Closing Bell - Closing Bell 7/19/23

Episode Date: July 19, 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.

And welcome to a big closing bell. Thanks, Kelly. I'm Scott Wapner at Post 9 here at the New York Stock Exchange. This make or break hour begins with the countdown to two of the most anticipated earnings reports of this early season. Netflix and Tesla, they both hit in overtime. And we're going to get you set before the numbers hit with Alex Kantrowitz and Dan Ives. First, your scorecard with 60 minutes to go now in regulation. More gains for stocks today. There it is, green across the board. The S&P 500 sitting just about 5% away from new all-time highs. The Dow working on its eighth consecutive day of gains, getting help today from Verizon and Goldman, Salesforce and Cisco. Well, it's been up and down for the Nasdaq ahead of those earnings we're waiting for. Apple. It is mostly higher on some AI related headlines,

not quite as strong as it was when those hit. But nonetheless, it is green. It takes us to our talk of the tape. All that is riding on these critical results will hit Tesla in a bit. First, though, big technologies. Alex Kantrowitz is watching Netflix closely. He's here with me at Post 9. Of course, also a CNBC contributor. Good to have you. I love when these earnings start coming down, especially the marquee names. What do you look for here? I mean, the good news is that Netflix is going to have subscriber growth. Well, you know, whether that's a few decibel points one way or the other, it's a completely different sea change, really, from what happened last year when it was contracting those subscribers. So I think the

story for Netflix, whether it comes in a little bit above or a little bit below, is it's making the right moves as a business to exist and thrive in this economy. Lost a million subs in the year ago quarter, right? You had two straight quarters of sub losses. Why have they been able to reverse that? Password sharing, the crackdown on password sharing has been crucial for them. You know, they had four of their highest single-day sign-up,

according to some third-party data, you know, right after this happened. When you do that, it just shows that your product is working. People want Netflix. They got used to it over the years, and they always had this lever. They always had this ability to say, all right, enough with the free ride. They said it. They're growing again. That's been huge for them.

Speaking of free rides, the ad tier, right, they just say they scrapped their cheapest ones, 10 bucks a month. How is this contributing, do you think? Yeah, right now it's doing okay. 20% of new signups are coming in via the ad tier, right? So that means they are getting some growth from it. We're going to start to see them monetize that tier,

by the way. I have hearing Madison Avenue talking again about growing advertising dollars. And there was a long time where the economy was uncertain. They weren't spending. Now they're starting to spend again. That's another incremental revenue source for Netflix. I'm sure you're thinking about the strikes that are ongoing out in Hollywood.

This company has had to think about it less than others in the media space. It just hasn't been as impacted. Now, who knows what happens if it really drags on for many, many, many months. But nonetheless, they've been able to avoid the biggest impact that others have felt. Oh, yeah. They're in a much better position than their competitors. And that's for two reasons. One, they have a nice stock of foreign shows and movies. Korean dramas on Netflix are really hitting. I'm in the middle of one right now, Crash Landing on You, super fun. And then there's a lot of reality television that they use. And people have been sl slagging Netflix saying, oh, it's junk.

It's filled with crap. Actually, Americans and people worldwide love watching these shows. Lots of great dating shows on Netflix. They can thrive on those while the rest of their competitors try to figure out what to put in there in their sites and on TV. So we're looking at media stocks right there on the right hand side of our screen. Right. And you see the one at the top is Netflix and it's up 62 percent year to date. It's outpaced everything and it's done incredibly well relative to some of its big tech brethren as well. Maybe that's one of the biggest obstacles going into the print. The stock's already up a lot. How do you think about that? Yeah, it's definitely up a lot, but it's still down from the highs where it was around $700. So when Netflix had its big drop, this was really a

question of like, can it settle into the right valuation? Can it settle into the right place for a company like it is, which is not, it's really not a technology company. It's more of a media company and it's been valued and it still really is being valued as a tech company, but just it can't really live to sustain those highs. It's in a much better spot right now. And, you know, it's down from the all-time highs. It's grown this year. Maybe that's the right place for it. We've been talking about these mega cap stocks,

and this isn't necessarily a mega cap. But when we talk about those, we always cite the execution of the Tim Cooks and the other CEOs who are front and center. Do we talk about the execution of the Netflix management team enough and what they've been able to do, making the transition the way they have? I think that we do talk about it enough. Now, we don't talk about it too much because the reason why we're not spending as much

time on it is it's just a different business. It's a completely different world to build an Apple than it is to build a Netflix. You know, Apple has a mini Netflix inside Apple. It's still building the iPhone. So I give Netflix management a lot of credit. They've come out of a really tough time. They're growing subscribers. They've built this ad product. They're doing everything they need to do. They're insulated in some ways against the strike. But they're just not on the same plane as some of the great tech leaders that we have today. No, but they've had to figure out some complicated issues. When you're losing subs, like we said, when you're losing a million subs a year ago and you have two consecutive quarters of declining subs,

you've got to deal with the password issue, which they were pretty forceful in. They're like, we're doing it, like it or not. It's worked. The ad tier, which they initially shunned, they decided to do. Don't they deserve any credit for that? Oh, definitely. I'm not taking away from them as a business. They've executed the playbook perfectly in terms of what they needed to do,

where they were, where they needed to get to. I just think that this is kind of it for Netflix. It's a great company. It has great shows and movies. People love it. But it has a ceiling. Do you feel like, I mean, I've seen some, I won't necessarily call them bears, but Michael Nathanson, for example, who has not exactly been the biggest bull, declared of this one, this is the one to own in the space.

And it's not lost on me either. If you look at the comparison between, say, Netflix and a stock price trajectory and versus Disney, it's pretty stark. Yeah. So it tells you part of the story, too. Absolutely. And I was just on the phone with a former Hulu executive yesterday and said, break down what's going on in streaming right now. His perspective was very simple. All the other companies have focused on profitability. They had to spend and now they're

really pulling back to get profitable. And Netflix has been in that place where it has free cash flow. And in some ways, it's going to benefit based off of the capitulation of some of its competitors. So it does seem like it's going to consolidate a lot of ground in this space. And, you know, maybe we change financial conditions and the others have the ability to spend again. But until they do, Netflix does seem like the lead horse here for sure. Netflix investors are usually confident going in. Jason Snipe is one. He joins us now. Odyssey Capital Advisors. It's good to see you. Are you optimistic?

And how does the stocks gain already leading up to this day factor into your thinking? Yeah, so I think Alex made a couple of really great points about just where the stock has been. Obviously, it's up 62% year to date. But to your point that we're looking at ads this quarter, you know, 2 million subs, you know, which I think is really solid. And I think, you know, as we talk about the management team and what the market has rewarded Netflix for this year is crackdown on the on the existing base. Right. So password sharing expected to add nine billion in revenue by 2025. The ad supported tier expected to add seven hundred and seventy million dollars in revenue by the end of this year. So the market has rewarded these two line items

that obviously Netflix is focused on as being accretive to the balance sheet. And I think that's why the stock has moved so much this year. Do you worry at all about a sell on the news that the stock is run, even though the story's great, and people just get a little bit skittish about expanding valuations and the like?

Definitely. I mean, one of the things as I'm kind of looking at the stock, as we've already mentioned, it's up a lot already this year. I mean, the options are implying a move of eight and a half percent, you know, either way. Right. So I think that that obviously can be concerning going forward. But I do think their story, there's still some legs to this story. And I think they're in the early innings of this ad-supported tier of password sharing. There's a lot more market share to gain there. And I think that's why we could still see some movement going forward. We've been, you know, Alex, we've been citing all of the positives that have been around this story. The reason why the stock has had its 60 plus percent gain year to

date. What are the risks? What are we not thinking enough about that we maybe should? I mean, the risks are that the economy turns when the economy turns. Maybe we get back to inflation and the Fed continues has to raise even more. And there's more scrutiny on all these businesses. We know they're not immune to shocks. Right. The fact that they went down, the Netflix, for instance, went down from 700 and has only inched its way back up to the mid 400s is an example of that you know we're it looks like we might be out of the woods but we're not clearly out yet and there could be some surprises on the way for every tech company if that happens how about that jason we look at these gains and we think that everything is great are we ignoring some of the more broad risks that are just out

and round that could ultimately come back and have an impact on a company like this? There's no doubt about it. I mean, we see it everywhere. Right. Obviously, our our main focus has been on the consumer and the consumer has been hanging in there. And then, of course, the headwind potentially with what's going on with the strikes in Hollywood. Now, you know, obviously there's it's been well written about what Netflix has done internationally in the studios that they've built through the pandemic. Shows like Lupin, Squid Games, obviously have done very well, and there's been a lot of demand there.

So not that they're completely immune to what's going on from a consumer perspective and also potentially what the strike, what the issues might lay down further from there. But I do think that they're still well positioned and better positioned than some of their other players, like we've talked about Disney and some of the others that are out there. So that's why I continue to like the stock here. Yeah. What about big tech more broadly? How are you thinking in general as we say this is the curtain raiser on what are, you know, the most closely followed reports of the season.

Yes. So I think with big tech, we've seen actual economic activity around AI really at the very foundational layer. That means people are paying OpenAI for chat GPT and other API access, and they're paying NVIDIA for those GPUs. What is built on top of it? Because remember, a lot of this rally has been driven by artificial intelligence belief, really. It's been a belief that these companies are going to turn these innovations into something bigger. Hype and hope. Hype and hope, exactly. And so what I want to hear from Amazon, for instance, what is AWS doing to enable its customers to build with AI? I want to hear from Meta how this AI, generative AI

in particular, has helped its advertising business. All across the board, there's going to be big questions for these companies in terms of whether they've turned that hype and hope into dollars. And that's what it's really, they're going to be riding on for this quarter. You see a lot of the stocks that were just flashing through as you were, are down today, except for Apple. Speaking of AI and hype and hope, maybe it's been the lone holdout of the most marquee of names in this market in terms of what their plans may be as it relates to AI. Got nothing at WWDC when we were out there. There's a headline out there today on what they might be working on. The stock spiked off of it. It's still in positive territory.

How are you thinking about that one? Yeah, I mean, it was kind of bananas to me that the stock would spike over 2% on this Bloomberg report. Now, I think the Bloomberg report is right. Every company, it's table stakes. They're all working on ways to implement generative AI. But in the first paragraph of that report, they say they have no idea

how they're going to bring it to consumers. And the market sends it up 2%. Now, of course, it's moderated a bit, but it is still positive as everyone is negative. So it just indicates to me there is an over-exuberance around AI with investors right now. Can Apple implement something? Sure. Do they have a really good track record of doing anything like chatbots or consumer applications? No. Are they going to license this to other companies? That would really be bizarre for Apple. So it really just it's puzzling to me why investors, you know, there's almost this FOMO factor. You hear AI, throw the money. Why are we doing that? What's the answer to that, Jason? You're one of those who are continuing to throw the money at

these names. Do you see an over exuberance around AI? And if there is around AI, how can there not be around the AI stocks? Of course. I mean, at the early stages of any of these, like, you know, very unique technologies, I think stocks really move. And clearly that we've seen that in the first half of this year. You know, for me, as it relates to Apple,

you know, I just look at their enormous consumer base, right? So they have a lot of data. You know, AI, generative AI is going to be productive in some shape or fashion. I think a lot of companies and firms are trying to figure out ultimately how that's going to play out. We'll see. I mean, if we thought that Apple was going to take a back seat and watch all the other magnificent seven companies participate and not get involved. I mean, you know, I think you're missing the boat. But ultimately, they'll do some beta testing internally and see how it plays out.

And then I'm sure they'll bring something to market in 2024. And we'll see how that works out. The other stock yesterday, Alex, that popped was Microsoft, some 5% to a new high. And you generally don't see a stock like Microsoft move 5%. It makes me think about what role Alphabet plays in your mind on where we're going from here. If they've ceded too much ground to a Microsoft and what you expect when they report and what they have to say, if they really have something big to prove. Yeah, I think investors were wrong on the Microsoft deal yesterday yesterday i mean it's about office ai in office i'm right now in a test group

that's using google docs and gmail that has a help me write button in there so the generative ai is available for free within google and google is keeping pace so for anyone who's given up on google and said microsoft has won this that just strikes me as a totally incomplete picture of what's going on in the market. So do you think that Alphabet was unfairly punished, at least from a stock standpoint? Now, it's caught up in some respects. I mean, the stock has done well, as everything in that area has. But the early narrative was that they got caught sitting down when Microsoft and others were running. Yeah, I mean investors were right to be skeptical of what

Alphabet was doing. I mean they sat back, they had this technology internally, they sat back as OpenAI and Microsoft brought to market and not only did that but created unbelievable hype and shine around their brands. Now it's time to catch up. I just don't think it's hopeless for Alphabet. These tools inside Docs and inside Gmail, they're good and they're just going to get better. And this is a multi-year battle. I mean, it doesn't just, 2023 doesn't just end and all of a sudden Microsoft wins. Like they have big engineering teams that are working on this stuff. It's already live in consumer products in beta and it's just going to continue to roll out and get bigger. So it's not over for Alphabet by any means. It's the perfect place, Jason, for you to have the last word because you own so many of the stocks in this group. Yeah, no, absolutely. And I think for me, as it relates to generative AI, as I mentioned earlier, I think obviously these new technologies will definitely be productive new new assets to a lot of these companies and I think we just have to work very much in the early stages and we just have to kind of really watch

and watch the technologies evolve and see how companies are able to put them to use and I think all of us are obviously evaluating that at this time and of course there's been some over-exuberance early on but I think all of us are obviously evaluating that at this time. And, of course, there's been some over-exuberance early on. But I think we'll start to see the real players emerge as we move forward. All right, guys, I appreciate it. Jason, thank you. I'll see you soon. Alex, I know we'll see you soon as well.

Let's get to our Twitter question of the day. Will we see record highs for stocks this quarter? Told you at the very top of our program, we set some new 52-week highs today for the three majors. Dow right now is up 157. You vote yes or no, please, on Twitter at Closing Bell. We'll tell you the results a little later on in the hour. Let's get a check meantime on some top stocks to watch as we head towards the close. Christina Partsenevelos is standing by with that. Christina. Well, Joby Aviation is falling today as J.P. Morgan downgrades the Air Taxi Company to Underway. Analysts

are concerned that the path to commercial operations could be slower than investors were expecting. That's why you're seeing shares down, what, 16 percent, almost 17 percent. The stock, though, has more than doubled just in the past three months amid excitement over the FAA's permission to test Joby's prototype. Point of sales provider Toast is removing its 99 cent online order processing fee just days after it was first introduced nationwide. There's been widespread backlash from restaurants that forced Toast's CEO today to admit

they made the wrong decision. Market didn't like that reaction though. Shares are down over 15% right now, Scott. Yeah, paging Josh Brown, paging Josh Brown. I know, I know. A lot of our viewers noticed how bullish he was on toast yesterday. Yeah, they seem to notice everything. Christina, thank you. We'll see you a little bit later. Yes, it is. Yes, it is. Christina Partsenevelos. We're just getting started. Up next, Tesla's moment of truth. The company gearing up to report earnings after the bell.

Shares have surged more than 60% in just the last three months. Star Wedbush analyst Dan Ives is here at Post 9 with his expectations ahead of the numbers and later putting public service over profits. We'll bring you the details of a new bipartisan bill that could ban lawmakers from owning individual stocks. Is it dead on arrival or not? We'll find out. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC.

Welcome back. Tesla shares off session lows ahead of its results in overtime. The EV maker hit a record high for deliveries last quarter following multiple price cuts this year. The stock, well, it's only up 138 percent for the year. Let's bring in Wedbush's Dan Ives to break down what to expect. Welcome back. Options are pricing in a bigger move up or down than we normally see. Why do you think that is? I think it's really about margins. They're going to be able to show that margins are troughing and could start to rebound into later this year. If that happens, combined with what we're seeing on deliveries, especially in China, I mean, that's the one-two punch that ultimately gets this on its path to

one and a half trillion. Gross margins could be the lowest in perhaps six years. What makes you believe that they're troughing at a time where Musk is obviously putting growth over profitability, which he's made it clear himself? And in our opinion, that was the smart strategic poker move that they needed to ultimately do to go after volumes, cut costs, cut prices. But I think the price cuts, 95% of it is in the rear view mirror. So I think now you're starting to see ultimately stabilization there. I think battery costs, ultimately that's coming down. It gives them a tailwind scale and scope. And ultimately, I think as we go into this year, this is now going to be that trough moment. I think it was

a moment of truth. And ultimately, I think he continues to play chess, others checkers. Why do you think the price cuts are done? Just from a demand perspective. What we're seeing specifically in China, where there's really been a price war going on. We're now starting to see demand continue to uptick. And I think that's important. This is going to be a record China quarter. That would be a big focus on the call in terms of how Musk talks about from a demand perspective. And also margins in China are incrementally higher than in the U.S. You don't think we're going to get a potential price war here in the U.S.? I mean, you look at what Ford did with the

F-150 Lightning. You drop it by $10,000. No surprise that they do that after Musk has repeatedly done it. You know, they're coming out, Tesla is, with the Cybertruck. I mean, how do we think about all of that in the context of a potential price war here? Yeah, I think for Tesla, I mean, they're in a massive position of strength because of those margins that are just so far above the industry. Sure, well, Musk wants to remain in that position of strength. That's my point. And to your point, I think Farley and Ford, they heard the footsteps of Musk.

They hear the footsteps of Rivian. I do think that was a smart move for them. But ultimately, if you look at Tesla, they really continue to be more and more in a position of strength because they could do this. And I think I don't really see a price war in the U.S. Because today, from a demand perspective, we are still in the first inning of this EV green title wave playing out. They already reported, you know, amazing deliveries in the quarter, right, up 80-something percent. We're going to get anything that you're paying attention to, especially closely on the delivery angle today? Yeah, I think they'll probably tip the hand a little about potentially delivery second half of the year.

What I believe is going to be toward that 2 million vehicles overall for the year. Streets call it 1.8 million. That's important because now we start to get over that 2 million mark into next year. With Cybertruck coming in terms of that journal, also expect an update for them to reiterate productions on par. Look, I mean, the bears will focus, of course, there'll be certain things to focus on, margins and some others. But I believe if they call a trough, line the sand, this is a stock that ultimately heads back toward 350. I mean, you point out that the bears are going to point to negatives. I mean, the stock's up a lot. Gross margins are coming in. So why do you necessarily

have to be a bear on the stock to point out some of the concerns that exist on those really, I think, key metrics? Why can't you just be a realist on sort of where things are relative to where they were, both in terms of price and in terms of margin? No, and it's a great point. I think clearly you've seen gross margins come down significantly. I think that was the right move. I think it's really looking forward because I think the major change in the story is that AWS moment in terms of the supercharger, Ford, GM, 313 area code now using Tesla.

And I think the next steps, it's battery and the big drum roll. What I view as sort of the Super Bowl for them, it's AI. Because I could argue from an AI perspective, that's not even priced in here, which is why I think they're really, right now, I think ultimately just starting to sort of turn the corner on that strategy. What about Cybertruck? What are your expectations there? I think that's, if you look at it coming out of the gate, I think you'll start to see deliveries early next year. There's ultimately 200 to 300K units as it sort of gets to some sort of scale. And then you look what's happened with F-150.

I mean, this is something for Tesla that's just going to add to the overall growth as well as what they're going for in the consumer. And it's going to give them more scale in Austin, which ultimately is just going to be a big part of their success, especially on the battery side. You haven't mentioned the name Twitter once during this conversation yet. Is that overhang over in your mind? You cited it before as a near-term risk. He reveals the other day, Elon Musk does, about the financial issues that Twitter is still having. You don't think there's any potential overhang that still exists between his multiple jobs, if you want to put it that way? Look, I ultimately think the interview heard around the world, the Faber interview, I think that's where investors really better understood Musk's strategy, even when he talked about Twitter. I think the biggest risk, does he sell more stock? I more stock I mean of course there's always potential but I do think most of

that sky is in the rear view why is it most in the rear view they're big at a massive debt load still mm-hmm because I believe ultimately it's gonna be outside capital that would come in I mean valuations have already been written down I think you are starting to see in some say I'll say a stabilization to some extent on the advertising side. Clearly, Linda has a lot more work to do in terms of the platform, but I continue to view threads as barks worse than a bite.

I don't really view that competitively. That's what I'll call a Twitter killer. So let me ask you about Apple before I let you go, obviously, because you're one of the most notable analysts around that stock. You have the announcement, or at least a report, no announcement, a report today sends the stock up 2%. What are their AI aspirations? Do you as an analyst feel like you have any grip on what they're really working on and what ultimately it might mean in

terms of added earnings per share? I mean, our sense, I mean, from covering out for many years is that this is all going to be the build out. It's a matter of when, not if, that Cook and Cupertino come out with the AI App Store. And I believe that adds $30 to $40 per share to the overall Apple story. They'll continue to stay close to the vest in typical Cupertino fashion. But it's an install base, a golden install base, where AI is just going to be the other piece. And in my opinion, that's why it's part of a $4 trillion 2025 thesis for Cook and Cupertino. All right. We'll talk to you soon. Dan Ives, thank you. Thank you.

All right. Up next, the latest push to stop lawmakers from owning individual stocks as public outrage and support now builds for an end to D.C. trading. We'll break down the new bipartisan proposal, possible penalties that could be put in place as well. And actually, if it has any chance of going anywhere down on Capitol Hill, we're back on Closing Bell next. Welcome back to Closing Bell. Two senators set to introduce a new bill this week that would ban stock trading by lawmakers. Emily Wilkins joins us now from Washington. She's following that story. Emily Wilkins joins us now from Washington. She's following that story.

Emily. Well, Scott, Republican Senator Josh Hawley and Democratic Senator Kirsten Gillibrand do not agree on a lot, but they are teaming up for a new bill to prevent members of Congress and folks in the executive branch from owning or trading individual stocks. While there are laws on the books that currently ban members from using insider information to buy and sell stocks, Gillibrand and Hawley said those don't go nearly far enough and even the perception of elected officials using their role for financial gain

is reason enough for a ban. Gillibrand said in a statement today that it was, quote, critical that the American people know that their elected leaders are putting the public first, not looking for ways to line their own pockets now this isn't the first bill that would ban trades by lawmakers and you can see some of the others here the biggest debates right now are over who

the ban would apply to and whether officials can use a blind trust and Scott the top leaders in both the House and the Senate have been open to the idea of a ban, but whether it will become enough of a priority to actually get done remains to be seen. Do you have any feeling from those you've been talking to as to whether there is finally critical mass? I saw what you cited earlier in a report, the public on both sides of the aisle is so overwhelmingly in favor of this issue, which frankly seems like such a no-brainer. Oh, yeah.

I mean, Democrats and Republicans, both almost at 90 percent, saying that Congress needs to do this. I think really one of the big issues in Congress right now is just that there are so many other things to get done. You have the defense authorization bill in the Senate. You have the FAA authorization bill in the House, and then you got to try and figure out how to fund the government. So even though there is growing momentum for this, there are still some lawmakers who have concerns about it and there's just

so many other things to get done that it is hard for congressional leaders to really give this the priority. Emily, appreciate it very much. It's Emily Wilkins down in Washington DC for us. We'll continue to follow that story. The Dow heading up for its eighth day in a row, the longest winning streak since September of 2019. Our next guest says the market rally just beginning. If the Fed pulls off a soft landing, that is. Joining me now, Alicia Levine, BNY Mellon Wealth's head of investment strategy and equity advisory solutions. It's a big title. Big title. What are your big thoughts

on the market as some on the street are now taking up their targets? Right. So we've taken up our targets also primarily because the recession is nowhere in sight. And while we do have a 40% chance of recession over the next 12 months, that's getting almost close enough to the average year of 20 percent if you had two years in a row. So the data so far are telling us in the next three to six months the recession is not happening. And if that's the case, earnings will go higher than expected and then the multiples will move higher and the targets go higher as well. So so far, you know, credit to the Fed because they pushed on this, they pushed on this,

and there was a lot of skepticism that they could actually pull it off. I'm not 100 percent certain, but I'm more certain than I was. No, because people say it's too soon to sound the all clear. I think it probably is too soon to some extent. But if you look at what the, look, if there's no recession, you're then forced to say it's different this time. So if you say it's different this time, you have to say, well, what's different? I think the antecedents are different, meaning there were no imbalances in the economy. You didn't have credit stress going into this.

You have a mortgage market that is essentially a 30 year fixed at under 3%. So the normal transition of a higher Fed interest rate is not damaging the housing market to the same extent. There are pockets. So I would call out regional banks as an area of potential concern. Clearly, the real estate issue, $1.5 trillion coming due by the end of 2025, those are areas of concern. And then not least is yield. So if yields stay below 4%, we're in a happier place. And you saw last week when yields got above 4%, the market didn't like it. Yeah, well, we came down pretty quickly off that. I mean, your overall point is that things were different at the beginning, so they may in fact be different at the end. They could be. And I think we have to open our minds to that, that this is not automatic. So the normal way that you get credit contraction and the normal way you filter tighter Fed policy,

just very different. And let's talk about fiscal policy. Fiscal policy also apparently works with long and variable ads. And the Biden administration has passed two trillion dollars worth of spending that is now going to be poured into the economy, mostly in the industrial sector. So if that's where earnings are coming from, you stabilize earnings as well. It's just a different cycle than it was in 2006 and 2007, which I think most people were concerned about. New highs this year? What do you think? That's the poll we asked our viewers today. I'll say this. I think it's entirely reasonable with no recession to end the year with a 24-month retracement to the old high of 4,800. That seems reasonable based on history if there's no recession. What about where valuations are right now?

What some would say are just too rich to the historical average of the S&P relative to where we are and where earnings are now and that expectations for 24 are just still too inflated. Okay, so let's take out those top seven, which are trading at 40 times forward 12 months. I knew you were going to go here, right? You knew it. Well, that's because that's the comeback that people have for you. You take those out. Look what's working.

Financials, health care, you know, even energy's gotten a bit. So the areas that were left for dead are actually starting to work. Small cap are starting to work as well, which is telling you that if we have some sort of a cyclical recovery, then the earnings have to go higher. It means your multiple is not going to be as high as well. Transports have been working. I mean, other areas beyond tech are starting to look pretty decent. Right. It feels concerned. Like, look, we're paid to worry. That's what we do. We worry.

You have to worry about the left tail risk. I just think that the downside is not as dire as when we came into the year. And so, therefore, you have to start looking to what can go right. And this is what can go right. Well, you know, a raging or at least, you know, an advancing bull market makes people more bullish. That's just human nature, I suppose. Alicia, thank you. Thank you.

Alicia Levine joining us right here. Up next, we're tracking the biggest movers as we head into the close today. Pippa Stevens is standing by for us with that. Hey, Pippa. Hey, Scott. Well, one stock is staging a comeback after hitting a three-decade low. We've got the details coming up next. We're approaching 15 minutes left in the session today.

Let's get back to Pippa Stevens for a look at the stock she's watching. Hey, Pippa. Hey, Scott. Elevance Health hired today after beating quarterly estimates and raising its full-year guidance. The report follows a beat from UnitedHealth last week, and the optimism is easing concerns over a slowdown in medical procedures, which UnitedHealth triggered with a warning last month. Meantime, shares of AT&T rebounding after yesterday trading at a three-decade low

following the Wall Street Journal's investigation on lead cables. The company saying lead-clad cables represent less than 10 percent of its copper footprint of roughly two million sheath miles, while also saying it strongly disagrees with the journal's conclusions. The stock higher for the first time in 11 sessions with Verizon, Lumen and Frontier also jumping. Scott? All right. Bit of a relief rally, I guess. Pippa Stevens, thank you very much. Last chance to weigh in on our Twitter question. We asked, will we see record highs for stocks this quarter? And to add CNBC closing bell on Twitter, vote yes or no. The results are coming right after this break. Let's get the results now of our Twitter question.

Will we see record highs for stocks this quarter? The majority of you said yes. Almost 69%, as a matter of fact. Up next, we're less than 15 minutes away from Netflix and Tesla earnings. Both of those stocks have been on a tear over the last few months. We'll break down the numbers we all need to watch when the results hit the tape at OT. That story and much more,

we take you inside the Market Zone. All right, we're now in the closing bell Market Zone. CNBC Senior Markets Commentator, Mike Santoli, here to break down the crucial moments of the trading day. Plus, Phil Lebeau on Carvana's latest surge also what to expect on Tesla earnings coming up in OT as well it's not the only major report we're watching Julia Borsten on Netflix numbers out as well Mike Santoli begin with you front and center Netflix Tesla your thoughts yeah obviously the market is it's kind

of out on a perch when we're getting these numbers. It's the kind of stocks that have been mostly the recipients of the enthusiasm. So, interesting test on how they're going to be received. Very different, though, in a sense. Netflix perceived to be a very clean, fundamental story. They have all those levers that they're pulling. The buy side really loves the story. The sell side, only now migrating. So, kind of interesting.

Whereas Tesla, it's about how much the margins maybe go down. And does it matter, frankly, because that stock sort of moves on its own fumes. Their importance right now especially is what? It's significant, I would say, to that class of stocks. I'll be honest, I'm also looking at things like. All of a sudden getting overbought even after they've had this nice rebound so. It there's a lot of things that have been working together to keep this market. Kind of calm and in this uptrend extending this rally. And so we'll see if

any of them. Fall away right here as I watch the volatility index again perk higher as the S. and P. goes up so. People are starting to wonder if. If we're we're in for a culmination of this little rally, at least in the short term. You made me look at Goldman Sachs, which is green. And most of these bank stocks, to your point, lately back on the back of earnings have been green. It's been tough to get on the market's bad side,

even with bad news in the very short term. So I do think we'll see if that continues, if basically we're going to forgive a lot during this earnings season. And frankly, if it's really just people, you know, sort of emptying the tank of buying power because they haven't participated enough in the upside. Phil LeBeau, one of the most heavily shorted names

in this market for some period of time has been Carvana, up 39% today. That's got to be, you know, part of the story covering a little bit there. Sure. And Scott, this is what happens when you deleverage with a debt exchange. And let's be clear here. A lot of retail investors and I know they're not all the shorts, but a lot of the shorts are retail investors. I don't think they've understood that the story with Carvana has been how much leverage it had. Well, they eliminated a lot of that today with a debt exchange, essentially getting rid of or not rid of, but converting about a billion dollars,

exchanging some bonds for new notes, delays in some of the interest payments over the next two years. And the new notes will be secured by company assets. Oh, and by the way, they're going to be issuing three hundred and $350 million worth of new shares. That will go towards the debt exchange. By the way, Ernie Garcia and his father will be required to purchase about $126 million of that offering. But again, Scott, this speaks to the question of know what you're investing in. So many people would say to me, Carvana, that's really a play on the consumer and used car sales. No, it was a story of a company that has been dealing with massive leverage.

Yeah. Let's get a thought from Mike Santoli. Phil, hang on just one sec. What do you think here? Yeah, I mean, obviously, a very impaired balance sheet that's now being fixed. And it's a lot of stocks that were sort of once left for dead. And there was a significant chance of equity going to zero. Now that's off the table. But

there's your two year chart. So you see what a complete kind of boom time story that was at the at the opening. They were going to revolutionize this world. And it was never to Phil's point about really the ebb and flow of the secondary car market. It was all about how they got too aggressive on the balance sheet that's being fixed. But again, you know, let's forget about where it traded back in 2021. For now, it's more just a survival story. All right, Phil, set the table for us on Tesla, the biggie that you're looking for in OT today. Gross auto margins excluding zero emission vehicle credits. 16.9% is what the street is expecting.

Now, I've talked to Dan Ives about this and with other analysts. The feeling is if it comes in around there, we may not see much of a reaction with Tesla shares. If it comes in well below there, let's say in the 15% range, yeah, maybe you're going to start to see some sell off with Tesla shares. You know what, Mike? You could come up with a bunch of, or you could try to come up with a bunch of question marks, and the bulls come right back at you. You say, well, gross margins maybe dropped to the most in six years. And they'll say, yeah, but look at the demand that they're spurring by cutting prices the

aggressive way they have, choosing growth over profitability is Musk's winning strategy here. Yeah, exactly. It's the kryptonite that helps them to fly somehow. Earnings estimates for 23 and 24 are down more than 30 percent since the start of this year for Tesla. The stock, of course, is up, what, 130 percent. So it shows you that it's moving on something else, which is the long game of, guess what, there aren't real easy alternatives in the EV space from the rest of the manufacturers.

And it seems like they, for a while, are going to be permitted to try to play that market share game in the long term. It is fascinating to hear what they might say about competition from things like the price cuts on the F-150, because that's where they're not the incumbent. Electric pickup trucks, they're just getting into it. So it's kind of fascinating. I think it's a complete eye of the beholder stock, and we'll see what the setup means for the reaction. All right, and Phil's going to deliver it to us in overtime.

Phil LeBeau, thank you very much. Now to Julia Boorstin, who's waiting on Netflix in overtime, and they're looking to show us all that they figured this out. Julia, right? Well, there are really three key issues that I see as being in focus in Netflix's earnings. First is the strike. Analysts saying that Netflix is actually better positioned than the rest of the entertainment industry when it comes to the strike because of its international exposure as well as its backlog of projects. Second, there's Netflix's

password sharing crackdown. And third, the success of its relatively new ad-supported business. We'll have to see how these factors impact its subscriber numbers, which are projected to grow by about 2 million in the quarter. Now, just today, Netflix announced it is no longer offering a basic plan for new or rejoining members in the U.S. and the U.K. as it pushes its standard tier with ads, which it says generates higher revenue. Now, overall revenue is expected to grow 4 percent, while earnings per share are projected to decline by 11 percent. Netflix shares are up about 62 percent year to date, and analysts are still bullish. Half have a buy rating, 43 percent have a hold rating on this stock. Scott?

All right, Julia, we'll look for an OT. Quick word from you. Well, I think the way you might look at it is given how well the stock has performed in the last year or so or last eight months, there's 43% of analysts yet to be persuaded that it's a buy here. So, you know, there's another way to flip that. I think it's being perceived as a net positive that they're getting rid of that ad-free basic tier, that they feel like they have the ability to do that. I think it is a lot about how much they say the password crackdown has legs to it as opposed to it just being maybe a one-time rush of new members.

All right, so you're going to get eight in a row for the Dow. You've got new 52-week highs for all three. 35K above that for the Dow. Yeah. You got new 52-week highs for all three. 35K above that on the Dow. Yeah, a lot of the hurdles are being cleared, at least in terms of round numbers. The S&P 500, again, we're getting into a Friday monthly expiration. The future is trading above 4,600. A lot of this stuff is getting toward where you might say maybe enough for now. But the trend is so strong, the pullbacks have been very modest that it's hard to get too disturbed. It's been

this outbreak of calm among investors that that seems like it wants to last a little longer. I mentioned the volatility index. You know, I don't get too caught up in the day to day of it, but it's got this floor around 13. It's up today when the S&P is also gaining. It just shows you people are at least tensing up for the fact that once we get the meat of earnings season and the big market caps reporting, we might have to brace for just a little bit more two-way action. At some point, you're going to have to go from hurdle to maybe a high jump and then to a pole vault as expectations get ratcheted up as this market continues to go up. Yeah, unless we just get a little more of a pure momentum move and have everything kicking in at once, and then you get much more extended. To me, the bigger risk is that sort of upward spiral of hot money kind of

feeding on itself, and that's going to eventually make it unstable. But it really hasn't so far. I wouldn't get also caught up in the year-to-date return of the NASDAQ 100. It really is a round trip. It's still a few percent from its all-time high. Yeah, triple digits for the Dow. It's going to be eight in a row, as I just said.