Closing Bell - Closing Bell 12/12/25

Episode Date: December 12, 2025

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. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, guys, thanks so much. Welcome to closing bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This maker breakout begins with more AI anxiety hitting the market today. We'll take you right to the scorecard with 60 to go in regulation. Take a look at the NASDAQ. It is under heavy selling pressure yet again today, down one and a half percent. A headline that Oracle will delay some of its data centers for open AI until 2028 unnerving the market today.

Oracle says not true. investor is not so sure, and that stock is sharply lower. Take a look at Rodcom as well. It's also falling despite a pretty good earnings report. Other chip names like Micron and AMD, also in the red today. Most of the AI power plays are as well. GEVernova, Eaton, Invertive among the big decliners. Lulu Lemon shares, though, higher today on Word CEO, Calvin McDonald, is stepping down.

Restoration Hardware is higher on its earnings. It takes us to our talk of the table. on this Friday, the AI trade, and where it does go from here. Let's welcome in Big Technologies, Alex Kanchowitz, also a CNBC contributor. It's nice to see you. I appreciate you joining us. What does this story of this delay even denied mean to you? Well, Scott, you opened up the show talking about how there's AI anxiety, and I think

that's exactly the case. Right now, the market is, and they believe, market and investors believe that the AI buildout will continue a pace and that the numbers that have been shown will be close to what's delivered. And any little blip in that story is going to cause a bit of a panic. And I think that's what we're seeing with Oracle, the delay of the data center buildout as investors thinking, well, maybe that $300 billion deal with Open AI isn't actually going to come to fruition. Let's pull back a little bit and let's hedge just in case that isn't going to happen.

And I think all along this story, anytime we have one of these moments, there's going to be a pullback like the one we're seeing right now. It underscores what the anxiety really has been about in some respects, the heavy reliance on Open AI for almost everything. That's right. I mean, $300 billion. That's the size of the deal between Open AI and Oracle. Open AI is on target to end this year with about a $20 billion run rate. And we know that Sam Altman, when he's been asked about how that he's going to make the math work, did not have a great answer. I think that's been hanging in the minds of anybody watching the story, asking, well, how is he going to make these numbers work together? And again, when there are blips in the story, whether it's from the Open AI side or the Oracle side, people are taking a look at that and saying, is this really going to happen?

And you have to pull back a little bit if your expectation previously was that it was. So this is sort of the story that Open AI and its partners are going to be living with in the months and maybe years to come. I mean, Oracle clearly is the most acute point of concern here, correct? You look at the stock, you look at the CDS. When you take the story in total, what does it tell you about this particular company in the eye of whatever storm this might be that it's dealing with, even if it's simply a storm of a bad narrative around it? Well, I think Oracle made a logical bet or a bold bet, maybe bold and logical,

and saying AI could be one of the biggest infrastructure moves of our lifetimes, and we're an infrastructure company. Let's take on some debt and some risk and try to get to the front of the line. And I think the market reacted really positively when they saw Oracle make that move. But now, you know, the rubber has hit the road a bit. And we see that Oracle has debt. There have been delays. And then there are dependability issues when it comes to whether OpenAI is actually going to put the money up.

So that's why Oracle has sort of been under pressure recently. The question is, can it deliver? The signs aren't great that this is all going to come to fruition according to plan. And then for the rest of the market, they catch strays because one company going bad makes people think, well, maybe the others ones will do poorly. And Broadcom, for instance, not like they delivered the worst results in the world, but they are starting to get some of this down draft from Oracle from investors, fearing that it could end up hitting others.

Yeah, I was going to ask you about that one, specifically. It's a peculiar move given the earnings report, maybe a victim of nothing more than a stock that has run up tremendously into that print at a time where we already have some anxiety. Yeah, absolutely. I mean, they're still up 56% this year, even with the 10% drawdown. So Broadcom is doing well. They, of course, have great deals going with Google and Anthropic. And so they should be in a good shape, in good shape. But again, the market. is basically, they believe this story that everything is going to go according to plan. And the plan is very, very aggressive, whether that's Open AI and Oracle or the other companies that are building out this infrastructure. So there needs to be some assurance to investors that it is going to go according to plan. And when there's a blip, even if it happens in an adjacent company, you're going to see a little bit of bad news somewhere else turn into a big drawdown like we're seeing with

Broadcom today. I want to show you before I let you go and our viewers as well in case they have. haven't seen it yet, the Time magazine person of the year cover, which is pretty interesting to look at. Hock tan, not on it, but others who are in the center of all of this certainly are. Mark Zuckerberg, Lisa Sue, Elon Musk, Jensen Wong, Sam Altman, of course, and others. And I'm wondering what you see when you look at this picture. Yes, these are the said architects of AI, but they're also teetering over very high in the air. And that might make some people nervous as well. We can't afford any slip-ups by almost any one of these folks. Right. I thought the cover

was great and the symbolism is terrific. Better not drop a lunchbox, right? We're trusting them to build some very important infrastructure, one that can be part of our metaphorical skyline for a long time. But, you know, a loose wrench or a bunch pail over the side is going to potentially be fatal to some standing on the ground. Yeah, it's interesting to think about, by the way, the FTs person of the years, Jensen Wong, which would surprise nobody. He's in the conversation, of course, no matter who's talking about it or where. Alex, thank you, as always. Alex Kanchowitz joining us. Have a good weekend. We'll see you soon. Let's welcome in now the Wharton Professor Jeremy Siegel. He's also chief economist for Wisdom Tree. It's good to have you back, of course. I'm wondering what you make.

of what's been happening in the market. You see it from Oracle, you see it from Broadcom, and frankly, you see it from a lot of other stocks. This AI trade, at least for the moment, seems a little out of favor. Yeah, and, you know, when you sell for 30 times earnings or 40 times earnings, nothing can go wrong. And when a few of the narratives wobble,

as they are, that puts that caution into them. By the way, I think those stocks are still a pretty, healthily for the year, but for the first time in a while, you know, we've often talked about the rotation, you know, and then it disappears a few weeks later. This rotation, I think, might have more legs than some of the ones that we've seen earlier this year. Boy, it's interesting that you say that. Others are, as well. You know, Wolf Research today is the broadening finally happening? They would wonder that maybe it is. If you look at the sector winners that have taken to the forefront since the Fed decision, materials are up

4 percent, and financials are up three, a record high today, industrial's up two, a record high today, health care's done quite well. This certainly seems to be at least a trend change of some sort. Well, you can't say for sure because there's been so many headfakes in the past. But as I said, this one has more legs in the sense that there are more things that are happening that throw doubt on how fast or how profitable all the AI buildout is going to be. And, you know, what's going on, Oracle, these delays, part of it is because expenses are going so high for building some of these data centers. And that, of course, adds to the burden of how do you get profitability out of them. On the other side,

Some people say, hey, you know, once, if they're delayed, maybe that will prevent an overbuilding of them. So you can see a little bit of a maybe a little silver lining there, but I think it adds more questions than answers in terms of the ultimate profitability of AI. Yeah, what is your big takeaway from this Oracle story today, which is undoubtedly unnerved the market, at least a little bit? Well, I think it started, you know, when, you know, the big, all the capital expenses. that run into the hundreds of billions or trillions, you know, academics have been doing research on how well do firms ultimately do that have high amounts of capital expenditures, and Scott, the results are not good. I had a chapter in my book called Capital Pigs in the sense that those that expend more relative to their income on capital, over expand, and ultimately suffer poor return. and lower profits. Now, I'm not saying that that's necessarily going to happen to AI, or certainly all the AI, but that narrative has to come in mind, and there is research on saying too much capital

expenditures is going to be bad for your stock. What do you make of the idea that Michael Hartnett of Bank of America puts forth today that really what we're witnessing in the market may, in fact, be a relative trend change, that what was a case-shaped economy being, in his words, all the rage in 2025. Now we're front-running what he suggests could be a run-at-hot economy in 26, and we are thus rotating into a lot of areas that would take advantage of that kind of trade. Are you a believer in that? Well, you know, I was actually quite encouraged by, you know, the Fed response, Jay Powell. He seemed more calm about inflation than I've seen in a long time in terms of saying,

yeah, mostly effective tariffs should be washed out. It's a one-time increase. He was saying, he said, indicators of inflation or expectation are more under control. Yes, it was a close decision, but, you know, I was actually quite impressed by that. Now, there's two bumps that we have. We have the bump of the Supreme Court tariff announcement

and what kind of, what is that going to be? And what is that going to make? And then, of course, as we know, we have another fiscal cliff at the end of January, and I think the betting markets actually say 30 percent that there's going to be another shutdown. No one wants that. I mean, that could have subtracted two percentage points in GDP in the fourth quarter, and it could even be worse if it happens. I think everyone wants to avoid it.

But after that, if we can get past those two, there's the headwinds to tax refunds, the tax bill, the effect of the terrorists of basically having gone through the system and digested better than people had thought that actually marks a better 2026 than certainly I thought we might have, let's say, at the middle of this year. So you think the Fed was decidedly less hawkish than you had thought they might be going in? Yeah, absolutely. I mean, I did say there was going to be a hawkish cut.

but it was a very mildly hawkish got in the sense of the narrative that J. Powell presented to us was the most positive narrative on inflation that I'd heard. I mean, by saying it's mostly the goods that are tariffed. We're seeing favorable signs on the service front. My indicators of inflation or expectations have not increased. I mean, a number of things that I thought was very favorable. Yeah, we did have two dissents, but interestingly enough, and I don't know if you heard Goolsby this morning, being interviewed

on CNBC, he said, yeah, I dissented, but I'm actually lower for next year on the Fed funds rate than the median estimate. A doveish dissent. He's not a voting member, but he's a very influential member

because, you know, he's such a strong economist from Chicago. So even though he won't be voting, his opinion really matters. And I found that to be quite interesting in his discussion. I did as well. I thought it was, if you could ever have a doveish descent from a cut, that that's pretty much what you got.

I'll tell you, you know, stay with me one second, if you would. You know, one of the areas that's done quite well away from tech is financials, the banks. Leslie Picker joins us now with that big move that we've seen this week. And you really did this week, Les, have a front row seat to the conversation in this group. Yeah. As you mentioned, Scott, it was really quite a solid week for the banks, investors digesting just a slew of news coming out of the Goldman Sachs Financial Services Conference earlier in the week where we were, as you mentioned, had a front row seat. Plus, there was some news on the macro and the regulatory fronts that's broadly seen as conducive to the industry. Goldman Sachs, the best performer of the Big Six this week, thanks to continued optimism, about the capital markets environment.

The firm's CFO told CNBC on Tuesday that 2026 could be a record year for M&A. Even JPMorgan is poised to close the week in the green, despite some guidance on expenses that caused that stock to slump on Tuesday. The Fed, of course, cutting rates, and then the twos and tens yield curve spread is now the widest in almost four years. And, of course, a steepening yield curve can be a tailwind for loanmaking profitability. regulatory front also broadly favorable for the sector this week as well, notably with yesterday's news that the Trump administration plans to overhaul the financial stability watchdog to remove, quote, undue burdens on the system, Scott. All right, Les, perfect. Thank you very much. That's Leslie Picker. Now let's bring in CNBC contributors, Capitol areas, Malcolm Etheridge and 314 research's co-founder Warren Pyes. The professor, of course, is still with us. Warren, you first. You have somewhat of a run-at-hot target. for 2026 in the market, 78.50. We're getting another thousand points out of this S&P from you.

Yeah, thank you for having me. I think it's hard to be meant to construct a bearish case on the doorstep of 2026. You know, you have as you discussed with the professor, you know, most everybody, even the dissenters are expecting cuts next year. We have, I think we're going to get 12 to 13 percent earnings growth. That'll be the best earnings year we've seen since 2021. And part of that is we're going to see margins expand. And I think that's key to our outlook and how it distinguished itself from most of the strategists out on the street. We think contrary to the consensus that multiples will actually expand next year. And so that's how we get to our target.

We're also in what I would call a recovery backdrop. We already had an 18 plus percent decline eight months ago. You go back in history. There's only one case where you get another one of those types of really serious corrections over the next 18 months. And that was COVID. So it takes some kind of really serious exogenous event. So I put all that together. I just don't know how you can be very bearish at this stage.

Wow. That makes sense to you, Malcolm? Yeah, I don't disagree. I think it's very telling that the professor started off the conversation talking about valuations and companies that are 30, 40 times earnings might have a tough road to hoe next year, which does say something about the broadening that you guys are discussing. I think the AI trade continues to roll.

And I think that maybe we start to play. place our bets with companies that have a little bit more going on than just spending to build out their AI infrastructure. So if you think about an alphabet, for example, in Amazon or Microsoft, they've got well-diversified revenue mixes that don't just rely on leasing out cloud servers and those types of things and can appease shareholders along the way while they build out. I think that's more likely the tech trade that carries the narrative next year. But I also think that there's definitely room for a lot of other sectors to participate in a way they haven't in quite a while. Professor, a thousand more S&P points for next year. Is that

makes sense to you? Well, that would be a 50? Is that it be 15%? I'm trying to do the math over here. Yeah, it is. You know, that would be on the high, not impossible. Listen, the Fed, you know, raised its estimate for GDP growth next year by the biggest amount that I've ever seen outside of coming out of a recession, which we're not in. I mean, you know, by 50 basis points, it shows how much they've raised their forecast for growth. And it certainly, it's growth and its earnings and its margins that drive stock prices. All three are in a positive thrust right now. You know, Warren, I'm just curious if you think we are on the cusp of a legit trend change.

in this market. Run it hot, go cyclical. There's going to be AI concerns for the foreseeable future, right? Any little blip is going to cause consternation somewhere. So if you're going to run it hot, especially into the midterms, let's run with what we've got here. Yeah, I think that everyone's wanted to see this broadening for years, really. And my view is more like Malcolm, which is that there is going to be broader participation. Look, this has been three of those. the narrowest years going back over the last 75 years. This is three of the narrowest, three of the five narrowest years on record meaning. We've had the fewest number of stocks beating the index. And so I think you will get a broader. And we've only had

three sectors, including the two tech sectors, outperform the index. So you get a broader move next year. And I think we're set up more for a this continuation of a Goldilocks period, say the first quarter, maybe the first half of the year. But I do think the run it hot, commodities, cyclicals, trade starts to take over in the second half of the year, and that's commodity positive, bond negative, and more choppy for the second half of the market. It's interesting. You talk commodity positive. You know, Jeffrey Gunlock telling us what Wednesday after Fed Chair Powell was done, that he's pretty bullish on the commodity space. What about that, Professor? I mean, the dollar has been certainly weaker. He thought the dollar was really going

to go down. And I think he thinks there's just too much going to be too much excessive cutting next year. And I just don't think that's the case. I mean, go down another 50 basis points. I mean, you know, get that curve, 100 basis points deep on the term structure. That's a healthy market. That's not a necessarily inflationary market. I think, you know, oil is 57. that most important commodity, you know, gasoline prices just, I think, hit a three-year low on average yesterday. Yeah, there are copper is a hot area. There are a few hot areas, but I really don't see a general commodity inflation in 2026. Interesting. Malcolm, I'm going to let you finish it out with, you know, reminding people

that you sold out of Oracle yesterday. Maybe you're feeling good about yourself today. The timing seems right for a stock that's down in total almost 13% this week. What do you make of the news that crossed today, even with the denial from Oracle? Well, in all seriousness, I don't love it just because it's not great for the entire ecosystem. I am very bullish on the AI trade, and I'm not a short seller, so I don't have a vested interest in any one company doing poorly against the other. But I do think that the timing of this is not great. the air is being let out of this balloon, so to speak, at a time where you started off the conversation with Alex pointing out that there wasn't a lot of room for error with all of these different tech titans who are helping to steer the AI narrative.

And I think it's very telling if you rewind back to the information's reporting on Microsoft's reasoning for why they decided not to tie their entire fates to open AI when they obviously had the chance as the first mover there. I think that's very telling as to what the underneath the surface looks like with relation to the spending commitments here with Open AI. And so for Oracle, I think it's probably not the right time for anyone looking to be saying this is where I want to buy the dip or I want to step in here and start to initiate a position. I think you're more than likely to get a much better buying opportunity in this name over the coming days. All right. We'll leave it there.

Good weekend, everybody. Malcolm, thank you, Professor, of course, Warren to you as well. We're just getting started here on the bell on this Friday. Up next, another professor, well, the Dean of Valuations, NYU's Oswath Demoter, and he is with us. So does he think the Mag 7 names are overvalued right now? We're going to ask him next. All right, welcome back on closing bell. One of the key questions facing mega-cap stocks is whether they are too richly priced, even if all of the AI optimism is justified.

Let's ask the so-called Dean of Valuation, Oswat Demoder, and NYU's Stern School of Business. Good to have you back. Thank you for having me. I mean, I think we're all looking at the same market and maybe coming with different conclusions. What about these mega-cap stocks? I mean, when you grade them, what do you give them? I think one of the reasons it's so difficult to arrive at a consensus here is when you look at the market caps and they clearly, I mean, they're at levels we haven't seen with any company

in history, $5 trillion, $4 trillion. At first, I'd say, that's way too high a number. There's no way. But it actually turns out that every one of these companies, the trillion dollar market cap plus, has a pathway to get there. It's plausible. And I think that's at the basis for why there's so much disagreement. it depends on how plausible you see that pathways.

You give you an example, take Nvidia at a $5 trillion market cap. If they can maintain their existing nosebleed margins, 53% net margins, return in equity in the triple digits, they can get there with 600 billion in revenue, which is not a big deal. I mean, they're 170 billion already with 20% growth you can get there. So the people are upbeat about Nvidia are seeing a plausible pathway there, if they can do that.

The question is, is that probable? And that's where the disagreement comes in. And I think that's why it's got to be personal. It's not something that you can hear from other people. You've got to look at the number and say, I can live with this. I can make this assumption and be okay with it. And every one of these companies, I think, has a plausible pathway to get to the market gap they're at. And, you know, as long as that's there, you're going to get disagreement about these stocks.

I think what's really provocative from you today in terms of your notes to our producers, is that you put forth that this is not the bifurcated market that some would paint it to be that the remaining 493 are also trading in your mind hefty multiples of earnings, explain. I mean, you take the seven out of the S&P 500, look at the rest of the market. It's trading at 20 to 23 times earnings. And you could argue that the remaining 493 companies have much less rosy operating metrics than the mag 7. They don't have the kinds of margins and the growth that the Mag 7 have.

So when people talk about this being a bifurcated market, they act like the Mag 7 is essentially the only, they're the only ones that are overvalued. The rest of the markets somehow is fairly valued. I don't think that's true. This is a richly priced market across the board. And if you fact, the differences in margins and growth, I'm not sure the remaining 493 are bargains relative to the Mag 7.

They look pretty richly priced to me as well. What looks undervalued to you, if anything, presumably you've thought about that. I mean, that's why I said, coming to a conclusion that the Mag 7 are overvalued, the rest are undervalued, is going to be tough to do because everything's been pushed up. It's like a rising tie. And with the Mag 7, you have this added oomph of high growth plus high margins at scale. I mean, that's an amazing part. It's growing when there are $150 billion, $200 billion, $250 billion revenue companies.

That's, I think, almost unprecedented, and the market is factoring that in, rewarding these companies, whether they can keep doing that becomes the area of disagreement, because I think that things only get rockier and more difficult from this point on. You saw that when Google announced that these new chips that compete with the Nvidia chips, you saw the sharp sell-off in Nvidia. I think you're going to get more shocks like that to the system, and the question of the story can hold up. Huh. What does your own portfolio look like these days? You've never really been shy in sharing

the moves that you make. Could you do it again? I'm down to five of the max seven. They're there because they've been there, and they're not overvalued enough that I want to dump that. I did, you know, sell off the rest of my Nvidia shares just recently. And I think that was the last segment of Invidia. I've, you know, and if it continues to go up, all the more power of people that continue to hold in video in video but for me i think i've gained enough from its from its rise that be greedy for me to hang in there and say give me more but do you agree with those who say that 2026 is going to continue to see more dispersion among the mega cap stocks among the mag sevens that

they're just not all going to trade like the monolith that they once did and they happen for about a year now right even if you look at this year they've been the mag seven have moved in different directions. This is not 2022 or 2023, but if you could tell me what one of the max seven stocks did during a week, I could tell you what the other six did. Now, if you tell me what Bitcoin did today, I can tell you what Nvidia did. I think you have a better shot of predicting how these stocks will do by looking outside of the Max 7. And that's, I think, that's, I think, good. I think the Max 7 are very, I mean, for the most part, they're very different forces driving them. What I worry about, and I look at an Amazon, is very different than

what I worry about when I look at a meta. And I think those differences are going to come into play. And we'll see what 2026 delivers. But I wouldn't be surprised if four of the Mag 7 have a really great year and three of the Max 7 don't have a very good year. And one of them I'd actually have a terrible year. And I think that's completely consistent with stories kind of moving in different directions. I don't think we've ever spoken about Bitcoin.

What do you see when you look at that these days? I see an instrument that people who are upbeat about high-tech stocks bring to the... The correlation between Bitcoin and the NASDAQ basically means that Bitcoin is not a great collectible. It behaves like a very risky stock. It might even draw from a same subset of investors. The people are investing in Nvidia and the people invest in Bitcoin. There might be an overlap there. So I think what I see in Bitcoin is really a measure of sentiment of what those people are

people are thinking about the market. And I think it's interesting that Bitcoin and that part of the market have become so connected over the course of this year. Does the current price make sense to you? I have never owned Bitcoin. I don't think it's a great currency, and I don't think of it as a good collectible. So I don't own Bitcoin because I can't see its function. But I can understand why people trade. It's an incredible speculative trade. I'm not a trader. I'm not good at calling mood and momentum. But if you can, what better place to play than Bitcoin? We'll talk to you soon. It's all mood or momentum.

Yeah. Thanks as always. I'll see you soon. Thank you. Take care. Still ahead. Vantage Rocks. Avery Sheffield is back with us.

We'll find out if she thinks the recent rotation has some staying power. Next. Welcome back to the bell. Is the rotation of the past week a sign of even bigger things to come? Avery Sheffield is co-founder and CIO. advantage rock and joins us now. It's good to see you again. Great to be here. You would answer that question. Yeah. Do you think it might be? I absolutely think so. Yes. I think first of all that the concerns about valuation for the market as a whole, for AI levered companies, many speculative

stocks and growth stocks are a concern like the dean evaluation just mentioned. However, there still are really interesting value opportunities in the market, both within cyclicals and defenses. Like what specifically do you like, if you can't really talk about individual names, like guide us close enough? Yes. So within the cyclical space, I think in autos, the OEMs or really high quality OEMs are very interesting, given very significant cash flow yields, about 15%, and actually a positive backdrop ahead. So you have tariffs, net tariffs, are probably going to be down for next year. you have emissions regulations going being substantially reduced you have lower losses on EV vehicles and you also likely have higher demand as a result of interest rates going down and actually all this construction spending on AI which will be up next year no matter what happens with the

stocks actually propelling potentially use of more use for pickup trucks I feel like one of the stocks of the year I'll talk about it because I know you can to your point is general motors throw up year to date of general motors if I would have told you told you that we're going to have these tariffs that are going to explode and you're going to go through that whole process. And I know someone from Halftime Report who sold General Motors on the first whiff of that. And I said, this stock's going to be up more than 50 percent year to date.

You probably would have said, you're crazy. And somehow these stocks have worked. Ford has, too. But General Motors is the real standout. Yes. I think that they have worked because they went into the tariffs is actually very cheap stocks. And while the tariffs have been a headwind, it's been much less than anticipated. And these other regulatory dynamics have been able to come through that are favorable. And

interest rates are likely to be lower next year as well. Do you believe in that, as I mentioned with Professor Siegel earlier, the so-called run-it-hot trade into 2026? We talked about, you know, K-shaped, bifurcated, top end doing well, bottom-end, not so much. And now we're just going to be administrations go to run the economy as hot as they can, and the Fed's going to play ball maybe in that ahead of the midterms for certain, and you need to lean into those cyclical areas of the market. Right. Well, I agree that the Fed is going to lean towards running it hot.

Powell said we care more about the labor market than inflation, which suggests he let it run a little hot. He also thinks, of course, inflation is coming down, and we know what Trump wants. So that backdrop, I think, is favorable. And then you have, of course, tariffs. sorry, you have lapping tariffs, which I think will be favorable. You have the big beautiful bill, tax refunds coming through in the early part of the year. So I think the backdrop is likely to be favorable as long as the long end doesn't go too high

and the market doesn't go down a lot on concerns over AI. But assuming that favorable backdrop, I think what's important, given how much a lot of these run at hot stocks have run over the past month is to find those that still actually have low valuations. I would be very concerned, cautious, on run-at-hot stocks that are quite expensive. We see, like, for example, in the transport space, stocks trading it like 30 times earnings, pricing in a very meaningful recovery next year, that might have gone too far. But if you're talking about stocks that are in the single digits, in autos, in airlines, in turnaround retailers, even in financials, those actually could have room to run as long as the economic backdrop is favorable.

Of course, this means the, I mean, the S&P 500 may not end up looking that great, right, in this kind of dynamic. Yes, no, I would be concerned about owning the market as a whole, I mean, especially given that you have so many stocks levered to AI and so many gross stocks taking up the higher part of the market. I think those stocks actually could be under pressure, and you're going to see a lot more bifurcation between, you know, who is capturing value from AI versus who is creating value from AI in those areas in the market. Interesting. It's good to catch up. for the again, Avery, thanks for being here. It's Avery Sheffield from Vantage Rock. Up next, we track the biggest movers as we head into the close. Christina Parts of Nevelos,

of course, is standing by with that. Hi there. Happy Friday. One fast casual chain hits a major milestone while a big box retailer slides despite beating estimates, plus defense stocks climb on Wall Street optimism. We've got all of that after this short break.

Alright, with less than 15 from the closing bell. Let's get back now to Christina for the stocks she's watching. Tell us. Topolet. Those shares are higher after the company said it opened its 4,000th location in Manhattan, Kansas. The fast casual chain has expanded its footprint by more than 70% since 2017, and is more than halfway to its goal of operating 7,000 restaurants in the U.S. and Canada shares up almost 3.5%. Meantime, Costco shares are lower despite posting better than expected earnings

as well as sales growth. Analysts are just concerned about the big box retailer's membership renewal rate, which saw its largest quarter-over-quartered decline in over 15 years. I think you still have your Costco membership, right? Scott, both shares down barely negative at the moment. And lastly, some key defense stocks are climbing on the back of buy initiations at City. The bank expects 2026 to be an inflection year for the industry amid an international rearment, RTX, Northrop, Grunman, and Lockheed. You can see all a little bit higher today. All right. Christina, thank you. Christina, thank you. Do you have a Costco membership, by the way? Maybe. Maybe.

What's in your wallet? I don't reveal what's in mine. I live in the city. I can't go to. I can't take a bicycle to Costco. Okay, great stuff. Enjoy the weekend. Christina, thank you. Coming up next, hot off the presses. Truis, Keith Lerner, just dropped a new note. We got it. I'll tell you what's in it. He's upgrading two key sectors. We're now on the closing bell market zone. CBC senior markets commentator. Mike Santoli is here to break down these crucial moments of the trading day. Plus, truest Keith Lerner, he just dropped a new note upgrading two sectors.

The reveal is coming up. Gabrielle Fon Rouge is watching shares of Lulu Lemon. That stock's leading the S&P today, and Brandon Gomez is tracking the action in cannabis stocks. Gabby, I'll begin with you. Tell us more. Yeah, so shares of Lulu Lemon are on the rise today after the retailer announced CEO Calvin McDonald's stepping down. Now, during his tenure, McDonald's helped triple Lulu Lemon's annual revenue, but lately the brand has been falling behind. sales in the Americas, its largest region, have been falling short, and most of its growth is coming

from new store openings abroad. Now, this leadership change comes after Chip Wilson, Lou Lemon's founder and largest independent shareholder, called for changes at the company and criticized its performance. He doubled down on that Friday, this time criticizing the CEO's succession plan. Wilson said the CEO's search should be led by new independent directors, and the board doesn't understand Lulu Lemon's target customer anymore. Now, we're out to Lulu for comment, and so far, No response. Scott? All right, Gabby, thank you. Gabrielle Fon Rouge. Brandon Gomez, tell us more about these pot stocks. Hey, Scott. Yeah, happy Friday. Stocks lighting up today as the White House prepares to significantly ease federal restrictions on cannabis. Now, sources telling me President Trump is

expected to issue an executive order as soon as Monday to reclassify the drug from Schedule I, same as heroin, to Schedule 3, same as Tylenol with codeine and steroids. Now, that shift is huge. We're talking lower tax burdens, access to banking, more investment for the industry, and research into medical use for the drug as well. Now remember, though, this is not legalization, and it would not be immediate. Timing will depend on any legal challenges that could delay the process. Tillray CEO telling me this morning, though, that after many false starts, he feels, quote, more optimistic this time round. One, I'll be keeping an eye on Scott on Monday morning. All right, Brandon, appreciate you. Thank you. That's Brandon Gomez. We'll get to Keith Lerner

in just a minute. But, Mike, the Wall Street Journal reporting moments ago that President Trump deciding between, or at least leaning towards one of the two Kevins, that being Warsh or Hassen. So we shall see on a week where we are digesting what the Fed said and how we think about it moving forward into the new year. Markets had several weeks to try and, you know, kind of metabolize what it would mean. Obviously, Hassett's been the betting favorite. Bond market, I'm not sure you want to necessarily identify this upturn and longer-term yields

to a reaction to Fed policy that might come down the road because it is a global movement. It is a global move, but I think it's very different, hazard awards, arguably, based on what they've said and how they've had a, you know, their posture toward rates in the past. So interesting, you know, we've also heard we were supposed to already have gotten a nominee by now. So maybe the process is just kind of ongoing and not necessarily very rigid. Yeah. So Keith Lerner, Michael, I'll come back to you in a minute. I mean, what we've teased here is that you've upgraded two sectors within this market, which to me plays right with a theme of where we start. some 56 minutes ago, the idea that cyclical stocks are going to do well, the run-at-hot trade

into 2026, you upgrade industrials and you upgrade materials. Tell me more. Yeah, sure. And I will say longer term, we're not giving up on tech, but I think there's a lack of a near-term catalyst. We've seen this market boring out, as we all know, with the average stock or the equal-weight index make a 52-week high. So we upgraded industrials to an overweight today. It just broke out of a five-month trading range. It's only up two percent since July, so we think it has some runway. And we do think it benefits from an uptick in the economic environment next year in this accelerated depreciation that we're seeing from corporations. Underneath the hood, it's got, we're seeing transports work. And then we're also now

seeing defense stocks get backing gear as well. You put that together. We think that makes sense. On the material side, we just upgraded that from an underweight to a neutral. So again, industrials is the overweight. Materials, a lot of the same themed uptick in the overall economy. It's only up 7% this year. I think in the interim, people are still be looking to say, where does the money from tech go to? And these are some areas that would benefit from that and this uptick in the economy that we're anticipating. Mike, it's too early to declare a trend change, obviously. Sure. But we're sniffing something out here in the market. At least investors are trying to, and more people are talking about it.

There's no doubt about it. I mean, it's been kind of gathering in that direction for a few weeks. I think everybody was getting very confident about just getting a little extra kick to consumer activity into the next year. And the market's been migrating now. I do wonder exactly how open-ended the upside can be in those types of sectors until you start to get the earnings upgrade cycle, maybe kind of getting farther along. Meanwhile, overall indexes, you know, too much pressure on the AI group as we call them CAPEX vigilantes because that's kind of what's happening right here. And just a little bit of misgivings about, you know, whether we should kind of trust that the buildout is well financed and well considered. I don't think it's much new there. I think the still looks like very normal kind of pullback. But we really have been chopping sideways for a while here at the S&P 500 level. Today's low.

We first got to that level, October 24th. Hey, Keith, we had a guest on earlier today who said you could do 15% in the S&P next year. I mean, if you do have a decided trend change, it might be hard to do that. Don't you think if these big tech stocks take somewhat of a backseat? Yeah, I mean, I think it could be a situation, not our base case, though, is that you see this rotation and you see a lot of stocks doing well at the headline index not doing as well. But Scott, I'll only still think in a week and a couple of days where tech has been under pressure. I do think at some point next year, money comes back to tech in that secular story.

But we have to remember, I mean, you know, off the lows, the tech sector was up 70%. That was double the S&P. There is some uncertainty. So you're rebuilding that wall of worry. I just think there's not a real clear, near-term catalyst for them. But at some point next year, whether that's three months, six months into the year, I think money ultimately comes back into tech. And I mean, you know, we're not big into price.

targets, but I will say when we look at the weight of the evidence in our work, you know, it does suggest the potential of high single-digit, low-double-digit returns for next year, but you need tech to at least participate in order to see that. Yeah, Keith, I appreciate you joining once again, 15%. You know, we'll see it would be hard to do that if you have a slip-up intact. It wouldn't be wild. It would obviously be a great four-year run if you got 15% next year. You can't rule it out.

You know, it's more common to get a 15% year than it is to get like an 8% year. So we'll see. Economic data next week, though. It's going to be interesting. Mike, change some minds on the Fed. All right, good stuff. Mike, thank you. Again, our thanks to.

Bill Wings. We've got a hundred years of the Harlem Globetrotters, and they are here ringing this bell into the weekend. I'll see you on the other side. In the over time, it's more than the time.