Closing Bell - Closing Bell: Big Rally Before a Big Collapse? 6/16/23

Episode Date: June 16, 2023

Will there be a big rally before a big collapse? Cheryl Young of Rockefeller Family Office gives her take. Plus, Chinese automakers are becoming a major player in the European EV space. So, might they make a big push to expand here in the U.S.? Phil Lebeau gives a live report from London about what could be next. And, star Wedbush analyst Dan Ives makes the bull case for Palo Alto. 

And welcome to Closing Bell, everybody. I am Brian Sullivan in for Scott today and as always, live from Post 9 at the New York Stock Exchange. This make or break hour begins with Wall Street looking to close out a big week. Investors cheering on the pause in hikes they were looking for from the Fed and they got it, not to mention some encouraging inflation data. And that has some strategists pivoting. Bank of America's Michael Hartnett joining colleagues admitting he was too pessimistic, but still holding strong that this is not the shiny bull market without problems that some people seem to think it is. All right. Here's your scorecard with 60 minutes to go. All three major averages, they are up on the week. The S&P and Nasdaq, they are both headed for their best performances since March. And the Dow looking to close out its third

positive week in a row. Wow. All right. Brings us now to our talk of the tape. And the question sort of being batted around Wall Street today and this week is, will there be a big other rally, keep going, before a big downturn? In other words, could this maybe be it? Here to help answer that question is Cheryl Young, private wealth advisor for the Rockefeller family office. Cheryl, good to have you on set. Thank you. Thank you, Brian. I know from watching other shows such as Closing Bell that you have timed this right. You went heavy on big tech a number of months ago. Congrats, making money. Are you getting nervous at all? Are you starting to trim at all? Well, it's a great question because I think there has been so much rally in tech. If you look at the

major indexes a month ago when I was on the show, 95% of the returns on the S&P 500 came from 10 names and they were all tech names. 95 from 10. 95. That seems a little scary. Well, it's very narrow, right? So people were talking about the S&P being up, but it's really just a handful of stocks being up. In the last month, now that participation rate has actually picked up in other sectors. The attribution to those big tech names are now 80%, not 93%. So we're starting to see some other sectors start to pick up and rally. Look, it's triple witching Friday. So there's a lot of interesting things going on today.

The S&P is rebalancing. And the next week, on the 26th, we have the Russell indexes rebalancing. I know you're kind of an options pro. It's $4 trillion in notional value of options expiring today. I kind of thought we'd see a little more mojo in the market. I know we got Monday off for Juneteenth. Is that more of it? Because normally we get a little more volatility. Well, we've seen a lot of volume today, but you're right, not a lot of volatility. The VIX is at 14. If you look at the last 52 weeks, the VIX has fluctuated between 13.5 on the low to 34.88 on the high. So we actually have a very

low level of volatility today. And historically, our question now is, if this is a historic low on the VIX, is this a calm before the storm? I mean, you look at the VIX, OK, under 14. It's like there's nothing going on. It's not that Russia moved nukes into Belarus. It's not that we discovered some secret spy base in China. It's not that we've got all a war, a ground war escalating in Ukraine. And the market is acting as if none of that is going on. There's almost no geopolitical risk premia in this market. And I can't understand why. I know.

I mean, look at the consumer sentiment numbers that just came out. Sixty three point nine. I mean, it just popped up. We were expecting a reading around 60. So I think people are starting to feel a little bit more bullish. I worry there's a little bit of a FOMO going on. You know, we're seeing a lot of investors now chasing names. We're seeing, frankly, analysts now upgrade names that have already had rallies.

Strategists, too, raising their price target on the S&P 500. Yep, absolutely. The same strategists, by the way, who were very bearish six months ago. So you sound a little skeptical right now. I'm a little bit cautious right now. I bought a little bit more of protection this morning. I think of it this way. When I advise my clients, look, if I take the gains of the stocks I bought in October, I'm going to create a short-term tax liability for them. No one wants to pay short-term taxes, especially in California, where the tax rates are really, really, really high on the California side. So I have to be very careful. I know. I know. Shocking. Breaking news, Cheryl. Taxes are high in California. Higher than New York, even. Hard to believe. Hard to believe. So when I think about these tech names, if I sell them and take the gains, now I'm looking at a 50% tax.

Yeah, now you've got some angry people. And then I have some angry people. So how do you, let's say I'm a client, I'm a little nervous, I've made a bunch of money in some of these big cap tech stocks. I'd like to monetize that, but I don't want to pay the short term. How do I do it? What's that hedge? What's that protection you talked about? Yep. So what I'm doing is I'm selling calls. I'm going out of the money. I'm going out to January 24. So I don't get hit and called away this year. I don't usually like to go with more than a quarter, but I'm getting a little bit better premium to go next year anyways. And I can push the tax off to next year if I do get called away. I think it's a great way of staying honest and rebalancing a portfolio because some of these

names have had tremendous run up. And then I'm taking the premium from those calls. I'm getting about 14% to go 10% of the money. It's a good trade. And if I only make 14% in the next six months, I'm going to be really happy. Let's be real. I can then take some of that premium by put protection. I can buy puts on QQQ. I can buy puts on the specific names. And that way I lock in the gains, but I don't create a tax effect that's shortterm for clients. It's not just here either. I mean, Europe has been, Europe is outperforming us. Brazil on fire. Again, we could talk about U.S. stuff, but this is a global rally. It's a global rally. And that gets really interesting because look at what the dollar's done the last year. I think the dollar has probably near-term peaked. I think there's downside ahead of the dollar. And so this may be time to think about adding some of those names that you haven't had in your portfolio. Now,

most of my colleagues have been in dividend stocks all year, so they've missed this rally. They've been in cash because they were afraid six months ago. So that's where, you know, if you think of driving down the highway, you get on that narrow cliff, you're looking over the cliff going, I really don't want to take this corner sharp in our fast cars, but put their guardrails on. That way we can continue to accelerate around the corner, keep the guardrails on, have those puts in place, stay in some of the names you love. But let's add some international, let's add some of those stocks that have maybe underperformed. I still come back to your stat at the top that it's 95% has been 10 stocks or something,

and then just about 4,000 other stocks that are saying, hey, what about us? Yeah. They have started to participate a little bit this week, small caps, mid caps, whatever, but only this week. That's right. You know, in my mind, sort of things, is there opportunity there? I mean, how much more money can I make in, you know, certain big cap semiconductor stocks that rhyme with Avidia?

You know what I mean? That kind of thing. How much more can I make in? computer stocks named after fruits We we have to understand The largest tech stock on the Nasdaq and on S&P 500 is Apple Apple is bigger than the entire Russell 2000 in terms of the market. It's a one stock is bigger than the Russell 2000 It's happened one other time in history. It was before a day, and it's held it for now about two months.

When was that? It was 2021, in April. I'm going to steal that from my random but interesting segment on Last Call. Yes, yes. Apple is bigger than the entire Russell. Again, Apple's an amazing company. We all have one of these, or we all have a couple of these. But at what point do you just think there's better opportunities somewhere in those other 2,000 stocks?

There could be some dislocation in the next week. Look, the Russell 2,000 is rebalancing. This is a time in the next seven days where stocks from the Russell 2,000 are going to be added to the Russell 1,000. The large caps, right, small caps go into large caps. A large number of those roughly we're expecting from projections. We don't have the final list until next week. But roughly a third of those are healthcare stocks. Healthcare has done nothing this year.

We're getting a great dividend, but the stocks have actually, in general, gone down in price. So the only return on healthcare stocks has been predominantly from the dividend, with the exception of a few names. So this could be an opportunity, for example, to pick up a little bit more of the health care sector and add that to your portfolio, not just rely on tech. And I like it or not, it's one fifth of the economy, health care. Health care in many ways is, I hate to say it, the American economy. All right. Speaking of names, sit tight. Let's bring in another name to this conversation. Our friend Bryn Talkington of Requisite Capital Management, of course, also a CNBC contributor, no doubt champing at the bit. It is champing, not chomping, by the way. I want to be clear on a Friday, Brent, which is you heard

our conversation. I know you're you know, you're down there in Texas. You got a little energy aspect as well, which I love. Are you also kind of poking around some of these, you know, non five or 10 stocks that we talk about a million times a day on this fine network? Well, first, I have to say I love Cheryl's strategy of selling some calls for in 2024. We do a lot of call strategies, a lot of option strategies. I think that's such a smart, smart way for private clients. So love that. Wanted to give you a shout out. You know, I think it's interesting because yes, tech and those those Fang Plus names have dominated. But I think actually what's interesting,

if you think about cyclical, you have this bifurcated market where, I mean, health care are not cyclicals, but health care is not doing well. Well, consumer staples, energy is not doing well. But within the cyclicals, industrials are crushing it. Home builders, casinos, cruise lines. Right. So these are like very, very cyclical in my opinion. And so you definitely have companies that are consumer driven, service driven, continue to very well. And so I do think is that I think it relates to energy. The market is still in this tug of war that if the economy continues to slow, demand will come down and hedge funds and algorithmic traders are really short

energy right now. And so I think that will continue in the short term. To put a damper on dampener on that. But Brian were where what makes me a little bit nervous I think as an investor we all like to

study history. Is that when you look at the NASDAQ. And you look at the percent the NASDAQ is above its a hundred and fifty day moving average average right now it's 20 percent above that 150 day moving average and where that's relevant is it becomes just more technically susceptible to larger drawdowns and if you remember in 2018 not at the end of 2018 when Powell was talking inflation but in the beginning of 2018,

we had a big move in January. And then the Nasdaq was about 14 percent above that 150 day moving average. And we got a 12 percent sell off really quick for really not not a big reason. But doesn't doesn't doesn't I hear you all. You know, I would get people that could say it's not like the past because we never had AI and artificial intelligence is this brand new, amazing thing that's going to transform work and computing in the world like the Internet did. And so these multiples, these valuations are deserved. Well, I think AI is not new, by the way. ChatGBT is what was new. And these large language models captured our imagination and our ideas. But Jensen's been making AI chips for so long. Amazon does AI with the robotics. AI has been around for so long. And this is where things go much higher than they should, is because all of a sudden, I mean, with the exception of NVIDIA that had just such an amazing raise in $4 billion, you know, raise for the

second quarter, earnings estimates for these big tech stocks aren't like ratcheting meaningfully higher. And so that's where you get these animal spirits are alive, which is amazing. Bull markets are much more fun than bear markets. So we're happy to have it here. I just do think investors, everyone's in the deep end of the AI pool right now. And so I am hopeful that you do get some more broadening out and these stocks will continue to digest. But I just do remember going back to January of 2018, like why you got a big sell off isn't really. And then markets went back higher.

But I do think investors need to be open to the idea that trees don't grow to the sky. And we are not going to get AI embedded into these companies' earnings anytime soon, with the exception of NVIDIA. Cheryl, is AI this, I mean, literally, it's amazing. It's this shiny new toy. How much should it add to prices, multiples, investor interest? Because it's almost a mania right now. It is.

I mean, look, we had a major company announcing earnings yesterday and had a great call. They were up sharply today and it was really around the AI trade. And for that company, I think it's real. You're talking about a company that rhymes with Badobe. Because you're talking about individual stocks. We're about a company that rhymes with Badobe. Because you're talking about individual stocks. We're talking about companies that rhyme with Badobe. So I think there are other companies, however, where I would absolutely agree with Bryn, where we are seeing if AI is in the name, if AI is in the conversation,

if the CEOs or CFOs are mentioning their earnings goal, even if it has nothing to do with the company earnings, the companies are rallying. And that makes me very nervous. It starts to feel a little bit like 2000 again. So I would be very cautious on the AI trade. I think you have to look at quality. I think you have to pick up the hood and really look under it. And I really think you need to understand a little bit more about what this deep learning is, about what machine algorithms can do.

You have to understand the biases that go into this. There's a lot of problems as well. And I know this has been talked about multiple times on this show. But for me, you have to sort of separate the noise from the reality of which companies have a real play in the AI space and which companies are riding the coattails of these actual companies with real earnings on it. You know, I don't know, Bryn, where AI is going to go, but I will say something definitive, which is I know that health care, what Cheryl was just talking about, is a huge part of our economy, about 20 percent in some ways of GDP. Unfortunately, America still has a lot of medical issues, right? A lot of serious things that are not called COVID that are out there. What I don't understand is when I look at the biotechs, XBI is one biotech,

heavily weighted in certain names. I get it. Can we put up a five-year chart, guys? Because here's the thing. Two ways to look at biotechs. Number one, Bryn, is that we're down about half from our peak of 2021. Or we can look at it five years and say we're exactly where we were five years ago, so there's no money to be made here. I know you're long it. Why aren't biotechs participating? Because if I think about an industry where AI might be able to help, it's going to be biotech because I know companies right now

that are running AI tests. They don't have to use human subjects. I still think with biotech, first of all, it's very event driven. What I have with XBI, I sell calls against it. And that's been a great trade. My calls have done better than the underlying position. I think that what does biotech have in common? And if you take the Regeneron, these smaller companies, they have no revenue, no free cash flow. And I still think in a 5% interest rate where cost of funding is high, that is a market hindrance right now to biotech because they are so capital intensive, these smaller companies. And so I think that will continue to be a headwind for those when we're at this 5% for longer.

That will be a headwind because companies in the market still want profitability. They still want earnings. They still want cash flow. So I would agree with you, Brian. I think AI is very powerful in the biotech space. You know, you can use AI to triage patients when they come in. AI is now analyzing MRIs, x-rays, saving doctors time, making it a lot more efficient. You have the ability to get out that information to patients

very, very quickly. There's a company we look to invest in. It's not publicly traded yet, but they're using artificial intelligence to really make more efficient pathways to transport blood. And they've reduced blood waste by 67%. This is huge for earnings. This is also a huge, when we think about ESG investing, what can we do for the world if we can really help patients in a much more meaningful manner? And look, let's be frank. Look at our population. We have an aging population. We know healthcare is becoming more and more important. And anything we can do to make efficiencies in payments, processing, how bills are paid, all of that factors into the earnings of these companies. I want to be optimistic on a Friday.

Cancer rates have soared. Obesity rates have soared 50 percent in two states. Now, Bryn, very quickly before we go, we do these on Last Call, we do these insider buying segments every Friday. Tune in tonight, by the way. Energy transfer. Kelsey Warren, pipeline companyeline Company guys bought hundreds of millions of his own stock. He's been on the list. He's like 30 million here, 30 million there. I know you want it. Why aren't these companies getting more love? The insiders love them.

Nobody else seems to. They do. And actually, energy transfers up about 13 percent year to day. It has a eight to nine percent yield. It's just been a great midstream company. I think that as these companies, once again, continue to generate free cash flow and people stop staring at the price of oil every day, you're going to see people return here. But I do think, though, Brian, the algorithmics and the hedge funds being short this space right now is just like an elephant sitting on the chest of energy. So it's just going to take time. But I think it's one of the cheapest spaces we have in the market that will have a catalyst longer term because of that free cash flow yield. Yep. The Elerian Pipeline ETF down about 50 percent from its highs of a couple of years ago. Bryn Togedon, thank you. Cheryl,

thank you. Have a great long weekend. All right. Let's now get to our Twitter question of the day. We want to know which of these stocks hitting record highs today do you think has the most upside left? Is it Microsoft? Is it B, Apple? Or is it 3, Nvidia? You can head to at CNBC closing bell on Twitter to vote. We'll share the results later on in the hour. In the meantime, let's get a check on some top stocks to watch on this Friday as we head toward the close. Kate Rogers here with that.

Hi, Kate. Hey there, Brian. Shares of Kava are pulling back in their second day on the market. Thursday's performance made Kava Group the top performing IPO this year for companies valued above $500 million. And while the stock is now trading below its debut price of $42 a share, it's still holding well above the initial pricing of $22 on Wednesday night. And shares of Virgin Galactic rocketing higher today as it plans to launch its first commercial spaceflight in less than two weeks between June 27th and June 30th. Virgin says its second flight will take place in early August with monthly launches thereafter. And take a look at that. Shares are up around 13% right now. Back over to you. Kate Rogers, thank you very much. We'll see more of Kate in just a bit. We are also just getting things started on closing bell up next, driving

some serious EV growth. It's not Tesla. Chinese automakers are making a big play for international and American expansion. Philip Oh, live in London with a look at what is coming up next. Phil. Brian, for a long time, we've talked about how China was the epicenter of the battle between Tesla and Chinese automakers when it comes to electric vehicles. Oh, no. What's happening here in Europe and in the UK? Far more interesting. We'll explain when The Closing Bell returns. All right. Welcome back to Closing Bell. Chinese automakers are becoming a major player in the European electric car space. So might they make a big push to expand here in America? Phil LeBeau is live from London with more. Phil. Eventually, Brian, they will try to come to the U.S., not real soon, maybe after the next election

later this decade. I want to focus on Tesla because so often we talk about Tesla's business in the U.S. and China. And yes, they're critical to its growth. But when you look at where Tesla is compared to other companies in terms of global sales, EV sales, look at BYD, which is nipping at Tesla's heels. Tesla's number two here in Europe. But BYD is just starting to sell vehicles here, as are other Chinese automakers. The reason? It's a market where they believe they can come in with lower-priced models that will gain buyers. Models that are made by companies like MG, which is owned by a Chinese company. And then you've got Polestar, owned by Volvo,

by extension, owned by Zhili out of China. All of this, when you put it together and take a look at shares of Tesla, brings up the question, should Tesla be worried about losing share here in Europe, where they have about 11% of the market right now? It's a possibility because the Chinese now have 8% of the market and that's expected to grow, Brian. Their sales, Chinese brand EV sales, have grown 78% year over year.

And what they're learning here in Europe, those are lessons they ultimately plan to apply to the U.S. market when they come. They're not ready yet for the U.S. market, but in terms of cost and fit and finish, they are very much competitors here in Europe. Brian? Yeah, I was poking around the BYD website. I mean, the car kind of looks like a little more of a sleeker Honda

Accord in a way. These are not, they're not going for the usual tiny sort of cars that so many people buy and sell in China. These are big cars with long ranges and fast charging times. They seem, at least the Han EV and others, they seem to be viable competitors. And they're coming in at a lower price point increasingly. And that's the sweet spot of the market. Yes, Tesla has the Model 3 and the Model Y, but the Chinese believe they can go even lower, which raises the question, when will Elon Musk and company bring out the so-called Model 2 or the lower priced model that many people expect, let's say two, three, four years from now.

Phil LeBeau, live in London. Phil, we appreciate it. Look forward to your air show coverage next week as well. Safe travels. All right, by the way, tonight on Last Call, we're going to be talking more about China with former Defense Secretary Leon Panetta. Secretary of State Anthony Blinken prepares for his trip to China.

Bill Gates was there this week. We're going to talk about it all. China risk, China opportunities tonight. Last call, 7 o'clock Eastern. All right. Up next here on Closing Bell, just climbing right up that old wall of worry. Your next guest betting big on a market uptrend. He'll tell us where he is seeing pockets of opportunity next.

All right. Welcome back to Closing Bell, everybody. The S&P 500 and the NASDAQ are both closing in on their longest winning streaks in years. Years. And our next guest believes that stocks can continue to rise. Joining us now is Chris Heisey. He is Merrill and Bank of America, private bank CIO. Chris, is this a technical rally? We broke through 4,200, 4,300,

new money coming in, technicals. Is it the Fed's done? Is it inflation looks a little more under control? Is it D, all the above? What's going on? One of the moves this go around, actually, if you look at it from the start of the year, positioning, as you know, Brian, was so poor. Positioning was way offside. There were a lot of hedges in place, very defensive, competing curve with 5% cash rates. Money was just parked there. And then once the market starts to see that this story is unfolding, whether some believe it's a soft landing, others will point to inflation coming down, actually a little bit more than what was originally discussed or expected. And then you all of a sudden get a Fed

pause or a skip or maybe a couple of skips. And lo and behold, you get another story in the innovation sector called technology, and that is generative AI. And those tailwinds all hit at once, and that's what creates a momentum market. So technically speaking, very good. And those tailwinds all hit at once. And that's what creates a momentum market. So technically speaking, very good. And there was a lot of concern about the narrow breadth of the market. But we've done a lot of studies that suggest that narrow breadth doesn't mean a bear or bull market. It's happened in many different cycles. So we're quite happy. We applaud this. We're going to continue to be balanced. And we're going to look actually for the next week periods. And you go back to those stats, Chris, and I'm not going to I can't remember the exact ones,

but you get directly correct about this, which is the bulk like the bulk of the money long term investors make in stocks comes on just a few days a year. Does it not? It's sort of the argument for not trying to time it being invested because you get these one and two week bursts and then maybe you do nothing for six months, but that's where you make your money. Yeah, that's a great point, Brian. You know, we all talk about diversification, asset allocation, but few people, when it comes down to thinking about the long term, believe what you just said, which is you can get caught off sides very quickly. And it's not necessarily market timing that is needed. It's time in the market. If you miss the best few days of each year or each decade going all the way back to the 30s, you've missed a good portion, if not almost all, of the big gains over those decades

of period. So we're not just going to set it and leave it and create an asset allocation to match long-term objectives. We're going to look for opportunities. And when cash flow comes in and there's weak periods in the market, that's when you rebalance. That's when you use dollar cost averaging and you use time in the market to your advantage. Where are said opportunities? Well, certainly you can't be offsides in technology. So at least being neutral there. But one caveat, obviously, is the fact of the big run, not only in semiconductors, but in some of the areas that the story is yet to be told, in some cases is being told, but around generative AI. So you have to be careful there because many of those companies have already priced in years worth of earnings, if not cash flow. But the tailwinds to productivity

coming from things like AI in the industrial space, if you consider what's going to be needed with the power grid, what's going to be needed with electrical equipment to cool down and cooling systems to cool down some of these data centers, not to mention some of the beneficiaries of the Inflation Reduction Act. And dare we say energy. Energy has had a very difficult time, particularly heading into a slowdown in the economy. But as we come out and we bottom out in the economy over the next, say, six to 12 months, energy should start to reignite itself once again. And that's a sector, you know, very well. Yeah. And, you know, and I also know this, Chris, that whatever the price of oil does, the stocks respond a little bit, not that much. Obviously, a lot of major divestitures from energy with ESG endowments getting pushed around by

students, whatever it may be. But I can't for the life of me understand why the oil stocks can't get out of their own way. It doesn't matter if oil is at 80 or 60, the stocks barely budge regardless. Yeah, I think there's a lot of portfolio managers out there that still view it as, you know, when oil went negative for that brief period back during the pandemic. And then we came out of it and many people declared that the end of the bear market for oil stocks and the oil patch, if you will. And now portfolio managers are very skeptical to marry a very small sector of the S&P 500, which is still only about, what, 3%, 4%. But when you take a look at the earnings power and the contribution, even, as you said, where oil is right now, that's double the market cap of where energy is. So I

think it's an area where they put off to the side. They know it's very cyclical. There's a drumbeat and the most talked about recession ever coming, whether it's mild or not. And I think it's in the parking lot for now. And that's the time when I think people should actually look at it again and be prepared to come back to that sector as things over the next six to nine months get a little slower. Got it. Chris Heise, really appreciate it, my man. Have a great long weekend. Thank you very much. All right. Up next, we are tracking the biggest movers as we head into the close. Kate Rogers back with that. Kate.

Hey, Ryan, two names heading lower for very different reasons, but one might eke out a weekly gain, even with today's performance. More after the break. All right, just about 22 minutes now until the closing bell, the final one of the week. Let's get right back to Kate for a look at the key stocks to watch. Kate. Hi again, Brian. Humana is lower after warning that insurance costs would be at the high end of its previous guidance due to an increase in outpatient surgeries. That follows UnitedHealth saying earlier in the week

that more seniors are catching up on knee and hip surgeries as COVID concerns wane. Humana tracking for its worst week since January of 2022. And SoFi is lower today as Bank of America and Piper Sandler downgraded to neutral like Oppenheimer on Thursday. Both firms citing the recent rally, which has seen SoFi gain more than 20 percent this month alone. Despite today's pullback, the stock is still heading for a weekly gain.

Back over to you. All right, Kate, thank you very much. All right, last chance, folks, to weigh in on our Twitter question. We asked this, which of these three stocks hitting record highs today has the most upside left? Microsoft, Apple, NVIDIA. I'll bet you I know the, I haven't looked. I know what I think. I'll write it down to show you.

All right. Head to CNBC at closing bell on Twitter. And we're going to bring you the results after the break. And of course, all month long, CNBC is celebrating pride, sharing stories of corporate leaders with you. Here is Google's head of brand accessibility. My advice is to tap into the power and uniqueness of your identity. That is the undeniable essence of you and will in fact help fuel your career growth.

Early in my career, I hid who I was at work, a queer disabled woman in tech. It wasn't until I started bringing all aspects of who I was into the work I did that I truly started to hit my stride. Don't shy away from bringing your whole self to work. Stand confidently in who you are and incorporating it into how you approach work will propel you to greater heights. Let's get out of the results of our Twitter question. We asked which of these stocks hitting record highs has the most upside left. Microsoft, Apple, NVIDIA. NVIDIA, the winning with 41% of the vote. Look at this. Dan Ives, what does that say?

The AI revolution. That's it? Oh, I had a 33% chance of being right. I did not look, and no one told me either. I'll be clear. All right, up next, that guy we just talked to, Dan Ives, making the bull case for Palo Alto, why he thinks the company's growth is just getting started. That and much more when we take you, where, Dan? Inside the Market Zone.

Prepare yourself. We are now in the CNBC closing bell market zone. Truist Keith Lerner is here to share where he sees stocks headed as they pace out for their best week since March. Star Wedbush analyst Dan Isley is out the bull case for Palo Alto Networks. And Leslie Picker on today's bank sell-off. Ahead of key data, out of overtime today, not everything rose. All right. Welcome, everybody, to the Market Zone.

Keith, let us start with you. You put out a note a couple of days ago. Tech extended short-term, but far from bubble extremes. I could probably find some valuation metrics, some earnings metrics that would put us close to some of those. Why do you feel like we're still safe? You recently upgraded certain stocks. Yeah, well, first, great to be with you, Brian, especially, you know, it's better than 550 in the morning like it's been in the past. Thank God. Thank God. Hey, so as far as the overall

tech sector, I mean, obviously, you're seeing things on a short-term basis becoming a bit stretched. But there's been some comparisons back to the tech bubble. I started my career during the tech bubble. And when I look at returns and I look at valuations as a whole and aggregate, it's a lot different. I mean, you know, we look at the last year, tech's up about 27, 28 percent. The year into the tech bubble or to the tech bubble peak, we were up over 100 percent. And then we also had multi-years of this. We have to remember tech was down 34, 35 percent last year. And a lot of that rebound is happening now. Valuations are certainly rich, you know, around 27 times on the S&P technology sector. But that's about half of the the valuation back during the tech bubble. And I think something that's important

and kind of something that shifted our view somewhat is that we had this kind of, you know, AI moment or iPhone moment. You know, I think a lot of corporations now, even if we have an economic slowdown that we still expect, they're going to still have to invest in tech or feel or, you know, there's a fear they would be left behind and become obsolete. So I think the earning trends, the reason why you're in tech is for earnings. I think those earning trends relative to the market will continue to stay stronger for over the next year. We talked about it earlier at the top of the show, Keith, that and it was Cheryl Young's stat. I'll probably butcher it, but I'm going to say it was like 95 percent of the S&P 500's return was just 10 stocks. I get it. If you own the S&P as an ETF,

you don't care because you're making money regardless. But, man, that's got to be extreme, extreme narrowness. Is that where you at all? And is there opportunity on the other side? I want to buy stuff that's low and sell it high. Yeah, it's a good point. Everyone's been talking about breadth. And, you know, what we've seen more recently is breadth has been cashing up to the other 95, you know, those magnificent seven, magnificent eight. So what we did more recently,

if you think about it, before the last week, we upgraded equities back to neutral in the beginning of the month. And our thesis at that point is a lot of these, the average stock was reflecting some of the concerns we were, you know, as far as the Fed and some of the weakness that we see in the economy, they were flat for the year.

So what we did in our portfolios is we actually added to the equal weighted S&P. We still have the large cap, you know, the market cap S&P, which has more tech. And then as far from a sector strategy, we also upgraded industrials a couple of weeks ago. And look at that sector. It's making a 52 week high, has some good secular tailwinds as far as the defense spending, infrastructure spending as well.

So I do think there's some rotation. Longer term for tech, you know, we've been overweight tech since March. We would stick with tech, but we would be more apt to buy on pullbacks as opposed to aggressively chase here after such a big run. Keith Lerner, truest. Keith, always appreciate it. And I always appreciated you getting up early as well, my man. Thank you. All right. Now let's go to number two. Get to Palo Alto Network's Dan Ives. Dan, welcome. Good to see you. Just increased your target to 290 from 225. Why? It's a golden age for cybersecurity.

And Palo Alto continues to be, in my opinion, it's a table pounder. I mean, they're gaining more and more share within the cloud. Our checks have been stronger, you know, as the year has gone on. And I think this is really one. It's not just multiple expansions, free cash flow. And I think what's starting to happen gone on. I think this is really one, it's not just multiple expansion, it's free cash flow. And I think what's starting to happen right now. Why that, I agree, okay, cybersecurity we know, got China hacking everybody, Russia's doing whatever,

but why Palo Alto Networks? There is a lot of competition in cybersecurity. Sure, and really, they at this point are really getting the lion's share of incremental cybersecurity as we move to the cloud. Palo Alto, I think what you've seen share gains, they've really flexed the muscles again and again.

I think what's starting to happen here is that this is a story going into its next year of growth. And in my opinion, when I look at cyber, we're looking at probably 15% to 17% growth this year in a 2% to three percent IT spending environment. That's why I view this as a green light to own cyber, where power has been won, even though the stock's risen and many were sort of saying skeptical to begin the year, I still view it as a table pounder name to own. You talk about the cloud theme of cyber, but I assume all software now is cloud so what what is the cloud theme is anybody

not on the cloud yeah so there's there's certain names like a name like a checkpoint or a fortinet you know fortinet's still one of our favorites that's more what i would call not as much of a cloud play when it comes cyber but that's really names like zscaler, CrowdStrike, Palo Alto. What they've really become right now is, I don't want to say, they're a mini Microsoft of cybersecurity. And what I love about it is that these free cash flow names now start to ramp more and more. I still think it's under-earned. And I think what we're seeing across the board is cybersecurity, with 45% of workloads in the cloud, cybersecurity is just going to get more and more growth. And I think it's going to be an M&A frenzy second half of the year. Would they be a buyer or a seller? I think they're a buyer, but I do believe we're ever

going to have a title. Palo Alto will be the buyer, but that means they're spending a lot of money and buying stocks that get bought. We know what they do. They rocket higher and you love it. Sometimes the buyers don't. No doubt. I think with Palo, they've been tactician-like in terms of the way the cash and the team have executed. And I think from an investor perspective, this has been one where it's the best of both worlds. You have the growth, you have the cloud element, and then ultimately you have the free cash flow story that continues to play out. And that's why, in my view, in what we're seeing in broader tech, you came into the year the New York City cab driver was bearish on tech stocks. We continue to view that tech stocks are going to be up 12%, 15% the rest of the year.

Cyber, cloud, and of course there's AI revolution, which I view as more of a 1995 moment playing out, not a 1999 moment. I'll pivot a little bit to this company. I don't, there's a company I don't, it's brand new. We've never talked about it. It's called Tesla. They make cars. I don't know if you ever heard of them. I've heard of them once or twice.

Today. Yeah. We've been talking about them a lot because they've been on an epic run. I think they fell yesterday, ended a 13-day streak. They're up 2% again today. They've added $250 billion in market cap. Teslarians, they love their cars. We just had Phil LeBeau on about BYD, the China company.

They're not in the U.S. yet. They may never come, but they probably will. Are we missing anything on the Tesla story? I think it's really been what I'll call an AWS moment because what's starting to happen now with the supercharger network in terms of what we saw with, of course, it started with Ford and then of GM, the sum of the parts story of Tesla, and I think AI is going to be the next piece, is now starting to be realized. And I think ultimately what's really happened is margins

are troughing, units in terms of demand in China, I think is ultimately gonna hit the year number. And I think a lot of those bears, they're going into hibernation, motors and stock continues to move higher. What about here though? Are the sales matching the stock? I mean, I talked to a dealer,

not a Tesla dealer, obviously, they don't have dealers, but a national auto dealer a couple days ago, and he was saying that their channel checks suggested that Tesla inventory is building. I don't know. Yeah, inventory is definitely built a little in the US. We've seen the six price cuts, but the hearts and lungs of the Tesla story,

what ultimately drives the stock is the China story. I mean, that's really the core DNA of the growth. And now what we're really starting to see is growth. And we talk about BYD and what Phil talked about. I believe in China, they're a share gainer. And I think Musk being in China as well just shows they're going to play nice in the sandbox in Beijing while they continue to build out in the U.S. And I think that's why, in my opinion, Tesla is going to be a trillion-dollar market. And Elon Musk was just in the aforementioned China. Dan Ives, good to see you. Thank you.

Thank you. All right, not everything was up today. Sorry. Bank stocks lower and sitting out the rally all week long. Leslie Picker joining us on that. And the critical balance sheet data out after the bells. They cheer here at the NYC, but not for banks. Well, it had been going so well for banks, but broadly lower today as investors continue to digest the news from earlier in the week that a few more rate hikes may be in store.

We also get fresh data, as you mentioned, on deposit levels after the bell today. Last week's data showed an increase in system wide deposits. So the question is, will that continue? In recent months, banks have been competing with money market mutual funds, but those flows were actually about $3 billion lower week over week as of June 14th. That's according to ICI, and that's the first decrease since mid-April. So the question with today's data is whether that affects the deposit flight toward higher rate alternatives or if it indicates further stabilization. Brian. All right. So we've got all this data next week. You just told us kind of the top line. Is there going to be one more thing that's more critical to watch than anything else?

If we are bank investors, frustrated bank investors, what's like the most important thing? Well, believe it or not, Brian, we're about a month from earnings. We also get stress tests in two weeks. And then there's Basel on the horizon. Those rules are expected at the end of June. So it's going to be regulation and Q2 earnings that investors are going to be very much focused on over the next few weeks. Listen, launching a new 7 p.m. show called Last Call, I got stress tested recently and I failed miserably. I just want to be clear on that, Leslie Ficker. Earnings, earnings, big banks, we have, use your crystal ball, any indication, like, how are they kind of looking? I could, I could, stocks are up, but M&A is down.

Stocks are up. M&A is definitely going to be lower. There was a lot of commentary over the last few weeks from executives speaking at conferences and NII for the regionals does appear to be somewhat limited, depending kind of on size here. The bigger firms, the Wells Fargo's of the world, for example, indicated that net interest income, that's a measure of profitability, would be okay. But it's more of the regionals, the super regionals that seem to be looking at having their margins a bit compressed in the current environment. Although they have been able to enjoy somewhat lower funding costs because they've kept those deposit rates lower. But a lot of that is kind of rolling off as their customers are pursuing higher rate CDs. They're seeing more competition from other

banks, from those money market funds. So the whole dynamic is really shifting right now. All right, Leslie Picker, great to see you. Not quite as good of a day for the banks, but we do appreciate it, Leslie. Thank you very much. All right, folks, it says ad lib into the close. That's what the prompter says. I know. I'm good at it, too. Thank you for the applause, everybody. You know.

Oh, they're cheering for the NYSE. I know we're down a little bit today, but it's been a great week. All the major averages, they are lower, but a good week, one of the best weeks in a long time for the equity market. That's it for us. I'll see you on last call if I have a voice left, 7 p.m. Eastern time tonight. Have a great weekend, everybody.