headlines now from new york fed president john williams who is speaking as we speak steve leesman our senior

economics reporter has the comments for steve yeah scott a new york fed president john williams saying he expects the fed to maintain a restrictive policy stance, quote, for some time. He says the Fed can reduce this policy restraint when they're confident inflation is moving back to the 2% target. On quantitative tightening, the unwinding of the Fed's balance sheet, he says the Fed is not yet close to the point where it should begin reducing QT. He sees inflation slowing to 2.25%, reaching target in 2025. They're kind of optimistic there on the inflation front. And he does see two-sided risks on inflation, both the risk of it remaining stubborn, as Josh was just saying, versus the risk of a weaker-than-expected economy.

He says the inflation situation has, quote, improved significantly and is beginning to see significant progress in the core services inflation, as well as the core services ex-housing, which he says has slowed considerably. That's the metric that is watched carefully by Fed Chair Jay Powell. He says indicators of inflation expectations have been quite encouraging, and wage inflation has also come into better balance. If you're seeing a trend here, I'll get back to it in just a second, still has a ways to go. He says to get inflation back to target, and he sees the current unemployment

rate prevailing over the long run. That is the current 3.7% unemployment rate, which is quite striking, though he does see it going up to 4% this year. The labor market, he says, is returning to better balance, and job growth has slowed considerably. He expects growth to just 1.25% this year and the unemployment rate to rise to 4%. So Scott, I'll leave it there, but what's remarkable to me about these remarks is he's saying all the things that he's looking at are going in their direction in terms of inflation, the job market, the economy slowing. But he's not giving you anything in terms of the Fed's outlook for cutting rates this year. He even sees reaching target by 2025, just two and a quarter percent inflation this year, but doesn't really say anything about reducing rates.

He talks about the need to he used the word, I believe you said, confirm that inflation is moving down to target. So what does that mean in in, you know, Fed speaker speak? How many more CPI reports, for example, do these folks need to see until they can be confident that it is confirmed that inflation is moving towards target. Yeah, the word I think is confident, Scott, I think is the word that he has used and others as well. And I don't know. I mean, we'll see.

You know, I think it's interesting. Josh introduces some risk to tomorrow's CPI report. I don't think that's wrong in that the market has very priced very one-sided for inflation to be coming down in a straight line. We know the data don't behave that way. I do think there's some possibility of a downside surprise tomorrow because I'm thinking that finally the housing component starts to come down as has been expected for many months, especially because we've got some new data that shows rents have been declining throughout the country as well. So we'll see if that's incorporated to the CPI. But there's definitely risk of an upside surprise somewhere along the way. And I

think the only answer I can give you, Scott, is that it's got to take several months of the inflation being down, coming down, heading towards target where they can say, you know what, if we were to cut rates here, we would not be making a mistake and have to make what I think they believe is a worse outcome, which is to have to reverse course and hike again. All right. Well, we've got a few CPIs before March, right? I mean, we're going to get the reads that maybe tell the story that moves the needle to the point where, you know, it plays the record that people want to hear. Steve, thank you very much.

That's Steve Leisman, our senior economics reporter, joining us with that breaking news on John Williams, New York Fed president. Liz Young, forgive me for cutting you off earlier. All good. What do you want to react to that? Do you want to finish what you're talking about? I mean, we were talking about the Fed, so let's just stay there. I don't think that we're going to get all the cuts that people have expected for this year. And a lot of that is the reason why. There hasn't been weak economic data yet.

So I think the risk here is more so that we're going to declare premature victory. Maybe investors are going to declare premature victory and say, OK, we have secured a soft landing. We have beaten inflation. The Fed isn't quite on board yet, but we believe that they will get there because the market will force them into it. Right. And then we get to a point where maybe shelter, the shelter component of CPI is coming down, but mortgage rates are also coming down. And everybody that's been sitting on the sidelines waiting to buy a house while the housing market has been frozen jumps back in. And then suddenly

that shelter CPI component is going to go back up. Right. And then we overheat to Josh's points, which is why I think we're actually saying the same thing. And the sequence of events where we haven't gotten the economic cooling yet, the contraction, the lagged effects that haven't shown their ugly head entirely, that's where you don't want to declare victory before that plays itself out. I feel like the risk, though, is that the nervous sit on their hands for too long, you know, obsessed with, well, the lag effects and how many cuts are there going to be when the most important thing is that the Fed's done hiking. That's I think that's sort of the baseline idea is that they're done hiking.

All right. So they don't cut six. But their next move is likely I think we can make a bet. Right. Probably a cut. You're right. This is this is horseshoes and hand grenades. This is not precision. We're trying to get close, right? Directionally, we're trying to understand what's going on, not how many cuts, how many. Haven't we decided directionally where things are going? I think. And so that's why the danger is if they reverse. Because to Liz's point, to Steve's point, everyone is on one side of the boat.

And that might be the right side of the boat, by the way. It's important to keep in mind the crowd's not always wrong. It's just that the crowd is wrong at the turn. We don't know where the turn's going to be. So directionally, I think we know what's going on. And look, I don't, again, I talked to a guy two weeks ago. He's been on the sidelines since last January. And the reason is commercial real estate. Like Like he's worried about office real estate being, so I said, let me ask you a question. What do you do for a living? Oh,

I'm a commercial real estate agent. You know what I mean? Like you're way too close to that. And you think that's the whole story. That's the whole thing. No, that's one thing. Here are all these other things that you're unaware of because myopically you're waiting for SL Green to miss a bond payment. It's really important that we don't get too myopic and too overly focused on one or two data points. And we just do a weight of evidence approach close enough, directionally close enough. Yeah, that's what I'm talking about. Liz, last word to you. I think one of the most interesting things to watch in the first quarter of this year is if rates do come down on the short end of the curve as we get closer and closer to possible cuts, money is probably going to start flowing out of money market funds because they're no longer

going to look quite as attractive as rates are coming down. Where does that money go? We have to watch the flows of that. So regardless of bullish or bearish... Right into Nvidia. Immediately. I'm sure at least $1 will go there. But that's what we'll tell us. That's what we'll confirm, whether or not there's more durable upside. All right, guys, that was great. I appreciate it very much.

Josh, you're coming back in the zone. We'll see you then. Liz, we'll see you soon. That's Liz Young, SoFi. We're just getting started here on Closing Belt. Coming up, a work of chart. Top technician, Jason Hunter. He's breaking down the health of this rally,

including the key market levels that could signal that start of a deeper pullback for stocks. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. We're back. Let's send it over to Pippa Stevens now for a look at the biggest names she's watching as we move towards the close. Hey, Pippa. Hey, Scott. Well, Chewy is under pressure after disclosing a block sale of 12.3 million shares owned by an affiliate of its former parent company, PetSmart. Morgan Stanley is facilitating the proposed sale, which has an aggregate market value of around $255 million.

Chewy is down over 5% today, adding to a rough start to the year with shares down 15% so far. And GoodRx jumping 10% after issuing strong preliminary results for its fourth quarter, along with an upbeat outlook for the first quarter. The company says it will issue its full results and guidance in February. Scott? All right, Pippa. Thank you. That's Pippa Stevens.

We'll be back in just a second. I want to show you the S&P 500 yet again because there we are, 4780. All-time high, closing high, is 4796. So keep your eyes there. Got to watch that closely over this final stretch here. Let's get straight to J.P. Morgan's Jason Hunter now for the key levels to watch right now. What are the numbers that you're paying attention to, Jason? Well, overhead, watching a slew of levels on either side of 4800. Most importantly, that's the high from the former cycle high back from the early days of 2022 before that

correction. But additionally, there's channel resistance, a number of Fibonacci swing objectives, pattern recognition type measured move objectives, all clustered around the 4800 area. The market already stalled out as we got up there in the latter part of December. We suspect that's going to continue to be a sticking point for the S&P over the near term. What do you make of the way that the market has started this year? So what's interesting is it was an everything rally in the fourth quarter. And to be fair, much stronger than I anticipated and my team anticipated. The strength above 4,400 and then the additional leg after the Fed was much more than I was looking for. It was high beta, small cap lead, which was important.

The interesting thing that we see here is you saw the initial pullback from the highs and those sell signals that we first got in late December. The last couple of days, and we're splitting hair here because it's a couple-of-day trend, but the rebound that we're seeing now, it's not the cyclicals, it's not the high beta or small cap. Again, it's the old mega cap, NASDAQ, AI-type names that have been leading the charge. So I think that's worth noting, that switch in leadership. Yeah. What about mega cap? You know, it's maybe tricking people into thinking that it's, you know, it's done for a little bit. And here we go over the last few days roaring back. Yeah, I think I mean, if you look at the Nasdaq 100 or the S&P 500 that encapsulate a lot of that

that type of price action, like I said, you've already decelerated in those key resistance zones. My guess is if the market were to even pop out a new high here after CPI or for whatever reason, that would likely stall in that area. Sentiment got fairly stretched into the latter part of the year. Even if one's going to make the case that this is going to be a continued bull run through 2024, which certainly that's not what our team is suggesting. But even if one makes that case, the setup that you have right now, even in bull markets, you tend to see a period of consolidation. Yeah, we'll see. It's interesting as we try and get to a new closing high on the S&P.

Jason, thank you. We'll see you soon. Jason Hunter, J.P. Morgan. Up next, coming in for a landing, American Century's Rich Weiss is back. He makes the case for caution. Stocks are hovering near 52-week highs, plus the two areas of the market, he says, are still a buy right now. Closing Bell Reaver. We'll be right back. Stocks are higher

across the board. Nasdaq leading the major averages yet again as investors look ahead to tomorrow's critical CPI print in the morning. My next guest says we're not out of the woods just yet and doesn't see much upside for stocks this year. Let's bring in Rich Weiss of American Century Investments. Happy New Year. Good to see you again. Same here, Scott. Happy New Year to you. But same New Year, same view. You were negative throughout much of last year, and here we are again. I'm trying to figure out why.

Well, to be fair, we were negative throughout much of the last two years. So net-net, it's not as bad as it might look. But you're right. We did not see as many strategists didn't see last year coming, right? The recession that wasn't. And that held us into a more conservative position and didn't reap the benefits of especially that fourth quarter run up in stocks. But, you know, we're not out of the woods yet the way we see it. And you certainly don't need me to read off that laundry list of economic and geopolitical,

you know, issues that we're still facing. But I guess we'd argue that whether or not there's a soft landing or a hard landing slash recession, which is the current debate, that we see that as academic. Stocks have already priced in a pretty rosy scenario here for the most part. And so we don't necessarily see where the fuel is going to come from for much higher stock prices relative, certainly, to fixed income securities. Maybe just the Fed being done hiking is enough. I mean, haven't we kind of learned our lesson over the last, you know, I don't know, 14, 15 years over what happens when the Fed is either engaged or not? Fair enough. But to be fair, look back a little longer period. I've been in the business a little longer than 15 years. And

if you go back, let's say, to 1960, you know, when you look at all of the Fed hike sessions, eight of them landed us in recession, eight out of 12, that is. One third of them were four times we hit a soft landing. And the eight times that we did hit a recession looked very much like this recent scenario where rates rose fast and furiously. So the probabilities from a longer history indicate something different than what you might take away from the last market cycle. Let me ask you the question then this way. What what makes you more positive slash bullish on the market? On the bond market or the fixed stock market? Yeah, stock market. Yeah. Hey, if if if we can envision this Goldilocks immaculate disinflation scenario, which, you know, we don't buy into wholly

because it's still a fairy tale. But if we can see consistent earnings, if we can see the labor market hang strong and inflation all come down to 2 percent, that's the Goldilocks scenario, then I guess stocks may have a little more room to run. But even with that, if rates are coming down, let's say, you know, anywhere near what the futures market is calling for, which is what six cuts, one and a half, two percent, give or take. If that were to happen, take your average duration bond portfolio. If you do the math there, let's just for for round numbers, let's say rates came down two percent with a duration of 5%, 6%. You got a 12%, 10%, 12% capital appreciation on fixed income securities, diversified bond portfolio, plus the coupon. You're talking

about 15%, 17% in fixed income, a much safer play than the equity market. So that's why we're leaning that way at the margin. But do you not believe the data? I mean, this is a serious question. I mean, because the last reports that have come out would suggest we actually are in what you say is a fantasy, that being Goldilocks, that growth is going to hang in there. And inflation has already come down at a much faster clip than the Fed itself had expected. You know, many strategists, maybe yourself included, would be in that boat as well. So this Goldilocks scenario seems to be why stocks rallied from the end of October to the end of the year and are still, as I suggested at the top of our program today, not all that far away from a new

closing high on the S&P. Right. But yes, agreed to two caveats to that one. Let's inflation has come down pretty fast. But what are we going to see it tomorrow? The CPI and then the next day PPI. If CPI comes in at, let's say, the consensus expectation of roughly 0.3 percent for December, that's still at an annualized 3.7 percent rate. OK, not quite double, but nearly double what the Fed is shooting for. But it's not nine. Right. But it's not nine. I mean, that's that's that's the key. Right. At some point you have to believe in the trend. Yeah. Right. But we're not there yet. And so that may allow the Fed to to to stop hiking rates. But I don't know that it gives them the leeway to start dropping them precipitously.

We'll see. But still, it's hard to argue.'re not at two if the Fed is holding fast to two. The other thing I'd throw out is it's hard to believe. Granted, the current data still shows job growth primarily in the government sector and leisure and hospitality. But leisure and hospitality, for the most part, is still playing catch up with covid. And so it's hard for us to believe that the labor market is going to remain resilient through all of this. I'll just go. What's your reaction? Oh, forgive me. Forgive me. Finish your thought, Rich, please. Labor markets jobs, Scott, generally the last shoe to drop, right, in an economic cycle. And so I doubt that this cycle is different or so abnormal that we won't see some glitch in jobs in the next year.

When you get, you know, the New York Fed's Williams on the tape, not not that long ago, I'm we're clearly moving in the right direction, that, quote, we're beginning to see significant progress, that core services housing, ex-housing has, quote, slowed considerably. What's your reaction when somebody of that caliber suggests those things? Doesn't that play into the story we're talking about? Yes, the trend is certainly positive. My middle daughter is taking ice skating lessons. She's getting better. That doesn't mean she's ready to join the Olympics quite yet. We haven't hit the 2 percent mark, not even close to it quite yet. So agreed, we're headed in the right

direction, but we're not there yet. And there are any number of things out there which could take us off course, you know, be it geopolitical or economic. So we're not saying to sell out of your stock positions. It's just at the margin for the near term. We prefer to overweight fixed income relative to equities at the margin. It's a safer, more consistent risk adjusted play. I appreciate the discussion, if not the debate. Rich, thank you. We'll see you soon. That's Rich Weiss, American Century joining us up next. We are tracking the biggest movers as we head into the close. Let's go back to Pippa Stevens for that. Hey, Pippa. Hey, Scott. Two medical stocks moving in different directions. We've got all the details coming up next.

We're 15 out from the bell. Let's get back to Pippa Stevens now. Pippa? Hey, Scott. Gilead Sciences is under pressure after a California state appeals court ruled that the drugmaker can face negligence claims over delays in the development of new HIV medicines, though shares down around 1.75%.

And Intuitive Surgical is at its highest level in over two years after the robotic surgery manufacturer issued strong preliminary results for its fourth quarter. The company saw procedures using its devices rise more than 20% year-over-year during the period and expects an increase of 13% to 16 percent in 2024. Those shares up about 10.2 percent. Scott. All right. Good stuff, Pippa. Thank you, Pippa Stevens. Coming up, CrowdStrike climbing to its highest level in more than two years,

while Wall Street is turning even more bullish today. When Closing Bell comes right back. All right. We're now in the Closing Bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of the trading day. Josh Brown is back to share how he is playing CrowdStrike and Toast. Both are on the move today thanks to upgrades. Diana Olick chatting housing stocks as D.R. Horton and Pulte make record highs. All right, Mike. It gets real starting tomorrow morning. It does.

And we're going into it. You know, the market continues to sort of color within the lines. Two weeks since the last all-time or the last approach to the all-time high. Haven't really given a lot back on the index level. I've been looking for stress points, looking for things about the market behavior that says, OK, this is a little bit of a macro warning or it's a sign of urgent de-risking or selling. You're not really seeing it. I mean, small caps have absolutely rolled over against the Nasdaq 100. It looks like maybe that burst of catch-up activity has more to prove.

That being said, it's really tough to argue with how we're doing. We probably exited 2023 at like a 5% nominal GDP pace. Atlanta Fed's 2.2. Inflation 3-ish. That's OK. We expect earnings to be maybe one percent for the fourth quarter. It all seems like it's pretty much, you know, the burden of proof is on people who are saying things are bad at this point. Now, very mindful of the fact that overheated sentiment during a

fourth quarter rally sometimes comes home to roost in the first part of a new year. You get some chop in the beginning of an election year. All that stuff could happen. But right now, markets not really serving up a reason for concern. Yeah, unless we get a surprise, you know, tomorrow. For CPI, yeah. And even at that, I think you can look through it because you've had this accumulation of evidence that inflation's going the right way. All right, so a couple stocks on the move today as Josh Brown

joins us once again here in Market Zone. Toast with the most. That's your stock. Yeah. $24 price target upgraded today by Goldman Sachs 35% upside for a stock you love so Goldman points out in their note how negative the sentiment is on this company and forgive me I really love that setup and I'm not saying it's going to do what Uber did it reminds me of. Uber could not get arrested.

It was literally persona non grata. The value people hated it. The growth people hated it. It didn't earn profits. There was no dividend. There wasn't enough revenue growth. And then all of a sudden, they figured it out, and the stock tripled. In the case of Toast, there's no profits here.

This is the problem. The good news is they're on the way. And Goldman is pointing out this stock probably should be in the mid-20s just on anticipation. I want people to understand the swing here. This is a company that has 37% revenue growth. And if you look at actual quarterly sales, it's now over a billion dollars each quarter. It's a much larger company than we give it credit for. More importantly, net loss was 31 million last quarter.

Nobody's giving them a medal for that. But the same quarter a year earlier was a loss of $100 million. So directionally, the fundamentals are improving. The sentiment is still pitch black. This stock is down 50% from its IPO, and I think undeservedly so. So I'm in here, and we'll see what happens. You got a thought here? I mean, just that it's the kind of thing that's,

there's sort of a recovery and rediscovery operation that's underway for a lot of these stocks that were, you know, total addressable market magic in 2021. And now it's, let's see what they can prove from a lower valuation level. I think it's a tough area, mostly because it always seems like there's a new and better mousetrap coming around.

But they're trying to prove it. All right, the other one we want to hit you on, Josh, CrowdStrike. Because these stocks, whether it's Palo Alto, Crowd, they continue to get a lot of love. Morgan Stanley today, positive there. RBC calls it a top pick. So this is the best stock in the world that's not named NVIDIA.

Actually, CrowdStrike is 206% off its 52-week low. The only other stock in the S&P 500, and Crowd is not even in the S&P 500, but the only other large stock that can say that is Nvidia, which is up 250% off its low. So that is both the good news and the bad news. It's really tough to buy a stock that has just tripled, which CrowdStrike has. Of the entire NASDAQ 100, this is the most extended stock. And so what I would tell people is, please wait. I know how painful it is to watch this thing go up 3% every day. This is the furthest above its 200-day moving average in the entire NASDAQ, and it's the second furthest above its 50-day right now. It's just short-term, intermediate-term, long-term. On any time frame,

it's extended. So, like, take a shower and revisit CrowdStrike the next time the market gives you an opportunity. I mean, it's a really impressive look at that chart right there. What are you going to do? You can't chase it here. And now I know by saying that it's going right to 300. But like that's that's why this is hard. It's not easy. It's love you sticking around. Thank you for sticking around for both of those. Diana Olick, speaking of chasing homebuilders, new highs.

Yeah, but I'm going to start with Home Depot. Home Improvement, the stock really took off today after Wedbush upgraded it to outperform from neutral. Home Improvement had a rough 2023. Interest rates took off. Home sales slumped. And a lot of people remodel right after they buy. But Wedbush said they think the sector is bottoming and should see stronger demand this year. Now, Lenar is also having a strong day after it increased its annual dividend

to two dollars a share from a dollar fifty. Lenar also said it would repurchase an additional five billion dollars of its stock. Finally, D.R. Horton and Pulte are both trading at all time highs, going back to their IPOs in 1992 and 72, respectively. Interesting, though, earlier this week, Citi moved Pulte from buy to neutral and said while they are selectively positive on the builders, their least preferred subsector is building products, particularly discretionary repair and remodeling. Going back to Home Depot where we started. So it's a little confuzzling. We get KB earnings any minute now. All right.

You'll let us know what happens there. Diana Olick, thank you very much. I mean, these stocks have been amazing in the face of, well, housing's doing nothing. Mortgage rates are elevated. And these stocks have been ripping. Horton, Pulte, and NBR all at highs today. Now, the overall group is sort of flagged a little bit, but it's just up so much. It's just kind of working with house money.

I think there is an interesting question, though. If rates really start to come down more, if the market starts to loosen up a lot, existing inventory starts to flood in, does the advantage, does the kind of false economy that the builders have been feeding off of, which is almost no supply, start to come into question? I don't think they're expensive. They're obviously not. But it'll be an interesting test. And by the way, that's part of the answer to are we late cycle?

Because housing already had its downturn, and it looks more early than late. We're getting back to that strike zone of closing in on that closing high of the S&P. Still got some work to do, but we're heading there. It would appear. We will see what happens in the morning with that CPI report. And then, of course, earnings on Friday with the banks kicking it off. Will that live up to the hype and will that be the last burst this market needs? We will find out. I'll see you.