Closing Bell - Closing Bell 7/14/23

Episode Date: July 14, 2023

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

Welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. This make or break hour begins with the summer rally showing some fatigue as investors take profits on strong early earnings reports and as bond yields bounce just a bit. Coming up, T. Rowe prices Sebastian Page. He calls himself a reluctant bear. He'll tell us what alternatives he sees to stocks right now. But we begin with our talk of the tape. Has the market's recent run to a 15-month high fully priced in the now popular soft landing story? Let's ask Cameron Dawson of New Edge Wealth. Cameron, great to see you here. Good to see you. So I guess coming into this year, the idea that we were going to have this perfect benign soft landing, you know, growth stays OK,

inflation comes down, the Fed's not too scary. It was a bit of a long shot. I think not that many were willing to bet on it. At this point, with the market up where it is, it seems as if after this week's CPI report, it almost seems like consensus. Where does that take us in terms of what the market has already priced in? Yeah, and I think one of the interesting things is that if we look into 23, the rest of the year, and 24, what you already are pricing into earnings is that soft landing. You have a growth of about eleven percent of earnings in twenty twenty four. So it's a question of what do you pay for that and is

there any further upside to those earnings. And that's where we look at markets trading at these very high valuations and now we see positioning which did start the year incredibly short incredibly light and underweight. Has now moved

about seventy five percent of the way back to kind of an overweight position. So that's what we'll watch to see what's the next leg higher for this market. How much more do you get people drawn in? There's no doubt about that. I mean, we've seen an ongoing kind of short squeeze running through parts of this market. The heavily shorted stocks have been have been soaring. And yes, the positioning numbers, the sentiment data, probably less of a tailwind, certainly, than it was. I just wonder if we can exist in that comfortable place for a while.

I mean, because the market, when it's in an uptrend, you know, when it seems like the economy is in a decent spot, it doesn't always punish optimism right away. Well, exactly that you what you see is that valuations can go high and stay high. Sentiment can go extended and stay extended and I think the real measure is going to be do earnings continue to surprise to the upside and deliver on that optimism for the second quarter we actually think that earnings estimates are too low if you look just at the revenue line the forecast is for revenues to be down about half a percent but you compare that to nominal GDP and remember revenues are a nominal number we're tracking that to nominal GDP, and remember, revenues are a

nominal number, we're tracking closer to 6%. So that's a pretty big gap on value on the estimates for even just the top line, which is why we think you could see more beats this quarter. So we have the formal consensus estimates, as you cite. You have what the market has already kind of priced to some degree in advance. And you have the actual investor expectations for how much companies are going to beat by. So we look for clues and earnings reactions. Right. So what do you see? It's early. We've only got a few of the banks and a handful of other companies. But so far, you've seen some selling into the good news. Yeah, it is disappointing with the banks given this setup,

because we know that so many of them were trading at depressed valuations, some below book value, which indicates that there was some distress priced in. Positioning was light. Expectations were low. They come out. They beat. They raise. They talk about some cautious optimism.

There's some mixed signals. And yet they give up all of that strength. It's not to say that they can't find their footing. But if this is an economy that's much better than expected, growth holding up better than expected, we really would like the banks to participate in that as a sign of health for the underlying market. Right. I mean, you like to see it as a market signal, but also the valuations don't make a tremendous amount of sense for banks if the rest of the market is somewhat correct about the economy. Exactly. And then if we look at broader sectors, other sectors should be showing more positivity

if this is a stronger economy. Think of things like energy, which has been in the doldrums because oil prices have been weak, somewhat pricing in the risk of recession. If you look at materials, that has been weak because of weak manufacturing. If you start seeing those things start to turn around, you should see that broader participation kind of in what you would call those cyclical value parts of the market. Well, so we have seen in general more stocks participate, right? So since Memorial Day, let's say, S&P is up like 8 percent. The average stock or the equal weighted version of the S&P has outperformed over that span. So essentially, June and month to date, it's been better. Now, the big stuff has still

worked. Right. That's the other interesting part. It hasn't been a zero sum game, but I guess has it been enough to really get traction in terms of the strength of the tape and proof that demand is going to be strong for stocks on an ongoing basis. It is an important point that strength in other places has not yet come at the expense of the prior leadership. Now, we have seen this big divergence in flows where you've had huge flows into tech and very big outflows, kind of capitulation and things like energy. Does that start to close because you're at those positioning extremes? And then it's a question of can the cheaper valuation in the equal weight index or the value index be enough for those parts of the market to work better?

The trends in those areas from a technical perspective still remain somewhat weak. But if we look out over the next two years, we'd rather buy things trading kind of below their long run average valuations instead of things like growth in tech names, which are now all the way back up to their prior run average valuations instead of things like growth in tech names, which are now all the way back up to their prior peaks and valuations. Right. Yeah. As the Nasdaq 100, I think it's like five or six percent even in price below below its peak.

If the market at some point, you know, needs a breather and goes in search of something to worry about, which sometimes does happen at these stages. What do you think is more likely to be that gut check? Is it going to be faltering growth and we have another recession scare? Is it going to be, you know, yields have some upside because inflation is sticky and we have to reprice the Fed again? How would you see it? I think both of those are very much wild cards. And when we think about the inflation side of things, we do see it continuing to moderate. But we have to remember, this will be a market that will remain hypersensitive to incoming inflation data just because of the past experience that we've had and that the Fed is going to be hypersensitive to it. So if you have a couple

months of a re-acceleration of inflation that could be enough to shake the market just given the fact that you are trading at such high valuations, doesn't necessarily have to completely throw the rally off of its course, but could be a cause for pause. Sure. No, it does make a lot of sense. There's no all clear as nobody's trying to call on at this point. Let's bring in Malcolm Etheridge from CIC Wealth. Malcolm, way in here in terms of where you figure the market has gotten to at this point, how does it change the risk reward if it does at all for you? Yeah I actually think Cameron was making an interesting point about the

banks and the fact that even though the the earnings season was not set up for them to do particularly well and for them to give us positive guidance going forward they still did they outperformed yet their shares don't necessarily

reflect that at least so far the earnings that we've gotten from banks and I'm curious if that's going least so far, the earnings that we've gotten from banks. And I'm curious if that's going to be indicative of the rest of Q2 earnings season, where there's a number of companies who beat because earnings estimates had been guided down, right? We had all started to believe that things should be cooling off a little bit. And then they give us good guidance, yet the market doesn't care because sentiment has shifted so much and because everyone is so focused on the additional rate hikes and the impending recession, it feels like is on the back at force. I'm wondering if we're not going to start to see some of these companies give us really good earnings and give us really good guidance in the market.

Still say so what I think in aggregate, we're probably about to get our last upbeat earnings for this year. There will certainly be some outliers, right? There's no telling how much longer the Magnificent Seven will be able to ride the AI wave into the stratosphere. But at the margins, I expect for companies to struggle to pass on a cost to consumers the way they've been allowed to the last couple of years. And I'm wondering if that doesn't show up in sentiment

that goes against the earnings numbers that we're getting from some of the companies that still have something good to say about Q2 and their guidance for Q3. I can see that that kind of mixed reception, maybe a bit of a sell on the news makes sense as a concern on a tactical basis as we get through earnings season. But I think bigger picture, couldn't you have the case made that earnings are troughing in terms of year over year percent change? That's what the consensus says. This is going to be the worst of it right now. It should pick up from here, of course, based on the forecast that alongside the idea that the Fed's inflation fight seems like it's kind of tapering

off. Who knows where it goes from here? But at least right now, the market's comfortable with the direction it's heading. And economic surprises keep, you know, working to the upside. I think that's fair. The thing that continues to bother me, though, when I think about the macro picture and the market trends right now is the yield curve. Like I'm sure you're well aware, we've now been inverted with the twos above the tens for 12 consecutive months now. And the note that I saw from Strategas a little bit ago pointing out that a similar thing happened in 1979 and 2007. You know, those two periods are the largest S&P rallies that also coincided with an inverted yield curve.

And so I think sentiment is starting to go in the direction of, yeah, but. Right. So we've seen earnings start to look good. We've seen all of the different peak to trough markers that we need to see the signal to us that we've hit the bottom. We're on our way out of it. Recession may not have to happen. We can actually hit this off landing. We just got a positive inflation number, even though core didn't necessarily come in where we wanted it. And I think the markets very well could respond with a yeah, but. And that's the part that I want to make sure that we're at least considering as an option here where we're talking about positive earnings trends and the fact that this could just be the

last good earnings season for 2023 in total, even though, again, we'll see some outliers in some industries that we just don't necessarily expect from right here. For sure. I mean, I guess, Cameron, the other thing that we haven't really addressed is, aside from the aggregate earnings picture and how it relates to where the economy is, just the rush of enthusiasm around AI and whether that's directly getting into the consensus estimates for certain companies or whether it's just this halo effect or just an excuse, frankly, to pay up for the same most popular big stocks out there. Is there a way to handicap it in your view? Well, the first answer to that has to be an acknowledgement that the street is always lagging

when it comes to pricing things in and usually things that are a big step change function higher or different. Just look at NVIDIA, which had its estimates for 2024 raised by 50% in response to the last earnings. But we looked at Microsoft and it's interesting because you could think that Microsoft is the one company where you could most accurately estimate in the near term the impact from AI. Those estimates for 23, 24, and 25 have each only gone up by about 3%. So we know that there will likely be more. We can't handicap it quite yet, but that still seems like a very low number. That's interesting in the sense that the sell side isn't comfortable putting a number on it or an aggressive number on it. On the other hand, you could say, look, it's $2.5 trillion market cap. It's 30-ish times earnings.

Maybe the market in general is saying, we don't know how much it's going to be, but we still think it's already paying up for whatever they're going to print here. And there is that dynamic of price it into the multiple and then see how it works through the earnings. We've seen that multiple times, even with something like tax reform. When we got the big tax cuts in 2018, everybody price it into the multiple because you weren't quite sure how it impact the earnings yet of course this is perpetual it be a stream of growth that we would get but I think that's why you've seen this re-rating in names and not necessarily a big upside to those earnings numbers.

Yeah and Malcolm you know if you feel as if maybe we're going to have a tougher road in terms of the earnings path and and and valuations make things more challenging, are there neglected parts of the market that you feel as if you're being invited to look at right now? Or is it about rotating out of equities in general? Well, interestingly enough, back to the point you guys were just making, I think the one place that I see could be a catalyst, there could be a catalyst, if you will, is tech. And interestingly, because we've been talking so much about how tech has been overbought possibly, and we're seeing a lot of money flowing into tech

that doesn't necessarily make sense because the AI story has already been told and should have been priced in already. The thing I'm thinking about, though, with tech is the number of institutional managers who were underweight tech coming into 2023. They sold off a lot of what they held in 2022, trying to rotate into whatever they thought was going to be the next sector to take us higher and higher. And they missed the first half of this year. And so I think where we could potentially see a sell-off coming out of Q2 earnings season, that means the tech has to get whacked as just a part of it because it's been the leader in both directions so far. I think what we'll see is a

lot of institutional managers trying to make up for lost time, buying up any potential weakness in tech near term. And that could be something that serves as a shorter term catalyst that helps to flatten the markets a little bit and make us not necessarily see that there is, in fact, the sell off happening until later on into the year without those dollars were kind of buoying what ultimately became a little bit softer market. You know, it's interesting, Cameron, there is this idea I know over the years, like Stan Drucker Miller and others have talked about this. You can be kind of focused on the risks, feeling like there's some systemic issues to worry about. The average stock doesn't look interesting.

Valuations aren't compelling. But disruptive tech, there is always something happening. And so you kind of, you know, in the old days, own Amazon against, you know, being short the world was actually a barbell trade in a way. And I think when you add on top of that Malcolm's dynamic about being short tech and to begin the year is that valuations don't really matter when everybody is underweight, because when everybody is underweight, you have this rush and chase to get in and you're not necessarily caring what price that you're paying. It's really at the point when people have gotten very extended in positioning and they're having to make that decision. Do I add more or not to go much more overweight? That's when valuations start to matter. Yeah. And it's

true that very few active managers, Malcolm, would own a seven and a half percent position in Apple, which is what it would be to match up with the S&P 500 or own 27 percent of the portfolio in six or seven stocks, which is what the S&P is right now. So definitely worth keeping in mind as we look at the mechanical impact here. Thanks to you both. Appreciate it, Malcolm and Cameron. Let's now get to our Twitter question of the day. Has the market peaked for the summer? Just need a yes or no answer on that one.

Head to at CNBC closing bell on Twitter to vote. We'll share the results later in the hour. Let's now get a check on some top stocks to watch as we head into the close. Christina Parks-Neviles here with those. Hi, Christina. Well, AT&T is under scrutiny after JP Morgan downgraded the stock to neutral, slashing its price target by five bucks to $17 a share. There's two reasons, increased competition from Verizon and T-Mobile, and the second reason, toxic lead. A Wall Street Journal investigation revealed that U.S. phone companies, including AT&T, have left behind more than

2,000 old unsafe lead phone cables found under poles, waterways, and in the soil, which will be very costly to remove. Other telecom names like Verizon Frontier, Lumen that you're seeing on your screen right now, Lumen down almost 10 percent, Frontier Communications down over 11 percent on this news. Switching gears, Western, or Chipmaker, I should say, Western Digital Shares actually popped mid-afternoon on news that it plans to complete its merger with Japan's Kioxia by next month. The weak memory chip market putting pressure on both of these names to join forces, but now you can see it's pretty much flat.

Mike. All right, Christina, thanks so much. Talk to you in a bit. Banks, a big underperformer today, despite better than expected results from JPMorgan Citi and Wells Fargo. Up next, we'll discuss what that could mean for next week's barrage of bank results. You're watching Closing Bell on CNBC. Bank stocks pulling back from morning highs following strong second quarter earnings results from J.P. Morgan, Wells Fargo and Citi. My next guest says with U.S. banking deposits under pressure, she's keeping her eye on next week's results from regional and community banks. Let's bring in Moody's Anna Arsav to talk about this group. Anna, it's great to have you. Have you gotten any clues from the reports

we've gotten so far about the sensitivity of large banks at this point to higher yields, pressure on deposit costs or any other big picture themes that you think are worth watching? Thank you for having me. Well, first and foremost, what we learned today is that the large banks remain strong from a capital liquidity perspective. There is a mixed story depending on which banks we're going to talk about. J.P. Morgan certainly being the leader, it outperformed. And it's the only one from the three that reported today actually that's trading up consequently today. And there is a reason for it. I mean, J.P. Morgan closed, you know, it's basically bought a bank that was in distress and is benefiting already from that. Its deposits

actually were up, only a bank that had deposits up relative to the other large peers that reported today. And even that's without the First Republic acquisition. So J.P. Morgan outperformed across all businesses. When we take now to Wells, definitely doing well, but regulatory costs still remain elevated. And there is a commercial real estate story that's developing and keep developing for Wells with greater exposure than particularly in office and particularly in California relative to the other large banks. And then Citi, I'm happy to talk more about it, but underperformed relative to particularly these two banks. High regulatory cost, different business mix, does not have the strong U.S. retail business as well as JP Morgan.

So definitely disappointed probably investors. Yeah, I mean, certainly. And the market has been essentially telling a similar story there. Of course, if you look at the way that the city is valued versus JP Morgan and the others, it seems like a familiar theme. I do wonder, though, if things like slightly higher credit reserves and things like that, is there anything that you would, I guess, be alarmed about? Or is this just kind of where we are in the cycle? Well, a couple of things we're watching. Number one, just to retrain the commercial real estate exposures. To give you a sense, we've been

writing a lot about this topic. Half of the $6 trillion exposure in the U.S. is on U.S. banks' balance sheets. And roughly a quarter, basically, of all the loans in U.S. banks are commercial real estate loans. So, of course, we have to be concerned about where this asset class is trending, particularly from an office perspective. But we have to kind of think about what does it mean, you know, small banks versus large banks. The bulk of this exposure and where it's a concentration is actually the banks that are sub $250 billion. We wrote research that for banks that are sub $250 billion in size, commercial real estate is greater than two times of their capital versus for the large banks who are bigger than $250 billion, that is only 50%. So yes, commercial real estate is a story, definitely for the banking sector,

but not necessarily for these banks, maybe more so for Wells Fargo. And Wells Fargo did provide significantly more disclosure this time around, particularly relative to regional exposures, et cetera, and increased its provision again. So the CRE is starting to show cracks, particularly in office. And this is going to be much more of a theme for the smaller banks that are starting to report next week. And as we look toward those reports next week, just to hop in on some of the smaller banks, how are we thinking about what the perhaps additional regulatory burden is going to be? What is it going to mean for those franchises? It seems as if there's been some relief that we didn't see, you know, further stress after SVB.

And now the question is, can we really relax? Look, we have a negative outlook on the U.S. banking sector. And this is primarily related to this bifurcation of regulation. I talked about this to you in an interview a few months ago, that the large banks had a much more stringent regulatory standards than the smaller banks. So what Vice Chairman Barr this week announced is what is called holistic review of capital. His view is that capital needs to go up in the system. There's speculation of how much that may be.

We have to see, of course, the final rules. But it's really going to affect banks that are greater than $100 billion in size. There's a lot on the table. Maybe I can kind of signify a couple of things here. First and foremost, the trouble that, if you will, banks like Silicon Valley Bank got in because of their unrealized losses in the available for sale securities, that now, and it wasn't reflected in capital, what Chairman Barr is proposing that that will be something that will be corrected and banks that are greater than $100 billion size will have the same rules as those that are above $700 billion. Additional item that's obviously very important on the back of the banking crisis in March

is how these banks will be resolved. Currently, only the globally systemically important banks are subject to something called TILAC, which is really a loss-absorbing capital that every bank has to have to be used for resolution to affect more effective and cheaper resolution for the FDIC. So now Chairman Farr is proposing

that these banks above $100 billion will also be subject to that TILAC rules. And then there's more discussion around using a standardized approach of modeling the risks and really with that closing some potential gaps. So all of this will be higher regulatory costs. And the large banks will handle it. I mean, there will be tweaks in their business models, of course, and there will be costs to the customer. But for the smaller banks, this is definitely higher expense. Yeah, a lot still to sort out. That is clear. Ana, I'm sure we'll talk to you about it

more. Thank you very much. The S&P 500 is now up more than 17 percent so far this year. But T. Rowe prices Sebastian Page remains a reluctant bear. Up next, why he says now is not the time to be a hero in this market. Welcome back to Closing Bell. The S&P 500 is trying to close out its best week since March, following two better than expected inflation reports. But my next guest is reluctantly staying in the bearish camp and says that cash remains a viable alternative to stocks. Joining me now, Sebastian Page of T. Rowe Price. Sebastian, it's good to have you back. What's keeping you from gaining more comfort in what other investors seem to be embracing about this macro outlook?

Well, you know, Mike, I think you ought to be invested in this market. It's just that it's not the time to be a hero and overweight stocks by a large amount. So that's why I talk about being cautious and having a cash buffer in the context of a diversified invested portfolio. So what's keeping me cautious? At least three big factors. The macro. The macro, you see the leading indicators have dropped by 8%. We've never had that outside of a recession. Sentiment, sentiment is actually running really high right now. The VIX, if you call it the fear index, is at the bottom of its range, 14. The surveys of retail investors have spiked to the very, very bullish top of the range. And that's usually a contrarian indicator. So sentiment is there. And then, you know,

lastly, you have to be aware of valuations. The equity risk premium is the most compressed it's been over the last 10 years. Look, the earnings yield on the S&P 500 is about 5% right now. If I take a forward P of 19, well, that's what you get on cash. Like the spread is almost zero on those two yields. And historically, it was about 4%. So if you think about it, you line up the macro, you line up the sentiment, you line up the valuations. You got to be cautious, but you got to be invested too, because there's a lot of cash in the system. And, you know, we're normalizing from very high levels of growth. So there's nuance in asset allocation positioning right now. Yeah, for sure. And, you know, I know that it does look as if there's not much of a valuation cushion, if any, between equities

and fixed income and cash. Although if you look back to before the year 2000, it was pretty routine for things to trade this way. So I guess it's to some degree a call on what kind of regime we might be in. Although within equities, you say there's things to do or maybe to position toward and away from. What would those be that you would favor? Yeah, look, first, it's interesting you mentioned the tech bubble, because that was the last time we had this compressed equity risk premium, and it was around the top of the tech bubble. So that might be a reason for reassurance that it's happened before, but I'd say it's a reason to worry because it's happened at the time where, indeed, stocks were quite highly valued. I think you've got to be careful making these analogies. We're not in the tech bubble, just to be clear. So what do we like in stocks? There are relative valuation opportunities,

even risk on opportunities, Mike, like small caps. Small caps are trading at 14 price earnings ratio. This is kind of like close to where they were trading in 2008. So if you just look at quality small caps, exclusive non-earners, look at S&P 600, look to get exposure through skilled active management. You know, you're looking at really an asset class that's pricing in a very, very, very hard landing. So if you get anything else other than that, you're in a good position. We look sort of 12 months ahead. So that's one position. We also like high yield. Think about, yes, spreads are fairly compressed, but it's now a pretty higher quality asset class than it's

been historically. It's got 9% yield. Go back to my comment earlier, 5% yield on stocks at 9% yield on equities. Just thinking valuation, it looks pretty attractive. Our analysts, they look at the default rates across the index. They're forecasting about 3% default rates for the next three months. That's passively for the index. You can do better actively. So that's a good risk return trade-off to add a little bit of risk. So Mike, this is how we're positioned, right? We're leaning back. We're invested. We're leaning back though on equities a little bit. We keep a cash buffer. But then under the hood, we take advantage of some relative valuation opportunities that could play out in our favor over the next 12 months. Yeah, I mean, that high yield story is interesting.

Eight, nine percent yields. And yet, if it's going to work and defaults are going to stay as low as your analyst thinks, it's hard to see the overall economy having a super tough time in that scenario. Correct? No, I think that's correct. it's hard to see the overall economy having a super tough time in that scenario, correct? No, I think that's correct. And, you know, those defaults forecasted at 3 percent. It's actually slightly higher than where we're running right now, but it's not a deep recession. I don't think we're getting a deep recession. We have still $500 billion in excess household savings.

And this is after adjusting for the additional debt that households have taken, and it's after adjusting for inflation. So the consumer remains strong. And, Mike, there are some trends that are turning here. Construction, non-residential construction is actually pretty good right now, and it's turning. The housing market, somewhat unexpectedly. Look at the Shiller Index, positive last couple months. So I don't think we're heading into a very hard landing.

It's just this environment where, look, we had 10% nominal growth in 2021, 9% nominal growth in 2022. And we're sort of normalizing that. So I think, look, neutral is not a bad place to be right now. No, no, possibly not. It seems like there's plenty else to do outside of stock. Sebastian, thanks very much. Good to speak with you. Thank you, Mike. All right. Up next, we're tracking the biggest movers as we hit another close. Christina, standing by with those. Thanks, Mike. Well, another obesity drug worth roughly maybe $2 billion could be in the pipeline for treatment, and it's sending shares of one name higher.

Can you guess which one? I'll explain next. Just about 20 minutes till the closing bell. The S&P 500 hovering above that 4,500 level, sitting on very modest losses. Let's get back to Christina Parts-Nevelis for a look at the key stocks to watch. Christina? I hope somebody guessed while they were watching at home. Eli Lilly was the name, boosting its weight loss treatment portfolio. The pharmaceutical giant said today it will acquire Versanis, a privately held obesity drug maker, for almost $2 billion.

The deal marks its latest attempt to capitalize on the weight loss industry gold rush. Eli Lilly's stock price rose roughly 3.5% following the announcement, as you can see where it is right now. Sticking with bio and healthcare and all that, Moderna shares down about 4% after HBC cut its price target for the company, citing longer-term risks for its mRNA vaccine technology, and question Moderna's profitability since it's been spending so much money on R&D in the near term. Happy Friday, Mike. Oh, you as well, Christina. Have a good weekend. You too. Speaking of some big pops, Kathy Wood's ARK Innovation Fund having its best week since January.

Georgia Bosa is here with the details. Heidi. Hey, Mike. After those big losses in 2021 and 2022, that flagship ARK ETF, it is rebounding this year. It's up 60 percent year to date, 10 percent in the last month alone. Momentum on its side. Also, inflation readings are cooling. That is helping the unprofitable names look less bad. The two top holdings as well have had major runs this year. That would be Tesla and Coinbase. Both of those have doubled this year. At the same time, though, she missed Nvidia selling her position in the flagship fund earlier this year. But, Mike, this is interesting.

Despite the rebound, ARK has actually seen outflows this year. And if that lasts until the end of 2023, it would be the first ever yearly outflow going back to its inception back in 2014. So we will ask her about that and lots more when she comes on CNBC to chat with me tonight at 6 p.m. Eastern, 3 p.m. Pacific for our Tech Check special. Lots to get to there, Mike. Absolutely. And so much work to do, really, to pull apart what's going on in the market when her funds do very well or not very well.

I recently looked at the ARK Innovation Fund year to date. It looks exactly like the meme stock ETF. So you mentioned unprofitable tech, heavily shorted stocks, kind of these busted names from the 2020-21 boom time have now settled out. So I'd be interested to hear if she's rethought the process, if it's the same types of companies she still finds attractive. Absolutely. You know, we look at year to date and the numbers are impressive. But if you go back, say, five years, that's sort of that classic pandemic mountain still hasn't even come close to those points. But those unprofitable names like she's been picking up Palantir as well this year, they have really rebounded hard. But even, you know, a 200 percent pop this year for a name like Coinbase doesn't bring it close to sort of those peak levels.

So it's interesting to know if she's going to stick with them or this is a recovery. We'll see. Yeah, absolutely. Be watching. Digibose, thanks so much. All right. Last chance now to weigh in on our Twitter question. We asked, has the market peaked for the summer?

Head to at CNBC closing bell on Twitter. We'll bring you the results after this break. Let's get the results of our Twitter question. We asked, has the market peaked for the summer? Decent majority saying no, that there should be further upside, I guess, going through Labor Day. Up next, Jessica Inskip of Options Play on whether earnings season will shift the recent market rally into high gear.

That story, plus a strong week for online retail and healthy returns for UnitedHealth when we take you inside the Market Zone. We are now in the closing bell Market Zone. Options Plays, Jessica Inskip is here to break down these crucial moments of the trading day. Plus, Courtney Reagan looks at a big week for online retail. And Malcolm Etheridge of CIC Wealth is back to react to United Health's big earnings beat. Welcome to you all. Jessica, markets sort of running hot coming into earnings season to a degree. Sometimes earnings season is a boost.

Sometimes it just kind of muddies the waters a little bit. You have a lot of back and forth action. What does your work tell you to expect here? Yeah, if we take a look at the beginning of every earning season as we'd entered it for the last four quarters, you'll notice that that has been the fuel for bear market rallies. And then we only meet resistance when we have a more restrictive Fed. So going back to Q1, once we were met with better than anticipated earnings, that's a narrative we are consistently hearing. But coupling that with a more dovish Fed, less restrictive, we're seeing the light at the end of the tunnel. That's what put us into the bull market. So Powell took his

foot off the gas, turned on cruise control, but I still want to exercise caution and know that there could be turbulence ahead because data and a restrictive Fed is what really, really test that momentum. And additionally, I've got another chart for you from a technical view, 1326.40 and 52 weekly moving average, adding another two weeks for the 50. Not too much of a difference. But that represents one, two, three, and four quarters worth of data. So we want to see that line to continuously slope upwards, as well as the major indices above that. That tells me that prices are increasing on a quarterly basis. And that hasn't happened since really the downturn. So that's a positive sign, a good base. But we're

on cruise control. Turbulence is important to be aware of. Yeah, the chart there marking the start of earnings season does show what is sort of familiar if you follow them, followed along, which is the catalyst you might get to the upside from the start of earnings often is kind of retraced. Right. So you have a kind of almost two phases to an earnings season where people get their expectations leaning one way and then the market kind of moves and it unwinds a little bit after the fact. Yeah, absolutely. I completely agree. And I think it's important to look at the headwinds that are there as well. We're entering an efficiency era. It's's driven by tech but it's also being recognized by all we heard that

from Pepsi earnings they're implementing automation and driving efficiencies and I want to see that in here that continuously. With on earnings calls I want to see profit margins expanding due to efficiencies because that head

wind in turbulence is absolutely. A tight labor market which could lead to a more restrictive fed which will give us those downturns and. Maybe the turbulence that we is absolutely a tight labor market, which could lead to a more restrictive Fed, which will give us those downturns and maybe the turbulence that we need to overcome to keep this momentum. Yeah, no doubt. A ton of focus on margins will be there. Just to be clear, as we wrap up, so you're still considering this kind of a bear market and whatever upside we've seen

is a bear market rally, or have we broken above it? Broken above it. Technically, we're in bull market. This is a bull market. Yes, that's right. But we did get the bear market rallies in earnings season. Jessica, thanks so much. Good to see you. Great. All right. Let's get to Courtney on online retails. Big week so far. Courtney, what's been moving? Yeah, you know, Mike, a lot going on. Of course, it was Amazon's Prime Day event. But really, that wasn't all that was happening. The higher income shopper is buying Burberry, but overseas because Burberry is reporting comparable sales in total grew 18 percent in the quarter. But China sales up 46 percent. And the company says U.S. and Middle East tourists were spending in Europe, lifting sales there. But sales here in the Americas falling 8 percent for the quarter. Meantime, the I buy ETF, it's made up of global companies

with at least 70% of revenues coming from e-commerce. It's having its best week since January at more than 8%. Compared to the broader XRT retail ETF, that's up, but just about 2.5% for the week. And Mike, only three names in the iBuy ETF are negative for the week, and all of them are international online players. This week's top performers in that iBuy ETF, Carvana, Affirm, Zalando. Short interest, of course, very high for Carvana. That's probably playing a big part there.

Buy Now, Pay Later, Affirm, though, up 22 percent on the week. It is a payment option on Amazon, and Adobe says that overall, Buy Now, Pay Later usage during the 48 hours of Prime Day grew 20 percent across U.S. online retail compared to last year. So possibly a reason that Affirm is getting a boost. I guess we could attribute some of that to Amazon Prime, but so much more going on in the world of retail than just that this week. Yeah, for sure. And there's definitely important to point out that these were, you know, stocks that had a hard run the last couple of years, had been heavily shorted. And so maybe they were sort of spring loaded here as the market as a whole reached for some of the riskier stuff. I know you say it and certainly it looks like it's well beyond Amazon Prime. I think there's always a little bit of a debate that goes on in terms of just how much the retail side of Amazon is driving the stock and driving the story at this point.

Can we stay one way or the other after this Prime Day? Yeah, that's such an interesting point. And I will say we sort of crunched the data to see what happens with the stock move for Amazon during this Prime Day event, which, of course, has sort of changed in its duration over the years. But if you take it all together, during Amazon's Prime Day sales event, Amazon stock is up only an average of 0.4 percent, though this week much stronger. It was up much more than what we see for average. But generally, you're right.

It's the AWS part of the business that people really care about when you're looking at Amazon as an investable asset. Of course, that is where all the profit is coming from. All of this, Cordy, happening in the context of probably what I would call mixed signals about the overall, I guess, run rate of retail spending, of consumer spending. People were pointing to a week, you know, Red Book report, which, you know, you can take or leave that. But also the Bank of America credit card numbers, you know, they're kind of steady, but they're not showing necessarily an aggressive spending pattern so far this month. Yeah, I think consumers are kind of doing what a lot of investors are, right? It's things are OK right now, but there is worry about what's to come. We just never know what's to come. But of course, right now, there's all this confluence of factors

that are possibly sort of impeding on individual personal finances and spending goals. And so I think there's a lot of mixed messaging that consumers are trying to figure out here. And so I think it's sort of steady as she goes, but with a warning message, sort of a flashing yellow light going into the very important back half of the year for consumer spending. Yeah, and I know you were focused on back to school as well. That's around the corner. Courtney, thanks so much. Thanks, Mike.

Talk to you soon. Malcolm, UNH, a stock you own up 7.5% or so on a pretty well-received earnings report this morning. Now, it had been a pretty weak performer. What are you seeing in the numbers? Yeah, Mike, I initially bought shares of UNH last month as a trade on that pullback where investors got skittish over United CFO's comments about rising costs in its Medicare Advantage business. And I thought that those fears were likely overblown. And I thought that given their scale and diversified services portfolio, UNH would certainly figure out how to pass those extended costs, increased costs onto their

insurers rather than absorbing the majority of those costs themselves. And based on what they reported this morning, I'd say that expectation was correct. As a matter of fact, they reported a 6.2 percent operating margin for the last quarter, which is the exact same as it was a year ago. So I think this is definitely a name that's turning the corner. They're at least getting past those fears that kind of spook the entire health insurer market as a whole. So we can probably expect that the majority, if notooked the entire health insurer market as a whole. So we can probably expect that the majority, if not all of those health insurers who all sold off in aggregate along with UNH are probably on the mend and going to see a rebound going into next week.

Yeah, it's a good point. I mean, Cigna, for example, is up four and a half percent today on this number. You say you're thinking about holding UNH a little bit longer. Does it mean it doesn't qualify as a longer term holding, that you're not confident in the overall long term story? I don't necessarily want to own health care long term. I think that, you know, they'll definitely continue to pass along increased costs, like I said, to their consumers in the form of higher premiums. But I do think that it'll catch up with them eventually. I think that, you know, they reported weakness in that medical loss ratio, which was up about 2% year over year. That's the number that really matters for them. And I assume that's what caused them to become

a little bit cautious in the first place. I think that's going to be overshadowed the remainder of this year by share repurchases, which will give them some time to get it sorted. So even though I expected to sell today following positive numbers for Q2, I'll end up sticking with this name a little longer and hang on to it. I like the increased guidance for the remainder of 2023, them lifting expectations by 20 cents for the full year in the face of those rising costs. But I'm not necessarily so sure that I'm keen on health care over the next two years plus, and this being a name that I want to hold on to all the way through that period.

I'm not as confident in this as I am maybe in tech. Just real quick, is there anything in particular keeping you wary on health care as a whole? Well, as I continue to read more and more of what came out from UnitedHealth, they started talking about places where they see those increased costs coming that they didn't necessarily anticipate. Right. So the increased costs coming that they didn't necessarily anticipate. Right. So the increased costs coming from seniors having more and more elective procedures was kind of obvious. But the increased costs related to things like mental health care, a number of folks seeking out additional mental health services was something they didn't necessarily see until recently.

And I think that trend can be negative for earnings. Yeah. Malcolm, thanks very much. Have a great weekend. As we head into the close, worth mentioning, UnitedHealth, its gain is good for 200 upside points in the Dow because it is a price-weighted index. It is in the Dow. So without UNH's gain today, the Dow would have been down about 100. You see the S&P 500 sitting on a slim decline of 0.2 percent on the day, still up more than 2% for the week, sitting on that 4,500 level, still very close to a 15-month high. Russell 2000 and the Nasdaq, both strong for the week, but both the Russell downside leadership today as we go out for the week with Zix below 14. That's going to do it for Closing Bell.