Closing Bell - Closing Bell: Can You Trust the Rebound? 8/9/24

Episode Date: August 9, 2024

What might the market’s next move might be… and can this rebound be trusted? Fundstrat’s Tom Lee, Requisite Capital’s Bryn Talkington and BMO Wealth Management’s Yung-Yu Ma give their forecasts. Plus, Wells Fargo Securities’ Chris Harvey says buy stocks, not the market. He explains why. And, critical CPI data is looming over the market after a volatile week. We discuss what to watch and what is at stake. 

All right. Happy Friday. Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with the outlook for stocks as another big week looms large. Earnings, more critical economic data, it's all taking center stage. We'll likely confirm, too, whether the worst is really over for the markets. We'll ask our experts over this final stretch what is really at stake ahead, including that man right there, Fundstrat's Tom Lee. He'll join me in just a moment. In the meantime, let's show you the scorecard with 60 minutes to go here in regulation. We're still negative on the week, but we are positive on the day. Pretty remarkable, too, what's happened this week, given Monday's big slide to start everything off. Energy,

industrials, financials, they're all positive on the week. And what's been a nice snapback for those spaces. You can take a look. Energy is just a modest loser at this moment. It does take us to our talk of the tape, the market's next move and whether this rebound really can be trusted. We're all wondering that, of course. So let's ask Tom Lee. He joins us now live. Welcome. It's good to see you. Great to see you, Scott. So I look at your notes today and you suggest the worst is behind us. What makes you think that? Well, I think the thing that we're watching is the VIX spiked to 60 on Monday, which is

the third highest reading ever, and the VIX futures curve inverted, which was the steepest inversion since the pre-pandemic times. Both are starting to normalize. I think the VIX as it closes below 20 and hasn't closed yet. And as that VIX futures term structure un-inverts, that tells us the worst of the panic is behind us. I don't think it means we won't have ripple effects because we know there's some trapped bulls and, you know, there's still some nervousness around Iran and how much of this yen carry trade has to unwind. But I think the worst of the selling pressure is behind us. How do we know that we had just a growth scare and not something more

dramatic to come, Tom, never mind the unwind of the carry trade? And no one really knows whether that's over either. But when you think about those two events, what does it make you think about where we could go moving forward? Well, I think investors, when it comes to the growth scare side, have something they can check every week, which is weekly jobless claims, because that's what was a positive surprise on Thursday. And a lot of it came from Texas. Texas had a big drop in weekly claims week over week. The fact that markets reacted so positively Thursday to that jobless claims number puts me in the camp that that's one of the big drivers

because we had a better than expected claims number and then the market popped. I think the growth scare is what's on investors' minds. And next Thursday they'll get another weekly claims number and if that's also equally improving or stable, I think it's gonna give people a lot more conviction. What about the unwind of the carry trade? I mean, there's no real tell

as to whether that's run its course. And that seems to be the obvious catalyst at the beginning of the week for positioning being well off sides and it just needed to correct itself. Has it finished? Scott, that's a great question. Nobody knows how big that carry trade could be. I think there is a large insurance industry participation in that. And I did speak to some insurance executives this past week. Their view is there's a lot of financial institutions that actually implemented this trade. But if it unwinds in an orderly way, it's not disruptive. It's just that if you have weeks

or days like Monday or last week, the end of last week, that's very disorderly. And that gets very expensive because these insurance companies have to take off these hedges and then they suddenly have unhedged carry trades. Well, I just want to continue this. You suggest, you know, if it unwinds in a messy way. There's no if. I mean, we saw at least the first reverberations from that unwind, and that was anything but orderly. What if there really is more of that to come, Tom? Scott, there may be more of it.

I think one thing that has been messy is the currency hedges, because these currency hedges were built for what you'd call like one percentile events, you know, 99 percentile standard deviations. So a bigger move than that is what makes these hedges so expensive. They just let them expire. I think central banks can manage currencies within a one standard deviation band. So I think it's still important to watch currencies. But if we're staying in stable and predictable ranges, it can be a orderly unwind. But yes, Scott, that's an uncertainty,

just like the Middle East is an uncertainty as well. But markets climb a wall of worry. Yeah. What do you make of how this week began? Not with necessarily the market upset, but the commentary around it, whether it was Jeremy Siegel of the Wharton School suggesting the Fed needs to come out and do a 75 basis point cut in an emergency way. Of course, he walked that back with our own Jeff Cox yesterday evening. Ron and Sana at the beginning of the week suggesting the Fed needs to come out and say something that essentially we've got your back from a liquidity standpoint. Do they need to do something before September's meeting? Scott, I think both comments from both Ron and Jeremy Siegel are actually valid. But to me, what it speaks of is I think the markets and I think economists

are no longer willing to deal with data dependence. I think they want a Fed that's more forward looking because that makes them comfortable the Fed could respond if conditions deteriorate. I think that's the kind of language I'd like to see disappear is we're data dependent so that by necessity they're going to be very late. I think it's actually encouraging to see this sort of pushback. But when you say the concerns from Mr. Siegel are, in your words, valid, you're suggesting that you agree that the Fed needs to come out and make an emergency cut between now and the September meeting? I don't think the Fed needs to make the cut, but I do think the Fed should, in their playbook, be willing to be forward looking to respond to

financial instability and I think that that's not language that's been evident in the FOMC meetings or the the press conferences and in the minutes and so I think it's I think it's kind of in the right direction that I'd like to see the Fed less data dependent but I mean isn, isn't that implicit, though? Right. I mean, if there's the kind of dislocation, perhaps, that you're alluding to, that's part of their job. I mean, wouldn't they be there in an emergency situation anyway? And I don't know that Monday rose to the level of an emergency situation. It was the first bit of major upset that the market had felt in an awfully long time,

and people were at the top of the mountain asking for help. Scott, it's a fair question, but we know the Bank of Japan felt compelled to speak. I think markets would feel a lot better if there was a sense that global central banks were monitoring the situation. I think there's different levels of forward-looking communication that can be made, which is we're not necessarily going to act, but we're prepared to act. And I think that's what some of these outcries were really pushing towards. Speaking of the worst being over,

mega cap declines off the recent highs as I look at the list here. NVIDIA is down 26%, Amazon's down 16 and a half, as is Alphabet, Microsoft about 13 and a half, and Apple and Meta are also down not quite as much as those. Would you suggest that the worst is over in that reset as well or not? I think it depends on an investor's time timeframe. You know, the AI and the capital expenditures that needed to really make up for this global labor shortage and the fact that these mega caps like NVIDIA is trading at 25 times forward, 2025 earnings. I mean, these are not expensive stocks where you have to worry about your risk reward over the next 12 months. But will there be a rotation if the Fed begins a cutting cycle that involves four cuts this year or five, depending on what the futures markets are predicting?

To me, that's very bullish for cyclical stocks and small caps and things that are money supply sensitive. So I think there is still a rotation risk, but I wouldn't be a seller of any of these mega caps here. You just said small caps, which is a good segue for me because I wanted to go there anyway. Of course, your call with me months ago that the small caps could be up 50 percent, five zero percent this year. The Russell's up two point four percent, two point five percent, excuse me, year to date. You want to mulligan on that? Do you still feel like you've got tremendous upside, but maybe not as much as you once thought? How would you characterize it yourself? Well, you know, we're still very constructive on small caps. I think

the upside is at least 50 percent, Scott, because they're trading at 10 times. The median Russell 2000 stock trading at 10.7 times forward earnings versus more than 17 times for the S&P for 600 basis points faster earnings growth. But the timing hasn't worked out. I think small caps really shine when the market believes the Fed is going to cut because it provides so much relief to companies that have high cost of money, whether it's biotech, financials, industrials. I think it's a real saving. It's a lifeline for reducing the cost of money for consumers, which helps the banks. You have huge exposure in the Russell. So I think when the market believes the cuts are imminent, or maybe it's September,

I think that's when the small cap call works. I think, you know, we've been wrong on the timing. I would like to have seen us to be up 20 percent at this point, but I still think 50 percent could happen before year end. Wow. Wow. Before year end. All right. You stick to your guns. Let's expand the conversation, Tom, if we could, and bring in Bryn Talkington of Requisite Capital Management and Young Yuma from BMO Wealth Management. Good to see you both. Brynn, you want to weigh in on that? I mean, Tom's still really optimistic. We could start with the small caps just because that's the wow moment, I think, that we still could do 50% between now and the end of the year. So I've been talking about this all year that, and really explicitly, I don't like the Russell 2000. So we'll get to that in a second. If he's right and we were to get a rally of that magnitude in

small cap, what that's going to tell you is that, yes, we did have a soft landing. Yes, economic growth is happening. And so I think a lot of things would do really well. And so I think in order for small caps to have this type of rally, you need to have a soft landing and then we need to continue to have economic growth. So that would be wonderful, by the way, if that happens. And I definitely think if that happens, he's correct. My where I get challenged on that is I do believe in the economic cycle. I do think we're slowing. I think the jury's out if we're stalling or not. I 1,000 percent agree with Tom. He said last week about Hurricane Beryl he thought did have an impact on the unemployment numbers and I can

tell you I live in Houston there's 6.8 million people there were over a million people that were out of companies businesses people out of electricity and internet for two weeks. I feel definitively it had an effect. And that's really where we started to see the market get dicey is last week when that unemployment. And then obviously we had the black swan of the yen carry trade magnified everything. But I think that we are slowing, not in the camp that we're necessarily stalling. And so that's why I would rather own RRSP, which is the equal way. Or maybe you could go to mid cap. I just think you have to thread the needle economically for small cap to really have a meaningful outperformance this year.

It's a good point because, Tom, as you say, small caps have a high cost of capital. We obviously would agree so that a drop in interest rates would certainly help. But they do, as Bryn said, have a high risk of upset, if you will, in a slowing economy. And there is, I don't think, any doubt that the economy is slowing. It's just the degree to which it is. I think Bryn is correct. If there is a recession, equities are just going to do poorly. So if that is someone's base case, it is going to be really tough to see stocks outperform in the second half. I think we're in a more resilient economy than consensus has

priced in. I think that's why the growth scare pushed a lot of people into the recession camp. As you know, on Friday, there were many people that declared we're already in recession because of the SOM rule. And Claudia SOM herself sort of walked back on the idea that this rule was meant to be broken. So I think that market expectations are much higher for recession risk. And I think as you reduce those odds, and I think a good claims report and a decent inflation report that takes those probabilities down. And I think that's a boost for small caps. And again, at 10 times forward earnings, I think the risk reward is still really good here, even on a one year time frame. It was rather remarkable from Wednesday's Fed

news conference where the chair was pretty positive on the state of where the economy is and even the labor market. And then by that Friday, we had decided that we were in a recession. Young Yu, I'd love to find out your views. What a crazy week it's been. So what are your takeaways here? It has been quite a week and it's great to be here, Scott. I think there are a few takeaways for this week one takeaway is that even though we are seeing some economic softening it's important to remember the first word in soft landing is soft we don't think there's actual downside momentum building the economy and we saw that punctuated by the weekly initial jobless claims number and we'll think we think we'll see that in coming data as well that that we might see a bit of softness, but not down momentum. Even if you look at credit spreads, for example, yes, they widened a lot on

Friday and Monday, but they've come back down a lot as well. And we think that's a sign of underlying health in the economy and underlying stability. So, you know, we're in the camp that we see softness or choppiness for the next couple of months, but this is probably more a period to look for opportunities. And once we get past the election, once we get a few Fed rate cuts under our belts, maybe 100 basis points of cuts over the next couple of meetings, that the economy can really get back on track toward acceleration rather than softening or mixed data that we've seen. Is that why, Young Yu, you like industrials, which, by the way, are the second best performing group of stocks on the week? It sounds like that

would match up with your broader view of the economy, too. That's right. We do think industrials over the past several weeks have pulled back more than warranted. We think their buying opportunities have started to develop. And we think as that cycle turns, once the Fed does start cutting rates or the rate-cutting campaign is further underway, that some of the spending that's been constrained by these higher rates will start to come forward in the economy. It might take a handful of months, but we do think that will be forthcoming and probably surprise people to the upside of the amount of impact that the Fed rate cuts will have. Tom, do you think we can get any real traction in this mega cap trade before August 28th? And you know what I'm sure referring to, and that's when NVIDIA reports its earnings.

Yeah, I mean, that's a really important date, Scott, because that is one of the most important stocks in the world. We did do a study that since 1928, if you look at that tough August to October period, the most common week for markets to bottom is the first week of August. So in other words, the odds are high that the flush we had in August was the low for the summer. And that's even true in election year. So I think there's a chance we take the escalator up into August 23rd, and then it's a binary outcome. Either we strengthen from there or we start worrying again. Yeah. Brynn, you obviously own NVIDIA. We've talked so many times about it. Do you look at August 28th as a line in the sand for this trade?

I mean, NVIDIA is going to have great numbers. There's no reason they wouldn't. I don't necessarily think it's going to help the other companies per se, like the mega caps, because we already know they're spending all of their money giving it to NVIDIA. I think it could help semiconductors, you know, certain semiconductors writ large. But I still think the AI story from the picks and shovels is an NVIDIA story. And I think, you know, AMD, as we saw, had great numbers, yet AMD doesn't even get close to the revenues and the product that NVIDIA had. So I still think it's an NVIDIA story.

I like NVIDIA at this price going into the print, you know, because it is healthy to have this pullback. And so I think we're all going to be once again, Jensen's going to deliver the goods and they're going to have great numbers with probably strong forward guidance. Yeah, that's the key. What they say about demand, because if you're scrutinizing the spending of mega caps more substantially now than you were prior, if it's justified in some respects by Jensen Huang that the demand is still there, then suddenly we don't necessarily worry so much about the spending because it's going to eventually be justified. Young Yu, you look at tech and AI and say you still like this trade? We definitely like this trade. And we think some of the attention on

NVIDIA is misplaced in the sense that what really matters ultimately if this spending is going to be sustainable is whether the typical companies, especially large cap companies, start to see gains from eventual gains in productivity and efficiency from an AI rollout. We think that is what is going to be the big wave that's a 2025 story that keeps this going. So we are very positive. We do think there's a lot of room to run here. But narrowly focused on NVIDIA is probably missing what is the ultimate driver of this trend, and that is productivity gains by a large swath of companies that we think will start to show fruition in 2025. Tom, you heard Young Yu suggest 100 basis points, I think I heard him say, of planned cuts by the Fed. What are your own expectations? What do we get for that first one

in September? Some have been throwing out 50 basis points, which I think the Fed chair himself all but poured cold water on at the meeting as well. But, you know, things can change and maybe in some respects they have changed. I'm not sure. What do you think? Scott, I think it's going to depend on whether the Fed shifts away from data dependence because, you know, the op-ed from Bill Dudley made a really cogent point this week, which is if the Fed was looking at inflation and real rates, the Fed needs to get towards neutral. And that would warrant more than 100 basis points of cuts in the near term. And so I actually would be in the camp that if the market's pricing in four and a half cuts between now and year end, I think the number will be higher.

I don't know if it's... I agree it's doubtful that it's September because it sounds like it's too much of a change, but I think to signal a significant path to future cuts would actually be very good for equities because it's not an emergency cut. It's a shift towards forward looking. All right. Good to see everybody. Good weekend to all of you. We'll talk to you soon. Tom Brennan, Young You. Thank you. Pippa Stevens has the biggest names moving into the close today on this Friday. Pippa? Hey, Scott. Akamai shares are jumping double digits after the cloud company reported better than expected second quarter results and raised its full year outlook.

The firm saw strong security demand this quarter and CEO Tom Layton telling CNBC this morning that AI also contributed to growth in cloud demand. But shares of Elf Beauty going the other way, sinking after the company's guidance disappointed Wall Street. Q1 results beat on the top and bottom line and sales jumped 50 percent. But it wasn't enough to counteract that tepid guide.

Now, for more on the quarter, be sure to catch CEO Tarang Amin coming up at 4 p.m. on Overtime. Scott. All right, Pippa, thank you very much. Pippa Stevens, we are just getting started here on this Friday edition of The Closing Bell. Up next, buy stocks, not the market. That is the message today from Wells Fargo Securities' Chris Harvey. He's going to explain exactly what he means next, break down where he actually sees stocks heading from here. We're live with the New York Stock Exchange. You're watching Closing Bell on CNBC. We're trying to go green here, see if we can finish the week in positive territory. Back after this.

Stocks are in the green right now to close out a volatile week on Wall Street, close to reversing this week's losses fully. Well, my next guest sees more upside ahead. He's advising investors to, quote, buy stocks, not the stock market. Joining me now, Post 9, Chris Harvey, Wells Fargo Securities. Welcome back. Thanks, Scott. So you sat down, I said, man, what a week. And you said, I've never seen anything like this in my life.

I haven't. When was the last time you saw a developed market down 12%, up 10% the next day, and the central bank saying, oops, we won't do that again. Never seen that, right? We are a little bit cautious here because this is really unusual, but what's also unusual is the similarities to 1998, right? 1998, you had large caps over small, growth over value, new economy versus old. You had long-term capital. Not quite the same as a carry trade, but for lack of a better phrase, it's when leverage went bad. And you have the Fed potentially cutting in September. A lot of similarities, a lot of volatility.

So we'll see. What do I do with that? What do you do with that? What we're doing with that is we're still a little bit cautious. That's why we're saying, hey, I can't pound the table. Buy the stock market. It's pulled back. Okay, everything looks great.

What we're saying is, hey, buy some stocks, some stocks have gotten beaten up. Be cautious, but don't be too fearful, right? Because value has been created. But at the end of the day, we could have some reverberations as we go forward. So you're cautious because you fear that there could be another shoe to drop as it relates to Japan? That's right. We're not sure, right? What was the last time you saw more than a 10% move in a developed market and everything's just fine a couple of weeks later? Nothing to see here. Everything's fine. Let's just move on. Now, what I will say is what would scare us is if the credit markets began to seize up, but the credit markets are actually in the U.S. functioning pretty well. And as long as that's true,

we're going to start adding money, putting money to work. What do you make of what certainly felt like a panic attack over the state of our own economy, never mind what's taken place with positioning in Japan? I'm a little bit surprised by that. We think the economy is slowing down. I'm not really sure why you have a panic attack,

because the wheels aren't falling off the cart. But I guess because it came together with some of these other things, people got a little bit excited. Too much so, but again, we'll see. Are you zeroed in when you say buy stocks, not the stock market, on some of the mega caps, which have come down a lot? I mean, I read through the list at the very top of the program, of course, of the pullback in most of these names. I think mega caps are fine. One of our favorite sectors is the communication space. So you do have some mega caps in there, but it's not a particular mega cap call. What we are saying is, hey, the rotation in the summertime, that was really an oversold bounce. The fundamentals

don't support that. But some of the fundamentals on the mega cap side, especially in the communication space, hey, that makes sense. You can make money there. You're alluding to the metas, the Googles, Alphabet, and Netflix. Yeah, that's right. That's right. Because of the dislocation? Because of dislocation, because they have something. So quant background, one of the things that we've seen is momentum bent but didn't break in July.

Typically, when that occurs, it begins to re-exert itself. A lot of these companies have that momentum, and we think they'll just continue. What was good before is going to be good going forward. And again, if you look at 98, a lot of those mega caps continue to move forward. The crazy thing is we talk about momentum. I think it was yesterday that the momentum ETF went positive on the week. I mean, if I would have told you that that was going to happen on Monday morning, you would have said there's zero chance it's going to happen. Probably zero chance. Now, we've had a nice rebound in a lot of those names within that space.

That's right. And that's the point is that if you have positive momentum, something good is happening. We had a little bit of reversal. It got stretched. You sold it off in July. But now people are realizing, hey, the fundamentals are still fundamentals are still good yeah we got a bounce in small caps but the underlying fundamentals in small caps not particularly great so it is we're showing it on the screen here it's it's plus three percent on the week by the way um the comeback in the

market itself is pretty remarkable I think right now the S&P for the week is flat. It's been steadily adding, trying to get a little something going here with 30 minutes to go in the trading week. Is that as shocking to you as what happened on Monday morning? It is. We were just talking to people yesterday. If you went away for the week, you're like, hey, what happened? Nothing happened. It's all fine. So it is shocking because, again, I've never seen anything that happened in Japan before. And the fact that it's not reflected in the market at this point in time is incredible. But again, when you start to pull away and you start to peel away the onion, one of the things we get back to is, is liquidity getting to where it needs to go?

Are the credit markets functioning? And the answer is yes. And that's the most important thing, I think, as we go forward in time. I've heard some suggestions, not only today, but along the route of the recent Fed chatter. Sell the first cut. Don't fight the Fed across the board. Just sell it. We make it up.

So a couple of things. One, if you think the economy is really slowing down, the answer is yes. If you don't think the economy is really slowing down, the answer is no. You go back to 1995, two of those six cuts, you should have sold. Four of those six cuts, you made over 20%. So I don't think it's a fair. If you really think the economy is slowing down, which we don't, yeah, sell the first cut. So you still think the economy slowing down which we don't yeah sell the first cut So you still think the feds gonna cut for the right reason that that's that's the bottom line

Yeah, I think so we had the Fed governor. We had a number of Fed. We had some fed communication this week Yeah, what are they talking about? They're talking about jobs. They're talking about inflation I thought that was great one of the things they weren't talking about was financial stability Which worried me a little bit. But at the end of the day, are they going to cut for the right reasons? Yes. And I don't think there's an emergency coming down the road. I mean, they didn't apparently feel the need to be as not as but hysterical.

Yeah. Like there was talk on Monday morning of, you know, they need to come out and do something now. Yeah, I don't think that was necessary. I wish they would have communicated a little bit better. Hey, we're talking to our counterparts in Asia and Europe, and we're constantly in contact. Hey, we're looking at liquidity.

Liquidity is getting to where it needs to go. We're looking at the credit markets. It's functioning. You didn't hear that. But yes, did they panic? No, they didn't panic, and that was the right thing to do. All right, it's good to hear from you. Have a good weekend. You too. Chris Harvey joining us here at to do. All right. It's good to hear from you. Have a good weekend.

You too. Chris Harvey joining us here at Post 9. All right. Up next, counting down to CPI. After a wild week for stocks, investors are looking ahead now to a key piece of inflation data. There's a couple of good reads next week, which is why it's so important. We're going to discuss what to watch for, what it could mean for your money. We'll do it next on The Bell. This may surprise me. I'm calling for a 75 basis point emergency cut in the Fed funds rate with another 75

basis point cut indicated for next month at the September meeting. And that's minimum. I think they should say something now. I don't need necessarily think like Jeremy Siegel suggested that you need a 75 basis point intermeeting cut. I think the Fed should provide some reassurance to the markets. There's a crisis of sorts going on within markets that the Fed should probably step out, assuage some fears and then cut in September because I do think they're behind the curve. Well, that was Wharton School Professor Jeremy Siegel and iFi AI's Ron Insana on Monday. The same day, the Dow tumbled more than 1,000 points. Since then, stocks have had a volatile week.

The major averages, by the way, are on the cusp of turning positive for the week. Pretty remarkable. Here to look ahead to next week and what to watch for from the critical CPI print is CNBC senior economics correspondent Steve Leisman. Before we look ahead, let's let's look back for a minute, though, Steve, because it was a remarkable week in which you did have that commentary that we've heard. And we're about to go positive on the week for stocks. Yeah. Scott, would you do me a favor? Would you check your calendar? You sure that was just Monday? That wasn't a month ago? It feels like we've lived about three weeks in a week. It's quite remarkable. I'm looking at you. You don't look tired, Scott, but I'm tired, I can tell you. I think investors are ready to maybe pour a nice cold

glass of Gatorade out and get ready to go for the weekend here. When Jeremy and Ron were speaking, things looked really bad. It looked like it was going to be a calamitous beginning to the week. I believe I held my fire and thought that the Fed would not react quite so abruptly. I do want to explain why I think Jeremy is right over time, but perhaps wrong in execution. And that is because if the Fed gets down, I don't know if you have that January 2025 Fed funds contract available. If the Fed does get down to 4% where it was the beginning of the week, now it's back 430 or so. It was actually below 4. The Fed will still be 100 basis points, Scott, above a neutral rate. So Jeremy's right that the Fed would have a lot of work to do

if it wanted to get back down to neutral. I think the concern at the Federal Reserve is that acting precipitously like that. And they also don't see necessarily the weakness that was universally agreed at least a week ago today, or maybe that was three weeks ago today, on Friday relative to the jobs report, that that's there. So where are we at now? We're 50-50 now on a 50 for September. That feels about right to me. Why 50-50? Because we got the CPI report coming up on Wednesday, PPI on Tuesday. And don't forget, by the way,

the Fed will also watch the New York Fed report on consumer expectations on Monday that'll give us inflation. So Jeremy's right. The Fed has a long way to go if it wants to get to neutral. Longer still to go if it wants to provide neutral. But maybe a question as to whether it ought to get there quite so fast. Yeah, I mean,

but implicit in all of this is, of course, that the Fed is simply too restrictive and too late. So while Jeremy may have been firing this off in the heat of battle, so to speak, and, you know, Ron as well, these are, you know, well thought of market watchers and they've seen a lot of markets, both of their points. And by the way, Rick Reeder came on Monday afternoon with us on this program, too, and said the Fed's too restrictive where they are. So, you know, all three of these gentlemen could be correct in what they're trying to suggest, but maybe not in the in the mechanism of the of the when and how. Right. Look, my analysis for what it's worth, Scott, and I think you shared this, is that there

were a bunch of things going on. There was the unwind of the carry trade. There was a sense on the part of investors they had overvalued some of those high flying AI stocks. And then beyond that, there was this issue of weakness in the economy and whether the Fed was too tight for that economy. The Fed ought to be addressing the last two. I'm not quite sure it rose to the level that those first two became factors

whether or not it ought to make monetary policy. So just FYI, Scott, on Wednesday, we're looking for some firming, and that's a reason for the Fed deposits. By the way, why Bark and I thought yesterday talked very circumspectly, I think, about the idea of a rate cut, because you're going to get zero twos. That's the expectation. You're still going to be around three, three, two. The Fed doesn't want to be stuck there. So I think it's going to maybe take a little bit more time. It could go 50 in September if there's a market or a clear weakening in the economy. Otherwise, I think it'll be in a 25 basis point steps down to getting back towards a more neutral rate.

And one more thing, in fairness to Mr. Siegel and Insana, Richard Fisher, the former Dallas Fed president, came on with us that day, too. And though he stopped short of suggesting that Mr. Powell needs to come out and say something, he said he should have some remarks in his keep in his back pocket just in case. So I just wanted to put that out there, but also have you look ahead to next week. I mean, CPI and PPI, these are critical because though the Fed chair himself, you know, hasn't used the victory words over inflation, you get the feeling that they feel like they've beaten it pretty well. I think they feel like they're confident that it's come down enough to provide some relief to the level of restrictedness to the economy. And like I said, you know, tremendous respect for Fisher, Reeder, Siegel and Insana.

These are very, very bright people who I look up to and learn a lot from. I just think that if you looked at the totality of all the things that were going on, not all of it seemed to be Fed related. And if I know the Fed, I think the Fed would wait for the dust to clear to see how much of this stuff remained. And of course, whether or not, Scott, and you and I texted about this, there were any kind of big blowups out there that was going to create financial system risk or systemic risk. And that has not been the case, I do say, so far. I don't want everybody to worry too much. We're going to drink their Gatorade over the weekend here. But at the end of the day, we have not seen that yet. I do still think there may be a ways to go to unwind the carry trade. As for next week, you mentioned the CPI, PPI on Tuesday. That should give us a good feel

for the PCE consumer expectations on Monday. But don't forget, I think one of the most important numbers is going to be that retail sales report on Thursday, Scott, which is going to tell us where the consumer is. That'll give us a really good read on whether or not the economy is indeed weakening here or we're maintaining our momentum. Yeah, good point. So, I mean, all of it, of course, easy for us to say now, to your point about the dust settling, there were real concerns that it wasn't dust, it was a sandstorm about to, you know, blow everybody over. So we'll see. We'll see what happens. Good weekend to you, Steve. I appreciate your insights today and all week. That's Steve Leesman, our senior economics correspondent. Up next, we're tracking the biggest movers into the close. Pippa Stevens is back.

Well, one stock is in the green as consumers load up on their greens. That's Stock to Watch coming up next. Well, less than 15 from the closing bell. Back to Pippa Stevens now for the stocks that she is watching. Tell us. Well, Sweetgreen shares are surging after exceeding second quarter expectations. The fast casual chain raising its revenue and same store sales outlook for 2024. As new restaurant openings, higher prices and increased traffic drove sales for the quarter, even as consumers turned cautious. While Sweetgreen is, you know, we think about price value a lot, while the consumer we understand may be a little bit pressured, as the inflation is at the industry, we've actually been able to

take a little bit less price than our competitors. He added that protein options have boosted dinner and weekend sales. And Doximity shares also soaring, hitting a new 52-week high as the digital health firm posted first-quarter earnings that surpassed expectations amid record user engagement. The company also lifting its full-year sales guidance, and those shares are up 39%. Scott? All right, Pippa, thank you.

Still ahead, Cisco reportedly laying off thousands of employees coming ahead of the company's earnings next week as well. All the details and what to watch for in that report. We're back on the bell just after this break. Coming up next, looks like both Cisco and Stellantis are set to lay off thousands of workers. We'll bring you the details and what it might mean for those stocks in the months ahead. And later do not miss a CNBC special taking stock it's hosted by our own Mike Santoli

it is tonight. And it's at six o'clock eastern time. Much more from Mike. As well we take you inside the market so next. Now the closing bell market zone CNBC senior markets commentator Mike Santoli here to break down these crucial moments of the trading day. Plus Steve Kovac and Phil LeBeau on two companies considering big job cuts. Mike, I'll go to you first.

I mentioned a moment ago we could actually go positive on the week on the S&P. We did for a brief moment, but we're going to fight it out right to the finish here. And that in and of itself is remarkable for this week. Yeah, after a 3% drop in the S&P on Monday, no doubt about it. I think it's all been pretty constructive, but not quite decisive. I always say that when we get into these zones, simply because you don't know exactly how much of an overshoot to the downside in the short term you had relative to the fundamentals. What you were doing if you were buying near the lows of this week in the S&P 500 is you're picking up the market, so to speak, at levels of about five months ago. So these are levels we first got to back in March. We've had two subsequent quarters of pretty good earnings growth. Now we're looking ahead to a higher earnings level. So on that basis, it feels

as if their macro shocks are not going to be driving things in the next week or so or even beyond that, it feels like, you know, the risk reward has gotten somewhat better. But it always leaves you with this sense that the market has something to prove because we didn't know if it deserved to be where it was at the highs based on earnings growth, soft landing prospects, the Fed nailing things and all the rest of it. So I feel like it's as good as you could hope for going into the weekend. The way that the volatility is drained away from this market has absolutely been positive. I just don't know how much you want to extrapolate it from here. All right. I'll come back to you in a minute.

Steve Kovach, I mean, I guess we thought we'd be simply looking ahead to earnings. And now we have these reports of layoffs at Cisco. Yeah, it's going to be a big day for Cisco next week. And Cisco is planning, Scott, its second round of mass layoffs that's going to affect thousands of employees. That's according to a new report today from Reuters. Cisco back in February cut 5 percent of its workforce, or about 4,000 employees. Reuters saying the new cuts will be of a similar size. Cisco is cutting costs as it transitions to AI-focused sales and absorbing cybersecurity firm Splunk, which it bought for $28 billion in a deal that closed back in March.

No official word from Cisco on these layoffs, but the company is set to report earnings Wednesday next week, so we'll probably hear more about them then. Shares right now down just shy of 1%, Scott. Yeah, I'm sure we will. Steve Kovach, thanks very much. You have a good weekend. Phil LeBeau, what do we know about Stellantis, Phil? Job cuts.

That will be going to one plant in the Detroit area. Not a huge surprise here, Scott. What Stellantis has announced today is that the Warren, Michigan, truck plant in Detroit, that is where the potential impact on 2,450 jobs, not all of those will be layoffs. There will be some through attrition, perhaps some early retirement. But they're cutting from one shift, from two shifts down to one shift. And that's basically the case.

We're going to see this with other automakers as well as they adjust their production. What they're doing is they're ending production of the Ram 1500 Classic Edition pickup truck. So the Ram's not going away. They're just getting rid of this one edition that was made at the Warren, Michigan plant. As you take a look at shares of Stellantis, GM, and Ford, keep in mind, we're seeing inventories continue to climb, Scott, up 49% for the industry in July compared to July of last year. All right. And a good weekend to you as well, Phil. Thanks for being with us today on Closing Bell. It's Phil LeBeau.

Back to Mike Santola. You want to tease us with what's coming up in just a couple hours here on your show, Taking Stock? Well, we're going to sift through a pretty eventful week. I mean, I feel as if market has given us plenty to sort through, including whether, in fact, all of this sort of forced liquidation, the repositioning, the yen carry trade on what all the things we talked about. Does it matter in the here and now? Is it something that's going to animate this market looking ahead? And really also, what's the rethink of AI profitability mean for the market? And is that process going to be one that, you know, is it just sort of a stutter step

in that huge secular growth story? Or is it something that we're going to have to live with for a little while? The NVIDIA action has been pretty fascinating. I think the street rallying to NVIDIA's defense right now, the target price in that stock is like, you know, 30 percent up from where it's trading right now. And so, you know, there's a defense going on, even as it struggles with these levels that it reached a few months ago. Yeah. Ret so, you know, there's a defense going on, even as it struggles with these levels that it reached a few months ago. Yeah. Retail sales next week, CPI, PPI. So we're going to have it right in front of us here on what the true state of not only the economy and the health of the consumer is, but inflation. Yeah, I definitely think retail sales, which is sometimes a quirky

number, but also coming along with Home Depot and Walmart earnings, is probably going to be front and center. The CPI, you know, keeps saying, I feel like they should be brave enough to say that we've taken care mostly of the inflation issue. So we'll see if the CPI number complicates that process or really moves in the right direction to where the market is. Really, the market is telling the Fed, as you've been talking about, that we should leave that aside. And if we have to worry about one risk, it's probably the pace of growth, not whether we can get the last mile of inflation squeezed out before credit rates. We'll look forward to tonight, six o'clock, taking stock with Mike Santoli on TV3. The bell's going to ring and the S&P is going to settle out and it might be positive on the week. Right now it's flat.

We shall see. Have a great weekend, everybody. I'll see you on the other side of that into overtime with Morgan.