Closing Bell - Closing Bell: Big Tech Put to the Test 9/12/23

Episode Date: September 12, 2023

Big tech market leadership is being put to the test with Apple shares in the red with the iPhone 15 launch event underway and Oracle’s disappointing outlook dragging on the key software names. CNBC���s Steve Kovach breaks down all the big headlines from Apple’s big event. Plus, DoubleLine’s Jeffrey Gundlach speaks to Scott Wapner at the Future Proof conference. His take on the fed, potential recession and more.

Welcome to Closing Bell. I'm Mike Santoli at Post 9 of the New York Stock Exchange. Scott Wapner will join shortly. He just finished up a conversation with DoubleLine's Jeff Gundlach at the FutureProof Conference in California. He will bring us the highlights in just a few minutes. But this make or break hour begins with stocks coiling in the face of two crucial catalysts. The S&P 500 now sitting just about exactly halfway between its summertime high and low as bond yields and oil push the upper end of their ranges with the CPI release first thing tomorrow morning. But first, to our talk of the day, big tech market leadership being put to the test. Apple shares in the red with the iPhone 15 launch event underway

and Oracle's disappointing outlook dragging on the key software names. Let's get right to Steve Kovach and Cupertino with the news from Apple this afternoon. Steve. Hey, Mike. Yeah, and the headline here is the analysts got it wrong on the pricing for these new iPhones. Pricing is going to remain the same, starting at $799 for the regular iPhone 15, all the way up to $1199 for that iPhone Pro Max. Now the big changes here on all the models includes a new plug at the bottom replacing that lightning connector that we've been using for over a decade, now using USB-C. And on those Pro models, Apple really touting the features that allow for videographers

and filmmakers and professional photographers to connect to their Mac easier, edit photos easier. This is a big change that kind of community of users has been asking for for a while. Plus on the pro end, again, better cameras as we expect every year, this time with a better zoom, 5x optical zoom versus 3x optical zoom before. And also following a pattern that we saw last year, the best features, the most advanced features and chips and so forth, those go into the Pro models to be introduced into the lower end models the following year. That's what we're seeing with these regular iPhone 15s.

They actually have the same processor that last year's iPhone 14 Pros had. And then of course some watches, minor updates here, the Apple Watch that is series 9 just some under the hood and improvements and this new feature they're touting the ability called double tap meaning you don't have to actually tap on the screen or use the dial on the Apple Watch you just go like this finger and index finger and thumb together to make selections they're saying that's easier when you have your hands full and things like that but look look, Mike, they're facing a really tough environment. Smartphone demand is low right now.

We know that. And we know Apple has already guided that this is going to be their fourth quarter of declining sales in a row, Mike. Absolutely, Steve. And, you know, we don't want to make too much of the moment-to-moment changes in the stock price. But the losses in Apple shares did deepen a little bit once we did get some of these details out what's the read on the lack of a price increase does it. Seem to suggest to investors perhaps

that the Apple just didn't feel like they could push these through. We obviously have seen general inflation in the two years. Since we had the prior model pricing set up. Yeah and also Mike I'll just caution doesn't mean price increases

more come later we've seen Apple do this before in certain markets especially as we've seen the strong dollar of the last couple years certain markets might get a price increase already I haven't seen all the prices I will also note that carriers are going to be offering deals Apple itself offering up to a thousand bucks off and I'm sure each individual carrier here in the US will have their own offers trading your own phone get a phone for free and so forth. So we'll see what those deals

look like. But that really moves those iPhones as well. Absolutely. With that weakness in Apple, we are also seeing session lows in the S&P and the Nasdaq, still relatively modest losses, but they have worsened in the last little bit. Here to discuss all of this are Lauren Goodwin of New York Life Investments and Surat Sethi of Douglas C. Lane and Associates. Surat, also a CNBC contributor. Let's first, Surat, get to just Apple and how you're thinking about the new product release in the context of where the stock sets up right now. You know, there's not really expected to be a whole lot of earnings growth in the fiscal year that just started. You hear anything today that's going to change that? No, not really. And I think the pricing was surprising because we know volume growth has been coming down. So how are they going to

increase revenue and more importantly, margins and cash flow? So I think you had a little bit of disappointment there. But, you know, as Steve had mentioned before, you don't know what they're going to pull out later. Maybe pricing comes. Maybe they're going to see what the demand is like and if demand is greater than what they can supply then you will get some pricing on it so you know I think everything we expected incrementally uh no big news there and you've kind of had this slow drip in Apple over the last week with the news from China in terms of government selling so uh yeah we'll see how it goes but I think this will be an interesting test to see what type of demand the phones are going to have. Yeah. So maybe Apple just treading a little carefully on that front.

I think more broadly, Lauren, the question is, what type of consumer do we have? What type of economic trajectory are we on? You know, we'll note again, the monthly Bank of America fund manager survey says soft landing expectations are pretty well ingrained. The majority figures that's what we're in for, at least for a while. You seem not to think that we're going to get out of this quite so easily in terms of the economic cycle. So if that's the case, how does it develop from here? What in the markets are mispriced in your scenario? The consumer is still incredibly strong right now. I think where we differ from the headline market perspective is how long it will stay that way in the sense that, look, we revert

to this fun, cute narrative around economic dominoes, where as soon as the Fed starts raising interest rates, dominoes topple. And right now they're stopped where they always tend to stop, which is with the consumer. So I'd expect that we have a couple more months of ballast supporting the consumer in this environment. What's challenging is not only are the sources of those ballasts coming off, but important changes like those in student loan payments we're seeing actually have an impact quicker than maybe we expected. And so does that impact the purchase of a new phone? I'm not sure in the next three, four months. But I think for next year, it's something that we're concerned about. So does that imply that the 4%-ish wage growth that we've been seeing and that on some level,

maybe the Fed wants to see soften even more, is going to come down? I mean, it seems like there are these offsets. You know, if we do have further obvious deceleration, if it contributes to further disinflation, then we can get some help on the Fed side. At least that's the perfect choreography people might imagine. Yeah, of course. And wouldn't that be a fun choreography to play out? I think we'll have to see wage growth come down. And it's one of the real challenges of the stronger than expected economic environment that we've seen,

that wage growth at 4 percent risks that you have services price inflation reaccelerate, move higher. And we'll see over the next couple of months how that plays out. But I think the reality is that the Fed cannot let its foot off the gas in an environment like that. The risk to inflation, it's used as, and it's said over and over, it's used as being more important than the risk of recession. In fact, I think the fact that the 500 plus basis points of hiking that we've seen haven't already contributed to recession has been a happy accident rather than a purposeful policy move. Yeah, well, there's no doubt that they didn't count on it going quite so well to this point. Surat, as you kind of look at companies

that you're maybe going to invest in or already invested in, what are they suggesting to you in terms of resilience of their end markets and then what their path of earnings are, because you have seen the consensus start to turn higher in terms of S&P earnings, though a lot of it driven by some of those big tech stocks. Yeah, and I think people are generally cautious. I mean, capital markets are starting to open up. You're seeing some IPOs, but to Lauren's point, input prices are still high.

I mean, oil prices are now going higher and higher wages are going higher we've got these. You need discussions with the autos you've already got higher wages for- pilots UPS. So I do think we have this. It embedded inflation our system. And the

market you know is pricing the soft landing so you will really be companies that have. True cash flow growth and earnings. And I think those that don't are going to get punished. I mean, you saw what happened to Oracle. You disappoint slightly and the stock gets hurt. So I do think the earnings season coming is going to be one of the most important ones.

With consumer demand slowing, costs increasing, and you look at capital structure for a lot of companies who are trying to raise debt as well. So a lot that I think has to be perfect for the soft landing to happen. That does seem true, although I guess a couple of things, Lauren, that maybe folks would argue as counterpoints. One of them is the initial conditions in terms of just how strong the consumer was, how much fiscal stimulus there was, consumer balance sheets, corporate balance sheets being in good shape, that the weakening we've seen is so far kind of a normalization as opposed to, you know, really falling off a cliff. I guess the other one is this micro cycle idea.

You know, housing already had the worst of its pain. Manufacturing's been bumping along for a while without a lot of help to the overall economy. So this idea that not everything's going wrong at once. Yeah, you know, both of those arguments are effectively a function of time. And timing is pretty important in investing. So I'll grant the objections that truth. But as the strong consumer has weakened over time, every recession looks like a soft landing

at first. We were talking about the same thing in 2000, the same thing in 2007. I anticipate that this will look very similar. What is absolutely different this time is the fiscal support that the consumer has been seeing. And that's not only what's allowed the economy to continue on the path that it has over the past year, but likely what's going to contribute to this difficult decision the Fed's going to have to be making. And I expect more hiking in the future. Now, all of that together, though, has created one of the most interesting investment opportunities

in the last decade, which is a little bit of yield. So it's certainly not all bad. This is an environment where we're staying fully invested because what we've seen time and time again in those same 2000, 2007 experiences is the market doesn't react to recession until it's already here. Pretty close, yeah. So we don't need to preempt it in quite that way. Yeah. And I guess if that's the case, if you are fully invested and the majority seems to be wanting to position for a better economic outcome, where are the opportunities that you feel are being neglected in that setup? Well, I think the soft landing positioning is an optimistic positioning that looks a little bit different from a we're expecting recession but staying fully invested positioning.

Now, what I mean by that is if you're worried that you might see a little bit of an inflation refirming, which we do expect that we'll see. I'm not talking about a double peak, but a little bit of refirming over the next couple of months. You expect that economic growth is going to continue to slow. Then you might still be adapting your equity risk back towards value stocks, taking a little bit of gains from growth, moving it into high yield, as an example. Even looking at some of the real assets that tend to do well, if you do see a little bit of an upside inflation surprise, like real estate, like commodities, those are slightly, if not very different allocation choices than one that you would make in the middle of an upswing or a cyclical recovery. And so those are the opportunities that we see having positive risk-adjusted returns. And high-yield bonds, I know you probably always get this question,

if you think the economy is wobbly, why does that make sense? Well, look, I think that we're likely to see spread widening, if not meaningful spread widening from high yield as recession risk rises. The difference, a couple of things. First, the fundamentals in high yield bonds are quite different in this cycle, mostly because of the government programs that we saw during the pandemic era. And so there is a stability of the maturity walls and of the quality of issuance that we think gives the asset class more resilience. So maybe you don't see spreads widen out as far as they tend to when recession hits. The other important benefit, though, is, of course, the yield that we're seeing from high yield wasn't the case in the last economic cycle and allows an investor, if they're looking to take equity-like risk, because that's

what high yield tends to provide in a portfolio, you can clip that coupon where you're not seeing the same yield out of an equity portfolio. For sure. Surat, we have the CPI tomorrow. You know, you could sort of pan out and say the basic ingredients of where the market, how the market got where it is right now this year is, you know, disinflation has been pretty much consistent all year. The Fed, maybe it's not done, but it's certainly close to it. And corporate earnings have had a downturn and maybe are coming out of that, at least in aggregate. Do you expect anything tomorrow from the CPI that's going to complicate that story? Or do you feel as if that's, you know, already too well priced in the market? I think it's already priced

in, but I think we just have to be careful with inflation showing up in commodities, inflation showing up in energy. So I don't think the Fed's done. I think they're going to wait. But if the economy slows down faster than we expect and we get inflation, I think that's where it's going to be difficult for the market. But in the perfect scenario, if we get inflation kind of coming up just a little bit and the economy slowing. I think that's exactly where the Fed wants to be. So tomorrow's number, I don't think, will be too surprising. But I think the data for the next four to six weeks is going to be very interesting to watch. I guess, you know, we did have this Wall Street Journal report over the weekend

that the Fed is now thinking that, you know, it can be more patient, I guess, or the risks are more balanced in its view right now. And even on paper, they don't expect the inflation to get down to their target for quite a long time. So arguably, they're giving the economy a little bit of a longer leash right here. Does that not change the dynamic to you? I think that's a correct assessment. And I agree with Surat that the Fed's unlikely to hike in September. That's my expectation.

But I think that represents a resetting of their pace of preferred hiking rather than a signal that they're likely to pause. And it has everything to do with the inflation risk that Sirat pointed out. The Fed, by its own admission, says that in 12 months' time, if things are going as well as they're going, we still won't be at the target. And again, that's an environment that we think presents interesting investment opportunities. But it's one that also has very different leadership from just a traditional cyclical upturn. And Surat, in terms of you and dealing with your clients, we've talked a lot about the somewhat novelty of a factor of 5% safe yields in cash-like instruments. A lot of folks have, it's been a long time since that was the case.

Are you having to talk people out of cash into cash? Does cash serve a different purpose right now in a portfolio? That's a really good question. So cash is more equivalent to either getting your 5% yield in money markets or treasuries. So a lot of clients are saying, hey, why not just be in treasuries? Or if we're going to do corporates, you know, you've got to give me a really good yield to compensate for that extra risk. But you are seeing that, especially in balanced accounts, where, you know, in the last 10 years, you're pretty much on the higher end because you weren't getting any yield.

Now it's, hey, I can actually be in my lower end and I've got, you know, equity type returns in some of the either high yield or bond type instruments. So I think that's taking away from some of the equities. And then on the equity side it's also you know valuations really important. Do you really want to buy companies with twenty twenty five times fees with interest

rates at six percent. So you really have to look hard and say hey the growth rate really has to matter. And you want to look at other areas where they are value stocks just make sure that you're not in value trap so. You know areas like healthcare some of the cyclicals.

If you get any type of rebound, that's the areas you want to be. All right. Surat, Lauren, thanks so much. Thank you. Talk to you again soon. Let's get to our question of the day. How would you bet the market will react to tomorrow's CPI report? Rally or sell off?

Red or black? Head to at CNBC closing bell on X to vote on that. We'll share the results later this hour. Let's get a check on some top stocks to watch as we head into the close with the S&P down about six tenths of one percent. Seema Modi here with those. Hi, Seema. Hey, Mike. Let's look at Westrock.

Higher on plans to merge with Irish firm Smurfit Kappa in an effort to better tackle an ongoing slowing macroeconomic environment. The combined company shares will trade in both London and New York. Smurfit Kappa is falling about 10 percent in London on concerns over valuation, while Westrock, you'll see, is up around 3 percent at this hour. We're also tracking gains in a number of banks. That includes names like Zions Bancorp, PNC, Wells Fargo. Those gains come a day after J.P. Morgan CEO Jamie Dimon criticized stricter capital rules proposed by regulators, saying he would not be a big buyer of bank stocks. Mike, Dimon was relatively cautious on the outlook for this economy.

He was. And even though he wouldn't have been a one-day flipper of those stocks, he could have had a good one there. Seema, thanks very much. We're just getting started. Up next, we're headed out west, where Scott Wapner just caught up with DoubleLine's Jeff Gundlach. All the highlights from that conversation, along with instant expert reaction after this break.

S&P and the NASDAQ are trading at session lows. You're watching Closing Bell on CBS. Welcome back to Closing Bell. I'm Scott Wapner, live from the Future Proof Wealth Conference here in Huntington Beach, California. Just finished speaking with DoubleLine CEO Jeffrey Gundlach on stage. Big thanks, by the way, to Mike Santoli as I made my way up here to our location. Obviously, we spoke a lot about the economy, the current state of that, what he thinks the Fed is going to do. We are just about a week out, of course, from the next decision. As you know, if you followed our conversations over the last many months, he's been arguing to me and to you, you know, viewers that the Fed should have been done already.

So I asked him, are they done now? Here's what he said. I think they're done. I think that we have enough economic weakness. I think the one thing that they need to change to be done is they need the core PCE to drop below four. It's been at four to four and a half for about two, two and a half years. And that's the one inflation indicator that is just sideways. All the rest of them are clearly very substantially have come off their highs, not the core PCE. And that's because of services. And to a certain extent, wages are part of that services component. That has to come down. I think once that goes below four, and I think it's a 4.1 today, I think that will definitively make them stop. I mean, the bottom line is that he just doesn't think that the economy is as strong as

people would like to believe. That's why they're done raising rates. Doesn't believe the soft landing scenario. Here's what he said about a recession and the idea of rate cuts. Absolutely. I look for one next year. And I think the indicators are getting really convincing in that regard. And so this debt coming due would be just devastating. The Fed can't have interest rates at 5, 6 percent and hold them there for the next few years without bankrupting everything about this country. And I think they realize that. And I think they want the economy to slow quickly. And I think they want rates to go back down because if this happens on their watch, it's going to go down, you know, in infamy, really.

So, yeah, I think that the economy is definitely weakening. I think it's going to be in the first half of next year. I think it's going to be when the economy really weakens. It being the first rate cut from the Fed, which, as you saw, looks for in the first half of next year. You know, we also discussed a topic that came up here yesterday somewhat unexpectedly. Bill Gross, of course, formerly of PIMCO, took a shot at Jeffrey Gundlach and his moniker of being the Bond King. I want to play you some sound here of what Jeffrey Gundlach said to the words of Bill Gross yesterday, where he said, quote, first of all, to be a bond king or queen,

you need a kingdom. PIMCO had two trillion, OK? Double lines got like fifty five billion. Come on, that's no kingdom. That's like Latvia or Estonia. I said preface preface this by saying, too, that double lines AUM is bigger than than fifty five billion. Jeffrey said it's over a hundred billion at the current time. But here's his response to a much talked about comment from bill gross yesterday i don't care i just don't care it doesn't bother you one bit it's sad that somebody that's been out of the business for 10 years and is still trying to i don't know i guess exercise the demons i It's sad. But I hope he's doing fine. Does the world really need two battling billionaire bond kings? I never wanted that title. I never embraced it. I really don't know what it means. We're doing great. Our five-year numbers are great.

Things are good. And we manage a lot more than $55 billion. So I don't know. Well, the last I checked... Four Pinocchios. The last I checked, at least at the end of 2021, it was three times that. Yeah. I don't know what it is today, but... About $100 billion, yeah. And I don't know. It's a strange thing. I actually don't want to manage more money than I do. I stopped marketing my largest fund 12 years ago. All right. So that's Jeffrey Gundlach there on the record. You heard his thoughts on the economy, his prediction for next week's Fed meeting, which, by the way, I should remind you,

he does spend every Fed day with us on Closing Bell. And we'll be doing that once again next week. So you've heard what he thinks is going to happen. Then you'll find out actually what did happen. And when I see you later on in the market zone, too, we've got more sound from Jeffrey on some investment ideas about bonds, stocks and and some other areas of the market that obviously he watches very closely. In the meantime, though, joining me now to discuss all of that is Nancy Davis, Quadratic Capital Management founder and chief investment officer. It's so good to see you here live out in Huntington Beach. So to the point about the economy not being as strong as some would like to believe, he doesn't believe, as you heard, in the soft landing scenario, recession next year, rate cuts to follow.

What do you think? Well, the Treasury does have to refinance. Almost a third of our debt is coming due in the next year. So his point, I think, was not the data in the U.S. has been pretty strong so far, but the Treasury has so much debt to refinance. Like, what are they going to do that's going to just explode the interest carry costs? So I think expecting some sort of rate cuts are reasonable. And I do think, you know, obviously we'll get CPI tomorrow and we'll see whether core actually comes down. But headline is expected at three

point six. So fingers crossed. But again, CPI is just a number, right? It's just an index. It's like the Dow Jones or the S&P. It's a consumer price index. It's not the only way to measure or think about inflation. But you would admit yourself the trend has been going in the right direction, which leads the Fed to, you would want to believe, you know, think that they could be patient from here forward, don't you think? I definitely think so. I think they've hiked too much already. They should have been using the balance sheet more. I feel like they keep hitting the same nail with the hammer over and over and over again. Like they have monetary policy.

It's not one policy, it's policies. And that includes using quantitative tightening. And they've been really pansies about it. They really haven't gotten, you know, gotten bold with reducing the balance sheet by having these caps in place. And then Silicon Valley Bank, they just created more liquidity and increased their balance sheet again in March to save the banking system. So I think they could really ease off the rate hikes, use more quantitative tightening with their balance sheet and stop doing the same thing over and over and over again. So just because you believe that they've done too much doesn't necessarily mean that they won't do more. Do you think, like Jeffrey

does, that they're done? I. Do you think, like Jeffrey does, that they're done? I think we'll probably get one more hike. I'll take the over on that and say through the end of the year, I think we'll probably get one more. But I do think the market, if you look at Fed Fund Futures, is expecting rate cuts next year. And I think that will be the real surprise for markets, right, is if the Fed hikes and holds longer than what we're expecting. Because pretty much all bond managers, whether you're a king, queen or something else, everybody's coming out and saying, where are the cuts, right? Everybody is looking for these rate cuts. And it's kind of like deja vu a little bit, because if you think about, you know, back in

2021, nobody was expecting the Fed to hike 5% interest rates in about a 12-month span. So I think it's very difficult. You don't want to be stuck with consensus thinking. And I think we'll have to see what the data shows. But it's also the Bureau of Labor statistics, and revisions happen all the time. You know, bond market volatility is something that you obviously follow and invest on where you see that going. Would you be willing to say that the volatility in the bond market has been pretty modest almost throughout this whole stretch of rate hikes, except for a few periods where things got a little crazy. How would you describe what you've witnessed in your

expertise, in your area of the market through a little more than a year of rate hikes? Yeah, definitely vol is very muted. I think a lot of people focus on equity volatility, but the thing that kind of is lurking in everyone's, all of your viewers, you have fixed income vol that you're short if you own things like mortgages. Any place you own a mortgage, if you think about it, a U.S. homeowner can prepay whenever they want. They own an option. If you own the mortgage, you're short options to them. And whenever you're short options, you're short vol. So the big surprise, vol has not gone higher. But if we do see an increase in fixed income volatility, that will mean price going down in mortgages. And so it's really important to understand things like

the ag index. A third of the ag is mortgages. And then if you look at the Fed's balance sheet, it's still about $8 trillion. The SOMA holdings have gone down about a trillion dollars, but the balance sheet expanded with Silicon Valley Bank. A third of that is mortgages. But Jeffrey likes mortgages and he's liked. Well he's maybe the mortgage king maybe we can agree on that. He's liked it because he made the point you know people are sitting in 3% fixed mortgages or perhaps you know some may be a little under some may be a little over who's moving who's who's going for the seven and a half percent mortgage now so there's been such a degree of stability

in that area of the market. Has that surprised you? Well, it's all about modeling prepayment risk, right? So it's about interpreting what homeowners are going to do, how they're going to respond, when they're going to prepay. And it's very rational for homeowners to prepay when interest rates go down. But when they go higher, people don't want to move. And that's created more of a wealth gap in property prices because it's so expensive to buy a home now. If you're not already in real estate, what is a regular person going to do? So I think that's also another problem. Going back to the Fed using their balance sheet more, a third of their balance sheet is mortgages. They can help normalize things because markets are distorted in fixed income.

The yield curve is more inverted now than it was in the late 80s. You think you buy a one-month T-bill and get paid five and a quarter, or you could lend the U.S. Treasury money for 10 years and get a percent lower. Like, that doesn't make a ton of sense, right? Like, normally you take more risk, you get higher reward. In this case, you take more risk with duration, you actually get less return. So the markets are definitely screaming that the rates markets, the bond markets with this inverted yield curve, that a recession is coming. All right. Well, it's been great to catch up with you

here and especially have you react in real time to what you heard from Jeffrey Gundlach. Nancy Davis, thank you. Thank you, Scott. All right. We'll catch up with you again soon. And a reminder to MarketZone, I've got more sound from Jeffrey Gundlach on whether bonds are still as attractive as they they once were. Also, the Fed's alleged change of focus, perhaps change of thought about what they can do from here on out, as people have been talking about over the last couple of days after that Wall Street Journal article. Up next, Apple, you know, unveiling the new iPhone today. The company's stock moving lower on the back of its highly anticipated event. It's been moving lower into the highly anticipated event, which is a story in and of itself. We have an expert panel standing

by to break down all of those headlines. And don't forget, register for CNBC's Delivering Alpha conference. I'll be there with some can't-miss interviews, including a sit-down with Pershing Square's Bill Ackman. That is on September 28th, New York City. Scan the QR code to get your tickets. Closing bell from Huntington Beach is back after this. Welcome back. Shares of Apple down over 2% following today's highly anticipated hardware event up in Cupertino, California. The tech giant announcing the new iPhone 15 and Apple Watch Series 9 set to be released next Friday, September 22nd.

Joining me now to react, Wed Bush's Dan Ives covers the company, as you know, and CIC Wealth's Malcolm Etheridge. Malcolm is also a CNBC contributor. Gentlemen, it's good to see you here just off the beach. Dan Ives, I'll turn to you first. Your first reaction to what we learned today from Apple. And the stock's been selling off into the event and now selling off on the backside, too. Yeah, no doubt. I mean, knee-jerk reaction, I think, that we've seen, especially with the China worries. But if you look, I think it's a flex the muscles moment.

I mean, you're getting the iPhone 15 Pro on time despite worries September 22nd. The price increase in terms of the Pro, they did not do. And I think this is important. That's something that shows more and more pricing power from a chip perspective. And it comes down to, I believe this is another share gain. And what I view as a mini super cycle that's going to play out, despite many of the bears, skepticism building. I know, but you say many of the bears. I always want to come back to you on that because many of the bears, are there really many bears on Apple? And the concerns that

exist are legit. I could read you the statistics. I mean, the shares are coming off the second worst week of the year. Three straight quarters of year-over-year revenue declines. Year-over-year iPhone revenue has declined in two of the past three quarters. That's not knee-jerk. Those are real numbers. And in my opinion, this is really just the transition to the next stage of the growth story in Cupertino. Services now start an uptick to double-digit growth. And I think the most important thing, 25% of the install base has not upgraded the iPhone in four plus years. And I think when you look at it, we sit here six, nine months from now

and look at more and more share gains in China, not the opposite. That's our call. So you thought there was going to be an increase of a hundred bucks. You didn't really get that other than for the Pro Max. Are you surprised? Because you said, as the rumors were swirling that this might happen, that it would be good for Apple if they did that. Well, they didn't do it. Why didn't they split the hair? I mean, on the Pro Max, I think you're going to see more and more, especially in China and the U.S., heavier going toward Pro Max because of the camera technology. Not raising Pro Max on $100, it's a bit of a surprise. But I think there right now, it's that balancing act for Cook and Cupertino,

especially given the macro. And this is something from a unit perspective that actually could be a positive. And I think it shows more and more confidence in terms of what they're doing and ultimately controlling their own ecosystem. Does it reverse those trends that have been trending in the wrong direction in terms of iPhone revenues of late? I mean, I know the importance of the next quarter, the December quarter is really the bread and butter. This one, OK, they'll do some numbers because the phones and the other stuff is rolling out, too. But is it enough to reverse those declines? I think it is,

because I think when you combine with the carrier discounts we're going to see, share gains in China, especially with Huawei two generations behind Apple. 300 bps of share that we've seen Apple in the last year and a half. And I believe from a unit perspective, mid-single-digit type unit growth plus ASP is lifting. That's the perfect combination, which is why we believe we sit here a year from now. Apple is toward $3.5 trillion, not the opposite. Okay, Malcolm, it's good to see you, as I mentioned. Apple shareholder?

Yeah. What do you make? Is he too optimistic? You don't find people who are more bullish than Dan Ives on Apple. I hate to say it because I like him because, you know, Dan's my guy, but I think he's a little bit too optimistic right now on the iPhone cycle. I think a lot of shareholders feel like I do, that we were hoping slash expecting to get something better than a new iPhone and,

you know, vegan leather now on the Apple Watch like that isn't really going to move the needle at this point. It's services revenue that they've proved is where the gross margins really live. And so can we get a confirmation of a partnership with American Express leaving Goldman Sachs? That's going to lead us to Apple Finance really moving the needle as far as services. Can we get the iPhone to no longer be 52% of the revenue mix? That's really what I as a long-term shareholder care about. Going from the 14 to the 15, the 15 to the 16, so forth and so on, really isn't going to move the needle anymore because the iPhone has become already a utility. It's no longer a purchase that you make just because you want to.

It's a necessity at this point. They won that battle. But what can they do beyond it is what I, as a shareholder, am looking for. Do they really even have to do anything beyond that? You really think that, you know, just because you mentioned it, partnerships with another financial institution is really going to be anything more than an incremental move forward, right? The services business, as you said, is like a Fortune 50 company all by itself's, this is an iPhone company, first, second, third, and 20th. But I don't think they should be long-term. I think what they've already proven is $10 billion

in deposits with the Goldman Sachs partnership, the Apple savings accounts in just what, three, four months. That showed where the demand really is. And all Apple really has to do is add its marketing wizardry, its secret sauce as far as branding is concerned, to a banking product that there's not a large lift. And Apple doesn't have to compete on net interest margin like a traditional bank does. So there's tons of opportunity there for them to really take some share away from traditional banks. And I think that's where they should be leaning to long term, because it's one of the only

markets there that they can disrupt at the size that they are at $2.8 trillion or whatever we're sitting at today. You want to just address that before we go? Good points from a shareholder. Of course, great points, as always, from Malcolm. The monetization of Cupertino has just begun. When you look at services, you look at e-finance, right view, ultimately be AI in 2025. This is just the middle stages of, I think, the next growth story that Cupertino and Cook are going to see. We'll leave it there.

Enjoy the rest of the conference. Dan Ives, Malcolm Etheridge, we'll see you soon. We'll see you back at Post 9, I hope. Up next, we're tracking all the biggest movers as we head towards the close today. And later, Oracle shares. Whoa, they got slammed today. We're going to break down that leg lower. Check in on the rest of the key software names as well. Closing Bell live from Huntington Beach is back

right after this. We're about 15 minutes away from the closing bell. Let's get back to Seema Modi now for a look at the key stocks she's watching today. Hi, Seema. Hey, Scott, take a look at Casey's General Stores delivering a strong beat on first quarter earnings as it remains on track to acquire 125 stores. The company's CEO citing whole pizza pies and the launch of thin crust pizza as one of the reasons sales came in higher than expected. RBC raising its price target on the stock from 275 to 284 shares up over 10 percent. But let's talk about energy. Exxon is moving higher as Morgan Stanley reiterates its overweight rating, saying the company is a top pick in this category. The gain's also being fueled by rising oil prices with WTI hitting its highest level since November,

which is giving the whole energy sector a continued boost. Scott. All right, Seema, appreciate that. Thank you. That's Seema Modi. Last chance, by the way, to weigh in on our question of the day. We asked, how will the market react to tomorrow's CPI report? Will it rally or will it sell off? You can head to CNBC closing bell on X. We'll bring you the results just after this break. The results of our question of the day. We asked, how will the market react to tomorrow's CPI report? Well, the majority of you said sell off. It was close, but the majority wins.

We'll see what happens, obviously, after tomorrow's report. Up next, much more from my interview with DoubleLion's Jeffrey Gundlach. We'll tell you what he says about investing in bonds versus stocks right now. That and much more when we take you inside the market so. We're live in the closing bell market so now CNBC senior markets commentator Mike Santoli here to break down

these crucial moments of the trading day plus we're digging into the sell off today and software stocks. And Philip O. on advanced auto parts trading at lows not seen. In more than of the trading day. Plus, we're digging into the sell-off today in software stocks and Filibo on advanced auto parts trading at lows not seen in more than a decade. Michael, though, first, we'll begin with you. Stocks lower, as you know, S&P heading for its first down day in three. As you know, I spoke with DoubleLine CEO Jeffrey Gundlach earlier, told me the

big issue for markets right now of what he's watching into the end of the year and what he thinks about bonds versus stocks right now. Listen. Right now, the competition that bonds give stocks is one of the highest in any of our lifetimes in terms of the risk premium on bonds versus the risk premium on stocks, in terms of the yield on bonds versus the yield on stocks. And that, I think, is going to be an issue for 2024. Bonds are less attractive today than they were a year ago. Now of course we're in a different environment perhaps Michael that today relative to where we were a year ago and the attractiveness that some saw to bonds at that particular time but what do you think about what Gundlach said? Well the math backs it up at least

in the in the sense that the earnings yield on stocks so that's the inverse of the price earnings ratio relative to the 10-year treasury has uh not been this low uh until you go back to like the pre global financial crisis years so basically since the global financial crisis stocks have actually given you a big a bigger valuation cushion relative to bonds with rates very low. Now, I would argue that if you look further back in the 80s and 90s, the current levels of equity risk premium are unremarkable. And the market was mostly going up during those periods of time. So to me, the key difference is, are risk-free yields above 3% or below 3%? And is inflation or deflation the main risk?

We're back in that world where rates are higher and inflation is the risk. And so, yeah, we can say stocks are less attractive on a relative basis, but I don't know that that's a clinching argument because we've been here before. I wanted your, you know, your reaction to, because I heard you talking about it earlier in the program as I was getting situated to come on about this, this idea that the Fed has made this change in their own minds, you know, rather than the risks being on overdoing it, rather than doing too little, that that's now changed to not doing too much and unnecessarily harming an economy that they've managed to manage fairly well. Yeah, I think it essentially goes back to the message that they've managed to manage fairly well. Yeah, and I think it essentially goes back to the message that they've been conveying,

which is one of patience, one where they think they're generally in the zone of where rates have to be, and they're willing to let time do some of the work. In other words, the amount of time with rates elevated up here around 5 plus percent. So I do think that's consistent. I think that's a relatively comfortable spot in general for markets if the economy holds up, because what it means is they're no longer chasing inflation. They're assuming it's going to come down. But over a multi-month basis, it still does have to continue to come down. It can't just be the Fed's going to allow the

numbers to be what they are without acting. So I think we're still on watch. But it's a better spot than last year when the Fed was just running headlong to get rates anywhere in the vicinity of the right spot compared to where inflation was. Gunlock made the point, too, when we were discussing it on stage. I hope that they're not changing. Those were his words because he thought that, you know, they've been really and Powell's been really consistent on his messaging so that they weren't going to do what some of the reports of the last couple of days had suggested. Let's talk Oracle. Let's talk Oracle quickly, Mike, because it's heading for its worst day in more than 22 years, and that's after earnings and what that might mean for software. You know, this was a stock that obviously had run really nicely since the prior earnings report. If you go back to the June quarter, it was very well received.

The stock has just done a round trip to that. So it was one of those, it got into the AI slipstream and it benefited from that. And then the rest of the business that's not really a cloud beneficiary of AI is causing problems. So we have that unwind.

It's still a reasonably priced stock. Rest of software has taken a hit, but the software sector as a whole was up more than 10% in three weeks. I don't necessarily see it as true game-changing. It seems like it's just a little bit of a gut check. All right, back to you in a second. Phil LeBeau to you. Give me 30 seconds on AAP.

What's going on with advanced auto parts today? Stock is now at an 11-year low, Scott. Go back to 2011. October of 11 was the last time you saw it here. S&P downgrades the company's credit rating to junk status, saying its competitive standing in the industry has weakened. That's why the stock is getting whacked today. Quickly take a look at the big three automakers, all of those stocks moving a little bit higher. Remember, the deadline for reaching a deal with the UAW, 1159 tomorrow or Thursday evening. Scott, back to you.

All right, Phil, and we're going to be following that. We'll come back to you, obviously, as needed. There, Phil LeBeau, Mike Santoli, back to you. Let's end where we probably began, Apple. This idea of the stock selling off into and now out of the event, and the idea that the stock needs to stabilize before the market can really find some footing. Probably. I mean, it's a relatively measured response,

but there was nothing in the release today that's going to really spur a round of earnings estimate increases over the next couple of weeks, I would imagine. That's what the stock has been lacking. It isn't really that much of a bottom line growth story at the moment, but it is weighing on market leadership. Very split market. You've got regional banks up today. Big cap tech weighing.

CPI is going to probably determine where we go next. All right, good stuff. I appreciate your help today, Mike. Thank you very much. That's Mike Santoli. So we'll go out in the red, as you see, across the board. We'll pick it up tomorrow. I'll see you back on Closing Bell tomorrow as well.