Closing Bell - Closing Bell: Can Stocks Keep Climbing? 8/21/24

Episode Date: August 21, 2024

Is there enough good news to keep stocks climbing toward new record highs? Hightower’s Stephanie Link, BMO’s Brian Belski and Thornburg’s Emily Leveille break down their forecasts. Plus, EMJ’s Eric Jackson tells us which tech name he recently sold out of… but is considering getting back into. And, we run you through what’s at stake from Zoom’s earnings report after the bell. 

All right, guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. Let's make a breakout. Begins with stocks on the run. The S&P back at a round number. All eyes now on Jackson Hole, where Fed Chair Powell either confirms what the market thinks will happen with interest rates or disappoints. We'll ask our experts over the final stretch what's likely to happen. In the meantime, here's your scorecard with 60 minutes to go in regulation. Stocks modestly higher, though there were some gyrations earlier today following big downward revisions to the employment numbers. Yields did slip on that news. We're holding positive, though, now on stocks.

Target, what's the big story of the day? That's after its same-store sales numbers exceeded expectations. The company giving a pretty muted outlook, though. Never mind that. Stock's good for 12%. A nice day for TJX following its own earnings. We'll follow that one, too, up near 6%. It does take us to our talk of the tape, whether there's just enough good news to keep stocks climbing towards new record highs.

Let's ask Hightower's Stephanie Link, BMO's Brian Belsky, Thornburg's Emily Lavelle, Steph, a CNBC contributor. Steph, I'll begin with you. Sure. I guess that's the question. Is there enough good news to just keep this trend intact? I don't like the setup into Friday, Scott. I really don't. No, I don't.

We are up 8% from the lows, and the expectations for the Fed to be very dovish really is prevalent. Three cuts are what most people are thinking between now and the end of the year. I'm not sure we're going to get it. And I certainly don't think we're going to get Powell telling us that. So the expectations are high. I know the minutes today were kind of dovish, right? There are some that wanted to go in July. Most think we should go in September. OK, but I'm not sure we're going to get the all clear on we're going to go three, 75 basis points between now and the end of the year. Why would he need to do that?

Why can't we just get the 25 out of the way first and figure that this is the start of a cutting trend, which we believe that it is. And I think it is positive for the long term. And if we do see a pullback, I'm all over it. I'll buy it. But we've had such a nice bounce since just two and a half weeks ago, up 8%. And we know what the Nasdaq has done. We know what the Mag 7 has done. So I just don't think that the setup is all that great in the short, this is a short, short run. But long term, I do think it's positive. Cuts are definitely coming, especially because inflation has come down

and the labor market is certainly slowing, not bad, but slowing. So I think they can. I think they will. I just don't know we're going to get a lot of conviction on Friday. All right. I mean, look, Brian Belsky, I don't think your view is all that different from Steph's. You suggest that stocks are pricing in a perfect outcome here. We do, Scott. Thanks so much for having us on. We like to remind investors that September is the worst month of the year. The good news is that when we have a volatile third quarter of the year, we typically have, on average, a double-digit gain in the fourth quarter. I'm with Stephanie. We said it on the network last week when we were on the halftime show.

I'm doubtful at three cuts. I really am. You think Powell's going to cut rates when the stock market's at all-time highs, number one. Number two, we are one macro data point from the market being down again. We are in a very, very, very reactionary type of market. And how many times do you say momentum on the network every day? So we think that the likelihood of some sort of weakness in September actually could be quite positive from our longer term perspective. We think stocks are at higher levels than they are today by year end. And the bull market continues. But we think we're going to see some volatility first. I mean, stocks at record highs have nothing to do at all with the fact that inflation is coming down, right?

And they need to get their rate, which is way too restrictive, they've admitted it themselves, back towards whatever they think normal is. Has nothing to do at all with where stocks are at the present time. You actually think they won't cut rates in September because stocks have done well? That's just one data point. Remember, the stock market is part of the leading indicators, number one. Number two, I think the more that Mr. Powell talks about the dual mandate, I think the more he's going to be sounding more and more hawkish. And I think people want the dove, and I think they're not going to get as dove as

we think. And I think there's a very good chance, Scott, that we see an overreaction for the market. And we would love to pounce on that because we do think we're going to make what they like to call a bit of a higher low here in September, which we do think is going to be a great buying opportunity. But don't you think I'm sorry to keep going at this, Brian, but I mean, don't you think they've made the point that at this stage of the game, they're a little more concerned about the labor market than they are inflation? So you talk about both sides of the mandate. It feels like we're sort of back to even here with the bias on more fears about the labor market than inflation.

I think that's true. I think that's true. But look at these retail sales numbers. People are still spending money. I know we're going to talk about Target here in a little bit. But also remember a year ago, the opposite was happening. Bonds were selling off. Yields were going higher. We were worried about inflation. thanks, and any kind of tick that may surprise people, again, reactionary, could cause people to make a mistake, I think, and sell, because longer term, we want people to be invested, Scott. But we're involved in a, we only buy stocks if they're going up type market, quote unquote. And I think we're going to get a better buying opportunity, especially given the fact that everybody and their mother, brother, sister, cousin, uncle, loves everything right now, is believing this big rally. Remember, it's August. We have lower trading volumes. We have a lot of volatility.

So we think there's a very good chance that we get a better pullback. Doesn't change our longer-term view of being in a big, giant bull market, but we think things have gotten a little bit ahead of themselves again. Emily, what about you? Well, I don't disagree with what everyone's said thus far. I mean, we're fundamental investors at Thornburg, and we're looking at these periods of volatility to take advantage of them.

We're also focused on international markets. And what I think is super interesting about where we are is, you're at record valuations, you're at record highs in the S&P, but actually if you look at international markets, the Nikkei, some of the indices in Europe, they haven't actually come back to the same extent

since the August pullback. So we're finding really interesting opportunities in tech, in health care outside of the U.S. And, you know, we'd encourage our investors to maybe take a little money off the table in the U.S. and reallocate that outside of the U.S. Do you think, Emily, that expectations are too high going into Powell's speech on Friday at this point? You know, it's an interesting point. I mean, I think that I think expectations are probably relatively well calibrated. I mean, you see today, you know, it's an interesting point. I mean, I think that I think expectations are probably relatively well calibrated. I mean, you see today, you know, I would have thought going into today's FOMC meeting minutes that, you know, there wouldn't be much surprise.

But you see the market rally on the back of that sort of incremental confirmation that we're going to be definitely more dovish, a little bit more of that is good right now. So, you know, I think market expectations are relatively well calibrated, but I don't disagree. I mean, it's going to be super data dependent. I really do think it's going to matter. You know, employment figures, I think the revisions today show us that the market has been slowing for longer. And so I do think the Fed is maybe going to take a little bit more of a dovish tilt from here. Obviously, very data dependent on what comes out between now and the next meetings. Steph, Target, you told me yesterday you were nervous going in, obviously not nervous coming out. Well, certainly feeling, I guess, gratified

by the move in the stock today. Not that it was the greatest outlook in the world, but I guess a positive comp relative to what expectations were is good enough right now for this company at this moment. For sure. The last six quarters, this company missed earnings four times, beat once and was in line once. So that's why I was nervous. It's been very inconsistent, which is so rare from this management team. It took them a long time to get out of the hole that they put themselves in. They were beneficiaries of COVID. They grew the wrong kind of inventory. Then people went into services.

So they got hammered. And that's why it's taken them so long. But this was really a quarter that was very, very solid. And it showed that the product innovation and the pricing that they're taking is working. A comp of 2% driven entirely by 3% traffic is really very impressive. Digital, 8.7% growth. Same-day services up double digits. I mean, that is remarkable.

Apparel up three. Who thought apparel was up anything at this point in time? And the food business actually was actually only up low single digit. I would have thought after Walmart they would have done a better job. Beauty up nine, makes me question Estee Lauder, by the way. So there's a lot of moving parts here, but I think the process that they're going through, the changes and the strategy and the vision has been spot on. It just took them a really long time to execute. And oh, by the way, on execution, operating margins at 6.4%. That was expectations were 5.5.

So really remarkable productivity and cost and, again, execution. And it trades at 15 times earnings. So, yeah, I was nervous. I'm happy. We're going to talk about Snowflake in a little bit. Nervous on that one, too. I'm not sure I'm going to be that happy after they report, but I'll take it. This is all about being long long term and looking for opportunities.

So, Brian, can we let's say that Friday, the jobs report started this whole market upset initially anyway. That happened two weeks ago this past Monday. Can we take worries about the consumer, like intense fears about the consumer off the table at this point or not. After we got the retail report, now you get Walmart, now you get Target, you get TJX, you get some others in the mix as well. Do we still need to leave that on the list of worries or can we remove it? I think we can mostly remove it because number one, you don't ever want to bet against the U.S. consumer. Number two, Stephanie put it best in terms of the operating margin situation with Target. We sold the stock in the fourth quarter of 2021 because operationally they were really starting to roll over.

And I think the key thing is the operators versus the non-operators. We took all of our Target and put it into Costco, Walmart, and TJX. We still own Target in one portfolio, Dividend Girl. But look at Macy's and their operating performance. You look at some of these other companies. I think the thing you want to start thinking about, Scott, is shareholder advocacy in some of these retailers that have been not well managed, quite frankly. And I think that might be the next thing. But I think the consumer has always been super smart in how and where they buy. And so I think you can largely take a lot of that off the table. Emily, do you agree with that comment? I feel like there are people still worried,

and rightly so, about the consumer because every consumer is not the same. The fact that Walmart was decent may tell a more negatively skewed story just relative to what their consumer base is. You know, the way we've been reading it is that this is actually just further confirmation that the consumer is really looking for value for money. So, you know, some of the companies where we've seen strength, Walmart, even Target, I mean, you know, that was driven by price decreases and we think we are seeing a more value-focused consumer. So, you know, that's one part of the consumer. The other end of the consumer where we're focused is on the

ultra high-end, the ultra luxury, right? So your Ferraris, your Brunello Cucinelli, these are not the types of people that are really worried about what's going to happen in the job market. So, you know, we think that they have tremendous runway for growth, very strong brands, and, you know, really supply constraint to their products. Scott, you know, Toll Brothers, they had... That's right. Toll was good. Net signed contracts up 11 percent. July was very strong. First three weeks of August, very strong foot traffic. This comes on the heels of D.R. Horton, where gross margins were better than expected.

Well, thank you. Mortgage rates coming down, although that stalled a little bit. That's OK. That's OK. But there's demand there. And then when you add on these other companies that you just mentioned, it's yeah, absolutely. The consumer is fine. Just fine. Brian's right. Everybody always wants to talk about the death of the consumer. We are a nation of spenders on the good times and in the bad times. And you can clearly see it in some of these results. And as interest rates come down, as commodity costs come down, the consumer is actually going to do a lot better.

And at the same time, the job market is softening, but the four-week moving average of weekly jobless claims is at 240,000. Recession is at 350,000 to 375,000. So we're certainly not at the lows, but we're nowhere near the highs. And as long as that's the case and wages are up in the low single digits, I think the consumer is going to be just fine. Brian, of the areas that are outside of tech, industrials have done well, health care has done well, staples have done well, real estate's done all right over the last month. Now, obviously, a good portion of those

have a more defensive bent. So some would say, well, it's not so great that those have done well. But outside of tech, what do you like best? Well, you know, I love financials. I think financials are a great place with respect to yield going forward. You know, this was coming your way, too. But I think health care also, from a growth perspective, we love certain REITs, especially on the apartment side and on the industrial side. I think there's some utilities like NextEra that look really interesting. Real quickly on the consumer again, people fail to remember. Strategists, we have to kind of backtest sectors in terms of how they do during economic environments. And consumer discretionary always, 10 out of 10, outperforms when GDP is slowing and or we're going to recession, period. Everybody thinks you buy

consumer staples, but right now consumer staples actually are quite expensive. And remember, in the consumer staple sector, you have Target, Costco, and Walmart. The majority of the performance in that sector has actually come from those areas. So we'd be buyers of more of the value consumer staples, but be really careful about anointing consumer staples as defensive. We wouldn't be buying them here. Yeah. Emily, I mean, you do like some consumer names. I find that the majority of the ones you like, though, are not in the United States. That plays with a little bit of the theme you suggested earlier. Yeah, absolutely. I mean, you know, in the U.S., we've got exposure,

broad exposure to the consumer through MasterCard. But there, we really like their exposure to cross-border e-commerce, to international travel, you know, some of those areas where we have continued to see strength. Outside of the U.S., we really think that, you know, the focus is to be very selective. You know, we're growth investors. We're long-term investors. We want to be looking at companies that are going to be able to grow their earnings power throughout an economic cycle.

And so that's really where we focused. You know, we've stayed away from some of the mass market luxury, LVMH, for example, that struggled a bit more, even in the United States. You know, some early data points from them in the quarter that they just reported as well that they're also seeing weakness in the U.S. So, you know, but other places we really like, health care. Again, you know, the number of people that are obese is not going to change whether the economy is in a recession or it's growing at three or four percent. So we think there's a long runway for growth there. We think there's some tremendous opportunities for value creation in that space. We really like, you know, other areas in health care, you know, exposure to cataract surgery, for example, Alcon's a name we really like, you know, other areas in health care, you know, exposure to cataract

surgery, for example, Alcon's a name we really like. They just reported yesterday. You know, I think a buying opportunity for this long-term winner. We'll get to tech stuff with you in a moment, but same question. Outside of that space, what looks the best to you right now? What sector? Is it financials? Housing. That's still my very favorite. Anything tied to power and the grid and electrification. That is a decade-long theme. By the way, utilities up 7% in one month. You could play the same. It's the best performing group. Yeah, because people are playing power and the grid on the utility side of things, right? So you could play it through the industrials or the utilities.

I prefer to play it through the industrials, as you know. And so I think anything also tied to aviation, we talk about Boeing all the time in the struggles, but it's still in a duopoly with Airbus. And I think the runway, pun intended, I guess, but the runway is very long for both of those companies, given the 13,000 backlog of planes. So I think there's a lot of places that you can add. That's why you talk about the broadening. There are so many themes to focus on where there's a lot of opportunity.

And, yeah, I do like financials. You know, I was buying Bank of America and Truist a couple of weeks ago. The Russell's up 1% today. It's outperforming. Emily, is that a place we should look if we finally think that rate cuts are happening and we could actually get the soft landing despite some of the scares we've had of late? You know, I think that's fair. I think you want to be selective and really focus on the fundamentals of the businesses. But yeah, you know, we've seen a little bit of a pullback there as well. So I think there could be some opportunity there, definitely. And I agree with Stephanie. I mean, you know, aviation, industrials, utilities here, even in the United States, I think there's long runway for growth there.

These are sort of, you know, structurally advantaged markets. Brian, how would you assess that in the here and now? No, as you know, we love the SMID cap area. We think value as well. I think this, you know, it's really interesting. If you take a look at the 493 stocks in the S&P 500 are outperforming quarter to date for the first time in over two years. And that's a really big deal. And I think it speaks to the broadening out, and that's why you have to own, quite frankly, a little bit of everything.

But I think where the big alpha is going to come from is in value and in small mid-cap, especially those with free cash flow yields and operating performance is really, really strong. All right, let's get to tech. It's the best for last. We can talk snowflake stuff if you want. You say you're nervous going in. I think there's some legit questions about software in the here and now, ones that maybe aren't pure AI plays. How do you look at this one? It is AI in some respects. So how do you see it? I mean, the expectations are low.

The stock is down 19% in the past year. The software index is up 25%. The stock now trades at nine times revenue, which is not cheap, but the group is at 10 times revenue. This had for a long time traded at a premium to the group, but they messed up the last two quarters. And had for a long time traded at a premium to the group, but they messed up the last two quarters. And so now it's all about product revenue growth.

And I think they're going to do 26%. Maybe they do a little bit better than that. But then, of course, it's going to be all about the guide. And the guide is for about 20% going forward. A seasonally soft period. So I'm not expecting much, but I just think the expectations are so low. And I still believe very strongly that you need scale in data for AI to work. And they have it. So that's the one, like, I'm nervous about it because they haven't executed, but I do like the concept.

And, oh, by the way, I really do like this new CEO. I like him a lot. Very smart. From Google. Okay. Brian, so everybody's looking forward to a week from today. That is August the 28th. And that would be the day that NVIDIA is reporting its earnings.

How big of a moment do you really think that is, just given how quickly the market has rebounded from those lows of a couple weeks ago? I'm looking at the stock, which has obviously had a remarkable move back. I think it's really big. You introduced me as pricing to perfection type of moment in the market. Those earnings better be really clean and really strong, and especially considering how strong the earnings were for AMD. I don't quite know if Nvidia and AMD are now Coke and Pepsi of the semiconductor space, but AMD is really coming on, especially with its acquisition. But Nvidia earnings better be strong. I think it's really, really hard to be overweight NVIDIA heading into this,

especially given the fact on how volatile the weighting has been in the S&P 500. We're still long-term holders, but obviously, like everybody else, we're watching it really closely. And I think their earnings have to be perfect. Steph, we'd probably argue that Broadcom deserves to be, if you want to use the Coke-Pepsi analogy, up near NVIDIA. It should be. As number two. 100%. That's what Stacey Raskin would suggest.

100%, and it's not 100% AI. That hasn't been the thing that's been driving. It's actually been the VMware acquisition, which is increasing their software exposure, and that is growing, and that's a recurring revenue. It has higher margins. But you do also get the kick of AI. They think AI is going to be a 30 to 50 billion dollar business from them from 11 billion this year. So that's real growth as well. You know, it's pretty popular, though, Scott, you know, and they report soon as well. So also watching that one very, very closely. Guys, we're going to leave it there. We will see you

soon, Steph. Thank you, Brian. Thanks, Emily it there. We will see you soon. Steph, thank you. Brian, thanks. Emily, welcome. And thanks to you as well. Let's send it to Pippa Stevens now for a look at the biggest names moving into the close. Hi, Pippa. Hey, Scott. Shares of JD.com are falling after U.S. retail giant Walmart sold its stake in the China-based e-commerce company.

According to LSAC data, it had been the largest shareholder in JD.com with a 5.19% stake. Reuters reports the shares were sold in a price range of $24.85 to $25.85 per share, below yesterday's closing price of $28.19. And chipmaker Texas Instruments is gaining ground. Citi upgraded the stock to buy from Neutral, saying it believes the company's margins have bottomed and that a rebound could result in significant earnings growth. Those shares up some 3 percent. Scott. All right, Pippa, thank you. Pippa Stevens, we're just getting started. Up next, navigating the tech trade. After stock's steep drop earlier this month, it looks like some upside could be on the horizon for that sector. At least that's what EMJ's Eric Jackson is betting on on he'll tell us

which big tech names he is banking on and the one name he sold but is considering buying again that's just after the break we're live at the new york stock exchange you're watching closing bell on cnbc welcome back tech investor eric jackson sees more upside for the space and is looking to buy a mega cap name he actually sold just in july he's the founder of emj capital joins me now welcome back it's good to see you you too well you you don't feel like being out of amazon that long i guess right that's the one you sold and now you got your eye on it again why um i i my favorite three scott in the in the mag seven right now are apple going into the the iphone upgrade cycle this fall.

Then Meta, because they're at all time highs. They're they're really the first poster child of somebody who's making money hand over fist from AI. And then, you know, of course, Nvidia, you know, the godfather. But but after that, it's Amazon. And I did sell out of it in July, but it's darn cheap. On a five-year basis, it's like trading at all-time lows on a forward PE basis. Nothing really was wrong with the quarter that they just reported a couple of weeks ago. So I think they are definitely one that's on my radar.

And I plan on adding probably in a few weeks as we start to get closer to the next tech earning season. Well, we can't get to the next tech earning season before we get out of this one. And we still have to consider NVIDIA a week from today. How do you see that? I mean, it's huge, obviously. It's it's the most important stock in the world right now. So, you know, if they laid an egg, it would be a major problem for the whole market. I don't think they will. I think they're going to surprise the upside. If you look ahead at sort of what Wall Street is counting on on a go-forward basis, it's almost like this explosion of AI revenue that they've seen over the last year and a half is going to just sort of dry up.

And I just don't think that's the case. Eric Schmidt gave a talk at Stanford recently. It was sort of leaked a few days ago. And they took it down off of YouTube because he made some critical comments about the work culture of Google. But embedded within that talk, one of his throwaway lines was, in talking to Sam Altman, they said that together they both believe that each of the hyperscalers plus the open AIs of the world were probably going to have to spend something like $300 billion in NVIDIA chips over the next few

years each, $300 billion each. So NVIDIA could basically only supply those hyperscalers, and their order book is going to be full for the next four years. Like, it's a massive, staggering amount of money that's sitting in front of them. And, you know, God love the Broadcoms and the, you know, the AMDs of the world, but, you know, the vast, vast majority, like more than 95% of that revenue is going to go to NVIDIA. Well, I mean, how do you, you just talked about, I mean, obviously the go to NVIDIA. Well, I mean, how do you you just talked about, I mean, obviously, the money that NVIDIA makes is the money that the hyperscalers are spending. So at what point do you look at what the hyperscalers are spending and say, you know what,

it might be a little longer for the ROI or the return on invested capital side of the story than I think we're willing to admit. How should we look at that? Well, I think that the I mean, the meta is showing now that they are making a lot of money from this. And that's why their stock is, you know, mid, you know, mid 500s right now. So they, you know, I'm starting to think that Zuckerberg was sort of leading us on several years ago when he was saying that he was spending all this money on reality labs and people panicked and sold the stock down to $80. I kind of think he was trying to throw off his competitors by just spending all this money on NVIDIA GPUs so he could get a head start of them. So he's showing the way. Now, if you're sitting in the seat of Andy Jassy or Microsoft or OpenAI, are you going to let another one of these competitors just take the lead and become the dominant player in AI going forward? I just don't think you can

do that. And you're only spending a minority in some cases or just, you know, certainly less than your annual free cash flow that these companies are generating. So you're not going to spend that money just like leaving it on the balance sheet and you're not going to spend it on M&A because Lena Kahn is not going to have anything to do with that. So, you know, I think it was Eric Schmidt in that same talk that said, you know, a lot of these people look at the investment in AI as like, what's the return on investment on intelligence? Like, they see it as a lot of them infinite. I mean, there are going to be some shocking applications that are going to come out over these next few years. I've seen some already that just make the hair stand on the back of my neck, Scott.

So I know everybody's impatient to see the applications, but they are here in some cases and they will be coming shortly. I mean, we're still less than two years away from from chat. I got you. I got you. Two of your new buys, Affirm and Upstart. You know, there are there are a number of growthy stocks that did especially well in a zero interest rate universe and struggled mightily when rates started to go higher. Now that rates are expected to come down, is that the catalyst you see for both of these names? Yeah. And for other what some would say trashy names like one man's trash is another man's treasure. I mean, all these kinds of stocks in the open doors of the world would be another one. You know, they all self-immolated, you know, as you say, when inflation went up and interest

rates went up. But I think it's interesting, just look at the last 90 minutes of the trading session. When the Fed minutes came out today, what happened? All these stocks took off today lucid it was up like 10% at one point- in the last hour- and the mag seven was not I mean you know they were having a

good day but. I just think that sort of shows that. A lot of these names that were sort of first in the garbage dumpster- you know on when rates started rising are going to react, you know, much more powerfully back to the upside when rates start to come down. So, you know, for Upstart and Affirm, they've been making money already, but, you know,

they've cut costs, obviously. Now they're going to have these massive macro tailwinds behind them with these rate cuts. A lot of people are going to use their services a lot more. So, yeah, I like I like both. I see them both having, you know, a similar kind of run that we saw at the end of 2023. I mean, do you see these rate cuts that are expected to come, you know, between now and the end of the year? I think the market's expecting several, right? Three, two, three at least. Is that the principal reason why you're thinking that tech as a sector can continue to do really well from here, even after the run that it's had and the comeback that it had from the lows of a couple of Mondays ago?

I think so. I mean, there's no question. It's been a huge bounce back in two weeks. I don't think anyone would have predicted it would come so fast. But, you know, like, tech is where the growth is, let's face it, of any sector. It's where the excitement is. And so the fact that rates are going to be coming down, that's going to put some life into some of these smaller mid-cap tech names that, you know, really haven't done much in the last two, three years. So I think there's going to be a broadening out story. And I think there's going to be some excitement around some of these smaller names that suddenly

get a get a big boost and people make some money from. So and we're just too tight. You know, like the Fed has to cut. They have to, you know, given where inflation is currently, like they're they're too tight at five now. So the cuts will come. All right. EJ, we'll see you soon. Thank you. Talk to you soon. Thanks, Scott. All right. Up next, top technician Chris Verone's back.

Tell us one sector he's betting could be on the brink of a breakout. Bell's coming right back. We're back with the S&P 500 around 1% from its record high. Our next guest says the trend is still your friend. Joining me now, post nine9, is Chris Ferron. He's the head of technical and macro research at Strategas. Welcome back. Great to be here.

That's the crux of your argument today is you're not that cautious. The charts look good to you? Yeah, I think the trend is still certainly intact. We see that with a very robust recovery from, I thought, what was a modestly oversold condition back in early August. But, Scott, I think the bigger question is, as this market has rallied, has the character of the leadership changed or certainly has the character of the macro that's driving it changed? Because we have yields under 380. We have oil breaking down. Bitcoin really hasn't been involved. So what does this tell us about kind of the broader liquidity picture, the broader attitude towards risk? And

the leadership maybe until today has largely been fairly defensive as well. So I brought that point up earlier. It's like staples. Yeah, it's utilities. It's health care. It's it's real estate. It's those more defensive parts of the market. Is that a bad thing? Well, I think what do they all have in common? They all have in common that lower bond yields are a tailwind here, particularly the REITs. I think particularly the biotechs. If you run sensitivity work, what sector, what group has the biotechs. If you run sensitivity work, what sector, what group has the highest sensitivity to bond yield? It's actually small cap biotech, which is acting fantastic here. So I have to look at the REITs and the biotech. I don't think it's

as defensive or as risk off as perhaps it's being advertised. It's not like they're going down, but outperforming. They're still going up in price, which is a very important backdrop here. But there is some level in yield or some level in oil where you do begin to wonder, what is the message of the macro? You say it's critical that the financials remain involved. I mean, it's been a space that's done well, obviously. They've been essential to this market. I think what's really important, if you go back to prior soft landings, 84, 85, 94, 95, what do they have in common? Financials, as the Fed moved to non-recessionary rate cuts, financials roared out of that.

Financials have roared for the last six, seven, eight months. I think it's essential, particularly the banks, that that continues here. The brokers have been good. The insurance stocks have been good. Financials may be pausing here, but 90% of the sector is still very much involved. Do you think that that continues? I know you say it's essential that the space still does well. Do you have a feel, and does the chart suggest that at all?

I do, and I think what's been really driving the financials globally, they've worked in Europe, they've largely worked in Japan. Even this recent sell-off, they've been relative outperformers. It's essential that persists. My expectation is it does. We would certainly have to adjust if it stopped. And we're very much in the camp of evaluate the world you see today, play the trends that are intact, and adjust when things change.

I don't think the financials have changed remotely enough to change course here. You think the market's expecting too much from Powell at Jackson Hole? Oh, I'm worried the opposite. I'm worried that this Powell Fed doesn't recognize the seriousness of the two-year yield trading 130 basis points below where the Fed funds rate is. I think it's a very, very serious message. It's only happened four or five times in history where the spread between Fed funds and twos has been this extreme. I think it's the largest in some, like, 20 years. It's the largest in, call it, summer of 07. Now, you hear 07, you always go to the very apocalyptic outcome. But remember, this happened in 89 as well. You had another year

left in the economic cycle. It happened in 98 around LTCM. I think the Fed should be forceful here. I would like to see them go 50. I don't know if we're going to get it or not. Ultimately, they're going to have to. This two-year yield is telling you where Fed funds ultimately will have to go. And I think it's essential we get there sooner rather than faster. You think they're too data dependent. That's what you're saying. Yeah, I do in some respects. I don't love the fact that it seems like we're getting very hung up on individual data releases. Last week, it was retail sales or benign claims. I want to see the Fed look at the bond market and say, why are twos 135 basis points

below Fed funds? We're too tight. And I think the sooner they address that, the better 25 can be. The longer we let this go, I get a little bit worried. Why is oil breaking down? Why are rates lower? Why are some streaks of defensive starting to show up? That has to be monitored. I think that's why you had some on the Fed who wanted to go in July. Yeah. And they didn't, and now I feel like there's a sense of urgency. You think he needs to articulate that, Powell, being he, on Friday. I do.

We always say in our work, the only Fed speaker we care about is the two-year yield. The two-year yield will tell you everything that you need to know, and it's screaming here. That's kind of the gunlock perspective, too. It's like the two-year leads the Fed. Think back two years ago, three years ago, late 21. The two-year yield was screaming on the way up that they were late. We have the exact same setup here on the other side. I just think it's one risk in an otherwise benign environment that we ought to be careful of.

I mean, it's a big risk. Maybe the biggest. Chris, good to see you. Thanks. Good seeing you. Chris Ferron. All right. Up next, we're tracking the biggest movers into the close.

Pippa Stevens is back with that. Tell us what you see. Hey, Scott, a B of A analyst puts up the caution flag on one of this year's best Dow performers. We've got all the details coming up next. We're 15 from the closing bell. Let's get back to Pippa Stevens now for the stocks that she's watching. Pippa. Hey, Scott, American Express has been one of this year's biggest performers in the Dow, but today it's the biggest drag on the industrial average.

B of A downgraded it to neutral from buy, noting Amex is trading near a 10-year high and at a 60 percent premium to its credit card peers. And shares of Capri Holdings are rallying. The company behind the Michael Kors brand has an $8.5 billion deal in place to be bought by coach and Kate Spade parent Tapestry, a deal the FTC has sued to block. Late yesterday, Tapestry filed a legal objection to the FTC's efforts, rejecting the contention that the deal would harm competition. Those shares up 6.5%. Scott?

All right, Pippa, thank you. Still ahead, Ford is switching up its big EV plans. competition. Those shares up six and a half percent. Scott. All right, Pippa, thank you. Still ahead, Ford is switching up its big EV plans. We'll break down what that could mean for the auto space just ahead. We're in the closing bell market zone now. CNBC senior markets commentator Mike Santoli here to break down crucial moments of the trading day. Plus, Phil LeBeau on Ford's EV shift and Kate Rogers on what to expect from Zoom when it reports in overtime today. All right, Mike, set the scene for us on what you learned today and what you think it means for the next couple of days with Powell on tap. Just from the top down, if you look at equities themselves, it looks like a pretty calm, sturdy day. You've got three stocks up for everyone down in the New York Stock Exchange.

Industrials doing fine. Consumer cyclicals are hanging in there. And the overall market is holding this big rebound rally we had over two weeks, you know, as we wait for Powell. But the conspicuous moves are outside of stocks where everyone's getting very doved up. I mean, yields cracking the recent lows, dollar in free fall, essentially repricing the Fed path to suggest that we're right on the borderline of cuts coming just in time and cuts coming too late. If you look at the Fed minutes, should have been, you know, pretty much a shrug because it was more or less as expected. But, you know, there's some retrospective element to this where they kind of characterize the conversation in a way based on what we've learned since,

which is weak jobs number. And it seems like, well, if several participants would have been good with a rate cut in July, does that mean we're even more restrictive now than we thought we were? So this is what's going through the market's head. Not at a critical moment just yet. But what's interesting to me is they're running the Fed rate cut playbook, the cliche playbook, which is bid small caps. And, like, make this thing happen again, even though we tried it before and it didn't necessarily work. So it's interesting. It builds a little bit of suspense for exactly how, you know, Powell's stance is going to come off relative to where the markets have come to.

I feel like tomorrow's trading activity, the price action will be really interesting. It's the day. It's like the dead zone before you really get to Powell. It'll be a dead zone in terms of no Powell. But we're going to hear from Fed officials all day that are there. Right. So Steve's going to have a bunch. We're going to have weekly claims. There are going to be new inputs to the conversation. So, you know, I've thought this for a while, which is a soft landing is alternating periods of we got this and we lost it. And that's kind of where we are at this point.

So Target's great, but a value-seeking consumer relative to low expectations isn't necessarily an all-clear. Well, that's why I suggested to Steph what I did about Walmart. It's like, okay, Walmart was okay. The stock went up a bunch, but that doesn't necessarily mean the greatest of stories. Yeah, maybe it's a muddle. It's not free fall, but it's definitely also not kind of the verdict is in and the consumer is great. All right, Philip O, tell us about Ford. Ford's making a decision, Scott, because the EV market is just not developing as quickly as many expected. So it is going to be delaying and deferring some

of its plans in terms of production. First thing that it's going to be doing is that it's going to be delaying production at a Tennessee EV plant that is being built. That's going to be pushed back another year. They are scrapping a three-row electric SUV. Look, the market's just not there right now for a three-row SUV. And they have three new models that they do plan to roll out in 26 and 27, including a couple of pickup trucks. Hey, the problem is not sales. Ford's growing its EV sales up 71 percent this year. The problem is they're still losing a boatload of money per vehicle that they sell, more than 44,000. So they are saying, you know what, until we can make a profit within the first 12 months, we're not going to pursue that particular vehicle. By the way, as you take a look at shares of Ford, this is a move that will cost them.

There's going to be a $400 million charge immediately, and then there's going to be an increase in EV costs of $1.5 billion. Scott, back to you. All right, Phil, I appreciate that. That's Phil LeBeau to Kate Rogers now on what to expect from Zoom in overtime. Kate. Hi there, Scott. Analysts are looking for $1.21 adjusted EPS on revenues of

$1.15 billion for Q2. Now, that would be a 9% decline in EPS from a year ago, also the first earnings contraction in six quarters for the company. The stock is down over 16% year-to-date as demand has waned from its pandemic run-up, but the company did raise its forecast last quarter as more companies adopt hybrid work schedules. Piper Sandler in a note earlier this month said that website traffic and app downloads point to a slight beat this quarter. But the firm remains concerned about a weaker small and medium sized business environment. And that's where Zoom gets about 40 percent of its business. So we'll be looking out for any guidance the company gives on that front.

Back over to you. All right. All right. Appreciate that. Kay Rogers, thank you. Mike, I'll turn back to you. We just had the sound effect for the two-minute warning. You've talked about the magnet of 5600. Yeah. We're going to close above it. We will.

Yeah. I mean, the NASDAQ 100 just kind of got a little bit of a bid in there. And by the way, the closes have been relatively strong. So clearly, you know, there's a sense out there that there's two-way risk, not just downside risk in terms of not just what Powell might say, but how the next run of data is going to play out. Of course, NVIDIA hovers even bigger every day on the horizon. So I get that that's where we are. We're about 1% below the all-time highs, just below 56, 70. I keep running through the whole historical patterns of saying the you know, the average up year is up 20 percent. I mean, the S&P is up like 18 right now. You know, it's not easy to get two back to back 20 percent years.

We got one last year, but it happens and it has happened in the context of prior soft landing. So you want to make sure you don't lose sight of what the overall underlying trend is, even as, you know, all the cross market activity is raising questions about whether we're pricing in too much resilience to the economy, or is there just a runaway bid in treasuries that might not itself be based on true reality of what the economy is up to? Your point about tomorrow is well taken, too. I mean, Leisman's got a number of important interviews, and maybe these officials really set the table for Powell to serve up something big on Friday.

And, of course, even though I was among those dismissing the downward payroll revisions, you know, this is old data and it's just bookkeeping, it clearly got in people's heads that at least this job market was a little bit less structurally tight than we thought it was as the Fed was hiking. Well, Glenn, thank you, Mike. We'll see you tomorrow. We are going to close about 5,600 on the S&P 500. That does it for us here.

I'll send it to you later, Thomas.