Closing Bell - Closing Bell: Bumpy Road Ahead for Stocks? 9/6/24

Episode Date: September 6, 2024

The road ahead for stocks has gotten bumpier… but are there too many potholes to get around? Fundstrat’s Tom Lee, Solus’ Dan Greenhaus and Payne Capital’s Courtney Garcia break down their forecasts. Plus, Morgan Stanley’s Chris Toomey tells us how he is advising his clients ahead of this month’s critical Fed decision. And, homebuilders were a rare bright spot in today’s down tape. We tell you what’s behind that big bounce. 

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 tech wreck. That sector's down 7% this week under pressure yet again. Today, we'll show you the Nasdaq here in this final stretch. Worst week in about 18 months, almost 2.5%. Chips, the focal point, as you no doubt know by now, Broadcom is the latest post-earnings pummeling. Almost 10%. And the index that tracks the semi space is down more than

11 percent this week alone. The weakness, though, not limited there. Microsoft is below three trillion in market cap today. Apple is down ahead of its big event next week. Elsewhere, a big jump in volatility today. The VIX is surging. There it is up more than 11 percent north of 22. Yields are going the other way. They're falling. There's the 10-year, 371, two years below that. And all of that after a weaker than expected jobs report, raising even more questions now about the economy and the Fed. It takes us to our talk of the tape, the road ahead for stocks. Definitely gotten bumpier.

The question now is, are there too many potholes to get around? Let's ask Tom Lee. He's managing partner, head of research at Fundstrat, also a CNBC contributor, and also here live at Post 9. Welcome back. Great to see you, Scott. What's going on here, Tom? Well, it's been a rough week. I mean, this September 1st, four days, we're down 4%. It's actually one of the fifth worst September since 1928. So it's pretty bad. I don't think there's actually a lot of fundamental arguments for why stocks are down this much, but I think we've pulled forward to seasonality. The September to November period last year was really tough.

Historically, it's tough, and I wonder if markets are going to risk off early. So you believe in the soft landing story. You said there's no fundamental reason for this. This is a debate over soft landing versus something worse. Market seems to be tilting towards something worse. You say no. Yeah, the reason I don't think it's something worse and we don't know is that the jobs added was better than July. Remember, July was the hard landing fears because it was such a weak number. And in fact, the number of industries adding jobs jumped to 53%.

That's the best in six months. And the unemployment rate fell. So I think we're at a point where the Fed could engineer soft landing, and that's why two weeks from now it's going to be important. 50, 25, does it matter to you? I think it's going to be how the market interprets either number because there can be such thing as a dovish 50 or a hawkish 50 or a panicked 50, even a hawkish 25. So I think the reality is the Fed is on a cutting cycle. That's really a good catalyst for rotation.

Interest rates are going to fall and it's going to help industries like housing, autos, credit cards come out of this recession. So I think it's good news when they start cutting. Okay. What's happening in tech? We said that the NASDAQ is down more than 5% this week. We're having the worst week in about 18 months and the tech sector itself is off more than seven on the week. What's going on with that trade? I mean, tech, I think, revealed its hand last week because NVIDIA had a good number, but it fell. So when stocks fall on good news, you know, it's either a crowded trade or something bad could be coming. And then, of course, they've led the downside this week. I think it is part of this pull forward the seasonality because people want to de-risk and tech is a big holding. i think on the margin there could also be a political aspect to this you know trump's

probability of winning actually increased this week in the betting markets and in the polls and i know investors think he'll be tough on china which would be bad for semis so i think part of this could be fears that a trump gaining is is bad for semis. What if there's just too much priced into these stocks at this point? Valuations have gotten a little too rich, even if they're the greatest stocks in the world, which you've made the argument that in fact they are, that this is the place you want to be maybe more than any other. And what if that's true and the multiples still don't make sense? I think it's possible. You know, in NVIDIA's last 10 years of history, there have been 30% drawdowns, almost eight times of similar magnitude.

Its PE, NVIDIA's Ford PE, was actually higher at the bottom of those drawdowns. You know, right now, NVIDIA's Ford PE is in the mid-20s. So to me, this looks like a normal profit-taking. Maybe it takes NVIDIA down to the 90s, but I think two years from now, that's really going to be a gift. So when you look at all of these, are you a buyer on the dip? Are you urging people who read your research and listen to you here and elsewhere to do that? We're close to that point because let's say we thought that there would be a 7% to 10% – the risk of a 7% to 10% drawdown between now and November, we're almost down 5% now. I think we're – next week we could be within that point of where we pulled forward that entire correction into the month of September.

So I think we're close to the point where – I mean, I wouldn't be a seller here, and I think the lower range of the S&P is 5,400, 5,350. We're almost there now. You think the move from August 5th to, let's say, September 5th was justified? Was it too much? Was it built on reality? What do you think? It's hard to know.

I know that there was panic that caused that three-day drawdown and the VIX spiked to 66. So we know that there was panic. But we also know there was a ton of cash on the sidelines already into August that was put to work. And I think part of this was a liquidity move because we know the yen was highly correlated with that move. And it's kind of happening again. The yen's turned strong and it's been putting pressure on stocks.

Make the case for our viewers that 21 times earnings make sense for the market. That's the current valuation. Everything could be great and that could still be inflated. Maybe it's not. I don't know. Make the case that it's fine. Well, I think there's a couple of things for viewers. Number one, the S&P is at 21 times, but that's because of the mag seven. The median S&P stock is at 16 times forward, which is not demanding considering the 10 years at 3.7. The 10 year is trading at almost a 30 PE multiple. So when you buy a bond and you think that's safe, you're paying a 30 PE and you can buy equities that are growing earnings 10% for 16 times

earnings. I think stocks are a bargain here, especially in a rate-cutting cycle and with inflation falling. So when you say stocks are a bargain here, you're talking about the 493, that they're the ones that you should be buying, even as we're asking ourselves, hey, is the economy a little slower than we think? Is the labor market weakening faster than we're willing to believe? Yes. And I would say, number one, the 493 are attractive because the Fed is on an easing cycle. And if you look at something like small caps, the median P.E. in the Russell 2000 is 10 times earnings.

You've got a huge margin of safety in small caps. I don't think tech is a sell here, but it probably is a source of funds if people are worried about seasonality. But do I think the mag seven is going to be lower by the end of this year? No, I think it's going to be higher, but it's just tough to know when the bottom is. The problem is, is, you know, tech is to use again the word of Rick Reeder, you know, recalibrating. But you don't feel comfortable going into these other areas over the last week because we have questions about the economy. Yes.

That's the conundrum for investors. Do I buy the dip in tech or is the re-rating still going to happen because the growth rates, albeit fabulous, are still a little bit slower than they were? And then can you really bank on the others if we're asking ourselves all these questions about the economy? Scott, these are fair questions. And I know Rick is a very studious follower of markets. And he's pointed out credit spreads have been really stable and tight. That tells us that the growth fears is more of a narrative risk.

People who are hard landing folks have some ammunition. But I think the economy is tracking for a soft landing. And that means stocks are overreacting to what is seasonality. And so ultimately, it's a buying opportunity. Unless all of that is, as some would make the case, priced in. Like all of the good news is priced in. Soft landings priced in. Rate cuts are priced in. Soft landings priced in, rate cuts are priced in. Maybe

the market's even a little ahead of itself on the number of cuts and the totality that we're going to get. How do you respond to that? I'd say that what you're describing is a major market top. And I know people are fearful. This looks like 2007. But there's two things to keep in mind. The advanced decline line made an all-time high, which means there's very, I mean, basically zero probability the index has made an all-time high. And I'm almost positive the major market top has never happened with small caps trading at 10 times forward earnings. All right. Before I open it up, you went small caps. I want to go small caps.

Your big call that happened on this show, I don't remember how many months ago it was at this point, where small caps go 50% higher this year. Last time you were on, I pressed you on whether you still believe that. You didn't back down, and you said the back part of this year, which is now we're winding down, could still be robust for that trade. And you still believe that? Yes, I believe it. Obviously, small caps have not followed, and they've actually been stuck in the mud.

But earnings have been supportive. Small cap earnings grew 19% in Q2. They're set to grow almost 40% in Q3. That's fundamental acceleration. The PE is still 10.7 times forward. And let's keep in mind last year, small caps moved 27% in less than 20 trading days. So I think that once the market's convinced of the Fed actually following up through on the cuts, and they believe we're in a soft landing, and next week might give some confirmation,

I think small caps do get the green light. Okay, so let's broaden the conversation out. Let's bring in Solis's Dan Greenhouse and Payne Capital's Courtney Garcia. Courtney's a CNBC contributor. It's great to have you both. You heard the conversation. Court, you get the first crack here. What do you think of what Tom said? Doesn't sound like he's too concerned.

Yeah, I mean, I do agree with you here. I think when we're looking at the markets, you have to look at what the data on the economy has been telling you. And we've gotten a lot of really positive data recently when you're seeing, I mean, unemployment did tick up, but a lot of that was due to the fact that more people are coming into the labor market as opposed to layoffs happening. That would be a much more negative indication that things are going south. That's not happening.

You're seeing inflation coming down. The Fed's lowering interest rates very likely. The big question is 25 versus 50. Them going down is like pretty certain at this point in time. And all of those things, I think, are positive to the markets. And it's really hard to see a recession with all of that backdrop right now. So I completely agree with everything Tom's saying here. Dan, you've been pretty positive on the markets. Is what Tom, the case that he made, does that make sense to you? I like to make a habit on the show of disagreeing with everything

everybody says. Tom knows that very well. I agree with almost everything he said. What is this then in the market? What is it? Is it just a growth scare? This too shall pass? My old friend Nate Rogoff used to say sometimes stocks go up and sometimes stocks go down. And we're in one of those periods where after a terrific rally, certainly after what happened with Japan, stocks are correcting somewhat. Not unjustifiably so. We've had a good rally. But I will make an echo point that Tom made on the political front. Tom talked about Trump's odds in the polls. On September 15th, the date of September 15th was the day that the odds of

Trump winning the overall election hit its peak. The stock market today, I'm sorry, the stock market subsequently peaked on September, on July 16th, the next day. We have not made a new high since then. So I'm not making the whole stock markets at the whim of political polls. But I think given the tax implications of the TCGA, of unrealized gains, et cetera, there's probably something going on in markets right now that does have a political tilt to it. We think there's going to be, Court, much more volatility, if nothing else, between now and Election Day, which is 60 days away? There can be. I mean, we've had a pretty unvolatile year this year, like historically speaking. And especially as you lead up to an election, you can see some volatility because we're kind of at that stage in the election cycle where both

candidates are going to have these grand ideas of what they want to do and these changes they want to make. But realistically, a lot of that's going to get watered down, whoever does get in office, which is why you get some volatility with nervousness as you lead up to the election. But regardless of who wins the election, it does tend to be a good thing for the stock markets over the long run. So I think if there is volatility, you want to take advantage of that as a buying opportunity. It's not something you want to get out of. And I'm hearing that a lot from clients, like, should I get out to the election? No, you just want to use these opportunities if they arise. What happens, Dan, if everything that the three of you say is correct? This is just a growth scare.

Things are going to be just fine. But the price is still wrong of the market. That earnings are not going to be as robust as the market would like to believe, even if we have a soft landing. And therefore, the price is wrong. And that's what is being recalibrated as we speak. Well, listen, I'm not going to break any news by saying if the price is wrong, stocks will go down. I think what we would argue and have been arguing and are arguing is that the price is right. I was asked the other day about is the market incorrectly pricing in a soft landing or something like that. But when you look at the data in front

of you, at least for now, we're getting it. It's happening. Unemployment's going up a little bit. Some of it is the immigration story. Some of it is people are losing their jobs. Wages are coming a bit off the boil. Companies are telling you consumers,

particularly in the packaged goods space, have had enough of increased prices. So some of the consumer confidence. There's a lot of stuff going on right now, but largely speaking, it's commensurate with a slowdown of an extremely accelerated economy in the back half of last year. And just on that front, I would just note for the viewer at home who hears all the time, the economy's slowing, the economy's slowing. The economy slowed in the middle of 2006. Stocks went on to make a new high into the end of 07. Obviously, something happened afterwards, but in the interim, stocks went higher.

Stocks slowed down in the middle of 2012, in the end of 2012. 2013, for any of us that were there, was a phenomenal year for stocks on the back of that slowdown. Just because the economy slows down doesn't mean the stock market has to necessarily slow down. They don't automatically go together. Nobody passed out, Tom, the handbook that says, hey, this is step one, two, three, four, and five of what the soft landing looks and feels like. so we're not exactly sure what to make of the little softer report here maybe a little stronger report there another softer one here we're jumping to conclusions figuring that maybe the soft landing story is in doubt that's right i think there is soft landing fears but i think the bigger fear would be a credit event i just don't think there's a lot of leverage in corporates.

We know household leverage and debt service ratios are still 40% below they were at the last cycle peak. So I think there's a lot of room for credit to expand and capital spending has been muted. So to me, I think the soft landing still has a lot more arguments versus a hard landing, which is, you know, we've overspent. What about the buy the dip idea, Court? Tom says, you know, I wouldn't sell tech. Likes a lot of these other parts of the market, as you clearly heard, even suggesting, you know, these tech stocks are attractive with this sell off. Yeah. And I mean, I do agree with that because I think when you look at either in the

earnings growth with the MAG7, you're still seeing robust growth there. But I don't know if it's going to necessarily keep up with some of those underperformers. Like you brought up small caps and actually do agree with this, where when you look at Q3, Q4 earnings, those are actually likely going to be accelerating at a faster pace than some of these other areas of the market. So a lot of people, I mean, I would say probably 90 percent of the people who come to us within the last year are much more overexposed to tech than they even realize. Because, hey, I have NVIDIA and I have Apple and Google, but I also have this growth fund and this tech fund. It's all owning the same thing. You own way too much of it.

You just want to make sure with new money you're adding, just make sure you're better diversified. Because if the rally broadens, you want to take advantage of the broad rally, not just the mag seven. Let me also say about NVIDIA and those stocks, like, what are you supposed to pay for a stock that's growing revenue at 400%, growing net income and EPS at 300, whatever the exact numbers are, at multiple hundred percent? What are you supposed to pay for that? And that, obviously,

Google has some regulatory issues right now, and Apple is sort of an island unto itself from the growth standpoint. But for the rest of those names, Microsoft, et cetera, what are you supposed to pay for those stocks? They're supposed to trade at a premium. And to Tom's point, again, for the millionth time, we're not a particularly large tech investor, but when those stocks sell off, when you're trading at 30 or 40 times forward in the case of some of these names,

you're going to get 8%, 10%, 30% drops. It doesn't mean the fundamental story for them has changed. And more importantly, Tom makes the, we've all made this point a zillion times, but Tom brought it up again. The rest of the market, not screamingly unattractive, certainly in an environment where the economy still continues to grow. And most importantly, we haven't mentioned it once, amazingly, 17 minutes into the show, the Fed's about to reduce interest rates for, to borrow a phrase from The Bachelorette, the right reasons, hopefully, as opposed to the wrong reasons. What happens if these other tech stocks, though, OK, NVIDIA, maybe let's just say NVIDIA should be trading where it is. Isn't the problem that a lot of these other stocks were given NVIDIA-like multiples? I mean, even greater than that, they were given a narrative the same as NVIDIA's. And sort of everything got the benefit of the doubt. And now some of them are realizing,

oh, you know what? Maybe the growth rates are going to be a little slower. Maybe the AI benefit that a lot of these stocks were getting, I don't know, maybe Broadcom's in that category, didn't deserve to get as much of a bump as it got. Sure, flows have a funny way of hitting everybody, and they did on the way up. But to the point that we're discussing, a lot of these names are 20, 30, 40. Dom mentioned in the previous show, 50% off their 52-week highs. The overall market is 2% or 3% off the high. Maybe the overall market's 4% or 5%, the equal weight's 2% or 3% off the high. Maybe the overall market's four or five percent, the equal weight's two or three percent off its highs. Over the last three months, financials, industrials, real estate, anybody, I could go into the details, but like four or five sectors have been outperforming.

Yeah, utilities, staples. And there's nothing wrong with that. There's nothing wrong with periods of time, and we'll call it risk-off because that appears to be what's happening, when the leadership shifts away from technology or cyclicals, at least today, to something a little more defensive. I don't think that there's something inherently wrong. The market's telling you something. We heard the story in the middle of the 2010s. There were periods of time, I think it was 2015, when defensive started to lead and everybody was worried about the market. And then you made a low in early 16 and off you went. I don't think there's anything inherently wrong. Right now,

there's a moment in time. Sometimes stocks goes up, sometimes they go down, and you're getting a rotation to those other names and hopefully getting the broadening out that so many of us talked about several months ago. Right. Dan makes a good point that we had people come on and where's the broadening? It's too narrow. Look at all the seven stocks carrying the whole market. Now, obviously, at the index level, that is the case. Then you get the broadening and they're like, well, wait a minute. I don't like the broadening. That's right.

Broadening feels too defensive. It's like, what? Staples, health care, utilities, those aren't classic risk on in the market feelings. So now we're having a problem with the broadening. Yeah, and I think a lot of that, too, when you look at some of the best performers, you bring over the last three months, like real estate has actually been one of those best performers. And that's because this is all the idea that inflation is coming down. The Fed is likely to be lowering interest rates. So it's all those interest rate sensitive sectors that are

going to be doing better. And I think in that environment, it really helps the story of the broadening because those sectors are likely going to outperform if rates do come down. So yes, I hear what you're saying, but you do want to be in a position for that broadening because it is likely going to be happening. Just very quick before we get off that, it's not all, it is certainly interest rates and that affects flows, but the fundamental story in some parts of the real estate market, take a look at SL Green. There's something going on here in the office market that's not just interest rates. In utilities, we've all talked about Vistra and Constellation Energy

and some of the more fundamental stories that are working. You're 100% right that the money flows have shifted because of rates. But fundamentally, it's not just that. There are some stories working. Tom, leave us with a thought that we can take into the weekend as we head towards next week. Well, I'd say the thought is next week you are getting a setup for some positive catalysts because we've got a presidential debate on Tuesday night, CPI Wednesday, which I think should confirm inflation is falling like a rock. And then

people have to look forward to the FOMC the following week. So I think there are positive fundamental catalysts on the horizon. So I wouldn't end this week too bearish. All right. We'll make that the last word. Good way to leave it. Everybody, thanks so much. Court, Dan and Tom Lee here at Post Time. I'd send it to Pippa Stevens now for a look at the biggest names moving into this Friday close. Pippa. Hey, Scott. Shares of software company DocuSign are higher after the company's fiscal Q2 results beat expectations fueled by strong subscription growth. The company also highlighted positive customer feedback on its new intelligent agreement management platform. The stock is on

track to snap a three-day losing streak. And Mobileye is dropping to an all-time low, with Intel also under pressure. Following a Bloomberg report that Intel is weighing options for its stake in the struggling autonomous driving tech company. Intel did decline to comment. Those shares are now down 60 percent this year. Scott. All right, Pippa, thank you. That's Pippa Stevens. We're getting some news out of Washington, D.C. Our Eamon Javers has that for us now. Eamon. Hey there, Scott. That's right. Federal Judge Ahmed Mehta just wrapped up a hearing here in the ongoing Google antitrust case, and he laid out a timeline for when he's going to ultimately decide the fate of Google in this ongoing case. Now, remember that Judge Mehta has already decided that Google is, in fact, a monopolist.

So that question is decided in this case. The question here now is what to do about that, what the lawyers call the remedy for that. The Department of Justice has not said yet whether it wants to break up Google or some step short of that as part of the remedy in this ongoing case. What Judge Mehta just laid out here in the timeline is that he wants the Department of Justice to indicate at a high level, level, by the end of the year what they want. He said by late fall or early winter he wants a proposal at a high level from the Department of Justice about what to do with Google. And then he wants by the end of the year a detailed proposal from the Department of Justice

laying out exactly what they think the fate of Google should be. There will be a trial period in this that will go through the spring. And then by August of 2025, Scott, Judge Mehta said he will be prepared by then to issue his final decision on what happens to Google here. So we've got a long bit of running room here, but now our first indication of when we might know what it is that the government's proposing to do here

in this remedy phase of the case, that first indication, again, will be late fall, early winter when the government gives that high level indication, Scott. All right, Eamon, thank you for that. That's our Eamon Javers in Washington. We're just getting started here. Up next, Morgan Stanley's Chris Toomey is back with us. We'll find out how he is advising his clients amidst this sell-off. We're live at the New York Stock Exchange. Closing bell's coming right back. Well, you know, by now we're selling off to close out this dismal week for the markets. Worst, in fact, in about a year and a half.

NASDAQ taking it on the chin today. It's on track for its worst week since January of 22. Joining me now, Post 9, Morgan Stanley's Chris Toomey. Welcome back. Thank you. All right. What's your take? You know, look, last time we were here, economic number was kind of in Goldilocks view situation, which was giving the Fed exactly what it wanted to do.

What we saw was a situation where prices had gotten way ahead of themselves. We thought we were probably in experience in a situation where something was going to have to pull this back. You know, we got a bad employment number at the beginning of August, then we got some decent numbers in between. But I think the big thing that's changed is bad news is bad news, right? Like it used to be bad news is good news. Now bad news is bad news. And the other thing is good news is not great news. So good news is now bad news, right? So you had... Is it? Is good news bad news? And I would take issue in even some respects that what we've gotten is quote unquote bad news. We're acting as if the economy is in some tailspin

that the data would suggest otherwise. Look, I think the data is if you look at earnings, earnings are actually okay, right? The MAG7 numbers, the most recent one, was actually not bad. I mean, the question is, is that, you know, everything is priced to perfection. And if it's not great, it's got to be bad. You know, the employment number today, you know, you've got Steve Leiseman on all the time. He looked at it first thing and he said, it's not bad, right? But the market's acting like it's horrible. And so I would say the economic data is not bad. I think the economic data is fine. I think the pricing was off. Right. So the pricing has come back. I don't even know if the market is taking it like, oh, the data was so bad. I think we're

starting to get into a conversation as to whether the Fed is going to blow it or whether they already did. No doubt. No doubt. Right. Because I mean, the thing is, we're in a situation where they've kind of thread the needle here with regards to kind of moderating growth, bringing down inflation, raising up unemployment, and the market's been doing well. But the problem is, is that, you know, we're at an elevated place for rates. We were just in a period where we had 15 years of zero interest rate environment, and there's about a six-month drag before they start cutting rates, right? And so you're in a situation where markets are priced for perfection. They're expecting the Fed to continue to be able to defy gravity. And maybe that's not going to happen. And so that has to be priced into the market. All right. So we recalibrate. We need to recalibrate.

Absolutely. But that doesn't mean we need to completely fall out of bed either. Well, I mean, you know what it is. I mean, it's, you know, stairs up, elevator down, right? So the market gradually goes up. It keeps kind of getting into this positive feedback loop of everything is going to continue as it is. And then all of a sudden it's like, wait a second, this isn't happening. And we get the elevator down, right? And so that's the reason why you have to be cautious when the market moves as aggressively as it has without any of these pullbacks. Part of your point, and again, it's like parts of the market took the stairs up. Big tech didn't take stairs up. They took a rocket ship. And now they need to come back down to earth a little bit. The problem is we don't know how

much. Well, I mean, I think we do. I mean, look, if you look at it from a pricing standpoint, you've got rates coming down. So the equity risk premium is actually becoming a little bit more attractive. You're in a situation where they're continuing to provide great earnings. In our view, it's a situation where you still want to own these names. You just going to expect to see the Mag7 get hurt and drag the market down and all the other names that have been benefiting from it over the last 18 months. And now is the opportunity where you can start looking selectively at opportunities, whether it's in the 493, right, or looking at some of these Mag7 names and say, look, I didn't own these names when they were at this level, but now they're at a more reasonable level. We can start owning these things. Is that what you're thinking about for your clients? Absolutely. So, I mean, look, we've been waiting for this pullback. We've been sitting on cash. We've been collecting the types of income that we like to collect, but we thought the markets weren't really justified with the right type of

risk that were in there. And so now the prices are coming back. We're getting a little bit more interested in putting some money to work. Interesting. So you thought the price was wrong. Now the price looks a little better. You're also implying that you don't think the pullback goes much deeper than here. No, I think it could. I think it could. But that doesn't necessarily mean we're going to try and call the bottom.

What we're going to do is we're going to look and see where the valuations are, how this fits into clients' portfolios, and we're going to start buying the names that we really like that we think we can get at good prices. How are you looking at volatility? VIX up 14% today, right? It's north of 22. And then election risk, 60 days away. Right.

So, I mean, look, I think people have talked about, I don't know if you know this, but September is not a good month with regards to investing. You know, elections also can be a problem for investing. And so in our view, that increased volatility is what we love. We like to take advantage of it, whether it's buying names that we think are unduly getting penalized or just writing call options on it and collecting extra income. So we like this volatility. We think it's going to stay. We didn't talk about this. I think one of the most important

things that has been going on in the market is the buyback situation. So buybacks tracking almost two to three times than it historically has. That's going to end at September 13th once we go into earnings. So that's going to be another wave of problems that we see going into the next couple of weeks. So in our mind, we're not rushing into the market. We recognize this is probably going to continue for a little while, but this is giving us a good opportunity to add some money. All right. This is a good place to leave. It's good to see you again, Chris. Thanks. This is Chris Toomey, Morgan Stanley, joining us here at Post Nine. Up next, five-star stock advice, capital wealth planning's Kevin Simpson. It's a good place to leave. It's good to see you again, Chris. Thanks. It's Chris Toomey, Morgan Stanley joining us here at Post 9. Up next, five-star stock advice,

capital wealth planning's Kevin Simpson. He's revealing how he's navigating the semi space, why he's hitting the pause button right now. He'll join us after the break. All right, we're back. Semis today. They're ugly. They're getting hit pretty hard. SMH having its worst week since March of 2020. A lot of that pressure today is coming from Broadcom. Joining me now is Kevin Simpson of Capital Wealth Planning. He's the founder and CEO. So you, it's good to see you. You tried to hedge a little bit heading into both NVIDIA and Broadcom, right? Talk to me about the trades that you made going in. Yes, Scott, I think we had a good thesis last week that NVIDIA was going to be volatile.

Option markets were indicating somewhere between a 9% move. You just never know if it's going to be up or down. Be a lot easier if you did. Same thing with Broadcom yesterday. Pretty heavy indication of an 8%, 9% move. So what we did yesterday with Broadcom is we wrote a covered call, only a one-week expiration. So it'll expire next Friday. But the annualized premium that we brought in was 60%. Now, I realize that sounds crazy, and it's only because of the hyper-volatility heading into earnings. But we brought in $1.73

yesterday. We wrote a covered call on Broadcom. Incidentally, when we did the NVIDIA call last week, we brought in $1.25. So we closed that out yesterday, wrote another Broadcom call. It brings in about $3 in premium for the past two weeks. Now, granted, the stock's down a lot more, but we were able to hedge 20% of today's decline with those two option trades just within the past two weeks. So it worked out well for NVIDIA. It's worked out well for Broadcom. The stocks are trending down. So I think we want to be a little bit patient before we add to them. But I think that you'll get a buying opportunity. And we're seeing prices, Scott, similar to where we did at

the earnings, excuse me, at the jobs report last month when we saw the massive sell off. So I feel like that would be a good entry point for people to buy the dip for sure. So you're more of in the buy this market rather than beware it. Yeah, we definitely we're not we didn't buy anything today. It was a short week. It's the first week where people are back after the holidays. You get a lot more volume. So we wanted things to settle out. We're also very concerned about what the jobs report would look like. Remembering what happened last week, last month, I thought the numbers were good on the jobs report. The market selling off, I think, is more of a growth issue than a recession issue. Whether

the Fed's going to cut 25 basis points or 50, a lot of uncertainty in the market there. But I think the opportunities, Broadcom's already back to where it was on that August 5th, August 7th low. NVIDIA isn't, but certainly it's getting closer. And yeah, I would be a buyer of the dip, Scott, and we will be. But yeah, I would be a buyer of the dip, Scott, and we will be. But I mean, as long as we continue to have this debate about where the economy is going, what the Fed is going to do, you maybe have to be more selective about what you're going to buy, don't you? In other words, the broadening story could get a little more difficult, no? Well, I think active managers always want to be careful about what they're

buying. But I think this type of volatility presents opportunities. And it's, you know, 2023 was just a weird year because you could own these seven names and they would just double every day and you didn't really have to think too hard. That stopped seemingly in October of last year when the Fed kind of called no mass on rate hikes. Now, granted, we've been in a pause for a while, but then all of a sudden you had to be a stock picker again. So what do you do when you see interest rates coming down because we're entering a declining cycle of rates? And that's why you're

seeing REITs and utilities as probably the leaders right now. I'm a little surprised on financials. I'd expect them to perform a little bit better in the light of the fact that you've got interest rates coming down. Maybe it has something to do with Warren Buffett selling Bank of America. I'm not entirely sure. But yes, your point is spot on. You can't sit back on seven names and go to sleep. You've really got to pay attention and be nimble in this market or you'll miss it. Kev, how are the next 60 days ahead of the election going to color the kind of decisions that you make in this market? Because we, you know, the market's tunnel vision, right? Doesn't think about it until it has to. Well, now it kind of has to. We'll have a debate next week.

Then, you know, the polling is going to be much more talked about than it has been. Yeah, the election is going to be huge for volatility. We're seeing that in the VIX for sure. Monday, we've got Apple. Tuesday, we've got a presidential debate to your point. Wednesday we get CPI. And every day that gets closer to the election there's more angst. I don't know that it has that much pressure on the overall market if you've got some divisiveness within government. The stock markets can typically perform well regardless of whether you have a blue or red White House. But I think that that's going to increase volatility absolutely for the next 60 days and maybe even into January. For us specifically, Scott, we'll continue to harvest that volatility by writing covered calls. I would encourage viewers

and investors to try to follow suit there, because when you have higher volatility, you have higher premium. What we saw with Abago Broadcom yesterday is 60 percent annualized premium. Yes, granted, that's pretty insane. But if you can generate another three, four or five percent on top of whatever dividends you're generating, all that does is smooth out the ride for what we expect to be heightened volatility for the next 60 days and beyond. Kev, have a good weekend. We'll see you on the other side, I'm sure of that. This is Kevin Simpson, Capital Wealth, joining us. Up next, we're tracking the biggest movers into this close.

Pippa Stevens is back for that. Hi, Pippa. Well, one crypto stock is down 20% on the week. We've got the name and what's behind that drop coming up next. We're 15 from the bell. Back to Pippa Stevens now for the stock she's watching. Tell us. Hey, Scott, Bitcoin is down nearly 5 percent, building on recent losses and dragging down shares of Coinbase, Marathon Digital and Robinhood. Coinbase and Marathon both now

down double digits on the week. Now, also today, a federal judge rejected an attempt by Coinbase to toss out a proposed class action suit by shareholders. Investors claim that Coinbase downplayed the chances it would be sued by the Securities and Exchange Commission. And Bloom Energy tumbling after getting cut to hold at Jefferies, which pointed to a lack of details around the fuel cell company's backlog. The firm also citing tax credit changes as well as minimal transparency around the company's partnership with South Korea's SK Eco plant, stock down 10 percent. Scott? All right, Pipp. I appreciate that. Pippa Stevens still ahead.

A bright spot and a down tape. We need that. There it is. Housing stocks are popping today. Tell you what's behind the bounce. We're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, homebuilders, a rare bright spot today.

Diana Olick is going to tell us why. And Sima Modi on Broadcom. The rest of the chips get hammered. Today, Mike, we begin with you. I'll just bring it full circle. We started the show with a conversation with Tom Lee and a couple others, and not too concerned. I mean, I think the overriding commentary on this program on this day was not too concerned. It's true. And I do think it reflects that we're in a little bit of a limbo state. You know, it's kind of the eye of the beholder. The numbers today, the jobs report, was probably not strong enough to really comfort people and say, you know what, growth is fine, labor market was a false alarm in July, but also not weak enough to say we really have to lose our grip on the soft landing scenario

or that the Fed has to immediately take on a stance of more urgency. Now, the market has been navigating in this defensive direction. If you look at how treasuries have repriced, I mean, they're pretty much braced for something, at least the potential of a tougher economic environment and a more aggressive Fed eventually. I do think that the stock market has managed to kind of keep it under control the average stock is not doing terribly. I would point out to. On a very very short term basis S&P. Looks as

oversold as it was in the early August low I think a lot of people are mapping the first week of September on the first week of August and say hey we overreacted to the downside there. We're still few percent higher so maybe I don't know if

all that hope has to be extinguished before we really rally again. But I understand why somebody wouldn't decide it's the moment to panic. I mean, just we're going to keep asking ourselves the question and maybe more acutely is whether the Fed's going to blow it. That's right. Yeah. And, you know, are they being too cute in saying we really want to have everybody lined up on the same page and we really have to make sure inflation is yet again going to give us more confirmation it's going the right way. You know, I really think the market's impatient with that type of stance.

But I also don't think that you can absolutely say the Fed squandered the soft landing opportunity. Not no, certainly not yet. Yeah. I mean, the data today certainly wouldn't suggest that it's compatible with either scenario. You just you have a definitely a smaller cushion cushion though, because you have decelerated quite a bit. That's why I said earlier, I think it was to Tom Lee, that no one's passed out the handbook that says, hey, this is exactly how the soft landing is going to go. Just don't know. You don't know because it always looks similar to the beginning stages of a recession or something worse.

All right. Diana Olick, bright spot on your beat. Housing, what's happening? Well, Scott, look, the builders are in the green because mortgage rates are down another leg today. Take a look. The average on the 30 year fixed fell eight more basis points today after already falling eight in the three days before. Now we're at six point two seven percent. That's the lowest rate since April of 2023, all according to Mortgage News Daily. So names like Lenar, D.R. Horton and Pulte all higher on the day, as is the home building ETF ITB, which incorporates a broader swath of housing stocks. Now, the home improvement stocks like Lowe's, Home Depot and Sherwin-Williams, they're basically moving around flat. These stocks have struggled a little bit more because sales of existing homes are so weak right now. People generally tend to renovate when they buy an existing home.

Of course, not so much with a new home because it's already done. While mortgage rates don't exactly follow the Fed funds rate, the expectation is that they will move even lower if the Fed cuts. And that expectation has some buyers still waiting on the sidelines. Scott. Yeah. Diana, Mike, you have a thought here about these stocks? Yeah.

I mean, well, this is one of those examples where you've had this cycle within a cycle and people have been waiting for the rate effect to kind of jolt it back to life. I know that people who look at things like residential construction employment have said that's still hanging in there OK. So that hasn't really waived that recession flag just yet. I do wonder about the psychology of buyers, though, as, you know, as Diana would allude to. Once you get the rate-cutting mentality in place, people feel like it's safe to wait and wait and wait and not just take the windfall of much lower mortgage rates we've seen already. Yeah, sure. If you know rates are going to continue to come down, what are you

going to do now? Diana Olick, thanks to you. Sima Modi, chips. That's the worst spot today, huh? Yeah, and this week it's been really tough. Today's catalyst, Scott, is. That's the worst spot today, huh? Yeah, and this week it's been really tough. Today's catalyst, Scott, is Broadcom, the worst performer in the S&P and the SMH ETF. Bar was set high and investors were left wanting more from CEO Hock Tan, who did paint an optimistic picture on the opportunity within artificial intelligence. Plus, he said the company's non-AI business has likely hit a bottom. He's expecting a recovery there. J.P. Morgan and Morgan Stanley, among the sell-side analysts, raising their price targets on the stock. Chips have played a decisive role in the Nasdaq's outperformance this year, but now caught up in a widespread sell-off. Every component of the SMH is down, with Nvidia, Qual, Intel, about 20% or more off their respective highs. Keep in mind, NVIDIA on pace for its worst weeks

in September of 2022. So significant weakness there. Next week, we will get a read on semiconductor demand when the world's biggest manufacturer of chips, Taiwan Semiconductor, reports monthly sales. Be sure to look out for that one, Scott. All right, Seema, we will. Thank you. That's Seema Modi. I mean, it's going to be hard for this market

to settle down as long as the chips keep selling off the likes of Broadcom, what it's doing today. Well, without a doubt. So they've lost their leadership position. And so it's a matter of whether we have enough to work with for the rest of the market to hold together pretty well. We are in a little bit of a vacuum. No Fed speak next week. No major economic growth proxy data releases, and no earnings to speak of. So I think we are a little bit on our own. We're probably going to be trading off the trading dynamics themselves.

The S&P 500, 5,400 is the level. We're back to where we first got to in June. We're back to some pretty significant levels around the end of the second quarter. That's not a disaster, but it's a matter of whether people are going to feel any sense of urgency to add back risk when we just sort of know we feel like there's self-fulfilling seasonal effects and pre-election stuff going on. So, you know, I feel like some hope has been drained out of this market. That's probably a positive thing at this point. I don't think investors necessarily have a lot of greed in their eyes at the moment looking at the tape these days. So you can take that as a positive and a generally sober tone around

the economy. Yeah, we'll see what the tone is. Conference season, too. Yeah, that's true. We do have that next week. I'll be at the Goldman Metacorpia Tech one speaking with Chairman and CEO of Goldman, David Solomon. Looking forward to that. Everybody have a good weekend. We'll go out red, obviously, but we'll see you on the other side. Into overtime with Morgan and John.