Closing Bell - Closing Bell: Can the Bulls Keep Charging Ahead? 6/27/23

Episode Date: June 27, 2023

Is there enough momentum to keep the bulls charging ahead? Avery Sheffield of Vantage Rock gives her expert take. Plus, Ed Yardeni dropped a mid-day note saying “the permabears will have to postpone their imminent recession yet again.” He explains his stance and what it means for your money. And, Renaissance Macro’s Jeff DeGraaf is charting where he sees stocks headed from here. 

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9, right here at the New York Stock Exchange. This make or break hour begins with the rally in stocks and whether the setup for the second half is now in your favor. Vantage Rocks, Avery Sheffield is here with that answer in just a moment. First, here's your scorecard with 60 minutes to go in regulation. A nice, broad move today. Industrials, discretionary materials and tech all contributing. More good news on key parts of the economy, no doubt helping today. New home sales rising at the fastest pace in a year. And consumer confidence blowing away expectations.

It leads us to our talk of the tape. The momentum as we make the turn. Is there enough of it to keep the bulls charging ahead? Let's ask Avery Sheffield, the co-founder, CIO and senior portfolio manager of Vantage Rock right here with me at Post 9. Welcome back. It's good to see you. Great to be here. So how do you answer that question? Is there enough momentum in what's been for many surprising first half as we make this turn? Yes, I'm not sure. So from a fundamental standpoint, I think the economy, what we see is we are seeing inflation kind of slowing, moderating, even rolling over, even going negative in some categories, which should be which is potentially good as a tailwind for consumers.

Yes, it's great. It's great. It's not necessarily good for companies that are experiencing the pressures of that inflation. Right. But that so that is like one dynamic that's a net positive. As long as the market continues to go up, that's a net positive. And then you on the other hand, and jobs are still pretty strong. On the other hand, you have rising credit card debt, rising interest costs, right. Creating some pressure. And so I think it's still like a tough call of what is going to happen moving forward. And so from a stock perspective, what we're focused on is where is there just too much negativity priced in on the long side and where are expectations very optimistic with high valuations in companies that maybe are going to have more issues? Because I think it's a really tough call. It feels to me like to be a little

weak, but if the market keeps going, that'll be a nice tailwind. And then also, sorry, you're going to have the student loan debt come due in September, which is kind of feels like forever from now. But that's actually quite meaningful. One hundred billion dollars in two percent of retail sales. If somebody said, I mean, do you think the risk reward is better now than it was? Would you say yes? Well, I'd say it's worse for the market as a whole, right? Because we've rallied a lot? Yes.

I mean, just valuations are too high. I mean, I kind of concur with Mike Wilson here in that it's like it matters what you pay, right? I mean, and he's calling for a bearish call. He's been bearish. He's been bearish, but he's continuing to be bearish, right? And he's continuing to be bearish, especially at the levels that we're at. But he's saying, well, maybe we'll have the market could be strong next year

from a very different level. So these levels look high. Can they keep running? Yes. Could this be 2006, 2007? You see issues that they're far enough down the road that we just forget it? We certainly could. But I feel like it's just safer to buy names that have more negativity priced in. So the run that we've seen in tech. Yes. What do you make of it? Does it make sense to you? Do you think it has legs to go further?

Right. So I think, look, the AI is clearly driving demand for NVIDIA's chips and some related other components. Certainly Microsoft's in a great place related to that. But outside of the build out, everyone's trying to figure out what's the business model going to be. So there is going to be a decent amount of investment spending there. But which companies benefit, how many benefit versus how many are disintermediated by new, cheaper startups putting together really easy to use AI applications? I think it's really unclear. So I think it's risky to be buying names that have a lot of AI hype in them that don't have a business model behind them. Outside of that, what we've seen is tech spending is actually very much related to

net income. And that determines your CapEx budget for the next year. Net incomes of companies are like, OK, but like someone under pressure because of the inflationary dynamics we've seen. And so what that means is that can crowd out other technology spending. So I think you really have to be careful in where you pick your spots. That's funny. I mean, when you say all that and I look at the sheet and you like Intel. You like Intel. Come on. I mean, aren't they being displaced by Nvidia? Yes, exactly. Justify it, though. I want to hear your explanation.

Right. So, I mean, so we always like define, you know, we always like are interested in like where people just overly negative and there's and things won't be as bad as people anticipate. And there are company specific idiosyncratic factors that can can can turn things around. right, one of the largest semiconductor manufacturing companies in the world, that's really lagged a TSM&C on the foundry, on the manufacturing side, and AMD, NVIDIA, and others on the design side. I mean, basically, really not doing well on either side. But what we have here is really, I think, the beginning stages of a turnaround underway. Patrick Gelsinger, who had been the company for over 30 years, left for EMC and VMware for 11 years, very well run. Michael Dell,

being involved in those companies, knows how to run a really good business. Came back, you know, just in the past couple of years to really create just much more discipline and efficiency. This is an execution-driven business. He's separating the P&Ls between Foundry and Logic and creating more accountability. Analysts are very skeptical about whether this can be successful, but you are starting to see some early signs of success in designs getting better. He's identified a $10 billion of cost. He's going to take out the next two years $3 billion. This year, they're investing $60 billion with help of governments in new semiconductor manufacturing facilities here in the U.S. and Germany and Europe. And so there's a lot that could go right in evaluation on normalized earnings. That's half of TSMC, a third of AMD. So if they execute, there's a lot of upside. It's interesting to me to hear somebody who is

generally cautious, if not skewed negative for the second half, right? You think the economy is going to continue to get a little worse, but you like select retailers, you like airlines, autos, chip manufacturers, regional banks, office REITs. How do we square this? Well, I mean, one thing I like to point out is, you know, everyone's been talking about the home builders and what great stocks they are. Like a year ago, we were all talking about how Armageddon was coming to the housing market.

And the reality is the homebuilders' earnings are down 30% from last year. But they're down nowhere near as much as was priced in, so the stocks have nearly doubled. So I think we're at this point where technology stocks are given a pass. They're going to be completely unaffected by any kind of cyclical downturn, whereas these stocks are just pricing in far too negative of an outcome. And also like one thing I would say they're pricing in far too negative of an outcome. I wouldn't buy every company in these sectors. I wouldn't buy an ETF for these sectors necessarily. OK, but you can because the whole sector has been pulled down. you can find companies that have company-specific dynamics that are very positive.

Like regional banks. Yes. If you buy select regional banks, do you want to name names? Right. I don't know that I want to name names, but I will tell you what you look for. What you look for is banks that have very strong credit. So banks that have very high interest coverage ratios. So the people they lend to can withstand higher interest rates.

So they can price up to handle the higher cost of deposits. They can price their loans higher and still make a margin. You also want to look at banks that are really focused on efficiency, right? They've got to drive down their costs. So you have multiple regional banks. You have some regional banks that are trading at like COVID levels, not about to go under, that have the ability to price up their loans, we think, and cut costs enough to offset the deposit, the increased deposit pressure. And then, by the way, if at some point we start to lower rates and the yield curve starts to steepen, they have potential

to be home runs. You know, when we talk office rates, I noticed earlier, I think SL Green is up like 30 percent in a month. Yes. I mean, that is telling an interesting story from a stock standpoint, even as there is broad concern about what's going to eventually happen there. Yes. I think it's very interesting because what happened yesterday is that they announced a Japanese investor has come in to buy a property at 46 and Park. And the current return is about 3 percent. The return fully utilized about 5 percent. Well, why would someone do that when treasuries here in the U.S. are like 5 percent? They want to lock in a 10 year return. And interest rates in Japan are still dramatically lower than in the U.S. And the Japanese are looking around the world like where's there an asset that we can buy that's going to get a good return?

And I think one thing that people are forgetting is that we are, I think, in the early stages of seeing a return to work. We're seeing most of the major banks. We're seeing major in our industry firms like Citadel just demanding that people come in, by the way, if the office is in that area, five days a week. And so I think we are going to see a return to office. And anecdotally, I've also been hearing about companies, like people in companies, really fighting to get the best office space to retain their workers. And so I think that dynamic is very underappreciated. Now, by the way, I wouldn't be buying Class C office space.

I think it's very similar to what you saw in the mall REITs. The best malls have been able to increase rents, have been in a good position. And what we're seeing is that not just the Japanese are coming in because they're seeing favorable dynamics. There was just an article actually in Bloomberg had overnight in London that HSBC is moving out of Canary Wharf into more central regions, taking half the space, but at 50 percent higher rents because having those in demand locations is important for workers. That, you know, that the company that we're talking about is all centered around Grand Central. Most of the properties are very high quality, so they could have pricing power while others in more peripheral areas could actually be in a lot of trouble.

Interesting. Let's expand the conversation, bring in somebody who has been unwavering in his positivity about this market. Ed Yardeni of Yardeni Research just came out with a new note this afternoon. So, Ed, thank you so much for calling in. I'm quoting from your note for people who are watching us. The perma bears will have to postpone their imminent recession yet again, based on today's batch of U.S. economic indicators. Our rolling recession is turning into a rolling expansion. Explain. Well, you know, there's been a big debate, as you well know, about when a recession is coming. And I've been arguing for a while here that we're actually in a recession. It's just a rolling recession hitting different industries at different times. And so we certainly got hit with a housing recession. And so we certainly got hit with a housing recession.

And now we also got hit with a consumer recession. But both of those look like they're reversing. So you think the second half looks pretty good for the market? I mean, what is your general outlook for where you think the S&P can go? Well, Scott, as you know, I've been, I argued that the October 12th low was the low back in late October. And so we've had a heck of a move here. And my target's still 4,600 by year end. And I hope we don't get there in the next few weeks, the way this market's going. I don't really want to, I'm not rooting for a melt-up here.

I wouldn't mind a bit of a correction, something like $4,200. I mean, that wouldn't be the 10% official correction, but I think the market needs to have some breather here. But it certainly looks as though the fundamentals are great, the technicals not so much, and the valuation not so much. Yeah. I've got Avery Sheffield with me, Ed, who I want to get in and opine on your perspective. What do you think about what he said?

So with housing, we just discussed, right, housing is in a recession. Prices are down year over year. But we've gotten to a point, at least in new home construction, that the builders are expanding. And they're finding that prices are stable, so maybe they can raise a little bit from here. That is down year over year, but we've kind of found a stable place where maybe things can improve a bit. We'll see what happens when student loan debt starts coming due. Does that affect down payments?

So kind of unclear call, but inventory is very constrained, so it might continue to improve from here, and the builders in particular could potentially make it up on volume. How about $4,600? Does that sound possible to you? Anything's possible. You look skeptical. I mean, it's like everything's possible, right? I think certainly if the animal spirits continue, yes, but does it make sense long term?

Like, would you, if you buy and hold that for the next 10 years, I wouldn't. So, Ed, I mean, how do you counter the thought that Avery put forth a little while ago and others do, too, that the market's just too expensive? Like, it's been multiple expansion based on multiple expansion. Right. I'm not telling anybody this market's dirt cheap and screaming buy from a valuation perspective. But I think from a fundamental perspective perspective the outlook is really quite good as as you know uh... during the

all the uh... pessimism we've had here i said you know where we're going to come out of this will probably not going to have an economy wide recession and once we start to see a more signs of the mccartney white expansion i think we're going to see something like the roaring twenty twenties were technological innovations lead to increases in productivity. Another point I've been making recently is, you know, the 75 million

baby boomers born between 1946 and 1964, they're now in their late 50s and into their mid-70s, and they have collectively $75 trillion in net worth, assets minus liabilities, $75 trillion. They're going to spend a lot of that, and they're going to pass a lot of that on to their kids. So does the 4,600, does the Fed matter at all to you? I mean, there are projections that they're going to go like Morgan Stanley today, adding a July hike. Others expect that they may go in July and they may go after that as well.

Do you care for your projection or not? Well, I do care. And I think the key issue is inflation. And as I pointed out in my note this morning, the news that we've gotten from the regional surveys conducted by the Federal Reserve Banks, five of them do business surveys, and their most up-to-date indicators are through June. And we continue to see prices paid and prices received really dropping sharply in a way that suggests that we're going to have a really surprising drop in consumer prices. And I think that we're going to have a really surprising drop in consumer prices. And I think that surprise is going to be led by something that's not going to be all that surprising,

and that is rent inflation has been a laggard, and it's going to come down a lot. And meanwhile, goods inflation, certainly according to the business survey, suggests that goods inflation is coming down as well, and will stay down. So, Ed, what do you make of Avery's suggestion that there is good opportunity in selective, whether it's airlines, autos, regional banks, office REITs, I mean, some areas that no one wants to touch. Well, let's think about what the baby boomers are doing. A lot of my friends are retiring. I don't play golf, so I don't know what I would do with myself, so I'm going to keep working.

But my retiring baby boom friends, they're going out to restaurants almost on a daily basis. They're going on trips. They're going on cruises. So that certainly continues to favor the cruise lines, the airlines, the health care area. And so obviously going to continue to boom as the baby boomers get older. And that's all creating a lot of jobs. And so it's all kind of feeding on itself. The demographics, particularly the baby boom demographics, I think is something that the pessimists haven't really factored into their thinking.

Ed, I appreciate it. I'm going to let you run. I know you're on vacay, and I'm grateful for you taking the time to phone into this conversation, talking about that note that certainly got us talking today, Ed Yardeni. So I'll leave it for lastly with you, Avery. The most underappreciated area right now in the market is what, would you say? You know, around what? Maybe it's not even equities. I don't know. area right now in the market is what would you say? You know, around what? Maybe it's not even equities.

I don't know. You've had a lot of competition elsewhere. There are some who suggest that it still exists. And that's one of the headwinds for stocks potentially into the second half. But there still are other opportunities that present good reward with less risk. Right. Well, I mean, private credit, I mean, certain areas in credit look to be very compelling and interesting. So, yes, I concur. The rates you can get for lending to very stable companies are quite compelling.

And then in the equity markets, I mean, I would say probably, like, regional banks and office REITs would be, like, two of the most hated could you could see real surprises, especially if Ed's forecast comes to fruition. We shall see. And we'll talk to you again soon. Avery, thank you. That's Avery Sheffield joining us. Advantage Rock today. Let's get to our Twitter question of the day. We want to know, has the risk reward improved for stocks? You can head to at CNBC closing bell on Twitter. Vote yes or no. The results later on in the hour. Let's now get a check on some top stocks to watch as we head into the close with Christina Partsenevelos. Hi. Hi, Scott. Well, Delta is at its highest level in over a year after hiking its Q2 guidance and projecting full year earnings per share at the high end of its previous range. CEO Ed Bastian

tells CNBC that demand is, quote, off the chain and Delta is still seeing customers pay for more expensive seats. That optimism is giving a boost to rivals as well, including JetBlue, quote, off the chain, and Delta is still seeing customers pay for more expensive seats. That optimism is giving a boost to rivals as well, including JetBlue, United, and American. You can see they're all about 5% or more higher on your screen right now. And let's switch gears and talk about Walgreens right now. It's having its worst day since 2020 after its first earnings miss in three years. The pharmacy chain also lowering its full year guidance as it sees lower demand for covid services and margin pressures related to a lighter respiratory season, which is good news for us. Obviously, bad news for the stock, which is down over nine and a half percent. Yeah, tough day for WBA. Christina, thank you. We'll see in just a bit.

Christina Partsenevelos, we're just getting started up next, searching for opportunity. John Spallanzani of the Miller family office is breaking out his second half playbook. He'll tell us where he's seeing some strength now after the break and later cruise line sailing higher today, reversing course in a major way. Take a look at those gains. Carnival's up seven, almost eight percent. We'll tell you what's behind the reversal. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Dow's good for 233. Back after this. Welcome back. We have a developing story in the M&A space. The FTC and DOJ proposing changes to some of the required pre-merger paperwork. It could have a major impact when and how deals get

done. Leslie Picker, following the money as always, joins us on the phone with more. A high hurdle already turning, it sounds, into a pole vault, if you will. Yeah, that's exactly right, Scott. You bring up a good point. It does have to do with filing paperwork, a lot of technical aspects to these changes here. But the overall so what to this story is what it means for deal activity, which, as you mentioned, has already been chilled over the last year or two. So what this involves is the Hart-Scott-Rodino form, the HSR form. This essentially is what agencies require merging parties to fill out their intent to merge. It describes all sorts of competitive aspects of what the merger would entail and what it means for the industry itself. If it's a horizontal merger, vertical merger, they look at, you know, revenue overlap, things of that

nature. Well, they're looking at overhauling. This is the FTC and DOJ. They're looking at overhauling this in a way that could potentially be more onerous for parties looking to merge. Analysts say it could increase the number of hours required to fill out these forms. It could delay the process by months. Although in its press release today, the FTC and DOJ says that it would allow for a more effective and efficient merger review. It also addresses some congressional concerns that subsidies from foreign entities of concern, these are countries that are seen as less friendly with the U.S., that subsidies of that nature could also impact the competitiveness of certain deals behind the scenes that aren't

previously accounted for. Now, this is a notice that will be published later this week in comments are due in about 60 days, Scott. So it's not official as a proposal. I didn't mean to step on your toes there. And the other beat you cover, of course, the banks. I can already hear the heads of capital markets for the biggest banks on Wall Street throwing their shoes against the wall saying, you know, what more could stand in the way of a pickup in capital markets business? You're exactly right. Obviously, the banking activity fees that they generate from these types of deals is critical. And it's been dormant for a very long time at this point. They're looking for anything that could warm the chilling that they've seen so far in deal. I think this certainly doesn't help at all. But

one of the main reasons that bankers tell me there's been such a chill is there's been so much uncertainty in the regulatory environment. They're not sure how much appetite regulators have for doing these deals. We've seen a lot of deals struck down and that's created more of a chill. So it could be that maybe once this gets up and running, once people see kind of how it works in the timeline and how it all happens, that could maybe unleash some of the pent up demand for deals. But in the meantime, it's definitely kind of more of the same in terms of uncertainty. All right. I appreciate you calling in with this news, Leslie. Thank you, Leslie Picker.

As we move on, the S&P already up 14 percent so far this year, but billionaire value investor Seth Klarman says the environment for stock picking opportunities has been improving. Here he is on Squawk Box this morning. This environment feels like a four in terms of opportunity. With a 10 being the best? 10 being the best. It's nowhere near, you know, 9 or 10, but it's better than it was. You had such extended valuations, such little downside volatility, really for the last decade or more. But the nature of opportunity that we see on a bottom-up basis is better than it was, but still not at peak.

All right, so let's bring in John Spallanzani of the Miller family office. Welcome. It's good to see you. Thank you. A four out of 10, according to Klarman. What do you think? That sound right to you? I don't know. But he also said there hasn't been a lot of volatility on the downside, which obviously we had a global pandemic. I was on the floor when the VIX was 80. So there has been a lot of volatility. What's the VIX now, like 14? It's 14. Exactly. So, yeah, I think, you know, in his mind, that's probably what he thinks. But what do you think?

I mean, in terms of the environment, is it a 4 out of 10, or has it improved to the point where it's gotten over the mid-hump, and let's say it's a 6 or 7 now, as some people are trying to suggest? I think most of the people you have on are still quite bearish. They don't believe in the digital renaissance. They don't believe in this tech revolution that we're seeing. They believe the market is overvalued. They believe in a lot of things that are kind of still bearish. So in terms of that, you know, there's there's that's been going on for 10 years. Are you taking the other side of that? Yeah, I would take the other side.

Of course, I think I'm in the I'm in the Dan Ives and Ed Yardeni camp of what's going to happen. All in Spallanzani. That's my new nickname for you. All in. I mean, come on. Dan Ives says 15% to 20% more in mega cap tech. Tom Lee's bullish. You heard Yardeni, 4,600. But there's only five guys, right? And you just named all of them, basically.

And the rest are still kind of bearish because they said the market's overvalued. There's a lot of things. We don't know when the correction is going to be, when the recession is going to come. Again, they've been saying recession now for 12 to 18 months that we're going to have a recession. This is the most predicted recession that we haven't had in the longest period of time. So that's really the other side of the story, that every time we say recession, you know, it doesn't come. So that leads us to believe well maybe you know maybe kathy wood could be right right are we looking at the wrong indicators you know is she you know she might be picking up zettabytes and you know we're going

from this big data creation that really is not factored into the ism and other things the global efficiency that chat gbt and all these other Internet of Things, 5G was supposed to be a 5X move in terms of productivity. Nobody's even talking about 5G anymore. That's going to be a huge thing rollout as we go towards 2030. Now we have ChatGBT. That's another huge productivity and efficiency gainer, not to mention the fact that it's disinflationary because you're going to have a lot more people doing a lot less and you're going to have a lot more productivity. So we have factories retooling. We have all kinds of things that are going on

that really we're not actually seeing picked up in the data. We're shuffling through here as you talk, a mega cap tech, which has been the story of the year thus far. People hear Miller, they think of Amazon and Megacap names. You still think that those stocks have a lot more room to go? I mean, you mentioned Ives. As I said, Dan Ives was here yesterday, if not the day before. It suggested 12% to 15% more this year. I mean, this year, yes, possibly.

But over the next 10 years, we don't know. The sky is the limit, right? Because what you're seeing now is that this big technological revolution that we're having is going to affect everything. And we don't there's going to be massive winners and massive losers. A lot of the stocks that you just mentioned were the biggest losers last year. So not only were they short, nobody was expecting the news to change in such a favorable way. So we had, you know, we went from the four T's being, you know, technology, trillions, tech, tax, tax policy and innovation right to the to the three B's this year, which basically Bitcoin is the best performer. We have big tech and also those big tech companies have

had the strongest balance sheets. And that's where people went to hide when we had the blow up in Silicon Valley Bank. They all went to the high liquidity stocks with big balance sheets. And that's what we've seen. We've seen the small caps and the mid caps basically flat on the year because they actually were expecting a recession over a year ago that never appeared. So let me ask you this. Miller family used to be Miller value. Where's the value?

Where's the great value in the market as we make the turn to the back nine of the year? Well, I think right now we see the, obviously the Q's are up 30%, and we saw the mid and small caps were flat. So you've got to sharpen your pencil, and you really have to dig deep into that category where, you know, if you want to go between 500 million and 5 billion or if you want to take it up to 10 billion, there's a lot of stuff that's been thrown out with the bad, you know, baby. And you think too much so? Yes, I think too much so. And not only do I think too much so, but that's going to be the

catch-up trade probably to the end of the year. Already then last week, we saw, you know, small and mid-caps rallied about 500 basis points because there's guys who exploit the relative value trade. So there's trillions of dollars, obviously, in the market. And when they see Q's up 30% and mid and small flat on the year, they're going to try to close that gap. And right now, it's beginning to close. So the other thing I want to talk about- And that's Fed dependent, obviously. The other thing I want to talk to you about is bitcoin you mentioned crypto um i mentioned amazon sort of synonymous with you guys bitcoin has

become that way as well and we played the clip of clarmen on squawk box this morning saying what he did i want you to listen to what he said about bitcoin let's listen there are hundreds maybe a thousand different cryptocurrencies and you don't have a thousand paper currencies in your wallet and i don't either i have one and i'm sure you do too and so i worry that it's a seductive idea i called it once catnip for techies that it's exciting and you can imagine that you're getting on the ground floor of technological gold but i'm skeptic, but I would never say nothing. You know, something can't happen. That's a fair assessment, isn't it? Yep. Yeah. We see the Bank of England just came out and they say they want to have the the Britain coin. Right. There's a lot of central banks that

would like to have more control over their currency, the digital dollar, all kinds of stuff like that. You know, basically, Bill's premise has been, since the paper was submitted to the Sanofini Institute, which is his think tank, about 2014, and he liked the technology of the Bitcoin itself. Obviously, it was a lot cheaper then. And he really viewed it as a cool technology, something that could be a disruptor.

Obviously, he thought Amazon was a disruptor and Jeff Bezos was a disruptor. When nobody believed that in 2000. And that seemed to work out. So he liked the technology. He liked what it presented. I mean, the use case, if you want to play that card of it, I mean, I could see a greater use case for an Amazon than some would suggest exists for Bitcoin or any number of the other, as Klarman says, not 100 coins or what have you. But remember that the use case for Bitcoin is the fact that it's the use cases as an insurance policy when all things kind of go bad. And we're not just talking domestically. As more and more people get connected to the Internet, get connected to banking. There's going to be a need for something like a Bitcoin or something like that

where, you know, people can't confiscate your money. We just saw the Russian coup. There was rumors that people in Russia were buying, you know, Bitcoin where they're doing legally, illegally. We see there's always a flight to safety, and it's a lot easier to have Bitcoin on your phone than something that's on a ledger that everybody could see that's transparent and that nobody's going to take from you

rather than having, you know, pesos or a dollar or Argentine dollars or Bolivian dollars. I enjoyed the conversation very much. Nice to be here. John Spallanzani here with us at Postline. Up next, the market's next move. Top technician Jeff DeGraff is charting out where he sees stocks heading from here. If he thinks the big tech rally can really last, it's after the break. Closing bell right back. Nice move today. Stocks are higher across the board. NASDAQ closing in on its best first half in some 40 years.

So has the outlook gotten more favorable as we get set to enter the second half of the year? Let's ask Jeff DeGraff. He's the chairman and head of technical research at Renaissance Macro. Jeff, welcome. It's nice to see you. Thank you, Scott. I've gotten many fundamental takes today, obviously.

So let's go technical. How do they look? Well, if you're a trend follower, I think they look pretty good. You know, our trend work turned positive at the end of January. It stayed resolute throughout that time, even with the Silicon Valley bank crisis. Oversold conditions have been met with buyers, which is exactly what you want to see. We're sequencing this series of higher highs and higher lows. I wouldn't call it a momentum market.

Maybe we're starting to shift to that a little bit, but certainly it's a trend market. It's being led by tech. It's being led by industrials. Those are cyclical sectors historically that are far more characteristic of a bull market than a bear market. The laggards have been roughly healthcare, a little bit of staples, and certainly utilities. Those are pretty good bulletproof indications that you're in a bull market. Wow. I mean, you use the word bulletproof. So you're suggesting that this bull market, which some are debating as to whether it really is one, is legit. I have no reason. I mean, keep in mind what we do, right? We listen to the market and we don't we don't force our views on the market. We just try to listen to what the market's telling us.

And when we listen intently without biases or prejudice, we find that, you know, the majority of the indications are certainly more bullish than bearish. Trends, though, look, if not changing on a dime, they can still change reasonably quickly based on a change of event. No. You know, it's a little bit susceptibility. they can still change reasonably quickly based on a change of event, no? Well, you know, it's a little bit susceptibility. It's kind of like you being healthy, right? If you're not healthy, you're going to be more susceptible to disease. The markets are the same way. And right now, I would say the markets, you know, scale of one to 10, I think you had a four on before. I would call this market a seven, you know, in terms of the technical strength. I still think it's pretty good. There's some question about breadth. We find that breadth tends to chase price, not vice versa. So, you know, I think you're in a pretty good spot here. I do. I would

say that, you know, real rates are something that has us a little concerned. We're not overly bullish on the banking sector. In fact, we're pretty bearish on banks right here because of what we're seeing out of real rates and trends. But, you know, with the exception of some of these one-offs, it really is still more characteristic of a bull, not a bear. Yeah, 69 percent of the S&P was up yesterday. We have a nice broad move again today. Jeff, I appreciate your time. Thank you. We'll see you soon.

Yeah, Jeff DeGraff joining us right here on Closing Bell. Up next, tracking the biggest movers as we head closer to the end of today's session. And we are up better than 200 points. Christina Partsenevelos is standing by with that. Christina. And I'm going to talk about artificial intelligence, AI partnerships in the works with NVIDIA. And that's helping two stocks jump today. We discuss the details after this very short break. Got 16 minutes to the closing bell. Let's get back to Christina Partsenevelos with the stocks. She is watching right now.

Christina. Well, it's time to team up on artificial intelligence. Data warehousing service provider Snowflake not only announced its expanding its existing partnership with Microsoft to build at large scale generative AI models, but it also announced a partnership with NVIDIA to build generative AI apps in Snowflake's cloud. So what that means is it'll allow Snowflake customers to build AI models

using their own data, and that's why you're seeing shares up over 4.5%. Speaking of NVIDIA, shares of Amcore Technology are jumping right now. And a report from DigiTimes that it's working with NVIDIA on advanced AI packaging. Amcor is up by 11% right now, and it's considered the number two in global packaging and testing after TSMC. So quite a big jump just on one rumored report. Yep, Christina, thank you. That's Christina Partsinevlos.

Last chance to weigh in on our Twitter question. We asked, has the risk-reward improved for stocks? And to add CNBC Closing Bell on Twitter, the results are right after this break. The results of our Twitter question, has the risk reward improved for stocks? The majority of you said no, but it was close. 52 and a half to 47 and a half. We're back right after this with the homebuilders hitting new highs today. We'll tell you what's driving that key part of the market higher, what it could be for your money in the long run when we take you inside the market zone.

All right, we're now in the closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of the trading day. Diana Olick on housing stocks hitting new highs today. Sima Modi on the big rebound in the cruise lines and Julia Boorstin breaking down the rally in Meta. Mike Santoli, begin with you. Got a pretty nice finish here, about 51 or so points on the S&P.

And now the sector's pretty broad move, too. Yes, a lot of participation today. We had about a 100-point pullback in the S&P, all told, from closing high to closing low. We're back to where the S&P was trading about a week ago. So just to scale things, it was a very kind of orderly, low drama pullback from an overbought condition. That's the way I would view it. So it did nothing to disturb the trend.

I was saying you can go all the way down to 4,200 and you still could in a pullback and still be in that better trend. So all things are, I think, all the boxes are getting checked off. The issue is we have run a little bit. The I think all the boxes are getting checked off. The issue is we have run a little bit. It seems the issue is all the boxes are getting checked and people have embraced, you know, a little more of an upbeat case. I don't think all of the skepticism has been burned off. So we can still go farther from here. But I think it seems a little more like like a balanced outlook. All right. Diana Olick, nice day for homebuilders. The XHB is at a 52-week high. And how about that housing data this morning that you gave us? Yeah, the homebuilders are clearly on a

tear after a much better than expected read on sales of newly built homes in May. The homebuilding ETF, ITB, it's one of my faves, up about 3% on the day and 40% year to date. Names like Lennar, Pulte, and D.R. Horton hitting 52-week highs. New home sales were up over 12% month to month and were up 20% from May of last year. These numbers are based on signed contracts during the month, so people out shopping in May when mortgage rates were actually really rough. The 30-year fix started the month around 6.5%, but then shot sharply higher, over 7% in the second half of the month. That really cut into affordability, but apparently it did not deter buyers. And the road ahead looks busy as the number of homes sold

but not yet started has nearly doubled from a year ago. And there is the runway for your home builders. All right, Diane Olick, thank you very much for that. Seema Modi, how about this move, the reversal? I'm looking at Carnival Cruise Line, for example, the low of 1470. Now it's at 1583, up better than 8%. Yeah, it's turning out to be the classic bull bear debate, Scott, and it's playing out real time. There is this collective acknowledgement on Wall Street that the stock ran up too far too fast this year, up 95% year to date. But other analysts also pointing to the impressive surge they've seen in bookings in the second quarter, that on higher ticket prices, and this expectation that that will help them achieve

their second half profitability goals. Now, the other thing to keep into account, the Carnival's investor day, it just ended. And I did hear from one attendee inside the room that CEO Josh Weinstein, who just joined recently, spent some time clarifying the company's longer term financial goals. So that perhaps is also playing into the rebound that we are seeing right now for Carnival shares. And of course, Royal and Norwegian also higher on the day. All right. Good stuff, Seema. Thank you very much for that. Julia Borsten. And then there is Meta, just two bucks away from its new high as well, up about 3% today. That's right, Scott.

Minishare is rising about 3%, bringing year-to-date gains to nearly 139%. This comes after Citi raised its price target on Meta to a street high of $360. That's up from $315. You see the stock is still below $290 right now. Now, Citi has an overweight rating saying, quote, we believe Reels is experiencing greater advertiser adoption and believe Meta's investments in generative AI can deliver incremental usage across its users, creators and advertisers. This all comes as today Meta's WhatsApp business announced that it has topped 200 million monthly active users, up from 50 million users three years ago. WhatsApp business also announcing new tools for the platform, easier ad creation of

click-to-WhatsApp ads, and a new paid service for companies to personalize messaging to WhatsApp business users. Scott? Julia, thank you very much for that. Mike Santoli, I turn to you. The stock has just had a monster of a year. As we debate the valuation, it looks to me forward PE, what, 36-ish? No, forward on meta is more like low 20s. Oh, low 20s. It's like 21. In fact, it's basically at its five-year average forward PE. So we had that big crash, and then people got more comfort with the margin story and the fact that we're going to be more disciplined on spending. And now, in fact, it's just barely eclipsed the forward valuation of Alphabet again. So it's getting

revalued as a play that people feel is less vulnerable, more predictable. We'll see how much it plays out. It did trade up toward 30 back in 2021. So I think this is the equation we're thinking about a lot. People are, almost people even who love the market say, well, it's not cheap. It's kind of overvalued or it's getting expensive. One of the cheapest of the mega caps. That is one of the cheapest mega caps. The other thing you would say is a lot of things are just in recovery mode still, like Netflix and Meta, where you have NVIDIA and Microsoft's bumping up against the old highs but I did do a

screen for stocks big ones no known ones that are trading below let's say a ten year average for P. and you've got names like American Express UPS Starbucks Lowe's visa it doesn't mean that they're really outright cheap it

doesn't mean that those forward earnings are going to come through as projected but it does tell you that you know really not all the market. is valued as aggressively as we think. Now, you could say rates are higher, real yields are higher, and maybe this moment in the economic cycle is not the time to pay up. So, again, I think it's a little more of an even trade. And usually the tie goes to the benefit of the doubt goes to the bulls when you have proven that this trend has been positive for this long.

Are we, as we just had the two minute warning here, are we vulnerable to central bank barks tomorrow? Because we're going to get Sarah's hosting that panel over in Portugal where you have an all star docket. If you get a real dramatic, sharp reaction in the bond market, yes. So far, anything beyond the two-year yield in treasuries is purely middle of the range. They're not making new highs in yield. It's in a comfortable zone. We feel as if, at this point, it looks like July hike for the Fed is probably being penciled in. Market seems OK with it. Again, the whole equation this year to me has been, you know, is the Fed going to feel as if it really has to undermine consumer demand and the labor market in order to get inflation where it wants it? Right now,

market's betting it doesn't necessarily have to. We're going to get the PCE number on Friday. We'll see if inflation is stubborn or if it's continuing to move in the direction that everyone is hoping and expecting. I mean, that's the wild card, whether inflation continues to come down to a degree where the Fed doesn't have to choke off the demand it thinks it does. That's right. And the other thing is the Fed has now messaged that it's not necessarily looking to target market levels or the unemployment rate and saying that they really need to apply more pain, which was the case almost a year ago in August at Jackson Hole. So it's a different tone.

That's, I think, why the market's been a bit more comfortable. All right, a bounce back today. That is the message we get. The Dow's good for better than 200. I'll see you tomorrow.