Closing Bell - Closing Bell: BlackRock's Rick Rieder on Inflation 7/16/24

Episode Date: July 16, 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.

And welcome to Closing Bell. I'm Mike Santoli in for Scott Lopner. This make or break hour begins with the revenge of the rejects, the unloved and underappreci in regulation. The S&P 500, look, it's participating. It's up about half a percent. It would be at a closing record right now. The intraday closing high, 5666 for those who are superstitious. We're just below that right now. The Dow up 1.8%, 700 points, 200 points of that or so is UnitedHealthcare up on earnings. NASDAQ Composite has been the laggard. That's up only about one

eighth of one percent. Then there's the Russell 2000. Take a look here. It's continuing its blistering run up three and a quarter percent right now. It's up more than 10 percent over five trading days. It is at levels not seen for some 32 months. It peaked back in November of 2021 all time. Advances across the market outpacing decliners by a three to one ratio on the day. So that takes us to our talk of the tape. Is this all inclusive rally a breath of fresh leadership or just a particularly aggressive snapback by laggard groups after a long run of underperformance? Let's ask Anastasia Amorosa. She's chief investment strategist at iCapital. Joins me here at Post 9. Great to see you.

Good to see you, Mike. So I guess on the spectrum of, look, this is a head fake, short squeeze, just a reflex in small caps against large, to this is a genuine title change in terms of market leadership and emphasis and the macro message. Where do you come down? I think this is the gray rotation that we've been waiting for all year. And coming into the year, the thesis was that this is likely to be a year of a broader opportunity set and a broader or greater investor optionality for investors predicated on the fact that the Fed is going to cut rates. Well, here we are. Finally, it looks like the Fed is likely to cut rates,

maybe not in July, but in September. And that gives not just the sentiment support to some of these trades, but actually the fundamental support to a lot of these trades. You know, why are the small caps rallying? Well, because they do have a lot of leverage, which is hopefully going to reset lower once the Fed cuts rates. Why are the regional banks really rallying is because they have a lot of unrealized losses that maybe will turn into not gains, but at least smaller losses if the Fed actually cuts rates. So I think there's something very much real that's happening with this rotation trade. I guess the question is, can it remain this perfect in a sense where you still have the

big cap indexes holding up their near records as opposed to it being a little more of a zero sum game? And I think back to, you know, if you look at the Russell 2000 relative to the S&P or the NASDAQ, right before all this started last week, it was at like a 22, 23-year relative low, small caps were. Right. Okay? You go back and look at that 25-year chart, and it blasted off in relative terms. But why? Because big cap growth collapsed in the tech bubble bust in early 2000.

So I guess that's the question for me is, in absolute terms, can kind of all boats float, but some higher than others? Or do we have to brace for some chop? Well, there's some nuances to that. You know, first of all, I do call it a rotation because I do think the time is ripe to take some gains in mega cap tech. And, you know, the catalyst is starting to change a little bit. You know, why is tech rallied so much this year and last year is because you had tremendous multiple expansion and you also had tremendous earnings and those earnings were getting marked up. But now if you look at the levels, you know, if you look at the earnings revisions, for example, they're pretty high for

communication services and infotech. And they're low, by the way, for all the other sectors. Valuations, as I mentioned, have expanded. And, you know, you had the positive momentum of the economy. But, Mike, the economy has been slowing down. You know, the online advertising business is fine. But if the consumer does slow down at second half of the year, what does that mean for some of those big tech companies? So I do think just like the right catalysts are emerging for some of the catch-up trades, the catalysts are sort of going the other way around for some of the big tech companies. Now, to answer your other question, you know, what does this mean for the aggregate index? I do think that the aggregate index does consolidate and sort of pause from this rip-roaring rally that we had.

And the other reason I say that, Mike, is because when you look at what the markets do with going into the first rate cut, they rally into it, but then they consolidate and pause and maybe even sell off in the three months after that first rate cut. So I suspect we're approaching that moment of consolidation for the broader indices. Yeah, I've been wondering about that and looking at that history as well. And I mean, first of all, it's hard to characterize what the typical or average response is to the market from a first rate cut just because the variation is really wide. Yeah. Right? So you have, I mean, the market just levitated in the mid-90s and that soft landing when you got that one.

And then, of course, first rate cut in 01 and 08, not so great. And I do also wonder because we basically, this bull market started with the Fed still tightening. Like, I just wonder if the rules are a little bit scrambled right here. I think that's exactly the right way to think about the history because we can just look at the median and say, well, this is what this means. Because the median includes 2001, 2007. And what you see there is the consolidation that ultimately turned into a downturn. And the defensive really led the way for more than just the three months. And on the flip side, if you look at the 1995 and actually a lot of the non-recessionary scenarios, you did have that

near-term consolidation. But the uptrend does actually resume about six months after the first rate cut. So to me, sort of the playbook for the next, you know, call it into year end is if we do get a pullback, if we do get some consolidation, you want to use that as a buying opportunity. By the way, there's elections that are coming up, which probably will stoke volatility as well. So if you do hit, you know, some of that downdraft in the fall, I think you want to buy that because ultimately I'm still in the soft landing camp and we get rate cuts. That's a pretty bullish scenario for stocks. Yeah, if you look within, let's say, the small cap index,

it's no surprise in terms of the sector weights, right? It's financials, industrials, health care, especially after the Russell 2000 kind of rebalanced in June. You got rid of a lot of the high-flying tech. Does that line up with the kinds of sectors that you think would be the place to be right now tactically? I'm sure a lot of people are saying, you know, it makes a lot of sense. It made a lot of sense three months ago for small caps to start to catch up. And now they're up 10 percent in a week.

Did I miss it? Well, no, I don't think you missed it. Maybe in the last week, you know, if you have an allocator, you missed it. But I think longer term, no, I don't think people have missed out on small caps or the regional banks, for example. And I looked at regional banks in particular this morning. And, you know, first of all, yes, they're up tremendously. They're up 10 percent in the last week or so. But they're just about over flat for the year.

They're up 3 percent or so. And they're still down 30 percent from the peak that we saw in early 2022. So, no, I don't think, you know, people have missed that trade. And by the way, if the Fed does cut rates, maybe not if I should say, but when the Fed cuts rates, that is a huge tailwind for regional banks. I think it's one of the best catch up trades that's out there. But I will say, Mike, I like the barbell approach. And I'm not talking about barbelling what people have been doing, which is tech and money markets. I think you get out of that barbell and you maybe barbell some defensive sectors like utilities with some of

these catch-up trades like regionals and small caps. Right. I guess the other question is, are we getting a little bit too certain about what the Fed is specifically going to do? I saw earlier maybe a 100 percent market implied probability of September or by September that we get a cut. Anything kind of complicate that picture? We had a strong retail sales report this morning. Well, so in a way, this is one school of thought. If the Fed chooses to wait until September, who knows what happens between now and then? Who knows what kind of data surprises you might get?

But I think the slate is pretty clean for them right now to actually probably cut as soon as July. I don't think they'll do that. But, Mike, the reason I feel fairly confident they will cut in the next couple of months is because it's not just inflation that's coming down, but it's also the labor market that's rebalanced quite a bit. And the fact that we did reach 4.1 percent unemployment, that's something to pay attention to. And by the way, you're looking at some of the bank reports. And

yes, trading is great and M&A activity is up again. But you did see credit provisions, for example, that have been set aside, maybe a little bit higher than expected. So I think there is a degree of slowdown in the economy that the Fed has to pay attention to. Actually, as we as we bring in the panel, let's actually hear what Brian Moynihan, CEO of Bank of America, had to say on exactly that point this morning on CNBC. Let's see if we have that. The Fed has gotten the consumer in the right place. Now they've got to be careful they don't go too far into spiritirit the consumer where they really slow down the spending. It really goes negative. And so that's the customer money moving into the economy in the broadest context. That is $4 trillion plus at Bank of America a year. So it's a big sample and you've seen it slow down.

And now we've got to be careful that we keep the balance right. Let's bring in Courtney Garcia of Payne Capital Management and Nadia Lovell of UBS Global Wealth Management. Courtney, of course, a CNBC contributor. Welcome to you both. And Courtney, you hear what Moynihan had to say there. He's basically saying we have a soft landing likely in place. Don't screw it up. How do you react to that? Yeah, and I think that is the reality here. I mean, the consumer is what drives the U.S. economy, and they have remained strong. We saw that with the retail sales numbers that came out today.

And if the consumer does remain strong, that is a good backdrop for the economy. But they are stretched right now. The higher the rates are and the more that's going to affect all of the interest payments and all their debt servicing, it is affecting the consumer. You're starting to see them pull back. But as rates come down, you're going to see that continue forward. But we do need to continue to see a tight labor market, which we're seeing, to your point. And I think all of those things do lead to a good backdrop that we're going to see rates come down.

That is the soft landing scenario. They're going to be data dependent, so we have to see where they go. But things are lining up nicely here. And aside from the macro, I mean, I think you are, Courtney, a believer in this idea that this rebalancing of the market that we're seeing has more life to it. Absolutely. Yeah, and I think what we're not talking about, too, is all of that cash that we're seeing has more life to it? Absolutely. Yeah. And I think what we're not talking about, too, is all of that cash that's on the sidelines, right? You're talking about that barbell effect. Everyone's either in cash or they're in the MAG-7 right now. But I think what you're going to see is all of that money is starting to go into those other areas, which you have not missed out on the rotation, but you forget how quickly

that change can happen. So you are seeing like 10 percent that small caps have moved in a week. That'll happen very quickly. It's why you need to start allocating that capital there now. But moving forward, the second that rates come down, those money markets are going to start paying less and all that money is going to start making its way back into the markets. I don't think the tech trade is over. I think people are going to continue to chase that, but it's going to make its way to the other categories. I think you're starting to see that this week. Nadia, talk about the conversations around all these topics you're having with your clients and what you think they should most be focused on right now. Look, we continue to focus on tech. I mean, while it remains to be seen how much lag this rotation

will have given that it is a little bit more riskier trade, the tilt to or cyclical, and also very rate dependent and economic growth dependent. We'll see what happens throughout the earnings season. But, you know, we know yet a day performance has been quite narrow and concentrated. We have been looking for a bargain now, but we continue to advise our clients to stay up in quality and emphasize quality, have tech as that anchor, because despite the fact that there is a tribute of AI enthusiasm, these companies have been able to deliver on the earnings growth. We cannot say that for much of the rest of the market. And quite frankly, small cap has been an earnings downgrade story. But that said, they do seem to be catching a bit and it's a bit more balanced.

And so we would tactically look to balance out some of the exposure and some of the more cyclical areas of the market. One of the areas that we particularly like is industrials, because we do think that that does have both secular components as well as the cyclical components that investors can take advantage of. You know, it's a good reminder that quality, you know, in terms of balance sheet earnings, quality as a factor, which has been leading all year, it really is skewed toward mega cap and toward tech to a lesser degree, Nadia. So you view this, I guess, this rotation towards small and lower quality and more cyclical as maybe a little more unstable at this point? Yes. And I think that the earnings season is where the rubber will meet the road. I mean, reality is you do have this trade happening. Yes, rate cuts can help,

but it's also happening in the backdrop of an economy that is slowing and that has implications for earnings. So I think that these companies have to show that they can put up the earnest growth. And I'm not sure if they will be able to do that. So to us, this might not have that much duration. And, you know, some of the strong rally that we've seen over the last week, yes, that might be able to continue over the short term period. But I think the magnitude and the duration of it will likely fade. Anastasia, you know, I guess the other piece that I'm just wondering if the market is growing a little bit too certain of too quickly is pricing in a specific policy mix, election outcome. Obviously, that can go for a long time. You know, after the 2016 election, you know, you would have thought it was just a trade. It wasn't just a trade. It actually persisted for a while.

Financials, smaller caps, cyclicals, industrials, domestic over international. Is that something you think should be driving a strategy right now? Or is it just a background factor? Well, the fact of the matter is we certainly don't know the election outcome. You know, we can guess at the election outcome and that's exactly what the markets are doing. But what you find out over time is markets move on probability. And if you go from a 30 percent probability of something happening to 100 percent certainty, that does tend to move the market. So what I'm trying to say is even though some of the Republican outperformance trades have already started to rally, if that ultimately ends up being the outcome, I think there's absolutely more to that trade. But one of the things, Mike, that makes me think that maybe some of the financials and some of the regionals trades do have some longevity

because, well, first of all, you know, first of all, it's the rate cuts that also hopefully support the economy. But also, if you do have a Republican win, you potentially have financial deregulation that could also be helpful to those trades. You also should have a pickup in small business confidence that historically has benefited small caps as well. I'm not saying we should only bet on this, but if you do believe the election odds now, and if you do want a position for that, I think sticking with domestic trades, which are exactly the rotation trades that we're talking about, I think that might be a strategy you want to adopt. Courtney, you mentioned that there is this big aggregate amount of cash, you know, on the sidelines, money market funds.

I know a lot of that's institutional. It's not necessarily mom and pop. But at the same time, if you look at equity exposures among retail investors, if you look at the Fed numbers, you look at the American Association of Individual Investors, they're pretty fully allocated towards stocks. I mean, not like over their skis. But I just wonder if, you know, in your experience with your clients even, do they feel as if they have not really been fully participating in the stock market? Therefore, they have to kind of sweep a bunch of cash into the market? Yeah, and I think that's the question, right? Because I think a lot of that money is your safe money. So people are using cash as opposed to bonds.

And I think that's where you're going. Is that money going to go into bonds or a safe investment as opposed to the equity markets? I think to a certain extent it will. And that's where we are talking to people about municipal bonds, for example. When you look at those tax equivalent yields, they're very attractive right now. It's definitely worth going longer duration. So I do think your bond market is going to benefit, which I don't think we've talked much about. But I don't think all that money is going into bonds.

I think there is still a lot of people who are nervous here. They're waiting for a recession. They're waiting for a second shoe to drop. And, you know, the overall consensus is that it's a more negative tone of where the markets are going. And so as people get more optimistic, a good chunk of that money is going to make its way back into the markets. Yeah. And I guess, Nadia, it's never as if we just get, you know, a consistent flow of data all telling us the same thing. I do wonder what this retail sales number today said. People are revising up second quarter GDP above 2 percent again. Not that that's, you know, runaway growth, but that's a little stronger than we thought it was going to be. Where does that leave you in terms of are we still mid cycle? Is it late cycle?

Does that that kind of conversation helpful at all to you? Yeah, you know, we still expect economic growth to be close to trend line for this year. So not saying we don't think that we're in end of cycle. We think that, you know, the Fed will lose the monetary policies that could give the economy an additional shot in the arm. And sort of how you think about positioning for that, don't disagree in terms of some of the comments around even like a financials. We are neutral on financials, but we do think that the bias is to the upside. One, potential for easing on money fund, whether that be on monetary policy or even discussions around potentially

easing some of the calculations for the SIFI banks capital buffer, as well as the outlook for the election. We do put a higher probability on a potential for a red sweep, and that would be beneficial to financials in terms of deregulation, and then we could potentially have a pickup in M&A. So there are ways to play this part of the cycle outside of tech. Like I mentioned earlier, in industrials and the wallets, I think that there are interesting opportunities within financials. Yeah, getting interesting along a few fronts for sure.

I appreciate the conversation, Anastasia, Courtney and Nadia. Thank you very much. Let's now send her over to Seema Modi for a look at the biggest names moving into the close. Hi, Seema. OK, Mike, 42 minutes left in trade and UnitedHe Health is leading the Dow after posting better than expected earnings. The healthcare giant up now more than 6% despite a warning that that cyber attack on its healthcare unit earlier this year would have an impact on full year profits. The stock now up about 4% so far this year. Let's turn to Shopify. That stock is jumping after Bank of America upgraded the stock from neutral to buy. The financial firm also increasing the company's

price target, citing smart spending and revenue growth. You'll see the stock is up 8%. Mike? Seema, thank you. Well, we're just getting started here. Up next, money in the banks. The financials rallying to a record high today, as we've been discussing. Now the top sector this month as well on the back of post earnings pops and optimism the Fed is getting ready to cut in September. We'll break down whether that trade still has room to run. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC, the Dow up 727. big bank stocks getting a boost outperforming this broad market rally after earnings beats from bank of america and morgan stanley investors now looking ahead to regional bank results kicking off tomorrow so we're here from citizens, First Horizon and U.S. Bancorp all going to report in the morning. Joining me now to discuss is Wedbush's David

Ciaverini. David, good to talk to you. I guess there's what these companies are going to report and maybe a little bit of noisy results. And then there's what the market seems to be positioning for, which is, I guess, happier times, less regulation, lower rates. What's your overall view of the setup here going into the regional numbers? Yeah, you hit the nail on the head that everyone is really looking forward because the rate outlook has certainly, you know, improved. The political climate has certainly improved with the Trump White House potential. But what could be more sobering is looking at the second quarter results themselves.

We are expecting sluggish loan growth, continued negative deposit mix shift. NIMS should continue to be under pressure, although they're likely to bottom in the second quarter, and negative credit quality metrics. So there's a few things that we're still keeping an eye on in the second quarter, but the outlook with potentially lower rates

definitely eases and mitigates some of these headwinds. So where does that leave you with regard to some of the stocks that are going to report here? They've certainly had their move. A lot of it is based, as you say, on, I guess, less pressure on some net interest dynamics as well as maybe some relief on the real estate lending front. So in terms of names, where would you focus? Yeah, so I'm still focused on the ones that have above average capital levels and can benefit from, you know, potentially lower interest rates. So Fifth Third Bank, they are liability sensitive, so they should benefit in a lower rate environment.

And then First Citizens, FCN. N. C. A. they have above average capital levels were expecting a sizable buyback to be announced either with July earnings results. Or shortly thereafter and that will be a nice tight tailwind for them. And then to the extent we do get lower rates remember they acquired Silicon Valley bank. So to the extent the V market rebounds they should benefit from that and then the other one we are pointing investors to. Is M&T bank we are expecting them to-

implement their buyback plans in the second half because remember. Just couple weeks ago the stress capital buffer from the stress test. Their S. C. B. improved- so that will give them additional capital. Flexibility and they are

neutral to interest rates. So we are expecting some expansion in their net interest income as we look out to next year. What can we read through, if anything, some of the bigger bank results on the consumer credit trends at this point? I mean, I realize people have been waiting for a long time to see if that softens up, but hasn't necessarily done it in a dramatic way, but what are the clues telling us? Yeah, normalization is still occurring, but it seems like it's still manageable. Unemployment rate remains very low. So that enables consumers, you know, while they're employed to stay up on their credit bills.

We are seeing pockets of weakness here and there, especially for some of the neobanks in our coverage. But overall, it looks like for the big banks particularly, it's very much a manageable risk. I imagine this is something that's going to be very contingent on the political, you know, setup looking out several months. But are we going to start at all to talk about M&A again as a significant factor? I really think so, because with, you know, deregulation and, you know, a Trump White House, that should certainly help. And then scale matters. What we saw a year ago, right, with the March Madness, with, you know, four bank failures. I think that with additional scale, that will probably lead to a number of banks looking for M&A to achieve that scale. Right. And is there, I guess, a regional focus that you would apply? I know you know those you like those specific names right now, but I wonder if there's an area of the country that

looks like it's ripe to be consolidated more than others. You know, not necessarily regional focus, but just based on valuations. Like I think a bank like Bank United could be potential acquisition target. Wintrust Financial in the Midwest, I think they could be an acquisition target. And then some of the Asian niche banks out on the West Coast, they could potentially benefit from some scale between East West Bank and Cathay Bank Corp. So it really just depends on valuation as opposed to geography. Yeah, interesting little situations there. David, appreciate the time today. Thank you.

My pleasure. David Gavirini from Wedbush. We're getting some news from Elon Musk on SpaceX. Kate Rogers has that for us. Hi, Kate. Mike, yes, Elon Musk announcing in a tweet here that he will be moving the SpaceX headquarters from Hawthorne, California, to Starbase, Texas. He says this is in response to a law that Governor Gavin Newsom signed today making rules that require parent notification if a child identifies as transgendered banned in schools in California. Jason Calacanis tweeted about it. Musk responded, saying, this is the final straw because of this law and many others that preceded it.

Attacking both families and companies, SpaceX will now move its HQ from Hawthorne, California to Starbase, Texas. We should note that SpaceX does already have operations in Texas, and it did reincorporate from Delaware to Texas earlier in the year. So the entire move in and of itself is not new. But the fact that they're relocating headquarters from California to Texas, and it did reincorporate from Delaware to Texas earlier in the year. So the entire move in and of itself is not new. But the fact that they're relocating headquarters from California to Texas, he says, partially in response to this law and other issues he's had with the state is notable. Back over to you. Kate, thank you. All right, coming up, shopping for opportunities. The discretionary sector hitting a 52-week high as we get the latest read on retail sales, and Amazon holds its Prime Day event.

We have a top analyst standing by to size up the space and make the case for her top picks. Closing bell. Be right back. Amazon's annual Prime Day event is underway with expectations calling for sales to reach a record high. CNBC technology reporter Kate Rooney has the latest on how it's going, Kate. Hey, Mike. Yeah, so Amazon is on track to bring in a record $14 billion in Prime Day sales. That's according to Adobe. That would be up about 10.5% from a year ago. Investors are watching some adjacent opportunities around Prime,

not just those retail sales. So JP Morgan, for example, says the financial benefit extends well beyond that two-day event they are watching. Advertising in particular, they say, estimates don't capture potential incremental revenue from ads or that subscription member acquisition when it comes to Prime. Then you've got Bank of America also looking for an ad bump. They view Prime Day as a positive for Amazon's brand as they continue to take market share from Walmart. And then AI has been a major theme around this year's event. I spoke to Beryl Tomei, VP of Transportation at Amazon. She told me they're using it on the back end for placing inventory near customers in the right quantities, plus they're rolling out their AI

chatbot. We just announced the general availability of Rufus to all U.S. customers last week. It is a generative AI-based personal shopping assistant. So you can go into our store and have a conversation with Rufus, learn more about our products, ask questions about the types of things you're looking for. Amazon shares are up about 26 percent this year, in part thanks to a better outlook around e-commerce margins and also that AI story. Of course, Mike, back over to you. Yeah, I guess that AI personal shopping feature for people who don't think that Amazon has enough sense of exactly what they want to buy next. You have to let them do a lot of data. So she was saying, too, they feed that data in based on what you've already bought.

So if you're seeing Prime Day sales that seem especially tailored to you, it's no surprise. Thanks, Dayi. Yeah. All right, Kate. Thank you. All right. Retail stocks rallying today after June sales came in flat but topped expectations. But it's an uneven story underneath the surface. Adidas today increasing its full year outlook, while Hugo Boss cuts its own. Here to share her outlook for the space, Bernstein's apparel and specialty retail senior analyst, Anisha Sherman. It's great to have you, Anisha. I'd love to just start at, I guess, kind of a top down level with that official retail sales report this morning.

Pretty big upside beat. Also positive revisions to prior months. I wonder if that changes the sense of whether the consumer is tired here or not? I think it's, as you said, it's a story of disaggregating the total and looking at the different pockets of consumers. The low-income consumer is fairly stable on discretionary spend. They had a lot of pain in 2022 while lapping the COVID benefits, and now they're fairly stable, flat year over year. Where we're seeing the most pain and the downgrades and the trading down is in that middle to slightly higher income consumer. That was doing really well in 22, was on a wave of revenge spending with excess savings, no student loan debt, you know, no credit card delinquencies and this revenge spending wave. And all of that has changed. And that's what we're seeing in the likes of Hugo Boss, but also in the U.S., the likes of Coach, Michael Kors, Lululemon, Canada Goose, some of these mainstream to slightly premium brands that depend on that consumer spending.

That's where we're seeing the pullback. Interesting. I mean, is it is part of the story you mentioned, the revenge spending wave, that the mix is changing from goods maybe back more towards services and travel. I've seen some numbers that suggest, you know, we're still working off that excess goods consumption from the pandemic years. Yeah, in certain categories, that is true. So we've seen a huge pull forward of home spending, so home improvement, home decor, but also kind of big home purchases. So if you bought a trampoline for your kids in 2021 or an air fryer or a mountain bike, you're really not in the market for that anymore. So there was a big pull forward of those big ticket items.

And many retailers in the sector, including the home retailers, as well as someone like Dick's Sporting Goods, mass retailers have seen that effect. On the more consumables, there's less of a pull forward effect, but it's more about just the consumer looking for ways that they can save some money if they have enough stuff, if they can trade down in a way. If there's nothing interesting that's drawing their attention, they're pulling back and they're trading down. So the winners here are the off-price retailers that have been gaining share and pumping positive and some of the other value retailers that have been gaining some of that trade down volume. Yeah, we're showing TJX and Ross, of course, in terms of the value retailers. We also, though, I know you're recommending Nike.

You mentioned the sort of weakness in some athletic related or Lululemon at least. And also, of course, you know, just this restructuring in the market share story for Nike hasn't been that positive. What at this point do you actually like in terms of what you see there? Yeah, it's not been positive at all. It's been a pretty terrible story. But the way I look at it is there is a big lag in when you start working on things like innovation or regaining distribution

and when the numbers actually start to show up. And we know that Nike has been focused on this for the better part of a year. They've been hiring. They've been investing in R&D. They've been putting more marketing dollars behind some of their launches. And they've been rebuilding partnerships with retailers. And we're in the trough where we haven't seen any of that impacting sales yet. And where the stock is, sentiment and the multiple are at 10 year or more than 10 year lows. Stock is really uncrowded. So as soon as we start to see some of that brand momentum working and some of their efforts paying off, the stock is poised to

rebound. I don't think this is a one week or one month or maybe even one quarter story, but I think on a longer term horizon, there's some clear upside. Yeah. I mean, obviously the relative valuation is pretty low for Nike compared to its longer term history. We were just talking about Amazon Prime Day. Are there any echo effects there, whether it be with the brands or with, you know, competitors or anything else that you've been able to pick up over the years? Or is this one of these things that we just kind of digest in the middle of the summer and move on? I think there are some conflating effects. So this is also back to school time, right, which is a huge spending wave, especially if you're something

like sportswear, where, you know, you're buying your kids new sneakers, new sports equipment and into the school year beginning. And so it's conflated with that back to school event, which we are going to see across the retail sector and is a big, it's not only a big event in and of itself, but it's a good predictor of what fall demand is going to look like. And then in addition, we also have some big sporting events this summer. We just had the Euros and the Copa America. We have the Olympics coming up. All of that is opportunity for brands to do more marketing, more product launches. And so there's a lot going on this month and into next month, including the Prime Day. So I think it's all of that together that's going to drive a little bit of an upswing in some subsectors,

particularly in branded apparel and footwear and in sportswear. And, of course, I mean, these stocks in general, as a reflex, if people start to expect a Fed rate cut right in the near future? They tend to start to fly a little bit. Is there any tangible effect you'd be looking for there? Is that going to somehow, you know, kind of dial down the pressure on some consumers at all? Yeah. So there's obviously an impact on stocks, as you mentioned, but also on the consumer. I mean, one of the factors that's holding back discretionary spending is the fact that credit card delinquencies are now higher than they were in 2019. And that student loans as well for that middle income to slightly higher income consumer

are putting pressure on the wallet. So if there is a rate cut that impacts your credit card bill, your student loan bill every month, that will help fuel some of those dollars back into discretionary spending that are being held back. So I think there's a tangible effect on volume and traffic as well as an effect on the stocks. Yeah, and I suppose if the rates flow through, then home improvement might benefit as well down the road. Right, so that's more of a lagged effect, exactly. Appreciate the time. Thanks so much. All right, up next, we're tracking the biggest movers as we head into the close. Seema Modi standing by with those.

Seema. And Mike, shares of Nvidia losing steam here down about 2%, breaking below $130 a share. One of its key suppliers reporting earnings tonight. We'll get right back. 16 minutes until the closing bell. S&P 500 and Dow trading at above the prior record closes. Very close to intraday record highs. Let's get back to Seema Modi for a look at the key stocks to watch. Seema. Mike, we'll start with Charles Schwab. The stock is sliding 9%, disappointing net interest margins, overshadowing the brokerage's earnings beat. You'll

see that stock again down about 10% now and turning to semiconductor stocks. Several positive notes. Cantor Fitzgerald writing that this morning that AI leveraged names are still the most attractive names to own. They're long NVIDIA, Marvell, among others. Wilf Research naming AMD its top pick with analysts there citing a longer cyclical recovery in servers. This as we await NVIDIA supplier ASML to report earnings tonight. That stock is trading in record high territory and up 50% so far this year, Mike. And that one will be in the middle of the night, right? In Europe, Seema.

Thank you very much. All right, still ahead, your earnings setup. Quarterly results from Interactive Brokers hitting the tape in overtime. We'll bring you a rundown of what to watch ahead of those numbers. And as we head to a break, we're keeping an eye on gold.

It is hitting a record closing high today, now up nearly 20 percent this year. Lots of expectations fed rate cuts. Who knows about policy flux at 2471 an ounce. Closing ballots back after this. The AI trade taking a breather today with the technology and communication services sectors underperforming. But Bank of America says one AI semiconductor stock is showing, quote, no signs of slowing down, naming the chipmaker its top pick. For the full story, head to CNBC.com slash ProPick or scan the QR code on your screen. Still ahead, playing matchmaker. Shares of online dating company Match popping today after activist investor Starboard Value swipes right. That story and more when we take you inside the Market Zone.

We are now in the closing bell Market Zone. Diana Olick is breaking down this major rally in the homebuilders, plus Julia Borsten on activist interest in Tinder parent Match Group, and Kate Rooney is looking ahead to interactive brokers reporting after the bell. Diana, it's amazing. Just a couple of weeks ago, people thought the homebuilder stocks were kind of breaking down, and now they've gone vertical. I guess rates matter.

Yeah, it's all mortgage rates. Look, they've been falling steadily in July, and while they popped up a little bit this morning after the retail sales data, bond yields are back down again now to the lows of the session, with greater optimism that the Fed will cut rates in September. So the average rate on the 30-year fixed went from 7.14% at the start of July to now 6.84%. That, according to Mortgage News Daily, all positive for the builders. We did get a lower than expected read this morning on builder sentiment in July. The expectation had been for a one-point gain, and we got a one-point drop with builders pointing to mortgage rates. But the component of the index measuring sales

expectations in the next six months rose, and it was the highest level of all the other components. In addition, Evercore raised its price targets last week on Pulte, KB Home, and Toll Brothers and maintained an outperform on all of them. So there you have it, Mike. Yeah, I guess, you know, the sentiment numbers, as you mentioned, a little bit mixed. What's the next thing we're going to be looking for in terms of whether there's actually tangible improvement here in terms of whether there's actually tangible improvement here in terms of turnover activity? Well, I think you have to look at the housing starts numbers, which we get tomorrow morning at 830. They're going to be for June and that's new construction.

We'll be looking at the single family side specifically, but that's going to tell you where the home builders are thinking, especially when we look at building permits, too, because that's an indicator of future construction. And then new home sales, which come out next week. Again, that'll be for June. So that will be mortgage rates based on June. But if you look at that drop in rates and you get a little commentary from the builders on their concessions, on perhaps their lowering prices, it'll give you an idea what they're looking for forward in the fall. All right. We'll know soon enough.

Diana, thank you. Julia, match shares really responding to this activist interest. Responding, indeed, match shares gaining over 7 percent going into the close after activist Starboard Value disclosed a new 6.6 percent stake in the company. Starboard writing that the board, quote, must also fully understand the potential value creation opportunity available through a sale of the company and compare the alternatives on a risk-adjusted basis. Match responding to this saying, quote, we are relentlessly focused on executing our key initiatives, which include driving growth at Tinder, continuing Hinge's impressive expansion, maintaining appropriate financial discipline, returning capital to our shareholders. Now, with today's gain, match shares are still down 27% over the last year.

Starboard joins another activist, Elliott Management, which amassed a billion-dollar stake in match earlier this year, then getting two board seats on match's board in March. Now, match says it will continue an open dialogue with its investors, including Starboard. We'll have to see what happens here. Back to you. You know, it's interesting, Julie, you mentioned how weak the stock had been before this Starboard news. And, you know, the other companies in the group have not really fared much better. I mean, Bumble's had a struggle. It seems like it might be a sector wide issue. Is there any sense of what specific recommendations the outside investors might have aside from selling the company?

Yeah, I mean, look, look, this does seem like a very much a sector wide issue. We saw the dating apps try to really pivot and embrace more digital dating during the pandemic. But now we're seeing fully post-pandemic that younger users who previously would have gone on to these dating apps are really enjoying meeting up in person and spending their money on going to live events and going and doing things in person instead of spending time on these dating apps. So this is something that we've seen weigh on Bumble shares as well. In terms of what they should do, I think it is really notable that they're pointing out the potential opportunity in selling here because, you know, remember Match, you know, it has been a standalone company for quite some time. So that would be quite a reversal to think about selling.

Absolutely would. Thank you, Julia. Kate, Interactive Brokers has been one of the stronger stocks in the group. Yeah, Mike. So it's going to give us also a little bit of a pulse on the retail investors. So daily active revenue trades or darts, that's one area to watch. Trading volume also tends to sort of paint that picture. Account growth is going to be key. And then net interest income, especially of interest after Schwab's results this morning, that brokerage firm's second quarter profit was down, had to pay more interest on client deposits amid higher rates and then a week's second half. And that guy used to really hit the stock. It's been down about 9% today, plus bank deposit outflows.

And then Piper Sandler lowering its price target on Schwab today, saying the CEO's call to reduce the size of the bank leaves them incrementally less confident in the potential upside from a net interest income-driven earnings recovery story. For more on the brokerage space and interactive brokers in particular, don't miss Chairman Thomas Petterfies coming up next hour on Overtime. Mike. Yeah, Kate, it's interesting. For a long time, investors sort of preferred Schwab as this financial supermarket. It was much more stable because it was a quasi bank. Now that's the problem. And interactive brokers and Robinhood are a little more the pure play on sort of the

retail animal spirits, the options trading boom, and things like that. So I guess I wonder how high expectations are for Interactive going into this. It's a great point on the bank, Mike. I think when rates were going up, it was seen as a plus to really be looped in with the financials and to have a bank. And now it's obviously working the other direction. The CEO today is saying that they're going to become a lot leaner, a lot smaller, and rely more on partners, which really is the interactive model.

So the expectations in terms of trading volume, you're supposed to see a little bit of a recovery. I think that very different models, though. So I think the read-through for interactive when you look at Schwab is more just on interest income. They're a lot more indexed, even if you compare it to Robinhood, to things like options, to derivatives. And it's a little bit more of a sophisticated retail trader versus Robinhood tends to cater more to the younger, first-time sort of millennial trader at this point. Yeah, exactly. Interactive Brokers, even a lot of hedge fund clients. Kate, thank you very much. As we head into the close, it really is a stampede higher, an acceleration in this big rotation move we've seen for the last week.

The Russell 2000, a full 3.5%. The S&P 500 on pace for a record close of 60 basis points. You actually have about three to one advances in the climbing, 400 new highs on the New York Stock Exchange against only six new 52-week lows. That does it for Closing Bell. We'll send it to Overtime with John Ford.