Closing Bell - Closing Bell: Blowout Jobs Report Fuels Gains 10/4/24

Episode Date: October 4, 2024

Wharton School Professor Jeremy Siegel tells us what he thinks is next for this resilient market rally. Plus, Roger Altman – founder of Evercore ISI – tells us what he is forecasting from the fed meeting in November. And, top technician Jeff DeGraaf breaks down what he is calling “the most important market call right now.” 

Welcome to Closing Bell. I'm Scott Wabner, live from Post 9 here at the New York Stock Exchange. And this make or break hour begins with stocks in striking distance of record highs, not that far away, less than 1%, in fact. After that blowout jobs report, we will track all of this over the final stretch, as always. And ask the Wharton professor, Jeremy Siegel, what today's news means for the bull running stocks. First, let's show you the scorecard here with 60 minutes to go. In regulation, we're green across the board. NASDAQ's the winner today. It's pretty much how the day has gone for the majors. The Russell is the outperformer as small caps get a nice boost off of that jobs report. Tech is leading. Almost every sector has been in the green and all of it on this economic

optimism. It does take us to our talk of the tape, whether what happens today clears the way for stocks to make their next move. Let's welcome in the Wharton School's Professor of Finance, Jeremy Siegel. It's nice to see you. Welcome back. Thank you, Scott. Good afternoon. What's this mean now for stocks? Well, you know, it's interesting. And actually, Rick Santelli referred to it in the last quarter. Although we hired 550,000 new jobs in the third quarter, interestingly enough, hours worked is virtually flat. The good news about that is that the GDP increase is going to be almost all productivity. And we're looking for third quarter GDP two and a half to three. That's going to be productivity. The good news about that is it was a little hotter on wages, but that's mostly productivity.

So that is not inflationary. That's good news for stocks. Listen, I never thought they're going to go another 50. I think it's a series of 25. I think the long run neutral rate. I know there was a big discussion this morning about what that what is that long term rate going to be? I think it's three and a half and I'm going to reach it probably in the second half of next year. And if you take a look at the futures market, that's pretty much what they project.

And you only need 25 basis points per quarter. I don't you know, you don't need any more 50s. I think that's the way the Fed will go unless we get some really bad news. And, you know, the soft landing scenario keeps on getting brighter and brighter. So what does that mean for the stock market, Professor? Where does it go? I mean, did you change your view of where you think it can go between now and the end of the year with this jobs report today? Well, there's two things pulling at that. First of all, what's really noteworthy is how yields have gone up. I mean, we're virtually four percent. And I know I've been saying, you know, on the show that the Fed, you know,

lowering that probability of recession and being aggressive may bring the short rate down, but it's going to bring the long rate up. And so that's a little more competition for stocks, but more importantly, is better earnings. So if you're going to avoid a recession, the market likes it. You know, I can certainly see 6,000 on the S&P by year end, but it's going to be contending with higher yields. I think the 10 year is eventually going to set down. I don't know if we're going to get there in two months, but closer to four and a half percent from where we are today. So some have made the point that, you know, valuations look full, that they look a little rich, but it's hard to argue about equities at the current time because there's just so much cash around.

And we know that the Fed is cutting, whether it's 50 or 25. And we know and was confirmed yet again today that this is one heck of a resilient economy. Yeah, and absolutely. And if earnings are still going up and there's no sensitive economic indicator right now that says recession. I mean, I think the trend is your friend here. Listen, it is true. Market is 21 and a half, 2021 times forward earnings. Take out the mag seven, you're at 18. I don't think that's expensive in the world we're in today. It's not cheap either, but it's certainly not expensive. And it doesn't mean that, you know, that there isn't room for the market to still grow. It does mean that I don't think there's going to be a melt up of the market.

You know, I don't think, you know, 6, 2025 is not going to match either 2023 or this year in returns, which have certainly been far above average. Larry Summers makes the case that 50 basis points at the last meeting was a mistake, that there was no reason to do that. Stan Druckenmiller, in an email to another media outlet today says the following. I hope the Fed's not trapped by forward guidance the way they were in 2021. GDP above trend, corporate profits strong, equities all time high, credit very tight, gold new high. Where's the restriction? These men have a point. Yeah. Well, you know, you know, I love Larry. Larry, I know'm very well but there it was also of the one that said there was actually no way we can

stop this inflation with having a severe without having a severe recession and that that that certainly has not come about uh... now what what's with fifty basis points a mistake no because i think they could add on twenty five in july and and then 25 in September.

So they doubled up. You know, again, as I said, although the jobs numbers look good, but hours worked certainly for third quarter was not a gangbusters number at all. And as a result, why not move more towards what you think the long-term rate is? Now, Fed put out the bulletin in September saying 2.9. Now, I've been saying, no, it's higher. It's 3.5. But when you were at almost 5.5 before the last rate cut, you were way too high for good growth to continue in the next several quarters.

So I disagree with Larry. Clearly, the Fed is going to take a look at all the indicators. Maybe they'll pause once, but I think they're on the track to get down to the mid threes, which all the models that talk about Fed policy says, given inflation, given the labor market, that's where they should be. Sure, but doesn't it at minimum sort of question those who suggested that the Fed was behind the curve or too late? These gentlemen are suggesting not only were they not behind the curve, they may have done too much. I think you were in the camp. Well, you were in the camp of wanting the Fed to do more.

Were you wrong? Were you wrong? I was very were in the camp. Well, you were in the camp of wanting the Fed to do more. Were you wrong? I was very worried in July, and that turned to be temporary. I admit I didn't expect it to go back up. But that said, it doesn't mean you should stay in an extremely restricted level, given the fact that unemployment is at your long run target and inflation is almost at your long run target. I think this look at the market itself, the long bond was saying if the Fed stayed that high, the likelihood of a recession was much higher. When the Fed started becoming more aggressive on the downside, I'm not at all

surprised. In fact, I said the long rate is going to go up. And by the way, all those people who said, oh, I'm going to wait to buy a home because mortgage rates are going down. No, there ain't. Take a look. The mortgage rates fall the 10 year. You're getting higher mortgage rates right now than before the Fed cut rates, and they're going to be higher in the future. So we're not going to go to a runaway economy like some predicted as a result of the Fed moving more towards the neutral rate of interest. We got more evidence of that. Diane Olick brought that to us on halftime today. Twenty seven, twenty nine basis points to jump in mortgage rates. Just just astounding.ounding. Let me ask you this. You

threw out the number 6,000 for the S&P, seemed realistic to you. Savita Subramanian this morning on this network on Squawk Box said, I feel like this is Goldilocks. This might be Goldilocks. As much as she hated to use that word, she did. Is it? Well, I heard her. I mean, the thing is, is that the stock market is priced pretty near that Goldilocks rate. So, you know, Goldilocks doesn't mean a big surge in the market. I think the market was expecting a soft landing. I thought they got worried that the Fed might be too slow. That worry now with the Fed being more aggressive and the data has tended to disappear. So it does look like we're going to be getting a soft landing. And I think the market is pretty near to price that way. And that's why I don't think, you know, the next 12 months are going to be any sort of a 20%

increase in the market or perhaps not even a 10 to 15%. It's going to deal with the higher rates. It's going to deal with a 10-year that's probably closer to four and a half percent, and that's going to keep the lid on stock prices, but it doesn't mean that stock prices cannot rise, and I think they will in the next year, but certainly not at the rates we saw previous to. OK, Professor, stick with me, if you would. I do want to bring in now Courtney Garcia of Payne Capital Management, Julie Carey Hall, Jill Carey Hall, excuse me, of B of A Global Research. Courtney is CNBC contributor. It's good to have everybody with us. Jill, I'll come to you first. You get the first reaction to Professor Siegel. What do you think today's jobs report does to the stock market?

Well, I think, you know, it's another data point to suggest that ever since the Fed cut, the economy has been been holding up better than than feared. So so our economists now think the Fed cut in November will be 25 rather than 50 basis points. We think really, you know, we're in an environment where we see a soft landing, which is our base case, and, you know, we're seeing economic data hold up. We're seeing the Fed cut into an accelerating profit cycle, which you don't typically see. We think it's a positive environment for cyclicals. And, you know, we don't have a very optimistic target on the S&P 500, as the professor mentioned, equities have grown expensive. And, you know, it's particularly true that some of the largest growth stocks are very expensive. So we have a 5,400

target on the S&P 500 for year end. But we see more upside in some of the cyclical areas and in some of the equity income areas where if you see rotation out of short duration bonds and into dividend paying stocks as the Fed cuts rates, those are some of the areas that haven't been as crowded by investors. I know. I want you to defend that target a little bit more because it's peculiar to me that you're at 5,400. That has to be one of the lowest on the street at this point, considering we're at 5735, let's call it. We just got more confirmation that the economy is good. Fed's just starting. Earnings expectations are still pretty good. So how can you guys be at 54? So we're more bullish on the equal weighted index, on mid caps, on value, and not necessarily on the cap weighted index.

When you think about the broadening out of the market, earnings expectations, we think, should drive that. So we were in an environment where some of the biggest parts of the S&P, tech, MAG7, these stocks had seen some of the best earnings growth, earnings surprises. Now earnings growth is decelerating had seen some of the best earnings growth, earning surprises. Now earnings growth is decelerating for that pocket of the market and it's picking up for the rest of the market. So, you know, we think when you're in an environment of accelerating profits, investors become more price sensitive. So we do expect that rotation out of, you know, some of the parts of the market that are the biggest weights into other areas. So we think that'll be more positive for the equal weighted index than the cap weighted index. Yeah. Court, what's your view?

Yeah. And actually, I completely understand that thought process, right? Because as rates are starting to come down here, you're starting to see more of a broadening as opposed to a rotation. And I actually completely agree with that viewpoint because you're going to see things like small caps are going to continue to do well as rates come down and they have a lot more loans on their balance sheets. You're going to continue to see things like real estate, things like utilities are going to outperform. You're seeing today actually some of those things have done more poorly actually to Professor Siegel's point because you're seeing the long term rates, the 10 year treasury is actually going up. Well, right. Rates aren't coming down. So

short term they are. You expect that they will continue to do that? I think this is something you need to be cognizant of and a reason you need to make sure. And how short term? I mean, what are the two years coming down? So you want to buy small caps? I think small caps are actually well positioned here. I think they're a much better value than your MAG 7 here. And I think even small caps aside, you're looking at the other 493 in the S&P 500 are a much better valuation. So it's the idea of, yeah, it's probably more of like that everything rally

people are talking about. There's the cash on the sidelines, which you've brought up. I mean, I think a lot of that is actually positive for the broader markets. Plus, we haven't talked about the stimulus that's happening in China, but it's not just good for the Chinese markets.

It's good for the U.S. markets. You're also seeing companies like Caterpillar are doing fantastic. They sell a lot to China. You're seeing things like energy doing really well, things like commodities. I mean, this is good for the global economies. And you're seeing global interest rates come down, not just the U.S. central banks. Yeah, but I mean, rates across the curve are up and they pretty much have been since since the Fed even cut rates. So if the economy remains strong, the Fed's going to do smaller cuts. Maybe they don't even do what we think they're going to do. What's going to push rates down to make that trade work?

I think you need the economy to continue to be on good footing, right? I mean, you're seeing the big data point today is the fact that the labor markets continue to remain strong. GDP is growing. The consumer is holding up there. I mean, if you can continue to see inflation coming down, which it is, but the economy is on good footing, I mean, that is that soft landing scenario. And that's exactly what you're seeing. So, Professor, what do you what do you make of the broadening story? It obviously worked in the third quarter that to Jill's point, the equal weight S&P outperformed the cap weight. And that's why the mega caps didn't do so well. But these other areas like utilities and real

estate, industrials and financials did. Does that continue or not? Well, first of all, Scott, I want to mention that there are trillions of dollars of loans that are absolutely directly tied to the Fed funds rate. They go up and down one for one with that rate. And smaller companies have more of those loans than larger companies. So you're having those short-term rates go down, and they will continue to go down. I mean, we could argue about how fast, but as I said, I wouldn't be surprised by the mid-threes. And that's another 130 basis point at the same time that the long rates go up. So that would argue that the interest costs

on those smaller firms is going to be less burdensome. In addition, the soft landing helps those smaller stocks. They're more cyclical, less global, more on high to the business cycle. The less chance of a recession, the better their profits will be. So they could be winners on two fronts here. I know. But, Professor, the the Russell has been, you know, pretty much held around twenty two hundred. It's not getting a huge boost today, albeit up one and a quarter percent. It's outperforming. I'll give you and everybody else on the panel that. But lately, it hasn't done that much. Don't you think it's interesting today that the Nasdaq is leading the way?

We just got a blowout jobs report. Yields are up and the Nasdaq is leading. OK, that thatq is leading. Okay. That is true. And oftentimes you see that sensitive, you know, Nasdaq stocks are what we call higher beta stocks. So generally they get a little bit of a bigger push, no matter what direction markets up or down, you'll see the Nasdaq up and down more than the S&P 500. But as you said, I mean, the Russell 2000 is the winner of the indexes today. And I think it's, you know, if the Fed continues to cut, that it will continue to be the winner into the next six months. Doesn't mean the rest of the market is down. It does mean that we will finally have the big run in growth stocks stocks we'll see i'm not saying

it's necessarily over i mean they've they've really done you know fantastically but there are fundamental economic uh forces that i think are finally going to favor those stocks uh in the market yeah i mean court it is peculiar to me, too. Again, on a day where you have confirming economic news and yields up that every single mega cap stock on my screen except for Apple is green and Apple is barely in the red. And I just wonder what kind of sign, if anything, that is, albeit hard to make a big call based on one day's action. Yeah. And I think it's more of what we have been seeing, where it's just kind of this almost like barbell effect. When people are in the markets, there's really this risk on trade. I mean,

people want to be in the MAG7. You're seeing things like those overly risky trades that are continuing to do well. But people are continuing to put money in cash. And so I think that's the question is, like, as that money starts to come out, where does that go? And I don't think that trade of the mag seven is over yet. Like, is it getting expensive and long and tooth? Probably, which is why I think there's better places to add your money. But I don't think that's over. And I think, yes, you may get these other areas to outperform, but people are going to continue to chase that trade with all the AI hype that's happening. Jill, what about earnings? What's the story of this earnings season going to be? Are we going to come out of it feeling better about our prospects? Because, you know, earnings growth

expectations for next year for the first quarter, like 15 percent. That's a lot to live up to. Yeah, well, I think, you know, going back to the discussion on small caps, I think that's going to be a really key. This is going to be a really key quarter for small caps because I think while I agree that a lot of the Fed cutting is a positive for small caps, economy holding up better, that's one step in the right direction. We've been in an earnings recession for small caps that at the beginning of the year, everyone expected we'd be out of it by now. And estimates still continue to come down. So I think that's, you know, one issue right now when, you know, we talk to a lot of small and mid-cap investors is, you know, there's a lot of hope baked in on the small cap earnings recovery, where for large caps,

we've seen more sustainable evidence of that earnings recovery. Earnings went back into positive territory for the rest of the market, ex the MAG7 last quarter. But that hasn't happened for small caps and guidance and corporate sentiment has still been pretty weak there. So I think that's where expectations look lofty. And if the economic data

will continue to hold up, perhaps that'll give corporates some confidence. But that's one element we're going to be watching closely is what companies are saying and guiding and how small cap earnings do this quarter,

because we've still been tactically cautious on small caps, given the fundamental backdrop, even though there's a lot of positive longer term for small caps. Professor, you get the last word. Same question about earnings. And what's going to be the big takeaway this quarter? I think there's a couple of things. I mean, first of all, if we get a three handle on Fed funds, then that means money market funds. Won't those dividend paying stocks well protected that are in the three, four percent

range look really attractive? I mean, that's where I think a lot of people say from money market, hey, I can get the same yield as I can on that. And those those are generally not going to be the tech stocks on the on the earnings growth, yeah, that's aggressive. I mean, you know, we're in a 2, 2.5% real growth economy. You throw in the buybacks that we have, that's another 2, 3%. You throw in 2% inflation, you're not getting to 15 there. Even when you add all those up, you're getting more like 7, 8, 9 percent. So, you know, it's not uncommon to see those long-term earnings estimates tend to fade down as time goes on.

I'd say those that are predicting 15 percent next year are perhaps going to be disappointed. All right, everybody, we'll leave it there. Yeah, I got you. Good weekend, everybody. Professor, thank you. Jill, we'll talk to be disappointed. All right, everybody, we'll leave it there. Yeah, I got you. Good weekend, everybody. Professor, thank you. Jill, we'll talk to you soon. Of course, Court, thanks for being here at Post 9 with us today as well.

To Pippa Stevens now for the biggest names moving into the close. Hi, Pippa. Hey, Scott. Spirit Airlines tumbling 24% as it reportedly could file for bankruptcy and is in talks with its bondholders, according to the Wall Street Journal.

The report added the timing of any filing will not be imminent and follows the budget carrier's failed merger with JetBlue. And Rivian shares are sliding after its slash production forecasts and missed Q3 delivery numbers. The EV maker blamed the lower production on a shortage of a component used in its R1 vehicles and commercial vans. Now, the company would not disclose the specific component, but said the shortage started in Q3 and has become more acute in recent weeks.

Scott? All right, Pippa, thank you. We'll see you in a little bit. Pippa Stevens, we're just getting started. Up next, Evercore ISI's Roger Altman is here. We'll get his first take on the jobs report, what he thinks the Fed's going to do next, what he thinks the markets are going to do.

We'll talk to him next. You're watching Closing Bell, live from the new york stock exchange stocks higher today on a better than expected jobs report for september let's bring in evercore's roger altman to discuss welcome back it's always good to have you on our program hey scott thanks for having me what's your takeaway from today unadulterated good news. Think about it. Growth is strong. Commerce Department reported 3% over the past year. That's amazing. Four years into the recovery, inflation headed straight to the Fed's target. Job creation, strong. Corporate profit outlook, as you just discussed a minute ago, strong. Dock workers strike over. Gasoline prices down. Hard to imagine a better macro and economic environment than the one we have right here. And there are a lot of election

implications of it, let alone other implications. Sure. But people would listen to what you just said as you went down the list and say, OK, why in the world did the Fed do 50? And then why would they think that they need to continue cutting rates on the schedule they seem to be on? I mean, I know, you know, Larry Summers. Well, he says 50 was a mistake. Well, I was on here, this network just before the Fed made that decision and just after, and my own view as I expressed it was that it was an extremely close call as between 25 and 50. And I don't really think you can, with all due respect to Larry, I don't think you can

really criticize the Fed because if you think back to Powell's comments at Jackson Hole, he made clear that they felt more confident about the inflation pathway than they did about the labor market outlook, and therefore, they were going to tilt a little bit toward protecting labor markets, which is what they did by cutting 50. Going forward, I've heard a lot of commentary today on your show and earlier shows here about the Fed now reverting or getting back to 25 basis point cuts. That's my own expectation in the November meeting. I don't think they'll stand pat because, as Powell said, the time has come to ease monetary policy. I think they're ultimately heading toward a roughly three to three and a half percent federal funds rate. And the pathway to that is probably going to be a little bit slow, but pretty steady.

You know, someone might also listen to that list that you went down, which listed so many different positives and say, well, Roger must be really bullish on the stock market then. And you're actually not. Why? Well, I wouldn't say I'm not bullish, but I think it's going to be hard for equities, at least between now and the rest of the year, the end of the year, to move up in any material way because they're already so high. They're at record levels. In a lot of cases, multiples are abnormally high. Not every case, but a lot of cases. And open market interest rates, as we see today, 10-year and so forth, are actually rising. In fact, the 10-year has risen about 40 basis points from its low. That's not trivial, which is not at the margin making it easier for stocks. So it's been an amazing year for stocks. As of a couple of weeks ago, if you annualize the S&P 500 for the whole year at the rate that it prevailed, rate of increase that

prevailed two weeks ago, it was going to be the best year for the S&P 500 in ages. So it isn't that the stock market isn't good. It's great. But getting up to a meaningfully higher from here over the short term, I don't see it. You know, every time you're on, we talk capital markets, we talk M&A, talk about your bread and butter at Evercord in some respects. And, you know, I had a conversation with the chairman and CEO of Goldman Sachs not that long ago, David Solomon, on his outlook for when this whole thing's going to pick up. Like, where are the IPOs? You just said the environment's so great, stock markets are record highs, we still have no IPOs. I want you to listen to what Mr. Solomon said and have your reaction on the other side. Environment's actually okay, I would say, you know, for bank activity in our business.

There are places where it's been accelerating. I think we've seen a real acceleration in debt capital markets activity, some meaningful improvement in equity capital markets and M&A activity. When does somebody like David Solomon get to come on and say we're back? Well, let's just focus for a moment on the M&A environment. It is improving, but 2024 is going to turn out to have been an okay year, but not an awesome year, although expectations for 2025 are very high. And if you look at a variety of early indications like conflict checks and engagement letters, risk backlog and so forth, we think that expectation for a much better 2025 is logical. So the M&A outlook is pretty good. And I expect equity capital markets activities

to be good also in 2025 because there's so much pent-up demand. That's what many are saying. Maybe, you know, we got to turn the calendar, see what happens, get through the election and all that. Roger, always a pleasure. You know that. Thank you for coming on. Thank you very much. My pleasure.

Roger Altman joining us once again here on Closing Bell. Up next, top technician Jeff DeGraff is back. He'll tell us what he's calling the most important market call right now. We'll tell you after the break. China stocks extending their rally. A number of ETFs set to have their fourth straight week of gains. Our next guest says buying China right now, the most important market call. Let's bring in Jeff DeGraff, Renaissance Macros chairman and head of technical research.

It's good to see you again. I think you got to know yesterday, which was like number one, buy China. Number two, just listen to number one. Something to that effect. Am I right? It was Tuesday, but yes, that's exactly right. If there's Tuesday, Thursday, what difference does it make? Just another day, right? Look, I think, Scott, you get these opportunities once every five, maybe 10 years. I'll give you some internal statistics. Ninety seven percent of the constituents of the CSI 300 are making 20-day highs. 100 percent of the

constituents are above their 20-day moving average. This is unabashed momentum. It's very, very bullish. And it's coming on the back of these extraordinarily negative readings that we've had in alpha generation over the last three to five years. This is where bottoms are made. People have given up. The ETF flows are negative. So, when we look for the conditions, call that kind of a technician's valuation, if you will, that alpha model, and then we get this hot spark through momentum, again, these are very rare occurrences. And I know this sounds crazy, but I think this market can get to 6000 within, call it 18 months, maybe even as short as 12 months. So I think it's a really important call coming out of China. You've actually got valuation and now you've got that momentum. So it looks

really, really good to us technically. I mean, these stocks, you know, most of them, certainly the tech names are up more than 30 percent in, you know, a little wind below. That's a lot, obviously. You make the suggestion, though, that this is just getting started. It really is. And I know it's it's such a human instinct to say, how can I buy them because they're up X? But all the work that we've done, there's absolutely no relationship between a short-term move of any consequence and a need to mean revert. And so I think it's people's primal fears that are probably going to hold them back from making a lot of money here. Sure, we can pull back. We can consolidate. We can have a 10% maybe consolidation. I think it's a gift, frankly,

if you get that. And we're going to be very, very aggressive, not only adding to those positions, but probably putting some leverage onto that. The problem that some have with this trade alludes to the idea of a lack of trust. It's like Stan Druckenmiller, you know, the other day suggesting I have no interest as long as Xi Jinping is running the country. How do I deal with that stimulus versus trust? You put those both on a scale. I'm not sure which one wins out. Yeah, look, it's a fair question. And, you know, those kind of become a little bit more philosophical than we like to we like to get our hands dirty with. So, you know, for us, it is the markets. It's the interpretation of the

markets message. And right now, you know, whether the trust is a longer term issue and this is a shorter term issue, maybe maybe it's frankly to to try to gain trust back in the short run. Yeah. You know, I don't know exactly how that's going to play. But when we listen to the consistency of the tape and the things that we look for, this absolutely is one of those conditions that we have to abide by and play. I understand. Just to push back on you real quick, forgive me, just to push back on you just for a second, because you use the word philosophical. Is it that or is it fundamental when you talk about the risk and the lack of trust? That's why people have been reticent to put money there because they don't trust it.

Right, right. Well, I think that's fair, but I also think that that's part of what helps to create a bottom, right? If Xi Jinping needs to stay in power, is he going to do things that are going to obviously facilitate his dominance there. And I think that's probably right. So that's where it gets more philosophical for us. I mean, there's a lot of self-interest involved in that. But when I look at valuation, when I look at that margin of safety, if you will, that we always look for in these trades, I just think the upside is multiples better than

the risk to the downside. So that's how we think about it and how we play it. So we are treading where others fear, I guess. Okay. No, forgive me for stepping on your toes there. My last question to you, the market today, we're about the highs of the day. Dow's up better than 300 now. When you look at the technicals of this market, now we have this jobs report.

Where can the S&P go from here? Look, this is a good trend market. This is not a momentum market like we're seeing in China, but this is a good trend market. I think the most refreshing part of today is this backup that we're seeing in yields. Now, yields are overbought right now. This is the first time that they've been overbought since April. So I think that's something to at least keep in mind and perspective. But that said, and I think this is really, really important, look at the sectors that are up today. Financials are up. Discretionary is up. Utilities, real estate is down. So that's a very good sign. In other words, the market is not dependent on these perpetual lower rates. And it really is

advancing on its own volition, if you will, with what's happening to the overall economy. I think this helps seal the deal on the soft landing. I don't think 50 basis points was a mistake. If you look at that spread between twos in the Fed funds, there's still ample room for this Fed to lower rates. They're just not going to have to do it with the same type of urgency that looked like they might need to as we got to the end of August and early September. This is a good news is good news rate move today. I mean, they're up for the right reasons. You can easily make the argument. Jeff, I appreciate you. We'll talk to you soon. Thanks, man. That's Jeff DeGraff. Up next, we're tracking the biggest movers into the close. Pippa Stevens is back with that. Hi, Pippa.

Hey, Scott. J.P. Morgan says one retailer is benefiting from back-to-school buying. We've got the name to watch coming up next. We're about 15 from the closing bell. Let's get back now to Pippa Stevens for the stocks. She's watching. Hi, Pippa. Hey, Scott. Boeing shares are rising in late trading.

The jet maker and its largest union will return to the bargaining table on Monday as they try to come to an agreement that would end a strike by 33,000 West Coast factory workers. Abercrombie & Fitch in the green after J.P. Morgan added the company to its positive catalyst watch list. The firm raised its third quarter earnings estimates, saying brands including Hollister showed momentum during the back-to-school shopping season. And Vistra's record run continuing, shares hitting a new all-time high and advancing in all but one of the last 20 trading days. Alphabet's Sundar Pichai, the latest tech CEO, to say they're exploring nuclear for data centers.

RBC also reiterating its outperform rating, saying the meaningful tailwinds driving power demand show no signs of abating. Scott? Pippa, thank you so much. That's P Bippa Stevens. Still ahead, the Mann Group CEO making the case for hedge funds today. Why? She says the industry is, quote, more relevant than ever. Coming up on the bell, we'll tell you exactly why. Market Zone, CNBC senior markets commentator Mike Santoli here to break down the crucial moments of this trading day.

Leslie Picker with the headlines from her interview today with the head of the largest publicly traded hedge fund in the world, Diana Olick on homebuilders selling off after this morning's jobs report. There's a big reason why. She'll tell us in just a minute. Michael, I'll turn to you first. We're less than 10 points from a new closing high on the Dow. We've really picked up some steam here as we've hit the final, final stretch. Well, it was an hours-long struggle to find something to complain a little bit about, and there really isn't much in terms of the jobs report, in terms of the data we got coming in the previous days even, the services, ISM, all the

stuff that you maybe had a little bit of fear about clicked off in a positive direction. So that being said, I still feel as if people are kind of sitting on their risk budgets here. You don't really see the grab for new exposure in the market now. Granted, we are at a high. We're only 20 S&P points away from a record high. The Dow is basically there. And so therefore, people feel like they're involved. But I do think that it's almost a healthy reservoir of caution that we are basically, because we're in October, because we have these known events, and it's keeping the market a little bit in check from celebrating what was pretty much an unambiguously positive jobs report that answered most of the fears.

Now, the yield's going higher for the right reasons within this range. Perfectly fine. Oil popping, that's OK because it was so low. So I think you're in a very lucky spot here to be facing those particular macro moves. I had a money manager, I'll leave it at that, text me and say, I bought some Russell today. Yeah. Bought some January Russell calls as well, thinking that this trade is going to really start picking up. Russell's at the highs of the day up near one 1.5%. This is where the action has been focused.

And here's the thing. The Russell's up 1.5% on a day when long-term yields are up and we're taking expected Fed rate cuts out of the curve, right? So it's not just an easing story. It is a the economy's going to pick up story. And therefore, it should filter into earnings, broadly speaking. Now, S&P earnings have in a healthy way again expectations been cut back by four percent over the course of this

quarter for the numbers we're going to start to hear next week. That probably creates a low bar. How much of it's priced in. That's what remains to be seen. All right. I should mention as well remember forty two three thirty is the number you need to watch on the Dow for a new closing high. We're above that level right now. Forty two three thirty one. We're moving around a little bit, Leslie, as I send it to you. Apropos here that we're talking about money management, hedge funds and somebody who made the case to you that they're more relevant than ever right now. Yeah. And Scott, it's interesting because just put in perspective, the hedge fund industry has seen no shortage of challenges. Outflows and underperformance have been the norm for the better part of the decade, with a few exceptions.

Man Group, the largest publicly traded hedge fund, has seen its share of headwinds, but recently it seems to be turning things around. The firm reversed two quarters of outflows and set an AUM record of $178 billion. The firm generated returns of about 9% net of fees derived from a multi-strategy fund, risk premia, and long-only funds in a variety of asset classes. And I recently sat down with CEO Robin Grew for her first CNBC interview after her first year in the seat. And I asked her what the hedge fund value proposition is these days. And she told me it's more relevant than ever, especially compared with other types of managers. Is passive still a good investment? It's not as reliable as it was before. Is private equity a bad thing? No. But there are two ends of a spectrum, and there's this big thing in the middle, which is liquid alternatives and is trying to find more active investment styles.

And that's where active alternative investment managers can lean in. You can catch our full sit down on CNBC dot com. Scott. All right, Les. Good stuff. Thank you. That's Leslie Picker. All right, Diana, tell us about these housing stocks. And I think we can put two and two together here. Good news on the economy yields up, mortgage rates up, as you told us earlier. Right. Tell Mike that I have something to complain about today. Look, the homebuilders are falling sharply. Lennar, Palti, D.R. Horton, all down around 3 percent on the day, as are the home improvement names like Sherwin-Williams, Lowe's and Masco off around one percent. And again, it's not brain surgery as to why the average rate on the 30 year

fixed mortgage jumped 27 basis points this morning following the release of the jobs report. The rate is now six point five three percent, according to Mortgage News Daily. That is 42 basis points higher than the day before the Fed cut rates by half a percentage point. Now, mortgage rates don't follow the Fed exactly. They follow loosely the yield before the Fed cut rates by half a percentage point. Now, mortgage rates don't follow the Fed exactly. They follow loosely the yield on the 10-year Treasury. And it's all about what the expectation is for the Fed. Matt Graham of Mortgage News Daily says the only salvation here would be the notion that this is just one jobs report in a recent run that's been mostly weaker

and that perhaps the next one won't be so damning for bonds. But, of course, he wants mortgage rates lower. So it depends on where you sit. Right, Scott? Yeah. Diana, thank you. Diana, we have 90 seconds left. We'll turn our attention next week and then it gets real with earnings at the end of the week. Yes, it does. Probably a welcome thing. I think the macro we can really kind of set aside and say it's doing what we'd hope it to do. Really, the bull case right now is that the status quo more or less continues as it is.

You're not necessarily looking to squeeze inflation lower in any aggressive way. You're not necessarily hoping that the economy perks up beyond 2.5% annual rate, which is where we are. So the question is, do we stay in that lane? Earnings, you know, I think it does kind of crank up slow in terms of getting the picture all together. But as long as 12-month forward earnings are going in the right direction and that maintains itself through the reporting season, usually you're okay. In about six weeks' time from now, the 12-month forward period will be pushed ahead by three months.

That's kind of how this game works. The carrot keeps kind of being extended farther out in front of you. Now, of course, the only thing that matters after the first Fed rate cut is, do we get a recession after the first Fed rate cut is, do we get a recession in the first six months? Today's numbers suggest that we're not close to worrying about that. And so I guess that's why the market is able to make a little headway here. Good stuff.

Great weekend to you. That's Mike Santoli. We'll go out with a new high, a new closing high record for the Dow Jones Industrial Average. Stay tuned for Kathy Wood. Haven't really heard from any of the investors in OpenAI's latest round. Well, she was one.