Closing Bell - Closing Bell: Can You Trust this Market? 11/12/24

Episode Date: November 12, 2024

Can the markets’ pro-growth, risk-on message of the past week be trusted? And how has it changed the setup into the year’s final stretch? Our all-star panel of Sofi’s Liz Young, Metlift’s Drew Matus and Thornburg’s Emily Leveille break down where they stand. Plus, Sherry Paul of Morgan Stanley Private Wealth breaks down her year-end playbook. And, we run through what to watch from Instacart, Occidental Petroleum and Flutter when those names report in Overtime. 

And welcome to Closing Bell. I'm Mike Santoli in for Scott Wapner. We are live from Post 9 at the New York Stock Exchange. This make or break hour begins with the rally taking a rest on the seventh day since the U.S. election after a swift near 5 percent surge since the start of last week in the S&P 500. Let's take a look at our scorecard with 60 minutes to go in regulation. That S&P barely off right now, actually, just pretty close to the flat line. It had been down more than half a percent around the midday lows. The Dow Industrials been a little more the outperformer recently, is settling back more so. It's down about six-tenths of one percent. The Nasdaq 100 hanging in there, though it had been sidelined in the immediate rally after the election, with the likes of Nvidia and Microsoft today playing a bit of catch-up. You see each up 1% and 2% there, giving support to the broad market.

The small-cap Russell 2000, then a more notable pullback after a blistering sprint to the verge of a record high on yesterday. It's down 1.6%, but still up more than 9% month-to-date. The Treasury market reopened after the Monday Veterans Day holiday, and the sellers have rushed in, pushing the 10-year yield. Let's see, it was back above 4.4 percent. There it is, 4.43. That's not far from those immediate post-election highs in yield. Now, that takes us to our talk of the tape. Can the market's pro-growth risk-on message of the past week be trusted? And how has it changed the setup into the year's final stretch?

Let's ask our panel. So far, Liz Young-Thomas, MetLife Investment Management's Drew Mattis, and Thornburg Investment Management's Emily Lavelle. Everyone here with me at Post 9. Great to see you all. Thanks for being, Liz. I guess the question here is it was a pretty assertive, you know, this is what the election means.

The anticipated policy makes pro cyclical small cap finish. We've talked about it. Those also were trends that were in place before. And I wonder if it's a matter of where we are right now as we as we assess where the markets have gone. Well, I think you're right, first of all, to note that the trend was in place before. So all we really did was give it more fuel to keep going. And that's what we've witnessed. Now, we've obviously made back a lot of what we pulled back today. I think don't focus too much on the one day move, right? It's not as if, OK, it's over. We had this big euphoric season and now we're done with it. I think there's still room for things to keep growing. And you have to also think about the momentum is intact.

The internals are strong. We've got 74% of the S&P trading above their 200-day moving average, 68% of the Russell trading above the 200-day moving average. So there's a lot of tailwind behind this. And I have learned the hard way that fighting momentum in this market is a losing battle. So I still think that there's more room to go. Now, yields today sending a little bit of a mixed signal. And I think maybe stocks are starting to get trepidatious about that. I think when yields get to four and a half and, God forbid, approach five, that's when it's really going to pressure stocks. And obviously, right in front of a CPI report, I think it makes sense. There's a little bit of volatility in the bond market. Yeah, obviously a little bit of maybe

a sensitivity there. And Drew, I mean, weigh in on that a little bit, because it's kind of incredible to see the market just decide that we're going to get a reacceleration in growth. You know, the last jobs report was a soft one that kind of put the Fed on a dovish path. Now we're pricing out rate cuts. And there's this general anticipation that we have a growth driven move higher in yields. How do you look? I mean, the trend was in place for employment before the storm-adjusted numbers that came out last. So everyone discounted them. But the reality of it is the labor market is slowing.

We're seeing that. If you look at the small business survey today, there are components of that that suggest we should be expecting the unemployment rate to move higher over the next couple of months. So if you talk about the market thinking about higher inflation risk and then pricing that in the 10 year notes and the idea that maybe, you know, you're going to get some slowing in activity, but not enough really to get the Fed to kind of move aggressively. You know, the hardest part of the landing is the landing. And you tend to bump around a lot. And I think that's what we're seeing,

where growth is going to be slowing. Inflation is going to be somewhat stable, and that means yields are overdone at these levels. They shouldn't be this high. They shouldn't be this high. So in other words, it's based on a premise of a reacceleration that you're not expecting. You're not going to get it anytime soon. And in the meantime, you're going to get data that suggests that there's actually, to confirm the slowing that we saw before the election. And Emily, I guess, you know, one of the ways to read how the market has taken the news of the last week is, well, we have one less reason to worry about an outright downturn. Or maybe we're going to give the data a little bit of a wider berth because, you know, we think there's going to be policy help along the way. Has the

general investment kind of backdrop changed for you much at all? You know, not very much, I would say. I mean, we're really focused on investing in companies, not in, you know, sort of broad markets or countries. And I would say, you know, the other sort of, so there's the deregulation part, which is obviously pro-cyclical and pro-business, but then there are these other components to policies, tariffs, immigration, which are actually, you know, spending cuts at the federal government, which are actually quite counter-cyclical and could be contractionary. And so, you know, when we think about investing for our clients, we want to focus on, okay, where are the

companies that are in control of their own destiny that have the ability to grow earnings through a variety of different cycles? And how are we sort of balancing the growth and industry outlook within our funds so that we're able to provide positive earnings growth and outperformance for our clients through any economic cycle. One of the talking points was that companies themselves were saying on conference calls and elsewhere, well, we might wait until after the election for some kind of clarity, whatever that might mean and however that might affect their own business. Do you think that's happening in the companies that you're following,

that there's any real kind of shift in priorities or acceleration or pulling back from one area or another? I do think so. I mean, I think you heard this a little bit with some of the, you know, anecdotally around consumer spending and investments as well. And we saw it with some of the rental equipment businesses saying, you know, people are holding back on renovations, on maybe smaller projects starting. And part of that is rates, but I think part of it was political uncertainty. So I do expect that that could be, you know, a little bit of a boost.

But in terms of sort of fundamentally what's changed in the outlook for the economy, I would say that there's, you know, potential for more inflation on the end of, you know, the spectrum where Trump is implementing more of these protectionist policies. And then there's also, you know, the potential for that to have an impact on an already relatively weakened consumer. So we're really focused on, you know, again, investing in these businesses that can grow sort of, we saw Shopify today as an example, you know, companies that can gain share in an environment that can grow earnings because they're seeing great operating leverages in their business. Those are the types of businesses that we want to be invested in for our clients in this environment that feels, you know, pretty rich valuation wise.

So you really need to have confidence in that earnings growth continuing to to beat expectations. Yeah, Liz, it is an interesting starting point when you talk about where valuations are, where credit spreads are incredibly tight already. And I guess it changes the equation in terms of what it even means if we have, you know, kind of growth supporting policies and the Fed trying to trim rates all to the good. But has the market already kind of front loaded some of that? Well, I think there's a lot of cross-currents in even just that question. So if you think about the headwinds that we might face or that the market might face that we weren't facing at the beginning of this year, we're unpricing Fed cuts. We've now got only about a 50% to 60% chance of 25 bps in December, a pause in January. So now we're doing this on the expectation of actually tighter monetary policy

than we had before. To that end, though, you still have a Fed that seems pretty comfortable with where things are. They're comfortable with where the labor market is. They're comfortable with the direction that inflation is going. I think the market right now has almost decided that the growth offset will be big enough to stand in the way of any other headwinds that might come its way between, let's say, now and inauguration or between now and, let's say, February. There are a couple other things that could kind of rock the boat. We've got the debt ceiling happening January 1st, but that's expected to be offset by draining the Treasury General account. So there's a lot of things that I still think could rattle markets, but you can't

fight the sentiment here. And I think the surveys that we're going to start getting, the survey data that we get, which is what we refer to as soft data, starting in November is going to be really positive because people just feel better. The uncertainty is behind us. This pro-cyclical idea is now in front of us. And there's sort of a positive vibe check that's going on. So I think we're going to get some positive sentiment indicators that should at least carry us through the end of the year. Yeah, that's almost a certainty. We're going to continue this in a second, but do want to actually get over to Steve Leisman, Minneapolis Fed President Neil Kashkari speaking in the last hour. Steve has some of the details. Hey, Steve. Yeah. And Liz

has the general sentiment. I'll come back to that in just a second. Minneapolis Fed President Neil Kashkari suggesting he's inclined to cut rates further near term, but offering doubts about how far the Fed may cut into next year. He said that if inflation surprised to the upside, it could give the Fed pause cutting in December. That's implying he would cut in the absence of an inflation surprise in December, and that's how the market's priced. Kashkari added the Fed is not necessarily close to neutral now. That's more evidence the Fed would cut. But he went on to say it may be that the neutral rate has gone up, at least in the short term, because of, among other things, higher productivity, which would mean a higher neutral rate. That is kind of necessitating fewer cuts in the median term and a higher terminal rate or stopping point for the Fed.

Kashkari offered that he expects the strong labor market we've seen now and the economy to continue into the coming months. On the election, he said, the Fed won't model new policies from the new administration or the new Congress until they become clear what they are. Tariffs are not viewed inflationary. If they are one-off, they could become inflationary with a series of retaliations. When asked whether he was concerned the president-elect would interfere in Fed policy, he said he's confident the Fed will focus on economic goals and not respond to pressure from Washington. So, Mike, this idea about next year being a little more uncertain, it's a developing theme from the Federal Reserve at this point, which I think is what Liz would say. Yeah, and it kind of comes into tune with, obviously, how the markets have tried to, you know, kind of reprice things at this point. Yeah. I'm looking,

Mike, at that pricing and it is dynamic, I guess is the best way to say it. We have a cut built in for December. January is a pause and we're around 50 50 for march but maybe the best way to look at this is the november 2025 fed funds contract and if we have that available i don't know if i asked for it before i wanted to talk about it anyway it's about 390 what does that tell you it tells you the fed is pretty close to where it was it was 280 so the market has baked out 100 basis points and now it's really a wait and see it's dependent a wait and see. It's dependent upon, you know, tomorrow we get the inflation numbers. That's important. Later on, we're going to get some other data as the month goes by, as Liz was suggesting.

And then we have to start thinking about what policies and what is the net inflationary result and growth result of all those policies that could be coming down the pike. All right, Steve, thanks very much. Pleasure. Drew, what's your read on all that and how it just interacts with where the bond market is positioned right now? Well, I mean, for me, the biggest thing is the neutral rate is higher. Yeah. And most likely it's going to continue to move higher. We're in the early stages of a productivity cycle, and the productivity cycle, I think, is going to make the early 90s look a little soft. It's going to be a very big productivity cycle because it's happening across multiple industries at the same time and then you

have the overlay of artificial intelligence which will allow those interactions to kind of those areas will be able to interact with each other and it'll actually boost productivity even higher. So I think if you're going to lead to a giant productivity cycle you're talking about a higher neutral rate it means the Fed really doesn't have to cut much more that's our view we think they have another 75 in them this cycle and they're done and they'll probably skip December because I don't think the data is going to be as much as I think maybe the labor market's weakening I think you know our view is that inflation is going to be somewhat sticky here for a little bit

and that'll be enough to get the people on the Fed who are concerned about inflation to just take a pause. That is an interesting part of it, though, because, you know, I've kind of made the point here and there that when you have the Fed starting to pivot to being a little more concerned about growth, the thing they're looking for is labor market deterioration. Right. So they're almost focused on the weakest of the components of the whole economic. But yeah, I tend to think that the Fed focuses on one thing at a time.

We'd like them to focus on two things at a time. They say they have a dual mandate, but in reality, they're either looking at inflation or they're looking at growth. And usually if they're looking at growth, they're trying to look at the labor market because that's where the other side of their mandate is. And they never look at both at the same time. And so right now it seems like, you know, they've kind of seconded the

inflation story away a little bit and they're focusing on growth. But I think if you get a number that seems sticky tomorrow, especially after some of the other sticky inflation data we've gotten, they're going to have to wonder if that downtrend is still in place. Sure. Emily, one of the, I think, standard pieces of the playbook here in the last week, and this goes back to 2016 too, is that the U.S. might be better positioned to either outgrow the world or be a source, kind of a destination of capital. You focus globally. Does that make sense to you? Or does the opportunity set still seem good overseas? I think in the short term, it does make sense. I mean, you just look at,

you know, what the dollar's done over the past week. And that's something as international investors that we have to, you know, sort of fight against. And you do have these long cycles where the dollar is very strong, and we've seen that. And I think that this will be a continuation. I think, you know, we need to find businesses that are able to benefit from that, even though they're outside of the U.S. I think that, you know, the real benefit of investing outside of the U.S. is you can have these incredible, high-quality businesses with the exposure to the same structural growth, AI, for example, that are sort of key picks and shovels and producers of this,

but they're trading at lower valuations. So in the long run, what we think drives the stock market is earnings growth. And so if we can dial in on that earnings growth and be very confident about that, we think that over time that story will play out. But in the near term, I do think the dollar is a headwind for international investing. And Liz, just on the earnings point, seeing a lot of stuff now where most of the way through the season where it's like, well, it wasn't a gangbusters beat rate or anything like that. But if you take out energy, it looks still like we're on track. Does that start to enable people to look in a more favorable way at the current valuation and just

wait it out? I think it does if you're looking at it on a broad market basis, because what we've talked about a lot through 2024 is earnings have been dominated by those major tech players. And we needed some of the other sectors to come in and pick up the slack if the tech players weren't going to dominate as much. And that has happened. And I believe the numbers, if you take energy out, I think earnings growth was actually about 11%, maybe 12%, something like that, which is in line with what we've seen for a lot of the prior quarters. And coming into this quarter, expectations were only about 3% to 4%. So this has been pretty good. If we're running at, let's say, 8% growth, we pretty much doubled what we thought it would be. The trouble with earnings right now is that the bar has gotten so high, the market has raised the bar so high that you have to beat and you have to be exceptional at beating.

And then you have to beat and you have to raise guidance in order to just get even a muted upside in the market. If you beat and don't raise guidance, you didn't even lower anything, you get punished. So the bar just continues. It didn't beat the buy side hurdle from the most aggressive multi-manager hedge fund pod. That's right. So I think that's what we're going to face in 2025. Expectations are still pretty high, but they have been coming down as far as earnings growth in 2025. But I think that hurdle just continues to get higher.

And Drew, finally, just across asset classes, down as far as earnings growth in 25. But I think that hurdle just continues to get higher. And Drew, finally, just across asset classes, you sort of suggested you think things are pretty fully priced across the board. But if we're having some kind of multi-year productivity boom and other things that seem like they're falling into place, does that not justify some of that? I mean, it argues for thinking carefully about equities instead of other asset classes, because, you know, if inflation goes down, right, then it's kind of somewhat credit negative. And but yet it doesn't have to be margin negative for these companies if there's a productivity story. Gotcha. Yeah. So in other words, equities have a kind of a path out more so than some other things. All right. Great to talk to you all. Thanks very much, Liz, Drew, Emily. Let's send it over to Kate Rogers for a look at the biggest names moving into the close. Hi, Kate.

Hey there, Mike. So shares of Tyson Foods are climbing up more than 7 percent. That's after the poultry processor reported fourth quarter results that beat Wall Street expectations, also raised its quarterly dividend by 2 percent. The company said the results were boosted by its improving chicken sales. And GE Vernova stock is tumbling after CEO Scott Strzok told the Financial Times he's holding off on his search for new offshore wind turbine orders, saying he wants to wait for market conditions to improve. The announcement comes shortly after Donald Trump's re-election, which has added some uncertainty to the sector. As you can see, shares are down around 7%. Mike, back over to you. Absolutely, Kate. Thank you very much.

Another big mover we're keeping an eye on is Amgen. Angelica Peebles is here with the details on what's behind that. Angelica. Hey, Mike. Yeah, Cantor Fitzgerald analysts putting out a note this afternoon saying that they found some concerning data from Amgen's Phase 1 trial of Maritide. Remember, that's the experimental obesity drug that we all have our eyes on. Now, people on the drug saw a decrease in their bone mineral density. That's according to the analyst. They lay out two scenarios here. Maybe that patients just are losing this bone mineral density naturally during the course of weight loss treatment,

or this could be a non-starter because it does look like it's dose dependent based on these results. Now, Maritide works differently than Novo and Lilly's GLP-1s, and Cantor's pointing out that this has been an unknown from that phase one data. Now, we've reached out to Amgen, and we'll let you know when we hear back. We have not heard back from them yet. And Amgen has already said that it's moving forward with Maritide into phase three, and we're expecting the full phase two results by the end of this year. So there's still a lot to come from this, but you can look today. Stock is down about 7%, Mike. Yeah, Angelica, and that move's coming on heavy volume, and it's taking about 150 points out of the Dow Jones Industrial Average. So thanks very much. We're just getting started here.

Up next, Morgan Stanley's Sherry Paul is back to break down her year-end playbook, and later, a look at the key names reporting results after the battle. We are live from the New York Stock Exchange. You're watching Closing Battle on CNBC. Stocks taking a breather from the post-election pop, but the major averages in a number of sectors are still up nearly 5% or more just this month. So has the rally gotten ahead of itself or is there more runway ahead? Let's ask Sherry Paul of Morgan Stanley Private. Well, Sherry, good to see you.

Great to see you. have to kind of, you know, operate where the long term and the short term, you know, kind of come together and figure out what has changed and what hasn't maybe when it comes to things like, you know, this new policy push or anything else. What are your sort of top line thoughts at this point? First of all, thank you for having me. My top line thoughts are that when it comes to investing, not a whole lot has changed because my strong recommendation to clients right now is to invest in enduring themes that are earnings driven, that transcend presidential or policy politics. So those themes continue to be intact. They drove the market this year. They drove the market last year. They'll continue into 2025 centered on AI thematics, which we can get into

a little bit more. With regard to policy, though, we're back to policy volatility, and that typically brings three to five percent swings in a market as the conversation around what might happen continues to accelerate. But what we know about policy, even if the Republicans have a triple crown, it usually means that there'll be a lot of talk and all of a sudden there'll be a decision day. So we're hedging that, but we're not necessarily investing in those outcomes because those are conversations that are not earnings based. Now, when you mentioned the longer term themes that you think remain on course, like the investment team, I can imagine a world if we didn't happen to have an election this year to where maybe there'd be a little bit of a pretty good debate going on as to whether we've hit some kind of a plateau.

I know there was some talk last week about this. Maybe the next generation of chat GPT is just not bearing as much fruit in terms of acceleration. And also semiconductors, it's really hit or miss in there. So I just wonder where that particular theme sets up for you right now. Well, you know, it's a great point. I think where it sits is in the larger conversation around deglobalization, right? So deglobalization, which requires a reimagining of supply chain and on-shoring manufacturing, it also disrupts what the human labor composition of globalization was, which can be expensive. And so I really believe that that becomes the accelerant around AI, particularly in automation and manufacturing, wherever you can replace human later, you're removing yourself from the geopolitical consequences

of those outcomes from a manufacturing standpoint. It reminds me a lot about what happened during the pandemic, where that in the pandemic, I think like less than 50% of people in the country had ever deposited a check via their iPhones. And so that became an accelerant of what we invested in at that time was the remote of everything. Now it's the automation of everything that would position companies for cost reduction, productivity enhancement, and also controlling outcomes in a world that may continue to deglobalize. It's interesting because if you hear the stated intent of a lot of the policies, it's not just deglobalization, but bring physical manufacturing work back here. You know, these very long lived kind of objectives, not necessarily companies making a decision to just get more efficient or find a way around.

Right. Well, that's what I love about the capital markets. Right. Because so, again, we go back to enduring themes that actually drive our earnings. That's where investors should be. And that's how our portfolios are set up right now. Now, they're reimagining a different sort of U.S.-based manufacturing renaissance. That may be multi-year out. It's also fundamentally inflationary from a cost standpoint to corporations. And so the incentive there then is, wow, if we're going to do that for greater political stability,

then we should be pushing automation in a way that can bring about cost savings and maybe we end up in a balance as it relates to earnings and profitability. I wonder, I doubt your particular clients would have really had a very sudden change of mood over the last few days, but the market character really did somewhat shift in the direction of a little got lathered up in some areas. Small cap meme stocks, crypto, a lot of the stuff that moves fast. Tesla seems like it just got this burst of energy into it and other stuff maybe got, you know, neglected or set aside. Does any of that speak to you in terms of whether risk appetites are rising or if it's just a passing thing?

Well, you know, it's a really good point because we've got like lots of money sitting in cash accounts that are taking pay cuts every time the Fed cuts rates. So if you want a little bit of taste of what FOMO looks like, we got it in the last seven days. And that just requires a mental shift for people to get out of cash into a market that will likely continue to accelerate. What about just fixed income as a category? Is it doing its job in a portfolio? Are you not interested in terms of based on what the economy might do? Yeah, you know, it's hard for people to say, why should I continue to own fixed income?

But right now for us, it's an airbag in a portfolio. That's really how we describe it to clients. And so if you're extending out, it's not too late to extend out, especially when you get the bumps in yields like we did over this concern around inflations associated with tariff policy, which sort of drove the 10-year up. But if you're extending out in that five to seven-year range, you should get a nice little pay bump in terms of price appreciation as rates continue to go lower and you're locking in good income.

That provides an income hedge to the innovation trade, which just by nature will bring more volatility to a portfolio, which is different than something going wrong. That is the key for people is that volatility will start to spike. It doesn't mean that things are going wrong. It's interesting you say that. I was just pointing out yesterday, if you looked at the second half of the 90s, it was actually a pretty volatile market. The VIX never really went below 20, and yet markets were going up, and it was capitalizing a lot of the new innovation. Right, because we were in the front end of the innovation.

Right, because volatility, this is innovation volatility. That's different than, oh, wow, things are breaking volatility. Sure. So a reset is not a recession, and a reset is not necessarily a correction. It's just a reset sometimes. Yeah. See if we get one of those soon, Sherry. Good to see you. It's just a reset sometimes. Yeah. See if we get one of those soon, Sherry. Good to see you.

Thank you. Thank you. All right. Up next, early Coinbase and Robinhood investor, Rashawn Williams, reacts to Bitcoin's big bounce, plus where he's seeing opportunity in tech post-election. And don't forget, you can catch us on the go by following the Closing Bell podcast

on your favorite podcast app. We'll be right back. There's widespread optimism that the Trump administration, which has stated that they wish to embrace cryptocurrencies and make America the center of cryptocurrency innovation worldwide is going to have a much more forward-looking policy towards this new industry. And I think what you're seeing is the market reacting to that. In the White House with President Trump, there's a full-throated endorsement of crypto. And so we couldn't be in a better position to finally get some clarity and start to rebuild the crypto industry in America again. That was Robinhood CEO Vlad Tenev and Coinbase CEO Brian Armstrong speaking on the future of cryptocurrency under a Trump presidency. Bitcoin trading near record levels and up 32 percent since the election.

Joining me now at Post 9 is venture capitalist Rashawn Williams. He's an early investor in both Robinhood and Coinbase, among several other things. Rashawn, good to see you. Thank you for having me. For coming by. I mean, just when it comes to the crypto piece of this, obviously, burst of excitement, most of the storyline is, well, promote broader adoption and maybe there'll be a little bit, you know, less kind of chasing after some of these businesses based on allegations of fraud. But how does it look to you in terms of whether there's an industry behind it and whether it's still a ripe investment opportunity? Well, first of all, it feels really surreal to see the founders as publicly traded CEOs now

when I met them almost a decade ago and we were a completely different environment. I think with crypto and the digital currencies, unlike the public equity markets, you have the technicals and the fundamentals and public equities, right? You have the technicals in crypto by cell dynamics, but the fundamentals are largely dependent on regulatory and kind of public sentiment. We're in the environment now

where I actually think the fundamentals will outstripe the technicals for the first time in a very long time. So I think you'll see a lot of explosion. You'll see that growth and you'll continue to see the adoption kind of take place mainstream. What are the components of the fundamentals? It's tough to chase this down like when you really want to get down to it. Because a few years ago it was supposed to be like new ways of lending and all the rest. It seems like that's calmed down.

Yeah, I really think it's about the regulatory and the public sentiment. It's a speculative asset class, right? So what are the components of artwork fundamentals, right? It's how much people are excited about it, how well the adoption is, how, you know, sexy the asset class is. So up until this point, it's been all about technicals, but now the fundamentals are largely being skewed by the regulatory and by the public sentiment environment. And when it comes to technology, as let's, the publicly traded stock, I mean, there's a lot of divergence, even within like semiconductors and software. It feels like the market's really aggressive in trying to separate winners from losers.

How do things look to you, just in terms of a lot of the major sources of new companies, new growth themes? Yeah, well, my job is to pick winners around the curve. So we're looking five and 10 years out. What's happening now is this huge tectonic plate shift that's happening with AI. I've only seen it happen two other times in the last 25 years, right? We have the internet,

and then we have software taking over the world, right? So now with AI, everything that's related to it is rising. The entire ocean is shifting, and all of the companies are benefiting from it. So in our world, it's our job to look around the corner. What's going to be next? Of course, we're making money and investments now in this AI space. But the things that are coming around the corner, quantum computing and then quantum protection, protecting security and infrastructure from all of the power that the quantum computers have. So think of cybersecurity for quantum computing.

That's quantum protection. So those are the things that we're thinking about. But in this environment, we're super excited about everything that we're seeing. That seems like it's, yeah, it's a few steps down the line, it would seem to me. Because part of the storyline when it comes to the AI build-out is this is one of those big shifts where scale matters so much. You have to have the data. You have to be able to invest very heavily. So it almost more skews the advantage toward the established massive companies. 100 percent. When we were investing in Coinbase and

Robinhood and Instacart 12 years ago, they would raise a five or ten million dollar Series A. These AI companies are raising a 250250 million Series A and they're valued at a billion or two billion dollars because they're raising $500 million in their first year, valuation doubling every six months. So that's a tectonic plate shifting thing where Instacart is kind of an IoT, Internet of Things, a marketplace type thing. It's a much bigger scale, much bigger theme, requires much bigger assets. So it would seem to me then,

if you're looking for founders who have an idea and maybe they can kind of work their way into some corner of an industry, it's probably harder to find that many of them. I mean, who can get to that scale quickly? Well, you're not only looking for those whales and those big AI companies. I'm a guest shark on Shark Tank this season. And we look at tons of consumer products and we know that entrepreneurship democratizes wealth creation and it drives Shark Tank this season. Sure, yeah. And we look at tons of consumer products, and we know that entrepreneurship democratizes wealth creation, and it drives growth in this economy. But there are plenty of areas outside of AI that people are still investing in. Even non-technology businesses are even booming and thriving right now.

And if you're looking just across the landscape, I mean, things like the possibility of tariffs or what are the tax rates going to be in a year and a half? How much of that has to enter into your process? You know, again, we're long-term investors. I know in the public equity markets, people are quarter to quarter. But for us, we're five and ten years out. So we don't really get too caught up in short-term political, socioeconomic situations that are happening now. Of course, it affects funding, it affects economy,

and it affects public sentiment and consumer confidence. But for us, our companies aren't even profitable until well into them being public. Five years after the IPO is when they really opened a spigot to profitability. Sure. I know you're also involved in the NFL, part owner of the Atlanta Falcons. Sports is now just, it seems like this feeding frenzy, people saying it's now an alternative asset class. It's not just, you know, this almost trophy piece type of an asset. Does that change the attractiveness of it? Does it change anything about, you know, what these businesses might be worth? Yeah, it's always been an asset class.

It just hasn't been open to private equity and to people other than billionaires mostly. What's attractive about sports outside of the NFL and the Falcons, which obviously I'm not able to speak about, but it's the reoccurring revenue stream that sports teams get from media rights. And that's very similar to software companies. So a lot of VCs and private equity guys love the profile because their revenue is baked in for 10 years from tier one creditors. And they know that the top shows are all sports programming. Right. So this asset class is going to grow.

It's non-correlated to the stock market, very low risk profiles. And, of course, you have emerging sports industries as well, the pickleballs and unprofitable leagues. But those are more like early stage leagues versus the later stage leagues that are all profitable. Completely different risk and return profiles. Sure. Yeah, I see the kind of startup leagues. They want to get a little bit of the media rights and have it work for them. I would, too. I would want them, too. Yeah. No, there's no doubt about it. But again, I guess the question I guess one question

I would have is how do you feel the, you know, the professional sports landscapes apparent dependence on, you know, the betting piece of it enlarge the market, or is there a risk in that? Well, I was an investor in DraftKings, and online sports betting was one of the big themes that was driving revenue growth for professional sports teams and leagues in general, international expansion, media rights, online sports betting. So I think some of the emerging leagues

are betting on being able to land those types of revenue streams from media rights and online sports betting. It's still unproven, and we really don't know. The Big Four obviously dominate in that space. But look, I think there's room for more than four winners in this space. Yeah, well, the Big Four also have the history and the data, and you need the data for the betting. For sure, for sure. Rashawn, great to talk to you.

Thank you. Thank you. Thanks for having me. All right. All right, up next, we're tracking the biggest movers as we head into the close. Kate is standing by with those. Hey, Kate. Hi again, Mike. One stock is climbing after an activist investor unveiled its stake. That name to watch. Hey, Kate.

Hi, Mike. Shares of Honeywell are popping after activist investor Elliott Management disclosed its $5 billion stake in the industrial conglomerate. The investor is pushing Honeywell to divide itself along its two primary business lines, aerospace and automation. Honeywell, as you can see, up around 4%. And Tencent Music is sliding after the Chinese streaming service posted its Q3 result. The company reported that revenue from its social entertainment services business fell nearly 24% year over year. Those shares are down nearly 5.5%.

Back over to you, Mike. Okay, thank you. Disney reports before the bell on Thursday, and the clock is ticking on incoming board chair James Gorman's process to identify Bob Iger's successor. Julia Borson joins us now with a look at what we know now. Hi, Julia. Hey, Mike. Well, incoming board chair James Gorman is known for running a smooth succession process for himself and Morgan Stanley, where he's credited with incentivizing the two runners up to stay.

He's also known for his former consultant attention to protocol, creating systems and rigor. Now, sources tell me now Gorman has a chance to potentially over-deliver. In surprise with a successor announcement earlier than expected, like he did back at Morgan Stanley, I'm also told that the board wanted to get the media off of Disney's back. Now, while two of the four internal candidates, entertainment co-chair Dana Walden at Morgan Stanley, I'm also told that the board wanted to get the media off of Disney's back. Now, while two of the four internal candidates, entertainment co-chair Dana Walden and Parks head Josh DeMauro, are seen as the leading contenders to replace Iger, Gorman is working with a recruiting firm on outside candidates. EA CEO Andrew Wilson has been floated, though I hear the board is more likely to go with an internal

candidate than with him. Now, sources tell me the message from the board is that succession will not be delayed again. Mike? All right, Julia, we'll look for more clues as Disney reports. Thank you. Getting some news now out of OpenAI. Steve Kovach has that for us. Steve. Hey there, Mike. Yeah, OpenAI co-founder Greg Brockman is returning to work after a leave of absence. This is according to a new report just out in Bloomberg. Brockman took a leave of absence earlier this year. This also came amid of just a wave of top executive and co-founder exodus at the company. Most recently, it was CTO Mira Marotti who departed the company. But Bloomberg reporting now that Brockman told employees he is returning to work and working with CEO Sam Altman for a new role at the company and what he'll do moving forward. We've reached out to OpenAI for comment, and we'll let you guys know when we're here back, Mike.

All right, Steve. Thank you. Still ahead, Instacart among the key names reporting in overtime. We'll break down top themes and metrics every investor needs to be watching. Closing Bell, be right back. We are now in the Closing Bell Market Zone. We're on Earnings Watch with three reports out in overtime today that are on our radar. Deirdre Bosa on Instacart, Pippa Stevens on Occidental Petroleum, and Contessa Brewer with Flutter. So Deirdre, set us up for Instacart. So Instacart is the best performing by far of the major gig economy stocks this year, doubling its value. Investors are looking for continued double-digit top-line growth

and better profitability. As always, guidance will be key. Last quarter, its outlook was ahead of expectations, sending shares higher. I'll also be looking for color on its Uber partnership, inked earlier this year to challenge DoorDash's dominance. Dash now partnering with Lyft. So could that present a new challenge for Instacart? And finally, its smart shopping carts offering is expanding. So how might that impact margins?

Back to you. All right, Dee, thank you. Pippa, Occidental reporting and been a rough road for the stock. That's right, Mike. And Occidental has actually underperformed the broader energy sector this year. And results we know will be impacted by the decline in commodity prices. Oxy already released its oil and gas price realizations for the quarter, which for the U.S. were down 6 percent and 26 percent relative to Q2's numbers. Now, during the quarter, the company closed its $12 billion acquisition of Crown Rock. And so analysts will be looking for an update on

those synergies, as well as plans to shore up the balance sheet, given the company's leverage ratio is now higher than its peers. Oxy has also invested quite a bit in carbon capture products. And so commentary on how they're viewing the Inflation Reduction Act, which has credits for carbon capture, will be interesting. We heard from Exxon CEO Darren Woods this morning who said that their low carbon division also relies on those incentives. So any commentary there, Mike, will be interesting. Yeah, so many cross currents, Pippa, as relates to policy in this group. I mean, there was also that commentary that obviously greater incentives to drill more domestically is really feeding into what

already looks like a pretty well-supplied market. That's right. And while President Donald Trump has said he wants to drill, President-elect Donald Trump has said he wants to drill, baby drill, it's really unclear whether or not the industry will actually heed that call because, of course, as you said, the market already looks oversupplied. We had OPEC out with its monthly oil report today bringing down its demand forecast. And so it's not as if executives want to increase their output so much into a market that's already looking pretty well supplied for 2025. And not to, you know, pivot too hard, Pippa, but I did notice that natural gas actually has a little bit of a spurt in the last couple of days. Are we just

talking about weather here? Are there other forces at work? Yeah, so we did see some production come offline in the Gulf of Mexico ahead of that storm. And so that was about 16 percent of output in the Gulf was offline. And then we also had some pipeline maintenance in the Permian, which also reduced output. We also have drillers being cautious given the decline in that gas that we've seen recently. And now finally, I mean, here in New York, you know, we're starting to get a little bit of that fall weather at long last. And so that has definitely increased the bullish case. And also, it was heavily shorted. And so cashing some of those shorts off guard, certainly increasing that big bounce we saw yesterday especially.

Yeah, the end of summer in November in the Northeast had its effect. All right, thanks, Pippa. Katessa, Flutter, a new name to some. To some. This is the parent of FanDuel, but the real story for Flutter is like a line out of Jerry Maguire. It's like, show me the money. Come on, show me the money. Come on, show me the money.

The street is expecting earnings of $0.10 a share on $3 billion of revenue. Flutter's growth engine is the United States. And it's putting all its efforts here and listing on the New York Stock Exchange in January. Looks like it's really paying off. At an investor day in September, the executive team looked at all the reasons that investors should expect solid returns. It insists its product innovations are leading industry. They showed off new customizable betting options, launching Wonka, a really popular slot machine game on the floors of casinos. They launched that on iGaming. And its CEO insists its size and its international scale creates this fly

wheel of customer acquisition and profits and performance that help it stay the number one sportsbook and iGaming casino in the nation. The stock was down a little bit today, but up to year to date, about 40 percent. So it really has performed incredibly well after it listed on the exchange in January. Exactly. And what's what I meant by a relatively new name to some U.S. investors after that New York Stock Exchange listing. Contessa, thank you very much. We will look out for those numbers as we head into the final minute of trade. And we are looking at just a modest pullback across the board in the major index. The S&P 500 did rally up from midday toward the flat line about an hour ago, but is now down about a quarter of 1%.

The Russell 2000 is down 1.8%. Keep in mind, it's been the leader kind of out of the blocks this month post-election. But you are giving back almost 2% of that today. Dow Industrial Average also weighed down by Amgen to a large degree, is also down about 0.8 or 8, 9 percent. Market breadth definitely negative. It actually has been rather selective for a while. Right here, we have only 25 percent of all New York Stock Exchange stocks to the upside. The leading stocks, though, are some of the old mega cap winners of the first half of this year, with NVIDIA and Microsoft doing their part to support both the NASDAQ 100 and the S&P 500, as well as Honeywell International going into Dow with talk of a potential split-up.

That does it for Closing Now. We'll finish overtime with Morgan Brennan and Johnson.