Closing Bell - Closing Bell: Can the Bulls Keep Charging Ahead? 7/3/23

Episode Date: July 3, 2023

Fundstrat’s Tom Lee raising his S&P price target in his second half outlook. He explains why… and debates that call with long-time bear Greg Branch of Veritas Financial. Plus, King Lip – chief strategist at Baker Avenue Wealth – breaks down his second half playbook for the tech sector. And, Courtney Garcia of Payne Capital weighs in on the opportunities she is sees as we head into the back half of the year.

Welcome to Closing Bell on, as Courtney said, this holiday short and trading day. I'm Scott Wapner here at Post 9, New York Stock Exchange. This make or break hour begins with the question of the moment. Can stock keep up their momentum and extend the rally into the second half? Fundstrats Tom Lee, he thinks so. In fact, he just raised his S&P target and will be here in just a second to tell you exactly why. In the meantime, your scorecard with 60 minutes to go on this 4th of July eve. The S&P trying to extend its 16% gain

over the first six months. It's moved into positive territory, albeit fractionally. Tesla, one of the big and best performers today after those record delivery numbers over the weekend. Those shares now the highest they've been since all the way back last September. NASDAQ's best start in 40 years,

bolstered by Apple, down slightly today, still holding, though, above that $3 trillion. $3 trillion in market cap takes us to our talk of the tape. Can the bulls keep charging ahead? CNBC contributor Tom Lee is Fundstrat's co-founder and head of research. He is with me, as you can see right here, post-9. Welcome. It's good to see you again. Great to see you, Scott.

So how timely. You just raised your your s p target to 48.25 so you were a little too bullish last year and you think you're not bullish enough for this year yeah um yeah we we're at the midpoint of the year uh we took a look at what could happen in the next six months and i think there are some positive catalysts coming up including you including inflation next month. The June CPI could fall to 3%. It really takes the pressure off the Fed. We've got the generative AI story that I think is gaining traction. And I know there's a lot of skepticism of this market, but the advanced decline line hit an all-time high last week.

So I think we build upon those gains. And we set new highs this year. Are you sympathetic to the skepticism that you say still exists? Why do you think people are still so skeptical of a rally you think can keep going quite substantially? Yeah, I think I understand why investors are skeptical, because we're in a hike cycle and the curve's inverted. But our view has been that this has been an inflation war. So the Fed's not trying to kill the economy. It's trying to kill inflation.

And I think they're winning. We, you know, I think it is still going to be a tough battle. You know, first half was a game of inches. It wasn't like the stocks went up every week. But I do think we're going to buy the dip regime. So I think it's still a street fight. But the bull's getting the upper hand. And we gain maybe eight, maybe as much as 12 percent.

Do you think the Fed thinks that you can can do one without the other in terms of killing inflation, without killing the economy? Because every time you hear Jay Powell and whoever else related with the Fed talk, they mention how the labor market is still strong, arguably too strong for their liking. Consumer is still too strong, strong for their liking. Consumer is still too strong, maybe for their liking. And the economy itself is hanging in there, I think, a lot better than even they expected it would. Yes, I think the Fed has an optics issue because, you know, 4 percent inflation doesn't look good for them. But the internals of inflation are really encouraging. Goldman had a nice piece today looking at that. And, you know, first of all, used car prices, which have been really pushing inflation, are set to roll over. That has nothing

to do with the stock market. Housing is finally starting to kind of catch up and will start to reflect market prices. That's rolling over. That has nothing to do with the stock market. The labor market's cooled off a lot. We'll get the Jolt's report this week, but average hourly earnings are growing at half the rate it was last year at 4%. That's where the Fed would like it, and that has nothing to do with the stock market. I understand, but I mean, the idea that services inflation is still too sticky for the Fed's liking has nothing to do with any of the things that you just mentioned that have come down a lot. And that seems to be the problem that the Fed has and why they're so apparently resolute in the way they talk about what they're still going to do.

That's right. You know, seven items make up services. And, you know, core services, ex-housing is running actually a pretty decent rate right now, like in the high twos. But financial services is being inflated because of higher interest rates. Travel could have a seasonal problem that's being fixed in the next two months. Because as we know, like when you look at things like airline demand, I mean, their price prices are cooling, even though it still looks like they're inflating. And then restaurants is tough. But, you know, that I don't know if the Fed wants to kill the economy just to get restaurant prices down.

But they need to kill demand to some degree. At least that's what they would suggest. And that's what, you know, Jay Powell seems to refer to anytime he makes comments about what's going to be ahead. Hike in July. Maybe there's another hike this year. All because they're not satisfied that they are full enough into what they would deem to be restrictive territory. That's right. I think that they're going to have an easier PR story after the June CPI comes out next week because headline CPI will be down to three. Now people can start to believe there's

real progress because you've gone from nine to three on inflation. And then they can argue that a lot of the 500 basis points of hikes is still going to kick in. So I don't know if there's the urgency to keep hitting with 25 basis point hikes. Yeah. You've been right, obviously, through through the first half of the year. But the skeptics would come back and say and they and they do. And the reason we talked about why people aren't fully willing to get on the train, so to speak, because they think that things still are going to come, that earnings are not going to live up to the hype, that multiple expansion that took you to where you are now can only go so far. And that's going to be upset by earnings that aren't going

to live up to what the expectations are, that they're essentially going to have a V-shaped recovery. Yeah, fair points. But the PE XFANG is 16 times. With a 10-year at 3.8, the PE should be closer to 18 or 19. Earnings revisions have been positive, and Q2 is coming out next couple weeks. But X FANG, sorry, X Energy, it's going to be up year over year. So we've already had a nadir, a bottom-end earnings in the fourth quarter, and now it's turning up. Advanced decline lines at an all-time high. So to me, I think investors are starting to buy individual names again. Is there a level of interest rates that makes you uncomfortable?

The two and five-year today are the highest they've been since March. Do you think about the prospects of rates going back up and what that could mean to your projection? Yes, I think if the if inflationary pressures resurface, that's a headwind because that means we're in the 70s again, not winning inflation, but still fighting it. And then I think the other risk is if expectations get too high. It's just, Scott, you know, our team talks to dozens, maybe hundreds of institutional investors every week. There's a lot of skepticism out there. So I don't think people are expecting much in the second half. That's why we can be more bullish. Yeah. Let's bring in somebody who's not expecting much good anyway in the second half.

CNBC contributor Greg Branch of veritas financial groups good to see you again i like when we do these i like when we do these conversations and debates between you and tom because you really could be hard pressed to find two incredibly opposed positions on the same thing so you heard what tom said what's your problem with it? So let's start with where Tom, well, I actually agree with Tom. The headline number may very well come in at 3% next month. And the question then becomes, are we going to look at the window dressing or are we going to look behind the window dressing? Because ultimately that will be because energy has declined significantly. Certainly energy is not pointing to a favorable or growth-oriented second path

globally. And it'll also just be because of the base effect, lapping that 9% from last year. And so I don't think the Fed's going to pay attention, nor investor support, pay attention to window dressing. I think they're going to look at core. And I think core, like it has every month since October, will grow 30 to 40 basis points. I think that that is the Fed's target. I do agree with your pushback on time. I don't think there is any immaculate disinflation. It's hard to get less demand without causing some slowdown in growth.

We can call it recession. We can call it destruction. We can call it whatever we want. The Fed's been very clear about this. In order to reach their target, unemployment needs to be significantly higher than where it is now to cause the proper demand destruction. Lastly, I'd say all of the forward indicators that I'm looking at, because by no means am I tied to a bearish view, I yearn for the day. You seem it, though. You sure seem it, though, because you've been tied to it for an awfully long period of time now, and you don't seem to want to untie yourself in any way, shape or form. Well, I'll be able to untie myself when we get an ISM that is not indicating a significant contraction going forward.

I'll untie myself when the purchasing barometer and the new orders barometers are not at recessionary levels. I'll be able to untie myself when credit conditions are not deteriorating and when we see how the consumer digests the $5 billion a month in school loans that we're about to have to pay back. And so with a deteriorating consumer balance sheet with estimates far too high, I think expanding the S&P is trading at more like 18 times, not 16, which is an inappropriate multiple for a slow environment. All right. I want to have Tom respond to all of that. What do you say?

It's a lot of things, but I'll just start with ISM. It was a bad reading, but it tells you a lot about positioning when you have a bad ISM and the market's up today, right? Because it's not a great number. It just shows you people have been betting on bad news, positioned to be more on the short side. And instead of getting this response of negative price reaction, we're getting rallies. On inflation, I find that there's a lot of conviction inflation sticky, yet headlines at three. I don't think most people would have said it would have been three by mid-year. Core is probably going to be 0.2 month over month this coming month, especially, it depends on what happens to used cars. It's not 0.4. It's really decelerating. And I think if we see it as an

inflation where the Fed's getting really ahead of this. But ultimately, the stock market is broadening. And there's less skepticism. and there's more companies speaking about better visibility. Those are things that normally cause fundamental investors to buy stocks. How about that, Greg? The fact that it was an easy market to pick at and say, you know what? This is a magnificent seven market and the S&P 493 doing nothing. And that's changed a bit over the last month, hasn't it? And I'm wondering why that doesn't move you in any way to see that market breadth is different than it was.

And that's a positive sign for why bulls feel the way they do. Yeah, if the duration was a little bit longer, I would agree with you that it's a positive sign. I don't know if any of us base our investment cases on four weeks of data. And so if we're going to talk about a longer series of broadening, then certainly that would get me to reconsider some things. Point of fact, I just want to clarify this, you cannot say that core is decelerating. You can say that you think it might. But the fact is, is that it has risen 30 to 40 basis points every month since October.

That is not a deceleration. And so it might it very well might. We can't say that. No, but sure. But I feel like you're in the same in the same boat, though, so to speak, of saying, well, because the Fed's done this, this should happen. And because, you know, earnings are too high in your mind, this should happen. And a lot of what you have said should happen hasn't happened. So at one point, you'd say, you know what, maybe what I thought was going to happen doesn't happen. Yeah, let me distinguish the difference. So I'm pointing at eight months of data, right? And the distinction I'm making is that if we have eight months subsequent to this conversation of the rally broad months, the likes of which we haven't seen since 2007 to 2009. And so all of the forward indicating things, all of the things that we look at tells where we're going, including the level of mortgage rates, including what's

happening in the housing market in terms of a rebound that's going to make this fight very, very difficult for the Fed. All of those things are not pointing in a direction where I can believe that we're going to have a 245 number next year are not pointing in a direction where I can believe that we're going to have a 245 number next year on the S&P, where I can believe that we're going to have eight or nine percent growth in the fourth quarter. See, I think that, you know, both sides are in a sense so dismissive of the other person's case, not you and Greg specifically, but generally speaking, whereas the bulls like you say, well, things are getting better, inflation's coming down. Bears like Greg say, no, the leading economic indicators all point to an economy that's going

to weaken even further. The yield curve remains inverted, which you don't pay attention to because you focus on the other positive things you're looking at. How can you both be looking at two markets, two economies and come to two distinctly different conclusions? Yeah, we're in a gray zone right where it's not decisive. Greg was saying on core at.44, last month, the main number, 43 of the 44 basis points of core was housing, used cars, and financial services. Financial services is Fed-induced. Used cars are about to roll over, and housing we know is going to roll over. So you now take core is actually running at.01 month over month without those three things. This is the internals that we look at. Those are,

I think, to us leading. But you're right. I think the aha moment is when the Fed can point to progress that we can no longer dismiss. And I think if inflation's got two and then next month's going to be, sorry, a three and it's going to be high three, I mean, high twos, low threes for a couple months, I just think the bond market and investors suddenly can't say inflation's a problem. And that's going to change how people view this inflation war. Greg, do you feel like, you know, FOMO is going to get the best of some bears, too, in thinking that, look, I got six months left and a large number of people miss this move because they weren't positioned for it. Not only mentally, psychologically, but the way they were literally positioned within the market. They missed it. So in some respects, they're going to chase it.

And the longer people are willing to chase it and realize that there may be fear of missing out, that's going to take the train down the tracks. And you're still going to be standing in the station trying to hail down the train as it's already gone down the tracks, because you feel like that things should be working in your favor, but they're not. It's look, it's a fair point. And my thesis coming to fruition is not necessarily working in my favor because it's hurting all of us. I do love to make that distinction. Look, I think June was a FOMO month. I think July up in until that Fed meeting where they raise rates will be a FOMO month. And then I think the FOMO will be over, much like it was in August when Jerome Powell had to come out and recertify and rearticulate his intentions. One area where I disagree with Tom that's relevant to what we're talking about now is I don't think housing is going to roll over. Right now, we have new bills accounting for about two

to three times their average in purchases. And that's because we have a base level of homes that are not hitting the supply side. Demand has not been destroyed in the way that the Fed would have liked. And we're seeing actually a reinvigoration of the housing market despite these higher mortgage rates bolstered by wage growth and those pandemic level savings. Well, that's exactly that's why. But that's again, like people would look at that and say, well, that's a positive sign that that's that shows me that, you know, the economy can withstand what what Fed's done. And it doesn't have to bring the entire economy to its knees. I see Tom shaking his head in agreement because that's the case that I hear. I'll let you take it over. Yeah. And in a way, the Fed is creating the housing

tightness because with high rates, it's getting it's making it difficult for builders to build and for construction to take place. So in a strange, ironic way, we need some easing of conditions. But I do, on your point of FOMA, Scott, I think it's actually really powerful because if you look at the years where the market's up more than 10% in the first half and you're negative prior, 90% of the time you have followed through in the second half with a median gain of 12. So there is real performance issue. People who've been recommending defensives have negative returns year to date,

whereas cyclicals are up almost on average more than double digits. So I think there's a really huge repositioning that has to take place. We're going to leave it there. I'm grateful for both of you being with us. You guys could easily both be grilling and chilling already, but I'm glad that you took some time to have this conversation because I thought it was a good one. I appreciate it very much. Have a good fourth. Greg Branch, we'll see you soon. All right. You as well. Let's get to our Twitter question of the day.

We want to know which sector will have the best second half tech, health care, energy or industrials. You can head to at CNBC closing bell on Twitter to vote. We share the results coming up a little later on in the hour. In the meantime, let's get a check on some top stocks to watch as we head closer to the end of this holiday shortened session. Christina Partsenevelos is here with that as always. Christina? Soon. Grilling and chilling soon. But let's talk about Overstock.com.

Will soon be a thing of the past after buying all of Bed Bath & Beyond's intellectual property for $21.5 million. And this after Overstock denounced it would eventually operate solely as Bed Bath & Beyond Online. Its stocks soared 20% on Friday, but today we're seeing the stock down almost 2%. Could be some profit taking. The shares are lower. The name change is already live in Canada, and it's going to launch BedBathAndBeyond.com in the U.S. later this summer. Several Chinese tech names are trending higher today after word that Treasury Secretary Janet Yellen would make her first visit to China in a bid to ease tensions

between the world's two largest economies. Take a look at JD.com, almost up 3%. PDD Holdings up over 3%. And even Alibaba up 1%. So JD and PD, one of the two best on the NASDAQ 100 right now. Scott. All right, Christina, thank you very much

for seeing just a bit. We're just getting started, though. Up next, your second half set up for tech. Can the sector's run continue as we head into the end of the year? A top strategist giving the names he thinks could see some serious upside. That's after the break. We're live in the New York Stock Exchange today. You're watching Closing Bell on CNBC. About 40 minutes to go in this holiday short and trading day. NASDAQ coming off its best first half in some 40 years. Let's send it over to Steve Kovach now with a look at what could be ahead for tech in the second half. Steve. Hey, Scott. Yeah, look at these runs so far. Apple's up 49 percent so far this year. Meta's up 138 percent. NVIDIA up an eye popping 189 percent.

Now, some catalysts look for through the end of the year for each of these names. Apple facing a fall in demand for its products. iPhone 15 will really have to wow people to make up for that. Over to Microsoft. Investors, well, of course, they're largely focused on AI, so expect to see more product announcements that they can actually make money off of throughout the year. But Alphabet, look out for their plans to monetize their AI tools and products like Search and Google Docs. They're still behind Microsoft on that front. As for Meta, that's the year of efficiency, of course, but it

still needs to show better monetization of its TikTok competitor, Reels. And over to NVIDIA, analysts still bullish long-term on the AI chip, darling, that we have seen some selling off days, sending shares lower over the last couple of weeks. And we're waiting to hear from the Commerce Department about more restrictions on AI chip exports to China. And finally, Amazon Prime Day coming up soon. That's going to be a good test of consumer demand ahead of the holidays. Not much going on with AI yet, though, as far as Amazon goes there, Scott. Yeah. You know what, Steve? I'm thinking, can you think of a tech earnings season with more

on the line, perhaps, than this one's going to be? I feel like we say that every earnings season. I know, but just given the fact that the gains that you showed on the wall that we made are so extraordinary, not to mention the fact of tech's outsized leadership role in getting us to this stellar first half. That just puts the bar real high in my mind. Yeah, tons of pressure. And this is exactly the same point I've been making all day, Scott. Not only that, these stocks have gotten so much more expensive on a forward PE basis. So they have to kind of justify those inflated valuations on top of all that. And I know we talked about this last week, but Apple, it's going to have a down year as far as revenue goes compared to last year, and it's still hitting all-time

highs in that $3 trillion market cap. Yeah, good points. Good stuff. Steve Kovach, thank you. Good holiday to you. You too. For more on the second half. Set up for tech, let's bring in King Lip. He's chief strategist at Baker Avenue. Well, it's good to see you. Welcome back. Hi, Scott. Good to be here. What is your outlook? How high is the bar now? The bar is high. I would say, obviously, the tech sector led the first half. I think you hit the nail on the head there is the expectations are high for the tech sector. A lot of expectations, high hurdles. So this earning season is pretty important for tech.

If they're able to meet those high expectations, I think the tech rally can continue. If they miss, even if it's a small miss, I think the shares of tech stocks could potentially be severely punished. Do you think they're going to live up to the hype? I think it's going to be name by name. I think for a company like NVIDIA selling at the multiples that it has now, it really needs to be a beat and a raise in order for the shares to continue at its current rate. It's hard for us to annualize the current numbers and extrapolate that into the remainder of the year. The hurdle is just too high. I'm just trying to think of how could they possibly beat and raise after they've already raised to such an enormous degree? How could we have expectations of even more than that? Yeah, it's tough for us to forecast that as well, not just with NVIDIA, but I would argue for a lot of other tech names as well. That's not to say we

don't like these names long term. It's just that in the short term, these shares have run so much. We really need earnings and valuation to catch up. Well, what about the idea of valuation? I mean, do you think that they've gotten way ahead of themselves? When you look at Apple, for example, which you own 31 times or so, is it justified in being there? Is Microsoft justified at a 33 or a 35 or wherever it sits today, 32? Yeah. Like I said, these are higher earnings hurdles. I would say as a company like Apple, $3 trillion in market cap. It's roughly 11% of the U.S. GDP. It's roughly 2.6% of world GDP. From that perspective, you can argue that Apple should probably be selling at $3 trillion.

Can it make another trillion dollars in terms of market cap? We really need to see earnings growth. And this year, it's actually pretty modest in terms of earnings growth. I think a lot of investors now are looking into 2024, which we expect to see a little bit of a rebound in earnings growth. So we need to see that in both Apple and Microsoft to justify the current valuations. What do you think of a more broad catch-up trade? Do you think that's in the cards that these sectors that are finally showing some signs of life are going to have a decent second half, some of the more cyclically sensitive stocks? I think it has to. For the S&P to do well in the second half of the year, I think you have

to have those other sectors perform better. One of our favorites right now is likely the industrial sector where it's going to see earnings growth like tech, like communications. It's selling at far lower valuations than tech and communications. You really need to see broader participation. Otherwise, it wouldn't really be a healthy market if only tech is leading this year. Yeah. What about financials? You have J.P. Morgan as one of your top holdings. What are your expectations there?

We like financials, too, from a perspective of valuations. You know, I think what we're seeing today, just the start of the second half, if you would, you are seeing some weakness in tech. You know, Microsoft is down. Apple is down. On the other hand, financials are up, you know, value is up. So there could be a perhaps a little bit of a handoff of the baton to some of these lower valuation sectors and names that could catch up in the second half of the year. Yeah, we shall see. We'll talk to you soon. Enjoy the holiday. That's King Lip, Baker Avenue, joining us today.

Here's where we stand as we head into the close. Up next, Payne Capital's Courtney Garcia is back with what's on her radar as we kick off a new trading month. And later, charting the rest of 2023, we have a technician standing by with the key levels he is watching. Closing bell right back. We're green across the board with about 30 minutes to go. We're back and stocks are near session highs as we wrap up the first trading day of the second half. So what is in store for the rest of 2023? Let's bring in CNBC contributor Courtney Garcia of Payne Capital Management.

Welcome. Thank you for being here. Thanks for having me. So I've had an unwavering bear versus an unwavering bull to start the show today. How would you describe yourself as we make the turn here to the second half? We have been a lot more bullish. We really have been all year and we remain bullish going into the second half of the year. I think really what you're seeing is the economy continues to be in a better place than people expect. The consumer is still spending. You're seeing GDP revisions are going higher. Earnings actually are not falling a cliff

like people expected. And, you know, you're finally starting to see the broadening out of this rally. And I think that's a lot more indicative that there's still room to run in these stock markets rather than just this magnificent seven that's been holding it up this whole way. Just because earnings projections are what they are doesn't mean they're going to live up to those projections, though. What makes you believe they're right? Well, I think ultimately it's going to come down to, is the consumer still spending, right? And people have been worried the consumer is going to fall off the cliff. But that is a majority of our GDP here in the United States. And I just don't see that falling off a cliff anytime soon, which is really what will affect these companies.

You're saying wages are continuing to stay stable, which is keeping people spending. People's savings has not come down as fast as it was expected. There's also about $7.6 trillion in unearned income. So people have money in cash. There's actually record levels of cash on hand. That cash is finally paying them some interest. So that's money on top of the wages that are there. And it's going to keep this consumer going. So you don't think that the market's too expensive at the multiple it's trading at right now? Parts of the market are, yes. And I think that's where

you don't want to be chasing a lot of your like long duration, specifically like your mega cap tech. So you think mega cap techs are too expensive? I do. Okay. So what's going to happen to them in the second half then? I just don't think they're going to outperform the same magnitude they have been. I don't think they're falling off a cliff. I'm not calling for a bubble or anything like that, but I'm not actively adding to those categories right now. We absolutely want to own them, but I think there's plenty of other areas in the markets right now. I think if you look at, like, industrials, for example, you look at materials,

I think there's other sections that are going to benefit from this whole idea of the U.S. is on shoring and there's a lot of infrastructure boom that's going to continue to happen. I think there's a lot more upside potential in other areas of the stock. So you think that the catch up trade is going to be legit, that these areas that have underperformed but have started breathing a little bit heavier as we've, you know, over the last few weeks, there's life there? Absolutely. Yes. But you don't think that mega cap tech is going to fall back at all? That's a big question. I mean, some of these companies have gotten overly expensive,

and I just don't think I can justify it at a certain point in time to continue adding money there. As a long-term investor, you absolutely want to own those things. But no, it's really, you know, when you're trading 50 times earnings, where the S&P is trading less those seven companies that are doing really well, 15 times earnings, like why pay that kind of multiple when there's plenty of other areas in the markets that can continue to work? Well, I mean, people would give you a long list, right? They would say, well, I'm kind of paying for some safety. I'm

paying for great balance sheets. I'm paying where the growth is. I'm paying for AI related growth, which we're still trying to figure out exactly how enormous that's going to be. That doesn't resonate. And it very well could be. I mean, the excitement has been artificial intelligence, right? That's why everybody's rushing to the mega cap tech trade. But I think the question is how much of that has been priced in. I think what happens in the stock markets is people tend to overestimate what's happening in the short term, underestimate what's happening in the long term. And I think AI is going to be a huge benefit for the economy and a huge benefit for your tech companies. But short term, I think a lot of that's probably already been priced. When a bear says to you, look, everything you said about the strength of the

economy makes sense. And you're right, because it has been a much stronger economic picture. And I think a lot of people thought it would be to this moment. But just wait, because it's only a matter of time, because inflation is going to be sticky enough that the Fed is actually going to follow through on what it says. And that's going to have eventual ripple effects to the economy. What's the retort to that? I hate the just wait comment because we have been just waiting. Yeah, we have. We have half now. And if you've called for it long enough, you're going to be right. Eventually, a recession will happen. It's a normal part of the cycle of the markets. But no, I don't see that anything is indicative of happening right now.

And yes, the Fed may increase interest rates again this month. That's what people are expecting them to do. But I think ultimately, they're going to follow what is happening with inflation, which is continuing to come down. And the Fed two years ago was saying, well, we're not even thinking about raising interest rates. Now they're saying they're not going to stop. But the markets aren't believing that because at some point in time they have to listen to the data.

Although, I mean, Fed funds futures are not pricing in cuts anymore. So, I mean, the market's getting its arms around the idea that the Fed's not going to come to the rescue. But it seems to be all right with that. And that's what we've been saying all year is we don't necessarily see cuts happening, but at some point in time they're going to stop raising. So we're probably going to be in this higher for longer rate environment, which, again, is not going to be helpful for some of your your high valuation companies, which, again, is why we're not adding money there. But yeah, you know, I think at some

point in time, they're going to have to stop raising. Have a good holiday. Thank you very much. All right. Thank you. Thanks for being here. Courtney Garcia up next. We're tracking the biggest movers as we head into the close. Christina Partsinovalos is back with that for us. Christina. Well, we have a cancer drug trial that disappointed and one social media app attracting millions of subscribers. Their stocks are moving. I'll have the details next. Less than 20 to go before the closing bell.

Christina Partsinovalos is back with a look at the stocks to watch. Christina. Well, let's talk about shares of Snap because they're up less than 1%. Maybe you're saying, that's not too remarkable. But if this stock closes in positive territory, it would be its longest winning streak since June 2020 when we're still dealing with COVID. The stock is over 16% higher just in the last two months. And that comes after it announced just last week that Snap plus subscriber services already included over 4 million subscribers after launching only a year ago. Shares of AstraZeneca are about roughly 8.5% lower after posting disappointing cancer drug

results. The phase three trial of its lung cancer drug showed it was able to slow down the progression of the cancer, but lacked details about how much longer patients lived overall. The company also reported some deaths in the trial, raising safety concerns. You can see shares are continuing to drop almost 9% now. Scott? Yep. Tough day. Christina, thank you. Enjoy the holiday. See you on the other side of that. Last chance to weigh in on our Twitter question. We asked which sector will have the best second half of the year. Well, tech had the best first. You know that by now. Will it carry over or will it be health care, energy or industrials? Head to at CNBC closing bell on Twitter. The results are right after this break. The results of our Twitter question, we asked which sector will have the best second half.

Will it be tech, health care, energy or industrials? Tech was the winner. Forty six percent of the vote. And a special announcement. There's a new member of the Closing Bell family, Lila Poppy Cohen, born Friday, six pounds, eight ounces to our supervising producer, Lauren and her husband, Zach. Look at that beautiful baby. Congratulations, guys, to Lauren and Zach. Of course, big sister Ella goes without saying we all cannot wait to meet baby Lila. You guys have a great holiday. Up next, a record delivery report. Tesla's latest numbers topping expectations in a big way. We break down what this could mean for the stock as we head into the second half. That and much more when we take you inside the holiday shortened edition of the Market Zone. 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. This holiday shortened one. Plus, Carson Group's Ryan Dietrich on why history points to a strong second half. And Phil LeBeau on Tesla's big deliveries beat and a big stock reaction at that. But I'll begin with Mike Santoli. So we're in green across the board. Twitter poll says it's going to stay the same. Yeah.

Green and it's going to be tech driven. Well, we do know trends tend to persist. You know, strength begets strength in the market typically, although you have to keep that in mind as you also recognize that there's ebbs and flows. I do think the market has proven a fair bit in terms of winning the benefit of the doubt, broadening out somewhat. You also have these sort of very modest pullbacks. So it shows you the supply demand really kicking in. That said, I do think it seems like more of an even trade to bet on. Everyone now is embracing soft landing.

You could have some variation from that view. Well, true. I shouldn't say everyone. I should say everyone is seemingly viewing the market through the lens of, well, that makes sense. Because even if it's only a period of time we have this window when soft landing seems plausible, the market's going to price that in. So, you know, again, I think that the market's won some points and you maybe should expect in the second half of the year at some point from some level a bit of a hiccup. Well, you need some healthy skepticism, though, still. And you've been pointing to the fact of, you know, sort of have we reached the point where it's getting a little bit of a little bit out of hand in terms of the euphoria around this move that we have. I would say there's room from where we are to get to outright pure. Everything is going right. Greed and over optimism. So I think that there's a

sense of, OK, nobody's fighting it as hard as they were a few months ago. We've chewed through a lot of the big picture worries and maybe there's not a big one out there hanging in front of us, but I do think there's room for the FOMO trade. Yeah. Ryan Dietrich, I think, is certainly one of the biggest bulls that we've spoken with who joins us right now, right? I mean, you see big things happening in the second half of the year. Yeah, we do, Scott. And we've been bullish, right, all year long. We came into this year overweight, seeing potential for new high this year. People thought we were crazy when we said it.

But let's just look real short term here, right? July. The S&P 500 has been higher nine of the last 10 Julys. The QQQ, the NASDAQ 100, has been higher every July since 2008. Now, believe me, there's lots of things to look at here. But you think about some of the things that Mike just talked about, some of other guests right the broadening out we've been seeing right you've got um you know consumer names breaking out relative to staples you got all-time highs and various advanced decline lines there's a lot more participation than we've seen in a long time now i sent you guys a chart hopefully you

can put it up what happens when you're up at least 10 for the year the rest of the year on a median returns up about 10 double the average But here's what's really interesting. I call this a sweet spot, Scott. When the S&P is up between 12% and 17%, so not way up, not way low, right in the sweet spot, the rest of the year has been higher 10 out of 10 times, almost 11% on median returns. So there's lots of factors, yes. But we've been bullish. We still think there's a rally.

Now, one more point here. Like Mike said, maybe we're due for a pullback sometime August, September, October. Perfectly normal, but we'd be a buyer of any weakness. I mean, I don't know. You mentioned Mike. He's our resident stock trader's almanac, and history doesn't always hold true to how it may seem. And this time is a little bit different on a number of accounts. Without a doubt. And by the way, Ryan has his own scroll there that he shares with everybody. And he's got a real good handle on the tendencies of things. I think what's interesting now is some of these very reliable patterns, one or more have to probably be wrong in some respect. When you're talking about whether it's when the yield curve

inverts and what does it mean for markets, what does the Fed do and how do markets react to it? We've kind of gotten through a lot of that. And I'm willing to allow for some play in those relationships here, in part because I think the yield curve got inverted in a hurry because you had the most transparent and aggressive Fed at the same time. And we got there early. And it's really telling you that inflation is going to be moderating more than anything else. So I'm with you. I think that, you know, the election year pattern has worked to an absolute T.

Midterm election, you bought it on that moment. You're up huge. That sort of takes you into around now, right through July is when that pattern tends to work out. In terms of how it's the interplay with the business cycle, I think it's still a big question because profits have been more resilient than you might have expected. The economy has not shown much give. The nominal growth still is sustaining equity prices at these levels. But valuations don't look great, but that's never a timing mechanism. Anything, Ryan, concern you? You can't just be overwhelmingly bullish. There's got to be something on your mind that says, well, maybe this could upset my view. Sure.

I mean, the Fed, we don't think they don't need to hike anymore. The Fed seems like they want to keep hiking. Valuations, like Mike said, are a little bit stretched. But one thing I want to point out here, the hard versus soft data argument. Just today, right, the manufacturing data wasn't very good. Look at last week, though. That's the soft data. The hard data last week, we've seen CapEx starting to bottom and go higher. So we've never seen a period like this before.

We're going to continue to follow the hard data, not so much those surveys, which, again, people are bearish for whatever reason. But the hard data says don't be so bearish and look for higher prices. All right. Wish you the best. Have a good holiday. Ryan Dietrich. Phil LeBeau. Thank you.

Quite a move for Tesla today. Last I checked, better than 6% off of those record delivery numbers over the weekend. We're making a run at a trillion dollar market cap again. And I wouldn't be surprised if they get there, Scott. Look, if you are a Tesla bull, there's a lot to like in this delivery report. Well above expectations, 466,000 vehicles delivered in the second quarter. The estimate was 445,000. They have delivered 889,000 in the first half of this year. They're halfway towards their guidance of 1.8 million vehicles being delivered this year. And by the way, the expectation is for deliveries and production to increase in the second half. One reason why Adam Jonas at Morgan Stanley upgraded his expectation to 1.9 million deliveries. We will find out what happened with margins as they had to cut prices and stoke demand in the second quarter. We get those results July 19th after the bell.

That's when Tesla reports its Q2 results. And I also want to take a look at shares of Rivian getting a real nice pop today. If you look at Rivian going back to April 25th, it's up more than 60%. Q2 deliveries up more than 60% relative to Q1. And they also reiterated their guidance that they expect to produce at least 50,000 vehicles this year. So Rivian continues to move higher as well. Scott, back to you. Yeah, I love Mike's opinion of this, which I had already sort of heard earlier, somewhat incredulous, the fact that, OK, the delivery number comes in where it does. And we're so surprised that the stock's up more than 6%. Yeah, you know, it's certainly an outright beat in

numbers, but it does just keep you on track for the annual run rate that we were expecting. Adam Jonas last October, I believe, took his 2023 volume estimate from two million down to one point eight. Stock was lower than it is right now. It continued to go down around one hundred at its low. And now the stock's higher. He takes it from one point eight to one point nine. We're celebrating. So to me, it's either it's a car company that is outperforming expectations in the near term and playing some market share games and winning on that score and margins be damned for the moment. Or it's just kind of a vehicle for everybody's hopes about the technological future. And it's worth a trillion dollars because Musk is a genius and

they're going to figure it out over time. So either we're trading on today's volume number and it's a $10,000 or $15,000 car beat and we've added almost $500 billion in market cap from the lows. The math doesn't always work out in terms of what's already built in. That debate's going to continue into the second half for certain. And again, there's no right or wrong price for this thing. It traded at a $1.2 trillion valuation once. Nothing says it can't get there again. Our thanks to Phil LeBeau, of course. Wish you the best Fourth of July holiday as well. All right. So here we go. We're going to make the turn. We've made it today, really, into the second half. But volumes, obviously, like the real question, are we going to have a substantial catch-up trade? And that

is going to, in large degree, determine where this market really, really goes. Yeah, I mean, first of all, banks are up a couple percent today. So that would be an element of any catch-up trade. The fact that we were up 15%, 16% in the first half in the S&P with banks down 20% was itself remarkable and probably not sustainable. I don't know that a broadening out always equates with absolute higher prices than the S&P 500. The big stuff has to hold together as well. But I think there is a chance of that. And as Ryan was saying, more stocks participating. Forty percent of the S&P is up more than 10 percent this year. So it's not as if it's only been a handful of stocks. But you definitely want to

see some follow through, some real demand hit all corners of the market for it to keep going. All right. So we've come back green across the board, really, as we end this holiday short in session. Dow looks like it's going to barely hang there, although it's trying to settle here.