Closing Bell - Closing Bell: Bet on a Year-End Rally? 10/31/23

Episode Date: October 31, 2023

Can seasonality spur stocks higher into year’s end? Sofi’s Liz Young and Veritas’ Greg Branch give their expert forecasts. Plus, BTIG’s Jonathan Krinsky is charting out the key levels to watch in Nvidia. And, top chip analyst Stacy Rasgon breaks down what he is watching ahead of AMD results after the bell.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with all that is riding on the next few days. The Fed decision tomorrow, Apple earnings on Thursday, jobs report to end the week. Those events surely to decide whether the best month of the year historically for stocks gets going with a boom or bust. In the meantime, your scorecard with 60 minutes to go in regulation feels a little bit of a wait and see for the markets as stocks go for their second straight up day. We're adding a little bit. There's the Dow third of 1%, S&P two-thirds, Nasdaq's green, Russell's green.

Yields are playing. We'll tell you about those in a second, too. Doesn't mean there aren't some big movers as this final stretch begins, though. Caterpillar dragging the Dow. It reports earnings, warns of softening demand. And China, it's one of the weakest stocks today, down more than 6%. How about VF Corp? Sliding as it launches a big restructuring, cuts its dividend.

Look at the stock, down 15%. Pinterest, though, it is surging on its own earnings as we highlight one of the biggest upmovers today, near 19%. Elsewhere, financials higher, definitely a defensive tilt somewhat today. Utilities remain one of the better sectors. There you go. But financials leading the way. As for interest rates, well, with the Fed meeting underway, 10-year holding steady below 4.9%.

487 is where we are as we begin the final stretch. It does take us to our talk of the tape, the great debate over where stocks are heading in the next couple of months, whether seasonality can spur stocks higher into year's end. Let's ask Liz Young, SoFi's head of investment strategy, with me here at Post9. It's good to see you. Welcome back. Good to be here. So what do you think? Seasonality definitely gets better. November, best month historically. December, second best.

It's like good riddance to the last three. But you've been kind of cautious. So what do you see now? Yeah, well, I mean, the three months in a row that we've had since the most recent top in july have been orderly but tough and persistently tough and it seems to me like there are people looking for more reasons to sell than reasons to buy and we continue to have this downward momentum and we're not really getting a lot of reasons to stop doing that granted we're not we didn't have a catastrophe there hasn't been some sort of negative shock there continued to be headwinds. And I think we're aware of what all those headwinds are, which is the good thing. We know what the big risks are out there.

But there continues to be this momentum and sentiment that we're just not sure. We're getting to the end, probably, of the hiking cycle. When will those legs kick in and how bad will they be? Okay, so that seems to be the central question. Those who are cautious, if not negative on the market, Dubrovko, Lakers, JP Morgan was on halftime. Yes. And talked about the headwinds in the macro. The fundamentals are going to slow the lagged effect on and on and on and on. And that is ultimately going to mean earnings are too high and the stock market is as well. And then the stock market is going to correct as a result of all of that. How do you counter that?

Right. How do you what is the counter to that, that the economy remains strong enough? Inflation comes down, Fed's done, earnings are OK. How do you build a case against that? I think the counter and I believe somebody it might have been Josh, said it, something along the lines of the idea that the consumer holds out until this is all over, right? That even the lower end consumer can stay supported until inflation comes down and we get more clarity about rates. I'm not going to counter Dubrovko because I agree with Dubrovko. And I do think that we're seeing slowing already. We're going to see more slowing. And, you know, we forget that we had four 75 basis point hikes in a row from last June to last November. I don't even think we've seen the effect of all of those.

And we had another 150 basis points after that in smaller quantities. But I don't think we've seen all of that. And the other thing is, you know, we talk about these long and variable legs. The market doesn't really lag so much anymore. The market doesn't lag Fed decisions. In fact, I think it leads Fed decisions for the most part. But the economy lags what happens with the Fed. And we still haven't seen all of that. I'm going to grant you it's hard to mount a counter argument against that. Other than to say nothing about this cycle has been normal. You could easily say and history would be on your side when the Fed raises rates to the degree that they do.

There is an obvious lag effect that eventually takes hold. That probably takes hold sooner than it than it has this time because it hasn't really taken hold yet um and then it leads to earnings falling apart the economy falling apart the stock market falling apart but dare i say this time's different so much money was in the system the consumer is much stronger than we ever thought they were they still are now i know it's bifurcated there's a difference between the top end and the bottom end. I'm not naive to that in any way, shape or form. But this time's different because all that stimulus that was in the system, the lag effects that we think are going to take effect aren't. Inflation is going to come down. Fed's going to cut because they can. And we're going to be fine.

There's a there's a wide range of possibilities. Is that outlandish? No, no. But I would say yes, if you think it is. I would put it on the tails of the bell curve. I wouldn't put it as the central idea and the central thing that I think is going to actually come true. The other thing is, before the pandemic started, we weren't exactly in a really strong position. We were heading into a recession or many were expecting a recession and we had a lot of weakness in the economy in late 2019. So we didn't really come into that in a great place. And returning to that place wasn't some sort of euphoric condition that we can say we were running at a really hot pace, the economy was growing rapidly, and we'll just go back to that and everything will be fine. The reality of all of the stimulus that went in the system is that all it does now there are

different forces at play obviously the pandemic had some effects on supply chains and that's what drove a lot of the inflation issue but stimulus drives the inflation issue as well so now taking all of that back out when we talk about lags what we try to do with monetary policy when it's i'm talking about the the grand we not you know what the fed tries to do with monetary policy when it's I'm talking about the grand we not, you know, what the Fed tries to do with monetary policy is to constrict capital in order to slow down that demand. Basically take money away from people and businesses so that they stop spending it so much. They've been you could make the argument rather unsuccessful in doing that. That's correct. Right. That's correct. 4.9 percent GDP growth would would say that they've been unsuccessful in doing that to this point. I don't think they're going to remain unsuccessful. I think they're going to get what they want at some point. And I think that point is quickly approaching. And we talked about earnings

a little bit and the idea that earnings will have to come down. Earnings have come down. Now, we've had over 50% of companies report so far this quarter from the S&P. But of the ones that have reported, Q4 earnings have been revised down 5%. So the idea that Q4 was supposed to be, I think, originally 9.4% growth year over year, that's come way down off of what we were expecting. 2024 expectations are probably next. So what you're seeing in the market after earnings reports, even on companies that beat, if they beat on the top line and the bottom line, they're still getting punished because guidance has not been what people have been hoping for. All right. So let's bring in CNBC contributor Greg Branch of Veritas Financial Group.

So, Greg, it's good to add you to the conversation today, too. And I feel like I have an especially heavy lift on my hands today. Liz is cautious, if not negative, on the market. I think by now everybody knows where you stand. So I try and come up with, well, what is the counter argument to any of it? Because I can see the perspective of those who have the points of view that you and Liz do. So what if I say, build on the case that it is different this time. AI is so transformational that it's going to change the game in ways that we are just getting our arms around. Tech in and of itself is deflationary. Infrastructure spending is transformational in the way we're going to

onshore manufacturing in this country. The consumer is somehow going to stay in there because the job losses that some predicted at the beginning of this tightening cycle are not going to materialize anywhere to the degree that some thought they would. Productivity is going to remain stronger than people thought it would. And somehow the best case beats the worst case in your perspective here. So I'll harken back to the question that you asked, Liz. That's outlandish. Yes, it is. I said if it was outlandish, Liz could say it. So I'm glad you just said it. I say it with greater comfort today, having been the target of those objections that you now find hard to make for the last six months. Is it just me having a hard time hearing Greg? I'm not sure.

Guys, can you hear me? All right. I'm told that they can hear you OK. I couldn't hear you all that well. And I just want to make sure our viewers could, too. So forgive me, but pick up your thought there. So let me pick out three specific things in what you just said. Everything may be very well true about what you said about tech, but when will we see that, Scott? And so the impact of AI on an economy basis might not be felt for another two, three years. Yes, those who are laying down the infrastructure like NVIDIA will see their results immediately. But in terms of a broader effect on the economy and a disinflationary effect, that will take some time.

In terms of the health of the consumer, I think you all know what I'm going to say about that by now. Keep an eye on the delinquency rates. The early delinquency rate has shot up over 25 percent in the last month to almost a full point. I've already noted credit card delinquencies have doubled in a couple of quarters. And those new credit cards, those credit cards that have a duration of less than a year, are well above pre-pandemic delinquency rates. And so the consumer is not in great shape. And lastly, you get one or the other. To say that we're going to not see a softening in the labor market is to say that the Fed will continue to work at this because we can't have both. We can't have a disinflationary environment with the labor market where it is

right now. We have to choose one. No, you could, though. You could. I know it sounds, as you say, outlandish, but you could have inflation continue to come down, which it is. So you could have, I'm not saying you have to have, you know, employment to the level that it is now. You can have some softening in employment, but you don't have to have the catastrophic scenarios that some are saying are inevitable as a result of what the Fed's done and hire for longer, and they might go take the terminal rate to 6% or 7%, and that would destroy the employment market. You could get inflation to come down, and it is actually coming down. I'm going to quibble with a couple of things. And let me first state that I'm not advocating for anything catastrophic. You know, a year ago when I said my terminal rate

was 6 percent, I think that was seen by some as catastrophic. But we're 50 basis points away from that. And so I don't think an incremental 50 basis points is going to lead to fire and brimstone. The notion, I'm going to quibble with your tense, Scott. The notion that we are seeing inflation decline is a misnomer. Have we seen a step down? Yes, that is past tense. It is not current tense. And so we are not seeing current disinflation. The monthly numbers says unequivocally that that is not factual. Core has grown by 30 to 40 basis points every month for a year. Once this base effect becomes more unfavorable and we start to see the numbers compared to lesser prior year numbers, I think

we'll start to see that more poignantly. And so we are not getting current disinflation, which is why we're not seeing a softening of the labor market or vice versa. But I think history would disagree with you that you cannot have both. The Fed seat says we need to get to around 4%, a little above 4% unemployment to get to that 2% level. I believe them until there's a reason why we shouldn't. Well, I mean, I could give you many reasons with all due respect to the Fed why you shouldn't necessarily believe what they say. I mean, I believe the whole cycle. No, I know. But this cycle has been sort of littered with, you know, things that just haven't panned out the way that they expected,

whether it was inflation being transitory or certainly they've gotten they they've gotten the economy wrong. I mean, they thought that the economy was going to be weaker at this point than it actually is. So, you know, you want to put your whole faith and trust in the Fed from this moment. I would say, you know, be careful with that. Scott, I think you know better than most that I've never put my whole faith and trust in the Fed. I was one of the few people saying that they should raise rates out of Jackson Hole in 2021. And so I've been more critical of them than most. The differentiation I'm making is that there are mathematics and then there are their opinions. I don't listen to their opinions about whether they're done raising or not.

As long as they tell me that they need to get down to 2 percent, I'll read the data for myself and say whether their job is done or not. As long as they tell me that they need to get down to 2%, I'll read the data for myself and say whether their job is done or not. So I put a little weight on that. But if they're going to mathematically say that 4.3% is the level of unemployment we need to get down to that correlates to 2% inflation, I'm not going to redo all that math. I'm going to take the word for the math, not necessarily their opinions. All right. So, Liz, let's talk about what breaks the market, so to speak, or what perhaps keeps it okay. I'm thinking of mega cap tech because that's where the strong points have been throughout this otherwise down year for the broader markets, right? You look under the surface, the stock performance doesn't look nearly as good as it does above the surface as the seven stocks.

Can they hang in? Is that tech trade OK? I mean, it seems to be recovering a little bit over a poor three-month stretch. I mean, it's had a real rough three months. And if you look at the equal-weighted S&P, what's happened since July 31st versus the Magnificent Seven since July 31st. You've got the equal weighted S&P in correction territory and the Magnificent Seven equal weighted in bear market territory. So they've given a lot of it back. Now, some of them have not given a ton back, but it's still they've had a rough time. Do I think that they will go up from here? Probably not yet. I think that there's still a lot to prove into 2024. And I'm going to go back to the labor market conversation a little bit. What we're trying to prove, what the market needs

to see as proof is that companies can make that bottom line earnings number and can make that growth number of 12 percent. If inflation is coming down, the top line is going to come down. In order to meet that bottom line number, they're going to have to cut costs more. And for a lot of companies, the only place still left to cut costs is in the labor market. So I do think we're going to see cooling there. And I think that's going to be OK with the Fed to about four and a half percent. The issue is that they can't catch it once it once it starts. Once those cuts start, they can't stop it. And usually when you see it go up quickly, it flies up pretty fast and you can't catch it until it starts to come back down. And you just have to wait that out. So let me ask you this, Greg Branch.

If this is so obvious and it seems quite obvious to you, right, you you have deep beliefs in your perspective on where we're going. Where's what's the market missing? We're forty two hundred. It's not like we've completely fallen out of bed we have a horrible a horrible stock market why hasn't the market traded down to where it should in your mind so i think this harkens back to something you and liz were talking about earlier i actually do not believe that the market the equity market at least is anticipatory anymore not believe that the market, the equity market at least, is anticipatory anymore. I believe that it is reactionary. I believe that that has happened as a result of expanding breadth in terms of how many of us participate in it.

And I think we can look at the last two years as evidence of this. One of the other things that Liz said that you know has been one of my key points is that consensus has been too high. This is something I've been saying since the beginning of the year the fourth quarter estimates as liz said indeed have come in in fact the consensus has gone from a little more than eight percent a month ago to five percent now and you just can't have equity performance in the wake of significant downward revisions like this. Like Liz, I think you know, Scott, I have long articulated that 2024 estimates are way too high and we'll need to see significant downward revisions there. I know, but consensus, Greg, has been kind of wrong this whole time. I mean, consensus came into 2023 saying, well, you don't want to be in mega cap tech. Well, here we go. Right. Those are the

stocks that have performed. Consensus said, well, the consumer is going to run out of steam any minute. Here we go. They haven't. Consensus suggested we're going to be in a recession by now. At least we would have been it. People were saying we'd already be in one. Well, consensus was wrong on that, too. Maybe the consensus is just wrong. I have long advocated for that as well, Scott. It has underpinned my opinions throughout all of 2022 and all of 2023 thus far and likely to underpin all of my opinions throughout 2024. But because you and I say that it's wrong, doesn't mean that we aren't actually, even in everything we say, parroting consensus. How many times have you stated a market multiple that's based on consensus estimates? How many times have you and I debated something and I've said it's 19 times and I've used consensus numbers, but then I've said it's on consensus numbers. And so it's really hard to desegregate all of consensus from how we engage, from how we engage with each other, from how we engage in the market. And I think that that's one of the front foot and i think you'll continue to see that now we've had some of that occur as we've moved from an 18 times multiple at the beginning of the year on consensus numbers to

now a 17 times but the consensus numbers are still too high and i think we'll continue to see the activity and the action that we've seen over the last month with those numbers getting cut pretty pretty but the liz i'll give you the last word. I mean, the market is not really, it's not really 17 and a half times. I mean, that's what it looks like on the surface. As I said, you take out the mega caps, some of these stocks are like, I don't know, what are we like 12 or 13 times?

So I think we got to be careful in the way we try and broad brush the whole market because of the performance of mega caps makes you think that the whole market is too rich, way overpriced. Where somebody could easily make the argument that the whole market is actually cheap other than these stocks. I mean, trough multiples in times of real stress are down in the 11s and 12s. So maybe not the whole market cheap. But if you look at small cap indexes and see, for example, they're in bear market territory, right? They haven't

made any really headway. They can't get out of their own way for good reason. They're the ones that are financed. And as rising rates continue to rise, they're going to be under more pressure. I still believe the market is a forward-looking mechanism. And if you've got small caps in bear market territory and not finding a way out of it, I think they're sniffing out the fact that demand is slowing and that the employment picture is going to crack at some point because they employ the majority of America. So you have to look at even sector behavior, too, regardless of how well-priced. I mean, financials are pretty well-priced on a price-to on a price to book basis and a PE basis, and they can't trade really well either, banks especially. So

I don't know that valuations are what's going to drive this in the near term. I think over the long term, valuations will look a little bit more explainable. But right now, that's not necessarily what I think the decision factor should be. Yeah. I mean, some people, they just look and they say, well, you know, the real market, the 493, not the seven, are like, you know, 13 times, 15 times, not the almost 18 times. I knew I was going to have a heavy lift against you guys. I don't know. Greg, I appreciate it very much. Liz, thank you. We'll talk to you again soon. Great to be here. All right. It's good to talk to you guys. We'll have full coverage tomorrow, by the way, of the Fed decision right here on Closing Bell, including the exclusive interview that we always have on Fed Day with Jeffrey Gundlach of DoubleLine. You don't want to

miss his first reaction to the Fed. Starts tomorrow, three o'clock Eastern time. Let's get to our question of the day. We want to know where will the S&P 500 end 2023? Under 4,200, between 42 and 4,400, or above 4,400? You can head to at CNBC Closing Bell on X to vote. We'll share the results a little later on in the hour. We're just getting started here on Closing Bell. Up next, Sam Bankman-Fried on the stand for another day of cross-examination. We'll get a live update from outside the courthouse after this break.

And later, NVIDIA's key levels. The top technician Jonathan Krinsky is flagging now, says it better hold than it might not. And if it doesn't, where it could go, he'll tell us next. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Welcome back. 35 minutes to go in the trading day. Let's get a check on some top stocks to watch as we head into the close.

Christina Partsenevelos always here with that. Christina. Yes, indeed. Let's start with VF Corp having its worst day since 1987 after withdrawing its guidance for full year revenue and profit. The Ugg maker is also slashing its dividend by 70% from last quarter as part of its turnaround efforts. The company saw direct-to-consumer sales decline and said it expects more difficulty in the U.S. wholesale environment. It also hasn't been able to solve problems with Vans, which I'm not wearing right now, saying it doesn't expect that brand's performance to improve in the second half of its fiscal year.

And that's why shares are off by 15% and down 47% year-to-date. Let's move on to Caterpillar, also under pressure as Wall Street digests the heavy equipment makers guidance. The company is expected expecting its fourth quarter revenue to come in just slightly above the same quarter last year. Caterpillar also expects weakness in China to continue. And those shares are down almost 7 percent, but still year to date. Not too bad. Down about 6 percent. Scott. All right. Thank you. We'll talk to you soon. Christina, thank you. We'll see you in just a bit. We are following new developments now out of Sam Bankman Freed's fraud trial. Kate Rooney

outside the courthouse a few blocks from where we are here with the very latest. Kate? Hi, Scott. So the defense has rested its case, and Sam Bankman Freed is off the stand after an intense couple of days of questioning. The jury went home for the day while the judge and attorneys discussed jury instructions and then potential objections. Some procedural things going on in there. Bankman-Fried was on the stand today. Earlier, we did hear a slightly less hostile tone compared to yesterday. He was asked about the $8 billion his hedge fund borrowed from his crypto exchange. He said he, quote, deeply regretted not taking a closer look into it and thought the fund was allowed to use money deposited by FTX customers. Prosecutors also questioned his, quote, cozy relationship

with Bahamas Prime Minister, then an offer to pay $11 billion in sovereign debt from the Bahamas. Eggman-Fried was presented with other multiple statements that he made to the media, too. He claimed he didn't remember some of those. He says he gave about 50 interviews. The time of the crypto company's collapse, he said he wasn't being evasive. He just, quote, doesn't recall every statement that he made. And as for the $65 billion line of credit his hedge fund had, Bankman-Fried said that

was the max amount, but it only drew on about $2 billion. We will get closing arguments. Some more info on that tomorrow, Scott. All right. Appreciate that. Interesting couple of days, to say the least. Kay Rooney, thank you. Outside the courthouse for us.

Up next, NVIDIA shares. They are slipping today. Now top technician Jonathan Krinsky has a new note on where he thinks that stock could go. He joins us after the break. Closing bell right back. Shares of NVIDIA falling more than 2% today. It's recovered a little bit. You see it's only down 1% now.

That would be the second straight monthly decline that it's heading for. My next guest says there may be another 10% downside in store for that stock. Let's bring in BTIG's Jonathan Krinsky now. It's good to have you on. I mean, you're watching the 400 level like I think most people are at this point. Got awfully close, but here we've bounced a little bit. Where do you see it heading from here? Hey, Scott. So, you know, it's when you're talking about support and resistance, it's, you know, it's never a fine line. I think the 400 to 410 level is pretty significant. If you think about the last few months since it had that gap up on the blowout earnings in May, it tested this 400 to 410 level in late June. It tested in mid-August, again in late September. And again, here we are in late October. And so, you know, typically double bottoms can happen,

but once you start testing a given level more than three or four times, odds are ultimately it does succumb. And the issue in NVIDIA is there's this big gap in both price and volume. So, you know, because it gapped up so swiftly and had that runaway move this summer, there wasn't a lot of volume that transacted between, you know, it's called 300 and this 370 level. So we think, you know, 400 is important. Once it breaks 370, there's a clear shot to that 200 day around 350. And that's kind of your 10% downside. But ultimately, we even can't rule out a complete round trip of that earnings gap for May,

which would get you back down to around 306. It's kind of dicey, though, to make a call like this. Now, I know, you know, you look at the charts more than anything else, but nonetheless, ahead of an earnings report that's coming in, you know, reasonably short order, it's dicey to say the least. Well, Scott, if you recall, the last time we were on set with you was the day before NVIDIA reported in August. And we felt that at that point it was universally loved and the odds favored maybe a sell the news reaction. And so here we are down about 20% from the high that it made in mid-August. And I think it's not so much about the earnings report. It's about the trend and the momentum and weekly momentum for NVIDIA and for the semis broadly has been on a sell signal on a weekly basis for quite a while now.

So, you know, that's not going to change in the immediate term. So I think trend and momentum favor the downside. You know, it could be a situation. Look, I think they report November 21st or something. So that's still about three weeks away. It could be down to the $ november i think they report um november 21st or something so that's still about three weeks away it could be down to the 208 before that point and then the risk reward might be a little more favorable but i think here and now um still favor some caution what about mega caps in general i mean i'm i guess now presumably you must think that those are going to break down as well if not it's not just going to be nvidia

yeah look this is something we've been talking about you know all all year long really and um you know throughout the summer the mega caps you know significantly diverged to the upside but you never really got any sustained uh confirmation by you know smaller mid caps or the average stock to be to be honest the average stock peaked February 2nd and never really reclaimed that level. So we continue to see evidence that more and more of these big cap names are playing catch down to the average stock. Even within the Magnificent Seven, you're seeing some, you know, Tesla's actually down 10% from the October 2022 lows. You know, you've seen other names kind of falter. So I think you're continue to see this thinning of the leadership stocks.

And ultimately, as bear markets unfold, that's when you get the final, the last man standing, if you will, which was the crux of our note, you know, come after the king, you best not miss. And that's really Nvidia. It's the best performing stock in the S&P 500 year to date and from the October lows. So we think it's probably the last man standing. Ultimately, that brings the Nasdaq 100 down with it as well. Well, what about the S&P?

I mean, we're at 4,200. And now we enter what is historically the strongest month of the year, followed by the second strongest month. How vulnerable then does that leave the S&P? And are you writing off the chances of a late year rally? So we actually put out a note this week and we do think the odds actually for November to finish higher are decent. We're down three straight months. We haven't been down four straight since 2011. We haven't been down four straight ending in November since 1946, meaning August through November have not been down consecutively in over 60 years. So

odds do favor in November. The issue is we don't think it's a straight line. We don't think you start off November 1st and go to the upside. We think there's unfinished business lower, maybe $39.50 to $4,000 in the S&P. I think there's still too many people banking on this year-end rally. I think you've got to shake out a little bit more of that optimism, and that could be a nice setup as we get into November. So let me have you answer the question we've asked our viewers to answer as well. We end the year on the S&P below 4,200 or are we between 42 and 4,400 or above 4,400? What do you think is most likely to happen?

I think you probably are ending below 4,200. Again, November could be positive, but if you're trading down to 3,950, 4,000, that's going to be tough to reclaim 4,200 in our view. All right. We'll talk to you soon, Jonathan. Thank you, Jonathan Korinsky, BTIG, joining us up next. We're tracking the biggest movers. As we head into the close, Christina Partsenevelos is standing by with that. Christina? What is going on with chip stocks today? Wolf speed is up over 20%. While Lattice is in the complete opposite direction.

We discuss what's driving that volatility right after this short break. We've got about 20 to go before the closing bell. Christina Partsenevelos is back with us now with the key stocks. She's watching. Christina? I am back. And let's talk about this Q3 earnings beat and yet shares of Latisse Semiconductor plunging over 17% right now after guidance that fell short of expectations.

Management warned of a slowdown in demand not only from industrial but auto consumers as well. Those comments echo silicon carbide producer on Semiconductor, whose shares fell 21% yesterday, continuing to fall almost 4% today, after management also issued a weak Q4 guidance and warned of increasing risk to what? Auto demand due to higher interest rates. AMD reports tonight, and sentiment has pretty much turned a little bit more negative.

Shares are down about 14% just over the last three months or so. Investors agree the PC recovery is underway, but are concerned about data center demand and the launch of AMD's new AI chip in December and what kind of revenue it's going to bring in next year. With Latisse and Omsemi off about 20 percent, but Wolfspeed is up over 20 percent on slimmer than expected losses. We're seeing so much more volatility, especially after earnings report. Mizuho saying it feels extra elevated, creating higher risk for all types of investors.

We'll speed up 22 percent. Scott. All right, Christina, thanks so much. Christina Parts, another last chance now to weigh in on our question of the day. We asked, where will the S&P 500 end this year? Under 4,200, between 42 and 4,400, or a nice run that gets us above 4,400. Head to at CNBC closing bell on X. The results after the break.

Welcome back. Fed decision tomorrow. Immediately following that and the news conference from the chair, Jay Powell, Jeffrey Gundlach, the DoubleLine CEO, joins us as always. It's a CNBC exclusive, gives you his first reaction to what happened in that room and how the Fed chair himself described their move and what they see moving forward. Let's get the results now of our question of the day. All that might factor into how you see this. Where will the S&P 500 finish the year? Most of you saying between 42 and 4,400. It's pretty close, though. Did get a fair amount of votes above 4,400. Up next, your earnings rundown, AMD and OT.

We have star chip analyst Stacey Raskin with us next to break down the themes and metrics. He'll be watching that and much more when 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 this trading day. Plus Bernstein, Stacey Raskin on what he's watching ahead of AMD earnings out in OT. And Contessa Brewer on expectations for Caesars when it reports. Mike, I begin with you. So I had this conversation on top of the show with two bears.

I mean, you know, who make a credible case and it's hard to push back against that and then i see these reports that stanley druckenmiller the famed uh money manager has bought quote massive bullish positions in two-year notes because he's worried about the economy quote i started to get really nervous he said that at a conference in the last handful of days. By the way, he's going to be on Squawk Box tomorrow at 7 a.m. Absolutely. Please don't miss that interview. What do you make of that? Well, first of all, I think that it reflects the sort of saturating psychology we've been in, which is that the cycle is in peril. And it's doubly confusing because we've been watching what has been a

relentless surge in long-term yields, in part because the current economic numbers have been so good. So I think if you talk about the Drucker-Miller trade, he's massively bullish, two-year notes, short-term treasuries. That's because he thinks that we're going to go from a bear steepener, where the curve steepens because long yields are going up, to a bull steepener, which is the traditional kind that precedes a recession, which is when people buy short term treasuries because the Fed's close to cutting. What's fascinating is almost guaranteed tomorrow, Fed Chair Powell is going to say the economy still seems solid. Yeah, we know there are lag effects. We're not really seeing them exert a huge gravitational pull just now.

So this is exactly the argument that the market has been waging for a few weeks. And if you look at cyclical stocks, if you look at the kinds of parts of the market that would suffer in that scenario, they have been suffering. So, you know, I guess you can still be right. And essentially, we're sort of just spiraling. On the other hand, you know, these feedback loops can be interrupted in the short term. And we can have some kind of seasonal rally that takes the pressure off. And you get a little glimmer of hope that the bond market has done enough for now. And we'll see.

But it is a fascinating moment for all those reasons. Yeah. Yeah. No doubt about that. So we're going to get AMD after the bell. You know, again, we got this Fed decision tomorrow. Gosh, nothing's going to happen, we don't think. But, you know, the chair's take on what might happen from here is going to be everything. And then followed by the jobs report, Apple and all these other things, as people are suggesting now that

NVIDIA is about to crack. Right. And on balance, the response to earnings has not been positive, right? You've been punished by any hint that demand is softening or you're going to see decelerating growth down the road. That shows you that we are acutely twitchy about the fact that we have vulnerabilities here. I think the market wants Powell to essentially endorse the, we're done. They seem to want to be done.

They seem not to want to have done. They seem not to have that want to have their hand forced to do more. And, you know, if they if he acknowledges that conditions are tight, I think that might be the smoke signal. But we'll see, because this market is not really wanted to embrace the bright side of these things. Sure. But there are those like, you know, as we just suggested, Druckenmiller, who are suggesting, you know, the near term, short term rates are going to start to go down as you get a buy in there because you're worried about the economy. The long end steepens and that precedes the scenario. And the fear is that the economic conditions will be in place for that Fed to be cutting. on a higher for longer point of view because they haven't yet seen inflation head to their target that you're going to have uh that difficulty where they're fighting uh that moment of going

toward an easing uh path all right stacy raskin amd what do you think we're going to get hey amd yeah so i think there's it's a tale of two end markets pcs look better like intel reported you know i guess it was last week and and Intel had a very good PC-driven quarter. However, their data center business was still lagging by quite a bit, and it's maybe an issue for AMD. AMD has something like a 50% half-over-half data center growth bogey that's built into their numbers this year, and so I think that's going to be one of the key questions on the call is, do they still hold to that outlook into the end of the year do they back it off i think on top of

that going into next year i mean it's an ai story everybody wants to know any little tidbits they can give us on the demand environment the ramp and the trajectory for their mi300 which is their ai gpu that they're going to be um launching soon and then and then ramping in next year to any color they can give us on that. I'll be honest, one more thing I'm looking for is actually their embedded business. They bought a company a year ago called Xilinx, which makes FPGAs. And this is a market like Intel has a piece of this. They call it their PSG group.

They're guiding it down like 30% next year. Lattice, I don't cover Lattice, but they reported last night they make FPGAs. They kind of blew up today. Street expectations for embedded into next year, look, it's not down very much. So this is one thing I think that I'll be watching as well. It's their most profitable and highest margin business. So something else, I think, to keep your eyes on as we go into it tonight. You know, I want to steer your attention, as we usually do, towards NVIDIA,

because there's a lot of talk about that stock at a really key level. And 400 is that line in the sand. We had a technician, I don't know that you heard our conversation or not, suggesting that it's due for 10% downside minimum from here and that it's looking really dicey. How would you address how you view the stock here, whether you think it's too expensive, whether it's gotten too ahead of itself, whether it needs a pullback? How does an analyst like you look at that? Yeah, we've had this conversation about multiples and valuations for NVIDIA before. If the forward numbers are even close to being right, the stock is not expensive.

The sell-side numbers in the ballpark of $15 next year. And they will probably beat numbers. Even with all the China stuff and everything that's going on, they will probably beat numbers when they report it. They're supply-limited right now, not demand-limited. They're selling everything that they can make. I do think that the China news has clearly been weighing on it. And that's part of what's on it today.

There was an article out there that said that there you know, there were order cancellations in China. I don't know why that's new news. Of course, there's order cancellations from China. They can't ship anything to China. We know that already. They've got enough demand, it looks like, at least in the near to medium term to make up the difference. But that that is what is actually weighing on it today. And so I think until those overhangs clear and we can actually get a better view of what the actual real limit of end demand is. And we won't really know that until like the supply constraints ease, which isn't going to be for a while. But so it may hang out here for a while.

But I personally still think that the long term opportunity in front of them is enormous and that we are still early. That stock is always volatile. Like I get it, but it's usually been a good thing to buy it during these periods of volatility when when everybody else is punting it. Let's also say the valuation is actually cheaper now than it was. As you know, you pointed out on numerous occasions. All right, well, I got to let you go. We'll see what happens with AMD. I know we'll talk to you soon.

Stacey Raskin joining us here. Get us set up for that. Not the only earnings report on our radar. Caesars is as well. Contessa Brewer, what are you looking for? Well, Scott, we're seeing Caesars shares negative on the day, down nearly 14% this month. Investors may really be bracing here for bad news after disappointing earnings from Boyd Gaming last week. They were talking about all the costs associated with labor unions, utilities, and insurance hitting their bottom line.

We saw Caesars take a dip then, so did other casino companies. Plus, Scott, it's up against tough comps from last year. There's been some question about when the astounding run for Las Vegas will take a breather, plus the cyber ransom, plus the culinary union threatening to go on strike here, plus we heard last quarter that football season would mean a ramp up in spending on promotions. So the street is expecting a billion bucks in adjusted EBITDA. That's the guiding earnings metric in gaming. We'll see whether Caesars can come in with that. All right. Yes, we will. And we will see you in overtime, I'm sure. Contestant Brewer, thank you very much for that. You heard the sound effect, two minute warning. Nice little move, Mike, into the close before we get that Fed chair tomorrow,

gun lock to follow, Apple job, and who knows what else. Yeah, and that positive over the past two days that at least the market was able to respond in a tentative way to the fact that it was super oversold. Maybe we're having a little bit of a lift in the tax loss selling by mutual funds and all the things we know were coming together for a very weak end to October. That said, you have a lot of the laggards get some relief. They were stretched way to the downside. Russell leading. Yes. So you have Russell leading, you have financials up again and all the rest. So I think the market likes,

as I always say, to pull itself onto more even footing before a Fed meeting. A lot to prove. I think a lot of the technical indicators you look at that say, you know, how do corrections tend to evolve and end? We're in the vicinity in time of when these things start to fire and say we might have a low. But usually or often, at least in many instances, the market has to go to a final low before you get there. So, you know, usually you're pretty close in time. Usually the market doesn't spend a ton of time at the very low of a correction, but it's treacherous footing

until we get through some of these catalysts. Let's say, too, look, the other day we were saying, all right, 4,100 is we're gonna get there, and here we are on the doorstep again of 4,200. Well, the intraday low was 4,103 or something, and it was also a low in late May. So it's trying to make that sort of stick as a potential floor. All right, we've got a big day tomorrow.

I look forward to spending it with you as well. There's the bell. We'll go out in the green. I'll see you tomorrow.