Closing Bell - Closing Bell 4/12/24

Episode Date: April 12, 2024

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

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange on this Friday. This make-or-break hour begins with the rally interrupted as geopolitical concerns, inflation fears, and a rate cut reset all weighing on the markets today. We'll ask our experts over this final stretch what's really at stake, and that includes Fundstrat's Tom Lee. Is the story for the bulls now changing? It is a key question. We'll get his answer in just a few minutes. In the meantime, take a look at the scorecard with 60 minutes to go in regulation a decidedly risk off day for the markets bonds are up dollar oil and gold also rising stocks are down the vix is up as well bank stocks are selling off and that's led by jp morgan following earnings tech also weak

nearly every mega cap name is lower today. Apple, though, an exception. And coming up, we're going to tell you whether this week might mark an inflection point for that stock. It does take us to our talk of the tape, whether this bull market has run off the road just as earnings season gets going. Let's ask our panel. Bryn Talkington of Requisite Capital, CNBC contributor, A.V. Sheffield, co-founder and CIO of Vantage Rock. She and our senior markets commentator, Mike Zantoli, are here with me on set. It's good to have you with us today. Avery, I begin with you. Did anything meaningful change this week for the bulls? I think the bulls began to recognize that you can't have your cake and eat it too, right? So

the market has been looking for lower unemployment, lower costs, lower rates, lower inflation, and at the same time, looking for growth enabled by higher wages, higher prices and higher government spending. And the reality is, is the last part of that's coming to reality and are continuing. And that means inflation is higher for longer. And it kind of makes it harder to have these low rates continue to stimulate, have low rates come soon enough to stimulate the economy for the next leg up. Should we, so should we be less bullish than we were? Did the game change some in some respects this week because of, you know, the inflation reads that we got?

Yes. Well, I mean, I think that that bulls have gotten ahead of themselves, right? Valuations have been expanding. Year over year, valuations are up 25 percent, while earnings estimates are actually about flat. And then even over the past several months, you've continued to have valuation expansion with going from the expectation of rate cuts to nearly six to under two. So, you know, something needs to give.

And, you know, I think it's the markets that are giving. And then you add on to that, you know, increased geopolitical risks. And it's a tougher environment. OK, Bryn, you want to tell me what the takeaway is thus far for what's been a pretty turbulent week? Yeah, I mean, I think as the week started, we're ending. I mean, I think it's definitely going to be risk off. You know, we don't want to see Iran and Israel get into any type of skirmish. I think that's also I mean, gold's down a little bit today, but gold's had a huge run.

And so I think people are putting their hedges on. And I think, you know, in addition, it's like we started the year, Scott, with six rate cuts and an A.I. euphoria. I think A.I. is getting a little bit tired, consolidating, and we're going to now have maybe one cut in December or what have you. And so I just think the market's repricing. But I think today also, I think today specifically is more geopolitical as well as yields, yields going higher. These are good points that are being made, Mike, and that if you were really bullish months ago on the idea that you're going to get rate cuts and that was going to be a principal part of the story. How can you possibly be as bullish today on the idea you're

going to get fewer? It's more complicated. We were operating on the premise that we might not have to make painful tradeoffs and give up the idea of the Fed easing into record high stock market, 3 percent GDP economies. That's something I've been saying for a while. I do look at it a little bit more about the atmospheric conditions that preceded this moment, which is the market straight up for five months, no 2% pullback in the S&P 500, a very tight clustering of the consensus around the softer no landing. And yet we're going to have the Fed cut and yields are going to stay tame and all of that. So I think we've gotten a pretty welcome shakeup of that opinion. And so if you had more, you have to have less conviction now in any of those views than you did two weeks ago. That being said, I'm not going to get too overexcited about a two hundredths of a percentage point,

you know, upside in CPI month over month that all of a sudden tears up the entire premise of how we got here. PCE is going to be under 3% annualized coming up in two weeks. And you're going to be able to kind of make both cases for a little while here. The economy's fine. Earnings are going to be better than expected in the first quarter, even if they're just getting back to what we thought they were going to be three months ago. And so we're less than 3% from the highs. We had our first 50-day moving average test in the S&P, again, in five months. That was a really long stretch. So I think you've lost the momentum players. That's broken. I think that you've lost the valuation. Doesn't matter because we're going to get rate cuts camp. And what you have to

do is have fresh eyes on valuation relative to earnings and also the big secular themes, because every time we think this market is getting a macro gut check, somebody says AI and three and three mega caps go flying. And all of a sudden we think it's back to happy days. So I understand, Avery, that there's been some new things introduced this week, but maybe it's important still to keep your eye on the ball and to keep your eye on the prize. And the prize is still it is still the prospects that the Fed's going to cut rates this year. It just might not be as many as we once thought. But that in and of itself is why some make the argument to stay bullish. Right. And I think that I would really agree with Mike that valuation, though, is going to matter

because, yes, maybe we'll get one cut. But the only way we're going to get two cuts is actually if the economy gets much worse. And if the economy gets much worse, that means earnings are going down and really should be putting a high multiple on earnings weakness. So what we're looking at here right now is, you know, thinking that in this earnings season, we're likely to see a real bifurcation between those companies that have just too much in growth expectations priced in versus those where people are still uncertain about the outlook but you know we have many cyclical sectors and we even saw today from our banking earnings I mean very high quality you know banks selling off

just because expectations got too high there's really nothing wrong with the reports but X but people are realizing that- Well, the stocks went up a lot into the reports too. Absolutely. A number of, like J.P. Morgan's a poster case for that. Sure. Yes, absolutely. And I think the point is that that's happened to a lot of the market, right? So as we sit here right now and we look at the earnings to come, I think they're very high expectations priced into a lot of areas in the market, like encyclicals, industrials, construction, home furnishings, machinery. All of these stocks are pricing in rate cuts with growth. But the growth's going to be steady, and we're going to get rate cuts, and then growth is going to reaccelerate.

And if we don't see that in earnings, there could really be some weakness in these types of companies. Although, Mike, I heard you make the point earlier today, and I think I heard this correctly, suggesting that there are going to be a lot of easy beats because of where expectations were relative to where they are now. Yeah. So that's just, I think, the mechanics of analysts have downgraded their expectations for this quarter. You have a 6% GDP economy. Guess what? That's the upside of having higher inflation than we thought, as well as decent real growth. And it just seems if you have the makings, especially once the big tech companies report in a couple of weeks, three weeks, whatever it is,

then you usually have that three to five percentage point beat. And I think FactSet is basically saying that. So it's a little bit of a turkey shoot. Like we kind of set ourselves up to have the big beat. But the point is the 12-month forward forecast has continued to go up. Obviously, we're putting a heavy multiple on top of that 12 month forecast. It's 250, let's say, in S&P earnings. And, you know, you're rich on that.

You're still 20 times plus. But I do think that at least if attention can turn to earnings, once the smoke clears and, you know, we get back through the back and forth of which we're not raising guidance enough. JP Morgan, when the CEO says the stock's too expensive for us to want to buy back a lot and costs are higher than we expected and the stock's been a monster. Yeah, it's going down 6 percent. And yes, of course. And Bryn, when also Jamie Dimon warns of all of these things that are out there as potential major risks like he's been doing, suggesting that, you know, in the past couple of weeks that the economy or the market's outlook about the economy is just simply too optimistic. And there are a lot of variables out there that can upset the story. Right. I mean, I think he's very pragmatic. He lays it

out for everybody. I mean, I think with JP Morgan, Mike hit it spot on. I think with earnings, though, you have to look at individual companies. If you think about it, you know, what, five names probably have an $11 trillion market cap collectively. If you just look at Apple, Amazon, Microsoft Meta, Microsoft Meta. And so I think that Amazon, Meta, Microsoft, and NVIDIA, I think they're going to have great numbers. I think they're going to be very solid. The calls are going to be very upbeat. And so I think we're not going to get to those numbers, though, for a couple weeks. And so I just think until we get to these big names that we're all excited about, I think you're going to have individual names.

If you do not beat and raise, I think this market will not suffer fools. And it's going to be really dicey for a lot of these companies that just kind of have, you know, meh kind of earnings this season. You see, this is why, Avery, that Tony Pasquarello at Goldman Sachs says exactly what Bryn is thinking, that mega cap earnings are going to be good. OK, we may have to wait a few weeks for them to come out, but that's why you shouldn't take your eye off the ball. Stay big. Stay in these stocks. Yes. Well, I think that there could be some bifurcation within the mega caps. Well, there already has been. There has been, and I think that could continue.

I mean, you know, where we tend to be most constructive in the mega caps is the companies that are the most reasonably valued, but not just because they're reasonably valued, because we think they have incredible modes to their business. So we're particularly inclined towards digital, Internet, an advertising place and I mean the companies in in the large mega caps in those spaces we think are some of the most underappreciated beneficiaries of AI they are already using AI to have the most sophisticated algorithms and advertising and the content they deliver to customers that is something they can continue to monetize we think that much better than anticipated.

And in addition, we've seen announcements not just from them, but from others, from some of the top consumers of AI chips. They are continuing to make a lot of progress on their own internal initiatives. We think it's too early to have a cost benefit from that. But over time, that could be a very material cost benefit that's not priced into numbers in the out years. Mike, you mentioned the mega cap trade. Look, maybe I'm forgetting about a day, but when was the last time we had a 300 point decline in the Nasdaq? It feels like it's been a lot, especially on a day where yields are actually down because of the flight to safety trade into bonds. Yeah. I mean, look, we hit a record in

the composite yesterday. We should remember that. And it's just top-heavy enough that it can be that kind of a swing and not necessarily change the overall story. I'm very open to the idea that we kind of capped our market March 28th for a little while and we have to chop around. It would fit right in with election year seasonality getting a little bit dicier in the spring. Everyone's going to talk about how tax day is Monday. Maybe some of this has been selling the winners in order to cover that. Actually going to be a big capital gains realization year, which is good news maybe for the budget and the federal budget. So I think

all that stuff is moving back and forth. And I don't think yields have been the prime driver of tech for a very long time. The secular excitement has overtaken a lot of that stuff. It's not about long duration stocks and discounting cash flows. It's about show me the earnings revisions. Show me where the big, big growth is coming for multiple years. And people keep fixing on those names. Bryn, you know, yields have definitely been directionally important for, let's say, the Russell 2000, which not lost on me, is sitting exactly at 2000 right now. It is down 2%. It had a 2.5% decline earlier in the week before the snapback yesterday. But B of A Securities today says, we think small is likely to lag large until later this year, until we get more confidence in cuts.

We've had a good debate on this program weekly about whether you can buy small caps now without rate cuts. We've had a good debate on this program weekly about whether you can buy small caps now without rate cuts. And I think the answer is being proven out as no. Right. I mean, I've been really clear on this. It's like that is not the trade right now. And listen, we're tactical. We went into small cap value in December of 2020. Why? Because they're very cyclically sensitive and we knew the economy was going to expand from all of the reopening the stimulus. But now you have, think about it, small cap value is a bunch of regional banks and small cap growth is non-profitable, which in theory is very rate sensitive on both sides. And so I just think

it's not a way to allocate dollars to stay large cap. How about look at free cash flow yield? There's just like so many other asset classes and factors you can look at instead of just trying to figure out Russell 2000 or S&P 600. Just step to the side. There will be a time, but it is not right now. Avery, the broadening in this market works both ways. You know, on the prospect of strong economy and rate cuts coming means you have a much broader rally, which we've been waiting for and we finally cheered. OK, so how much of that trade is in jeopardy if now, OK, maybe we need to worry about the economy a little bit more. If the Fed's going to be more patient than we thought, maybe there are cracks that develop. Can the broadening trade work in a pushed out rate cut market. I it can work for companies that

are still suspicious about the company's earnings growth potential in an unclear market so there are areas within cyclicals where you know you could see appreciation and you know areas that we're looking at- where we think it's you

still have enough uncertainty priced in. Are withinos, areas within travel, especially airlines over in Europe, again, assuming geopolitical risks don't explode. Here, very high quality airlines. Those are companies like trading at high single digit multiples. But other areas in cyclicals, like mentioned in construction in in industrials in home furnishings in machinery you have high valuations on

expectations that you're going to have these cuts come through and that's where I think that you're you know you're likely or you're likely to see some disappointments but also I'd say you know given the dynamics in the market. We don't there

are still areas that are reasonably priced that are more defensive and not sensitive to interest rates going down. They actually benefit from rates going up. So we continue to like insurance. Certain areas with insurance, in life insurance, there was a major short report out yesterday. I don't know whether it's true or not. But you had other insurers in the life insurance space sell off. And the fundamentals there are just fine.

And the valuations are not high. You have an auto insurance continuing to have a favorable backdrop with valuations not sky high. And whatever happens to the economy, unfortunately, we're all going to be paying more for our auto insurance. You highlight what our contestant Brewer was highlighting earlier today. And she covers the insurance space, is that they were bucking the trend in a down market. These stocks were higher. But Mike, this goes to another, you can't have it both ways trade necessarily, in the big broadening that we have. If we've somehow changed the game on expectations of cuts and economic strength lasting, do you need to rethink these kind of moves? Because there are a lot of stocks within these sectors outside of tech that went up a lot.

Yeah. I mean, the Eagleweight S&P is right back on its lowest relative to the market cap weighted. We had these kind of false dawns in July, in November, and then a few weeks ago as well, where it seemed as if you were sharing the wealth. And it has been yield dependent. That's been the rule. You know, the Russell 2000 is still 40% on profitable companies. It just raises the hurdle for them a little bit too much.

And for whatever reason, that's now the trading algorithm is yields up, you sell small caps. So I don't know. I'm more interested in, are the cyclicals still beating the defensives? And so that tells you a little more about the underpinnings of this rally beyond, you know, AI names than to me is the average median stock doing better or worse than the average. You've also made the point repeatedly that bull markets typically aren't upended by a too strong economy. Yeah, certainly not only that. And I think but so if you really think inflation is just like not going to go down further from here or it's really going to be sticky and bumpy and the Fed's not going to have a way, then it inherently means you have to be worried about the Fed airing by

staying too long. Let's get to Washington. We do have a news alert and it is Contessa Brewer, who I just mentioned covers insurance, but she's obviously watching the broader news today. What's up, Contessa? Yeah, well, you know, we're watching the markets and having some geopolitical jitters, especially where it comes to the Middle East. And President Biden was just giving some comments from the White House for the National Action Network. He was asked about the potential for there to be more conflict or an escalation of conflict between Iran and Israel. And here's what he said. He said he didn't want to get into specifics, but he's anticipating it sooner rather than later. And when asked what his message is to Iran, he said, don't. He said, quote, we are devoted to the defense of Israel and said, quote, Iran will not succeed. So the

sooner rather than later, Mark, is certainly attention getting here. Scott, we'll keep an eye on the markets and how they react. All right. Appreciate that, Contessa Brewer, very much. The markets, obviously, Mike, have already been reacting mostly to this. Yeah, so we're down, you know, 560 or so on the Dow. It gave up 38,000 a little bit earlier. In fact, the matter is you're just not going to be long into the weekend with this overhang. Yeah, I mean, if you had a sense of wanting to be tactical, yes. This is definitely going to be a net selling type of environment.

Again, usually these things don't end up being the big thing that changes the trend for good. But I understand the apprehension and it's worth remembering. I mean, the U.S. called, so to speak, the Russia invasion of Ukraine very publicly. So it's not as if they're just casually saying we think something's going to happen. All right. So we'll continue to watch that. Dialed down 571. S&P is working on a 90 point decline. And Mike said it's been a minute since we've had a two percent decline and certainly a two percent decline across the board. And we may be doing that over this final stretch.

Back to the conversation in a minute. We are keeping our eyes on shares of Apple, too, because they're actually staying positive today, or at least they were then they still are. Steve Kovac joins us now. I guess, Steve, there's some talk this week as to whether, you know, there was an inflection point for shares, which have seemingly been down for weeks. And here we are, maybe bucking that trend. We'll find out if it's lasting. Yeah, and especially yesterday. And what we're seeing right now, Scott, is Apple resisting today's broader market sell-off, fractionally positive, about four-tenths of a percent last night looked. Shares were up more than 4 percent yesterday, though, because that was its best day since May 5th of last year, about 11 months there. Meantime, all of its big tech

peers, we don't say this often, Microsoft, Amazon, Alphabet, and Meta, they're all down today. This is the opposite of what we've seen so far this year, with Apple significantly underperforming its peers and the S&P 500. One thing helping Apple shares what I talked to you about yesterday, Scott, that Bloomberg report yesterday saying Apple plans to debut new processors and Macs at the end of the year to enable AI features. That seems to be one of the catalysts. On the other hand, Goldman Sachs analysts out this morning with their Apple earnings preview cutting their price target a few bucks from $232 to $226. They see potential for June quarter revenue guidance to miss expectations amid weak iPhone demand, especially in China. And still a mystery what exactly Apple's AI play will be, though that chip news yesterday gave some hints. Not going to

find out, of course, until June 10th, as I keep saying, when we were expecting Apple to reveal its AI plans at its annual developers conference. That's going to be the next catalyst to watch for, Scott. I appreciate that, Steve. Thank you for giving us a look at what's happened this week with shares of Apple. Brynn, you're long the stock. Yep. Yeah, I mean, it looks like technically, I mean, the stock doesn't look good.

It's still below the 50, below the 100, and below the 200-day moving average. So we're just about to pop close to that 50-day. So to me, it looks like it's an upward trend still in a downward chart. And once again, I don't live for technicals, but it still looks like this big bounce is going to get tired out right here. I think you're just going to have to wait a couple of quarters until Apple actually gets their story together around what they're going to do for AI, because to me, it still feels like it's a little bit of a fishing expedition. We'll see. Interesting week for sure, especially in light of what's happening in the broader market. Bryn, thank you. Avery, thanks to you as well. Mike, I'll see you back in the zone in just a little bit. Our senior markets correspondent,

commentator Mike Santoli. We're just getting started. Up next, stocks sinking to end the week, as you know. But Fundstrat's Tom Lee, well, he's not backing down, says it's an opportunity to buy this dip. He's going to tell us how he's navigating the inflation situation and how many cuts, how many cuts he's expecting from the Fed this year. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. All right, we are back with the S&P sliding again today.

The S&P now on track for its worst weekly loss since October. But Fundstrat's Tom Lee says it's temporary, a temporary moment of pain and a buy-the-dip opportunity. He joins me now, Post 9, to make that case. Good to see you again. I'm glad you're here in person, too. So you don't think that much changed this week? I mean, I think the narrative got muddled because that CPI report was a disappointment. But it was driven by what we'd call stubborn components, shelter, auto insurance. You know, the median core CPI component now has only 1.7% year-over-year inflation.

I mean, inflation is normalizing. It's just not evident in the total picture. So the PCE in a couple of weeks is going to be more favorable, we think, than these latest inflation reads. And I know what everybody says about it being the Fed's favored measure on where inflation is. But are you entertaining the idea that this is not going to be as easy as you once thought it was going to be for this last mile, and therefore the market can't do what you once thought it could? I mean, I'd say that that's really the narrative disruption this week, you know, because now the Fed has three inflation reports that it can't argue against that are a little hotter than expected.

And the bulls can't really explain them away either, can they? That's right. So what we would need to see is April and May CPI improvements, which is in the future, and then keeps the Fed from standing in the way of the economy. What we don't want is a Fed that wants to further slow the economy, which is rate hikes. And I think if they just do even one hike this year, it's still actually a good environment for stocks. One cut, you mean? Sorry, one cut. Yeah, let's be clear. See, that's a Freudian slip. I mean, because the greatest fear of all is that they're going to have to hike again, however remote that possibility seems today. And even if you put into the soup all the Fed commentary that we've gotten of late, just seems to be push off rather than push up. That's right. And I think it's, you know,

at the end of the day, even if CPI does look like it's somewhat sticky, PCE, as you pointed out, is more cooperative than PPI is. And measures like truflation show inflation much softer, inflation expectations much lower. So I think at some point we could also just ask, is CPI a bit aberrant? What about the valuations of the market? How do you counter the argument that they're just way too stretched? Multiples are just way too rich, given what now is likely to be the case of cuts later on. I mean, I think when someone looks at 20 years of history, that's the argument they'll make.

If they look at 90 years of PE multiples versus interest rates, when the 10-year is between 4% and 5%, which is a pretty big range, the median PE is 20 times. So we're not even at a median PE multiple of what's existed whenever the 10-year's been in this range. And then if you look at the median stock, it's actually at 16 times. I'd say that there's upside to earnings. I think multiples can expand. I don't think 5,200 is the ceiling for stocks this year. What feels like the right ceiling now? I know this is going to be tough for investors to embrace it,

but I think something like 5,600, 5,700 is probably where the S&P exits the year. Much more backloaded into that than you once thought? I think it's still backloaded because we'll have the cuts behind us and we'll have visibility into 2025 earnings, which probably could be 270, maybe 280 next year. Well, when you say we'll have the cuts behind us, are you so sure? Right? So let's just take June off the table.

For argument's sake, no June. Yeah. You think the first one's in July? Or it could be September. But that's why I asked you if the move in the market that you just suggested is backloaded. Because you're not going to get a big move until you see the first cut at this point. Now there's a lot of disbelief in the market. That's right. And Scott, one thing to keep in mind is the probability of a June cut has been reduced, but it can come back if we have a good April and May CPI, because then it's going to put back into focus what is the trend in CPI. It does feel stubborn when you look

at January, February, March. Now the flip side of the argument that the bulls would suggest is all of this is noise. Keep your eye on the ball. The Fed's going to cut. They may wait. They may not do as many as we thought, but the regime has changed and the economy is going to remain good and earnings are going to be strong enough and they're still going to cut because they're going to be able to. And they'll point to the PCE and say, just don't be blindsided by the other noise. That's the story that matters most. I mean, I'd say that that's a story that's going to, as the dust settles from this week,

that's what's going to sort of push back into the front lines of people's minds, because it's totally different than 2022 and 2023. And we're in the middle of earnings season and think deliverance will be good. And interest rates, look, it's not comfortable here at 400 percent, but the economy is handling it. And there's for now, for now. Yes. So you made a call, I think, first on this program that small caps were going to rally 50% this year. It was several months ago.

I can't imagine that you still believe that's going to happen now that rate cuts have been pushed out seemingly until the fall. Well, I think the viewers need to keep in mind that small caps almost rallied 20% in a month last year. So for them to rally 50% over the next eight months, I think it's still very plausible, given that median earnings growth for small caps in the rest of 2000 is 19% versus 11% for the S&P, and the median P.E. is 10 times versus 16 times in the S&P. Oh, I know why they're cheap, but they're cheap for a reason, some would say.

Sure, but then if we have corporate CEO confidence go up and some mergers start to happen, I think you're going to have a very, very quick adjustment in the price of small cap stocks. And again- Okay, I'm sorry, finish your thought. Oh, and there's 6 trillion in the sidelines as well. Okay, lastly, and briefly, mega caps.

Are you still as bullish as you have been? Yes, yeah, because I still think it makes sense Okay, lastly and briefly, mega caps. Are you still as bullish as you have been? Yes. Yeah, because, you know, I still think it makes sense to own what's working, and that's AI-related and the Ozempic-related names. But, you know, now on the margin, the ISM is turning up, so you want to own some industrials. And because of Fed cuts, I like small caps. All righty.

We'll see. Tom Lee, thank you. Yeah, thanks. That's Tom Lee here at Post 9. Up next, we're trading the turbulence, the NASDAQ dropping in today's session. Star VC investor Rick Heitzman, he's Tom Lee here at Post 9. Up next, we're trading the turbulence, the Nasdaq dropping in today's session. Star VC investor Rick Heitzman, he's back with us at Post 9. We're going to get his outlook for the tech space, and we'll do that next. All right, welcome back.

Tech stocks among the hardest hit today with the Nasdaq giving back its post-PPI bounce. And with rising concerns about higher for longer rates, is that space set up for more pain ahead? Let's ask First Smart Capital's Rick Heitzman. He's with me here at Post. Nice. Good to see you again. I mean, I'm imagining a scenario in which, you know, you see this pushed off rate cut environment and say higher for longer. And you're like, oh, just as we thought things were trying to get back to normal. Now, are we pushing things off again? Just as we thought it was safe to get back in the water. So, you know, we thought it was going to be, you know, you're starting, we'd be starting to get into the cuts. Although there's two things we really look for, you know, rates coming down helps tech because they're long dated assets and obviously helps VC.

But the other thing is, at least there's a little bit more certainty. The volatility of rates compounded that, and that was a big issue. So at least if we're able to say, hey, it's going to be higher for longer, we anticipate that happening over the course of 24, at least there's rules of the road and people have begun to invest. What about the return of volatility, not just relative to interest rates, but markets in general, as we're hoping that they're going to open up again? And you're going to be here talking about the latest and greatest IPO and maybe one that you've been to open up again. And you're going to be here talking about the latest and greatest IPO and maybe one that you've been an early investor in.

Are you pushing your expectations back there, too? We're not. We're not. Hopefully, we'll be here. Hopefully, I'll be here talking about that company that's still being here at the New York Stock Exchange. We're preparing our companies to go. And even if rates are higher for longer, we think certainly these companies are riding big enough megatrends and have results that bear out being a public company regardless of economic environment. So you think at what point this year are we going to start seeing more IPOs? I think you'll see some soon.

I think you're going to see maybe Harry's.com, a StubHub, a SeatGeek go out in the second quarter. I think this window before the election, you're going to see more IPOs than you have in the last couple of years. Are they, are they, you know, I look at a Reddit and I'm like, okay, well, this is like an idiosyncratic story. And maybe some of the ones you just mentioned are too. But what's the signal that the capital markets are truly open for business again? I think you are going to see the more idiosyncratic stories. You're going to see the sub-$10 billion market cap companies go. You're not going to see, I don't think in the near term, a Databricks, a Stripe,

which is the big IPO which really opens the market. What forces them to go public? I mean, what do they need to see before they feel comfortable and secure in this market? They're going to need to do a big financial, a billion-dollar type IPO, which means there's going to have to be a lot of dollars that are currently on the sidelines, off the sidelines. So they're going to want to see a healthy market, and they're not going to be forced to go. They have plenty of capital. The private markets are open for them, whether they want to do share buybacks from their employees

or whether they need to raise primary capital or acquisition financing. So they're not in a rush. And that's the other side of the coin of they're not in a rush. The markets aren't ready. And it'll probably take till post-election time frame for that to happen. Where are we in terms of, you know, non-AI, non-GLP-1? I've thrown another variable in there. You can't pick that either. If I took those two out, what's the trend that's the next bet that I need to think about now? That's pretty hard because I think those are the two megatrends that we're seeing play out across the ecosystem. Still. Still. Still. You're still seeing the highest valuations in the public and private markets being somehow correlated to AI. And sometimes they're chips and sometimes they're hardware like Astera, sometimes they're application

level like, you know, Databricks or even Dataiku in our portfolio. But then the next trend is probably GLP-1s and healthcare. And you're seeing the manufacturers, distributors, all those companies performing incredibly well due to fundamental demand. Beyond that, I think there'll be somewhat of a return of enterprise. Well, you were early, maybe the earliest money in Rho, right? Yes. And they're seeing fundamental demand for Rho body and Rho.co's kind of body and health care products that, you know, as Ozempic and Wagovi are now becoming mainstream, and you're seeing a lot more use cases for health that are that are really going to change the environment is there when you look for example you

know I'm looking at all the mega cap test tech stocks today and so they're all down except for Apple if if that trend is broken for a while is that the easiest barometer to perhaps look at to figure out where sentiment is broadly for even a venture person? We look at more narrow-based things. So we'll look at like the SaaS companies. And how are the SaaS companies traded? Or how are the public data companies traded?

The Datadogs, the MongoDBs. How is that correlating to our infrastructure software portfolio? And there might not be appetite for application software. There might not be appetite for D2C companies. But there might be appetite as enterprise spending turns back on this year for data infrastructure companies who are driving real ROI. All right. Good insight. Always good check-in with you. Rick Heitzman, thanks. Thanks, Scott. That's first marks. Rick Heitzman here at Post 9. Up next, we're tracking the biggest movers into the close. Steve Kovac is standing by with that. Hey, Steve. Hey, Scott.

Yeah, we've got one AI name dropping on an analyst double downgrade and a well-known pet care company shares are falling as well. Going to reveal those names when Closing Bell returns after this. We're about 15 from the bell. Let's get back to Steve Kovac now for the stocks he's watching. Hey, Steve. Hey there. Yeah, let's start with Zoetis. Shares of the animal medication company down about 8% heading into the Closing Bell. That's following a Wall Street Journal report today on the potential side effects of its arthritis drugs. Some pet owners in the story blame the drugs for the death of their pets. Zoetta says its drugs are safe. And Arista Network's down as much as 9% today following a double downgrade from buy to sell from Rosenblatt analysts.

They warn the networking company may not benefit as much as previously thought from the build out of AI data centers. Scott. All right. Steve Kovac, thank you very much. Still ahead, chips getting whacked and wrecked. That sector being weighed down by Intel and NVIDIA. We're going to dig into those big moves, how the rest of the sector is faring ahead. Closing bell is coming right back. Well, we made it. We're in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day. Plus, Intel and AMD weighing heavily on the chip space. We'll dig into those moves. In a rare bright spot today, Sima Modi on gold hitting record highs yet again.

We'll do that in a second. But, Mike, leave us with something to think about over this weekend. Pretty good flush today, I do want to say, even though the selling is sort of moderated. It's like 95 percent downside volume in the New York Stock Exchange. And we're in that mode now saying, OK, maybe on a short term basis, you want to see things get a little bit oversold, get people get just a little bit afraid, frankly, of what there could be to come. I do think that the market kind of kept from spinning out further when you had oil and gold come off the highs today. So it didn't just seem like some kind of runaway spinning out further when you had oil and gold come off the highs today. So it didn't just seem like some kind of runaway risk off move. All told, almost 3% down from the highs

in the S&P. We're sort of trying to make peace with a 4.5% 10-year yield. I think that's almost a little more present than the notional, well, maybe we're going to have to wait a few months more for a Fed rate. I was going to say exactly where you left it there about, you know, you watch yields next week, you know, to see what happens and see how much pressure if they continue to go up or back up that that's going to continue to put on the market. Or if that's where, you know, buyers seem to feel like there's value being created on some level, as we saw today, you know, it becomes self-correcting

because if people get really scared of other stuff that's bigger than the Fed, they'll start to buy Treasuries. Mega caps, too, are going to be a tell next week. Let's see if the weakness continues there and what the broader meaning of that could be. And then Apple staring at that 4 percent up on this week, 176 and a half. Yeah, this feels like a if you're reducing crowded positions all across the board, you're kind of buying the stuff you're underweight or short like Apple because it's been such a dog and you're selling the stuff where you have the profits. Now, that said, it's really made a stand in this area multiple times in that 170 range. It definitely takes the edge off of the off the

valuation. You kind of get a feeling that it's underperformed the other big names enough in the short term. So I think that's why you get this mean reversion type move. To me, the bigger issue might be, is there real selling behind these pullbacks in meta in the other real big winners of this trade? Or is it just kind of, again, taking some off the top, pay some taxes, reduce your overweights? So far, a lot of these dips have been bought, as you know, and that's what you're obviously alluding to. Look, we're going to start getting a busy earnings calendar, too. So we started with the banks. The stocks do poorly, but now it's going to get real. The calendar is

full next week, and the movements in the stocks, based on what the earnings are, are going to be a real tell as well. For sure. It's interesting because last quarter, the reporting season started off very stingy in terms of the market not really giving that much benefit for the beats and also punishing the misses. But then it sort of settles out over the course of the earnings season. I think it would be a welcome thing to have a lot of dispersion in the market. By that, I mean a lot of stocks going their own way because of their own news and fundamentals. And that would be a little bit of a rescue from the macro spiral that we've been in for a while, which is all intensive about inflation and the Fed and you. It's a pretty nasty day for some under-the-NVIDIA-surface chip names.

Intel today down more than 5%. AMD is down more than 4% today. You do have this news that China told telecoms to remove foreign chips. Yeah, which seemed like obviously a catalyst, but maybe not some brand new fresh thing that's a needle mover for all the stocks in the group. It has been NVIDIA, AMD, and Broadcom against everything else. There really hasn't been much conviction in the rest of semis in terms of the cyclical drivers. If you look at the XSD, that's the equal weighted semis, it's really done nothing for months while the market cap weighted driven by NVIDIA has really been the big winner. So again, these stocks are

momentum. They're secular growth. And sometimes they're just kind of beta. So when the market's down, they get hit. All right, Sima Modi, oil up, dollar up, bonds up, VIX up, gold up. New record again. And what makes this interesting, Scott, is the prospect of higher interest rates does not seem to be stopping gold's rally. We're looking at the yellow metal hitting another fresh high today, trading above $2,300 an ounce as investors pile in.

Gold now on track for its third straight week of gains, slightly lower right now. But PIMCO's Mohamed El-Erian posting on X this morning that central banks are increasingly looking to gold as a way to hedge against geopolitical risks. Goldman's new price target for gold now, twenty seven hundred dollars. So analysts do seem to think there is more room for upside here, Scott, when looking at gold. Appreciate that, Seema Modi. Thank you. You want to weigh in on what's happening with gold here? Yeah, I mean, it's one of those things where you can kind of construct your narrative because real rates have been going up. It used to be that's what mattered for gold. There obviously was a technical breakout. You absolutely see capital flight into it. People are unnerved about whatever it might be, whether it's

Treasury supply or the deficit or geopolitics. That said, just sheer vertical momentum in gold recently has gotten it, you know, way up in thin air. And that's why I do think that you can look at the fact that it sort of lost a little bit of the juice midday as something that I think is probably a positive, that it's not just going to completely blast higher. Sure. Well, I mean, it is key, I would think, for next week as well, that we break the commodity and dollar fever. Yeah, this reflation trade, it's fine as long as it's really kind of following global growth expectations and things like that. Really just outsized moves in individual agricultural contracts and things like that, I think, makes it seem as if there's a little more behind it in terms of just fast money grabbing on

these things. And, you know, it has an inflation push aspect to it. But I do think that it's getting a lot of adherence all of a sudden, this idea that commodities are someplace where, you know, if you're looking for something to diversify that's not called Treasury bonds, people are finding their way to commodities. Yeah. I mean, look, we're still down about 500 on the Dow, but we are off the worst levels. So we likely will have a 2% down day for the Russell 2000, not so much for the others, although obvious weakness. Watching financials, let's just sort of

bring it back full circle where this day started. They delivered, the stocks did not, and you've got that sector the worst today. Yeah, you know, it's just very difficult for this group to perform if what you're really worried about is Fed's not going to give them relief. The economy's okay. The credit metrics were fine in the financials. So that's why I wouldn't panic too much about that. We got an IPO that traded up today. It seems as if this could just be

kind of the ebb and flow on a risk-off day. I'm not really ready to say that's going to lead the market wrong. All right. Deep breath. Bell rings. Have a great weekend. I'll see you on the other side

into OT with Jared DeBosch.