Closing Bell - Closing Bell 12/22/23

Episode Date: December 22, 2023

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

All right, John, thanks. Welcome to Closing Bell. I'm Scott Wabner, live from Post 9 here at the New York Stock Exchange. This make-or-break hour begins with the Santa Claus rally. Whether we're going to get one this year after that sizzling six-week stretch for stocks, we'll ask our experts over this final stretch. And it could be an interesting final stretch, because here's your scorecard with 60 minutes to go in regulation. I thought I was going to tell you that we had turned red across the board, because we did, but now we've bounced back. So the Dow has lost a lot of its early gains. Nike taking the biggest bite out of the index and that after its outlook disappointed. One of the worst days in a long time for shares of Nike, S&P, Nasdaq. They're trying to hold on to gains. It's the Russell that's once again outperforming

today. And all of this after the Fed's favorite inflation read, the PCE, comes in below expectations. Rates, well, they're mixed across the curve as Treasuries react to some pretty robust economic data all the way around today, which takes us to our talk of the tape. How far stocks are set to go in the new year with several potential challenges still ahead. Let's ask Dan Greenhouse, Solus Alternative Asset Management's chief strategist and economist here at Post 9. Welcome back. Thank you, sir. So as we close the week, what are we going to do here with this market as we edge towards the end of the year and go into the new one?

Have we done too much too fast? Are we still set up for something pretty good as we begin a new year? I'm generally a skeptic of any point markets have gone too far too fast. I mean, obviously there's overbought conditions that need to be worked off, but to the extent that the market was, I'll use the word insular, but that's probably not the right word.

It's been very narrow. Until lately. Yeah, so for the whole year, only three sectors have outperformed, but over the last month, over the last fourth quarter, six sectors have outperformed. So you've last month, over the last fourth quarter, six sectors have outperformed. So you've seen the rally broaden out.

We all know this. All else equal, I take that as a positive sign and sets us up, I think, fairly well heading into the new year. Do you think that broadening continues? Oh, I do. And we've discussed this in the past. And I think if you have two avenues here, do I want to continue to invest in the large seven tech names, let's say, or the broader market? This is not so easy, but I would go with the broader market. You think we're going to get a rotation from these mega cap names?

I mean, there was one note on the street today that suggested it's time to short NVIDIA. Yes. There's a lot of notes on the street, and a lot of people say a lot of things. I make no comment about NVIDIA, but listen, I don't think you need a rotation per se, because the word rotation implies that money's going to come out of the large cap tech stocks, implying that they're going to go lower in order. I don't think that needs to be the case. Both can go up. It's just a question of relative performance. Well, some have gone up a lot more than others,

like mega cap tech relative to the other parts of the market. Well, if you're looking at the market as a whole, but if we break it down into individual sectors, for instance, if you look at some of the restaurants, Chipotle obviously is a name that's done phenomenally a whole but if we break it down into the visual sectors for instance if you look at some of the restaurants uh... chipotle obviously is a name that's not the only one but if you go a little smaller wingstop in texas roadhouse all outperform the hotels i we talked in the past about what's all this does with our money uh... the consumer focus space is continues to be one because of the strength of the consumer with gas prices down et cetera a lot of names expose to

the consumer have done quite well so you're not thrown off by Nike in any way? You don't have to speak about Nike directly, but does that make you pause and say, okay, maybe there's a slowdown coming from the consumer? I'll agree with a lot of what Stephanie Link had to say on the halftime report. I don't think the report is quite as bad as the performance. I say that as someone not involved in the name and not a Nike analyst.

But I don't think they said anything particularly worrisome about either. A lot of their issues were concentrated in China, which is less of an issue for what we're talking. But no, I'm not thrown off by it as a short answer. What about bigger picture? Can the Fed, based on what the data has done lately, declare victory? No. I just had I was just with an ex-client, now friend, and we were debating this. The idea that the Fed has won and engineered a soft landing, forget my opinion, is completely not accurate. In order to have a soft landing, you will have had to have landed.

And right now, interest rates are still at the top. So in my opinion... What do you mean that they're at the top? They're not at the top. Interest rates? The Fed funds rate. The federal funds rate is controlled by the Fed. In order for them to actually have landed the plane, they will have had to have reduced interest rates

by making it up 1, 200 basis points, and no subsequent recession have occurred. Right now, they've done a great job, better than I would have expected a year, two years ago. But I don't think you can declare a victory just yet until you've reduced rates, the market remains where it is, and the economy continues to chug along. Is it your base case, though, that they're going to do what you just said? Right now, I think there's nothing in the next six months or so that particularly worries me. The job market remains quite strong and healthy. And I think the market is like, again, if the market was particularly concerned about the

economy, you wouldn't see United Rentals, train technologies, a whole host of the industrial companies. We discussed this in the past doing as well as they have. I mean, there's the market's not broadening out into a recession for no reason. You worried that they may wait too long to start cutting? Yeah, I worry about everything they do. Like they waited too long to start hiking? I think we should worry about everything they do. They're dancing on the head of the pin here, so to speak. And I don't ascribe any godlike powers to them that are unwarranted. I think these are just a bunch of people sitting around the table trying to control the price of money in a 20 plus trillion dollar economy, which is not an easy thing to do. Don't you think they've done a good job to this point after admittedly getting

to a slow start? Well, sure, they've done a good job after they did a bad job, although admittedly it wasn't all their bad job. But as market participants, we've got to bet on what we'll call expected value for now. What's the likely outcome? And for right now, the likely outcome is that the market continues to move higher, at least for the next couple of months. I see no evidence in the short term here that that's going to abate. And one of my favorite topics when I was on the sell side and I still use here on the buy side is I need to be – someone needs to explain to me why tomorrow will not look like today.

And I don't understand right now why that won't be the case. Well, what if I just say to you, because don't fight the Fed is basically here at this point, right? They told you they're going to cut rates. We figure their next move is going to be to cut. So why can't you make the leap at this point to say, you know what? Don't fight the Fed. Tried and true. Do you not believe in that?

Well, 2023, the interest rates went up by 500 plus basis points. The 10-year skyrocketed to multi-decade highs. And most of the market went down other than mega caps until, you know, Waller sort of set the scene for what was going to happen. And then the Fed chair piled on himself. Sure. But the calendar year for my performance doesn't end with Christopher Waller's speech. It ends at the calendar. And right now, even the equal weight is up 10, 11, 12 percent for the year. And that's, while not a particularly good year for the equal weight, not a bad year either. I think a lot of people, granted,

I have been saved by the last month or two's worth of performance. But nonetheless, when I send out my sheets or someone opens up their 401k statement, it ends on December 31st. And right now, that's working in our favor. What about earnings next year? Are they going to live up to what they need to be to continue to justify the multiple of the market? Rates come down. Economy stays good. Earnings live up to the expectations, which justifies a higher multiple. We've had this conversation with Greg Branch. And the idea being that 12 or 13 percent earnings growth is too high and needs to come down. I agree. The irony of the market moving higher here is that actually earnings expectations have come down.

I think a lot of people would be surprised to hear that while the market has had this terrific rally into year end, EPS expectations for the first quarter are down by about two percentage points. EPS expectations for the second quarter are down by about two percentage points and are down about four percentage points for the third quarter. Right. But as the more stocks go up, you can't have expectations come down too much. Right. How are you going to justify a multiple that historically hasn't been able to maintain itself at these levels? Listen, I wouldn't be a proper Wall Street strategist if I didn't say that valuation is not a market timing tool. It is instructive. It is indicative. But if it was just simply a function't say that valuation is not a market timing tool. It is instructive, it is indicative, but if it was just simply a function of the market valuation is too high,

sell, market valuation is cheap, buy, you would need nothing more than a simple Excel spreadsheet to run your money. And obviously that's not the case because I've been told that the market's been expensive for most of the last 15 years. And yet here we are sitting at basically record highs or whatever. Listen, valuation is really important, but we also have to account for the changing composition of the market. As tech grows to be a larger part of the market, it has a higher level of valuation, call it 30 times earnings, and it's going to drag the broader market's valuation up with it. It's why you can't just simply compare the valuation of U.S. equities to, say, European equities because of the divergence between, let's say, tech and financials. So the market's going to get more expensive as tech does better.

That's inherent and not necessarily a bad thing. But again, and you've noted this in the past, you can look at the valuation of the equal weight, which should account for that. And the equal weight index, including the big seven, is not particularly cumbersome. Those who are already suggesting that mega cap is extended from a multiple standpoint, as it is because the growth rates have been going in the opposite direction where the multiple has expanded to listen that is a legitimate observation to make i would counter that by saying those stocks still have growth rates earnings growth rates that are multiples of what the broader stock market is i

mean we're going to be lucky well of course yes which is why they get premium valuation and ultimately that's that's what matters for that sector right now. But also, let's not pretend. We're talking about seven stocks, but we're really talking about 20 stocks, 20 companies. Google is YouTube. Meta is Instagram. Tesla has the charging network, which if it was its own stock would be a huge company. Microsoft has 17 companies. It's Twitch. It's LinkedIn. It's Amazon is Whole Foods. I mean, there's a whole bunch of standalone companies within those seven. And that doesn't excuse the overvaluation, if you will. But it does, I think, diminish some of the arguments that only seven stocks are doing all this work, which, while true, we also need to take account of the

fact that there's a lot of companies within those seven. All right. Let's bring in Alicia Levine of BNY Mellon Wealth Management. Nice to see you as well. Great to be here. Stay on mega cap for a second. You do not think they're overextended yet. I don't think they're overextended. I think I think to think you're going to sell it and buy the equally weighted S&P or to buy small cap instead is likely a seasonal mistake. And while they could be struggling in the first part of the year just because they have run so far and there is some reversion to the mean in the first part of the year, ultimately, I think the better idea is to come out of cash where we have six trillion dollars in cash. Typically, cash doesn't go lower over time. If you look over the last 20 years, cash just keeps on building up. I think a better idea is to go into some of the underperformers over the last one to three years,

whether it's health care or some of the industrials or even some energy names, but hold on to your large-cap tech and your overall S&P exposure. You can't time it. And ultimately, if you're not there, you're not going to get the benefit of the margins and the earnings. Because in the end, what we know about these names, large cap tech, is that they can pull a lever on expenses any quarter they need to and bring it down to the bottom line and blow it out of the park. And if you're not there, you're not going to participate in that. In the end, that's where the growth is. That's where AI is. And I think it's a mistake to think that there's a relative trade here.

You're better off somewhere else like small cap. But it doesn't necessarily have to be instead of. It can be in addition to. And that's what we're saying. In addition to. So if all you've talked about this year is T-bills and cash, which is a lot of what we've heard this year, cash is set to underperform in 2024. Take the cash, go into other parts of the market, but keep your exposure where it is. Why take the tax event, first of all? Why try to time this? And why would you leave the names that have been so strong? And as Dan said, in order for me to leave the overall S&P, which is, you know, in the end,

very diversified because financials are the second largest group, in order to leave that, I have to believe that something else is happening in the economy that we have no idea. What do we know? We know the Fed's going to cut. We know inflation is going in the right direction. We know that earnings are growing. We're at 8 percent for next year, not 11. We're at 8 percent. That's a setup for a pretty decent year as long as there's no calamity out there. Well, what happens when, you know, someone like Tom Lee suggests that small caps can go up 50 percent next year for many of the reasons that you're talking about? Inflation coming down, economies hanging in there, Fed's going to cut, you know, several times, we think. Look, in the end, 48 percent of the Russell 2000 are non-earners, and they have floating rate debt. So even if rates are lower, these companies still have to refinance at higher rates.

It may not be at 7%, but it's still higher what they have, and they're non-earners, and they need to borrow to grow. It's not like every maturity, though, is coming due in three weeks. We need to make that point as well. The way people talk about it is if the calendar is going to turn and then the maturity comes, and oh my gosh, they have to refinance right now at these higher rates. In small cap, it's sooner. From large cap, you're really looking at 2029. And also remember, for a lot of these companies, they have loans, not bonds. And for viewers who don't know, loans reprice almost immediately.

Bonds have to be reissued when the so-called maturity wall hits. And for smaller cap companies, they tend to be more highly levered. But the tangent of this conversation is, if you know interest rates are coming down next year, what do you do with that? Well, you don't want to be in T-bills because all is equal. You don't want to be in T-bills because rates are going to come down. So who's likely to benefit from the reduction in interest rates? Well, a lot of biotech companies and technology companies who have earnings further out in the future from a valuation perspective, that's sort of the easy stop. So is small caps. But you were talking to Leslie Picker earlier today about some of the KKR and Carlyle-type companies.

Well, the private equity firms, their stocks have gone crazy this year. You know, many are up 70 plus percent. So what if I told you that lower interest rates might spark a boom in M&A activity or lending activity because maybe the financing markets are a little easier than they have been? Well, the types of companies that engage in that activity are likely to benefit. And I think that's part of what you're seeing right now. It's because it's not just it's Aries, it's KKR, it's Blue Owl. It's a whole host of those companies that do this sort of thing. So there's a lot of places you can look at besides utilities and real estate when rates come down. There's a lot of different ways to play it. Corporate credit's another one. What about financials as a group,

which some would suggest under-owned, under-appreciated, under-loved? Under-loved, right? Under-valued and under-loved. Everybody's worried about regulation. But the scenario where the Fed's cutting, IPOs are coming back on the market, M&A is happening, I think that's a great environment. You've got to be picky here, right? You've got to choose your large banks. But I think that's actually a great place to be. And again, that's the second largest, the financials. So insurance and the alternatives and the large banks are the second largest sector in the S&P. So we're set up here. It's set up for just a better year. So when we look into 2024 overall, is it going to be another 25% year?

All I can tell you is when the market's up double digits, 75% of the time the following year is also up double digits. Yeah, but you're not looking for a double digit. You're looking for a single digit return across most asset classes. Because I think some of the risks out there are going to be on the election year, in the first part of the year. It just feels like there's some risks out there. But ultimately, we're positive.

We see earnings growth. We've incorporated some chance of a slowdown because to get out of this weird cycle without any slowdown, just commercial real estate's a great example of where you might see some risk out there. But if I didn't incorporate the risk of a slowdown, we'd be higher. Listen, I don't buy that. The slowdown argument gets talked about all the time. We just grew 5%.

You mean the long and variable lag argument? Just the idea that the economy's going to slow. The economy just printed a 5% GDP number. Like, by definition, we have to slow down. Right, of course. Normalize. Yes, go back. Normal.

And listen, plenty of years, the economy grows at a normal rate and the stock market does terrific. And just to build on Alicia's point, going into the everyone's going to start talking about the presidential cycle. It always happens when the calendar turns. You might think, well, the stock market's up 20 percent. We have to come down from that somewhat. This five or six years into the fourth year of a presidential cycle postwar, the stock market's been up every time when the stock market's up 20 percent or more in the third year. That's no guarantee, but it also pushes back on the idea that just because you're up 20 percent, you need to have some sort of a moderation. And we're actually running out of time to have a recession. If we don't have that recession by April or May, because in the end, the administration has levers it can

pull on the fiscal side to steady the economy. So we're sort of running out of time for that. Listen, the Federal Reserve, I don't want to—I'm no conspiracy theorist, but it's an election year. And I don't think the Federal Reserve is— You sound like a conspiracy theorist, because you're making some of the same arguments that others are trying to make. But I caveat it by saying I'm not a conspiracy theorist.

So I've cleaned the deck, so to speak. I know, but I called you-know-what on that almost the moment you said it, when you laid out the conspiracy theory. You're not supposed conspiracy theorist. So I've cleaned the deck, so to speak. I know, but I called you know what on that. It was almost the moment you said it when you laid out the conspiracy theory. You're not supposed to do that. You've interrupted the train of thought now. But yeah, listen, I don't want to be a conspiracy theorist, but it's an election year. And I think they have to be very careful, especially when there is so much focus on the Fed in general, let alone what's happening right now at the presidential level.

Why would areas like health care and energy all of a sudden wake up and start to do better, Alicia? Well, I think the idiosyncrasies in health care were very strange this year. It was all about GLIP-1s, and if you weren't a GLIP-1, your valuation crashed. So I think there's some reversion there. The weight loss drugs. The weight loss, the Ozempics, the WeGoVs, the Manjaros. So there were two stocks that worked in health care this year. That was it. That is definitely going to revert to the mean next year.

It just was overdone and a fear of what's going to happen to all of health care. So that feels right. The lower rates are very important and it's just going to be a broadening out of the market. So it's a good place to be. Why do you think it was overdone? I would almost as you're saying that, I'm thinking, well, why aren't we saying that all the AI hype was overdone? Are we suggestive of that? I mean, if this is a groundbreaking trend in health care, why would it be, and the way we're going to live our lives for the foreseeable future, why is it necessarily overdone? Because it's overdone because, first of all, the runway is going to be much longer. There's going to be insurance pushback on this.

It's not going to be so easy to get 200 million people on this drug. Because the benefits from being on the drug happen when everybody's on Medicare, not when they're paying commercial insurance. And that's the problem. The problem is the benefits are the heart disease and the kidney disease and the liver disease, which Medicare will benefit from, but not from the commercial health insurance. To answer that very quickly on health care, there's going to be enormous pressure on the health care companies to cover this and say, okay, we have to spend X dollars today

to not spend X times 100 tomorrow. And so I think there's going to be enormous pressure on them to cover all these drugs, not just for the people 65 plus, but for the people 40 plus before they develop the type of conditions. Do you not want to own the insurers as a result of that? I don't want to comment on whether I would own the insurers or not.

Just in general, with respect to the GLPs, I think this is going to be, a lot of people are going to be on GLPs, and I think there's going to be pressure on the companies to cover it. On the energy side of things, real quick, listen, large cap energy has had a tough year. Mid and small cap is up, called 6%, 7%, 8% for the year. There have been some terrific names, ways to play that within that space. And you still have the secular tailwinds from a demand side of things in energy. There's a risk with Saudi Arabia, for sure. But I think energy is getting a bad rap. There are plenty of names to have done very well. OK, good end of year to you both. We'll see you soon. Alicia, thanks. Dan Greenhouse, thanks for being here as well. Let's send it to Pippa Stevens now

for a look at the big names she's watching as we head towards the close. Hi, Pippa. Hey, Scott. Well, Rocket Lab is rocketing 21% higher after winning a $515 million contract from the U.S. government to build and operate 18 space vehicles. Work will start immediately on the projects, and the company aims to conduct launches in 2027. The stock has now more than doubled its year-to-date gains with today's surge, now up 42 percent this year. And Lionsgate falling 5 percent after announcing plans to spin off its studio business in a SPAC deal worth $4.6 billion, including debt. The move splits the company's film and television assets from its

Starz cable and streaming operations. Lionsgate will receive $350 million in proceeds as a result of the deal. Scott, back to you. All right, Pippa. Thank you, Pippa Stevens. We're just getting started here. Up next, an NFL holiday doubleheader on Saturday. The Bengals battle the Steelers on NBC. The Bills face the Chargers exclusively on Peacock. Broadcasting legend Chris Collinsworth will be in the booth calling the action. He's going to join me next to set the stage. We're live from the New York Stock Exchange and you're watching Closing Bell on CNBC. We have some news out of the software space right now. Our Steve Kovach has it for us.

Steve? Hey, Scott. Yeah, potential merger here, Wall Street Journal's reporting. Synopsys reportedly going to acquire Ansys. These are two software firms that make design software for things like testing chips and processors and things like that. No price is here in the report, but Wall Street Journal does note Ansys has a market value of $30 billion. And last night, we had this Bloomberg report that said Ansys is considering a sale of the company. We see shares here up 15% on the news, Scott.

All right, Steve, appreciate that, Steve Kovach. Well, tomorrow night, the Buffalo Bills, they take on the Los Angeles Chargers exclusively on Peacock, featuring the NFL's first ever commercial-free fourth quarter. Joining us now, the man calling the game, Hall of Fame sports broadcaster and game analyst for NBC's Sunday Night Football, Chris Collinsworth. He's also the majority owner of football analytics company PFF. Welcome to Closing Bell. It's great to have you on.

Scott, this is big time for me right now we're gonna sit here you guys i feel like i should talk a little faster so make it sound like i'm breaking some news and get right into the show you guys are lively it's fun it's been great i've been watching for about a half an hour now oh we appreciate it i might ask you for a stock pick then since you went there but i'll i'll save that for later let's do let's do football first. So let's talk about this second game, the one you're doing. Bills-Chargers, first ever commercial free fourth quarter. The Bills, they don't look like their record says they should. They still look pretty good. They went in and dismantled the Dallas Cowboys, who the week before dismantled the Philadelphia Eagles. So you start to feel pretty good about where the bills are here. They switched to Joe Brady at

the offensive coordinator position, been throwing it all over. But this past week, they ran the ball like crazy. So it's going to be an exciting game for us. A lot of reason to be pumped about this, especially the fact Mike and I, we really don't know what we're going to do in the fourth quarter. There are no commercials. We both did talk radio for over 10 years. So maybe we take some calls. We don't know exactly how it's going to be. There's going to be no delay because it's on cable, right? Subscription. Then you're going to hear some natural language come out of the players. So it's going to be fun. It'll be different. Yeah.

How do you think you guys are going to handle that? I mean, you know, you guys are you guys are used to broadcasting these games. You have to fill time occasionally and, you know, during injuries or other things. But this is going to be an entirely different muscle flex for you both. Well, one thing we never want to do is say anything negative about the people that provide commercials for our football game or for your show, right? They pay the salaries of a lot of great announcers out there. Would you agree with me, Scott? I absolutely would. An important part of the game. But we're excited about it because I think dating back all the way to my days when I used to work for HBO,

there was always a curiosity of what if there were no commercials and it was just the game. The game would be over in two hours and we would be able to do this and do that. So it's a great experiment. We're excited about it. It's going to be a good game. And we're looking forward to it. Let me ask you about the other game that we've got on NBC and Peacock tomorrow. It's the Bengals and Steelers. A few weeks ago, if I said to you, well, the Steelers look pretty good, and now that the Bengals lost Burrow, they're going nowhere,

you'd have said, well, that makes sense. And here we are a few weeks later than that suggesting the opposite. Yeah, with uncertainty at the Pittsburgh Steelers quarterback position, they don't really know who they're going to play there. And Jake Browning has gone nuts for Cincinnati Bengals, my old team. I used to play for them, so I'm kind of cheering for the boys a little bit. But yeah, they really have just been astounding the last couple of weeks with some real surprises being able to get right back in the race. Right now they're in the playoffs.

Yeah. Overall, 49ers have sort of set themselves apart in the NFC. It looks that way, at least. The AFC still looks wide open with a number of teams. I'm sure that you would say, well, they could do it. They could do it. This other team down in Baltimore, they could do it. How do do it. This other team down in Baltimore, they could do it. How do you assess where we are now as we head in the final stretch? Yeah, I agree with you.

San Francisco looks like the team to beat in the NFC. And we just saw Baltimore last week. The one team that I always sort of keep my eye on is Miami, because Miami has so much speed on that team. And when that team is right and when they're healthy, sometimes they can just be the most explosive thing that we've seen since the old St. Louis Rams back at, you know, the 2000s kind of thing. So this is it's going to be an exciting playoff this year. I have no idea. I think the 49ers a legitimate favorite after that.

Here we go. It's just going to be a great year. Let me ask you about pro football focus for a moment, but the greater theme of how analytics have really infiltrated all of sports, but they certainly play a role in the NFL. You have to kind of work it into the way you broadcast games too. Whereas, you know, before maybe a punt would be a punt. Now it's a go for it on fourth down. Can you talk about the proliferation of analytics in football? Yeah, it's really been in the past decade or so. We now sell our data to all 32 NFL teams and over 200 other teams around the country, college football, USFL, Canadian Football League, all the different things.

And it's exactly that. It's a lot of, do I punt? Do I kick a field goal? Do I go for it on fourth down? And we've seen the game sort of fundamentally change since the mathematicians have taken over the world. Clearly in your business, we've seen that for decades now. But in football, it's really been in the last 10 years that essentially things that every coach in the world took for granted,

that this was the truth, this is how you had to do it, are no longer true. It's just not. Like the mathematicians told us all that we've been playing football the wrong way for the last 80 years. And now almost everybody's adopting the new mathematical way of making decisions. Yeah, it's got to be a big change for coaches, I would think, who have to rethink their game plans a bit based on whether, you know, on a third and ten they get eight yards and what they're going to have to do next. Well, I think almost probably like it does in the business world as well. It takes some pressure off of decision makers. I mean, most of the really hard decisions are those

51 percent to 49 percent kind of decisions. And so when you get there, you know, the thing that you have to remember is you're going to be wrong 49% of the time, no matter what you do, right? So this is sort of that 50-50 call. And when you go into a press conference at the end of the game and you go, why'd you do that, coach? You lost the game. You go, well, the math said this gave me a 2% edge over doing it the other way. You want to do the math? You go do the math yourself. That's what our guys told us. And so it really, I think like a CEO or anything else, any other CEO, you just want all the edge you can get. And sometimes the margins are really small. Well, have a great call. We'll be watching rest the chops because you're going to need them

in that fourth quarter. And we'll talk to you soon. Scott, I think you could be our third in the booth anytime you want, man. Come on over. I'll do the Collinsworth slide anytime in the booth next to you guys. You guys have a great end of year. Thank you, Scott. All right, take care. That's Chris Collinsworth joining us. A reminder, don't miss an NFL holiday doubleheader.

It's tomorrow. Bengals take on the Steelers at 3 Eastern on NBC and Peacock. That's followed by the Bills and Chargers at 730 Eastern exclusively on Peacock, as we said. Straight ahead, five-star stock advice with markets near recent highs. Capital Wealth Planning's Kevin Simpson joins us with his latest portfolio moves, including the one name he's buying. Already up 100 percent this year. Tell you what it is when we come back from closing bell. All right, welcome back. Markets trying to find some footing here as we head towards the close today,

attempting to extend that year-end rally. Here to share his five-star stock picks as we head towards the close today, attempting to extend that year-end rally. Here to share his five-star stock picks as we head into the new year, Kevin Simpson of Capital Wealth Planning. Welcome back. It's good to see you again. Hey, Scott. Been pretty active, as always. Added to Caterpillar, added to IBM, added to Broadcom. Talk to me. Why? Well, if you remember, we had our Apple position called away. So we've been recycling those proceeds back into the tech sector. We have a little Cisco.

We like IBM, old school tech, 4% dividend. It seems like they're finally getting into the AI game. They figured out a way to utilize Red Hat from a profitability standpoint. I still think it's old school tech. What they do with Watson X will remain to be seen, but just lots and lots of cash flow. And Scott, it traded in a range for like three or four years. It's just started to break out. If there is a continuation of this broadening that we've seen here in the past month or two into 2024, which we fully expect, we're thinking that these other stocks will benefit from it. So that's the trade on IBM.

Yeah. I mean, you also you're essentially making the point as well when you say that you got Apple called away. Apple hasn't given you the opportunity to get back in because it's been steadily moving towards two hundred dollars a share. Right. Yeah. But I don't know that it's worth it. You know, the multiple on Apple is a little bit stretched, a little bit on the higher side. And over the past 11 years, every time that the Apple multiple has gotten up into the 30s, we seem to get it called away. Of the previous eight times, we were able to get back into it lower on six of those occasions. Two times, we just had to pay more to get into it. And I probably didn't brag about it as much on those two. But this year, we were able

to take a position in Broadcom. And boy, for the past month or so since we've gotten into that, it's outperformed Apple by leaps and bounds. So we're really thrilled with that trade. And I know you teased it at the commercial, but we actually bought more this week. And the thesis is that this stock has still got plenty of room to run with a 23 forward multiple. This is still a cheap stock. Now, I don't I don't think it's going to go straight up without giving us other opportunities to get into it. So we we now have a three and a half percent position in it. But it's making us really look smart heading into year end. About a month ago, I couldn't wait for the year to be over because, you know, we're value managers, we're dividend managers, and not participating in the Magnificent Seven made it a

little bit of a frustrating year for 2023. But ever since the Fed threw in the towel, we've seen our stocks now catch a bid and go up. And boy, I wish we had another couple of months in 2023 instead of just a few days. Well, why don't you think it will continue into 2024? Yeah, I think it will. But, you know, we're operating as portfolio managers on a Gregarian calendar. So if I could put more returns into 2023, the better. You want to stuff the stocking a little bit. I hear you.

Give our shareholders something to smile about. Yeah. Are you more, I mean, I don't know, I want to make the leap and suggest that you sound to me to be more bullish than you've been in many, many, many months. Yeah, 100 percent. Once the Fed pivoted, it's a game changer because it's really tough for me and my space to make money when rates are going up. And what we needed, the first the first thing we needed was for them to stop raising rates. And we got that. And the stock market has responded, you know, as we all see. But I think that that is just a tremendous catalyst to be really constructive for stocks,

not just for the next few months, but really for the next couple of years. Because you may get bumps along the way. Of course, you'll get bumps along the way. But when you have a Fed that's going to be cutting rates, maybe 24, 25 and into 26, that's really, really good for the stock market at its most basic level. I still think you need to be very careful on what stocks you own. You want to manage risk. It's not just blindly following indexing and closet indexing. But for us, yes, if I sound more enthusiastic, it's for good reason. Yeah, it was unmistakable. But yet you're still trimming

some of your positions like Visa, which is interesting. Tell me why you do that. Now, Visa has been one of our winners, Scott. So we had enjoyed over 25 percent return on the stock this year. But everything that I'm looking at is risk adjusted portfolio management. So if we have a stock that gets to a six, seven, eight percent weighting, we feel like that's too much of anything, even too much of a good thing. So we'll use old school rebalancing. We'll trim it back to a five percent weighting. That's what we did here with Visa. They still have a tremendous moat. They probably process twice as many transactions a year than MasterCard. And their PE on Visa, forward PE is 31, MasterCard is 36.

So we still think that this is the best of breed in the space. The dividends are just a little bit under 1%, but they've been increasing it by a 27% clip on average for the past five years. So really strong growth, no real exposure to defaults or things like that. It's a transaction business, a little bit of a fintech. We love the stock, but we want to make sure that we manage it accordingly because we want to manage risk. That's the ultimate objective in our portfolio. You think quickly, you think you're done now between, you know, now for the not buying anything else until year end, you're going to try and squeeze some juice out of this thing if you think there's more upside over the next week. It's going to be a thinly traded week. You know that. I know that. We'll be here watching if there's any pullback like we saw on Wednesday.

If the algos come in, we'll definitely be buyers. That's what predicated our purchases this week. So we're not going to fall asleep at the wheel. But I think for the most part, for most traders, this is really the last day of actual trading. And if the algos go off, we'll absolutely be buyers next week. Gotcha. Happy holidays. We'll see you on the other side. That's Kevin Simpson. Thank you. All right. Up next, tracking the biggest movers into the close today. Pippa Stevens is standing by with that. Hey, Pippa. Hey, Scott. Warren Buffett's Berkshire Hathaway is buying more of this energy company. We've got the details coming up next. We're 15 from the close on this Friday.

Let's get back now to Pippa Stevens for a look at the key stocks she's watching. Pippa. Hey, Scott. Engine maker Cummins in the red after reaching a $1.7 billion settlement over emissions violations. It's the largest penalty ever for a violation of the U.S. Clean Air Act.

The company was accused of altering hundreds of thousands of engines to bypass emissions tests. And Occidental Petroleum, rising after Warren Buffett's Berkshire Hathaway, bought another 5.2 million shares in the energy firm. Berkshire remains the biggest shareholder with a nearly 28% stake in the oil and gas company, worth roughly $15 billion. Earlier this month, Occidental announced it would acquire shale producer Crown Rock in a $12 billion deal. Scott, back to you. Scott, appreciate it very much. Pippa Stevens

coming up. The multi-billion dollar deal that has shares of this biopharma stock surging today. We have the details ahead, what it could mean for the rest of the health care trade. Next, we'll be right back. All right, up next, the buy now, pay later boom that's shaking up the fintech sector we're going to run through the biggest players in that space and which names could be set to surge in 2024 all that and more when we take you inside the market zone all right 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, Angelica Peebles with details on a multibillion-dollar deal in pharma.

And Kate Rooney with a look at fintech's impact on spending. Michael, I begin with you as we close what's been a pretty interesting week. And we're trying to hang on positive, at least for the S&P. Yeah, working on eight straight up weeks. So it is a rare thing. And obviously, this is not anymore a hated or a cheap market. But I also think it's important to take a look at how it's not quite, on a longer-term basis, overcooked.

A year ago, we were in the midst of a really bad December. People didn't think the low from October, from the bear market low, was going to hold. You thought a recession was coming, probably had to take out those lows. It seemed like stagflation was a pretty good possibility. So all of those bad things that we were bracing for that didn't happen, May 2023, essentially a 180-degree reverse of the prior year. So what does that mean? It's left us basically where we began 2022 in a lot of respects. Actually, the 60-40 portfolio, I think it's important to keep in mind, has a great comeback this year. It's up 15% total return. It's still, though, down from the beginning of 2022 because bonds are still underwater.

But that means the yields are higher as an entry point. So a lot of pretty good things have happened, even if in the short term, it feels as if we're hitting a little bit of friction after this strong move. Starting to get some calls on mega caps, like from a firm today, it's a short NVIDIA mega cap could pull back. It kind of reminds me, well, I don't know, was it a few months ago where, you know, Apple was at 170. You got a downgrade for it. I think we joked around like, OK, that marks the bottom in that one. And sure enough, it's been pushing 200.

There's always a sense out there, and it's understandable that, well, everybody already owns these stocks, right? Everybody already expects them to be great. They're wonderful companies. Nobody has a bad thing to say about them. There's no short interest. But really, in aggregate, active investors, professional ones, don't own these stocks in proportion to their weight in the index. And I think what I'm wondering about for next year is not so much, is it another mega cap year or is it, you know, do you bet on the equal weight in the field? Maybe it's not going to be a year of such radical divergence where it has to be one or the other.

I mean, that is an option, right? One of the extremes of this year was not just that seven stocks created so much upside, but that the split between the average stock and the biggest was that huge. Look, there's no reason to think that if the economy remains strong and the Fed does cut rates, they actually pull it off, that don't fight your Fed moniker means that theoretically a lot should go up, if it goes according to that plan. If we stay on that track where it seems like economic resilience plus declining inflation means the Fed can be more flexible and easier, it's tough to see what really disturbs things. It could make the case the market's priced a lot

of that in, but that remains to be seen. Yeah. Angelica, Bristol-Myers talking a health care deal. Yeah, Scott. Caruso shares are up almost 50 percent today after Bristol-Myers Squibb saying that it will buy the drug maker for $14 billion or $330 a share. And that's about a 50 percent premium to yesterday's close. Karuna is developing a drug for schizophrenia, and that works differently than what's already out there. The idea here is to offer something that's more effective and comes with less side effects. That drug's already in front of the FDA and a decision scheduled for September of next year. Corona's already studying the drug in other areas like Alzheimer's disease, psychosis, and Bristol sees even more opportunities in conditions like bipolar disorder. For Bristol, this is a big splash back into neuro, which is becoming a hot area for pharma.

Shares of Bristol also up about 2% today. Scott. Angelica, appreciate that very much. Now to Kate Rooney on FinTech. What are we learning here? Hey, Scott. So the big payment trend to watch this year, it's been all about buy now, pay later. But there's also been a rise in mobile payments and then direct bank payments. We'll start with BNPL. As it's also known, it's seen by far the biggest transformation, Scott. According to Adobe, it's a 40% pop or so over Thanksgiving weekend and overall for the year up about 15%.

So these installment payments used to be for things like a Peloton or a couch, those big ticket items. But amid higher rates, interest-free options are now becoming everyday payment methods. You've got a firm, the main beneficiary, it's up 400% this year. Square, PayPal, Apple, and then the card companies also have their own offerings. And then mobile shopping, that really took off this year. It outperformed desktop, even making it more than half of all sales for the first time over the holidays. Shopify and Amazon there could be key winners. And then direct bank payments.

So linking directly to a checking account. It's been a win for merchants and helps to limit credit card interchange fees. And then the big loser this year, it's been store credit cards. Those originations down about 17 percent, according to Equifax. Scott, back to you. All right. OK, Rooney, appreciate that very much. You heard the sound effect. That means we're under two minutes on this Friday before this holiday weekend. Mike Santoli, it's not like rates across the border down today. No. PCE was in the right direction. Some of the other economic data was strong.

And the 10-year got a little bit of a bump, maybe four or five basis points today. Yeah, I think that most of the PCE numbers today were largely expected. They were anticipated. They definitely kind of validated the view that PCE is pretty close to target, at least the core is. But yeah, not a lot of incremental move you're going to do in terms of buying of bonds because of it. At this point, we do have a little bit of supply coming in two and fives, I think, next year.

So, I mean, next week. So I do think, you know, we've reached a level here where I'm not even sure you're rooting for much slower yields on the 10-year. If you get below 375, that's going to raise the questions of what does it mean about the economy, consumer stress, you know, talking about BNPL. People are trying to stretch their buying power.

So we'll see if that comes to pass. All right. Well, the Santa Claus rally is technically supposed to start today. Maybe it will on the S&P because we're going to go out green there. Dow looks like it's going to give a little bit back. And we'll see what happens on the other side of the holiday on that. Merry Christmas to those who celebrate. I'll see you on the other side.

There's the bell, which means I'm sending it to OT with John Ford.