Closing Bell - Closing Bell: Can You Trust the Bullish Breakout? 6/13/23

Episode Date: June 13, 2023

Can the bullish breakout really be believed? Anastasia Amoroso of iCapital gives her expert market take. Plus, AMD held its AI investor day. Top chip analyst Stacy Rasgon of Bernstein explains how investors should trade the big event. And, Apple got hit with a downgrade from UBS today. Steve Kovach explains why the firm is turning lukewarm on the company after its record run… and what it could mean for the broader market. 

Welcome to The Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make-or-break hour begins with what else? The rally. Inflation drops to its lowest level in two years now. All eyes now turn to Washington, where the Fed will announce its next move on interest rates in less than 24 hours. There is the countdown clock, and here is your scorecard. With 60 minutes to go in regulation, the Dow on track for its best month since November. Industrials, materials, financials, energy, all posting strong gains today. New 52-week highs for the Nasdaq and the S&P 500 as well. Even as tech takes a little bit of a breather, it leads us to our talk of the tape, the bullish breakout, and whether it can be trusted or not. Let's ask Anastasia Amoroso, iCapital's chief

investment strategist, with me here once again at Post 9. Welcome back. It's good to see you. Good to see you. Do you trust this move? I do trust it. Look, Scott, you know, there's three reasons why the markets have been rallying this year, which is inflation has clearly been slowing, and we saw that in the CPI report. I mean, there's a lot of good news that I think the Fed will take solace from. The fact that month-over-month rate of change is just barely there. The fact that the super core measure dropped to 4.6% versus the 5% that it was before. So inflation is clearly slowing. And that means, in turn, that the Fed should be close to pausing.

And that's also great news for stocks. And then the third point is I love the cyclicals rally because guess what? This economy has been surprising to the upside. Earnings revisions have actually been going up. And that's why this breadth of the market has been broadening out. So you feel like the bulls have absolute control at this point of this market? I do. Look, I do want to say that near term we might be approaching some sort of stretch levels. I mean, what's been happening over the last few weeks now has been this capitulation into risk. And it started with systematic investors, the CTAs, commodity trading advisors that have piled in. Then you've had hedge

funds that have been chasing technology, and now they're chasing the cyclicals like financials. Now you've got mutual funds that are starting to get back in there. And you're also kind of at the peak of corporate buybacks open window. And at the same time, the S&P relative strength indicator is now actually above 70. So I do feel like, you know, the bulk of this capitulation into risk near term may have happened. But you take a step back and you look at how much cash has gone into bonds, how much cash has gone into cash. You know, I think that longer term rally does have legs. What if we're getting too excited about this print that we got on the CPI today? Wolf Research, for example, says, quote, We continue to believe this year's rip hire has been a classic bear market rally.

Inflation is going to remain sticky. The Fed will be higher for longer and a recession will hit later this year. Isn't that better odds than not of what's going to happen? Well, people have been calling for a recession for a long time now, but I think the Fed pause may actually be real and the Fed may ultimately pause at 5.5%. The reason I say that, Scott, is because if you look at this really important relationship between the Fed funds rate and the core PC inflation, there's a gap that finally opened up that's positive. For the long time, the Fed has been chasing their tail, but now there is a delta there. So the Fed can just stay pat and inflation has slowed down already and is on track to get to 3.6%. So you think the Fed's done?

I think the Fed is really close to done. You know, there's another... Close to done and done are two different things. Well, I think we're talking about 25 basis points. You know, I think the Fed is really close to done. You know, there's another... Close to done and done are two different things. Well, I think we're talking about 25 basis points. You know, I think they're close to done in July. There's a 60% probability that they go another time in July. But it's that delta that matters. You know, if they just follow the consensus forecast, then the core PC goes from 4.6 to 3.6.

And by the way, there's a credit cycle tightening that's playing out. So maybe they don't have to do much more than just be close to done. What do you make of what's happened with Nasdaq, which is, you know, like 30 percent on the year? Jonathan Krinsky, I mean, there are a lot of nonbelievers, OK, still now. Now, maybe that's just because the last 18 months have been so turbulent for the market. And given the 500 basis points that the Fed's already hiked and the fact that the economy is weakening off of where it was, some are not willing to sound the all clear. He says, well, we feel a bit like a broken record. Today's gap up on NASDAQ, NDX is all the hallmarks of a parabolic blow off top as the boat is getting

very one sided. Now, I know that it's gotten a little more broad in the last few sessions. But how about that point. Yeah I'm a believer in the Nasdaq and for a very simple reason is stocks they typically deliver above average earnings growth rate. They typically outperform over a longer period of time. And if you look at a lot of companies in the Nasdaq they are growing their earnings at double the S&P 500. Now, having said that, if you look at the valuations of technology, for example, relative to its 10-year average, it's a bit extended. If you look at communication services, also extended relative to the 10-year average. So I do think we have a rotation trade in the making. As I mentioned, all the hedge funds have chased TMT. Guess what? They've been selling them for the last week or so, and they've been buying back into financials. So it's all about the perspective. But if I get a pullback in the Nasdaq, which I honestly hope we do of these very high levels, I want to step back in, given that's where the earnings growth rate is. I want you to hold your thought for just a moment, because we've been watching these events

down in Miami. We do have breaking news on the arraignment of the former president, Donald Trump. Our Eamon Javers has the very latest for us. Eamon? Scott, that's right. We are now learning that the former president, Donald Trump, has pled not guilty on 37 counts in a federal courtroom in Miami. That arraignment going on right now as we speak. You see the live pictures there from outside the courthouse in Miami where quite a crowd has gathered to witness the history of the first former president of the United States to face federal charges in court. The former president, we are now learning, has pled not guilty on all of those counts, the 37 counts involving some involving Espionage Act and others involving allegations of mishandling classified documents of the highest national security order, Scott. So we'll wait to see the former president emerge from the courtroom and his motorcade make his way out of that area. What we're expecting is that he'll now head to New Jersey this afternoon,

and he might speak before supporters in New Jersey this evening. So we'll wait to see public comment from former President Donald Trump. But we now do know that he has pled not guilty Scott Do we know a min when we will? actually get a trial date and and then we can start thinking about the What I would think is an extraordinarily difficult process of seating an impartial jury of mr. Trump's peers And we don't know when we're gonna get. What we might get from the magistrate judge today in the process that's going on behind closed doors right now

is some indication of when the next appearance is going to be, when some of the preliminary activities will be, and that will give you a sense of the pacing, at least that the magistrate judge is setting up. But as to when this trial might actually happen, that's anybody's guess at this point. It could be a long time. And then to your point, the question of seating a jury will be difficult. Add on top of that the publicity of

having a current presidential candidate and the frontrunner for the Republican nomination being the one who is facing these charges. That adds an element of complexity to it. And also the fact that what you've got at core here are classified documents of a high degree of secrecy that the United States government is not going to want to release under the open court record. So you have to have a trial about documents where you can't even necessarily reveal those documents to the public because of the nature of the secrecy of them. Some of them involve allegedly U.S. nuclear weaponry secrets. So the challenges here are really unprecedented, Scott. Former president, very popular in that state, winning in 2020, Eamon,

as you know, by a wider margin than he did in 2016. Yep. And the selection of South Florida here for the venue for these charges is seen as something to the credit of the Trump defense team. That is, they'll be able to use that to their advantage because you do imagine that there are more Trump supporters sort of in the jury pool generally in South Florida than there would be in the District of Columbia where I'm sitting, which is a very blue city, and would have fewer, just by the nature of the jury pool here,

fewer Trump supporters who would show up on that jury. But the jury selection, as each side gets to question and knock out potential jurors, you can only imagine what that process would be like in this case and how they would sort through all those issues. It's just enormously complicated, Scott. Yeah, no doubt. Eamon, thank you very much. That's Eamon Jarvis with the latest for us on the events down in South Florida. Let's bring in Ed Yardeni now of Yardeni Research as we expand our conversation on the market. Look, Ed, I mean, you put yourself out there ahead of most in suggesting that maybe this was going to have a happy ending after all and be, you know, not the economic disaster

that some had been calling for. You think the bulls are now in charge, Ed? Yeah, I think so. I thought at the end of October that we made a low in the bear market on October 12th. There was a tremendous amount of pessimism and there was a lot of talk about a recession, as you know, and there's still a lot of talk about a recession. I think the pessimists are now saying that once the consumer runs out of excess saving, that's when we're going to fall into recession. So now I think they're actually talking about 2024 as when we get the recession. I just don't agree. I think there's a tremendous amount of forward momentum in the economy, particularly in the baby boom generation. They're retiring and they got 73 trillion dollars of net worth, which I think they're going to start spending as they do retire. You don't think it's too soon to sound the all clear, though?

We just simply don't know what the impacts are likely to perhaps still be from that 500 basis points that the Fed's already done. Right. I think that's really been the main main point of of the bears is that we've had an unprecedented increase in the Fed funds rate of 500 basis points, at least in the past few decades. The last time that happened was when Paul Volcker tried to bring inflation down and could only do it by pushing interest rates up to levels that caused the recession. I don't think history necessarily repeats itself. It does rhyme. But I think in this case, we've been in a recession, as we've been discussing in the past, Scott. It's a rolling recession. And I think it's affecting different industries at different times. And I think what the pessimists have been missing on the economy is a tremendous amount

of fiscal stimulus in the economy, the tremendous trend towards onshoring. And consumers have the wherewithal to continue to move the economy forward. So I wouldn't say that, I never called it all clear signal. There's always something to worry about. But at this point, I think that the market is making a pretty good account of itself. Do you need the Fed to be completely done for your forecast to come to fruition? It would help. It would certainly help. And I think the market is thinking along those lines. I think the Fed is done.

I think they've been promoting the idea that they want to get the Fed funds rate up to a restrictive level and then keep it there. They don't want to push the Fed funds rate up too high, get a recession, then have to force it back down without completely being sure that they brought inflation down. So I think they've been pitching the storyline, which is working out pretty well, that they get to restrictive. And I think five, five and a quarter percent is restrictive enough as evidence by the banking crisis. I think they just leave it there through the end of the year. I think the market has been wrong about the notion that the Fed is going to lower interest rates. I think they just leave it there through the end of the year. I think the market has been wrong about the notion that the Fed is going to lower interest rates. I think they keep them at five and a quarter through the end of the year. And then maybe

next year they start to consider lowering it. You know, I wonder, Anastasia, whether you think the next move from the Fed might be a cut. Now, I'm not saying it's going to be, you know, tomorrow, next month or three months after that, but that the Fed may in fact be able to be done because of the inflation trajectory and that the next move, whenever it is, may be a cut. Well, maybe the next move after July will eventually be a cut. But I agree with Ed that I think the objective of the Fed right now is to get to five and a quarter, five and a half and keep it there and let the inflation convincingly go down. For the Fed to cut, they really have to see a recession. And, you know, as Ed has been pointing out, I don't think recession is in the cards for this year.

I mean, this consumer, we talked about excess savings, this consumer still has excess savings. This consumer still has a job and wage growth that's actually still rising year over year. And by the way, this year, the Nasdaq is up 35 percent. We certainly hope that a lot of people have participated. You know, the S&P is up close to 14 percent, you know, once again. So the household net worth has actually increased this year. So that makes the consumer that much more resilient and pushes off the recession. Speaking of the Nasdaq, do you have a problem with the fact that the market's been very top heavy? Not really, especially now that it seems to be broadening

out. Again, the bearish scenario has been that it's top heavy and therefore it's vulnerable to decline. But I think we may be looking at a structurally higher forward P.E. in the market because you've got eight stocks that account for 25% of the S&P 500. And they look like they're going to continue to account for a large share of the market cap of the S&P 500. And I think it also looks as though they're going to be highly prized, meaning that back in January, when they were about a 22 forward PE, there were actually bargains. And now they're more like 30. I think the market is broadening. As Anastasia pointed out, there's a lot of participation now in

industrials, materials, energy, financials. That's all good. Today there is. Today there is. I'll certainly give you that. Are you are you a bigger believer in a cyclical catch-up trade? Well, absolutely. Look, the market was broadening out from October 12th to basically March 8th, 9th, 10th when the banking crisis hit. Then everybody jumped out of financials and jumped back into the mega cap eight stocks. I like the action I'm seeing here where we are broadening out into other sectors of the market, and I think it is sustainable. Anastasia? It is really nice to see the broadening out of the market and the catch-up in the cyclicals trade.

And, you know, partially it's because of the U.S. economic resilience, but I also think China and the stimulus talk that's really heating up in China is a really, really big deal because all of a sudden if China does manage to stimulate domestic consumption, that spills into our commodities, that spills into industrials, that spills into manufacturing, and that can help the S&P in turn as well. And I also want to pick up on the valuation point. I mean, if you look at the S&P 500 valuation, if you take out information technology and if you take out communication services,

the P.E. on the S&P is about 17 times versus the 17.6, which is a 10-year average. So it's actually not that stretch if you don't count the technology names, which I think structurally deserve a higher valuation. And then the last thing that really makes me encouraged, if I look at even some of the frothy components of the market, at least that they were in 2022, if I look at the IPO, recently IPO companies that IPO, well, their valuations have gone from 24 times to about 5.2 today. And they've sort of been staying there, which tells me the valuations are stabilizing. And that's good news for markets. Ed, last point to you. I mean, what about the idea of competition and wondering whether you can really take significant steps forward

in the stock market as long as the bond market presents opportunities to go elsewhere. And until that dynamic changes, you're not going to be able to take big leaps and bounds forward. Well, there's just so much liquidity still in the system. As Anastasia pointed out, there's probably still about half a trillion dollars in excess savings. But we also look at demand deposits are actually up about three trillion dollars above their pre-pandemic trend line. So in other words, I'm not going back before the pandemic. I'm just extrapolating the trend line and saying there's a tremendous liquidity has never been so liquid, if you know what I mean. Demand deposits is a fraction of M2. It's the highest it's been in a few decades. So I think there's a tremendous amount of liquidity, and I think it can go to both

asset classes. We'll talk to you soon. I appreciate it very much. Ed, thank you. Anastasia, to you as well. Thanks for being here at Post 9. Let's get to our Twitter question of the day. We want to know, will the Fed raise interest rates again this year? You can head to at CNBC Closing Bell on Twitter to vote. We'll share the results with you a little bit later on in the hour. By the way, do not miss Double Lines. Jeffrey Gunlock, he's back tomorrow. Of course, it's Fed Decision Day. We'll get his first reaction to it tomorrow right here on Closing Bell. Can't wait for that as always. Let's get a check on some top stocks to watch as we head into the close. Pippa Stevens is with us today. With that, Pippa. Hey, Scott. Well, Urban Outfitters

is higher today as Morgan Stanley upgrades the stock to overweight from equal weight. Analysts say the stock's valuation is relatively low and see a number of factors that could fuel a turnaround, including the back to school season. That stock hitting its highest level since November 2021. Elsewhere in retail, Ulta is also in the green. Loop Capital upgrading that stock from hold to buy, saying its luxury brand expansions could fuel multi-year comps growth. Those shares up roughly four and a third percent today. Scott?

All right, Pippa. Thank you, Pippa Stevens. We're just getting started. Up next, AMD holding its big AI event today. The stock is falling. CEO Lisa Su just wrapping up her keynote speech. Top chip analyst Stacey Raskin is with us once again on how investors should trade that big event. We'll talk to him after this quick break.

We're live for the New York Stock Exchange. You're watching Closing Bell on CNBC. Dow good for 133. Back after this. Welcome back, shares of AMD. Falling this hour. There you go. Down 2.2%. back after this. Welcome back, shares of AMD. Falling this hour, there you go, down two and two-thirds percent. CEO Lisa Su updating investors about the company's product roadmap at its event

in San Francisco. Company giving a sneak peek at its upcoming line of AI processors aimed at challenging rival NVIDIA. Joining us now to break it all down is top chip analyst Stacey Raskin of Bernstein. Welcome back. Good to be here. Sounded pretty good. Why is the stock down? Look, it's just high expectations and sell the news. You got to remember the stock was up 30 percent like over the last month and almost 100 percent year to date into the event. So I think it's just that we didn't hear anything was bad. Like, it sounds fine. My biggest takeaway, would be that they're very early on this journey. I think maybe that's more of it. They didn't really talk about the AI roadmap until the very end.

They talked about some new products that are coming. The products that are specifically for AI, it's called the MI300X. It's not even sampling until Q3. You'll start to ramp it in Q4. But by then, like NVIDIA's H100 would have been shipping for a year. They've got a ways to go, basically. Oh, so they're playing some pretty good catch-up, even as, you know, they're trying to position themselves, obviously, as the closest competitor to

NVIDIA. Lisa Su, I mean, the total addressable market numbers that she threw out today, going to go from $30 billion to $150 in just four years well i mean to be fair if that's true it's actually probably pretty bullish for nvidia i mean that 30 billion this year that's effectively nvidia's data center revenues this year so that's going to grow to 150 who knows right but i mean it's going to grow um i think their hope is is to know to catch up by the coattails and ride along with it right i mean i don't think anybody would argue that even over that period that they would gain a leadership position over nvidia i don't think so i don't think it will be

a repetition of what happened on the cpu side but i think the hope is that the market can be big enough that even if they're relegated to a smaller piece of it, that smaller piece can still be meaningful for them. Interesting to me as I look at your coverage list, Stacey, you know, obviously NVIDIA, you're outperform, Broadcom, you're outperform. I'm thinking of the real pure player AI companies. And then if you look at AMD, if you want to lump those three in together, you only have a perform on that. And I'm curious as to why. Well, think about it, right? So NVIDIA, if we're really arguing AI plays, NVIDIA, 70% of their revenue this year is going to be data center. And it's

all AI, effectively. AI and accelerated computing. Broadcom, 15% of their semiconductor revenue this year is AI. And that's design services for custom chips for AI as well as networking. And they said next year that's going to be 25%, which, by the way, for Broadcom would suggest that their non-AI semi-business could be down double digits, and they could probably still grow the semi-business next year if the AI piece is going to grow that much. AMD this year is effectively going to be zero, or pretty close to zero relative to AI. And then next year they'll get some. It's probably single digits like it's actually not that big as of yet. Stocks are near double, though, year to date. It's pretty remarkable.

Sure. Like they've done. I'm not going to knock them. They've done very, very well in there. You know, they've been killing it on the CPU side and everything. That's that's all fine. Certainly, the shares have cut quite a bit over the last month or two or three, certainly since NVIDIA reported. On the back of the AI play, everybody's looking for alternatives, other ways to play the obvious, which is NVIDIA. And AAB seems to be the next in line in the sense that at least they have a roadmap with products on it that seem reasonably credible. But it is going to take time. And there's a lot that is now getting built into the stock as people have been getting excited about it. But I mean, in your universe, does this end up being a haves versus have nots as it relates to AI? You know, it kind of already is. My own personal feeling, Franklin, we could debate it, but I feel like if you're really going

to be benefiting from AI, you're probably already seeing it. And in my coverage, I cover 10 stocks. I don't cover 40, but in my coverage of 10 stocks, it's NVIDIA and Broadcom and not really very many others. Some of the others that have talked about it are obviously our names like NVIDIA and Marvell and others, and you can try to size it. But I mean, it really is NVIDIA and then maybe everybody else, like, quite a bit below. NVIDIA really is the purest way to do this, though. Yeah, I'm not going to debate you on it.

You're like the top chip analyst. I'm not that stupid. Lastly, Intel. In talks to be the anchor investor in ARM's IPO, what's your thought here? Look, they have mobile. Maybe they'll have a little bit of ARM. I wouldn't read too much into it.

It's not like, you know, maybe they'll buy a little bit of ARM. I wouldn't read too much into it. It's not like, you know, maybe they'll buy a few hundred million dollars worth of stock. They'll have a little bit of skin in the game on the Foundry business. They've already got a partnership with ARM on the Foundry side anyways. So maybe it's in their best interest to make sure that IPO goes well.

I don't know that I would read too much into it, though. But I saw the news reports today. Yeah, all right. Stock's getting a nice bump. Stace, we'll talk to you soon. Thank you, as always. Yeah, you bet, you bet. Yeah, Stacey Raskin joining us once again

on Closing Bell. By the way, Lisa Su, the AMD CEO, Dr. Lisa Su is going to be on overtime today. That's four o'clock Eastern right here on CNBC. Don't want to miss that. Up next, spicing up the IPO market. Restaurant chain Kava

expected to go public this week. Does that mean a thaw in the IPO market is in the works? We will discuss. And throughout the month of June, CNBC is celebrating pride, sharing stories of corporate leaders with you. Here's Barry's Boot Camp founder and CEO, Joey Gonzalez. I grew up gay and Latino in a very homogenous part of the United States. And I was definitely made fun of, left out. But what that did to me was it really fueled the fire from within and inspired me to want to grow up into an adult that

built a community and a culture of inclusiveness at Barry's. And I feel like that's living proof, A, that adversity can fuel greatness and B, that it's our will and our spirit that dictates how we handle the deck that we're now. We are back on Closing Bell. The IPO market might finally be showing some signs of thawing. With restaurant chain Kava on deck to make its public debut this week, that company raising its valuation target to $2.23 billion. My next guest says the move could be a good sign that risk capital is, quote, putting its toes back into the market. Let's welcome in Aswath Damodaran. He is NYU professor of finance. It's good to see you.

I guess it's taken a long time to put a toe back in the water, hasn't it? Well, it had a long run, which is a really great one, one of the best runs of all time. So it was coming back from an all time high in 2021. So I think that being on the sidelines was warranted. And I think it's taken about 12, 16, 18 months for it to come back. But this is just a very small experiment, a $2.3 billion IPO. I'll be watching to see what's happening in the next few months to see if it's come back. But this is just a very small experiment, a $2.3 billion IPO. I'll be watching to see what's happening in the next few months to see if it's really back. So we have this debate now every day, whether this is a legitimate bull market, whether the bulls are really back in

charge. When you look at the valuation of this market relative to where the economy is and interest rates, what do you come to the conclusion of? Do you think the market's fairly priced? Is it too expensive or not? At the start of this year, when I looked at the S&P 500, I put in a range of about 4,300 to 4,400. If the economy did not go into recession, inflation was benign. And in many ways, the market seems to be pricing in that scenario. The problem with pricing in that scenario is you have now plenty of room for the downside. If you get an unexpected surprise in either one, inflation stays high or the economy actually goes into recession, I think the market is some weak spots.

But by itself, I mean, I can live with the 4300, S&P 500, given where we are today with the economy and inflation. Yeah. You couldn't live, though, with NVIDIA, where the valuation had gotten stretched to the point where you sold it. You said at the time, quote, it was pushing the absolute limit of what sustainable value is. That's an interesting quote to make about a stock that has always traded

at an extremely lofty valuation, no? That's absolutely true. The same thing can be said for Tesla, which is these are stocks that have always been priced, not valued. That doesn't mean that somebody who cares about value cannot hold them. I've held NVIDIA now for five years, and I'm happy that I did. But at $400 per share, I actually backed out what you would need to justify that price. And NVIDIA would basically have to decimate or dominate the entire AI market for it to be justifying this price. And I'm not willing to take that bet.

I mean, there's too little upside left when you price that in. I mean, the stock, though, was cheaper the day after earnings than it was before because of that unbelievable revenue projection that the company came out with I mean it has been this buzzword that pushes every company forward the two companies that have really something material to show for it are Microsoft and Nvidia and both have benefited in Nvidia in particular so I've you know I I I the story makes sense. The pricing doesn't. I'm wondering how you're thinking then about just AI stocks in general. We call you the dean of valuation, and people look to you as the arbiter of what a fair valuation at times is. I'm wondering if you're thinking about valuation as a whole differently today than you have in the past, if you're forcing yourself to be more open to thinking about

higher valuations than you otherwise would, because how do you value the impossible to know? And in a sense, that's what AI is. The minute you pay a price, you are valuing it. The question is whether you want to value it explicitly or implicitly. So when somebody says, I'm not willing to value AI, but I'm going to buy NVIDIA, whether you like it or not, you're buying into the NVIDIA valuation. So I'd rather make my best estimates and be hopelessly wrong than not make estimates at all. And AI is changing the conversation, And I think it has the potential. Unlike, you know, the cloud or the metaverse where I felt I could not quite see the magnitude of the business that came out of both worlds. With AI, I can see changes that could be pretty dramatic to the way we live and work.

And those changes always have valuation consequences. I mean, NVIDIA reminded us of just how difficult this is going to be to value, right? I mean, the analysts had no idea. Presumably, the people who comb over these balance sheets and know the estimates better than everybody else were as blown away as the layperson was by what they delivered in terms of their guidance. So if they don't know, who does? With companies with this much growth, the answer will never be by looking at past financial statements. It is in the story and assessing whether the story you're telling about the company

is possible, plausible, and probable. I call it the three P-tests. And with NVIDIA, the possibilities have expanded, obviously, with AI. The plausible scenarios are much more upbeat. And the question is, what can you bring into the probable that could justify paying $400 per share? And it's on that last leg that I basically gave in on NVIDIA, because I can see the possible and I can see the plausible.

But I can't see this as a probable where you can justify the $400 stock price. All right. We will revisit. I'm sure. I look forward to doing that as well. Aswath, thank you. Appreciate it very much. Aswath Damodaran again from NYU. Up next, we're tracking the biggest movers as we head into the close. Pippa Stevens is back and standing by with that. Hey, Pippa. Hey, Scott. We've got details on the energy stock that Goldman Sachs says you've got to own. That's up next. Twenty until the closing bell. Let's get back to Pippa Stevens now for a look at the key stocks to watch. Hey, Pippa. Hey, Scott. Biogen is under pressure today

as Reuters reports that its Alzheimer's drug candidate could face skepticism from European regulators. This comes just a few days after an FDA panel unanimously recommended approval for the drug. Biogen shares have since given back most of those gains. And Devon Energy is higher as Goldman Sachs upgrades the stock to buy with a $58 price target. Analysts cite an attractive valuation after its recent underperformance. The stock is still down around 17% this year, but getting about a 2.5% boost on the heels of that upgrade. Scott, back to you. All right, Pippa. Thank you very much. Last chance to weigh in on our Twitter

question, by the way. We asked, will the Fed raise rates again this year? You can head to CNBC Closing Bell on Twitter. We'll bring you the results right after this break. Let's get the results of our Twitter question. Will the Fed raise rates again this year? The majority of you said yes, two thirdsthirds. In fact, 61.5%. Up next, today's crucial CPI number sending stocks higher. We'll tell you what today's data might mean for the Fed decision tomorrow when we take you inside the Market Zone. And by the way, do not miss Double Lines.

Jeffrey Gundlach tomorrow, his first reaction to that Fed decision. That's tomorrow right here on Closing Bell. We're right back. 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. Plus, Wells Fargo's Scott Wren shares whether he's a believer in this breakout. Our Steve Kovac on why UBS turning lukewarm on Apple after its record run. Mike, I'll begin with you. Quite a day and a nice broad based one at that. Yeah,

the market continues to kind of answer the gripes in a pretty satisfactory way. We're at a level, given what the market, the S&P 500 has done, to where the trend starts to become your friend in the sense that when the market has been up 20 percent after a bear market, up 90 percent of the time 12 months forward. When the markets hit a new 52 week high, up 90 percent of the time 12 months forward. Doesn't say a lot new 52-week high, up 90% of the time 12 months forward. Doesn't say a lot about what happens between now and let's say 6 to 12 months out, but it shows you where the bias lies. Now, within that, you could say the parts of the market that really have been leading us here are piping hot, going into a Fed meeting. It seems like they need to kind of take a break, and we'll see how the overall market might respond if we do get that.

I'm on the lookout for a couple of things. One is this general sensibility of victory lapsed by bulls, shaming of the bears, that kind of sentiment that feels like we got this already, that might be coinciding with some sort of a short term breather in the market. The other piece of it is, I guess you'd have to say the going into the Fed meeting, it could be this kind of culmination moment, and we're watching yields. The five-year yield has had a pretty good move up today. We're absorbing a lot of supply. We're trying to assimilate this idea that we got down to 4%-ish on the headline CPI.

What does that mean from here to there? Scott Wren, are you being shamed by any bulls? Well, I tell you, Scott, we think 4700 is where the market's going to be at the end of 2024. But as Mike said, between here and there, we think we're going to have a bumpy ride here. So we're expecting a recession. We're not expecting the Fed to cut rates. We think earnings estimates are too high. So for us, we want to fade this rally and look to pick up some stocks at lower levels. But I mean, those who've been, you know, urging to stay defensive by in large part of the ones who have missed this rally. That's right. You know, it's helped us. We've been overweight until,

as a matter of fact, today we've been overweight in technology, which, you know, at 20 percent of the market cap, that'll cover up a few mistakes on some other sectors. So we just cut that position today, and it has been tough in some of these other sectors, but we've been defensive. That's how we stand right now. We hold a little bit of cash, and we hold more fixed income than we normally would, but we still do not want to chase this rally, Scott.

You're not banking on a soft landing? We're not banking on a soft landing. We have penciled in the second half of the year recession and really the first quarter of next year as well. So we're expecting the Fed to make a mistake. And a Fed mistake means we're going to have a recession, moderate one. You're going to keep hearing this, Mike, until you don't? Yeah. No, and I understand why. I mean, there have been enough of the prerequisites of a recession that have lined up and they've been flaring for a while. I do think the market loses patience with assuming that it's just a matter of time and it's going to be soon.

I'm not saying we have anything like the atmospherics of the 1995 scenario, which was the ultimate soft landing. But there were similar aspects of it where something structurally was different about the labor market than we thought going into that episode. We thought unemployment couldn't go low as it did without sparking more inflation. Now, we've had much more inflation right now to deal with. But there seems to be something structural with the labor market that's keeping it from weakening too quickly. And then I don't know what to make of the apparent resilient profitability, at least at the index level, because that's another thing that's gone on for a few months now. The forward estimates have been climbing. So you hear B of A say, yeah, the market looks

expensive at 20 times earnings, 20 times trailing earnings. But that's where they trade off trough earnings. That's just how it is in every cycle. So if we've just had an earnings drop, I know that's a lot to kind of take for granted. i think it's the market's kind of suggesting that it's willing to migrate over to that being a higher probability outcome uh than we thought before hey scott how about that what about the prospects of a different labor market and then the power of of ai which none of us really thought about in terms of the potential of being an earnings driver until six months ago. Well, you know, that's the thing

that's really kept us out of a recession is the labor market and consumer spending. But if you look at really, you go back 40 or 50 years and you look at what happened before recessions, unemployment's always pretty low. And one of the things that usually goes along with that is that inflation is high and the Fed gets nervous. So you know for us that was a great CPI number a little bit below expectations today at 4% for the year over year. But let's face it the Fed is not going to be satisfied with that.

We think inflation will be below 3% by the end of the year but we need. I think we lost Scott's mic, as you heard there. And again, I raised this issue earlier. You know, the one hurdle for the bulls to really get over is to convince people that fixed income and cash isn't a better place to be. There's no doubt about that. And it's it's a perfectly reasonable and plausible alternative for somebody to say it's too uncertain for me to take the equity risk at this level after this move. I'm happy with what I get here, 4% to 5%. Now, history will show that if the market continues to barrel higher,

people will simply not be satisfied with 4% to 5%. Or, as I always say, you're satisfied with 4% to 5% as ballast in your portfolio and you allow yourselves to shoulder the risk of equities elsewhere in it. So that's all fine. I think that's more of a normalized environment that we can welcome and not say that the sky's the limit on valuations. And we have this huge momentum move in a handful of stocks. And we'll see how we deal with any reset that comes from that. Steve Kovach, looking at this Apple downgrade from UBS

today, you know, they cite softer iPhone and services growth. Theoretically, you could have cited that at any point over the last many months. It's interesting that they choose today to do the downgrade, which they cite persistent. I'm quoting from their note here, persistent softness in developed markets and data that indicates growth is likely to remain under pressure. What do you make of this? Yeah, Scott. So it's an interesting call for one, not just the downgrade from buy to neutral, but also raising the price target right from 180 to 190. But it's more specific than look.

We already knew that iPhone demand was waning. We heard that from Tim Cook and executives the last two earnings calls. But what specifically is in this note is it's the most profitable markets for Apple that are really seeing the weakness in demand. That's China. That's the U.S. That's Europe. That's countries like Japan where they sell those most expensive iPhones. That's where they have great market share, where they're taking market share away from Android. That's not happening in a significant way anymore. On top of that, Kelly Evans and I, we talked to the analyst behind this, Dave Vogt, during the exchange, and he was telling us all that commentary we hear from Apple about emerging markets, that's India

and countries like that, that they say they're seeing growth in. Well, that growth is off such a small base, and that growth is not enough to catch up for what they're going to miss this year from those bigger markets. So that is really what the crux of his thesis, I guess, is. On top of that, just services is just the knock-on effect of that. With fewer iPhones, fewer Apple-installed devices, that's fewer opportunities to sell services to customers. So that's why he's flagging that warning on services as well, Scott. Mike, I wonder if we're appreciating enough this uncertainty that's coming out of the Chinese market and for companies, whether it is an Apple or a Nike or a Starbucks or these

businesses that rely on a fairly healthy percentage of their revenues. For sure. And, you know, obviously the whole market has had to try to take down its anticipation of a growth burst from a lot of the Chinese domestic demand and all that. But Apple, what's fascinating to me always about the stock is you can have cogent, careful, you know, kind of alternative data driven arguments about the merits of this stock, positive or negative. And look at the way that has moved since March, since SVB. That is like the tightest trend channel going higher. And you can't tell me that that's because the market and its collective wisdom has decided it's figured out where earnings are going in the next 18 months. It's because it's the best balance sheet we know of.

It's got this beeline for a $3 trillion market cap. You give it a $3 trillion market cap because you assume they're going to be able to navigate the next turn in technology. So my point is, I agree it's expensive. At some point, it'll run out of people willing to just play the trend. But I'm not sure anybody has found that gotcha data point, either bullish or bearish, that says,

this changes the story on Apple. Also, Steve Kovach, I remember when we were together at WWDC and the deliberate nature in which Tim Cook is approaching AI. He's not just suggestive that it's going to be the be-all, end-all and trying to take advantage of this, you know, hype narrative that's around all of these companies. And it still remains to be seen. I bring it up because this stock's up 40-some-odd percent year-to-date.

It's gotten the AI bump without being a pure play AI company, if you will. Yeah, exactly. And at some point, they're going to have to deliver on whatever investor expectations are. Yeah, and Tim Cook actually gave some comments after WWDC about that, Scott, saying he's looking at chatGPT and products like that and experimenting with it. He says he uses it. But look, we know Apple likes to get it right.

And Siri, they don't want to be embarrassed by Siri turning into ChatGPT and getting things wrong. So they are going to be very, very slow compared to what we see out of Microsoft and Google on that front. But again, they use AI in everything. I keep saying this, but AI is behind all of their products. It's just not necessarily consumer facing. Yeah.

Appreciate that, Steve. Thank you, Steve Kovac. All right. We got less than a minute to go. And here we go. You know, we think the Fed's not going to do anything tomorrow. And we're going to pay close attention to what J-PAL says. That's for sure.

We will. And, you know, I think it's there's no answer as to whether they're done or not tomorrow. Like, the answer doesn't exist within the Fed's decision-making, so you can't guess what it's going to be. But we're close enough to where you can kind of take the Fed policy piece and set it aside and say we think they're about where they need to go. The question is, what then are we going to be worried more about? Are they going to be more worried about inflation staying stubbornly high or the risk to growth? So it'll be worth

listening to, but I think the market's correct that we see where they are at this moment. All right, there's the bell. Emeril Lagasse's up there. I don't know if he's going to yell, bam. But we're closing the market with a nice game today. I'll send it into OT with Morgan and John.