Closing Bell - Closing Bell: 6/26/25

Episode Date: June 26, 2025

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

One hour left to be specific. Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner today. This Make or Break Hour begins with stocks scaling the summit for a second look. The S&P 500 trudging with an easy sight of its former peak set more than four months ago on some refreshed enthusiasm for the AI story,

relief that uncertainty has receded on the geopolitical front, and growing expectations that the Federal Reserve will see its way clear to cut interest rates into a still steady economy. Take a look at the scorecard with 60 minutes left in regulation. There is the S&P 500 at 6138,

the closing high of 6144 back in February, just over a couple months ago. The NASDAQ 100 four months ago actually is already at a new record high and you see it adding to those gains from yesterday up up almost 1% Amazon and video meta pacing the climb there in the Nasdaq. Treasury yields have been easing back further led by the two-year maturity as markets price in fed rate cuts as the president reportedly considers naming a successor to Chair

Powell before too long. Which takes us to our talk of the day. So is the market sending an all clear signal on the economy and the policy path ahead? Or is it time again to start looking out for what might trip things up? Let's ask BlackRock's Rick Reader, he's CIO of Global Fixed Income

and head of the Global Allocation team there. Rick, great to have you. Good to see you. Yeah, appreciate it. What's your read on what we're getting from the markets here in terms, I mean, it feels like this is how the markets trade when kind of soft landing, risk has been mitigated,

and people are kind of jazzed up by the opportunities and growth. You know, so I would add to that. You also have, you know, you had this period of the markets were in this sense of stasis that people were concerned about. You had tariffs, you had mideast, what was inflation going to look like. And some of those clouds, as you said, have parted.

And then what is so clear is you look at the amount of cash that's sitting out there, the amount of, we were looking at the total net worth to the size of the fixed income market, size of the equity market. Globally, there is so much money that wants to come into the market that didn't for a while and I just think if you don't have any negative news the natural gravitational pull is across all these assets. But you know that listen when you look at the the growth data the growth data has been okay and you know I would argue the next couple of months you're gonna slow a little bit but not in a disappointing way or not in a stressed way. I don't think we're going

into recession. I think that's been taken off the table. And you know, inflation, the last three months, moving average of core CPI is 1.7%. It's okay. So, you know, can the Fed move? I think the Fed can move. Will they move in July? I don't think so.

But the window is there that they could do it. You've made the case over the years repeatedly that the US economy is, it's just kind of hard to knock off track. It's a big service-based economy. Our companies are massively profitable. And therefore, if you're not going to get a shock, and maybe the shock of the tariffs, at least the threat of the tariffs didn't do it, maybe we're free of that for a while.

But I do wonder what the market is now implicitly trying to price in here in the way of whether tariffs are really going to be a restraint on growth, whether it's going to be a little bit of a period of inflation cosmetically going higher, or if it's going to maybe create some other knock-on effects. Mike, I would say one thing. You know, I believe in this thesis that, by the way, it's like the best trade every year. It seems like sometime in the first or second quarter, people get horrified about, we're gonna go into recession or deep recession.

And I just don't think service economy is what the US economy is. I don't think that happens. Second thing is I think people don't realize you transferred so much money post-COVID from the public sector to the private sector. The reason why the biggest risk is the government holds the debt down.

What happened was the private sector, corporations, individuals, financials, de-levered. So you have this ballast underneath you. You don't have a geared economy other than what's at the government. You don't have a geared economy. And then think about the same time you put a lot stimulus in, the central banks kept the rate down at zero or in Europe at negative. So you actually created this explosive growth of wealth, corporate wealth, corporate cash flow dynamics. You don't have, you've turned your debt out.

So the underlying foundation is pretty darn strong. So what trips it up from here? Listen, I still think the tail risk is the government debt, is that's where you're geared. And that's where, we gotta keep doing a lot of auctions as you get into next year. I love the front end of the curve, I love the front to the belly of the curve.

You know, out the curve, you know, I'm not sure I need to be a big buyer out there at all. I just think you create a lot of income using the front to the belly and just keep ticking off income while the equity market will do its thing. If the economy does have that cushion and that momentum on some level,

is the Fed actually particularly restrictive here at four and a quarter to four and a half? So, you know, I'll throw out something. And it seems like for years, people said, gosh, if the tenure gets to three and a half, if it gets to four, if it gets to four and a half, it's over. You have an economy that's not interest rate sensitive.

Companies, you think about who are the big drivers of AI, of CapEx, of R&D spend, they don't borrow. You know, you talk about the big hyper skills, et cetera. They capex, of R&D spend, they don't borrow. You talk about the big hyper skills, et cetera. They fund through free cash flow, so the interest rate doesn't affect them. Banks are asset liability matched, that's not interest rate sensitive, and the consumer is largely delevered. So point being, with Fed raised rates 500, based on the economy, really break much, not

really. There's only one aspect. The reason why I think you can open the door to the Fed cutting is housing. The mortgage rate is too high. And there are a whole series of things that I think we should be doing as a country to incentivize home-building. You look at it, it was the KB Homes this week. If the mortgage rate, the funds rate's high, floaters are high, the mortgage rate stays

too high, we don't build enough homes because those companies have to subsidize the mortgage. And so what happens, you compress their margins, they don't build any houses. By the way, that's what would bring down shelter inflation which has been the stickiest part of inflation. So I would argue, Fed could bring the rate down even though you've got a bit higher and I think what Chair Powell said,

you're gonna get some tariff transmission over the next couple of months into inflation. At the end of the day, maybe, and by the way, it's probably right, but then I think, listen, I think we got to take some of the pressure off the housing market so that, quite frankly, young people, et cetera, can move into houses. That's where I think the interest rate is the most effective. Some have made the case that you drop the Fed funds rate, whatever, 50 basis points or more.

You kind of don't know where mortgage rates are gonna go. Do you think it just refreshes the ecosystem enough that it incentivized, I mean, the builders can obviously benefit and the banks can benefit if short rates are lower. So the long, great conversation, which I will go deep into, but I think there's a whole series of things.

First of all, the interest rate tool, the federal funds rate, the front end of the yield curve, companies don't borrow off the front end, the mortgage markets aren't. It doesn't really, the front rate tool, the federal funds rate, the front end of the yield curve, companies don't borrow off the front end, the mortgage market's not, it doesn't really, you know, the front end is something, when you think about banks borrowed short, lent long, it made a difference. There are a whole series of things you could do.

I think the interest rate tool is blunt at the front. There's a whole, by the way, the relaxing the SLR is helpful around the banking system. I think there's also other fiscal initiatives you could do to buoy enhanced home building and incentive to build houses. I think that the interest rate tool will help to bring it back down. Is it restrictive that I...

Listen, the economy's moderating. There's no reason to keep it up there. And so I think they can bring it down. I think in September they'll start doing that. Yeah, you say the economy's moderating, which I guess it does net out to that kind of a picture. But there is a camp that wants to look at things like, first of all, the economic surprises were looking pretty weak, even as of a week or two ago. Things were kind of falling short of expectations. And then, you know, people look under the surface of the labor market, decelerating. It's like low hiring, supplies coming down, just low metabolism there. And then I guess the housing market would be the other argument that perhaps you don't

want to get too close to stall speed. So agreed. So I mean, by the way, look at the quits rate, that's slowing. Look at the indeed job openings coming off. There's a whole series of metrics that would suggest employment over the next. This payroll report is going to be interesting. I think you'll see some of that softness. It's always hard to predict one month.

Listen, you have an economy where we talk about what the strength is. The amount of spend on CapEx, AI, infrastructure development is incredible. So the economy, you've got so many different parts of the economy operating today that end up in a place that pretty good, slowing the trajectories down a little bit.

And by the way, for the equity market, my view is you just stay in technology, I would argue healthcare technology. By the way, for the equity market, you know, my view is you just stay in technology, I would argue healthcare technology. By the way, there's some really interesting things on the shift from goods to services and things like leisure, hospitality, that is, I think, it's a cultural transition, but also I think we're leaving to a larger extent a goods economy into something that's quite different. Yeah, a couple of months ago when you were here, I think you were feeling like maybe the equity valuations weren't exactly compelling and how much more can you expect out of this market or maybe just that the market is pricing in a pretty positive outlook.

How does it seem right now? I think the multiple is full. I think today if you said to me, gosh, what do you think of this multiple on a historic basis, too high. That being said, I still think you have a dynamic. There's too much cash, and my sense is, there's too much cash, and there's enough. Listen, this is the most fun and trading environment

I've ever been around, because there is so much dispersion, there are so many companies that are growing quickly, investing quickly, there's dispersion happening. And one of the ways, like we've been able to, I don't like multiples, but we've been able to keep a long position, like we've been able to, I don't like multiples, but we've been able to keep a long position. Why you've got volatility that allows you to overwrite sell call options

and some of your single names, that volatility's still reasonable, it's come down a fair amount. Buy some downside protection so you can run long alongside a technical that's extraordinary. Even though I just don't love multiples. But there's enough areas, like people talk about the DAX has had a great run.

There's like three, four stocks in the DAX. You know, the market cap of the DAX is about Nvidia. And so, you know, there are places, by the way, there are some good companies in Germany. There's just not that many. There are some things to do in this market. There are companies you get really comfortable with their growth trajectory,

and you just stay long nose, buy some data, buy some protection of the downside using the options market So you can run along and I would say you know one thing the buybacks Today more to authorize buybacks or a trillion one trillion to the size of the IPO market is year-to-date eleven twelve billion It's tiny so that the supply technical supply demand technical is pretty pretty unbelievable sure The you mentioned the Fed seems to have this window here I mean, you know,

for all the criticism from the president on Powell not moving yet and him saying maybe September looks like where it'll be. It seems like a lot of things might converge around there. I mean, if you get the inflation numbers that maybe we can handicap right now, maybe the economy decelerates, you just time takes care of it. But does the market have anything to do in terms of worrying about this idea of appointing a successor earlier or any of the noise around the Fed? Because by the way, whoever the chair is, it doesn't seem like the committee is dying to move in July either. There's been an interesting couple of shifts. The Bowman shift I thought was interesting.

That was, it seems like the movement is a bit more towards cutting. Listen, I think uncertainty is never good when you've got sort of ambiguity around what the decision is going to be. Listen, I think that the direction of travel is removing to cutting, the door is opening to be able to cut. It's part of why, like sitting in the front to the belly-yield curve, clip a lot of income, you know, by the way, you can sell volatility in higher interest rates, and people pay you for that.

There's some things to do around it, but listen, the direction of travel is to lower. How we get there and some of the uncertainty, that's gonna, quite frankly, that's why it's the, like I said, the best trading market I've seen in years. I mean, look, as you say, the market kind of locks into that view that it's probably going lower, whether it's one month or another, it kind of gets you what you need out of it. We'll see.

Rick, great to talk to you as always. Thanks, Mike. Thank you very much. Appreciate the time. All right. We are getting some news out of Apple right now. Steve Kovach is going to have that for us. Hey, Steve.

Yeah, Mike, this is impacting the services business over in Europe at Apple. Apple is changing its App Store rules over in Europe again because of the Digital Markets Act. That's that really stringent law over in Europe that regulates tech companies. Apple is now reducing their fees throughout the App Store again in order to, in its words, comply with this new law. Otherwise, today is the deadline. It would have faced fines

as up to 50 million euros a day. They believe this is going to prevent them from doing those fines. It's really wonky, it's really complicated, but at the end of the day, Apple is still charging fees through these alternative app store payments and other alternative app stores outside of the app store.

But we've heard this story from Apple many times throughout this entire process where they say, we're complying, we think we're complying, our lawyers tell us we're complying, and then the European Commission comes back and says, uh-uh, you're not complying, guys. You need to make these changes again. So this is just another step in this long drawn out battle

that we're seeing that does impact Apple services business. We're not seeing shares react too much here. I don't expect this to get resolved anytime soon. It's gonna take years and years for this to really play out. But in the meantime, this is a longer term threat to that services business and that lucrative app store model over there in the EU. Yeah, I guess as Apple just trying to play defense

at each increment here. Some would call it malicious compliance. That's the word people like to throw around. Exactly. All right, Steve, thank you very much. We are tracking some big moves in the semi-space. Let's send her over to Christina Parchenevalos for more on that group. Hey, Christina.

Hi, Mike. Well, you talked about it. AI enthusiasm is really surging again. NVIDIA hovering near all-time highs today, shares up, what, 60% from the April lows. This turnaround, though, puts the chipmaker back as the world's most valuable company by market cap. But the chip rally that we're talking about right now really extends beyond Nvidia. I know we talk about it all the time, but almost all chip names are higher.

Custom chip maker, Broadcom near its 52-week high. Marvell, you can see on your screen, up almost 6%. Even Intel, up almost 1%. Only a few are lower. ASML on a downgrade. Micron after earnings despite the higher guide. Though keep in mind Micron had rallied about 51% year to date into yesterday's close. So some are saying it was just a crowded trade.

The software ETF, IGV, I just want to show that for a second. Just over the last month you can see that it's up about 6% versus the SMH up over 16% just showing how money is rotating out of software and back into chips just over the last few weeks. And why are we seeing this rally though? Heading into earnings season, you know, not too long ago, many assumed big techs, AI spending, CapEx had peaked. But recent guidance from Microsoft, Google, and Amazon shows plans are continuing and

even more infrastructure investments are on the horizon through 2026. That spending plus easing of US-China trade tensions, you know, what deadline do we have anymore, is really reinvigorating the AI trade and by then chips by extension since they're the foundation of this AI buildup. Mike? Christina, thank you. Well let's for more on this, let's bring in Bernstein Senior Analyst Stacey Raskon. Stacey, when it comes to really, I guess, the marquee names, the sort of acknowledged

leaders in the AI story, NVIDIA, Broadcom, it feels as if not much has changed over the last several months except for investors' perception of how much risk there is to that story. That's exactly it. You go back five or six months beginning of the year, especially around the deep seek moment. People thought the AI trade was over. They thought deep seek was going to result in lower spending needs.

They thought the capex peak was shortly arriving and all these stocks got completely whacked. The only thing we've seen since deepSeek is purchase intentions and capex intentions go up. We've seen a lot of the sovereign demand coming from the Middle East and other places. We've seen Nvidia's own supply issues run Blackwell start to really ease up and those parts are really starting to ship. And so I think investors are a lot less worried about a capex peak this year. They don't really seem to be as worried about it next year.

26 looks good. Again, the floodgates have opened on Blackwell supply, and so it is looking good there. Even a company like Broadcom, they reported earnings a couple of weeks ago. They took up their expectations for their AI trajectory, especially into next year materially, which again, I think fuels that belief that the current spending trajectory that we're on has some legs and it's clearly meant that the AI trade is back on in spades and by proxy it's sort of dragged a lot

of the other chip names along with it as well. So are we genuinely free of the concerns that the export restrictions are gonna be material, that they're really gonna bite, that they could be tightened up again because the demand from elsewhere is just too strong? Yeah, well, to be honest, I feel like people have sort of been acting like the export restrictions and the tariffs in particular are not going to happen. At least on the export restrictions like to China for AI. Those are done. I mean, like Nvidia now and even AMD, I mean, they can't ship any

of these parts into China right now. So that's been zeroed out. And for those guys, to the extent that they can work around some of those new restrictions, China may actually represent upside rather than downside around the controls because it's been zeroed. Around the tariffs, I think we'll see, you know, I guess it's July 9th is when the reciprocal tariffs are supposed to end. We'll see if they actually do or not. We've got the two three two tariffs on the the sector specific Tariff investigations that are ongoing. We're expecting something there. We'll see if we get semiconductor tariffs I feel like the the whole tariff story is probably not gone away. It has been sort of tabled for now

We'll see what that looks like into the second half But I also think that, again, the general demand for these parts is strong. There's a real sort of strategic reason, strategic rationales to build up capability here. And frankly, if semiconductor costs are going up, I mean, it's happened already. Semiconductor ASPs are 50% higher today

than they were for pre-COVID. It hasn't really impacted demand all that much. People have still bought, so. And what about just other areas? I mean, we talked about the Micron, the move into earnings and the reaction to earnings and away from the core AI names. It's been a little bit of a spottier story

in terms of when that cycle might really start to kick back in. Yeah, so in some of the other things, let's take the analog space, for example, industrial and auto, and most of the analog companies have actually been talking about a cyclical bottom, especially in industrial, and it's kind of hard to say, it's not implausible.

We've had eight or 10 quarters of year-over-year revenue declines in industrial, so the idea that we could be reaching a cyclical bottom and have a recovery, especially as channel inventories, at least the companies are claiming that they're lean now, that's not implausible. At the same time, you do have to wonder, given all the tariff noises, some of that increased demand pull forward in front of those tariffs.

We've absolutely seen pull forward in areas like auto. We've had some companies like ADI have called that out. I suspect in consumer electronic areas like PC, we've also seen pull forward. Its demand has been not fantastic, but reasonably or relatively strong. I think the CPU has been overshipping. To me, that's clear evidence of pull forward. I think it's a little mixed. On the analogs, investors by and large have wanted to believe, and it's not that hard

to think that near term like estimates for the analogs on that sort of rebound could go up with the question of sustainability is still out there though. Got it. Not as clean a story perhaps as AI data center but interesting stuff as well. Stacy, thank you so much.

Appreciate it. Yeah, you bet. All right, we are just getting started. Up next, Marathons Bruce Richards is back with a check on credit and the one part of the market he is very concerned about right now. We are live from the New York Stock Exchange S&P 500 up three quarters of 1%.

You're watching Closing Bell on CNBC. Welcome back. Private credit inflows getting a boost and my next guest is seeing even more positive signs ahead for the credit market. Joining me now is Bruce Richards, CEO of Marathon Asset Management here at Post9. Bruce, good to see you. Good to see you, Mike. Really, the credit markets, I mean, measured however you wanna measure them through this entire year, which has been noisy

with the tariffs scare and everything, have really not buckled at all, right? I mean, spreads remain tight, demand for credit product remains good. Is that rational? Do you expect it to last? Credit should be born. That's the first thing.

We shouldn't have the big credit events. The truth is over the last few weeks, credit has come ratcheting in. The high-yield bond market is 300 spread now, which is towards the all-time tight. That's 50 basis points tighter or lower in yield than it was just a month ago. So it's actually performance-wise, price-wise done exceptionally well. And so we like a boring credit market. Very few credit events, and that's healthy for the economy, it's healthy for the borrowers, it's healthy for us as investors.

We love this type of market. So does the economy as it sits right now, and as you expect it to develop over the next few months, support that continued strength? I guess that's the question, because there is a legitimate debate out there as to whether, you know, we had negative first quarter GDP, it was technical reasons,

but it seems as if growth has been moderating or decelerating, is that okay for the credit line? The first half of the year, 2.2% GDP is what I think comes in at blended, first quarter, second quarter. The second half of the year, I think it probably slows to about a percent and a half. They're both okay. And so a 2% GDP, and I also believe that inflation won't take up

to the extent that the Fed is worried about. Say it's 2% inflation, I believe that's where we're gonna kind of settle into. And that's a beautiful thing. 2% inflation, 2% GDP growth, maybe a little lower than that, won't allow the Fed at all to keep rates as high over a long period of time.

So you think the Fed needs to get moving sooner than later or it has to just wait and see to make sure that doesn't get into the inflation? They won't get moving sooner or later because there's no Fed cut coming in July, unlikely in September. You think it's unlikely? It's unlikely in September. But what I've been saying is this calendar year, one to two Fed cuts, I believe it's more the fourth quarter, and I believe it's once Powell and the other hawks

at the Fed have the evidence that tariffs have not been inflationary, that tariffs have not caused the economy to, you know, to do what it's going to do. So I think that That the Fed is gonna ease but screened fourth quarter I also think that Powell will probably ease four times by by time may of next year rolls around and I think The rates are simply too high. Yeah, so that gets you to some estimate I mean where the committee sort of feels like rates should settle out, you know for this cycle Well, I think the rate is 3% because if you look at the ECB, look at what's happening in Europe.

You have 1% growth, 1% inflation. And when you have inflation and growth at 1%, where's their natural rate? It's 2%, and that's what the ECB's done, brought rates down from 4.5 to 2. What has our central bank done? They brought rates down from 5.5 to to four and a half with two percent growth and what's probably going to be two percent inflation.

Four and a half is too high. What's parity? Parity is three percent, I believe. I believe that's what we'll eventually get to. I believe the next Fed governor or chair come May of next year will be a dove that understands rates have to come down. It will be a very healthy thing for the economy and very healthy for funding our federal deficits. So that generally is friendly for credit, but there are pockets, I guess, where you're a little

bit more cautious within credit, right? I mean, I think sort of maybe some of the vulnerable areas to AI, in other words, that might be displaced by it. There's a lot of things we're thinking about now. And we mentioned, you we mentioned tariffs a minute ago, and so tariffs, I think, do get extended, doesn't really expire in July, July 9th, they'll get extended for an extended period of time, because it's really nice. At the space line level. At the space line level of 10%, and it's really nice for the government to have 300 billion of annual revenues that helps them get the big, bill through which is 25 billion a month and that's that's you know a nice income to

have for the federal government and helps you know kind of balance equality of what we're charged around the world versus what we charge so that's that's the first thing is tariffs you know we just did it deal by the way the something to share with you live is one of the biggest auto parts suppliers in the world owned by one of the best-run, savviest private equity sponsors, just filed for bankruptcy. And this is Morelli, you know, the big Japanese but it's a global auto supplier. Deutsche Bank and Marathon led debt dip finance and so we provided financing. So doing capital solutions for great companies

that are affected by tariffs or affected by a slowdown in the economy is a beautiful thing. We earned SOFR plus 800 with our points up front. It's a 16% return on a big block of this dip financing to help the company end bankruptcy and helping them throughout the course of next year as they exit bankruptcy.

So there's lots to do. In terms of areas that are troubled, it's whatever's gonna be disrupted, right? So the consumer sector, consumer discretionary spending is a bit weak and it's being disrupted by many different things and so we're avoiding that. But as you point out, any software company that doesn't adjust to AI is going to be

obsolete in a matter of three to five years. And so there are a lot of software companies that will be AI first software companies. They'll cross that Rubicon, they'll be powerhouses of companies and that's who you want to invest with. But there are also 5,000 other software companies that are owned by private equity and not all of them will make it through the transom to be able to convert to AI. And so we're avoiding software. Look at, for instance, rideshare and rental cars.

On the rideshare you have UberLift, on the rental cars you have Enterprise, you have Avis, you have Hertz. And so what does autonomous driving mean for those companies and how many jobs does that affect because there's 18, 8 million people that drive for a living in this country and it's a big impact with autonomous driving. So you have to really focus on what companies and what industries are going to get disrupted. Where you're getting paid in a sustainable way.

I'd stay away from that. Yeah. Bruce, good to talk to you. Thanks so much. Nice to see you, Mike. Thank you. Take care. All right. Next, we are tracking the biggest movers as we head into the close. Christina has those for us. Hey, Christina. Hi, Michael.

An AI computing stock is having its best day in months on acquisition rumors, plus a spice maker that's seasoning investor portfolios. I did it with a strong earnings beat. More when we return. Oh, 26 minutes till the closing bell. Let's get back to Christina for a look at the key stocks to watch. Let's start with Equinix. Pauling for the second straight day after it issued weak guidance through 2029.

They issued it at their analyst day just yesterday. You can see the stock down over 7%. You've got slashing of price targets across the board. JP Morgan Wells Bank of America Bank of Montreal, the data center provider you can see is one of the laggards right now on the S and P 500 today. Sticking though with data centers, take a look at shares of core scientific. There's surging right now. Core scientific down over here up 35% the data center. We're going to talk about the data center and the data center and the data center and the data center. We're going to talk about the data center and the data center

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and the data center and the data center. We're going to talk about the data center and the data center and the data center and the data center. fourth 2024. And why is that day significant? Hopefully we can show you that longer chart for Core Scientific. That was when last year Core Weave previously attempted to buy out Core Scientific, but Core Scientific didn't like the bid, declined it. And so now we're doing that whole ball game all over again. And we'll see if the two actually merge. I reached out to Core Weave. They told me that they weren't commenting on this deal at the moment last but not least But Cormac shares having a good time today It beat bottom line estimates in its Q2 report earlier today

It also reaffirmed full your guidance which included plans to quote offset costs related to tariffs You can see shares up over five percent But for more on this quarter, be sure to tune into Mad Money at 6 p.m. Eastern tonight with the CEO, Brendan Foley, who sits down with our own Jim Kramer. Mike? All right, Christina, thank you. Up next, Naveen, Sarah Malik joins us with her second half outlook, including three reasons why she's optimistic on the market right now. Closing bell, we'll be right back. Stocks moving higher today. An S&P record looks to be within reach. New Vines head of equities and fixed income Sarah Malek is out with her second half playbook

and joins me now. Sarah, it's good to see you. Good to see you. So you know, for as much as has happened in the first half of this year, it's good to see you. Good to see you. So, you know, for as much as has happened in the first half of this year, it's been dramatic. Some of these violent market moves. Point to point, the S&P 500 and the total bond market index are really close to where we started the year, within a few percent.

So what should an investor be considering doing, if anything, looking into the second half? Well, I think what the first half proved is that it's tough to time the market. So my first message would be be careful about that. There's three reasons the markets have continued to move significantly higher. And that's first of all, the Middle East, where tensions have

been reducing rather than escalating. Also, the Fed is not the second reason people are anticipating that first Fed rate cut coming for the year. Are we expect to rate cuts this year. And then the economy, it is slowing, but the recession is not imminent. So it is looking like that soft landing for the economy and after that, a couple of rate cuts

in the second half of this year. And that's why markets are approaching highs for 2025. Yeah, I mean, I suppose there's no doubt that having things calm down in the Middle East is a net positive. But I find it interesting when we talk about the relief from a bad thing that didn't happen, when if you go back four months to February when the S&P 500 was first at this level, it wasn't as if we felt it was being held back by the possibility of a conflict with

Iran, right? So I just wonder, you know, back to those valuations and back to those levels, you know, whether we can sort of be confident that the fundamentals are gonna be able to carry it higher still from here. Well, the concern, of course, which was the concern at the beginning of this year is that the S&P 500 is trading at a premium again.

So that is an issue, but earnings growth has been very strong and that is what would take the market higher. Going back to first quarter earnings, expectations were for 6% earnings growth has been very strong and that what is what would take the market higher going back to first quarter earnings expectations were for 6% earnings growth we came in at about 12% earnings growth so earnings can continue to move

this market higher the issue and what brought the S&P 500 Dow now that we can all look in the rear view mirror was of course the level of tariffs around liberation day we have yet to see any impact from tariffs but if you assume

about a 10% tariff rate for the rest of the world except for tariffs around Liberation Day. We have yet to see any impact from tariffs, but if you assume about a 10% tariff rate for the rest of the world except for China, that hurts GDP by about 1.5%. That just gets us to skirting a recession. We don't end up in a recession with that level of tariffs. So that is again back to that soft landing type of scenario where the economy, and it ekes its way out of it, this, the Fed has the ability to cut rates a couple of time because employment markets are slowing and they look at inflation due to tariffs as a one time bump. I suppose the other big feature of this year so far in markets has been you know this comeback of non U.S.

equity markets and obviously it's big rotation you know things like European defense and the rest of the world as the dollar is has weakened and performed pretty well. Does that tell you that investors ought to revisit their diversification and either sell into it or ramp up the exposure? I think it's important for investors

to remain globally diversified. We are in the camp that the dollar will be neutral to weaker going forward, which is good for non-US equities. And we are seeing other countries around the world reduce interest rates. So there's this global reduction in interest rates happening. But we are very bullish on the US,

driven by artificial intelligence. Looking at earnings growth within the US, almost two thirds is driven by technology stocks. The AI boom is alive and well. We heard that in first quarter earnings. Demand is very strong spending continues and with the S. and P. five hundred

having over 30% of its market cap driven by mega cap as long as tech and AI is doing well that's bullish for U. S. market so I see the rest of the world. Having somewhat of a catch up to the U. S. but I still think the U. S. is going to be a strong

place to generate returns. Yeah at times in the last several months, the bond market has seemed as if it was very sensitive to the level of deficits and maybe the outlook for continued heavy federal deficits. We have this budget bill. It's supposed to be taking shape very soon. And yet the bond market has kind of calmed down.

I mean, 10-year yield is pretty much right where it's been for two years or so, around four and a quarter. So are there risks to the outlook for fixed income or do you feel as if they can kind of act as a as ballast in a portfolio. Well the bond market has definitely settled since where we were at liberation day where the bond markets and treasuries were worried will the U.S. remain a safe haven for investors treasury yields were increasing the, beautiful bill also looked like it would add a few trillion to the deficit,

which was negative for the bond market. I think any of those factors coming back into play would be negative for the bond market. An area that we like is where fundamentals are very strong, and that's municipal bonds. What we like about that segment is the yields and returns right now for muni bonds are very high relative to history, and fundamentals are strong because of the

strength of the US economy states rainy day funds state savings rates are very high. You mentioned just the general AI technology theme as being kind of sort of a protector of the US equity market to a degree but also you favor financials why why is that the case at this point? They've had a pretty good run. Yeah, financials are an area that we're somewhat positive on for mid-size regional banks that have growth areas like in the Southeast.

As rate cuts come into play, that could be somewhat positive for financials, but generally other areas that we like, favor above financials are areas like infrastructure, which is a strong play on artificial intelligence. We're going to need to build more infrastructure in the US, upgrade our electrical grids, also build more data centers. I think infrastructure is going to be a strong

multi-year play within the US, based on its relationship to artificial intelligence. Sarah, thank you so much. Appreciate you running through all that with us. Thanks for having me. All right, well still ahead, HSBC's Max Kettner standing by to break down the final moments of the trading day.

Plus a rundown of what to watch when Nike reports in overtime. Cozy Bell, we'll be right back. We are now in the closing bell market zone. Taneya McKeel is looking at Circle as those shares resume its post IPO rally. Gabrielle Fonroux standing by with What to Watch from Nike when it reports in OT. Plus HSBC's Max Kettner is counting us down into the market close. Taneya, I guess a one day or two day break with Circle, but it's back to the upside.

Yeah, Mike, off its highs of the day, but it is climbing again after its first pullback earlier this week, which looks like natural profit taking amid perhaps overbought conditions. It's still hot off its monster IPO from the beginning of this month, up about 600% since then. So I'd expect continued volatility, especially as investors look for other ways to make money in crypto now that's more exciting than Bitcoin perhaps, but less risky maybe than other cryptocurrencies. What's interesting, Mike, is the rotation that we saw out of Circle and into Coinbase during that pullback. Coinbase jumped over the same three days that Circle fell and are still climbing today.

The two companies, of course, very close, have a significant revenue sharing agreement. So investors starting to see how Coinbase could benefit from stable coin opportunities. Coinbase as of now best performing stock in the S&P 500 for both the month and the week. Mike. Yeah, and on absolutely massive volume.

There are some days where half of its float has traded just in a single day. So obviously a lot of excitement there. Thank you very much, Taneya. Gabrielle, tough year for Nike, but the stock's been bouncing this week. Yeah, it's definitely been a tough year, and there might be more pain to come. Nike is expected to report earnings per share of 13 cents on revenue of 10.72 billion. Now, this is expected to be a double-digit drop

from the year ago period as Nike continues to work through its turnaround. But a key question from investors tonight will be, is this the low point of its turnaround or is the worst still to come? In March, Nike said its fiscal first quarter is expected to be the low point, but conditions have worsened since then. It's now facing a 30% tariff on goods imported from China up from 20%, and the consumer environment remains rocky. Investors will want to hear more about Nike's timeline to recovery, how its China business is doing, and color on how product launches are performing. Mike?

All right. We will be tuned into all that. Gabrielle, thank you very much. Let's bring in Max Kettner, HSBC's chief Multi-Asset Strategist to talk about this close, Max. You know, I sit here, the S&P 500 at 6142. It's a couple of points from the closing high from February 19th. Does it make sense that we're back here?

Yeah, I think it does, it absolutely does. Because when we look at the earnings picture, that actually does really still look resoundingly good. And when we look particularly at forward earnings, when we look at Q2 earnings expectation, it is actually bizarre to me that ConsenZ is looking for a quarter and quarter drop now in the Q2 reporting season relative to Q1. So when we look at that, ConsenZ is saying we're going to drop from around 63.5 dollars down to 62.5 dollars down in Q2. That creates a massively low bar to beat.

And even in tech, earnings are expected to just remain flat quarter and quarter. Let's remember that, particularly with the weaker dollar, you know, the magnificent 7 to 7 mega caps make around 60% of their revenues outside of the US. So that really, really should support particularly the tech earnings, particularly the mega cap earnings going into July and August. And that actually could lead us to even more

all-time highs, I think, going forward. So then if investors have the luxury of being mostly able to focus on the corporate fundamentals, you talked about the earnings growth, obviously corporate credit conditions are quite strong at this point. That would be great, I suppose, but I guess to what degree are you confident

that we've been able to set aside things like the tariff threat, which remains open-ended to some degree, and then of course, all of the other sort of policy flux out there? Yeah, look, I think we can take that from both the bearish and the bullish side. Unsurprisingly, I'll take that probably more from the bullish side.

And one of the bullish things around this is what we face right now is this classic textbook like wall of worry. You just mentioned tariffs, right? We've got the 9th of July deadline. We obviously also have the 12th of August, the US-China deadline. Perhaps in August and September,

what could keep investors quite cautious as well is any sort of possibility of a failed bond auction in treasuries. Then, of course, in the second half, the narrative goes that, in fact, maybe we'll see some reversal of front loading of activity, which keeps activity quite strong in Q2. So I would argue what we're seeing right now is very subdued positioning, very subdued sentiment, precisely because of all these elements in the wall of Fory that we need to climb.

What I haven't seen personally yet is that, you know, we're climbing by almost 25% from the lows, we're almost back to an all-time high in equities, and our positioning framework is still nowhere near sending a buy signal. And in fact, nowhere near signaling neutral, it is still sending a buy signal. And that really is positive.

Yeah, and there's no doubt that many professionals feel as if they need to chase this thing to get their exposures back up. How does the Fed fit into this framework? I mean, if you say things are great and markets are at a high, there's still a drum beat for saying that the Fed fit into this framework? I mean, if you say things are great and markets are at a high, there's still a drum beat for saying that the Fed is too late.

How does that fit in? Look, I think, you know, I would be worried about higher yields. There is a narrative, of course, that, you know, if growth is too strong, doesn't that hurt equities and credit spreads and valuations across the board? Because obviously it might keep the Fed a bit mahogany.

But let's remember, the outlook for the Fed for risk assets is pretty much binary. As long as they tell us, look in the next six to 12 months, the next move is going to be a rate cut. That's totally fine for risk assets. And that's very, very likely going to continue. They're not going to tell us are they going to stop now because of course inflation is on this generally pretty pretty supportive path downwards. And on the other side, when we look at yields, you know, I would be more concerned if the 10 year was, you know, well north of four and a half percent at the level that we've identified where it really starts hurting risk assets is still around 470, 475. So you could argue we're a good 40, 50 basis points away from that. So even if we were to get an upside surprise on tariffs, 475, so you could argue we're a good 40, 50 basis points away from that.

So even if we were to get an upside surprise on tariffs, on inflation, maybe even on activity in the next couple of months, it will take an awful lot of upside in yield until it really starts hurting risk assets. Until then, it's really game on for risk assets, for equities, for credit, for pretty much the whole risk assets mixture. Yeah, I mean, treasury yields down, oil down, dollar down, financial conditions looser. Pretty tough to pick apart the bull case in that environment.

Max, it's great to have you weigh in. I appreciate the time today. We are about 30 seconds from the close. And as of now, we are tracking for a new closing high on the S&P 500. It's very close. You see it there. 6144.19 or 15 is the old one. So it's going to approximate the old closing high. The intraday high was

6147. It is a broad rally as well. Some three quarters of all volume is in advancing stocks. You have things like banks fully participating up 1.7%. That does it for closing bell. Send it in to overtime with Morgan Brent.