Closing Bell - Closing Bell: Big Tech Tumbles, Double Digit Upside in 2025? 12/27/24

Episode Date: December 27, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Sarah Eisen. In today for Scott Wapner, we are live at post nine of the New York Stock Exchange. Stocks selling off to close out the week, putting the Santa Claus rally on ice. Let's get straight to the scorecard with 60 minutes to go in regulation. A decline across the major averages, but we are off the lows of the session. Some of the year's biggest winners among the worst performers in today's session. We're talking NVIDIA, Amazon, Microsoft, all slumping, along with Apple, Apple and Meta as well. Tesla shedding four and a half percent. Yields continue to climb the 10 year above that four point six level, hitting a seven month high. Oil on track for a weekly gain

spurred by expectations of a stimulus driven economic recovery in China. We've got a special report on the move in energy later this hour. That takes us to our talk of the tape. Is today's action just end of year profit taking, or is it a sign of a bigger rotation to come in the new year? Here with me now to discuss all this is Robinhood's Stephanie Guild, Obermeyer Wealth Partners, Allie Flynn Phillips, and Raymond James's Tavis McCourt. It's good to see all of you, but first I want to get to our own Steve Kovac, who's breaking down this big move in the mega cap tech stock. Steve. Yeah, this is probably the worst Santa Claus rally ever, Sarah. Tech is taking it especially hard today. And that tech sell off a big drag on the Nasdaq, now down about one point six percent. Let's talk about Apple

first. So much for that four trillion market cap that it's been chasing all week. It's down about 1.4%, but it has been quite a run for Apple this month, still up more than 7% so far. Now over to Microsoft, just as its biggest AI investment, OpenAI, says it needs to raise billions more cash. It's down about 1.7%. Microsoft says it will start recording losses from its OpenAI investment. That's expected to be $1.5 billion for this December quarter. Now over to Amazon, not as bad, about 1.5% down. Alphabet down about 1%. Meta down about 1% as well.

Nvidia a little worse, down more than 2%. But Tesla, the worst of all this whole group, now down about five percent, accelerating those losses going into the close here. It's been on a nice run since the election, up more than 70 percent, thanks to Elon Musk's closeness with President-elect Trump. But that's not doing much for it today, Sarah. No, been a pretty incredible run, though. Thank you, Steve. Steve Kovach. Let's get to our panel. Tavis, do you read into today's moves? Anything other than sort of year-end profit taking? Well, I think it's long overdue. I would expect more as we get into January. We just had a tremendous amount of momentum into a narrow subset of names for the

previous month or so. And historically, at least for the short term, this typically reverses. It's kind of a re-broadening of the market. Maybe not forever, but least for the short term, this typically reverses. It's kind of a re-broadening of the market. Maybe not forever, but probably for the next few weeks, I suspect. So what do you mean by that? You mean you expect the market to be carried by different leaders in January? I would expect small and mid-caps to outperform large, equal-weighted indexes to outperform market-cap-weighted indexes. Basically, the losers to outperform the cap-weighted indexes, basically the losers to outperform the winners. Again, maybe not forever. Earnings season will be really important for that,

but I think we're on wide- It's not what happened in December. So what changes? Yeah. So from Thanksgiving until basically a day ago, what we had was significant narrowing in the market. And you had all the performance driven by just a handful of companies. And I think we're going to be in the process of unwinding that for the next couple of weeks. Allie, do you agree? Well, thanks for having me. I think one of those things we need to take a step back and look at what are the cases that's still in place that should ride us into 2025. If we think about the market, there's really four things that drove it. One, the economic landing. Two, the fact that

inflation pressures were contained, which allowed the Fed to be able to ease. Three, it has just been in terms of overall momentum with respect to general AI. And fourth has really been the strong earnings. And to us, all those four to carry over to two thousand twenty five. And the nice thing with you do have that we also agree with have us that you will see a broadening out. But technology will still be a very important part of the

returns. In the next four months. So everyone's on are you on board Stephanie with the broadening out. Trend. I am I have a general positive view of mid caps I prefer mid caps over small caps, actually, at this point. But I actually think we're in a stock pickers market. And the reason

for that is because some of the ingredients that were just mentioned, I think they are in place. But I think what you're also seeing is the fact that we have higher interest rates than we've had in a long time, and they're unlikely to drop. And as a result of that, and probably even in this new administration, you might not get the tax cuts that maybe you had the last time around. Trump was president. And I think some of those things just force company management to make decisions that help or hurt. And I think it's why you're actually getting this great disparity. I actually see more breadth than maybe it feels like on the surface. If you look even in the last month, the top performers aren't just the top 10 names.

The top 10 names make up 40% of the S&P, but actually the top 10 drivers over the last month and even on a year-to-date basis only make up 10% of the S&P. So I actually think we're just in this place where you can find interesting opportunities, even if you're not buying the S&P 500. I mean, I guess, but it's still another year where the S&P is going to close up. We're what, 26%? And the index funds win again with large cap tech leading the way. So, Stephanie, I just wonder if there's anything

fundamentally that you think changes that will lead to the broadening or the stock pickers winning again? Yeah, I think when you look year to date, yeah, it's definitely driven by some of the larger cap tech names, but there are also other names included in that. Like if you look at United Airlines and Deckerers and Walmart, they're all have been like top performers and they're not necessarily the biggest tech names. And that's what I mean that there are underlying trends that are making you be sort of, you know, be able to find opportunity no matter what the larger S&P is doing. Ali, I wonder, you know, we also get this year-end phenomenon where it's not just the winners selling off,

but the losers are actually catching a bid today, looking at some of the names like Biogen, FedEx, Hershey. I mean, there are plenty of winners today, some of the energy names as well, energies underperformed. Is there a group or a theme that you think has been left behind this year that looks good for next? I think one thing, and we talked a little bit about some of the small cap companies, if you look within that sector in terms of more of a better banking environment, as well as just overall economic strength should really benefit that sector. There was a real uptick in terms of overall small business confidence. I think it was actually one of the best jumps on the NFIB in the 50-year history.

So that sort of animal spirits we think will carry that sector. The other area probably would be health care. I mean, poor health care has been beaten up. Staying away, for instance, like from the pharmacy benefit managers, but looking at the GLP-1 companies, even the disparity between how Eli Lilly and Novo Nordisk has done, that's a case where sometimes having both of those companies in a portfolio would make a lot of sense. One is the clear market leader. The other one's trading a very attractive valuation. And pairing them together could be a good exposure as that sector continues to solve a lot of the health crises we see out there. Tavis, does it all depend on what the 10-year yield does? We're now 4.62, near the highs of the year. Is that going to be an ultimate tell on what stocks can do?

It seems to have been the last couple of years. Ten-year yield goes up and the market gets narrower every time, largely because investors lose faith in the economy and they just want to scrounge into the big liquid perceived recession-resistant names that have been driving the market for a couple of years. So one thing I do think will happen is I think we've seen the bond market really get on one side of the boat here, and they're trading on 10-year yields. And we're about to head into a three- to six-month period of debt ceiling debate in Washington.

And at least when that happened in 2023, yields went down very significantly. And so I think that the pain trade for the bond market yields come down. So I do one of the reasons I think this broadening is going to happen short term is because I think this 10 year Treasury yield is ripe for a pretty significant decline. Yeah, I was going to ask how the market broadens out if yields continue to stay elevated or even move higher from here. Yeah, I think the answer is it doesn't. Right. That would be a challenge. Stephanie, you've got such a good vantage point sitting at Robinhood

to how retail investors did this year and what they're doing now. What can you tell us? Yeah, so generally speaking, we have something called the Robinhood Investor Index that looks at the most owned names. And it doesn't matter how much money you have in your account. It sort of looks at your positioning. And from that, you can tell that our customers have been definitely buying. Some of the largest cap names and they continue to hold them but they trained around the volatility

so. We saw in the month of November actually post election our index caught up with the broad indices and a month to date basis- I was also looking at its- outperforming the broader indices now. And a lot of that has to do with the fact

that there was you know a good amount of Tesla a lot of Apple- but when they traded around this problem these- volatility what you've seen is that they've taken some profits in Nvidia- they had taken profits from Tesla but I saw more recently that they had

been- adding to that name actually in the more recent you know. Since the eighteenth Tesla's- you know fallen in price and And we see our customers always sort of take those opportunities to buy more or trim and take some profits. Ali, I wonder how sentiment and positioning figures in to your view, if it does at all. I mean, we've had had a nice run, but it does feel like there's still healthy skepticism in this market.

What do you think? Well, for us, I mean, there's always a reason not to invest, but history shows over time that actually by staying, it's more not timing the market being time in the market. So actually holding high quality assets is really the best way to create wealth for clients over time. But to be fair, we would love a pullback. There are several companies we've been looking at, high quality that we just haven't gotten comfortable with the valuation. And if we were given a gift of a pullback in January, the key thing is to be opportunistic and really invest in those companies you think are due over the next three to five years, not necessarily the next three to five months. What's the hottest stock on Robinhood these days, Stephanie? It

feels like a long time since GameStop. I mean, Tesla is always consistently at the top of the holdings. Palantir also has been a top holding. And then a lot of the companies that I think our customer base considers to be more like utilities, Microsoft, Apple, and then in the entertainment space, things like Disney. So they definitely try to snuff out some value as well. I mean, not doing too shabby with Palantir up 361%. We'll leave it there, guys. Thank you very much. Have a great weekend. Happy New Year, Stephanie, Ali, and Tavis. We appreciate it. On closing bell, OpenAI saying it's moving toward a new for-profit structure in 2025. Our Kate Rooney is here with the details.

Kate. Hi, Sarah. Yeah, so this transition for Open AI has been a bumpy one. It's the first time the company has laid out its plan, which is for Open AI's profit arm to become a public benefit corporation, essentially the same as any type of for-profit business in terms of what a PBC is, but with a dual mandate. So it's got this fiduciary duty on one side and then some sort of publicly stated mission. Ben and Jerry's in Patagonia are really well-known examples of this, plus XAI and Anthropic in the private markets.

OpenAI acknowledging the cash crunch that's behind this decision, saying we once again need to raise more capital than we'd imagined, and that in part, investors need conventional equity and less structural bespokeness. That structure has been a headache at times for OpenAI, really on display when CEO Sam Altman was ousted by the nonprofit board about a year ago. And the structure can be confusing. It does involve this capped profit company, which is controlled by the nonprofit, which will still exist as part of this. This was not a structure that investors loved. Those that I've been talking to are relieved by this. They say it makes it easier for the company to go public at some point. Elon Musk, though, is sort of the elephant in the room here. He has tried to

throw a wrench in this pivot. OpenAI co-founder Musk is also a co-founder, we should mention, he did start a rival firm, XAI. He is suing to block this for-profit plan, and OpenAI has been fighting back in court, Sarah. So is his AI company that is competing a non-profit? And what does it even mean to be a non-profit if you're valued at more than $100 billion and taking outside funds from VCs? So his company, XAI, is one of these public benefit corporations where you have one of these big state admissions, whether it's AI for the good of humanity. I'm not sure what

XAI is. So they're a more traditional corporate structure and not necessarily a nonprofit, but they're seen as sort of a dark horse in AI. They're relatively new, but have been able to raise boatloads of money this year. They've made a lot of progress. They have this Grok chatbot that competes with ChatGPT. So it's one to watch. And also Musk and his influence

in Washington are something that cannot be ignored. And interesting to see him as really an adversary of Sam Altman in all of this, where they used to be friends. At least Sam Altman has said that. They were they used to be friends. At least Sam Altman has said that. They were co-founders. And you've seen this very, very public battle

play out over the last couple of years. Yep. Kate Rooney, thank you very much. We are all over today's big market move. Dow is still down almost 400 points, even though we've come off the lows. Up next, we're going to drill down on the tech sector with Deepwater's Gene Munster, what he's forecasting for that space as we head into the final few trading days of the year. We are live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Tech among today's hardest hit sectors with some of its largest stocks dragging on the market. Our next guest says, well, the pain in this group isn't over, neither is the opportunity. Joining us now is Gene Munster, managing partner at Deepwater Asset Management. Look, it's been a good run,

and tech stocks are still up for the week, for the month, certainly for the year. They're putting together two back-to-back strong years. How much do you read into what's happening now as it relates to what can happen next year? Sarah, this is, I think, just evidence of just how nervous the market is. And ultimately, the market is looking for these reasons to pull back. I think we saw that a couple of weeks ago with Micron. We saw it with the Fed's numbers and the interest rates going from four to two cuts and how that has spooked investors. And I just want to kind of frame in what this punky market has,

what it's up against here is ultimately you said it was the returns have been good, up 33% than NASDAQ over the past year, 90% over the past two years. And that really sets the bar. That's what's in investors' minds. So any sort of hiccup and even any sort of change in the trading dynamic, a day like today, we don't have any news in tech. There's no reason for us to be having this pullback, but here we are and I think that this is just evidence that investors, tech investors, are looking at the calendar and seeing one event between now and when big tech earnings come out at the end of January. That one event is the CPI number on January 15th.

And so for those investors who have enjoyed this ride, you look at the next month, it's understandable that we have had this anxiousness in the market. So with the market a little more anxious and certainly bigger uncertainties around what the Fed does next year and policy, I guess, do you have to be more scrutinizing of these valuations? I think the simple answer is no. And I think that this is what I would describe as an uncomfortable truth, how the market is going to trade over the next couple of years, is that I think we're still in the mid part, still early to mid part of a multi-year bull run that will be powered by AI. And it's when you think about those numbers,

about what the NASDAQ has done, that comment almost feels out of touch with reality. But I want to frame it in that we are going to have pullbacks. We had 12 pullbacks from 95 to 2000. The internet was that and the market is going to go sideways for certain periods. But I think if you look at in total over the next couple of years, that the substance of ai ultimately will exceed the hype and uh we can uh drill into names but i think that uh okay because because not all valuations are equal right nvidia is trading 46 times next year earnings while palantir what is it a lot higher a lot higher well i said 46. if you look at Nvidia on calendar, 26 is trading at 23 times. And so I think that- 208 for Palantir.

208. So, you know, we have to, I think we have to, again, big picture is I think that this AI is going to pull the whole market. And we do tech investing in Deepwater. And so from the perspective of, you know, where are some of these better companies, I think, you look at Micron, that's a company that we own. I mean, it's trading at about 10 times. This is, it just sounds, it sounds like I'm, something wrong with my spreadsheet here.

It's trading at 10 times calendar 26 earnings. And obviously, it had that big pullback last week. But I think it's a symptom of investors just not understanding how important high bandwidth memory is. You look at a company like Apple, the expectations for the iPhone for the next year for fiscal 25 is for 3% growth. They're going to hit that falling down just based on what happened in 2021 with this huge 37% growth.

They're going to benefit three, four years later from that. And so, Sarah, I think that you look at a company like Apple that can exceed expectations. You look at a company like Micron where the estimates are wiped out. I think that this is still a great opportunity for tech investors over the next couple of years. Well, so you are breaking it down by ones that you see with lower valuations and lower expectations to where reality is. Google would be another one I would mention, too. And I think that's part of just our investing philosophy is to find these transformative companies but also have an eye for valuation. But I would mention Google there, too. Google's not out of the

woods. I just want to mention. Why? Is that a quantum story? Is it an AI story? Well, I think that Google still, in the front part of this year, is still going to have a great run because I think more investors are going to understand that they've made some significant progress in Gemini. We saw it last week with some of their thinking models now exceeding what's happened with what OpenAI has shown. I mean, that is a remarkable turnaround after basically this cover-up job that Google did

a year ago around multi-modal models. Now they're actually showing some substance around these thinking models ahead of opening I but I want to just mention one thing about Google that it is important is the Google conversation I think again is going to continue to move higher I think their search numbers are going to be good over the next couple quarters but there is still this seismic change in terms of how people are going to be using open it chat GPT this number just is surprising. They don't give them a daily active user number.

They give them monthly. It's about 300 million. Their daily users are only 150 million. I mean, that's a small number compared to Google Search. It's about 2.5 billion a day. And so my point is that there are companies like Google to own, but I think there are some questions just in terms of as more and more people

see the clean results that you get with GPT and just a pure Gemini offering, I think it's gonna change some behavior. So I don't think that that company is necessarily out of the woods, but I think it has a good strong trade here in 20 calendar. There's also regulatory risk there. There's some regulatory risk. I just wanna to be clear. I'm positive on Google. I'm just pointing out that

there's still like this whole question about what's going on in search and how is it going to impact Google. It really still hasn't been answered because most people just simply don't use as much as kids talked about generative AI, most people don't use it. And then on the regulatory front, I think that, you know, that's to me, just like force of nature. I don't know how to put odds on how that plays out. I generally think I'm in consensus camp here

that that's gonna be less of an issue. Finally, where does that leave a company like Tesla? You didn't mention it on your list. Yes, I didn't mention it because, first of all, I own Tesla personally. I'm a big believer in where this company can go. I'm just looking at what the stock has done over the past three months since the election. It's up 70%. That's about $500 billion in market cap that's added.

And I look at the ride-sharing market, that ride-hailing opportunity. I think that that could add $800 billion for the U for the US piece of it. But a lot of that's gotten priced in and we're sitting in front of the the numbers, the delivery numbers, which are going to come up on likely on January 2nd. And I actually think that they can exceed those numbers because I think there's going to be some pull forward as people anticipate the runoff on the tax credits. But so right now the whisper numbers is about 500,000, which should be up about 1% year over year. But overall, I would just say with regards to Tesla,

the stock is gonna be wild. It is probably the most progressive AI company that is in the market, all the different opportunities that they have around that. So I think longer term, it should be much bigger than a $1.3 trillion company. Progressive AI, not progressive politics. Gene, thank you very much. Appreciate it. Have a good weekend. Gene Munster joining us. Tesla, by the way, down 5.3% right now. It is the biggest weight in the triple Qs. Up next, top technician John Kolobos is here with how investors should be navigating

today's big downturn and what to expect from stocks in the new year. That's after a quick break. Closing bell. We'll be right back. Major averages are under pressure, but also off the session lows. We're down one and a quarter percent on the S&P. NASDAQ down 1.6 percent. It was down more than 2 percent. Our next guest says investors should stay patient in the near term. Still sees double-digit upside in the charts for next year. Joining me here at Post 9, John Kolovos of Macro Risk Advisors with a technical take. John, it's good to see you. Welcome. Thank you. Thanks for having me.

So S&P chart, what does today look like and what does it tell you? I think today what we're getting here is just part of the pullback that we saw after JP pulled the eggnog on the 18th. We had a distribution day on that day. That means we had 90 percent down volume, 90 percent stocks were down on that day as well. So it's distribution. I mean, there's resistance now forming within the market. I think this is follow through on that. But if JP's at the tone and this is follow through on that, does it mean more of this ahead?

I think so. I think into January. See, the conventional wisdom was we were going to get a degrossing event in January. I think what happened on the 18th was we're pulling that forward. Right. So we should continue to see the market pull back. I don't think we'll I don't think we'll get as low as the 200 day moving average. My guess is, you know, we'll find support somewhere around 5800 and then start to work our way back up. But why are you more optimistic in the longer term? Expecting as much as double digit? We're having two now back-to-back years with more than 20% gain.

Yeah, yeah, yeah. So I think we could do that. Reason being is that even though interest rates are going up, financial conditions haven't tightened yet, right? And that, to me, is like the main bullish case you can make from a technical perspective. I'm primarily an equity guy, but I listen to the fixed income market so, so closely. And until financial conditions tighten, whether credit spreads or Moody spreads, BBBs. You don't see

that. I don't see it. I don't see it yet. I don't see it yet. Because we are seeing higher yields and a stronger dollar, both of which I think you expect to continue. I do. I do think yields will go up over time. I think yields are in a multi-year uptrend. So I think they're going to go up for long periods of time. And I do think that stocks and interest rates can get along. I think yields are in a multi-year uptrend. So I think they're going to go up for long periods of time. And I do think that stocks and interest rates can get along. I think cats and dogs can get along in this scenario, like they did in the 50s and the 60s. If you actually were to see a chart of the S&P during that time frame, they both went up concurrently. I think we're going to that period. What, because the economy is just so good?

Yeah, it's more of an inflationary situation. We just went through like a decade of deflation. Now we're reflating right now. So I think we can continue to see that. But what's happening is that equities are going through a bit of a hissy fit, a bit of a tantrum every now and then. So while I think interest rates will get to maybe like five and a quarter to five and a half next year, I don't think it'll be enough. Five and a half? Yeah, could get that way. That's what the charts imply. People are wondering if they should be freaking out now about 4.6. I know. Well, they have to get used to it. Huh. What about the Nasdaq? Does that mean NASDAQ continues outperformance? I think NASDAQ has the ability to be a market performer. And I think what's

going to happen next year is we're going to see a rotation out of these momentum winners. So if 24 was about breadth expanding, 25 is going to be about whether or not that momentum gravy train is going to continue or not. So what I mean by momentum is it's like those outperformers as a factor, the momentum as a factor, whereas should we be buying laggards, like the ones that are down and out of 52-week lows? The answer is no. I think what's going to happen is we're going to rely less on tech, we're going to rely

less on financials, we're going to rely less on industrials, but we're going to start looking a little bit more at the cyclical laggards, like in energy, materials, and parts of discretionary. Where does that put small caps? Because that's been a big question lately. Looks like they're going to close the year up more than 10 percent, but still underperforming. When so many people were optimistic, this was the time. Yeah. And it was right after the election was a massive breakout for small caps. You got it petered out. And now you're down quite a bit. You retraced more of the election was a massive breakout for small caps. You got it petered out. And now you're down quite a bit.

You retraced more of the election. Tough month, December. Very tough. We're very close to the 200-day moving average. I'm going to give it breathing room. So long as it stays above the 200-day moving average, I'm going to give small caps the benefit of the doubt. And the back test that I have done does show that the market should continue to broaden out next year. So what do I mean by that?

It means that breadth should improve. So this is a pullback that I think the market is using or market participants will be using as an opportunity to get stocks that were overbought after the election at a better price right now. So you don't see the run-up in the mega cap stocks and the outperformance as tied to the higher interest rates? Not necessarily. How I would put it is this way. At some point, the euphoria that was created after the election will be ringed out. And I think that we're in that process right now. At that point, then the average stock will start to work its way higher. And that's when things will get back into gear again with interest rates and the average stock.

Right now, I think we're just having a bit of a shakeout, year-end, profit-taking, whatever you want to call it. But I think that's ultimately how we work our way higher. A sentiment extreme, a bearish sentiment extreme, and those parts of the market should create an oversold condition, and then the market will pull itself up. And how do you get to 5.5% on the 10-year? How do we get to 5.5%? Because that's so out of consensus.

Well, there's different types of measuring techniques we do as technicians. One of it would be if you just would assume that the last couple months were just that pullback initiative was a consolidation in rates. You're just going to resolve it higher. It's called a measured move technique that we have, and it's just based purely off of the chart, to be quite frank. But you think it's going to be cool for stocks? I think it'll be okay, but the trick is the volatility of it. That vol has to be low, and that'll be all right.

Well, John, it's good to have you here in town. John Kolobis at Post 9. Up next, we are tracking the biggest movers as we head into the close. Our Steve Kovach standing by with that. Hi again, Steve. Hey there, Sarah. Yeah, shares of one name in food processing are frying higher after some activist investor interest will reveal the name when closing bell returns after this. 21 minutes left until the closing bell. Still down pretty sharply, but higher for the week.

Let's get to Steve Kovach for a look at the key stocks to watch. Steve? Hey, Sarah. Let's look at shares at Medisys. They are higher after the home health care provider agreed to waive its right to terminate a merger agreement with UnitedHealth Group. The DOJ sued last month to block the $3.3 billion deal. Medisys said it would extend the merger deadline until the end of 2025 or whenever a court rules on the lawsuit. Also, Lamb Weston shares are climbing after a filing showed activist investor Yana Partners is working with another executive to push for changes at the company. It could result in a majority of the French fry maker's board being replaced.

Shares have fallen more than 35 percent so far this year, Sarah. Yeah, but one of the losers winning today with a catalyst. Thank you very much, Steve. Still ahead, the energy sector outperforming the rest of the S&P on this ugly day on Wall Street. We're going to tell you what's behind that move when we come back. And as we head out, another check on where we stand as we head into the close. Watching the Nasdaq carefully, down one and three quarters percent. Again, the low is down more than two percent, but we are heading south again as we get closer to the close. We'll be right back. Welcome back. Click check on the Nasdaq 100 as we go into the bell. On pace

for now, it's worst day since December 18th when it dropped more than three and a half percent. That was post Fed. NVIDIA, Microsoft, Tesla, those are the big drags right now. Tesla losing about 5.4% here into the close. PepsiCo, Mondelez, and Kraft Heinz in the green. Those have all been some of the worst performing stocks of the year, down double digits. Food hasn't been the hottest place for investors, but the big cap tech stock, the winners, that's what's getting hurt. Up next, our own Bob Bassani standing by to break down the final trading minutes of this holiday shortened trading week. That and much more when we take you inside the market zone. Don't go anywhere.

We are now in the closing bell market zone. The energy sector is outperforming in a down tape. Pippa Stevens tracking that move. Plus, Bob Bassani on the potential for a rotation in the markets in the new year. And data tracks Nick Colas breaking down the crucial minutes of the final minutes of the trading day. Pippa, let's start with you and the resilience in energy stocks today. No surprise, they've been among the biggest losers of the year. Yeah, that's right, Sari. Energy did just now turn negative, but it is still the best sector amid all the red, and it's also the top sector on the week. So the gains are being driven by the upstream, including APA, Occidental, EQT, and Cotera. And it comes as WTI trades back

above $70 on track for its best month since June after a larger than expected inventory draw in the U.S., as well as optimism around stimulus measures in China and if that could boost demand next year. NatGas, though, continuing its slide, but their front month contract does expire today. So there's very thin volume there. The more actively traded February contract is in the green, although it is trading below that front month. Now, energy is still the second to worst sector this year, and refiners have been in an especially weak spot this month, all down double digits as product prices remain muted.

And as we head into what's traditionally a quieter driving demand season. Sarah. So, Bipa, I'm curious what your read is on on the view forward from here. We were talking to Halima Croft of RBC earlier on CNBC, and she was saying, OK, on one hand, if you have friendlier energy policy under President Trump, the drill, baby drill, that's lower oil prices, but also a tougher policy position on Iran, the maximum pressure campaign, sanctions on their oil. That could be a big upside risk for oil. She ultimately sees it going to 80.

What are you hearing? Yeah, so I think those are really the two main points that people in the market are waiting for, and that's also why a lot of people are on the sidelines right now, because there is so much uncertainty on the geopolitical front. So on the maximum pressure, not only on Iran, but also on Venezuela, if those sanctions are ratcheted up and we really crack down on them in a way that we've been recently turning a blind eye, that could certainly depress global supply and that could have an impact on prices. But on the drill baby drill front, it really seems like executives don't want to open the taps right now. The United States is already producing more oil than any country in history at

the moment. And so they're not really incentivized to produce more because that would lead to a drawdown in prices. But I think in the interim, what's really driving this market is also just simply the fact that supply outside of OPEC is coming online. It's not just the U.S., it's also places like Brazil and Canada. And so for the moment, the market is very well supplied. And so until there's some sort of supply disruption or further clarity on how that maximum pressure campaign might be applied, it really feels like oil will still be stuck, Sarah, in this pretty tight range. Got it. Pippa, thank you. Pippa Stevens, let's turn now to Bob Bassani on whether we could see a market rotation next year, Bob, as we see the anti-rotation today a little bit.

Yeah, well, I'll comment on that in a minute. But the hope here is big cap tech earnings are going to grow nicely next year, some of them in the 20% range or even higher. But the acceleration is slowing down. In other words, this year's numbers are not quite, or next year's numbers and estimates are not going to be quite as strong as last year's. Here's an example. There's NVIDIA. That's the estimate for next year. This is earnings growth, 50%. It was 120% this year. And almost all of these, with the exception of Broadcom, are seeing their earnings growth lower. Now, they're not going down dramatically. It's just decelerating a bit. And if you look elsewhere, so let's look at the Magnificent

7 for the fourth quarter of this year. The numbers right now are expected to be up 24% collectively for the entire group, the Magnificent 7. But it's expected to be up only 18% for the same period, the fourth quarter of next year. You see, that's still pretty strong, but it is decelerating. Now, when you look at the ex-Mag7, the 493 other stocks in the S&P, it's the opposite. So for this quarter, growth is a 4% for the rest of the S&P 500, believe it or not. That's it for this quarter. But look next year, same quarter, fourth quarter, 14%. Okay, that's the opposite. This is accelerating earnings growth. So the

rotation people are looking at this and saying, ah, now the issue here is, are they really going to get that excited about this rotation? Number one, the numbers of growth, the percentage change is fairly small. When you're used to NVIDIA and Broadcom dealing with 20, 40, 60, 80 percent growth, are you interested really, Sarah, in just the single digits or 10 percent growth? I think that's the big question. By the way, just on today, look at the volumes today. Look at NVIDIA, look at Broadcom, look at Apple. Volumes are way below normal. This is lack of buying interest, not some intense selling pressure that's occurring in the market. And that's a big technical indicator. That tells me there's nothing really important today fundamental going on. We just don't have a lot of buying interest right now.

I guess some of it has to do, too, with what happens with bond yields, Bob, with the Fed, which injected a bunch more uncertainty when it said it wasn't going to cut rates as much and it was a little bit more worried about inflation. What's going to happen with some of these inflation reports, especially as the Trump policies roll out? Right. So there's four big issues for 2025. The first one is that the Trump administration makes some kind of mistake. For example, they put tariffs that are too high that cause a lot of economic problems. So that would be an issue.

The second would be the Federal Reserve makes some kind of policy mistake. Maybe they don't cut enough. They're worried about fighting inflation and they stop worrying about job market deteriorating. That's a major worry. Another concern would be the tech story. If there was a sudden revolt by investors against the AI story, that would drive down valuations rather dramatically. I think that's unlikely, but it is definitely a risk. And the final one you mentioned there, Sarah, the bond vigilantes really gain control and drive up yields rather noticeably. That would be another problem. So there you've got four rather significant problems for the market.

But overall, I have to say that the handoff is pretty good. Corporate earnings high, the economy 3% GDP growth. It's a good handoff, but a lot can go wrong in 2025. A lot of optimism building from CFOs we saw in a report today from small businesses. Bob, thank you very much. Bob Bassani, have a good weekend. Stocks are selling off here into the close with only a few trading days left in 2024, but Datatrex Nick Kolas is bullish on the setup for next year. Nick, it's good to see you. What are you watching? Well, for the beginning of next year, we're just looking for continued strong economic growth, continued good corporate earnings, obviously a

lot more policy uncertainty, both from the White House and from the Fed. But this is very typical of what I call mid-cycle markets, markets where the economy is growing, where earnings are growing. But there's still lots of things to worry about. And in retrospect, these periods of time look very easy, like the 1990s or the 2010s. But in reality, we always have things to worry about. And yet the market tends to chug along higher pretty much every year. No, the worry has been helpful in terms of injecting some healthy skepticism and sentiment into the market. You know, the question of the hour, I feel, has been whether the market can broaden out in the new year.

You just heard Bob talk about earnings expectations. We had three guests on the top of the show saying the market is due to broaden out. Do you buy that? To a certain degree. I mean, the fascinating thing about this year is we started, we ended last year with big tech plus the usual suspects like Amazon, Google, Netflix, Tesla, and Meta as 40% of the S&P. And we exit the year with that group of companies plus tech being 47% of the S&P. So we're very near half of the S&P just in the tech sector plus the big tech names. Will it broaden out a little bit more next year? Perhaps, but I'm still thinking that those names plus big tech or the tech sector will be 50% of

the S&P sometime next year. So it might broaden out to financials, for example, that have been a leadership group this year, but it's hard to see it broadening out a whole lot further. Just because it's so big. I was talking earlier, the entire market cap of the Magnificent Seven is larger than the entire Eurostox index in Europe. They don't have any AI companies and their stocks haven't done particularly as well as the U.S. There was a big gap this year. So is this a healthy thing? It is a necessary thing. When you think about what really drives investor sentiments over time, it's the possibility of earning surprises. Bob was talking about the acceleration of earnings outside of big tech. But it's hard to get excited because

even if they do 14%, they're not going to do 20%. You never have that kind of hope. So with tech, you do. You have the possibility of much better earnings growth over time than the rest of the market. And that's why the valuations are so high. Valuations are driven by expectations of surprise, since that's what drives stock prices. And those expectations are high, but I don't see any reason in the near term that they begin to decline precipitously and cause a valuation contraction. What about, and there are questions going into next year about the 60-40 stock bond portfolio, right? That was tough in 2022, especially with the bond sell-off. What do you expect here? Because bond yields have been

creeping up to end the year. Yes, we've heard that question a lot from clients. The 60-40 portfolio was decimated in 2022, down 16% if you use the AGG as the bond proxy. The good news going into 2025 is that yields are already pretty high. So even if yields back up another percentage point, it'll be nothing like the three or three and a half percentage point increase that we had in 2022. And stocks should be able to weather that OK. So you might not get a lot of diversification in a 60-40 portfolio, but it should be nowhere near as bad as we had in 22. But it's a great point and one we hear a ton from clients about. I know you also probably get asked about Bitcoin because you've done a lot of work on Bitcoin. You've analyzed it. Does the Nasdaq have to work for Bitcoin to work? Would you tell clients to buy

Bitcoin even at these levels near 100K? You know, what we've told people about Bitcoin over the years is you put a small amount of money to work and you do it regularly. It really was one of those assets where you need to dollar cost average over a long period of time because the volatility can be so profound. And we stick to that advice. It's a useful asset, an interesting asset. We don't think it's more than 2% of our portfolio, but it is an interesting and novel asset that's really, I think, grown into being something that people take seriously now versus when you and I were talking about this a decade ago when it wasn't. We were. We were. I'm glad you reminded me of that. So, look, it's hard to know, especially for Bitcoin, what's priced in. But to the overall market, as far as Trump policies and pro-growth policies like deregulation

and lower taxes, what's in the market already? Oh, yeah, that's the $64 question. But the answer is Bitcoin lives and breathes by the next catalyst. So if the next catalyst is more talk about a reserve stash of Bitcoin for the U.S. government, that's got to be helpful. If it's just the market continues to like the asset and sees it as a valuable tool and adoption continues to grow, that's another catalyst. So it's going to become creeping catalysts versus these seismic catalysts that we had, say, when futures first took off. Yeah, no, I think it's hard to tell that about Bitcoin. I was asking Scott, but it's a conversation we're going to continue to have.

Nick Kolas, thank you very much. It's great to talk to you again of DataTrack. Have a great weekend. As we head into the close here, let's take a look at the overall market. It has been a day of selling really since the opening bell this morning and a pretty deep day of selling for especially the NASDAQ. Worst day since December 18th after that Fed meeting. Looks like we're going to go out with a close of about one and a half percent lower on the Nasdaq. S&P 500 down a full percent. And again,

it's big cap tech that bore the brunt of the selling, but it was broad. We really saw it across the board. If you look at the Nasdaq 100, Tesla, Nvidia, Microsoft and Apple, worst performing stocks. But overall, and here's the good news for the Bulls, we are ending with a gain on the week, up seven-tenths of a percent on the S&P, and a little more than that for the Nasdaq. We're also firmly higher for the Nasdaq on the month.