Closing Bell - Closing Bell: Banking on a Year-End Bounce? 10/11/23

Episode Date: October 11, 2023

Will “just good enough” earnings be good enough to send stocks into a year ending run-up? Dan Greenhaus of Solus Alternative Asset Management and JP Morgan Asset Management’s Jordan Jackson give their expert takes. Plus, top chip analyst drills down on the strength in semis and what he’s expecting from the upcoming earnings season. And, Leslie Picker breaks down Birkenstock’s first day of trade.

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with a still unsettled market as rates, inflation, and of course the escalating situation in the Middle East all tug on investor sentiment. Your scorecard with 60 minutes to go in regulation, it's mixed, it's volatile. Yet again for stocks following that hotter than expected PPI report, yieldsields, which were mostly lower ahead of it, well, they moved mixed. There's your picture, the two years above 5%, the 10 years at 459. Equities, a little volatile as well.

They've moved lower, too. If there's a bit of a bright spot today, it's in tech, as several of the mega cap names have stayed in positive territory. There's a picture there, Meta, NVIDIA, Amazon, all up better than 1%. Energy's the weakest sector today. Crude continues its sharp pullback. We're keeping an eye there over the final stretch

as well. 83 bucks. That's a decline of 2.5%. All of it takes us to our talk of the tape. Whether just good enough earnings, which begin in just a couple of days, will be good enough to send stocks into a year-ending run-up. Let's ask Dan Greenhouse, Solus Alternative Asset Management's chief strategist. He is with me once again at Post 9. So rates have largely been cooperating in the past few days. Will earnings? Yeah, I mean, I think the answer is yes. I think this idea that earnings just need to be satisfactory or not is sort of secondary to the yield story, which you just brought up. And what I mean by that is pretty clearly you've seen a relationship between the two since the end of July.

You had the Bank of Japan. Rates and stocks. Rates and stocks. You had the Bank of Japan, and then you had the supply worries all hit at the same time at the end of the month. That was essentially the peak in the stock market. We've traded down ever since. And in the last few sessions, as rates have come off the boil, markets, equity markets have begun to rally again. I don't think this is saying anything everybody doesn't know, but it does underscore that right now that's the important part.

So rates are the beginning, middle and the end of the story for equities, at least in the near term, even if equities or earnings, excuse me, I mean, what was that? I think it was Barclays today used that word satisfactory. Sure. It's a satisfactory earnings. We're going to be good enough. Yeah. And listen, again, I think this is a yield story right now. Obviously, something more terrible in the Middle East notwithstanding. Sure. But listen, earnings are going to be fine whether they're down 1 percent or up 3 percent. We're coming out of the earnings recession and that theme is probably going to be validated. Boy, if ever a Fed minutes seemed to not matter so much,

this would be that moment, wouldn't it? I mean, they came out within the last hour or so. The majority judged one more hike likely appropriate. Some judged no further hikes would be warranted. Well, do you know what the 10-year was, the date of the last Fed meeting on September the 20th? No, tell me. The 10-year was 437.

So do you know what the 10-year was this past Friday? It was 479. In other words, you had a 42-bip jump in the 10-year. The bond market has done a lot of work for the Fed to the point where you've had almost every Fed speaker who's come out lately suggest, you know what, we probably don't have to do any more as a result of what's taken place with yields. Not everybody. Some who have spoken are not voting members. That's critical to keep important. We don't know where the chair himself lies. We're going to go into a quiet period coming

up soon ahead of the next meeting. But how do you sort of see where we are today relative to where we were on the question of rates and what the Fed may or may not do? Yeah, listen, I would take issue with one word that you used, which was probably. We're probably not going to do anything. I would swap out possibly not going to do anything. You're probably better. I think you're better saying that than I was in the word. But the point the point is the same. Yeah, we're maybe I'm being a little too nitpicky here. No, I think it's more accurate. But listen, I think the speeches have been on balance in general, have been of the idea that we're at the end of this thing, whether there's one more hike or not, or two more hikes or not. You're at the end of this, whether it's a month

or not ahead. But to the point, I think Lori Logan's speech, the president of the Federal Reserve Bank of Dallas, her speech is getting a lot of attention, and rightfully so, because she's explaining why we're probably at the end of this and why the move in yields gives, in some Fed members' minds, room to not do more. And I think it's important for everybody to read that speech and understand where some of these people are coming from. Lori Logan is not unfamiliar with this topic and monetary policy. She's not. Anyway, but yes, I think you're towards the end of this thing. You're coming out of the earnings

recession and getting back to the original question that we posed at the outset. Are we going to rally into year end? When you put this together, again, something notwithstanding in the Middle East, the bias is probably there for the upside into year end. Okay. So the bias is there because there is a good debate right now as to whether the market's primed for a year-end run you know partly due to rates coming down uh mispositioning if you want to describe it um that way and the earning story actually being decent enough to take you into the end of the year yeah yeah no i think so the the earning story again you into the end of the year. Yeah, I think so. The earnings story, again, you're coming out of the earnings recession, if you will. And whether you're up three or down two is besides the point. The commentary is what's going to matter about the consumer.

Obviously, the banks go first. And there is a lot of consternation about net interest margins and losses in various books, HTM, AFS, et cetera, et cetera. And that's going to be a problem for the banks at the outset. But when you get into the industrial names, when you get into the consumer names, I think the bias is probably to the upside. If anything, we're going to be looking for commentary on Ozempic and how this is completely reorienting, despite not being prescribed to anybody outside of the Upper East and L.A., is completely reorienting the economy. It's having a dramatic impact on

certain areas of the market, which we will get to a little bit later in case you haven't been following the tick by tick in every single sector today, because some of the moves are unbelievable and we'll show them to you coming up. So I'll just tease you with that. Some have suggested today to me that simply coming out of an earnings recession is good enough. I would push back on that and say, if you look at where the projections are, not only for Q3 earnings of this year, which are about to be reported, but then Q4 and then the turn into next year, we're starting to get to some pretty optimistic levels. How important is it to meet those levels, not just the fact that, well, we're coming out of an earnings recession, so we're at least trending in the right direction. So let's play towards it. In general, I think the answer is not very important. And what I mean by that is if we're

forecasting three quarters out, EPS growth of 10 percent and the actual number comes in at six or 12, that's largely not going to matter for the path of equities over long periods of time. Obviously, there'll be tradable fluctuations in the interim. But in general, earnings going up, stocks go up. That's how it works. I'll get back to the yield story. And you've seen it here. To me, the yield volatility is the problem for markets. It's not just that yields went up. It's that they went up pretty dramatically. You mentioned 40 plus basis points since the last Fed meeting. That throws a wrench in the works. And when you look historically, my work bears out that that rate and inflation volatility is the biggest problem for multiples.

And so I'm not surprised, despite earnings being roughly earnings expectations being roughly unchanged over the last couple of months, markets came down. That was largely explained by the multiple to me because of what happened with yields. It's hotter than expected PPI this morning. Now, you could strip some things out and maybe it wasn't as hot as the headline would suggest. But does it raise the bar and the pressure now for tomorrow's CPI? I will also say no. A year ago, no one in this market even had any idea the PPI was released. See, I thought you were going to say yes. No, but I think-

Because there's a story being told that inflation is moving in the right direction. It is. Yeah, but you can't have a reversal of fortune as it relates to inflation, or you're going to have a greater chance of a reversal of fortune within stocks because that just keeps things unsettled and the Fed more uncertain. You've got to keep the trend intact of inflation coming down. I'm not on every day, so I forgive the viewers for not remembering everything I say, but I've been mentioning—

Though everything has been memorable. That's right. Let me just throw that out there. Listen, I'm on weekly for a reason. All say, but I've been mentioning... Though everything has been memorable. That's right. Let me just throw that out there. Listen, I'm on weekly for a reason. All right, good point. But in all seriousness, it's been a theme of mine, and not only mine, that the fourth quarter, the relentless, Labenthal-enthusiastic decline in inflation is going to abate.

And the next few months should be that. Now, it's not all only energy. You've got airfares and a couple of other things that are going to give support to the CPI tomorrow. But the next few months, probably not going to be point ones on CPI. And then the market's going to have to wrestle with that. But but I don't this is not Aesop's fable. I mean, the inflation rates are coming down. My point all year and it remains now is you're not going to get to two percent in a uninterrupted decline. It not going to get to 2% in a uninterrupted decline. It's going to be a little choppier from here on out.

All right. Well, let's bring in Jordan Jackson of JPMorgan Asset Management, joins the conversation. It's good to see you again. So are we set up? Are we set up well? Or are there still too many risks in your mind? You know, I think very tactically, there are probably still too many risks, in my view, when I say tactically, probably till the next FOMC meeting. I think it still remains to be seen whether the Fed will feel like they've got enough ammo or they can go on pause here. I'm a little bit more in the hawkish camp.

I think they'll have enough evidence to maybe go again. When you look at the revisions to the payroll numbers over the last three months, the three-month moving average has jumped up from $150,000 to $266,000. You could almost argue there's been a reacceleration in hiring over the last couple of months. And this is sort of further corroborated by the job openings number, which took a tick higher in August. We'll see how that shakes out in September. Also, when you look at the skew in the FOMC members, just about almost every voting member views core PCE as skewed to the upside from here, where you have no members that see core PCE as skewed to the downside. And then when you look at sort of the broader growth narrative, our numbers are converging with the Atlanta Fed's GDP tracker at now 5 percent. Our numbers are closer to 4 percent. But we're

still looking at some pretty firm growth numbers. So you put all this together. And then last point I'd make, when you think about the inflation narrative over the next couple of months, autos, I'm a little bit worried about new and used cars with the strikes. You're already at low levels of inventories. And now the strikers add another layer of maybe inflation to the auto sector. So obviously energy as well being a wild card. And so, look, I think they want to put the last nail in the inflation coffin. And that skews me to be that they want to go again before the end of the year. All right. So there's a lot to get to within that.

The first thing I think of, Jordan, is when does good news just become good news? Why can't we accept the fact that we may actually have a soft landing? That, yes, job growth continues to be robust, but at the same time, and you left this out, by the way, wages within that same report came down. That is arguably more important than the headline number of how many jobs were added is it not remember since the early nineteen eighties the average wage inflation rate

has been about three percent over the last three years consumers have enjoyed wage inflation of north of four percent now i certainly acknowledge that isn't it is in a downward trend of the now with where inflation is at today, you're seeing real positive wage growth, particularly amongst lower income consumers. And look, the reality is there's, you know, there's an old adage, a penny saved is a penny earned. But for the American consumer, a penny earned is a penny spent. So as long as you absent a meaningful tick up in the joblessness or tick up in the

unemployment rate, I still think consumption remains fairly firm over the next couple of quarters. And I don't think we move back to good news being good news until the Fed is done hiking. And that won't be until next year. Well, that's your opinion, obviously. Good news, good news. We can't, Dan, it's not, you know, this, you could pick it, whatever you want to, within the labor report to make your case. If you're more negative stocks, you say, man,

the economy is too strong. Sure. We're adding too many jobs. The Fed needs the employment market to slow down. If you're more bullish, you're like, well, who cares about too many jobs? That's actually good. Increases soft landing, wage growth coming down. That's most important. And with the moving yields that we just talked about, there's no way the Fed's going in November, no less December. Maybe they're done. Yeah. Listen, I am generally of the view that good news is good news. I think obviously there's moments in time where Fed activity is a little more, the market's focused on it a little more. But in general, in an environment like now where we're worried about a recession, and we've been worried about a recession, including myself, for a year, good news is good news.

And creating more jobs is better than not. But for investors out there, I'll come back to a main point of mine. When I'm looking at the investment landscape, we worry about this because the Fed is going to interrupt it. We're creating too many jobs or there's too much wage growth and the Fed's going to shut it down. The Fed has told us numerically in their, what we call the SEP or the summary of economic projections, that they are not going to. They can talk and tell me and talk and tell me, but the numbers they put on the page, that until they stop doing it, reporting the SEP, which they should, but anyway, until they stop doing it, tell me that they are not going to interrupt the expansion in order to get the inflation rate down where they want it. Then I have to be long stocks on balance. Jordan, if you knew that the Fed was done,

let's just say we had a crystal ball. We look into it and they're not going to do anything. And the next move is going to be a cut. Who knows when that's going to be? But that's the next move. Would that make you more positive on stocks? That would make me more positive on stocks. You know, it's interesting if you were to look at 180 day rolling correlation between stocks and bonds. It's fascinating when you look at the Fed and overlay that with the Fed funds rate. When the Fed funds rate moves up, i.e. the Fed is tightening monetary policy, the correlation was positive. Once the Fed goes the other way, the correlation turns back to negative and bonds are back to being the balance of the portfolio

and you potentially get a relief rally coming from risk assets. And it's interesting. Typically, the long rates tend to peak about three months prior to the last rate hike. Now, maybe we've seen that peak this month, late last month, and you actually get maybe November and December hike.

But investors should not wait for the Fed to start cutting rates to start to move back into duration assets. On average, over the last five rate hiking cycles, the 10-year has fallen by about 100 basis points after the Fed delivers the last rate hike and then continues to move lower by about 30 basis points. But suffice to say, don't wait until the Fed starts cutting rate. Wait till they're done. And so to your point, if the Fed said that they were done and we had a perfectly crystal ball, I'd start overweighting risk assets, particularly growth, given that we have a bit of a reset in growth valuations.

I think growth leads to charge through the end of the year and into the beginning of next year. Then you need a little bit more balance, given real rates will be positive. Jordan, the problem I have with what you just said is the long-term yield will decline by 100 basis points. Investors should get into long duration. And also, we should start getting long tech stocks

at the same time. Roughly speaking, that's what we said. But what I'm curious to explain that dichotomy is the reason yields come down is because the Fed's done raising rates because they've done enough damage to the economy to cause a recession. And if I'm going into long duration assets on the idea that the average will become the reality over the next, say, six months, why would I want to be long tech stocks into an environment presumably again that'll be recessionary and and uh...

uh... probably come with an associated decline in earnings yeah well uh... we have to remember that you know tech is still considered as a a long duration equity writes an environment in which yields can come down uh... and i i do think that you'll get a more valuation driven rally coming from the growth your long duration parts of the market in an environment in which rates can come down. And to your point, you're absolutely right. But what I will highlight is, you know, markets and the economy can be on two different sleep cycles. Right. And so stocks will sell off before the economy starts to fill it. The bond markets will start to respond in accordance to that slower growth, lower inflation outlook.

And so maybe we've kind of already seen a bit of that correction or sort of weakness from a valuation perspective, given the move higher that we've seen in rates. And then I think that's how you get that sort of valuation-driven rally coming, again, those more longer duration growth, your growth, your equities. You're really doubting that growth is going to be the place to be like the mega caps. And you could I mean, you ask why? I'll tell you why. I mean, balance sheets bank on them. Right.

You can play defense and offense in there. Right. Offense, you're going where the proverbial puck is going. AI and everything else, you play defense because in part of the balance sheets that I suggested, among other reasons. And then more guaranteed earnings, even though, you know, revenue growth for a lot of those mega cap companies has come down over the last few quarters. Don't you believe that that is where you're going to get more guaranteed earnings growth than some of these other more cyclical, dare I say, more risky areas of the stock market?

Yeah, listen, this is a complicated conversation and we're not going to solve it at the end of the A block, as we call it in the business. I just solved it. But listen, you've got a couple of narratives going on. One is AI. One is, in all seriousness, Ozempic and what effect that has. You've got all the infrastructure spending that's in the system that's going to benefit some of the industrials. Positioning a portfolio in an environment like that is more difficult than usual, and it's always very difficult. But that said, if you're going to have, in the environment that was just laid out, if you're going to have a recession, even the impenetrable balance sheets, the 50 companies in one that make up those magnificent seven, although less Tesla, which seems to be way more influenced by interest rates than everybody else, I can't believe anything is insulated. No, they may go down like everything else, but they're going to go down less.

Sure. talking about relative performance, then a lot of those names presumably are going to be insulated. Assuming the current trends for Google, for Meta, for NVIDIA continue, they're presumably going to be more insulated. That's right. Even though they come with already higher valuations. All right. We'll leave it there. We'll see you next week. You already booked yourself on next week. You said you're on every once a week, right? Am I? Okay. Well, I mean, that's the way you said it goes. Folks, tune in. Our showrunner over there, we're not so sure. We'll discuss later. Jordan, thanks. We'll talk to you soon. It's George Jackson joining us. All right, let's get a check on some top stocks to watch as we head into the close. Pippa Stevens is here for us today. Hi, Pippa. Hey, Scott. Well, Exxon and Pioneer Natural Resources on the move after Exxon said it would buy the shale driller

in an all-stock acquisition valued at roughly $60 billion. The deal will more than double Exxon's output in the key Permian Basin. This is the oil giant's largest deal since buying Mobil in 1999 and comes just a few months after it bought pipeline company Denbury. The deal is expected to close in the first half of 2024. And Brinks is denying a Reuters report that it's in talks with rival NCR about a merger with NCR's ATM unit. NCR has been working to separate its digital commerce unit from its ATM division and plans to complete that process

on October 16th. The company said this morning that its CEO will retire once the separation is complete. Scott? All right, Pippa, we'll see you in a little bit. Pippa Stevens, we're just getting started right here. Up next, trading the semi-strength. You know the Sox is up nearly 40% this year. Now top chip analyst Stacey Raskin joins us just after the break with his top picks in that space and his forecast for the big chip names during earnings season. As we head out, a check on Birkenstock. That stock, look at that. It is lower by 12%.

Remember, priced at 46. It's currently trading at 40. Brings us to our question of the day. Would you buy it? Would you buy that IPO, the Birkenstock IPO today? It's trading below the price. Maybe you think you're getting a deal. Vote yes or no at CNBC Closing Bell on X. The results later on within the hour. We're back on closing bell. Semiconductor stocks having a strong start to October, the sector gaining nearly four percent. But will the bounce have staying power? Let's bring in top chip analyst Stacey Raskin of Bernstein's. Good to see you again. You want to answer the question first and foremost, will it have staying power or not? Well, I guess we'll find out in a few weeks when earnings starts.

No, I guess you're right. I mean, what are you inclined to think heading in? Yeah, you bet. So, you know, you're right. The sector has been pretty strong year to date. It's been strong so far this month. I would say over the last, like, you know, three or four months, it hasn't quite been as strong. Both the sector and the broader market have sort of sold off from, like, the July peaks.

Now, that being said, I am a little nervous sort of overall, just valuations in the sector, even though they've come in, they're still very high. I think the SOX is close to 24 times earnings. You almost have to go back before the financial crisis to find absolute multiples that are that high. It's something like a 25 percent premium to the S&P. So overall expectations are fairly elevated. I think going into earnings, it really depends on the end market, too. This is kind of an asynchronous cycle. Different end markets are happening at different points. Things that were very strong during COVID that rolled over hard are probably bottoming. PCs, for example, looks like the inventory correction

in the channel is mostly done. Overall demand, it's not super, but it looks like it's stabilized. Smartphones have been awful. They still look pretty bad, but at some point, we've got to be a lot closer to a bottom than a top there. Traditional data centers, pretty weak. The enterprise spending is weak. Cloud spending is shifting to GPUs. And on that note, AI is off the charts, as we know. I think the more incremental worries going into this earnings season is more on the industrial and the auto side. These are end

markets that were very robust during COVID. And over the last quarter, so we've started to see some cracks, particularly in automotive. That's one in particular I will be watching as we get into the end of the year, if the strength that we've seen the last couple of years finally does start to fade. Oh, so I wanted to ask, let me, because you went there, I have other questions, obviously, but NXPI, because of what you just said about autos, you worried about that name because of the strikes? Well, because of the strike, like, well, since strike is sort of on top of everything else, I've been nervous about auto for a while, simply due to the divergence between auto semiconductor shipments and car shipments, and it's been getting bigger and bigger and bigger. To be clear, I've been sort of been nervous for almost two

years. I guess to this point, I've been wrong. Auto has been amazingly resilient. But over the last quarter or two, we've started to see cracks from from other companies that play in that space. NXP, as far as I know, is still saying things look OK. And I would say for NXP, if auto is OK, that stock looks pretty good but auto is 60 of their revenue so that's that's what makes me a little bit nervous and it's not really an nxp specific thing it's just i am nervous in general about auto the strike you know we'll see how long it lasts that that'd be on top of everything else i think i did i gotta be honest with you i had a little bit of a chuckle um i saw some of the notes that suggested you said you've mellowed on Intel.

I'm like, the guy was in a deep slumber on Intel, and he maybe opened one eye. And now how do you mellow from that state? So as you know, and I think what you're referring to, we did upgrade it. Yes, that's what I'm referring to you know the title of that note was we hate this call but fine um i remember it well that call is on the back of pc um a cpu channel normalization it's actually played out like a champ um the channel has normalized the company's actually positively pre-announced the last quarter as well as this quarter actually that the quarter for intel should be pretty good they've already said they're coming into the upper half of guidance. It's mostly that PC channel normalizations. That's all good. My guess is going forward, Intel's revenues can actually,

maybe we can see some upside. And certainly this quarter, we will. I think there's some question on margins now. The CFO recently was sort of talking down the gross margin trajectory next year a bit. So that's an uncertain kind of thing. I will say for Intel, I think they're doing the right thing. They sort of identified some big buckets of cost that they are going after. They've sort of woken up to the fact that they need to be more competitive from a cost standpoint on their manufacturing. If they can't be competitive internally, they'll never be competitive building an external foundry model. So they're doing the right things. They do have a lot of wood to chop, though, from here. So that's enough to kind of keep me sidelined. But at a minimum,

at least their business looks like it's bottomed and we're at least through that cycle. Okay. I guess you've got to start somewhere on a rebound. So your top picks are NVIDIA and Broadcom. But I want to ask you the question, I guess, this way, because I think the story is well known on NVIDIA and Broadcom to some degree. I had a portfolio manager within the last day or so on this program suggest AMD over NVIDIA. On the point being that, well, the NVIDIA story is mostly known. It's in the price. And AMD's got some new chips coming.

Well, that's the question. I'll ask you. Hang on. AMD's got some new chips coming well well that's the question i'll ask you hang on amd's got some new chips coming and lisa sue deserves some you know good feeling here too not just giving everything to jensen wong sure sure so let's talk let's take those one at a time so nvidia is it in the price? NVIDIA is not an expensive stock anymore. It's only about 30 times forward earnings. And I can still make the argument that those sell-side forward earnings may still be too low. This has been the scenario with NVIDIA. The stock's gone up a lot, but the earnings have gone up even more. And the multiple's been actually cut in half, if you can believe it. It's actually not an expensive stock,

if you can think they can make the numbers. And I think they can make the numbers. They may even be able to do better. And they've got not only is this product cycle incredibly strong, they've got more product cycles that are coming next year. They're not done by a long shot. Now, with AMD, so going into the earnings, I think there's some tactical concerns. They've got a very big ramp built into the back half for their data center business. And I think that's doable. Most of it is the El Capitan supercomputer. I'm actually worried about Q1. The street estimates, they have data center flat into Q1, and that may prove to be a little overly optimistic. So I think there's some tactical risk to the numbers. And then on their AI story,

they've kind of admitted it's not really happening until the second half of next year. They've only just barely sampled the parts. So they're not in happening until the second half of next year. They've only just barely sampled the parts. So they're not in volume until the second half of next year, which is a ways away. And then at that point, NVIDIA will be launching Blackwell, which is their next generation part. So I still wonder. But there is a thesis that I have some sympathy for, which says the opportunity is so big it doesn't matter. You know, it's $100 billion. They'll get 5%, and that's fine.

And I would say if that happened and they got five billion dollars yeah amd would probably be a good stock but in a scenario with an opportunity that is that big if that's what you need to believe for amd i'd rather own nvidia in that in that scenario anyway so we don't have to worry that is the demand there or not i think the demand is there i got you we'll leave it there continue next time i appreciate it very much. Stacey, thank you as always. All right. Stacey Raskin joining us on Closing Bell. Up next, five star stock picks. Capital Wealth Planning's Kevin Simpson is back breaking down his latest trades and how he's navigating all of this uncertainty within the market. That's just after the break. Closing Bell right back. We're back on Closing Bell. The major average is bouncing off session lows as stocks grapple with today's hotter than expected inflation read.

And, of course, more bond yield volatility. Our next guest, though, making some big moves within his portfolio, seems to always be doing that, which is why we like having Kevin Simpson of Capital Wealth Planning right here at Post 9 to tell us. I mean, you remain pretty active in the market. What does that say about sort of your psyche about where we are right now? Well, I'm still nervous. So we're trying to find opportunities. Some of these moves are because the stocks have underperformed so much that we're bailing on things.

We use a relative stop loss and eventually the pain gets too much. So you move away from them. The good news is you did a great show earlier this week about dividend growers, which is the world that I live in. And I feel like there's momentum starting to build up under the surface. Right. Not just dividend payers, dividend growers. Big distinction, because I think the high dividend stocks for many years was a proxy for fixed income. You know, you'd look for that when there was no alternative. Now there is. I mean, you can get five, six percent in the money market now, and that feels great. In fact, I saw something that said there was over six trillion dollars in money markets

right now. Unbelievable. Not surprising. So on that note, a bunch of focus on Staples stocks, right, that over the last few weeks have really gotten hammered. Now, some are rebounding nicely. Pepsi's earnings helped. That stock was up. You sold General Mills.

It speaks to sort of this pain that you endured. And I suppose you threw in the towel and said enough is enough. We did. And that's the problem. You know, we love the company. I can't believe how poorly it's traded. But when we have a relative discipline, we're going to stick to it. So if a stock underperforms, we move away from it. You know, we still have exposure to the space with Coca-Cola. It's performed well. If it has anything to do with what Pepsi did to kind of mirror that, then we should be in good shape. Did you buy more of that, by the way? Did you

buy more Coca-Cola on its pullback and on Pepsi? We haven't owned Pepsi in quite some time, but we have been buying Coca-Cola pretty aggressively on the pullback. Oh, you have been? Yeah, I think that there's value there. The dividend growth, just a stalwart company. Pepsi did a great job, so I'm hoping Coke will follow. You bought more Cisco.

Yeah, you know, Cisco I bought for the first time in a really long time. We were here the day they announced the Splunk deal. And that wasn't really the catalyst for it. But I think if that does go through, it does help with a lot of things having to do with cybersecurity, software. It's a company that even in the absence of the Splunk deal prints money, 3% dividend, consistently growing that dividend. It's just a constant pipeline for cash flow for shareholders. The next one is an interesting move that you made just relative to this still unfolding story in the Middle East. And we don't know to which degree it's going to escalate beyond where it already obviously is. You trimmed Lockheed Martin.

Day after this news broke, I mean, the first trading day was Monday after the weekend. Obviously, you saw defense stocks shoot higher. You sold into some of that strength? We've been selling Lockheed since September around $4.50 for relative underperformance. That's how lousy this sector and this stock has been. So looking at this opportunity to sell out of it, it speaks nothing to what happened over the weekend. It speaks more to the fact that I think there's dysfunction in Washington, and it's going to take some time for them to get maybe their act together to do what we would all hope that they would do, which is to support Israel, to continue to support the Ukraine. I still have some Lockheed Martin, but we've been selling it purely as you would, are even more emboldened now to put more money into defense. Wouldn't those stocks continue to go up?

I've had such lack of confidence in Washington over the past year. It violated our price point. So we have to follow the rules. I hope that happens. I hope we can get back into the stock. Same with General Mills. It's a stock I'd like to buy again. But if we're looking at it from pure price performance, we can't wait it out. You wrote a covered call on Visa and SLB. Tell me why. We've had some strength in Visa. We wanted to write a call into that strength,

and there's been a lot of volatility in SLB. That call's only 4% out of the money, Scott. We wrote it on half the position. But if you annualize the premium, it comes out to a 25% annualized premium. We'll fight for every penny. Yeah, you will. Always active, Kevin Simpson. That's your new nickname. Thanks for being here. Capital Wealth Planning. Up next, stunning testimony in the Sam Bankman free trial, a star witness on the stand. You won't believe some of that testimony. In fact, we are live from outside that courthouse right after the break. Closing bell is right back. We're going to go back to Pippa Stevens now for a look at the key stocks that she is watching with about 15 minutes to go. Pippa. Hey, Scott. Well, Caesars is higher as Stiefel reiterates

its buy rating on the stock and raises its price target. Analysts say the recent pullback has created a solid buying opportunity and cites catalysts on the horizon like the upcoming F1 race in Vegas and next year's Super Bowl. Meantime, solar companies show technologies jumping after Goldman upgraded the stock to a buy rating. The firm's new $28 target implies 60% upside potential. Based on improving gross margins and strength in utility scale, solar shares, though, still down 17% in the last month. Scott? All right. Pippa Stevens, thank you so much. We are following, as I said, the latest developments in the Sam Bankman-Fried trial. Carolyn Ellison, his former girlfriend and the head of Bankman-Fried's crypto hedge fund on

the stand today. Kay Rooney outside the courthouse with the latest. And to say the least, this testimony today has been shocking, if not explosive, Kate. Scott, that's completely right. Caroline Ellison has been calm and collected throughout her entire testimony. She broke down on the stand this afternoon. She started crying when the prosecution asked her about what has been a chaotic week or what was a chaotic week when their companies filed for bankruptcy. She said she felt an overwhelming sense of relief when the truth finally came out. They showed some texts

between Bankman Freed and Ellison in which she says, quote, it's been it's the best mood I've been in in a year when this was all going on. She said she did feel a sense of guilt about some of the people that trusted us who we, quote, betrayed. They did talk about that week in November and trying to raise emergency funds. They named names like Sequoia, Apollo, Silver, like they were picking up the phone, trying to get investor money. And earlier today, Ellison described living in a constant state of dread when she was running that hedge fund every day. She said she was worried about not being able to meet FTX customer withdrawals. She said Bankman-Fried knew about this.

In order to plug a hole that FTX had, Ellison said Bankman-Fried tried to raise money from the Saudis, in particular, Prince Mohammed bin Salman, MBS. And at another point, Ellison says Alameda executives paid a $150 million bribe to Chinese government officials to unlock some of their accounts they had on a Chinese crypto exchange. There has been some tension between these two in the courtroom.

Both are avoiding eye contact. Bankman Freed looking stressed at certain points. He has not looked at her. Testimony continues this afternoon. We're going to get back inside. Scott, we'll bring you any of the latest. I appreciate that very much. Kate Rooney, thank you. Last chance to weigh in on our question of the day. We asked, would you buy the Birkenstock IPO today? You can head to at CNBC closing bell on X. We have the results just after the break. To the results of our question of the day, we asked, would you buy the Birkenstock IPO today? The majority of you, wow, that's a big discrepancy there.

One of the largest I think we've seen ever in a poll of ours. Eighty nine percent say no. Remember, price forty six trading well below that right now. We'll have much more on that, by the way, including some breaking news regarding it from our own Leslie Picker about to come up here and tell you exactly what it is. Plus, shares of Novo Nordisk are popping. We'll drill down what's behind that jump, how it's impacting other parts of the health care sector next. That and much more when we take you inside the Market Zone. 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. Leslie Picker is with us on Birkenstock's market debut and some breaking news coming up. And Angelica Peebles on Novo Nordic's latest Ozempic breakthrough and the impact it's having on a number of stocks today.

But Mike, we're making a nice little move here. Back to green as we approach the close. A lot of the mega cap names a little volatile today. Most are green. Yeah, I think it was relatively comfortable little digestion after a few days sprint higher. I do think that we have big picture. You know, the imminence of $100 crude oil is not really with us at the moment. You have yields coming off the boil and the dollar easing back and Fed officials not looking to work too hard to add to the tightening conversation. So that to me is, you know, also seasonal factors are starting to work in your

favor. So that's the backdrop that explains why we got up to where we are. Is it interesting to me that for a second day in a row, the S&P 500 tries to get above one of these very widely watched levels, 43.75. We're right there now. And that's like the bottom end of the zone where people think maybe we could hit some friction. So we'll see if it does or not. Yesterday's high was about 10 points higher. But it does seem as if people, once the market doesn't break down and once you have some of the macro factors look less scary, people suddenly feel underinvested because you really did have a lot of aggressive liquidation,

especially by a lot of the systematic traders coming into last week. We mentioned it's been a bit of a rough debut, if we call it that. Leslie Picker on Birkenstock. And you have some breaking news for us, which I'm really hyping up. So what is it? You are hyping it up. I don't know if it's, I hope I can deliver and be worthy of the hype here. But just kind of as you do these step backs and these postmortems of why would you lead to a decline on the first day of trading,

especially with something that priced, you know, toward the middle of the range, maybe a bit below the middle of the range. And look, it's down 12.5% right now. So just chatting with some sources, getting some color on what that book looked like. And at the outset, you don't really see any major, major issues here. I'm told that the vast majority of the allocation, about 85%, was the top 20 investors. These are long onlys. These are people that you work with to ensure that they're holding the stock for the long term, not flipping it on day one. Only about 5% retail, 5% hedge funds. And if you see a bigger proportion of retail, bigger proportion of hedge funds, that would indicate some potential issues because the risk of them flipping is higher. But here is the big challenge with this one,

valuation. This is not a market where you push on valuation. And so I'm told that during the roadshow process, during these conversations, there were a lot of discussions about valuing this company on the basis relative to EBITDA. Now, a lot of the retail and especially these brand footwear comps trade on the basis of price to earnings. EBITDA looked somewhat more favorable for Birkenstock, and therefore that's kind of how these valuations were justified. So even though they priced in the middle of the range, it didn't necessarily guarantee a higher, more demand because investors in the current market, they're just kind of sick of it. Now, this is what's really interesting about the IPO market right now because we've now seen a pattern. We have enough of these deals that we can kind of figure out where the similarities are. And we're seeing all these deals get oversubscription numbers, oversubscribed.

I mean, you saw the Reuters piece from last week that said this was going to price at the high end of the range because they had enough demand there. Well, look what happened. But then you also are seeing such languishing aftermarket performance. There's a clear disconnect between what's going on in the roadshow and what's going on in the aftermarket. And, you know, that's something that I really haven't seen in my 10 years of covering this. Wow. I think that lived up to the hype. I mean, where else are you going to get that kind of detailed under the hood information? Thank you. Leslie Picker, Angelica Peebles, Novo Nordisk. Big story today, not only for that company, but the residual impact on many other stocks. What do we see? Yes, Scott. So Novo Nordisk is ending a trial about one year early.

And that trial was looking at Ozempic, which is the diabetes drug. And that trial was looking to see if people who have type 2 diabetes and chronic kidney disease, to see if that would help slow the progression of the chronic kidney disease. And it's really a good thing that they're ending it about a year early because it means that it already met the threshold to declare success. Now, Novo is saying that they'll have the full results early next year, about in the first half. So we'll see more then. But investors are really excited about this because it could be yet another opportunity for Ozempic. Yeah. Thank you, Angelica Peebles, for that. And the impact, Mike, on some of these other stocks has been pretty dramatic. If you look at some of the hospital names, Tenet, HCA, and then the medical device makers are almost all down.

I had somebody reach out to me in the medical community, suggest that this looks way overdone. Yeah, it's clearly investors are very skittish. And what they see is very few beneficiary disruptors and an entire industry that can be, in theory, eventually disrupted. They're definitely rushing to price those things in in an aggressive way up front. I do think when it comes to certain types of medical devices, I over said this. The first element of the bull case for a lot of these artificial joints and knees was average weight of Americans and age of Americans is going up. I mean, it was very much part of that story. And, of course, DeVita, the dialysis center operator, that's really direct you. Oh, that's down huge today, right?

20-something percent? In the zone of, you know, obviously less kidney disease, you're going to have less demand. But I agree with you. People are kind of selling first and we'll figure it out later. As usually happens, right? It's the knee jerk and then the reversion. I mean, once the dust settles. You could almost look at it as, you know, look at how Google traded down on a relative basis when the AI hype got going, because everyone all of a sudden decided they were going to be a net loser. That stock is up 40 percent, by the way, year to date. It is up

again today. It's up 4% in a week. So we've got about a minute left. And let's focus on what needs to happen tomorrow morning, you think, from a CPI standpoint, after the PPI perplexed some on where inflation is going from here. And it definitely had an impact, it would seem, on the bond market. Yes, it did. At least it sort of halted some of the buying in there at the short end, for sure. Obviously, it's the core. Everyone is fixated on core services outside of housing.

We'll see if there's any surprises in there. If not, I think the market can live with it. The responses to the CPI number have not been all that dramatic in recent months because the numbers have been coming in relatively close to estimates. It's not quite been as much of a spring-loaded release as it was last week. But the bond market's going to tell us, you know, if in fact we can take any comfort in the trend of disinflation once we get it. All right. Well, the folks from Hormel here, they're clapping.

I guess they have good reason to. We're going out in the green. The bell rings. I hope there's chili. Where's the chili?