Closing Bell - Closing Bell: Countdown to Critical Fed Decision 9/17/24

Episode Date: September 17, 2024

What should investors make of either a half or quarter point rate cut tomorrow? And where does that leave a market that seems priced for a soft economic landing? Rockefeller’s Cheryl Young, Sofi’s Liz Young Thomas and CIC Wealth’s Malcolm Ethridge break down their forecasts. Plus, DoubleLine’s Jeffrey Gundlach sits down with Scott Wapner one day before the Fed decision with his rate cut prediction. And, the Conoco Phillips CEO weighs in on oil prices and the broader energy sector. 

Welcome to Closing Bell. I'm Mike Santoli, in for Scott Wapner, who will join us shortly, live from FutureProof in Huntington Beach, California. He just finished speaking with DoubleLine's Jeffrey Gundlach, and Scott will join us with the highlights shortly. But this make-or-break hour starts with Wall Street in suspense. A rare degree of uncertainty on the Fed's next move within 24 hours of the decision is helping to hold the indexes in check just below record highs. Here's your scorecard with 60 minutes to go in regulation. The S&P 500 briefly touched a new intraday record high before the rally leaked away. You see it down, oh, by about a sixth of a percent, eighth of a percent right now. The Dow and the Nasdaq, they've been flattish most of the day.

They continue that way. The Russell 2000 is the upside standout as traders execute that standard playbook ahead of a Fed. Yeah easing policy this the- Russell two thousand of nine tenths of a percent banks are strong though they as well are well off their highs from earlier in the day energy

higher oil prices bouncing off of those two year lows set last week consumer stocks are well bid following a decent retail sales report this morning while tech continues to lag as it did yesterday. It takes us to our talk of the tape. What should investors make of either a half or quarter point rate cut tomorrow? And where does it leave a market that seems priced for a soft economic landing? Cheryl Young, Rockefeller Global Family Office private advisor,

is here to talk about all of that. Cheryl, great to see you. Great to see you, Michael. How are you thinking about the scenarios in terms of what the Fed does, what the market expects, how we should react, and what it says about the economic environment here? Yeah. You know, Michael, the markets are pricing in a 50 basis point cut tomorrow. Mostly. Mostly.

It's almost a coin flip. Well, we're seeing it fade right now. And I think that's probably why. I'm expecting 25 basis points. Look, I'm a data girl. I'm from Silicon Valley. The data just does not support 50. So I think we'll see 25 tomorrow.

But look, I'm also a long-term investor. And I really care more about the trend than what happens in one day. So if you're a gambler, you care about what happens tomorrow. If you're an investor, you care what happens over the next year. Yeah. You call them speculators, maybe not plenty of them out there watching. But you say you're focused on the data. What particular data says 50 would be out of bounds? I ask because it seems like a lot of the reports in the chatter and the commentary in the last few days has been directed at building a case for why the decline in inflation to current levels and just how high rates are compared to that really do allow for more room to ease up front

with a 50 basis point cut rather than waiting and going small. Yeah, you know, you can make the argument that they should have cut in July. And I think that's part of the pressure on the feds tomorrow is they really should have cut in July. But look, stock market touched all-time high today. Unemployment is still at really reasonable levels compared to long-term, although the velocity of the last year is why people are considering the 50 basis point cut tomorrow.

So you have to weigh all the data. GDP is still very strong. We still don't see recession ahead of us, but things are softening. And I expect GDP to still be 1 you know, 1.5 to 1.7 next year. So we're not seeing that decline go negative. And unless we see recession territory, we just don't want to get really too far away from controlling inflation either, which is the balance act. We still have to keep that inflation check.

That would net out to a pretty positive view on the economic backdrop, right? I mean, if you really think that there's time and there's and, you know, if we cut by 50 basis points, you're still above four and three quarters percent. So it's not as if you're all of a sudden stimulative. I guess the question is, are the stakes particularly high with the decision tomorrow or do you feel like we're in a decent place either way or we're vulnerable either way? I don't think we're vulnerable. I think we're in a decent place either way or we're vulnerable either way? I don't think we're vulnerable. I think we're in a decent place either way. I think either choice is going to be a good choice.

Now, there's probably no chance of a no cut. That would be the disastrous scenario where the markets would really react big. You know, 50 basis points does potentially put some question mark. What data are they seeing that we're not seeing? Are there more signs of bad news ahead? And I think that's the reason we will get a 25 basis point cut. But look, either one in the long run is not going to move the needle that much. And we expect five rate cuts over the next 12 months. So whether they do, you know, two in one tomorrow or stretch it out, either way, I think

we're going to get to the same effect over the next year. And of course, there's going to be plenty of guidance and the Fed's formal outlook to chew on after the fact to get a sense of what they envision in terms of their pace. Retail sales this morning were OK. I guess you would just say no incremental reason to be further worried about the consumer, even if it wasn't a gangbusters number. In terms of the market, you've had this phase where kind of more defensive groups, rate-sensitive areas of the market have outperformed. And now you're finally getting some of the consumer cyclicals catching up. But the rule has been the winners of the first half of the year have not done a whole lot since mid-July, right? The mega cap growth stocks, the semis.

I think you were concerned to some degree about the concentration of the market in the first half. Where does that leave you now? Yeah, you know, when I was last on with Scott in June, I was really concerned about the price, especially of semiconductors. That sector has had a 25% sell-off twice, August 5th to August 7th, and again around September 6th. And has bounced back off those lows considerably. However, semis tend to lead and you really have to pay attention to how they're moving. So that double bounce off the bottom has me a little bit concerned. Valuations were really high. If you look at valuations on the tech sector, it's almost double that of the rest of the S&P 500. And so we really want to see this broadening that we've seen

kind of come into play since July continue for a healthy market. When you have 63% of the returns come from seven stocks and with 61% last year, so this is not news. This has been going on for a long time. There's just a lot of concern about how healthy the economy is. Over half of the market, if I look at the S&P 500, is still 48%, so I'm rounding, still negative year to date as of right now. And so that's just not the healthy market we want to see. We want to see that broadening continue. We want to see some of these beat up sectors continue. But my concern also is if I look at utilities, just for example,

that's a more defensive play. And we've had a huge rally there. There's some names that are at P ratios that look like tech P ratios that really doesn't fit with what utilities should be trading at. Yeah, it's been a noisy stretch here the last couple of months. Let's bring in SoFi's Liz Young-Thomas and CIC Wells' Malcolm Etheridge. Malcolm, a CNBC contributor, brought out this conversation. Liz, talk about tomorrow's decision and I guess just the degree to which we feel like it's going to be a major swing factor in terms of how the economy breaks and how the market adjusts to it.

Well, I think it is going to be a swing factor in the market because there's not certainty about what they're going to do. This is the first meeting in a really, really long time that I think we're going to go into it really not knowing what's about to happen. So that in and of itself is likely to be a market mover. Someone's going to be disappointed either way. Someone's going to be disappointed. Somebody's going to be wrong. And that's a new experience that we're having as investors. So at that period of time, and I say this all the time, that period between 2 o'clock and 2.30 p.m. is the most dangerous time to trade because they've made the rate announcement,

but they haven't had the presser yet. So heed the warning that that is a dangerous time to be playing with the market. But the decision of between 25 and 50, I think that they should do 50. It would be out of character for them to start with 50. It would look big. It would be aggressive, so to speak, based on their history. But if they know that they need to do that at some point, if they know that they need to get to a certain point before the end of the year,

why wait? And particularly, why wait until the day after the election results, hopefully results actually come out. Why wait until then and be accused of being more political? So I think they should do 50. I think that the labor data has disappointed them. It's gotten cooler more quickly than they expected, given that the unemployment rate has already overshot their year-end target.

So I think 50 actually would not be that aggressive, especially considering that on the way up, they did 25.50 and then three 75s in a row. That was really aggressive. So why not get it started with 50 and manage the messaging? Yeah, it seems as if, I mean, it's worth remembering that they've been on hold since July of last year. That's 14 months. It's an unusually long period to kind of keep rates at cycle highs. And so over that time, I guess it probably and the reason that the 50 basis point chatter has probably kicked up, you know, whatever, maybe there's leaks, maybe there's people deciding to try and kind of push the debate in one direction or another, is that five and a quarter to five and a half on the Fed funds rate increasingly

looks out of whack with all the things you mentioned, right, with the upturn in unemployment, with where inflation has gotten to. And I guess the question is, with the S&P already up 18 percent this year, you are starting to see, you know, like 60 plus percent of all stocks are now in an uptrend. In other words, it's not as if the market expects bad things from the economy. So we're not priced for a further downturn, it would seem. Right, which would send the message that the market can absorb it. Now, maybe it would have some jitters initially if the 50 was a surprise to people that were expecting 25. But the market right now seems to me to be priced for a soft landing. We're almost pricing that in. We've got this broadening out going on. You've got small caps outperforming the S&P over the trailing three

months. The sectors that are leading are either rates-driven sectors, some defensive sectors, but I'd also call those dividend-paying sectors that are trying to anticipate further drops in yields. So the market is telling us that it has resiliency under the surface and the average stock is doing okay. The economy still doing okay right now. I'm of the mind that we're actually just making a stop in balanced territory on our way to weak territory. But right now we're balanced and that's okay. And the market continues to be resilient and there's buying power out there. So that's another reason I think the Fed can afford to do 50 tomorrow. And we just have to manage the messaging around it. And that messaging being just because we did 50 today doesn't mean we have to do 50 every single time from here on out. But the risk of only doing 25 and then having this

big gap of time between the September meeting and November 7th and having all this data roll in cooler and then looking too far behind, I think that risk is much higher than just doing 50 and trying to manage the message. Malcolm, where do you come in on this in terms of which is the choice that is likely to lead to the least regret down the road? Yeah, I think Liz's point about needing to just get it over with and go 50 now is a good one. But I think that the Fed is more likely to go 25 here just to keep from spooking the markets. It's a safer bet. It's the more consensus bet, right? If we just listen to the remarks coming out

from a lot of the Fed officials who have kind of tried to front run this thing, they're really not all on the same page. And so the easiest way to get to a consensus is to go 25 rather than the more extreme case at 50 because it's really tough, I think, to message to the markets that, yes, we went 50, but that doesn't necessarily mean

that we see a whole lot of bad out there today. We're just trying to be data dependent once again. I think that the more impactful way to go about it is to do 25 here, see what happens, and then maybe go 25-50 the next one. You don't think that the past four, five days of people kind of laying out the case for why 50 wouldn't be a panic move and it wouldn't really be because of some kind of an urgent emergency that the Fed is responding to? You don't think that the markets could live with that as a message? I don't, because to your point, we've been in this holding pattern for 14 months now where we haven't seen cuts at all, which is unusually long. And so a big shock to the system would be an interest rate cut anything bigger than the smallest possible required cut just to start the easing cycle. So you can always add to it. It's really tough to

take it back once the toothpaste is out of the tube, though. Cheryl, in portfolio terms, what does it all mean right now? I mean, what would you be telling clients about, you know, where we are in the cycle, whether you feel like this bull market is in a fragile position, are we okay? How should we set expectations for the rest of the year? Yeah, you know, it's a really— Sorry, Malcolm. Cheryl's going to jump in on that for a sec. Sorry, Malcolm.

We'll give it back to you in a second. I really think you have to ask yourself at any of these juxtapositions whether something has materially changed. And, look, the markets are, you know, the fund rates is at a 23-year high. Jobless numbers are at a three-year high. So you have to look at this and say, yes, something has materially changed. So what has worked for the last year or two years may not be what is going to be working going forward. And I would love to say I still love my technology stocks because if I sold them all, I'm going to get crushed in taxes. My clients would kill me.

We have to think about the overall tax effect. But I do have to think that there has to be some rotation. Technology has been on such a tear. The valuations are too high. And the story has changed. What has done well during a flat rate environment or a rising rate environment, which is what we've had for the last decade and the last two years, is not necessarily what's going to perform well during a declining rate environment.

Malcolm, I know you're an owner of some of those big tech stocks. You can kind of weigh in as what we were saying before about the portfolio approach, but also, you know, Microsoft, for example, out there been one of the leaders for years. Yeah, I think it makes logical sense to say that that rotation now is finally the setup. We've been asking, when is this rotation, this broadening going to happen for more than a year now? And I think you could make a logical case that maybe it's time to rotate into things like financials and energy and so forth. But I also think in an accommodative rate cycle, it allows for some of the other tech names that haven't really participated to the level of the hyperscalers to actually

now borrow to invest in artificial intelligence because they don't have the fortress balance sheets to do it on their own, like, say, an Apple. Right. You have HP, you have IBM, other names that need to invest in refreshing their hardware today and integrating AI into it so that they can get ahead of where their customers are going to be looking to them for those baked in AI solutions later. And so I just don't think that it's necessarily a foregone conclusion that today is the day or tomorrow is the day that we say we turn away from tech altogether. And maybe it makes more sense that we're broadening our holdings inside of the tech sector more likely. Yeah, I guess if we're going to get a full rerun of the whole Internet run up, we need leveraged CapEx investment in tech because that was a big part of it back then in that final phase.

Liz, you suggested that we're in this kind of maybe delicate equilibrium here in terms of the economy, you know, kind of slowing to a point where you think it's going to lead to a downturn. Is there a way to avert that? Is the bond market telling us that's a done deal? I mean, the bond market and the stock market have been sending conflicting signals for most of this cycle. And usually people rely on the bond market more. And now it's looked like maybe the bond market has gotten it wrong. Is there a way to avert that? I don't know that there's a way to avert that. When we look over history at the times when, in a cutting cycle, we've pulled off a soft landing, so in the 80s and then again in the 90s, both of those periods, that was happening into a

strengthening labor market. So unemployment during one of those times was, I believe, over 7%. Another time it was at about 5.6%. Both times the unemployment rate was falling. That's not the case today. So when you think about just where we are in the economic cycle and the fact that unemployment seems to be on the upswing and we're just at that balanced place where we've got about one job open to every unemployed worker,

that's what makes me concerned. Usually when you draw the correlation between cutting cycles and the unemployment rate, the unemployment rate rises pretty clearly and actually pretty dramatically during most cutting cycles, except for those two periods when the labor market was strengthening. So I just don't think the conditions are present for that to happen. I'm going to circulate a petition to have 2019 categorized as a contingent soft landing because they did cut. And I don't think that the yield curve predicted COVID. But anyway, it didn't play out long enough to know exactly how it was going to go. Liz, Cheryl, Malcolm, thanks so much.

Appreciate the time today. Let's send it over to Seema Modi for a look at the biggest names moving into the close. Seema. Sima Modi for a look at the biggest names moving into the close. Sima. Hey, Mike. Hewlett-Packard shares are surging here as much as 6% after Bank of America upgraded the stock to buy from neutral. The bank says it believes the stock's valuation is now, quote, compelling, and it sees a slew of positive catalysts, including cost-cutting efforts and a recovery in the AI server market. Shares up 5%. Let's talk about Moderna. Among the biggest gainers on the S&P 500 today. The drug maker says its updated COVID-19 vaccine has been approved for use in Canada.

The stock is up about 4%. Mike? Seema, thanks. Talk to you again in a bit. We are just getting started. Up next, we'll take you live to the Future Proof Festival where DoubleLine's Jeffrey Gundlach just caught up with our own Scott Wapner. Scott will bring us all the highlights from that conversation,

including what Gundlach thinks about AI and private credit. Plus, we'll hear from top retail analyst Simeon Siegel with his first take on today's better-than-expected retail sales data. We're live from the New York Stock Exchange. You're watching Closing Bell. Let's send it over to Scott Wapner, who just got off stage after speaking to Double Line's Jeffrey Gundlach at the Future Proof Festival. Scott, what did he have to say one day ahead of the Fed? Yeah, Mike, we hit a

number of topics, Jeffrey and I did, but I did begin by asking him the question on everybody's mind. What is going to happen tomorrow? I think we get 50 tomorrow and I think we're going to get another 50 by year end and a 25 in the middle. So that'd be 125. So it'll actually be five cuts between today and the December meeting, inclusive. So given that outlook, I asked Jeffrey what his best investing strategy is right now. There have been some suggestions

that this is going to be a great time for fixed income, given the fact that interest rates are expected to come down here's what he said about that i think you have to be extremely careful of your positioning what i mean by that is i think long-term treasury bonds will fall in price as we get further along into economic weakness they won't go up in price they'll go down in price of course the Fed will cut rates aggressively. So two-year, three-year, five-year treasuries. So we have really one of our best performance years ever

going across the firm at DoubleLine. And one of the reasons is we've been committed to the idea that the curve was going to de-invert. And so we're, in essence, this is oversimplifying, but we're basically short the long bond and long twos to five-year treasuries, and it's working a lot, and it's gonna keep working. So, but it isn't that you're losing money

on the long-term treasuries right now, but you're making much more money on a duration-adjusted basis on the short-term ones. And so that's the way we're positioning. And like many, Jeffrey Gundlach has watched this whole AI craze with amazement. So I asked him about that, and he said unequivocally, at least in his mind, it's a bubble. AI is exactly the same today as the dot-coms were in 1999. Terrific long-term potential, tremendous overinvestment and excessive belief that it's all good. There's nothing but good. And then you get the crash, and then the ones that survive end up to be world beaters. I think

that will happen in AI as well. I think the overinvestment in AI is just astounding. And finally, I asked Jeffrey about one of the hottest areas over the last couple of years in credit, that being private credit. Everybody's been talking about it. Financial advisors have been getting their clients into it. It certainly has been a topic of conversation at many different conferences. Somewhat surprisingly, Jeffrey took that on as well. Without any doubt, I know that when the first question at a large crowd presentation is over and over again, talk to me about private credit, I say like, well, you're asking me that because you own a ton of it, right? You're an RIA and you've got your clients all in these funds. And of course, now, I think somebody's trying to do a closed-end fund for private credit. It gets weirder and weirder. First, someone's so bold as to want a

billion-dollar fund. Then somebody wants to do a $5 billion fund. Now there's somebody doing a $25 billion fund. This is what the top looks like. This visit today with Jeffrey was so unique here in Huntington Beach at Future Proof because it's the day before the Fed. And as all of you know, we speak to him the day of the Fed, which we will do tomorrow. We're going to be live at Double Line headquarters up in Los Angeles with Jeffrey for his first reaction to whatever the Fed does tomorrow, whether it is 25, whether it's 50, whether it's something else, and what his investment strategy thus would be as a result of what happens tomorrow. We look forward to that. Hope you'll join us. Michael, we talked about the

election as well, and he spent a lot of time talking about concerns about the deficit and funding it, saying that neither candidate for the president of the United States has a policy that he really likes, that both would be inflationary. If you talk about obviously raising taxes or tariffs or reinstituting the Trump tax cuts, he's not really a fan in either scenario. And also suggested that no matter what anybody says about the current state of the economy, it could very well already be in a recession because of some of the indicators that he's been looking at over the last many months that would suggest. And he said this as well with us on this program, that the economy is just weaker than people want to believe. Well, I was going to actually say, Scott, if you knit together all those comments that you that we played, I mean, if you think the Fed's going 125 basis points in the next three months when they've only said they're going to do a little bit here up till now, clearly he feels as if there's economic vulnerability. It's going to come to bear.

And then we got an AI bubble and he thinks a private credit peak in the midst of it. So I guess it paints a picture of of a lot of fragility there. He said and he was straightforward in how he answered this. He thinks the Fed's behind the curve right now and substantially so. I asked him, so what do you think? You know, how would you grade Jay Powell and company on the job they've done? And he went back to the beginning of when this all started, said I I'd give them an F for the beginning of the hiking cycle because they started way too late. Then I'd actually give them a B plus, A minus for the middle because of how swiftly they reacted to raising interest rates in the face of this historically high

inflation. But now, more recently, because they are behind the curve, he suggested they get an F yet again. We'll see how it transpires. It's going to be interesting tomorrow. I mean, I thought it was pretty telling, Mike, that even in a conversation I had today with Steve Leisman on halftime, he's like, look, usually I know. And this time, I don't know. So it makes it more interesting for tomorrow. Yeah, without a doubt. Tough grader, though. I mean, look, we got four point two percent unemployment and inflation is back to two point five. I got great stuff we will get a lot more from you. Of course the day tomorrow. Talk to you soon I retail sales coming in stronger than expected for the month of August consumer spending still on

the rise in the face of a possible economic slowdown. Let's bring in Simeon Siegel senior research analyst at BMO capital markets covering retail Simeon great to have you on. Let's just I guess start with the macro it seems as if. bring in Simeon Siegel, Senior Research Analyst at BMO Capital Markets covering retail. Simeon, great to have you on. Let's, I guess, start with the macro. It seems as if, you know, a lot of concerns around aggregate consumer activity hasn't necessarily really fallen away in a major way. A lot of people talking about a more careful consumer. How do you read it? Hey, Mike, good to see you. I would say what we're about to talk about is going to be a fantastic juxtaposition to the conversation you just had. Because listening to Scott and Jeff, I mean, I'm hearing all this doom and gloom. And I think that there is no question the macro seems worse

than it was when everyone was flush with stimulus. But I think whether it's today or whether it's, I mean, we got a whole slew of earnings a month ago, people are still spending, and you and I talk about this all the time, without making a judgment call, whether it's healthy or not, the U.S. consumer is overly resilient when it comes to spending. Over. Yes. So there's no doubt there's resilience. And yet what we've seen, I guess, in terms of the market and how it's rewarding and penalizing different companies is investors seem to want to hide in the big box stores or the ones that seem to be value leaders. What does that mean for your coverage universe and where you're finding companies that still seem to have a decent story to tell? So I think it's really interesting. I

think that what you're describing, if you wanted consumer exposure, there were big companies like Nike and big companies like dollar stores and big companies, just all these global businesses that people were comfortable with, that then all of a sudden they became increasingly less comfortable with. And so the question you have to ask, and this is a little bit of a game theory question that's above my pay grade, is do you look at losing beacons of safety as a game of dominoes and then you have to be worried about the ones that are still safe? Or do you view them as the scarcity value is just going up? So TJX, the multiple, it's an excellent business. You and I have talked about this one a lot. Can you just ignore the multiple? And so what's interesting is from my conversations with

investors, at least for right now, the answer to that is increasingly yes. It's people are watching their core safety elements fall away. And so they're moving, they're effectively willing to pay more for the ones classic supply and demand. I think that's the reason. So when I look at it, when I talk to my investors, I'm trying to go again, sell side analysts are supposed to say the word barbell at least every conversation. So I'll just say it now. The barbell that I'm looking at is call it TJX, that off price business, which becomes increasingly important, not just to consumers in tough environments, but to brands as department stores shrink. They need a place to move them. That's

one side, recognizing it's expensive, but it's expensive for a reason. On the other side, my team just did a big, deep dive into Under Armour, right? Not the type of company you would put next neck and neck with TJX, but here's a business that's incredibly large. People have written it off for dead, which doesn't make sense because of its billions of dollars of revenue, but it's also really sick. And now you have Kevin Plank coming back in and saying, you know what, I could do more with less. I could achieve more by doing less.

And so in a world where investors are worried about how hard is it going to be to generate another dollar of revenue, I like a business that's actually going to win because it's donating the revenues. And it sounds counterintuitive, but some of these businesses just overstretch. Some of these brands dilute themselves. And the best fix is by doing more with less. Yeah, it seems like sometimes the, you know,

the incremental revenue is kind of empty calories, I guess, in some situations. You mentioned last week, and I think it's interesting, you say investor appetite for finding compelling, underappreciated retail longs is incredibly low right now, which I guess for you makes you have a sales job here. So what are the things that are being overlooked aside from Under Armour that you think are worth some attention? So the beauty of my seat is I have incredibly long duration. We think about hedge funds having somewhat shorter than mutual funds having longer and then analysts without capital on the line being able to just look for ideas that they liked. I think that this is a classic mid-September

into October event. We looked, October, sell in May, go away is a great rhyme. Sell in October doesn't rhyme with anything, so no one says it. But October ends up being the second worst month for my group. And it makes sense. There's no catalyst. There's no shopping catalyst. We're far away from back to school. We're not yet at holiday. There's no investing catalyst because we already have the two Q earnings and we're not going to get three Q. Again, very important holiday period. And so what ends up happening is you get these doldrums. And so from an immediate time perspective, all that fear that Scott just brought up earlier, that's going to be what people are talking about. It's hard to ignore the macro and second derivative. It's not getting better. But what that means for those that are willing to look past that is to say, okay,

I actually believe that the environment's not as worse as it seems, or at least people are going to spend their way through it. If that happens, then you can find businesses like a Victoria's Secret, like a Bath & Body Works, businesses that arguably are good businesses that are struggling with the time right now, that you're getting a multiple gift. The valuation's coming back down. And so that's why I created that TJ Under Armour conversation where you get struggling with the time right now, that you're getting a multiple gift. The valuation's coming back down. And so that's why I created that TJ Under Armour conversation where you get to play both sides. But if you're just looking at what's going on now, appreciating that you're going to lose news-driven catalysts, theoretically, is a reason to be concerned or it's a reason to dig in

and say, OK, as long as I make it to November, which isn't that long, then there are these compelling opportunities. That's how we're approaching it. Yeah. All right. Well, you have a big drop in gasoline prices. I mean, a lot of things maybe could keep the consumer going even longer than many hope or expect at this point. Simeon, great to talk to you. Thank you. Good to see you. All right. Up next, the CEO of ConocoPhillips joins us exclusively with his take on oil prices and the broader energy sector. 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. It's been a rough year for oil and gas investors as the price of oil falls. Stocks in most oil and

gas companies are also being sold off. ConocoPhillips shares down nearly 11 percent this year. But the CEO remains optimistic about global oil and gas demand remaining high for years or decades to come. Brian Sullivan is at the Gas Tech Conference in Houston with ConocoPhillips CEO Ryan Lance. Brian, take it away. Thanks, Mike. And I know a guy named Michael Santoli who's been talking to us about sort of investor distaste or dislike for a lot of the oil and gas companies that are out there as the price of oil goes down. So let's dig in a little bit more with Ryan Lance, chair and CEO of ConocoPhillips. Ryan, thanks for joining us. Thank you, Brian. On paper, oil traders are net short oil for the first time in ever or at least a very long time.

Do you agree with the market's bearishness? Everybody just hates oil all of a sudden. Well, you know, we know the price is going to be quite volatile right now. There's a bit of overhang. There's some demand concerns coming out of China. Demand concerns is the U.S. even slowing down a little bit in other areas around the world, combined with an overhang on supply side

with some spare capacity sitting in OPEC+, some growth coming out of the U.S., and some growth coming out of the non-OPEC, non-U.S. sector as well. So, yeah, it's created a dynamic that it's trading at a lower end of that volatility range than what we would have expected. But this too shall cover. The demand will recover. Supply will get self-worked off.

And I think we are pretty constructive as we go forward over the next few years. Does $68 a barrel, I'm talking about WTI, does $68 oil versus $72 oil determine what ConocoPhillips does with its capital? No. We look at a mid-cycle price that's even below prices that are occurring today. We make sure our plans are robust. We can invest across the cycles to do that. We have the balance sheet available to invest through these cycles and do that. We know these consistent investment programs are right rather than following the market up and down.

And look, we're building a company for the next two or three decades. We know oil is going to be around for a long time. It's going to be important, oil and gas, both the fossil fuels. So we think long term in this business, the cycle times are longer in this business. We don't get caught up in what's going on in the day to day But I don't think ten years ago anybody said to me or on CNBC There will be a day soon where US natural gas will be keeping the lights and the heat on in Europe We're literally I don't know what the German word for dairy areas of the French word you get my tone

Did you think that we want U.S. natural gas would be saving much of Europe? No, we couldn't have imagined what's happening today. And that's what we're blessed with a huge amount of supply and natural resource here in North America, primarily here in the United States. And that's the opportunity that's in front of us, that opportunity to keep our energy prices low with the growing power demand and the electrification that's coming and the opportunity to export that to our low with the growing power demand and the electrification that's coming and the opportunity to export that to our allies. The shale revolution in this country has been truly remarkable and it's revolutionized our business, our industry, our company as we

think about the next 5, 10, 15 and 30 years in this business. It didn't get a lot of attention because it wouldn't but the California electric grid which is just California, it's western U.S., last week, I think it was, made a deal with an energy provider in South Dakota starting in 2026 to import more electricity from South Dakota and Wyoming to California. Much of that will be coal powered. to myself, California might be adding more coal generation to its capacity, or at least it'll help out in a couple of years with all the gas that we've got, all these other hydrogen, nuclear, how did we get here? Well, yeah, what's interesting, the power demand has been relatively flat over time and it's allowed us to take these old coal-fired power plants and some of the old combined cycle gas plants out of business.

Now the power demand is growing, AI, it's growing just because of the economics are growing and the energy expansion needs in the United States are going to be enormous. It's going to take all forms of this energy and that's why you're seeing some of these crazy things like you just described going on in places like California because they need to keep it a reliable source of energy and need to keep it low cost for the consumer. And to do that, you're going to need all these advantages. You're going to need renewable. You're going to need coal. You're probably going to need more expansion of the oil and gas system as well.

Probably more nuclear over time as well because that expansion is significant. Well, we finally had a plan open up, but you get my point about California. I'm not picking on my former home state, but we're talking about getting more power potentially from coal into California. Just mind-blowing. Very quickly, you might have heard that tomorrow the Federal Reserve, Ryan, may cut interest rates for the first time in years, 2 o'clock, 2 o'clock Eastern, power lunch, the decision. You guys are capital-intensive industry. Does it matter to you if the Fed goes 25 or 50, given that you borrow and spend billions of dollars a year?

Yeah, not much Brian. I mean it matters to us because we want to see a healthy economy in the United States. So certainly the unemployment rate has been a problem. We're trying to manage through, I know the Fed is trying to manage through that whole system a little bit. We understand that. I think what's important to us is positive economic global growth around the globe and underpinned by what's happening here in the United States. So it's probably time to do something, whether it's 25 bps or 50 bps. It doesn't make a huge difference to our company. Again, we invest through these cycles, and we're investing for decades to come.

And that's what's important to our company and the growth and development. Ryan Lance, ConocoPhillips, great discussion. Ryan, we appreciate your time. Thanks for joining us here on CNBC. Thank you, Brian. Michael Santoli, I don't know if you heard, there's a Fed decision tomorrow. You heard it here. I'm breaking news to you.

We appreciate it. We'll be here. I may just stay right here for it as we get within 22 hours of it. Brian, thank you very much. Thank you, Ryan Lance, as well. Up next, we're tracking the biggest movers as we head into the close SEMA, standing by with those. Mike, an online sports betting company is winning today, and up big, we're tracking the biggest movers as we head into the close. SEMA standing by with those. Mike, an online sports betting company is winning today.

And up big, we're going to tell you why after this short break. About 14 minutes until the closing bell. Let's get back to SEMA for a look at more key stocks to watch. SEMA. Mike, let's start with shares of Apple Lovin up for the fourth consecutive day, hitting a new all-time high. The mobile software company getting an upgrade at UBS to buy from neutral. The bank citing opportunities for Applovin in the e-commerce space as a potential catalyst. The stock up nearly 7%. Flutter climbing to its highest level in more than three years. This is the online sports betting company behind FanDuel that says it would buy Playtech's Italian gambling business for about $2.5 billion.

It also announced a major deal in Brazil last week. So that momentum is behind shares up another 2.5% today, Mike. All right, Seema, thank you. Still ahead, GE Vernova shares jumping thanks to a key upgrade from one Wall Street firm. We'll break down that bullish call. Coming up, closing bell. Be right back. Up next, Novo Nordisk shares sinking on the back of some fresh comments about its weight loss drug, Ozempic.

All those details coming up. And tune in tomorrow for more from DoubleLine's Jeffrey Gundlach. We'll get his instant reaction to the Fed decision and Chair Powell's news conference. That is tomorrow at 3 p.m. Eastern Time. The Market Zone is next. We are now in the closing bell Market Zone. Angelica Peeble shares what's putting pressure on Novo Nordisk today. Plus, GE Vernova hitting record highs for a fifth session in a row. Sima Modi has the details. And Axana Capital's Peter Cecchini breaks down these crucial moments of the trading day heading into the close.

Angelica, talk to us about Novo Nordisk. Yeah, those shares are down about 3.5% today. And that's after Senator Bernie Sanders saying that generic drug makers could sell Ozempic for less than $100 a month and still make a profit. We're a week out from Novo's CEO testifying before Sanders' Senate committee, so this is a preview of what's to come when he testifies. Also today, a Novo executive reportedly saying it's, quote, very likely Ozempic will be one of the next drugs that Medicare will negotiate the price of. Remember, Medicare recently getting authority to negotiate directly with drug makers on some drugs. And analysts widely expect that Ozempic will be in the next round.

Now, I did reach out to Novo and they, quote, can't speculate on which medicines will be selected for future negotiations. So we'll see what happens when we get the next list in February. Mike. We will. I note Lilly down almost 2%. Who knows, perhaps related to that. Angelica, thank you very much. Seema, incredible move since the spinoff in GE-Vernovo.

Yeah, absolutely. Also that debate helping a little bit as well. The analysts at Bank of America today are raising their price target on GE-Vernovo from $200 to $300 a share. You don't see that often, citing the acceleration in U.S. electricity demand driven in part by growth in data centers and how that will drive GE Vernova's gas power business, which currently accounts for about 30 percent of total sales. Wall Street now looking ahead to the December 10th investor event, where the street is expecting a potential buyback announcement. One headwind has been its wind business, but GE Vernova split from

GE in April. And since then, the stock has risen about 66 percent. Mike, you and I had a conversation right around that time in April about spinoffs. At that time, as an investor, do you get exposure to the company that's leaving versus the parent? I would point out even GE is up more than GE Vernova. It is remarkable. The focus and the idea that these were underappreciated assets within a bigger company is bringing to bear. Also, it seems like these are long-lived order flows, right? In other words, if you think the gas turbine business is really picking up,

that's kind of years' worth of business. And listen, they have gas power. They also have small nuclear reactors that are being used, similar to what Larry Elson said last week, coinciding with this data center growth. So clearly one stock at its position as part of this broader AI trade. Yeah, right place and right time. Seema, thank you. All right, we have a news alert on Steve Cohen. Cohen is going to

stop trading for 0.72, but will remain a co-chief investment officer at the firm. That's according to a report. We'll bring you more details as we have them. Peter, Cicchini, way in here, not on Steve Cohen. Of course, the Mets are probably going to be in the playoffs. He needs to focus on that at this point. But we have a Fed decision coming tomorrow. We have a little bit of suspense around it. How do you think it's going to go? What do you think it's going to mean? You know, Mike, maybe we'll just start with a little historical context, which is that, you know, the Fed has never started a modern cutting cycle, that is, since 1994, with a 50 basis points move unless it came in an unscheduled meeting or it was preceded by an unscheduled meeting, as in 2007. And at that 2007 meeting, that unscheduled meeting, they obviously discussed stresses in the housing market. And it would appear that no such stresses exist now. So to put it in perspective, you know, a 50 basis point move, which is what Fed funds

future futures markets are more or less pricing in, in which many on the street are calling for as necessary, given the slowdown they're seeing, it would be very, very unusual. And, you know, I think the Fed ought to be loath to do anything unusual in an election year. And so if this move, let's say it's in smaller increments, it's been sold as kind of a normalization process. This is insurance cuts. It's not something because the economy is really weakening. Do you buy into that being the environment into which the Fed is easing? Well, you know, Mike, I do believe the economy is slowing. I do see softening signs in the labor market.

The high-frequency data has been showing that for months. But what's very interesting is when you look at initial and continuing claims, you know, initial claims have done nothing close to what I would have expected at this point. There's been no acceleration there. Payroll is about weakening. But, Mike, you know, this is not really the environment where I think the Fed needs to do a 50 basis point cut as a preemptive measure when historically it's never done so. So I think 25 makes sense. But unfortunately, I think there's a coin toss here. I think it's a 50 50 chance they actually go 50 basis points.

And what does that mean for you? Just quickly, in terms of, you know, investment tactics at this point, do you still like government bonds after this huge rally or corporates? Yeah, you know, we talked about that in sort of mid-late August. And 10-year, you know, we liked extending duration and we liked owning the 10-year. I think a bunch of that is priced in at this point. You know, when you look at the shape of the yield curve, I think we're about 120 basis points inverted still from three months to 10 years. So I think that tells you, you know, a lot of the, a lot of cuts have been priced in, in our view. I think the 10-year will get better bid as

the economy continues to smoke. We like that as an intermediate to longer term trade. But I think the 10-year will get better bid as the economy continues to smoke. We like that as an intermediate to longer-term trade. But I think for now, it's going to be a bit played out. And, you know, we've exited that trade at least for now. Cautious reentry. Peter, appreciate the time today. We'll see how it goes tomorrow. Thank you very much.

As we get set to close here, the S&P is going to go out almost exactly flat. Thank you very much.