Closing Bell - Closing Bell 11/10/23

Episode Date: November 10, 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.

All right, Kelly, thanks so much. 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 the rally. Take a look. The scorecard with 60 minutes to go in regulation, that 4,400 level on the S&P. We are above that. It hasn't closed above there since back in September. So we're going to watch that over this final stretch elsewhere, strong across the board a big reason we're here today mega cap tech several of the big names with really nice gains today apple around 185 above that level look at microsoft another new all-time high today and nvidia back above 480 dollars that's near seven percent over the past week and that's where the move has been the strongest as a result nasdaq not surprisingly the outperformer as it has been for the entire year.

If there's a knock this week, it's the Russell 2000. It's been mired in a long and painful slump, even though higher today, as I just showed you, small caps can't get much going lately. They're not the only sputtering sector of stocks, that's for certain, which leads us to our talk of the tape. Does it matter? Does it make a difference to the rally if it continues to be led by the biggest names in the market? Let's ask Adam Parker. He is the founder and CEO of Trivariant Research

and a CNBC contributor. Look, that's the knock on the rally all year. Does it matter or not? Not really. Not really. I mean, if you're trying to beat the S&P 500, then you have to own a chunk of those names. We've been saying that for a couple of years. And if your job is to beat the S&P, you got to risk manage those names and get your alpha elsewhere. But I mean, as we've been saying, it's very unlikely, I think, in the next three to six months that the small cap companies are going to have more achievable estimates or have more margin expansion than the big seven. It's just unlikely. Why? Well, you need wages to be more beneficial, commodities, depreciation, pricing and mix. The small cap companies just don't have as much of that

as the big ones. So I think it's going to be hard to have a big market rally and not have the magnificent seven like pro rata participate. Well, of course, but it's a matter of the other stocks that are not participating. You know, look, when the S&P was at 4000, people hated it because they're like, well, it's only being led by seven stocks. And then when it was at 4200, hated it still because, well, it's a magnificent seven and nothing else. Well, here we are at 4400. And in large part, it's the mega cap stocks and kind of everything else. I mentioned what the Russell's doing lately, and it's ugly.

And a lot of these other sectors, energy's done nothing. Health care's done nothing. Healthcare's done nothing. It depends on who you gathered the money from, your investors and what fees you charge and what your mandate is. But if your mandate is long, only beat the S&P 500, you absolutely have to own at least the market weight of the big seven. You don't know anything about them. The idea that somebody knows something about Google that isn't in the price, I think, is rough. Or Microsoft or Apple. They're covered by 4,000 buy-side analysts and 60 sell-side analysts. I know, but at what point do these stocks exhaust themselves and then everything else has to come up? When their earnings are less achievable and their margin expansion and growth

is less attractive. You know what the answer is? When things get much worse and six months before the accommodations coming, then you buy small caps because, you know, they're going to recover more lower quality and small cap stuff work. So if we still think they're going to, you know, raise one more time or we're still at that part of the cycle, why am I going to go all the way anticipatory to three to six months before? So things have to get way worse before that works. So you're saying it's too early. Way too early. Yeah. For small caps.

That's right. Because they haven't troughed yet. Yeah. They haven't troughed yet. There isn't enough pain in the earnings. So earnings are pretty good. I mean, they're okay. So, you know, you need earnings, I think, what, X energy?

They're up 7% over this year when people were calling for down 5%. So the answer is you need a lot more pain in the economy, a lot more pain in earnings. You need to dream that accommodation is three, six months away. Then you get in, you buy the low-quality stuff that's going to survive, the small caps that then have a runway for margin expansion. But sitting here at this point in the cycle no no and then you know i don't think that should be surprising to people so simply the fed potentially being done is not enough and that's the central question we we ask ourselves every week because there's a new fed speaker every week including mary daly earlier today i want you to listen to what she said. Are we pretty good where we are? Listen.

Policy is in a very good place. We have it positioned so that in my judgment, the risks are over-tightening and under-tightening or roughly balanced. And we see policy working. That's the second point. Policy is working. All right. I mean, I hear we're done unless the data suggests that we need to do something else. What do you hear? I prefer to let other people judge whether I'm doing a good job or not. So, I mean, for somebody to say they're doing a great job and it's perfect seems a little off. Policy is no. She's saying policy. She's not saying we're doing a great job, but she said policy is in a very good place that that I.E. I don't need to do anything else because in her mind, it's working.

Look, I hear you. I think they're smart people with good access to information and they have a hard job. What I would describe is going on is, look, the first six months this year, the market was good because earnings were way better than people. Then the market was bad in Q3 because all of a sudden rates didn't matter again. They backed up a lot. That hurt the multiple. Where are we today? I think we're close to being done hiking, but we don't know when the the cutting's coming and in my mind it wouldn't

be proactive cutting it would be when things really erode and deteriorate and your fear about earnings is far greater than it is now maybe that will cause a sell-off and then you'll say all right now it's time to get the best risk reward for small caps but i'm not going to do it while they might hike one more time or they're they could more time. They might not cut for two years if the economy's okay. Okay, but why has the market been rallying the way it has even well before whatever cuts would happen? Isn't it rallying because the Fed is about to be done with this historic regime that they've been on? I think that was a lot of the first six months of the year that had earnings. Look, I think it's Goldilocks.

That's why. What does Goldilocks mean? It means earnings are still okay, and you're dreaming that they're done hiking and their accommodation's coming someday. That's what it is. And as long as earnings are okay and you think they're going to grow next year versus this year, why would you be bearish on equities? That's kind of the point we've been making when we're on here is it's 70-30 bullish

because people are behind. They didn't come in this year, overweight equities. They like bonds more. They didn't own enough tech, and they're chasing. It's a classic kind of November- own enough tech, and they're chasing. It's a classic kind of November, December setup. And we'll see what happens in January. But right now, earnings are OK, and the Fed's close to being done.

So that's a good cocktail. You're putting together what you call the uninverted playbook, right, as the yield curve re-steepens, which, you know, obviously some would suggest, well, that just means you're closer now to a recession because that's a precursor often to actually having a recession. But what does that, in your mind, the uninverted playbook look like? You know, it's just I think all of us have thought for a while, man, that two-year yield looks more attractive than the 10-year. I don't know any, well, I know very few individual people who say I'm going to buy the 10-year yield and hold it to duration. Right? That two-year, you might say, all right, well, if it backs up, I'll hold it to two, I'll collect it, it's not bad. So I think ultimately there'll be

enough demand for the two year that we should un-invert and get that normal shape where the 10 year old's above the two. If that happens, you probably get a bit more of a, you know, a classic value playbook unfolding for a little bit. We'll see. That value universe is so much smaller than growth that it might not drive everything. But, you know, you could get energy working again. You could get a little bit of a bit for the banks. All right. So let's go there.

Okay. Because of the names on your list of candidates for outperformance, it's Halliburton. It's SLB. It's Marathon. It's a lot of these stocks. It's Valera. It's a lot of these things that haven't been working. Right.

EOG. Yeah. Apache. Why? Why is it going to work now? Look, I mean, very tactically, you know, the trading part of me, which I would say is a very, very small part of me, worries about how the stocks have acted in the face of a couple of big deals. You know, you saw with Chevron and Hess and Exxon and Pioneer, I would have liked those stocks to act better. And obviously, demand fears and recession fears have really hit oil in the last five or 10 days while the markets rallied. The thing that I can't get my head around, I've said it pretty much every time I've been on for

two, two and a half years, and probably will say for the next five or 10 is, we cannot produce enough oil to where demand is going to be five, six, seven years from now. We know we're going to need 107 million barrels or whatever it is, and there's no way to get that much more. So demand will exceed supply in any one, two, three, five, or 10 year. If right now we're afraid of a demand recession, they're not going to act great. Do you want to own these stocks for the next five or 10 years? And are they going to massively outperform the S&P 500? Damn straight they are. And so you want to be cute and time it for three months, go for it. I'm going to own them like I did in 21, and I did in 22, and I did this year, and I'm going to look back and I'm going to massively

outperform the whole time. Are you calling a bottom in regional banks like Bill Gross did in the past 10 days or so? I mean, you must be if you're suggesting Regions Financial, Huntington Bank shares, Citizens Financial. These are a lot of the ones that he said he was buying. They act well when the unabortion happens. Look, I do think there are stocks like that. Truist is another one where the price got so low. That's another one he bought. Right, where you look and you say, if this is a real bank in a good region with a lot of private credit problems,

not a lot of commercial real estate problem, it's probably a pretty good risk-reward. Do I think it's going to be the next market leader for the next five years? No, but I do think it's tactfully oversold and we'll participate if we get a little bit on inversion. All right, let's bring in CNBC contributor Bryn Talkington now of Requisite Capital Management into the conversation. So it's good to have you on the program. Are we in a better place overall for stocks right now? Well, we're certainly in a better place than we were last month. And, you know, we talked about this last week.

The mutual fund selling was over. And since the beginning of November, that seasonality has kicked in. Right. And so, I mean, the NasDAQ median return since 1985 is almost 4%. I think we're up almost 4% this week. And so I think that seasonality, it's real. It's not just some made up thing. That will continue. I will say, I mean, the S&P is what, going to close over 4,400 today. And so I think we can grind higher to the end of the year, which is what we would expect with seasonality. But I still think these Treasury auctions, which really none of us have ever focused on for decades, are going to continue to be a narrative that we're going to have to deal

with. Because once again, that 30-year auction was really weak. And don't forget, international, we have sellers and the Fed is a seller. And so I think that's going to continue to be the seesaw between the other inflationary data that we get is what happens in these treasuries auctions, because we're going to have a truckload of supply for the foreseeable future. So I think that's a risk that we haven't had to deal with in decades. Hey, Bryn, I struggle with the supply argument myself because in the past I've heard that argument a ton and then if it gets risk up yields go lower anyway. So how do you think about that? Because I'm of two minds on it. I feel like you might be right right now and there's supply. On the other hand, we've seen supply come on QE 1, 2, 3, twist, torque

every other time and then yields still can go lower. But we're in QT, right? So first of all, we're in QT. But I'm saying that if you look back in time, we've actually had a failed Treasury auction one time in the 70s. So it's not without precedent. And so what is also without precedent is we've never had this type of spending pre-recession. And so I just think that the market is clearly telling us, the treasury market is saying, hey, am I compensated enough for these yields? And are there enough buyers in aggregate? We don't know because international buyers have really cut in half over the last few decades. So it's not like a base case, but it's a metric that we are going to have to tackle. And I think we'll create a weight somewhat to the upper bounds of the market.

Maybe not this month, because I think we have this thrush of energy on the positive side, but that we will have to deal with over the next three and six months. So, Adam, what do we do with, you know, the cautious clearly here, Bryn and others, the cautious are still cautious. The bullish are still bullish. What breaks either side? What event is it? Is it something before a cut or we literally need to wait that long? I think right now I don't have a clear view on whether earnings in the second half of 2024 are accelerating or decelerating, right? We know that the market is, let's call it three quarters anticipatory of that. So when earnings collapsed last year,

the market got killed before that when the market ripped. So I think right now the challenge is we just don't know enough about whether earnings are going to be good kind of second half of next year. They kind of look flattish. So we don't know if they're accelerating or decelerating. They look about the same level. And so the market's kind of, you know, fits and starts with flows or whatever. To get 5,000 or whatever, you know, kind of get nice upside in equities, we need to believe that earnings are going to accelerate in the second half next year

and be higher in 25 than 24. And I think it's a little too early. I need to like understand, you know, the, you know, the economic path a little bit better. Bryn, when does it matter? I asked at the very top of the program in the opening read, does it make a difference if the rally continues to be led by the biggest stocks in the market? That's the way it's been. Well, people throw shade all over it, but the stock market still goes up.

When does it matter? I think, yeah, I think the last time that you saw this much of a spread between, you know, the S&P and the small caps was like 99. So, you know, that could just be a data point. But I do think it matters, but I also think that you have two different things happening. On the mega caps, you actually have durability of earnings, and they don't care about the 10 year. They don't need to go to the debt markets.

So between the durability of earnings, they have a macro, they have a tailwind of AI, especially with Microsoft, Google, and Meta, and Amazon. The small caps, though, at the same time, you have a lot of regional banks of small cap value. They are definitely interest rate sensitive. So we're in this unique period of time where I can totally get the reasons why small cap in general are not doing well because they are absolutely interest rate sensitive. And I get why the large caps. Ultimately, though, I do believe in a healthy

market, you need more than just seven stocks. And yes, I can run a screen and find other stocks that are at 52 weeks high. But tell me one person that has all of those stocks in their portfolio. Nobody. Right. So in general, I do think you want more breadth in the market. And we just haven't seen that. And so in the meantime, if you want to have returns, you better own the Q's in the S&P 500. How do you address that? I don't actually maybe maybe. First of all, I don't I didn't disagree with anything Brent said. You know, I think she, as usual, is sensible. I think on the small cap side, I would say I don't think they're as cheap as that optical chart of the cap versus equal weighted universe, meaning they're not as cheap because when I peel it back, mega cap growth is sort of a little bit expensive, 75th percentile versus history, but so is small cap growth.

Mega cap value is super cheap, but so is small cap value. When you look at quality, yeah, the mega large cap quality is a little bit more expensive, but it's just way higher quality, more free cash flow, higher margins than the sort of group of small cap quality. So when I adjust for sort of gross profit, easy to gross profit, it doesn't look like small caps that attractive to me on the valuation front. It's nowhere near as extreme as that 1999 chart that she mentions, which is factually true. But I think when you peel back the onion, I think for the point she mentioned, rate sensitivity, kind of earnings trajectory, margin profile, et cetera. So I think you own small caps when you're way more nervous and you really have to pinch your nose and we're not at nose pinching time right now. When do we break the cash is better,

bonds are better, or at least a reasonable alternative, as good alternative? When does that break? As rates need to come down yeah probably just the front end of the curve has to come down so that you can't say all right the two-year yield is so cheap yeah that's part of the un-inversion i think if it comes down because there's demand for the two-year and then you can say all right well now all of a sudden there's like real companies a lot of staples they sold off because of rising rates and and and obesity fears but when you look at them like i can get some pretty good businesses for 20 times earnings when they were 28 times. You'll start getting that argument of the equity kind of upside looks a little bit better than the guaranteed bond return.

And so maybe we're not there yet. But for me, for the first time in years and years, I don't find it that offensive to buy some of these pretty high quality, expensive, defensive stocks. Yeah. Brent, how do you feel about defensive stocks? And then I want your take on energy, but I'll ask you separately that. Just give me your view right now on the defensive names, the staples, the utilities. As rates come down, utilities start to look more attractive, although, frankly, not today. Yeah, not today. I would think, you know, going into the beginning of the year,

health care and utilities were very expensive relative to history. I definitely sense some of the staples, if you've got rates starting to come down, are interesting. But you know what? Also, I was looking at the staple, the top 10 in the staples index, like Walmart and Apple basically have the same P.E. So which one do I want to own? I think I still want to own Apple. So they're not that cheap relative to when I look at some other names on the tech side. So I wouldn't be buying those today because they're incredibly cheap.

I'd actually just stick with an Apple that I could actually make the case could be a staple. I meant more like Coke and, you know, Kimberly and Procter and Pepsi, you Pepsi, things that Brown Foreman. So Jack and Coke just became 20% cheaper. And I don't want to short U.S. consumers liking Jack and Coke on a 3, 5, and 10-year view. You're giving us a view of what you're going to be doing when you get out of here. It's almost 4 o'clock. Exactly. All right, Bryn.

So Adam gave us his list for his un-inversion plays. And it's littered with energy stocks, which is right in your wheelhouse, which have been dreadful lately. Right. Energy, I'm looking here, down 4 percent this week, down more than 6 percent over a month. How do you defend the space here? Well, it's been it's been an underperformer. Dreadful, I think, is an overstatement. There's some individual names that have been dreadful. But listen, when you aggregate these names, the free cash flow yield of the space is still above 9%. And that gives, I mean, that's a real number. And I think it's going to take time. And I will say 2021, 2022 were blockbuster years for energy.

And this has been a year of digestion, we'll say. And so I think that going forward next year, energy, I feel remains between that 70 to 90 dollars. These companies print cash. And so I think you want to stay with these names. I like RSPG, which is the equal weight. Also, Diamondback, it's up 15 for the year. Energy Transfer, it's up 10 for the year. And so I do think you want to pick your spots. But if you want free cash flow yield, you're going to have to buy the energy names. So I thought what Adam said was spot on. And that's where you want to have a position in your portfolio. Absolutely. I don't like it. It was too harsh. I'm going to have to position in your portfolio. Absolutely. I don't like that.

Dreadful is too harsh. I'm going to have to agree with her again. I think dreadful is the best performing percent and a quarter. Best performing sector in Q3, though. And now it's sold off hard as everything else is ripped. But, you know, again, it's about horizon. Like, am I sure I want to buy it between now and year end? No, of course not.

How could anybody have? It's a 19 variable problem with so many things that could go wrong. But if you're looking out, like, how can you produce the 107 million barrels that are going to be demanded, you cannot. Name me one thing where over time demand exceeded supply and it didn't go up. So this, in your personal account, if you don't own a ton of this, I'll remind you every time I see you until you get the full position. All right. All right. Bryn, I'll give you the last word.

I mean, you are down in Houston. You know, I get it. Don't mess with Texas. Exactly. I get it. I get it. We've got to go out in public. I mean, you can't hate on energy stocks. Hey, listen, bull markets are always more fun than bear markets. Let's hope that lasts till the rest of the year. Right. Yeah. We'll leave it there. You guys have a good weekend. We'll see you on the other side. Thank you, Adam Parker, for being here as well. Let's get to our question of the day.

What will the Fed's next move be? Will it be another hike? Remember, the next move, another hike or a cut? You can head to at CNBC closing bell on X to vote. We'll share 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 today. Christina Partsenevelos is here with that. Christina.

Scott, did you get a haircut? Nice. Trade Desk is having its worst day in more than a year after the digital advertising giant issued disappointing fourth quarter guidance. The company cited cautious advertisers in certain verticals, including industries impacted by recent strikes like media and autos. And that's why shares are off over 16% right now. Plug Power, heading for its worst day in a decade

after hitting its lowest level in three years. The fuel cell company posted a larger than expected loss and a big miss on revenue, saying it saw, quote, unprecedented supply challenges in North America. At least four analysts just this morning have downgraded the stock and those shares are off 42 percent. Scott. No haircut. No haircut. Sorry. A little unruly. I had a little extra product today. But that's you know, that's just I just let the big secret out. Thanks a lot. Appreciate that. All right. Christina Partsinellos, we'll see you in just a bit. We are just getting started here. Up next, making sense of the mega cap momentum as the tech sector leads today. It tries for its

10th positive day in 11. CIC Wealth's Malcolm Etheridge is here to discuss whether there is still more upside from here. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Our recession highs. NASDAQ up nearly 2%. MegaCap Tech getting a big boost today. Microsoft and Apple both up 2%. Microsoft's at a new all-time high, as we mentioned earlier.

Let's bring in contributor Malcolm Etheridge of CIC. Well, it's good to see you. Yeah. Good day for you to be here. Amazon, Apple, Microsoft among your biggest holdings. These stocks are running again. Yeah. And mega cap tech is the default trade once again.

But I think specifically to the point you just made about Microsoft all-time high, Microsoft is becoming the new default safe haven trade. It used to be Apple, right, all last year. Anytime the markets got rocky, everybody dumped into Apple. But with Apple revenue down, what, negative 1%, I think, last quarter, Microsoft up 13%, the new default trade is obviously becoming Microsoft. Is this justified? Do you think the fact that this is where the money keeps going, these stocks keep getting pushed higher,

in some cases the valuations are moving back higher? I think the fact that this is where the money keeps going, these stocks keep getting pushed higher. In some cases, the valuations are moving back higher. I think so. I think if you just consider the fact that Apple, I'll use specifically, and I'm beating up on them on purpose here. A lot of what Apple is talking about is past glory, right? It's the iPhone story. It's what they've done in the past. What Microsoft is talking about is what they're going to do in the future. And so I think when we consider how valuable these co-pilots could be, right, to enterprise clients, and again, Apple, I'll continue to pick on them here.

Everything they do is consumer facing for the most part. For Microsoft, it's enterprise clients. And so who's going to spend in a potential recession? Enterprise is not necessarily the consumer. And so when I have to find somebody who's going to be that lead horse in the race, it makes perfect sense that Microsoft, with the position they have with OpenAI, will be that lead dog.

You have been throwing some shade on Apple lately, have you not? I mean, with the idea that they need to further diversify themselves away from the iPhone, even though I feel like they've already done that with their services business. And with the quality of their installed base, which I think you can make the argument that it's the most powerful in the history of certainly a technology company,

a consumer-facing technology company at that. Let me say first, I do appreciate Apple and its brand. It's got a very, very valuable brand. There's a ton of trust out there, especially with Gen Z and millennials. So they can break into a lot of different industries that most people can't. But separately from that, where we talk about services, one thing that's less reported in services revenue with Apple is the fact that they booked something like $200 per handset sold as services revenue from each iPhone because they think that the iMessage and other features built into the phone have some value and that's just fancy accounting, right? So that 20 whatever percent the service is accounting for is partly iPhone once

again so they're double dipping in a way and so I just I'm not knocking Apple in the sense that I don't think they can regain their stance as the true champion but I definitely think near term Microsoft is about to supplant them as the most valuable company. Now, we made a lot of when you sold Alphabet, right? And then when we had an interview at Schwab Impact in the midst of a reasonably big pullback for tech, you know, you were throwing some shade back at me for giving you grief about

that. The moral of this story is that it's really hard to trade in and out of these names as they continue to prove. Do you in and out of these names as they continue to prove do you regret getting out of alphabet i don't i don't i think long term there's no way alphabet can participate in this ai wave that we're talking about where microsoft is going into enterprise with these co-pilots google's number one product or alphabet's number one product is google and it's search and that's 90 plus percent of what they do. You have to cannibalize that business in order to lean into AI the way that Microsoft has leaned into AI.

And I just don't see how that's possible. Give me your view before I let you go of just where we are overall on the market. Yes, it's being led by Megacat, but I mean, we're over 4,400 now on the S&P. Who thought we'd be here but 10 days ago? We had a lot of issues in front of us. We sort of got over these hurdles individually, and here we are. Where do we go from here? There's a lot of catch-up trade happening.

You've got a lot of portfolio managers that missed out on the tech trade in the first couple quarters of the year, and so this is their opportunity to lock in some of those names and say, hey, I was here all along. But I think within the next two weeks, our knees start to buckle because Jerome Powell has made it very clear that he intends to stay focused on CPI, stay focused on getting back to that 2% number. And I think the breadcrumbs that he's throwing out there lead to we might actually see another hike here. And if there is another hike, all the confidence we've been seeing the

last few days in the markets goes out the window. That's a big if. Very big if. Malcolm, it's good to see you again. Malcolm Etheridge here at Post 9. We do have breaking news. Want to get to Eamon Javers. We had so much focus, Eamon, on what the Fed chair has been saying, but there is commentary today from the former Fed chair, now the Treasury Secretary, Janet Yellen. Yeah, that's right, Scott. And take a look. We can see a live look in now. Janet Yellen is giving a press conference out in San Francisco talking to reporters about her meeting with her counterpart in the Chinese government. She has been taking questions for a few minutes now in San Francisco, covering a wide range of topics of coming out of

that meeting with the Chinese delegation. Among the things that she has said is that the United States delivered a message to China that it is concerned that Chinese firms, possibly without the knowledge of the Chinese government, she said, are helping Russia evade sanctions and helping to boost the Russian defense industrial sector. She says she wants the Chinese government to crack down on that. She says the U.S. has specific information about which firms are doing what and that they plan to send that information to China. They would like China to crack down, but they are prepared to impose additional sanctions on those firms.

She also said that they had a productive discussion today. She said that it helps set the stage for the meeting between Xi Jinping and Joe Biden next week in San Francisco. And she said she expects to travel to China next year as sort of the opposite end of this visit with the Chinese delegation coming to the United States. Janet Yellen also asked about Chinese holdings of U.S. treasuries just in the past couple of moments. And she said that the United States doesn't have specific information about how those holdings are being handled by the Chinese government. But she said it would not be surprising if they're running down their treasury holdings to some extent to support their currency domestically. So a whole range of issues being discussed here. But Janet Yellen also said, Scott, that she expects that the Chinese, the United States, will now communicate a little bit more formally and effectively back and forth.

They're going to have what she called a regular cadence of communication on economic issues. Scott, back over to you. Yeah, a bit of a change. I mean, interesting to watch, Amy, the reengagement between these two countries. And again, coming towards that meeting with President Xi and President Biden. Thank you, Eamon Javers in D.C. with the latest for us. Coming up, technical strategist Jeff DeGraff explains why he sees more upside ahead to this market. Reveals the one hot stock he thinks investors should be focusing on right now and selling.

He'll tell us next. Got a little ramp here that's why we show you the animation that says session highs because that's where we are look at the s&p 4412 getting over 4400 again today for the first time since september hasn't closed above that level since then what a gain one and a half percent really carried by mega caps today two percent apple mic, Microsoft, new all-time high, better than 2%, Alphabet approaching 2% as well. Meta, better than 2%, NVIDIA 2%. NVIDIA's up 7% in a week. That's been the big story. As mega cap tech has really carried this market back. Dow's good for like 374 at the moment, too. 34,265. So we have a rally on our hands here as we finish off a positive week. The latest move puts some major averages on track to finish this week. Kier here to discuss with me now, Jeff DeGraff of Renaissance Macro Research.

Welcome back. Look, man, I mean, I remember many of our conversations. You were looking for a move like this. You were more positive than most. What led you to be so? And where do we go from here since you, like other technical strategists, are theoretically looking at the same charts? Yeah, I think it's a combination of things, Scott. I mean, we tend to prioritize the factors that are important. One of the big ones for us was these real yields were at a level that was historically very overbought. And we thought that there was room in the bond market, particularly

from positioning, for yields to soften. And because of the sensitivity that we've seen for equities to those yields here, particularly in the last six months, we thought that that was going to clear the way for a pretty good year-end rally that's consistent with the seasonal trends that have been in place since really the early 1900s. And we had a good oversold condition. So very few tops. It was really a market that was trying to consolidate some of those gains that we had seen from July when there was kind of this capitulation from the Bears. We went into that third quarter, and it was softer. But to us, that really looked like it was just kind of a normal consolidation setting up for a good year end.

So far, so good. Yeah, I mean, but aren't we now overbought? I mean, how quickly things change. Yeah, we're not quite there yet. But, you know, what my concern is, we've had decent breadth days. I think today is about an 80%, 82% advance your day. That's not a bad number, but it's not a spectacular number either, right? The good news about this has been we've had several of these.

We've had, I think this will be the fourth or fifth, you know, kind of mid-80s in terms of breadth, which is a good sign. We like to see it a little higher than that. But you're right. I mean, we're going to get to 4,500, and I think we've got a real test on our hands because we're not seeing that broadness. And there's really two things I'm looking at. One is the all-world index. So the all-world index X the U.S. And that's weaker. That actually entered a downtrend back in the middle part of September. And then we look at the Russell microcap. And that's really been the laggard this year. And, kind of stalling out, you want to see everything power through.

And as we start to see these things diverge, then I think we start to get ourselves into some trouble with the overhead. I do think that we can get to 4,500 between now and the end of the year, particularly these mega caps helping. But that'll be my concern is as we get into that Christmas time, do we still have that kind of momentum? Or are we overbought and starting to fade a little bit? This idea of the breadth of the market needing to widen for a more healthy market, I think everybody would agree with that. The question is, it hasn't really mattered.

You know, it hasn't mattered to the overall trajectory of where we've gone from and where we are now. When does it matter? It's the question we asked at the very top of the program. And maybe it doesn't matter. I don't know. When will it? Well, you know, we've done some stats

and I won't go through all those because I don't want to put your viewers to sleep. But generally when you have a breadth divergence, when the S&P is in an uptrend and breadth is in a downtrend, your returns are slightly below average. So it's not a disaster. I know a lot of people think it has to be negative returns it's not that bad what you really need to do is you need to wait for the overall trend of the market

to shift or change that doesn't look like it's a bit's gonna happen here if we get into December we fail at 4500 and then come down that's certainly a characteristic that we'd be looking for in terms of a trend change but I think you want to focus on the trend of price, not the trend of breadth, because that tends to be the final arbiter. And that's kept you out of the fray. I agree with you 100 percent. I mean, people have been complaining about breadth all year long. We've just been looking at price trends and the internal momentum and saying, look, that might be a problem at some point, but let's wait for that point to really develop into the price trends themselves.

Speaking of price trends, the price trend on Disney has not been good one day, notwithstanding, obviously, after earnings. You suggested you'd sell that? Yeah, look, we've got something we call optimal exits, and optimal exits are well-defined downtrends that are now overbought. And this is the classic definition

of an optimal exit. American Tower, AMT, would be another one. Got right to the 200-day moving average and it looks like it's running out of gas. So there's a few of those names out in the marketplace here that still look like they're better for sale for us. And Disney certainly is a characteristic of an optimal exit here from our work. Gotcha. Good weekend. Jeff, we'll see you soon. Thank you. Jeff DeGraff, joining us here on Closing Bell. Up next, we're tracking the biggest movers as we head into the close. Back to Christina Partsenevelis now, who's standing by.

Christina. Well, wind shares slumping despite an earnings beat. And Diageo having its worst day since the year the big Lebowski and Home Alone came out. Can you guess that year? Details next. We're about 15 minutes away now from the closing bell. Let's get back to Christina Partsenevalos for a look at the stock she's watching. Christina. Let's start with wind. It's under pressure after missing estimates on a key profit metric in the

lucrative Macau segment. That's overshadowing an otherwise strong earnings report. But several analysts see opportunity with Deutsche Bank saying bye on this weakness. Shares are down 6%. The maker of Johnny Walker in Guinness is issuing a warning to investors. Spirit sales and profits in the first half of its fiscal year could or would be worse or could be worse than expected. Diageo said consumers in Latin America and the Caribbean were cutting back or seeking cheaper alternatives. Those regions account for 11% of total sales, so a big hit for them. Shares are down 11.5% and on pace for their worst day, did you guess it? Since 1990.

Scott. All right. Christina, thank you very much. Christina Pertinovalos. Last chance now to weigh in on our question of the day. We asked, what is the Fed's next move? Is it a hike or a cut? Head to at CNBC Closing Bell on X.

The final results are after this break all right question of the day results what will the feds next move be the majority of you said another hike 57 percentty seven percent of you think that straight ahead, the semiconductor surge with the group having its best day. Wow. In more than five months, we're going to highlight the names driving that big move and explain what has investors so bullish on that space today. Told you about NVIDIA. That and much more when we take you inside the market zone. We're now in the closing bell market zone. CBC Senior Markets Commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, two very different groups outperforming today. We dig into the rally in the homebuilders. Christina Partinello is back with what's behind the semiconductor surge.

As names like NVIDIA have done exceptionally well this week. Mike, I turn to you. This is one heck of a move that we are having late day. 13,800 on the nose on the NASDAQ. And we're going to close above 4,400 on the S&P. We will. And also close back just a little bit above that was a couple of other targets we had in sight, which was the 100-day average. And then also from September

20th, keep saying highest level since September. Well, September 20th, we kind of fell off a cliff. That was the September Fed meeting day, went higher for longer, really was pushed in everyone's face when we got the new dot plot. And rates the next day, the 10-year yield went from like 437 to 448. Big move. Stocks down. We've been dealing with that kind of dynamic ever since. I do think it's worth emphasizing we are higher now on the S&P than we were when the 10-year Treasury was under 4-4. So it's not a tick for tick move. You can make your peace with higher yield levels if it's coming for a decent reason. Most of this week has been kind of digesting and waiting and resting and letting some of the, you know, the less advantaged parts of the market pull back a little bit. I feel like they just barely averted rollovers, you know, in terms of regional banks, in terms of small caps. So we'll see if this, in fact, makes people feel as if last week's low is really more cemented as a likely base.

But that's 4,100 at this point. It's a good ways down. I mean, if there is a stain on the week, if you will, it is small caps, right? The rush is down 3% where everything else, everything else is up quite nicely. Now, the Dow is a little bit shy of a 1%, so it hasn't been as strong. But nonetheless, I mean, that's where the pain point is. It is. Now, you can't really grant small caps any grand, magical, predictive powers.

You just don't want them to be sending such a nasty macro message by going down every single day and not responding to any kind of valuation support or anything like that. And that's the fix we're in a little bit right here. You do have a lot of year end tax loss selling on the way. I think we're going to set up a monster of a January effect garbage rally, but we're not even close to that yet. Yeah, you're going to hear the clapping. I just want to mention it because we are approaching the closing bell, of course, on where the New York Stock Exchange is acknowledging Veterans Day today. And you'll see many servicemen and women up on the podium today in summer. In fact, as we see and you can hear making their way towards the front of the exchange here now

as we, like everybody here, salute our men and women in service and uniform. So we'll watch them at the close today. But back to our conversation. Homebuilders. Yeah. One of those spots today to keep an eye on. They are.

And so, you know, direct beneficiary of any relief in rates. You're down to 7.5% on 30-year fixed mortgages. Also, DR Horton, good numbers this week, even after they had bounced hard off the lows and the stock followed through to the upside. It's one of these groups where we know that there's sort of structural advantages. We think they're more capital disciplined than they've been in prior cycles. Very similar, really, to energy companies and airlines where it's like, no, no, it's different this time. They're not going to actually succumb to the boom-bust dynamics. So, so far, so good in terms of them reasserting a little bit of a leadership position.

It's ironic in the sense that if the overall housing market really does free up a little bit, you get existing inventory back on the market. It might not be great for homebuilders, even though it's probably better for the economy. Christina, NVIDIA gets all the love- and for obvious reasons stock is back at four eighty two. But Intel today up near three AMD up better than four percent what are you seeing and why. Okay so we are seeing quite the turnaround like you alluded to the SMH is a good barometer and that's up five and a half percent but I want to start I'll get your names. Let's start with the largest chip contractor in the world Taiwan semi that's up 5.5%. But I want to start, and I'll get to your names. Let's start with the largest chip contractor in the world, Taiwan Semi. That's jumping actually 6% today. That's

helping the entire group. It's on a six-day win streak, and that's after reporting October revenue that jumped 35% from September, thanks to the strong dollar and Apple's new product, Lunch. Shares are also helped by the proposed $13 billion chip stimulus package from Japan, because TSMC could get aid. Now let's switch to Arista Networks, another name that's actually down about 2% after its analyst day. They designed networking switches, posted an outlook that was mostly in line but guided for long-term margin contraction. You asked about Nvidia. It's up about 7% this week with most of those gains in the last two days after a report from China that it successfully made three AI chips that circumvented the U.S.

export rules and can actually mean that these chips can be shipped to Chinese customers now. Morgan Stanley says early expectations for NVIDIA earnings out November 21st suggest another big beat and production improvements despite all the backlogs we keep talking about with GPUs. I'd like to point out you have to keep in mind NVIDIA could move quite a bit on Wednesday if there's any trade headlines coming from Biden and Xi. And Scott, just to your point about Intel, AMD, what you're seeing is a bifurcation in the chip market. You're seeing strength with the AI trade, strength in the PC smartphone trade, which would be Intel, AMD is more the AI, and then weakness, analog, weakness in auto,

and some strength as well in memory. So there's a little bit of a divergence there. All right, Christina, we appreciate it. Enjoy the weekend. Christina Parson, thanks for all your help this week as always. So Mike, we turn back to you. Bond auction was a bit of a stinger. We removed the stinger. Powell was trying to get on top of that, worked for a minute, and now that just raises the bar for CPI, I suppose, on Tuesday? Yes. I mean, I understand all the scrutiny and the attention on it. It matters a lot. We don't know exactly what the capacity is for the markets to absorb the supply. It's on the way.

But I do think the net effect is yields went sideways this week. That's basically what happened, and they're down significantly from where they were. So if they're not going to be running away to the upside, we can sort of sort through the other fundamentals and see what matters the most. So, yeah, I do think CPI is going to matter a lot. You're going to talk about mechanical adjustments to health care that's going to boost to the upside. Energy should actually soften up the headline number, whatever the net effect is. I do think that this market, if we get confidence that disinflation is still a process underway, the Fed is patient about waiting for it to actually show up.

And corporate earnings are now pointed higher, not lower, as they were for most of the last two quarters. You know, you could probably make your peace with that and see whether the stocks under the surface beyond the most reliable secular winners can work. Still have to believe that, you know, the Fed is going to be patient. The Fed chair, he used that word again, Mary Daly on today with Kelly and Steve, policy in a good place. It's working. So nothing is upsetting the story to where the market is voting. You know, you look at what the projections are for more rate hikes,

you know, December, January, March. They're in the teens. Yes. And look, if they finished, usually you start to anticipate the first cut. It's probably not for many months. We don't have to worry about that. Stable is OK for now.

A flat-ish yield curve is not the worst thing in the world in the growing economy. All right, well, there are a lot of medals up there on that podium today for good reasons. Stig is doing the honors. And that's in recognition of Veterans Month, the U.S. Marine Corps birthday as well, as we honor our men and women in service. Have a great weekend.

See you on the other side, the Morgan, in the O2.