Closing Bell - Closing Bell 7/17/23

Episode Date: July 17, 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.

Kelly thanks so much welcome to closing bell I'm Scott Wapner this make or break hour begins with the rally and whether earnings which really get going this week will confirm or cancel it we'll ask so far as Liz Young in just a moment first your scorecard with 60 minutes to go now in regulation the Dow trying for six up days in a row with today's gains were right off the highs of the day we're still good for 80 80 points that is and that's about of a percent. Nice day for JP Morgan. Financials leading the way ahead of more bank earnings tomorrow. Tech is strong as well. Both Netflix and Tesla are higher. They get set to report midweek. Apple shares also getting a lift. And by the way, we're going to talk about that stock with Morgan Stanley's Eric Woodring. He just put out a new note on it today. We'll catch up with him in just a bit. Finally, interest rates, they're mostly lower. And that, you have to believe, is keeping the pressure off of stocks a bit as well. It takes us to our talk of the tape, a question many investors are grappling with right now. Is it time to be sold on this bull market or still skeptical of it?

Liz Young is SoFi's head of investment strategy here with me with the answer at Post 9. What are you? Are you sold on it yet or are you still skeptical of it? I've been skeptical the whole way up. People have been angry with me for it. Yeah, well, I haven't changed my mind yet. I mean, I certainly haven't changed it now in the sense of we've run up really, really far and we've got valuations at extended levels by any measure. You can look at it over a historical measure. You can look at it currently. It just it looks very extended, particularly in tech in those growthy areas. However, Tom Lee made the call last week. We still had more room to run. He was right. I think we still can keep going until there's a reason not to. I do think there's going to be a reason not to. Obviously, next week is a big week with the Fed. Could be their last hike. I'm still not entirely sold that they're going to hike,

but we've now entered a period where we're either done with hikes, we've got this new era of monetary policy where we're high in hold, and stocks have to be able to grapple with that. So I think the idea of whether the Fed's going to hike in July, most people think that that's a foregone conclusion, including Marko Kalanovic, the guy we follow over at J.P. Morgan, global markets. He just put out a note a few moments ago. While we still see the Fed hiking at the July meeting, the downside CPI surprise, he says, means a narrow path to a soft landing is modestly wider. Now, he goes on to talk about stocks. We disagree. Continue to think a recession is the most likely scenario in terms of the view that some would suggest we're in the middle innings rather than the end of the cycle. He says further, they have a defensive

stance on risk assets such as equities and credit. So he's not willing to be sold, I guess, to our question on the rally itself, but does admit there maybe is a wider path to a soft landing. If there is, does that make you more optimistic about where we could go? Well, optimistic in the sense that it doesn't have to be some kind of terrible, catastrophic recession, but it does have to be something, in my view, that resets the business cycle. And I do think that we are pretty decidedly late cycle. And the way that inflation has come down, the fact that we are probably ending a hiking cycle, most of the indicators would tell you that we're late cycle.

And even some of the stock market behavior with large caps leading would tell you that we're late cycle. So in order to come out of that, you usually do need some type of a contraction. Now, the degree of the contraction, I don't know what that has to be. Maybe it doesn't have to be that big, prolonged or deep. I also think the tricky part for investors is that I don't say this stuff to paint with a broad brush and say that every single index has to go down with the same veracity and speed, it could be that the NASDAQ already bottomed and maybe the S&P and Dow are going to go down more this next time. But I do think that a pullback is in order.

Why do we have to be late cycle? Why is that? Why is that the case? Well, I think the indicators, when you look at just thinking about what late cycle is, right, you have early expansion, the economy is heating up. And then usually what happens is you get to mid-expansion, which is kind of the sweet spot. If we could just live in mid-cycle, it'd be great. Late cycle is usually that the economy has overheated. That causes inflation. So demand has outstripped supply. In this case, part of it was a supply problem. But in any event,

demand outstrips supply. You overheat as an economy. The Fed has to come in and try to cool it down and get it back down to a speed that's comfortable. Yeah, but what if we're in a sweet spot, though? What if we're in terms of where the economy is, where the labor market is, where inflation now is, and that the reads on what historically would suggest you would be right are being misread because of where we were from the beginning. Some of it's like the economy was super overheated to get inflation to where it was. We had supply shocks.

We you can certainly there are people who will make the argument that we overstimulated an already pretty good economy, et cetera. But on the backside of a pandemic, maybe we're just looking at things the wrong way. If we don't use the word overheated, it was pretty imbalanced, right? And it caused the effect of inflation becoming an issue. The indicators that I'm talking about, it's not necessarily a matter of reading them the wrong way. Just mathematically, that's what they're saying, right? Things like yield curve inversions, manufacturing PMI and contraction for a long time, leading economic indicators, which includes the S&P 500 as a component, leading economic indicators over a six-month period down 8.4%.

It's never gotten worse than 3% without a recession to follow. And the fact that we are probably ending a hiking cycle, that's pretty late cycle behavior as well. So I don't think we're in a sweet spot. You wouldn't have those sort of negative leading indicators and even some of the concurrent indicators if we were in a sweet spot. So the idea that the bears are too focused on the past, how would you argue against that? That was Joe Terranova's view today on halftime. Bears are too focused on all the stuff in some respects of what you said, but not giving enough credit to where we are and where we may go. In fact, if we are at the end or

near the end of the hiking cycle, that's bullish, not negative. Well, actually, markets tend to bottom after the Fed starts cutting. So if we're at the end of a hiking cycle, the next phase of that would be a pause or holding at a certain level. And then the next phase of that would be a cut. It's the catalyst that would make them cut that I think is going to answer that question on whether Joe's right or whether maybe the bears are right. If they have to cut in reaction to something bad that happens or they have to cut in reaction to data that starts to soften faster than they wanted it to and they can't get their arms around it, that's a bad thing.

What if they just cut because inflation's come down faster than they thought? That would be the positive side, right? That would be the bull case, that they can cut to just normalize policy and neither stimulate nor restrict, and we can just hum along at a decent pace. The thing that sticks with me, however, is that inflation is still growing. As long as it stays positive, it's just growing at a slower pace. It's still growing, though, and all of those costs that got passed through, all the prices that rose are still high, and they're much higher than they were 12 months ago, still taking a bite out of consumers.

So pivotal week, obviously, for earnings. It really starts to get going in the morning with more bank earnings, and then we start to really get into into tech. What if earnings aren't as bad as people thought they were going to be? Because so far they haven't been. That seems to be the theme this year. Rightfully so. Right. We've well, we've lowered the bar quite a bit. Right. And then we we sort of skip over this really, really low bar and everybody says everything's fine. To be fair, this earnings season would be the third in a row that's negative year over year, but it also would be the worst one that we'll see before a nice little turnaround if expectations are correct. So it's very possible since the

expectations are right around negative 7% growth in earnings, that we could do better than feared. And financials have so far set a pretty good tone for earnings season. Much of it was reliant on the fact that rates were up and they made more money on the lending side. And there's still a lot of consumers out there wanting to spend. They're spending on credit, which is usually an early warning sign of stress later. But the reality is that there's not stress now necessarily in the consumer. Well, because the labor market is still robust.

Right. As long as that remains the way it is now, does that just prolong the cycle that you still suggest is late? Sure does. People will spend as long as they feel employed and they feel confident that they can get another job if they end up not employed. And so far, there hasn't really been any big indication that people should feel any different, which is why you're seeing things like sentiment surveys, all the consumer confidence and consumer sentiment stuff come out. You've got market up, inflation down, jobs market still strong. Consumers are going to say, I feel great. I'm going to keep spending money. The issue is that they're spending it on credit cards and some of it taking out loans. And then there was an article over the weekend about $9 trillion in home equity lines of credit that have been taken out because people are using

that as cash now to spend. They don't want to refinance and pay a higher mortgage rate. But now we've got this new kind of HELOC leverage that's entered the system. OK, let's expand the conversation, bringing Victoria Fernandez of Crossmark Global Investments and Brian Levitt from Invesco. It's good to see both of you. Appreciate you being here. Victoria, what do you make of what you just heard from Liz? Yeah, well, I think I have to join Liz in her camp here of saying I'm not going to buy all in on being a bull in this market. We've been pretty bearish for most of this year, anticipating that we were going to have some kind of a, however you want to categorize it, a mild recession, a larger pullback

in the fourth quarter of this year. We're saying probably somewhere between Labor Day and the end of the year. And a lot of it, in our minds, has to do with the timing of the weakness of the consumer. You've mentioned so many things that are the red flags that we've seen in this economy. The leading economic indicators down 14 months in a row, the inverted yield curve, the money growth, all of the things that you and Liz have been talking about. And we sit there and we say, okay, well, what is it then that is not allowing these things that historically have led us into a recession?

What is it that's keeping that from happening? And we say, well, it has to be the consumer, artificial stimulus coming from the government, but also combining that with the labor market. I mean, you guys just mentioned it. We've got pay raises for the first time in two years that are higher than the level of inflation. So consumers feel confident in what they're doing. And at the same time, you've got fiscal policy with an Inflation Reduction Act,

an Infrastructure Act, semiconductor that's adding liquidity and spending to the system. So we have to see when we talk about what's the event that we think is going to bring us to a mild recession or a pullback. I think it's going to be when those elements start to weaken. We just don't know when that is. You've got high-frequency credit card data telling you in June spending was a little less. If student loan repayments come back, does that take away some disposable income? But for right now, it looks like the bulls have a little bit of a leg up, even though I think those warning signs and those red flags, you just can't ignore them. I know, but the bulls have had a lot of leg up, right? I mean, being mostly bearish is being mostly wrong. And you just point out, you point out a number of reasons, Victoria, as to why maybe you shouldn't be as negative.

In a consumption-based economy where two-thirds of economic activity is due to the consumer, why still so negative? Yeah, it's a question we just talked about in our investment policy committee last week. Are we being stubborn in our stance here? But we look at these elements and we say, look, we know the consumer is going to run out of their savings that they have. And we know the disposable income is going to come down a little bit as some of the stimulus component and some of the wages stop growing at the rate that they're growing. And when they do and when some of the liquidity comes out of the market that has been put in there, I mean, you look at the banking crisis, the Fed stepped in immediately and saved that, right? Without that, we probably would have seen a recession already. We look at these elements and we just can't say that they're not going to happen this time. When you look at these,

and I know it's looking in the past for some people, but looking at the yield curve, looking at what yields are doing, looking at leading economic indicators and money growth, I don't think you can ignore those signs. So we've moved from thinking we were going to have a recession, probably a 70, 75 percent recession a few months ago, to going to where, yes, there is a wider path now for a soft landing. And I think it's only fair to say that. But you're not I understand it. But but but you're not investing like it. I mean, if you're saying, well, there's a wider path, but I'm still I'm still negative. Where's the I'm not I'm trying to like where's the investable, actionable playoff of that perspective? Just saying it doesn't really mean anything. No, I agree. And that's the key. We've never been out of the market just because we were

bearish doesn't mean we were saying, let's go to cash. It's look at the sectors that you're seeing. Ed Yardini has talked many times, even on your show, right, about the sector rotation that we have been seeing in the rolling recession. So maybe we take advantage of some of those sector bets. We're overweight in tech, but we're not overweight those top seven names, which has hurt us. But we're looking to find ways to add a little bit of cyclical exposure, but still to have that health care, some of those defensive names, because we do want to be well positioned when the market's going to pull back. We don't want to be out of the market. We don't want to be underexposed, but we want to be smart as to where we're going in. We want quality earnings. We want to see how margins do in this earning season. And those are the companies that we want to invest in. We've

added to Oracle. We've added to Adobe. We've trended Hilton. We're in there making trades in this market for our clients, but we're trying to be very smart in our positioning so that we don't get caught on the wrong side when we think whatever the event might be actually happens later this year. Brian, you sold on this rally. You're skeptical of it, as we ask at the top. I'm sold on it, and I've been sold on it all year. And I think that the conversation is really, really what we need to do is differentiate between the macro and the market. Of course, the economy is going to slow. That's precisely what the Federal Reserve has indicated, what they want to have happen. But let's not forget the stock market fell 25.4 percent

peak to trough last year. That's very much in line with the historical mild recessions of the past, similar to 81, similar to to 91 everyone who keeps talking that inflation has to bottom i'm sorry that markets have to bottom in a recession well historically that has been true but it's typically been coincident with inflation peaking so in this instance uh to your point scott inflation just peaked a lot earlier because it's a bizarre cycle. It's a different cycle. So investors waiting for the recession. I mean, the market priced that in a year ago.

What we're doing now is we're rallying because inflation has come down so rapidly. You can look at just about any time in U.S. history and say, how did the markets do after inflation peaked? How did the markets do after inflation peaked? How did the markets do after the end of a tightening cycle? In almost every instance, the markets have done very well. This time is no different. And I think this market's going to continue to go higher because more and more investors are getting a little bit of FOMO now as they miss out on what's been a very good year. Liz, you say that markets typically bottom after the Fed is done hiking. After they start cutting. Or after they start cutting. Almost the same thing. But does that mean you think that the October lows of last year are in play?

Well, the drawdown that we saw last year, as you mentioned, 25 percent would be consistent with either a mild recession or a bear market absent a recession. So if that's what ensues and we don't have a recession or we have one that's very, very mild, or maybe we already had it. Maybe we already did. Manufacturing is, maybe we've had this, that's another issue, whether we've actually had the recession already in the critical parts of the economy that would be more affected by what the Fed has done. Right. Well, the NBER has not declared it. So if they're the authority, it didn't happen. But OK, the textbook says it didn't happen. But we all know that manufacturing has been in a recession. That's correct. So the market did price in either a mild recession or a bear market absent a recession. If there's a classic recession, I'm not even talking Armageddon

scenario. If there's a classic recession, we probably did not price that in yet. So the idea that the market is expecting some kind of soft landing or some kind of very mild contraction is consistent with what's happened already. Usually, if it's a classic recession where we would see unemployment go back up and you'd see most of the indicators go decidedly negative for at least a little while, you'd see the yield curve uninvert, right? That's when you get beyond 30% contraction. Usually a regular recession, you get about 44% average in a contraction. So we did not price that in yet, which is why you still hear people saying we could be headed for new lows.

I'm not going to declare that that's possible. I'm never going to try to call the top or the bottom. I will be wrong every single time. But that's why that argument still remains out there. Brian, I mean, your bet is that we're not obviously going to have a recession because otherwise you wouldn't want cyclical sectors like materials, which you like, and industrials as well in the second half. Well, look, I mean, the market already priced in a recession. So what we're doing here is we're seeing leadership shift based on, you know, whether or not the market is concerned that tightening is going to be even worse than they had expected. So from October of last year through, call it

January, February, you had a nice recovery trade, cyclicals, value, small caps, emerging markets. That gave way March, April, May, because the economic data was too hot. You had some banking challenges. Well, where are we now? The economy is still good and inflation is at 3 percent. So you're getting a broadening out here. This is more of a recovery trade. So our opinion is for the rest of the year, you want to be cyclical value, small emerging markets. Now, that doesn't mean that you can't feel a little bit of a contraction phase ahead of a downturn in 2024 in the economy. I'm not convinced that we're not going to see a recession. What I am convinced is that we've already priced it and we've seen the bottom, which was in mid-October. So you may see

some flipping back to defensives taking a lead in early 2024. But the critical point is investors with a time horizon beyond a few minutes, one year, two year. Remember, what we're living in right now is is how new cycles play out, how new cycles emerge. And over the next couple of years, you want to be risk on in your portfolio to take advantage of that. That's going to be risk credit. That's going to be cyclical equities. Guys, we're going to leave it there. I appreciate it very much, Liz. Thank you, Victoria. Thanks as well. Brian, we'll talk to you soon. Thanks to all of you. Let's going to be risk credit. That's going to be cyclical equities. Guys, we're going to leave it there. I appreciate it very much. Liz, thank you. Victoria, thanks as well. Brian, we'll talk to you soon. Thanks to all of you. Let's get to our Twitter question of the day now. Which stock will get the biggest earnings pop this week? Netflix, Tesla or United Airlines?

Please vote. Head to at CNBC closing bell on Twitter. We got the results coming up a little later on in the hour. In the meantime, a check on some top stocks to watch as we head into the close. Christina Partsenevelos is here with that. Christina. Thanks, Scott. Well, let's talk about shares of AT&T. They're hitting their lowest level since 1993 as the stock continues to get hammered over concerns that it left toxic lead cables buried across the country. Citigroup is the latest firm to actually weigh in on the potential financial risk that AT&T faces. Analysts there cutting the stock to neutral from buy and slashing the price target to $16 from 22. You can see shares are down almost 7%. And Sunrun is surging as Morgan Stanley reiterates its overweight rating and raises its price target by $9 to $39 a share.

They say there's an opportunity for Sunrun to gain share in sunny California. Scott. All right. Thank you, Christina Partsenevelos. Rather sunny on Wall Street right now. Dow Jones Industrial Average good for nearly 150 points. New 52-week high as well at this very moment for the S&P 500. We're green across the board.

NASDAQ's up 150. And we're just getting started. Up next, globetrotting for growth. The top tech analyst Eric Woodring on the region he is calling Apple's next growth frontier also just raised his price target on that stock, calling now for near 40 percent upside in his bull case, which he makes to you next. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. We're back. Shares of Apple climbing on the back of Morgan Stanley, boosting its price target this morning. Analyst Eric Woodring is the one who did it. He's making a big bet on Apple in India. He calls it the tech giant's next growth frontier.

Joins me now, in fact, to discuss that. Welcome back. It's nice to see you. Thank you so much for having me, Scott. Is that really the reason that you raised your price target to 220 and you have a bull case as high as 270? So there's two factors to what we did overnight. One was introducing the concept of India as being Apple's next growth frontier. What I would tell you there is we think that India will account for 15% of Apple's revenue growth over the next five years. If you look back over the last five years, China has accounted for roughly 18% of Apple's revenue growth. So we're making the argument that on a go-forward basis, India is going to be as important to Apple's growth story as China

was over the last five years. We think that says a lot about how important we think India will become. The second part— I mean— Sorry, go ahead. Yeah, I'm sorry. No, I thought you were finished. Please go ahead.

My bad. Please go ahead. The second part of our note was really, again, updating our price target to $220 from $190. That's both a function of greater confidence in Apple building this base of new users, some of which come from India. And the other factor here is thinking about Apple as this low churn kind of consumer technology platform and comping Apple to those respective peers. Think of someone like a Google, very low churn.

You're always going to Google to search, Amazon for shopping, et cetera. So we were just comping our, updating our price target, marking it to market. Again, 220 is where we're at today from a price target perspective, $270 bull case valuation. And again, let me reiterate, 270 is entirely based off of the lifetime value of Apple's user base as we think out over the next 40 plus years. When do we get to a, I guess what I would call a significant reacceleration of revenue growth? So I think we get a partial reacceleration in the September quarter. What I mean by that is right now we're forecasting revenue declines of about 2% in the June quarter. We think that in the September quarter, you get back to growth of about 4%. So about a 6% growth acceleration. We think that becomes more meaningful in fiscal 24.

Again, I was listening to the participants in your prior conversation. For Apple, we've seen now revenue declines in three of the last four quarters, assuming June is also a decline. We're facing easier compares. We think that's a meaningful factor. We think the dollar as a less prohibitive headwind is going to become a meaningful factor. And then we think coming out of the iPhone 14 cycle into the iPhone 15 cycle can really drive growth. So it's services, it's iPhone. We think it's all. But again, September quarter, we see a reacceleration. Fiscal 24 is when we see a more significant growth reacceleration.

We have 10 percent growth in 2024. What if we're launching a new phone in the September quarter into a deepening slowdown in China? And I ask you that question because I don't understand why Apple seems to be, in terms of shares, why the shares seem to be getting a pass on the weakness that we're seeing in China when Richemont and all these other luxury names keep getting hit, but Apple doesn't. China's an interesting market for Apple. It's a very aspirational market. It is a brand, similar, frankly, to Richemont or other luxury goods, that is part of the luxury culture in China. So we think if there's a consumer in China that's out buying an iPhone 14 today,

that's probably unlikely because, again, an iPhone 14 becomes old in, let's call it, two months. So we actually think there's a pause in demand in China right now for the iPhone 15 or for the iPhone in general. When the iPhone 15 is launched, presumably in the middle of September, we think the Chinese consumer actually comes back there. Again, don't forget, China's been somewhat shut down for Apple for the last three years. We do think that there is pent up demand there. Again, don't forget, China's been somewhat shut down for Apple for the last three years. We do think that there is pent up demand there. We sized it at, call it 10 to 30 million units

six months ago. That creates a pretty significant base to upgrade for post-September. But again, we'll have to wait for that point. But that's the thesis that we're running with today. Are you thinking at all about prospects of any kind of acquisition for Apple? As you see, you know, further dislocation related to the media business, you know, and Bob Iger talks about the future of ESPN, for example, or networks. You see a day where Apple would make a, you know, a huge splash further into the media world? I think that it is unlikely as we sit here today. Again, 2013, Apple acquired Beats for $3 billion.

That is still the largest acquisition Apple has made in its company history, if that tells you anything about their propensity to buy versus build. We've seen them build out an entire streaming TV service, Apple TV Plus, entirely on their own. Do I think it would be interesting? Sure, absolutely. I do think sports becomes bigger for Apple as we look out over the next five to 10 years. But when I think about Apple being very acquisitive in using their cash for something like transformative M&A, I think those odds are probably lower. You thinking at all like modeling Apple plus ESPN, for example, what that might look

like? Not the whole thing of Disney, obviously, but an asset like that. Are you entertaining that in any way? One, as a sports fan, I think that would be awesome. But two, I think that's something that we do actually have to contemplate. But I'd still say the odds of that happening today are low. But by all means, again, I told you I think sports becomes more important to Apple. I don't think that we can ignore that. I think we have to at least think about what that scenario would create from a financial fundamentals perspective. Yeah, which means we'll talk further about it. I'm sure. Eric, thanks as always. I appreciate your time very much. Thanks so much. All right, Eric Woodring joining us there from Morgan Stanley, as you see. Coming up, banking on a turnaround.

Signs of life for investment banking are starting to show after upbeat earnings commentary from J.P. Morgan and Citi. We'll break down the numbers to watch this week. Remember, you've got Morgan Stanley, you've got Goldman Sachs coming up. So we'll talk about what a rebound there could mean for investors in those names and others. We'll do it next plus coming up on july 25th please join me in los angeles at cnbc and boardroom team up to host a game plan it is a high-powered event bringing together the most influential leaders across the sports landscape for details go to cnbcevents.com slash game plan we're back after this. The health of investment banking will be front and center this week when Morgan Stanley and Goldman Sachs report their quarterly results.

Leslie Picker following the money on that story. Are we going to hear green shoots in any way, shape or form less? If I had a dollar every time I heard the word green shoots this earnings season, I would be a little bit richer, Scott. But to your point, dealmaking has been effectively dormant for a while now, which has created this slump in fees for firms that advise on mergers and acquisitions and IPOs. KPW said the industry's investment banking haul is expected to be down 22 percent in 2Q. And we saw some glimpses of that last week. On Friday, Citigroup reported investment banking revenue declined 24 percent year over year. J.P. Morgan reported a slip of 7 percent when excluding certain markdowns from positions in their portfolio. Now, we'll get another read tomorrow from Bank of America and Morgan Stanley and then Goldman Sachs on Wednesday. Two years

ago, when the market was more vibrant, Morgan Stanley generated about a fifth of its top line from investment banking, while that business represented about a quarter of Goldman's net revenue. That proportion has shrunk as overall deal activity dried up. Executives from the firms that have already reported indicated those so-called green shoots are out there that may signal a turnaround. But the question is when that actually materializes into revenue, how strong that pipeline is, how confident are they in that pipeline? I'll be able to ask this question and more tomorrow when I sit down with Morgan Stanley CEO James Gorman in his first interview since announcing plans to step down as CEO and later with Bank of America CEO Brian Moynihan. Scott. Oh, good stuff, Les. We look forward to both of those interviews.

Mike Santoli is joining the conversation here as well. The kick isn't any worse, can it? No, it certainly shouldn't be bottoming out. And a lot of the things that are usually the inputs to more activity are lined up pretty well. Obviously, valuations are higher. Growth stocks are in favor again. That's probably setting the scene for more IPOs. And then, you know, the M&A pipeline should actually have a backlog in it.

We haven't had a lot of deals. Now things are seeming maybe a little bit friendlier or less hostile on the regulatory front after the Activision FTC case. So all those things together. We have an election next year. Sometimes that matters. But since we're coming off of a perceived tough M&A regulatory environment, it's hard to see how that's something that would dissuade people. I think that the question is, what have the stocks already suggested has happened? If you look at some of the boutique investment bank firms, Lazard, Evercore, you know, Molis and those, they've come off the lows and they're kind of flat over two years, not down much less. So, I mean, maybe we will hear about a better environment in the next few months. And there are a number of you, as you know, you cover this so closely. There are a number of big names that are in the pipeline for IPOs.

They're definitely in the pipeline. The question is when they actually take that next step of listing, of going public. To Mike's point, the Activision news today is a definite positive sign for C-suites who are maybe thinking, you know, I'd like to do this deal, but given the regulatory environment right now, I'm going to wait this out for a while. I don't want to go through the process of doing a deal only to get sued and wind up in court and go through that whole process for a year and a half. But the prospect of, you know, actually being able to consummate deals is a potential green chute here as well. I mean, is it overstating it, Leslie, that in the span of a week that the skies are bluer

in the M&A and dealmaking world is simply what happened with Microsoft and Activision? I think so. I mean, there's just been so much negativity with regard to the prospect of doing a deal only to kind of wind up in court and have it all blocked and going through all of that behind the scenes where your business is basically kind of stuck in purgatory and not really making too much strategic change. You know, that definitely makes things look a little bit better for, you know, that definitely makes things look a little bit better for, you know, CEO confidence to consummate deals. All right.

Good stuff. Leslie, thank you, as always. Look forward to those interviews of yours as well. Mike, we'll see you in the market zone in just a few. Up next, we're tracking the biggest movers as we head into the close. Christina Partsenevelo standing by, as always, with that. Christina? Scott, we've got some trouble with pools and Yetis.

And no, it's not about a weekend at your house. Some big names are down. I'll explain the real details after this break. Well, that's in 20. Before the closing bell, Christina Partsenevelos back looking at the stock she's watching. Christina. Well, in acknowledgement of the record heat waves across the country, I want to talk about pools. More specifically, pool supplier Leslie's because shares are down 18% on a lowered outlook for the year.

Management also warning that higher prices are causing double-digit traffic declines in its key businesses. And customers are sitting on higher levels of leftover pool chemicals from last year. So no need to buy more. And that's why Jefferies also downgraded the stock to hold from buy and cut their price target. And for those with pools, I'm not one of them. I'm sure you have some kind of Yeti to keep your drinks cool. Scott seems like the type of guy to do so. But key bank analysts say Yeti competition is up and high inventory levels could hurt Q4 performance.

So they downgraded the shares to underweight. And that's why the stock is down about 6%. Scott? Neither a pool nor a Yeti. Sad as I say. I don't know you that well then. Nope. You only think you do.

All right, Christina, thank you. See you tomorrow. Christina Partsinevlos. Last chance to weigh in on our Twitter question. We asked which of these stocks will get the biggest earnings pop this week, Netflix, Tesla, or United Airlines? You can head to at CNBC closing bell on Twitter. The results after the break.

The results of the Twitter question, which stock will get the biggest earnings pop this week? Half of you said Tesla. Fifty percent shares are only up one hundred and thirty three percent this year. And that's the winner. Well, Netflix second. Pretty good year. United Airlines3% this year, and that's the winner. Well, Netflix second. Pretty good year. United Airlines had a good year, too, up 22. Up next, dimming the lights.

Ford shares. They are falling today after the company announced price cuts on its electric F-150 pickup. We got the details behind that story, what it might mean for the other big EV players. We'll do that next when we take you inside the market zone. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli is with me to break down the crucial moments of the trading day. Plus, Phil LeBeau on Ford's price cuts and Julia Borsten outside the picket line behind her. The latest on the Hollywood strike, how it's impacting some of the largest studios. Mike, I begin with you. Triple digits for the NAS.

Just had triple digits for the Dow, giving a few points back, but a pretty good day across the board. Yeah, we seem like we're in path to least resistance as to the upside mode. We've kind of gotten peace on the macro front, chewed through a lot of the scares over the last few months. That leaves us now, I think, with a point of how many people have already bought into the bull case and are there more to be persuaded still? I think there are more to be persuaded, but it's the market's own mechanics that matter a lot in these phases. So the seasonal stuff, whether we get one of these spirals of hot money just driving the Teslas and Nvidias up every day for no reason, creating its own instability in the NASDAQ,

that's where it feels like we are at this point in the absence of anything happening much on the yield front or really macro. A lot of the threats seem neutralized at the moment, yet I don't think everybody is yet quite in that everybody in the pool overconfident phase. I'm glad you brought up Tesla and Nvidia the way you did, because I'm trying to think of another earning season in which you go in where you have many stocks where the bar is presumably as high as it is.

Now, Nvidia is up 161 percent year to date. Tesla's up 120. No slouch in any way. For sure. And both of them riding what the companies have already said. Of course, Tesla gives you the volumes, gives you the sales figures before they get the earnings reports. You kind of know what you're working with. And of course, we're still working on that NVIDIA upside guide. And people probably have their eyes pretty big for another one or confirmation of that right now. So I guess that's probably the next thing to look for is whether we do get some sell on the news responses, no matter what the results say. Right now, still, we have this broadening trend is still in place. Russell's up one point one percent since about Memorial Day. The equal weight

S&P is up more than the market cap weighted one. So, you know, we've kind of run dry on big things for people to complain about. Although hilariously, I do like that the new bear case is inflation is coming down because of what it's going to mean for profit margins. So you have to just keep rolling to the next thing to worry about. Phil, Tesla's gain, since we're talking about that, is contributing to Ford's pain, if you will. Stock's down more than 5 or 6 percent. And I mean, I think you can say there's a direct correlation. Well, there's definitely a correlation between who's got momentum when it comes to electric vehicles right now.

You know who it is? It's Tesla. Is it GM? Is it Ford? Definitely not Stellantis. They don't even have EVs out right now. Scott, this was supposed to be the year of GM and Ford ramping up production of the EV. That momentum has been squandered. That's gone in terms of the investor who is out there right now. Ford today cutting the prices on the F-150 Lightning. Now, they say they're doing this because they have a greater supply, that the manufacturing capacity is increasing, so that they can afford to do this right now. Make no mistake, when you cut prices 7% to 16%, you're trying to stoke demand. And I called some Ford dealers, and they all said basically the same thing, which is, we've got some supply of F-150 Lightnings,

now we'd like to see more demand. And that's what Ford is hoping to do here. By the way, GM and Ford, they both report their Q2 results next week. So we will hear from them. And you can bet a lot of the questions will focus on where they are, not just with ramping up EVs, but really getting the momentum back. Because what momentum was there, Scott, with investors? It's gone. It really has evaporated within the last few months. This is Jim Farley, in some respects, taking a page out of Mr. Musk's book, right? You cut prices to try and stimulate demand, and he's cutting them a lot. Absolutely, and they need to. And by the way, when I've talked with people not at Ford headquarters,

but at people out in the field, what I hear is it's a good start. Look, $10,000 off the price of a vehicle is going to attract attention. But you've got to bring these prices down even more if you're really going to start to get people into electric vehicles and electric pickup trucks. Bill, thank you. Julia Boorstin, out to you. In Los Angeles, looks like the Paramount lot is the one behind you and the picketers who continue to walk. That's right. I'm here outside Paramount. We have the SAG-AFTRA and also the Writers Guild members picketing behind me. But right now I'm looking at the stocks and the media giants are going in different directions on the heels of this double actors writer's strike starting now

ahead of Netflix earnings on Wednesday afternoon. Netflix shares are up about 2% bolstered by analysts pointing out the company's advantage if there is a drawn out strike. Deutsche Bank raised its price target on Netflix to $4.75, saying that virtually all of the headwinds that are plaguing the traditional TV-focused media companies are actually tailwinds for Netflix, citing its international exposure as well as the upside from cracking down on password sharing. Now, meanwhile, Disney shares are down 3.5% on concerns about the impact from this strike, as well as some of the issues raised by CEO Bob Iger in an interview on CNBC with our David Faber last week. Now, take a look at some of these other media stocks.

Paramount, Warner Brothers Discovery are also down on concerns about the impact of a strike. Scott. Yeah, Julia, it's interesting that, you know, Netflix is the one that's not taking the brunt of the pain here. You cover that story closely as well. Yeah, I mean, I think the key thing about Netflix is that its user base is so international and the content it produces is so international. So the percentage of its shows that are going to have to shut down production, the ones that were going to be shot here in the U.S. or with SAG or WGA members, is smaller than that of the other companies. The other thing to keep in mind is that Netflix has shown they could have big global hits from international content. Think about shows like Squid Game, which were produced overseas without the impact of SAG or WGA. So I think there's some sense that they might be able to tap into that.

And also remember that streamers can release shows on their own cadence. So they might take a season, split it up into two, release six episodes at a time, and they're not beholden to the traditional fall TV model, if you will. Yeah, good points you make, Julia. Thank you very much for that, Julia Borson, for us out in Los Angeles in the market zone. We'll turn back to Mike Santoli as we approach the two-minute warning. Yields got the 10-year at 380. So the long end of the curve is lower across the board. It is. And that's taking the pressure off here. I think even more important, maybe, than the absolute Treasury yield level is the fact that credit spreads have come in.

If you looked at high yield spreads, they're back where they were in February before SVB. So whether correct or not, whether the credit market has a crystal ball or not, it's showing you there's not a lot of stress buildup in the system in the immediate moment, even though, you know, this kind of divergence of performance within the stock market is showing a little bit of anxiety on the legacy businesses channel. We just hit a few of them, right? Ford, the Disney's of the world, Paramount, Warner's, AT&T today, of course. So all these 19th and early 20th century businesses where it's like, well, they're at a tough spot. They have to figure out both the secular and the cyclical. And therefore, the $10 trillion worth of market cap in the six largest stocks of the NASDAQ

seem like a refuge. They're getting very expensive. Maybe they're going to get overloved. But for now, those mechanics are keeping the overall market, you know, supported. But there's nothing to suggest to you that that dynamic is going to change anytime soon, right? I mean, as long as you continue to have questions about those more legacy businesses, you're going to have money go to the perceived ports, if you will, not necessarily that we're in a storm, but certainly the ones that are deemed to be the safest and most secure, so to speak.

I would say there's nothing specific that makes you think that's going to change, but you don't always get a warning. And sometimes, again, as I said before, it seems like it's more about when you get to extremes of crowding in certain types of stocks. You know, it's probably not going to be the interest rate trigger the way it was in early 2022, but something probably is out there that's going to cause some mean reversion to go directly. All right. I appreciate it. We'll see you tomorrow. Got a little bit of peel off the top here on the Dow. It's still positive, not quite as strong as it was a few moments ago. We had a new 52-week high for the S&P 500, NASDAQ.

Same story, the outperformance today up near 1%. I'll see you tomorrow. I'll send it into OT with Morgan and John.