Closing Bell - Closing Bell 10/27/23

Episode Date: October 27, 2023

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.

Morgan thanks so much welcome to Closing Bell I'm Scott Wavner live from Post 9 here at the New York Stock Exchange. This make or break hour begins with a very shaky end to an ugly week. And now some serious questions about the state of stocks. We'll search for answers this hour with some big interviews just ahead. Fundstrat's Tom Lee with us and Goldman's Tony Pasquarello join us shortly as well. We're going to get their up to the minute views on your money. In the meantime your scorecard with 60 minutes to go in regulation for this week. Amazon lifting the Nasdaq out of the doldrums today,

but it's hardly been a big bounce for the index overall. Apple, one of the reasons why that stock continues to look a little bit dicey ahead of its critical earnings report next week. We'll discuss what is riding on that during this final stretch of trading elsewhere. Chevron, a huge drag on the Dow today after its earnings and concerns about its planned deal with Hess. J&J, Amgen, look at them. Also weak spots today. Decliners, healthcare putting in a tough week. And we are watching JP Morgan, too. You heard the news yet again a moment ago, down near 4%. Jamie Dimon, he's going to sell some shares for the first time as that company's CEO.

It does take us to our talk of the tape. What might the week ahead bring with Apple on deck, the Fed meeting in focus, and probably so much more? Let's ask Cameron Dawson, chief investment officer for New Edge Wealth, with me here at Post 9. It's good to see you. Welcome back. As I said, an ugly end to a pretty rough week. What do you make of it? Yeah, it would have been nice to see a healthier balance, mostly coming out of yesterday, where a lot of the indices got short-term oversold. We saw the RSI hit oversold levels. Some of the breadth measures looked a little bit washed out. So to see even

more selling into that just suggests that there's more digestion to come. And the reality is, is that in the near term, we've been setting up this series of lower highs and lower lows, and that isn't showing any signs of turning yet. Are you giving up on the idea that we could have a late year rally or is it too soon to do that? I think it is too soon to give up. But of course, the lower you start the rally, the less likely that you get back to the prior highs that we reached in July. You'd have a much more room to go. But the reality is that we've seen these bounces. And clearly, after a day like today, we could see another bounce like we had in early October. But they've been rather tepid. So I think we're still in the mode of you have to judge the bounce as it comes.

So what do you make of what's happened in tech this week? I mean, it was the biggest question going in, along with where rates were. Big part of the thought was, OK, rates can remain a little bit elevated as long as mega cap comes through and delivers. I find that we end the week not really feeling great about where mega cap is and rates are still elevated. So where does that leave us? Yet compared to the rest of the market, tech is holding up OK. On a day like today,

we see that tech is almost back near its relative high versus the S&P, which is surprising, giving this rates backdrop. We think one of the reasons this is happening is people don't want to sell their tech because they're probably sitting on big gains this year. So you may be less likely to take gains into the end of the year, maybe waiting until 2024 to do that. Although there is a view, and I mean, there's action, not just a view. I've talked to some investors, whether on Halftime or elsewhere, who are buying the dip. I mean, we've seen it. Alphabet sells down hard. Stephanie Link comes in and buys it. Steve Weiss, he's not real positive on the market,

but he buys some of these mega caps too on the dip. Meta, Microsoft and others are doing the same. Yeah, they're great companies with actual earnings revisions going higher compared to the rest of the market where we're starting to see some earnings revisions turn lower. The biggest question going into 2024 is you have a name like Amazon, which has had earnings go up 350 percent this year. That slows to 30 percent next year. What does that second derivative slowdown mean for the performance of the stock? But at the end of the day, these are great companies. Valuations are far more reasonable today than they were back in July, which is likely by some people are saying it's a good time to step in. A lot of the commentary over the last few weeks,

utilities, you know, a total disaster, staple stocks not doing anything. Obviously, we have a little sign of life now because the market is feeling a little upset. Is that just what it is, a moment, or is it something to build on, you think, for those areas? We're still technically in downtrends on absolute and relative basis for utilities and staples. So we're seeing a bounce, but we still need to see evidence that there is a sustained turn in relative performance. If that happens, and if utilities and staples really start outperforming the market, that's a sign that growth fears could be coming back. And one of the questions we're asking ourselves is, are we at peak growth?

Look at the GDP from this week, 4.9%. Can it get any better than that? And is that maybe what utilities are sniffing out? If I feel like I need to play a little defense, where do I do it? Bonds? I mean, is that the most obvious choice? They still super cheap relative to where stocks are? If you really want to play defense, you're playing bonds within the shorter end of the curve because you still have the risk within bonds that yields could move higher on things outside of just the economic cycle, that supply and demand factor of what we're seeing within treasuries that is impacting the long end of the curve. TLT continues to struggle and yet you still see big, huge inflows into long treasuries.

So people are trying to catch this bottom. It hasn't worked yet. So if you're playing ultra defensive, that cash like is likely the best place to do it. However, we would argue that there are a lot of stocks that are now trading at extremely attractive valuations. Look at the equal weight S&P 500, just 5% above its October 2022 lows. So you're already seeing that washout in valuations in large parts of the market that still really have good fundamentals, even if we see growth start to slow a little bit. What's the most attractive,

cheap enough part of the market that you see? I mean, it's time to buy small caps, for example, or not. You've got to be careful with small caps because it's all about the balance sheet. A lot of small caps have really ugly balance sheets because they have floating rate debt and a lot of debt on the balance sheet. And a lot of small caps aren't profitable. So what you have to be careful of is the balance sheet. We think we are late cycle. Usually small caps only sustainably outperform at the beginning of a cycle when there's liquidity flooding into the market. So small caps, you could have a big bounce. Ten percent just gets you back to the 200 day moving average.

But that's not likely to be sustained unless we start seeing support from policy. All right. Let's look policy. OK, you said policy. I think Fed meeting. Right. I said to Mike Santoli a couple hours ago, I thought that you could make the argument that this was the most consequential Fed meeting where nothing is expected to happen. They're not going to they're not going to raise rates, we don't think. But I that's the feeling among Chair Powell and others, the chair didn't really give us that feeling in the speech that he gave at the New York Economic Club recently, where all of that was on the table and it came off as a little more hawkish than expected. Are we in for something we don't expect next week? Yeah, because he focused on economic data being stronger than expected. So instead of focusing on financial conditions and maybe

that could drive economic data lower, he called out the fact that growth remains above trend, that look at that strong retail sales. They'll, of course, call out the strong GD preprint from earlier this week. And if he continues to say in order to sustainably have inflation back to 2 percent, we need a period of below trend growth, which has been their message. Then that just means that they continue to hone in on that higher for longer. Yeah, we get jobs report next Friday, too. So there's a lot ahead of us. Apple earnings we didn't even get to yet, but we will in a moment. Keith Lerner, Truist Wealth, joins the conversation, too.

Somebody who's been, I think, incrementally more positive the last few times we've spoken. Are you wavering now? Hey, Scott. Great to be with you. Actually, we put out a note today that we think that this pullback is an opportunity as some of the things that we were waiting for has fallen in place. I mean, it is an ugly tape. It is an ugly way to end Friday. But something we were looking for was actually to break below the 200-day moving average. We've seen that. And, you know, we think somewhere between, you know, let's call it 4,050 on the S&P, plus or minus 50. We'll start to see some support.

That's basically a 50 percent retracement of the bull market that we've seen. And then going to tech, you know, often as you mature in a corrective phase, you bring down the leaders last. And we've seen that. If we look at the Magnificent Seven, they're down about 17 percent from a 52-week high. So we've seen a pretty good reset. The other thing that is somewhat lost is we're starting to see some stabilization in interest rates at 10 years, around 485 as well. So from our perspective, we've seen a pretty broad reset, especially even outside the S&P with the average stock. Cameron mentioned, you know, the valuations are down,

the valuations down because they're down 14 percent from the high. Small cups are down 17 percent. So from our perspective, if you're underweight equities, we would be using this as an opportunity because we think the risk reward has improved. So if I agree with you and I'm willing to do what you tell me to do, where's the nibble? Where should I do it? Yeah, no, good question. Listen, we still like over intermediate term, we still like large cap, we like communication services. But if I am right that the risk reward is improving, I think, well, you get a bigger balance in some of these really beaten up areas. Two areas that was already mentioned is small caps and the equal weighted S&P.

I think that's more of a trade from an oversold condition. But as we head into the fourth quarter and we move past some of this tax law selling from the mutual funds and so forth, I think that's where you'll see a bigger balance. Do you feel like, Keith, we have a bit of a floor in some respects, certainly under the Nasdaq, just because these stocks got sold off pretty hard this week. You do have some buyers coming in. You can only figure that if these stocks continue to trade lower, they're going to be snapped up like we've witnessed over the last 24 hours, if not a little bit more than that. Yeah, I think if you look at large cap managers, a lot of them are underperforming this year because they were underexposed to these areas.

Now this will give an opportunity for some of those managers to get back in. And it wasn't like they had bad earnings. It's just that expectations were too high. The stocks were up 50% on average or more than that before this correction. We've had a nice correction. So I think they're big cash flow generation names. And in some ways, even if the economy slows, we still think there's going to be good cash flow from these names.

So I think investors will gravitate back towards these areas of the market. What do you think, Cameron, about what Keith says? This is an opportunity for some people to add if you've been underweight equities. Yeah, that makes a lot of sense. And he called out that 40-50 level, which is your 200-week moving average. That's been an important level of support for the last cycle. You tested it in 2011, 16, 18, 2022. We broke through it in 2020, but bounced right back quickly. So if we get down to that level, quite interestingly, you would be trading at about 16 times 2024 earnings. That's not stretched. But then of course, it raises the question, is that 2024 number of $245 a share the right number? Is it too high? Is it too low? But that's where certainly there's been a long line of support. And that would be something where you could add to risk at that point. Do you think it's too high or do you think it's too low? What do you think? It all depends if we have a recession. And it is so very dependent on it simply because if you look at under the

surface the estimate has five percent or revenue growth and margins going back to all-time highs so if we don't have a recession and we're continuing into this strong economy then yes 12 is achievable however if we have a recession we could actually be looking at the third year in a row of around 220220 a share. We were there last year. We're there this year. And if we have a recession, it wouldn't be surprising to see it repeat. So, Keith, I'm trying to think. Ex-Adovish Fed.

What's the next catalyst for a bounce? I mean, what is it? Because earnings were supposed to be it. And mega caps leave more questions than answers, I think, at this point. It's a good question. You know, the way I think about it, Scott, is the biggest challenge for this market has been higher rates. So we actually see rates come down somewhat. And even if we get, you know, some of the upcoming inflation reports are a little bit softer. Let's say that employment report next week is solid, you know, solid employment with someone's

cooler wages. I think that will help out. And I also think, you know, employment with someone's cooler wages i think that will help out and i also think you know as you go into the fourth quarter everyone knows seasonality and one has been talking about it but we are turning as we turn into november typically a better seasonal period now you don't make an investment just based on seasonalities um so but i think just solid growth and benign inflection could be enough to get people a bit more excited to move back into this market and let's not forget you can move from fear to greed very quickly just like we've moved you know from um from from greed to fear pretty quickly since july no you make a good point he does right i mean this has been um at times a very big counter trend market just when everybody gets

super scared nervous and everything else the market bounces. Now we're kind of in that feeling again. But I'd ask you, ex-a-dovish Fed, what is the real catalyst if we can't count on earnings, at least in the near term? Bonds could get to the point of being so oversold or yields overbought that you crack towards trend. Trend on the 10-year would bring you down to about 4.3%. Maybe that coincides with the seasonal tailwind, and that's enough to bring us higher into year end.

But as we've seen so many times with the 10-year, it is in an uptrend. And so if it starts to fall, your likelihood is that it continues its uptrend, which means it's a relief rally, not necessarily the start of something great. Well, see, as you're saying that, I'm thinking, well, if I'm buying bonds, I'm probably, you know, I've got like econo fear, right? I'm worried about the macro and or not knowing what's going to happen in the Middle East. In other words, the reason the reasons that yields start going down is not the right reasons you want yields to be going down.

Exactly. That is the catch here, which is that if you're really hoping for an easier, more loving Fed, you're actually betting on the fact that the economy is weaker, earnings estimates are too high, earnings need to drop, and that yields are dropping for a reason. And if that reason is a bad reason, then usually risk assets, which include equities and credit, do bad initially until the Fed steps in, supports markets with liquidity, and then you have your rally. Right. But it's two phases. Yeah, sorry. Keith, last word. I mean, that is the cross-current we have to deal with. We want yields to go down. The problem is if they're going down because we're worried about a recession or we're worried about new developments in the Middle East that make us, you know, even more uneasy than we are. That's not great.

Yeah, well, we can have yields come down because inflation is somewhat moderating. We had an overshoot, you know, in a short period of time. From my view to work out, I don't think we need yields down to 4 percent, but to come in and show some stability, because don't forget that, you know, all asset prices are priced off that risk-free asset. There's been huge volatility, so it's not just the direction. It's just seeing some stability. And then the other thing is, again, we've had a broad-based reset already. So just having some stability in interest rates, I think, can go a long way. And we're losing sight. Even though

the earnings season hasn't been great, we are at a 52-week high on forward earning estimates as well. And Atlanta GDP, the first print for fourth quarter is showing about 2.3%, which is fine. I want to ask you one more question. I know I said that was the last word, but then I was thinking, you know, what's happened in the bank stocks? Yeah. Ex-Jamie Diamond selling, right? For reasons that we don't need to read into anything more than what they suggested it was, at least from Leslie's reporting. Goldman down big. I mean, it's not great for the overall market if the financials can't find any stability, is it? I'm not just talking about regional banks.

We could show a bunch of regionals up here, too, that would look a lot worse than what we're showing you on the screen right now. Exactly. And the old phrase is that you don't need banks to lead in a bull market, but you certainly can't have them lagging significantly because are they sniffing out some kind of brewing weakness within the economy that we should be concerned about? We do know that we still have balance sheet issues with a lot of the banks. They're not having to realize it because of the Fed support, but that starts to expire in March. And so as we go forward into 2024, even though these names are cheap, is there more earnings risk to be considered?

I mean, there's a handful of stocks today that are taking the biggest chunk out of the Dow. And Goldman Sachs is one of them. It's 50 points in and of itself. But JP Morgan's on that list. And Chevron's taking the biggest chunk, 80 points, 80 points on the back of its earnings. I appreciate the time very much. It's Cameron Dawson. Keith, we'll talk to you soon. Thank you. That's Keith Lerner of Truist. Let's get to our question of the day now. Speaking of those declines, which Dow stock would you buy on today's pullback? JP Morgan, Chevron, J&J, or P&G? You can head to at CNBC closing bell on X to vote. The results coming up a little later on in the hour. In the meantime, a check on some top stocks to watch as we head into the close.

Christina Partsenevelos here with that. Hi. Hi, Scott. Decker's is at an all-time high as the shoemaker smashes estimates alongside strong guidance, which is no small feat. B of A reiterates its buy rating, saying the company's UGG and HOKA brands are, quote, firing on all cylinders. Shares of Decker are up about almost 45% year-to-date and up almost 20% right now. Sanofi, though, opposite direction, having its worst day ever on weak guidance as the French pharma giant aims to spend more on research development, but that's overshadowing plans to spin off its consumer

healthcare business following similar moves by rivals like J&J. Today's move has literally wiped off more than $20 billion from Sanofi's market cap. Shares are down 19%. Scott. All right, Christina, thank you. We'll see you in just a bit. Christina Partsinevelos. Up next, Fundstrat's Tom Lee.

Well, he'll join us on the pullback. He's got a heavy lift. He's bullish, as you know, in the face of this selling that we've seen this week. So he'll join us next to tell us what he thinks happens next. Plus, Sam Bankman-Fried still testifying in front of the jury in his fraud trial. A few blocks from here, we've got the highlights straight ahead. You're watching Closing Bell on CNBC. We're back.

Sam Bankman-Fried testifying for the second day in his fraud trial, this time, though, in front of the jury. Kate Rooney joining us now with the highlights. Hi, Kate. Hi, Scott. So Sam Bankman-Fried has been on the stand today. He's been acknowledging mistakes and the fact that customers were hurt in the collapse of his crypto exchange, but says that he did not commit fraud. Bankman-Fried saying that his biggest mistake was not controlling risk. When asked if FTX had a risk management department, he responded, we sure should have, which got some

chuckles inside the courtroom. When he was asked asked by his attorneys did you defraud anyone he said no I did not also said no when asked if customers if he took customer funds rather he replied no their banquet freed has tried to shift the blame to other executives and claim at times he was too busy that he didn't know about some of the issues going on in his crypto hedge fund also said he was too busy to get a haircut he was known for that hair he's got a much shorter cut on the stand lately they talked about his romantic relationship as well with caroline ellison former girlfriend and the ceo of his hedge fund said that he didn't have the time or the energy to put into that

relationship he went on to say he did not direct colleagues to make political donations either. When it came to spending on venture investments, he said he believed funds for VC investments came from the profits from his hedge fund, Alameda. He says he thought that was OK because he owned the hedge fund and it had a few billion dollars of arbitrage based profits. He said he saw no reason he couldn't borrow from those funds. Scott, back to you. All right, Kate, appreciate that. Kate Rooney, outside the courthouse, a few blocks from here. Major averages taking a look now. Dow's down 429.

We're on track for steep weekly losses. The S&P and Dow, as we said, near session lows now. Joining me now, Tom Lee. He's the co-founder of Fundstrat Global Advisors. Been one of the more bullish people, obviously. Welcome. It's nice to see you again. I said in one of the earlier teases, you have a heavy lift, right? And this week has left us with that. What do you make of what's

happened? Well, it's been a tough week. I mean, this has been a victory for those who've been bearish. But to me, this is also a reminder that the stock market and investor views about equities really depends on FANG. You know, FANG didn't do well this week in earnings, and it really sort of took some of the support out of stocks. Do I think the Fang thesis is changed or broken? I mean, I don't think so. To me, if someone hasn't owned Fang all year, this is a chance to get in. But the thesis can be intact, right, that these are the places you want to be. You can have that while still saying, you know what, the stock's got too stretched and the valuations got too rich, and now it's time for a pullback. Yes. I mean, you know, we're down 10 percent from the highs for the S&P. So I think a lot of bad news is baked in. But we've also done, as you point out,

a lot of technical damage and people don't like the tenure at five percent. I mean, this is why next week is pretty critical because we do get some pretty important data points. I mean, momentum is a dangerous thing at times, right? I mean, you can say, well, it can carry you when the times are good for these FANG names. And that was one of the criticisms the whole time. It's seven stocks and 493 stink. And then now it's 493 still stink and the seven look dicey. That's a problem.

It is. I think there is some good news. You know, I think this week there has been some improvement in the internals of the other 493. We did a report even last night about how the small caps are starting to look a little stronger. So I think that the 493 is less bad. And in terms of returning capital and compounding capital, the FANG story is strong. So you're right. I don't know if the market's comfortable with the multiple now, but in 12 months, I think they're a great opportunity. Is this a cautionary tale about where earnings expectations have gone? That's been the big debate. Now we're out of the earnings recession.

We start to get liftoff, and then we get higher and higher as you turn the calendar into next year. Do we need to rethink where we are? Because we're worried about the economy rates are high and may remain such yeah I've got a contrarian take on earnings number one if you look at the stock market reaction of those that beat they're up a half a percent that's better than q1 and q2 of this year so actually we're getting better reactions it's just like you said it's more in the 493, not the FAANGs. The PMIs have turned up year over year. And historically, that leads to earnings growth year over year. So it's confirming that earnings should strengthen from here. And if we look at

even Q3 earnings, they've actually gone up 2% since the start of reporting season. So I think the FAANGs disappointed in terms of market reaction, but the rest of the market's actually been okay. And I think that is what's going to help us get through the rest of this HANK'S DISAPPOINTED IN TERMS OF MARKET REACTION, BUT THE REST OF THE MARKET'S ACTUALLY BEEN OKAY, AND I THINK THAT IS WHAT'S GOING TO HELP US GET THROUGH THE REST OF THIS YEAR. I JUST WONDER IF THERE'S A COUNTERINTUITIVE WAY TO LOOK AT THAT. SO PMI IS GOOD, GOOD FOR EARNINGS. HOWEVER, THE FED DOESN'T NECESSARILY WANT ALL THIS TO BE GOOD, RIGHT? THEY WANT DEMAND IN SOME RESPECTS TO START TO SLOW DOWN, AND THEY'VE BEEN UNSUCCESSFUL IN GETTING IT TO DO THAT.

SO AS THEY POTENTIALLY STEP UP THEIR EFFORTS TO MAKE DEMAND SLOW DOWN, been unsuccessful in getting it to do that. So as they potentially step up their efforts to make demand slow down, that potentially hits earnings, doesn't it? You're right. I think there is a view that the Fed is running out of patience. They're like, look, when are we going to break the economy? But I think maybe the more subtle point is I think the Fed would like to see the labor market slow down because we know underlying the two big drivers of inflation are housing and autos. They've slowed, but the job market's still strong. Next week is the jobs report. If it's a little soft, I think that takes the edge off. And of course, next week we get the FOMC meeting. And again, I think that they're going to be patient because a lot of tightening, especially five-year,

5% tenure is already going through this pipeline. So I think the Fed're going to be patient because a lot of tightening, especially five year, five percent tenure is already going through this pipeline. So I think the Fed can actually be patient. Sure. But no. Now, I agree with you that the backup in rates has given them the flexibility to be to show softening, then we have to worry about what's been the whole key to this thing to begin with, and that's the consumer remaining strong. Job losses pick up, spending goes down, the soft landing story starts to unravel, doesn't it? It's a delicate balance because, you know, you really want to see jobs at a hundred thousand a month and you want to see wage expectations cool off so it's a tricky calculus but I I think that we don't have to reflexively say hey if the job market slows down we're headed for a hard landing that might be the markets

reaction but then that ends up being an overreaction you're you still a Bitcoin bull yes I want to end our conversation on that because I think it's the best performing asset class of the year. Certainly one of them. It's up more than 100 percent. So what's your view of it here? And why has it been going up the way it has been recently? Well, there's a couple of things. One is it's been real buying. So there's real money institutional buying. We can see it in the CME volumes at all time highs. And we know Asia has been buying again and they've been absent. So this is true people wanting to get in. It's been a good, sound money story, especially as we worry about Washington. ETF optimism, too. Is that where

you're going to go also? Yeah. And the ETF, I think, is far bigger than people realize, because, again, supply is going to be only $12 million a day after the halvening. ETF can be $100 million a day of demand. We get a turn in the markets next week, Tom. We've got Apple reporting. I think there's three catalysts, so you only have to get one out of the three right. It's Apple, the FOMC, and the payrolls report. Only one?

If one of the three is better than expected, I think the market rallies. Don't you think, just given what's happened, we might need all three? You'd need all three if the vix wasn't elevated and we weren't down 10 already and we had a terrible three days so i think to me sentiment is so bad that i think it is rubber band stretched all right i appreciate the conversation as always thanks for coming down doing it in person tom lee a fun strat don't give up the ship that's what gold Goldman Sachs' Tony Pasquarello says after another rocky week for stocks. He'll tell us why he thinks the path of least resistance for the markets is still higher when closing bell returns. Stock still on shaky ground after a week of critical mega cap earnings reports.

It's not the time to give up the ship, though. That's according to our next guest, Tony Pasquarello, Goldman Sachs' head of hedge fund client coverage. He joins us back at Post 9. It's good to see you. Welcome back. Thanks, Scott. of hedge fund client coverage. He joins us back at Post 9. It's good to see you. Welcome back. So you put out a note, usually Saturday mornings, which a lot of us get and everybody reads, right? Last week, the headline on your note was the path of least resistance was likely higher. I come here on Friday and I'm like, oh, what is he going to write now?

Sometimes you get the bear and sometimes the bear gets you. The path of least resistance was lower, not higher. I'd say a few things, I think, in terms of trying to understand what's playing through in the market. One is I think investors are holding their breath around a very fragile geopolitical backdrop. I'd use the same word choice as it relates to the bond market. I think stock operators are holding their breath as it relates to interest rates. And then the third piece is, and this is where I think we were surprised about the setup, mega cap tech earnings,

clearly a net negative for the market. So we can impact any one of those. Has the game changed as a result of that? I don't think so. I don't think so. I mean, I think if we sift through earnings quality itself, the quarter was fine. It's true for the companies who were in question this week.

I think it's more broadly true of the index. So the percentage of companies beating final estimates was higher than normal. I think the challenge was twofold. One is I think it's hard to disassociate that local price action from the broader risk-off narrative. I think sometimes the acronym, the pack of those stocks, moves as a group in a risk-off or a risk-on context. I think the other piece is if you didn't upwardly revise 2024 guidance, the market punished you. On net for S&P and NASDAQ, that estimate hasn't come down. It simply hasn't gone up. And again, I think the bar was higher for those stocks than we realized.

One of the telltale signs of a dicey market is when earnings come in good and stocks still go down. How problematic is that? Well, I think that tells you a good bit about flow of funds and positioning. And what I'd say on that front is we've got a very busy couple of weeks in our franchise. I think the systematic trading community is trading around a record short. I think the fundamental community have been in sell mode. So if you look at our prime brokerage data, length held by clients is at a three-year low. And on top of that, and this is data, length held by clients is at a three-year low. And on top of that, and this is where things will improve, you've had a corporate community

have been in buy-back blackout mode that is starting to turn in the other direction as companies report. So I do think the technicals get better, but they've been very difficult over the past couple of weeks. If I shouldn't give up the ship, which is sort of the way we teased you, what's the most important or powerful catalyst for reasons that we shouldn't to still think we could have a move between now and the end of the year? So if I were to sketch out a bullish call for November and December, I think it's three things. I think one is growth remains strong, but not too strong. So here's what I find so interesting about the world we live in. If you and I were sitting here in August, the consensus estimate for Q3 GDP was 50 basis points.

We know from yesterday Q3 GDP was not 50 basis points. It was 10 times that. It was 4.9%. What happened along that path? Well, S&P sold off three handles. Why? Because the long bond backed up 75 basis points. And so that, again, that cat and mouse game,

I'll use that word choice again, has been very difficult for the stock market. So I think one is, if growth actually slows down a little bit, which is our expectation, in a way, I think that will take down the temperature on the rate market and the equity market will breathe more easily. So you're more apt to say that bonds are in the yields are in the peaking process? I would hope so. I would hope so. I mean, the front has been very steady, so that's been helpful. The back end is where people have been nervous. That's been the most disanchored and open debate about how we're going to soak up all this duration next year.

But again, I think we go from a 5% run rate in GDP to a 1% or a 2% run rate for GDP. I actually think that's a more friendly temperature for the market. And then the second piece alongside earnings would be flow of funds. And again, I think the market is probably sold out. I think position sentiment is about as negative as it could be. And I do think the corporate bid is usually very forceful in November and December. I don't want to make too much of market seasonals. You've seen kind of, I feel kind of funny talking about it in this context, but typically November, December comprises the best two months of the year. Does Powell give us some kind of Halloween surprise next week that we need to be cognizant of? What are your thoughts around that meeting?

We think they're done. The market thinks they're done. Done fully. Done with the cycle. I think the rhetoric from the committee suggests they want to be done. Now, you've pointed this out. I think Powell has been able to sit back a little bit and let the market do the work for him. So if you look at our financial conditions index since the summer, the backup has been equivalent to essentially 75 basis points of rate hikes. That might be appropriate given how strong the economy's been. A lot is going to happen between the November and the December FOMC. Certainly as it relates to the geopolitical backdrop, we have a refunding

announcement. We could have a government shutdown, although that is not our view. My guess is he plays it pretty close to the vest and again, lets the market do some of the heavy lifting for him for now. I felt like that was the opportunity he had at the speech at the New York Economic Club, where a lot of the other Fed speakers preceding him in the days prior basically said just that, right? Rates backed up. The financial conditions are tighter. It's the equivalent of one rate hike. And then maybe I was naive. I don't know. He didn't really go there. He came off, I think, to more people than not as hawkish. Yes.

So that was like, all right, well, maybe all bets are off. I don't know now what to read from him, and maybe that's just how he wants it. And again, if you look at core PCE today, if you look at core CPI, I mean, the reality is core inflation is a lot closer to 4% than it is at 2%. We're on track to create 2.8 million jobs this year. For all the debate about the consumer, I thought retail sales were very constructive. And so he's dealing with a hot economy. He's dealing with above-trend inflation.

So, again, I think to let the market do the work is probably appropriate for now. It's certainly given them the flexibility to be patient, you would think. Yes. And now we'll see. And now we'll see, followed by the jobs report. We'll talk to you soon. Tony, thanks. Thanks.

All right, Tony Pasquarello, Goldman Sachs, joining us right here post-night. Up next, we're tracking the biggest movers as we head into the close. On this Friday, Christina Parts de Nevelos is standing by. Once again, with that, Christina. I'm standing by with beer queso on my list today, but no hard Mountain Dew. I'll explain what those items have to do with my stock movers and maybe my happy hour, too. Details next. All right, we're about 15 out from the closing bill. Christina, excuse me, parts of Nevelos has the key stock she's watching.

Christina. Christina. It seems like my earpiece isn't working, but I'll keep going. Chipotle is higher after handily beating earnings estimates, along with better-than-expected steam store sales growth. Kizzo and beef costs rose during the quarter, which were offset by price hikes last year. The company recently began hiking prices again, but says traffic has remained strong, and that's why shares are up over 5%.

On the other hand, Boston Beer is lower today after cutting its guidance. The Sam Adams Brewer saw more strength in its Twisted Tea and Hard Mountain Dew brands, but it wasn't enough to completely offset weakness in brands like Truly and Dogfish Head. Yes, Dogfish Head. Shares are down 14%, Scott. All right. Christina, thank you. Christina Partsinovalos. Last chance now to weigh in on our question of this day. We asked, which Dow stock would you buy on today's pullback? JP Morgan, Chevron, J&J, or Procter & Gamble?

Head to at CNBC closing bell on X. The results are next. next for the closing bell market zone now cbc senior markets commentator mike santoli here to break down the crucial moments of this trading day plus christina parts and envelopes on on what Intel's quarter could mean for the chip makers reporting in the week ahead. Pippa Stevens on Chevron's post-earnings sell-off. A huge weight on the Dow today. And how about this headline, guys? I want to just get this out there before we begin

the conversation. A Wall Street Journal headline says that Google, one of the worst hit of the mega caps this week, that stock locked down 10 percent on the week. We'll invest up to two billion dollars in the open AI rival Anthropic. It had already said five hundred million. So now it kicks in another one and a half billion. We're going to two billion dollars now. And remember, Amazon had said it would invest four4 billion into Anthropic. So, you know, judge this for what it is. Is it an act of desperation on Alphabet's part to try and become a bigger player in the AI game, which some say it's ceded to people like Microsoft? We shall see.

But, Mike, it's nonetheless, it's an interesting story about the arms race, if you will, taking place among the mega caps, and that's been the center of the activity this week. Yeah, I'd say it's an act of urgency or additional urgency, if not desperation. We're about a year out from when chat GPT first showed up. So one year of this idea of who's out in front. It's not the kind of thing I think they'll get rewarded for right now, except they have to constantly seem like they're on the right side of this disruption curve. Yeah. So how are we going to look at what happened this week as we turn our attention to Apple? And, you know, it's the biggest stock in the market. The chart has not looked great at all. And the pressure is really on now. Almost none of the charts look great at this point.

You've definitely done some structural damage here to all the uptrends to the point where it's now that moment in the correction where you say, OK, is it now so bad it's good? Is it now at the point where we can say it's washed out, it's over? So, yeah, you're starting to get in that in that area, if not absolutely there. The question is, to what end are we really just going to have a cursory relief rally or is it going to be something more? You've had valuations come down as earnings have come through fine and prices declined. You definitely had sentiment turn sour, but earnings have come through fine and prices declined. You definitely had sentiment turn sour, but not all that negative. I do think the sell on the news on decent results from the mega cap tech stocks was another piece being taken out of the things people were comfortable with.

And so that's, you know, it's all part of the process of folks losing hope and feeling as if there's nowhere to hide. We'll see if that matters. You're one of those who reads, you know, Tony Pasquarello every weekend morning, and you heard him say, don't give up the ship. You know that the technicals are still in your favor. Buybacks are going to come back because of blackouts over seasonals are in your favor, too. I mean, it's an interesting counter view to where the negativity has really gotten us. It would just be strange if we said this entire market fell apart because the economy was doing better than expected. Companies were able to

finally grow earnings again and provided yields calm down as they have this week. So all that put together, I do think you have an extra little dose of Friday anxiety. The last three Fridays you've had a clenching up of the market with the sort of unknowns of the weekend on a geopolitical front.

Yeah. Earnings next week beyond Apple, of course, Christina. Got some chip names. What does Intel tell us, if anything, a nice nine plus percent gain today? Yeah, a nice nine plus percent gain. But I think like Mike mentioned just earlier today, that's, you know, where the stock was about 10 days ago. But with a lot of descriptions for this company, it was better than feared, less bad. And these are what we heard for Intel's earnings beat. Management did promise they're on track to deliver five new manufacturing processes in four years in an attempt to catch up with Taiwan Semiconductor by 2025. But the quarter was really driven by PC sales. This is the third consecutive quarter of PC shipment improvements, and that should bode well for AMD's earnings out next Tuesday. AMD is really the only other major competitor in the PC market, but if you look at its stock, it's down 13% just

over the last three months, and it's heading for its third straight month of losses. Intel also said it was supply constrained for its Gaudi AI chip, with order pipelines doubling just over the last three months. That's pretty good news forIA and AMD, who both make AI chips. Lastly, autonomous driving firm Mobileye, which is controlled by Intel, grew sales by 18%. Yes, the stock is down 4% today, but Texas Instrument also saw a resilient auto segment. And those are positive signs for OnSemi. Earnings are out on Monday. Although, if you look at On on semi stock, it's been

having a rough go ever since the UAW strike started. On semi, like AMD, is tracking for three straight months of losses. All right, Christina, I appreciate that very much. Pippa Stevens, Dow's down about, well, 415. The biggest drag within the Dow today, Chevron, now almost 7% down. Is it on earnings? Is it on prospects for the deal with Hess or C, all of the above? Yeah, Scott, I think it really is C, all of the above. Clearly disappointing the street when it comes to earnings. EPS was 70 cents short of estimates. That weakness coming from multiple divisions, especially international. On the upstream front, Chevron noted a six-month delay for its expansion plan at TCO, its operation in Kazakhstan,

and also said that their dividends at that project will be about $2.5 billion lower than previously expected. Overseas refiners underperforming estimates as well. Chevron also citing taxes and what they call timing effects. That includes things like cargos on the water that are in transit and cross over quarterly periods. But of course, Scott, as you said, these results definitely overshadowed by the Hess announcement on Monday. And it feels like it is an overhang still for the stock as investors evaluate how this will play out in terms of a short-term hit in favor of long-term opportunity. And the company, of course, ensuring shareholders that it will pay out in buybacks and

dividends in the future. But it seems like the market's looking at the here and now right now. I appreciate that. Two minute warning. Pippa Stevens, thank you very much. I turn back to Mike Santoli. Not exactly at the lows on the Dow or the S&P, not that far off either. No, firmed up a little bit. And the S&P 500 has basically got down to 4,100. If you go back to April, May of this year, spent just an enormous amount of time just kind of hashing around those levels. It was considered to be a possible ceiling for the trading range for a long time. In theory, that should be a place where you do have some buyers find reason to come in there.

The idea that we've sort of tried to kind of argue it out at that level for a while. So you have that going for us, at least in the very short term and then you know we do have the everyone now pointing to the treasury refunding announcement the fed next week apple so you should at least be able to clear the way uh toward having the the narrative get fixed in one direction or another on whether the bond market can uh can sort of live with the current level of Fed policy and demand. I wonder how many of the big events next week have to, quote unquote, go our way out of what are really four.

Apple, as you said, Fed meeting, jobs number, supply as well from the Fed. I wonder now, just given what this week has put in, how many of those four you need in your corner? I mean, the more stretched you get to the downside in price, in theory, you don't need that much to be wonderful. You just need it to be a little bit less bad. And, you know, you have a fewer new lows being made in the stock in the New York Stock Exchange, even as the market made a new low. So you squint. You can see the market trying to sort out some potential opportunities that it'd take a shot at here. All right.

We'll see you on the other side of the weekend. Great to have your insights this week, Mike Santoli. All right. So the Dow is going to go out 376-ish. S&P, boy, going under 4,200 this week was a story. That was a couple days ago. It's closer to 4,100 now. I'll see you on the other side.

OT with Morgan and John.