Closing Bell - Closing Bell: Big Week for Your Money 7/9/24

Episode Date: July 9, 2024

How should investors navigate all that lies ahead? Sofi’s Liz Young Thomas tells us what she is expecting from upcoming data and earnings… and what it could mean for your money. Plus, Former Deputy Treasury Secretary Roger Altman tells us what he thinks the road ahead for the Fed might be and how the upcoming election could impact stocks. And, JP Morgan Asset Management’s Gabriela Santos reveals the themes she is watching in the second half, and the names she is betting on right now. 

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the road to rate cuts, whether it is getting a lot shorter and what that might mean for stocks in the months ahead. We will ask our experts over this final stretch. In the meantime, let's look at the scorecard. With 60 minutes to go in regulation, we are mostly higher, albeit slightly on the S&P, but we are extending those record highs. So is the Nasdaq. Dow is going to fight it out over this final stretch. The Fed chair, he appeared on Capitol Hill today, skewing a bit dovish as he laid the groundwork for rate cuts later this year. S&P and Nasdaq, well, we're going to watch them. Financials, best sector today, led by the stocks

you see right there. Look at Goldman and JP Morgan, Bank of America, all with nice gains. Apple is on the move again. It is once again the biggest market cap company in this market, and it has been on a roll of late. So has Tesla. It is higher yet again today. It does take us to our talk of the tape. This big week for your money, how to play all that lies ahead. We will ask Liz Young-Thomas, SoFi's head of investment strategy, with me here at Post 9.

It's good to see you. Good to see you, too. I felt like that's what the Fed chair largely did today. He was pretty dovish. He was dovish in Portugal. He really seemed to lay the groundwork for what's coming. He did. And after this week, we're going to get two more CPI prints before that September meeting. So the August pause builds in an opportunity for them to stay flexible. I think what happened today was, you know, we didn't see the futures market move too much on what it was expecting in July or September. But I think if we get a cooler print on CPI this week and if we get a cooler print on PPI, September will get priced in as a lock. Okay. So what does that mean for me preparing for that

as an investor? What do I do? Well, I still think there's a contradiction. It seems like the market continues to cheer cooler data as long as earnings are strong. And that's okay. But as soon as we start cheering cooler data that sometime will catch up with earnings, I think the market's going to have to digest at what point is cool too cool. That's what Goldman was talking about today, right? I don't know if you saw that blurb from them. The idea that bad news is eventually going to be bad news for the market, or at least it could be. Well, and there's been sort of this detachment. We want the economic data to get cooler, but earnings data needs to stay strong. There you go. We're showing

it on the screen right now. And it continues to be that way. And I think this quarter probably continues to be that way as well, where we get cooler data in the economy. It confirms that the Fed can start cutting rates in September and stocks will cheer that. But some of the things that I look at that are a little bit concerning about it is that even if we compare it to the mid-90s and say, OK, the Fed started cutting rates. Everything was fine. We secured a soft landing. They started cutting rates at a point when the unemployment rate was 5.6 percent and falling. So they cut rates at that point into a strengthening labor market. At this point, we just crossed above 4 percent in unemployment. We've gone up for the last three months in a row. It will likely continue to weaken. None of these numbers are concerning,

but it will likely continue to weaken. None of these numbers are concerning, but it will likely continue to weaken. And then the Fed will be cutting into a weakening labor market. Sure. The market has to understand. Yes. OK. But weakening from a high level. From a tight spot.

So that's what the Fed chair said today, right? Yes. The labor market's cooled, but it's still strong, right? He used the word strong. It's back in balance is the labor market. It's not like it's falling apart. It's just slowing. Which is kind of what they need. In this present moment right now, that is exactly what they need. more how many jobs are open versus how many people are unemployed in order to fill those jobs. We were way too tight before driving wage costs up, and we all know that that put pressure on earnings in companies. The issue is that if you look over history, the longest history you can find of an

unemployment rate, as it starts to rise, it hits escape velocity quickly, and it's difficult to stop that rise. The rises usually happen very fast. So right now, we're still in a good sweet spot between four and four and a half percent, I would call the sweet spot of the unemployment rate, because four and a half percent is still what's considered frictional unemployment, what we can expect even in a healthy economy. So that's okay. What we need to not happen is that the speed picks up. If the speed picks up and we can't get a hold of it while the Fed is cutting rates, then it'll look like they're reacting to something that's getting

weaker. Okay. So maybe the most debatable idea you have that we can kick back and forth is this idea of a portfolio move to make right now. Trim some gains, particularly in large caps that are driving the market. You're talking about mega caps. Okay. And allocate to sectors that benefit move to make right now. Trim some gains, particularly in large caps that are driving the market. You're talking about mega caps. OK. And allocate to sectors that benefit from steepening yield curve. We can go through what those are. But sure. You really want to take some profits off the table. I know you're smiling because I mean, it's like a gutsy call, right? I mean, it's some people are going to say no way no way. Why do you want to do it? So whenever the market gets to extremes, it's at a higher risk of what I'll call normalization. I'm not even going to say mean reversion.

I'll say normalization. Some of the metrics that are getting uncomfortably extreme right now are things like the forward P.E. ratio on the S&P is in the 89th percentile. The spread between the market cap weighted S&P and the equal weighted S&P over one year is 17%. That's in the 99th percentile. And then we've got the max drawdown this year so far, only 5%. If we hold that, that's in the 91st percentile. So we are getting to the point of extremes just in the sense of, okay, is it time for there to be what I would call a redistribution of strength?

Okay. That doesn't mean that we have to have this big pullback, but when you get certain pockets of the market that are so overly valued compared to others, there might need to be a redistribution. Some people might call that a broadening. Okay. Well, that's what I'm going with though, because can you get the broadening? Do you think there's going to be a, and I'll use your word, the redistribution of strength at the same time where you appear to have some growing concerns about the strength of the economy? So do I want to buy into your broadening story at the same time I buy into your weakening story?

How do I do that? So, good question. The broadening story that we've seen so many times has been a broadening into cyclicals, a broadening into small caps. What I would consider a broadening now is a broadening into those sectors that would do well, that tend to do well in a steepening yield curve environment, which is what I expect to happen in the second half if and when the Fed starts cutting rates. We'll see the two come down. Some of it is financials as the yield curve

steepens. Yes, financials should benefit from that. But the ones that tend to do well in a prolonged steepening environment are things like energy, stocks that are paying a good dividend, and then staples, utilities, healthcare. I'll put a little asterisk by healthcare because of the election, but those are the sectors that tend to do well. And that's not even a defensive statement. That's more of a dividend statement and the sectors that tend to do well. And that's not even a defensive statement. That's more of a dividend statement and the ones that are not the high flyers that have benefited from what we've seen in rallies recently. All right.

Let's bring in Chris Harvey of Wells Fargo Securities. He is with us at this table as well. It's nice to see you. Welcome back. Good to see you. Do you want to debate what you heard? So one thing, everyone is talking about rotation, rotation, rotation, rotation. Or lack thereof.

Or lack thereof, right? It is the question on the table. When's it going to happen? Is it going to happen? Our case or our belief is it's not happening anytime soon. You need the economy to slow down and you need to get the Fed involved. Until you see that, there's no rotation. So you have to have rate cuts before you can get the rotation. There's no anticipatory moves in these places?

So what we think is going to happen is the economy is going to slow down. If you look at a lot of the surprise indices, they've rolled right over. So the economy is slowing down. Now what you need to see is you need to see one more leg down in small caps in value and cyclicality And then you have to bring in the Fed because what these companies need the way they perform is lower rates in a better economy They have so much leverage on the balance sheet so much leverage on the operational side if you don't have those two things They just can't work. I know but if I know I Guess if I know that the Fed is going to cut for one reason or the other, then why do I have to wait? Well, the question is,

why is the Fed cut? If the Fed is going to cut 25 basis points, wait, kind of hang out, that's really not going to do anything. Then that moat trade is still in place. How do you know it's going to be just 25 basis points? And how do you know it's going to be just once? Because in all life, if you listen to the Fed, like, hey, inflation is coming down. Hey, the economy is still OK. Why do they need to be aggressive? There's no indication they're going to be aggressive. There's no data that says they will be aggressive. Well, the labor market, as Liz was pointing out, I mean, unemployment, you know, the unemployment rate going above 4 percent may be like a little ringing of a bell that says, OK, we're on the clock, right? I think it's kind of faint. And if you go back to what Powell said, it's cooled down,

but it's still pretty strong. The wheels aren't falling off the cart at this point in time. And what I think is it's going to take a while for the market and for the Fed to realize the economy is slowing. By that point in time, you'll have those stocks trade down one more time, and then the Fed will really have to start to get in motion. Until you see that, it's mo, it's growth, it's what you see, it's what's working, it's what will continue to work. Liz? Yeah, I mean, I think there's two different time frames, and maybe we're saying the same thing. The first time frame that I would point to of where I think that this rally can actually continue, or at least the strength can be sustained, is between now and maybe mid-August, when we will get Jackson Hole late August. Then September, we start to anticipate that first cut. I think there still can be upside

here from a seasonality standpoint. There can be upside here from earnings season, right? If we get good earnings, I think that will be rewarded in the market or at least sustained at these valuations. But then come fall, if the Fed is cutting, and I think that first cut will probably be 25 basis points. It's not even about the cut. It's just a message that we're done hiking. That's all I think. Well, I mean, they kind of already have given that message, haven't they? Yes, but they keep pulling it back. They've left it open. We might, if things get much worse, we'll change it. And yes, we'll still hike again. I think that will be solidifying. We're done hiking. At that point, then economic data that cools too fast will become scary. And then the market pulls

back broadly. But the stuff that if we're still at a point where these mega caps are overvalued or have even gone up further, that's the stuff that gets hit the hardest. Why do you think, Chris, that the Fed's going to wait for the wheel to fall off before they make a move? Isn't the whole idea to keep the car moving, isn't that the idea that Powell leaves you with repeatedly and underscored yet again today on the Hill, the two-sided risks? And arguably the risk now of waiting too long rather than going too early was out oversized. No, no, you're right. What he's saying is the risks are balanced.

And what I'm saying is the economy is slowing down. The Fed doesn't want, and they've said this time and time again, we don't want to go into recession. We don't want to be too tight for too long. They're going to, I think they're going to cut later this year, but I think they'll be too slow because the data, the market will move faster. The data will be moving a little bit slower than the market and the Fed will be in third place. And so the Fed will have to once again play catch up, but they don't, they still want to get inflation under control. Until they can say firmly inflation is under control, they can't be very aggressive. Let's throw up the financials again guys

please in control and that we were just looking at because part of the reason why you know, the Dow is hanging in is because of names like Goldman Sachs and And JP Morgan Chris it mean is that the area? Why are those moving like that today? I think they're moving like that today It's actually a pretty good environment for banks, for financials, right? If you look at M&A and you look at how the political winds are blowing, we'll have less regulation. That means more M&A. And usually when you have more M&A, that also means more IPO. So that capital market business is a lot more attractive. Yeah. Let's bring in, speaking of what's happening with these bank stocks, let's bring in Leslie Picker.

She obviously follows the money always in these names. What do you make of these moves that we're seeing today? Can you draw a line between the Fed chair on the Hill and these Wall Street banks that are doing well? Yeah, I think you can because bank investors have been watching very closely to see what happens with these capital rules. You can see they're quite the boost among the biggest U.S. banks today, thanks to comments Chair Powell made about where regulators are at with Basel III endgame rules. These are those capital rules proposed a year ago that have been met with fierce opposition by the banking industry and are in the midst of changes. The question where we're continuing to try to make progress is that of process.

So it is my view, it is the strongly held view of members of the board, that we do need to put a revised proposal out for comment for some period. And the reason is, you know, when there are broad and material changes, that has been our practice. One of the key challenges is getting three agencies, that's the Fed, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, all on the same page. Powell indicated that he believes a revised proposal should be out for comment for some period, potentially 60 days or so.

However, that, of course, would take some time, meaning the finalization wouldn't even take place until early next year, potentially, Powell said. Scott, so just the overall watering down, the material changes, the prospect of the timeline getting pushed out further, even past the election, all of that is good news for bank stocks today. Yeah, appreciate that, Leslie. Thank you. That's Leslie Picker, right? Capital markets related names like Goldman Sachs, obviously, are the ones that are looking to the other side of what we've been in for the last 18 or so months and seeing brighter skies and saying that this is our opportunity. Yeah, and that might be correct. I think that's actually what's driven them. If you look at the financial sector as a whole, first of all, second cheapest

sector in the index. So if you're an investor who's looking at valuations, it's attractively valued compared to the other stuff that feels pretty frothy. But you have to break it down into insurance. You've got to break it down into banks. And looking at the banks, those are really what has carried it for the last one to three months. Part of that is that there's an expectation of yield curve steepening. And as that happens, banks will benefit. I'd expect that to continue. But then capital markets activity, as the market has risen and asset prices have risen, you've seen it have this resurgence in an area that was pretty dead for a long time. So that has helped the bigger banks, too. I think you should stick with banks. Some of the things that I am really interested in hearing from financials, some of which we'll get later this week,

but later in earnings season two, things from credit card companies. I want to hear what they're saying about activity, spending activity. Well, I mean, American Express, if it's not the best performing Dow stock year to date, it's in the top three at this point. But I want to hear what they're saying about the spending habits. There are a couple other big companies in there. Will it confirm many of the concerns that we've heard recently about consumers pulling back, changing their habits, being more discerning about what they're spending money on? And I want to hear that from the credit card companies, especially because we've seen, obviously, this huge rise in credit card debt. Is it concerning?

Have they seen a tick up in delinquencies? That sort of information. Chris, do you think that big tech, Liz uses the word frothy. She obviously thinks that these stocks have, I mean, they have gone a long way, but maybe they're in the valuation danger zone. Those are my words, not Liz's, obviously. Do you think they're frothy? I don't think they're frothy. I think taking some profits on some extended stocks makes sense. I don't think the run is over. I don't think the mo run is over, the growth run is over. But if you tell me you're taking some profits on extended stocks, I say, okay. The financial, the bank and financials, that also makes sense to us, right? You have a

different regulatory environment. It's getting much better you have good valuation the credit cycle is going to be relatively benign curve could be steepening you have capital markets that are starting to turn up and and they are actually part of the momentum trade right the momentum trade is broadening out so there's a lot of good things to like about banks and finance you you took industrials off of the we hate them list and put them on. All right. Well, we can deal with them, I guess. I mean, you upgraded them to neutral from underweight. But it doesn't sound like you have that much conviction behind that.

It's a stronghold. So we don't like the reinflation trade. So it's materials, it's energy, it's industrials. But we also have a discipline. Industrials have underperformed by 10% this year and around 10% last year, right? They're now technically oversold. A lot of the bad news is priced in. It just doesn't feel like an underweight at this point in time. We're not particularly fond of the group. We think there's a great ability to go stock picking in the group.

But at this point, it's time to take some profits there take some profits on the short side and move on last question to both of you three four weeks from now we if we're back together again at this desk are we saying how strong earnings have been able to hang in there or do we see some danger signs we need to be concerned about how would you answer that I think earnings season will be will be fine I don't think that we're gonna see danger signs this quarter I think earnings season will be fine. I don't think that we're going to see danger signs this quarter. I think we would have heard about that already. And a lot of times if there's a big company that knows something surprising is going to come out to the downside, they pre-report.

So I don't think that we're going to see that yet this quarter. I don't even mean necessarily that. Just like if these mega cap stocks, which have been running so much, if they don't deliver up to expectations, that would fall into the danger zone. That would, yes. And there's a handful of names that could take sentiment in the other direction. I think the only dangerous thing that I've heard about earnings season so far, and this isn't even that dangerous, is that revisions downward are usually more than they have been for this quarter.

So that would tell me that maybe expectations are a little loftier than usual. But it's not as if we're expecting 20 percent earnings growth. I think we can eke out that 8% to 9% that's expected. What's our conversation going to be? So I think the rich keep getting rich. I think we'll have a couple stocks that blow up. And what we're looking for, the way we're wrong, is the Nike and the Walgreens don't go down on bad news.

If we see that, then we have to rethink our whole philosophy. I mean, Nike has been going down on bad news. Well, that's what I mean. So if you see bad news being penalized, we're still OK. If you see bad news not being penalized, then that rotation is coming faster than we thought. Guys, I appreciate it very much. Kristen, we'll see you soon. Thank you. To Seema Modi now for a look at the names moving into the close. Seema. It's got less than 41 minutes left in trade, and Oracle is poised to snap a seven-day winning streak. The information is reporting that Elon Musk's company, XAI, and Oracle have ended talks on expanding their server rental agreement. Now,

in a post on X, Musk said his company decided to build a system to train AI models internally because, quote, our fundamental competitiveness depends on being faster than any other AI company. You'll see Oracle down about 3%. But let's pivot to Helen of Troy. Shares are having their worst day on record. The houseware stock plummeted nearly 28% after the company posted an earnings missed for its first quarter of fiscal 2025. The company also slashing its full year guide. It's not a great macro setup there, Scott. All right, Seema, we'll see in just a bit. Seema Modi, we're just getting started here on the bell. Up next, Evercore ISI's Roger

Altman is back with us to break down where he sees inflation heading, what the Fed may do in the months ahead. We'll get his first reaction to Chair Powell's testimony today on The Hill just after the break. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. S&P and Nasdaq pulling back a bit after hitting fresh intraday highs, still heading towards a record close, though. Fed Chair Powell signaling today the central bank may be considering taking a less restrictive stance, saying that staying higher for too long could, quote, do unduly weaken the economic activity. Joining me now is Evercore founder and senior chairman, former Deputy Treasury Secretary Roger Altman.

That was quite an intro we had for you, Roger. It's good to have you back. I appreciate any intro. All right. Fair enough. What did you take from the Fed chair today? Did he set the table for later this year? I think the answer is yes, in particular because for the first time, at least with emphasis, he talked about the two-sided risks, namely that it's now at least roughly equally balanced in terms of the risk that the Fed waits too long to ease and that the economy gets weaker than anybody would want versus continuing to be restrictive and the economy becoming too strong despite it. So I think that signals that the Fed is now turning. And the market, as you know, is pricing in two rate cuts, the first one likely in September.

Of course, that's data dependent. We need to see, as Paul said, continued progress on inflation. Thursday's CPI number will be the next metric that's relevant. But I think the market's probably right in terms of what it's pricing in. And you can see that in open market interest rates, which are now ticking lower than they have. The 10-year is just right now a little below 430. So we have the soft landing right in front of us that we all talked about for so many months. So you think that the market's got it right. Two cuts sounds good to you.

Despite the fact we have an election coming up. We're obviously creeping hard of that. Fed chair was asked about it at least a couple of times today. It was on one side of the aisle, as you would probably expect that to be, where that conversation would be dictated. But you think two is good? Well, Powell did say that inflation has to cooperate in the context of that expectation. So PCE, as you know, if you annualize the most recent month, is running below 3% already. So as long as the next set of inflation data continues to indicate progress on inflation, yes, I think two cuts is right. I mean, I know that the Fed chair is never going to come out and declare victory in the

purest, most direct way. Do you think they can, though? Here's what he said today. This is no longer an overheated economy. so you can check that box, right? They've handled that. The labor market's back in balance, right? You've got to talk about the other side of the mandate, which not a lot of focus has been on over the last 18 months.

You check that. The likely direction is that we begin to loosen policy. That means that they believe that they're going to win on inflation, too. Can they declare victory yet? Well, as you know very well, Scott, the Fed is never going to actually declare victory in the literal sense of that. But look, if they pull this off

and they're on track to do so in terms of achieving a soft landing, it's quite an amazing accomplishment and the Fed will deserve a lot of credit, particularly since they missed it at the very beginning when they waited too long to begin to tighten in the face of what became stubbornly high inflation. So there won't be an actual declaration of victory,

but I think it will be implicit based on the path we're on. Yes. What's this mean for the markets over the remainder of this year, Roger? Is your business, is M&A going to pick up? Are you going to be much more busy than you guys have been over the last 18 months? First of all, I don't know how you get a better macroeconomic and global financial market environment, or at least U.S. financial market environment, than we have right now. I mean, growth has slowed a bit, as you've talked about all day, but it's still steady. Corporate profit outlook is good. Inflation is trending slowly down.

Prospect for a rate cut is pretty imminent. And that's why equities, including today, continue to make new highs and open market interest rates are falling. So it's just a very positive market environment overall. In terms of M&A, M&A levels have been improving so far this year. Dollar volume is up, although the number of transactions itself year over year is down. So gradual, steady improvement. Not sure whether the second half is going to continue that, although probably it will. So that transaction market is healing, so to speak. Roger, you're a well-known voice in Democratic circles, Deputy Treasury Secretary under President Clinton, of course, as I think our viewers know. Should President Biden step aside?

I think this today, Scott, is in the hands of the House and Senate members who are Democrats. If they decide to continue to support President Biden as the nominee, I think he'll remain the nominee. uh they uh indicate otherwise uh at least a majority of them do that they would rather have a change maybe it'll be hard for president biden uh to avoid stepping aside at this very moment and it could change any minute i suppose it looks as though most of the democrats in the house and the senate are sticking with President Biden. So to me, that's the crux of it. Are you? Are you, Roger? Well, I have a good relationship with President Biden.

I've known him a long time. And I'm going to leave this in the hands of those who are elected officials who actually have to run for election, unlike me. And as I just said, I think that's the relevant area of judgment. We'll see where it goes. Right now, it looks as though they're inclined to stick with him. Are you confident that he can win? He's in a hole now.

There's no getting around it. And there are some pretty dire polls in key battleground states as of the last day or two. But there's 44 months until the election. A lot can happen. I don't think you can reach a judgment this early as to what will happen. But he is in a hole and there's no doubt about that. Roger, we'll leave it there. I appreciate your time so very much. We'll see you soon. That's Roger Altman for us today. All the best. Up next, your second half playbook, the start of earnings season just a few days away. The Fed's next move still hanging in the balance as well. JPMorgan Asset Management's Gabriela Santos is here to tell us how she's navigating this uncertainty and the big opportunities she sees ahead. We're right back. We're back. The S&P and Nasdaq both hitting all time highs yet again today as investors brace for key inflation data and the start of earnings

season later in the week. Joining me now at Post 9, Gabriela Santos, chief strategist for J.P. Morgan Asset Management. Welcome back. It's nice to see you. Good to see you. What does the chief strategist have to say the best strategy is right now? So we've been getting asked, I would say, two major types of questions. The first one really centered around where are we in the here and now in the economy? There's this macro ping pong going on all year. And the other one is more related to long-term themes. Is AI overhyped? Are there different ways to play it? Are there different themes going on in the market? In terms of the here and now, we find it very much a good strategy to not get caught up

in this shifting narrative, but really to look at a combination of data and see that there's a slowdown happening in the economy, but there isn't a tumbling happening at the moment. It's more of a normalization in the pace of growth, isn't a tumbling happening at the moment. It's more of a normalization in the pace of growth, normalization of inflation, and a start to normalization of rates. And then in the long term, to pair some of the cyclical risk on positioning with particularly leaning into areas of long-term conviction. We don't think AI is overhyped. We don't think this is a Cisco moment. It's just that

there's an important broadening out that's starting to happen of the winners of that theme. And one of the big ones that we see as an intersection of AI and other themes is healthcare. And we really want to make sure we don't forget other themes as well. But it sounds like you think it's maybe a little too early. We had a debate to start our program and it seems to be the debate. Top heavy market, whether it's going to finally broaden. I don't feel like you suggest you really believe in this broadening, at least now, right? You'd make the distinction near term, longer term. So I think sometimes the broadening is interpreted as a rotation, as the early winners losing out at the expense of completely different themes. And I think really what we mean by broadening is more an expansion of the winners at the same time

that some of those large cap, mega cap tech continue to do well as well. And this is where I think it's really important to see that we have started to see some broadening of the AI beneficiary theme. So what's the whole compute going into data centers? There's a whole variety of semiconductors and semiconductor supply chain providers that can do well. Taiwan is up 33 percent. That's another way to play the compute power of data centers, as well as the hard infrastructure and energy required. Utilities seeing some love again, for example. But I don't hear you making an argument away from the AI conversation. Yes, I mean,

you're still talking in large pockets about the growth trade, just different levels of it. Now, I'm not putting utilities into that, obviously, but that's primarily where you see the best opportunities still. But I think, yes, related to this long-term theme where we have conviction, it's not, you know, cyclically moving up and down. It's very much the early adoption investment phase. But that includes companies that are found in the U.S. and overseas, companies that are found in your traditional tech and in utilities, in industrials. And we're also making a related but separate argument to focus in on what's happening in healthcare. This is partly a key beneficiary of AI and unrelated. It's also the

other big disruptive theme that's happening, which is GLP-1 drugs. And that's one where I think is very much underappreciated recently on performance and valuations. But you think it's not the right time for value? Not the right time to go all in on this big cyclical kind of investment. When is the right time? I think it's when growth is re-accelerating. And we're at a phase where growth is good, but it's decelerating. And especially in a sector related to the consumer. So that's one pocket where we're

cautious, consumer discretionary, consumer staples. That's the one that's in the negative delta, the deceleration. Do Fed rate cuts solve that problem or not necessarily? I think not necessarily. It certainly puts a floor on consumption if we get going sooner rather than later, and then we maintain this pretty good enough kind of jobs market. But it alone doesn't preclude this normalization of consumption. And that's ultimately where we're speaking of. But the market cares about the delta. And so the consumer is one that we still have our eye on. It's also not the time, we think, to make big cyclical investments like over-weighting

value versus growth, over-weighting small cap versus large cap, or weighting regionals versus large banks. There'll come a time for that eventually when growth re-accelerates. I'm going to ask you the same question I asked our top two guests today to start the program. Three, four weeks from now, we're saying what about earnings season? Did it live up to the hype? Did it do what it had to do? Or are we saying, well, here's some cracks that we need to pay attention to? So it's really interesting.

I'm so excited we're getting back to the actual earnings bit of the equation. I do think three, four weeks from now, we'll start talking with much more conviction about a certain broadening out that's happening in earnings growth. And that includes sectors that are tech-related and AI-related, but also other sectors that can be getting some of that boost or that have bottomed enough. And that's where we go back to this idea of utilities, industrials, as well as certain parts of energy. Do you think that the mega cap tech names are going to deliver something that backs up the moves that they've already had in the stock names? I think what we saw in the last earnings season is that great's not good enough. It's got to be really, truly excellent.

And especially there's much more of a focus on, all right, well, how much is all of this investment going to cost? What is the return on that investment? And how much of the monetization of it have we already pulled forward? And then that's not going to be a uniformly positive answer. But largely speaking, we do think it's quite reasonable to expect delivery, meaning pretty good double-digit pace of earnings growth. And it's not a bubble kind of a market. Well, we'll start having this conversation, I suppose, this late this week when the banks, including the one you work for, start supporting. Gabriella Santos, thanks so much. Thank you.

All right. Up next, we're tracking the biggest movers into the close. Seema Modi is back with us for that. What do you see now, Seema? Coming up, Scott, a big move in one stock that is tied to robots and it's not holding up well. We'll explain which name after this break. 15 from the bell. Let's get back to Seema Modi now for a look at the stocks that she's watching. Seema. Hey, Scott, BP is on pace for its largest percentage drop since October of 2023 after booking an impairment charge of up to $2 billion for the second quarter, which in turn will lower its refining margins.

You'll see the stock is down over 4% at this hour. And the return on investment on robots still being worked out. UiPath, which focuses on utilizing robots to automate processes, is cutting its global workforce by 10% as part of this restructuring plan. It's the first big announcement since its founder, Daniel Dines, returned as CEO in June.

The stock has fallen about 3.3% since then, is down just 6% today, Scott. All right, Seema, thanks so much. Seema Modi, still ahead. Bill Ackman's Pershing Square kicking off its roadshow for its closed-end fund. We are following that money with some fresh CNBC reporting, and we'll bring you those details next. All right, we're in the closing bell market zone. CBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Phil LeBeau on Tesla tracking for its longest winning streak in a year. And Leslie Picker with fresh reporting on Bill Ackman's Pershing Square U.S. closed fund,

closed end fund as it kicks off its IPO roadshow. But let's talk about what's happening here. We're trying to get another record close for the S&P. Nothing upsetting on the Hill today. Of course, there's a session tomorrow, but I'm not expecting anything different than what we got. And then we'll start thinking about earnings. Yeah, it's pretty status quo in terms of the macro monetary front. We're trying to do another record in the smallest possible increment, it seems, in the S&P 500. It's kind of remarkable. And everybody keeps trotting out really a bunch of complaints about how the market's gotten here. That really is just one

complaint, which is this extreme concentration that allows most stocks not to really be reflective of what the index is doing. So you've had the majority of the market kind of churning sideways for three to four months, which if you say, well, the market needs to correct, you could answer, well, most of the market doesn't need to correct. Most of the market's just been kind of hanging out. And it's priced for a generally positive outlook, but maybe not a super optimistic one. And I think everybody is probably going to welcome the arrival of earnings season when it looks like with the normal beat rate, you'll have double-digit growth, which, if nothing else, can mitigate the charge, which is somewhat justified that this is a richly valued market. CPI, too, this week. I know nobody really expects anything to happen in July in terms of a

cut, but a favorable CPI could lead to further table setting for September. It seems like the Fed requires a little more incremental confirmation that inflation is tame and doing the right things. And it's also very close to what economists are forecasting. That's been a real benefit this year, is that economists have more or less had a handle on the trend. So, yeah, I do think it could increase or sap market conviction that we're on that runway to a possible ease. And as I keep saying, you want a sooner cut, mostly so that it can be a pretty slow and deliberate process as opposed to having to rush to anything because the economy fell apart. Yeah, right. The job market sort of falls apart a little quicker than anybody either expects or wants. Phil LeBeau, talk to me about this run that Tesla has been on. Quite impressive.

Yeah, it is. It's the best since June of last year. And in that run, the stock was up 41 percent over a course of a 10 day, 13 day run. In this case, it's up more than 44 percent. And there's three things really that are driving this right now. The big part of this move here was when the company reported its Q2 results. They were better than expected in terms of deliveries. That really added juice to Tesla shares. Has people saying, well, look, have margins bottomed? There was some concern that they might be even weaker in the second half of this year. You hear less chatter about that now.

And then there's optimism about RoboTaxi. What will they tell us on August 8th? But before we even get to the August 8th unveil of Elon's RoboTaxi vision, we will get the company's Q2 results after the bell exactly two weeks from today. Scott, back to you. All right, Bill, thank you. Bill LeBeau, over to you. Leslie Picker, what's up with Bill Ackman? So as you mentioned, Scott, this is Ackman's closed-end U.S.-listed fund going public on the NYSE at $50 per share,

and that will be under the symbol PSUS. I'm told the listing date will be at the end of this month. This is different from the expected IPO of Pershing Square, the broader firm. That entity just sold a private stake, valuing it at more than $10 billion and is targeting a public debut next year or potentially the year after. But PSUS, that closed-end fund, will invest in large, minority, and occasionally controlling positions in 12 to 15 large-cap investment-grade, free cash flow generative, North American durable growth companies.

How it's different from the hedge fund? Well, PSUS isn't charging performance fees. It's waiving management fees for the first 12 months post-IPO. Additionally, the company expects it will have, quote, significant liquidity supported by its scale, name recognition and the manager's broad following. However, closed end vehicles do differ from mutual funds that investors don't have the right to redeem shares on a daily basis. So it's not quite as liquid as a mutual fund. It's it's interesting the words that they use in part the manager's broad following.

You know, he's been pretty active on social media over the last six to 12 months. And I feel like all of this kind of plays together in some respects in how he has broadened his own following. Yeah, it'll certainly be a true test of how far that following can take something like a closedend fund listed on the NYSE. It's also kind of a unique model and a unique iteration of the traditional hedge fund model in the sense that you've got this private fund charging pretty standard management and performance fees, and then you have a closed-end vehicle doing something very, very, very similar, most likely, that isn't charging that management fee for the first 12 months and no performance fee. So it's a very interesting test.

We'll definitely be following it closely. All right. Appreciate it. Leslie Picker, thank you very much for that. Back to Mike Santelli. We're about to have the one-minute warning. S&P is good for about five, so we're looking at another closing high. Yeah, and it looks like the market is making full use of this seasonal strength in the first part of July, this little bit of a flush of flows that we got in here.

You know, I definitely feel as if this whole dispersion with the average stock moving differently than the indexes has reached a little bit of an extreme. It doesn't mean it's some kind of a state of fragility. It just means that it makes people a little bit more uneasy with the character of this market making new highs than you otherwise would be. So, you know, things in theory probably shouldn't be expected to work so smoothly for the next several months. You have the seasonal effects getting a little more negative. You obviously have things like earnings season and, of course, the election starts to come into the equation. So I'm not saying we're running out of upside, but it seems that it's been a pretty easy glide path to here. We've got a new closing high for both the S&P

and the NASDAQ. This will settle things out, obviously, but it certainly looks that way. I'll see you tomorrow. And OOT.