Closing Bell - Closing Bell 11/17/23

Episode Date: November 17, 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.

Live from Post 9 here at the New York Stock Exchange, this make or break hour begins with the fate of the rally as stocks rise for a third consecutive week. Only question now, how long can it last? We'll ask our experts during this important final stretch. There's your scorecard with 60 minutes to go in regulation. We're green across the board. Looks a little muted for sure, but consider the week itself as the markets have rallied in a big way, especially areas that have seen the love go elsewhere for the better part of this year. The equal weight S&P 500 up 3% on the week. How about the Russells up 5%?

Small caps finding a much needed bid. Some love there for materials. Industrials also nice gainers. As for tech, well, it's largely waiting on NVIDIA earnings on Tuesday. That stock rallying from near, get this, $400 on Halloween. Well, now it's pushing $500, just $6 short of that. If there's a pain point, it's energy. That sector, one of the weakest.

Crude continuing to pull back. Yes, it's having a nice move today, but look at the week. It's just up better than 1%. So it's an underperformer across the board. Yields as well, they continue to come down. And we'll keep our eye there over this final stretch. 10-year at $4.43. takes us to our talk of the tape, the runway for the rally, whether the bulls are correct. They say it's getting longer. Is that true?

Let's ask Dan Greenhouse of Solus Alternative Asset Management here with us once again at Post 9. Is that is that true? Is the bull case getting better? Yeah, I think the bull case has been getting better for some time now. More credible now? Sure. And listen, with respect to the earnings this week, I think on balance there wasn't too much to worry about. Obviously, there's a wide variety of retailers to have reported this week. Home Depot, Bath & Body Works, up and down the retail spectrum.

And the talk from most of them is that there was a bit of a slowdown and not that there's nothing to worry about. But on balance, I don't think that anybody gave me any indication that the consumer was suddenly suffering in a meaningful way. I'm going to take you, you know, veer way right and say, okay, well, the other side of that question is, is the bear case dead? Now, how would you answer that? No, I don't think the bear case is dead.

I think this is an important conversation that doesn't get discussed enough, which is two things can be true at once, tactical and secular, in the sense that over the course of this year, as a lot of us got a little more bullish, the idea wasn't that the bearish narrative was completely dead. It was that perhaps we were a bit early to the case. And over the course of the year that increasingly proved to be accurate. And I think what you have to think about going into next year, as you have a stock market up in the upper double digits and a lot of that from a performance standpoint wise driven by the seven or ten largest stocks, how much of that bear case that that has proven not yet to have materialized is gonna start to come to

fruition next year because you're starting to see a little bit of the indications that we were worried about a year ago. Credit card delinquencies are starting to normalize, move in the wrong direction. Jobless claims are starting to tick up. So there's a couple of things on which you can hang your hat to say, well, maybe we're starting to see the early inklings of the slowdown, the long-awaited slowdown. I wonder if we're starting to see, as the Bulls would suggest, the early inklings of a broader rally. As I mentioned in the opening read, right, S&P equal weight up 3% on the week. Russell's staring me right in the

face here. On the week, up 5.35%. So these, you know, other dormant areas of the market have suddenly woken up. Is it real? Yeah, well, listen, I don't think they were dormant. I mean, listen, look at the homebuilders. They're basically back to highs. Semiconductors as a group, basically back to highs. There are a couple of industries that you can point to to say the rally is broadening out. I'm not positive that's sufficient by itself to get me super enthused about the market or at least more enthused than I would have been otherwise. Well, I'm not saying by itself. That's the whole point is that it's not by itself to get me super enthused about the market, or at least more enthused than I would have been otherwise. Well, I'm not saying by itself. That's the whole point, is that it's not by itself. It's that if you have a broadening rally, but you still have the hot area of the

market, the mega caps go up, but now you finally get some pickup from the underloved, underappreciated, and just sitting there at a much cheaper valuation than the mega caps. Absolutely. That's like the dream scenario for the bulls. Yeah. Listen, it's probably going to we've seen it already, obviously. My expectation is that it probably continues into early next year. But to your point about is the bull case dead? No, because, again, the Federal Reserve raised rates by a lot. And that's presumably going to have some effects throughout the economy beyond what we've seen. And it's an outlook season, if you will, from the sell-side banks. And I think at this point, it seems pretty clear that the sell-side is all in on the soft landing narrative.

But again, some of those things that you've started to see unfold, bear watching. Don't you think the Fed's done? Are they saying anything that suggests otherwise? No, yes. I mean, they're like, well, I mean, inflation hasn't come down far enough. We still have a long way to go. Sure, but this is the same two conversations we've been having all year. One is how much more do they have to raise?

And then the second question is how long are they going to leave them up there? Those are two different conversations. Do they have to go more? I'll repeat for the last six months. Maybe they raise one more time. Maybe they raise one more time. Maybe they raise two more times. You know, I don't think that really has a meaningful effect on either the broader landscape or my portfolio, per se, or the universal my portfolio. What happens if inflation continues to trickle lower? And that's the trajectory that it's on. And the economy, rather than, you know,

make a sort of steeper decline, just sort of has a leveling off from this period of growth that we've you know been in that's really surprised a lot of people sure the resiliency of the economy certainly has been a shock if you know surprise at best um what happens if it just levels off that's the soft landing which is presumably terrific for equity and credit is that a base case yet uh is your the streets base case is a soft landing. Yes. The streets. And again, what's the greenhouse base case? What's the greenhouse effect? I wouldn't. I do get it. It's been 40 years of hearing that, but I could bring it back. Listen, my base case is at some point there is a price to pay. And I think the street is too cute by half by

arguing you're going to see a slowdown, but just enough. I think that's a pretty difficult case to make. Although with all due respect to, I'm sorry, with all due credit to, let's say, Jan and the team at Goldman, they were exactly right last year, more or less. And they are the ones arguing more or less for a soft landing this year. So I think they deserve a bit of credit and heeding, so to speak, with respect to how they're seeing the landscape, because thus far they've seen it correctly. But listen, I think my view, again, is that the bias has been to the upside for several months now. It's probably to the upside for credit and equity over the next few months. But I'm watching some of those indicators that, if they continue,

suggest that maybe the price to pay will have arrived. OK, let's broad the conversation. Let's bring in Greg Branch of Veritas Financial Group and Christina Hooper of Invesco. Greg is CNBC contributor. It's good to have everybody with us. I'll get to you in a second, Greg. Christina, you first. What do you make of what Dan said? So I agree with much of what he's saying, but I will say definitively the Fed is done hiking rates and that is critical because what we know is that it is not the start of cuts that is the beginning of strong performance. It's actually the end of rate hikes that we tend to see the 12 months after strong performance. In five out of the last six rate hike cycles, we saw double

digit gains from the S&P 500 in the 12 months after the end of those rate hikes. So July, I would argue, was the end of this rate hike cycle. Now, to your question about the economy, the outlook, I would agree that I think it's hard to imagine a scenario where it's a truly soft landing. That suggests no economic damage. But I don't believe in a hard landing either. If you think about it, where rate hikes ended, if they did end in July, was at a 3.5% unemployment rate. That's significantly lower than any other end

of tightening cycle unemployment rate. So that suggests we could be in better shape. But we have to recognize the long and variable lags of monetary policy. So that's still doing damage. It was an aggressive rate hike cycle. So I think we will see areas of weakness where growth comes under pressure. But overall, the picture is no broad based recession. We get through this, but it's bumpy. There's some damage. But you sound bullish, though, at the beginning of your commentary. I am bullish because we have to disconnect markets from the economy. Markets are already starting to look out, in my opinion,

to an economic recovery that will unfold in the second half of 24. And that's why, for example, this week, while stocks have been up in general, small cap value has been a better performer than the other areas of the stock market. That's what I was referring to, finally, right? You got the S&P, you know, on the week up a little more than 2%. You have the Russell 2000 up 5.3%. So, Greg Branch, are you moved off of your bearish perch at all by what this market has done? It's defied the view of you and many others who have been in your camp. Yeah, a little bit.

And I'll get to that in one second, Scott. But I did want to address something. I don't know how we can be definitive about something that the Fed themselves are not definitive about. And so the Fed has taken great pains over the last two weeks to stress two points to us because our narrative is quite different than theirs. The first is that they are not definitive that they are done. What they want us to be definitive about is that it depends on the data from here, and that they reserve the right to hike more if they so choose. The other data point which I think

is embedded in thinking of a recovery in the back half of the year is that they will likely not have rate cuts next year. And Kashkari,ari I think said it the best when he said any expectation for near-term rate cuts is not embedded in reality And so am I slightly more bullish than I used to be it hinges on one thing We saw in this CPI report and it's the only thing that's been different from the last five CPI reports We see we've seen 20 basis points of poor before we don't know if that's a new trend In fact fact the data would say that it's not the last two times we saw 20 basis points of core in the last year we jumped right back into the trend of 30 to 40 basis points right after i think dan and i had a big argument

last time we saw 20 basis points of core in fact over the summer but the one thing that was different is we finally saw the breadth of disinflation widen. We finally saw some disinflation in the housing component. Am I willing to extrapolate a trend off of that? No, we shouldn't be extrapolating a trend off of any of this. But you've decided that you've got a trend of that you said you're waiting for the Fed to be definitive that they're done. I mean, they were definitive when they declared that inflation was transitory more than a year ago, and they were wrong. Now, you're waiting for a signal now that they're done.

By the time they say they're done, the train's going to be at the next station and you're going to be walking with the jacket over your shoulder. I'm not necessarily saying that scott what i actually said was that i don't know if we can be definitive if they're not i'm not saying that they're definitively going to raise what i'm saying is it's really hard to be for us to be definitive about what they're going to do if they don't know what they're going to do so that's not necessarily positing any veracity to any one direction of where they're going to go i know what they but they keep saying, but they keep saying that, well, we can afford now to be, I'm paraphrasing, but basically they've been saying, well, policy is in a place now where we can afford to be patient. I mean, there's sort of dropping clues here that they're not

going to do anything more than likely next month. And then after that, the market's priced out pikes completely. i maybe you think the market's crazy and the market's wrong but inflation is obviously going in the direction which would suggest that they don't have to do anything else well let me not paraphrase let me quote directly what powell said is that the record suggests that a sustainable return to two percent inflation is likely to require a period of below-trend growth, which we have not seen, and some further softening in the labor market, which we've seen a little of, certainly a lot less than the 4.4 or 4.5% they projected. And so just to address, you know, I was the biggest

proponent of what they were saying in terms of transitory in 2021. So absolutely not do I take everything they say at face value. I'm just saying I can't be certain of a direction until they come out with some certainty. I mean, Greg, here's the problem I have. Solus manages money. Not that we're the only ones out there, but Solus manages money and we need to invest for investors who demand a return, both short, medium and long term. And I feel like the argument being put forth, the argument that you've put forth over the course of the year and others sort of ignores the reality on the ground. And what I mean by that is to echo Scott's point, you're saying, well, I need to wait for the Fed to tell me they're done.

All year long. That's not what I said, Dan. That's not what I said. I feel like that's kind of what you're saying. I can tell you exactly what I said, and you can choose to listen to what I'm saying, or you can choose to paraphrase something that I didn't say, but that's not what I said. Okay. That said, what I'm kind of curious about is how do you go about investing in a year, or I mean this more generally, you have to put money to work. You can't be short everything, I assume. You haven't been short everything, I assume. So in the context of an environment where the Royal U are worried about the Federal Reserve, how do you put money to work in an environment like that where investors are demanding return

at the same time that the stock market, at least the headline level, is up 17% year to date, if that question makes sense? Right. And this shouldn't be a mystery. I think I go through this every time we talk about the bear thesis. The bear thesis is that the yields are not done rising. And so that means that we're going to concentrate on the short end of the curve

because we're being rewarded to be there. I don't think you are still being compensated to be at the long end of the curve just yet. I think that yields will increase there as well, particularly as we have to issue 1.6 trillion over the next four months, just as international demand for treasuries is somewhat softening.

So I think you're safe in the short end of the curve. I think that there's lots of areas in medium duration fixed income where we have great risk reward and where we need to be in equities. I've long talked about being in the sectors where we're going to see some relative performance because we're going to see relative performance of earnings growth. Those that have secular tailwinds, those that have projected margins.

So we're talking about AI, we're talking about cybersecurity, and I've been talking about these for a year now. And so I don't think this should be a mystery at all in terms of where we believe we can make money. Since everybody's getting along with the paraphrasing, I'm going to I'm going to just do it one more time. I mean, Christina, it's kind of obvious what Greg's point essentially is, is like all you bulls are completely underestimating the Fed, that there might be more cuts, that rates are going to be higher for longer than all of you think, and that that is going to have an impact on the economy. And the Fed's not going to cut interest rates nearly as soon as all of you think, and that that is going to have an impact on the economy. And the Fed's not going to cut interest rates nearly as soon as all of you think. And earnings are going to be

overinflated as a result of all that. And the stock prices need to correct. Hold on. Greg, did I get that right? That was right. That was a good paraphrase, Scott. I knew it. I felt good about that. He's a better paraphraser than I am. I felt good about that one. I love that paraphrase. And I love you too, Dan. I just, I don't, it wasn't personal. It's all good, Christina. So what I was simply going to say is that back in September, the catalyst for yield starting to go up dramatically was the release of the FOMC dot plot, which implied only two

rate cuts for 24 after the June dot plot had implied four rate cuts for 2024. Now, if we go back to just kind of check on the accuracy of dot plots, in December of 21, the Fed's dot plot anticipated 90 basis points by the end of 22. It was, in fact, 440 basis points. So that's just to say that I find the Fed can be rather inaccurate, to your point, Dan, and that what scared markets and sent yields up in September, to me, should be taken with many, many grains of salt. And I would argue that we have seen rates peak. I would go longer duration.

I think that the Fed does not have the ability to hike rates, but they are going to continue to bear down on markets with hawkish Fed speak because that is how they try to tamp down financial conditions. Hey, Greg, so when do you get to a point, and I mean this sincerely, you know, where you say, look, I thought things were going to be much worse off than in reality they are. And now I've got a chase for performance. I've got areas of the market that have done virtually nothing, which have come alive at a time where the area that's done everything is still going okay. Is it next week with NVIDIA?

If NVIDIA sort of validates some of that, what is the moment? And it's a great question, and it's really hard to determine from a bearish perspective, Scott, just because I don't know what the new term catalyst is. You know, like Christina said, I suspect that the Fed will come out and talk much more hawkishly over the next few weeks for very different reasons, because I still don't think that FedWatch and, you know, we're talking about rate cuts and they've tried to be very explicit that they're not coming. But that's the thing, is that the catalyst is gradual. It's like death by a thousand slow cuts in slow motion.

You know, Bridgewater did an excellent job of articulating this much better in a note last week, much better than I've been able to do in the last five or six months. But I think the key here is that we saw credit growth follow the normal correlation with monetary tightening. What we didn't see follow the normal correlation is spending, both from the corporate side and the housing side. And what they laid out is that—and I've tried to lay out—is that the reasons for that have very limited runway. Both corporates and households were spending now on this big government transfer, essentially,

that we experienced. And both of them had taken advantage of basically 0% interest rates in 2020 and 2021. And so the duration between the spending collapse and the credit collapse is still forthcoming. And it's taken longer than we typically would need to see that. And so, you know, I think that it's coming. I can't say it's going to be next week. And until the presentation of a negative catalyst, then, yeah, this probably still has some air left. But I remain at 3,800. All right. 3,800.

3,800? 3,800. You see what made,800. 3,800? 3,800. You see what made people gasp? 225. By when? 3,800 for when? Well, that's my 2024 estimate. I think

at some point we will have negative catalysts because if we continue to see the heat and we don't see a trend in that housing disinflation, the Fed will raise it. And they'll raise in first. The greenhouse was literally on his phone. He was going to make dinner reservations on one of the apps. And you said thirty eight hundred.

And he said thirty eight hundred. I was paying very close attention to everything. Everybody. You can always throw it back at me. We're on tape. We'll come back. Let me ask you this. It goes in kind of a point to what, you know, Greg's saying.

First, Dan, and then I like Christina's view, too. The idea that cash, which people have been hiding in, or in some respects not necessarily hiding, but taking advantage of because rates have been where they are. When does cash, is cash already not, no longer the best option? Is it losing its luster relative to where the market may go? Well, listen, I think if you're an investor at home, so to speak, and we've talked about this before, if you can get 5, 5.5% on a good chunk of your portfolio, you're achieving 75% of your long-term equity return basically at a risk-free rate. For us, we're a hedge fund.

If you're advising institutional clients or you're running money, 5% is just not going to cut it. Now, obviously, that increases your hurdle rate, both from a corporate and investment standpoint. But no, I don't think 5% is particularly unattractive. But I'm looking at names in the industrial space that are keyed off of the Inflation Reduction Act and a lot of the government spending that's coming down the pike, the electrification throughout the country. You look at some of the restaurants that are levered to, first of all, up on the screen right now,

where all the retailers are reported, raw stores, et cetera, et cetera. Like there's plenty of money to be made, presumably, that's going to give you better than 5% annual returns over the course of the next few years. Okay. So Christina, how would you answer that? And then we're going to wrap it up. I would agree completely. Cash is sitting on the sidelines that represents an over-weighting in many portfolios. That is a very powerful catalyst. I think we are going to start to see that move in. We're already starting to see that move into equities as well as risk assets within the fixed income space. This is a time of real opportunity for those investors who are looking to history as a guide.

All right. You guys are great. I enjoyed the conversation. Thank you, Christina. Thanks, Dan, for being here as well. Greg, you gave us a lot of quotable stuff and we don't need to paraphrase anymore. I appreciate it very much.

Enjoy the weekend. We'll see you soon and have a good Thanksgiving, everybody, if I don't see you before that. Appreciate it. All right. Number of retail stocks outperforming the broader market today

on the back of earnings. Courtney Reagan here with those details. Hey, Court. I was worried Dan was going to take some of my thunder on this, Scott, but most retailers have beaten expectations this quarter, but actually giving holiday forecasts with caution. So that sent shares in various directions. But today, number of standouts.

The XRT up 2.7%. That is much stronger than the broader environment we're seeing in equities here today. Shares of Gap having the best day since its IPO in 1976, up about 30%. Gap Inc. reported a big beat for profit, thanks to what new CEO Richard Dixon calls, quote, financial and operational rigor. Though revenue and sales were also stronger than expected, especially its biggest brand, Old Navy,

that posted a surprise comparable sales number, up just 1%, but still positive. Its smallest brand, Athleta, did see comps drop 19%, but investors are looking right past that. Raw stores also beating estimates for earnings. I know Dan Polk called that one out too. Revenues and comps issuing cautious guidance. Shares, though, still up about 8% on the session. And then Macy's surprise profit yesterday drove shares then. It's continuing today. Macy's shares actually up 30% over the past week, and that's lifting department stores more broadly. Kohl's up sharply, 17%.

Nordstrom up 11%. So got some big moves here for the week and the day. Scott? All right, Court, appreciate it very much. Courtney Reagan. We're just getting started. Straight ahead, more on this big week for the markets as stocks try for their longest winning streak since the summer. Johnny Filion of BNP Paribas USA will join us here next right

at post nine. Find out how he sees the setup into 24, including the road ahead for rates and recession risk, M&A and everything else. We're at the New York Stock Exchange. You're watching Closing Bell on CNBC. All right, welcome back. Major Average is heading for their third positive week in a row as we near the close today. Here to share his perspective on the global market is Jean-Yves Filioni. He's the vice chairman of BNP Paribas USA. Welcome. It's good to see you again. Thanks for coming down here and sitting on our set.

Thank you so much for having me, Scott. So you know what makes a market is you know differing views on where we are. We just had a you know a vigorous debate about whether it's time to be bullish or bearish. You know the bears had won out for a while but how does the how does the environment feel to you today? The data of the week was quite positive. Inflation is coming down, probably at a faster pace than expected. Retail sales are coming down as well, but probably not as fast as one would have feared. And this U.S. economy seems to continue to be very resilient in spite of the headwinds. And I think this is what the markets are recognizing, right?

Yeah. Are you surprised by how resilient the, oh gosh, almost everything is? I mean, the consumer's been resilient, the economy's been resilient, the market's been resilient. Not so much. You know, spending a big part of my time with business leaders, I was actually last week with some of the largest, you know, tech CEOs. This economy continues to have strong fundamentals. You know, corporate balance sheets continue to be in a good shape, very liquid.

The consumer continues to spend. And the velocity of capital markets here is just unprecedented. Yeah, I mean, you are talking about some of the most well-known CEOs out in Silicon Valley that I know you've been with lately. What sense are you getting from them on enterprise spending, the very things that the market is concerned about that would be first hit in a more dramatic economic slowdown? There is concern about the geopolitics and politics situation.

We have to be very clear on that. It's in everybody's mind. However, I see them very involved and engaged in terms of investing, expanding, expanding internationally, by the way, where the bank is pretty well positioned to support them having a presence in six countries in the world. What they need mostly is they still need lending and actually at times bridging to capital markets, you know, expecting better conditions. They are very focused on the more, I would say, industrialized ones on, you know, short-term financing, trade, receivable financing, supply chain financing. But I would say I would be remiss if I were not saying that given the uncertainty and the potential expected volatility, we've had unprecedented demand on hedging strategies.

And, Scott, across the spectrum, obviously, it starts with rates, with currencies, commodities, given the status of energy and equities. OK, so since we're talking about, you know, demand for financing, let's talk about rates. Have we peaked? Do you think we have? Do you think the Fed's done? Let's start there. I think central banks, and I'm putting a nice here because I think there's a common view between the Fed and the ECB, acknowledge the good trend in terms of inflation.

But when you look at inflation, I think we have to make a distinction between holistic inflation, between core inflation, and between services inflation. And this last, the latter is probably the most, you know, steady. However, I don't think anybody claims victory on this battle. Yeah, well, I mean, that's clear. You're getting that, including from, you know, the Boston Fed president who was on our network today, Collins. Let's listen to what she told our Steve Leesman, and we can react on the other side of that, Jean-Yves. Three-month core is still at 3.4 percent, Steve. That's higher than we want. And so in order to get back down to 2 percent in a reasonable amount of time, we need to be patient and resolute.

And I wouldn't take additional firming off the table. We need to be patient and resolute. And I wouldn't take additional firming off the table. We need to look holistically at the data. JEFFREY BROWN, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington

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Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington Post, The Washington There is always a debate about is 2% the proper benchmark going forward? What do you think? Did you hear Jim Gorman this week? Who said, you know what, maybe it's not. He said maybe 3%. Then I think there is a good discussion. And I wish I had a crystal ball on this one, right? However, what I have more certainty about is this is the end of cheap money

and this is the end of cheap labor. The House view for 2024, we see the Fed and the ECB sticking to their policy. Probably we've reached the stage where terminal rates are probably where they are, but we don't see any cuts until the second half of 2024. As you know, central bankers are fact-based and driven by data. And that's going to be the main driver in the next few months. Do you think they cut because they can, because inflation's come down on trend? Or do you think they cut because they have to, because the economy's weakened to the point that they have no choice?

And I think you are just highlighting the dilemma. They have to manage this very fine line between fighting inflation and keeping this economy going. I have to say, as it relates to this economy, this is such a resilient economy that they might have a bit more room to maneuver than the ECB might. Who cuts first? Who cuts first, Lagarde or Powell? I'm putting you on the hot seat now. I was going to ask you.

I think that's what I came over today. Well, listen, what's interesting to see here, there is convergence between these two central banks, you know, in terms of money, first and foremost, in terms of oversight supervision, in terms of monetary policy. If there is one difference still, the Fed has been using in their toolbox rate hikes, as well as unwinding the balance sheet. QT, quantitative timing. QT, $90 billion monthly. The ECB so far has only mostly used rate hikes, not yet unwinding the balance sheet.

And this is what could be a differentiating factor. OK. Lastly, you talked about the clients that you're talking to and the visibility they're giving you into capital markets. What kind of environment do you think we have for M&A moving into 2024? Well, let's look at 2023. Actually, it's been quite good. It's not in the magnitude of 21, 22, but it was kind of a peak.

But we've seen transactions. We've seen more like larger transactions with actually a mix of stock and cash. What I've noticed as well, which is a complicating factor, there is much more regulatory scrutiny on these transactions, which make the lag time probably definitely longer. But interestingly, there is a lot of dry powder in the system. You know, corporate balance sheet, the strategics have ample liquidity. And what I can see and what I can see in the position I have, I see a lot of inflows from outside of capital inflows and liquidity from outside of the U.S. into this economy.

Which, by the way, means when we get to a more normal environment, this money will be ready to be put at work. Wow. So maybe we're, in some respects, spring loaded as, you know, as we say, just waiting for that moment. To be seen. Thanks for being here. Thank you for having me. It's good to see you. Johnny Filion of BNP Paribas right here, Post 9. Straight ahead, casino operators in Las Vegas are calling for a record November in the wake of this weekend's Formula One race.

We're going to break down just how much is at stake when the closing Bell returns. All right. We have major breaking news related to OpenAI. Steve Kovach joins us now. This is a stunner in some respects, Steve. Yeah. Sam Altman is out as CEO of OpenAI. We just got this announcement. Scott, I'll read you directly from the release,

the board saying, quote, Mr. Altman's departure follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise responsibility. The board no longer has confidence in his ability to continue leading OpenAI. No details about what was said or what wasn't said or what this communication was about. They are naming their chief technology officer, Mira Marotti, as a interim CEO for the time being. But, of course, this has more implications beyond just OpenAI. Microsoft, of course, major investor in OpenAI, owning a significant part of that company as well. I've reached out to Microsoft for comment, and I'll get back to you if we hear anything, Scott.

Well, I mean, I can just tell you as we're having this conversation, Steve, that, you know, the minute this thing started these two companies, which have had, which, let's be honest, put Microsoft into the driver's seat in the way that the market has taken it from step one. Yeah. And Sam Altman was very much the face of this company, right? He was just at the APEC summit meeting with everyone there, along with the top tech CEOs, including Satya Nadella, including folks like Apple's Tim Cook. So he is very much at the forefront of this company. I was in Congress, Scott, back in May. He was the one who testified in front of Congress

talking about AI regulation. He's the guy to go to. He has been at the forefront of this AI boom we've been seeing more than any other company, more than any other person. And he is now out. Of course, we're dying for details of what exactly happened here. But, you know, up until this week, he was still the face of the company and really out there promoting this technology. Just, you know, even just a week ago, they had a big event and he was there giving the keynote speech in a very like Steve Jobsian way,

showing new features for what's coming at OpenAI and ChatGPT. So it's unclear what the future is here. But yeah, you see Microsoft now down 2% on this news, Scott. Yeah, I'm looking at the sort of broader implications, too, just again of how, you know, big these stocks are and the weightings that they have in the different indices. If you're, you know, the Dow, for example, we were wondering, OK, we're going to make a run at positive territory. Well, Dow's now down 28 points. It was a somewhat muted day to begin with. But now you have the biggest point contributor to the downside in Microsoft shares, which are taking about

seventy dollars or so off of the Dow as it relates here. It's gonna be interesting to see what happens from this, Steven, in the broader context, what you think this might mean to Microsoft's efforts as Alphabet's made it clear too, that they're not willing to take a backseat to anybody and they're gonna spend whatever they have to and do whatever they have to do to close whatever perceived gap uh exists or at least the one that the market has already voted on

exists by virtue of what microsoft shares have done which have been hitting an all-time high almost every day this week yeah and it's not just that like google has not just fallen behind but it actually had to delay its product, reportedly, this Gemini product that was supposed to compete with the latest and greatest chat GPT product. That has been delayed, so it's still behind. But look, this is great news for Google. I don't know if we have Alphabet shares up here and see how they're reacting. But at the same time, you also got to look at what's been going on at OpenAI.

They literally crashed because they had so many people signing up for their latest products that they just announced this month. So there is momentum there. They have so many users. It doesn't seem like they still are the top of the game and still perceived as the leader. It's unclear. But so much of that, again, Scott, was tied to Sam Altman as the figurehead and face of the company. And now he's out. And, yeah, Alphabet down about one percent here, it looks like, Scott. Yeah, incredible. I mean, the valuation of that company has just absolutely exploded.

And they're trying to raise even more over the last year. Right. I mean, they they went from near a 90 billion or whatever they went from. I can't remember how low the valuation was, but a year ago to near $90 billion now. That tells you what the excitement is around this company. And actual revenue, Scott. They're actually selling stuff and actually bringing in sales, unlike so many early startups that are pre-revenue or no revenue. There's money coming into this company, not just from investors. And Sam Altman, by the way, gave an interview, I believe it was with the

Financial Times just a few days ago, saying he's willing to go back to Microsoft for more funding. So this is still a very active company. And without Sam Altman, it's unclear if they have that kind of leadership mojo that they would need to continue up this momentum and this leadership position that they have, not just for themselves, but also for Microsoft. It's so funny. It's how everything works. We're sitting here talking about this stunner of a story. We're talking about what it means for Microsoft and Alphabet and the like.

And, of course, I said I couldn't remember exactly what the valuation was back then. So what did I do? I Googled it. And, of course, it comes up. It was $29 billion in April to near ninety billion around now. It's just, you know, a real sign at how meteoric this company's emergence, Steve, has been. Yeah. And it's not just these kind of fake valuations that we hear from so many startups. You know, I think there's one called Character AI that makes no revenue and it's not, you know, as advanced as what we've been seeing. There are talks that that has a $5 billion valuation. This is also really good news,

Scott, for Anthropic, which doesn't get as much attention as OpenAI and ChatGPT, but its product, Claude, which is its version of ChatGPT, is also very capable and very advanced and right up there, neck and neck with what ChatGPT is able to do. Of course, there is that Amazon investment into Anthropic to kind of boost that as well. But look, this is this made the horse race, so to speak, between all these AI companies just really tighten up again without this leader. Scott. Yeah. All right. Well, I appreciate you bringing us this news and rolling with all this on the fly. Let us know if you have anything else over the next 15 minutes or, of course, in overtime as we turn the clock. Steve Kovac, thank you very much.

Up next, we're tracking the biggest movers as we head into the close. Closing bell right back. Welcome back to Las Vegas in the final lap of preps for this weekend's Formula One Grand Prix with one of the big winners expected to be the casinos. Big shock. Contessa Brewer following the money on that story in Las Vegas. I don't know. You combine F1 with a ton of people and gee, the casinos are going to do well. Yeah, I mean, there are really lofty expectations for F1's impact on the fourth quarter, Scott. Caesars CEO Tom Riege said on his most recent earnings call they're on track for a 5% profit lift from F1. Wynn expects to exceed its previous record for hotel revenue by 50% for these three days.

So does MGM Resorts. Now, overall, Vegas has put a $1.3 billion economic impact number on this weekend. But look, there are a lot of skeptics. For one thing, room rates have plummeted. The hotel room I booked earlier this year for this weekend was $1,200 a night. Now it's $200. Ticket prices for F1 hit the skids, too. StubHub says they have declined by 15 percent and more than half of them have been sold in just the last week. In the last hour, I've spoken to two different high level casino executives who don't want to go on the record with their names, but they told me, complaining that this is the worst weekend that they have seen since COVID. One of them actually used a very

stark expletive to describe it because thousands of rooms either are empty or they're just booking for chump change. So why are we seeing the discrepancy between what the Bellagio rooms are going for more than $2,000 a night and what these other executives are complaining about? One of them said, look, F1 is a rich man's sport, and publicity over these million-dollar packages, which, of course, we here on CNBC have brought you, sky-high ticket prices, got headlines, and that all scared away the mass demographic

that would normally fill tens of thousands of modestly-priced rooms, Scott. All right, Contessa, we appreciate it very much. Contessa Brewer in Vegas, ahead of the Grand Prix there. We got the market zone coming up. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Deirdre Bosa with the latest on that bombshell leadership shakeup at OpenAI. And NVIDIA partners with Dropbox, what that means for the stock ahead of its critical earnings next week. Mike, I begin with you. We're going to find out real quick whether this was a telling week for the market.

Sure. the market, the broadening out, S&P equal weight, which you've talked about for more than a year now, of the real place to look for the strength in this underlying strength in the market or lack thereof, small caps, et cetera. It massively outperformed last year, massively underperformed this year, and finally getting a little traction pretty much where it needed to around the flat line for a year to date. In terms of the S&P, it's interesting how it's dealt with the big one-day pop off the CPI on Tuesday.

Up almost 2%, up almost 10% in three weeks. The closes in the next three days, 45.02, 45.08, we're at 45.12 right now. In other words, holding the gains, trying to work off the overbought condition by going sideways and allowing the mass of stocks to catch up to the few leaders. That's probably bullish if that's how it goes. And to me, the big question is, is it over its skis yet? Technically, getting overbought, not terribly, not compared to July necessarily.

Is it ignoring some kind of bad economic news or something like that? It doesn't seem like it. It doesn't feel like it. So all of it working together is, you know, relatively reassuring, I would say. And anything can come along. But for now, it seems like a win for the week. I mean, treasuries are doing nothing to upset the narrative either. Ten years at $443.

Pushing $444 as we speak. But that's telling you to sell. That's where we want. You want them under $4.5. I mean, it hasn't broken down entirely, but it allows the market a little bit of a breathing room. And, you know, credit, of course, has been fine. And understandably, you know, people feel as if maybe they missed the initial burst off this move. We'll see how that reacts into year end.

People putting a little faith in the holiday-related seasonals as well, in addition to just the fourth quarter tailwinds. Yeah. Deirdre Boso, what are we learning here about Sam Altman out at OpenAI? I mean, we're talking about literally the face of all that we've talked about over the last year and why the market has done what it has done. The face of generative AI and OpenAI as the darling, especially after billions and billions of dollars from Microsoft. So my phone is blowing up right now. I'm pinging sort of everyone I know

in the tech and San Francisco community. And there is a certain amount of shock, right? As you said, he was the face of generative AI. He had this gigantic valuation on the back of investment from Microsoft on track for reported $1.3 billion in revenue this year. You talked about valuation. We did this deep dive on our Tech Check Weekly that showed that if you looked at OpenAI's valuation on a valuation to sales metric,

it had a multiple many times that of even NVIDIA. Scott, I will also say that I've heard from a few people in the investment community that this isn't surprising. And over the last few months, you did hear, it wasn't the popular opinion, some doubts about Sam Altman and what he was selling. So I will say that at this very early stages, I'm still getting information coming in and I will update you. But even when you look at the structure of this company, it's a very strange structure, right? It's a nonprofit. That's why Microsoft was only able to invest

up to 49%, a 49% stake of the company. Its duty was not, its fiduciary duty wasn't necessarily to its shareholders. It was a nonprofit. And in the charter, it says, our primary fiduciary duty is to humanity. So it was already an unusual know, an unusual structure. And probably a lot of this is going to come out.

A lot of questions are being asked, but certainly shockwaves through the community here. No doubt about that. I suppose, you know, as you said, some saying it's not surprising, but it is universally jarring. I can tell you that. Georgia, thank you. Yes. That's Georgia Bosa. And you can see it, Mike, showing up in Microsoft. But again, you know, you put all this into context, this person we're talking about,

you know, the company that he founded and what it has meant to this market by way of Microsoft. The valuation of that company, you know, $23 billion to $90 billion. It just underscores everything that we've spoken about from the beginning of this year. Without a doubt. And, you know, Microsoft's piece of it, what is it? You know, is it 10 percent stake? Something like that is really trivial relative to the size of Microsoft over two and a half trillion dollars. But in terms of how we got to two and a half trillion, it's because they have that advantage of open AI. So it's not just about what this business is where maybe we can, you know, take one moment to enjoy the irony of a human being whose leadership is now lost from a company that's supposed to be just artificial intelligence.

The software itself is going to do the job. We already have the technology. It's just going to iterate itself. Clearly, there's a sense out there that maybe there is a sort of key person risk even in these businesses. But I think that it's interesting that you've taken a little off the top from Microsoft stock. Stock was at 360 a week ago. OK, so it's still 369. But it shows you the sensitivity and the fact of why people own it at this level.

OK, well, let's take that then to the next logical step, which says, OK, we know why people own NVIDIA at this level. And that's for the exact reasons we're talking about this in context of Microsoft, the promises of AI and the ability of these companies uniquely so to monetize it in a way that others cannot yet. I think the advantage NVIDIA has and has enjoyed is that people aren't sure exactly what the payoff is going to be, but they feel like they need the investment up front no matter what. You have to test it out. You have to be involved. So, yeah, we'll see what the trajectory is and what they say about 2024 when they report on Tuesday. It's such a moonshot stock. As everybody says, the earnings estimates

have had this heroic blast to the upside. So, stakes are pretty high, I would say, for that stock, if not the market. Well, the moral of this story this week is the other areas of the market that have done quite well, and we'll see if it turns into the new week. I'll see you on the other side of the weekend. Have a good one, everybody. Into OT with John Foy.