Closing Bell - Closing Bell 12/28/23

Episode Date: December 28, 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. Thank you, Kelly. Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. This make or break hour begins with stocks drifting toward a soft landing at a new record high for the key market benchmark. The S&P 500 just a fraction of a percent away from completing a two year round trip to its old January 2022 peak. That's at about 4797 would be a new record high. Now, since that point in January 2022, the Fed has jacked the policy rate more than five percentage points. Constant recession bets have come up empty. And in recent months, a radically narrow market leadership has given way to a convincingly broad rally, all of which brings us to our talk of the tape. Is this approach of all-time highs a chance for investors to cash in, to break even, or confirmation that a young bull market is gathering steam into 2024? Let's ask 314 Research co-founder Warren Pies. Warren, it's great to have you here. How are you doing? I'm good. Thanks for having me. Sure thing. Now, you know, the story

for this year, I mean, you could have said it a year ago, but it was can inflation go down more quickly than the economy loses steam? And that has certainly happened to this point. We now seem to have kind of seen a Fed pivot rhetorically, if not in reality. Where does that leave you in terms of what we should expect, at least in the first part of next year? Yeah, I think that we try and be data driven at 314 Research. And so the data points in a bullish direction. It's hard to kind of deny that at this point in time. You end up with a few just broad axioms that we live by. Don't fight the Fed. Well, the Fed's now stepped aside. And if you remember, we talked earlier this year, and one of our problems with fighting the tape back then was the tape signals aren't as good when the Fed's in your way. And so now the Fed's cleared the path. You can trust the tape more. So we're seeing a broadening rally. We see,

even though there's a lot of bullishness in the market, it feels that way. When I look at it objectively by the data, economists are still kind when I look at it objectively by the data. Economists are still kind of on the fence on a recession next year, and strategists are far from bullish. I mean, at this point in time, the average strategist target for 2024 year end is implying less than 1% gain on the S&P 500. So I think this kind of sets up for this big bullish chase. We upgraded equities in November with the idea that everyone's going to be behind the eight ball and need to catch up. And I think that's what's happening right now. Yeah, it does seem as if a lot of those things you mentioned, plus just the run of macro data and what's happened to bond yields,

has really turned the burden of proof back over to people who think the economy is in some serious trouble in the near term. How do you think the market, though, trades with respect to what the Fed might do, just exactly how the numbers have to come in, the data have to come in, in order to get the Fed continuing to, I guess, be more of a tailwind than a headwind? Well, I think we have to go back and study history a little bit. And unfortunately, soft landings, that's our base case, but they're relatively rare. But the one takeaway that I see when I study history of soft landings is that the market rallies aggressively in anticipation of the first Fed rate cut. And that's a little different than hard landing cases. And so the average case sees a 10% return in the market in the six months leading into the first Fed cut. And so the average case sees a 10% return in the market in the six months

leading into the first Fed cut. And so I actually think that's going to hold this time around. I think that points to a kind of crazy sounding target that we put out there a little while ago of 5,200 by May 1st Fed meeting. That's when we expect the first cut. So it sounds crazy, but I think that keeps the pressure on these strategists who have yet to increase their targets. And we have this kind of perfect storm, perfect bullish storm here in the first part of the year. The other thing I would say, I think every strategist is looking the last year after getting burned on their recession predictions, and they want to get back to normal. And normal is like 8% return. And they go through and check all their boxes.

And they think presidential election cycle says weak first half, strong second half. I think you could flip that entire script on its head where we have a strong first half and then a weak second half next year as everyone has to catch up and is behind the eight ball. You know, it's interesting that you characterize a 5,200 S&P target as of May of next year as sounding crazy. And I think to a lot of people, it probably does, given where people's I think they're they're kind of mental accounting for where the market is. But that would be 400 points or 8 percent on top of where we traded in January of 2022. Right. So if you look at it over a longer span, it's not exactly as if the market is really racing ahead of itself. Yeah, and especially when you think of the fact

that an equal weighted S&P and S&P 493 in general has lagged even more. And I think that's where you're going to see outperformance in this cycle is that the playbook says buy the laggards, buy the non-MAG seven. And so, yeah, I think when you zoom out a little bit, it's, it's not as bullish as it seems in, in new all-time highs, which is where we're on the doorstep right now. Those are bullish as well. If you go back and say, okay, new all-time highs after a year drought in between all-time highs, you're, you're looking at a 15, 16% return in the next 52 weeks. So it's a bullish event to make new all-time highs. The worst case we have is 2007. The market was down almost 9% of the year following that

all-time high. That's the only negative we have going back to 1950. So yeah, when you zoom out and you consider new all-time highs and you consider how underinvested everyone is given the money market flows we saw this year, it's easy for me to construct a pretty bullish case in H1 next year. You mentioned the tendency of the market to rally into the first anticipated rate cut in a cycle. We did have a survey question from our Delivering Alpha survey about the timing of a potential first Fed rate cut if the Federal Reserve cuts rates in 2024, in which quarter is it most likely to happen?

And we basically had more than half, 54% said the second quarter looks like the most likely. That gets toward your May timeframe, with some thinking maybe not quite one in five, thinking it could happen in the first quarter, and then sort of similar amounts in the third quarter thereafter. I guess the question I would have is how sensitive is your market call to the timing and magnitude of those cuts? Because I think there's a real commonly heard refrain right now, which is the market's going crazy pricing in, you know, six rate cuts next year, whereas that's not really, to me, the expectation

of most people out there that we're going to get that. It might be what the Fed Funds Futures is saying, but not necessarily individuals. I totally agree with you. I think that's what's happening. I think this you've seen the market, the futures market be a little more dovish than I think the average investor and commentator has been throughout this year, really. And yeah, that has provided some potential areas of volatility. I think when you look at the inflation data, that's where you really go back to is inflation is either going to confirm the dovish signal of the futures market or deny it. And I think the runway for disinflation is pretty strong going into, you know, I'd say the next nine months.

I think it gets a little less clear from nine months out., the next nine months. I think it gets a little less clear from nine months out. But the next nine months, given what's happened with shelter, I think that we're going to be in good shape on the disinflation front. And just because we don't get exactly what the futures market's suggesting, I think there are still a lot of underinvested managers out there who have to catch up. Just this pivot in general, just the fact that Powell went from, we're not even talking about cuts to, yeah, we're going to cut. It's just a matter of when. That's a sea change. To me, that was a major event. And the market has a hard time digesting that all at once. I think that's why you're seeing this just nonstop drip of higher prices,

because it's just telling us there's a lot of people who've gotten stuck out of this outside of this rally. So, yeah, I don't think we need exactly what the futures market is suggesting. Right. Yeah, the market does seem to trade that way, that people don't yet necessarily feel as if they're exposed enough to this rally. Let's bring in Joe Terranova of Virtus Investment Partners and Nicole Webb of Wealth Enhancement Group. Joe, of course, a CNBC contributor. And really, Joe, just your kind of take on this pretty rosy scenario that, I mean, if you look at a lot of historical tendencies, you look at the setup into next year, it's tough to quibble with too much, I guess, leading us to ask, you know, what could upend this nice picture?

A backup in yields. And I think that's the single thing that you want to be watching for. And you will have a backup in yields at some point in Q1. And that's probably healthy for the market. I think a correction right now would really reveal underneath the market the desires of people to reenter and establish bullish positions and equity. So I actually would like a little bit of a pullback. But, Mike, this just feels to me using history as a guide. Ninety four. Ninety five. Ninety six. Yeah, it's exactly what it feels like. It feels like, you know, you went through the inflation scare of ninety four. The rate hiking cycle, you got to the point ninety five middle of the year.

You began to cut rates. Ninety five market off to the races. Ninety six. You followed along. So I think it's a very bullish setup as Warren has suggested for 24. Yeah I mean I've certainly been kind of using 1995 as a beacon as well for the kind of ideal soft landing scenario now the pushback on that Nicole is that inflation never got to be much of a problem in 94 the market was not as expensive in 1994 at least as it is cosmetically right now and I think there's another element of it, which is tough to really get your hands around, which is in 1995, people weren't standing around saying, hey, 1995, that was a great year. That's what this one's going to be like.

So anyway, how do you read all of these patterns and expectations? I think the first thing that we all have to lead into, just thinking about 2024 as a setup, there's so much discussion right now on, you know, when and what about March. And at the end of the day, what we all really need to focus is on the why. Why is the Fed cutting rates? And so if what we're seeing is really growth going sideways, we're seeing disinflation leading to real rates becoming overly restrictive. Therefore, the Fed has to surgically pull back. Now you still have bonds and stocks that are correlated, which

we all know, textbook, in periods of hyperinflation, they become correlated. The question is, when do they break apart? Or when do investors start to believe that risk on is more valuable than believing that rate cuts help their bond investments. And I think this is where you're going to start to see that restoration of greed mentality come into play in January and February, where if the Fed really does look like it's on track to cut in March, the short end of the curve starts to contract. Money markets aren't paying as well. And now it's not about a sell off in tech. It's that, OK, we see the technology advancements. We see what you did in 2023. Now, can we continue the broadening of the market? Can we say maybe we are earlier cycled than we all thought in 2023?

And there's stickiness to the momentum in small and mid cap. That's the question around positioning going into Q1. Yeah, you know, Warren mentioned that it does seem as if it's now pretty well consensus that you should emphasize the stuff that hasn't gone up quite as much. So the 493 is now the, you know, the shorthand way of saying the rest of the market. Now they have had a big, you know, partial catch-up move. Is it as simple as that, Joe, do you think, to play the field against the favorites? I think one of the things that has worked really well in the last several years is the beginning of the year has provided you the clue that you needed to solve the mystery of the year. If you think back to last year, very early we established, OK, it's going to be the mega caps that are going to lead the market higher.

You can even go back to 2018, coming off a really strong 2017. The early part of 2018, you had the market higher you can even go back to 2018 coming off a really strong 2017 the early part of 2018 you had the indication you know what 2018 is not going to look like 2017. so i like to always look at money flow i'll just go back to 94 for one second because remember 94 everything went down and that's a very similar setup to what you had in 2022. Everything went down. So I think the early stages of 24, seeing where the money flow is, is going to be so incredibly important in understanding what the market's going to do. And I think, Mike, yes, the broadening out of the rally is going to be the first place that I think capital is going to look to allocate towards. And Warren, when you think about what we need to see or what we need to kind of check off as this idea that the economy is

still going to be able to be OK, we look at what oil is doing. I mean, maybe it's all supply driven and it's actually net good news for the economy, at least domestically. You see what yields are doing. And I guess there's a limit to how much you'd want to see long term yields really collapse in this environment until it starts to perhaps suggest a scarier message. So how much leeway do you think the actual economy has to get toward a kind of a slower muddle through type environment if that's what we're headed for and still have the markets behave OK. Yeah, I think that the backup in yields is kind of self-reinforcing in that way.

And so we've had when yields fall, we've seen mortgage rates drop by over 100 basis points. And to me, housing is the epicenter of the economy. And if you're going to have a slowdown or a reacceleration, you got to look to housing. So I think that this move back in yields is actually reinvigorating housing. We've got kind of a structural undersupply, and that's where rates have done the most damage. So I think you actually get some relief on the economy and some reacceleration at the same time. The disinflation data is kind of baked in, and that's why I think you have this kind of perfect storm where the economy can reaccelerate, but the inflation data will stay tame. I like the analogy of 1995. I think every cycle is different. But when you look at it historically, there have been two times only where we've seen the S&P make new all-time highs while the Fed's on pause, 1995 and 2007.

So I think soft landing and more towards a 1995 outcome is what we're looking at. Yeah. Stark outcomes you know, outcomes after that, of course. But, you know, you've got to pick one. And it does seem as if, you know, 95 has a fighting chance at this point. Nicole, where within the market specifically, you mentioned the AI theme. And, you know, that's been one of those things that was somewhat idiosyncratic. It wasn't about the macro and it enabled the market to kind of change the subject for a while. Yeah. What about looking into next year? Is it going to be is it going to

be that? Is it going to be more old economy? I think it's about productivity. I mean, our huge emphasis, what we're listening for going into 2024 is everything below the surface of AI. So where has investment been made? And if we start to see this rollover in sentiment, CEO sentiment, consumer sentiment, there's a bit of a dislocation. You hear CEOs interviewed, their business is doing well, yet their perspective on the broader economy is it's fragile. If we start to see that rollover

as we push this recession fear deeper and deeper into 2024, and maybe it falls off a cliff, and we are in this beginning of a new cycle era, then do we have this boom in productivity? And I think that's what you're going to look for below the surface. That got priced into the mega tech names this year. Now, where does it start to hit across other margins broadly in the market space? And for us, that's exciting. I think in retrospect, we want to believe that we can look back on the 2020s era and it be the roaring 20s of productivity. Well, I mean, that would also echo the late 90s if we want to just keep up the metaphor there.

And Joe, I guess the other question is, what has accounted for the huge bond rally? You mentioned backup and yields might be a complicating factor. But what has accounted for it at a time when you're also seeing, you know, I could see the fear and greed index is in extreme greed at 77. The National Association of Active Investment Managers above 100 percent equity exposure. So the short term tactical stuff is looking like people have chased this rally. On the other hand, buying treasuries hand over fist and corporate spreads are collapsing. Well, if you go back to the final days of October, you had a pretty high probability that the treasury secretary who is going to decide what the size of the quarterly refunding was going to be. And oh, by the way, used to be the head of the Federal Reserve

was going to lean in the direction of not surprising the market. And I think that decision was critical in kind of chasing out the speculative shorts that existed. Speculative shorts in bonds. Speculative shorts in bonds to the degree that as long as we've kept the statistics, it's never been higher than it was in September and October. So I think positioning was a critical element of that. I applaud Treasury Secretary Janet Yellen for what she did in her decision.

And I think subsequent to that, we're beginning to see a little bit of slowing down in the economic numbers consistent with this quote- unquote, soft landing. And that's the unwind of positioning. And now the question becomes, Mike, have we built positioning up in the other direction where now specs are long treasuries and we need a little bit of a backup? I wouldn't be surprised if that's the case. Yeah, maybe. there is some counter effects to Warren just in terms of where you might navigate toward within the market. You mentioned quality outside of the Magnificent Seven. So, I mean, you can look at that and it's some of these steady businesses, the visas, the MasterCard, the Costco's, I guess, would fall into that type of basket. What makes that the right call here? Well, typically you look for quality when you're late cycle. And I think this is a weird cycle. And so I think there are a lot of people who are going into this

kind of early cycle playbook, which is cyclicals in high beta, including small caps and things like that. And maybe that works out. And if our call's right on the market for the next five months, then it probably will. But I don't think this is going to be a normal cycle. And I would prefer to still stick with the late cycle playbook. We have a quality system. It returned 22% this year, and less than 1% of that return came from MAG7 names. And so to me, I think we're still in that late cycle kind of regime, and we haven't quite gotten into an early cycle washout that we would need. And so it's really risk-reward to me, and it's earning stability through a full cycle,

and that's what we're looking for to play in going outside of MAG-7. Yeah. How long can we stay late is often the question when we get to one of these phases, and it seems like it'll be for a little while longer. Warren, Joe and Nicole, thanks a lot. Appreciate the conversation today. Happy New Year. All right, let's send it over to Christina Partsenevelis for a look at the biggest names moving into the close. Hi, Christina. Hi, Michael. Let's start with Penn Entertainment. Higher as HD Vora Capital Management pushes for changes at the casino giant, calling it significantly undervalued. The firm holds roughly 9.6 percent stake in Penn's common stock,

along with a large batch of swaps, and says it's in talk with Penn's management, including a push for board seats. And that's why shares are up almost 6%. And North Coast Research is upgrading WisdomTree to buy with a $9 price target. Analysts say the fund manager has missed out on the recent rally. Despite attractive assets under management, North Coast says WisdomTree's ETF portfolio is more

balanced than ever, making it resilient to shifting investor strategies. Stock is reacting quite dramatically, up 6.5%. Mike? Christina, thank you. See you again in a bit. We are just getting started here on Closing Bell. Up next, widely followed tech analyst Dan Ives, upping his price target on one name that has seen its best year in more than a decade. We'll tell you what it is and why he sees more room for that stock to run. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Wedbush's Dan Ives out with a new note, raising his price target on Microsoft from $425 to $450. Why? He's betting artificial intelligence will be Microsoft's iPhone moment.

Dan Ives joins me now at Post 9. Dan, good to see you. Yeah, great to be here. So $450, I mean, it would seem not necessarily to be a layup. It's up 20% from here, but that's, you know, $3.3 trillion market cap, I guess, at the current share count. It's 32 times 2025 calendar earnings. So how do we get there? I think it's conservative. I mean, because the reason this is the iPhone moment for Nadella and Microsoft is because AI. The monetization opportunity, I mean, to put some numbers, we could be talking an incremental $25, $30, $40 billion per year.

That's not factoring the street numbers. I think on the sum of the parts, you look at AI and cloud, you could actually get to 60%, 70% of the valuation just from that. So I believe some of the parts, this is a stock. You have a year and a half, $4 trillion will be there. $25 billion plus in revenue by when and through what means? I'm sure that's not just $35 a head for the copilot. Yeah, I mean, our checks are showing transformational deal flow. In terms of the copilot conversions, I think the big thing here is really monetization

is going to happen a lot sooner than anything the street's factoring in. $25 billion by 2025, I think that's sort of the baseline. But then you look to ultimately where this could lead. Based on our checks, for every $100 of Azure, of cloud spend, we believe there's an incremental $35 to $40 for AI. And that's why right now, it's another flex the muscles moment for Nadella and Redmond, because they are leading this AI arms race. The idea of it being an iPhone moment, though, it would seem to me that when the iPhone was introduced, people didn't have really great expectations for it, right? It was kind of like this thing that was somewhat out of the blue, a lot of skepticism about how big the market was going to be for it. It feels as if we've got

a lot of momentum of excitement around Microsoft already with regard to AI. Yeah, no doubt. But I think the difference here is that the iPhone moment, it's from CEOs, CIOs, CTOs, what they're seeing on the use cases. I mean, use cases are exploding across the board. And I think that's really the most important thing here is that Nadella continues to ultimately really play chess, others playing checkers in this AI race. Now, of course, Amazon, Google and others are going to follow. But demonization in their own backyard, I still think massively underestimated by the street,

which is why we believe 450. I think that's just the next step. As you know, this is, in our opinion, it's a get out the popcorn moment for Microsoft in terms of where this is going. How do you think about the New York Times company lawsuit against Microsoft and OpenAI, essentially saying that they're using copyrighted material to train the large language models and they obviously want remedies along those lines. Look, I think it's not just going to be in the New York Times. You're going to see others jump into this because they want a piece of their pie. I mean, that's really what's at stake here. Now, I do think legally speaking, if you look at Microsoft, they're going to defend that turf and

this will continue to play through in the courts. But I think the big thing here is that these content providers are trying to figure out how they can monetize this. And ultimately, but it just speaks to Microsoft OpenAI Altman, they've been three, four steps ahead. And that's really what's happened right now. This is all a game of poker that's being played out. But the top of that mountain is Nadella. Right. And of course, there has been negotiation ongoing. So this might be just part of that to figure out what ultimately is going to be the arrangement down the road. Dan, stay with me here. I want to bring in Steve Kovac. He's looking at Apple and the company's revenue growth

prospects next year. Hi, Steve. Hey, Mike. Yeah, that's the big question, too, for Apple going into next year. How does it finally return to top line revenue growth? Of course, as we've been saying all year, four straight quarters in declining sales. And this quarter, not going to be much better. Apple said to expect flat sales for the current December quarter, its most important quarter every year. Despite that, of course, Apple shares up about 49, 48% so far this year. And let's talk about what needs to be done now in order to return to that growth. We've got some good news, some bad news that they have to grapple with. Let's start with the bad news first.

Headwinds in China. What else? Huawei returning to the smartphone game, creating more competition there, a homegrown brand that people may or may be switching over to from the iPhone now that Huawei is making phones again. Also, an online gaming crackdown from the government there. That could damage some app store revenue. And just overall, what we've seen throughout the entire year, a slow post-COVID economic recovery for the consumer. In the U.S., the Apple Watch band,

that's still being worked out despite the reprieve they got yesterday. They're going to be able to get a couple more weeks of sales at the very least in the beginning of the March quarter, starting in the new year out of that. But it's still got to work through that legal battle. And then I just want to quickly mention what's going on in the European Union with the Digital Markets Act going into full effect over there, forcing Apple to open up its app store, open up its payment systems and damaging the margins there. Now let's go for the good news because there's a lot to go over here too. Services growth is re-accelerating that high margin software business. It was up 16% in the September quarter,

probably going to see some similar numbers in the December quarter. So good news there. And some signals also just broadly around the PC and phone market that maybe demand has bottomed out and we'll start seeing growth again, especially in PCs. Now, Dan was just talking about the iPhone moment for Microsoft. What's not going to be a new iPhone moment, though, for Apple, the Vision Pro. That headset is going to be just a small launch at the beginning of next year. It's only going to be available in the U.S. at first, only available in Apple stores, rather, and it's not going to be a mass market product, at least not yet. Sure. Although I guess we can all remember when it seemed as if the watch was kind of trivial and wasn't moving the needle. And now all of a sudden it seems like a loss when

they're not able to sell it. And Steve, you know, I look back and there have been periods before when Apple's revenue just kind of went sideways, fiscal 2018 into 19, basically stagnant at the $260 billion annual level. And, of course, now it's up toward $400 billion. So I wonder if it's just about a reset of demand as you get through these model launches for iPhone and then just the install base just does what it does. That's exactly it. And I know what Dan is going to say before he even says it,

that there is a massive upgrade cycle that is impending as people kind of reach that point where they've had their phone for three to five years. So, yes, it does ebb and flow. But back to your point, Mike, about 2018, 2019, that was largely a China problem, too. There was just having trouble pushing those iPhones in China. That was part of the problem there, too. Maybe things turn around this year and the consumer gets stronger over in China. And Dan, given the fact that the stock has been able to perform because of other things, you know, basically the buyback, the

stability of the company, the fact that it's, you know, it's got the great balance sheet, I guess allows it buys the company time to maybe get some growth back. Look, I think Steve summarized phenomenally the Bulber debate. I think the difference here is that this is the golden install base, unparalleled, of Cupertino. 250 million iPhones still in the window of an upgrade opportunity. And as of last night, our Asia checks, no demand cuts. And that's the important thing because China still, even though despite the headwinds,

there's actually massive growth in China for Apple. And I think as this plays through, the renaissance of growth in Cupertino, Cook with his red cape, I think it's going to come through again in 2024. And in my opinion, this is really this has been probably the most formidable year for Cook in terms of proving the naysayers wrong. And Steve, have there been any signs that there have been cracks in the Apple brand and how it's regarded by customers? You know, you've seen the attacks from the app makers, and they want to kind of reduce the level of the power of Apple to control what's in and out. The iMessage rewrite, all these things that feel like, you know, a lot of small attacks on Apple's, you know, once impenetrable kind of competitive position. Yeah, I wouldn't call maybe the brand so much cracks, but definitely the walled garden that they've built over the last decade plus,

right? And, you know, we're seeing, like I mentioned earlier in my piece just now, you have the European Union laws coming into effect. You have Japan considering similar laws around the App Store. The United States still is behind on regulating these things, but there are multiple lawsuits and cases going through, including the Supreme Court case that might be, or a case at the Supreme Court that might be taken up next month between Epic Games and Apple that have resolved a lot of this stuff in the United States. So yeah, the cracks are starting to show. It is becoming a more open ecosystem across these platforms. And Apple is slowly but surely losing some of that control. But to Dan's point, they still have that great lock-in. iMessage is one lock-in,

but it's not the only lock-in. And keep people upgrading keep people on their services keep people downloading apps and and that's the positive momentum there but again it is not going to be the same Apple by this time next year. All right. See how it plays out Steve. Appreciate it. Thank you very much Dan. Good to see you. Thanks so much. All right. Up next trends in high places. Carson Group's Ryan Dietrich is back. Why he says this year's market momentum will roll into the new year and where he's seeing the most&P closes in on an all-time high. My next guest has been bullish all year and thinks the stage is set for a solid 2024. Let's bring in Carson Group Chief Market Strategist Ryan Dietrich. Ryan, it's great to have you. Describe the setup now versus where it was a year ago,

and what are the main things that you think are worth emphasizing in terms of feeding into a potential continuation of this uptrend? Yeah, Mike, thanks for having me back. And Happy New Year to all the listeners out there coming up. And I mean, a year ago, right, everyone was bearish. Everyone felt one way. We know that. Now we're looking at a 20 percent gain. I think there's a lot of ways we can talk about this. Bottom line, on the Carson team, we still see no recession, right? We still see real wages making new highs. We still see the economy making 150,000 to 200,000 jobs every month, manufacturing and housing both coming back.

So if you don't have a recession next year, which again, we didn't expect to this year, we don't see one next year. We think this trend can continue. Just one way to look at it, Mike. I mean, who knows? We might have all-time highs today, maybe tomorrow, maybe next week. When you go at least a year without all-time highs on the S&P 500, like we're going to, I found 14 times, go back to 1950, we went that long with an all-time high. After you

make that first all-time high, Mike, a year later, up 13 out of 14, about 15% average return. Put a bow on this. New highs are bullish. When you go a while without one, it still could be a pretty good market next year for investors. And so you mentioned that everybody was very bearish a year ago, and there's no doubt about it. People were not convinced that the market low was in from a few months earlier. Overwhelming calls for a recession. Earnings were still on the decline. The Fed still had more to do. Don't you feel as if the attitudes have been reset to a degree this year to where maybe the capacity to surprise to the upside is reduced? Yeah, I can't disagree with you there. I mean, there's still some calls

where you see what the average strategist is saying. It's still very, very few people expect to see double digit returns next year. So it's modified. And you look in history, when you gain 20 percent, you tend to usually not gain 20 percent or at least more the next year. So it's modified. And you look in history, when you gain 20%, you tend to usually not gain 20% or at least more the next year is what I should say. I know the nineties, we saw a string of 20% years, but you know, more modest, we, we think Mike, I mean, you know, low double digit returns is likely next year for, for at least the S and P, but I know I've come on with you guys for a while. I'm a judge for a while saying we like smaller mid caps. I know everybody likes smaller mid caps now, cause they're having one of their best months ever. We've liked them

for a while. And we still think that broadening out theme is the next stage of the bull market next year. So small mid-cap industrials, we think those are some areas that are going to do pretty good next year. It's not all about tech. It's not all about seven stocks. We think that's a good thing for investors. For sure. I mean, one of the, I guess, broad disclaimers you're going to hear people offer about next year as well. It's an election year. A lot of times the market is sort of held in check for a while as things clarify about how the election might play out or who's going to be involved. So what does that mean to you, if anything, in terms of how we should set our expectations? No, that's a great point. I mean, the first half of election years normally don't do all that well. But I think what really matters, we're hearing this a lot from our Carson partners and their clients. It's an election year. What does it mean? Well, Mike,

the last 10 times we had a first term president, the election year was higher, right? I mean, the 10 out of 10 is not too bad. And we think it'll happen again. It's those that's when you have a lame duck president, 1960, 2000, 2008, when we've had some trouble. So again, that's not, that's just one reason to look at it, one way to look at it. But still, I think it's important to point that out to people. One more, Mike, we're going to have a 10% gain these final two months of the year, right? Unless we really have some trouble tomorrow. I don't anticipate that. So what does it mean when you're up a lot the last two months of the year? Incredibly, Mike, the first quarter returns higher every time, up like 6% on average, and the full next year has never been lower, up 20% on average.

Again, what's that telling us? A big end of a year rally like this is not consistent with the end of the bull market. It usually means that upper momentum, that slingshot, is going to continue. Yeah, it's interesting because so many people assume you're kind of pulling forward returns from the following year, and history says not usually the case. Ryan, great to catch up with you. Thanks so much. Happy New Year. Thanks for having me all year. Had a lot of fun.

Take care, Mike. All right, I'll see you. All right, up next, we are tracking the biggest movers as we head into the close. Christina Partsenevelos standing by with those. Hi, Christina. Hi, Mike. Well, up next, we have one cancer testing company

that's in hot water. I'll explain all of that and more. Closing bell is back in two minutes. 15 minutes till the closing bell. S&P still clinging to a small gain. Let's get back to Christina for a look at the key stocks to watch. Christina. Let's start with oncology testing company Neogenomics that's in the deep in the red right now after a court barred the company from making, using or selling a key cancer test in the United States, ruling that it infringes on a patent by rival Natera. NIO says it'll peel the ruling. You can see shares are down almost 18% right now.

Boeing is urging airlines to inspect their 737 MAX planes for a possible loose bolt in one of its control systems. The issue has been fixed on the manufacturing side, but Boeing says it's encouraging airlines to inspect their jets out of an abundance of caution. You can see shares down about half a percent, and that stock is up about 36 percent this year, but it's still down over 40 percent from its 2019 all-time high just before the 737 MAX was grounded. Mike? All right, Christina, multi-year charts necessary to get the whole story. Thanks very much. Still ahead, a reversal of fortune hitting China's stock market as outflows

and concerns over the country's economy rise into year end. We'll break down what it means for investors looking for international opportunities. Plus, a lovable plush toy finds itself in a legal battle with Alibaba. Details when Closing Bell returns in two. Squishmallows are suing Alibaba. A judge in New York has rejected the Chinese e-commerce company's request to dismiss a case filed by Kelly Toys. That's the maker of those popular plush toys. The suit alleges that Alibaba's online platforms were used to sell counterfeit Squishmallows. Kelly Toys is owned by Jazzwares. It's a toy company whose parent, Allegheny Corporation, is now controlled by Warren Buffett's Berkshire Hathaway.

All right, up next, it is the latest read on the health of housing. We'll take a look at which regions fared the best in November and what impact the recent fall in mortgage rates has had on buyers. read on the health of housing. We'll take a look at which regions fared the best in November and what impact the recent fall in mortgage rates has had on buyers. That and more when we take you inside the Market Zone. We are now in the closing bell Market Zone. Diana Olick is here with a look at some key housing data. Christina Partsenevelos is back to talk Chinese investment trends. And Bob Pisani joins us to break down these crucial moments of the trading day. Diana, pending home sales, what does that tell us about the state of housing right now?

Well, Mike, the street was expecting a slight gain because mortgage rates fell sharply in November, but pending sales remained unchanged from October. Sales down 5.2% from November of last year. This number is based on signed contracts during the month, so a forward-looking indicator of closed sales, but also the most current look at what buyers are thinking. And mortgage rates here are the key. The average rate on the 30-year fix soared over 8% in mid-October, but then dropped sharply to 7.5% in the first week of November and ended the month around 7.25%. That's why the street was looking for a small bounce in sales. But the realtors did note in their report that while that drop

didn't result in any formal contracts, any more at least, it did spark a surge in interest, according to their so-called lockbox indicator, which records showings. That's those little things on the front door when you go to see a showing of a house. They actually tell you who's interested. That's actually fascinating as a real-time read on things. And, Christina, I mean, sorry, Diana, you mentioned mortgage rates have come down. They're moving in the right direction for buyers. But there still is a pretty substantial spread between the 10-year Treasury yield and the 30-year fixed mortgage rate. Obviously, a lot of factors here. But what do we expect from that

spread? Well, the spread has been shrinking. And look, it's going to depend on economic factors outside of the housing market. You know, what the Fed is going to do next, whether there's going to be more cuts than expected, less. It really depends on the broader economy to see where that spread goes. But we are in this, as you said, the six and a half percent range. And some people have been talking about fives. I think you get a five handle on the 30 year fix and you're going to see a lot more buyers get into this market, not just buyers, but sellers who've been sitting on the fence because they don't want to trade from their three percent or four percent rate up. They might be willing to go on a 5% rate. Yeah, fives are probably going to be considered a pretty good deal, you know, given where they've been. Thank you, Diana.

Christina, trends in China investing, are people throwing in the towel here? Yeah, they are. They're losing faith in Chinese equities with foreign purchases actually dropping to an eight-year low. This, according to research from the FT, that means almost 90 percent, 90 percent of foreign money invested in China's stock market in 2023 has moved on to greener pastures. You can blame many things, the lower than expected demand resulting in deflation or real estate and debt crisis, new gaming regulations, aging population. The list continues. These factors, though, leave investors doubting future growth. Even Q3 foreign direct investment in China was negative for the first time. We are seeing a rebound today in certain ETFs like the K-Web. We often refer to that. That's up over two and a half percent, the China

large cap and the MSCI China ETF. All of these on your screen, you know, two and a half percent or more. But if you zoom out like we like to, and you look at the individual names, you can see massive drops like JD.com, Billy Billy, both of those names down almost 50% or around 50% year to date. And then you also have the widely observed Shanghai Composite Index, which is down roughly over 4% over the year, but compare that to the S&P 500, and that's up over 26%. So clearly a discrepancy. Once an unstoppable growth machine, China's economy really has stuttered. I'll use that word in 2023. And investor confidence still remains relatively weak heading into 2024. Even though, Mike, the second half of the year, you started to see a little pickup, but it was really the

gaming regulations that changed sentiment just within the last month or so. Christina, thanks so much. And Bob, as we head into the close here, two and a half minutes left, the S&P losing a little bit of ground, but in general, right within just a fraction of a percent of the all time highs. It feels as if people have been chasing this rally over the last two months. On the other hand, strategists not that excited about next year in terms of their targets, haven't seen IPOs. A lot of those things you see associated with a really enthusiastic bull market, not quite in place. Yeah, I was interested to hear you talk to Ryan Detrick, who's been

directionally right, talking about no recession, job growth still resilient. The problem with this, that's in the market already. And the market, as you know, is expensive. We're almost 20 times forward earnings, 11% earnings growth expectations. That's on the high side. So the pain trade is down right now. We talked about the effects this week. Fewer rate cuts than expected might happen. The economy slows down more than expected. Earnings slow down a bit more than expected. We've seen revenues slow down in some of the recent reports. So there's some risk in the market right now. With all that said, the Santa Claus rally is on target. We're not at a new high, but we could hit one tomorrow. We're up 0.9 percent in the last four days. Santa Claus rally seven days. It's right on target.

Average 1.3 percent. By the way, I was calling around about the prospect of a closing historic high on the last day of the year. That is a very rare occurrence. I just thought the S&P, it's only happened eight times since 1926. The historic closing high happened on the last day of the year. That is a very rare occurrence. I just thought the S&P, it's only happened eight times since 1926. The historic closing high happened on the final day of the year. We'll keep an eye on that and see what happens. Other than that, I'm excited tomorrow. We're going to have Tom Leon, the high estimate on the street, 5,200 for 2024. John Stoltzfus from Oppenheimer, also 5,200. You and I both know this has no predictive value whatsoever, a parlor game that we play, but we all actually engage in it. I'll be interested to hear what he has to say about this here.

I added up 19 strategists. $4,800 is the average they have. We're here. For 2024, the average strategist has $4,800. We're at $4,780 right now, and that's what I call a lack of enthusiasm with a lot of things having to go right. Yeah. And it does feed into the idea that at least sentiment is not necessarily, you know, kind of off to the races right here. We'll see how that goes. Bob,

definitely be watching that all time high potential for tomorrow. The Dow, of course, will set another all time, up about 60 points, 37,700. Oil, rough day. Market's plugging it off. That's going to do it for Closer Dow. I'll send it into overtime with Morgan Brunner.