Closing Bell - Closing Bell: Fed Expectations & NBA Media Rights 7/11/24

Episode Date: July 11, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Welcome to Closing Bell. I'm Scott Wapner, live from Post 9 here at the New York Stock Exchange. And this make or break hour begins with a market melt-up. Why Ed Yardeni says this current one will take stocks even higher into the end of the year. He just raised his target. He'll be here in just a moment to discuss. In the meantime, check out the scorecard. With 60 minutes to go in regulation, we're going to start with the Russell today, which is ripping, to say the least. This could be the best day of the year for the small

caps today after that softer than expected CPI report yields falling. And that is why that trade is working so well today. Take a look at biotechs and regional banks as well, because they're having a great day, too. It's all part of the yield story, the value trade story. But it is a down day for big tech as names like Apple. Well, it's seven day streak But it is a down day for big tech. There's names like Apple. Well, its seven-day streak looks to be running out of some gas today. How about Tesla? It was down earlier on a report about a delay in its robo-taxi plans. We'll keep an eye on that stock as well today. Delta's taken a big hit after its guidance came in lighter than street expectations as well. Takes us to our talk of the tape, even higher stocks.

That is the call today from Ed Yardeni. He joins me right now. Ed, welcome back. It's nice to see you. Thank you. Thank you, Scott. CPI better than expected. Yields fall.

We see parts of the market going up pretty sharply today. What do you make of it? Well, I think the bull market is broadening. As you know, there was a lot of concerns that it had been narrowing to just a handful of stocks, the so-called Magnificent Seven. But I think today is an important day. I think this is the day where investors are starting to rotate out of the Magnificent Seven and into the rest pull the S. and P. five hundred down I think there's going to be a little enough money. To keep the- leading- stocks that have done so well. A fairly elevated but I think. We are going to see more. Gains- in the S. and P.

four hundred ninety three. As well as in this mid caps the small and middle mid cap of stocks. So this is the start of something because that's been a great debate. When this broadening would happen, there's been some teases before, but you think this is legit? Well, I think it's legit, partly because the Fed has changed my mind in terms of where interest rates are going. We still think that the economy is doing well enough with inflation moderating

that there's no real good reason for the Fed to lower interest rates. But Jay Powell has made it very clear. The Fed chairman has made it very clear that they really do want to lower interest rates. And so I think now the market is absolutely right in anticipating a 25 basis point cut in September. I don't think it's going to happen in July. And so now we're actually going to see interest rates come down. As you know, at the beginning of the year, the markets were expecting six to seven cuts, and that just never happened. This time around, I think the rate cut is coming. That feels like that's what the takeaway was over the last couple of days, right? The chair on the Hill, I thought, pretty explicitly set the table on what is to come.

Nick Timoros, the Wall Street Journal, writing after that appearance that Powell, quote, made the beginning of a pivot on interest rates that might prove more durable than one that sparked a big market rally at the end of last year. That's what you're talking about. Absolutely. And I think the key thing is that the Fed now is balanced in its assessment of the dual mandate. In other words, unemployment is just as important as inflation, whereas before inflation was the key. They were just totally focused on convincing us that inflation had to come down before they started lowering interest rates. Now they're basically signaling that, you know, we're getting pretty close there. And, you know,

excluding shelter, the CPI was up only one point eight percent in the data that came out today. And we know shelter inflation is coming down. So I hope they don't ever utter the words mission accomplished. I think they're getting awfully close to that. And as a result of that, they just want to make sure they don't get a recession, which, again, I think has just been an exaggerated risk for over two years now. Yeah, but I mean, the unemployment rate did tick over 4% for the first time in some years, right? So that obviously put this whole thing on the clock. You could sense from the commentary from the Fed chair himself that that was a moment to pay attention to. And they don't want to let that go any further or any higher and ruin a good story that they think they're going to be able to tell.

Look, that's a reasonable position. But I think the risk that they're taking is if they, in fact, do move in September and the market continues to expect that, that this will turn out to be a 1990s style melt up. And then they'll have a whole nother kind of problem with the economy and with the financial markets. I mean, financial conditions are awfully easy for a Fed that maintains that they're being very restrictive. I don't think they really need to ease. But look, it doesn't matter what I think, they're going to do it. And that's going to keep the bull market going and that's going to help the economy somewhat. And all in all, the labor market indicators to me add up to a labor market that's doing just fine. We saw initial claims coming down a bit today. We saw the continuing

claims remaining relatively low. So all in all, I think the economy is doing fine without the Fed having to mess around with the Fed funds rate. But like I said, my opinion is irrelevant here. What matters is what they're going to do. And they've made it very clear. They beat me up over the head that they are going to lower interest rates. I mean, you raised your year end target for the S&P to fifty eight hundred from fifty four directly as a result, I would assume, of what you've heard over the last couple of days from the chair on the Hill. Why just stop at 5,800? Just curious as to, you know, we're at 56, we can call it, even with the pullback today.

Let's just say we're near that level, right? So why just 5,800? Well, maybe it's wishful thinking. I really don't want to see a melt-up market here. Valuations are already stretched. And if we see this market going to 6,000, 6,500, those are my targets for the end of next year and the year after that. So this market's, you know, as you know, Scott, we've been bullish, but this market, not bullish enough. But 5,800 feels like the right number to me.

I mean, we're getting closer and closer to presidential election day. And I am concerned about a lot of partisanship, shall we say, as we get into that entire mess. And that may weigh on the market. Also, you think that that uneasiness that you feel towards what could transpire around that time of the election is coloring your view a little bit or tempering at least a little bit of your enthusiasm as a bull. Yeah, I'm trying to curb my enthusiasm. Exactly. Exactly. Correct. But the reality is I have to be realistic about what the market's doing and there's six trillion dollars in money market mutual funds that if the fed starts in fact lowering interest rates or when the fed actually starts lowering interest rates later this year that's a tremendous amount of firepower that could drive the market higher what i'm counting on is the market rally

broadening out so i like what i'm seeing today I wouldn't mind at all if the Magnificent Seven do nothing for the rest of the year and we see money going to the rest of the market, which has been left for dead there for a while. That'd be something, wouldn't it? Let's bring in Joe Terranova of Virtus Investment Partners and Christina Hooper joining us here of Invesco. Joe's a CNBC contributor. It's good to have you both with us. Christina, it sounds like Ed Yardeni is singing the same kind of tune that you've been telling us we need to think about here. And that's the idea that value stocks and the Russell 2000 and small caps, you should have started buying them already. And here they are outperforming in such

a dramatic way today. You agree with Ed? Absolutely. They look very attractive and they are, at least today, discounting an economic recovery because they're assuming that the Fed will act quickly enough that we can avoid a recession. But where I disagree with Ed is that I do think the situation is more pressing, that I do think we could easily end up in recession if the Fed doesn't start cutting soon because cracks have appeared in the economy. Well, what do you mean? Soon, you mean like this month? No, I would love to see a cut this month. I think that would be very wishful thinking. Yeah. But starting to cut this year. But that's not disagreeing with Ed. He thinks that's going to happen, too. But he's not saying that it's necessary. And I think it's necessary for us to get started on that rate cut

path for us to be able to avoid a recession. I mean, necessary or not, he said it's going to happen whether he likes it or not. Right. I mean, that was the point made a couple of times. But the difference is that could mean the difference between a sustainable rally for small caps and cyclicals or it fizzling out fairly quickly if we start to see more signs that the economy is in worse shape. Okay. So, Joe, you've made the case that you're not a believer in the broadening story as much as you are in the mega cap story. You have suggested on numerous occasions, especially lately, that you need to see the rate cuts first before that trade starts to work. Have I said that correctly? Correct. Yes.

So the market activity today would suggest that's not the case, that now is the time to get in because the market believes that cuts are coming and you want to anticipate it rather than be reactive after the fact. Okay. So first of all, today what is going on has nothing to do with investors pivoting towards small caps. What's going on today is systematic trading is rotating towards small caps and away from large and mega cap stocks. Keep in mind something, Q4, the S&P 500 was up 4.9%.

The equally weighted S&P was down 2.5%. That 6.9 differential in performance is the largest differential between the S&P 500 and the equally weighted on record. What is going on today is nothing more than a rotation within the market. If we want pure broadening, what we would be encouraged by is the fact that technology is rising modestly along with the cyclical areas of the market. I mean, it's like one day. No, I don't want to see Nvidia down 5 percent. I don't want to see Apple down 3 percent. I don't want to see Microsoft down 3 percent I don't want to see Microsoft down 3%. All that is is a rotation. And I agree with your point on if you're going to believe in the broadening out, the cyclical story,

you have to know that the economy is going to remain resilient because there is a chance, a small chance as it might be, and I agree with Ed, the economy is strong, but there's a small chance that the Federal Reserve might be late here. Well, they are. The economy is weakening. The damage has already been done, and that a trend of economic weakness is building, and it's only going to accelerate in the coming months. Ed, how would you respond to that? I mean, because the data would suggest that Joe's correct.

I mean, the economy clearly is softening. You see it in all of the data. So what about this idea? The Fed, let's be honest, you said it yourself over the last many conversations we've had. They were late to start hiking. What if they're too late to start cutting and they lose control of a story that they had pretty well written? Well, you're right. They were late to start hiking, but not too late. And then they caught up pretty quickly in terms of raising interest rates from zero to five and a quarter percent, basically within two years. That was the market got crushed because of that, though it did.

But as you might recall, back in twenty twenty two and twenty twenty three, when a lot of people were talking about recession, our position was we're in a recession. It just happens to be a rolling recession with different industries getting hit at different times. I think now we're just in a soft patch. I don't think there's much risk of a recession here. Look, historically, recessions are caused by the Fed tightening monetary policy. So check that. That's certainly been the case. Then that in turn causes a financial crisis. We had one in March of last year, but then that financial crisis turns into a credit crunch. And it's the credit crunch that caused recessions in the past. We're not seeing that situation right now. Another way we've gotten recessions is with a major spike in oil prices.

And that doesn't seem to be happening. The global economy is just kind of muddling along while the u.s economy is doing quite well so all in all i i i don't know i don't know when we're going to be rid of this concerns about a recession but it's still out there there's you know there's still people who are convinced that um the economy is weak and it's vulnerable which is why christina you know joe has this residence uh reticence to buy these stocks. I mean, I've read notes today that were passed around from some houses on the street that said it's just if you have a softening economic environment, why in the world would you believe in the value trade right now? Because you anticipate that economy is going to re-accelerate once the Fed starts cutting rates. And there are other arguments for why the economy will start to improve. One of them is that as inflation comes down, real wages are going up. And that will also be

a powerful driver. Of course, a lot of this is predicated on unemployment staying relatively low. So I'm not thrilled to see unemployment climb from 3.7 percent in January to 4.1 percent. It's fine for right now, but we have to worry about what has already happened, what more damage has occurred to the economy that we haven't seen yet because of the aggressive tightening and then the Fed holding rates at these levels for so long. I mean, you look, I think it was the PepsiCo CEO who was making some really cautious comments today about the consumer, which goes to the points that some have made on this program, like Mohamed El-Erian is like the economy is weaker than you think. And he thinks the Fed should go in July. And if in fact that is the case. And by the way, I want to be clear on something. I run an equally weighted strategy. So if I look at the tape today, I'm pretty happy with the performance that I have, but I don't trust it.

And the reason that I don't trust it is if the economy, in fact, I don't think we could we should be using the word recession. I think I think that's I think that's not something that we're putting on the table. But if we are seeing softening, then I think you have to call into question the ability to have the type of earnings growth that's needed for these cyclical stocks to have expansion. And I know where I could get the earnings growth. I'm going to get the earnings growth surrounding the AI story. Certainly, Taiwan Semi told me that the other day. So I'm calling into question the cyclical earnings growth if we see that softening economy. You know what, I'll bring up a stock example.

I was going to do it in the next block, but let's just do it here because I think it's relevant to the conversation. Delta Airlines to me is the perfect example of everything that we're talking about, if not some are worrying about, okay? It's hard. It's hard to pick winning stocks that are so tied to the economy. Air travel has never been busier. Three times in

the last two weeks, we've had the busiest day at airports in this nation's history. And yet Delta's guidance, they tell you that business is great and their guidance doesn't live up and the stock goes down. Airfares are coming down. They have a lot of capacity. Their costs are up. Isn't that the point? Like you stay with what is tried and true in this market. And there's one cohort of stocks that has been tried and true, and that's big cap tech. Or you could go with diversification, which means you have some of the tried and true, and you also have the cyclicals and the smaller caps, because it's uncertain where we're going from here. My base case scenario is that we will see an economy that reaccelerates and a broadening of the market. But you want to be well diversified because you don't know exactly how this is going to play out. Ed, how would you address that issue

of whether you just stay with what's worked? You're going to have days like today. It's rotation. Whether it's a lasting rotation remains to be seen. But you're going to have some days where these mega cap tech stocks pull back the longer term trend i think people believe in pretty heavily and maybe that's going to be backed up when they report earnings in a few weeks yeah well you you raise the issue of uh delta and i would uh you know counter that with uh some of the cruise line stocks that have done extremely well uh consumers are still spending money and maybe delta is just having specific problems with labor costs and maybe some competition. But as you point out, I mean, you can look at

the statistics or you can go to the airport and you see that everybody's the airports are absolutely full. Sure. But those long lines haven't translated into higher stocks. Right. Which is my which is my point. It's hard to look at that. And you would say, well, I mean, if the airports are busier than they've ever been, well, obviously the airline stocks are going to work. And the commentary from Bastion and Kirby and whoever else in the airline dynamic says, hey, demand is off the charts. The stocks haven't exactly responded in kind, which is why people continue to go back towards these other stocks. Yeah, look, I have no problems with staying with the

Magnificent Seven, but they're not cheap. They've discounted a great deal. Look, here's what I'm expecting for second quarter earnings announcements. I think every management or almost every management is going to have to talk about AI and how it's impacting their companies. Investors are going to be asking those kind of questions. Analysts will be asking those kind of questions. I think we're going to be surprised how many companies actually start to talk about how they are implementing AI and how it's actually cutting costs and increasing their productivity, not having a major impact immediately on earnings, but they see it as being potentially a very big game changer.

So I think in that sense, the broadening of the market is simply the broadening of the understanding that technology overall lends itself to increasing productivity and cutting costs, not just in a handful of stocks, but a very broad range. If the result of today, if the result of the expectation that the Federal Reserve is going to cut in September, and by the way, we'll know by Jackson Hole, if not at Jackson Hole, I think Chairman Powell will telegraph. Let me tell you something. I feel like he told us. All right. He didn't explicitly say. By the way, I agree with that. I said that to you yesterday on halftime. But if the result of all of this is that we lose technology or the mega caps and they go into a correction.

Well, yes, we could have a broadening effect in the market, but that's not good for the market overall. That means the S&P is going down. So what ultimately the best case scenario is, is that technology hangs in there. It's resilient. Maybe you get some outperformance from the cyclical areas of the market. I'd welcome that more than anyone else. But let's not lose technology. It's far too critical. On a day like today, what is it that we see? We see the Russell up 3.4 percent or do you see the Nasdaq down 2 percent? I'm more concerned about seeing the Nasdaq down 2 percent. But point two is like, look, I'm not saying he obviously didn't come out and explicitly say, hey, we're hey, everybody, we're cutting in July. I mean, in September. But his bias, though, was clearly now and the and the Federal Reserve's bias now seems to have pivoted. OK, I'll use the Timoros word, pivoted to, they're going to cut,

barring data that changes their minds, right? They've developed the confidence. And I would argue that that's okay. That's going to be the boost for the cyclicals and the smaller caps. And what can keep technology at relatively high levels is all that cash sitting on the sidelines. Because there's so much of it that you don't need to take from Peter to pay Paul. What you need to do is just take some of the enormous pile of cash, that overweight to cash, and move that into areas like the cyclicals and the small caps.

And I think ultimately that's what happens. The other point I think to be made that I've heard from some is, okay, if I think that those areas of the market, maybe they can go up 5 percent between now and the end of the year. Well, I'm getting the 5 percent risk free by staying in cash. And I got the election to worry about, as Ed was talking about. And I don't know exactly what's going to happen with Fed policy. So maybe the money that some have speculated is going to come in off the sideline says, you know what, it's not worth the risk. If I give up a percentage point or two of gains, I can put my head on the pillow at night knowing the cash looks good.

And then where's your entry point? I think that for most investors, they have a long time horizon. So it's far more important to get in, to be well diversified and ride this through, even though we could very well see some short-term volatility along the way. Ed, real quick, last point. I'll let you wrap it up. Well, again, I think we're in a bull market. That's the bottom line of it all. And I think it's right now earnings-driven melt-up. Earnings have been very strong for the companies that have gone up, and they've been basically the tech companies.

And I think the second quarter earnings season is going to turn out to be surprisingly strong. And I think that could broaden the market. All right. Well, that's a good last word. And we will see what happens starting tomorrow with those earnings. Ed, I appreciate it, of course, from the banks. Edgar Denny, I appreciate it. Christina Hooper, thank you. Joe Ternova is going to stick around to the other side of this break as we need to talk about some more individual names. Let's send it to Seema Modi now for a look at the biggest names moving into the close. Hi, Seema. Hey, Scott.

Shares of QuantumScape soaring after the company announced an agreement with Volkswagen's PowerCo battery unit to mass produce its solid-state battery technology for the vehicle maker. The deal is replacing an earlier venture between both companies. Nonetheless, QuantumScape up 28%. And Roblox sliding on a Jeffries downgrade to hold a price target cut to $42 on valuation concerns. Analysts believe Roblox can return to its bookings growth expectations through international expansion and advertising efforts, but that the company's execution has recently been, quote, concerning.

Shares of Roblox down 2.3 percent. Scott? Thanks for that, Sima Modi. We're just getting started. Up next, Tesla's pain. It's Uber's gain as a new report drives those shares in opposite directions today. Uber shareholder Joe Terranova standing by with his reaction to that. We are live at the New York Stock Exchange and you are watching Closing Bell on CNBC. All right, welcome back. Tesla selling off today and set to snap an 11-day win streak on reports. It's delaying its robo-taxi announcement until October had been expected in August. Uber and Lyft both moving on that report. Virtus' Joe Terranova is back to share how he is playing Uber stock here. You see both of those names. He's long that. Long, yes. So what do you make of this? Personally and in the ETF

long, this is a critical juncture for this stock. For Uber? Yes, it is. It's right back at a very critical price point. Since the last three months, it's been unable to get above the $74 level. It's been somewhat consolidating from the correction it had to the low 60s area. Now, it gets the news today on the robo-taxi delay that's benefiting the stock itself. What you want to see here is you want to see the stock break at about 74, get into earnings, which are August 1st, I believe, and then in that earnings report, we need to see the return to profitability. We don't want to have multiple quarters where Uber's telling us, okay, we're back to being unprofitable,

because that's why investors like myself came in and bought the stock. Remember, momentum, but also... They had a surprise, right? That's why the like myself came in and bought the stock. Remember, momentum, but also— They had a surprise, right? Right. That's why the stock sold off. Absolutely. So remember, momentum, but also quality. I want quality.

I want profitability. They have to return to profitability quick here, and I believe that they will. Would you add Tesla? You had Tesla before in the JOTI, didn't you? Yes. Tesla's been in and out of the JOTI several times. Quite candidly, I will tell you, it's been unsuccessful every time that it's gone in and out. Tesla's a very difficult stock to trade because its momentum becomes very intense very quickly,

and then you tend to lose it. It evaporates very quickly. Which is funny because, I mean, in many respects, you're a prisoner to your rules and your strategy. So you don't buy it until you already have this momentum in place. But you're suggesting by the time you buy it, then the momentum tends to run out. Right. What you're trying to do is you're trying to catch the wave as the wave is building and ride the wave. But what happens with Tesla over the last several years, we've noticed this, is the wave builds and then the wave quickly dissipates. So it's been challenging to try and trade Tesla's surrounding momentum. 40% in a month. Let's talk Delta. I mentioned it in the A block just as an idea of, you know, if you're buying stocks based on economic metrics,

in some cases it doesn't work, okay? You have this stock, Delta? Purely on momentum. All right. It's in the ETF. Is it now losing the momentum? Of course it is. You know the answer to this.

It is? Just because of one day? The momentum, no. It's not just because of one day. Let's pull the chart up. Pull it up. For what kind of length do you want? You'll see the momentum.

Look at the momentum. Since May, now we're working on nearly three months where the momentum is sliding you've got a little bit of a mild correction underway this airline has been resilient relative to its peers in the airline industry that's why it's the one airline that we've owned in the etf previously we owned ual we were in that and out of that for one quarter. Airlines are very difficult. They are very difficult. I think Stephanie said today on halftime with you, they're a trade. And she's so right about that. It's nothing more than a trade. And I have to tell you something. Why do you ever add any of them then to your ETF? They're in the universe. You have the universe. You can't break the rules. They're part of the universe. Then you're getting into the discretionary element.

The rules take you out of that discretionary element, out of the emotion that you're picking and choosing. You don't have the discretion to say, you know what, I don't care if that particular stock hits the rules and the buzzer goes off. I'd have to file with the SEC for that. Oh, you got to do all that. Yeah. All right. Well, I'm glad you gave me insight into that. Does it, I mean, would you be hesitant to buy another airline stock?

Personally, when these airline stocks went into the ETF, I was kind of like, oof, oof, really? Not so excited about that. But it's part of an index. It is what it is. But you don't own it personally? No. I don't think I've owned an airline personally in my lifetime. Okay. And I don't think, by the way, I don't think airlines are a good representation of the state of consumers.

All right. I might sneeze in a second. I think I can wait until the break. Coming up, Joe Terranova. Thank you. I felt it coming. I wasn't sure. 314 Research's Warren Pies is back with us.

He's bringing his new outlook for the rest of the year. We're going to get his thoughts on today's big market moves and where he sees stocks heading from here next. Hi, we're back. S&P and Nasdaq pulling back from record highs as investors rotate out of the year's big tech winners. This after June, CPI showed the first decline since May of 2020, signaling rate cuts could be on the horizon. Joining me now to discuss Warren Pies of 314 Research. Good to have you back. What do you make of this market action today? Yeah, I mean, it's definitely a strange market today. And I don't think you can expect this kind of a day, this intense of a rotation going forward. But I do think it's a taste of what's going to happen in the second half of the year.

So, you know, I think to understand the second half, you have to kind of go back to the beginning of the year, the beginning of the year. Even the biggest bulls on the street were saying it was going to be a weak first half. And so then you get a strong first half. So when you have consensus that's under position for a strong first half and then a strong first half, that combination leads to a pretty powerful second half usually. So we've had 23 years where the first half of the year was up double digits. In 19 of those 23 years, you end up with more gains in the second half of the year. So that's

kind of what we're looking for. And then how are those gains going to manifest? We do think there's going to be a broadening of this rally. We talked about that before. The S&P made a new high on May 15th. It hasn't been confirmed by the S&P equal weighted. So the last new high in the S&P equal weight was back on March 28th. We wanted to see that new high confirmed within 90 days. So that's mid-August. Days like today bring us a lot closer to that. And so you're tempted to want to believe in this? Yeah, I am. There's parts. I think you need to be nuanced, though, about how you believe in this. And so like the small caps are the obvious big winners today. And it's been an area we've been recommending clients avoid all year. And so I still don't think you're in the right part of

the cycle to chase small caps. So for us to play the broadening, we want to go to just outside of that mega cap tech really. And so you want to go to still high quality. I do think this is a tricky part of the cycle. It could be late cycle. So you don't want to play this like it's an early cycle environment and go into high beta, low quality, small cap type stuff. So you want to find that that quality group that's right below mag seven that hasn't quite kept up with the market. And that's how we're positioned ourselves. So what do you think the story is going to be after this earnings season wraps up or the bulk of it? Is it going to be the same story or are we going to be, you know, starting to look beyond these mega cap tech stocks because their growth rates are just simply it's impossible that they could

possibly keep up what they've already done? Yeah. So in my view, the narrative that's going to really start to take shape is that it is going to be that number one, I think earnings are going to come through. We have a big earnings lift from the whole market, especially when you go out to Q4 of this year. I think that we're going to hit those earnings numbers. So that's number one. And I think that the narrative that's going to start taking shape and really driving the next leg of the bull market is this credit expansion narrative. So if you go back, yeah, we've had a pretty strong economy in a lot of ways over the last few years. But there are pockets that are really restrained by the Fed interest rate policy. So as we go in and we get new cuts, I think the first cut comes in September at the latest at this point, you start seeing, I think, a story open up where things that have

been dormant, like existing home sales, which are back at 2009 levels, or new auto sales, which are still below 2018 levels, those areas of the economy, the durable goods segments, for instance, those reawaken. And the consumer borrowing takes the baton from this fiscal deficit-led expansion that we've been in. And so I think there are a lot of things that can go wrong with that as you play it forward into next year and stuff like that. But that's the narrative that I believe that we believe that the market's going to grab a hold of here in the second half. Warren, I got to leave it there. I appreciate your time very much. We'll see you soon. Warren Pye is joining us. All right. Up next, an interview you do not want to miss.

NBA legend Charles Barkley. He's going to join us live from the American Century Golf Tournament. He always has a lot on his mind, and we have a lot on ours, too, about what we want to talk about. We'll do it next. all right welcome back we're joined now by nba legend charles barkley our own dom chu with him as well at the american century Golf Championship out in beautiful Lake Tahoe. Gentlemen, good to see you. Charles, welcome.

It's good to have you on. Well, it was good to be on until I started watching the stocks go by. You know, I'm getting ready to go out and play golf. There's nothing more stressful than hitting that first tee shot when you're seeing your money just blowing away. Well, you must be big in NVIDIA and Apple. Is that what you're telling us i think i got a lot of apple i wish i had gotten the video way way way back i don't know some people don't think it's too late so you talk to your financial advisor you guys figured out let's

let's talk let's talk nba okay um because you saw, just like we saw yesterday, that the NBA had finalized its deals for the media rights with ESPN, NBC, of course, our parent, and Amazon, but that TNT could still match. You announced, really a month ago, that you were going to retire after next season, no matter what happened. Was that firm? Were you joking? What's the real status of you in terms of broadcasting going forward? Well I really feel bad for everybody at TNT. All the people I've been working with for the last 24 years they're like family to me and I really hope we match I honestly in my heart I think we have lost the pack that's my honest opinion but I really

hope we get a last-minute reprieve for the people at Turner but the main reason I was talking about next year being in my last year I wouldn't feel comfortable going to work for another network. It'll be 25 years that I've been working with Turner, and I love everybody at Turner. But at this age to go over and start over, I don't know if I want to do that. Is there a certain, we're not going to have a negotiation on television, but you know how these things work. I mean, it's no different than in any other business. People say they don't want to do something, and then they get a nice financial offer and they change their mind. Is it in part,

could financial reasons change your mind? Hey, if I don't have enough money by now, I'm the biggest idiot fool in the world. And hey, seriously, if I don't have enough money by now, I'm the biggest idiot fool in the world. And seriously, if I don't have enough money by now, I've been so lucky and blessed. I played in the NBA for 15 years. I've been on television for 24 years. If I don't have enough money by now, I'm the biggest loser in the world. I hear what you're saying. I hear what you're saying. but I think you know how popular your program inside the NBA remains with fans. So I don't think people want to see you go. Let me ask you another question before Dom jumps in. Still related to NBA basketball, but as it relates to the Olympics, which obviously at NBC we're extremely excited about what's about to happen over in Paris.

You probably have seen some of the highlights of the workouts like we did as well. The team is obviously stacked. Is it a no-brainer to think that they're going to go win the gold medal? Well, I hope it's a no-brainer. But, you know, any time you get in a shootout round, you know, they're going to get to the knockout round. But in one game scenario, anything can happen. And any time you get in a shootout round, you know, they're going to get to the knockout round. But in one game scenario, anything can happen. I think they're going to win the gold medal.

I'll be totally shocked and mad and disappointed if they don't win the gold medal. But, you know, there's two things that go against them. They've lost the intimidation factor. Because when I played in the first Olympics in 92, those guys were so intimidated. So they've lost the intimidation factor. But also, the big advantage we always had was depth. I watched them play last night against Canada. Canada had five NBA players in their starting lineup.

But the big advantage the United States has always had, when these other teams go to the bench, they're not bringing in five other NBA players. But some of those other countries, they're going to have ten good NBA players. But listen, I think they're going to win the gold medal, and I'd be totally mad and disappointed if they don't. Now, Charles, it's also interesting as well, the sports side of things has evolved to a point where streaming is now the norm. And that's the reason why some of these packages develop the way that they are. Do you feel as though the world is evolving enough in sports to accommodate streaming or do you think streaming is outpaced what sports can offer right now? Well I think that you got greedy players and greedy owners. They don't really care about anything but how to make the most money possible.

We should never put money above the regular fan. Everybody can't afford streaming. There's nothing wrong with streaming. But when you start just going to the highest bidder and you're not on regular television, I think you do a disservice to the fan. But in fairness, the players want to make as much money as possible. The owners want to make as much money as possible. But we should always never, the fan is always the most important thing. Because no matter how much money you make,

if people are not watching, it's a lose-lose proposition. Now, one of the last times we spoke, you had talked about some of the cultural situations developing in America, wealth inequality, things like that. It was also a very tense political situation back then. I wonder if you might weigh in right now how you feel as though the culture politically is developing in America right now. I just feel sadness. You've got the greatest country in the world. And I have nothing but admiration and respect for President Biden. But it's time for him to pass the torch to a younger generation. He's been a great person. He's been a great man.

This ain't something I'm saying now. I've said it like a year ago. It's time for him to pass the torch. And I don't wanna hear about the convention that's coming up soon. He's had a great life. He's one of the greatest people I've ever been fortunate to be around in my life. But it's time to pass the torch. And listen, President Trump, I would never vote for somebody who had that mentality.

You should always have respect for the office of whoever who's in the presidency. Now, I get mad at these sports teams. Some of these bozos won't visit the White House because there's a Democrat or Republican in there. That is stupid. As the president of the United States, we should always admire that office, no matter who's in there. Charles, I'm going to ask you one more question before I let you get back down to

the golf course, and it's back towards the Olympic team for a moment. There seems to be a bit of controversy over the fact that Jaylen Brown's not on the team, even though Kawhi Leonard was just taken off the team. What's your opinion on that? I'm sure you have one. Yeah, you know, I don't know if it, you know, Jalen's on the fire right now, you know, getting MVP in the playoffs and in the finals. He's an amazing player. But, you know, listen, I don't know how they came to that conclusion.

Derek White is a terrific player also. So, I don't even know if it's controversial. Listen, they can get this guy right here to take Kawhi's place. And if they don't win the gold medal, it's going to be bad. It doesn't matter who that number 12 player is. We can put this guy out there. Now, he would never get in. What are you trying to put this guy out there. Now, he would never get in. What are you trying to say, Charlie?

First of all, he would never get in the game. We're never going to have a big enough lead to put him in the game. But if he was on the team, they should still win the gold medal. I've never seen Dom Chiu shoot a basket, but I have seen him on the golf course, and he is pretty darn good. I'm just going to say that. Just going to say that. Just going to say that. You guys have fun.

Charles, hit him straight. Thank you. All right, Dom, good stuff. I appreciate you. Still ahead, racing for the banks with earnings out tomorrow morning. We're breaking down the key numbers to watch. The bell's coming right back. All right, we're in the Closing Bell Market Zone.

CBC Senior Markets Commentator, Markets Correspondent. I stole Mike Santoli's title. It's all right. Forgive me. You're going to break down the crucial moments of the trading day. Is that okay? I am. You can still do that, right?

All right, good stuff. Leslie Picker, she's going to look ahead to the bank earnings in the morning. But we're going to begin with Bob. You're a senior markets correspondent. I am indeed. This is corresponding to me on what's going on right now. As the stocks guy, this is the most interesting day of the whole year. Stocks guy.

Stocks guy, right. Most interesting day of the year. I'm going to say, I'm going to call this the revenge of diversification. That's what I'm calling this. Everybody's going to look at this and they're going to say, what the heck? The NASDAQ's down big. Amazon's down two or Apple's down two. This is not a negative on technology stocks.

This is a positive on diversification. Look at this. The Russell 2000 up 3.6% with the S&P down. Do you know the last time that actually happened? October 2008. That's how rare that is to have the Russell 2000 up 3% or more and the S&P 500 down. Three and two-thirds percent. I mean, this is the biggest one-day gain of the year for the Russell. For the Russell, for sure.

So here's why. Again, this is not negative on tech. This is positive on diversification. That's the way to look at this. Right. I think you're framing that well. Six to one, advancing the declining stocks at the New York Stock Exchange. Six to one with the S&P down.

So here's what everybody's asking me today. OK, great, Bob. Is this a one-hit wonder? How does this continue? So what do we need to get this to continue? So obviously, lower rates is the key here. And small caps are very interest rate sensitive. That seems to be happening now in a very real way.

You see what's happening with expectations for rate cuts from the Fed in September. Secondly, we have to have some confidence the economy is going to be stable to good. There seems to be some confidence in that as well. And I'll tell you the final thing is the earnings situation. So the root source of all of this rally of the tech outperforming everything has been the expectations of superior earnings growth. Nothing comes close. So how much upside is there left in tech? And is there anything more on the value side of things, on the small cap side, that's going to enable people to be comfortable saying, OK, we can rotate out? I can't answer that.

And we may have an earnings situation where everything blows it out and growth comes back again. I don't know. But we have the seeds of a potential little rotation going on here. That makes me very excited. You know when we'll get some more answers? Tomorrow morning, because we're going to get banks reporting. Leslie Picker, what should we be on the lookout for here? You are exactly right, Scott.

And if you kind of think about the performance leading up to earnings, the big six banks, except Morgan Stanley, each up more than 40% over the last year, dramatically outperforming the S&P and their regional counterparts. So going into earnings, there's this big question about whether the big bank bias continues into the second half of the year, or whether we start to see some rotation into those regionals. The debate stems largely from uncertainty around net interest income, the profitability metric for loanmaking.

NII has been held down by higher funding costs, banks paying more to their depositors as rates stay high, and then loan growth has been more muted lately, meaning they're earning less in interest. Some on the street believe NII will drop in 2Q. Others think it's more of a 2025 event, so color on NII outlook will be key. Now, the larger banks have also been supported by improving capital markets and investment banking revenue, as well as the potential for proposed capital rules to be watered down. However, the flip side, other analysts urge investors not to rule out regionals

this season, which would benefit from lower rates, benign credit and deregulation as a potential catalyst around the election could drive performance there, Scott. Leslie, I appreciate it. Thank you, Leslie Picker. Bob, I'll turn back to you. We had the animation for two minutes. We're less than that. Yesterday was interesting. So we had this really powerful move post-PAL into the close. The VIX was up as well. I wonder if there's a new dynamic that we're going to be preparing for where volatility may pick up a little bit. The VIX could be a little more elevated than it's been. Stocks can still do fine in that kind of environment. But what's your thought? The short answer is yes, and I'll tell you why.

It's a seasonal thing. If you look at the VIX performance on a seasonal basis, a monthly basis, volatility in the VIX goes up notably between the middle of July all the way into the early part of October. And it's very striking. I don't have the chart with me, but everybody who follows us knows this. The volatility goes up. And this is part of that whole thing about sell it may go away, the worst three months performance going into October. So, yes, I would expect the

VIX to be higher a month from now and even two months from now if it's if it follows historic pattern. And of course, remember, we're going into an election. The VIX futures are higher already. You can just look at the VIX futures for September, October, and November, and they're higher than they are right now. But I'm more interested in whether or not we can continue to have the strong earnings in technology and whether that'll keep people in tech

or whether to finally see some real rotation. I think what today was tremendously healthy for the stock market, and anybody who's worried about NVIDIA being down or Apple being down, it's not sufficiently diversified. This is a great win for the market. All right, Bob, I appreciate it. Thank you. That's Bob Desani.

Bell's ringing. So Dow will be up, S&P down, NASDAQ down, but the Russell, my goodness, almost three and three-quarters percent, best day of the year in O2.