Closing Bell - Closing Bell 11/13/23

Episode Date: November 13, 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.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. And this make or break hour begins with a make or break moment for the market. Tomorrow morning, CPI report. Stocks looking to continue their late year run as rates remain steady. And investors wonder if it's finally OK to buy in. Well, there's your scorecard with 60 minutes to go in regulation. A bit of a wait and see, as you can see. Dow not doing too much. S&P and the Nasdaq are fractional losers. So is the Russell 2000, modestly to the upside. We were focusing on rates, but they're holding steady. Mega caps are modestly lower today.

Yields are keeping in their recent range. It takes us to our talk of the tape. Whether the bear case is tired and overstated, as one Wall Street firm suggested today. Well, let's ask someone who's been negative on stocks for many months. Eric Johnston of Kenner Fitzgerald is with me here at Post 9. Welcome back. Thank you, Scott. Are you tired of making this bear case?

Is it overstated at this point? Are you sticking to your conviction here? Yeah, it's not overstated. And the only reason why I'd be tired is that, you know, stocks have performed poorly for now almost two years. Right. We're down versus where we were just two years ago, end of 21 into 2022. So it's been a poor return environment i think those returns are going to continue to be poor now there's different dynamics short term versus long term and the short-term dynamics in the next week or so i think are actually you know somewhat somewhat favorable and will provide a bid to the market

but i think if you look out beyond the next couple of weeks and into the next few months, I don't think it's tired at all. I think that, you know, the background fundamentals are actually continuing to get worse. But this market sort of confounded you and other bears for a while now, right? This isn't just like, you know, you come in here today and saying, well, OK, so the market can go up for another week or a month or what have you. There are many stretches along the way this year where you've been like, look, I'm more negative today than I was two weeks ago. Next appearance, I'm even more negative than I was last appearance. And somehow this market's just hung in there. Why?

Yeah, so it's been very resilient. Multiples have stayed higher than I would have expected. I still think they're going to go materially lower, but right now they've held in. And they've held in because of the economy, right? The economy has not rolled over yet, okay? It is weakening, okay? There's a lot of data points that are suggesting that. We're seeing that from corporations, right? This earnings season, estimates came down for the fourth quarter. The corporate commentary on the conference calls, a little bit, right? Continuing claims. Continuing claims are up for about seven straight

weeks. Youth unemployment is rising. ISM new orders is falling. And I think this quarter we had 4.5% GDP growth. But if you look at sales growth for corporations, they were up about 1.5%, significantly underperforming what GDP is saying. And their commentary was also a significant sort of underperformance relative to what GDP is saying. But what point do you say that, you know what, it's not going to roll over like I thought it would? Yes, it's slowing like everybody thought, but it's just not going to roll over like you're suggesting that it still will. So I think the interest rate picture is a big deal. So over the last five months, the 10-year and 30-year yield are up by about 130 basis points.

And that's the kind of thing that does not hit the economy right away. And it's also far more important than the Fed funds rate. So if you think about corporate America, right, their debt that they're going to be refinancing in 24 and 25 is on the longer end of the curve. You think what's going on with commercial real estate. You think what's going on with mortgages, auto loans, right? All of that is pegged towards the long end and needs to be, is going to need to be, to be rolled. And this backup that we've seen yields is going to be, I think, very problematic. And there clearly is a lag effect to that, right? It doesn't hit people until they need to roll their debt, until a small business needs to raise equity,

needs to finance the company. You know, until that happens, it doesn't hit you. So that's why there is a it is a very important delayed impact. Well, you're assuming, of course, that rates remain as high as they've been or perhaps move even higher than some still predict. You know, there is that chance that they might not, right, that they might not. I mean, the issue is, is that the supply of treasuries. And so if we have an economy that is chugging along as it is now, then presumably the Fed funds rate is going to stay in and around here. And long end yields are still 50 to 75 basis points below the Fed funds rate, while the treasury supply that's coming to the market is continuing to rise. Even today, the budget statement came out. Our interest expense this

past month was $89 billion. Double than it was a month ago. That's right. So the issuance next month is going to be higher than this month. And the issuance the following month is going to be higher than that month. It's going to continue to go up. And if we do see an economic downturn, then tax receipts fall and then that deficit even explodes even more. So it's a very the risks that are out there are remain very high. And this market is not priced for those risks that still exist. Where is it priced, do you think? How is it so wrongly priced? What's wrong with the price itself? So if you look at it relative,

so if you look at the multiple overall for the S&P 500, right, we're trading at 18 and a half to 19 times forward estimates. Which is being skewed by the top seven stocks, obviously. Yes. Because the 490 some odd other stocks are not trading at 18 times. So I think, agreed.

And I think this is an important point, though. When you look at the S&P 500, you have to include all 500 stocks. Because one of the reasons why the 493 multiples have gone down is because portfolio managers have allocated money away from the 493 and into the 7. So it's inflated the 7 and it's from the 493 and into the seven. So it's inflated the seven and it's depressed the 493. But the bottom line is you take the average and you take the blended based on capitalization to the S&P 500, it's trading at 20 times this year's earnings.

It's trading at 18 and a half times forward earnings. And so that is a rich multiple when you consider that money market yields are almost five and a quarter, five and a half percent. That multiple, I think, is too high. And what happens is typically those multiples only come down during economic downturns. And so it may take until then for those multiples to contract. All right.

Well, let's bring in Alicia Levine of BNY Mellon Wealth Management, Keith Lerner of Truist Wealth. It's great to have you both with us. Alicia, you first. Is Eric right or wrong? So I hear what Eric's saying, but that's a tail scenario, right? So we think that the overarching case is for a slowdown precisely because of tightening credit conditions. But ultimately, the economy looks like it can take it. It's clear that commercial real estate and some of the smaller cap names are reflecting exactly what Eric is talking about, which is the terming out of debt, rolling it over at higher rates and not being able to take it in those sectors. However, large cap America is largely immune to this till about 2027, 2028. And because of that, if you're talking about the overall index, we just think that most of the S&P can handle this going forward. It is bifurcated.

But just the way large cap America termed out its debt and households termed out its debt, the rate cycle here is not biting yet. That doesn't mean it won't. It just means that it's slower. And then you're looking at an election year. And at some point, we're running out of time for that recession to get here, because you typically never have a recession in an election year, especially when the incumbent is running. And so whether it's Joe Biden or another Democrat, that is the incumbent. And so you have to ask yourself, is there a recession in the next six months? There could be, but we think mostly unlikely. How would you respond to that yourself, is there a recession in the next six months? There could be, but we think mostly unlikely. How would you respond to that?

The economy can take it, is what Alicia said. You just obviously think it can't. Right. So I think a slowdown, you know, in and of itself, I still would, I think, would cap equity prices. Because if we have a slowdown, then you have a weaker economy and rates, presumably, and inflation kind of stay where it is and stay elevated. I think one thing around an election year would just be, you know, is it going to be different this time?

Because are we sort of filled to the gills on fiscal spending? And typically, right, you don't have the recession in the final year of the presidencies because they spend money in order to keep the economy up. We don't really have that situation now based on some of the pressures around the fiscal situation. But I think certainly a scenario is that this cycle is elongated and we just have slower growth and we don't go into recession. But if I told you we're going to go into recession in 2025, I would still say that in 2024, the market is going to be pricing essentially that in,

knowing that in recessions, earnings estimates get hit, earnings multiples get hit. And so if you see that coming even a year out, that's still problematic based on where we currently are with multiples. So, Keith, you look the last time, a couple of times you were on, you were more positive than not, I think, and decidedly so. Not only do you have what Eric suggests is still on the come in terms of these lag effects, but the other issue for the bulls is that the markets run a lot in a really short period of time in the last, you know, eight, nine, 10 days. So is that now a headwind or not? Yeah. Well, great to be with you, Scott. You're right. We were actually with you on the day of the low around 4,100. We published a note that day

that said the pullback was an opportunity, but we thought that was in the context of a choppy range that continues. To answer your question specifically, the risk reward is less favorable than it was then. But ultimately, we still think before year end that we still have some upside, maybe 3% to 4% upside, because we still have positive seasonals. Forward earning estimates, I know there's a lot of concern that they're going to weaken, but they're right now at a record high, and they have defied expectations all year long. And let's not forget, a lot of corporations have been told there's going to be a recession all year long. So they've been preparing for that recession. And what we've seen over the last quarter is that margins have actually expanded, again, defined odds as well. So I don't know that it's helpful to label this a bearable market. I think

we're in this choppy trading range, a choppy trading range where it remains more upside after maybe a little bit of a short-term digestion phase after we've gone up 7%, 8% off the lows. If you knew, Eric, that at some point you're going to have to make a decision as to whether you say, you know what, I thought we were going to have a recession because lag effects always take some major effect, but maybe this time's different. We're not. At that moment, do you change your outlook? Sure. Because you don't think earnings are going to come down dramatically enough to make the multiple completely offsides? Yes. I mean, I think that, you know, the the ultimately what's going to cause this market to move lower is going to be a, you know, a weakening economy that takes growth to zero

or to negative and takes the unemployment rate to something in the high fours, mid fours or higher. To the extent that that doesn't happen, then this market could sort of grow into its multiple and could grow into that type of economy. But I think we're still a ways, I mean, we're still six, nine months away from that point to be able to say, okay, we've made it through the lag effects from the rate increases.

We've made it through some of the issues that are facing us now to say, okay, great, we've made it through the lag effects from the rate increases. You know, we've made it through some of the issues that were that are facing us now to say, OK, great. We've made it through. Now we can start. Sure. But you've been you've been pretty negative. The market for the six to nine months in which you've already said that in six to nine months, the economy is going to, you know, probably be in a recession. Now, here we are. We're looking ahead to another six to nine months because it hasn't worked out the way you thought that it might. So, I mean, at what point does it get pushed off to the point where I'm just like, you know what? It's just not going to happen. It's not going to happen like I thought it would. Economy's much stronger. The mattress was so thick going into this whole thing that it's

cushioned the landing to a degree that I didn't think was going to happen. So if the money market yields were 1%, I would say, yeah, it's tough. It's very, you know, it's tough waiting. Money market yields are over 5%, would say, yeah, it's tough. It's very, you know, it's tough waiting. Money market yields are over 5%, right? You have plenty of investments where you can earn high single-digit returns based on this market. So a sideways equity market while you're waiting is not a bad thing. You can have your money in a lot of different places to earn very good returns. And so, you know, you don't always have to be in,

in equities. You know, I've been, I've been bullish probably 80% of my career. It's been about 90% of the last two years that I've been bearish, but it's because of what I, of what I see out there. And while you're waiting, you're getting, you're getting paid and we're, we're going to be patient. He's not the only one, Alicia, who shares that view. In fact, there are many people who make that case and for good reason. And as long as you have these other competitive places to go beyond equities, you do have that fight over risk reward, which people like Eric and others would still argue is just better. It's just better than the stock market, especially now. Well, it's better because it's a sure thing in the short term if you're going to be in cash or T-bills. But the issue is if you think in any case that there's going to be some sort of slowdown, you don't want to be there anymore.

And we think there's real reinvestment risk. I mean, investors were flocking to these short-term instruments all year long because the macro looked so crazy. We actually think it's time to go out a little bit on duration. I mean, you're getting over 5% on the two-year. I think you can go out a little bit. I wouldn't be so bold to say go long duration here because I think the supply issue is real. But high for longer with a slowdown coming that's not a disaster does feel like a nice setup for moving out of cash into a little bit more fixed income and getting more balance in portfolios. I mean, as we know, for the last 12 years, investors really didn't want to be in fixed income at all because it didn't matter.

So now it matters and you can get some return, you can get some yield and you can be more balanced in your portfolios than you have been. I think the real issue in the real economy here, as Eric is talking about, is what does that $1.5 trillion in the commercial real estate that's coming due by the end of 2025 look like? Is that enough to throw the economy into the tailspin? I think that's where you see the risk. The other assets have already priced it in. So the equally weighted S&P, small caps, we're in the recession there. We're there. Well, yeah, because regional banks make up such a good part of the Russell, and that's where the biggest fears about the commercial real estate role are happening. But we're there. We're there.

Keith, let me ask you this. The idea that the market is just unhealthy in its current state, you still favor communication services and tech, i.e. the Magnificent Seven. At what point does it actually have a negative impact on the overall market? Now, look, you can make the argument that it's already had a negative impact on the overall market because that's where the action's been and the rest of the market doesn't look nearly as good as that part of the market. But when does it really matter, if ever? Yeah, well, I mean, to be realistic, I would prefer to see small caps really outperforming right now, the equal weighted index really outperforming now.

But we have to take the market that we have. And at this point, what's notable is that technology went down, was one of the last things to go down. That normally happens at the latest stages of a correction. What's notable is that technology has come back as the leader again. So there hasn't been any handoff. So at this point, you know, we're seeing the technology sector just make a relative or five month relative price high to the overall market. Communication services also doing very well. So the old leaders are the new leaders, which is tech. And I would just say, I don't think there's any reason at this point to go against that theme. And as long as that continues, the headline market will do just fine.

And at this point, earning trends for the NASDAQ and technology are stronger than the overall market. That's likely to continue. Semiconductors are up about 13% off the lows, also showing leadership as well. So at some point, that ends the work that we're looking at today, Scott. It's not showing any substantial change at this point. Yeah. What's your take on tech? So one of the things that's happening is, you know, portfolio managers are seeing a lot of the stuff that I'm talking about here today. And they've been going to safety. And their perceived safety, I think rightfully, is high free cash flow, you know, no debt, large company, secular tailwinds.

And so you see this picture out there that's quite negative and you're a portfolio manager, you've got money to manage. You're going to move out of the cyclically sensitive and rate sensitive groups. That's been the right play. And that's been the right play. Right. So I think with, you know, within the seven, I think that I, you know, I have different views within the seven. You know, I'm quite negative on Tesla. I'm quite negative on Apple. But I understand Microsoft. I understand Google. I understand Nvidia.

Why are you quite negative on Apple, which was like 169, now it's 185? Yeah, so the quarter was poor. So if you look at what the fourth quarter estimate was, going into it is about $124 billion. Sorry, the first quarter of 24 estimate was about $124 billion. After the quarter, that had to be lower to about $124 billion. Sorry, the first quarter of 24 estimate was about $124 billion. After the quarter, that had to be lower to about $119 billion. So now they're going to have another quarter where it's going to be about 1% revenue growth if they make it in the first quarter. So this trend of an economy that's growing 4.5% and a company like Apple that's growing negative 1, 0, or 1%, and you're you're trading at 28 times to me is not attractive.

Also based on their buyback situation. Let me ask you this. Normally, I would say when someone makes an argument, well, you can't have it both ways. Why can't you have it both ways? Why can't you? Because you just made a case for the mega caps. Right. Good balance sheets, no debt, blah, blah, blah. Why can't you just have a negative underlying market view about cyclical stocks like, you know, all of those economically sensitive things that you don't like for the variety of reasons which you already articulated? But say, you know what? I think you should be putting money into the stock market, and I think you should be putting money into these seven names

because if this dynamic continues, if the economy slows like I think it will, and earnings get hit for those kinds of companies, this is exactly the place you want to be. Why can't you have it both ways? Why don't I hear you saying that? Because Microsoft and Google and Amazon are levered to the economy.

Google is an ad company, right? They make a lot of money on selling advertisements. Amazon, they've got their enterprise business, retail business, right? These names are going to be impacted by a downturn in the economy. I just think they're going to perform better than the, however you want to phrase it, the other 493 in the index. But make no mistake, they will get hurt by an economic downturn. Like I said, Apple's growing 0% in a 4% GDP environment. What's going to happen when GDP is 1% or 0? I think that their earnings, they will get hit. It's just that right now, there know, there's just this money flow. That's which I again, I understand that if I'm managing money and I have a pot of one hundred

dollars, right, I'm going to move them into those seven, which is then going to inflate those prices. But until that hundred dollars leaves my portfolio, it's still invested in the overall in the overall market. Alicia, last point to you before we go. So we like large cap America and large cap tech precisely because they can earn through the higher yield world. And in the end, if you slow down a little bit and yields come in, you get the performance on the multiple side from the duration. So we like this area. It's true what Eric says. There are some in that Magnificent 7 where I think the earnings are suspect. I can't talk about them because but there are others that will have

an earnings boost from hyperscaling on AI. And so that I think we outweighs each other. OK, we'll leave it there. Everybody, thank you. Keith, we'll talk to you soon. Alicia, thank you. Eric, appreciate it as always. Thank you. Eric Johnson, Cantor joining us right here. Let's get to our question of the day. Do you think the bear case for stocks is overstated? You can head to ABC closing bell on X to vote. We'll have the results 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 Parts of Nevelos, as always, is here with us. Christina. Monday.com is having its best day since May after smashing estimates. The enterprise collaboration company also raised its full year guidance, and that's why shares are up almost 10%.

Medical device stocks are also higher. Those stocks have been selling off on fears that popular weight loss drugs like Govi would threaten device makers in the space like heart disease and diabetes, but you can see U.S. medical devices is up over 2% right now, but still down 12% on the last three months. Switching gears, you got some analysts that see hope for some of these beaten up stocks, with Baird saying the findings could be seen as a marginally positive for some device makers, especially given their recent underperformance. We just talked about that. And that's why we're seeing big gains in names like Insulate, Dex.com, Transmedics on your screen. You can see it's up 5 percent.

Penumbra up 16 percent, Scott. Christina, thank you. We'll talk to you soon. We're just getting started here. Up next, going beyond big tech, big tech. Top chart watcher Chris Verone is making the bull case for upside out of the mega caps where he's finding that opportunity and the key levels he's watching. He'll tell us just ahead. We are live from the New York Stock Exchange and you're watching Closing Bell on CNBC. All right, welcome back.

Stocks mixed today as we head into the close. Here to share where he is finding opportunity, Chris Ferron. He's the head of technical and macro research at Strategas Research Partners. Good to see you again. Great to be here. So where is the opportunity now after we've had a pretty darn good run? You know, I think what's tricky is we're back at, call it 44, 15, big level. Yeah.

You still only have 40% of the S&P above the 200. So to say this is like some great rising tide would not be true. So we've got to pick our spots. Anything but. I'm looking squarely at the Russell like, when are you going to do something? And we know where the leadership has been with the MAG-7. That certainly has continued. But there has to be other things to do and other places to play.

And I think there's a couple areas that get neglected that actually act quite well talk to me industrials in particular I mean these things have largely been leadership for a year have not gotten anywhere near the attention that tech has gotten here look at names like Parker Hannifin new absolute and new relative high today PAC are PCA are there's like 20 analysts that cover the stock there's only four buys on it so strength neglected. We love that combination. When you have a good chart with the sell side is totally not paying attention. Even within tech, Scott, look at IBM. IBM is about to break out of a huge base here. Above 150 is a major breakout. 22 analysts covered, only five buys. You're speaking Stephanie Link's language. I mean, first of all, she owns IBM and she bought Parker Hannafin recently. I way they've responded from being very oversold a few weeks ago right back to the highs,

I think is how leaders behave. And, you know, there's always this risk. Are you owning homebuilders into a slowdown? Believe it or not, homebuilders are not very cyclical. I know that sounds crazy. No, but they're super-duper rate sensitive, aren't they? You know, it's funny. Not how you would think historically.

That relationship has been much more pronounced in the last year or so, but not really when you look at the life of the data set. They tend to be far more secular. They go on these big secular 10-year runs. I think we're in a secular home building run. And every time they sell them down to you 20 or 30 percent, like we had a few weeks ago, take advantage of it. They're good long-term setups. Just because we don't have enough supply? I suspect that's the secular story here. Remember, we think of 08 as them leading down before, during, and after, but they acted very differently in the slowdown in 2000, 2001, 2002. They led the entire time. We've gotten over some key technical hurdles overall

in the market. What does it mean? Where does it take us? You know, it's a good question. As we think about 24, the things I'm really cuing off of are the following. Number one, do we get a broad expansion in new highs? I mean, even last week, you had a very good rally. Only 10% of the S&P made a one-month high. I want to see something 50%, 55%, 60%, generally more rising tide, escape velocity, all things go. The second thing I would just note, look at the leadership characteristics of this move. If the market's going to go on to decisive new highs into 24, I think it would mean it's because the economy is still okay. If that's the case, don't we need discretionary carrying the flag here of leadership, small caps, beta, all the

things that you generally look to to really signal risk on. They haven't made up their mind here yet. So, you know, 40% above the 200-day, I still think you proceed selectively and not necessarily skeptically, but just be mindful that if you're going to play here, make sure you're owning the 40% that are working. The other 60%, you can't play. You can say skeptically because, I mean, you kind of have to be skeptical that, you know, the economy is going to really hang in there. And that's why it's so difficult for people to buy those stocks right now. They think, you know, you want to make a call? Well, I think they've troughed.

Well, not if we're going into a recession. They haven't. You know, it's funny, like even some of the vaunted groups that you would consider very pro-risk or pro-cyclical like semis, only about half the semis are actually working. The other half are just nowhere on the field right now. Look at strong semis, KLA, Tencor, AMAT. But then you look at Qualcomm really hasn't done anything. Texas Instruments is still a disaster here.

So it's very split, even in the market's most vaunted groups. What I would watch globally, I think we'll get some signals here globally, watch Cospi. They've tried to rally this thing over the last week or so. Obviously, very pro-cyclical index. I think that would be an important part of any really constructive 2024. Watch Brazil. This actually acts really well. It's probably the only market I could find anywhere where the stocks are good,

the currency is strong, and the bonds are bid. We call it the hat trick. Find me another place in the world where that's the case. Give me your view of the Magnificent Seven. As a group, they get knocked down and then they come back with a vengeance. So we call it the Magnificent Three. I think three of the seven are legitimately magnificent type charts. I think the Microsoft chart is fantastic here. Been at a new all-time high. You can't fight that. Apple generally has still led. And then take your pick between, say, Meta or Amazon.

But Google's still below the 50-day moving average here. Tesla is one of the weaker of those. So I think this name, Magnificent Seven... You didn't name NVIDIA. NVIDIA was like 400. Now it's almost 500. Put it in that camp of excellent charts. But to say it's seven, I think, is a bit of a stretch here. I think the big question of a stretch here I think

the big question for this group of names if you look at their spread versus equal weight S&P if they're reflective of large cap tech on this the wider wider than the Grand Canyon why does we've seen since 99 now that can persist and persist and persist as we saw in 99 but I think the bar is high for these to keep doing what they've done all right good stuff pretty much any great room thank you thank you all right up next not out of the woods yet. That is the message under the market surface, according to Charles Schwab's Kevin Gordon. He is back with us today to break down what has him. Well, he's still cautious and he has been. And we have tomorrow's

critical CPI print. That's after the break. Stocks are flat to start the trading week ahead of tomorrow morning cpi my next guest says well we have yet to enter a durable bull market he's still finding pockets of opportunity and strong quote deep value plays joining me now right here post and i once again kevin gordon charles swab welcome back hey scott good to see you all right so i'm looking at the notes now participation from average stock lagging breath breadth not consistent with a strong, durable bull market. Constructive price action outside of the Magnificent Seven is lacking. Got to be cautious. We've been saying this for like 10 and a half months. When does it not matter? I will say some of it started to change in midsummer. And we started to get constructive

when all that, as you just listed, started to improve. You had started to see breadth metrics participate. The average stock improved relative to the cap weighted index. Small caps started to get some. For a little bit. No, no traction, really. No traction, but that proved to be a head fake. And then July was kind of this turning point, obviously, in hindsight, because we know that that was the most recent peak, but also the fact that you really started to see, I think, more of a negative divergence within some of the earnings data, where even though earnings

beat rates started to improve, sales beat rates started to roll over, you haven't really seen as much of a durable improvement as you move down the cap spectrum. So we're kind of back to this theme that we've been in for a couple of years now, which is just one of bifurcation, where now even in this latest advance from late October, you've had the mega caps leading the way. So the Magnificent Seven has been the group to be in. And then everything else has sort of been just lacking. I will say, you know, in terms of the advance and whether it's sustained, you do still have some support from a sentiment perspective. So, you know, for all of the excitement around the gains that you've had over the past couple

of weeks, it hasn't really been met with a ton of investor enthusiasm, especially on the behavioral side. It's not like we're miles away either from new highs, really. Oh, yeah. I mean, yeah, you've had a really decent snapback. Which shows the resiliency of the market in the face of everything and the haters. I'm not necessarily putting you in the hater group, but, you know, the haters who say, well, the market doesn't look good. It's not healthy. It's being led by mega caps, it's just up, up, up the whole way. Yeah, and it's not as much that, you know, just because it doesn't look good means it looks outright bad. If you were just to take out the mega caps, you're up slightly year-to-date. If you were just looking at the equal-weighted S&P, you're flat year-to-date.

So that's not terrible. But again, I think a lot of the discussion this year has been dominated by whether we're in a bull market, you know, a new bull market. Oh, sure. Or just a bear market rally. Yeah. You can use the 20 percent rule if you want to, if you want to. But I think that that's a little bit too simplistic. And it's too simplistic because when you look at prior major market lows, even in the case of a non-recessionary bear market, which as far as we know, that was the case last year, everything that is supposed to do well in all the cases of recessionary, non-recessionary markets, whether it's small caps, whether it's banks, they just haven't done well at all.

Well, because you have this overarching and overriding, in many respects, recession fear. Oh, yeah. People just can't get out of their mind that the Fed's done all of this work. Yeah. Well, of course it leads to a pretty good recession. Yeah. Well, of course it leads to a pretty good recession. Yeah. Well, maybe not. Well, that's the tough part because you've got this, what I think is the message from the market,

it's going to dominate for a while. It's just late cycle for longer because you have still indicators, which we're turning a little bit this year, housing, housing related, consumer confidence, CEO confidence, even CEO confidence around hiring trends, which started to improve and look like they were entering their own little rolling recoveries because we've been calling these rolling recessions. Now those have rolled back over. So not back into dismal territory where everything is catastrophic, but keeping you sort of in that zone of even if you were just looking at something like the ISM manufacturing PMI, not yet at a recession like territory like you had in 2001 or 2008 to 2009, but still sub-50 and staying in that zone where you're just kind of muddling along in contractionary territory and there's not much going on. So I think that's what you have to look for is whether that starts to turn, whether you get some strength from services and labor. Where are the pockets then of opportunity that

exist in an uncertain economic world versus an area where all the money has gone anyway already, so everybody knows about it. Yeah. So as we think about where we're turning, not just into 2024 in the short term, maybe more on a secular basis, if we really are in more of a hire for longer environment, you really have to consider, which I know it's been the topic of conversation, at least on the show so far today, just the interest environment where we're going in terms of rates, what companies can withstand higher interest expense and have the earnings to offset that? So it's not as much a sector play. It's much more of a factor or characteristic play because you can find companies in every sector almost right now,

whether it's energy, whether it's consumer discretionary, whether it's tech that have high and rising interest coverage ratios. And that's the opportunity, I think. So if you're approaching this and you're more of a long-term oriented investor and you're approaching it from that standpoint, that to us makes a lot more sense because it's just kind of the new normal where rates have gone. The fact that the trend, the longer-term downtrend for yields has kind of broken. For companies that haven't termed out debt, they're definitely struggling right now. But even for those that have, you want to be up in quality.

What does a favorable CPI report tomorrow morning mean for the rest of the year? I actually, just because of all the data we have this week and all the Fed speak we have this week, I'm not sure it matters a whole lot. There's literally 20 Fed speeches. So I think that. But in addition to you've got PPI, you have home builder sentiment coming out. You've got retail sales. You have a lot more that's going to give you more of the context for the economic backdrop. So to me, that's much more important is the collection of data.

But I think even if you were stepping back and taking a look at the landscape, the Fed is still in a position. And, you know, I do think that the risks are getting more balanced and more two sided. But the Fed is still in a position where they'd probably bias towards over tightening rather than under tightening. I think you could see that pretty clearly in the language. Even if there's not another hike on the table, the willingness to cut rates, even with inflation not back to target and the unemployment rate still relatively low when you look at history, I think that's still the bias is to keep things in a tight and a restrictive position. All right. Good stuff.

Good to see you again. Thanks. All right. Kevin Gordon. I'm Schwab. Joining us back post-night. All right. Good stuff. Good to see you again. Thanks. All right. Kevin Gordon from Schwab joining us back post-night. All right. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelos is back with that. Christina. Well, Google Paranalfabet selling its stake in two major tech firms and Tyson Food blaming chicken and pork for its revenue outlook myths. I'll explain next. All right. We're about 15 away from the closing bell. Let's get back now to Christina Partsenevelos with the key stock she's watching. Christina.

Thanks, Scott. Well, Tyson Foods posting an earnings beat, but not because of strong sales volume, but because of aggressive cost cutting, which seems to be a trend among retailers and food distributors. Demand and prices drop, but cost cutting is preserving the bottom line. Tyson's forecast for next year, fiscal revenue next year, I should say, they did see a drop in that missed estimates because they are predicting a continued drop in chicken and pork prices and slowing demand for beef. That's why the stock is down almost 3%. Goodbye, Robinhood and Lyft.

According to a securities filing released today, Alphabet sold its remaining stake in both Robinhood and Lyft last quarter. Robinhood has been struggling as of late with its monthly active user base and crypto trading both shrinking in Q3, while Lyft still struggles to catch up to Uber. But you can see Lyft down about 5%, Robinhood not reacting as much, up over 1%. Scott? All right, Christina, thanks so much.

Thanks. Christina Partsenevelos. Last chance now to weigh in on our question of the day. We asked, do you think the bear case for stocks is overrated? Head to at CNBC closing bell on X. The results just after this break. Results of the question of the day. Do you think the bear case for stocks is overstated? The majority of you said yes. Yes, I do. Near 56%. Coming up, Fisker shares powering higher today, but under pressure over the past month, the company gearing up to report earnings in OT.

We're going to run you through the numbers you need to watch for when those results hit the tape. We'll do that and much more in the Market Zone next. All right, we're in the closing bell Market Zone now. CNBC senior markets Commentator Mike Santoli here to break down the crucial moments of the trading day, plus Courtney Reagan on weakness in retail stocks. And we had a really busy stretch of earnings for that group coming up. Phil LeBeau looking ahead to Fisker's report. That's out in overtime today. But, Mike, today very much wait and see because I think all eyes and minds are on the CPI tomorrow morning.

There's no doubt about that. Just kind of idling here. And it makes sense. It's funny. You look at all the strategists, year-ahead outlooks that are starting to filter through, and I can see why there's not a tremendous amount of conviction for a huge move away from where we are. In a weird way, both bulls and bears, I know you've been having this debate all hour, could declare victory. If you're a bear

and you say, look, we never really got out of the muck from last year, you could look at the average stock doing nothing and actually most of the economically sensitive areas of the market really not performing and sending a little bit of a tough macro message and say, see, we told you. The problem is, you know, seven, eight stocks got the S&P up 15 percent and only a quarter of the S&P is keeping pace with it. If you're bullish, you say, look, we're sort of sideways for two years. The economy is bigger. We don't have a recession yet. As long as we don't have a recession, we should be able to keep this up and maybe get a catch up trade from the rest. So I'm on board with that being the way you set out the probabilities for 2024.

What breaks that, though? Yeah. We've talked about that. It's like you're in your camp here, you're in your camp here, and no one's budging. No. I don't know if it breaks it entirely, but you can go through these phases where all of a sudden it seems like, you know, we got a second wind in the consumer because wage growth remains where it is. And if you start to get inflation

surprising to the downside further and it looks like we're getting closer to the 2 percent target, then the Fed itself has said we're going to get there in 2025. All of a sudden, the market can talk itself into we're going to get rate cuts and that maybe allows them to stick the landing more easily. So I think all those things are in the mix. At the same time, you know, you can't ignore that we are late in the cycle, probably. And how much more earnings growth can you get out of a slowing economy? I'm glad you bring up the consumer. It's a good segue, Court, to you, because retail's under pressure. And boy, we have a lot of earnings coming up. Depot and Target, Advanced Auto, TJX, Walmart, Macy's, and on and on and on. I know the retailers really give it to us in November, Scott. Really, though, big downside moves in retail here to start this week ahead

of all the major retailers reporting their earnings. We've got CPI tomorrow, Black Friday next week. The XRT is underperforming the broader market, but really it's a number of individual names that are off very sharply that kind of got our attention today. Department stores continue to suffer. Nordstrom down 4% and hitting a 52-week low. Kohl's down 4%. Macy's off 3%. Bank of America credit card data did show clothing spending fell more than 9% in October from last year. That was more than double the drop from September year over year. Now, some of the discounters, they're selling off pretty sharply too. Big Lots, Burlington, they're down 4%, Five Below down more than 2%. And look at some of these specialty names sort of across the board. Hanes Brands off 7%, Under Armour, VF Corp, Bath & Body

Works, Boot Barn, those are all lower by around 5% or so. So really sort of across the board here, just some negative sentiment on the consumer before we start to hear the details from some of these retailers and the anticipation for this all-important quarter that we're just starting into right now. Yeah, ugly-looking board there with all those stocks down a lot. Court, thanks so much. Courtney Reagan, as we look ahead to some pretty substantial retail earnings. We're also looking ahead to Fisker. Those numbers are coming out in OT, Phil LeBeau.

And, Scott, we're expecting another quarterly loss from Fisker. Remember, we were supposed to get these reports, this report last week. And then at the last second, just a couple of hours before they were supposed to report them, Fisker came out and said, well, look, we're going to push it off until Monday. We had a change in CFOs. And as a result, you know, that spooked people. That's why the stock was under pressure Thursday and Friday. Came back a little bit today.

Here's what to expect when you look at the third quarter. It all comes down to the fact that, OK, yes, they're going to report probably a loss of 19, 20 cents a share. I don't think that's going to move the stock unless it's dramatically away from consensus. It's deliveries. Where do they come in at? Average sales price still north of 65,000. That's the expectation. And what do they say about full-year deliveries? Remember, Scott, they have twice reduced full-year production expectations down to a range now between 20,000 and 22,000 vehicles. Do they change it again?

Or do they say, nope, this is what we expect to deliver for the year? If they keep that guidance, Scott, that might give a little bit of support to a stock that has really been beaten down in the last several months. Yeah, no doubt. We'll see what happens. Phil, thank you. Appreciate that. Mike, I'll turn back to you as we approach the two minute warning. Good CPI tomorrow causes a bigger, bigger bump in the Russell beaten down or the cues. Presuming we get the rate response in line. That's what I'm thinking. Yeah. CBI comes in favorable. Rates move lower. Russell or Q's or both?

I mean, I would think I would think Russell has more room. It's obviously wound pretty tight down here. There's a lot of revisionism going on, interestingly, on the small cap front. You look in and say, are they really as cheap as they look? If you actually take out the money-losing Russell 2000 stocks, I think B of A said today, it's merely at an average valuation. So I think there's people talking themselves into there being a reason that small caps have suffered this much.

But I do think in general, CPI is what we have to work with in terms of a potential market mover. If it's not too far from expectations, I don't know if it really stays with us for very long as a catalyst. Inflation reports this year have been really close to consensus, and it's almost taken some of the drama out of it. So we'll see if bond yields are held up by any sort of trepidation about what we're going to get tomorrow or not. How close are you watching the banks these days?

Yeah. You know, just haven't really done anything. And you can't seem to do anything as long as you have these economic overhang questions. Yeah, I mean, I think they're right alongside small caps with the problem parts of the market that are not allowing you to fully relax about the outlook. And I'm not thinking necessarily just about regionals,

which obviously make up a big part of the... Some Fed commentary today to basically saying that the actual balance sheet stress, that moment has passed. It's not what it's about right now. It's really they just operate downstream of what the overall economy is going to do at this point. You know, it really, to me, isn't about, oh, who's got the who's got less insured deposits and more insured deposits and, you know, who has more duration on the balance sheet on the asset side. I think it's much more about, you know, is the economy going to hang in there or not? Is the delinquency rates that are rising mostly just about normalization and getting through the 2020 kind of, you know,

bulge in credit creation? Or is it something more to worry about? I mean, tomorrow morning goes a long way to confirming the story that inflation here becomes impossible. The price is coming down. The economy can hang in. We'll see. We'll go out. At least the Dow will end the green. Elsewhere, we're going to wait and see what happens.