Closing Bell - Closing Bell: Countdown to Apple’s Crucial Report 11/2/23

Episode Date: November 2, 2023

Questions about the iPhone and China looming large ahead of Apple’s earnings after the bell. All-star panel of Wedbush’s Dan Ives, Virtus’ Joe Terranova and CIC Wealth’s Malcolm Ethridge break down what they are expecting. Plus, Gabriela Santos from JP Morgan Asset Management is mapping out what she thinks the Fed’s next move might be. And, Vantage Rock’s Avery Sheffield is laying out where she is seeing opportunity right now. 

All right, Kel, thanks so much. 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 stocks on the run, big time, and Apple earnings just ahead. In just a few minutes, star analyst Dan Ives will tell us what's likely to happen, how shares could react to whatever Apple reports. In the meantime, your scorecard with 60 minutes to go in regulation. That post-Fed rally still going strong. The S&P now going for its fourth straight positive day. It's been a nice broad move to every sector today on the upswing. Take a look at how much green is on the map today. Small caps, they're sizzling.

Look at the Russell, bottom of your screen. Two and a quarter percent today. Regional banks breaking out big time. The NASDAQ going for its best week of the year as mega cap tech is mostly higher. And even some of the growthier tech names like Palantir, Roku and Shopify are ripping. Take a look at those gains. Not too shabby. Interest rates. Well, they're a major story today. Look at the 10 year yield as well. It continues to fall. Take a look. Four sixty seven. That's right around the lowest level in about three weeks. It takes us to our talk of

the tape. The critical Apple report. Questions about the iPhone and China looming large and just as shares have started to climb again. Is the worst now behind the stock? It's a key question. Let's ask Wedbush's Dan Ives that question. He joins us here post nine. I mean, so what a difference a week makes. You know, you could have said, wow, the stock looks terrible. It's in a downtrend. Here we are. We're pacing for five up have said, wow, the stock looks terrible. It's in a downtrend. Here we are. We're pacing for five up days, the best day since August 30th. It's back above the 200-day moving average.

What's going to happen here? I think it's going to be not just better than feared, but I'm expecting Cook's commentary on China to actually be cautiously positive because what we're seeing in China, I'm not saying it hasn't slowed since pre-orders, but I'm actually seeing a stabilization. I think demand from our perspective is actually going to show growth, especially when we go into the next few quarters. And that's what it's all about here in terms of whisper expectations that have come down. I think investors are viewing this in a glass half empty sort of view. And I think that's the wrong move. So you don't believe the hype that

Huawei has been taking market share from Apple in China? I think about 100 bps of market share, maybe incremental in terms of what they've taken. I just got back from Asia yesterday. In my opinion, you're still seeing growth from a China perspective. And the most important thing, guys, that ASPs, in terms of the pro, we think it's going to be about 80% this time in China. A year ago, it was 60%. That ASP tailwind is important, especially going to the December quarter. Is this the quarter where we finally reverse the year-on-year quarterly revenue declines? Because it's been three in a row, from down 5.5% to down 3% to down 1%.

So are we back positive now? I think we're basically back toward positive. And in the December quarter... What's toward positive? We were toward positive last quarter. So I think about 1% in terms of what we're going to see. But I think the important thing, what everyone's focused on is December guidance.

We think 5% incremental year over year. And as you've talked about a lot, that's important because you see unit growth from an iPhone perspective, and then services, which I view as really the golden goose in terms of the valuation, that's now back to double digits. So I think clearly there'll be some caution from a macro perspective, but we're not seeing any of the number cuts coming from the supply chain in China, which is why we sit here and we're bullish into the print. So you're not worried at all about guidance about the holiday quarter because others on the street who cover the stock are even ones who are really bullish.

The name like Eric Woodring, Morgan Stanley, he's overweight the stock. But here's what he told me just the other day right on this set. When we think about earnings on Thursday and the potential for Apple to guide the December quarter slightly below where consensus numbers are, again, is it thesis changing? No. But tactically, given what we've talked about in terms of the setup for tech this earnings cycle, I think it makes me a little bit more cautious. OK, don't call him a hater because he's not. He has overweight on the stock. What do you make of that? I think whisper expectations are already expecting softness here.

I think when it comes down to it, you're going to have iPhone unit growth that's probably 4% or 5%. So I think the December quarter, as he's talking about, definitely fears about cautious, really more negative commentary from Cook around China. I think there could be maybe a sprinkling of caution, but I think overall positive. And I think that's the important thing going into this quarter. What happens if there is, in your words, a sprinkling of caution around a stock that, let's be honest, it hasn't traded all that well over the last few months at all, despite what these last few days have brought us?

I think the New York City cab drivers bearish on Apple relative to the China fear, the shadow ban. You know, this is something that the last few months has really been a massive overhang on the stock. Smartphones have been weak, OK? Not just, we're not talking Apple, just more broadly. So are you assuming that that's trough, that's done, now we're back towards growth? And I think what Qualcomm's even talked about, I think the smartphone recovery is starting here. And I think we look back three, six months from now, the trough and the worst is in the rear of the mirror, despite what we're seeing in terms of China, where I'm not saying that that's not going to be sprinkled in here in terms of some little negative. But overall, what they're seeing

in China, I think this is something where Apple is actually going to be surprised to the upside when we look at the next two, three quarters. All right, let's bring in Joe Terranova now, Avertus Investment Partners, and Malcolm Etheridge of CIC Wealth. Both are CNBC contributors, and both own the stock. Joe, are you as optimistic as Mr. Ives is? I'm optimistic when you look at positioning because positioning specifically in the options market is suggesting a very bearish sentiment towards Apple. The put to call skew right now is in the 80th percentile favoring puts. That's an extreme level that we have not witnessed. Let's also remember what Scott introduced earlier in the conversation.

The technicals, the technicals the technicals on this stock just four days ago looked awful so you have very bearish sentiment let's remember this does matter to the market the August earnings report the stock was above 190 after that earnings report it went below 190 never got back there again and the market followed through with a pretty ugly quarter so So this is going to be critical. And if in fact you are correct and we see a better than expected earnings report from Apple, guess what? The chase for performance begins tomorrow morning. Does it

matter to you, though, that the chart over the last few days, I mean, look, it's up six percent, six plus percent in a week. So the whole dynamic going into the number has completely changed. We said before, wow, the stock looks horrible. It's trading down into earnings, which rarely happens. The whole story always is, wow, Apple's running into the number. Is there going to be a sell on the news? Well, in the last five days, we've reversed the whole story. Now it's running into the print again. So how do you make do with that? So the technicals are improving.

And you asked me initially if I had the same optimism that Dan has. I didn't answer that, OK? I laid out the bullish scenario. Now I'm going to give you the bearish scenario, because quite candidly, I'm not sure what to expect here. Will the services business, will the cash flow be strong enough to maybe overcome the weakness in China, maybe the weakness surrounding the iPhone 15? But really, I believe what we're going to hear from Apple tonight is we're going to take the temperature, I believe, of the true economy. This is really going to tell you what the state of the economy

is. And if, in fact, Apple misses tonight, well, then I think your expectation has to be that the stock itself, it will be on the retreat and the bearish technicals since August will take over once again. And I think it's an indicator for you of where, in fact, the economy is going to go over the coming quarters. All right. So Malcolm sold half of his position in the middle of May when it was at 174. So now we said we're at 177 and a half. What do we think? What do we think about the stock here? I asked at the very, very top of the program if we think the worst is now behind this stock, at least for the near term period. how do you answer that

question yeah so i told you i was going to sell half my apple position and half my microsoft position at that time because i thought the market had gotten a little overblown and i know you thought i was crazy but today looking at it with apple up something like two percent the last six months i feel like you know i didn't really miss out on anything it's pretty much come full circle so i'm not necessarily as bullish uh as dan and it sounds like joe t is as well near term on apple right this is not a trade for me this is one my kid will probably inherit so i'm long-term bullish on apple but in the next 12 months i think they have some work to do i think they have not necessarily just a china problem but i think they have an iphone problem in the sense that they have to diversify away

from 50 plus percent of their product mix, of their revenue mix, being the iPhone. That to me is one of the biggest existential threats to Apple. And to Joe's point about this giving us an idea directly of where the consumer stands, I don't know that it necessarily tells us as much about the consumer as it used to in the sense that the cycle for replacement on iPhones has just gotten more and more extended than it used to be. And so we can't necessarily just predict automatically that every person who owns an iPhone is going to be willing to upgrade every two years when they come out with the next new one. And I will say that with the perspective of a person who's still holding an iPhone 8. So do with that what you will. Why did they have to diversify away from their bread and butter product any more than they

already have? Between the other hardware devices that they obviously have come out with, and then how big the services business has grown to, why do they have to do that? The biggest existential threat to me as it relates to Apple is not China. It's actually the day that a T-Mobile, Verizon or AT&T decides that they're going to worry about their own business and they're no longer interested in subsidizing the cost of every person who wants to upgrade to that next new iPhone. To me, the moment one of those companies comes out and says we're making a change to that, it's over. That's 50 percent of their market share. So right now they enjoy being the largest company by market cap at something like two point six trillion dollars. That gets whacked in half the moment

one of those CEOs from one of those big three cell phone carriers says you're on your own, Scott. We're not going to subsidize you going to the iPhone 17, 18, 19, 20. You want to respond to that, Dan? Yeah, I mean, people have been saying that and Malcolm raised great points really for going to subsidize you going to the iphone 17 18 19 20. you want to respond to that dan yeah i mean people have been saying that and amalgam rate is great points really for the last decade and if you look at the carriers within the us i mean this is the golden goose in terms of apple 4t for verizon you know in terms for at t so you don't see it happening so we don't see it happening and i think the important thing is carrier discounts are actually increasing because ultimately 250 million right now have not upgraded their phone in four plus years.

That is the opportunity and that's why it's the best installed base in the world from a consumer perspective. How do you want to address that, Joe? I mean, it is to Dan's point. You could easily make the argument it's the most powerful installed base for a consumer product company ever, arguably. And the retention is insane, above 90%. So I do think, though, I do think that it's critical in terms of understanding where the economy is. I disagree with what Malcolm's saying. One of the reasons why is

if this is going to be a weak holiday holiday season if consumers are actually going to be affected with their buying intentions I don't see how a Tesla right a Tesla can be so impacted by the increase in rates by the increase in the economic environment and then we could say okay well you look at a consumer facing company like Apple and we're not we're going to dismiss the economic impact of what might be unfolding. So I think this really is going to tell us something about the holiday season, about where we're going to be as we move forward into the coming quarters. And again, the way you overcome that is the services business and the usage of cash. I don't know what they're going to do with their cash, what they're going to do with their buyback, but that's the way you overcome it. And if you can't

overcome it, then I think Malcolm has done the right thing in selling half his position. I think the stock is in a place right now where it's sitting on the fence. It could go either direction, but it's got to be that services business and the cash to save it. Honestly, I feel like that's a little over the top, suggesting that Apple is like this great read on where the overall economy is. First of all, the economy has been really, really strong for the last year, right, at least. Apple revenues have declined every quarter over that period of time. The iPhone's been up and down. It's told us nothing about the broader strength of the U.S. economy whatsoever.

It hasn't. So why is it going to now? Okay. Well, now you have new products that are being launched. You have a holiday season, which is typically the strongest quarter for Apple. And if Apple is telling you that they have muted expectations for that holiday season, isn't that a direct read-through for what the overall holiday season is going to look like? I don't know that it's a one-to-one comparison between an upgrade cycle for a new phone when people already have phones versus if they're not upgrading that quarter is not going to be a strong quarter,

what's the signal? What's the message there? You just dismiss that? I don't think you can. I'm not dismissing it, but I'm also not willing to make some broad brush comment about the overall economy based on what they say about demand for the new iPhone. I don't know. Malcolm, AI, it's the one thing we haven't talked about yet. What do you want to hear from Apple, if anything? It's the one company that really hasn't given you anything to this point, right? They're being deliberate. They're being patient. They're going to get it right. Most people think it's around Siri. Do you need more definitive information today or not? Yeah, so leave it to Apple to provide us with a more elegant solution on their timeline,

right? That's pretty much what the expectation is for them around AI. But I think to Jyoti's point about he was alluding to the amount of cash that Apple has on its balance sheet, right? Something like $166 billion in cash and cash equivalents that, you know, if they park it in treasuries, it's going to provide them with a really nice yield. And that's really all they have to do. But I want to hear about how the company is going to innovate itself out of this

rut that it's been in and whether they're going to work there. You've heard me make the case for them to push further into fintech, for example, right? Are we going to get a new partnership with somebody to replace Goldman Sachs? Separately from that, are we going to get something in the world of connected fitness maybe, right? There's companies like Peloton that were once COVID darlings that are now cast out that they could pick up for pennies on the dollar. And so I'd like to see Apple become really innovative with the dollars that they do have sitting on the sideline,

on their balance sheet, as well as finding ways to integrate AI into their product set and impress us with the ways that they can make Siri, make us more efficient and tell us to do things we didn't even know we wanted to do. What do you think about AI? What are we going to get?

When are we going to get it? And what's it going to mean? Well, I think in June is where you're going to get it. That's where they're going to start. What I view is the AI app store that they're going to lay out to the developers and to the consumer base. And I think that that's really the opportunity for them in terms of monetizing. What is that, WWDC?

Is that what you said? Yeah. So I think that's where they ultimately lay it in terms of monetizing. What is that, WWDC? Is that what you said? Yeah, so I think that's where they ultimately lay it out in terms of the AI app store for developers. When I look at Vision Pro, it's really just the start in terms of courting developers. And I believe a year from now, we have an AI app store that's within the ecosystem. So a year from now, Joe, are investors patient enough to wait a year from now to get more answers on AI? I think so. I don't see any reason why they shouldn't be. They've been rewarded in certain circumstances and in select stocks year to date.

I think it's one of the stronger thesis as why you could be bullish equities in 2024. And there's no surprise up Tim Cook's sleeve at all about an acquisition of any kind related to AI or something else, is there? I don't believe, but we've talked about, I think even for a company that's never really done M&A outside beats $3 billion, we believe for the first time, I think ESPN, I continue to view that as sort of, that would really be the trophy case for them to look at ESPN asset, because that's something from a live sports perspective. It's unique. And we think 30, 40 billion, they could easily do that. What probability would you put on that?

I think 30 to 40 percent probability that they're seriously looking at it in terms of the opportunity. And if anything, at a minimum, a strong partnership. But I believe for the first time, maybe ever, they're going to significantly look at a larger deal here. Wow. Okay. We'll make that the last word then. Dan Ives, thank you. Joey, thank you. Malcolm Etheridge, to you as well.

Thanks. We'll talk to you soon. Let's get to our question of the day. We want to know, where will Apple trade first? Closer to 190 or closer to 160? Maybe last week you'd answer this question differently. I don't know. But answer it today. Head to at CNBC closing bell on X to vote the results later on in the hour. Let's get a check on some top stocks to watch as we head into the close. Christina Parts

of Nevelos is here with that. Christina. Let's start with Roku shares soaring right now, 30 and a half percent. Yes, 30 and a half percent after posting a 20 percent increase in revenue for the third quarter, even though the loss per share actually came in a little higher than expected. Roku's branded TVs and quote strong performance in content distribution and video advertising help drive those revenues. Canadian e-commerce firm Shopify is seeing its shares also jump over 22% right now after an earnings beat and a strong forecast for the remainder of this year. The total number of merchandise sold, which is an important metric for a lot of retailers, on the platform grew by 22% during the quarter.

Also during the quarter, Shopify announced a partnership with Amazon that allows store merchants free Prime delivery so it'll help traffic. Shares up 22.5%. Scott? All right. Christina, thank you. Appreciate it very much. We're just getting started here. Up next, stocks are popping big time today. Post Fed worth the highs of the day. More than 500 points. Five twenty five. In fact, J.P. Morgan Asset Management's Gabriela Santos is back with us in just a moment. So tell us what she thinks the Fed will do in December. She's going to tell us what stocks are going to do also over the next few months. At least we're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Stocks rallying across the board today. The S&P and Dow both on track now for their biggest weekly gains of the year.

Let's bring in Gabriela Santos now of J.P. Morgan Asset Management. Welcome back. It's nice to see you. Nice to see you. Are the markets getting this right? Did they get what the Fed chair said correct? I think so. I think what the Fed chair officially communicated was that they're still in a hawkish state of mind. But I do think the market is right to interpret several dovish signals that he sent as a sign to reduce expectations for

another rate hike and to increase on the probability that the Fed is really done raising rates. You think they're done? We hope they're done, and we do think the odds have risen since yesterday that they're done. And that's because of several things he said. Chair Powell mentioned third quarter's very, very elevated growth, but mentioned that forecasts for that growth to slow down. He also cited several improvements in the supply side of the economy, be it the jobs market, be it productivity that

we got this morning. That means that resilient growth doesn't have to mean inflation pressure. And then lastly, he cited risks, including the tightening of financial conditions. So we do think he could have pushed back against expectations for no more hikes. He didn't. Didn't really happen. He had the chance to do it on multiple occasions and he didn't do it. So given all that, has the equity position improved as a result? I think this very broad-based recovery we're seeing in the market yesterday and today just signals how crucial this question of interest

rates has been for every corner of the market. And the Fed is a piece of it. This uncertainty about the risk of rates going higher and uncertainty about what a neutral rate is. I think we got a little bit more clarity about that yesterday. What also happened yesterday was the question about the term premium and the move that we had seen in long end rates since late July. And what we heard is maybe there's a little bit less uncertainty about Treasury issuance going forward and that the Treasury is listening. And we got a positive surprise with less issuance of long end Treasury, especially 10 year, 30 year bonds. So a little bit less uncertainty in general about the cost of capital means you can have a little bit

more conviction about investing not just in interest rate sensitive stocks, but in cyclical stocks, in fixed income, in asset markets more broadly. Wow. So this might have been a bit of a game changer in terms of the Treasury issuance. As you said, lower Powell's commentary yesterday. I mean, yields are obviously collapsing over a two day period pretty dramatically, which leads people like Jeffrey Gundlach to say that, you know, bonds are the place to be. I want you to listen to what he told me yesterday. I believe that we've started a bond rally here. I think we've had such a brutal increase.

I think the Fed is sounding the right tone. I do think rates are going to fall as we move into a recession in the first part of next year. All right. So here's the big question for you. The pressure's on. Are we going to have a bigger bond or stock rally? That is such a good question. I think if we think about our base case, which is in the next 12 months, a soft landing, then our expectation is that yields have reached a peak at 5%, but they drift lower. So that suggests 5%-ish returns for the bond market, whereas for stocks, we're already at a correction of 10% from just the late July levels, even more than that from the all-time highs we had reached way back early last year.

So we would say, actually, the probability is for stocks to do a little bit better than bonds. But we still feel like there's opportunities and urgency right now to lock in bond yields where they are, because what we find is the majority of investors might have an allocation to so-called fixed income. But really what that means is just ultra short cash, three months, six months, T-bills. So really the urgency is to actually extend a bit duration and capture some of that 5% income. One of the keys of what you just said was if there's a soft landing. Exactly. That's where it all, you know, the rubber meets the road.

It has to be a soft landing for that to work. If you have an orderly measured decline in yields, stocks can do OK. If they start going down yields for the wrong reason, meaning we're worried about a recession, you know, sooner, that's a potential problem. And that's where the risk reward for bonds actually is quite interesting. If we do get a soft landing, you can collect 5 percent and benefit from income if you've increased duration, of course. If there is a hard landing and yields fall, let's say, 1% from here, that's not crazy, a little bit below 4%, then you could be talking about 12% return from something like the U.S. aggregate.

So, for fixed income, there are different scenarios that are possible, but the risk-reward is quite favorable to add a little bit of duration from here. What about adding a little bit of diversity in terms of regions, geography, where you're investing? How would you address that? And this is a big topic that comes up in client conversations. Number one is why should I step out of cash? Number two is why should I step out of the U.S.? Why should I step out of the U.S.? But actually, actually, we see our clients a lot more open to the idea because I think there's a realization that the pandemic has shaken things up in a positive way. For example, Europe and Japan have inflation, have the perspective of

positive interest rates. So you can have better nominal growth, better earnings growth. They've also discovered buybacks, so better earnings per share. Japan, especially out of the two, is one that we feel optimistic about. And then lastly, in emerging markets, a lot of headwinds and challenges for China. I think the enthusiasm about adding to China has fizzled, but one that's really growing is India. It's already the third largest EM equity universe, and we see a lot of investors honing in on that and growing exposure. All right. I enjoyed it. Thanks for being here. Thanks investors honing in on that and growing exposure. All right. I enjoyed it. Thanks for being here. Thanks. Good to have you back. Yep. Gabriela Santos joining us once again here at Post 9. We are getting some news out of the Sam Bankman Freed trial. Major news at that. Kate Rooney joins us. Kate.

Hey, Scott. So the jury has officially started those deliberations in Sam Bankman Freed's criminal trial. We are officially on verdict watch. Reminder, 12 jurors here, they need to agree unanimously on this decision. He faces seven criminal counts of fraud and conspiracy. Sam Begman-Fried, the crypto founder of FTX, has pleaded not guilty. The jury is going to go a bit later today. Court normally adjourns around 4.30. The judge extending that to to 8 15 is offering people a dinner and uber is home if they need it it could go until 8 15 court is not in session tomorrow they're not deliberating tomorrow so if they do not reach a decision by this evening it will go into next week but again scott jury officially deliberating in this criminal case back to you all right

appreciate that kate thank you kate rooney outside the courthouse up next, searching for opportunity. Vantage Rock's Avery Sheffield breaking out her playbook. Tell us where she sees some upside ahead as we head into the end of the year and into a new one. She's here at Post 9 just after this break. Closing bell right back. We are back with stocks rallying as we head into the close here to share where she's finding finding opportunity now, Avery Sheffield, co-founder and CIO of Vantage Rock. Welcome back. Good to be here. Let me get your view, though, of this market, what's going on here over these last couple of days post-Jay Powell.

Yes. Are we getting it right, as I asked Gabrielle as well? I'm not sure the market is actually getting it right. I mean, I don't think Powell would say that the market's getting it right. I mean, I don't think Powell would say that the market's getting it right. I feel like he was really trying to present as hawkish message as he could, given that the economy is starting to show signs of slowing. Really? I mean, he had multiple opportunities yesterday to push back on the market's view of, you know, future hikes. And he really didn't do that. Markets priced him out. Yes. He had that chance. He didn't do that. Markets priced him out. Yes. He had that chance. He didn't do it. Well, I don't think he thinks, given the way things are going

right now, that there need to be future hikes. But the market's reaction has almost moved from future hikes to near term cuts. Right. The market has gone into this still being expensive relative to treasuries. And so if you think that there just aren't going to be cuts and you're going to have the Fed funds rate over 5 percent, the 10 year, you know, close to 5 percent, many stocks are far too expensive. And the movements since he started speaking suggest that they're starting to price in some real rate cuts. So you agree with Jeffrey Gunlock then that now's the time to buy bonds? You're going to have a bond rally? I don't know.

This could be a head fake. I don't know that rates need to go that much higher. So it might be a fine place to be because over time, especially like the short end of the curve over time will come down. But how long is that from now? Who knows on the short end of the curve? The long end of the curve is, you know, really a question of how long can Yellen stave off, you know, more Treasury issuance, what happens internationally. So this move right here, given that we aren't going to have a surprise in Treasury issuance, might be OK, but it also might be a head fake. I mean, what happens tomorrow if the jobs data is strong? Yeah,

well, I mean, good news has been greeted with bad news and vice versa. And you think we're at risk of that again? I think we're at risk of that again? I think we're at risk of that. And actually, I think there's a very reflexive dynamic in the market, right? Whenever there's bad news, the market rallies, bond yields come in. That's stimulative. That's a key part of the financial conditions that Powell was speaking about. Like if financial conditions loosen, they loosen for him.

He's going to keep rates higher. As long as rates are higher, things are going to slow. What that might mean is that we're in a more range bound kind of potentially grind down on stocks that are too expensive dynamic. Which which stocks do you say are too expensive? Which do I say? Well, I mean, the way we look at things is the way many investors are today is if cash is at five percent. You want to you want to you want an earnings yield that's greater than 5%. You want a PE that's lower than 20. Right. The market's right around there. And so we think. Well, only because of mega caps. Not just because of mega caps. I mean, there are still a lot of growthy stocks out there that come that are much more expensive than the mega caps. And I think people are still measuring those

stocks on incrementality towards potentially making money. But they're still nowhere close to their valuations. I think as the economy probably does continue to slow, unless, again, we have so much stimulation from the market that things move up again, those companies might have a harder time granting their valuations. So you're telling me you want to stay. It sounds like you want to stay away from the Nasdaq. Not all of the Nasdaq, but you want to be careful about stocks, I think, that are still much more expensive than a treasury yield, unless there's very significant growth in addition to that strong earnings yield. Well, like the ARK-type stocks are the ones with the higher valuation.

The mega caps have all or, well, not all, but most are above 20. Yes, yes, yes. Maybe Alphabet and Meta are below, but, you know, they're still elevated. The other ones are. Yes, yes. So, that's right. So, with the kind of the Magnificent 7, there's certainly a dispersion of valuation in there. The less expensive stocks in the Magnificent 7 certainly could grow into their valuations.

You have Microsoft, where if Copilot goes really well, will certainly grow into its valuation. So, you know, what we're looking at is like how are which stocks could potentially grow into that kind of 20 times P.E. or lower over the next one to two years. A few of those names, I think, fit into that potentially really fit into that category. But it's more like the ARK stocks, stocks that are still very growthy, very frothy, some with very still questionable balance sheets. Earnings. Earnings that I would be more concerned about. Let me get your opinion on what Bill Gross said today.

He tweeted. We're going to show you the tweet, essentially calling the bottom. Yes. In regional banks, says buying Truist, Citizens, Key Corp. The falling knife of regional banks has now hit a bottom. By the way, he's going to be on last call tonight. It's an exclusive interview with Brian. You'll want to pay attention to that 7 o'clock Eastern time.

Your thoughts? Yes, I think he might be right on the regional banks. And it's not because they're about to turn tomorrow, again, if we have this dicey economy. But there's so much negativity that's priced in. And given that we're likely to have kind of an up and down economy, but not that could keep a major credit event from happening. If you don't have a major credit event happening, these, the regional banks are far too cheap

and they don't have the same regulatory pressures with the very significant capital constraints that are being put on the larger banks. So I do think it's a place to watch. But look, if we have a bond rally today, they're going to work really well in bond rallies. That goes the other way. You could certainly feel some pain in the near term. OK, so last question. The absolute best place in the stock market right now is what? Is what? Well, I think the safest place for a risk-reward is one of the most boring places out there. And I think that that is the U.S. telecommunications carriers, which have been the dog of all dogs.

But I think that they are very underappreciated. If you like bonds, you should really like the U.S. telcos. You know, you have AT&T and Verizon, both with free cash flow yields well over 10 percent, dividend yields over 7 percent. You have T-Mobile with nearly 9 percent free cash flow yields and giving back a lot of that to shareholders. And if these are stable businesses, that's a much better yield than you can find for that quality business anywhere else. And there are a couple of key reasons why I think that's the case. All right. You want to give me a real quick? Yeah. So one is, first

of all, the competition from the cable operators is really, you're starting to see dissipate. You saw Comcast mobile subscribers actually going down. You have Charter is actually going to be lapping their free subs or free line starting 4Q. And that's been a major risk to the operators that Cherish is going to shift to cable. The other major dynamic is that CapEx is going down. Each of the major operators said that their upgrade rates of new cell phones, which the carriers buy, are going down. So their CapEx for cell phones is going down and their CapEx for the 5G networks, which should further expand free cash flow yields. All right. Awesome. I appreciate it. Thanks for being here. My pleasure.

All right. We will talk to you soon. Avery Sheffield up next. We're tracking the biggest movers as we head into the close. Christina Partsenevelos is standing by once again with that. Christina. Goodbye, pumpkin spice. Sorry, Scott. Hello, peppermint patty and gingerbread oat chai.

These fancy drinks are a reason why Starbucks shares are popping right now. And a software firm now eligible for the S&P 500. I'll explain all this and more next. We're back with a news alert on the auto space. Phil LeBeau here with those details. Phil. Scott, take a look at shares of GM, Ford, and Solantis moving higher with the rest of the market today. We have confirmed that the UAW members who were on strike, more than 35,000 at one point, will be receiving compensation for every day that they were walking a picket line and not working. This is unusual because typically there's no compensation

aside from the strike fund from the union for those workers. But we have confirmed that as part of the tentative agreements with the three auto companies, there will be some money that comes from the final amount agreed to in those tentative agreements that go to those workers. Not a full day's salary, maybe closer to $100, $150, whatever it might be. The Wall Street Journal reporting earlier this afternoon that it's $100 per day that they were on the picket line. We haven't confirmed that amount, but there will be some compensation, Scott, as part of the tentative agreements for those workers who were not working, but were striking and walking a picket line. Scott, back to you. All I can think, Phil, you know, between the deals that Sean Fain of the UAW cut with the major automakers and then this brilliant negotiation, I just, I can't, you can put it into perspective better than me. You cover

the space for many, many years. It's remarkable what he was able to do for the UAW. Far exceeded what anybody expected. When he was first elected UAW president, Scott, there were a lot of people who were saying, you know, this guy's coming in and he's promising to do things differently. Well, his strategy was completely different than what the UAW has done in the past. And it's paid off in terms of record contract. And look, in terms of this news here, when was the last time you heard about anybody striking any company in any industry and the people who are walking the picket line receiving some form of compensation? That's pretty remarkable. Yeah. I also wonder, you know, in terms of this future work stoppages, the precedent that that this may now set and how that all factors into down the road in other areas

of the economy where you could see work stoppages in the future. I appreciate it. That's Phil LeBeau with the latest reporting here. Appreciate that, Phil. We do have about 15 minutes to the close. Let's get back to Christina Parts and Novelos now for a look at the key stocks she's watching. Christina. Well, you may make fun of those who order the extra shot, more milk, salt, topping, caramel, drizzle, pumpkin spice, latte. But those pricey customized drinks and expensive lattes helped revenue climb 11 percent in Q4 with a 3 percent increase in Starbucks traffic. But not everywhere. North American customers were the ones buying as the international business saw weakness. Coffee drinkers in China are cutting back orders

amid a slowing economy. And we've got another stock pop. This time it's Palantir on an earnings beat, which also includes a fourth straight quarter of profitability. That means Palantir is eligible for inclusion in the S&P 500 right now. The software firm is known for its defense and intelligence work with the U.S. government and also raised its full year guidance. Shares 20 percent. Scott. All right. Appreciate it as always, Christina. Thank you. Last chance now to weigh in on our question of the day. We asked where will Apple trade first, closer to 190 or closer to 160? Well, we're going to find out where it goes pretty soon because those earnings are coming in over time. Head to at CNBC closing bell on X to vote.

The results are just after this break. All right, the results now of our question of the day, where will Apple trade first, closer to 190 or closer to 160? You know, reasonably close, though closer to 190 is the winner with 56 percent of that vote. Up next, Apple not the only big name reporting in overtime. We'll bring you a rundown of what to watch for when some other crucial travel names hit the tape. We'll take you inside the market zone next. All right, we're now in the closing bell market zone. Joe Terranova back with us for these final minutes of this trading day.

Courtney Reagan looking ahead to Expedia and Booking Holdings both out in overtime. And CNBC senior markets correspondent Bob Pisani on what he is watching in this rally. Joe, as I turn to you first, we have a nice little ramp here as we get closer to the end. We're pushing towards 600 points on the Dow. We sure do. And it's a little bit of a short squeeze. Let's remember where we were just one week ago with this market. A little bit of a short squeeze, a little bit of the seasonality effect.

We have to hear from apples to get the confirmation, I believe, for mega caps. But this is all a very good setup as we move towards the end of the year. You know, the question I asked a couple of our earlier guests, including Avery Sheffield, is the market getting the Fed chair right? Because that's really where we ramped, you know, right out of the Fed once his press conference was over. And now we've got follow through. She said not so sure that he was still. it's not like he was super dovish. How would you address that question?

Is the market getting this right? I just look at the 10-year Treasury. The 10-year Treasury has pulled back to $4.65. I think that's telling you everything you need to know. We're taking back the hiking that the Treasury market did on behalf of the Federal Reserve. Yeah, unless it's falling because we think we're in a weakening economic period. So, Courtney Reagan, Expedia, booking holdings, it's not just all about Apple. These are important ones, too. Yeah, sure, Scott. I mean, we're going to get a window into how consumers are feeling about leisure travel when booking an Expedia report here after the bell in just a couple

minutes. Both, of course, online booking agencies for airline and hotels. And while domestic air travel is seeing a slowdown, at least from post-pandemic highs, international appears to be holding up. At least that's what we've heard so far from the airline carriers. Now, hotel operators Marriott, Hyatt, Hilton, they're reporting still strong demand with slightly higher rates, at least for the most part, but disappointing profit expectations. So investors will want to know expectations from booking and Expedia upcoming non-peak holiday travel. That's the color that we'll hopefully get on the conference calls. And the stock moves are really varied between booking and Expedia, with booking up 40% year to date, but down 2% over the past three months, or this quarter,

they're going to report. Expedia up 8% on the year, but down nearly 20% since August 3rd. Back over to you. All right, Court. Thank you so much. We'll see what happens. All right, Bob Pisani. So I read your trader talk note yesterday morning, and it's about 60% of the companies who've reported

their earnings estimates are coming down for the fourth quarter. Earnings may be too high. And here we are in a two-day move that's just astonishing. The NASDAQ is working on its best week of the entire year. So nobody puts these things into perspective better than you. So the market was very efficient at sniffing out the fact that earnings were coming down because stocks dropped before even the analysts got ahead. So here's a good example, efficient market hypothesis.

The market sniffed out that earnings were coming down. But I'm a Terranova. It's the 10-year yield that mattered. So what's a quarter point drop in the 10-year yield worth? It's worth 200 points in the S&P. We're up 5% this week. That was the determining factor. The macro factor, even more important

than the concerns about the slightly lower earnings situation. So then you add a slightly better earnings picture for a few of these companies, you get rocket fuel. Look at this here. Clorox up 8 percent. Starbucks up 10 percent. Ingersoll ran 14 percent. That's not a high beta stock.

That doesn't move 14 percent. Parker Hannafin up 10 percent. Are you kidding me? You know what's one of the interesting stories as you're reading that? Because the companies that had reported before those did, one of the big stories this earnings season, you weren't getting pops in stocks. Now, all of a sudden, the dynamics changed. Because you're getting what he was just talking about.

Suddenly, there's a reversal, and the market believes that we're not going to pop through 5% on the 10-year yield. So here, let me tell you what the problem that I see right now, because Apple is going to occupy us very, very quickly. The problem is the rally we've seen sets the bar much higher for Apple to really pop. Yeah. Even if they say something, what are they going to say to turn things around? It's hard to imagine, but you had a very good observation about Apple in the put-call situation there. And I agree that that could move up. But Apple's up 5.5% this week.

And even for the jobs report, Scott, the rally that we've had, I think, makes the bar higher for a pop, even if we get a desirable jobs report, which I think should be a little bit below the consensus. It's like, Joe, I mean, Apple's up near $10 in the span of a week. It is. You looked at a chart that looked bad up near $10 in the span of a week. It is. You looked at a chart that looked bad. It was below its 200-day moving average. Everybody who talked about it was like, the chart that's been trading awful. And to Bob's point, now it's ramping into this earnings report. Well, but it's all a reaction to what we're witnessing in treasury yields.

And it's not ironic. It's actually what history teaches us about markets, that the day that the GDP print came out was the top for yields. That was the actual near-term top for yields. Yields fell from that. I got less than 30 seconds, Bob. You've got to be super quick. The Russell, wow, 2.5%. And it's been crushed lately. The Russell, small caps were the most sensitive to higher interest rates because it raises borrowing costs and companies have higher costs who are smaller because the risks are higher. Eliminating that really, really helps small caps. All right. Good stuff. Thank you, gentlemen. I appreciate it very much. Okay. Apple is just ahead in the OT with Morgan and John.