Closing Bell - Closing Bell: Fed Upending Rally Hopes? 9/20/23

Episode Date: September 21, 2023

Did the Fed just upend hopes that the rally in stocks might soon resume? Cameron Dawson of NewEdge and Virtus’ Joe Terranova give their forecasts for stocks. Plus, Plexo Capital’s Lo Toney weighs in on how he’s navigating the IPO landscape. And, Diana Olick breaks down why the housing stocks are suffering today. 

Guys, thanks so much. Welcome to Closing Bell. I'm Scott Wapner, live from One Market in San Francisco. This make-or-break hour begins with the outlook for stocks. 24 hours after the Fed signaled interest rates could be much higher for far longer than the markets thought. That surprise, setting interest rates higher, stocks lower, and that dynamic, as you probably know by now, continues today. There's your scorecard with 60 minutes to go in regulation. Stocks in the red throughout, not significant losses, but nonetheless weaker across the board. The Dow dragged by Cisco today after that company announced it would buy Splunk for almost $28 billion. And speaking of tech, NASDAQ, the weakest of the three majors following the Fed decision,

and Chair Powell's comments, Nvidia and Amazon among the weaker names today. I did mention yields to you. They are the real story of this day. They hit fresh cycle highs across the curve, and that's probably taking a toll on tech as well today. It does take us to our talk of the tape. Whether the Fed just upended hopes that the rally in stocks might soon resume. Well, let's ask Cameron Dawson, Chief Investment Officer for New Edge Wealth, back with us today.

It's good to see you. Is that what happened yesterday? Did the Fed do that? I think that the reality that higher yields is definitely setting into this market has been one of the things that has surprised us the most this year, this ability for the market to shrug off a tighter Fed and higher yields. But I think now we're at the point where the market looks around and says, hey, maybe we won't get those cuts in 2024 as early as we expected. And if we look back when we traded to the high back in July, you were trading at 20 times forward for the S&P, 33 times on the Nasdaq. And so that was a very full and rich multiple if you weren't going to get support from the Fed. So that was the message that the Fed gave yesterday, which is why we think that these interest rates have really now started to weigh.

Was this more hawkish than you expected? No, we expected this outcome in the sense that we did think that you would see those 2024 rates start to move higher in the dot plot. That's certainly what we saw. It drifted higher by 50 basis points, which really just said that the Fed is saying that just because inflation is moderating if we're seeing higher growth that means that they cannot cut rates simply because the risk is that inflation could come back and so if we think about

the most bullish scenario for markets it was that we could get good growth inflation would moderate and the Fed would be incrementally easier. If you take that last part out, it just means that valuations can't be the sole upside driver of this market, and we need earnings to really be the thing that kicks in to drive markets higher. I mean, it's interesting. It seems as though the biggest problem you could argue for the Fed at this very moment is not necessarily the level of inflation. It's the level of economic growth. Yeah. Much stronger than they had even expected it would be. Very much so, because if

we go back to the Jackson Hole meeting in 2022, Powell said that a period of below trend growth would be necessary in order to get inflation back to their 2 percent target. That's what they forecasted in their S&P all or in their SEP all this year. And that simply hasn't materialized. So it's not just about what the inflation reading is today. It's what the inflation reading is in the next six months or 12 months. So they are concerned that if growth is above trend, that that would cause a reacceleration in inflation, which is why they don't want to talk dovish, because the risk would be then that inflation would reaccelerate and then they'd have to do a lot more. But do you think a risk of recession is a higher probability at this moment because of that more hawkish tilt? I'm not sure if it's necessarily a higher probability

just because what's 25 basis points of an incremental difference. We think that there is still risk of recession in 2024, but the timing still remains highly uncertain. There was so much expectation for it in 23, but we're just now starting to see the bite of higher interest rates. So look at some of the housing data starting to roll over again. It will be really interesting if we start to see things like new home sales rollover,

given where interest rates on the mortgage rate is going. So I think overall, we still don't think that we are ready for an imminent recession. We think it's still more of a 2024 question. And eventually these higher interest rates will bite, but we simply haven't seen the evidence of it yet. So the question is what to do now if you're an investor after the Fed decision. I want you to listen to what Jeffrey Gundlach of DoubleLine, Cameron, told me yesterday about what the ideal portfolio might look like right now. A year and three quarters ago, bonds were stupidly overvalued. And as rich as stocks were when they began that bear market, they were cheap to bonds. That's changed by a factor of four. So you've gone from

bonds were doubly rich to stocks. Now bonds are doubly cheap to stocks. So it's been a 4x shift. And I think that that should be respected in portfolios. So I think 25% long-term treasuries, 25% not in cash, but in this short-term, not terribly low in credit, but not pristine credit stuff. And then you want 25% in stocks. At this point, I think there might be a case for building a position in commodities. All right, that's the gunlock portfolio, at least what he would do. What about you? Yeah, I think Jeffrey makes a really good point because we went from a world where both bonds and stocks were wildly expensive. And now we're in a world where stocks are rich, but bonds are much more attractive in valuation. Now, for long term investors,

only 25 percent in equities. It really does depend on what your overall goals are. Jeffrey is a bond guy, so he'll argue for less equities. We have typically higher equity valuations, of course, depending on a client's risk tolerance. But I think his point also is very clear, is that there is a case for commodities in portfolios. Ours is much smaller than that remaining 25 percent in what he has. So if we look at our overall allocation, we would agree that bonds incrementally are far more attractive than they were. But of course, you have to judge that versus where your capital gains taxes could be as you're rebalancing portfolios. Sure. But would you agree with his characterization that

bonds, in his words, are doubly cheap to stocks? i think that there still could be upside to bond yields but i think if you're looking out over a two to three year basis that's when you could see much better performance out of bonds i wouldn't necessarily call them doubly expensive just in the sense that because we could see that continued uplift in yields in the short run we shouldn't forget that tomorrow we also have the Bank of Japan coming out, and that could result in further upside to bonds, mostly if they signal any change to the yield curve control. So that is more tactical in basis. From a strategic perspective, yes, bonds are more attractive. And if you can take less risk to get to the same return, that is possibly something that investors should consider.

Well, let's bring in CNBC contributor now, Joe Terranova of Virtus Investment Partners, to join the conversation. Joe, it's good to see you. Did the game change yesterday? Well, I think the loudest and most clear message came from the Treasury market itself, Scott, and that spoke volumes. I don't think the Federal Reserve did anything that was incorrect. I think they took the right position. But it's very clear, as you have said on the network, that the focus is on strong growth, a strong economy. And therefore, the consequence to that has to be that rates stay higher for longer. And the only outcome that I see, the only possible outcome that I see,

is that consumer spending weakens and the economy turns south. Do you regret then the purchase that you made earlier this week of the Q's, the tech ETF? No, I don't. I do not regret that purchase because what I see in front of us is I do believe the upcoming earnings season has the potential to be a good one, a positive one. And I think it'll be good in particular for technology and mega caps. Now, that'll set us up. That'll set us up for the fourth quarter in which mega caps and technology could actually lead the market back to its prevailing bull trend. So I'm not concerned about that because, Scott, you're talking about technology and mega cap. They don't need to access the debt market.

The larger issue that I have is as we look out into 2024, the earnings estimates are too high. The earnings estimates in the near term, I don't think they're unreasonable. But I think the earnings estimates, as you look into the future and you understand the monetary policy that's going to be maintained and the higher private sector borrowing costs, I think those earning estimates have to come down. All right. Well, there's a lot of talk about where valuations are specifically in mega cap tech relative to where rates are and what the earnings projections, Joe, are going to be. Light Street's Glenn Kacher was with me on halftime. I want you to listen to what he's a big tech investor. I should caveat there. Listen to what he said about valuations in the mega caps. I completely disagree. You know, the reality is that the multiple that you're paying for

NVIDIA today is lower than it was at the beginning of this run. That's fair. And the earnings power is being has been demonstrated already. If you want to invest in that cycle and you want to invest in a cycle that's going to last 10 years, those are the stocks you want to invest in. Well, Joe, I mean, speaking of 10 years, a lot of these mega cap forward PEs are above their 10-year historical average. Yet Cater makes the case that they're not as overvalued as some would like you to believe. And I agree with that. Look, if you're trying to find where is their

confidence within the equity markets, it's certainly narrowing significantly. You can look towards energy and you could look towards these balance sheet rich companies like NVIDIA, like a lot of the semiconductors and like the mega cap. So I think in the environment that's ahead of us, Scott, you're willing to understand that you will accept positioning in a lot of these names where you can question the valuation because you believe that they'll be able to be resilient in the environment and grow into the valuation, as in fact we're witnessing with NVIDIA currently. All right. So, Cameron, what's your take? I mean, is tech going to remain the place to be? In large regard,

these stocks have gone straight up since the beginning of the year, working in some fits and starts and some modest pullbacks, let's call it that. But is this still the place you want to be for the very reasons that Joe and Glenn Kacher just articulated? I think for the long term, yes. And if there is weakness, that is something that can be viable. In the short term, though, we think that tech could continue to struggle. It actually peaked versus the market back in July. The relative performance is rolling over. If you look at from a valuation perspective, the technology sector got trading up to the same peak it got to in 2021 in a wildly different interest rate environment, a wildly different Fed

environment. And so there is a point where kind of regardless of the earnings fundamentals, valuation can become a risk in and of itself and a source of short-term volatility. And that's exactly what we think we're seeing. So tech did run up a lot more. It was more overbought. It was more overvalued, which leaves more room for it to correct. The long-term earnings trends can still remain very, very attractive. And that's where we would look to add positions on one of those corrections, which I think will get better valuations at that time. It's a good point, Jo, right? Fundamentally, you can easily make the cases you and Glenn have made as to why these stocks are going to be the places to be. But

there are other market forces at work that could still drive these stocks lower in the near term regardless. Absolutely. And I think a lot of that comes into the forefront in 2024. I think we'll be able to avoid that for the duration of 2023, because, again, I expect the earnings are going to be strong. But in 2024, if we're in an environment where it's risk-off, where the overwhelming attractiveness of the bond market, which Jeffrey Gundlach highlighted with you yesterday and I completely agree with, takes hold in the market, then risk-off environment, then nothing is going to be immune to that, and you're going to see the mega caps and technology names,

even with their cash-rich balance sheet, they're going to decline. I'll tell you what, Joe, I mean, I'm interested to know more about why you sold Bank of America, which jumps out to me if you look at other sectors, some talking about catch up trades. You've got to figure where rates are and the implications on the banks. Also, the economic projections to weighing on the outlook there. I just don't see the broadening out of the rally that so many have expected as we move towards the end of the year. J.P. Morgan is a large money center bank that I bought back in March. I'm maintaining the position there. Bank of America is a position I've

maintained for several years, and it has significantly underperformed. And I think the challenges are going to be ahead of a lot of these money center banks in terms of seeing significant defaults. I think loan loss provisions are going to have to obviously move significantly higher. You have regulatory standards that still suggest the hoarding of cash on balance sheets. I just don't see financials as we move into 2024 in what I expect to be a weakening economy. I can't see that they're going to be witnessing relative outperformance. I also saw the IBB, which is the biotech ETF. Again, what is it in fact that the biotechs need in order to go out and do the R&D? They need the funding. They have to access the debt market. So if you

have to access the debt market right now, it's incredibly challenged. That's why if you talk to institutional investors, Scott, one of the biggest opportunities in the market right now is in the alternative space, owning private credit. You know, I want to go back to tech for a minute because I'm looking at the moves in some of these semiconductor stocks today. Joe and Cameron, you stay with me. I want to bring in Christina Partsenevelis now. I mean, I'm looking, Christina, at NVIDIA is down 10% in a week. Broadcom was down by a pretty large amount earlier. Now it's come off of those levels because of a story that was out there about it and Alphabet. What do we know? Okay, well, let's start just to your first point, the AI rally and the subsequent steep valuations. I guess the thought

on the street right now is maybe this is a reset. The SMH and the SOX semi ETFs that we often look at, both down over 9% just this month alone. To your point, Scott, NVIDIA down double digits. Valuations are coming under pressure ahead of earnings that are out soon with the rise also in treasury yields. And you can see just today, NVIDIA down again almost 3%. To your point about Broadcom, it was or is considered an AI darling for its custom chips, but it too, down about 12% on the month, down 2% today. What happened today is earlier this morning, a report said that Google was thinking of ditching Broadcom as its chip supplier in the next three to four years. Google has since said they see no change in their engagement with Broadcom right now.

That could change. Shares, the moment Google put out that statement. You saw shares come up off of the earlier lows. Another bright spot that I do want to point out is U.S. foundry Global Foundries. That's up. Look at that. Almost four and a half percent on the month and positive today. Why? After announcing it won a 10 year, three billion billion Department of Defense contract to build semiconductors. Wedbush, many others believe that this name, Global Foundries, could keep winning deals since the fabrication hub is on U.S. soil and there's a greater need to diversify away from Asia given the rising geopolitical tensions. Yeah, that's a good sweep.

Christina, thank you for that. That's Christina Partsinovels, of course. Joe, back to you. Broadcom, take that first. You own it. I do. So this headline that was out there, Google comes out and says, well, not really now, but who knows about the future. Stock was down 7%. It's

still down some 2%. But how should we look at Broadcom today? I think it's a public negotiation between Google and Broadcom, certainly suggesting that Marvell can benefit from potentially moving some chips away. They've had a very strong working relationship in the past. I don't expect any change to that. Scott, if I have to worry about my position at Broadcom, then we have bigger issues for the entirety of the semiconductor industry and therefore the equity market overall itself. I still view Broadcom as a reasonable valuation play an alternative to owning nvidia which i also earned and it clearly in terms of generative ai has the ability to generate significant revenue in the future because they will be able to fund the necessary r d and bring the innovation forward i'm not

concerned about broadcom all right i'll just give you a quick check on what's happening at the market in the very you know in the moment if you will. We're the lows of the day. Dow's down 254. It's three quarters of one percent. So the point decline obviously appears more significant than the percentage one does. But nonetheless, it's a follow through after the Fed meeting yesterday. The Nasdaq is where the action is. It's down one and two thirds percent. It was down 200 or so points yesterday. That selling continues. So, Cameron, I come back to you on the semi since we're talking about it. Do you want to be here or do you want to avoid it? I think for the long term, it's similar to the broader tech story is that you do want to be there.

It doesn't mean that these names can't sell off more because they had such a strong run up. I think we would look to a retracement of the of the whole move post the NVIDIA earnings beat back in May to really get a sense of maybe that's where some of these names could find a footing. If we think about tech overall, it's really important for tech to hold that August low that it hit back just a few weeks ago. If that doesn't hold, the 200-day would be in sight, which could mean that we could still have a bit of a mid-single-digit to high-single-digit decline from here. So we're watching very closely that those August lows hold for the entire market to get a sense of how much further this could go. Yeah, it's a good point.

You make one that Jonathan Krinsky at BTIG, Cameron, is talking about, too. Those August lows of 43.35, Joe, the need to hold that. Or you'd start talking about air pockets. You know, however steep the pocket might be, you need to hold on to some of these technical levels. Yeah, it's interesting because, again, I'm coming back to what I said earlier in the show. I'm more concerned looking out over the next nine months than I am looking out towards the end of the year. I think we'll be able to maintain the prevailing trend. I think we're obviously going to have difficulty as you move towards the end of this current quarter. That's for sure.

The U.S. dollar, by the way, is uncomfortably high, but I think earnings potentially can give the market the lift that it needs as we move towards the end of the year. Now, that being said, that might create a significant inflection point for the equity market at some point in Q4, because looking out into 2024, those earnings estimates are way too high and the consumer will weaken. The bond market's telling you that, and certainly Chairman Powell did yesterday as well. Well, we'll see how it all shakes out. Guys, thanks so much. Cameron, it's good to see you.

Joe, you as well. I'll see you back on the East Coast very soon, I know. Let's get to our question of the day. We want to know, did the Fed just upend the tech trade for the rest of the year? Yes or no? You can vote. Head to at CNBC Closing Bell on X. The results coming up a little later on in the hour.

We are just getting started, though, here on Closing Bell. Up next, navigating the IPO landscape, Plexo Capital's Lottoni. He is right here at one market. He says, well, he'll give the three themes he is watching in the space right now. The one name he says might be the jewel of the IPO market. That's just after the break. We're back in San Francisco after this. It's the very beginning of the opening of the door for IPOs. I think it's exciting. It's what institutional investors, endowments, foundations, sovereign wealth funds, those firms that feed capital into the venture community. It's what they want and what they need, and it's a natural part of the cycle. And so it's really exciting that those doors are opening back up again.

Well, that was Light Street Capital founder Glenn Kacher on Halftime with me earlier today. Speaking on the resurgence of the IPO market with Arm, Instacart, Klaviyo making their debuts over the past week. All three names, though, trading near their IPO prices. Joining me now to discuss all of this, Lottoni, Plexo Capital. It's good to see you out here on your coast. So, Cater says, you know, the doors are opening. Are they truly? I think we're starting to see them open.

I think what's going to end up happening is people are going to really analyze these three different companies. They actually have dramatically different business models and sizes, which is a good thing, because it gives us a chance to kind of take a step back and digest this new information and look at the performance. Speaking of, what do you make of the performance? I mean, it's not great. The first day pops have been pretty nice, but afterwards, not so much. What's up with that? Not so much. I think when we look at these three, and I'm going to exclude Klaviyo for the moment,

but when we look at Arm and Instacart, I think there's some challenges there. We're just not seeing the same level of growth. I think Arm is priced a little bit close to perfection right now, given where its revenue growth is. I mean, look, it's going to trade, I don't know, where is it, like, right, 147, 150 PE multiple versus looking at NVIDIA, right, about 100. So it's priced at a premium with not the same level of growth as NVIDIA. And I would say, you know, looking at Instacart, I think the optics look good. It's a profitable gig economy company. However, if we peel back the onion a little bit and kind of see where some of that growth is coming from, probably almost a third of the revenue for Instacart is actually coming from advertising, not actually from its core business. And that advertising, those advertising dollars, we know those are higher margin, right? And that's actually where we're seeing a lot of

what's driving the growth for Instacart. Speaking of growth, I mean, you make a good point about the maturity of these companies, Arm and Insta, for example. They went public as pretty mature companies. That's what you're alluding to when you talk about, you know, what level of growth can they attain from here? Yeah, that's right. The growth rate. That's right. And look, these are why historically people are attracted as investors to IPOs, is they there looking for those companies that can be these next, you know, magnificent seven big tech companies that can both provide the growth at a sustainable level over a long period of time?

And so I think that's why we're seeing some questions. Now, all that said, I think going back to the clip that we just played, yes, we are seeing at least that good companies will be able to get to the public markets, but we need to be cautious. Well, I mean, Instacart does a down round, right? It's the valuation is not nearly what it was. And the prevailing thought is that there are a lot of companies still out there that have yet to take their quote unquote medicine and that valuations of some companies that still want to go public still need to come down. How

do you view that? That's it right there. When we look at Instacart in particular, we look at those Series A investors, Kosla, Canaan, Y Combinator, even to the Series B, you know, that was led by Sequoia and then, you know, Andreessen Horowitz, or actually Series A led by Sequoia and Series B led by Andreessen Horowitz. Those investors are able to appreciate returns that are greater than what they would have received if they had just invested in an ETF over that same period of time.

However, when we start looking at those later investors, in particular people that came in about the Series G or so, T. Rowe Price, DST Global, those investors are actually underwater. Now, here's what's going to happen. There are more companies that have a similar profile to Instacart. In other words, companies that raised at a very high valuation in the free money days, right, 2021, they're going, those companies still are good companies. They'll get out into the public markets. However, it's going to come at a discount. So those investors that invested at the later stage will probably see similar losses to T. Rowe Price and DST Global.

Let's talk about what I guess I would call the latest stage that you could be, a retail investor on these IPOs, right? And you see what's happened to the prices post first day pop. What does that do to the psyche, do you think, of a retail investor who's looking at the prospects of investing in some of these companies here forward that are going to come to market, that are going to have the sexy names and the big stories behind it? But you look at the performance and you're saying, eh, what do you do? And I think those investors are probably saying, well, should I go Magnificent 7 Big Tech or some of these hot, sexy IPO names? And I think that's what people are going to start doing.

They're going to start looking at a lot of the performance of these companies and then really start to question whether or not the upside is there to warrant shifting dollars away from the big, historic brand name companies to earlier stage companies. Yeah. So we always talk venture mostly with you. But you have a good mind for tech overall. NASDAQ right now is down one and two thirds percent. Dow's down 300 points. I mean, you watched the Fed meeting yesterday. The message certainly seems to be more hawkish than perhaps even some were expecting it might be. Has that reset the game about how we should think about NASDAQ stocks, mega cap stocks, the Magnificent Seven? Yields may be higher for longer than we even thought and what the implications are? Yeah, I think some of the same dynamics that we're closely observing

in the private market space play out in the public market, in particular, looking at the macro, looking at the yield curve, looking at what's happened in the geopolitical. I think people are still cautious. So just as a lot of companies that are in the pipeline thinking about going public are probably looking at this as an opportunity, if they don't get out before Thanksgiving, to think ahead to 24. And I think your point around what's happening with the Fed and the other signals that they're giving, they gave a very hawkish signal. And I think that will make investors take pause. But I do believe that ultimately the best companies, there are still great names, Reddit,

Stripe, Turo. There are great names in the IPO pipeline. And we are still seeing some resilience from the big tech names. So I think 24 will be a good solid year for tech overall. But I think people are going to be very mindful to watch out for any gotchas. All right. So clearer skies ahead, maybe a few storm clouds that we still have to watch out for. Low thanks. Thank you. That's low Tony. Plexo right here.

One market up next, an Apple turnaround, the company's newest iPhone hitting shelves tomorrow. So will this be the catalyst for growth that investors have been hoping for? We're going to hear from Morgan Stanley's Eric Woodring, top analyst who covers that stock. Just after this break, closing bell. We'll be right back. We're back with less than 30 minutes to go. Session lows. You just saw the graphic there. There's our wall where it is decidedly red, as you can see. The Dow right now is down just about one%. That's the lows of the day, I said. S&P down 61 points. NASDAQ is still off better than 200 points. We should probably show

you yields, too, if we can put those up, because that's been a considerable story today, following Jay Powell and the Fed chair, of course, and his comments yesterday. The roadmap ahead of where Fed members think all of this is going results in on your left green and on your right red. And that's the story. We'll track it with less than 30 to go. We're watching Apple today, too. That stock is in the red. The new iPhone 15 officially going on sale tomorrow. That after reportedly strong pre-orders comes at a time when shares are tracking for their worst month of the year. Joining us now, Morgan Stanley's Eric Woodring. He covers the stock for us.

It's good to see you. So tomorrow's a big day. Reports are so far so good, maybe stronger than we thought. What's your read? You know, Scott, it's tough to say this earlier. We're only, call it, five days into the post-preorder period. I would say relative to expectations, again, given what we know and the concerns about China, I would say these first data points have probably been better than expected. Again, lead times,

by and large, for the iPhone 15 family are slightly longer than the iPhone 14 family at this point in the cycle. But as you know, there's a lot left to go. You know, you can get a head fake early, early in the cycle. So what I would tell you today is demand is outstripping supply. There are some supply shortages, especially at the high end with the iPhone 15 pro max. But by and large, I think the data points thus far have been better than expected. I just had the, you know, the noted tech investor Glenn Kacher on with me a couple hours ago. He's got all the mega caps in his book except for one.

Apple, which he suggested was the one that stuck out like a sore thumb with its valuation relative to the rest. Because in his words, the smartphone market is still weak. How do you counter that? In the near term, I'm not sure I do counter that, Scott. You know, frankly, the smartphone market is weak. What I've said, you know, Apple is here, call it $175. That's about 25 times my fiscal year 24 earnings. I'd like to see the stock kind of derate to the 160, 170 level before I come back on here and say, Scott, you know, this is the time to get more aggressive because we're at a period right now where there are risks. China is a risk to Apple.

The Department of Justice investigation with Google, while Apple is not a part of it, inherently becomes a risk for Apple in the event there is an adverse scenario. And when you look at the three months Apple performance post an iPhone launch, Apple typically performs in line with the stock market. So we need to get past this period of elevated risks. Again, you know, you talked about the 10 year earlier, the 10 year at four and a half percent, another headwind. So I don't think that Apple today is a name that I need to come up here and be very vocal. Again, data points are better than expected, but I'd feel more comfortable to see a little bit more consolidation in the stock before, again, I pitched you more aggressively on Apple. No, I so much appreciate your extraordinarily honest view on it. And I know our viewers do

as well. But do you think 160 or about is a reasonable level to think the stock could trade down to? So this is a high quality company. I think if we're looking forward and we say we're concerned about the world, I do think there's going to generally be a flock to higher quality companies. We know that Apple and the iPhone is a staple in people's lives. They're not going to give it up. That doesn't necessarily mean they'll refresh this year, but it doesn't mean that the that the platform that we know that apple has that is so powerful uh is gone so to speak and so i do think 160 that's about 23 times my earnings power again a premium to the historical average but i think apple has shown

how this platform has changed and again you're onboarding new users, 150 million new users last year that are now new Apple customers that Apple can go and monetize. I just think that's a very important tailwind for this company. And so we do have growth accelerating in fiscal 24, call it high single-digit revenue growth, mid-teens EPS growth, 20% free cash flow growth. I'd argue at 23 times that's actually relatively attractive. So, yes, I do think 160 is kind of where I'd come up here and tell you, Scott, let's get more aggressive. Wow. I mean, you know, look, in some respects, investors need this. Shareholders need this phone to be a big hit if for no other reason than to reverse

the trajectory of where iPhone revenues have gone recently, if not overall growth, the growth path for this company, which has, you know, suddenly been questioned over the last few quarters. It has been, you know, totally fair. This has been a very challenging last 12 months. The consumer is challenged, generally speaking, especially after we look past kind of the post-COVID boom of technology good consumption. You know, the consumer is a little bit weak here, and that's not just a U.S. comment. That is a global comment.

Again, I think Apple stands out amongst the rest of my coverage in terms of being more insulated. Again, if I have $1,000 and I can allocate it to some form of technology good, you better believe that I'm going to buy my iPhone before I buy something such as a PC, a speaker, or a TV, for example. But it's a challenged market out here. So the iPhone 15 is an important launch for Apple. And when people ask me, is this device evolutionary? Is it revolutionary? My answer to them is it depends on what phone you have. If you have an iPhone 11 or older, this is a revolutionary device. It to have. It's not a need to have. The one thing I

will tell you is that I own an iPhone 12 Pro. I've placed a pre-order for an iPhone 15 Pro Max. I'm not big into the large screen. It's big in my pocket, but I really do care about the camera. I care about displays as I watch videos more. That'll be important, at least in dictating the growth of this phone this cycle, because ultimately ASPs do play or pricing does play an important factor when we think about the iPhone 15 cycle. Feel like you're indirectly calling me out for the model of the iPhone that I currently use, but that's neither here nor there. I'll see you soon, Eric. Thank you. That's Eric Woodring, Morgan Stanley joining us up next. We're tracking the biggest movers as we head into the close. Christina Parts and Nevelos is standing by with that.

Hi, Christina. Say goodbye to Fox and Hello USA Network. And no, I'm not talking about Rupert Murdoch. More details on WWE SmackDown next. We're just about 15 minutes from the closing bell. Let's get back now to Christina Parts and Nevelos for a look at the key stocks to watch as we head there. Christina. TKO Group and Endeavor are getting slammed, of course, as WWE's Friday Night Smackdown moves to NBCUniversal's USA Network from Fox. TKO began trading just last week after

the merger between WWE and Endeavor's UFC. Sources tell our Alex Sherman that the Smackdown deal is worth over $1.4 billion. Investors, though, as you can see, are not exactly cheering on the news. Hopefully it has nothing to do with USA Today. Shares are down about 15%. Switching gears completely, FedEx is higher as a big earnings beat overshadows a slight miss on revenue. Bank of America reiterating a buy rating and raising its price target to $330 up from $309. They say that the company's cost cutting efforts are helping and

discipline and gaining market shares also working. And that's why shares are up about 5% right now. And you can see just after the earnings call. Yeah. All right. Nice move there. Christina, thanks so much. Thanks. See you back east. Christina Partsenevelos. Last chance now to weigh in on our question of the day. We asked, did the Fed just upend the tech trade for the rest of the year? Yes or no? Head to at CNBC closing bell on X. The results after the break. To the question of the day, the results. Did the Fed just upend the tech trade for the rest of the year?

Yes or no? It can still rally. No, it can still rally. That's the winner today. Fifty five and a half percent of the vote up next. Housing stocks, they're slumping. We'll tell you what's weighing on that group today, what it might mean for the broader economy as well. That and much more when we take you closing bell market zone. CNBC senior markets commentator Mike Santoli here to break down the crucial moments of the trading day. Plus, Kate Rooney is here on the sell-off in fintech stocks today.

Diana Olick, too, on what today's housing sales data could mean for the homebuilders. Mike, I mean, it's not really rocket science, is it? It's hawkish, Fed skittish stocks. And that's exactly the dynamic that we've had since the decision and the commentary yesterday. Yeah, I mean, obviously, the bond market having to reprice the Fed's path going into next year to some degree and really just creating just an extra push in the direction that the stock market was already leading, which is it's already been consumed with worry about whether the consumer, the broader economy, corporate earnings can handle the level of long-term yields

that we have already. And so we're pushing the highs. That said, it also is following a certain script. We knew this was supposed to be a very tough week after the September options expiration. It is proving to be. We're now in the S&P 500 right at or just below the intraday low from August. So this is kind of a retest of that sell-off.

Starting to get a little bit oversold, similar oversold readings to what we got in mid-August. Also back to March. So some of this stuff is lining up to say, well, we needed some kind of a proper, you know, kind of shakeout to the downside. We're getting some of it. I'm not saying it's over, but at the same time, bearishness in bonds is also reaching some extremes. So some things are coming together.

And what do you know? Tuesday morning is the other half of the sell Rosh Hashanah, buy Yom Kippur trade. So we'll see if we have the makings of a low here, or it is just really just, you know, kind of this feedback loop of worry. Got to watch some technical levels, too. Mike, I'll be back to you in just a second. Kate Rooney, as I said, sitting next to me here out in San Francisco. Fintech stocks across the board, at least 3 percent declines in almost every name, if not worse.

Getting crushed today. So it's very much a rate story, Scott. These are rate-sensitive names, threats of higher rates. For longer after yesterday's Fed meeting weighing on those names. You mentioned we got SoFi, Robinhood lower. Affirm has been the biggest lagger today. It's down about 8 percent. Higher rates increase some of the funding costs. The buy now pay later lender. You got PayPal and Square also lower. On top of rates, though, there's been a lot of uncertainty around leadership for these two names.

PayPal is in the middle of a planned CEO transition. Dan Schulman stepping down at the end of the month. Then you've got Block. That executive shakeup was a bit more sudden this week. The head of the payment side of Square, Alyssa Henry, stepped down. Jack Dorsey, the founder of that company, taking over that part of the business. And she had been at the company for more than a decade. Caught a lot of people off guard there. Got Block down about 14% or so on the week.

Credit card names also lower, underperforming today. Some analysts telling me this is thanks to some of the weaker travel and restaurant spending data there, Scott. You know, Mike Santoli, talk about a comeuppance of sorts for some of these stocks in what is no longer a zero interest rate environment. Boy, PayPal has been really a part of the center of that. But a lot of these stocks have seen a similar fate. For sure. I mean, when you talk about the so-fives and the affirms of the world, they're just high beta financials with subscale businesses. They're still growing fast, but still from a small base. So you can see why on a day like today they're going to be

discarded. There's also a lot of talk, by the way, of people both taking profits and some of the big winners of the day. You can, of people both taking profits and some of the big winners of the day. You can see that in the index performance and also selling losers on a tax loss harvesting basis that sometimes happens in the fall when mutual funds close their books. So all that stuff coming together when it comes to the PayPal and Square, I agree that issues over leadership, but also kind of the unmet promises of exactly how profitable these businesses could be in an admittedly fast-growing area of digital payments. The pie was considered to be big enough and growing

fast enough for everybody. It's just not really reaching shareholders in a really manifest way just yet. Yeah, I'll be back with you again in a second, Kate. Thank you so much. Diana, I'll look to you on what we're witnessing today with the homebuilders. What can you tell us? Well, Scott, it's been a rough day in housing news, no question. Mortgage rates moved sharply higher, and August home sales came in low. The average rate on the 30-year fixed mortgage hit 7.47% today, according to Mortgage News Daily. That's up from 6.85% on June 1st, and I'm using June 1

because we got the read on existing home sales in August this morning. They're based on closing, so contracts signed in June and July. Sales missed expectations and were actually the second slowest August pace on record, second only to August 2010 during the financial crisis. So no surprise, the homebuilders are taking it on the chin with the homebuilding ETF ITB down about 2%, almost 3% on the day. They're also reacting to KB Home's quarterly report yesterday, which beat expectations but had lower home completions and lower prices, which could hurt going forward. So, again, now we look to next week

when we get more data on sales of newly built homes. Scott? You'll bring it to us. We'll see what the stocks do. Diana Olick, thank you so much. Micah, I come back to you. I'm looking squarely at some mega cap tech names, okay? Because the losses over a week jump out at you in terms of the kind of red you're seeing on

the board. One week, Amazon down 10 and a half percent, Nvidia down 10, Tesla's down about seven and a quarter. What do you make of what we're seeing there? It's I know you don't believe that it's, you know, directly rate related, but nonetheless, this Nasdaq's choppy as a result of what's happening in the Treasury market. Oh, without a doubt. I would never say that rates don't matter. Of course, they matter for valuations. It's just it gets overcome in real time by a lot of other factors. I think a lot of those fit into the category of, you know, widely owned with a massive embedded profits year to date in those stocks. And they're all kind of getting harvested on some level. Every one of the ones you named is in that category. And yes, rates do bring

valuation into focus. We're in this zone right now where it is a little bit about the macro dynamics. You're out of the corporate earnings season. We haven't had that much in the way of guidance updates. So all that stuff fitting together is weighing on the indexes. I'm much more concerned, though, with the consumer cyclical area, which is down 2 percent on an equal weighted basis today. And it's showing you when you talk about housing, you talk about the other areas of concern for investors. It is about how much is is being restrained by rates at this level. We had the the energy cost as well. You know, when you have a balanced outlook from the Fed, that's what they told you yesterday. More or less, we have to worry

equally about inflation and growth. You know, it means that you can never quite be comfortable on one side or another. We'll get through it. The market can find its equilibrium with four and a half percent rates. We've done it before. It just takes time to test whether that's the level that's really going to hurt economic activity or not. Yeah, I mean, you really hit it on the head. I'm looking at the discretionary space as we speak, which is really where the most acute part of where a lot of the selling is today. Discretionary is down near three percent, three percent, excuse me, some of the casino names. Caesars is down 5%. So really, those names, you've zeroed in on it for a good reason.

And, of course, auto and housing related, it fits right in there. Very rate sensitive. And, again, you know, we could be seeing the start of a real washout as opposed to the beginning of something. We've just got to wait and see. All right. So we're going to go out. Mike, thank you so much. We'll go out today virtually at the lows of the session. Dow down just about 370 points. S&P

negative by one and two thirds percent. And of course, the Nasdaq, that's where a lot of the selling has been since the Fed, still down pretty sharply again today. Does it for us into OT with Morgan and John.